SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 4, 1998.
[ ] 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: (781) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at May 1, 1998
---------------------------- --------------------------
Common Stock, $.01 par value 18,571,959
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMOTREX CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
April 4, September 27,
(In thousands) 1998 1997
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $257,453
and $91,164 under repurchase agreement with
affiliated company) $260,796 $135,720
Available-for-sale investments, at quoted
market value (amortized cost of $17,167
and $17,520) 17,174 17,499
Accounts receivable, less allowances of
$2,313 and $1,969 69,888 58,632
Unbilled contract costs and fees 4,122 4,651
Inventories:
Raw materials and supplies 28,035 27,860
Work in process 16,542 13,474
Finished goods 7,819 6,870
Prepaid expenses 4,679 3,422
Prepaid income taxes 11,387 11,877
-------- --------
420,442 280,005
-------- --------
Property, Plant, and Equipment, at Cost 70,559 67,957
Less: Accumulated depreciation and
amortization 17,890 15,568
-------- --------
52,669 52,389
-------- --------
Notes Receivable from Related Parties (Note 2) 4,967 3,300
-------- --------
Prepaid Income Taxes and Other Assets 16,375 13,831
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 6) 108,410 100,592
-------- --------
$602,863 $450,117
======== ========
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THERMOTREX CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 4, September 27,
(In thousands except share amounts) 1998 1997
------------------------------------------------------------------------
Current Liabilities:
Note payable to parent company $ - $ 11,000
Accounts payable 18,588 21,373
Accrued payroll and employee benefits 7,037 8,863
Accrued warranty costs 6,283 6,299
Accrued commissions 6,169 3,922
Payable for repurchase of subsidiary
common stock 10,000 -
Other accrued expenses 26,923 24,245
Due to parent company and affiliated
companies 2,000 2,027
-------- --------
77,000 77,729
-------- --------
Long-term Obligations:
3 1/4% Subordinated convertible debentures
(includes $10,000 of related party
debt; Note 3) 124,500 -
4 3/8% Subordinated convertible debentures 115,000 115,000
-------- --------
239,500 115,000
-------- --------
Deferred Lease Liability 1,454 1,379
-------- --------
Common Stock of Subsidiary Subject to
Redemption 40,500 40,500
-------- --------
Minority Interest 84,543 39,374
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000
shares authorized; 19,464,986 and
19,251,769 shares issued 195 193
Capital in excess of par value 63,379 78,601
Retained earnings 117,813 97,597
Treasury stock at cost, 946,767 and
8,747 shares (21,525) (243)
Net unrealized gain (loss) on available-for-
sale investments 4 (13)
-------- --------
159,866 176,135
-------- --------
$602,863 $450,117
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOTREX CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
----------------------------------------------------------------------
Revenues $ 82,563 $ 70,079
-------- --------
Costs and Operating Expenses:
Cost of revenues 52,907 46,778
Selling, general, and administrative
expenses 20,769 16,944
Research and development expenses 9,515 7,824
-------- --------
83,191 71,546
-------- --------
Operating Loss (628) (1,467)
Interest Income 3,654 1,183
Interest Expense (includes $228 and $29 to
related party) (2,522) (29)
Gain on Issuance of Stock by Subsidiary
(Note 4) 23,798 -
Equity in Losses of Joint Ventures (420) -
-------- --------
Income (Loss) Before Provision for Income
Taxes and Minority Interest 23,882 (313)
Provision for Income Taxes 3,712 250
Minority Interest Expense (Income) 1,311 (751)
-------- --------
Net Income $ 18,859 $ 188
======== ========
Earnings per Share (Note 5):
Basic $ 1.02 $ .01
======== ========
Diluted $ .83 $ .01
======== ========
Weighted Average Shares (Note 5):
Basic 18,526 19,203
======== ========
Diluted 23,294 19,608
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOTREX CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
-----------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
----------------------------------------------------------------------
Revenues $168,118 $132,904
-------- --------
Costs and Operating Expenses:
Cost of revenues 104,772 86,831
Selling, general, and administrative
expenses 41,161 31,808
Research and development expenses 18,906 15,194
-------- --------
164,839 133,833
-------- --------
Operating Income (Loss) 3,279 (929)
Interest Income 6,925 2,463
Interest Expense (includes $557 and $59 to
related party) (4,755) (59)
Gain on Issuance of Stock by Subsidiary
(Note 4) 23,798 1,997
Equity in Losses of Joint Ventures (820) -
-------- --------
Income Before Provision for Income Taxes and
Minority Interest 28,427 3,472
Provision for Income Taxes 6,022 1,227
Minority Interest Expense (Income) 2,189 (706)
-------- --------
Net Income $ 20,216 $ 2,951
======== ========
Earnings per Share (Note 5):
Basic $ 1.08 $ .15
======== ========
Diluted $ .93 $ .15
======== ========
Weighted Average Shares (Note 5):
Basic 18,772 19,192
======== ========
Diluted 22,889 19,634
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOTREX CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
---------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Operating Activities:
Net income $ 20,216 $ 2,951
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 6,962 3,930
Provision for losses on accounts
receivable 437 185
Gain on issuance of stock by subsidiary
(Note 4) (23,798) (1,997)
Minority interest expense (income) 2,189 (706)
Increase in long-term prepaid income
taxes (1,050) -
Other 989 499
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable (11,431) (4,627)
Inventories and unbilled contract
costs and fees (3,353) (10,307)
Other current assets (747) (2,443)
Accounts payable (2,703) (552)
Other current liabilities 2,362 8,731
-------- --------
Net cash used in operating activities (9,927) (4,336)
-------- --------
Investing Activities:
Acquisition, net of cash acquired (Note 6) (7,174) -
Purchases of available-for-sale investments (4,000) -
Proceeds from sale and maturities of
available-for-sale investments 4,400 29,500
Purchases of property, plant, and equipment (5,004) (17,797)
Advance pursuant to note receivable from
related party (Note 2) (1,667) -
Investment in other assets - (1,119)
Other (41) 567
-------- --------
Net cash provided by (used in) investing
activities $(13,486) $ 11,151
-------- --------
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THERMOTREX CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
-----------------------
April 4, March 29,
(In thousands) 1998 1997
-----------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company and
subsidiary common stock and sale of
subsidiary put options (Note 4) $ 68,719 $ 5,367
Purchases of Company and subsidiary common
stock (28,810) (2,179)
Net proceeds from issuance of subordinated
convertible debentures (Note 3) 121,814 -
Repayment of note payable to parent company (11,000) -
Payment of withholding taxes related to
stock option exercises (2,234) (1,018)
-------- --------
Net cash provided by financing activities 148,489 2,170
-------- --------
Increase in Cash and Cash Equivalents 125,076 8,985
Cash and Cash Equivalents at Beginning of
Period 135,720 43,940
-------- --------
Cash and Cash Equivalents at End of Period $260,796 $ 52,925
======== ========
Noncash Activities:
Fair value of assets of acquired company $ 7,787 $ -
Cash paid for acquired company (7,176) -
-------- --------
Liabilities assumed of acquired company $ 611 $ -
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOTREX CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoTrex Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at April
4, 1998, the results of operations for the three- and six-month periods
ended April 4, 1998, and March 29, 1997, and the cash flows for the
six-month periods ended April 4, 1998, and March 29, 1997. The Company's
results of operations for the six-month periods ended April 4, 1998, and
March 29, 1997, include 27 weeks and 26 weeks, respectively. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of September 27, 1997,
has been derived from the consolidated financial statements that have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1997, filed
with the Securities and Exchange Commission.
2. Related-party Note Receivable
In October 1997, the Company's ThermoLase Corporation subsidiary
advanced $1.7 million to ThermoLase U.K. Limited pursuant to a note
receivable, due December 31, 2003, and bearing interest at 8.0%, payable
annually. ThermoLase U.K. Limited, a subsidiary of a joint venture that
is 50%-owned by ThermoLase, is marketing ThermoLase's SoftLight(R) system
in England.
3. Subordinated Convertible Debentures
In November 1997, the Company issued and sold at par value $124.5
million principal amount of 3 1/4% subordinated convertible debentures
due 2007, including $10.0 million principal amount of such debentures
sold to Thermo Electron Corporation, for net proceeds of $121.8 million.
The debentures are convertible into shares of the Company's common stock
at a conversion price of $27.00 per share and are guaranteed on a
subordinated basis by Thermo Electron.
4. Issuance of Stock by Subsidiary
In February 1998, the Company's Trex Medical Corporation subsidiary
sold 5,175,000 shares of its common stock at $13.75 per share for net
proceeds of $66.9 million, resulting in a gain of $23.8 million. At April
4, 1998, the Company owned 67% of the outstanding common stock of Trex
Medical.
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THERMOTREX CORPORATION
5. Earnings per Share
During the first quarter of fiscal 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." As a result, all previously reported earnings per share have been
restated; however, basic and diluted earnings per share equals the
Company's previously reported earnings per share for the fiscal 1997
periods presented. Basic earnings per share have been computed by
dividing net income by the weighted average number of shares outstanding
during the period. Diluted earnings per share have been computed assuming
conversion of the Company's subordinated convertible debentures and the
elimination of the related interest expense, and the exercise of stock
options, and their related income tax effect. Basic and diluted earnings
per share were calculated as follows:
Three Months Ended Six Months Ended
-------------------- --------------------
(In thousands except April 4, March 29, April 4, March 29,
per share amounts) 1998 1997 1998 1997
----------------------------------------------------------------------
Basic
Net income $18,859 $ 188 $20,216 $ 2,951
------- ------- ------- -------
Weighted average shares 18,526 19,203 18,772 19,192
------- ------- ------- -------
Basic earnings per share $ 1.02 $ .01 $ 1.08 $ .15
======= ======= ======= =======
Diluted
Net income $18,859 $ 188 $20,216 $ 2,951
Effect of:
Convertible debentures 607 - 1,026 -
Majority-owned
subsidiaries' dilutive
securities (26) (14) (44) (41)
------- ------- ------- -------
Income available to common
shareholders, as adjusted $19,440 $ 174 $21,198 $ 2,910
------- ------- ------- -------
Weighted average shares 18,526 19,203 18,772 19,192
Effect of:
Convertible debentures 4,611 - 3,902 -
Stock options 157 405 215 442
------- ------- ------- -------
Weighted average shares,
as adjusted 23,294 19,608 22,889 19,634
------- ------- ------- -------
Diluted earnings per share $ .83 $ .01 $ .93 $ .15
======= ======= ======= =======
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of April 4, 1998, there were 373,500 of
such options outstanding, with exercise prices ranging from $21.25 to
$43.88 per share.
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THERMOTREX CORPORATION
6. Acquisition
In October 1997, the Company's Trex Medical subsidiary acquired
substantially all of the assets, subject to certain liabilities, of
Digitec Corporation, a North Carolina-based manufacturer of
physiological-monitoring equipment and digital-image archiving and
networking systems used in cardiac catheterization procedures, for
approximately $7.2 million in cash, subject to a post-closing adjustment.
To date, no information has been gathered that would cause the Company to
believe that such post-closing adjustment will be material.
The acquisition has been accounted for using the purchase method of
accounting, and the results of operations have been included in the
accompanying financial statements from the date of acquisition. The cost
of this acquisition exceeded the estimated fair value of the acquired net
assets by $7.1 million, which is being amortized over 15 years.
Allocation of the purchase price was based on an estimate of the fair
value of the net assets acquired and is subject to adjustment upon
finalization of the purchase price allocation. Trex Medical has gathered
no information that indicates the final allocation will differ materially
from the preliminary estimates.
7. Subsequent Event
On April 29, 1998, Trex Medical acquired the outstanding stock of
Trophy Radiologie, a French manufacturer of dental and medical X-ray
systems specializing in dental technology. The purchase price consists of
approximately $25.0 million in cash and the repayment of approximately
$10.0 million of net debt, subject to a post-closing adjustment to be
based on the final determination of Trophy's book value at the date of
acquisition, and additional consideration, which will not exceed
approximately $8.0 million, if Trophy achieves certain future earnings
targets.
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 27, 1997, filed with the Securities and Exchange
Commission.
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THERMOTREX CORPORATION
Overview
The Company operates in three business segments: Medical Products
manufactured by the Company's Trex Medical Corporation subsidiary,
Personal-care Products and Services offered by the Company's ThermoLase
Corporation subsidiary, and Advanced Technology Research, including the
laser communications research performed by the Company's Trex
Communications Corporation subsidiary.
Trex Medical designs, manufactures, and markets mammography equipment
and minimally invasive digital breast-biopsy systems, general-purpose
X-ray equipment, and specialized X-ray equipment, including imaging
systems used during diagnostic and interventional vascular and cardiac
procedures such as balloon angioplasty. 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. Until April 1998, Trex Medical had four operating
units: Lorad, a manufacturer of mammography and digital breast-biopsy
systems; Bennett X-Ray Corporation (Bennett), a manufacturer of
general-purpose 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. In April 1998, Trex Medical acquired the
outstanding stock of Trophy Radiologie, a French manufacturer of dental
and medical X-ray systems specializing in dental technology.
ThermoLase has developed a laser-based system called SoftLight(R) 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 hair-removal services using the SoftLight system.
ThermoLase began earning revenue from the SoftLight system in the first
quarter of fiscal 1996 as a result of opening its first commercial
location (Spa Thira) in November 1995. ThermoLase opened a total of four
spas during fiscal 1996, opened nine additional spas during fiscal 1997,
and opened its fourteenth spa in October 1997. Rather than continuing to
open additional Spa Thira locations, ThermoLase presently intends to
concentrate its resources on attempting both to increase the capacity
utilization of its existing spas and to expand its physicians' licensing
program and international licensing arrangements, discussed below.
In June 1996, ThermoLase commenced a program to license to physicians
and others the right to perform the Company's patented SoftLight
hair-removal procedure. In this program, ThermoLase licenses its
technology and receives a one-time fee and a per-procedure royalty that
varies depending on the anatomical site treated and pricing plan selected
by the client. ThermoLase also provides the licensees with the lasers and
lotion that are necessary to perform the service.
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THERMOTREX CORPORATION
Overview (continued)
ThermoLase experienced a decrease in revenues from its hair-removal
services during the second quarter of fiscal 1998, as discussed in the
results of operations below. In response to this trend, in April 1998
ThermoLase significantly reduced the prices in its Spa Thira locations
for its single- and multiple-treatment plans and similarly changed the
pricing terms of its physicians' licensing program to reduce the
per-procedure royalty paid by the physician-licensees, in an attempt to
establish an optimum price point that will result in increased demand and
higher revenues. In April 1998, as part of its effort to improve
profitability, ThermoLase also initiated an effort to amend the existing
agreements with its physician-licensees to include certain monthly
minimum royalties, and will require such minimums with its new
physician-licensees. Although not all licensees have responded,
approximately 30% of those responding have declined to accept these new
terms, which may result in the termination or restructuring of these
licenses by ThermoLase. There can be no assurance that the strategies
described above will be successful.
ThermoLase is marketing the SoftLight system internationally through
joint ventures and other licensing arrangements. In January 1996,
ThermoLase established a joint venture in Japan. During fiscal 1997,
ThermoLase established joint ventures in France in November 1996 and
England in September 1997, and six additional licensing arrangements: in
Saudi Arabia in November 1996; in Tunisia and Belgium in December 1996;
in the United Arab Emirates and Oman in March 1997; in Switzerland in
April 1997; in Brazil in June 1997; and in the United Kingdom (excluding
England) and the Republic of Ireland in September 1997. In December 1997,
the Company established a joint venture to market the SoftLight system in
Australia, Cyprus, Germany, Greece, New Zealand, South Africa, and Spain.
ThermoLase's international arrangements resulted in the opening of spas
in Paris in May 1997 and in Lugano, Switzerland, in October 1997.
ThermoLase plans to continue research and development as it seeks to
improve the efficacy and duration of its hair-removal treatment, and
believes that such improvements are critical elements in its ability to
improve the profitability of its business.
In March 1997, ThermoLase filed with the FDA a 510(k) application
seeking clearance to market cosmetic skin-resurfacing services utilizing
its SoftLight Rejuvenation(TM) Laser, including wrinkle and skin-texture
treatment. This technology, which uses the same laser as ThermoLase's
hair-removal system, is designed to improve the skin's appearance and
texture. Following discussions with the FDA in December 1997, ThermoLase
submitted additional data in February 1998 and focused on claims related
to skin texture rather than wrinkle treatment, in order to expedite
clearance of the application.
ThermoLase also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. subsidiary, which also
manufactures the lotion used in the SoftLight hair-removal process.
12PAGE
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THERMOTREX CORPORATION
Overview (continued)
The Company's Advanced Technology Research segment performs research
primarily in the fields of communications, avionics, X-ray detection,
signal processing, and lasers. The Company has developed its expertise in
these core technologies in connection with government-sponsored research
and development. The Advanced Technology Research segment includes the
Company's Trex Communications subsidiary, which is developing a laser
communications (lasercom) technology, designed to move very large amounts
of data quickly via lasers without the need for wires or licensing from
the Federal Communications Commission. In addition, Trex Communications'
Computer Communications Specialists, Inc. (CCS) subsidiary designs and
markets interactive information and voice-response systems, as well as
call-automation systems.
The Company conducts all of its manufacturing operations, other than
those of Trex Medical's Trophy subsidiary, in the United States and
distributes its products, services, and technologies worldwide. The
Company anticipates that an increasing portion of its revenues will be
from sales to customers outside the United States. Although the Company
seeks to charge its customers in the same currency as its operating
costs, the Company's financial performance and competitive position can
be affected by currency exchange rate fluctuations affecting the
relationship between the U.S. dollar and foreign currencies. The Company
may use forward contracts to reduce its exposure to currency
fluctuations.
Results of Operations
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
-------------------------------------------------------------------
Total revenues increased 18% to $82.6 million in the second quarter
of fiscal 1998 from $70.1 million in the second quarter of fiscal 1997.
Medical Products segment revenues, excluding intersegment sales,
increased 21% to $66.1 million in fiscal 1998 from $54.7 million in
fiscal 1997, primarily due to increased sales at all of Trex Medical's
existing operations. Revenues increased at XRE primarily due to increased
demand for its cardiac catheterization laboratories, including a $6.7
million sale to a Russian customer. Revenues at Lorad increased as a
result of increased demand for breast-biopsy systems, mammography system
upgrade components, and mobile X-ray systems. To a lesser extent,
revenues increased as a result of increased demand for Continental's
digital radiographic/fluoroscopic systems and Bennett's mammography
systems.
Personal-care Products and Services segment revenues decreased to
$8.1 million in the second quarter of fiscal 1998 from $11.7 million in
the second quarter of fiscal 1997. ThermoLase earned revenues from
hair-removal services and related activities of $2.9 million in fiscal
1998, compared with $5.2 million in fiscal 1997. The decrease in revenues
resulted in part from reduced demand at ThermoLase's Spa Thira locations,
offset in part by an increase in the number of U.S. spas to 14, compared
with 10 spas open during fiscal 1997. Revenues from ThermoLase's
physicians' licensing program decreased slightly in fiscal 1998 compared
13PAGE
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THERMOTREX CORPORATION
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
-------------------------------------------------------------------
(continued)
with fiscal 1997, primarily due to a decrease in one-time fees as a
result of a decrease in new physician-licensees, offset in part by an
increase in the number of physician-licensees producing per-procedure
royalties in fiscal 1998. As discussed in the accompanying overview, in
April 1998 ThermoLase significantly reduced the prices for its single-
and multiple-treatment plans and changed the pricing terms of its
physicians' licensing program. Revenues in fiscal 1998 also decreased as
a result of the inclusion in fiscal 1997 of $1.3 million of minimum
guaranteed payments recorded upon granting technology rights under
ThermoLase's international licensing arrangements. The amount of minimum
guaranteed payments recorded by ThermoLase will vary depending on its
ability to enter into additional international licensing arrangements,
the availability of additional territories, and the terms of any such
arrangements. Revenues at CBI decreased to $5.2 million in fiscal 1998
from $6.5 million in fiscal 1997. A portion of CBI's revenues are derived
from sales to large retailers, which have a relatively long buying cycle
that results in periodic variations in revenues. In addition, CBI's
revenues in fiscal 1998 were negatively impacted as a result of a shift
by certain of its retail customers away from health- and beauty-aid
sales.
Advanced Technology Research segment revenues, excluding intersegment
sales, increased to $8.4 million in the second quarter of fiscal 1998
from $3.7 million in the second quarter of fiscal 1997. Revenues
increased $3.2 million due to the inclusion of product revenues from CCS,
acquired in July 1997.
The gross profit margin was 36% in the second quarter of fiscal 1998,
compared with 33% in the second quarter of fiscal 1997. The Medical
Products segment gross profit margin, excluding intersegment sales,
increased to 42% in fiscal 1998 from 37% in fiscal 1997, primarily due to
increased sales of higher-margin products at all of Trex Medical's
operations. To a lesser extent, the gross profit margin at Trex Medical
increased due to margin improvements resulting from manufacturing
efficiencies, primarily at Continental and Bennett. The Company's total
gross profit margin also increased due to the inclusion of higher-margin
revenues at CCS. The Personal-care Products and Services segment gross
profit margin, excluding intersegment eliminations, was negative 13% in
fiscal 1998, compared with 19% in fiscal 1997. ThermoLase's hair-removal
business reported gross profit of negative $2.7 million in fiscal 1998,
compared with gross profit of $0.1 million in fiscal 1997. Each period
was impacted by the operations of the Spa Thira business, which has been
operating below maximum capacity as ThermoLase seeks to develop its
client base, expand its product lines, and refine its process and
operating procedures, offset in part by the effect of physicians'
licensing fees and, in fiscal 1997, minimum guaranteed payments relating
to international licensing arrangements, which have a relatively high
gross profit margin. In addition, fiscal 1997 was negatively impacted by
pre-opening costs incurred in connection with new spa openings. The gross
profit margin decreased in fiscal 1998 primarily due to the decrease in
revenues from international licensing arrangements and the Spa Thira
14PAGE
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THERMOTREX CORPORATION
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
-------------------------------------------------------------------
(continued)
locations, as well as increased fixed costs associated with operating
more spas and supporting more physician-licensees in fiscal 1998. During
the remainder of fiscal 1998, the effect of operating each spa below
maximum capacity, as ThermoLase seeks to develop its client base and
expand its product lines, will continue to have a negative impact on its
gross profit margin. ThermoLase believes that improvements in the
efficacy and duration of the SoftLight process, as well as increased spa
utilization through broadening the array of spa-related services and
products offered, are critical elements in its ability to improve the
profitability of its spas. The degree to which ThermoLase's recent
pricing structure changes are successful will also affect the Company's
gross profit margin. The gross profit margin at CBI declined to 31% in
fiscal 1998 from 33% in fiscal 1997, as a result of a continued shift to
lower-margin products and a decrease in revenues.
Selling, general, and administrative expenses as a percentage of
revenues was 25% in the second quarter of fiscal 1998, compared with 24%
in the second quarter of fiscal 1997, primarily due to the effect of the
acquisition of CCS, which has higher costs as a percentage of revenues,
as well as an increase in costs as a percentage of revenues in the
Personal-care Products and Services segment, due to a decrease in
revenues. These increases were offset in part by an increase in the
relative size of the Medical Products segment, which has lower expenses
as a percentage of revenues. Research and development expenses increased
to $9.5 million in the second quarter of fiscal 1998 from $7.8 million in
the second quarter of fiscal 1997, primarily due to increased spending at
Trex Medical and the inclusion of $0.6 million of expense at CCS,
acquired in July 1997, offset in part by a decrease in spending at
ThermoLase. Trex Medical's increase in spending, primarily at XRE and
Lorad, reflects its continued efforts to develop and commercialize new
products, including the full-field digital mammography system and
direct-detection X-ray sensor, as well as enhancements of existing
systems. ThermoLase's decrease in spending related primarily to a
reduction in the number of outside testing facilities and consultants
used, as well as a reduction in payroll costs. ThermoLase continues to
seek to improve the efficacy and duration of the SoftLight process as
well as to develop its SoftLight Rejuvenation Laser skin treatment and
investigate other health and beauty applications for its proprietary
laser technology.
Interest income increased to $3.7 million in the second quarter of
fiscal 1998 from $1.2 million in the second quarter of fiscal 1997,
primarily due to interest income earned on the invested proceeds from the
Company's November 1997 issuance of $124.5 million principal amount of
3 1/4% subordinated convertible debentures (Note 3), ThermoLase's August
1997 issuance of $115.0 million principal amount of 4 3/8% subordinated
convertible debentures, and Trex Medical's February 1998 sale of
5,175,000 shares of its common stock for net proceeds of $66.9 million
(Note 4). Interest expense increased to $2.5 million in fiscal 1998 from
$29,000 in fiscal 1997, primarily due to the August and November 1997
issuances of subordinated convertible debentures.
15PAGE
<PAGE>
THERMOTREX CORPORATION
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
-------------------------------------------------------------------
(continued)
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option incentive programs, as well as capital to support the
subsidiaries' growth. As a result of the sale of stock by Trex Medical,
the Company recorded a gain on issuance of stock by subsidiary of $23.8
million in the second quarter of fiscal 1998 (Note 4). The size and
timing of these transactions are dependent on market and other conditions
that are beyond the Company's control. In addition, in October 1995, the
Financial Accounting Standards Board (FASB) issued an exposure draft of a
Proposed Statement of Financial Accounting Standards, "Consolidated
Financial Statements: Policy and Procedures" (the Proposed Statement).
The Proposed Statement would establish new rules for how consolidated
financial statements should be prepared. If the Proposed Statement is
adopted, there would 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 the equity of
the consolidated entity with no gain or loss being recorded. The FASB
continues to deliberate on this issue and the timing and contents of any
final statement are uncertain. Accordingly, there can be no assurance
that the Company will be able to realize gains from such transactions in
the future.
Equity in losses of joint ventures in the accompanying statement of
income represents ThermoLase's proportionate share of losses from its
international joint ventures.
Minority interest expense was $1.3 million in the second quarter of
fiscal 1998, compared with minority interest income of $0.8 million in
the second quarter of fiscal 1997, primarily due to the Company's
inability to record minority interest income in ThermoLase's net loss,
because the Company's minority interest liability related to ThermoLase
has been reduced to zero. In addition, minority interest expense
increased in fiscal 1998 due to an increase in Trex Medical's net income.
The effective tax rate was below the statutory federal income tax
rate in the second quarter of fiscal 1998 primarily due to a nontaxable
gain on the issuance of stock by subsidiary, offset in part by the impact
of state income taxes and certain nondeductible expenses, including
amortization of cost in excess of net assets of acquired companies. In
addition, the effective tax rate in fiscal 1998 reflects the
establishment of a valuation allowance against the tax benefit associated
with losses arising at ThermoLase during the second quarter of fiscal
1998. The Company establishes valuation allowances in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Management believes that sufficient
uncertainty exists regarding the timing of the realizability of the tax
16PAGE
<PAGE>
THERMOTREX CORPORATION
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
-------------------------------------------------------------------
(continued)
benefit for losses arising during the quarter at ThermoLase that a
valuation allowance is required. The effective tax rate exceeded the
statutory federal income tax rate in the second quarter of fiscal 1997
primarily due to the impact of state income taxes and nondeductible
amortization of cost in excess of net assets of acquired companies.
Trex Medical is defending claims in an arbitration proceeding in
which Continuum Electro-Optronics, Inc. is seeking approximately $1.4
million in alleged lost profits under a contract it had with Trex
Medical's Lorad division to sell laser components to Trex Medical.
Although Trex Medical believes it has adequate defenses to such claims
there can be no assurance as to the outcome of the arbitration.
The Company is currently assessing the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products are either year 2000 compliant
or will be so prior to the year 2000 without incurring material costs.
There can be no assurance, however, that the Company will not experience
unexpected costs and delays in achieving year 2000 compliance for its
internal information systems and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
First Six Months Fiscal 1998 Compared With First Six Months Fiscal 1997
-----------------------------------------------------------------------
Total revenues increased 26% to $168.1 million in the first six
months of fiscal 1998 from $132.9 million in the first six months of
fiscal 1997. Medical Products segment revenues, excluding intersegment
sales, increased 23% to $129.8 million in fiscal 1998 from $105.7 million
in fiscal 1997, primarily due to increased sales at all of Trex Medical's
existing operations, due to the reasons described in the results of
operations for the second quarter. In addition, Medical Products segment
revenues increased $1.5 million due to the inclusion of revenues from
Digitec, acquired in October 1997 (Note 6).
Personal-care Products and Services segment revenues increased to
$21.5 million in the first six months of fiscal 1998 from $20.3 million
in the first six months of fiscal 1997. ThermoLase earned revenues from
hair-removal services and related activities of $9.9 million in fiscal
1998, compared with $7.7 million in fiscal 1997. The increase in revenues
17PAGE
<PAGE>
THERMOTREX CORPORATION
First Six Months Fiscal 1998 Compared With First Six Months Fiscal 1977
-----------------------------------------------------------------------
(continued)
resulted in part from an increase in the number of U.S. spas to 14,
compared with 10 spas open during fiscal 1997. Revenues from ThermoLase's
physicians' licensing program also increased in fiscal 1998, primarily
due to an increase in the number of physician-licensees producing
per-procedure royalties in fiscal 1998, offset in part by a decrease in
one-time fees as a result of a decrease in new physician-licensees. In
addition, revenues from hair-removal services and related activities in
fiscal 1998 included $2.8 million of minimum guaranteed payments recorded
upon granting technology rights under ThermoLase's international
licensing arrangements, compared with $1.6 million in fiscal 1997.
Revenues at CBI decreased to $11.6 million in fiscal 1998 from $12.6
million in fiscal 1997, due to the reasons described in the results of
operations for the second quarter.
Advanced Technology Research segment revenues, excluding intersegment
sales, increased to $16.8 million in the first six months of fiscal 1998
from $6.9 million in the first six months of fiscal 1997. Revenues
increased $7.2 million due to the inclusion of product revenues from CCS,
acquired in July 1997.
The gross profit margin was 38% in the first six months of fiscal
1998, compared with 35% in the first six months of fiscal 1997. The
Medical Products segment gross profit margin, excluding intersegment
sales, increased to 42% in fiscal 1998 from 38% in fiscal 1997, primarily
due to the reasons discussed in the results of operations for the second
quarter. The Company's total gross profit margin also increased due to
the inclusion of higher-margin revenues at CCS. The Personal-care
Products and Services segment gross profit margin, excluding intersegment
eliminations, was 12% in fiscal 1998, compared with 20% in fiscal 1997.
ThermoLase's hair-removal business reported gross profit of negative $1.0
million in fiscal 1998, compared with gross profit of negative $0.1
million in fiscal 1997. Each period was impacted by the operations of the
Spa Thira business, which has been operating below maximum capacity as
ThermoLase seeks to develop its client base, expand its product lines,
and refine its process and operating procedures, offset in part by the
effect of physicians' licensing fees and minimum guaranteed payments
relating to international licensing arrangements, which have a relatively
high gross profit margin. In addition, fiscal 1997 was negatively
impacted by pre-opening costs incurred in connection with new spa
openings. The gross profit margin decreased in fiscal 1998 primarily due
to the decrease in revenues from ThermoLase's Spa Thira locations, as
well as increased fixed costs associated with operating more spas in
fiscal 1998, offset in part by the increase in higher-margin revenues
from international licensing arrangements. The gross profit margin at CBI
declined to 31% in fiscal 1998 from 33% in fiscal 1997, due to the
reasons described in the results of operations for the second quarter.
18PAGE
<PAGE>
THERMOTREX CORPORATION
First Six Months Fiscal 1998 Compared With First Six Months Fiscal 1997
-----------------------------------------------------------------------
(continued)
Selling, general, and administrative expenses as a percentage of
revenues was 24% in both periods. An increase due to the effect of the
acquisition of CCS, which has higher costs as a percentage of revenues,
was offset in part by an increase in the relative size of the Medical
Products segment, which has lower expenses as a percentage of revenues.
Research and development expenses increased to $18.9 million in 1998 from
$15.2 million in 1997, primarily due to the reasons described in the
results of operations for the second quarter, including the impact of
$1.2 million of expense due to the acquisition of CCS.
Interest income increased to $6.9 million in the first six months of
1998 from $2.5 million in the first six months of 1997, primarily due to
interest income earned on the invested proceeds from the Company's
November 1997 issuance of $124.5 million principal amount of 3 1/4%
subordinated convertible debentures (Note 3) and ThermoLase's August 1997
issuance of $115.0 million principal amount of 4 3/8% subordinated
convertible debentures. Interest expense increased to $4.8 million in
1998 from $0.1 million in 1997, primarily due to reason described in the
results of operations for the second quarter.
During the first six months of fiscal 1998 and fiscal 1997, the
Company recorded gains of $23.8 million and $2.0 million, respectively,
from the issuance of stock by subsidiaries in connection with sales of
Trex Medical common stock (Note 4).
Equity in losses of joint ventures in the accompanying statement of
income represents ThermoLase's proportionate share of losses from its
international joint ventures.
Minority interest expense was $2.2 million in the first six months of
fiscal 1998, compared with minority interest income of $0.7 million in
the first six months of fiscal 1997, primarily due to the reasons
described in the results of operations for the second quarter.
The effective tax rate differed from the statutory federal income tax
rate in the first six months of fiscal 1998 primarily due to a nontaxable
gain on the issuance of stock by subsidiary, offset in part by the impact
of state income taxes and certain nondeductible expenses, including
amortization of cost in excess of net assets of acquired companies. In
addition, the effective tax rate for the first six months of fiscal 1998
reflects the establishment of a valuation allowance against the tax
benefit associated with losses arising at ThermoLase during the second
quarter of fiscal 1998. Management believes that sufficient uncertainty
exists regarding the timing of the realizability of the tax benefit for
such losses that a valuation allowance is required.
19PAGE
<PAGE>
THERMOTREX CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $343.4 million at April 4, 1998,
compared with $202.3 million at September 27, 1997. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$278.0 million at April 4, 1998, compared with $153.2 million at
September 27, 1997. Of the $278.0 million balance at April 4, 1998,
$179.3 million was held by the Company's majority-owned subsidiaries, and
the remainder was held by the Company and its wholly owned subsidiary.
Net cash used in operating activities during the first six months of
fiscal 1998 was $9.9 million. An increase in accounts receivable,
primarily at Trex Medical, used $11.4 million of cash. The increase in
accounts receivable at Trex Medical was primarily due to increased sales
and, to a lesser extent, a shift from OEM sales to direct and dealer
sales at XRE and slower customer payment patterns as a result of
increased export sales at Bennett. The Company used $3.4 million of cash
during the period to fund an increase in inventories, primarily to
support an increase in sales at Trex Medical.
Excluding available-for-sale investments activity, the Company's
primary investing activities during the first six months of fiscal 1998
included capital expenditures. The Company expended $5.0 million for
property, plant, and equipment.
In connection with certain of ThermoLase's joint venture
arrangements, ThermoLase provided funding of $1.7 million during the
first six months of fiscal 1998 (Note 2). ThermoLase has agreed to
provide additional funding of up to approximately $5.4 million under
these arrangements.
The Company's financing activities provided $148.5 million of cash
during the first six months of fiscal 1998. In November 1997, the Company
sold at par value $124.5 million principal amount of 3 1/4% subordinated
convertible debentures due 2007 for net proceeds of $121.8 million
(Note 4). The Company used a portion of such proceeds to repay in January
1998 an $11.0 million note payable to Thermo Electron. In February 1998,
the Company's Trex Medical subsidiary sold 5,175,000 shares of its common
stock in a public offering at $13.75 per share, for net proceeds of $66.9
million.
In April 1998, Trex Medical acquired Trophy for approximately $25.0
million in cash and the repayment of approximately $10.0 million of net
debt, subject to a post-closing adjustment and additional consideration,
which will not exceed approximately $8.0 million, if Trophy achieves
certain future earnings targets. Trex Medical financed the acquisition
with a portion of the proceeds from its February 1998 sale of common
stock.
20PAGE
<PAGE>
THERMOTREX CORPORATION
Liquidity and Capital Resources (continued)
Trex Communications has signed two non-binding letters of intent to
acquire two companies for aggregate consideration of $9.8 million in cash
and Trex Communications common stock valued at $11.2 million. The
proposed acquisitions are subject to certain conditions, including
completion of due diligence and negotiation of definitive agreements, as
well as approval by the Company's board of directors and the stockholders
of the potential acquirees. The final terms of such acquisitions have not
been determined and there can be no assurance that these acquisitions
will be completed.
In November 1997, the Company's Board of Directors authorized the
repurchase by the Company of up to $20.0 million of its common stock,
through November 1998, in the open market or in negotiated transactions.
During the first six months of fiscal 1998, the Company repurchased
878,652 shares of its common stock for $20.0 million. In March 1998, the
Company's board of directors authorized the repurchase by the Company of
up to 2,000,000 shares of ThermoLase common stock in the open market or
through negotiated transactions. During the first six months of fiscal
1998, the Company purchased 2,000,000 shares of ThermoLase common stock
for $10.0 million, which amount is reflected in payable for repurchase of
subsidiary common stock in the accompanying fiscal 1998 balance sheet,
and was paid during the third quarter of fiscal 1998. During the first
six months of fiscal 1998, ThermoLase repurchased 643,000 shares of its
common stock for $8.8 million.
ThermoLase's capital expenditures during the remainder of fiscal 1998
will primarily be affected by the number of physicians and other domestic
and international licensees engaged in its licensing programs. In
addition to expenditures by ThermoLase, the Company plans to make capital
additions of approximately $3.8 million for its other businesses during
the remainder of fiscal 1998. The Company expects that it will finance
growth at its majority-owned and wholly owned subsidiaries through a
combination of internal funds, additional debt or equity financing,
and/or short-term borrowings from Thermo Electron, although it has no
agreement to ensure that funds will be available from Thermo Electron on
acceptable terms or at all. The Company believes its existing resources
are sufficient to meet the capital requirements of its existing
operations for the foreseeable future.
21PAGE
<PAGE>
THERMOTREX CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
--------------------------
On April 7, 1998, Fischer Imaging Corporation commenced a lawsuit in
the United States District Court, District of Colorado, against Trex
Medical, alleging that its manufacture of breast-imaging equipment and
breast-biopsy systems incorporating a digital imaging system, including
Lorad's prone breast-biopsy system, infringe a Fischer patent entitled
Motorized Mammographic Biopsy Apparatus, which issued April 7, 1998. This
lawsuit is the second patent lawsuit filed by Fischer against the Company
with respect to the breast-biopsy system. The suit requests a permanent
injunction, treble damages, attorneys' fees, and expenses.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
On March 5, 1998, at the Annual Meeting of Shareholders, the
shareholders elected seven incumbent directors to a one-year term
expiring in 1999. The Directors elected at the meeting were: Mr. Morton
Collins, Mr. Peter O. Crisp, Mr. Paul F. Ferrari, Dr. George N.
Hatsopoulos, Mr. Robert C. Howard, Mr. Gary S. Weinstein, and Dr.
Nicholas T. Zervas. Messrs. Crisp, Ferrari, Howard, and Weinstein and Dr.
Zervas each received 15,316,523 shares voted in favor of his election and
58,747 shares voted against. Mr. Collins received 15,316,223 shares voted
in favor of his election and 59,047 shares voted against. Dr. Hatsopoulos
received 15,316,123 shares voted in favor of his election and 59,147
shares voted against. No abstentions or broker nonvotes were recorded on
the election of directors.
Item 6 - Exhibits
-----------------
See Exhibit Index on the page immediately preceding exhibits.
22PAGE
<PAGE>
THERMOTREX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 13th day of May 1998.
THERMOTREX CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
23PAGE
<PAGE>
THERMOTREX CORPORATION
EXHIBIT INDEX
Exhibit
Number Description
------------------------------------------------------------------------
4.3 First Supplemental Indenture dated as of February 6, 1998,
by and among the Company, Thermo Electron Corporation, and
Bankers' Trust Company, as trustee.
27 Financial Data Schedule for the quarter ended April 4,
1998.
27.1 Financial Data Schedule for the quarter ended December
30, 1995 (restated for the adoption of SFAS No. 128).
27.2 Financial Data Schedule for the quarter ended March 30,
1996 (restated for the adoption of SFAS No. 128).
27.3 Financial Data Schedule for the quarter ended June 29,
1996 (restated for the adoption of SFAS No. 128).
27.4 Financial Data Schedule for the year ended September 28,
1996 (restated for the adoption of SFAS No. 128).
27.5 Financial Data Schedule for the quarter ended June 28,
1997 (restated for the adoption of SFAS No. 128).
27.6 Financial Data Schedule for the year ended September 27,
1997 (restated for the adoption of SFAS No. 128).
Exhibit 4.3
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental
Indenture") dated as of February 6, 1998, by and among ThermoTrex
Corporation, a Delaware corporation (the "Issuer"), Thermo
Electron Corporation, a Delaware corporation (the "Guarantor")
and Bankers Trust Company, a New York banking corporation (the
"Trustee").
WHEREAS, the Issuer, the Guarantor and the Trustee have
entered into that certain Indenture dated as of October 28, 1997
(the "Indenture"), with respect to the issuance and sale of the
Issuer's subordinated debt securities (the "Securities"); and
WHEREAS, Article Twelve of the Indenture ("Conversion of
Securities") contains provisions permitting the Issuer, in its
sole discretion, to (i) pay cash in respect of all or a portion
of the shares of the common stock, $.01 par value per share, of
the Issuer (the "Common Stock") otherwise issuable upon the
conversion of the Securities (the "Cash Settlement Option")
and/or (ii) deliver fully paid and non-assessable shares of the
common stock, $1.00 par value per share, of the Guarantor in lieu
of issuing shares of Common Stock upon the conversion of the
Securities (the "Stock Settlement Option"); and
WHEREAS, the Board of Directors of the Issuer has determined
that the Cash Settlement Option and the Stock Settlement Option
do not serve any desired purpose of the Issuer; and
WHEREAS, the Issuer and the Guarantor have the ability,
pursuant to Section 901 of the Indenture, to amend the Indenture
to remove both the Cash Settlement Option and the Stock
Settlement Option, upon the authorization of such amendment by
the Boards of Directors of the Issuer and the Guarantor, which
authorization has been received; and
WHEREAS, as required by Section 903 of the Indenture, the
Issuer and the Guarantor have provided the Trustee with (i) an
Opinion of Counsel of the Issuer and the Guarantor stating that
the execution of this First Supplemental Indenture is authorized
by the Indenture and (ii) Officers' Certificates of the Issuer
and the Guarantor stating that all conditions precedent to the
execution of this First Supplemental Indenture have been
fulfilled;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. The Issuer shall no longer have the ability to exercise
either the Cash Settlement Option or the Stock Settlement Option
with respect to any Securities issued pursuant to the Indenture.
PAGE
<PAGE>
2. This First Supplemental Indenture shall form a part of
the Indenture for all purposes, and every Holder of a Security
authenticated and delivered pursuant to the Indenture (whether
before or after the date hereof) shall be bound hereby.
3. Except as amended by this First Supplemental Indenture,
the Indenture shall continue in full force and effect and the
Indenture is in all respects hereby ratified and confirmed.
4. In case any provision of this First Supplemental
Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
hereof and of the Indenture shall not be in any way affected or
impaired.
5. This First Supplemental Indenture may be executed in
any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
6. All capitalized terms defined in the Indenture and used
herein without definition shall have the same meanings herein as
are ascribed to them in the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed as of the date
first above written.
THERMOTREX CORPORATION
------------------------------
By: Melissa F. Riordan
Its: Treasurer
THERMO ELECTRON CORPORATION
------------------------------
By: John N. Hatsopoulos
Its: President and Chief
Financial Officer
BANKERS TRUST COMPANY
------------------------------
By: Sandra J. Shaffer
Its: Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> APR-04-1998
<CASH> 260,796
<SECURITIES> 17,174
<RECEIVABLES> 72,201
<ALLOWANCES> 2,313
<INVENTORY> 52,396
<CURRENT-ASSETS> 420,442
<PP&E> 70,559
<DEPRECIATION> 17,890
<TOTAL-ASSETS> 602,863
<CURRENT-LIABILITIES> 77,000
<BONDS> 229,500
0
0
<COMMON> 195
<OTHER-SE> 159,671
<TOTAL-LIABILITY-AND-EQUITY> 602,863
<SALES> 168,118
<TOTAL-REVENUES> 168,118
<CGS> 104,772
<TOTAL-COSTS> 104,772
<OTHER-EXPENSES> 18,906
<LOSS-PROVISION> 437
<INTEREST-EXPENSE> 4,755
<INCOME-PRETAX> 28,427
<INCOME-TAX> 6,022
<INCOME-CONTINUING> 20,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,216
<EPS-PRIMARY> 1.08
<EPS-DILUTED> .93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> DEC-30-1995
<CASH> 37,545
<SECURITIES> 67,416
<RECEIVABLES> 29,877
<ALLOWANCES> 1,244
<INVENTORY> 21,962
<CURRENT-ASSETS> 163,767
<PP&E> 19,855
<DEPRECIATION> 6,413
<TOTAL-ASSETS> 253,069
<CURRENT-LIABILITIES> 42,340
<BONDS> 0
0
0
<COMMON> 191
<OTHER-SE> 176,622
<TOTAL-LIABILITY-AND-EQUITY> 253,813
<SALES> 39,560
<TOTAL-REVENUES> 43,095
<CGS> 23,214
<TOTAL-COSTS> 26,332
<OTHER-EXPENSES> 4,799
<LOSS-PROVISION> 104
<INTEREST-EXPENSE> 122
<INCOME-PRETAX> 15,725
<INCOME-TAX> 1,519
<INCOME-CONTINUING> 14,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,172
<EPS-PRIMARY> .74
<EPS-DILUTED> .72
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 48,801
<SECURITIES> 57,224
<RECEIVABLES> 30,072
<ALLOWANCES> 1,156
<INVENTORY> 23,295
<CURRENT-ASSETS> 168,485
<PP&E> 22,105
<DEPRECIATION> 6,971
<TOTAL-ASSETS> 257,043
<CURRENT-LIABILITIES> 44,346
<BONDS> 0
0
0
<COMMON> 191
<OTHER-SE> 177,914
<TOTAL-LIABILITY-AND-EQUITY> 257,043
<SALES> 79,010
<TOTAL-REVENUES> 85,794
<CGS> 45,994
<TOTAL-COSTS> 51,481
<OTHER-EXPENSES> 10,301
<LOSS-PROVISION> 159
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> 19,550
<INCOME-TAX> 3,082
<INCOME-CONTINUING> 16,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,275
<EPS-PRIMARY> .85
<EPS-DILUTED> .83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 20,800
<SECURITIES> 59,503
<RECEIVABLES> 28,957
<ALLOWANCES> 1,356
<INVENTORY> 31,999
<CURRENT-ASSETS> 151,100
<PP&E> 29,302
<DEPRECIATION> 7,673
<TOTAL-ASSETS> 265,904
<CURRENT-LIABILITIES> 54,323
<BONDS> 0
0
0
<COMMON> 191
<OTHER-SE> 177,317
<TOTAL-LIABILITY-AND-EQUITY> 265,904
<SALES> 128,566
<TOTAL-REVENUES> 128,566
<CGS> 77,222
<TOTAL-COSTS> 77,222
<OTHER-EXPENSES> 15,913
<LOSS-PROVISION> 285
<INTEREST-EXPENSE> 351
<INCOME-PRETAX> 22,080
<INCOME-TAX> 4,366
<INCOME-CONTINUING> 17,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,346
<EPS-PRIMARY> .91
<EPS-DILUTED> .88
</TABLE>
<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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 43,940
<SECURITIES> 51,701
<RECEIVABLES> 38,201
<ALLOWANCES> 1,586
<INVENTORY> 37,303
<CURRENT-ASSETS> 184,334
<PP&E> 40,535
<DEPRECIATION> 9,031
<TOTAL-ASSETS> 320,222
<CURRENT-LIABILITIES> 56,471
<BONDS> 0
0
0
<COMMON> 192
<OTHER-SE> 204,887
<TOTAL-LIABILITY-AND-EQUITY> 320,222
<SALES> 169,669
<TOTAL-REVENUES> 182,029
<CGS> 101,967
<TOTAL-COSTS> 112,245
<OTHER-EXPENSES> 24,986
<LOSS-PROVISION> 336
<INTEREST-EXPENSE> 464
<INCOME-PRETAX> 48,292
<INCOME-TAX> 5,341
<INCOME-CONTINUING> 42,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,575
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOTREX
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 38,267
<SECURITIES> 6,986
<RECEIVABLES> 49,828
<ALLOWANCES> 1,767
<INVENTORY> 47,817
<CURRENT-ASSETS> 158,847
<PP&E> 64,386
<DEPRECIATION> 13,619
<TOTAL-ASSETS> 319,535
<CURRENT-LIABILITIES> 61,281
<BONDS> 0
0
0
<COMMON> 192
<OTHER-SE> 177,005
<TOTAL-LIABILITY-AND-EQUITY> 319,535
<SALES> 205,835
<TOTAL-REVENUES> 205,835
<CGS> 133,068
<TOTAL-COSTS> 133,068
<OTHER-EXPENSES> 23,544
<LOSS-PROVISION> 266
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> 3,664
<INCOME-TAX> 1,603
<INCOME-CONTINUING> 3,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,236
<EPS-PRIMARY> .17
<EPS-DILUTED> .16
</TABLE>
<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 27, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 135,720
<SECURITIES> 17,499
<RECEIVABLES> 60,601
<ALLOWANCES> 1,969
<INVENTORY> 48,204
<CURRENT-ASSETS> 280,005
<PP&E> 67,957
<DEPRECIATION> 15,568
<TOTAL-ASSETS> 450,117
<CURRENT-LIABILITIES> 77,729
<BONDS> 115,000
0
0
<COMMON> 193
<OTHER-SE> 175,942
<TOTAL-LIABILITY-AND-EQUITY> 450,117
<SALES> 265,947
<TOTAL-REVENUES> 282,121
<CGS> 168,469
<TOTAL-COSTS> 180,136
<OTHER-EXPENSES> 33,467
<LOSS-PROVISION> 279
<INTEREST-EXPENSE> 835
<INCOME-PRETAX> 10,618
<INCOME-TAX> 3,474
<INCOME-CONTINUING> 8,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,441
<EPS-PRIMARY> .44
<EPS-DILUTED> .43
</TABLE>
