SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 1, 2000
[ ] 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
incorporation or organization) (I.R.S. Employer 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, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at April 28, 2000
Common Stock, $.01 par value 22,990,687
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOTREX CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
April 1, October 2,
<S> <C> <C>
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ---------
Current Assets:
Cash and cash equivalents $ 57,144 $ 11,483
Advance to affiliate 78,225 30,199
Available-for-sale investments, at quoted market value - 64,174
(amortized cost of $64,169)
Accounts receivable, less allowances of $813 and $2,444 7,397 15,181
Unbilled contract costs and fees 7,565 14,606
Inventories:
Raw materials and supplies 4,250 7,727
Work in process 556 3,826
Finished goods 369 810
Deferred tax asset 3,662 4,310
Prepaid expenses and other assets 4,419 6,059
Net assets from discontinued operations (Note 10) 58,106 65,349
-------- --------
221,693 223,724
-------- --------
Property, Plant, and Equipment, at Cost 12,294 22,100
Less: Accumulated depreciation and amortization 5,531 7,341
-------- --------
6,763 14,759
-------- --------
Prepaid Income Taxes and Other Assets 9,704 10,703
-------- --------
Cost in Excess of Net Assets of Acquired Companies 11,149 28,233
-------- --------
Long-term Net Assets from Discontinued Operations (Note 10) 35,250 92,159
-------- --------
$284,559 $369,578
======== ========
2
<PAGE>
THERMOTREX CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 1, October 2,
(In thousands except share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ---------
Current Liabilities:
Current maturities of long-term obligations $ - $ 1,448
Accounts payable 3,530 7,011
Accrued payroll and employee benefits 2,051 4,294
Accrued restructuring costs (Note 6) 16,423 19,013
Payable for acquired company (Note 7) 1,436 5,000
Other accrued expenses (Note 7) 19,574 17,332
Due to parent company and affiliated companies 562 763
-------- --------
43,576 54,861
-------- --------
Deferred Income Taxes 1,818 2,096
-------- --------
Deferred Lease Liability 194 233
-------- --------
Long-term Obligations:
Subordinated convertible debentures (includes $27,590 and 203,948 203,948
$18,225 of related-party debt)
Other - 45
-------- --------
203,948 203,993
-------- --------
Common Stock of Subsidiary Subject to Redemption 40,500 40,500
-------- --------
Minority Interest - 8,337
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares 233 233
authorized; 23,338,377 and 23,302,518 shares issued
Capital in excess of par value 110,557 109,043
Accumulated deficit (95,685) (28,844)
Treasury stock at cost, 920,628 and 933,421 shares (20,582) (20,877)
Accumulated other comprehensive items (Note 2) - 3
-------- --------
(5,477) 59,558
-------- --------
$284,559 $369,578
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMOTREX CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues:
Product revenues $ 8,315 $ 17,215
Contract revenues 6,071 4,649
Service revenues 23 5,368
-------- --------
14,409 27,232
-------- --------
Costs and Operating Expenses:
Cost of product revenues 7,399 11,316
Cost of contract revenues 4,990 3,773
Cost of service revenues 30 8,456
Selling, general, and administrative expenses 4,293 8,329
Research and development expenses 1,609 1,919
Restructuring and unusual costs (income), net (Notes 6 and 8) (3,301) 540
-------- --------
15,020 34,333
-------- --------
Operating Loss (611) (7,101)
Interest Income 1,775 1,159
Interest Expense (includes $272 and $132 to related party) (2,144) (2,113)
Other Income, Net (Note 6) 1,554 -
-------- --------
Income (Loss) from Continuing Operations Before Income Taxes 574 (8,055)
Income Tax (Provision) Benefit 311 (454)
-------- --------
Income (Loss) from Continuing Operations 885 (8,509)
Loss from Discontinued Operations (net of income tax benefit and minority - (2,866)
interest income of $3,597 in 1999; Note 10) -------- --------
Net Income (Loss) $ 885 $(11,375)
======== ========
Basic and Diluted Earnings (Loss) per Share from Continuing Operations (Note 3) $ .04 $ (.46)
======== ========
Basic and Diluted Earnings (Loss) per Share (Note 3) $ .04 $ (.61)
======== ========
Weighted Average Shares (Note 3):
Basic 22,383 18,658
======== ========
Diluted 22,457 18,658
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMOTREX CORPORATION
Consolidated Statement of Operations
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues:
Product revenues $ 23,963 $ 31,068
Contract revenues 10,575 9,424
Service revenues 900 9,588
-------- --------
35,438 50,080
-------- --------
Costs and Operating Expenses:
Cost of product revenues 18,765 20,272
Cost of contract revenues 8,821 7,982
Cost of service revenues 617 15,914
Selling, general, and administrative expenses 9,585 16,949
Research and development expenses 3,221 3,813
Restructuring and unusual costs (income), net (Notes 6 and 8) (3,015) 540
-------- --------
37,994 65,470
-------- --------
Operating Loss (2,556) (15,390)
Interest Income 3,171 2,643
Interest Expense (includes $443 and $262 to related party) (4,258) (4,225)
Equity in Loss of Joint Ventures - (200)
Other Income, Net (Note 6) 1,554 -
-------- --------
Loss from Continuing Operations Before Income Taxes and Minority Interest (2,089) (17,172)
Income Tax (Provision) Benefit 126 (652)
Minority Interest Income - 21
-------- --------
Loss from Continuing Operations (1,963) (17,803)
Loss from Discontinued Operations (net of income tax benefit and minority (4,878) (3,776)
interest income of $5,056 and $5,310; Note 10)
Provision for Loss on Disposal of Discontinued Operations (Note 10) (60,000) -
-------- --------
Net Loss $(66,841) $(21,579)
======== ========
Basic and Diluted Loss per Share from Continuing Operations (Note 3) $ (.09) $ (.95)
======== ========
Basic and Diluted Loss per Share (Note 3) $ (2.99) $ (1.16)
======== ========
Basic and Diluted Weighted Average Shares (Note 3) 22,377 18,660
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMOTREX CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Operating Activities:
Net loss $(66,841) $(21,579)
Adjustments to reconcile net loss to loss from continuing
operations:
Loss from discontinued operations (Note 10) 4,878 3,776
Provision for loss on disposal of discontinued operations (Note 10) 60,000 -
-------- --------
Loss from continuing operations (1,963) (17,803)
Adjustments to reconcile loss from continuing operations to net
cash used in operating activities of continuing operations:
Depreciation and amortization 1,983 4,740
Provision for losses on accounts receivable 150 110
Gain on sale of business (Note 8) (3,400) -
Minority interest income - (21)
Other noncash items (1,838) 419
Changes in current accounts, excluding the effects of acquisitions,
dispositions, and discontinued operations:
Accounts receivable 719 (1,017)
Inventories and unbilled contract costs and fees (3,425) (6,529)
Other current assets 693 (125)
Accounts payable 731 (1,327)
Other current liabilities (9,182) 1,663
-------- --------
Net cash used in continuing operations (15,532) (19,890)
Net cash used in discontinued operations (13,854) (2,135)
-------- --------
Net cash used in operating activities (29,386) (22,025)
-------- --------
Investing Activities:
Advances to affiliate, net (48,026) -
Purchases of available-for-sale investments (30,535) -
Proceeds from maturities of available-for-sale investments 95,535 8,000
Acquisition, net of cash acquired - (20,112)
Refund of acquisition purchase price 970 -
Proceeds from sale of businesses, net of cash divested (Note 8) 54,914 -
Purchase of Trex Communications common stock (Note 7) (9,965) -
Payments for fiscal 1999 acquisition (Note 7) (3,396) -
Collection of notes receivable (Note 6) 2,555 -
Purchases of property, plant, and equipment (1,120) (2,812)
Other (836) 272
-------- --------
Net cash provided by (used in) continuing operations 60,096 (14,652)
Net cash provided by (used in) discontinued operations 10,557 (2,331)
-------- --------
Net cash provided by (used in) investing activities $ 70,653 $(16,983)
-------- --------
6
<PAGE>
THERMOTREX CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Financing Activities:
Net proceeds from issuance of Company and subsidiaries common stock $ 594 $ 123
Payment of withholding taxes related to stock option exercises (104) (25)
Repayment of notes receivable from related party - 1,300
Other 17 -
-------- -------
Net cash provided by continuing operations 507 1,398
Net cash provided by (used in) discontinued operations 330 (23,975)
-------- -------
Net cash provided by (used in) financing activities 837 (22,577)
-------- -------
Exchange Rate Effect on Cash of Discontinued Operations 416 (806)
-------- -------
Increase (Decrease) in Cash and Cash Equivalents 42,520 (62,391)
Cash and Cash Equivalents at Beginning of Period 19,558 157,107
-------- -------
62,078 94,716
Cash and Cash Equivalents of Discontinued Operations at End of Period (4,934) (8,629)
-------- -------
Cash and Cash Equivalents at End of Period $ 57,144 $86,087
======== =======
Noncash Activities:
Fair value of assets of acquired companies $ - $35,491
Cash paid for acquired companies - (22,161)
Amount payable for acquired company - (5,464)
Issuance of subsidiary common stock for acquired company - (5,000)
-------- -------
Liabilities assumed of acquired companies $ - $ 2,866
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
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 1, 2000, the results of
operations for the three- and six-month periods ended April 1, 2000, and April
3, 1999, and the cash flows for the six-month periods ended April 1, 2000, and
April 3, 1999. Interim results are not necessarily indicative of results for a
full year.
Historical financial results have been restated to reflect a decision to
sell the Company's majority-owned Trex Medical Corporation subsidiary, which has
been presented as discontinued operations in the accompanying financial
statements (Note 10). The consolidated financial statements and notes are
presented as permitted by Form 10-Q and do not contain certain information
included in the annual financial statements and notes of the Company. The
consolidated financial statements and notes included herein should be read in
conjunction with the financial statements and notes included in the Company's
Annual Report on Form 10-K, for the fiscal year ended October 2, 1999, as
amended, filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents certain amounts that are reported as components of
shareholders' investment in the accompanying balance sheet, including foreign
currency translation adjustments and unrealized net-of-tax gains and losses on
available-for-sale investments. During the second quarter of fiscal 2000 and
1999, the Company had comprehensive income of $0.9 million and a comprehensive
loss of $11.4 million, respectively. During the first six months of fiscal 2000
and 1999, the Company had comprehensive losses of $66.8 million and $21.6
million, respectively.
</TABLE>
3. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 3, April 1, April 3,
<S> <C> <C> <C> <C>
(In thousands except per share amounts) 2000 1999 2000 1999
- ------------------------------------------------------------- ---------- ---------- ----------- ----------
Basic
Income (Loss) from Continuing Operations $ 885 $ (8,509) $ (1,963) $(17,803)
Loss from Discontinued Operations - (2,866) (4,878) (3,776)
Provision for Loss on Disposal of Discontinued Operations - - (60,000) -
------- -------- -------- --------
Net Income (Loss) $ 885 $(11,375) $(66,841) $(21,579)
------- -------- -------- --------
Weighted Average Shares 22,383 18,658 22,377 18,660
------- -------- -------- --------
Basic Earnings (Loss) per Share:
Continuing operations $ .04 $ (.46) $ (.09) $ (.95)
Discontinued operations - (.15) (2.90) (.20)
------- -------- -------- --------
$ .04 $ (.61) $ (2.99) $ (1.16)
======= ======== ======== ========
8
<PAGE>
3. Earnings (Loss) per Share (continued)
Three Months Ended Six Months Ended
April 1, April 3, April 1, April 3,
(In thousands except per share amounts) 2000 1999 2000 1999
- ------------------------------------------------------------- ---------- ---------- ----------- ----------
Diluted
Income (Loss) from Continuing Operations $ 885 $ (8,509) $ (1,963) $(17,803)
Loss from Discontinued Operations - (2,866) (4,878) (3,776)
Provision for Loss on Disposal of Discontinued Operations - - (60,000) -
------- -------- -------- --------
Net Income (Loss) $ 885 $(11,375) $(66,841) $(21,579)
------- -------- -------- --------
Weighted Average Shares 22,383 18,658 22,377 18,660
Effect of Stock Options 74 - - -
------- -------- -------- --------
Weighted Average Shares, as Adjusted 22,457 18,658 22,377 18,660
------- -------- -------- --------
Diluted Earnings (Loss) per Share:
Continuing operations $ .04 $ (.46) $ (.09) $ (.95)
Discontinued operations - (.15) (2.90) (.20)
------- -------- -------- --------
$ .04 $ (.61) $ (2.99) $ (1.16)
======= ======== ======== ========
Options to purchase 486,000 and 1,172,000 shares of stock for the second
quarter of fiscal 2000 and 1999, respectively, and 1,239,000 and 1,131,000
shares of common stock for the first six months of fiscal 2000 and 1999,
respectively, were not included in the computation of diluted loss per share
because the effect would be antidilutive. The computation of diluted earnings
(loss) per share for all periods excludes the effect of assuming the conversion
of $88.9 million principal amount of 3 1/4% subordinated convertible debentures,
convertible at $27.00 per share, and the elimination of the related interest
expense, because the effects would be antidilutive.
9
<PAGE>
4. Business Segment Information
Three Months Ended Six Months Ended
April 1, April 3, April 1, April 3,
(In thousands) 2000 1999 2000 1999
- ---------------------------------------------------------- ----------- ---------- ------------ -----------
Revenues:
Personal-care Products and Services $ 4,819 $ 9,815 $ 9,745 $ 19,361
Advanced Technology Research 9,590 17,417 25,693 30,719
-------- -------- -------- ---------
$ 14,409 $ 27,232 $ 35,438 $ 50,080
======== ======== ======== =========
Income (Loss) from Continuing Operations Before
Income Taxes and Minority Interest:
Personal-care Products and Services (a) $ (1,734) $ (6,531) $ (3,161) $ (13,404)
Advanced Technology Research (b) 1,584 165 1,559 (131)
Corporate (c) (461) (735) (954) (1,855)
-------- -------- -------- ---------
Total operating loss (611) (7,101) (2,556) (15,390)
Interest and other income (expense), net 1,185 (954) 467 (1,782)
-------- -------- -------- ---------
$ 574 $ (8,055) $ (2,089) $ (17,172)
======== ======== ======== =========
(a) Reflects restructuring and unusual costs of $0.1 million and $0.4 million in
the second quarter and first six months of fiscal 2000, respectively.
(b) Includes gain on sale of business of $3.4 million in the fiscal 2000 periods.
(c) Primarily includes general and administrative expenses.
The results of operations of the Medical Products segment have been
classified as discontinued operations as a result of a plan to sell this
business (Note 10).
5. Accrued Acquisition Expenses
The Company has undertaken restructuring activities at certain acquired
businesses. The Company's restructuring activities, which were accounted for in
accordance with the requirements of Emerging Issues Task Force Pronouncement
(EITF) No. 95-3, primarily have included reductions in staffing levels and the
abandonment of excess facilities. In connection with these restructuring
activities, as part of the cost of the acquisitions, the Company established
reserves, primarily for severance at LNR Communications, Inc. In accordance with
the requirements of EITF 95-3, the Company finalizes its restructuring plans no
later than one year from the date of acquisition.
A summary of the changes in accrued acquisition expenses for severance,
which are included in other accrued expenses in the accompanying 1999 balance
sheet, is as follows:
(In thousands) LNR
- ------------------------------------------------------------------------ ---------- ----------- ----------
Balance at October 2, 1999 $ 179
Usage (54)
Sale of business (125)
------
Balance at April 1, 2000 $ -
======
10
<PAGE>
6. Restructuring and Unusual Costs (Income)
Continuing Operations
ThermoLase
During fiscal 1999 and 1998, ThermoLase Corporation recorded restructuring
and unusual costs, primarily in connection with ThermoLase's decision to exit
the spa business and, to a lesser extent, to terminate certain obligations
related to the hair-removal business. The restructuring and unusual costs at
ThermoLase were primarily for the sale and closure of ThermoLase's spas; the
write-off of leasehold improvements and equipment; costs for ongoing lease
obligations, net of assumed sublease income; and payments to licensees and joint
venture partners to sever relationships and terminate arrangements. The fiscal
1999 restructuring costs included severance for 26 employees across all
functions, 23 of whom were terminated during fiscal 1999. One additional
employee was terminated during the first six months of fiscal 2000.
During the first quarter of fiscal 2000, in connection with ThermoLase's
proposed reorganization (Note 9), ThermoLase incurred and recorded costs of $0.3
million, primarily for investment banking and legal fees. During the second
quarter of fiscal 2000, ThermoLase recorded $0.1 million of these costs.
A summary of activity in ThermoLase's accrued restructuring costs is as
follows:
Abandonment Other
of Excess
(In thousands) Severance Facilities Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Fiscal 1998 Restructuring Plan
Balance at October 2, 1999 $ - $ - $ 50 $ 50
Fiscal 2000 usage - - (50) (50)
------- ------- ------- -------
Balance at April 1, 2000 $ - $ - $ - $ -
======= ======= ======= =======
Fiscal 1999 Restructuring Plan
Balance at October 2, 1999 $ 99 $10,999 $ 7,693 $18,791
Provision charged to expense in fiscal 2000 - - 385 385
Fiscal 2000 usage (74) (174) (2,511) (2,759)
------- ------- ------- -------
Balance at April 1, 2000 $ 25 $10,825 $ 5,567 $16,417
======= ======= ======= =======
Of the total restructuring costs accrued as of April 1, 2000, ThermoLase
expects to pay $7.6 million in calendar 2000 and $8.8 million in calendar 2001
and thereafter through the expiration of various leases in fiscal 2014. The
timing of these cash payments will be affected by the terms of any subleases or
settlement arrangements with landlords.
Trex Communications
In February 2000, the Company sold its Trex Communications Corporation
subsidiary and realized a gain of $3.4 million (Note 8).
11
<PAGE>
6. Restructuring and Unusual Costs (Income) (continued)
Other
During the second quarter of fiscal 2000, the Company collected $2.6
million relating to a note receivable for which a reserve had previously been
established. In addition, the Company established a reserve of $1.0 million for
the impairment of a note receivable reflecting a decline in the value of the
underlying collateral. The collection of the note and the establishment of the
reserve were recorded as other income, net in the accompanying statement of
operations.
Discontinued Operations
Trex Medical
Trex Medical has been treated as a discontinued operation in the
accompanying financial statements (Note 10).
During fiscal 1999 and 2000, Trex Medical recorded restructuring costs,
primarily in connection with the consolidation of Trex Medical's Bennett X-Ray
Corporation and Continental X-Ray Corporation facilities into Trex Medical's
Danbury, Connecticut, and Littleton, Massachusetts, sites and, to a lesser
extent, actions to reduce costs in other operations. Restructuring costs at Trex
Medical included severance for 348 employees across all functions, 169 of whom
were terminated in fiscal 1999, and 179 of whom were terminated in fiscal 2000.
During the first six months of fiscal 2000, Trex Medical recorded
restructuring costs of $2.9 million for costs related to the consolidation and
relocation of facilities and retention bonuses. Costs related to the
consolidation and relocation of facilities are recorded as incurred. Retention
costs are recorded ratably over the period through which employees must work to
qualify for a payment.
In November 1999, Trex Medical sold the operating facility of its
Continental X-Ray subsidiary for $3.1 million in cash, resulting in a gain of
$0.9 million, which is included as a reduction of the loss from discontinued
operations, in the accompanying statement of operations.
A summary of activity in Trex Medical's accrued restructuring costs is as
follows:
Severance Facility- Other (a) Total
(In thousands) closing
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Balance at October 2, 1999 $ 973 $ 2,250 $ 479 $ 3,702
Provision charged to discontinued operations 237 - 2,675 2,912
Usage (765) (212) (2,827) (3,804)
Currency translation (43) - - (43)
------ ------- ------ -------
Balance at April 1, 2000 $ 402 $(2,038) $ 327 $ 2,767
====== ======= ====== =======
(a) Includes provisions in fiscal 2000 of $1.6 million for
facility-consolidation costs incurred during the period and $1.1 million for
retention bonuses.
The aggregate future cash expenditures for restructuring will include
amounts accrued at April 1, 2000, as well as $2.3 million of future costs that
are expected to be incurred over the next twelve months. These amounts total
$5.1 million, of which Trex Medical expects to pay $1.2 million during the
remainder of calendar 2000, $3.2 million during fiscal 2001, and the balance
primarily over the term of facility leases expiring through 2005.
12
<PAGE>
7. Purchase of Minority Interest
In November 1999, the Company agreed to purchase the outstanding shares of
its Trex Communications subsidiary that it did not already own for $4.00 per
share. The Company expects that the total cash outlay for purchasing the
minority interest in Trex Communications, as well as for settling an obligation
to deliver cash or shares of Trex Communications in connection with a fiscal
1999 acquisition, will be approximately $18.0 million. During the first six
months of fiscal 2000, the Company expended $10.0 million of cash for the
purchase of the minority interest of Trex Communications and $3.4 million to
settle the obligation relating to a fiscal 1999 acquisition, described above.
The Company expects the remaining balance of $4.6 million will be paid over the
next fiscal quarter. Of this amount, $1.4 million is included in payable for
acquired company in the accompanying balance sheet and the balance is included
in other accrued expenses in the accompanying balance sheet.
8. Dispositions
In December 1999, the Company sold the Computer Communications
Specialists, Inc. (CCS) subsidiary of Trex Communications for $8.6 million in
cash and a $2.0 million note receivable due in December 2004, with an interest
rate equal to the prime lending rate, payable quarterly. CCS was sold for
approximately book value.
In February 2000, the Company sold all of the stock of Trex Communications
for $46.3 million, net of cash divested and transaction costs, subject to a
post-closing adjustment based upon a determination of the net book value of Trex
Communications at the date of sale. The Company recorded a gain of $3.4 million
in connection with the sale of Trex Communications. Unaudited revenues and
operating income before restructuring costs of Trex Communications were $21.0
million and $0.3 million, respectively, in the first six months of fiscal 2000,
and $49.6 million and $1.6 million, respectively, in fiscal 1999.
9. Proposed Reorganization
Thermo Electron Corporation has announced a proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the Company,
ThermoLase, and Trex Medical. Under this plan, the Company and ThermoLase would
be merged into Thermo Electron, and Trex Medical would be sold. The Company and
ThermoLase would become wholly owned subsidiaries of Thermo Electron. The public
shareholders of the Company and ThermoLase would receive common stock in Thermo
Electron in exchange for their shares. In December 1999, the board of directors
of the Company and Thermo Electron approved a definitive agreement and plan of
merger with Thermo Electron under which Thermo Electron would acquire all of the
outstanding shares of Company common stock held by shareholders other than
Thermo Electron in exchange for Thermo Electron common stock at a ratio of one
share of Company common stock for .5503 shares of Thermo Electron common stock.
In addition, the board of directors of ThermoLase and Thermo Electron approved a
definitive agreement and plan of merger with Thermo Electron under which Thermo
Electron would acquire all of the outstanding shares of ThermoLase held by
shareholders other than the Company and Thermo Electron for not less than .132,
and not more than .198, shares of Thermo Electron common stock. The exchanges of
common stock under both mergers will be taxable transactions to the
shareholders. These proposals are subject to certain conditions, including
filing with and review by the Securities and Exchange Commission of certain
required filings regarding the proposed transactions and listing on the New York
Stock Exchange of the shares of Thermo Electron common stock to be issued in
connection with the mergers.
In October 1999, the American Stock Exchange (the Exchange) notified
ThermoLase that if ThermoLase did not have a definitive agreement to merge with
Thermo Electron by December 15, 1999, the Exchange would request a meeting to
discuss its intent to proceed with delisting ThermoLase's shares from the
Exchange due to a possible failure to meet listing requirements. Holders of
ThermoLase's subordinated convertible debentures would be entitled to have their
debentures redeemed by ThermoLase if ThermoLase's shares are neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States. As a result of the agreement to merge with Thermo Electron, ThermoLase
expects that its shares will continue to be listed through the completion of the
merger transaction. Accordingly, the Company has classified the debentures as
long-term in the accompanying balance sheet.
13
<PAGE>
10. Discontinued Operations
On January 31, 2000, Thermo Electron announced a plan under which the
Company will divest its Trex Medical subsidiary, which represents its Medical
Products segment. In accordance with the provisions of Accounting Principles
Board Opinion No. 30 concerning reporting the effect of disposal of a segment of
a business, the Company classified the results of operations of the Medical
Products segment as discontinued in the accompanying statement of operations. In
addition, the net assets of the Medical Products segment were classified as net
assets of discontinued operations in the accompanying balance sheet, and
primarily consisted of accounts receivable, inventories, deferred tax assets and
refundable income taxes, machinery and equipment, and cost in excess of net
assets of acquired companies, net of certain current liabilities, principally
accounts payable.
</TABLE>
Summary operating results of the Medical Products segment were as follows:
<TABLE>
<CAPTION>
Three
Months Ended Six Months Ended
April 3, April 1, April 3,
<S> <C> <C> <C>
(In thousands except per share amounts) 1999 2000 (a) 1999
- -------------------------------------------------------- ------------ ------------ ----------- -----------
Revenues $ 59,156 $43,860 $123,451
Costs and Expenses 65,619 53,794 132,537
-------- ------- --------
Loss from Discontinued Operations Before Income (6,463) (9,934) (9,086)
Tax Benefit and Minority Interest
Income Tax Benefit 2,241 3,076 3,535
Minority Interest Income 1,356 1,980 1,775
-------- ------- --------
Loss from Discontinued Operations $ (2,866) $(4,878) $ (3,776)
======== ======= ========
(a) Includes results of Trex Medical for its first fiscal quarter, which was the
period prior to the decision to divest this business.
In the first quarter of fiscal 2000, the Company provided $60.0 million
for the estimated loss on disposal of Trex Medical. During the second quarter of
fiscal 2000, Trex Medical had revenues and a net loss of $40.7 million and $4.6
million, respectively. The Company intends to complete the sale of Trex Medical
during calendar 2000.
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 October 2, 1999, as amended, filed with the Securities and
Exchange Commission.
14
<PAGE>
Overview
The Company's continuing operations are divided into two business
segments: Personal-care Products and Services offered by the Company's
ThermoLase Corporation subsidiary and Advanced Technology Research, including
the Company's Trex Communications Corporation subsidiary until its sale in
February 2000.
ThermoLase 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, ThermoLase received clearance from the U.S. Food
and Drug Administration (FDA) to commercially market hair-removal services using
the SoftLight system, and in May 1998, ThermoLase received clearance from the
FDA to market its SoftLight Laser Peel for skin resurfacing. To provide the
laser-based hair-removal and skin-resurfacing services, ThermoLase developed a
network of 14 high-end day spas, originally called Spa Thira.
In June 1996, ThermoLase commenced a program to license to physicians and
others the right to perform ThermoLase's patented SoftLight hair-removal and
skin-resurfacing procedures. Through these arrangements, ThermoLase received a
per-procedure or minimum royalty and/or flat periodic fee. ThermoLase also
entered into joint venture and licensing agreements to bring the technology to
international markets. In fiscal 1999, ThermoLase began offering licensees the
opportunity to purchase or lease SoftLight lasers in lieu of paying ongoing
license fees.
In connection with its June 1998 acquisition of The Greenhouse Spa, Inc.,
a full-service luxury destination spa located in Arlington, Texas, ThermoLase
converted 11 domestic Spa Thiras to Greenhouse day spas. In addition to
hair-removal and skin-resurfacing services, these facilities offered more
traditional day-spa services, such as massages and facials. Following conversion
of the facilities to Greenhouse day spas, significant losses continued and,
during fiscal 1998, ThermoLase initiated certain restructuring actions,
including the announced closure of three of its domestic day spas and the
termination of a joint venture that operated its spa in France. ThermoLase
closed two of the domestic day spas in November 1998 and the third spa, as well
as two additional spas, were closed in the third quarter of fiscal 1999. In May
1999, ThermoLase announced additional plans to undertake a broad-scale
restructuring of its business. As part of the restructuring plan, ThermoLase
decided to exit the spa business and, as a result, sold The Greenhouse Spa,
Inc., and the remaining nine Greenhouse day spas. In addition, ThermoLase has
terminated the physician-licensing program and has terminated or renegotiated
the terms of its international joint ventures and licensing arrangements as well
as discontinued certain branded product lines at ThermoLase's Creative Beauty
Innovations, Inc. (CBI) subsidiary. ThermoLase expects to complete its
restructuring plan by the middle of calendar 2000.
ThermoLase manufactures and markets skin-care, bath, and body products and
markets dietary supplements through CBI. This business represents ThermoLase's
principal operations following the sale of the spas and the termination of
various licensing agreements.
The Company's Advanced Technology Research segment performs research
primarily in the fields of 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 included the Company's Trex Communications
subsidiary. As part of the restructuring plans announced in May 1999, the
Company decided to hold its Trex Communications subsidiary for sale. In November
1999, the Company agreed to purchase the outstanding shares of Trex
Communications' minority shareholders (Note 7). In December 1999, the Company
sold the CCS subsidiary of Trex Communications and, in February 2000, sold the
stock of Trex Communications (Note 8).
Thermo Electron Corporation has announced a proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the Company and
ThermoLase. Under this plan, the Company and ThermoLase would be merged into and
become wholly owned subsidiaries of Thermo Electron (Note 9). In addition,
Thermo Electron has announced that the Company will sell its Trex Medical
Corporation subsidiary, which represents the Medical Products segment (Note 10).
15
<PAGE>
Results of Operations
Second Quarter Fiscal 2000 Compared With Second Quarter Fiscal 1999
Total revenues decreased to $14.4 million in the second quarter of fiscal
2000 from $27.2 million in the second quarter of fiscal 1999. Personal-care
Products and Services segment revenues were $4.8 million and $9.8 million in the
second quarter of fiscal 2000 and 1999, respectively. ThermoLase earned product
revenues of $4.8 million in fiscal 2000, compared with $5.8 million in fiscal
1999. Product revenues include beauty product sales, and in the fiscal 1999
period, lasers sold in international and domestic markets and beauty product
sales at ThermoLase's spas. Product revenues decreased due to the decision to
exit the hair-removal business and due to the discontinuation of certain branded
product lines. ThermoLase had no service revenues in the second quarter of
fiscal 2000, compared with $4.0 million in the second quarter of fiscal 1999.
This decrease is due to the sale and closure of ThermoLase's Greenhouse day spas
and the termination of its physician-licensing program and certain international
licensing arrangements (Note 6).
Advanced Technology Research segment revenues, excluding intersegment
sales, decreased to $9.6 million in the second quarter of fiscal 2000 from $17.4
million in the second quarter of fiscal 1999. Revenues decreased $9.0 million as
a result of the sale of the Company's Trex Communications subsidiary (Note 8).
This decrease was offset in part by higher contract research revenues.
The gross profit margin was 14% in the second quarter of fiscal 2000 and
1999. The Personal-care Products and Services segment gross profit margin,
excluding intersegment sales, was 9% in fiscal 2000, compared with negative 17%
in fiscal 1999. ThermoLase's gross profit margin was $0.4 million in fiscal
2000, compared with a negative gross profit margin of $1.7 million in fiscal
1999. This increase in gross profit margin was primarily due to the sale of the
spa business, offset in part by a decrease in gross profit margin for beauty
product sales due to changes in product mix and, to a lesser extent, $0.7
million of higher provisions for excess and obsolete inventories in the fiscal
2000 period. The gross profit margin from sales of beauty products was 9% in
fiscal 2000, compared with 32% in fiscal 1999. The gross profit margin from the
Advanced Technology Research segment, excluding intersegment sales, decreased to
16% in fiscal 2000 from 31% in 1999, primarily due to the sale of Trex
Communications, which had higher gross profit margins than the Company's
remaining contract research business.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 30% in the second quarter of fiscal 2000 from 31% in the second
quarter of fiscal 1999, primarily due to lower expenses in the Personal-care
Products and Services segment. In the Personal-care Products and Services
segment, selling, general, and administrative expenses decreased to $2.0 million
in fiscal 2000 from $3.7 million in fiscal 1999, primarily due to $1.1 million
of lower costs following the sale of the spa business and the termination of
various licensing agreements and, to a lesser extent, reductions in personnel as
a result of cost reduction measures.
Research and development expenses decreased to $1.6 million in the second
quarter of fiscal 2000 from $1.9 million in the second quarter of fiscal 1999.
Research and development expenses decreased due to ThermoLase's decision to
substantially exit the SoftLight business and the sale of Trex Communications.
During the second quarter of fiscal 2000, the Company recorded costs of
$0.1 million related to Thermo Electron's proposed reorganization (Note 6) and a
gain of $3.4 million on the sale of Trex Communications (Note 8).
Interest income increased to $1.8 million in the second quarter of fiscal
2000 from $1.2 million in the second quarter of fiscal 1999, primarily as a
result of higher average invested balances due to the sale of Trex
Communications, offset in part by the effect of funding losses in the
Personal-care Products and Services segment. Interest expense remained unchanged
at $2.1 million in fiscal 2000 and 1999.
16
<PAGE>
Other income, net, represents the collection of a note receivable for
which a reserve was previously established, and a reserve established for the
impairment of another note receivable (Note 6).
The effective tax rates reflect the effect of nondeductible amortization
of cost in excess of net assets of acquired companies and the establishment of a
valuation allowance for the tax benefit associated with losses arising primarily
in the Personal-care Products and Services segment during fiscal 2000, as
ThermoLase has been unable to realize a tax benefit from such losses on a
stand-alone basis. The Company establishes valuation allowances in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The tax benefit recorded in the second quarter of
fiscal 2000 was related to losses at Trex Communications prior to its sale.
Trex Medical is a defendant in two patent infringement lawsuits and a
lawsuit alleging the Company misappropriated certain other technology owned by a
third party. An unsuccessful resolution of one or more of these matters could
have a material adverse effect on the Company's future results of operations and
financial position.
In accordance with the provisions of Accounting Principles Board Opinion
No. 30 concerning reporting the effect of disposal of a segment of a business,
the results of the Company's Medical Products segment have been classified as
discontinued in the accompanying statement of operations (Note 10). The loss
from discontinued operations was $2.9 million in the second quarter of fiscal
1999. It is reasonably possible that the actual proceeds from the sale of Trex
Medical could vary materially from the Company's estimate. Any difference would
result in an adjustment to provision for loss on disposal of discontinued
operations. The Company expects to complete the sale of Trex Medical during
calendar 2000.
First Six Months 2000 Compared With First Six Months 1999
Total revenues decreased to $35.4 million in the first six months of
fiscal 2000 from $50.1 million in the first six months of fiscal 1999.
Personal-care Products and Services segment revenues were $9.7 million and $19.4
million in fiscal 2000 and 1999, respectively. ThermoLase earned product
revenues of $9.7 million in fiscal 2000, compared with $12.6 million in fiscal
1999. Product revenues include beauty product sales and, in the fiscal 1999
period, lasers sold in international and domestic markets and beauty product
sales at ThermoLase's spas. Product revenues decreased due to the
discontinuation of certain branded product lines. ThermoLase's service revenues
decreased to $19,000 in fiscal 2000 from $6.8 million in fiscal 1999. This
decrease is due to the sale and closure of ThermoLase's Greenhouse day spas and
the termination of its physician-licensing program and certain international
licensing arrangements (Note 6). ThermoLase's service revenues for the fiscal
2000 period represent licensing fees from the remaining physician-licensing
agreements, which have been terminated as of April 1, 2000.
Advanced Technology Research segment revenues, excluding intersegment
sales, decreased to $25.7 million in the first six months of fiscal 2000 from
$30.7 million in the first six months of fiscal 1999. Revenues decreased $9.0
million as a result of the sale of Trex Communications (Note 8). This decrease
was offset in part by $3.1 million due to the inclusion for the full period of
revenues from Trex Communications' LNR Communications, Inc. subsidiary, which
was acquired in November 1998.
The gross profit margin increased to 20% in the first six months of fiscal
2000 from 12% in the first six months of fiscal 1999. The Personal-care Products
and Services segment gross profit margin, excluding intersegment sales, was 12%
in fiscal 2000, compared with negative 16% in fiscal 1999. ThermoLase's gross
profit margin was $1.1 million in fiscal 2000, compared with a negative gross
profit margin of $3.2 million in fiscal 1999. This increase in gross profit
margin was primarily due to the sale of the spa business, offset in part by a
decrease in gross profit margin for beauty product sales due to changes in
product mix, higher inventory provisions of $0.5 million in fiscal 2000, as well
as the discontinuation of certain branded product lines, which had higher gross
profit margins. The gross profit
17
<PAGE>
margin from sales of beauty products was 3% in fiscal 2000, compared with 29% in
fiscal 1999. The gross profit margin from the Advanced Technology Research
segment, excluding intersegment sales, decreased to 24% in fiscal 2000 from 30%
in fiscal 1999, primarily due to the sale of Trex Communications, which had
higher gross profit margins than the Company's remaining contract research
business.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 27% in the first six months of fiscal 2000 from 34% in the first
six months of fiscal 1999, primarily due to lower expenses in the Personal-care
Products and Services segment. In the Personal-care Products and Services
segment, selling, general, and administrative expenses decreased to $3.7 million
in fiscal 2000 from $8.5 million in fiscal 1999, primarily due to $3.1 million
of lower costs following the sale of the spa business and the termination of
various licensing agreements. In addition, ThermoLase sales and marketing costs
decreased $0.8 million as a result of the discontinuation of certain branded
product lines, management efforts to reduce overall marketing costs, and
reductions in personnel.
Research and development expenses decreased to $3.2 million in the first
six months of fiscal 2000 from $3.8 million in the first six months of fiscal
1999. Research and development expenses decreased primarily due to ThermoLase's
decision to substantially exit the SoftLight business and the sale of Trex
Communications.
During the first six months of fiscal 2000, the Company recorded costs of
$0.4 million associated with Thermo Electron's proposed reorganization (Note 6)
and a gain of $3.4 million on the sale of Trex Communications (Note 8).
Interest income increased to $3.2 million in the first six months of
fiscal 2000 from $2.6 million in fiscal 1999, primarily due to the reasons
discussed in the results of operations for the second quarter. Interest expense
was relatively unchanged at $4.3 million in fiscal 2000 and $4.2 million in
fiscal 1999.
Equity in loss of joint ventures in the fiscal 1999 period represents
ThermoLase's proportionate share of losses from its international joint
ventures, which have been substantially terminated with the exception of
ThermoLase's continued ownership of a 46% equity interest in ThermoLase England
LLC, which continues to pursue the SoftLight business in the United Kingdom,
Ireland, Spain, and South Africa.
Other income, net represents the collection of a note receivable for which
a reserve was previously established, and a reserve established for the
impairment of another note receivable (Note 6).
The effective tax rates reflect the effect of nondeductible amortization
of cost in excess of net assets of acquired companies and the establishment of a
valuation allowance for the tax benefit associated with losses arising primarily
in the Personal-care Products and Services segment during fiscal 2000 as
ThermoLase has been unable to realize a tax benefit from such losses on a
stand-alone basis. The Company establishes valuation allowances in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
The Company does not record minority interest income in the Personal-care
Products and Services segment's net loss because the Company's minority interest
related to ThermoLase has been reduced to zero.
The loss from discontinued operations was $4.9 million and $3.8 million in
the first six months of fiscal 2000 and 1999, respectively. In fiscal 2000, the
Company provided $60.0 million for the estimated loss on disposal of Trex
Medical.
18
<PAGE>
Liquidity and Capital Resources
Consolidated working capital was $178.1 million at April 1, 2000, compared
with $168.9 million at October 2, 1999. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $57.1 million at April
1, 2000, compared with $75.7 million at October 2, 1999. Of the $57.1 million
balance at April 1, 2000, $1.2 million was held by ThermoLase and the remainder
was held by the Company and its wholly owned subsidiaries. In addition, as of
April 1, 2000, the Company had $78.2 million invested in an advance to Thermo
Electron. Of the $78.2 million balance, $7.7 million was advanced by ThermoLase
and the remainder by the Company and its wholly owned subsidiaries.
Net cash used in operating activities during the first six months of
fiscal 2000 was $29.4 million, which consisted of $15.5 million used by
continuing operations and $13.9 million used by discontinued operations. The
Company used $9.2 million to reduce other current liabilities, including
restructuring reserves, accrued payroll and employee benefits, and due to parent
and affiliated companies. The Company used $3.4 million to fund an increase in
inventory and unbilled contract costs and fees due to timing of billings for
certain research contracts. Of the total restructuring costs accrued as of April
1, 2000, as well as future costs that will be incurred in fiscal 2000, the
Company expects to pay $7.6 million in calendar 2000 and $8.8 million in
calendar 2001 and thereafter through the expiration of various leases in fiscal
2014. The timing of these cash payments will be affected by the terms of any
subleases or settlement arrangements with landlords.
Excluding available-for-sale investments and advance to affiliate
activity, the Company's primary investing activities consisted of the purchase
of Trex Communications stock, the sale of Trex Communications, and capital
expenditures. The Company expended $10.0 million of cash for the purchase of
minority shares of Trex Communications and $3.4 million to settle an obligation
relating to a Trex Communications fiscal 1999 acquisition. During the next
fiscal quarter, the Company expects to expend an additional $4.6 million
relating to the Trex Communications obligations (Note 7). The Company received
net proceeds of $54.9 million from the sale of businesses (Note 8). Trex
Communications received a refund of $1.0 million of the acquisition cost of a
fiscal 1999 acquisition. The Company expended $1.1 million for property, plant,
and equipment during the first six months of fiscal 2000. The Company expects to
make capital expenditures of approximately $0.5 million during the remainder of
fiscal 2000.
In October 1999, the American Stock Exchange (the Exchange) notified
ThermoLase that if ThermoLase did not have a definitive agreement to merge with
Thermo Electron by December 15, 1999, the Exchange would request a meeting to
discuss its intent to proceed with delisting ThermoLase's shares from the
Exchange due to a possible failure to meet listing requirements. Holders of
ThermoLase's subordinated convertible debentures would be entitled to have their
debentures redeemed by ThermoLase if ThermoLase's shares are neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States. As a result of the agreement to merge with Thermo Electron, the Company
expects that its shares will continue to be listed through the completion of the
merger transaction. Accordingly, ThermoLase has classified the debentures as
long-term in the accompanying balance sheet.
The Company believes its existing resources are sufficient to meet the
capital requirements of its existing operations for the foreseeable future.
Thermo Electron has expressed its willingness to lend Trex Medical up to $10
million for short-term liquidity should the need arise. ThermoLase has an
obligation to pay $40.5 million, in the aggregate, to the holders of redemption
rights if all of the holders thereof exercise their redemption rights in April
2001 when such rights become exercisable. ThermoLase does not have sufficient
funds to satisfy these obligations. The Company has agreed to reimburse Thermo
Electron, the guarantor of this obligation, in the event that Thermo Electron
needs to make a payment on such guaranty. The exercise of the redemption rights
would adversely affect the Company's liquidity in fiscal 2001.
19
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in foreign currency
exchange rates, interest rates, and equity prices has not changed materially
from its exposure at fiscal year-end 1999.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On February 25, 2000, the Company filed a Current Report on Form 8-K dated
February 25, 2000, with respect to the sale by the Company of all of the
stock of Trex Communications Corporation.
20
<PAGE>
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 15th day of May 2000.
THERMOTREX CORPORATION
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
21
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
10.1 Letter agreement between Barry Lyons and Thermo Electron dated April 12, 2000, relating
to retention bonus.
10.2 Letter agreement between Kenneth Y. Tang and Thermo Electron dated March 13, 2000,
relating to retention bonus.
27.1 Financial Data Schedule for the period ended April 1, 2000.
27.2 Restated Financial Data Schedule for the period ended April 3, 1999.
</TABLE>
To: Barry Lyons
From: Jack Keiser
Date: April 12, 2000
Re: Transition Bonus
As you know, Thermo Electron has undertaken an aggressive reorganization plan.
This restructuring is critical for the long term health and success of Thermo
Electron.
This transition will take up to two years to complete. To make the transition
successfully, it is important that we retain your services during this period.
To provide you with an incentive to support the company through this transition,
Thermo Electron is offering you a transition bonus equal to 100% of your annual
base salary. This bonus will be paid to you on July 1, 2001.
Since this bonus will be considered income it will be subject to appropriate
federal, state, city and other tax withholding requirements.
As always, your employment during this period will continue to be as an
employee-at-will. If you elect to leave the company voluntarily Prior to July 1,
2001 you will forfeit this bonus.
If your employment is terminated during this transition period without cause,
your transition bonus will be paid to you at that time.
Termination of your employment for cause during this period (e.g. for gross
personal misconduct, insubordination, misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you, or any conduct which is in willful violation of any applicable
law or regulation pertaining to Thermo Electron) will also result in the
forfeiture of this bonus.
You will also be paid a prorated portion of your annual reference bonus for the
time you have worked in 2001 at the time your employment is severed.
<PAGE>
This agreement supercedes the bonus offer made to you on January 18,2000 and
constitutes the entire agreement between us. That original bonus commitment is
now null and void.
I appreciate your past contributions to our company and look forward to working
with you as we reorganize our business to assure our future success. If you have
any questions regarding any of the terms of this agreement, please do not
hesitate to contact me.
Once you have read and understood the terms of this offer, please indicate your
agreement by signing below on the line above your typewritten name, make a copy
for your records and return the original document to Joe Momyer.
- ------------------------------- -----------------------
Barry Lyons Date
March 13, 2000
Ken Tang, Ph.D.
10455 Pacific Center Court
San Diego, CA 92121
Dear Ken:
As we have discussed, Thermo Electron Corporation has announced a reorganization
of the company in which certain of the company's assets, including those of
ThermoTrex Corp., will be sold. We recognize that your past contributions have
been integral to the success of the company and that your continued involvement
will be necessary in order to facilitate the sale of ThermoTrex Corp. and to
assure a smooth transition for a potential buyer.
In order to provide an incentive for you to remain with the company through the
completion of the sale, we will pay you a retention bonus.
RETENTION BONUS
The retention bonus payable to you shall be equal to 100% of your annual base
salary.
This retention bonus will be paid to you in one lump sum on or before ninety
(90) days following the closing date, or January 1, 2001 whichever occurs first.
TERMS OF AGREEMENT
1. ThermoTrex Corp. agrees to continue to employ you on the same terms and
with the same benefits you currently enjoy as an employee-at-will. In
return, you agree to remain in such employ and to continue to devote
your full time and best efforts to ThermoTrex Corp., as an
employee-at-will, until the closing date of the sale of ThermoTrex
Corp.
2. You understand that ThermoTrex Corp. retains the right to terminate
your services without cause (as defined below) and you retain the right
to terminate your services for ThermoTrex Corp. at any time. If you
terminate your employment prior to the closing date, or ThermoTrex
Corp. terminates your employment for "cause" (as defined below), you
will forfeit any and all payments that you would be entitled to under
this agreement.
3. For the purposes of this agreement, "cause" shall be determined by the
company in the exercise of good faith and reasonable judgment and will
include any breach of this agreement by you or any act by you of gross
personal misconduct, insubordination, misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties
reasonably required of you pursuant to this agreement or any conduct
which is in willful violation of any applicable law or regulation
pertaining to the business.
4. For purposes of this agreement, we agree that ThermoTrex Corp. will be
considered to be sold when any person or entity, other than a person or
entity affiliated with Thermo Electron, purchases at least fifty
percent (50%) of the assets of the business, whether through a purchase
of the business or a purchase of the company of which the business is a
part. In the event that ThermoTrex Corp. is purchased by ThermoTrex or
Thermo Electron employees, this retention bonus offer is void.
<PAGE>
5. You understand that all payments made under this agreement are subject
to appropriate federal, state, city or other tax withholding
requirements.
6. You acknowledge that this agreement supersedes any prior agreements or
understandings oral or written between you and ThermoTrex Corp.
pertaining to any incentive payments being offered to employees of
businesses being sold in connection with the reorganization and that
this agreement constitutes the entire agreement between us.
On behalf of Thermo Electron and ThermoTrex Corp., I thank you for your
continued assistance and support. If you have any questions regarding any of the
terms of this agreement, please do not hesitate to contact me.
Once you have read and understood the terms of this agreement, please indicate
your agreement by signing below on the line above your typewritten name, make a
copy for your records and return the original document to me.
Very truly yours,
John T. Keiser
COO, Thermo Electron
Accepted and agreed:
- ------------------------- --------------------
Ken Tang Date
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<PP&E> 58,590
<DEPRECIATION> 14,938
<TOTAL-ASSETS> 419,909
<CURRENT-LIABILITIES> 40,370
<BONDS> 185,777
0
0
<COMMON> 196
<OTHER-SE> 119,119
<TOTAL-LIABILITY-AND-EQUITY> 419,909
<SALES> 31,068
<TOTAL-REVENUES> 50,080
<CGS> 20,272
<TOTAL-COSTS> 44,168
<OTHER-EXPENSES> 4,353
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 4,225
<INCOME-PRETAX> (17,172)
<INCOME-TAX> 652
<INCOME-CONTINUING> (17,803)
<DISCONTINUED> (3,776)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,579)
<EPS-BASIC> (1.16)
<EPS-DILUTED> (1.16)
</TABLE>
