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 September 28, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-10791
THERMOTREX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-1711436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10455 Pacific Center Court
San Diego, California 92121-4339
(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:
Title of each class Name of exchange on which registered
---------------------------- ------------------------------------
Common Stock, $.01 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 November 22, 1996, was approximately $304,566,000.
As of November 22, 1996, the Registrant had 19,170,568 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended September 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 March 12, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business
ThermoTrex Corporation (the Company or the Registrant) has two
publicly traded subsidiaries, 64%-owned ThermoLase Corporation
(ThermoLase) and 80%-owned Trex Medical Corporation (Trex Medical).
Through its ThermoLase subsidiary, the Company has developed a
laser-based system for the removal of unwanted hair (the SoftLight(SM)
system), which is being marketed in the U.S. through ThermoLase's Spa
Thira salons and through licensing agreements with physicians, and in
foreign countries through joint ventures and other licensing arrangements
with companies or individuals that are experienced in those locations. In
addition, ThermoLase's wholly owned CBI Laboratories, Inc. (CBI)
subsidiary manufactures and markets skin-care and other personal-care
products. Through its Trex Medical subsidiary, the Company designs,
manufactures, and markets mammography and minimally invasive stereotactic
breast-biopsy systems used for the detection of breast cancer, as well as
general-purpose and specialty X-ray equipment. The Company also conducts
advanced technology research in communications, avionics, X-ray
detection, signal processing, advanced-materials technology, and lasers.
In April 1995, ThermoLase received clearance from the U.S. Food and
Drug Administration (FDA) to market services using the SoftLight system,
and began earning revenue from the SoftLight system in the first quarter
of fiscal 1996* as a result of opening its first commercial salon (Spa
Thira) in La Jolla, California, in November 1995. ThermoLase opened
additional salons in Dallas in June 1996, in Houston and Beverly Hills in
September 1996, in Denver in October 1996, and in Boca Raton in November
1996. ThermoLase also plans to open a spa in suburban Detroit in December
1996 and has signed leases for four additional sites in Greenwich,
Connecticut; Manhasset, New York; suburban Minneapolis; and Palm Beach,
Florida. Lease negotiations are under way for additional sites.
In January 1996, ThermoLase entered into a joint venture to market
the SoftLight process in Japan, as well as its laser-based skin-
rejuvenation process, if and when available. Before opening the first spa
in Japan, the joint venture must obtain Japanese regulatory clearance to
market the SoftLight process, for which it is presently conducting
clinical studies to obtain data to submit to the appropriate Japanese
regulatory authorities. ThermoLase currently holds a 50% stake in the
joint venture, with an option to increase its ownership to 51% pursuant
to a fair-value purchase option.
In June 1996, ThermoLase initiated a program to license its
SoftLight technology to doctors. In this program, ThermoLase licenses its
technology to doctors and receives a per-procedure royalty that varies
depending on the location treated. ThermoLase also provides the doctors
with the lasers and supplies that are necessary to perform the service. A
total of 55 doctors were licensees as of December 1, 1996.
* In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
References to "fiscal 1996," "fiscal 1995," and "1994" herein are for
the year ended September 28, 1996, the nine months ended September 30,
1995, and the year ended December 31, 1994, respectively.
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In June 1996, ThermoLase purchased $4.4 million of convertible
preferred stock of AntiCancer Incorporated (AntiCancer), representing an
approximate 10% equity interest on a fully diluted basis. San Diego-based
AntiCancer is developing technology that may have the potential to
enhance the effectiveness of the SoftLight process. In this technology,
liposomes, which have been proven to be effective delivery agents in
other applications, might provide a more efficient method of delivering
carbon, which is the primary ingredient in the lotion used in the
SoftLight process, to hair follicles. ThermoLase has signed an agreement
to license this technology as it pertains not only to hair removal, but
also to stimulation of hair growth, suppression of hair growth, and hair
coloring.
In November 1996, ThermoLase entered into a joint venture to market
its SoftLight process in France, as well as its laser-based skin-
rejuvenation process, if and when available. ThermoLase's partner in the
joint venture is an affiliate of Groupe Jacques Dessange, which is a
leading provider of premium hair- and skin-care services in France. The
joint venture plans to open Spa Thira salons in France and to sublicense
to French physicians and others the right to perform services using the
SoftLight system.
In November 1996, ThermoLase entered into a license agreement to
allow a third party to market the SoftLight process in Saudi Arabia, as
well as its laser-based skin-rejuvenation process, if and when available.
ThermoLase is investigating other applications for its laser-based
technology, and in June 1995 was granted a patent covering a laser-based
skin-rejuvenation system, which ThermoLase believes may be used to remove
the outer layers of dead skin cells. Carbon dioxide (CO2) lasers have
recently been used to remove wrinkles, but their use has been associated
with long healing times and, in some cases, undesirable side effects.
ThermoLase believes that the skin-rejuvenation process that it is
developing will cause less skin damage than existing laser skin
treatments that use a CO2 laser. Although the safety of using lasers for
skin treatments has been established by several systems that are already
approved by the FDA for the removal of birthmarks and tattoos, ThermoLase
may not commercially sell its skin-rejuvenation system, or services using
the system, until it has received clearance from the FDA. ThermoLase is
currently conducting clinical trials and plans to submit a 510(k)
application containing clinical data by the end of the second quarter of
fiscal 1997.
In July 1996, the Company completed the public spinout of its Trex
Medical subsidiary. Trex Medical issued 2,875,000 shares of its common
stock in an initial public offering, and 871,832 shares of its common
stock in a concurrent rights offering, for net proceeds of $49.1 million.
Trex Medical, which was incorporated in September 1995, consists of
four operating units: Lorad, Bennett X-Ray Corporation (Bennett), XRE
Corporation (XRE), and Continental X-Ray Corporation (Continental). In
September 1995, ThermoTrex acquired and subsequently transferred to Trex
Medical all of the outstanding capital stock of Bennett; in May 1996,
Trex Medical acquired substantially all of the assets and liabilities of
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XRE for approximately $18.5 million in cash, net of cash acquired and
including the repayment of debt; and in September 1996, Trex Medical
acquired substantially all of the assets and liabilities of Continental
for approximately $18.4 million in cash, net of cash acquired and
including the repayment of debt.
Each of Trex Medical's operating units specializes in manufacturing
a particular type of imaging equipment for different market segments.
Lorad, acquired by the Company in 1992 and transferred to Trex Medical in
September 1995, manufactures and markets mammography and minimally
invasive stereotactic breast-biopsy systems, which provide a
cost-effective, less-invasive alternative to open surgery for the biopsy
of suspicious breast lesions. Bennett's product line consists primarily
of general-purpose X-ray equipment, but also includes mammography
systems, a stereotactic breast-biopsy system, and X-ray units used by
chiropractors and veterinarians. XRE manufactures and markets X-ray
imaging systems used by interventional cardiologists in the diagnosis and
treatment of blockages in coronary arteries and other vessels. XRE also
manufactures electrophysiology products that aid doctors in diagnosing
and treating cardiac arrhythmia. Continental manufactures and markets a
broad line of general-purpose and specialty X-ray systems, including
radiographic fluoroscopy (R/F) systems used to diagnose gastrointestinal
disorders. Continental also manufactures electrophysiology products and
mammography systems.
Trex Medical is currently developing a full-breast digital
mammography system that is intended to yield higher image quality, permit
the enhancement of an X-ray image through software, and allow off-site
analysis of the X-ray image. Trex Medical believes this technology may
also provide better images of dense breast tissue, which is often found
in younger women. Trex Medical is currently collecting clinical data to
be submitted with its 510(k) application to the FDA, which must grant
market clearance before this system can be sold commercially. Trex
Medical has designed its new, high-end conventional mammography systems
so that radiologists can upgrade to this digital technology when it
becomes available. Trex Medical believes that the digital imaging
technology being developed for this system may be adaptable to its
general and specialized radiography systems, and will seek to develop
applications in these markets. Trex Medical is also working on a more
advanced version of its existing digital technology, which incorporates a
flat-panel, direct-digital detector and could provide even more
information for earlier diagnoses.
The Company continues to focus on applying its core technologies to
the development of new commercial products, including a passive microwave
camera and a laser communication system called lasercom. The passive
microwave camera could be used to enhance safety in aircraft navigation
during low-visibility conditions and in certain security applications.
The lasercom system could one day be used as a satellite-to-satellite
communication system to transmit phone calls, faxes, and video
teleconferences across the globe. The Company continues to perform
substantial amounts of government-sponsored research and development.
At September 28, 1996, Thermo Electron Corporation (Thermo
Electron) owned 9,711,282 shares of the common stock of the Company,
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representing 51% of such stock then outstanding. Thermo Electron is a
world leader in environmental monitoring and analysis instruments,
biomedical products such as heart-assist devices and mammography systems,
papermaking and paper-recycling 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 50% ownership of the Company. This will require the purchase by
Thermo Electron of additional shares of Company common stock from time to
time as the number of outstanding shares issued by the Company increases.
These and any other purchases may be made either on the open market or
directly from the Company. During fiscal 1996, Thermo Electron purchased
50,000 shares of the Company's common stock in the open market for a
total price of $1.8 million. See Note 6 to Consolidated Financial
Statements in the Registrant's Fiscal 1996 Annual Report to Shareholders
for a description of outstanding stock options.
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. These statements involve a number of risks and
uncertainties, including those detailed under the caption "Forward-
looking Statements" in the Registrant's Fiscal 1996 Annual Report to
Shareholders incorporated herein by reference.
(b) Financial Information About Industry Segments
The Company's business is divided into three industry segments:
Medical Products manufactured by the Company's Trex Medical subsidiary,
Personal-care Products and Services provided by the Company's ThermoLase
subsidiary, and Advanced Technology Research. The principal products
produced and services rendered by the Company in these three segments are
described in detail below. (See "Principal Products and Services.")
Financial information concerning the Company's industry segments is
provided in Note 13 to Consolidated Financial Statements in the
Registrant's Fiscal 1996 Annual Report to Shareholders and is
incorporated herein by reference.
(c) Description of Business
(i) Principal Products and Services
Medical Products
Through its Trex Medical subsidiary, the Company designs,
manufactures, and markets mammography and minimally invasive stereotactic
breast-biopsy systems used for the detection of breast cancer, as well as
general-purpose and specialty X-ray equipment and radiographic
fluoroscopy systems. Trex Medical sells its products through a worldwide
network of more than 100 independent dealers and, to a lesser extent, on
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a direct basis. In addition to manufacturing and marketing its own
systems, the Company manufactures systems and system components as an OEM
for other medical equipment companies such as United States Surgical
Corporation (U.S. Surgical), the GE Medical Systems division of General
Electric Company, Inc. (GE), the Philips Medical Systems North America
Company subsidiary of Philips N.V. (Philips), and the Picker
International, Inc. subsidiary of GEC, Inc. (Picker International).
Mammography and Breast-biopsy Systems
Trex Medical is the world's leading manufacturer of mammography
equipment and minimally invasive breast-biopsy systems. Trex Medical's
systems are differentiated on the basis of price and performance, with
high-end models including the recently introduced Lorad M-IV and the
Bennett Contour, which offers a patented tilt C-arm that permits the
system to tilt toward, or away from, the patient to allow for imaging of
a greater area of the breast. The M-IV incorporates the optional
High-Transmission Cellular (HTC)(TM) grid, which reduces X-ray scattering
while blocking fewer primary X-rays, resulting in higher-contrast images
with lower radiation doses. The Company's lower-priced models include the
Lorad M-III and the Bennett MF-150, which do not offer all of the
features of the high-end models and are marketed to more cost-conscious
consumers. In addition, the Company offers two mobile mammography
systems.
The Company currently has a prototype full-breast digital imaging
mammography system and expects to submit data using this prototype to the
FDA for clearance, which is required before the Company can commercially
market it. The Company is currently developing a next-generation
full-breast digital mammography system, which would replace the film with
a solid-state detector capable of directly recording the X-ray image in
an electronic format. The system is designed to substantially increase
image contrast without a significant decrease in image resolution.
Trex Medical also offers a variety of minimally invasive
stereotactic breast-biopsy systems, designed to provide an alternative to
surgical breast biopsies. Compared with open surgery, a stereotactic
breast-biopsy procedure generally removes only a small tissue sample,
resulting in minimal scarring, which can affect the accuracy of future
mammograms, and is generally performed under local anesthetic on an
outpatient basis, resulting in significantly lower cost. Recent studies
indicate that stereotactic needle biopsy is equally effective compared
with surgical biopsy in determining whether a suspicious lesion is
malignant, and the typical cost of a stereotactic needle-biopsy procedure
is approximately one third of the cost of a surgical biopsy. The Company
offers a dedicated, prone table called the StereoGuide(R) and upright,
add-on systems that can be attached to most of its mammography systems.
Trex Medical's StereoGuide system is the subject of a lawsuit alleging
infringement of a Fischer Imaging Corporation (Fischer) patent. See "Item
3 - Legal Proceedings."
Trex Medical offers a digital spot imaging option with all of its
stereotactic breast-biopsy systems. Although not capable of imaging the
entire breast, digital spot imagers are capable of capturing an area
large enough to cover a suspicious lesion. The Company's digital spot
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imaging systems can record and display an X-ray image in approximately 10
seconds. Since the image is recorded in electronic format, a computer can
quickly plot the location of the lesion and aim the needle gun once the
lesion has been located with a cursor on the computer screen. A
stereotactic breast-biopsy procedure using digital spot imaging can be
performed in as short a time as 10 minutes, compared with a typical time
of 45 minutes using a film-based system.
The Company believes that demand in the market for mammography
systems is driven primarily by technological innovation that result in
better image quality. Although growth of the installed base has slowed,
demand for new systems continues as older models are replaced with those
offering technological innovations. In addition, Trex Medical believes
that the market outside the United States will grow as more countries
adopt mammography quality standards similar to those recently adopted in
the United States. Trex Medical believes that the stereotactic
breast-biopsy system market will grow as the procedure becomes more
widely accepted by the medical community and as pressures to contain
healthcare costs increase.
General Radiography
Trex Medical addresses the general radiography (X-ray) market
through its Bennett and Continental subsidiaries. Bennett designs,
manufactures, and markets office-based X-ray systems, which are basic
systems generally used in medical outpatient facilities, such as doctors'
offices and surgi-care centers. Bennett has focused on this segment of
the market by providing low-cost, reliable systems. Bennett and
Continental also design, manufacture, and market more sophisticated and
expensive radiographic systems typically used in hospitals and clinics.
In addition, Bennett manufactures and markets imaging systems designed
specifically for chiropractors and veterinarians.
The U.S. market for general X-ray systems is stable, and consists
primarily of replacement sales as customers upgrade older equipment. Trex
Medical believes that the international market is substantially larger
than the U.S. market and that the installed base of systems is still
growing, particularly in developing countries. Trex Medical has recently
expanded its international sales efforts.
Trex Medical offers two linear tomography systems: the Bennett
BT-300 and the Continental Precision Movement Tomography (PMT)
radiographic/tomographic system. In a linear tomography procedure, the
X-ray tube sweeps over the patient in one direction with the film tray
sweeping under the patient in the opposite direction. The resulting image
provides an unobstructed view at a desired plane within the patient's
body, of the kidneys, for example. The Company believes that for a number
of applications its tomography systems may be a cost-effective
alternative to computed tomography (CT) scanners.
The Company believes digital imaging will have significant
application in the general and specialized radiographic markets and that
the technology it develops for its full-breast digital imaging system may
be adaptable to these applications. In general X-ray applications, the
Company believes digital imaging will produce better quality images and
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reduce operating costs by eliminating the need for film, processing
equipment, and chemicals. In addition, digital imaging will permit the
electronic storage of images on magnetic or optical media, as well as the
transmission of images to multiple locations. Furthermore, the Company
believes digital imaging could make the image intensifiers, which are
large and expensive components in certain imaging systems, obsolete.
Cardiac Catheterization, Angiography, and Electrophysiology
Through its XRE subsidiary, acquired in May 1996, Trex Medical
designs, manufactures, and markets complete cardiac catheterization
laboratories (also called cath labs) and positioners for cardiovascular
imaging systems. XRE's imaging equipment is used in cath labs where
angiography (examination of the blood vessels using X-rays following the
injection of a radio-opaque contrast medium) is performed by an
interventional cardiologist. The entire system is designed to provide
real-time images of the heart and coronary arteries for physicians
performing interventional procedures, such as a diagnostic angiogram or
balloon angioplasty, which has become a common alternative to open-heart
bypass surgery.
Both XRE and Continental design, manufacture, and sell
electrophysiology systems used in the diagnosis and treatment of cardiac
arrhythmia, which is characterized by the sudden, erratic beating of the
heart and can result in cardiac arrest.
Radiographic Fluoroscopy Systems
Through its Continental subsidiary, acquired in September 1996,
Trex Medical designs, manufactures and markets R/F products. An R/F
system is able to record dynamic events by capturing a series of images
in a short period of time. For example, R/F systems are used for various
gastrointestinal procedures to image the progress of a radio-opaque
ingested solution (typically barium) through the digestive tract.
Continental produces R/F systems that use advanced high-frequency
generators that provide pulsed power, resulting in substantially reduced
radiation exposure to the patient. Continental's R/F products include the
new DigiSpot 2000, a high-speed digital imaging system that records the
image in an electronic format, permitting the electronic storage of
images on magnetic or optical media and the transmission of images to
multiple locations with image quality comparable with film-based systems.
Personal-care Products and Services
Laser-based Hair Removal
ThermoLase's patented SoftLight system uses a low-energy,
dermatology laser in combination with a lotion that absorbs the laser's
energy to disable hair follicles. Unlike electrolysis, the SoftLight
system can disable numerous hair follicles at one time. As a result,
ThermoLase believes that it will be able to address a larger market than
electrolysis by offering hair removal from large areas, such as the legs.
The lasers, which are similar to those used for tattoo and birthmark
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removal, are manufactured for ThermoLase by Trex Medical. The lotion is
manufactured by ThermoLase's CBI Laboratories subsidiary.
In a typical treatment, the area from which hair is to be removed
is first waxed to open each hair duct. The lotion is then applied, and
the area is scanned with the laser beam. The laser energy passes through
the skin and is absorbed by the lotion that has penetrated the hair duct,
causing the temperature of the lotion to increase to a level that
disables the hair follicles. Each client typically has a series of
treatments, for which each Spa Thira currently offers several pricing
programs, including fixed fees for one or more treatments and fixed fees
for treatments during specified time periods. ThermoLase continues to
invest in research and development to improve the efficacy of the system
and increase the length of time between treatments.
In April 1995, ThermoLase received clearance from the FDA to market
services using the SoftLight system, and began earning revenue from the
SoftLight system in the first quarter of fiscal 1996 as a result of
opening its first commercial salon (Spa Thira) in La Jolla, California,
in November 1995. ThermoLase opened additional salons in Dallas in June
1996, in Houston and Beverly Hills in September 1996, in Denver in
October 1996, and in Boca Raton in November 1996. ThermoLase also plans
to open a spa in suburban Detroit in December 1996, and has signed leases
for four additional sites in Greenwich, Connecticut; Manhasset, New York;
suburban Minneapolis; and Palm Beach, Florida. Lease negotiations are
under way for additional sites.
In June 1996, ThermoLase initiated a program to license its
SoftLight technology to doctors. In this program, ThermoLase licenses its
technology to doctors and receives a per-procedure royalty that varies
depending on the location treated. ThermoLase also provides the doctors
with the lasers and supplies that are necessary to perform the service. A
total of 55 doctors were licensees as of December 1, 1996.
In January 1996, ThermoLase entered into a joint venture to market
the SoftLight process in Japan, as well as its laser-based skin-
rejuvenation process, if and when available. Before opening the first spa
in Japan, the joint venture must obtain Japanese regulatory clearance to
market the SoftLight process, for which it is presently conducting
clinical studies to obtain data to submit to the appropriate Japanese
regulatory authorities. ThermoLase currently holds a 50% stake in the
joint venture, with an option to increase its ownership to 51% pursuant
to a fair-value purchase option. During fiscal 1996, ThermoLase received
$2.0 million in minimum guaranteed payments in accordance with
contractual terms. ThermoLase will receive $1.0 million in minimum
guaranteed payments in fiscal 1997, subject to certain exceptions in the
event the joint venture is unable to obtain patent protection in Japan on
prescribed terms.
In November 1996, ThermoLase entered into a joint venture to market
its SoftLight process in France, as well as its laser-based skin-
rejuvenation process, if and when available. The joint venture plans to
open Spa Thira salons in France and to sublicense to French physicians
and others the right to perform services using the SoftLight system.
ThermoLase has committed to provide up to $5.0 million to fund working
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capital requirements of the joint venture in exchange for its 50% stake
in the joint venture. ThermoLase's partner in the venture has also
committed to fund up to $5.0 million in exchange for its 50% ownership.
ThermoLase has licensed the technology to perform the SoftLight process
to the joint venture, and will receive a royalty based on the joint
venture's revenues.
In November 1996, ThermoLase entered into a license agreement with
a third party, which will market the SoftLight process through Spa Thira
salons and sublicensing arrangements in Saudi Arabia, as well as its
laser-based skin-rejuvenation process, if and when available. Pursuant to
the agreement, ThermoLase will receive up-front fees totaling $1.0
million over a two-year period and a fee based on revenues derived from
SoftLight services.
ThermoLase's existing and planned spas are designed to reflect the
environment of a luxurious day spa. ThermoLase believes that the
uniformity of its centers will foster brand recognition and facilitate
the opening of new spas. ThermoLase advertises the SoftLight system
through an advertising and public relations campaign focused on exposure
in fashion and health magazines as well as the national news media.
Skin-care and Other Personal-care Products
In December 1993, ThermoLase acquired CBI, a designer, developer,
manufacturer, and packager of high-quality personal-care products for
sale to retailers under its own brand names and as a contract
manufacturer under arrangements with third parties. CBI develops and
manufactures most of its products using botanicals and herbal extracts,
with no animal fats, chemical dyes, or artificial aromas. CBI has the
facilities and personnel to develop new product formulations, design
packaging layouts, mix and fill formulations, and package final products
for distribution. CBI does not manufacture packaging such as containers
and boxes, but contracts with third parties for these supplies. CBI has a
portfolio of approximately 3,000 formulations, and may manufacture up to
300 different products in a quarter.
CBI divides its business into three primary groups: Salon, Custom
Design, and Store Brands. The Salon group, which represents CBI's
original business, develops and manufactures a line of products primarily
sold directly by CBI to professional estheticians in skin-care salons and
spas. The Custom Design group markets CBI's manufacturing and design
services primarily to major retailers and multilevel marketing groups for
custom design of private-label product lines. The Store Brands group
markets complete proprietary product lines created by CBI, including
product formulations, packaging, brand name, and promotional materials,
which can be purchased by a customer for sale in its retail outlets as an
exclusive product line.
CBI's marketing and sales strategy varies by product line, but
generally includes phone solicitations and local representatives. In
addition, ThermoLase expects its network of Spa Thira salons and
physicians' offices where SoftLight services are offered to provide a
retail outlet for CBI's salon products. To support its marketing
activities, CBI attends industry trade shows and advertises in major
trade publications.
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Advanced Technology Research
The Company is currently focusing its advanced technology research
efforts in the areas of communications, avionics, X-ray detection, signal
processing, materials technology, and lasers. The Company has developed
its expertise in these core technologies in connection with
government-sponsored research and development.
Passive Microwave Camera
The Company is developing a passive microwave camera (PMC) to see
objects hidden by fog and clouds and to see through certain opaque
objects, such as building partitions. The Company's PMC could thus
improve safety in aircraft navigation and provide enhanced surveillance
capabilities.
The Company's PMC is intended to combine the capabilities and
advantages of infrared imaging and radar detection to form thermal images
at microwave frequencies. Like infrared imaging, but unlike radar, the
PMC will be a totally passive device that emits no radiation and can
produce real-time video images during the day or night without the
clutter typical of radar. Like radar, but unlike infrared imaging, the
PMC will have the ability to see through fog, smoke, clouds, and some
opaque objects. For example, microwave imaging devices have penetrated
cloud cover to produce identifiable images of highways from helicopters.
The Company's goal is that its PMC will achieve resolution of objects
that are several feet, to several tens of feet, in size at a distance of
one mile and that resolution will increase as distances decrease.
The Company believes the largest potential application of the PMC
would be the incorporation of the device into airplanes for use during
takeoffs, landings, and taxiing in adverse weather conditions. The
Company's PMC is subject to approval by the Federal Aviation
Administration (FAA). The U.S. Army has provided approximately $6.0
million in funding for PMC development over the last four years. In
fiscal 1996, the U.S. Army Research Laboratory awarded ThermoTrex an
additional $4.0 million contract to continue development. Under the
previous funding, ThermoTrex built and field-tested a first-generation
camera. The additional funding will be used to conduct further upgrades
that are intended to improve performance and make the camera more user
friendly. In addition, ThermoTrex is developing a flightworthy
second-generation camera for in-flight testing. Because the Army is
interested in the potential for using this system on unmanned aircraft,
the Company plans to develop a new system architecture that is compatible
with an unmanned vehicle, with the goal of producing very-high-resolution
images from long distances.
Under a two-year $1.7 million cooperative agreement announced in
early 1995, the Company is developing a more compact version of the PMC
for the National Aeronautics and Space Administration. Under the terms of
this agreement, the Company will provide matching funds of $1.3 million
and its subcontractor, Aerojet GenCorp., will contribute $0.8 million.
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Laser Communication System (lasercom)
The Company is developing a laser communication system called
lasercom that could help ease the burden that data transmission is
placing on existing communication systems. The commercial lasercom system
envisioned by ThermoTrex would employ a constellation of low-earth-orbit
satellites. The information being transmitted would be uplinked via radio
waves to the closest satellite, then relayed via laser beams to
intermediate satellites before being downlinked via radio waves near the
recipient.
Since 1989, the Company has developed lasercom under the
sponsorship of The Ballistic Missile Defense Organization, which has
provided funding totaling approximately $11.8 million through the end of
fiscal 1996. The military would benefit from the speed and security that
lasercom could provide. In September 1995, the Company successfully
demonstrated the data transmission capability of the system when data
were broadcast over a distance of almost 100 miles.
In September 1996, the Company received a $4.9 million contract
(with options for an additional $0.4 million) from the Defense Airborne
Reconnaissance Office (DARO) for advanced development of the lasercom
system for use on aircraft. Under this contract, the Company will apply
its lasercom technology to develop a system that could be used on
unmanned reconnaissance aircraft. Lasercom would provide a horizontal
communications link to quickly transmit digitized images of the ground
below the aircraft, for example, to another unmanned aircraft flying near
a command post hundreds of miles away, where the information could be
downlinked and analyzed. Under the contract, the Company is developing a
fully functional prototype to be tested using small commercial jets.
Other Projects
The Company is developing a more advanced version of its existing
digital medical imaging technology, which Trex Medical currently
incorporates into certain of its mammography systems. This
next-generation system would incorporate a flat-panel, direct-digital
detector that could provide even more information for earlier diagnoses.
This system is based on complementary metal oxide semiconductor (CMOS)
technology. The CMOS system would "directly" detect the X-rays and
convert them into digital information, as opposed to converting them into
visible light first before being digitized, as is the case with the
Company's current full-breast digital technology. Trex Medical has the
right to license this technology as it pertains to certain medical
applications. The Company is also exploring other nonmedical applications
for this flat-panel direct-digital technology.
The Company is currently working on government projects in several
areas, including: (1) space surveillance -- Under an $8.0 million
contract from the U.S. Air Force Phillips Laboratory that was awarded in
1993, the Company is designing and building a system to produce
high-resolution images of low-earth-orbit satellites. (2) ROBS (rapid
optical beam steering) laser radar system -- ThermoTrex has developed and
extensively tested the ROBS system over the last nine years, supported by
more than $23 million in government funding. In fiscal 1996, the Company
12PAGE
<PAGE>
received a three-year $8.8 million contract from the U.S. Naval Air
Warfare Center at China Lake, California, to continue development of this
system, which is designed to simultaneously track multiple, fast-moving
airborne objects with extreme precision. In July 1996, the Company
received a $5.9 million contract from the U.S. Army Missile Command to
build a new version of ROBS to meet Army specifications.
One of the Company's long-term research and development programs is
the development of a Sonic CT(TM) (Computed Tomography) system that uses
acoustic waves to form high-resolution images of breast tissue. The
Company has deferred spending additional resources on Sonic CT at the
present time, so that it may concentrate its resources more directly on
its digital imaging research and development.
(ii) New Products
The Company's business includes the research and development of new
products. (see "Principal Products and Services.")
(iii) Raw Materials
Raw materials, components, and supplies purchased by the Company
are either available from a number of different suppliers or from
alternative sources that could be developed without a material adverse
effect on the Company. To date, the Company has experienced no
difficulties in obtaining these materials.
(iv) Patents, Licenses, and Trademarks
The Company protects its intellectual property through patents,
trademarks, and trade secrets, as appropriate. In addition to relying on
patents, the Company protects some of its technology as trade secrets and
uses trademarks in association with certain products. The Company also
enters into licensing arrangements to acquire rights in technology.
The technology underlying the SoftLight system, including all
patents issued thereon, belongs to the Company by virtue of a license
agreement executed in February 1993 between ThermoLase and the inventor
of the system, which grants ThermoLase an irrevocable, exclusive,
worldwide, perpetual license to the technology in exchange for a $0.1
million commitment fee and a royalty equal to 0.25% of revenues generated
from the sale or use of the SoftLight system through February 10, 2010.
Patented inventions of the Company include certain mammography and
other X-ray equipment, lasers, telescopes, high-power diamond switches,
laser-radar devices, microwave cameras, a laser-based hair-removal
process, a Sonic CT system, a wind-shear detector, and methods of
producing composites and ultrafine particles. Patent applications are
pending on certain mammography equipment, a passive microwave camera, and
a free-space laser communication system.
The Company is a defendant in certain patent litigation and has
been notified that it allegedly infringes certain other technologies
owned by third parties. See information under the heading "Intellectual
13PAGE
<PAGE>
Property Rights, Uncertainties and Litigation" under the caption
"Forward-looking Statements" in the Registrant's Fiscal 1996 Annual
Report to Shareholders incorporated herein by reference.
Several of the Company's patents were the result of research
programs funded by the U.S. government. With the exception of a
prohibition on disclosure of classified technology, the government does
not impose significant restrictions on the Company's use of
government-sponsored technology. The government retains a non-exclusive,
royalty-free license to use technology developed under government
contracts for government purposes, and could, in certain circumstances,
transfer all commercial rights to technology to a third party if the
Company does not pursue its development.
(v) Seasonal Influences
There are no significant seasonal influences on the Company's sales
of products and services.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms
extended to customers that would have a material adverse effect on the
Company's working capital.
(vii) Dependency on a Single Customer
No single customer accounted for 10% or more of the Company's total
revenues in fiscal 1996. Medical Products segment revenues from OEM sales
of a modified design of Trex Medical's stereotactic prone breast-biopsy
system to U.S. Surgical accounted for 11% of Medical Products segment
revenues in fiscal 1996. No single customer accounted for more than 10%
of the revenues of the Personal-care Products and Services segment.
Advanced Technology Research segment revenues from U.S. government
agencies accounted for 85% of that segment's revenues in fiscal 1996. The
Company's Advanced Technology Research segment is heavily dependent on
government funding through several agencies, and the loss of any of such
agencies or customers would have a material adverse effect on this
segment.
(viii) Backlog
The backlog of firm orders for the Medical Products segment was
$65.3 million as of September 28, 1996, compared with $45.4 million as of
September 30, 1995. The backlog of firm orders for the Personal-care
Products and Services segment was $5.5 million as of September 28, 1996,
compared with $4.6 million as of September 30, 1995. The backlog of firm
orders for the Advanced Technology Research segment was $17.9 million as
of September 28, 1996, compared with $10.6 million as of September 30,
1995. This backlog includes government contract orders that are firm but
not yet funded of $1.6 million at September 30, 1995. The Company
believes that substantially all of its fiscal 1996 backlog will be
completed during fiscal 1997.
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(ix) Government Contracts
Less than 10% of the Company's total revenues in fiscal 1996 were
derived from contracts or subcontracts with the federal government, which
are subject to renegotiation of profits or termination. The Company does
not have any knowledge of threatened or pending renegotiations or
terminations.
(x) Competition
Medical Products
The healthcare industry in general, and the market for imaging
products in particular, is highly competitive. Trex Medical competes with
a number of companies, many of which have substantially greater
financial, marketing, and other resources than Trex Medical. Trex
Medical's competitors include large companies such as GE, Philips, the
Siemens Corporation subsidiary of Siemens AG (Siemens), Toshiba American
Medical Systems, Inc. and Toshiba America MRI, Inc. (collectively,
Toshiba), Shimadzu and Picker International, which compete in most
diagnostic imaging modalities, including X-ray imaging. In addition, a
significant portion of Trex Medical's sales are to U.S. Surgical, GE, and
Philips through OEM arrangements. The products sold through such OEM
agreements compete with those offered by Trex Medical and its independent
dealers. Trex Medical competes in these markets primarily on the basis of
product features, product performance, and reputation as well as price
and service. Trex Medical believes that competition is likely to increase
as a result of healthcare cost-containment pressures and the development
of alternative diagnostic and interventional technologies.
Personal-care Products and Services
ThermoLase expects that, in the near term, the principal
competitors relative to treatment using the SoftLight system will be
electrolysis providers. The electrolysis market is characterized by many
small practitioners. Although ThermoLase believes that it has a
significant competitive advantage over electrolysis, it does not have the
well-established network of client relationships that many electrologists
have. In addition, a number of laser manufacturers have announced that
they have filed applications with the FDA seeking to obtain clearance to
market a laser for hair removal. Although, to date, none of these
companies has been successful in obtaining such a clearance, a number of
them are currently marketing substantially similar devices for
indications other than hair removal. The Company believes that certain of
these devices are being used "off-label" for hair removal by some
physicians in the U.S. and are being marketed for hair removal in some
foreign jurisdictions where regulatory clearance is not as stringent as
it is in the United States. ThermoLase's products and services will also
compete with other hair-removal products. If ThermoLase's technology is
accepted by the general public, it expects that others will seek to
develop similar technologies and products that may compete directly with
the SoftLight system.
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<PAGE>
The professional skin-care and bath-and-body products markets are
highly competitive. In selling its Salon product line, CBI competes with
a number of small manufacturers and divisions of larger companies. The
competition in this market is fragmented with no one competitor
dominating the market. In the Custom Design and Store brands groups, CBI
competes with numerous contract packaging companies that can prepare and
package custom formulations for customers. Some of these competitors have
substantially greater financial, marketing, and research and development
resources than those of the Company. CBI competes in these markets by
offering its customers an exclusive product line that the Company
believes can generally be sold at a lower price but with higher margins
than CBI's competitors.
Advanced Technology Research
The Company competes for its research and development programs
principally on the basis of technological innovations. As government
funding becomes more scarce, particularly for defense projects, the
competition for such funding will become more intense. In addition, as
the Company's programs move from the development stage to procurement of
large-scale, electro-optical systems, competition is expected to develop
and intensify. Some of the Company's competitors for research and
development funding and procurement have substantially greater resources
than those of the Company.
As the Company develops commercial products, it expects to
encounter competition from various sources, including companies that will
have substantially greater technical, marketing, and financial resources
than those of the Company. The Company believes that its overall success
will depend primarily on its ability to continue to make technological
advances.
(xi) Research and Development
During the year ended September 28, 1996, the nine months ended
September 30, 1995, and the year ended December 31, 1994, the Company
incurred approximately $24,986,000, $13,430,000, and $14,172,000,
respectively, on internally sponsored research and development programs,
and $10,278,000, $11,803,000, and $14,452,000, respectively, on research
and development programs sponsored by others. Approximately 268
professional employees were engaged full-time in research and development
activities at September 28, 1996.
(xii) Environmental Protection Regulations
The Company believes that compliance with federal, state, and local
environmental regulations will not have a material adverse effect on its
capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
As of September 28, 1996, the Company had a total of 1,383
employees.
(d) Financial Information about Exports by Domestic Operations
Financial information about exports by domestic operations is
summarized in Note 13 to Consolidated Financial Statements in the
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Company's Fiscal 1996 Annual Report to Shareholders and is incorporated
herein by reference.
(e) Executive Officers of the Registrant
Present Title (Fiscal Year First
Name Age Became Executive Officer)
------------------------------------------------------------------
Gary S. Weinstein 39 Chief Executive Officer (1996)
Firooz Rufeh 59 President (1990)
Dr. Kenneth Y. Tang 49 Senior Vice President (1990)
Anthony J. Pellegrino 56 Senior Vice President (1992)
John N. Hatsopoulos* 62 Vice President and Chief Financial
Officer (1990)
David A. Teitel 33 Vice President, Finance (1996)
Dr. Brett Spivey 36 Vice President, Commercial Technology
Development (1990)
Hal Kirshner 55 President and Chief Executive Officer,
Trex Medical Corporation (1992)
Paul F. Kelleher 54 Chief Accounting Officer (1990)
* 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 Messrs.
Weinstein, Pellegrino, Teitel, and Kirshner, have held comparable
positions for at least five years with the Company or Thermo Electron.
Mr. Weinstein has been Chief Executive Officer of the Company since
February 1996. Prior to joining the Company, Mr. Weinstein held various
positions at Lehman Brothers, including heading its global syndicate and
equity capital market group from March 1995 until joining the Company.
Mr. Pellegrino is the founder of Lorad and has been Chairman of Lorad
since its inception in 1984. Mr. Teitel has been Vice President, Finance,
of the Company since August 1996. Prior to joining the Company, Mr.
Teitel was Vice President, Finance, of Deknatel Snowden Pencer, Inc.
(Deknatel), a manufacturer of specialty surgical products, from May 1995
to August 1996, and was Director of Finance at Deknatel from August 1994
to May 1995. From August 1985 to August 1994, Mr. Teitel held various
positions at Arthur Andersen LLP, a professional services firm. Mr.
Kirshner has been President of Lorad since February 1991. Messrs.
Hatsopoulos and Kelleher are full-time employees of Thermo Electron, but
devote such time to the affairs of the Company as the Company's needs
reasonably require.
Item 2. Properties
The location and general character of the Company's principal
properties as of September 28, 1996, are as follows:
Medical Products
Trex Medical owns two office and manufacturing facilities: a 63,500
square-foot facility in Danbury, Connecticut, and a 163,000 square-foot
facility in Broadview, Illinois. Trex Medical leases a 120,000
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<PAGE>
square-foot office and manufacturing facility in Copiague, New York,
under a lease expiring in 2005, and a 156,000 square-foot office and
manufacturing facility in Littleton, Massachusetts, under a lease
expiring in 2012. Trex Medical has entered into a lease for a new 60,000
square-foot building to be constructed adjacent to its existing facility
in Danbury, Connecticut. The lease will commence upon completion of the
building, which is expected to occur in December 1996, and has a term of
10 years.
Personal-care Products and Services
ThermoLase occupies approximately 213,000 square feet of office and
manufacturing space in Carrollton, Texas, under a lease expiring in 2004,
through its CBI subsidiary. ThermoLase also occupies approximately 43,000
square feet of retail space in California, Texas, Colorado, and Florida
for its Spa Thira salons, under leases expiring from 2000 through 2006.
Advanced Technology Research
The Company currently leases 90,000 square feet of office,
engineering, and laboratory space in San Diego under a lease expiring in
2006. The Company also leases a 10,000 square-foot office and warehouse
facility in San Diego as a tenant-at-will.
The Company believes that its facilities are in good condition and
are suitable and adequate to meet current needs.
Item 3. Legal Proceedings
In April 1992, Fischer Imaging Corporation (Fischer) commenced a
lawsuit in the United States District Court, District of Colorado,
against Lorad, alleging that Lorad's prone breast-biopsy system infringes
a Fischer patent on a precision mammographic needle-biopsy system. As of
September 28, 1996, the Company had aggregate revenues of approximately
$63.1 million from the sale of such systems. The suit requests a
permanent injunction, treble damages, and attorneys' fees and expenses.
If the Company is unsuccessful in defending this lawsuit, it may be
enjoined from manufacturing and selling its StereoGuide system without a
license from Fischer. No assurance can be given that the Company will be
able to obtain such a license, if required, on commercially reasonable
terms, if at all. In addition, the Company may be subject to damages for
past infringement. No assurance can be given as to the amount that the
Company may eventually be required to pay in expenses or in such damages.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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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, $.01 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's Fiscal 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 Fiscal 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 Fiscal 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements and
Supplementary Data are included in the Registrant's Fiscal 1996 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable.
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<PAGE>
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.
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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.
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<PAGE>
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 by the undersigned, thereunto duly authorized.
Date: December 5, 1996 THERMOTREX CORPORATION
By: Gary S. Weinstein
---------------------------------
Gary S. Weinstein
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 December
5, 1996.
Signature Title
By: Gary S. Weinstein Chief Executive Officer, Chairman
------------------------- of the Board, and Director
Gary S. Weinstein
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: Morton Collins Director
-------------------------
Morton Collins
By: Peter O. Crisp Director
-------------------------
Peter O. Crisp
By: Paul F. Ferrari Director
-------------------------
Paul F. Ferrari
By: Dr. George N. Hatsopoulos Director
-------------------------
Dr. George N. Hatsopoulos
By: Robert C. Howard Director
-------------------------
Robert C. Howard
By: Firooz Rufeh President and Director
------------------------
Firooz Rufeh
By: Nicholas T. Zervas Director
-------------------------
Nicholas T. Zervas
22PAGE
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of ThermoTrex Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in ThermoTrex
Corporation's Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated November 1,
1996. 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 21 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. The
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 consolidated
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
November 1, 1996
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SCHEDULE II
THERMOTREX CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Balance Provision Balance
at Charged Accounts at
Beginning to Written End of
Description of Period Expense Off Other (a) Period
----------------------------------------------------------------------------
Year Ended
September 28, 1996
Allowance for
Doubtful Accounts $1,141 $ 336 $ (163) $ 272 $1,586
Nine Months Ended
September 30, 1995
Allowance for
Doubtful Accounts $ 643 $ 178 $ - $ 320 $1,141
Year Ended
December 31, 1994
Allowance for
Doubtful Accounts $ 438 $ 215 $ (10) $ - $ 643
(a) Allowances of businesses acquired during the year as described in Note 4
to Consolidated Financial Statements in the Registrant's Fiscal 1996
Annual Report to Shareholders.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
3.1 Restated Certificate of Incorporation, as amended (filed as
Exhibit 3(i) to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended July 2, 1994, [File No.
1-10791] and incorporated herein by reference).
3.2 By-Laws of the Registrant, as amended and restated (filed as
Exhibit 3.2 to the Registrant's Transition Report on Form
10-K for the transition period January 1, 1995, [File No.
1-10791] through September 30, 1995 and incorporated herein
by reference).
10.1 Asset Transfer Agreement dated December 29, 1990, between
Thermo Electron Corporation and the Registrant (filed as
Exhibit 10(a) to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-40972] and incorporated herein by
reference).
10.2 Amended and Restated Corporate Services Agreement dated
January 3, 1993, between Thermo Electron Corporation and the
Registrant (filed as Exhibit 10(b) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-10791] and incorporated herein by reference).
10.3 Form of Indemnification Agreement between the Registrant and
its officers and directors (filed as Exhibit 10(f) to the
Registrant's Registration Statement on Form S-1
[Reg. No. 33-40972] and incorporated herein by reference).
10.4 Thermo Electron Corporate Charter as amended and restated
effective January 3, 1993 (filed as Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993 [File No. 1-10791] and incorporated
herein by reference).
10.5 Stock Option Agreement granted to Anthony J. Pellegrino dated
November 16, 1992 (filed as Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 2, 1993 [File No. 1-10791] and incorporated herein by
reference).
10.6 Stock Option Agreement granted to Hal Kirshner dated
November 16, 1992 (filed as Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 2, 1993 [File No. 1-10791] and incorporated herein by
reference).
10.7 Lease dated October 12, 1988 between CBI Laboratories, Inc.,
Trammell Crow Company No. 91 and Petula Associates Ltd., as
amended (filed as Exhibit 10.18 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1994
[File No. 1-10791] and incorporated herein by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.8 Lease dated September 1, 1993 between CBI Laboratories, Inc.
and Lincoln Valwood, Ltd. (filed as Exhibit 10.19 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-10791] and incorporated
herein by reference).
10.9 Master Repurchase Agreement dated January 1, 1994 between the
Registrant and Thermo Electron Corporation (filed as Exhibit
10.20 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994 [File No. 1-10791] and
incorporated herein by reference).
10.10 Master Guarantee Reimbursement Agreement dated as of January
1, 1994 among ThermoLase Corporation, the Registrant and
Thermo Electron Corporation (filed as Exhibit 10.5 to
ThermoLase's Registration Statement on Form S-1 [Reg. No.
33-78052] and incorporated herein by reference).
10.11 Lease executed February 9, 1995 between LMP Properties Ltd.
and the Registrant (filed as Exhibit 10.22 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 [File No. 1-10791] and incorporated
herein by reference).
10.12 Stock purchase agreement dated as of September 15, 1995, by
and among Bennett X-Ray Corporation, ThermoTrex Corporation,
and Calvin Kleinman, Robert P. Coe, Walter F. Schneider, and
Martin Koening (filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated September 14, 1995 [File No.
1-10791] and incorporated herein by reference).
10.13 Lease dated as of September 15, 1995, by and among the
Registrant and BK Realty Associates, L.P. and Calrob Realty
Associates (filed as Exhibit 10.26 to the Registrant's
Transition Report on Form 10-K for the transition period
January 1, 1995 through September 30, 1995 [File No. 1-10791]
and incorporated herein by reference).
10.14 Incentive Stock Option Plan of the Registrant (filed as
Exhibit 10(h) to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-40972] 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 1,945,000 shares, after adjustment to
reflect share increases approved in 1992 and 1993 and 3-for-2
stock split effected in October 1993).
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<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.15 Nonqualified Stock Option Plan of the Registrant (filed as
Exhibit 10(i) to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-40972] 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 1,945,000 shares, after adjustment to
reflect share increases approved in 1992 and 1993 and 3-for-2
stock split effected in October 1993).
10.16 ThermoTrex Corporation - ThermoLase Corporation (formerly
ThermoLase Inc.) Nonqualified Stock Option Plan (filed as
Exhibit 10.53 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994 [File No. 1-10791]
and incorporated herein by reference).
10.17 ThermoTrex Corporation - Trex Medical Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.73 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).
10.18 Deferred Compensation Plan for Directors of the Registrant
(filed as Exhibit 10(j) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-40972] and incorporated
herein by reference).
10.19 Directors Stock Option Plan of the Registrant (filed as
Exhibit 10.26 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 [File No.
1-10791] and incorporated herein by reference).
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 Corporation for services rendered to the Registrant
or such affiliated corporations. Such plans were filed as
Exhibits 10.21 through 10.44 to the Annual Report on Form
10-K of Thermo Electron for the fiscal year ended December
30, 1995 [File No. 1-8002] and as Exhibit 10.19 to Trex
Medical Corporation's Annual Report on Form 10-K for the
fiscal year ended September 28, 1996 [File No. 1-11827] and
are incorporated herein by reference.
10.20 Operating Agreement of ThermoLase Japan L.L.C. dated as of
January 22, 1996 between ThermoLase Corporation and Fox River
Japan Partners, L.P. (filed as Exhibit 10.1 to ThermoLase's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
27PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.21 License Agreement dated as of January 22, 1996 between
ThermoLase Corporation and ThermoLase Japan L.L.C. (filed as
Exhibit 10.2 to ThermoLase's Quarterly Report on Form 10-Q
for the quarter ended December 30, 1995 [File No. 1-13104]
and incorporated herein by reference).
10.22 Option Agreement dated as of January 22, 1996 between
ThermoLase Corporation and Fox River Japan Partners, L.P.
(filed as Exhibit 10.3 to ThermoLase's Quarterly Report on
Form 10-Q for the quarter ended December 30, 1995 [File No.
1-13104] and incorporated herein by reference).
10.23 License Agreement dated as of October 30, 1995 between
ThermoLase Corporation and Ronald G. Wheeland, M.D.,
Professional Corporation (filed as Exhibit 10.4 to
ThermoLase's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.24 Management Agreement dated as of October 30, 1995 between
ThermoLase Corporation and Ronald G. Wheeland, M.D.,
Professional Corporation (filed as Exhibit 10.5 to
ThermoLase's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.25 Sublease Agreement dated as of October 30, 1995 between
ThermoLase Corporation and Ronald G. Wheeland, M.D.,
Professional Corporation (filed as Exhibit 10.6 to
ThermoLase's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.26 Lease dated as of April 12, 1995 between ThermoLase
Corporation and The Goldberg Family Trust (filed as Exhibit
10.7 to ThermoLase's Quarterly Report on Form 10-Q for the
quarter ended December 30, 1995 [File No. 1-13104] and
incorporated herein by reference).
10.27 Lease dated as of December 8, 1995 between ThermoLase
Corporation and Canon Properties (filed as Exhibit 10.8 to
ThermoLase's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.28 Lease dated as of January 17, 1996 between ThermoLase
Corporation and Trammell Crow Equity Partners (filed as
Exhibit 10.9 to ThermoLase's Quarterly Report on Form 10-Q
for the quarter ended December 30, 1995 [File No. 1-13104]
and incorporated herein by reference).
28PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.29 Lease dated as of December 20, 1995, between Melvyn J. Powers
and Mary P. Powers D/B/A M&M Realty and Trex Medical
Corporation as amended (filed as Exhibit 10.14 to Trex
Medical's Registration Statement on Form S-1 [Reg. No.
333-2926] and incorporated herein by reference).
10.30 Lease dated May 29, 1996 between John K. Grady, Trustee of
Concord Associates Foster Street Trust and XRE Corporation
(filed as Exhibit 10.89 to Trex Medical's Registration
Statement on Form S-1 [Reg. No. 333-2926] and incorporated
herein by reference).
10.31 Asset Purchase Agreement dated September 4, 1996 by and among
CXR Acquisition Corp., Trex Medical Corporation, Continental
X-Ray Corporation, Alphatek Corporation, Broadview
Manufacturing Corporation, Haymarket Square Associates,
Advanced Medical Imaging, Inc., Trans-Continental X-ray
Corporation and the Stockholders and Partners thereof (filed
as Exhibit 10.21 to Trex Medical's Registration Statement on
Form S-1 [Reg. No. 333-15381] and incorporated herein by
reference).
10.32 Master Joint Venture Agreement dated as of October 30, 1996
among ThermoLase Corporation, Franklin Holdings, S.A. and
Yves Micheli (filed as Exhibit 10.26 to ThermoLase's Annual
Report on Form 10-K for the fiscal year ended September 28,
1996 [File No. 1-13104] and incorporated herein by
reference).
10.33 SoftLight and Spa Thira Franchise and License Agreement dated
as of November 8, 1996 between ThermoLase Corporation and
Medical Supply & Service Co. (filed as Exhibit 10.27 to
ThermoLase's Annual Report on Form 10-K for the fiscal year
ended September 28, 1996 [File No. 1-13104] and incorporated
herein by reference).
10.34 Equipment License Agreement for SoftLight Lasers dated as of
November 8, 1996 between ThermoLase Corporation and Medical
Supply & Service Co. (filed as Exhibit 10.28 to ThermoLase's
Annual Report on Form 10-K for the fiscal year ended
September 28, 1996 [File No. 1-13104] and incorporated herein
by reference).
10.35 Promissory Note Due April 30, 1997 issued by the Registrant
to Thermo Electron Corporation.
10.36 Stock Holding Assistance Plan and Form of Promissory Note.
11 Statement re: Computation of Earnings per Share.
29PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
13 Annual Report to Shareholders for the fiscal year ended
September 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 10.35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, PLEDGED,
MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE
SECURITIES OR (2) UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
ThermoTrex Corporation
Promissory Note Due April 30, 1997
Waltham, Massachusetts
September 26, 1996
For value received, ThermoTrex Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to Thermo
Electron Corporation (hereinafter referred to as the "Payee"), or
registered assigns, on September 26, 1996, as described below,
the principal sum of two million dollars ($2,000,000) or such
part thereof as then remains unpaid, to pay interest from the
date hereof on the whole amount of said principal sum remaining
from time to time unpaid at a rate per annum equal to the rate of
the Commercial Paper Composite Rate as reported by Merrill Lynch
Capital Markets, as an average of the last five business days of
the fiscal quarter, plus twenty-five (25) basis points, such
interest to be payable in arrears on the first day of each fiscal
quarter of the Company during the term set forth herein, until
the whole amount of the principal hereof remaining unpaid shall
become due and payable, and to pay interest on all overdue
principal and interest at a rate per annum equal to the rate of
interest announced from time to time by The First National Bank
of Boston at its head office in Boston, Massachusetts as its
"base rate" plus one percent (1%). Principal and all accrued but
unpaid interest shall be repaid on April 30, 1997. Principal and
interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office
of the Payee or at such other place as the legal holder may
designate from time to time in writing to the Company. Interest
shall be computed on an actual 360-day basis.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. All
prepayments shall be applied first to accrued interest and then
to principal.
1PAGE
<PAGE>
The then unpaid principal amount of, and interest
outstanding on, this Note shall be and become immediately due and
payable without notice or demand, at the option of the holder
hereof, upon the occurrence of any of the following events:
(a) the failure of the Company to pay any amount due
hereunder within ten (10) days of the date when due;
(b) any representation, warranty or statement made or
furnished to the Payee by the Company in connection with
this Note or the transaction from which it arises shall
prove to have been false or misleading in any material
respect as of the date when made or furnished;
(c) the failure of the Company to pay its debts as
they become due, the insolvency of the Company, the filing
by or against the Company of any petition under the U.S.
Bankruptcy Code (or the filing of any similar petition under
the insolvency law of any jurisdiction), or the making by
the Company 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
Company;
(d) the sale by the Company of all or substantially
all of its assets;
(e) the merger or consolidation of the Company with or
into any other corporation in a transaction in which the
Company is not the surviving entity;
(f) 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 Company or any liability or obligation of the Company to
the holder hereof; and
(g) the suspension of the transaction of the usual
business of the Company.
Upon surrender of this Note for transfer or exchange, a new
Note or new Notes of the same tenor dated the date to which
interest has been paid on the surrendered Note and in an
aggregate principal amount equal to the unpaid principal amount
of the Note so surrendered will be issued to, and registered in
the name of, the transferee or transferees. The Company may
treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all
other purposes.
2PAGE
<PAGE>
In case any payment herein provided for shall not be paid
when due, the Company further promises to pay all cost of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Payee in exercising
any right hereunder shall operate as a waiver of such right or of
any other right of the Payee, 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 Company
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 Payee.
This Note shall be governed by and construed in accordance
with, the laws of the Commonwealth of Massachusetts and shall
have the effect of a sealed instrument.
THERMOTREX CORPORATION
By:
___________________________
Gary Weinstein
President
[Corporate Seal]
Attest:
____________________________
Sandra L. Lambert
Secretary
cc: Seth Hoogasian
Peter Hornstra
Maureen Jacobs
Sandra Lambert
Karen Levin
Andy Pilla
Gina Silvestri
David Teitel
3<PAGE>
Exhibit 10.36
THERMOTREX CORPORATION
STOCK HOLDING ASSISTANCE PLAN
(As adopted on July 19, 1996)
SECTION 1. Purpose.
The purpose of this Plan is to benefit ThermoTrex
Corporation (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: ThermoTrex Corporation, 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 ThermoTrex Corporation 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
PAGE
<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
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
<PAGE>
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. 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.
3PAGE
<PAGE>
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
THERMOTREX CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to ThermoTrex Corporation (the "Company"),
or assigns, ON DEMAND, but in any case on or before [insert date
which is the fifth anniversary of date of issuance] (the
"Maturity Date"), the principal sum of [loan amount in words]
($_______), 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
6
Exhibit 11
THERMOTREX CORPORATION
Computation of Earnings per Share
Nine Year
Year Ended Months Ended Ended
---------------------- ------------ --------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
1996 1995 1995 1994
--------------------------------------------------------------------------
(Unaudited)
Computation of Primary
Earnings per Share:
Net Income (a) $42,575,000 $36,658,000 $36,341,000 $ 9,602,000
Shares:
Weighted average
shares outstanding 19,074,734 18,913,286 18,938,215 18,475,287
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) 593,822 - - 601,091
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 19,668,556 18,913,286 18,938,215 19,076,378
----------- ----------- ----------- -----------
Primary Earnings
per Share (a) / (b) $ 2.16 $ 1.94 $ 1.92 $ .50
=========== =========== =========== ===========
Exhibit 13
ThermoTrex Corporation
Consolidated Financial Statements
Fiscal Year 1996
PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Income
Nine Months
Year Ended Ended Year Ended
--------------------- ----------- ----------
(In thousands except Sept. 28, Sept. 30, Sept. 30, Dec. 31,
per share amounts) 1996 1995 1995 1994
------------------------------------------------------------------------
(Unaudited)
Revenues (Notes 9 and 13):
Product and service
revenues $169,669 $ 93,503 $ 72,485 $ 73,092
Contract revenues 12,360 18,107 14,046 17,960
-------- -------- -------- --------
182,029 111,610 86,531 91,052
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of product and
service revenues 101,967 50,809 39,426 38,387
Cost of contract
revenues 10,278 14,750 11,803 14,452
Selling, general and
administrative
expenses (Note 9) 41,283 27,318 21,145 23,707
Research and develop-
ment expenses 24,986 17,964 13,430 14,172
Costs associated
with divisional
restructuring (Note 12) - 968 968 650
-------- -------- -------- --------
178,514 111,809 86,772 91,368
-------- -------- -------- --------
Operating Income (Loss) 3,515 (199) (241) (316)
Interest Income 5,977 4,226 3,223 3,273
Interest Expense (Note 9) (464) (6) (6) (7)
Gain on Issuance of Stock
by Subsidiaries (Note 11) 39,149 34,721 34,721 8,609
Gain (Loss) on Sale of
Investments 115 153 194 (17)
-------- -------- -------- --------
Income Before Provision
for Income Taxes and
Minority Interest 48,292 38,895 37,891 11,542
Provision for Income
Taxes (Note 8) 5,341 2,802 2,115 1,940
Minority Interest (Income)
Expense 376 (565) (565) -
-------- -------- -------- -------
Net Income $ 42,575 $ 36,658 $ 36,341 $ 9,602
======== ======== ======== ========
Earnings per Share $ 2.16 $ 1.94 $ 1.92 $ .50
======== ======== ======== ========
Weighted Average Shares 19,669 18,913 18,938 19,076
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Balance Sheet
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 43,940 $ 21,512
Available-for-sale investments, at quoted
market value (amortized cost of $51,774
and $65,659) (Note 3) 51,701 65,633
Accounts receivable, less allowances of
$1,586 and $1,141 36,615 27,910
Unbilled contract costs and fees 2,933 3,164
Inventories 37,303 22,317
Prepaid expenses 2,157 513
Prepaid income taxes (Note 8) 9,685 1,761
-------- --------
184,334 142,810
-------- --------
Property, Plant and Equipment, at Cost, Net 31,504 12,336
-------- --------
Notes Receivable from Related Party (Note 9) 3,300 2,000
-------- --------
Other Assets 4,680 340
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 4) 96,404 73,295
-------- --------
$320,222 $230,781
======== ========
3PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Balance Sheet (continued)
September 28, September 30,
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Note payable to parent company (Note 9) $ 2,000 $ 8,000
Accounts payable 19,569 13,203
Accrued payroll and employee benefits 7,228 3,930
Accrued warranty costs 5,379 2,990
Customer deposits 3,582 921
Accrued income taxes 2,239 477
Other accrued expenses (Note 4) 15,205 7,508
Due to parent company and affiliates 1,269 2,484
-------- --------
56,471 39,513
-------- --------
Deferred Lease Liability 494 -
-------- --------
Minority Interest 58,178 28,880
-------- --------
Commitments and Contingencies
(Notes 4, 9 and 10)
Shareholders' Investment (Notes 5 and 6):
Common stock, $.01 par value, 50,000,000
shares authorized; 19,190,107 and
19,074,854 shares issued 192 191
Capital in excess of par value 116,753 116,837
Retained earnings 89,156 46,581
Treasury stock at cost, 25,508 and 62,711
shares (975) (1,206)
Net unrealized loss on available-for-sale
investments (Note 3) (47) (15)
-------- --------
205,079 162,388
-------- --------
$320,222 $230,781
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Cash Flows
Nine Months
Year Ended Ended Year Ended
--------------------- ----------- ----------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
(In thousands) 1996 1995 1995 1994
----------------------------------------------------------------------------
(Unaudited)
Operating Activities:
Net income $ 42,575 $ 36,658 $ 36,341 $ 9,602
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 4,902 2,983 2,288 2,686
Provision for losses
on accounts
receivable 336 185 178 215
Costs associated
with divisional
restructuring
(Note 12) - 968 968 650
Gain on issuance of
stock by subsidiaries
(Note 11) (39,149) (34,721) (34,721) (8,609)
(Gain) loss on sale
of investments (115) (153) (194) 17
Minority interest
(income) expense 376 (565) (565) -
Other noncash
expenses - 162 162 11
Changes in current
accounts, excluding
the effects of
acquisitions:
Accounts receivable (2,790) (8,598) (6,745) (3,637)
Inventories and
unbilled contract
costs and fees (1,176) (3,721) (1,456) (3,295)
Other current
assets (3,478) (150) (775) 253
Accounts payable 1,254 6,454 3,523 1,965
Other current
liabilities 2,182 2,620 2,767 1,427
-------- -------- -------- --------
Net cash provided by
operating activities $ 4,917 $ 2,122 $ 1,771 $ 1,285
-------- -------- -------- --------
5PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Cash Flows (continued)
Nine Months
Year Ended Ended Year Ended
--------------------- ----------- ----------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
(In thousands) 1996 1995 1995 1994
------------------------------------------------------------------------
(Unaudited)
Investing Activities:
Acquisitions, net of
cash acquired (Note 4) $(36,888) $(42,199) $(42,002) $ (197)
Proceeds from sale of
businesses to related
parties (Note 9) 860 - - -
Purchases of available-
for-sale investments (52,000) (50,061) (49,793) (22,968)
Proceeds from sale
and maturities of
available-for-sale
investments 65,230 34,836 18,462 25,758
Purchases of property,
plant and equipment (14,462) (4,684) (2,603) (4,361)
Payment to dissenting
shareholders in
connection with 1992
Lorad acquisition
(Note 4) - (2,300) (2,300) -
Issuance of notes
receivable to related
party (Note 9) (1,300) (2,000) (2,000) -
Investment in other
assets (Note 1) (4,400) - - -
Other 1,045 1,243 321 944
-------- -------- -------- --------
Net cash used in
investing activities $(41,915) $(65,165) $(79,915) $ (824)
-------- --------- -------- --------
6PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Cash Flows (continued)
Nine Months
Year Ended Ended Year Ended
--------------------- ----------- ----------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
(In thousands) 1996 1995 1995 1994
------------------------------------------------------------------------
(Unaudited)
Financing Activities:
Net proceeds from
issuance of Company
and subsidiaries'
common stock
(Notes 5 and 11) $ 71,873 $ 56,162 $ 56,108 $ 37,818
Proceeds from issuance
of notes payable to
parent company
(Note 9) 2,000 8,000 8,000 -
Repayment of note
payable to parent
company (Note 9) (8,000) - - -
Repayment of notes
payable - - - (6,700)
Payment of withholding
taxes related to
stock option
exercises (6,447) (2,180) (1,755) -
-------- -------- -------- --------
Net cash provided by
financing activities 59,426 61,982 62,353 31,118
-------- -------- -------- --------
Increase (Decrease) in
Cash and Cash
Equivalents 22,428 (1,061) (15,791) 31,579
Cash and Cash Equivalents
at Beginning of Period 21,512 22,573 37,303 5,724
-------- -------- -------- --------
Cash and Cash Equivalents
at End of Period $ 43,940 $ 21,512 $ 21,512 $ 37,303
======== ======== ======== ========
Cash Paid For:
Interest $ 464 $ 6 $ 6 $ 84
Income taxes $ 3,106 $ 2,292 $ 2,058 $ 1,283
Noncash Investing
Activities:
Fair value of assets of
acquired companies $ 53,519 $ 50,419 $ 49,940 $ 479
Cash paid for acquired
companies (38,178) (42,199) (42,002) (197)
-------- -------- -------- --------
Liabilities assumed of
acquired companies $ 15,341 $ 8,220 $ 7,938 $ 282
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Shareholders' Investment
Net
Unrealized
Common Loss on
Stock, Capital in Available-
$.01 Par Excess of Retained Treasury for-sale
(In thousands) Value Par Value Earnings Stock Investments
--------------------------------------------------------------------------
Balance January 1,
1994 $ 172 $ 77,299 $ 796 $ (673) $ -
Net income - - 9,602 - -
Net proceeds from
public offering of
common stock
(Note 5) 16 23,018 - - -
Issuance of stock
under employees'
and directors'
stock plans 1 698 - (5) -
Tax benefit related
to employees' and
directors' stock
plans - 945 - - -
Effect of majority-
owned subsidiary's
equity transactions - 11,951 - - -
Accretion related to
common stock of
subsidiary subject
to redemption - - (158) - -
Effect of change in
accounting
principle (Note 3) - - - - 243
Change in net
unrealized loss on
available-for-sale
investments
(Note 3) - - - - (634)
-------- -------- -------- ------- --------
Balance December 31,
1994 $ 189 $113,911 $ 10,240 $ (678) $ (391)
-------- -------- -------- -------- --------
8PAGE
<PAGE>
ThermoTrex Corporation
Consolidated Statement of Shareholders' Investment (continued)
Net
Unrealized
Common Loss on
Stock, Capital in Available-
$.01 Par Excess of Retained Treasury for-sale
(In thousands) Value Par Value Earnings Stock Investments
--------------------------------------------------------------------------
Net income $ - $ - $ 36,341 $ - $ -
Issuance of stock
under employees'
and directors'
stock plans 2 1,188 - (528) -
Tax benefit related
to employees' and
directors' stock
plans - 2,217 - - -
Effect of majority-
owned subsidiary's
equity transactions - (479) - - -
Change in net
unrealized loss on
available-for-sale
investments
(Note 3) - - - - 376
------- -------- -------- -------- --------
Balance September 30,
1995 191 116,837 46,581 (1,206) (15)
Net income - - 42,575 - -
Issuance of stock
under employees'
and directors'
stock plans 1 (424) - 231 -
Tax benefit related
to employees' and
directors' stock
plans - 2,494 - - -
Effect of majority-
owned subsidiaries'
equity transactions - (2,154) - - -
Change in net
unrealized loss on
available-for-sale
investments
(Note 3) - - - - (32)
-------- -------- -------- -------- --------
Balance September 28,
1996 $ 192 $116,753 $ 89,156 $ (975) $ (47)
======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
9PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
ThermoTrex Corporation (the Company) develops and markets medical
products and personal-care products and services, and also performs
advanced technology research. The Company's 80%-owned Trex Medical
Corporation (Trex Medical) subsidiary designs, manufactures, and markets
mammography equipment and minimally invasive stereotactic breast-biopsy
systems used for the detection of breast cancer, general radiography
(X-ray) equipment, and X-ray imaging systems used for cardiac
catheterization and angiography, as well as radiographic fluoroscopy. The
Company's 64%-owned ThermoLase Corporation (ThermoLase) subsidiary has
developed a laser-based system called SoftLight(SM) for the removal of
unwanted hair, and also markets skin-care, bath, and body products
through its wholly owned CBI Laboratories, Inc. (CBI) subsidiary. The
Company concentrates its advanced technology research efforts in the
areas of communications, avionics, X-ray detection, signal processing,
advanced-materials technology, and lasers. The Company has developed its
expertise in these core technologies in connection with government-
sponsored research and development.
Relationship with Thermo Electron Corporation
The Company was incorporated in January 1991, as a wholly owned
subsidiary of Thermo Electron Corporation (Thermo Electron). As of
September 28, 1996, Thermo Electron owned 9,711,282 shares of the
Company's common stock, representing 51% of such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company, its wholly owned subsidiary, and its publicly held ThermoLase
and Trex Medical subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's transition period, which ended on September
30, 1995, was the 39-week period from January 1, 1995 to September 30,
1995, referenced as "fiscal 1995." References to "fiscal 1996" and "1994"
are for the years ended September 28, 1996 and December 31, 1994,
respectively. Fiscal 1996 and 1994 each included 52 weeks. The unaudited
consolidated statements of income and cash flows for the 52-week period
ended September 30, 1995 are presented for comparative purposes only.
Revenue Recognition
The Company recognizes product revenues upon shipment of its
products. The Company provides a reserve for its estimate of warranty
costs at the time of shipment. The Company recognizes revenues from
hair-removal services performed at ThermoLase's Spa Thira salons over the
10PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
anticipated treatment period. Revenues from hair-removal treatments
performed by ThermoLase's network of independent doctors are also
recognized over the anticipated treatment period. Nonrefundable minimum
licensing fees are recorded when earned. The Company recognizes contract
revenues and profits using the percentage-of-completion method. The
percentage of completion is determined by relating the actual costs
incurred to date to management's estimate of total costs to be incurred
on each contract. If a loss is indicated on any contract in process, a
provision is made currently for the entire loss. The Company's contracts
are generally cost-plus-fixed-fee, and customers are billed monthly as
costs are incurred. Revenues earned on contracts in process in excess of
billings are classified as "Unbilled contract costs and fees" in the
accompanying balance sheet. There are no significant amounts included in
the accompanying balance sheet that are not expected to be recovered from
existing contracts at current contract values, or that are not expected
to be collected within one year.
Research and Development Expenses
Costs classified as research and development expenses in the
accompanying statement of income are costs incurred in connection with
internally funded programs, including independent research and
development as defined by U.S. government procurement regulations.
Included in cost of contract revenues in the accompanying statement of
income are research and development costs incurred under U.S.
government-funded contracts.
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. See Note 11 for a description of
gains recorded.
If gains have been recognized on the issuance 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.
Concentration of Credit Risk
The Company's Trex Medical subsidiary sells its products primarily
to customers in the healthcare industry. Trex Medical does not normally
require collateral or other security to support its accounts receivable.
Management does not believe that this concentration of credit risk has,
or will have, a significant negative impact on the Company.
11PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Income Taxes
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
Earnings per share have been computed based on the weighted average
number of shares outstanding during the period. In fiscal 1996 and 1994,
weighted average shares include the effect of the exercise of stock
options that were computed using the treasury stock method. During fiscal
1995, the effect of the exercise of stock options was not material.
Cash and Cash Equivalents
As of September 28, 1996, $40,727,000 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 corporate notes, U.S. government agency
securities, money market funds, commercial paper, 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 September 28, 1996,
the Company's cash equivalents also include money market fund
investments. Cash equivalents are carried at cost, which approximates
market value.
Available-for-sale Investments
Pursuant to SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company's debt and marketable equity
securities are accounted for at market value (Note 3).
Inventories
Inventories are stated at the lower of cost (on a first-in,
first-out 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 $22,046 $12,348
Work in process 9,731 5,927
Finished goods 5,526 4,042
------- -------
$37,303 $22,317
======= =======
12PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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 principally using the
straight-line method over the estimated useful lives of the property as
follows: buildings - 29 to 31.5 years; machinery and equipment - 3 to 10
years; and leasehold improvements - the shorter of the term of the lease
or the life of the asset. Property, plant and equipment consist of the
following:
(In thousands) 1996 1995
------------------------------------------------------------------------
Land and building $ 4,982 $ 3,728
Machinery and equipment 24,918 13,746
Leasehold improvements 9,040 1,735
Construction in process 1,595 298
------- -------
40,535 19,507
Less: Accumulated depreciation and amortization 9,031 7,171
------- -------
$31,504 $12,336
======= =======
Other Assets
In June 1996, ThermoLase purchased $4,400,000 of convertible
preferred stock of AntiCancer Incorporated (AntiCancer), representing an
approximate 10% equity interest in AntiCancer on a fully diluted basis.
AntiCancer is a San Diego-based company that is developing a new
chemotherapeutic drug for cancer patients, and that is also developing
certain technologies that may be relevant to ThermoLase's SoftLight
hair-removal process and other personal-care applications. ThermoLase has
the option to purchase for $2,500,000 an additional 5% equity interest in
AntiCancer on a fully diluted basis, exercisable at any time before the
earlier of June 19, 2011, or AntiCancer's initial public offering of
stock. This investment is being accounted for under the cost method of
accounting. In addition, ThermoLase has licensed certain technology from
AntiCancer (Note 10).
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 $5,434,000 and $3,353,000 at September 28,
1996 and September 30, 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
businesses in assessing the recoverability of this asset.
13PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Deferred Lease Liability
Deferred lease liability in the accompanying balance sheet
represents facilities rent which is being recognized ratably over the
respective lease terms.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, available-for-sale investments, accounts receivable,
note payable to parent company, accounts payable, and due to parent
company and affiliates. The carrying amounts of the Company's cash and
cash equivalents, accounts receivable, note payable to parent company,
accounts payable, and due to parent company and affiliates approximate
fair value due to their short-term nature. Available-for-sale investments
are carried at fair value in the accompanying balance sheet. The fair
values were determined based on quoted market prices. See Note 3 for
information pertaining to the fair value of available-for-sale
investments.
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 fiscal 1995 and 1994 have been reclassified to
conform to the presentation in the fiscal 1996 financial statements.
14PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
2. Unaudited Comparative Results
The following unaudited financial information for the nine months
ended October 1, 1994 is presented to provide comparative results for
fiscal 1995, included in the accompanying statement of income.
Nine
Months Ended
October 1,
(In thousands except per share amounts) 1994
------------------------------------------------------------------------
Revenues:
Product revenues $52,074
Contract revenues 13,899
-------
65,973
-------
Costs and Operating Expenses:
Cost of product revenues 27,004
Cost of contract revenues 11,505
Selling, general and administrative expenses 17,534
Research and development expenses 9,638
Costs associated with divisional restructuring 650
-------
66,331
-------
Operating Loss (358)
Interest Income 2,270
Interest Expense (7)
Gain on Issuance of Stock by Subsidiary 8,609
Gain on Sale of Investments 24
-------
Income Before Provision for Income Taxes 10,538
Provision for Income Taxes 1,253
-------
Net Income $ 9,285
=======
Earnings per Share $ .49
=======
Weighted Average Shares 18,975
=======
15PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
3. 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 classified as 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 loss 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.
The aggregate market value, cost basis, and gross unrealized gains
and losses of available-for-sale investments, by major security type, as
of September 28, 1996 and September 30, 1995, are as follows:
1996
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency securities $50,956 $51,029 $ - $ (73)
Other 745 745 - -
------- ------- ------- -------
$51,701 $51,774 $ - $ (73)
======= ======= ======= =======
1995
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency securities $58,619 $58,681 $ - $ (62)
Corporate bonds 5,706 5,670 37 (1)
Other 1,308 1,308 - -
------- ------- ------- -------
$65,633 $65,659 $ 37 $ (63)
======= ======= ======= =======
Available-for-sale investments in the accompanying 1996 balance
sheet include $36,609,000 with contractual maturities of one year or less
and $15,092,000 with contractual maturities of more than one year through
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 the Company and/or
the issuer to redeem these securities at an earlier date.
16PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
3. Available-for-sale Investments (continued)
The cost of available-for-sale investments that were sold was based
on specific identification in determining realized gains and losses
recorded in the accompanying statement of income. Gain on sale of
investments in the accompanying statement of income for fiscal 1996 and
fiscal 1995 represents the gross realized gains relating to the sale of
available-for-sale investments. Loss on sale of investments in the
accompanying 1994 statement of income resulted from gross realized gains
of $54,000 and gross realized losses of $71,000 relating to the sale of
available-for-sale investments.
4. Acquisitions and Joint Venture
Acquisitions
In September 1996, Trex Medical acquired substantially all of the
assets and liabilities of Continental X-Ray Corporation and affiliates
(Continental) for approximately $18.4 million in cash, net of cash
acquired and including the repayment of debt. Continental designs,
manufactures, and markets general-purpose and specialized X-ray systems.
In May 1996, Trex Medical acquired substantially all of the assets
and liabilities of XRE Corporation (XRE) for $18.5 million in cash, net
of cash acquired and including the repayment of debt. XRE designs,
manufactures, and markets X-ray imaging systems used in the diagnosis and
treatment of coronary artery disease and other vascular conditions.
In September 1995, the Company acquired all of the outstanding
capital stock of Bennett X-Ray Corporation (Bennett) for approximately
$42.9 million in cash. In conjunction with the capitalization of Trex
Medical, the Company transferred to Trex Medical all of the outstanding
stock of Bennett in October 1995. Bennett manufactures high-frequency
specialty and general-purpose X-ray systems.
These acquisitions have been accounted for using the purchase
method of accounting, and their results of operations 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 $64.0 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 Continental and XRE, is subject to adjustment
upon finalization of the purchase price allocation. To date, no
information has been gathered that would cause the Company to believe
that the final allocation of the purchase price will be materially
different from the preliminary estimate.
17PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
4. Acquisitions and Joint Venture (continued)
Based on unaudited data, the following table presents selected
financial information for the Company and Bennett on a pro forma basis,
assuming that Bennett had been purchased at the beginning of 1994. The
pro forma data does not include Continental or XRE, since these
acquisitions were not material to the Company's results of operations or
financial position.
Nine Months
(In thousands except Ended Year Ended
per share amounts) Sept. 30, 1995 Dec. 31, 1994
-----------------------------------------------------------------------
Revenues $117,332 $133,585
Net income 35,790 7,107
Earnings per share 1.89 .37
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of Bennett been made at the beginning of 1994.
In November 1992, the Company acquired Lorad for $5.3 million in
cash, assumption of $6.7 million of pre-existing debt of Lorad, and
shares of the Company's common stock and stock options valued at $12.3
million. In addition, in March 1995, the Company made a cash payment of
$2.3 million to the holders of approximately 9.2% of Lorad's common stock
who had earlier voted against the acquisition, in exchange for their
interest in Lorad.
Other accrued expenses in the accompanying balance sheet include
$3.5 million at September 28, 1996 and $4.0 million at September 30, 1995
for estimated reserves associated with acquisitions, including a reserve
of approximately $2 million for legal fees and other costs associated
with a patent infringement suit that existed prior to the Company's
acquisition of Lorad. This suit was brought by Fischer Imaging
Corporation (Fischer), which alleges that Lorad infringes on a Fischer
patent on a precision mammographic needle-biopsy system. While the
Company believes it has meritorious legal defenses to the allegation, due
to the inherent uncertainties of litigation, the Company is unable to
predict the outcome of this matter. Although an unsuccessful resolution
could have a material adverse effect on the Company's results of
operations, in the opinion of management any resolution will not have a
material adverse effect on the Company's financial position.
Joint Venture
In January 1996, ThermoLase entered into a joint venture agreement
and a technology license agreement to market its SoftLight system in
Japan. ThermoLase currently holds a 50% stake in the joint venture but
may increase its ownership to 51% pursuant to a fair-value purchase
option. Under the terms of the joint venture agreement, ThermoLase will
receive payments for the use of the SoftLight system equal to 2% of the
joint venture's revenues through calendar year 2010, subject to minimum
guaranteed payments totaling $3,000,000, of which $2,000,000 was received
18PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
4. Acquisitions and Joint Venture (continued)
in fiscal 1996. The remaining $1,000,000 is due in fiscal 1997, subject
to certain exceptions in the event the joint venture is unable to obtain
patent protection in Japan on prescribed terms. If cumulative licensing
fees paid to the Company exceed $50,000,000, the rate will decrease to
.25% through calendar year 2010. Starting in calendar year 2011, the rate
will be 1%.
5. Common Stock
In March 1994, the Company sold 1,610,000 shares of its common
stock at $15.375 per share in a public offering for net proceeds of
$23,034,000.
As of September 28, 1996, the Company had reserved 2,066,646
unissued shares of its common stock for possible issuance under
stock-based compensation plans.
6. Stock-based Compensation Plans
The Company has stock-based compensation plans for its key
employees, directors, and others. Two of these plans, adopted in 1990,
permit the grant of nonqualified and incentive stock options. The option
recipients and the terms of options granted under these plans are
determined by the human resources committee of the Company's Board of
Directors (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 periods ranging from
five to ten years after the first anniversary of the grant date,
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. To date, with the exception of the options granted in
connection with the acquisition of Lorad (Note 4), all options have been
granted at fair market value. The Company also has a directors' stock
option plan, adopted in 1991 and amended in fiscal 1995, that provides
for the grant of stock options in the Company and its majority-owned
subsidiaries to nonemployee 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 stock-based compensation plans of Thermo Electron or
its majority-owned subsidiaries.
19PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
6. Stock-based Compensation Plans (continued)
No accounting recognition is given to options granted at fair market
value until they are exercised. Upon exercise, net proceeds, including tax
benefits realized, are credited to equity. A summary of the Company's stock
option information for fiscal 1996, fiscal 1995, and 1994 is as follows:
1996 1995 1994
---------------- ---------------- ---------------
Range of Range of Range of
Option Option Option
Number Prices Number Prices Number Prices
(In thousands except of per of per of per
per share amounts) Shares Share Shares Share Shares Share
--------------------------------------------------------------------------
Options outstanding, $ 4.45- $ 4.45- $ 4.45-
beginning of year 1,470 $35.65 1,526 $15.62 1,642 $15.62
36.85- 21.25- 12.88-
Granted 114 43.88 180 35.65 8 15.18
4.45- 4.45- 4.45-
Exercised (172) 23.15 (190) 15.45 (107) 10.39
4.45- 4.45-
Lapsed or cancelled - - (46) 15.45 (17) 15.45
----- ----- ------
Options outstanding, $ 4.45- $ 4.45- $ 4.45-
end of year 1,412 $43.88 1,470 $35.65 1,526 $15.62
===== ===== =====
$ 4.45- $ 4.45- $ 4.45-
Options exercisable 1,412 $43.88 1,470 $35.65 1,524 $15.62
===== ===== =====
Options available for
grant 518 131 255
===== ===== =====
7. Employee Benefit Plans
Employee Stock Purchase Plan
Substantially all of the Company's full-time employees are eligible
to participate in the Company's employee stock purchase plan. Under this
plan, shares of the Company's and Thermo Electron's common stock can be
purchased at the end of a 12-month plan year at 95% of the fair market
value at the beginning of the plan year, and the shares purchased are
subject to a six-month resale restriction. Prior to November 1, 1995, the
applicable shares of common stock could be purchased at 85% of the fair
market value at the beginning of the plan year, 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 fiscal 1996 and 1994, the Company issued 25,792 shares and
29,744 shares of its common stock, respectively, under this plan. No shares
were issued under this plan during fiscal 1995.
20PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
7. Employee Benefit Plans (continued)
401(k) Savings Plan and Employee Stock Ownership Plan
The majority of the Company's full-time employees are eligible to
participate in Thermo Electron's 401(k) savings plan and, prior to
January 1, 1995, in Thermo Electron's employee stock ownership plan
(ESOP). Contributions to the 401(k) savings plan 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 $1,166,000, $653,000, and $679,000 in fiscal 1996,
fiscal 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.
8. Income Taxes
The components of the provision for income taxes for fiscal 1996,
fiscal 1995, and 1994 are as follows:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Currently payable:
Federal $ 4,535 $ 1,517 $ 1,969
State 2,043 750 812
------- ------- -------
6,578 2,267 2,781
------- ------- -------
Prepaid:
Federal (1,178) (123) (741)
State (59) (29) (100)
------- ------- -------
(1,237) (152) (841)
------- ------- -------
$ 5,341 $ 2,115 $ 1,940
======= ======= =======
The Company receives a tax deduction upon exercise of nonqualified
stock options by employees for the difference between the exercise price
and the market price of the Company's common stock on the date of
exercise. The provision for income taxes that is currently payable does
not reflect $2,680,000, $2,217,000, and $945,000 of such benefits of the
Company and its majority-owned subsidiaries from employee exercises of
stock options that have been allocated to capital in excess of par value,
directly or through the effect of majority-owned subsidiaries' equity
transactions in fiscal 1996, fiscal 1995, and 1994, respectively.
21PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
8. 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% in fiscal 1996 and 34% in fiscal 1995 and
1994 to income before provision for income taxes and minority interest
due to the following:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Provision for income taxes at statutory
rate $ 16,902 $ 12,883 $ 3,924
Increases (decreases) resulting from:
Gain on issuance of stock by subsidiaries (13,702) (11,805) (2,927)
State income taxes, net of federal tax 1,288 476 470
Amortization of cost in excess of net
assets of acquired companies 680 495 359
Nondeductible expenses 173 66 114
-------- -------- --------
$ 5,341 $ 2,115 $ 1,940
======== ======== ========
Prepaid income taxes in the accompanying balance sheet consist of
the following:
(In thousands) 1996 1995
--------------------------------------------------------------
Prepaid income taxes:
Inventory basis differences $ 2,827 $ 1,591
Accruals and other reserves 3,750 878
Net operating loss 2,226 660
Accrued compensation 1,711 532
Allowance for doubtful accounts 723 632
Other, net 111 537
-------- --------
11,348 4,830
Less: Valuation allowance 1,663 3,069
-------- --------
$ 9,685 $ 1,761
======== ========
The year-end 1996 valuation allowance relates to employee exercises
of stock options for which no tax benefit was recognized, and will be
used to increase capital in excess of par value when the net operating
loss is realized. The year-end 1995 valuation allowance related primarily
to the uncertainty surrounding the realization of future tax benefits
associated with acquisition reserves related to Lorad, CBI, and Bennett
(Note 4). Due to decreased uncertainty concerning the realizability of
this amount, the year-end 1995 valuation allowance related to these
reserves was reversed through a reduction of cost in excess of net assets
of acquired companies. As of September 28, 1996, ThermoLase had federal
tax net operating loss carryforwards of $6,184,000 that begin to expire
in fiscal 2009.
22PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
8. Income Taxes (continued)
The Company has not recognized a deferred tax liability for the
difference between the book basis and tax basis of 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.
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
calendar year 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 $1,906,000, $1,038,000, and $1,138,000 in fiscal
1996, fiscal 1995, and 1994, respectively. 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. 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 relationships among Thermo
Electron and its majority-owned subsidiaries). 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.
Other Related Party Services
Data processing services and, as of January 1995, contract
administration, are provided to the Company by a majority-owned
subsidiary of Thermo Electron and are charged to the Company based on
actual usage. For these services, the Company was charged $90,000,
$139,000, and $72,000 in fiscal 1996, fiscal 1995, and 1994,
respectively.
Prior to January 1995, the Company provided contract administration
services to Thermo Electron and two of Thermo Electron's majority-owned
subsidiaries, which were charged based on actual usage. For these
services, the Company charged $191,000 in 1994.
23PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
Operating Leases
Until June 1996, the Company leased two office and research
facilities from Thermo Electron. In connection with the Company's
decision to close its Waltham, Massachusetts division (Note 12) and
because Thermo Electron desires to sell these facilities, the Company
agreed to vacate these facilities during fiscal 1996. In addition, the
Company leases an office and manufacturing facility from a realty trust
controlled by an employee under a noncancellable operating lease
arrangement expiring in fiscal 2012. The accompanying statement of income
includes expenses from this operating lease of $375,000 in fiscal 1996.
Future minimum payments due under this noncancellable operating lease as
of September 28, 1996, are $858,000 per year in fiscal 1997, 1998, 1999,
and 2000; $897,000 in fiscal 2001; and $11,102,000 in fiscal 2002 and
thereafter. Total future minimum lease payments are $15,431,000.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with
Thermo Electron as discussed in Note 1.
Notes Receivable from Related Party
During fiscal 1995 and fiscal 1996, the Company loaned $2,000,000
and $1,300,000, respectively, to Dolphin Acquisition Corporation
(Dolphin). Borrowings bear interest at an annual rate of 6.0% and are due
in June 2000. Dolphin operates a retail chain of beauty product stores in
California and other states within the United States. The president of
ThermoLase is a shareholder and former officer of Dolphin.
Note Payable to Parent Company
In September 1995, the Company borrowed $8,000,000 from Thermo
Electron pursuant to a promissory note bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points. This note was
repaid in September 1996. In September 1996, the Company borrowed
$2,000,000 from Thermo Electron pursuant to a promissory note, due April
30, 1997, and bearing interest at the 90-day Commercial Paper Composite
Rate plus 25 basis points.
Related Party Revenues
Under an arrangement with Thermedics Detection Inc., a
majority-owned subsidiary of Thermedics Inc., a publicly traded,
majority-owned subsidiary of Thermo Electron, Trex Medical manufactures
an X-ray source, pursuant to written purchase orders, that is used as a
component to a fill-measuring device produced by Thermedics Detection
Inc. During fiscal 1996 and fiscal 1995, Trex Medical recorded $361,000
and $120,000, respectively, of revenue under this agreement.
24PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
Vendor Agreement
During fiscal 1995, Trex Medical placed an order for $2,500,000 for
the design and production of high-transmission cellular grids from Thermo
Electron's Tecomet division (Tecomet), which will be received through
fiscal 1997. During fiscal 1996, the Company purchased grids valued at
$397,000 from Tecomet under this arrangement. In addition, Trex Medical
recorded expense of $250,000 during each of fiscal 1996 and fiscal 1995
related to research and development funding provided to Tecomet in
connection with this project.
Sale of Thermoelectrics and Thermionics Businesses
During fiscal 1996, the Company sold its thermoelectrics and
thermionics businesses to two subsidiaries of Thermo Electron. The
selling price for these companies of approximately $860,000, subject to a
post-closing adjustment, was based on the net book value of the net
assets transferred. These businesses were not material to the Company's
results of operations or financial position.
10. Commitments and Contingencies
Operating Leases
In addition to the leases described in Note 9, the Company occupies
office, research, manufacturing, and service facilities under various
noncancellable operating lease arrangements that expire at various dates
through 2006. The accompanying statement of income includes expenses from
these operating leases of $2,253,000, $794,000, and $1,010,000 in fiscal
1996, fiscal 1995, and 1994, respectively. Future minimum payments due
under these noncancellable operating leases as of September 28, 1996, are
$4,017,000 in fiscal 1997; $4,188,000 in fiscal 1998; $4,178,000 in
fiscal 1999; $4,285,000 in fiscal 2000; $4,547,000 in fiscal 2001; and
$19,508,000 in fiscal 2002 and thereafter. Total future minimum lease
payments are $40,723,000.
Technology License Agreement
ThermoLase has licensed from AntiCancer (Note 1) certain technology
related to hair removal, stimulation of hair growth, suppression of hair
growth, and hair coloring under an agreement that calls for up to
$1,500,000 in future payments by ThermoLase upon the attainment of
certain milestones by AntiCancer. In addition to such future payments,
ThermoLase will be substantially responsible for development costs
incurred after attainment of such milestones. In the event that the
funded development efforts result in commercially viable products,
ThermoLase will pay AntiCancer a royalty based on sales, subject to
certain minimum payments.
25PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
10. Commitments and Contingencies (continued)
Contingencies
ThermoLase has from time to time received allegations that its
patented SoftLight laser-based system for the removal of unwanted hair
infringes the intellectual property rights of others, and ThermoLase may
continue to receive such allegations in the future. In general, an owner
of intellectual property can prevent others from using such property
without a license and is entitled to damages for unauthorized past usage.
The Company has investigated the bases of the allegations ThermoLase has
received to date and, based on opinions of its counsel, believes that if
ThermoLase were sued on these bases it would have meritorious defenses.
The owner of a U.S. patent related to Trex Medical's automatic
exposure control has claimed that the Company's mammography systems
infringe such patent. The patent owner has offered a nonexclusive license
under the patent on terms not acceptable to the Company. Although the
Company believes that the validity of the patent may be questionable and
subject to a successful challenge, if the patent holder were successful
in enforcing such patent the Company could be enjoined from manufacturing
and selling mammography systems. In addition, the Company is aware of two
U.S. patents owned by a former employee which have been asserted against
the Company relating to its High-Transmission Cellular (HTC)(TM) grid to
be used with the Company's mammography systems. Although the Company
believes that the HTC grid does not infringe either of these patents, if
the holder of the patents were successful in enforcing such patents, the
Company could be subject to damages and enjoined from manufacturing and
selling the HTC grid.
See Note 4 for a discussion of certain additional litigation.
Due to the inherent uncertainty of dispute resolution, management
cannot predict the outcome of these matters. While an unfavorable outcome
of one or more of these matters could have a material adverse effect on
the Company's results of operations, in the opinion of management any
resolution will not have a material effect on the Company's financial
position.
11. Transactions in Stock of Subsidiaries
In July 1996, Trex Medical issued 2,875,000 shares of its common
stock in an initial public offering, and 871,832 shares of its common
stock in a concurrent rights offering, at $14.00 per share, for net
proceeds of $49,069,000, resulting in a gain of $25,645,000.
In January 1996, Trex Medical issued 100,000 shares of its common
stock in a private placement at $10.75 per share for net proceeds of
$1,070,000, resulting in a gain of $732,000. In November 1995, Trex
Medical issued 1,862,000 shares of its common stock in a private
placement at $10.25 per share for net proceeds of $17,618,000, resulting
in gain of $12,772,000.
26PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
11. Transactions in Stock of Subsidiaries (continued)
In June 1995, ThermoLase issued 150,000 shares and 50,000 shares of
its common stock at $13.75 and $12.825 per share, respectively, in
private placements for net proceeds of $2,563,000, resulting in a gain of
$1,661,000. In August 1995, ThermoLase issued 2,250,000 shares of its
common stock at $25.25 per share in a public offering for net proceeds of
$52,772,000, resulting in a gain of $33,060,000.
In July 1994, ThermoLase issued 5,349,572 shares of its common
stock at $3.00 per share in an initial public offering, pursuant to a
rights offering, for net proceeds of $14,784,000, resulting in a gain of
$8,609,000.
The Company's percentage ownership of its majority-owned
subsidiaries at fiscal year-end was as follows:
1996 1995 1994
-----------------------------------------------------------------------
ThermoLase 64% 65% 69%
Trex Medical 80% 100% 100%
12. Costs Associated with Divisional Restructuring
Costs associated with divisional restructuring in the accompanying
fiscal 1995 and 1994 statement of income result from the decision to
close the Company's division located in Waltham, Massachusetts. The
fiscal 1995 restructuring costs primarily represent the write-off of cost
in excess of net assets of acquired companies and disposal of equipment.
The 1994 costs primarily represent severance costs for approximately 34
employees at this location and, to a lesser extent, the cost to write off
leasehold improvements.
13. Segment Data, Significant Customers, and Export Sales
The Company's business segments include the following:
Medical Products manufactured by the Company's Trex Medical
subsidiary, including mammography equipment, minimally invasive
stereotactic breast-biopsy equipment, general X-ray equipment, and
X-ray imaging systems used for cardiac catheterization and
angiography, as well as radiographic fluoroscopy.
*Personal-care Products and Services offered by the Company's
ThermoLase subsidiary, including high-quality skin-care and other
personal-care products manufactured by CBI, hair-removal services
performed at ThermoLase's Spa Thira salons, and the licensing of the
SoftLight hair-removal system to doctors in the U.S. and to
international joint ventures.
*Advanced Technology Research performed by the Company in the fields of
communications, avionics, X-ray detection, signal processing,
advanced-materials technology, and lasers, funded by the U.S.
government and other customers.
27PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
13. Segment Data, Significant Customers, and Export Sales (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Revenues:
Medical Products $150,195 $ 55,291 $ 54,410
Personal-care Products and Services 27,812 17,544 18,682
Advanced Technology Research 14,401 14,841 18,486
Intersegment Sales Elimination (10,379) (1,145) (526)
-------- -------- --------
$182,029 $ 86,531 $ 91,052
======== ======== ========
Income before provision for income
taxes and minority interest:
Medical Products $ 15,342 $ 6,787 $ 3,385
Personal-care Products and Services (4,979) (2,970) 63
Advanced Technology Research (3,053) (1,676) (1,203)
Corporate (a) (3,795) (2,382) (2,561)
-------- -------- --------
Total operating income (loss) 3,515 (241) (316)
Interest and other income, net 44,777 38,132 11,858
-------- -------- --------
$ 48,292 $ 37,891 $ 11,542
======== ======== ========
Identifiable assets:
Medical Products $200,850 $102,374 $ 48,000
Personal-care Products and Services 91,713 89,292 33,570
Advanced Technology Research 12,004 16,586 13,795
Corporate (b) 15,655 22,529 59,619
-------- -------- --------
$320,222 $230,781 $154,984
======== ======== ========
Depreciation and amortization:
Medical Products $ 3,195 $ 1,311 $ 1,491
Personal-care Products and Services 1,362 640 741
Advanced Technology Research 345 337 454
-------- -------- --------
$ 4,902 $ 2,288 $ 2,686
======== ======== ========
Capital expenditures:
Medical Products $ 3,071 $ 957 $ 1,300
Personal-care Products and Services 9,423 1,409 2,736
Advanced Technology Research 1,968 237 325
-------- -------- --------
$ 14,462 $ 2,603 $ 4,361
======== ======== ========
(a) Primarily general and administrative expenses.
(b) Primarily cash, cash equivalents, and available-for-sale investments
at the Company's headquarters.
28PAGE
<PAGE>
ThermoTrex Corporation
Notes to Consolidated Financial Statements
13. Segment Data, Significant Customers, and Export Sales (continued)
U.S. government agencies accounted for less than 10% of the
Company's total revenues in fiscal 1996, and 17% and 20% of the Company's
total revenues in fiscal 1995 and 1994, respectively. No single customer
accounted for 10% or more of the Company's total revenues in fiscal 1996
or 1994. Sales to one customer accounted for 11% of the Company's total
revenues in fiscal 1995. Export sales were $35,908,000 and $12,374,000 in
fiscal 1996 and fiscal 1995, respectively, and were less than 10% of the
Company's total revenues in 1994.
14. Unaudited Quarterly Information
(In thousands except per share amounts)
Three Months Ended
--------------------------------------------
Dec. 30, March 30, June 29, Sept. 28,
Fiscal 1996 (a) 1995 1996 1996 (b) 1996 (c)
----------------------------------------------------------------------
Revenues $43,095 $42,699 $42,772 $53,463
Gross profit 16,763 17,540 17,041 18,440
Net income 14,172 2,103 1,071 25,229
Earnings per share .72 .11 .05 1.32
April 1, July 1, Sept. 30,
Fiscal 1995 (d) (e) 1995 1995 1995 (f)
----------------------------------------------------------------------
Revenues $26,277 $28,084 $32,170
Gross profit 11,493 11,739 12,070
Net income 983 2,524 32,834
Earnings per share .05 .13 1.73
(a) Results include nontaxable gains of $12,772,000, $732,000, and
$25,645,000 in the first, second, and fourth quarters, respectively,
from the issuance of stock by subsidiaries.
(b) Reflects the May 1996 acquisition of XRE.
(c) Reflects the September 1996 acquisition of Continental.
(d) Results include nontaxable gains of $1,661,000 and $33,060,000 in the
second and third quarters, respectively, from the issuance of stock
by subsidiaries.
(e) In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's 39-week transition period ended September
30, 1995 is presented.
(f) Reflects the September 1995 acquisition of Bennett.
29PAGE
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of ThermoTrex Corporation:
We have audited the accompanying consolidated balance sheet of
ThermoTrex Corporation (a Delaware corporation and 51%-owned subsidiary
of Thermo Electron Corporation) and subsidiaries as of September 28, 1996
and September 30, 1995, and the related consolidated statements of
income, shareholders' investment, and cash flows for the year ended
September 28, 1996, the nine months ended September 30, 1995, and the
year ended December 31, 1994. 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 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
ThermoTrex Corporation and its subsidiaries as of September 28, 1996 and
September 30, 1995, and the results of their operations and their cash
flows for the year ended September 28, 1996, the nine months ended
September 30, 1995, and the year ended December 31, 1994, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
30PAGE
<PAGE>
ThermoTrex Corporation
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. These statements involve a number of risks and
uncertainties, including those detailed immediately after this
Management's Discussion and Analysis of Financial Conditions and Results
of Operations under the caption "Forward-looking Statements."
Overview
The Company operates in three business segments: Medical Products
manufactured by the Company's 80%-owned Trex Medical Corporation (Trex
Medical) subsidiary, Personal-care Products and Services offered by the
Company's 64%-owned ThermoLase Corporation (ThermoLase) subsidiary, and
Advanced Technology Research.
Trex Medical designs, manufactures, and markets mammography
equipment and minimally invasive stereotactic breast-biopsy systems,
general radiography (X-ray) equipment, and X-ray imaging systems used for
cardiac catheterization and angiography, as well as radiographic
fluoroscopy. Trex Medical sells its systems worldwide principally through
a network of independent dealers, and also acts as an original equipment
manufacturer (OEM) for other medical equipment companies. Trex Medical
has four operating units: Lorad, a manufacturer of mammography and
stereotactic breast-biopsy systems; Bennett X-Ray Corporation (Bennett),
a manufacturer of general X-ray and mammography equipment; XRE
Corporation (XRE), a manufacturer of X-ray imaging systems used in the
diagnosis and treatment of coronary artery disease and other vascular
conditions; and Continental X-Ray Corporation (Continental), a
manufacturer of general-purpose and specialized X-ray systems.
ThermoLase has developed a laser-based system called SoftLight(SM)
for the removal of unwanted hair. The SoftLight system uses a low-energy,
dermatology laser in combination with a lotion that absorbs the laser's
energy to disable hair follicles. In April 1995, the Company received
clearance from the U.S. Food and Drug Administration (FDA) to
commercially market services using the SoftLight system. The Company
began earning revenue from the SoftLight system in the first quarter of
fiscal 1996 as a result of opening its first commercial salon (Spa Thira)
in La Jolla, California, in November 1995. ThermoLase opened additional
salons in Dallas in June 1996, in Houston and Beverly Hills in September
1996, in Denver in October 1996, and in Boca Raton in November 1996.
ThermoLase also plans to open a salon in suburban Detroit in December
1996 and has signed leases for four additional sites in Greenwich,
Connecticut; Manhasset, New York; suburban Minneapolis; and Palm Beach,
Florida. In June 1996, ThermoLase commenced a program to license to
doctors the right to perform the Company's patented SoftLight hair-
31PAGE
<PAGE>
ThermoTrex Corporation
Overview (continued)
removal procedure. In this program, ThermoLase licenses its technology to
physicians and receives a per-procedure royalty that varies depending on
the location treated. ThermoLase also provides the doctors with the
lasers and supplies that are necessary to perform the service. ThermoLase
is marketing the SoftLight system internationally through joint ventures
and other licensing arrangements, including separate joint ventures
established in Japan in January 1996 and in France in November 1996, and
a licensing arrangement established in Saudi Arabia in November 1996.
ThermoLase also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. (CBI) subsidiary, which
manufactures the lotion used in the SoftLight hair-removal process.
The Company's Advanced Technology Research segment performs
research primarily in the fields of communications, avionics, X-ray
detection, signal processing, advanced-materials technology, and lasers.
The Company has developed its expertise in these core technologies in
connection with government-sponsored research and development.
Results of Operations
In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the results of operations for 1996 compares the year ended
September 28, 1996 (fiscal 1996) with the unaudited year ended September
30, 1995 (1995). The results of operations for 1995 compares the nine
months ended September 30, 1995 (fiscal 1995) with the unaudited nine
months ended October 1, 1994 (fiscal 1994).
Fiscal 1996 Compared With 1995
Total revenues increased 63% to $182.0 million in fiscal 1996 from
$111.6 million in 1995. Medical Products segment revenues, excluding
intersegment sales, increased 102% to $141.8 million in fiscal 1996,
compared with $70.2 million in 1995. Medical Products segment revenues
increased $56.2 million due to the acquisitions of Bennett, XRE, and
Continental. In addition, revenues at Lorad, excluding intersegment
sales, increased 24% as a result of increased demand for mammography,
biopsy, and nondestructive testing (NDT) systems. Personal-care Products
and Services segment revenues increased 19% to $27.8 million in fiscal
1996 from $23.3 million in 1995, primarily due to the inclusion of $2.6
million in revenues from ThermoLase's Spa Thira salons and doctors'
licensing program, as well as $2.0 million in SoftLight licensing fees
from the joint venture established in Japan in January 1996. Revenues at
CBI were $23.2 million in fiscal 1996, compared with $23.3 million in
1995. ThermoLase estimates that CBI will continue to represent a smaller
portion of its total revenues as revenues from hair-removal services
increase. During fiscal 1996, ThermoLase opened its first four Spa Thira
salons, including two that opened in September 1996. Under the current
pricing structure, the majority of spa clients pay a fixed fee in advance
to receive a series of treatments, as necessary. Consequently, ThermoLase
32PAGE
<PAGE>
ThermoTrex Corporation
Fiscal 1996 Compared With 1995 (continued)
defers revenue related to such payments, which is recognized over the
anticipated treatment period. As ThermoLase collects further data
concerning the number of treatments required and duration of the
treatment period, the period of revenue recognition may be affected.
In January 1996, ThermoLase entered into a joint venture agreement
to market its SoftLight system in Japan as well as its laser-based
skin-rejuvenation process, if and when available. ThermoLase currently
holds a 50% stake in the joint venture with an option to increase its
ownership to 51% pursuant to a fair-value purchase option. The agreement
calls for ThermoLase to receive minimum guaranteed payments of $1,000,000
in fiscal 1997, subject to certain exceptions in the event the joint
venture is unable to obtain patent protection in Japan on prescribed
terms.
Advanced Technology Research segment revenues, excluding
intersegment sales, declined to $12.4 million in fiscal 1996, from $18.1
million in 1995, primarily due to lower funding levels for the Company's
government-sponsored research and development contracts and the sale of
the Company's thermoelectrics and thermionics businesses. The Company
estimates that revenues from Advanced Technology Research will continue
to decline as a percentage of total revenues.
The gross profit margin declined to 38% in fiscal 1996, compared
with 41% in 1995. The Medical Products segment gross profit margin,
excluding intersegment sales, declined to 42% in fiscal 1996 from 49% in
1995, primarily due to the inclusion of lower-margin revenues at Bennett
and XRE. The Personal-care Products and Services segment gross profit
margin was 28% in fiscal 1996, compared with 37% in 1995. The decline was
primarily due to the early operations of the Spa Thira business, which
has been operating below maximum capacity as ThermoLase develops a client
base, continues refining its operating procedures, and incurs pre-opening
costs, offset in part by the effect of revenues from the joint venture in
Japan and doctors' licensing program. As ThermoLase opens additional Spa
Thira locations in fiscal 1997, the effect of operating each spa below
maximum capacity as ThermoLase develops its client base, as well as
pre-opening costs, will have a negative impact on the gross profit
margin. In addition, the decline in the gross profit margin in fiscal
1996 resulted from lower margins on the sale of skin-care and other
personal-care products at CBI due to a shift to lower-margin products.
The Advanced Technology Research segment gross profit margin decreased to
17% in fiscal 1996 from 19% in 1995, primarily due to cost overruns on
certain contracts, offset in part by the absence of certain lower-margin
contracts as a result of the closure of the Company's division in
Waltham, Massachusetts, in 1995 (Note 12).
33PAGE
<PAGE>
ThermoTrex Corporation
Fiscal 1996 Compared With 1995 (continued)
Selling, general and administrative expenses as a percentage of
revenues declined to 23% in fiscal 1996 from 24% in 1995, primarily due
to increased revenues at Lorad and the inclusion of the operations of
Bennett and XRE, which incurred lower expenses as a percentage of
revenues. This decrease was offset in part by an increase in selling,
general and administrative expenses as a percentage of revenues for the
Advanced Technology Research segment primarily due to its decrease in
revenues.
Research and development expenses increased to $25.0 million in
fiscal 1996 from $18.0 million in 1995, due to the inclusion of $4.2
million of expense at Bennett and XRE, and continued efforts to develop
and commercialize new products including the M-IV mammography system
(first shipped in the fourth quarter of fiscal 1996), the full-breast
digital mammography system, and the direct-detection X-ray sensor, as
well as enhancements of existing systems.
In 1995 the Company recorded restructuring expenses of $1.0 million
resulting from the decision to close its division located in Waltham,
Massachusetts (Note 12). During fiscal 1996 and 1995, this division
recorded revenues of $0.4 million and $3.0 million, respectively, and
incurred operating losses of $0.1 million and $0.7 million, respectively.
Interest income increased to $6.0 million in fiscal 1996 from $4.2
million in 1995, primarily as a result of interest income earned on
invested proceeds from ThermoLase's August 1995 public offering of common
stock and Trex Medical's private placements of common stock in November
1995 and January 1996 and its initial public offering in July 1996.
Interest expense in fiscal 1996 and 1995 primarily represents interest
associated with an $8.0 million promissory note issued to Thermo Electron
in September 1995. This note was repaid in September 1996, and the
Company issued a $2.0 million promissory note to Thermo Electron on
similar terms.
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 subsidiary 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 Trex Medical in
fiscal 1996 and ThermoLase in 1995, the Company recorded gains of $39.1
million and $34.7 million in fiscal 1996 and 1995, respectively (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. Also, the accounting
rules applicable to these transactions may change. See "Risks Associated
34PAGE
<PAGE>
ThermoTrex Corporation
Fiscal 1996 Compared With 1995 (continued)
with Spinout of Subsidiaries" under the heading "Forward-looking
Statements" below. Accordingly, there can be no assurance that the
Company will be able to realize gains from such transactions in the
future.
Minority interest expense in fiscal 1996 represents minority
shareholders' allocable share of Trex Medical's net income, offset in
part by minority shareholders' allocable share of ThermoLase's net loss.
Minority interest income in 1995 represents minority shareholders'
allocable share of ThermoLase's net loss.
The effective tax rates in fiscal 1996 and 1995 differ from the
statutory federal income tax rate due to the nontaxable gains on issuance
of stock by subsidiaries, offset in part by nondeductible amortization of
cost in excess of net assets of acquired companies and the impact of
state income taxes.
The Company is a defendant in certain patent litigation and has
been notified that it allegedly infringes certain other technologies
owned by third parties (Notes 4 and 10). While an unfavorable outcome of
one or more of these matters could have a material adverse effect on the
Company's results of operations, the Company does not believe that it is
reasonably likely that any resolution would have a material effect on the
Company's financial position.
Fiscal 1995 Compared With Fiscal 1994
Total revenues increased 31% to $86.5 million in fiscal 1995 from
$66.0 million in fiscal 1994. Medical Products segment revenues,
excluding intersegment sales, increased 40% to $55.0 million in fiscal
1995, compared with $39.2 million in fiscal 1994. The increase resulted
from higher demand across all product lines, with significant growth
coming from export sales, which accounted for 21% of Medical Products
segment revenues in fiscal 1995, compared with 11% in fiscal 1994.
Personal-care Products and services segment revenues increased 36% to
$17.5 million in fiscal 1995 from $12.9 million in fiscal 1994 due to an
increase in demand at CBI.
Advanced Technology Research segment revenues, excluding
intersegment sales, were $14.0 million in fiscal 1995, compared with
$13.9 million in fiscal 1994, as funding levels for the Company's
government-sponsored research and development contracts remained
relatively unchanged.
The gross profit margin declined to 41% in fiscal 1995 from 42% in
fiscal 1994. The Medical Products segment gross profit margin, excluding
intersegment sales, declined to 48% in fiscal 1995, compared with 50% in
fiscal 1994, primarily due to a nonrecurring adjustment to expense of
$0.3 million for inventory revalued at the time of Bennett's acquisition
by the Company. The Personal-care Products and Services segment gross
profit margin was 35% in fiscal 1995, compared with 42% in fiscal 1994,
35PAGE
<PAGE>
ThermoTrex Corporation
Fiscal 1995 Compared With Fiscal 1994 (continued)
due to lower margins at CBI as a result of an increase in the price of
raw materials and, to a lesser extent, a shift in product mix. The gross
profit margin for Advanced Technology Research segment decreased to 16%
in fiscal 1995 from 17% in fiscal 1994, due to overhead incurred in
excess of amounts billable on government-sponsored contracts.
Selling, general and administrative expenses as a percentage of
revenues declined to 24% in fiscal 1995 from 27% in fiscal 1994. The
decline was due to increased revenues at Trex Medical, partially offset
by an increase in expense at ThermoLase resulting from increased selling
efforts to expand the market for ThermoLase's skin-care and other
personal-care products and the buildup of the infrastructure necessary
for the operation of a personal-care service network.
Research and development expenses increased to $13.4 million in
fiscal 1995 from $9.6 million in fiscal 1994, reflecting ThermoLase's
expanded efforts to develop and commercialize the SoftLight system and,
to a lesser extent, continued efforts to develop the full-breast digital
mammography system, the Sonic CT(TM) medical imaging device, and the
passive microwave camera synthetic vision system.
In fiscal 1995 and fiscal 1994, the Company recorded restructuring
expenses of $1.0 million and $0.7 million, respectively, resulting from
the decision to close its division located in Waltham, Massachusetts
(Note 12). During fiscal 1995 and fiscal 1994, this division recorded
revenues of $2.4 million and $2.0 million, respectively, and incurred
operating losses of $0.6 million and $0.8 million, respectively.
Interest income increased to $3.2 million in fiscal 1995 from $2.3
million in fiscal 1994, primarily as a result of interest income earned
on invested proceeds from the Company's March 1994 public offering of
common stock, ThermoLase's July 1994 initial public offering of common
stock and, to a lesser extent, the June and August 1995 offerings of
ThermoLase common stock. This increase was offset slightly by lower
invested amounts due to the cash expended to acquire Bennett. Interest
expense in fiscal 1995 represents interest associated with the $8.0
million promissory note issued to Thermo Electron in September 1995.
Interest expense in fiscal 1994 represents interest associated with notes
payable of $6.7 million that were repaid in January 1994.
As a result of the sale of stock by ThermoLase, the Company
recorded gains of $34.7 million and $8.6 million in fiscal 1995 and
fiscal 1994, respectively.
Minority interest income in fiscal 1995 represents minority
shareholders' allocable share of ThermoLase's net loss.
The effective tax rates in fiscal 1995 and fiscal 1994 differ from
the statutory federal income tax rate due to the nontaxable gain on
issuance of stock by subsidiary, offset in part by nondeductible
amortization of cost in excess of net assets of acquired companies and
the impact of state income taxes.
36PAGE
<PAGE>
ThermoTrex Corporation
Liquidity and Capital Resources
Consolidated working capital was $127.9 million at September 28,
1996, compared with $103.3 million at September 30, 1995. Included in
working capital are cash, cash equivalents, and available-for-sale
investments of $95.6 million at September 28, 1996, compared with $87.1
million at September 30, 1995. Of the $95.6 million balance at September
28, 1996, $52.1 million was held by ThermoLase, $34.0 million was held by
Trex Medical, and the remainder was held by the Company and its wholly
owned subsidiary. Net cash provided by operating activities during fiscal
1996 was $4.9 million.
The Company's investing activities used cash of $41.9 million in
fiscal 1996. In May 1996, Trex Medical acquired XRE for approximately
$18.5 million in cash, net of cash acquired and including the repayment
of debt. In September 1996, Trex Medical acquired Continental for
approximately $18.4 million in cash, net of cash acquired and including
the repayment of debt. In addition, the Company expended $14.5 million
for property, plant and equipment during fiscal 1996.
The Company's financing activities provided cash of $59.4 million
in fiscal 1996. The Company raised $71.9 million from the sale of Company
and subsidiary common stock and repaid an $8.0 million promissory note
from Thermo Electron.
In September 1996, ThermoLase's Board of Directors authorized the
repurchase by ThermoLase of up to $10.0 million of its common stock
through August 28, 1997, in market transactions or pursuant to the
exercise by investors of standardized put options written on ThermoLase
common stock. As of December 1, 1996, no shares had been repurchased,
however, ThermoLase had contingent obligations under outstanding put
options to purchase up to 80,000 shares for $1.5 million.
In addition to the Denver, Boca Raton, and suburban Detroit spas
which were being completed as of September 28, 1996, ThermoLase has
signed leases in Greenwich, Connecticut; Manhasset, New York; suburban
Minneapolis; and Palm Beach, Florida where it plans to open additional
Spa Thira salons. ThermoLase plans to open between 10 and 20 additional
spas in various parts of the United States during fiscal 1997. Depending
on the size of the salon, each facility will require approximately $1.5
million to $2.5 million for such items as leasehold improvements and
laser systems. In addition, ThermoLase expects to expend between $8.0
million and $10.0 million during fiscal 1997 for equipment related to its
program to license doctors the right to perform hair-removal services. In
addition to capital expenditures planned by ThermoLase, the Company plans
to expend approximately $5.0 million on other capital additions in fiscal
1997.
The Company believes it has adequate resources to meet its
financial needs for the foreseeable future.
37PAGE
<PAGE>
ThermoTrex Corporation
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 fiscal 1997 and beyond to
differ materially from those expressed in any forward-looking statements
made by, or on behalf of, the Company.
No Assurance of Development and Commercialization of Products Under
Development. The Company has several lines of existing products and
number of commercial products under development. Product development
involves a high degree of risk, and returns to investors are dependent
upon successful development and commercialization of the Company's
proposed products. Proposed products based on the Company's technologies
will require significant research and development. There can be no
assurance that any products developed by the Company will be
commercialized or that development will be completed in any particular
time frame. In addition, there can be no assurance that the Company will
be able to build manufacturing, marketing, and distribution organizations
that will be necessary for the successful commercialization of its
commercial products under development.
The Company has developed several of its core technologies in
connection with government-sponsored research and development. The
Company is seeking government funding for further applications of certain
of its core technologies, but there can be no assurance that such funding
can be obtained on favorable terms, if at all. In addition, the Company
does not expect that government funding will be sufficient to complete
the development of the Company's proposed commercial products. In order
to further or complete the development of its commercial products, the
Company may seek to raise additional funds for specific projects or for
subsidiaries of the Company that will commercialize its products. There
can be no assurance that funding for further development of the Company's
commercial products can be obtained on favorable terms, if at all. Such
funding may include funding from capital markets.
Uncertain Market Acceptance. The success of the Company's products
depends on obtaining favorable perceptions of the Company's products by
markets and opinion leaders. ThermoLase's SoftLight process for laser
hair removal is significantly different from current commercially
available hair-removal technologies. With any new cosmetic technology,
there is substantial risk that the marketplace may not accept or be
receptive to the potential benefits of such technology. Market acceptance
of the SoftLight process will depend, in large part, upon the ability of
ThermoLase to demonstrate to consumers the safety and effectiveness of
the SoftLight process and its advantages over other types of hair-removal
treatment. There can be no assurance that the SoftLight process will be
accepted by the general public. The Company's passive microwave camera
and laser communication technology, ThermoLase's skin-rejuvenation
system, and Trex Medical's full-breast digital imaging system are also
significantly different from current technologies and, if successfully
developed, will be subject to similar market acceptance risks.
38PAGE
<PAGE>
ThermoTrex Corporation
Forward-looking Statements (continued)
Government Regulation; No Assurance of Regulatory Approvals.
Certain of the Company's products are subject to pre-marketing clearance
or approval by the U.S. Food and Drug Administration (FDA) and similar
agencies in foreign countries. The use or sale of certain of the
Company's commercial products under development will require approvals by
other government agencies, such as the Federal Aviation Administration.
Trex Medical's full-breast digital imaging system and ThermoLase's
skin-rejuvenation system require the completion of human clinical trials
prior to submissions for FDA approval. Clinical trials of the digital
imaging system and the skin-rejuvenation system are currently under way.
At the conclusion of the trials, the Company expects its subsidiaries to
submit 510(k) applications for FDA approval, but there can be no
assurance that there will be favorable clinical results, which are
necessary for such submissions. The process of obtaining FDA approvals is
time consuming and expensive. There can be no assurance that the FDA will
accept any of such 510(k) applications, and may require additional data
or alternative and more time-consuming approval procedures. Furthermore,
there can be no assurance that the necessary approvals for any of the
products will be obtained on a timely basis, or at all.
FDA regulations also require continuing compliance with specific
standards in conjunction with the maintenance and marketing of products
and services that have been approved. If such regulations are not
complied with on an ongoing basis, the FDA can enjoin production, seize
products, and levy fines.
The Company recognizes for purposes of commercializing the
ThermoLase centers that the operation of the SoftLight process may be
deemed by certain regulators to constitute the practice of medicine. If
operation of the SoftLight process is determined to involve the practice
of medicine, the degree of physician involvement required in delivering
the process is unclear. In addition, many states prohibit business
corporations from engaging in the practice of medicine, employing
physicians, or entering into certain financial arrangements with
physicians, including fee splitting. Although the Company believes that
the existing and proposed structures for the ThermoLase centers and its
relationships with physicians and others comply with applicable laws and
regulations, no formal ruling regarding such structures and relationships
has been obtained from any government agency and there can be no
assurance that any such ruling would deem such structures or
relationships in compliance with applicable laws and regulations. There
can be no assurance that review of the Company's business by courts or
healthcare, tax, labor, and other regulatory authorities that have
jurisdiction over matters including, without limitation, the corporate
practice of medicine, licensure of facilities, practitioners and
equipment and franchising will not result in determinations that could
adversely affect the operations of the Company or that the healthcare
regulatory environment will not change in a manner that would restrict
the Company's proposed operations or limit the expansion of the Company's
business or otherwise adversely affect the Company.
39PAGE
<PAGE>
ThermoTrex Corporation
Forward-looking Statements (continued)
Healthcare Reform; Uncertainty of Patient Reimbursement. The
federal government has in the past and may in the future consider, and
certain state and local as well as a number of foreign governments are
considering or have adopted, healthcare policies intended to curb rising
healthcare costs. Such policies include rationing of government-funded
reimbursement for healthcare services and imposing price controls upon
providers of medical products and services. The Company cannot predict
what healthcare reform legislation or regulation, if any, will be enacted
in the United States or elsewhere. Significant changes in the healthcare
systems in the United States or elsewhere are likely to have a
significant impact over time on the manner in which Trex Medical conducts
its business. In addition, the federal government regulates reimbursement
of fees for certain diagnostic examinations and capital equipment
acquisition costs connected with services to Medicare beneficiaries.
Recent legislation has limited Medicare reimbursement for diagnostic
examinations. These policies may have the effect of limiting the
availability or reimbursement for certain procedures, and as a result may
inhibit or reduce demand by healthcare providers for products in the
markets in which Trex Medical competes. While the Company cannot predict
what effect the policies of government entities and other third-party
payors will have on future sales of Trex Medical's products, there can be
no assurance that such policies would not have an adverse impact on the
operations of the Company.
Technological Developments and Intense Competition. The Company's
products do, and will, compete in fields characterized by rapid
technological progress and intense competition. New developments in
technology may have a material adverse effect on the development or sale
of some or all of the Company's products or render such products
noncompetitive or obsolete. Other companies, many of which have
substantially greater capital resources, marketing experience, research
and development staffs and facilities than the Company, are currently
engaged in the sale and development of products and technologies that are
similar to, and may be competitive with, certain of the Company's
products and technologies. 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.
In 1994, the Company conducted a clinical trial using a SoftLight
laser to collect data on the effectiveness of the SoftLight hair-removal
process under the clinical protocol established for the Company's FDA
submission. Results were based on a dermatologist's visual observation of
each subject's treatment area at various time intervals after treatment
and varied depending upon the anatomical site treated. Of the 65
anatomical sites screened 12 weeks after receiving such treatment, 49
(75%) experienced a reduction in hair growth greater than 30%, with the
average reduction in hair growth equal to 46%. Of the 32 anatomical sites
screened 24 weeks after receiving such treatment, 21 (66%) experienced a
reduction in hair growth greater than 30%, with the average reduction in
hair growth equal to 39%. Although ThermoLase received FDA clearance in
April 1995 to commercially market the SoftLight process, ThermoLase
continues to study the process to better understand the effects of the
40PAGE
<PAGE>
ThermoTrex Corporation
Forward-looking Statements (continued)
system and to develop the system in order to increase its effectiveness
and the length of time in between treatments. These studies will also be
used to further clarify the duration for which hair will be removed, the
number of treatments required to effectively remove hair from a given
area, and the effectiveness of the process across a broad range of skin
types and anatomical sites. In addition, although ThermoLase has not
observed any significant side effects to date, it is continuing to
monitor subjects and customers for the development of possible side
effects. Failure to further improve the SoftLight process may limit
ThermoLase's ability to successfully commercialize the SoftLight process.
Need to Manage Growth; Ability to Attract Qualified Personnel.
ThermoLase is experiencing a period of rapid growth as it commences
commercial operations of its SoftLight process. ThermoLase presently
intends to commercialize the SoftLight process in the United States
primarily through affiliated spas and a network of physicians using the
process as part of their practices. ThermoLase will be required to
recruit and train a large number of personnel for its spas, including
medical staff such as physicians, registered nurses, physician
assistants, or other personnel. There may be only a limited number of
such persons with the requisite skills, and it may become increasingly
difficult for ThermoLase to hire such personnel over time. ThermoLase
will also be required to recruit qualified physicians for its network of
physician practices that offer the SoftLight process. Such qualified
physicians may not be available or interested in offering the SoftLight
process in their private practices. ThermoLase's commercialization
strategy may also significantly strain operational, management,
financial, sales and marketing, and other resources. To manage growth
effectively, ThermoLase must continue to enhance its systems and controls
and successfully expand, train, and manage its employee base and
physician network. There can be no assurance that ThermoLase will be able
to manage this expansion effectively.
Intellectual Property Rights, Uncertainties and Litigation. The
Company places considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and
processes because of the length of time and expense associated with
bringing new products through development and the regulatory approval
process to the marketplace. Proprietary rights relating to the Company's
products will be protected from unauthorized use by third parties only to
the extent that they are covered by enforceable patents or are maintained
in confidence as trade secrets. Certain technology that may be used in
the Company's products is not covered by any patent or patent application
and therefore may be the subject of ownership disputes. The Company
generally relies on trade secrecy agreements to protect such technology,
but there can be no assurance that such agreements will provide
meaningful protection or that others will not independently develop
substantially equivalent technology. There can be no assurance that
patent applications covering the Company's products will be successfully
filed or that patents will ultimately issue. Further, even if patents are
issued, the protection afforded by such patents and the Company's
existing patents will depend upon their scope and validity. In addition,
there can be no assurance that the Company's patents will not be
41PAGE
<PAGE>
ThermoTrex Corporation
Forward-looking Statements (continued)
challenged. There may be patents or other intellectual property rights
owned by others, which if infringed by the Company would permit the owner
to prevent the Company from making, selling, or using the affected
product or process without a license and to be entitled to damages for
past infringement. ThermoLase has from time to time received allegations
that the SoftLight process infringes the intellectual property rights of
others and may continue to receive such allegations in the future.
Protection and defense of intellectual property rights may involve the
commitment of large amounts of time and financial resources. Furthermore,
the government retains a non-exclusive, royalty-free license to use
technology developed under government contracts for government purposes.
If the Company decides not to pursue further development of
government-sponsored technology, the government could, in certain
circumstances, transfer that technology to a third party.
Fischer Imaging Corporation (Fischer) sued Trex Medical's Lorad
division in April 1992, alleging that Lorad's prone breast-biopsy systems
infringe a Fischer patent on a precision mammographic needle-biopsy
system. As of September 28, 1996, Trex Medical had revenues of
approximately $63.1 million from the sale of such systems. The suit
requests a permanent injunction, treble damages, and attorney's fees and
expenses. The Company also is aware of a U.S. patent held by a third
party which has been asserted by him against certain automatic
exposure-control features included in most of Trex Medical's current
mammography systems. As of September 28, 1996, Trex Medical had accrued a
reserve of approximately $2 million in connection with these matters,
although given the inherent uncertainty of patent litigation and
disputes, no assurance can be given as to the amount which the Company
may eventually be required to pay in expenses, or in damages, if the
Company is unsuccessful in defending these matters. The Company also has
been notified that it allegedly infringes certain other technologies
owned by third parties.
Potential Product Liability. The administration of medical
treatments is subject to various risks of physical injury to the patient.
The Company maintains product liability insurance, but there is no
assurance that this insurance will provide sufficient coverage in the
event of a claim. Furthermore, there can be no assurance that the Company
will be able to maintain its insurance coverage or that insurance
coverage will continue to be available at economically feasible rates.
Dependence Upon Significant OEM Relationships. A significant
portion of Trex Medical's sales are through OEM arrangements with United
States Surgical Corporation, General Electric Company, Inc., and the
Philips Medical Systems North America Company subsidiary of Philips N.V.
Trex Medical's sales depend, in part, on the continuation of these OEM
arrangements and the level of end-user sales by such OEMs. There can be
no assurance that Trex Medical will be able to maintain its existing, or
establish new, OEM relationships.
42PAGE
<PAGE>
ThermoTrex Corporation
Forward-looking Statements (continued)
Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of businesses that complement or augment the
Company's existing products and services. Promising acquisitions are
difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory
approvals, including antitrust approvals. Any acquisitions completed by
the Company may be made at substantial premiums over the fair value of
the net assets of the acquired companies. There can be no assurance that
the Company will be able to complete future acquisitions or that the
Company will be able to successfully integrate any acquired businesses.
In order to finance such acquisitions, it may be necessary for the
Company to raise additional funds 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, in the case of equity financing,
may result in dilution to the Company's stockholders.
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 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" (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 calendar 1997.
43PAGE
<PAGE>
ThermoTrex Corporation
Selected Financial Information
Nine
Months
Year Ended Ended (a) Year Ended
------------------- --------- --------------------------
(In thousands
except per Sept. 28, Sept. 30, Sept. 30, Dec. 31, Jan. 1, Jan. 2,
share amounts) 1996 (b) 1995 1995 (c) 1994 (d) 1994 (e) 1993 (f)
--------------------------------------------------------------------------
(Unaudited)
Statement of Income Data:
Revenues $182,029 $111,610 $ 86,531 $ 91,052 $ 54,329 $ 19,843
Income before
provision for
income taxes
and minority
interest 48,292 38,895 37,891 11,542 1,490 627
Net income 42,575 36,658 36,341 9,602 495 280
Earnings per
share 2.16 1.94 1.92 .50 .03 .02
Balance Sheet Data:
Working capital $127,863 $103,297 $ 82,798 $ 45,103 $ 18,213
Total assets 320,222 230,781 154,984 117,335 67,904
Common stock of
subsidiary
subject to
redemption - - - 14,511 -
Shareholders'
investment 205,079 162,388 123,271 77,594 48,735
(a)In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's 39-week transition period ended September
30, 1995 is presented.
(b) Reflects the May 1996 and September 1996 acquisitions of XRE and
Continental, respectively, and Trex Medical's private placements,
initial public offering, and rights offering, which resulted in
nontaxable gains of $39,149,000.
(c)Reflects ThermoLase's 1995 private placements and public offering,
which resulted in nontaxable gains of $34,721,000, and the September
1995 acquisition of Bennett.
(d)Reflects the net proceeds of the Company's 1994 public offering and
ThermoLase's 1994 initial public offering, which resulted in a
nontaxable gain of $8,609,000.
(e)Reflects the net proceeds of ThermoLase's 1993 private placement, the
Company's 1993 private placements, and the December 1993 acquisition of
CBI.
(f)Reflects the net proceeds of the Company's 1992 private placement and
the November 1992 acquisition of Lorad.
44PAGE
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ThermoTrex Corporation
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 TKN) for fiscal 1996 and fiscal 1995.
Fiscal 1996 Fiscal 1995
--------------------- ---------------------
Quarter High Low High Low
----------------------------------------------------------------------
First $50 5/8 $31 1/2 $16 5/8 $12
Second 50 7/8 41 3/8 39 3/8 15 1/2
Third 50 1/8 42 3/4 41 3/8 31 1/2
Fourth 51 3/8 36 5/8
As of November 22, 1996, the Company had 580 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 November 22, 1996, was $35 1/8 per share.
Common stock of the Company's majority-owned public subsidiaries is
traded on the American Stock Exchange: ThermoLase (TLZ) and Trex Medical
(TXM).
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 issuances of stock certificates, changes of ownership, lost
stock certificates, and changes 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
Shareholder Services
Shareholders of ThermoTrex Corporation who desire information about
the Company are invited to contact John N. Hatsopoulos, Vice President
and Chief Financial Officer, ThermoTrex Corporation, 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 with the 1997 fiscal year, quarterly distributions will be
limited to the second quarter report only. All quarterly reports and
press releases are also available through the Internet at the Company's
home page on the World Wide Web (http://www.thermo.com/subsid/tkn.html).
45PAGE
<PAGE>
ThermoTrex Corporation
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
September 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Vice
President and Chief Financial Officer, ThermoTrex Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Wednesday, March
12, 1997, at 11:00 a.m. at the Westin Hotel, 70 Third Avenue, Waltham,
Massachusetts.
46<PAGE>
Exhibit 21
THERMOTREX CORPORATION
Subsidiaries of the Registrant
At November 30, 1996, ThermoTrex Corporation owned the following companies:
Registrant's
State of Jurisdiction % of
Name or Incorporation Ownership
---------------------------------------------------------------------------
ThermoTrex East Inc. Massachusetts 100
ThermoLase Corporation Delaware 64
CBI Laboratories, Inc. Texas 100
Trex Medical Corporation Delaware 80
Bennett X-Ray Corporation New York 100
Bennett International Corporation U.S. Virgin Islands 100
Eagle X-Ray, Inc. New York 100
Island X-Ray Incorporated New York 100
XRE Corporation Delaware 100
Continental X-Ray Corporation Delaware 100
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated November 1, 1996, included
in or incorporated by reference into ThermoTrex Corporation's Annual Report
on Form 10-K for the year ended September 28, 1996, into the Company's
previously filed Registration Statement No. 33-47846 on Form S-1 (as
amended on Form S-3), Registration Statement No. 33-45282 on Form S-8,
Registration Statement No. 33-45284 on Form S-8, Registration Statement No.
33-52818 on Form S-8, Registration Statement No. 33-68654 on Form S-3,
Registration Statement No. 33-69426 on Form S-3, Registration Statement No.
33-70512 on Form S-8, and Registration Statement No. 33-80891 on Form S-8.
Arthur Andersen LLP
Boston, Massachusetts
December 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> SEP-28-1996
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<RECEIVABLES> 38,201
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<CURRENT-ASSETS> 184,334
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