SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 28, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-9786
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 Hammerwood Avenue
Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 24, 1997, was approximately $597,117,000.
As of January 24, 1997, the Registrant had 96,931,388 shares of Common
Stock outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 28, 1996, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 2, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business.
Thermo Instrument Systems Inc. (the Company or the Registrant) is a
worldwide leader in the development, manufacture, and marketing of
analytical instruments used to identify complex chemical compounds, toxic
metals, and other elements in a broad range of liquids and solids, as
well as instruments used to monitor radioactivity and air pollution, and
to control, image, inspect, and measure various industrial processes and
life sciences phenomena. Through its 72%-owned ThermoSpectra Corporation
(ThermoSpectra) subsidiary, the Company develops, manufactures, and
markets precision imaging, inspection, and measurement instrumentation
that employ a variety of energy sources or signals as well as high-speed
data acquisition and digital processing technologies. The Company's
93%-owned ThermoQuest Corporation (ThermoQuest) subsidiary develops,
manufactures, and sells mass spectrometers, liquid chromatographs, and
gas chromatographs for the pharmaceutical, environmental, and industrial
marketplaces. These analytical instruments are used in the quantitative
and qualitative chemical analysis of organic and inorganic compounds at
ultra-trace levels of detection. Through its 93%-owned Thermo Optek
Corporation (Thermo Optek) subsidiary, the Company develops,
manufactures, and markets optical and energy-based analytical instruments
and has key technologies in electro-optic components and systems. Thermo
Optek's analytical instruments are used in the quantitative and
qualitative chemical analysis of elements and molecular compounds in
solids, liquids, and gases. Through its 67%-owned Thermo BioAnalysis
Corporation (Thermo BioAnalysis) subsidiary, the Company develops,
manufactures, and markets instruments and information management systems
used in biochemical research and production, as well as in clinical
diagnostics. The Company's 84%-owned Metrika Systems Corporation (Metrika
Systems) subsidiary develops, manufactures, and markets on-line
industrial process optimization systems that employ proprietary,
ultra-high-speed measurement technologies. Through its wholly owned
subsidiaries, the Company also manufactures monitoring instruments to
detect and measure nuclear radiation and air pollutants, including toxic
and combustible gases and participates in the process monitoring,
analysis, gauging, and control instruments markets, primarily for the
oil, gas, and petrochemical industries.
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option incentive programs, as well as capital to support the
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subsidiaries' growth. During 19961, ThermoQuest, Thermo Optek, and Thermo
BioAnalysis sold shares of their common stock in initial public offerings
and Metrika Systems sold shares of its common stock in a private
placement for aggregate net proceeds of $125.0 million. See Note 11 to
Consolidated Financial Statements in the Registrant's 1996 Annual Report
to Shareholders for a description of the issuance of stock by the
Company's subsidiaries.
In September 1996, Thermo Optek announced its intent to spin out its
Thermo Vision Corporation (Thermo Vision) subsidiary through a
distribution of all of Thermo Vision's outstanding capital stock in the
form of a dividend to Thermo Optek shareholders. The Company anticipates
completing the spinout in 1997 and is seeking a Letter Ruling from the
Internal Revenue Service stating that the proposed spinout will have no
current tax effect on Thermo Optek or its shareholders. Thermo Optek
would distribute the shares upon receipt of the Letter Ruling and
satisfaction of other conditions, including the listing of the Thermo
Vision shares on the American Stock Exchange. Upon completion of this
proposed transaction, Thermo Vision would be a majority-owned subsidiary
of the Company.
The Company historically has expanded both through the acquisition
of companies and product lines and through internal development of new
products and technologies. During the past several years, the Company has
completed a number of complementary acquisitions that have provided
additional technologies, specialized manufacturing or product development
expertise, and broader capabilities in marketing and distribution. In
1996, the Company's acquisitions included Oriel Corporation for $11.8
million in cash and the assumption of $0.7 million in debt; Corion
Corporation for $5.1 million in cash; the DYNEX Technologies (formerly
Dynatech Laboratories Worldwide) division of Dynatech Corporation for
$43.2 million in cash; and a substantial portion of the businesses
comprising the Scientific Instruments Division of Fisons plc (Fisons), a
wholly owned subsidiary of Rhone-Poulenc Rorer Inc., for approximately
123.5 million British pounds sterling in cash (approximately $188.9
million) and the assumption of approximately 30.8 million British pounds
sterling of indebtedness (approximately $47.2 million). The purchase
price for the Fisons businesses is subject to post-closing adjustments
equal to the amounts by which the net tangible assets and net debt of the
acquired businesses on the closing date are greater or less than certain
target amounts agreed to by the parties. On March 12, 1997, the Company
declared unconditional in all respects its cash tender offer for all
outstanding shares of Life Sciences International PLC (Life Sciences) for
135 British pence per share (approximately $2.16 per share). As of that
date, the Company had received acceptances representing approximately 91%
of the Life Sciences shares outstanding and the Company owned an
additional 3% of the outstanding Life Sciences shares. There are
approximately 175 million Life Sciences shares outstanding. The Company
has established March 26, 1997, as the date for payment for all shares to
which acceptance had been received. In addition, the Company expects to
repay approximately $72 million of Life Sciences' debt, net of acquired
1 References to 1996, 1995, and 1994 herein are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
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cash expected to be used. Life Sciences, a London Stock Exchange-listed
company, manufactures laboratory science equipment, appliances,
instruments, consumables, and reagents for the research, clinical, and
industrial markets.
The Company was incorporated in Delaware in May 1986 as a wholly
owned subsidiary of Thermo Electron Corporation (Thermo Electron) to
succeed the instruments businesses that were previously conducted by
several Thermo Electron subsidiaries. As of December 28, 1996, Thermo
Electron owned 79,207,044 shares, or 82%, of the Company's outstanding
common stock. Thermo Electron is a world leader in environmental
monitoring and analysis instruments, biomedical products such as
heart-assist devices and mammography systems, paper-recycling and
papermaking equipment, biomass electric power generation, and other
specialized products and technologies. Thermo Electron also provides a
range of services related to environmental quality.
Thermo Electron intends for the foreseeable future to maintain at
least 80% ownership of the Company, so that it may continue to file
consolidated U.S. federal and certain state income tax returns with the
Company. This may require the purchase by Thermo Electron of additional
shares of common stock and/or convertible debentures of the Company from
time to time as the number of outstanding shares of the Company
increases. These and any other purchases may be made either in the open
market or directly from the Company or pursuant to conversions of the
Company's 3 3/4% senior convertible note due 2000 held by Thermo
Electron. See Notes 5 and 7 to Consolidated Financial Statements in the
Registrant's 1996 Annual Report to Shareholders for a description of the
Company's outstanding stock options and convertible obligations. During
1996, Thermo Electron purchased 753,750 shares of the Company's common
stock in the open market at a total cost of $24.6 million.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the caption "Forward-looking
Statements" in the Registrant's 1996 Annual Report to Shareholders
incorporated herein by reference.
(b) Financial Information About Industry Segments.
The Company operates in one business segment: the developing,
manufacturing, and marketing of analytical instruments used to identify
complex chemical compounds, toxic metals, and other elements in a broad
range of liquids and solids, as well as instruments used to monitor
radioactivity and air pollution, and to control, image, inspect, and
measure various industrial processes and life sciences phenomena.
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(c) Description of Business.
Principal Products and Services
The Company manufactures and markets instruments that employ a
variety of advanced analytical techniques to determine the composition,
structure, and physical properties of natural and synthetic substances.
The Company's instruments are used for analysis; test and measurement;
environmental and nuclear monitoring; process control; and in life
sciences applications. Revenues from analytical and test and measurement
instruments were $772.0 million, $537.5 million, and $429.8 million in
1996, 1995, and 1994, respectively.
ThermoSpectra develops, manufactures, and markets precision imaging,
inspection, and measurement instrumentation based on high-speed data
acquisition and digital processing technologies to provide industrial and
research customers with integrated systems that address their specific
needs. ThermoSpectra's products include digital oscillographic recorders
and data acquisition systems that continuously measure and monitor
signals from various sensors; digital storage oscilloscopes (DSOs) that
are capable of taking hundreds of millions of measurements per second of
transient signals or short bursts of data; X-ray microanalyzers used as
accessories to electron microscopes to provide elemental materials
analysis as a supplement to the microscopes' imaging capabilities; X-ray
fluorescence instruments used for bulk and selected area sample analysis
in the semiconductor and electronics industries; nondestructive X-ray
inspection systems for process monitoring and quality control
applications; and confocal laser scanning microscopes that use laser
light to generate precise optical images primarily for life science
applications. ThermoSpectra recently added a line of scanning probe
microscopes that are used in industry and academia to test and measure
the topography and other surface properties of materials, down to the
atomic level.
ThermoQuest manufactures commercial mass spectrometers and has
pioneered many of the significant developments and applications of mass
spectrometry. ThermoQuest's mass spectrometry products identify and
measure the components of a sample for organic chemical compounds or for
inorganic compounds. These instruments are used primarily by
pharmaceutical companies for drug research, testing, and quality control;
by environmental laboratories for testing water, air, and soil samples
for compliance with environmental regulations; by chemical companies for
research and quality control; by manufacturers for testing in certain
industrial applications, such as the manufacture of silicon chips, and
for quality control; by food and beverage companies for quality control
and to test for product contamination; and in forensic applications.
ThermoQuest provides both stand-alone mass spectrometers and combined
systems that use its own chromatographs or those purchased from other
companies. These products span a range of sensitivity, specificity,
separation technologies, data-handling capabilities, sizes, and prices.
ThermoQuest also manufactures high performance liquid
chromatographs, gas chromatographs, and related instruments and equipment
used principally in the research and development and production analysis
of pharmaceuticals and chemicals, and for environmental analysis. These
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instruments separate the chemical components of substances for purposes
of identification and measurement and are frequently used in
environmental and industrial laboratories as stand-alone instruments or
in conjunction with mass spectrometers, where the gas or liquid
chromatograph separates a sample into individual chemical components for
the mass spectrometer to identify.
Thermo Optek develops, manufactures, and markets analytical
instruments that utilize a range of optical spectroscopy and energy-based
techniques. These instruments are used in the quantitative and
qualitative chemical analysis of elements and molecular compounds in a
wide variety of solids, liquids, and gases and are based on several
optical spectroscopy techniques, including atomic emission (AE), atomic
absorption (AA), Fourier transform infrared (FT-IR) and FT-Raman, and
ultraviolet/visible (UV/Vis) technologies. AA and AE spectrometers are
used to detect and measure metals and other elements in solid and liquid
samples from ultratrace (parts per billion) to major concentrations based
on the atomic spectra that a sample emits or absorbs when it is excited
by an energy source. FT-IR and FT-Raman spectrometers are used to
determine the molecular composition of samples by observing how they
absorb or emit infrared light. UV/Vis spectrometry instruments are based
upon the selective absorbence of ultraviolet radiation by various
substances. Thermo Optek also offers a line of wavelength dispersive
X-ray fluorescence instruments that provide elemental analysis of a wide
variety of materials in a highly precise and generally nondestructive
manner. Thermo Optek's products are used by its customers for
productivity enhancement, research and development, quality control, and
testing applications in the environmental testing, chemical,
metallurgical, food and beverage, pharmaceutical, and petroleum
industries; and by forensic laboratories, research organizations, and
educational institutions. Through its Thermo Vision subsidiary, Thermo
Optek addresses the photonics marketplace for optical components, imaging
systems, analytical instruments, and lasers. Thermo Vision is pursuing
applications of its photonics technologies for cost-effective,
application-specific instruments and for optical components, systems, and
subassemblies for analytical instrumentation.
Thermo BioAnalysis develops, manufactures, and markets instruments
and information management systems used in biochemical research and
production, as well as in clinical diagnostics. The Company focuses on
three principal product areas: life sciences instrumentation, laboratory
information management systems, and health physics instrumentation. The
Company's life sciences instrumentation products include instruments and
consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry, and capillary electrophoresis (CE) technologies. The
Company's laboratory information management systems (LIMS) and
chromatography data systems (CDS) are used in laboratories and clinical
testing facilities. These systems are designed to facilitate the
monitoring and analysis of samples throughout the laboratory or clinical
lifecycle. The Company's health physics instrumentation includes
radiation detection instrumentation and complete radiation monitoring
systems for use in and around nuclear power plants and other facilities
where radioactive materials are used.
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The Company's majority-owned, privately held Metrika Systems
subsidiary manufactures equipment that provides on-line, real-time
analysis of the elemental composition of bulk raw materials, such as coal
and cement, in the basic materials production process. In addition,
Metrika Systems manufactures industrial gauging and process control
instruments and systems for measuring thickness and coating used
principally by manufacturers of web-type materials, such as metal strip,
rubber, and plastic foils.
In other wholly owned businesses, the Company manufactures
monitoring instruments for three principal markets: the detection and
measurement of nuclear radiation; the monitoring of air pollutants,
including toxic and combustible gases; and process monitoring, analysis,
and control.
The Company's nuclear radiation monitoring instruments detect and
measure alpha, beta, gamma, neutron, and X-ray radiation emitted by
natural sources and by radioactive materials used in nuclear power plants
and certain governmental, industrial, and medical facilities. The Company
is a leading manufacturer of a broad range of stand-alone and portable
instruments and computer-integrated instrument systems used to ensure the
safety of personnel from exposure to nuclear radiation. In addition, the
Company is a major supplier of instruments and systems that are
manufactured to European standards for personnel protection and
environmental monitoring.
The Company's air-monitoring instruments measure pollutants in
ambient air and from stationary sources such as industrial smokestacks.
The principal pollutants measured are oxides of nitrogen, sulfur dioxide,
carbon monoxide, ozone, volatile organic compounds (VOCs), and airborne
particulates. These instruments are used by utility and industrial
customers to ensure compliance with environmental regulations; by
government agencies to monitor air quality; and by research facilities.
The Occupational Safety and Health Administration's safety requirements
for protecting workers from toxic or explosive atmospheres in confined
spaces are addressed with the Company's detectors, instruments, and
systems for sensing, monitoring, and warning of such dangers. These
worker-safety products are used in a wide range of applications, from
large petrochemical plants, utilities, and industrial manufacturing
facilities to commercial buildings.
The Company also participates in the process monitoring, analysis,
gauging, and control instruments markets, primarily for the oil, gas, and
petrochemical industries. The Company manufactures and markets a number
of process monitoring, analysis, and control systems including: analog
and digital recorders for continuous process industries; process and
laboratory analytical instruments and monitors to detect lethal gases for
the oil, gas, and petrochemical industries; supervisory control and data
acquisition software for process monitoring and operator interface in a
variety of industrial processes; and turnkey, integrated systems to
control networks of distant oil and gas wells.
The Company also manufactures and markets process gauges and
noncontacting and nonintrusive process control instrumentation to measure
liquid levels, density, weight, and flows for a variety of industries.
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The Company's X-ray fluorescence instruments allow for the nondestructive
analysis of inorganic elements.
With the acquisition of Life Sciences, the Company manufactures
laboratory science equipment, appliances, instruments, consumables, and
reagents for the research, clinical, and industrial markets. These
operations are organized into four product groups including: laboratory
products, serving the global research laboratory market; clinical
products, serving the hospital and clinical laboratory markets;
biosystems, serving the biotech and molecular biology R&D and QC labs;
and industrial products, serving semiconductor manufacturers and other
industries with water baths and chillers. The Company believes that this
acquisition will extend its product offerings into new markets, such as
clinical laboratory equipment, as well as enhance its presence in the
bioanalytical instrumentation marketplace.
Backlog
The Company's backlog of firm orders was $266.6 million as of
December 28, 1996, and $188.7 million as of December 30, 1995. The
Company anticipates that substantially all of the backlog as of December
28, 1996, will be shipped or completed during 1997. The Company does not
believe that the level of, or changes in the level of, its backlog is
necessarily indicative of intermediate or long-term trends in its
business.
Competition
The Company generally competes on the basis of technical advances
that result in new products and improved price/performance ratios,
reputation among customers as a quality leader for products and services,
and active research and application-development programs. To a lesser
extent, the Company competes on the basis of price.
In many markets, the Company competes with large analytical
instrument companies such as Hewlett-Packard Co. (Hewlett-Packard),
Perkin-Elmer Corp. (Perkin-Elmer), Varian Associates, Inc. (Varian), and
Hitachi, Ltd. (Hitachi). Certain products manufactured by the Company
also compete with products sold by numerous smaller, specialized firms.
ThermoSpectra competes in each of its markets primarily on the basis
of technical advances that result in new products and improved
price/performance ratios and reputation among customers as a quality
leader for products and services. To a lesser extent, ThermoSpectra
competes on the basis of price. The market for digital oscillographic
recorders is characterized by competition among a number of competitors,
including Astro-Med, Inc. and Yokogawa Corporation (Yokogawa). The
general purpose DSO market is dominated by Tektronix, Inc. and
Hewlett-Packard. The Company competes primarily in the high- and mid-ends
of the X-ray microanalysis market. In the high end of this market,
ThermoSpectra offers superior imaging and user-interface software.
ThermoSpectra competes in the mid end of the X-ray microanalysis market
on the basis of quality, performance, and price. The main competitor in
this segment is Link Analytical Limited, a wholly owned subsidiary of
Oxford Instruments plc (Oxford). In the X-ray inspection market,
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ThermoSpectra competes with smaller companies in the manual segment of
the market, and primarily with Four Pi Systems, a subsidiary of
Hewlett-Packard, in the automated segment. In the digital video segment
of the confocal microscopy market, ThermoSpectra competes primarily with
Nikon Inc. as well as Bio-Rad Laboratories, Inc. (Bio-Rad). The Company
competes in the scanning probe microscope market on the basis of quality
and, to a lesser extent, price. The dominant competitor in this market is
Digital Instruments, Inc.
ThermoQuest competes in each of its markets primarily on technical
performance, customer service and support and, to a lesser extent, price.
ThermoQuest's principal competitors in the mass spectrometry market
include Hewlett-Packard, Micromass Ltd. (Micromass), Japan Electro
Optical Laboratories, and the Sciex Division of Perkin-Elmer.
ThermoQuest's principal competitors in the liquid chromatography market
are Waters Technologies Corporation, Hewlett-Packard, Shimadzu
Corporation (Shimadzu), Beckman Instruments, Inc. (Beckman), and
Perkin-Elmer. In the gas chromatography market, ThermoQuest competes with
numerous companies, including Hewlett-Packard, Varian, Perkin-Elmer, and
Shimadzu.
Thermo Optek competes in each of its markets primarily on the basis
of performance, reliability, customer service, and price. In the market
for AE and AA spectrometers and inductively coupled plasma/mass
spectrometry instruments, Thermo Optek competes primarily with
Perkin-Elmer and, to a lesser extent, Varian. Thermo Optek competes in
the arc/spark market primarily with Spectro. In the FT-IR and FT-Raman
markets, Thermo Optek competes primarily with Perkin-Elmer, the Digilab
division of Bio-Rad, and Bruker Instruments, Inc. (Bruker). Thermo
Optek's primary competitors in the UV/Vis instruments market are
Perkin-Elmer, Shimadzu, and Hewlett-Packard.
Thermo BioAnalysis competes in each of its markets primarily on the
basis of technological innovation, cost, performance (including
throughput and sensitivity), and flexibility. The Company's principal
competitors in the immunoassay consumables or plastics market include
Nunc-Nalge Inc., Greiner GmbH, and Corning-Costar Corp. In the detection
systems market, the Company competes primarily with Bio-Tek Instruments,
Inc. and Molecular Devices Corp. In the automated systems market, the
Company's main competitors include BioChem Pharma Inc., Immunosystems,
Inc., and Hamilton Bonaduz AG. The Company's dominant competitor in the
market for optical biosensors is the Pharmacia Biosensor subsidiary of
Pharmacia & Upjohn, Inc. In the matrix-assisted laser
desorption/time-of-flight (MALDI-TOF) mass spectrometry market, principal
competitors include PerSeptive Biosystems, Inc., Bruker, and Micromass.
Thermo BioAnalysis' principal competitors in the CE market include
Beckman, Bio-Rad, and Hewlett-Packard. Significant competitors in the
LIMS and CDS markets include Perkin-Elmer, Beckman, and the Laboratory
MicroSystems Inc. subsidiary of Instron Corp. Significant competitors in
the health physics instrumentation market include the Instruments Group
of EG&G, Inc., the Nuclear Products Division of Morgan Crucible Co., plc,
and the Bicron/NE Technology division of Saint-Gobain-Norton Industrial
Ceramics Corporation.
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Metrika Systems competes primarily on the basis of performance and,
to a lesser extent, price in the coal, cement, and mineral industries.
Scantech Holdings is the Company's primary competitor in these
industries. Competition in the thickness gauging business is highly
fragmented with numerous competitors competing in various end use market
segments. As a result, competition varies according to the end use
segment. Metrika Systems competes on the basis of quality, performance,
and price. Metrika Systems' competitors in this market include Measurex,
Toshiba, Yokogawa, IMS, and Asea Brown Boveri.
The Company is a leading manufacturer of ambient air monitoring
instruments and a major manufacturer of source monitoring and
worker-safety monitoring instruments. The Company competes in these
markets on the basis of technical performance and reliability, as well as
customer service. The Company's principal competitors include Monitor
Labs Incorporated, Advanced Pollution Instruments, and Mine Safety
Appliances Co.
The Company has a relatively small presence within the large and
varied process control marketplace, which is extremely fragmented and
comprises several large companies, including Fisher-Rosemount, Elsig
Bailey, and Honeywell Process Control, as well as numerous smaller
companies. The Company competes in this market primarily on the basis of
technical performance, customer service, and reliability.
Environmental Protection Regulations
The Company believes that compliance by the Company with federal,
state, and local environmental protection regulations will not have a
material adverse effect on its capital expenditures, earnings, or
competitive position.
Number of Employees
As of December 28, 1996, the Company employed approximately 6,870
people.
(d) Financial Information About Exports by Domestic Operations and
About Foreign Operations.
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 13 to Consolidated Financial
Statements in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
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(e) Executive Officers of the Registrant.
Present Title (Year First Became
Name Age Executive Officer)
------------------------- --- --------------------------------
Arvin H. Smith 67 Chief Executive Officer (1986)
Earl R. Lewis 53 President and Chief Operating
Officer (1990)
Denis A. Helm 58 Senior Vice President (1986)
Dr. Richard W.K. Chapman 52 Vice President (1994)
Barry S. Howe 41 Vice President (1994)
John N. Hatsopoulos * 62 Vice President and Chief
Financial Officer (1988)
Paul F. Kelleher 54 Chief Accounting Officer (1986)
* John N. Hatsopoulos and George N. Hatsopoulos, a director of the
Company, are brothers.
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until earlier
resignation, death, or removal. All executive officers, except Mr. Lewis
and Dr. Chapman, have held comparable positions for at least five years
either with the Company or with its parent company, Thermo Electron. Mr.
Lewis was named President of the Company in March 1997. Mr. Lewis served
as Executive Vice President and Chief Operating Officer of the Company
from January 1996 through March 1997, as a Senior Vice President from
January 1994 through January 1996, and as a Vice President from March
1990 through January 1994. Dr. Chapman has been President and Chief
Executive Officer of ThermoQuest since its inception in June 1995, and
served as President of Finnigan Corporation (Finnigan), a subsidiary of
ThermoQuest, from 1992 to 1995 and as Marketing Manager of Finnigan from
1989 to 1992. Messrs. Lewis, Helm, Chapman, and Howe are full-time
employees of the Company. Messrs. Smith, Hatsopoulos, and Kelleher are
full-time employees of Thermo Electron and certain of its subsidiaries,
but devote such time to the affairs of the Company as the Company's needs
reasonably require.
Item 2. Properties
The Company owns approximately 1,973,000 square feet of office,
engineering, laboratory, and production space, principally in California,
Colorado, Florida, New Mexico, Texas, Wisconsin, Germany, England, and
Switzerland, and leases approximately 2,281,000 square feet of office,
engineering, laboratory, and production space under leases expiring from
1997 through 2017, principally in California, Massachusetts, Connecticut,
Ohio, Texas, England, France, Germany, and Japan. As of December 28,
1996, the Company had a $9.3 million mortgage loan that is secured by
200,000 square feet of property in California with a net book value of
$16.0 million. The Company believes that its facilities are in good
condition and are suitable and adequate for its present operations and
that suitable space is readily available if any of such leases are not
extended.
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Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for the
Registrant's common stock, $.10 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1996 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of December
28, 1996, and Supplementary Data are included in the Registrant's 1996
Annual Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
13PAGE
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a), (d) Financial Statements and Schedules.
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2) The consolidated financial statement schedule set forth in
the list below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14.
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
See Exhibit Index on the page immediately preceding exhibits.
14PAGE
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: March 19, 1997 THERMO INSTRUMENT SYSTEMS INC.
By: Arvin H. Smith
----------------------
Arvin H. Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated, as of March 19, 1997.
Signature Title
--------- -----
By:Arvin H. Smith Chief Executive Officer, Chairman of
----------------------- the Board, and Director
Arvin H. Smith
By:John N. Hatsopoulos Vice President, Chief Financial
----------------------- Officer, and Director
John N. Hatsopoulos
By:Paul F. Kelleher Chief Accounting Officer
-----------------------
Paul F. Kelleher
By:Frank Borman Director
-----------------------
Frank Borman
By:George N. Hatsopoulos Director
-----------------------
George N. Hatsopoulos
By:Polyvios C. Vintiadis Director
-----------------------
Polyvios C. Vintiadis
PAGE
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of
Thermo Instrument Systems Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
Instrument Systems Inc.'s Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
February 11, 1997 (except with respect to the matter discussed in Note 15
as to which the date is March 12, 1997). Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule listed in Item 14 on page 14 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation
to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 11, 1997
PAGE
<PAGE>
SCHEDULE II
THERMO INSTRUMENT SYSTEMS INC.
Valuation and Qualifying Accounts
(In thousands)
Provision
Balance at Charged Accounts Balance
Beginning to Accounts Written at End
Description of Year Expense Recovered Off Other(a) of Year
- --------------------------------------------------------------------------------
Year Ended
December 28,
1996
Allowance for
Doubtful
Accounts $12,569 $2,274 $ 69 $(5,015) $7,084 $16,981
Year Ended
December 30,
1995
Allowance for
Doubtful
Accounts $ 8,779 $2,543 $ 191 $(2,942) $3,998 $12,569
Year Ended
December 31,
1994
Allowance for
Doubtful
Accounts $ 8,456 $ 733 $ 126 $(2,736) $2,200 $ 8,779
(a) Includes allowance of businesses acquired during the year as described in
Note 4 to Consolidated Financial Statements in the Company's 1996 Annual
Report to Shareholders, the effect of foreign currency translation, and a
disposition in 1994 of $2,696,000.
17PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
---------- -----------------------------------------------------------
2.1 Asset and Stock Purchase Agreement among the
Registrant, Thermo Electron,. and Fisons plc dated
March 1, 1995, as amended (filed as Exhibit 2.3 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and as Exhibit 2 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 [File No. 1-9786] and
incorporated herein by reference). Pursuant to Item
601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Company hereby
undertakes to furnish supplementally a copy of such
schedules to the Commission upon request.
3.1 Amendment to Restated Certificate of Incorporation of
the Registrant (filed as Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1996 [File No. 1-9786] and
incorporated herein by reference).
3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-9786]
and incorporated herein by reference).
4.1 Fiscal Agency Agreement dated as of September 15,
1993, among the Registrant, Thermo Electron, and
Chemical Bank as fiscal agent, relating to $70,000,000
principal amount of 3 3/4% senior convertible
debentures due 2000 (filed as Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1993 [File No. 1-9786] and
incorporated by reference).
4.2 Senior convertible note purchase agreement by and
between the Registrant and Thermo Electron as of
September 15, 1993 (filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1993 [File No. 1-9786] and
incorporated by reference).
The Registrant hereby agrees, pursuant to Item 601(b)
(4) (iii) (A) of Regulation S-K, to furnish to the
Commission upon request, a copy of each instrument
with respect to other long-term debt of the Registrant
or its subsidiaries.
10.1 Amended and Restated Corporate Services Agreement,
dated as of January 3, 1993, between Thermo Electron
and the Registrant (filed as Exhibit 10(a) to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993 [File No. 1-9786] and
incorporated herein by reference).
18PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
---------- -----------------------------------------------------------
10.2 Tax Allocation Agreement dated as of May 29, 1986,
between Thermo Electron and the Registrant (filed as
Exhibit 10(b) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference).
10.3 Thermo Electron Corporate Charter, as amended and
restated effective January 3, 1993 (filed as Exhibit
10(f) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993 [File No.
1-9786] and incorporated herein by reference).
10.4 Form of Indemnification Agreement with Directors and
Officers (filed as Exhibit 10(g) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 [File No. 1-9786] and incorporated
herein by reference).
10.5 Plan for sale of shares by the Registrant to Thermo
Electron (filed as Exhibit 10(dd) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
July 3, 1993 [File No. 1-9786] and incorporated herein
by reference).
10.6 Master Repurchase Agreement dated December 28, 1996,
between the Registrant and Thermo Electron.
10.7 Master Guarantee Reimbursement Agreement dated January
1, 1994, by and among the Registrant and Thermo
Electron (filed as Exhibit 4.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 [File No. 1-9786] and incorporated
herein by reference).
10.8 $30,000,000 Promissory Note dated as of February 13,
1996, issued by Thermo BioAnalysis to Thermo Electron
(filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 30,
1996 [File No. 1-9786] and incorporated herein by
reference).
10.9 $65,000,000 Promissory Note dated as of April 12,
1996, issued by the Registrant to Thermo Electron
(filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 30,
1996 [File No. 1-9786] and incorporated herein by
reference).
10.10 Restated Stock Holdings Assistance Plan and Form of
Promissory Note.
19PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
---------- -----------------------------------------------------------
10.11-10.15 Reserved.
10.16 Deferred Compensation Plan for Directors of the
Registrant (filed as Exhibit 10(f) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-6762]
and incorporated herein by reference).
10.17 Directors' Stock Option Plan of the Registrant (filed
as Exhibit 10.17 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994
[File No. 1-9786] and incorporated herein by
reference).
10.18 Incentive Stock Option Plan of the Registrant (filed
as Exhibit 10(c) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and
the Registrant's Nonqualified Stock Option Plan is
2,812,500 shares, after adjustment to reflect share
increase approved in 1990; 3-for-2 stock splits
effected in January 1988, July 1993, and April 1995;
and 5-for-4 stock split effected in December 1995).
10.19 Nonqualified Stock Option Plan of the Registrant
(filed as Exhibit 10(d) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-6762]
and incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan
and the Registrant's Incentive Stock Option Plan is
2,812,500 shares, after adjustment to reflect share
increase approved in 1990; 3-for-2 stock splits
effected in January 1988, July 1993, and April 1995;
and 5-for-4 stock split effected in December 1995).
10.20 Equity Incentive Plan of the Registrant (filed as
Appendix A to the Proxy Statement dated April 27,
1993, of the Registrant [File No. 1-9786] and
incorporated herein by reference). (Maximum number of
shares issuable is 4,031,250 shares, after adjustment
to reflect share increase approved in December 1993;
3-for-2 stock splits effected in July 1993 and April
1995; and 5-for-4 stock split effected in December
1995).
10.21 Finnigan Corporation 1979 Long-term Incentive Stock
Option Plan (filed as Exhibit 10.21 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference).
20PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
---------- -----------------------------------------------------------
10.22 Former Thermo Environmental Corporation Incentive
Stock Option Plan (filed as Exhibit 10(d) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Former Thermo
Environmental Corporation Nonqualified Stock Option
Plan is 1,160,156 shares, after adjustment to reflect
share increase approved in 1987; 3-for-2 stock splits
effected in July 1993 and April 1995; and 5-for-4
stock split effected in December 1995).
10.23 Former Thermo Environmental Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10(e) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Former Thermo
Environmental Corporation Incentive Stock Option Plan
is 1,160,156 shares, after adjustment to reflect share
increase approved in 1987; 3-for-2 stock splits
effected in July 1993 and April 1995; and 5-for-4
stock split effected in December 1995).
10.24 Thermo Instrument Systems Inc. - ThermoSpectra
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.51 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994
[File No. 1-9786] and incorporated herein by
reference).
10.25 Thermo Instrument Systems Inc. - ThermoQuest
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.65 to Thermo Cardiosystems' Annual Report
on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by
reference).
10.26 Thermo Instrument Systems Inc. - Thermo BioAnalysis
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.64 to Thermo Cardiosystems' Annual Report
on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by
reference).
10.27 Thermo Instrument Systems Inc. - Thermo Optek
Corporation Nonqualified Stock Option Plan.
21PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
---------- -----------------------------------------------------------
In addition to the stock-based compensation plans of
the Registrant, the executive officers of the
Registrant may be granted awards under stock-based
compensation plans of Thermo Electron for services
rendered to the Registrant or to such affiliated
corporations. Thermo Electron's plans were filed as
Exhibits 10.21 through 10.44 to the Annual Report on
Form 10-K of Thermo Electron for the year ended
December 30, 1995 [File No. 1-8002] and as Exhibit
10.19 to the Annual Report on Form 10-K of Trex
Medical Corporation for the fiscal year ended
September 28, 1996 [File No. 1-11827] and are
incorporated herein by reference.
11 Statement re: Computation of Earnings per Share.
13 Annual Report to Shareholders for the year ended
December 28, 1996 (only those portions incorporated
herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
Exhibit 10.6
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
The Master Repurchase Agreement dated as of July 2, 1996
between Thermo Electron Corporation, a Delaware corporation
("Seller"), and Thermo Instrument Systems Inc., a Delaware
corporation (the "Buyer"), is hereby amended and restated in its
entirety as follows on and as of December 28, 1996.
1. Applicability
From time to time Buyer and Seller may enter into
transactions in which Seller agrees to transfer to Buyer certain
securities and/or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities on demand, against
the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction" and shall be governed by
this Agreement, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to either party (i)
the commencement by such party as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property;
or (ii) the commencement of any such case or proceeding against
such party, or another seeking such an appointment, which (A) is
consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a
general assignment for the benefit of creditors; or (iv) the
admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or
other distributions thereon;
(d) "Market Value", with respect to any Securities as of
any date, the price for such Securities on such date obtained
from a generally recognized source agreed to by the parties or
the most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than any
Income transferred to Seller pursuant to Paragraph 6 hereof) as
of such date (unless contrary to market practice for such
Securities);
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(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this
Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper
Composite rate for 90-day maturities provided by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or, if such rate is not
available, a substantially equivalent rate agreed to by Buyer and
Seller) plus 25 basis points, which rate shall be adjusted on the
first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased
Securities are transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by
Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The
term "Purchased Securities" with respect to any Transaction at
any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude
Securities returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account
maintained by Seller containing, among other Securities, the
Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an
amount equal to the Purchase Price paid by Buyer to Seller for
such Purchased Security.
3. Transactions
(a) A Transaction may be initiated by Buyer upon the
transfer of the Purchase Price to Seller's account. Upon such
transfer, Seller shall transfer to Buyer Purchased Securities
having a Market Value equal to 103% of the Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer
by Seller in the Repurchase Collateral Account. Seller shall
indicate on its books for such account Buyer's ownership of the
Purchased Securities. Upon reasonable request from Buyer, Seller
shall provide Buyer with a complete list of Purchased Securities
owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase
from Buyer, and Buyer shall sell to Seller, for the Repurchase
Price all or any part of the Purchased Securities then owned by
Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer is less than 103% of the
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aggregate Repurchase Price for such Purchased Securities, then
Seller shall transfer to Buyer additional Securities ("Additional
Purchased Securities"), so that the aggregate Market Value of
such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such
aggregate Repurchase Price.
(b) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer exceeds 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller may transfer Purchased Securities to Seller, so that the
aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. Interest Payments
If during any fiscal month Buyer owned Purchased Securities,
then on the first day of the next following fiscal month Seller
shall pay to Buyer an amount equal to the sum of the aggregate
Repurchase Prices of the Purchased Securities owned by Buyer at
the close of each day during the preceding fiscal month divided
by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided
by 360.
6. Income Payments and Voting Rights
Where a particular Transaction's term extends over an Income
payment date on the Purchased Securities subject to that
Transaction, Buyer shall, on the date such Income is payable,
transfer to Seller an amount equal to such Income payment or
payments with respect to any Purchased Securities subject to such
Transaction. Seller shall retain all voting rights with respect
to Purchased Securities sold to Buyer under this Agreement.
7. Security Interest
Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such
Transactions are deemed to be loans, Seller shall be deemed to
have pledged to Buyer as security for the performance by Seller
of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with
respect to all Transactions hereunder and all proceeds thereof.
8. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. As used
herein with respect to Securities, "transfer" is intended to have
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the same meaning as when used in Section 8-313 of the
Massachusetts Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
9. Substitution
Buyer hereby grants Seller the authority to manage, in
Seller's sole discretion, the Purchased Securities held in
custody for Buyer by Seller in the Repurchase Collateral Account.
Buyer expressly agrees that Seller may (i) substitute other
Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase
Collateral Account. Substitutions shall be made by transfer to
Buyer of such other Securities and transfer to Seller of the
Purchased Securities for which substitution is being made. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of
substitution equal to or greater than the Market Value of the
Purchase Securities for which such Securities were substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the
other that (i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder
and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (iii) it has obtained
all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (iv) the
execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On
the date for any Transaction Buyer and Seller shall each be
deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
fails to transfer Purchased Securities upon demand for repurchase
from either Buyer or Seller, (ii) Seller or Buyer fails, after
one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to make payment to Seller pursuant to Paragraph
6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof,
(v) an Act of Insolvency occurs with respect to Seller or Buyer,
(vi) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, or (vii) Seller or Buyer
shall admit to the other its inability to, or its intention not
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to, perform any of its obligations hereunder (each an "Event of
Default"):
(a) At the option of the nondefaulting party, exercised by
written notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given,
immediately upon the occurrence of any Act of Insolvency), Seller
shall become obligated to repurchase, and Buyer shall become
obligated to sell, all Purchased Securities then owned by Buyer
for the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises
or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligations
hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise shall
be retained by Buyer and applied to the aggregate unpaid
Repurchase Prices owed by Seller, and (iii) Seller shall
immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting
party, upon tender by Seller of payment of the aggregate
Repurchase Prices for all such Transactions, Buyer's right, title
and interest in all Purchased Securities subject to such
Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under
subparagraph (a) of this Paragraph or the notice referred to in
clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the
defaulting party, (A) immediately sell, in a recognized market at
such price or prices as Buyer may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and
apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in
its sole discretion elect, in lieu of selling all or a portion of
such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on
such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder; and
(ii) as to Transactions in which Buyer is the
defaulting party, (A) purchase securities ("Replacement
Securities") of the same class and amount as any Purchased
Securities that are not delivered by Buyer to Seller as required
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hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting
party, Buyer shall be liable to Seller (i) with respect to
Purchased Securities (other than Additional Purchased
Securities), for any excess of the price paid (or deemed paid) by
Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed
paid) by Seller for the Replacement Securities therefor.
(g) The defaulting party shall be liable to the
nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection
with or as a consequence of an Event of Default.
(h) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto
and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and
have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that
each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other
and netted.
13. Entire Agreement; Severability
This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for
repurchase transactions. Each provision and agreement and
agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be
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enforceable notwithstanding the unenforceability of any such
other provision or agreement.
14. Non-assignability; Termination
The rights and obligations of the parties under this
Agreement and under any Transactions shall not be assigned by
either party without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns. This
Agreement may be canceled by either party upon giving written
notice to the other, except that this Agreement shall,
notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. Governing Law
This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to the
conflict of law principles thereof.
16. No Waivers, Etc.
No express or implied waiver of any Event of Default by
either party shall constitute a waiver of any other Event of
Default and no exercise of any remedy hereunder by any party
shall constitute a wavier of its right to exercise any other
remedy hereunder. No modification or waiver of any provision of
this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto.
17. Intent
(a) The parties recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of
Title 11 of the United States Code, as amended (except insofar as
the type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable), and
a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph
11 hereof, is a contractual right to liquidate such Transaction
as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
7PAGE
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of December 28, 1996.
THERMO ELECTRON CORPORATION THERMO INSTRUMENT SYSTEMS INC.
By:_____________________________ By:_______________________
Name: Jonathan W. Painter Name: Earl Lewis
Title: Treasurer Title: President
Exhibit 10.10
THERMO INSTRUMENTS SYSTEMS INC.
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Instrument
Systems Inc. (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the Stock
Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo Instrument Systems Inc., a Delaware
corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo Instrument Systems Inc. Stock Holding
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
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<PAGE>
interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments from the
2PAGE
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payment of annual cash incentive compensation (referred to as
bonus) to the Key Employee by the Company, beginning with the
first such bonus payment to occur after the date of the Note
evidencing the Loan, and on each of the next four bonus payment
dates, provided that the Committee may, in its sole and absolute
discretion, authorize such other maturity and repayment schedule
as the Committee may determine. Each Loan shall also become
immediately due and payable in full, without demand, upon the
occurrence of any of the events set forth in the Note; provided
that the Committee may, in its sole and absolute discretion,
authorize an extension of the time for repayment of a Loan upon
such terms and conditions as the Committee may determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
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The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMO INSTRUMENT SYSTEMS INC.
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Instrument Systems Inc. (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company an
amount equal to 20% of the initial principal amount of the Note
from the payment of annual cash incentive compensation (referred
to as bonus) to the Employee by the Company, beginning with the
first such bonus payment to occur after the date of this Note,
and on each of the next four bonus payment dates. Any amount
remaining unpaid under this Note, if no demand has been made by
the Company, shall be due and payable on the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
5PAGE
<PAGE>
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee, the
filing by or against the Employee of any petition under the
United States Bankruptcy Code (or the filing of any similar
petition under the insolvency law of any jurisdiction), or the
making by the Employee of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver, custodian
or similar agent with respect to, or the taking by any such
person of possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction not
removed, repealed or dismissed within thirty (30) days of
issuance, against or affecting the person or property of the
Employee or any liability or obligation of the Employee to the
Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 10.27
THERMO INSTRUMENT SYSTEMS INC.
THERMO OPTEK CORPORATION NONQUALIFIED STOCK OPTION PLAN
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended
to encourage ownership of Common Stock, $0.01 par value (the
"Common Stock"), of Thermo Optek Corporation ("Subsidiary"), a
subsidiary of Thermo Instrument Systems Inc. (the "Company"), by
persons selected by the Board of Directors (or a committee
thereof) in its sole discretion, including directors, executive
officers, key employees and consultants of the Company and its
subsidiaries, and to provide additional incentive for them to
promote the success of the business of the Company and
Subsidiary. The Plan is intended to be a nonstatutory stock
option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of
Directors of the Company.
3. Stock Subject to Plan
At no time shall the number of shares of the Common Stock
then outstanding which are attributable to the exercise of
options granted under the Plan plus the number of shares then
issuable upon the exercise of outstanding options granted under
the Plan exceed 1,000,000 shares (as adjusted to reflect the
three-for-two stock split effected in the form of a 50% stock
dividend in April 1996), subject however, to the provisions of
paragraph 11 of the Plan. Shares to be issued upon the exercise
of options granted under the Plan shall be shares of Subsidiary
beneficially owned by the Company. If any option expires or
terminates for any reason without having been exercised in full,
the unpurchased shares subject thereto shall again be available
for options thereafter to be granted.
4. Administration
The Plan shall be administered by a committee (the
"Committee") composed of the members of the Board of Directors of
the Company, no member of which shall act upon any matter
exclusively affecting any option granted or to be granted to
himself or herself under the Plan. Subject to the provisions of
the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to
each option to be granted by the Company: (a) the person to
receive the option (the "Optionee"); (b) the time of granting the
option; (c) the number of shares subject thereto; (d) the option
price; (e) the option period; and (f) the terms of the option and
form of option agreement (which need not be identical, but which
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shall conform to the applicable terms and conditions of the Plan
and contain such other provisions as the Board of Directors deems
advisable and not inconsistent with the Plan). In making such
determinations, the Committee may take into account the nature of
the services rendered by the Optionees, their present and
potential contributions to the success of the Company and/or one
or more of its subsidiaries, and such other factors as the
Committee in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements (which need not be
identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this paragraph 4
shall be conclusive.
5. Eligibility
An option may be granted to any person selected by the
Committee in its sole discretion.
6. Time of Granting Options
The granting of an option shall take place at the time
specified by the Committee. Only if expressly so provided by the
Committee shall the granting of an option be regarded as taking
place at the time when a written option agreement shall have been
duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement
shall provide, among other things, that it does not confer upon
an Optionee any right to continue in the employ of the Company
and/or one or more of its subsidiaries or to continue as a
director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such
subsidiary to terminate the employment of the Optionee at any
time if the Optionee is an employee, to remove the Optionee as a
director of the Company if the Optionee is a director, or to
terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such
installments, cumulative or noncumulative, as the Committee may
determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by
written notice of intent to exercise the option, specifying the
number of shares of stock with respect to which the option is
then being exercised. The notice shall be accompanied by payment
in the form of cash or shares of Subsidiary Common Stock (the
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<PAGE>
"Tendered Shares") with a then current market value equal to the
option price of the shares to be purchased; provided, however,
that such Tendered Shares shall have been acquired by the
Optionee more than six months prior to the date of exercise,
unless such requirement is waived in writing by the Company.
Against such payment the Company shall deliver or cause to be
delivered to the Optionee a certificate for the number of shares
then being purchased, registered in the name of the Optionee or
other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other
body having jurisdiction in the premises shall require the
Company, Subsidiary or the Optionee to take any action in
connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or
certificates for such shares shall be postponed until completion
of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
Options shall not be transferable, otherwise than by will or
the laws of descent and distribution, except as may be authorized
by the Committee, in its sole discretion. T he Committee may, in
its discretion, determine the extent to which options granted to
an Optionee shall be transferable, and such provisions permitting
transfer shall be set forth in the written option agreement
executed and delivered by or on behalf of the Company and the
Optionee.
10. Vesting, Restrictions and Termination of Options
The Committee, in its sole discretion, may determine the
manner in which options shall vest, the rights of the Company to
repurchase the shares issued upon the exercise of any option and
the manner in which such rights shall lapse, and the terms upon
which any option granted shall terminate. The Board of Directors
shall have the right to accelerate the date of exercise of any
installment or to accelerate the lapse of the Company's
repurchase rights. All of such terms shall be specified in a
written option agreement executed and delivered by or on behalf
of the Company and the Optionee to whom such option shall be
granted.
11. Adjustment of Number of Shares
Each stock option agreement shall provide that in the event
of any stock dividend payable in the Common Stock or any split-up
or contraction in the number of shares of the Common Stock
occurring after the date of the agreement and prior to the
exercise in full of the option, the number of shares for which
the option may thereafter be exercised shall be proportionately
adjusted and the price to be paid for each share subject to the
option shall be proportionately adjusted. Each such agreement
shall also provide that in case of any reclassification or change
PAGE
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of outstanding shares of the Common Stock or in case of any
consolidation or merger of Subsidiary with or into another
company or in case of any sale or conveyance to another company
or entity of the property of Subsidiary as a whole or
substantially as a whole, the Optionee shall, upon exercise of
the option, be entitled to receive shares of stock or other
securities in its place equivalent in kind and value to those
shares which he would have received if he had exercised the
option in full immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and had
continued to hold the shares subject to the option (together with
all other shares, stock and securities thereafter issued in
respect thereof) to the time of the exercise of the option;
provided, that if any recapitalization is to be effected through
an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par
value will exceed the option price under such agreement, the
Company shall notify the Optionee of such proposed
recapitalization, and the Optionee shall then have the right,
exercisable at any time prior to such recapitalization becoming
effective, to purchase all of the shares subject to the option
which he has not theretofore purchased (anything in such
agreement to the contrary notwithstanding), but if the Optionee
fails to exercise such right before such recapitalization becomes
effective, the option price under such agreement shall be
appropriately adjusted. Each such agreement shall further
provide that upon dissolution or liquidation of Subsidiary, the
option shall terminate, but the Optionee (if at the time an
employee or director of the Company and/or any one or more of its
subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the option to the full
extent not theretofore exercised; that no adjustment provided for
above shall apply to any share with respect to which the option
has been exercised prior to the effective date of such
adjustment; and that no fraction of a share or fractional shares
shall be purchasable or deliverable under such agreement, but in
the event any adjustment thereunder of the number of shares
covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the
nearest smaller whole number of shares. In the event of changes
in the outstanding Common Stock by reason of any stock dividend,
split-up, contraction, reclassification, or change of outstanding
shares of the Common Stock of the nature contemplated by this
paragraph 11, the number of shares of Common Stock available for
the purpose of the Plan as stated in paragraph 3 hereof shall be
correspondingly adjusted by the Committee.
12. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in
respect of shares as to which their options shall not have been
exercised, certificates issued and delivered and payment as
herein provided made in full, and shall have no rights with
respect to such shares not expressly conferred by this Plan.
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13. Stock Reserved
The Company shall at all times during the term of the
options reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of
this Plan and shall pay all other fees and expenses necessarily
incurred by the Company in connection therewith.
14. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the
Company, will be required to give a representation in form
satisfactory to counsel for the Company that he will not
transfer, sell or otherwise dispose of the shares received upon
exercise of the option at any time purchased by him, upon
exercise of any portion of the option, in a manner which would
violate the Securities Act of 1933, as amended, and the
regulations of the Securities and Exchange Commission thereunder
and the Company may, if required or at its discretion, make a
notation on any certificates issued upon exercise of options to
the effect that such certificate may not be transferred except
after receipt by the Company of an opinion of counsel
satisfactory to it to the effect that such transfer will not
violate such Act and such regulations.
15. Tax Withholding
The Company shall have the right to deduct from payments of
any kind otherwise due to an Optionee any federal, state or local
taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of options under the Plan (the
"withholding requirements"). The Committee will have the right
to require that the Optionee or other appropriate person remit to
the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery
of any Common Stock pursuant to exercise of an option. If and to
the extent that such withholding is required, the Committee may
permit the Optionee or such other person to elect at such time
and in such manner as the Committee provides to have the Company
hold back from the shares to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the
withholding requirements.
16. Termination and Amendment of Plan
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect.
Notwithstanding any other provisions hereof, the Plan shall
terminate on December 31, 2006 and no options shall be granted
hereunder thereafter.
<PAGE>
Exhibit 11
THERMO INSTRUMENT SYSTEMS INC.
Computation of Earnings per Share
1996 1995 1994
------------------------------------------------------------------------------
Computation of Fully
Diluted Earnings per Share
from Continuing Operations:
Income:
Income from continuing
operations $132,751,000 $ 79,304,000 $ 58,261,000
Add: Convertible obligation
interest, net of tax 5,288,000 5,729,000 6,315,000
------------ ------------ ------------
Income from continuing operations
applicable to common stock
assuming full dilution (a) $138,039,000 $ 85,033,000 $ 64,576,000
------------ ------------ ------------
Shares:
Weighted average shares
outstanding 95,085,318 90,577,966 88,173,053
Add: Shares issuable from
assumed conversion of
convertible obligations 12,233,650 15,503,734 17,539,251
Shares issuable from
assumed exercise of
options (as determined
by the application of
the treasury stock method) 992,648 870,643 410,542
------------ ------------ ------------
Weighted average shares
outstanding, as adjusted (b) 108,311,616 106,952,343 106,122,846
------------ ------------ ------------
Fully Diluted Earnings per Share
from Continuing Operations
(a) / (b) $ 1.27 $ .80 $ .61
============ ============ ============
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Exhibit 11
THERMO INSTRUMENT SYSTEMS INC.
Computation of Earnings per Share (continued)
1996 1995 1994
------------------------------------------------------------------------------
Computation of Fully
Diluted Earnings per Share:
Income:
Net income $132,751,000 $ 79,306,000 $ 60,220,000
Add: Convertible obligation
interest, net of tax 5,288,000 5,729,000 6,315,000
------------ ------------ ------------
Income applicable to common stock
assuming full dilution (a) $138,039,000 $ 85,035,000 $ 66,535,000
------------ ------------ ------------
Shares:
Weighted average shares
outstanding 95,085,318 90,577,966 88,173,053
Add: Shares issuable from
assumed conversion of
convertible obligations 12,233,650 15,503,734 17,539,251
Shares issuable from
assumed exercise of
options (as determined
by the application of
the treasury stock method) 992,648 870,643 410,542
------------ ------------ ------------
Weighted average shares
outstanding, as adjusted (b) 108,311,616 106,952,343 106,122,846
------------ ------------ ------------
Fully Diluted Earnings per Share
(a) / (b) $ 1.27 $ .80 $ .63
============ ============ ============
Exhibit 13
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Financial Statements
1996
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Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Statement of Income
(In thousands except per share amounts) 1996 1995 1994
--------------------------------------------------------------------------
Revenues (Note 13) $1,209,362 $ 782,662 $ 649,992
---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 654,165 403,443 335,341
Selling, general, and administrative
expenses (Note 9) 340,963 220,436 174,490
Research and development expenses 84,091 54,314 42,924
Write-off of acquired technology
(Note 4) 3,500 - -
---------- ---------- ----------
1,082,719 678,193 552,755
---------- ---------- ----------
Operating Income 126,643 104,469 97,237
Interest Income 20,490 14,646 5,935
Interest Expense (includes $8,145,
$5,512, and $5,384 to parent company) (28,923) (18,129) (15,761)
Gain on Issuance of Stock by
Subsidiaries (Note 11) 71,713 20,128 6,469
Gain on Sale of Related Party
Investments (Note 9) - 2,227 2,000
---------- ---------- ----------
Income from Continuing Operations
Before Provision for Income Taxes
and Minority Interest Expense 189,923 123,341 95,880
Provision for Income Taxes (Note 6) 51,727 42,713 37,507
Minority Interest Expense 5,445 1,324 112
---------- ---------- ----------
Income from Continuing Operations 132,751 79,304 58,261
Income from Discontinued Operations
(net of applicable income taxes of
$1,655 in 1994; Note 3) - 2 1,959
---------- ---------- ----------
Net Income $ 132,751 $ 79,306 $ 60,220
========== ========== ==========
Earnings per Share from
Continuing Operations:
Primary $ 1.40 $ .88 $ .66
========== ========== ==========
Fully diluted $ 1.27 $ .80 $ .61
========== ========== ==========
Earnings per Share:
Primary $ 1.40 $ .88 $ .68
========== ========== ==========
Fully diluted $ 1.27 $ .80 $ .63
========== ========== ==========
Weighted Average Shares:
Primary 95,085 90,578 88,173
========== ========== ==========
Fully diluted 108,312 106,952 106,123
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
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Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Balance Sheet
(In thousands) 1996 1995
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 522,688 $ 395,233
Available-for-sale investments, at quoted
market value (amortized cost of
$7,430; Note 2) 7,452 -
Accounts receivable, less allowances of
$16,981 and $12,569 303,331 211,906
Unbilled contract costs and fees 6,043 3,800
Inventories 213,683 154,914
Prepaid expenses 13,417 9,450
Prepaid income taxes (Note 6) 58,296 31,233
---------- ----------
1,124,910 806,536
---------- ----------
Property, Plant, and Equipment, at Cost, Net 178,663 133,677
---------- ----------
Patents and Other Assets 32,454 29,611
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Notes 4 and 6) 588,373 402,989
---------- ----------
$1,924,400 $1,372,813
========== ==========
3PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable (Note 7) $ 89,462 $ 55,822
Accounts payable 83,161 55,626
Accrued payroll and employee benefits 51,728 33,025
Accrued income taxes (includes $10,839 and
$8,096 due to parent company) 39,686 25,875
Accrued installation and warranty expenses 44,211 17,962
Accrued acquisition expenses (Note 4) 30,025 20,687
Deferred revenue 35,959 20,759
Other accrued expenses 101,646 73,966
Due to parent company 12,329 12,919
---------- ----------
488,207 316,641
---------- ----------
Deferred Income Taxes (Note 6) 20,710 20,168
---------- ----------
Other Deferred Items 29,805 23,718
---------- ----------
Long-term Obligations (Note 7):
Senior convertible obligations (includes
$140,000 due to parent company) 334,781 207,600
Subordinated convertible obligations 192,500 214,775
Other (includes $15,000 in 1996 due to
parent company) 26,933 18,659
---------- ----------
554,214 441,034
---------- ----------
Minority Interest 85,197 28,547
---------- ----------
Commitments and Contingencies (Note 8)
Shareholders' Investment (Notes 5 and 10):
Common stock, $.10 par value, 250,000,000
shares authorized; 97,674,228 and
92,566,341 shares issued 9,767 9,257
Capital in excess of par value 319,464 248,468
Retained earnings 424,641 291,890
Treasury stock at cost, 750,055 and
917,985 shares (8,679) (9,724)
Cumulative translation adjustment 1,060 2,814
Net unrealized gain on available-for-sale
investments (Note 2) 14 -
---------- ----------
746,267 542,705
---------- ----------
$1,924,400 $1,372,813
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Operating Activities:
Net income $ 132,751 $ 79,306 $ 60,220
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for losses on
accounts receivable 2,274 2,543 733
Depreciation and amortization 44,233 25,257 22,810
Write-off of acquired
technology (Note 4) 3,500 - -
Gain on issuance of stock by
subsidiaries (Note 11) (71,713) (20,128) (6,469)
Gain on sale of related
party investments (Note 9) - (2,227) (2,000)
Minority interest expense 5,445 1,324 112
Increase (decrease) in deferred
income taxes (757) 2,196 1,816
Other noncash expenses 4,889 2,964 363
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable 1,394 (22,661) (2,586)
Inventories 14,184 (7,433) 6,422
Other current assets 3,978 3,058 (12)
Accounts payable (9,903) 1,202 7,745
Other current liabilities (37,456) (4,968) (8,315)
Other 290 (315) (84)
--------- --------- ---------
Net cash provided by operating
activities 93,109 60,118 80,755
--------- --------- ---------
Investing Activities:
Acquisitions, net of cash acquired
(Note 4) (248,150) (89,469) (101,336)
Proceeds from sale of services
businesses (Note 3) - 34,267 -
Purchases of available-for-sale
investments (10,250) - (23,105)
Proceeds from sale and maturities of
available-for-sale investments 3,000 17,825 16,250
Purchases of property, plant, and
equipment (19,134) (10,313) (8,190)
Proceeds from sale of property,
plant, and equipment 4,597 2,252 2,075
Other 530 (1,691) (861)
--------- --------- ---------
Net cash used in investing activities $(269,407) $ (47,129) $(115,167)
--------- --------- ---------
5PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of
Company and subsidiaries'
common stock (Note 11) $ 127,024 $ 41,788 $ 17,446
Net proceeds from issuance of
long-term obligations 168,850 187,846 -
Proceeds from issuance of notes
payable to parent company (Note 7) 110,000 15,000 -
Repayment of notes payable to
parent company (Note 7) (95,000) (15,000) -
Repayment of long-term
obligations, net (5,133) (1,373) (7,948)
--------- --------- ---------
Net cash provided by financing
activities 305,741 228,261 9,498
--------- --------- ---------
Exchange Rate Effect on Cash (1,988) 1,050 405
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents 127,455 242,300 (24,509)
Cash and Cash Equivalents at
Beginning of Year 395,233 152,933 177,442
--------- --------- ---------
Cash and Cash Equivalents at
End of Year $ 522,688 $ 395,233 $ 152,933
========= ========= =========
Cash Paid For:
Interest $ 25,837 $ 16,035 $ 14,782
Income taxes $ 42,636 $ 31,529 $ 24,913
Noncash Activities:
Conversions of convertible
obligations $ 67,594 $ 18,321 $ 14,107
Transfer of services businesses to
Thermo Terra Tech joint venture $ - $ - $ 31,301
Fair value of assets of
acquired companies $ 487,218 $ 161,985 $ 147,696
Cash paid for acquired companies (258,785) (93,004) (100,855)
--------- --------- ---------
Liabilities assumed of acquired
companies $ 228,433 $ 68,981 $ 46,841
========= ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Common Stock, $.10 Par Value
Balance at beginning of year $ 9,257 $ 4,816 $ 4,708
Issuance of stock under employees'
and directors' stock plans 5 1 4
Conversions of convertible
obligations 505 160 104
Effect of stock splits - 4,280 -
--------- --------- ---------
Balance at end of year 9,767 9,257 4,816
--------- --------- ---------
Capital in Excess of Par Value
Balance at beginning of year 248,468 233,765 219,703
Issuance of stock under employees'
and directors' stock plans 950 (1,023) (785)
Tax benefit related to employees'
and directors' stock plans 199 1,950 1,120
Conversions of convertible
obligations 65,924 17,814 13,727
Effect of stock splits - (4,280) -
Effect of majority-owned
subsidiaries' equity
transactions 3,923 242 -
--------- --------- ---------
Balance at end of year 319,464 248,468 233,765
--------- --------- ---------
Retained Earnings
Balance at beginning of year 291,890 212,584 152,364
Net income 132,751 79,306 60,220
--------- --------- ---------
Balance at end of year 424,641 291,890 212,584
--------- --------- ---------
Treasury Stock
Balance at beginning of year (9,724) (12,736) (15,850)
Issuance of stock under employees'
and directors' stock plans 1,045 3,012 3,114
--------- --------- ---------
Balance at end of year (8,679) (9,724) (12,736)
--------- --------- ---------
Cumulative Translation Adjustment
Balance at beginning of year 2,814 1,991 (2,870)
Translation adjustment (1,754) 823 4,861
--------- --------- ---------
Balance at end of year $ 1,060 $ 2,814 $ 1,991
--------- --------- ---------
7PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Net Unrealized Gain on
Available-for-sale
Investments
Balance at beginning of year $ - $ 343 $ -
Effect of change in accounting
principle (Note 2) - - 1,885
Change in net unrealized gain
on available-for-sale
investments (Note 2) 14 (343) (1,542)
-------- --------- ---------
Balance at end of year 14 - 343
-------- --------- ---------
Total Shareholders' Investment $ 746,267 $ 542,705 $ 440,763
========= ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
8PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Instrument Systems Inc. (the Company) develops, manufactures,
and markets analytical instruments used to identify complex chemical
compounds, toxic metals, and other elements in a broad range of liquids
and solids, as well as instruments used to monitor radioactivity and air
pollution, and to control, image, inspect, and measure various industrial
processes and life-sciences phenomena.
Relationship with Thermo Electron Corporation
The Company was incorporated on May 28, 1986, as a wholly owned
subsidiary of Thermo Electron Corporation (Thermo Electron). As of
December 28, 1996, Thermo Electron owned 79,207,044 shares of the
Company's common stock, representing 82% of such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company; its wholly owned subsidiaries; its majority-owned public
subsidiaries, ThermoSpectra Corporation (ThermoSpectra), ThermoQuest
Corporation (ThermoQuest), Thermo Optek Corporation (Thermo Optek), and
Thermo BioAnalysis Corporation (Thermo BioAnalysis); and its
majority-owned privately held subsidiary, Metrika Systems Corporation
(Metrika Systems). All material intercompany accounts and transactions
have been eliminated. The Company accounts for investments in businesses
in which it owns between 20% and 50% using the equity method. The
Company's ownership percentages of its majority-owned subsidiaries at
year end were as follows:
1996 1995 1994
------------------------------------------------------------------------
ThermoSpectra 72% 72% 86%
ThermoQuest 93% 100% 100%
Thermo Optek 93% 100% 100%
Thermo BioAnalysis 67% 80% 100%
Metrika Systems 84% 100% 100%
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1996, 1995, and 1994 are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
Revenue Recognition
The Company recognizes product revenues upon shipment of its products
and recognizes service contract revenues ratably over the term of the
contract. The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment. Deferred revenue in the
accompanying balance sheet consists primarily of unearned revenue on
service contracts. Substantially all of the deferred revenue in the
accompanying 1996 balance sheet will be recognized within one year.
9PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Gain on Issuance of Stock by Subsidiaries
At the time a subsidiary sells its stock to unrelated parties at a
price in excess of its book value, the Company's net investment in that
subsidiary increases. If at that time the subsidiary is an operating
entity and not engaged principally in research and development, the
Company records the increase as a gain.
If gains have been recognized on issuances of a subsidiary's stock
and shares of the subsidiary are subsequently repurchased either by the
subsidiary, the Company, or Thermo Electron, gain recognition does not
occur on issuances subsequent to the date of a repurchase until such time
as shares have been issued in an amount equivalent to the number of
repurchased shares. Such transactions are reflected as equity
transactions, and the net effect of these transactions is reflected in
the accompanying statement of shareholders' investment as "Effect of
majority-owned subsidiaries' equity transactions."
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 5). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
Income Taxes
The Company and Thermo Electron have a tax allocation agreement under
which the Company and its greater than 80%-owned subsidiaries, exclusive
of its foreign operations, are included in Thermo Electron's consolidated
federal and certain state income tax returns. The agreement provides that
in years in which the Company has taxable income, it will pay to Thermo
Electron amounts comparable to the taxes the Company would have paid if
it had filed separate tax returns. If Thermo Electron's equity ownership
of the Company were to drop below 80%, the Company would be required to
file its own federal income tax return.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred
income taxes based on the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
Primary earnings per share has been computed based on the weighted
average number of shares outstanding during the year. Because the effect
of the assumed exercise of stock options would be immaterial, they have
been excluded from the primary earnings per share calculation. Fully
diluted earnings per share has been computed assuming the conversion of
the Company's dilutive convertible obligations and elimination of the
related interest expense, as well as the exercise of stock options and
their related income tax effects.
10PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Stock Splits
All share and per share information was restated in 1995 to reflect a
three-for-two stock split, effected in the form of a 50% stock dividend,
distributed in April 1995, and a five-for-four stock split, effected in
the form of a 25% stock dividend, distributed in December 1995.
Cash and Cash Equivalents
As of December 28, 1996, $459.1 million of the Company's cash
equivalents were invested in a repurchase agreement with Thermo Electron.
Under this agreement, the Company in effect lends excess cash to Thermo
Electron, which Thermo Electron collateralizes with investments
principally consisting of U.S. government agency securities, corporate
notes, commercial paper, money market funds, and other marketable
securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. As of December 28, 1996,
the Company's cash equivalents also include investments in short-term
certificates of deposit of the Company's foreign subsidiaries, which have
an original maturity of three months or less. Cash equivalents are
carried at cost, which approximates fair market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
or weighted average basis) or market value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
(In thousands) 1996 1995
------------------------------------------------------------------------
Raw materials and supplies $108,497 $ 80,959
Work in process 47,518 40,851
Finished goods 57,668 33,104
-------- --------
$213,683 $154,914
======== ========
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: buildings and
improvements, 5 to 40 years; machinery and equipment, 2 to 10 years; and
leasehold improvements, the shorter of the term of the lease or the life
of the asset.
11PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Property, plant, and equipment consists of the following:
(In thousands) 1996 1995
------------------------------------------------------------------------
Land $ 31,048 $ 23,578
Buildings 101,761 78,075
Machinery, equipment, and leasehold improvements 118,167 87,432
-------- --------
250,976 189,085
Less: Accumulated depreciation and amortization 72,313 55,408
-------- --------
$178,663 $133,677
======== ========
Patents and Other Assets
Patents and other assets in the accompanying balance sheet includes
the costs of acquired trademarks, patents, and other specifically
identifiable intangible assets. These assets are amortized using the
straight-line method over their estimated useful lives, which range from
3 to 20 years. These assets were $15.5 million and $17.0 million, net of
accumulated amortization of $16.2 million and $13.1 million, at year-end
1996 and 1995, respectively.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
companies is amortized using the straight-line method over 40 years.
Accumulated amortization was $56.2 million and $38.0 million at year-end
1996 and 1995, respectively. The Company assesses the future useful life
of this asset whenever events or changes in circumstances indicate that
the current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired companies in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
Environmental Liabilities
The Company accrues for costs associated with the remediation of
environmental pollution when it is probable that a liability has been
incurred and the Company's proportionate share of the amount can be
reasonably estimated. Any recorded liabilities have not been discounted.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
and losses are included in the accompanying statement of income and are
not material for the three years presented.
12PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation
Certain amounts in 1995 have been reclassified to conform to the
presentation in the 1996 financial statements.
2. Available-for-sale Investments
Effective January 2, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with SFAS No. 115, the Company's debt and marketable equity
securities are considered available-for-sale investments in the
accompanying balance sheet and are carried at market value, with the
difference between cost and market value, net of related tax effects,
recorded currently as a component of shareholders' investment titled "Net
unrealized gain on available-for-sale investments." Effect of change in
accounting principle in the accompanying 1994 statement of shareholders'
investment represents the unrealized gain, net of related tax effects,
pertaining to available-for-sale investments held by the Company on
January 2, 1994.
Available-for-sale investments in the accompanying 1996 balance sheet
represents investments in corporate bonds with contractual maturities of
one year or less. The difference between the market value and the cost
basis of available-for-sale investments at December 28, 1996, was
$22,000, which represents gross unrealized gains on those investments.
The cost of available-for-sale investments that were sold was based
on specific identification in determining realized gains recorded in the
accompanying statement of income. Gain on sale of related party
investments in the accompanying statement of income resulted from gross
realized gains relating to the sale of available-for-sale investments
(Note 9).
3. Discontinued Operations
Effective April 4, 1994, the Company formed an environmental services
joint venture with Thermo TerraTech Inc. (Thermo TerraTech), another
public subsidiary of Thermo Electron. The joint venture operated under
the name Thermo Terra Tech. The Company contributed its analytical
laboratories and its nuclear health physics and environmental science and
engineering services businesses. Thermo TerraTech contributed its
environmental laboratory business, which specializes in fast-response
testing of petroleum-contaminated soils and groundwater, and
approximately $31 million in cash and short-term investments.
13PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
3. Discontinued Operations (continued)
Effective April 2, 1995, the Company and Thermo TerraTech dissolved
their joint venture. Thermo TerraTech then purchased the services
businesses formerly operated by the joint venture from the Company for
$34.3 million in cash, which was the net book value of the services
businesses. The Company owned 49% of the joint venture and accounted for
its interest in the joint venture using the equity method. Prior to the
joint venture's formation on April 2, 1994, the Company's services
businesses comprised its Services segment and were consolidated in the
Company's financial statements. The sale of the services businesses to
Thermo TerraTech represents the Company's disposal of its Services
segment. Accordingly, the operating results of the Company's Services
segment for the three-month period ended April 2, 1994, and the equity in
the income of the joint venture recorded by the Company are classified as
"Income from discontinued operations" in the accompanying statement of
income. Revenues from the Company's Services segment for the three-month
period ended April 2, 1994, were $12.2 million.
4. Acquisitions
On March 29, 1996, the Company completed the acquisition of a
substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons plc (Fisons), a wholly owned subsidiary of
Rhone-Poulenc Rorer Inc., for approximately 123.5 million British pounds
sterling in cash (approximately $188.9 million) and the assumption of
approximately 30.8 million British pounds sterling of indebtedness
(approximately $47.2 million). The purchase price is subject to
post-closing adjustments equal to the amounts by which the net tangible
assets and net debt of the acquired businesses on the closing date are
greater or less than certain target amounts agreed to by the parties. The
Company and Fisons are attempting to agree on the required adjustment to
the purchase price based on their respective calculations of the net
tangible assets of the acquired businesses. If the parties are unable to
reach agreement, a firm of independent public accountants will be
appointed to determine the adjustment. Any adjustment would affect the
purchase price allocation, including the amount allocated to cost in
excess of net assets of acquired companies. In 1996, the Company wrote
off $3.5 million of acquired technology in connection with this
acquisition, which represents the portion of the purchase price allocated
to technology in development based on estimated replacement cost. The
businesses acquired from Fisons are involved in the research,
development, manufacture, and sale of analytical instruments to
industrial and research laboratories worldwide.
To finance the acquisition of a substantial portion of the businesses
comprising the Scientific Instruments Division of Fisons, the Company
used available cash in addition to borrowings from Thermo Electron
(Note 7). During 1996, the Company made several other acquisitions for an
aggregate $69.9 million in cash, subject to certain post-closing
adjustments.
During 1995, the Company made several acquisitions for an aggregate
$93.0 million in cash.
14PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Acquisitions (continued)
In March 1994, the Company acquired several businesses within the
EnviroTech Measurements & Controls group of Baker Hughes Incorporated
(Baker Hughes) for a purchase price of $89.7 million in cash. The Company
acquired the EnviroTech Controls, NORAN Instruments, TN Technologies, and
Tremetrics businesses, which collectively design, manufacture, and market
a variety of process control, process measurement, and laboratory
analytical products for use in a wide range of industrial, energy,
environmental, and research applications. During 1994, the Company made
several other acquisitions for an aggregate $11.2 million in cash.
These acquisitions have been accounted for using the purchase method
of accounting, and their results have been included in the accompanying
financial statements from their respective dates of acquisition. The
aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $350.8 million, which is being amortized over
40 years. Allocation of the purchase price for these acquisitions was
based on estimates of the fair value of the net assets acquired and, for
acquisitions completed in fiscal 1996, is subject to adjustment upon
finalization of the purchase price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company and the businesses acquired from
Fisons on a pro forma basis, assuming the companies had been combined
since the beginning of 1995. The effect of the acquisitions not included
in the pro forma data was not material to the Company's results of
operations.
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $1,278,824 $1,144,956
Income from continuing operations 112,973 45,528
Earnings per share from
continuing operations:
Primary 1.19 .50
Fully diluted 1.09 .48
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the businesses from Fisons been made at the beginning of
1995.
In connection with the acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons, the
Company has undertaken a restructuring of the acquired businesses. In
accordance with the requirements of Emerging Issues Task Force
Pronouncement (EITF) 95-3, the Company is in the process of completing a
plan that includes reductions in staffing levels, abandonment of excess
facilities, and other costs associated with exiting certain activities of
the acquired businesses. As part of the cost of the acquisition, the
Company established reserves totaling $38.1 million for estimated
severance, excess facilities, and other exit costs associated with the
acquisition, $19.0 million of which was expended during 1996, primarily
for severance. Unresolved matters at December 28, 1996, included
completing identification of specific employees for termination and
15PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Acquisitions (continued)
locations to be abandoned or consolidated, among other decisions
concerning the integration of the acquired businesses into the Company.
In accordance with EITF 95-3, finalization of the Company's plan for
restructuring the acquired businesses will not occur beyond one year from
the date of the acquisition. Any changes in estimates of these costs
prior to such finalization will be recorded as adjustments to cost in
excess of net assets of acquired companies.
5. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has stock-based compensation plans for its key employees,
directors, and others. Two of these plans, adopted in 1986, permit the
grant of nonqualified and incentive stock options. A third plan, adopted
in 1993, permits the grant of a variety of stock and stock-based awards
as determined by the human resources committee of the Company's Board of
Directors (the Board Committee), including restricted stock, stock
options, stock bonus shares, or performance-based shares. To date, only
nonqualified stock options have been awarded under these plans. The
option recipients and the terms of options granted under these plans are
determined by the Board Committee. Generally, options granted to date are
exercisable immediately, but are subject to certain transfer restrictions
and the right of the Company to repurchase shares issued upon exercise of
the options at the exercise price, upon certain events. The restrictions
and repurchase rights generally lapse ratably over a five to ten year
period, depending on the term of the option, which may range from seven
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must
be granted at not less than the fair market value of the Company's stock
on the date of grant. Generally, all options have been granted at fair
market value. The Company also has a directors' stock option plan,
adopted in 1991, that provides for the grant of stock options in the
Company and its majority-owned subsidiaries to outside directors pursuant
to a formula approved by the Company's shareholders. Options in the
Company awarded under this plan are exercisable six months after the date
of grant and expire three or seven years after the date of grant. In
addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Electron.
Employee Stock Purchase Program
-------------------------------
Substantially all of the Company's full-time U.S. employees are
eligible to participate in an employee stock purchase program sponsored
by the Company and Thermo Electron. Under this program, shares of the
Company's and Thermo Electron's common stock can be purchased at the end
of a 12-month period at 95% of the fair market value at the beginning of
the period and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common
16PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
stock could be purchased at 85% of the fair market value at the beginning
of the period, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages. During 1996, 1995, and
1994, the Company issued 49,973 shares, 74,826 shares, and 97,125 shares,
respectively, of its common stock under this program.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards in 1996 and 1995 under the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net income and earnings per share would have
been as follows:
(In thousands except per share amounts) 1996 1995
-----------------------------------------------------------------------
Income from continuing operations:
As reported $132,751 $79,304
Pro forma 129,591 79,033
Primary earnings per share from
continuing operations:
As reported 1.40 .88
Pro forma 1.36 .87
Fully diluted earnings per share from
continuing operations:
As reported 1.27 .80
Pro forma 1.25 .79
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation expense may not be representative of the amount to be
expected in future years. Pro forma compensation expense for options
granted is reflected over the vesting period; therefore, future pro forma
compensation expense may be greater as additional options are granted.
The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1996 1995
-----------------------------------------------------------------------
Volatility 26% 26%
Risk-free interest rate 6.2% 5.1%
Expected life of options 6.2 years 1.1 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
17PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
restrictions and are fully transferable. In addition, option-pricing models
require the input of highly subjective assumptions, including expected
stock price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
Stock Option Activity
A summary of the Company's stock option activity is as follows:
1996 1995 1994
---------------- ---------------- -----------------
Weighted Weighted Range of
Number Average Number Average Number Option
(Shares of Exercise of Exercise of Prices
in thousands) Shares Price Shares Price Shares per Share
--------------------------------------------------------------------------
Options outstanding, $ 2.85-
beginning of year 3,221 $14.85 3,798 $13.94 3,552 18.02
15.08-
Granted 378 34.49 6 18.84 744 16.58
2.85-
Exercised (204) 9.14 (375) 6.08 (353) 12.64
2.85-
Forfeited (142) 15.00 (208) 14.22 (145) 16.68
----- ----- -----
Options outstanding, $ 3.29-
end of year 3,253 $17.48 3,221 $14.85 3,798 18.02
===== ====== ===== ====== ===== ======
$ 3.29-
Options exercisable 3,253 $17.48 3,221 $14.85 3,791 18.02
===== ====== ===== ====== ===== ======
Options available
for grant 1,526 1,764 1,564
===== ===== =====
Weighted average fair
value per share of
options granted
during year $13.63 $ 3.72
====== ======
18PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
A summary of the status of the Company's stock options at December
28, 1996, is as follows:
Options Outstanding and Exercisable
-------------------------------------------
Weighted
Weighted Average Average
Range of Number Remaining Exercise
Exercise Prices of Shares Contractual Life Price
---------------------------------------------------------------------
(Shares in thousands)
$ 5.16 - $10.42 328 1.9 years $ 7.79
10.43 - 19.14 2,547 8.2 years 16.21
27.87 - 36.58 378 9.7 years 34.49
-----
$ 5.16 - $36.58 3,253 7.7 years $17.48
=====
401(k) Savings Plans and Employee Stock Ownership Plan
The majority of the Company's full-time U.S. employees are eligible
to participate in Thermo Electron's 401(k) savings plan and, prior to
1995, certain of the Company's employees were eligible to participate in
Thermo Electron's employee stock ownership plan (ESOP). In addition,
certain of the Company's employees are eligible to participate in 401(k)
savings plans sponsored by the Company's Nicolet Instrument Corporation
and Finnigan Corporation subsidiaries. Contributions to the 401(k)
savings plans are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For
these plans, the Company contributed and charged to expense $4.9 million,
$3.9 million, and $3.9 million in 1996, 1995, and 1994, respectively.
Effective December 31, 1994, the ESOP was split into two plans: ESOP I,
covering employees of Thermo Electron's corporate office and its wholly
owned subsidiaries and ESOP II, covering employees of certain of Thermo
Electron's majority-owned subsidiaries, including the Company. Also,
effective December 31, 1994, the ESOP II plan was terminated, and as a
result, the Company's employees are no longer eligible to participate in
an ESOP.
6. Income Taxes
The components of income from continuing operations before provision
for income taxes and minority interest expense are as follows:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Domestic $143,377 $ 95,999 $ 77,840
Foreign 46,546 27,342 18,040
-------- -------- --------
$189,923 $123,341 $ 95,880
======== ======== ========
19PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The components of the provision for income taxes are as follows:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Currently payable:
Federal $ 29,593 $ 29,336 $ 17,682
State 6,978 5,766 5,499
Foreign 27,100 11,490 7,977
-------- -------- --------
63,671 46,592 31,158
-------- -------- --------
Net deferred (prepaid):
Federal (5,553) (3,628) 5,480
State (1,178) (769) 1,207
Foreign (5,213) 518 (338)
-------- -------- --------
(11,944) (3,879) 6,349
-------- -------- --------
$ 51,727 $ 42,713 $ 37,507
======== ======== ========
The Company and its majority-owned subsidiaries receive a tax
deduction upon exercise of nonqualified stock options by employees for
the difference between the exercise price and the market price of the
underlying common stock on the date of exercise. The provision for income
taxes that is currently payable does not reflect $2.0 million, $2.1
million, and $1.1 million of such benefits of the Company and its
majority-owned subsidiaries that have been allocated to capital in excess
of par value, directly or through the effect of majority-owned
subsidiaries' equity transactions, in 1996, 1995, and 1994, respectively.
The provision for income taxes that is currently payable does not reflect
$4.7 million and $3.0 million of tax benefits used to reduce cost in
excess of net assets of acquired companies in 1996 and 1995,
respectively. The deferred provision for income taxes does not reflect
$3.4 million of tax benefits used to reduce cost in excess of net assets
of acquired companies in 1995.
20PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of
income differs from the provision calculated by applying the statutory
federal income tax rate of 35% to income from continuing operations
before provision for income taxes and minority interest expense due to
the following:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Provision for income taxes at
statutory rate $ 66,473 $ 43,169 $ 33,558
Increases (decreases) resulting from:
Gain on issuance of stock by
subsidiaries (25,100) (7,045) (2,264)
Net foreign losses not benefited and
tax rate differential 5,596 2,438 817
State income taxes, net of federal tax 3,770 3,248 4,359
Amortization of cost in excess of
net assets of acquired companies 2,445 2,432 2,089
Tax benefit of foreign sales
corporation (2,102) (1,987) (1,602)
Other, net 645 458 550
-------- -------- --------
$ 51,727 $ 42,713 $ 37,507
======== ======== ========
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1996 1995
-------------------------------------------------------------
Prepaid income taxes:
Tax loss carryforwards $ 64,902 $ 22,549
Reserves and accruals 38,929 12,165
Inventory basis difference 11,895 9,553
Accrued compensation 5,064 4,439
Allowance for doubtful accounts 2,399 1,454
Other, net 9 3,622
-------- --------
123,198 53,782
Less: Valuation allowance 64,902 22,549
-------- --------
$ 58,296 $ 31,233
======== ========
Deferred income taxes:
Depreciation $ 16,476 $ 14,039
Intangible assets 4,234 5,130
Other - 999
-------- --------
$ 20,710 $ 20,168
======== ========
21PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The valuation allowance relates to uncertainty surrounding the
realization of certain tax assets, including in 1996 $150.0 million of
foreign tax loss carryforwards, $1.4 million of certain state
tax-deferred assets, and $6.4 million of federal tax loss carryforwards,
the realization of which is limited to the future income of certain
subsidiaries. Of the $150.0 million of foreign tax loss carryforwards,
$45 million expire from 1997 through 2004 and the remainder do not
expire. The federal tax loss carryforwards expire from 2008 through 2010.
Any tax benefit resulting from the use of the loss carryforwards will
first be used to reduce cost in excess of net assets of acquired
companies. The increase in the valuation allowance results primarily from
valuation allowances established for tax loss carryforwards of businesses
acquired in 1996.
The Company has not recognized a deferred tax liability for the
difference between the book basis and tax basis of its investment in the
common stock of its domestic subsidiaries (such difference relates
primarily to unremitted earnings and gains on issuance of stock by
subsidiaries) because the Company does not expect this basis difference
to become subject to tax at the parent level. The Company believes it can
implement certain tax strategies to recover its investment in its
domestic subsidiaries tax-free.
A provision has not been made for U.S. or additional foreign taxes on
$105 million of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
The Company believes that any additional U.S. tax liability due upon
remittance of such earnings would be immaterial due to available U.S.
foreign tax credits.
7. Short- and Long-term Obligations
Short-term Obligations
Notes payable in the accompanying balance sheet represents bank
borrowings at several of the Company's foreign subsidiaries. The weighted
average interest rate for these borrowings was 5.25% and 4.27% at
year-end 1996 and 1995, respectively.
To finance the acquisition of a substantial portion of the businesses
comprising the Scientific Instruments Division of Fisons (Note 4), the
Company used available cash in addition to borrowings of $89.0 million
from Thermo Electron. In April 1996, the Company repaid a portion of the
borrowings from Thermo Electron and issued a $65.0 million promissory
note for the remaining indebtedness, which was repaid in October 1996.
To partially finance the acquisition of the DYNEX Technologies
(DYNEX; formerly Dynatech Laboratories Worldwide) division of Dynatech
Corporation in February 1996, Thermo BioAnalysis borrowed $30.0 million
from Thermo Electron pursuant to a promissory note, which was repaid in
July 1996.
To partially finance the acquisition of Gould Instrument Systems,
Inc. (GIS) in May 1995, ThermoSpectra borrowed $15.0 million from Thermo
Electron pursuant to a promissory note, which was repaid in August 1995.
22PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
7. Short- and Long-term Obligations (continued)
Long-term Obligations
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
3 3/4% Senior convertible note, due 2000,
convertible at $16.93 per share (a) $140,000 $140,000
3 3/4% Senior convertible debentures, due 2000,
convertible at $16.93 per share (b) 22,281 67,600
4 1/2% Senior convertible debentures, due 2003,
convertible at $43.07 per share (b) 172,500 -
6 5/8% Subordinated convertible debentures,
due 2001, convertible at $9.38 per share (c) - 22,275
5% Subordinated convertible debentures, due 2000,
convertible into shares of ThermoQuest
at $16.50 per share (c) 96,250 96,250
5% Subordinated convertible debentures, due 2000,
convertible into shares of Thermo Optek
at $14.85 per share (c) 96,250 96,250
10.23% Mortgage loan secured by property with
a net book value of $16,042, payable in monthly
installments with final payments in 2004 9,267 10,101
Promissory note to parent company from
ThermoSpectra, due 1998 (d) 15,000 -
Other 4,788 10,885
-------- --------
556,336 443,361
Less: Current maturities of long-term obligations 2,122 2,327
-------- --------
$554,214 $441,034
======== ========
(a) Represents an obligation to Thermo Electron.
(b) Guaranteed on a senior basis by Thermo Electron.
(c) Guaranteed on a subordinated basis by Thermo Electron.
(d) Bears interest at the 90-day Commercial Paper Composite Rate plus 25
basis points.
The $96.3 million principal amount 5% subordinated convertible
debentures of ThermoQuest and Thermo Optek are guaranteed on a
subordinated basis by Thermo Electron. The Company has agreed to
reimburse Thermo Electron in the event Thermo Electron is required to
make a payment under the guarantee.
In lieu of issuing all or a portion of the Company's common stock
upon conversion of the 3 3/4% senior convertible debentures due 2000, the
Company has the option to pay holders of the debentures cash equal to the
weighted-average market price of the Company's common stock on the
trading date prior to conversion.
In lieu of issuing all or a portion of the Company's common stock
upon conversion of the 4 1/2% senior convertible debentures due 2003, the
Company has the option to deliver shares of Thermo Electron common stock
23PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
7. Short- and Long-term Obligations (continued)
with an aggregate value equal to the market value of the Company's common
stock otherwise issuable upon such conversion. Thermo Electron has agreed
to sell at market prices such number of shares of its common stock to the
Company as the Company may require to exercise such option.
During 1996, 1995, and 1994, convertible obligations of $67.6
million, $18.3 million, and $14.1 million, respectively, were converted
into common stock of the Company.
The annual requirements for long-term obligations as of December 28,
1996, are: $2.1 million in 1997; $16.2 million in 1998; $1.2 million in
1999; $356.1 million in 2000; $1.4 million in 2001; and $179.3 million in
2002 and thereafter. Total future requirements of long-term obligations
are $556.3 million.
See Note 12 for the fair value information pertaining to the
Company's long-term obligations.
8. Commitments and Contingencies
Operating Leases
The Company leases portions of its office and operating facilities
under various operating lease arrangements. The accompanying statement of
income includes expenses from operating leases of $21.1 million, $11.1
million, and $9.0 million in 1996, 1995, and 1994, respectively. Future
minimum payments due under noncancellable operating leases at December
28, 1996, are: $15.5 million in 1997; $12.6 million in 1998; $10.1
million in 1999; $8.7 million in 2000; $7.5 million in 2001; and $29.5
million in 2002 and thereafter. Total future minimum lease payments are
$83.9 million.
Contingencies
In December 1996, five employees of the Company's Epsilon Industrial,
Inc. (Epsilon) subsidiary commenced an arbitration proceeding alleging
that Epsilon, the Company, and certain affiliates of the Company breached
the terms of certain agreements entered into with such employees at the
time that a predecessor of Epsilon acquired the assets and business of a
company formerly owned by such employees. The employees are claiming
damages of $36 million resulting from the alleged failure of the Company
and its affiliates to use best efforts to develop and promote certain
products acquired at that time. The Company believes that it has
meritorious defenses to the claim and intends to contest the matter
vigorously. However, due to the inherent uncertainty of dispute
resolution, the Company cannot predict the outcome of this matter. In the
opinion of management, while an unfavorable resolution of this matter
could materially affect the Company's results of operations in a
particular quarter or year, any such resolution would not have a material
adverse effect on the Company's financial position.
The Company is also contingently liable with respect to certain other
lawsuits and matters which, in the opinion of management, will not have a
material effect upon the financial position of the Company or its results
of operations.
24PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
9. Related Party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company pays Thermo Electron
annually an amount equal to 1.0% of the Company's revenues. The Company
paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
1995 and 1994, respectively. The annual fee is reviewed and adjusted
annually by mutual agreement of the parties. For these services, the
Company was charged $12.1 million, $9.4 million, and $8.3 million in
1996, 1995, and 1994, respectively. The corporate services agreement is
renewed annually but can be terminated upon 30 days' prior notice by the
Company or upon the Company's withdrawal from the Thermo Electron
Corporate Charter (the Thermo Electron Corporate Charter defines the
relationship among Thermo Electron and its majority-owned subsidiaries).
Management believes that the service fee charged by Thermo Electron is
reasonable and that such fees are representative of the expenses the
Company would have incurred on a stand-alone basis. For additional items
such as employee benefit plans, insurance coverage, and other
identifiable costs, Thermo Electron charges the Company based upon costs
attributable to the Company.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Sale of Related Party Investments
During 1995, the Company sold its remaining investment in 6 1/2%
subordinated convertible debentures due 1998, which were issued by
Thermedics Inc. (Thermedics), a majority-owned subsidiary of Thermo
Electron. The Company sold $2.3 million principal amount of the
Thermedics debentures in 1995 for net proceeds of $4.5 million, which
resulted in a gain of $2.2 million. During 1994, the Company sold $4.0
million principal amount of the Thermedics debentures for net proceeds of
$5.9 million, which resulted in a gain of $2.0 million.
Short- and Long-term Obligations
See Note 7 for short- and long-term obligations of the Company held
by Thermo Electron.
10. Common Stock
At December 28, 1996, the Company had reserved 16,945,293 unissued
shares of its common stock for possible issuance under stock-based
compensation plans and for issuance upon possible conversion of the
Company's convertible obligations.
25PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
11. Issuance of Stock by Subsidiaries
Gain on issuance of stock by subsidiaries in the accompanying
statement of income results from the following transactions:
1996
Initial public offering of 3,450,000 shares of ThermoQuest common
stock at $15.00 per share for net proceeds of $47.8 million resulted in a
gain of $27.2 million.
Initial public offering of 3,450,000 shares of Thermo Optek common
stock at $13.50 per share for net proceeds of $42.9 million resulted in a
gain of $25.1 million.
Initial public offering of 1,670,000 shares of Thermo BioAnalysis
common stock at $14.00 per share for net proceeds of $20.8 million
resulted in a gain of $9.8 million.
Private placement of 1,935,667 shares of Metrika Systems common
stock at $7.50 per share for net proceeds of $13.5 million resulted in a
gain of $9.6 million.
1995
Private placement of 1,601,500 shares of Thermo BioAnalysis common
stock at $10.00 per share for net proceeds of $14.9 million resulted in a
gain of $9.5 million.
Initial public offering of 1,725,000 shares of ThermoSpectra common
stock at $14.00 per share for net proceeds of $21.9 million resulted in a
gain of $9.3 million.
Private placement of 202,000 shares of ThermoSpectra common stock at
$15.72 per share for net proceeds of $3.0 million resulted in a gain of
$1.3 million.
1994
Private placement of 1,505,000 shares of ThermoSpectra common stock
at $10.00 per share for net proceeds of $14.0 million resulted in a gain
of $6.5 million.
12. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, available-for-sale investments, accounts receivable,
notes payable, accounts payable, due to parent company, long-term
obligations, and forward exchange contracts. The carrying amounts of
these financial instruments, with the exception of available-for-sale
investments, long-term obligations, and forward exchange contracts,
approximate fair value due to their short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying 1996 balance sheet. The fair values were determined based on
quoted market prices (Note 2).
The Company enters into forward exchange contracts to hedge certain
firm purchase and sale commitments denominated in currencies other than
its subsidiaries' local currencies, principally U.S. dollars, British
pounds sterling, French francs, German deutsche marks, and Japanese yen.
The purpose of the Company's foreign currency hedging activities is to
protect the Company's local currency cash flows related to these
26PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
12. Fair Value of Financial Instruments (continued)
commitments from fluctuations in foreign exchange rates. The amounts of
such forward exchange contracts at year-end 1996 and 1995 were $12.8
million and $12.2 million, respectively.
The carrying amount and fair value of the Company's long-term
obligations and off-balance-sheet financial instruments are as follows:
1996 1995
------------------ ------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
----------------------------------------------------------------------
Long-term obligations:
Convertible obligations $527,281 $681,550 $422,375 $595,482
Other long-term
obligations 26,933 27,767 18,659 19,122
-------- -------- -------- --------
$554,214 $709,317 $441,034 $614,604
======== ======== ======== ========
Off-balance-sheet
financial instruments:
Forward exchange
contracts receivable $ 886 $ 462
The fair value of long-term obligations was determined based on
quoted market prices and on borrowing rates available to the Company at
the respective year-ends. The fair value of the Company's convertible
obligations exceeds the carrying amount primarily due to the market price
of the Company's common stock at the respective year-ends exceeding the
conversion price of certain of the convertible obligations.
The fair value of forward exchange contracts is the estimated amount
that the Company would receive if it were to terminate the contracts,
taking into account the change in foreign exchange rates.
27PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
13. Geographical Data
The Company is engaged in one business segment: developing,
manufacturing, and marketing analytical, monitoring, process control, and
imaging, inspection, and measurement instruments. The following table
shows data for the Company by geographical area:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Revenues:
United States $ 688,865 $ 520,485 $ 457,121
United Kingdom 227,375 78,768 57,752
Germany 182,958 124,035 96,338
Other Europe 225,244 107,755 72,633
Other 104,885 79,368 59,663
Transfers among geographical
areas (a) (219,965) (127,749) (93,515)
---------- ---------- ----------
$1,209,362 $ 782,662 $ 649,992
========== ========== ==========
Income from continuing operations
before provision for income taxes
and minority interest expense:
United States $ 97,114 $ 81,144 $ 86,189
United Kingdom 14,333 5,128 3,569
Germany 9,894 8,703 3,168
Other Europe 15,350 12,505 6,823
Other 11,500 8,203 7,490
Corporate and eliminations (b) (21,548) (11,214) (10,002)
---------- ---------- ----------
Total operating income 126,643 104,469 97,237
Interest and other income
(expense), net 63,280 18,872 (1,357)
---------- ---------- ----------
$ 189,923 $ 123,341 $ 95,880
========== ========== ==========
Identifiable assets:
United States $1,045,345 $ 888,620 $ 595,329
United Kingdom 253,203 85,615 46,959
Germany 172,468 125,686 114,536
Other Europe 221,420 94,135 53,664
Other 57,435 62,090 37,947
Corporate and eliminations (c) 174,529 116,667 163,482
---------- ---------- ----------
$1,924,400 $1,372,813 $1,011,917
========== ========== ==========
28PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
13. Geographical Data (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Export revenues included in United
States revenues above (d):
Europe $ 100,767 $ 88,418 $ 70,903
Asia 107,796 80,839 57,249
Other 45,142 40,303 25,412
---------- ---------- ----------
$ 253,705 $ 209,560 $ 153,564
========== ========== ==========
(a) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(b) Primarily corporate general and administrative expenses.
(c) Primarily cash, cash equivalents, and available-for-sale investments.
(d) In general, export revenues are denominated in U.S. dollars.
29PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
14. Unaudited Quarterly Information
(In thousands except per share amounts)
1996(a) First Second(b) Third Fourth
------------------------------------------------------------------------
Revenues $225,571 $321,552 $315,292 $346,947
Gross profit 107,364 144,524 147,803 155,506
Net income 34,043 35,296 30,521 32,891
Earnings per share:
Primary .37 .37 .32 .34
Fully diluted .33 .34 .29 .31
1995(c) First Second Third Fourth
------------------------------------------------------------------------
Revenues $172,944 $185,744 $193,899 $230,075
Gross profit 84,914 90,916 93,535 109,854
Income from continuing
operations 16,914 18,673 21,881 21,836
Net income 16,916 18,673 21,881 21,836
Earnings per share from
continuing operations:
Primary .19 .21 .24 .24
Fully diluted .17 .19 .22 .22
Earnings per share:
Primary .19 .21 .24 .24
Fully diluted .17 .19 .22 .22
(a) Results include nontaxable gains of $24.3 million, $25.5 million,
$11.4 million, and $10.5 million in the first, second, third, and
fourth quarters, respectively, from the issuance of stock by
subsidiaries.
(b) Reflects the March 29, 1996, acquisition of a substantial portion of
the businesses comprising the Scientific Instruments Division of
Fisons.
(c) Results include nontaxable gains of $4.7 million, $4.8 million, $9.3
million, and $1.3 million in the first, second, third, and fourth
quarters, respectively, from the issuance of stock by subsidiaries.
30PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
15. Subsequent Event
On March 12, 1997, the Company declared unconditional in all
respects its cash tender offer for all outstanding shares of Life
Sciences International PLC (Life Sciences) for 135 British pence per
share (approximately $2.16 per share). As of that date, the Company had
received acceptances representing approximately 91% of the Life Sciences
shares outstanding and the Company owned an additional 3% of the
outstanding Life Sciences shares. There are approximately 175 million
Life Sciences shares outstanding. The Company has established March 26,
1997, as the date for payment for all shares as to which acceptance had
been received. In addition, the Company expects to repay approximately
$72 million of Life Sciences' debt, net of acquired cash expected to be
used. Life Sciences, a London Stock Exchange-listed company, manufactures
laboratory science equipment, appliances, instruments, consumables, and
reagents for the research, clinical, and industrial markets.
31PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors of
Thermo Instrument Systems Inc.:
We have audited the accompanying consolidated balance sheet of Thermo
Instrument Systems Inc. (a Delaware corporation and 82%-owned subsidiary
of Thermo Electron Corporation) and subsidiaries as of December 28, 1996,
and December 30, 1995, and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in
the period ended December 28, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermo Instrument Systems Inc. and subsidiaries as of December 28, 1996,
and December 30, 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 28, 1996,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 11, 1997 (except with respect
the matter discussed in Note 15 as to
which the date is March 12, 1997)
32PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
caption "Forward-looking Statements."
Results of Operations
The Company's revenues were $1,209.4 million in 1996, compared with
$782.7 million in 1995 and $650.0 million in 1994. The increases were
primarily due to acquisitions, which included a substantial portion of
the businesses comprising the Scientific Instruments Divisions of Fisons
in March 1996, DYNEX in February 1996, Oriel Corporation in February
1996, the analytical instrument division of ATI in December 1995, GIS in
May 1995, the Analytical Instruments Division of Baird Corporation in
January 1995, and several businesses within the EnviroTech Measurements &
Controls group of Baker Hughes in March 1994. Acquisitions added revenues
of $404 million in 1996 and $104 million in 1995. The remainder of the
increase in revenues in 1996 resulted primarily from greater demand
experienced by ThermoQuest's mass spectrometry business as a result of
the introduction of two new products, one in the third quarter of 1995
and another in the first quarter of 1996, and, to a lesser extent,
greater product demand at Thermo Optek's Fourier transform infrared
(FT-IR) and FT-Raman spectrometry businesses. The increases in 1996 were
offset by a decrease of $21.8 million in revenues due to the unfavorable
effects of currency translation as a result of the strengthening of the
U.S. dollar relative to foreign currencies in countries in which the
Company operates. The remainder of the increase in revenues in 1995 was
substantially a result of the favorable effects of currency translation
due to the decline in the value of the U.S. dollar relative to foreign
currencies in countries where the Company operates. An increase in
revenues in 1995 from certain existing businesses was offset in part by a
decline in revenues from the Company's air monitoring instruments
subsidiary as most orders in response to Phases I and II of the Clean Air
Act of 1990 have been completed.
International sales account for a significant portion of the
Company's total revenues. Although the Company seeks to charge its
customers in the same currency as its operating costs, the Company's
financial performance and competitive position can be affected by
currency exchange rate fluctuations. Where appropriate, the Company uses
forward exchange contracts to reduce its exposure to currency
fluctuations.
33PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
The gross profit margin was 46% in 1996, compared with 48% in 1995
and 1994. The gross profit margin decreased in 1996 primarily due to
lower margins at acquired businesses.
Selling, general, and administrative expenses as a percentage of
revenues was 28% in 1996 and 1995 and 27% in 1994. Selling, general, and
administrative expenses as a percentage of revenues increased in 1995
from 1994 due to higher costs as a percentage of revenues at acquired
businesses and reduced revenues from the Company's air monitoring
instruments subsidiary as discussed above. The Company's goal is to
continue to reduce selling, general, and administrative expenses as a
percentage of revenues at its newly acquired businesses.
Research and development expenses as a percentage of revenues were
7.0% in 1996, 6.9% in 1995, and 6.6% in 1994. The increase is consistent
with the Company's objective to develop and market new products.
In 1996, the Company wrote off $3.5 million of acquired technology in
connection with the acquisition of the businesses from Fisons (Note 4).
Interest income increased to $20.5 million in 1996 from $14.6 million
in 1995 and $5.9 million in 1994. The increase in 1996 was primarily the
result of interest income earned on invested proceeds from the issuance
of $96.3 million principal amount of 5% subordinated convertible
debentures by each of ThermoQuest and Thermo Optek in August 1995 and
October 1995, respectively, the issuance of common stock by the Company's
subsidiaries (Note 11) and, to a lesser extent, the issuance of $172.5
million principal amount of 4 1/2% senior convertible debentures by the
Company in October 1996. The increase in interest income in 1996 was
offset in part by a reduction in cash as a result of acquisitions. The
increase in interest income in 1995 was primarily the result of interest
income earned on invested proceeds from the issuance of the 5%
subordinated convertible debentures by ThermoQuest and Thermo Optek and
higher prevailing interest rates in 1995 compared with 1994. Interest
income also increased in 1995, to a lesser extent, as a result of
interest income earned on invested proceeds from the issuance of common
stock by the Company's subsidiaries in the first three quarters of 1995
and the third and fourth quarters of 1994 (Note 11). The increase in
interest income in 1995 was offset in part by a reduction in cash as a
result of acquisitions.
Interest expense increased to $28.9 million in 1996 from $18.1
million in 1995 and $15.8 million in 1994. The increase in interest
expense in 1996 was primarily due to the issuance of the 5% subordinated
convertible debentures by ThermoQuest and Thermo Optek. To a lesser
extent, interest expense increased due to the issuance by the Company of
the 4 1/2% senior convertible debentures, the issuance of promissory
notes to Thermo Electron in connection with acquisitions (Note 7), and
the inclusion of interest expense on the debt assumed as part of the
Fisons acquisition. The increases in 1996 were offset in part by the
conversion of a portion of the Company's convertible obligations into
common stock of the Company. The increase in interest expense in 1995 was
primarily due to the issuance of the 5% subordinated convertible
debentures by ThermoQuest and Thermo Optek, offset in part by the
34PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
conversion of a portion of the Company's convertible obligations into
common stock of the Company.
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option incentive programs, as well as capital to support the
subsidiaries' growth. As a result of the sale of stock by subsidiaries,
the Company recorded gains of $71.7 million in 1996, $20.1 million in
1995, and $6.5 million in 1994 (Note 11). These gains represent an
increase in the Company's proportionate share of the subsidiary's equity
and are classified as "Gain on issuance of stock by subsidiaries" in the
accompanying statement of income. The size and timing of these
transactions are dependent on market and other conditions that are beyond
the Company's control. In addition, in October 1995, the Financial
Accounting Standards Board (FASB) issued an exposure draft of a Proposed
Statement of Financial Accounting Standards, "Consolidated Financial
Statements: Policy and Procedures" (the Proposed Statement). The Proposed
Statement would establish new rules for how consolidated financial
statements should be prepared. If the Proposed Statement is adopted,
there could be significant changes in the way the Company records certain
transactions of its controlled subsidiaries. Among those changes, any
sale of the stock of a subsidiary that does not result in a loss of
control would be accounted for as a transaction in equity of the
consolidated entity with no gain or loss being recorded. The FASB expects
to issue a final statement or a revised exposure draft in 1997.
Accordingly, there can be no assurance that the Company will be able to
realize gains from such transactions in the future.
The Company recorded gains of $2.2 million and $2.0 million in 1995
and 1994, respectively, from the sale of the Company's investment in
Thermedics Inc. subordinated convertible debentures (Note 9). Thermedics
Inc. is a majority-owned subsidiary of Thermo Electron.
The effective tax rate was 27% in 1996, 35% in 1995, and 39% in 1994.
The effective tax rate decreased in 1996 and 1995 primarily due to a
higher nontaxable gain on issuance of stock by subsidiaries. Excluding
the impact of the gain on issuance of stock by subsidiaries, the
effective tax rates exceeded the statutory federal income tax rate due to
the inability to provide a tax benefit on losses incurred at certain
foreign subsidiaries, the impact of foreign and state income taxes, the
nondeductible amortization of cost in excess of net assets of acquired
companies, and the write-off of acquired technology in connection with
the acquisition of the businesses from Fisons in March 1996.
Effective April 2, 1995, the Company and Thermo TerraTech dissolved
their Thermo Terra Tech joint venture. Thermo TerraTech then purchased
the services businesses formerly operated by the joint venture from the
Company. Prior to the joint venture's formation on April 2, 1994, the
Company's services businesses comprised its Services segment and were
consolidated in the Company's financial statements. The sale of the
35PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
businesses to Thermo TerraTech represents the Company's disposal of its
Services segment (Note 3).
See Note 8 for a description of an arbitration proceeding involving
the Company.
Liquidity and Capital Resources
Consolidated working capital was $636.7 million at December 28, 1996,
compared with $489.9 million at December 30, 1995, an increase of $146.8
million. Included in working capital are cash, cash equivalents, and
available-for-sale investments of $530.1 million at December 28, 1996,
and $395.2 million at December 30, 1995. Of the $530.1 million balance at
December 28, 1996, $16.6 million was held by ThermoSpectra, $182.4
million by ThermoQuest, $63.6 million by Thermo Optek, $45.5 million by
Thermo BioAnalysis, $20.2 million by Metrika Systems, and $201.8 million
by the Company and its wholly owned subsidiaries. Cash provided by
operations in 1996 was $93.1 million. Inventories decreased $14.2 million
primarily due to improved inventory management at certain subsidiaries.
Other current liabilities decreased $37.5 million primarily due to
restructuring expenditures at businesses acquired by the Company in 1996.
At December 28, 1996, $59.2 million of the Company's cash and cash
equivalents was held by its foreign subsidiaries. Repatriation of this
cash into the United States would be subject to foreign withholding taxes
and could also be subject to a United States tax.
The Company's investing activities used $269.4 million of cash in
1996. During 1996, the Company expended $248.2 million, net of cash
acquired, for acquisitions (Note 4) and $19.1 million for the purchase of
property, plant, and equipment.
The Company's financing activities provided $305.7 million of cash in
1996. During 1996, ThermoQuest, Thermo Optek, Thermo BioAnalysis, and
Metrika Systems sold shares of their common stock for aggregate net
proceeds of $125.0 million (Note 11). During 1996, the Company issued
$110.0 million and repaid $95.0 million of notes payable to Thermo
Electron in connection with acquisitions (Note 7). In October 1996, the
Company issued and sold $172.5 million principal amount of 4 1/2% senior
convertible debentures for net proceeds of $168.9 million (Note 7).
In 1997, the Company plans to make expenditures of approximately $21
million for property, plant, and equipment. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future.
The Company has historically complemented internal development with
acquisitions of businesses or technologies that extend the Company's
presence in current markets or provide opportunities to enter and compete
effectively in new markets. The Company will consider making acquisitions
of such businesses or technologies that are consistent with its plans for
strategic growth. The Company expects that it will finance these
acquisitions through a combination of internal funds, additional debt or
equity financing from the capital markets, or short-term borrowings from
Thermo Electron. On March 12, 1997, the Company declared unconditional in
all respects its cash tender offer for all outstanding shares of Life
36PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
Sciences for 135 British pence per share (approximately $2.16 per share),
or approximately $378 million. As of that date, the Company had received
acceptances representing approximately 91% of the Life Sciences shares
outstanding and the Company owned an additional 3% of the outstanding
Life Sciences shares. The Company has established March 26, 1997, as the
date for payment for all shares as to which acceptance had been received.
In addition, the Company expects to repay approximately $72 million of
Life Sciences' debt, net of acquired cash expected to be used (Note 15).
37PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1997 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Risks Associated with Spinout of Subsidiaries. The Company has
adopted a strategy of spinning out certain of its businesses into
separate subsidiaries and having these subsidiaries sell a minority
interest to outside investors. As a result of the sale of stock by
subsidiaries, the issuance of stock by subsidiaries upon conversion of
convertible debentures, and similar transactions, the Company records
gains that represent the increase in the Company's net investment in the
subsidiaries. These gains have represented a substantial portion of the
net income reported by the Company in certain periods. The size and
timing of these transactions are dependent on market and other conditions
that are beyond the Company's control. Accordingly, there can be no
assurance that the Company will be able to generate gains from such
transactions in the future.
In addition, in October 1995, the Financial Accounting Standards
Board (FASB) issued an exposure draft of a Proposed Statement of
Financial Accounting Standards, "Consolidated Financial Statements:
Policy and Procedures" (the Proposed Statement). The Proposed Statement
would establish new rules for how consolidated financial statements
should be prepared. If the Proposed Statement is adopted, there could be
significant changes in the way the Company records certain transactions
of its controlled subsidiaries. Among those changes, any sale of the
stock of a subsidiary that does not result in a loss of control would be
accounted for as a transaction in equity of the consolidated entity with
no gain or loss being recorded. The FASB expects to issue a final
statement or a revised exposure draft in 1997.
Uncertainty of Growth. Certain of the markets in which the Company
competes have been flat or declining over the past several years. The
Company has identified a number of strategies it believes will allow it
to grow its business, including acquiring complementary businesses;
developing new applications for its technologies; and strengthening its
presence in selected geographic markets. No assurance can be given that
the Company will be able to successfully implement these strategies, or
that these strategies will result in growth of the Company's business.
Risks Associated with Acquisition Strategy. One of the Company's
growth strategies is to supplement its internal growth with the
acquisition of businesses and technologies that complement or augment the
Company's existing product lines. Certain businesses acquired by the
Company within the past year, including businesses within the former
analytical instrument division of Analytical Technology, Inc. and the
former Scientific Instruments Division of Fisons plc, have had low levels
of profitability. In addition, businesses that the Company may seek to
acquire in the future may also be marginally profitable or unprofitable.
In order for any acquired businesses to achieve the level of
profitability desired by the Company, the Company must successfully
38PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Forward-looking Statements
change operations and improve market penetration. No assurance can be
given that the Company will be successful in this regard. In addition,
promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers, the
need for regulatory approvals, including antitrust approvals, and the
high valuations of businesses resulting from historically high stock
prices in many countries. There can be no assurance that the Company will
be able to complete pending or future acquisitions. In order to finance
any such acquisitions, it may be necessary for the Company to raise
additional funds either through public or private financings. Any equity
or debt financing, if available at all, may be on terms which are not
favorable to the Company and may result in dilution to the Company's
shareholders.
Risks Associated with Technological Change, Obsolescence, and the
Development and Acceptance of New Products. The market for the Company's
products and services is characterized by rapid and significant
technological change and evolving industry standards. New product
introductions responsive to these factors require significant planning,
design, development, and testing at the technological, product, and
manufacturing process levels, and may render existing products and
technologies uncompetitive or obsolete. There can be no assurance that
the Company's products will not become uncompetitive or obsolete. In
addition, industry acceptance of new technologies developed by the
Company may be slow to develop due to, among other things, existing
regulations written specifically for older technologies and general
unfamiliarity of users with new technologies.
Possible Adverse Effect From Consolidation in the Environmental
Market and Changes in Environmental Regulations. One of the important
markets for the Company's products is environmental analysis. During the
past three years, there has been a contraction in the market for
analytical instruments used for environmental analysis. This contraction
has caused consolidation in the businesses serving this market. Such
consolidation may have an adverse impact on certain of the Company's
businesses. In addition, most air, water, and soil analysis is conducted
to comply with federal, state, local, and foreign environmental
regulations. These regulations are frequently specific as to the type of
technology required for a particular analysis and the level of detection
required for that analysis. The Company develops, configures, and markets
its products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated
in response to new scientific evidence or political or economic
considerations. Any significant change in environmental regulations could
result in a reduction in demand for the Company's products.
Risks Associated With the Sale of Products to the Pharmaceutical
Industry. The pharmaceutical industry is one of the important markets for
the Company's products. Although the Company's existing general purpose
analytical equipment and services are not subject to regulation by the
U.S. Food and Drug Administration (the FDA), FDA regulations apply to the
processes and production facilities used to manufacture pharmaceutical
products. Any material change by a pharmaceutical company in its
manufacturing process or equipment could necessitate additional FDA
review and approval. Such requirements may make it more difficult for the
Company to sell its products and services to pharmaceutical customers
39PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Forward-looking Statements
that have already applied for or obtained approval for production
processes using different equipment and supplies. Any changes in the
regulations that apply to the processes and production facilities used to
manufacture pharmaceutical products may adversely affect the market for
the Company's products. In addition, from time to time as a result of
industry consolidation and other factors, the pharmaceutical industry has
reduced its capital expenditures for equipment such as that manufactured
by the Company, and there can be no assurance that further changes in the
pharmaceutical industry will not adversely affect demand for the
Company's products.
Risks Associated With Dependence on Capital Spending Policies and
Government Funding. The Company's customers include pharmaceutical and
chemical companies, laboratories, government agencies, and public and
private research institutions. The capital spending of these entities can
have a significant effect on the demand for the Company's products. Such
spending levels are based on a wide variety of factors, including the
resources available to make such purchases, the spending priorities among
various types of research equipment, public policy, and the effects of
different economic cycles. Any decrease in capital spending by any of the
customer groups that account for a significant portion of the Company's
sales could have a material adverse effect on the Company's business and
results of operations.
Possible Adverse Impact of Significant International Operations.
International sales accounted for a significant portion of the Company's
total revenues in 1996, and the Company expects that international sales
will continue to account for a significant portion of the Company's
revenues in the future. Sales to customers in foreign countries are
subject to a number of risks, including the following: fluctuations in
exchange rates may affect product demand and adversely affect the
profitability in U.S. dollars of products and services provided by the
Company in foreign markets where payment for the Company's products and
services is made in the local currency; agreements may be difficult to
enforce and receivables difficult to collect through a foreign country's
legal system; foreign customers may have longer payment cycles; foreign
countries could impose withholding taxes or otherwise tax the Company's
foreign income, impose tariffs, or adopt other restrictions on foreign
trade; export licenses, if required, may be difficult to obtain and the
protection of intellectual property in foreign countries may be more
difficult to enforce. There can be no assurance that any of these factors
will not have a material adverse effect on the Company's business and
results of operations.
Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company
believes that the principal competitive factors affecting the market for
its products include product performance, price, reliability, and
customer service. The Company's competitors include large multinational
corporations and their operating units. Some of the Company's other
competitors have substantially greater financial, marketing, and other
resources than those of the Company. As a result, they may be able to
adapt more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion
and sale of their products than the Company. In addition, competition
could increase if new companies enter the market or if existing
40PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Forward-looking Statements
competitors expand their product lines or intensify efforts within
existing product lines. There can be no assurance that the Company's
current products, products under development or ability to discover new
technologies will be sufficient to enable it to compete effectively with
its competitors.
Risks Associated with Protection, Defense, and Use of Intellectual
Property. The Company holds many patents relating to various aspects of
its products, and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to the
Company's products are protected from unauthorized use by third parties
only to the extent that they are covered by valid and enforceable patents
or are maintained in confidence as trade secrets. There can be no
assurance that patents will issue from any pending or future patent
applications owned by or licensed to the Company or that the claims
allowed under any issued patents will be sufficiently broad to protect
the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the
Company's products or gain access to its trade secrets and know-how.
Proceedings initiated by the Company to protect its proprietary rights
could result in substantial costs to the Company. There can be no
assurance that competitors of the Company will not initiate litigation to
challenge the validity of the Company's patents, or that they will not
use their resources to design comparable products that do not infringe
the Company's patents. There may also be pending or issued patents held
by parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that
any license required under any such patent would be made available on
acceptable terms or that the Company would prevail in any such contest.
The Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patent
rights against others. If the outcome of any such litigation is
unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected. In addition, the
Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its
collaborators, employees, and consultants. There can be no assurance that
these agreements will not be breached, that the Company would have
adequate remedies for any breach or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.
41PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Selected Financial Information
(In thousands
except per share
amounts) 1996(a) 1995(b) 1994(c) 1993(d) 1992
-----------------------------------------------------------------------
Statement of
Income Data:
Revenues $1,209,362 $ 782,662 $ 649,992 $ 529,278 $ 368,532
Income from
continuing
operations 132,751 79,304 58,261 42,793 31,666
Net income 132,751 79,306 60,220 44,764 33,130
Earnings per
share from
continuing
operations:
Primary 1.40 .88 .66 .51 .39
Fully diluted 1.27 .80 .61 .48 .38
Earnings per
share:
Primary 1.40 .88 .68 .53 .41
Fully diluted 1.27 .80 .63 .50 .39
Balance Sheet
Data:
Working
capital $ 636,703 $ 489,895 $ 230,306 $ 238,053 $ 68,412
Total assets 1,924,400 1,372,813 1,011,917 891,141 686,425
Long-term
obligations 554,214 441,034 263,559 286,161 170,092
Shareholders'
investment 746,267 542,705 440,763 358,055 272,723
(a)Reflects the March 1996 acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons
plc, the October 1996 issuance of $172.5 million principal amount of
4 1/2% senior convertible debentures due 2003, and nontaxable gains
of $71.7 million from the issuance of stock by subsidiaries.
(b)Reflects the August and October 1995 issuance of $96.3 million
principal amount of 5% subordinated convertible debentures due 2000
by each of ThermoQuest and Thermo Optek, respectively, and nontaxable
gains of $20.1 million from the issuance of stock by subsidiaries.
(c)Reflects the March 1994 acquisition of several businesses within the
EnviroTech Measurements & Controls group of Baker Hughes Incorporated
and nontaxable gains of $6.5 million from the issuance of stock by
subsidiary.
(d)Reflects the February 1993 acquisition of Spectra-Physics Analytical,
Inc., the April 1993 sale of the biomedical instruments products
business of the Company's Nicolet Instrument Corporation subsidiary,
and the September 1993 issuance of $210.0 million aggregate principal
amount of 3 3/4% senior convertible obligations due 2000.
42PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Common Stock Market Information
The following table shows the market range for the Company's common
stock based on reported sales prices on the American Stock Exchange
(symbol THI) for 1996 and 1995. Prices were restated in 1995 to reflect a
three-for-two stock split distributed in April 1995 and a five-for-four
stock split distributed in December 1995.
1996 1995
--------------------- -----------------------
Quarter High Low High Low
------------------------------------------------------------------------
First $30 1/2 $24 5/8 $18 13/15 $15 13/15
Second 43 3/8 28 1/2 20 1/5 17 1/5
Third 38 3/4 29 1/2 22 2/5 19 4/5
Fourth 37 5/8 29 27 1/10 21 1/2
As of January 24, 1997, the Company had 2,897 holders of record of
its common stock. This does not include holdings in street or nominee
names. The closing market price on the American Stock Exchange for the
Company's common stock on January 24, 1997, was $34 3/8 per share.
Common stock of the Company's majority-owned public subsidiaries is
traded on the American Stock Exchange: ThermoSpectra Corporation (symbol
THS), ThermoQuest Corporation (symbol TMQ), Thermo Optek Corporation
(symbol TOC), and Thermo BioAnalysis Corporation (symbol TBA).
Shareholder Services
Shareholders of Thermo Instrument Systems Inc. who desire information
about the Company are invited to contact John N. Hatsopoulos, Chief
Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046, (617) 622-1111. A mailing
list is maintained to enable shareholders whose stock is held in street
name, and other interested individuals, to receive quarterly reports,
annual reports, and press releases as quickly as possible. Beginning in
1997, quarterly distribution will be limited to the second quarter only.
All quarterly reports and press releases are available through the
Internet from Thermo Electron's home page on the World Wide Web
(http://www.thermo.com/subsid/thi.html).
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuance of stock certificates, change of ownership, lost
stock certificates, and change of address. For these and similar matters,
please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
43PAGE
<PAGE>
Thermo Instrument Systems Inc. 1996 Financial Statements
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 2,
1997, at 10:00 a.m., at the Hyatt Regency Hotel, Hilton Head, South
Carolina.
44<PAGE>
Exhibit 21
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
As of February 28, 1997, the Registrant owned the following subsidiaries:
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
-----------------------------------------------------------------------------
Analytical Instrument Development, Inc. Pennsylvania 100
Eberline Instrument Company Limited United Kingdom 100
Eberline Instrument Corporation New Mexico 100
Epsilon Industrial Inc. Texas 100
Flow Automation (UK) Limited United Kingdom 100
Gas Tech Inc. California 100
Gas Tech Australia, Pty. Ltd. Australia 50*
Gas Tech Partnership California 50*
Gastech Instruments Canada Ltd. Canada 100
Houston Atlas Inc. Texas 100
Metrika Systems Corporation Delaware 84
Eberline Radiometrie S.A. France 100
Gamma-Metrics California 100
Gamma-Metrics International F.S.C. Inc. Guam 100
Thermo Instrument Systems GmbH Germany 100
Eberline Instruments GmbH Germany 100
Thermo Instrument Systems Limited United Kingdom 100
National Nuclear Corporation California 100
Optek-Nicolet Holdings Inc. Wisconsin 100
Thermo Instrument Controls Limited United Kingdom 100
Thermo Optek Corporation Delaware 93
(additionally, .30% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
ARL Applied Research Laboratories S.A. Switzerland 100
Fisons Instruments (Proprietary) South Africa 100
Limited
Thermo Optek Wissenschaftliche Gerate Austria 100
GesmbH
ATI Acquisition Corp. Wisconsin 100
Mattson Instruments Limited United Kingdom 100
Thermo Elemental Limited United Kingdom 100
Thermo Optek Limited United Kingdom 100
Unicam Limited United Kingdom 100
Unicam Export Limited United Kingdom 100
Unicam Analytical Inc. Canada 100
Unicam Analytical Technology The The Netherlands 100
Netherlands B.V.
Unicam Italia SpA Italy 100
Unicam S.A. Belgium 100
Fisons Instruments Inc. Canada 100
Fisons Instruments Nordic AB Sweden 100
Nicolet Instrument Corporation Wisconsin 100
Nicolet Japan K.K. Japan 100
Spectra-Tech, Europe Limited United Kingdom 100
Spectra-Tech, Inc. Wisconsin 100
Nicolet Instrument GmbH Germany 100
Optek Securities Corporation Massachusetts 100
Page 1PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
-----------------------------------------------------------------------------
Planweld Holding Limited United Kingdom 100
Nicolet Instrument Limited United Kingdom 100
Planweld Limited United Kingdom 100
Hilger Analytical Limited United Kingdom 100
Thermo Electron Limited United Kingdom 100
Thermo Instrument Systems Japan Delaware 100
Holdings, Inc.
Nippon Jarrell-Ash Company, Ltd. Japan 100
Thermo Jarrell Ash Corporation Massachusetts 100
Baird Do Brazil Representacoes Ltda. Brazil 100
Beijing Baird Analytical Instrument China 100
Technology Co. Limited
Thermo Instrument Systems (F.E.) China 100
Limited
Thermo Instruments (Canada) Inc. Canada 100
Eberline Instruments (Canada) Ltd. Canada 100
Thermo Optek France S.A. France 100
Thermo Optek Holding B.V. The Netherlands 100
Baird Europe B.V. The Netherlands 100
Baird France S.A.R.L. France 100
Thermo Group B.V. The Netherlands 100
Thermo Vision Corporation Delaware 100
CID Technologies Inc. New York 100
Laser Science, Inc. Delaware 100
Oriel Instruments Corporation Delaware 100
Oriel Foreign Sales Corp. U.S. Virgin 100
Islands
Scientific Measurement Systems Inc. Colorado 100
ThermoSpectra Corporation Delaware 75
(additionally, .88% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Diametrix Detectors, Inc. Delaware 50
Gould Instrument Systems, Inc. Ohio 100
Kevex Instruments Inc. Delaware 100
Kevex X-Ray Inc. Delaware 100
Nicolet Instrument Technologies Inc. Wisconsin 100
NORAN Instruments Inc. Wisconsin 100
Park Acquisition Corp. Delaware 100
ThermoSpectra B.V. The Netherlands 100
Nicolet Technologies B.V. The Netherlands 100
Bakker Electronics Limited United Kingdom 100
NORAN Instruments B.V. The Netherlands 100
ThermoSpectra GmbH Germany 100
Gould Nicolet Messtechnik GmbH Germany 100
NORAN Instruments GmbH Germany 100
ThermoSpectra Limited United Kingdom 100
Nicolet Technologies Ltd. United Kingdom 100
Thermo Spectra S.A. France 100
Nicolet Technologies S.A.R.L. France 100
Page 2PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
-----------------------------------------------------------------------------
Quest-Finnigan Holdings Inc. Virginia 100
Quest-TSP Holdings Inc. Delaware 100
ThermoQuest Corporation Delaware 93
(50% of which shares are owned
directly by Quest-Finnigan Holdings Inc.)
(additionally, .12% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Finnigan FT/MS Inc. Delaware 100
Finnigan Corporation Delaware 100
Finnigan Instruments, Inc. New York 100
Finnigan International Sales, Inc. California 100
Finnigan MAT China, Inc. California 100
Finnigan MAT (Delaware), Inc. Delaware 100
Finnigan MAT Instruments, Inc. Nevada 100
Finnigan MAT International Sales, Inc. California 100
Finnigan MAT (Nevada), Inc. Nevada 100
Finnigan MAT AG Switzerland 100
Finnigan MAT Canada, Ltd. Canada 100
Finnigan MAT GmbH Germany 100
Finnigan MAT S.R.L. Italy 100
Thermo Separation Products S.R.L. Italy 100
Thermo Instruments Australia Pty Australia 100
Limited
ThermoQuest Ltd. United Kingdom 100
Finnigan MAT Ltd. United Kingdom 100
Finnigan MAT AB Sweden 100
Thermo Separation Products Ltd. United Kingdom 100
Finnigan Properties, Inc. California 100
Masslab Limited United Kingdom 100
ThermoQuest B.V. The Netherlands 100
Thermo Separation Products B.V. The Netherlands 100
Thermo Separation Products B.V. B.A. Belgium 100
ThermoQuest France S.A. France 100
Finnigan Automass S.A. France 100
Finnigan MAT S.A.R.L. France 100
Thermo Separation Products S.A. France 100
ThermoQuest Italia S.p.A. Italy 100
ThermoQuest Spain S.A. Spain 100
ThermoQuest Wissenschaftliche Gerate GmbH Austria 100
Thermo Separation Products AG Switzerland 100
Thermo Separation Products Inc. Delaware 100
ThermoQuest GmbH Germany 100
Thermo Separation Products GmbH Germany 100
ThermoQuest K.K. Japan 100
SID Instruments Inc. Delaware 100
FI Instruments Inc. Delaware 100
Fisons Instruments BV The Netherlands 100
Fisons Instruments NV Belgium 100
Page 3PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
-----------------------------------------------------------------------------
Fisons Instruments K.K. Japan 100
Fisons Instruments S.A. France 100
HB Instruments Inc. Delaware 100
NK Instruments Inc. Delaware 100
Thermo Capillary Electrophoresis Inc. Delaware 100
Thermo Haake Ltd. United Kingdom 100
Thermo Haake (U.K.) Limited United Kingdom 100
Thermo Instrument (S.E.A.) Pte Limited Singapore 100
Thermo Instrumentos Cientificos S.A. Spain 100
Thermo VG Systems Limited United Kingdom 100
Spectrace Instruments Inc. California 100
Thermo BioAnalysis Corporation Delaware 67
(4.7% of which shares are owned directly by
Quest-TSP Holdings Inc. and 2% of which
shares are owned directly by
Quest-Finnigan Holdings Inc.)
Dynatech Laboratories spol. s.r.o. Czech Republic 100
DYNEX Technologies (Asia) Inc. Delaware 100
DYNEX Technologies Inc. Virginia 100
Thermo BioAnalysis GmbH Germany 100
Dynatech Deutschland GmbH Germany 100
Thermo LabSystems Vertriebs GmbH Germany 100
Thermo BioAnalysis (Guernsey) Ltd. Channel Islands 100
Thermo BioAnalysis Holding, Limited United Kingdom 100
Dynex Technologies Limited United Kingdom 100
Thermo BioAnalysis Ltd. United Kingdom 100
Thermo FAST UK Limited United Kingdom 100
Thermo LabSystems Limited United Kingdom 100
Thermo BioAnalysis S.A. France 100
Thermo LabSystems S.A.R.L. France 100
Thermo LabSystem (Australia) Pty Limited Australia 100
Thermo LabSystems Inc. Massachusetts 100
Thermo Environmental Instruments Inc. California 100
Thermo Instrument Controls Inc. Delaware 100
Flow Automation Inc. Texas 100
Thermo Instrument Controls de Mexico, Mexico 100
S.A. de C.V.(1% of which shares are
owned directly by Thermo Instrument
Systems Inc.)
VG Gas Analysis Systems Inc. Massachusetts 100
Thermo Instruments do Brasil Ltda. Brazil 100
(1% of which shares are owned directly
by Thermo Jarrell Ash Corporation)
TN Technologies Inc. Texas 100
Kay-Ray/Sensall, Inc. Delaware 100
TN Technologies Canada Inc. Canada 100
VG Gas Analysis Limited United Kingdom 100
Van Hengel Holding B.V. The Netherlands 100
Eberline Monitoring GmbH Germany 100
Fisons Instruments Vertriebs GmbH Germany 100
Page 4PAGE
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
-----------------------------------------------------------------------------
Gebruder Haake GmbH Germany 100
Thermo Instrument Systems B.V. The Netherlands 100
Euroglas B.V. The Netherlands 100
Thermo Automation Services (ThAS) B.V. The Netherlands 100
This Analytical B.V. The Netherlands 100
This Gas Analysis B.V. The Netherlands 100
This Lab Systems B.V. The Netherlands 100
This Scientific B.V. The Netherlands 100
Thermo Instruments GmbH Germany 100
Thermo Jarrell Ash, S.A. Spain 100
TN Spectrace Europe B.V. The Netherlands 100
Westronics Inc. Texas 100
* Joint Venture/Partnership
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated February 11, 1997 (except
with respect to the matter discussed in Note 15 as to which the date is
March 12, 1997), included in or incorporated by reference into Thermo
Instrument Systems Inc.'s Annual Report on Form 10-K for the year ended
December 28, 1996, into the Company's previously filed Registration
Statements as follows: Registration Statement No. 33-14980 on Form S-8,
Registration Statement No. 33-16461 on Form S-8, Registration Statement No.
33-14974 on Form S-8, Post Effective Amendment to Registration Statement on
Form S-4 No. 33-32579-02 on Form S-8, Registration Statement No. 33-33577
on Form S-8, Registration Statement No. 33-36221 on Form S-8, Registration
Statement No. 33-37866 on Form S-8, Registration Statement No. 33-42270 on
Form S-3, Registration Statement No. 33-69526 on Form S-3, Registration
Statement No. 33-65275 on Form S-8, and Registration Statement No. 33-37559
on Form S-8.
Arthur Andersen LLP
Boston, Massachusetts
March 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 522,688
<SECURITIES> 7,452
<RECEIVABLES> 320,312
<ALLOWANCES> 16,981
<INVENTORY> 213,683
<CURRENT-ASSETS> 1,124,910
<PP&E> 250,976
<DEPRECIATION> 72,313
<TOTAL-ASSETS> 1,924,400
<CURRENT-LIABILITIES> 488,207
<BONDS> 399,214
0
0
<COMMON> 9,767
<OTHER-SE> 736,500
<TOTAL-LIABILITY-AND-EQUITY> 1,924,400
<SALES> 1,209,362
<TOTAL-REVENUES> 1,209,362
<CGS> 654,165
<TOTAL-COSTS> 654,165
<OTHER-EXPENSES> 87,591
<LOSS-PROVISION> 2,274
<INTEREST-EXPENSE> 28,923
<INCOME-PRETAX> 189,923
<INCOME-TAX> 51,727
<INCOME-CONTINUING> 132,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,751
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.27
</TABLE>
