SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter ended April 1, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-10573
THERMO POWER CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2891371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
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
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Class Outstanding at April 28, 1995
---------------------------- -----------------------------
Common Stock, $.10 par value 12,367,056
PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of April 1, 1995 and
October 1, 1994 (In thousands)
April 1, October 1,
1995 1994
-------- ----------
Current Assets:
Cash and cash equivalents $ 30,794 $ 7,474
Available-for-sale investments, at quoted market
value (amortized cost of $12,457) (includes
$1,397 of related party investments) (Note 2) 12,909 -
Short-term investments (includes $800 of
related party investments) - 20,405
Accounts receivable, less allowances of $578
and $590 13,378 13,638
Unbilled contract costs and fees 5,917 5,236
Inventories:
Raw materials and supplies 11,881 11,568
Work in process and finished goods 3,773 3,294
Prepaid expenses and income taxes 3,393 3,138
-------- --------
82,045 64,753
-------- --------
Rental Assets, at Cost 4,789 4,543
Less: Accumulated depreciation and amortization 435 348
-------- --------
4,354 4,195
-------- --------
Property, Plant and Equipment, at Cost 14,169 13,410
Less: Accumulated depreciation and amortization 6,332 5,731
-------- --------
7,837 7,679
-------- --------
Long-term Available-for-sale Investments, at
Quoted Market Value (amortized cost of $471)
(includes $248 invested in parent company common
stock) (Note 2) 563 -
-------- --------
Long-term Investments (includes $18 invested in
parent company common stock) - 471
-------- --------
Cost in Excess of Net Assets of Acquired Companies 5,451 5,523
-------- --------
$100,250 $ 82,621
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(a) Consolidated Balance Sheet - Liabilities and Shareholders' Investment
as of April 1, 1995 and October 1, 1994 (In thousands except share
amounts)
April 1, October 1,
1995 1994
-------- ----------
Current Liabilities:
Accounts payable $ 9,392 $ 9,929
Accrued payroll and employee benefits 2,370 2,466
Accrued warranty costs 2,914 3,368
Customer advances 682 1,139
Billings in excess of contract costs and fees 676 562
Accrued income taxes 572 924
Other accrued expenses 2,693 2,948
Due to parent company 329 274
-------- --------
19,628 21,610
-------- --------
Deferred Income Taxes 224 192
-------- --------
Long-term Obligations 323 344
-------- --------
Common Stock of Subsidiary Subject to
Redemption ($18,450 redemption value) (Note 3) 17,288 -
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 30,000,000
shares authorized; 12,433,473 and
12,425,273 shares issued 1,243 1,243
Capital in excess of par value 53,328 53,211
Retained earnings 8,226 6,634
Treasury stock at cost, 69,603 and 121,140 shares (363) (613)
Net unrealized gain on available-for-sale
investments (Note 2) 353 -
-------- --------
62,787 60,475
-------- --------
$100,250 $ 82,621
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(b) Consolidated Statement of Income for the three months ended
April 1, 1995 and April 2, 1994 (In thousands except per share amounts)
Three Months Ended
--------------------
April 1, April 2,
1995 1994
-------- --------
Revenues $24,912 $22,014
------- -------
Costs and Operating Expenses:
Cost of revenues 19,419 17,619
Selling, general and administrative expenses 3,807 3,390
Research and development expenses 716 433
------- -------
23,942 21,442
------- -------
Operating Income 970 572
Interest Income 431 338
Interest Expense (6) (7)
Gain on Sale of Investments (includes
gain of $285 on sale of related party
investments in fiscal 1994) - 282
------- -------
Income Before Provision for Income Taxes and
Minority Interest Expense 1,395 1,185
Provision for Income Taxes 555 456
Minority Interest Expense 35 -
------- -------
Net Income $ 805 $ 729
======= =======
Earnings per Share $ .07 $ .06
======= =======
Weighted Average Shares 12,356 12,294
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(b) Consolidated Statement of Income for the six months ended April 1, 1995
and April 2, 1994 (In thousands except per share amounts)
Six Months Ended
--------------------
April 1, April 2,
1995 1994
-------- --------
Revenues $47,226 $41,789
------- -------
Costs and Operating Expenses:
Cost of revenues 36,467 33,609
Selling, general and administrative expenses 7,528 6,471
Research and development expenses 1,246 755
------- -------
45,241 40,835
------- -------
Operating Income 1,985 954
Interest Income 731 706
Interest Expense (includes $37 related to
note to parent company in fiscal 1994) (11) (49)
Gain (Loss) on Sale of Investments (includes
gain of $616 on sale of related party
investments in fiscal 1994) (38) 600
------- -------
Income Before Provision for Income Taxes and
Minority Interest Expense 2,667 2,211
Provision for Income Taxes 1,040 851
Minority Interest Expense 35 -
------- -------
Net Income $ 1,592 $ 1,360
======= =======
Earnings per Share $ .13 $ .11
======= =======
Weighted Average Shares 12,342 12,282
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(c) Consolidated Statement of Cash Flows for the six months ended
April 1, 1995 and April 2, 1994 (In thousands)
Six Months Ended
--------------------
April 1, April 2,
1995 1994
-------- --------
Operating Activities:
Net income $ 1,592 $ 1,360
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 810 642
Provision for losses on accounts receivable 27 29
(Gain) loss on sale of investments 38 (600)
Minority interest expense 35 -
Changes in current accounts:
Accounts receivable 233 (1,233)
Inventories and unbilled contract
costs and fees (1,473) (613)
Prepaid expenses and income taxes (255) (520)
Accounts payable (537) 1,292
Other current liabilities (1,603) 142
------- -------
Net cash provided by (used in)
operating activities (1,133) 499
------- -------
Investing Activities:
Proceeds from sale and maturities of
available-for-sale investments 7,687 -
Decrease in short-term investments - 4,356
Increase in rental assets (265) -
Purchases of property, plant and equipment (813) (291)
Proceeds from sale of property, plant and equipment 23 -
Purchases of long-term investments - (453)
Other 222 -
------- -------
Net cash provided by investing activities 6,854 3,612
------- -------
Financing Activities:
Net proceeds from issuance of Company and
subsidiary common stock (Note 3) 17,620 239
Repayment of long-term obligations (21) (3,036)
------- -------
Net cash provided by (used in)
financing activities 17,599 (2,797)
------- -------
Increase in Cash and Cash Equivalents 23,320 1,314
Cash and Cash Equivalents at Beginning of Period 7,474 6,154
------- -------
Cash and Cash Equivalents at End of Period $30,794 $ 7,468
======= =======
Cash Paid For:
Interest $ 11 $ 49
Income taxes $ 1,525 $ 569
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(d) Notes to Consolidated Financial Statements - April 1, 1995
1. General
The interim consolidated financial statements have been prepared by
Thermo Power Corporation (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary
for a fair statement of (a) the results of operations for the three- and
six-month periods ended April 1, 1995 and April 2, 1994, (b) the financial
position at April 1, 1995, and (c) the cash flows for the six-month periods
ended April 1, 1995 and April 2, 1994. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of October 1, 1994, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 1, 1994, filed with the Securities and
Exchange Commission.
2. Available-for-sale Investments
Effective October 2, 1994, the Company adopted Statement of Financial
Accounting Standards (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." "Net
unrealized gain on available-for-sale investments" consists of (1) an
unrealized gain, net of related tax effects, of $268,000 that was recorded
as an effect of change in accounting principle adjustment and (2) an
unrealized gain, net of related tax effects, of $85,000 relating to the
increase in market value of available-for-sale investments for the
six-month period ended April 1, 1995.
The aggregate market value, cost basis, and gross unrealized gains and
losses of short- and long-term available-for-sale investments by major
security type, as of April 1, 1995, are as follows:
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
--------------------------------------------------------------------------
Tax-exempt securities $ 6,273 $ 6,301 $ - $ 28
Government agency securities 5,083 5,183 - 100
Corporate bonds 1,385 805 580 -
Other 731 639 230 138
------- ------- ------- -------
$13,472 $12,928 $ 810 $ 266
======= ======= ======= =======
7PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
(d) Notes to Consolidated Financial Statements - April 1, 1995 (continued)
2. Available-for-sale Investments (continued)
Short- and long-term available-for-sale investments in the
accompanying balance sheet at April 1, 1995, include $4,296,000 with
contractual maturities of one year or less, $8,613,000 with contractual
maturities of more than one year through five years, and $563,000 with
contractual maturities of more than five years. Actual maturities may
differ from contractual maturities as a result of the Company's intent to
sell these securities prior to maturity and as a result of put and call
options that enable either the Company and/or the issuer to redeem these
securities at an earlier date.
The cost of available-for-sale investments that were sold was based on
specific identification in determining realized losses recorded in the
accompanying statement of income. Loss on sale of investments for the
six-month period ended April 1, 1995, resulted from gross realized losses
relating to the sale of available-for-sale investments.
3. Transaction in Stock of Subsidiary
On March 6, 1995, the Company's wholly owned subsidiary, ThermoLyte
Corporation (ThermoLyte), sold 1,845,000 units, each unit consisting of one
share of ThermoLyte common stock, $.001 par value, and one redemption
right, at $10.00 per unit, for net proceeds of approximately $17.3 million.
Holders of the common stock purchased in the offering will have the option
to require ThermoLyte to redeem in December 1998 and 1999 any or all of
their shares at $10.00 per share. The redemption rights are guaranteed on a
subordinated basis by Thermo Electron Corporation (Thermo Electron). In the
event a payment is made by Thermo Electron under its guarantee, the Company
has agreed to reimburse Thermo Electron. The difference between the
redemption value and the original carrying amount of "Common stock subject
to redemption" is accreted using the straight-line method over the period
ending December 1998, which corresponds to the first redemption period. The
accretion is charged to "Minority interest expense." ThermoLyte is
developing a line of propane-fueled lighting products, including
flashlights, area lights or lanterns, and hazard lights, as well as
researching propane-fueled power supplies. Following the offering, the
Company owned 78% of ThermoLyte's outstanding common stock.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Description of Business
Industrial Refrigeration Systems
--------------------------------
The Company's FES division supplies standard and custom-designed
refrigeration systems used primarily by the food-processing, petrochemical,
and pharmaceutical industries. NuTemp, Inc. (NuTemp), which was acquired in
May 1994, rents and sells remanufactured and new equipment for industrial
refrigeration applications in the food-processing, petrochemical, and
8PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Description of Business (continued)
pharmaceutical industries, and for commercial cooling applications in
institutions and commercial buildings, as well as for service contractors.
Historically, the demand for NuTemp's equipment is highest in the summer
period.
Engines
-------
The Company's Crusader Engines division (Crusader) manufactures
gasoline engines for recreational boats and natural gas-fueled engines for
vehicle, cooling, pumping, refrigeration, and other industrial
applications.
Cooling and Cogeneration Systems
--------------------------------
The Company's Tecogen division designs, develops, markets, and
services packaged cooling and cogeneration systems fueled principally by
natural gas for sale to commercial, institutional, industrial, and
multi-unit residential users. Certain large-capacity cooling systems are
manufactured by FES, and the cogeneration systems are manufactured by
Crusader.
Through this segment, the Company also conducts research and
development on advanced systems for clean-coal combustion and other
high-efficiency gas-fueled devices. The Company's research and development
capability and expertise in engine, instrumentation, control, and
heat-recovery technologies have enabled it to obtain support from outside
sponsors in industry and government, develop new products, and support
existing products.
The Company's revenues by industry segment for the three- and
six-month periods ended April 1, 1995 and April 2, 1994, are shown in the
following table.
Three Months Ended Six Months Ended
------------------ ------------------
April 1, April 2, April 1, April 2,
(In thousands) 1995 1994 1995 1994
--------------------------------------------------------------------------
Industrial Refrigeration Systems $15,263 $14,302 $29,441 $26,485
Engines 6,526 4,816 11,681 9,710
Cooling and Cogeneration Systems 3,843 3,443 7,223 6,464
Intersegment sales elimination (720) (547) (1,119) (870)
------- ------- ------- -------
$24,912 $22,014 $47,226 $41,789
======= ======= ======= =======
9PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
Second Quarter Fiscal 1995 Compared With Second Quarter Fiscal 1994
-------------------------------------------------------------------
Total revenues increased 13% to $24,912,000 in the second quarter of
fiscal 1995 from $22,014,000 in the second quarter of fiscal 1994.
Industrial Refrigeration Systems segment revenues increased to $15,263,000
in 1995 from $14,302,000 in 1994 due to the inclusion of $1,864,000 in
revenues from NuTemp, which was acquired in May 1994, offset in part by a
decrease in revenues from custom-engineered refrigeration packages at the
Company's FES division due to a decrease in demand. Engines segment
revenues increased 36% to $6,526,000 in 1995 from $4,816,000 in 1994. The
1995 results include a $2,250,000 increase in revenues from Crusader's
inboard marine engine-related products due to increased demand. The 1994
results include $481,000 in revenues from sterndrive marine engine-related
products. The Company's sterndrive customer exited that market in fiscal
1994. Cooling and Cogeneration Systems segment revenues increased to
$3,843,000 in 1995 from $3,443,000 in 1994 due primarily to the inclusion
of a $312,000 fee received from one of the Company's packaged cogeneration
systems distributors to satisfy the financial obligations under a minimum
purchase contract and an increase of $303,000 in revenues from sponsored
research and development contracts. These increases were offset in part by
a decrease in revenues from packaged cogeneration systems and, to a lesser
extent, gas-fueled cooling systems.
The gross profit margin increased to 22% in the second quarter of
fiscal 1995 from 20% in the second quarter of fiscal 1994. The gross profit
margin for the Industrial Refrigeration Systems segment was 22% in 1995,
compared with 18% in 1994. The increase is due primarily to the inclusion
of higher-margin NuTemp revenues and, to a lesser extent, an increase in
margins at FES due to higher-margin sales and lower warranty expenses in
1995, compared with 1994. The gross profit margin for the Engines segment
decreased to 13% in 1995 from 14% in 1994 due to a shift in the sales mix
of marine engine-related products. The gross profit margin for the Cooling
and Cogeneration Systems segment increased to 33% in 1995 from 32% in 1994
due to the fee received from one of the Company's packaged cogeneration
systems distributors as discussed above.
Selling, general and administrative expenses as a percentage of
revenues were 15% in the second quarters of both fiscal 1995 and 1994.
Research and development expenses increased to $716,000 in 1995 from
$433,000 in 1994, due primarily to development costs associated with
gas-fueled lighting products and, to a lesser extent, natural gas-engine
products.
Interest income increased to $431,000 in the second quarter of fiscal
1995 from $338,000 in the second quarter of fiscal 1994, reflecting higher
prevailing interest rates in 1995 and, to a lesser extent, interest income
earned on the proceeds from ThermoLyte Corporation's March 1995 private
placement (see Note 3 to Consolidated Financial Statements). The increase
was offset in part by lower average invested amounts as a result of the
cash expended for the acquisition of NuTemp in May 1994.
10PAGE
<PAGE>
FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Six Months Fiscal 1995 Compared With First Six Months Fiscal 1994
-----------------------------------------------------------------------
Total revenues increased 13% to $47,226,000 in the first six months of
fiscal 1995 from $41,789,000 in the first six months of fiscal 1994.
Industrial Refrigeration Systems segment revenues increased 11% to
$29,441,000 in 1995 from $26,485,000 in 1994 due to the inclusion of
$4,450,000 in revenues from NuTemp, offset in part by a decrease in
revenues from custom-engineered refrigeration packages at the Company's FES
division due to a decrease in demand. Engines segment revenues increased
20% to $11,681,000 in 1995 from $9,710,000 in 1994. The 1995 results
include a $3,624,000 increase in revenues from Crusader's inboard marine
engine-related products due to increased demand. The 1994 results include
$1,490,000 in revenues from sterndrive marine engine-related products.
Cooling and Cogeneration Systems segment revenues increased to $7,223,000
in 1995 from $6,464,000 in 1994 due primarily to the inclusion of a
$1,187,000 fee received from one of the Company's packaged cogeneration
systems distributors in lieu of that distributor making minimum purchases
required by contract. This increase was offset in part by a decrease in
revenues from packaged cogeneration systems and, to a lesser extent,
gas-fueled cooling systems.
The gross profit margin increased to 23% in the first six months of
fiscal 1995 from 20% in the first six months of fiscal 1994. The gross
profit margin for the Industrial Refrigeration Systems segment increased to
24% in 1995 from 19% in 1994 due primarily to the reasons discussed in the
results of operations for the second quarter. The gross profit margin for
the Engines segment remained relatively unchanged at 12% in 1995, compared
with 13% in 1994. The gross profit margin for the Cooling and Cogeneration
Systems segment increased to 33% in 1995 from 30% in 1994, due primarily to
the fee received from one of the Company's packaged cogeneration systems
distributors as discussed above.
Selling, general and administrative expenses as a percentage of
revenues remained relatively unchanged at 16% in the first six months of
fiscal 1995, compared with 15% in the first six months of fiscal 1994.
Research and development expenses increased to $1,246,000 in 1995 from
$755,000 in 1994, due primarily to development costs associated with
gas-fueled lighting products and, to a lesser extent, natural gas-engine
products.
Interest income increased to $731,000 in the first six months of
fiscal 1995 from $706,000 in the first six months of fiscal 1994 due to the
reasons discussed in the results of operations for the second quarter.
Interest expense decreased to $11,000 in 1995 from $49,000 in 1994 due to
the repayment of a $3,000,000 principal amount 6.2% subordinated
convertible note to Thermo Electron Corporation (Thermo Electron) in the
first quarter of fiscal 1994.
11PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Financial Condition
Liquidity and Capital Resources
-------------------------------
Working capital was $62,417,000 at April 1, 1995, compared with
$43,143,000 at October 1, 1994. Included in working capital were cash, cash
equivalents, and short-term investments of $43,703,000 at April 1, 1995 and
$27,879,000 at October 1, 1994. During the first six months of fiscal 1995,
$1,133,000 of cash was used in operating activities. In March 1995, the
Company's ThermoLyte Corporation subsidiary completed a private placement
for net proceeds of approximately $17.3 million (see Note 3 to Consolidated
Financial Statements). As of April 1, 1995, the Company's short-term
available-for-sale investments included subordinated convertible debentures
issued by Thermedics Inc. (Thermedics) that were purchased on the open
market for $651,000 and have a market value of $1,397,000. Thermedics is a
majority-owned subsidiary of Thermo Electron. As of April 1, 1995, the
Company owned 7,313 shares of Thermo Electron common stock (adjusted to
reflect a three-for-two stock split) that were purchased for $18,000 and
have a market value of $248,000. The Company currently expects to make
capital expenditures of approximately $1,500,000 during the remainder of
fiscal 1995, primarily for machinery and equipment. The Company believes
its existing resources are sufficient to meet the capital requirements of
its existing operations for the foreseeable future.
PART II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
On March 14, 1995, at the Annual Meeting of Shareholders, the
shareholders elected seven incumbent directors to a one-year term expiring
in 1996. The directors reelected at the meeting were: Marshall J.
Armstrong, Peter O. Crisp, George N. Hatsopoulos, John N. Hatsopoulos,
Robert C. Howard, Donald E. Noble, and Paul E. Tsongas. Messrs. Armstrong,
G. Hatsopoulos, J. Hatsopoulos, and Howard each received 9,921,553 shares
voted in favor of his election and 6,174 shares voted against. Mr. Crisp
received 9,920,853 shares voted in favor of his election and 6,874 shares
voted against; Mr. Noble received 9,915,128 shares voted in favor of his
election and 12,599 shares voted against; and Mr. Tsongas received
9,922,253 shares voted in favor of his election and 5,474 shares voted
against. No broker nonvotes were recorded on the election of directors.
The shareholders also approved a proposal to amend the directors stock
option plan to change the formula for the award of stock options to
purchase common stock of the Company to its outside Directors and also to
provide for the automatic grant of stock options to purchase common stock
of majority-owned subsidiaries of the Company to its outside directors as
follows: 9,866,829 shares voted in favor, 48,288 shares voted against, and
12,610 shares abstained. No broker nonvotes were recorded on this proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
SIGNATURES
Pursuant to the requirements 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 as of the 5th day of May 1995.
THERMO POWER CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
13PAGE
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FORM 10-Q
April 1, 1995
THERMO POWER CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
------- ---------------------------------------------------- ----
10.1 Directors Stock Option Plan of the Registrant, as
amended.
27 Financial Data Schedule.
<PAGE>
Exhibit 10.1
THERMO POWER CORPORATION
DIRECTORS STOCK OPTION PLAN
As amended and restated effective as of January 1, 1995
1. Purpose
The purpose of this Directors Stock Option Plan (the "Plan") of Thermo
Power Corporation (the "Company") is to encourage ownership in the Company
by outside directors of the Company whose services are considered essential
to the Company's growth and progress and to provide them with a further
incentive to become directors and to continue as directors of the Company.
The Plan is intended to be a nonstatutory stock option plan.
2. Administration
The Board of Directors, or a Committee (the "Committee") consisting of
two or more directors of the Company appointed by the Board of Directors,
shall supervise and administer the Plan. Grants of stock options under the
Plan and the amount and nature of the options to be granted shall be
automatic in accordance with Section 5. However, all questions of
interpretation of the Plan or of any stock options granted under it shall
be determined by the Board of Directors or the Committee and such
determination shall be final and binding upon all persons having an
interest in the Plan.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
subsidiary or parent of the Company shall be eligible to participate in the
Plan. Directors who receive grants of stock options in accordance with
this Plan are sometimes referred to herein as "Optionees."
4. Stock Subject to the Plan
The maximum number of shares that may be issued under the Plan shall
be twenty-five thousand (25,000) shares of the Company's $.10 par value
Common Stock (the "Common Stock"), and twenty-five thousand (25,000) shares
of the common stock of each Spinout Subsidiary (as defined in Section 5(B))
as of the date of the Annual Meeting of Stockholders on which options to
purchase such common stock are first granted to eligible Directors as
provided in Section 5(B), each subject to adjustment as provided in Section
9. Shares to be issued upon the exercise of options granted under the Plan
may be either authorized but unissued shares or shares held by the Company
in its treasury. 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.
A-1PAGE
<PAGE>
5. Terms and Conditions
A. Annual Stock Option Grants
Each Director of the Company who meets the requirements of
Section 3 and who is holding office immediately following the Annual
Meeting of Stockholders, commencing with the Annual Meeting of Stockholders
held in calendar year 1995, shall be granted an option to purchase 1,000
shares of Company common stock at the close of business on the date of such
Annual Meeting. Options granted under this Subsection B shall be
exercisable as to 100% of the shares subject to the option as set forth in
Section 5(C)(1), but shares acquired upon exercise are subject to
repurchase by the Company at the exercise price in the event that the
Optionee ceases to serve as a director of the Company, Thermo Electron
Corporation ("Thermo Electron") or any subsidiary of Thermo Electron, prior
to the first anniversary of the grant date, for any reason other than
death.
B. Subsidiary Stock Option Grants.
Each Director of the Company who meets the requirements of Section 3
and this Section 5(B), from time to time in accordance with this Section
5(B), shall be granted an option to purchase shares of the common stock of
each majority-owned subsidiary of the Company, the common stock of which
shall have become publicly traded or a portion of which shall have been
sold primarily to third parties in a private placement or other arms-length
transaction (such transaction being referred to herein as a "Spinout
Transaction", and such subsidiary being referred to herein as a "Spinout
Subsidiary"), upon the following terms and conditions.
Each eligible Director who is not a Director of the Spinout Subsidiary
shall be granted an option to purchase 1,500 shares of common stock of the
Spinout Subsidiary as of the close of business on the date of the Company's
Annual Meeting of Stockholders that first occurs after the Spinout
Transaction, and also as of the close of business on the date of every
fifth Annual Meeting of Stockholders of the Company that occurs thereafter
during the duration of this Plan.
Options granted under this Section 5(B) shall vest and be exercisable
as to 100% of the shares of common stock subject to the option on the
fourth anniversary of the grant date of the option, unless, prior to such
anniversary, the underlying common stock shall have been registered under
Section 12 of the Securities and Exchange Act of 1934, as amended (referred
to herein as "Section 12 Registration"). From and after 90 days after the
effective date of Section 12 Registration, options granted hereunder shall
be immediately exercisable as to 100% of the shares subject to the option,
subject to the right of the Company to repurchase the shares at the
exercise price in the event the Optionee ceases to serve as a director of
the Company, or any subsidiary of the Company or Thermo Election during the
option term. The right of the Company to so repurchase the shares shall
lapse as to one-fourth of the shares granted on each of the first, second,
third and fourth anniversaries of the grant date of the option, provided
the Optionee has remained continuously a director of the Company, Thermo
Electron or any subsidiary of Thermo Electron since the grant date. In all
other respects, the option shall be subject to the general terms and
conditions applicable to all option grants as set forth below in Section
5(C), including the determination of the exercise price of such option.
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<PAGE>
No Director, who is otherwise eligible under Section 3, shall be
eligible under this Section 5(B) to receive grants of stock options in
Spinout Subsidiaries, if such Director also serves as a director of such
Spinout Subsidiary.
In the event any subsidiary shall become a "Spinout Subsidiary" as
defined herein, then there shall be immediately reserved for transfer
hereunder, on the date options to purchase common stock of the Spinout
Subsidiary are first granted to eligible Directors and without further
action required by the Board of Directors or Stockholders of the Company,
twenty-five thousand (25,000) shares of the common stock of such Spinout
Subsidiary.
C. General Terms and Conditions Applicable to All Grants.
1. Except as otherwise provided in Section 5(B), options shall be
exercisable at any time from and after the six-month anniversary
of the grant date and prior to the date which is the earliest of:
(a) three years after the grant date for options granted under
Section 5(A) and five years after the grant date for options
granted under Section 5(B), (b) three months after the later of
the date (i) the Optionee either ceases to meet the requirements
of Section 3 or (ii) otherwise ceases to serve as a director of
the Company, Thermo Electron or any subsidiary of Thermo Electron
(six months in the event the Optionee ceases to meet the
requirements of this Subsection by reason of his death), or (c)
the date of dissolution or liquidation of the Company.
2. The exercise price at which Options are granted hereunder shall
be the average of the closing prices reported by the national
securities exchange on which the common stock is principally
traded for the five trading days immediately preceding and
including the date the option is granted or, if such security is
not traded on an exchange, the average last reported sale price
for the five-day period on the NASDAQ National Market List, or
the average of the closing bid prices for the five-day period
last quoted by an established quotation service for
over-the-counter securities, or if none of the above shall apply,
the last price paid for shares of the Common Stock by independent
investors in a private placement; provided, however, that such
exercise price per share shall not be lower than the par value
per share or less than 50% of the fair market value of the Common
Stock until such time as the Company elects to be subject to Rule
16b-3 as amended by SEC Rel. No. 33-28869.
3. All options shall be evidenced by a written agreement
substantially in such form as shall be approved by the Board of
Directors or Committee, containing terms and conditions
consistent with the provisions of this Plan.
6. Exercise of Options
A. Exercise/Consideration
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
A-3PAGE
<PAGE>
shall be accompanied by payment in the form of cash or shares of common
stock of the Company (as to options to purchase Company Common Stock) or
the Spinout Subsidiary (as to options to purchase common stock of the
Spinout Subsidiary, but only if the common stock is then publicly traded)
(the shares so tendered referred to herein as "Tendered Shares") with a
then current market value equal to the exercise 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 or the Director 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.
B. Tax Withholding
The Company shall have the right to deduct from payments of any kind
otherwise due to the 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. Subject to the prior approval of the
Company, which may be withheld by the Company in its sole discretion, the
Optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii) by delivering to the Company
shares of Common Stock already owned by the Optionee. The shares so
delivered or withheld shall have a fair market value equal to such
withholding obligation. The fair market value of the shares used to
satisfy such withholding obligation shall be determined by the Company as
of the date that the amount of tax to be withheld is to be determined.
Notwithstanding the foregoing, no election to use shares for the payment of
withholding taxes shall be effective unless made in compliance with any
applicable requirements of Rule 16b-3.
7. Transferability
Options shall not be transferable, otherwise than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Internal Revenue Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder (a "Qualified
Domestic Relations Order"). Options may be exercised during the life of
the Optionee only by the Optionee or a transferee pursuant to a Qualified
Domestic Relations Order.
8. Limitation of Rights to Continue as a Director
Neither the Plan, nor the quantity of shares subject to options
granted under the Plan, nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or understanding, express
or implied, that the Company will retain a Director for any period of time,
or at any particular rate of compensation.
A-4PAGE
<PAGE>
9. Changes in Common Stock
If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or
if additional shares or new or different shares or other securities are
distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all
of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to such shares of Common Stock, or other
securities, an appropriate proportionate adjustment may be made in the
maximum number or kind of shares reserved for issuance under the Plan. No
fractional shares will be issued under the Plan on account of any such
adjustments.
10. 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 or the written agreement evidencing options granted
hereunder.
11. 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 permit the exercise in full of all options granted under this
Plan and shall pay all other fees and expenses necessarily incurred by the
Company in connection therewith.
12. Securities Laws Restrictions
A. Investment Representations.
The Company may require any person to whom an option is granted, as a
condition of exercising such option, to give written assurances in
substance and form satisfactory to the Company to the effect that such
person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company
deems necessary or appropriate in order to comply with federal and
applicable state securities laws.
B. Compliance with Securities Laws.
Each option shall be subject to the requirement that if, at any time,
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any securities
exchange or under any state or federal law, or the consent or approval of
any governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval, or
satisfaction of such condition shall have been effected or obtained on
conditions acceptable to the Board of Directors. Nothing herein shall be
A-5PAGE
<PAGE>
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
13. Change in Control
13.1 Impact of Event
In the event of a "Change in Control" as defined in Section 13.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options awarded under the Plan that were not previously
exercisable and vested shall become fully exercisable and vested.
(b) Shares purchased upon the exercise of options subject to
restrictions and to the extent not fully vested, shall become fully
vested and all such restrictions shall lapse so that shares issued
pursuant to such options shall be free of restrictions.
13.2 Definition of "Change in Control"
"Change in Control" means any one of the following events: (i) when,
any Person is or becomes the beneficial owner (as defined in Section 13(d)
of the Exchange Act and the Rules and Regulations thereunder), together
with all Affiliates and Associates (as such terms are used in Rule 12b-2 of
the General Rules and Regulations of the Exchange Act) of such Person,
directly or indirectly, of 50% or more of the outstanding Common Stock of
the Company, or the beneficial owner of 25% or more of the outstanding
common stock of Thermo Electron Corporation ("Thermo Electron"), without
the prior approval of the Prior Directors of the Company or Thermo
Electron, as the case may be, (ii) the failure of the Prior Directors to
constitute a majority of the Board of the Company or of the Board of
Directors of Thermo Electron, as the case may be, at any time within two
years following any Electoral Event, or (iii) any other event that the
Prior Directors shall determine constitutes an effective change in the
control of the Company or Thermo Electron. As used in the preceding
sentence, the following capitalized terms shall have the respective
meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is
defined in Rule 405 under the Securities Act of 1933 and any "group"
(within the meaning of such term in Rule 13d-5 under the Exchange
Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's
or Thermo Electron's Board of Directors, as the case may be,
immediately prior to any Electoral Event (or, if there has been no
Electoral Event, those persons sitting on the applicable Board of
Directors on the date of this Agreement) and any future director of
the Company or Thermo Electron who has been nominated or elected by a
majority of the Prior Directors who are then members of the Board of
Directors of the Company or Thermo Electron, as the case may be; and
(c) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's or Thermo Electron's
Common Stock, not approved by the Prior Directors, by any Person other
than the Company, Thermo Electron or a subsidiary of Thermo Electron.
A-6PAGE
<PAGE>
14. Amendment of the Plan
The provisions of Sections 3 and 5 of the Plan shall not be amended
more than once every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. Subject to the foregoing, the Board of Directors may at any
time, and from time to time, modify or amend the Plan in any respect,
except that if at any time the approval of the Stockholders of the Company
is required as to such modification or amendment under Rule 16b-3, the
Board of Directors may not effect such modification or amendment without
such approval.
The termination or any modification or amendment of the Plan shall
not, without the consent of an Optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the Optionees
affected, the Board of Directors may amend outstanding option agreements in
a manner not inconsistent with the Plan. The Board of Directors shall have
the right to amend or modify the terms and provisions of the Plan and of
any outstanding option to the extent necessary to ensure the qualification
of the Plan under Rule 16b-3.
15. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of
Directors, but no option granted under the Plan shall become exercisable
until six months after the Plan is approved by the Stockholders of the
Company.
16. Notice
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Secretary of the Company and shall
become effective when it is received.
17. Governing Law
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the Commonwealth of Massachusetts.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO POWER
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED APRIL 1, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-01-1995
<CASH> 30,794
<SECURITIES> 12,909
<RECEIVABLES> 13,378
<ALLOWANCES> 578
<INVENTORY> 15,654
<CURRENT-ASSETS> 82,045
<PP&E> 4,789
<DEPRECIATION> 435
<TOTAL-ASSETS> 100,250
<CURRENT-LIABILITIES> 19,628
<BONDS> 323
<COMMON> 1,243
0
0
<OTHER-SE> 61,544
<TOTAL-LIABILITY-AND-EQUITY> 100,250
<SALES> 47,226
<TOTAL-REVENUES> 47,226
<CGS> 36,467
<TOTAL-COSTS> 36,467
<OTHER-EXPENSES> 1,246
<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 2,667
<INCOME-TAX> 1,040
<INCOME-CONTINUING> 1,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,592
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
