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 March 29, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-13104
THERMOLASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1360302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10455 Pacific Center Court
San Diego, California 92121-4339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at April 25, 1997
---------------------------- -----------------------------
Common Stock, $.01 par value 40,075,837
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOLASE CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
March 29, September 28,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $11,715 $ 7,923
Available-for-sale investments, at quoted
market value (amortized cost of $14,270
and $44,205) 14,250 44,132
Accounts receivable, less allowances of
$393 and $319 4,475 4,572
Inventories:
Raw materials and supplies 1,872 1,521
Work in process and finished goods 2,247 2,748
Prepaid expenses 666 408
Prepaid income taxes 4,703 1,882
------- -------
39,928 63,186
------- -------
Property and Equipment, at Cost (Note 2) 38,363 21,343
Less: Accumulated depreciation and amortization 3,509 2,020
------- -------
34,854 19,323
------- -------
Other Assets 5,679 4,679
------- -------
Cost in Excess of Net Assets of Acquired Company 8,214 8,332
------- -------
$88,675 $95,520
======= =======
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THERMOLASE CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 29, September 28,
(In thousands except share amounts) 1997 1996
-----------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 2,925 $ 5,179
Accrued payroll and employee benefits 1,762 1,008
Deferred revenue 2,673 913
Other accrued expenses 3,675 1,791
Due to parent company and affiliated
companies 5,127 7,098
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16,162 15,989
------- -------
Deferred Lease Liability 993 494
------- -------
Common Stock Subject to Redemption (Note 3) 2,613 -
------- -------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 100,000,000
shares authorized; 40,807,932 and
40,803,932 shares issued 408 408
Capital in excess of par value 81,621 85,813
Accumulated deficit (8,604) (3,516)
Treasury stock at cost, 218,089
and 116,570 shares (4,505) (3,621)
Net unrealized loss on
available-for-sale investments (13) (47)
------- -------
68,907 79,037
------- -------
$88,675 $95,520
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
--------------------
March 29, March 30,
(In thousands except per share amounts) 1997 1996
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Revenues:
Product revenues $ 6,511 $ 5,940
Service revenues 5,155 1,080
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11,666 7,020
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Costs and Operating Expenses:
Cost of product revenues 4,392 3,672
Cost of service revenues 5,252 731
Selling, general, and administrative expenses 6,052 2,499
Research and development expenses 1,393 1,061
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17,089 7,963
------- -------
Operating Loss (5,423) (943)
Interest Income 438 907
------- -------
Loss Before Income Taxes (4,985) (36)
Income Tax (Provision) Benefit 1,286 (41)
------- -------
Net Loss $(3,699) $ (77)
======= =======
Loss per Share $ (.09) $ -
======= =======
Weighted Average Shares 40,578 40,174
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Consolidated Statement of Operations
(Unaudited)
Six Months Ended
----------------------
March 29, March 30,
(In thousands except per share amounts) 1997 1996
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Revenues:
Product revenues $12,557 $13,282
Service revenues 7,719 1,138
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20,276 14,420
------- -------
Costs and Operating Expenses:
Cost of product revenues 8,407 8,393
Cost of service revenues 8,064 1,170
Selling, general, and administrative expenses 10,266 5,098
Research and development expenses 2,302 1,586
------- -------
29,039 16,247
------- -------
Operating Loss (8,763) (1,827)
Interest Income 1,054 1,845
------- -------
Income (Loss) Before Income Taxes (7,709) 18
Income Tax (Provision) Benefit 2,621 (177)
------- -------
Net Loss $(5,088) $ (159)
======= =======
Loss per Share $ (.13) $ -
======= =======
Weighted Average Shares 40,632 40,132
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
March 29, March 30,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Operating Activities:
Net loss $ (5,088) $ (159)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,649 552
Provision for losses on accounts receivable 74 -
Increase in deferred lease liability 499 -
Changes in current accounts:
Accounts receivable 22 (575)
Inventories 150 569
Other current assets (3,098) 46
Accounts payable (2,255) (1,038)
Other current liabilities 3,881 3,021
-------- --------
Net cash provided by (used in) operating
activities (4,166) 2,416
-------- --------
Investing Activities:
Purchases of available-for-sale investments - (29,500)
Proceeds from maturities of available-
for-sale investments 29,500 34,525
Purchases of property and equipment (18,495) (2,949)
Investment in other assets (1,119) -
Other 535 363
-------- --------
Net cash provided by investing activities 10,421 2,439
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock and sale of put options (Note 3) 444 249
Payment of withholding taxes related to stock
option exercises (728) (351)
Purchases of Company common stock (2,179) -
-------- --------
Net cash used in financing activities (2,463) (102)
-------- --------
Increase in Cash and Cash Equivalents 3,792 4,753
Cash and Cash Equivalents at Beginning of Period 7,923 13,146
-------- --------
Cash and Cash Equivalents at End of Period $ 11,715 $ 17,899
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoLase 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 March
29, 1997, the results of operations for the three- and six-month periods
ended March 29, 1997, and March 30, 1996, and the cash flows for the
six-month periods ended March 29, 1997, and March 30, 1996. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of September 28, 1996,
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, as amended, for the fiscal year ended September 28,
1996, filed with the Securities and Exchange Commission.
2. Related-party Transaction
During the six months ended March 29, 1997, the Company purchased
laser systems from Trex Medical Corporation, a majority-owned subsidiary
of ThermoTrex Corporation, the Company's parent, at an aggregate cost of
$7,830,000.
3. Common Stock Subject to Redemption
In September 1996, the Company's Board of Directors authorized the
repurchase by the Company of up to $10,000,000 of Company common stock
through August 28, 1997, in market transactions or pursuant to the
exercise by investors of standardized put options written on the
Company's common stock. During the first six months of fiscal 1997, the
Company repurchased 137,500 shares of its common stock in market
transactions for $2,179,000 and wrote put options obligating the Company,
at the election of the option-holders, to repurchase up to 145,800 shares
of its common stock at various prices for an aggregate price of
$2,613,000. The Company recorded the net proceeds from put options sold,
$294,000, as an increase to shareholders' investment in the accompanying
balance sheet.
The $2,613,000 obligation classified as "Common stock subject to
redemption" in the accompanying balance sheet as of March 29, 1997,
relates to the put options, all of which were exercised on April 18,
1997. The Company repurchased the 145,800 shares of its common stock
tendered pursuant to the exercise of the put options for an aggregate
price of $2,613,000 and recorded that amount as "Treasury stock."
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THERMOLASE CORPORATION
3. Common Stock Subject to Redemption (continued)
On March 6, 1997, the Company commenced an exchange offer whereby its
shareholders had the opportunity to exchange one share of existing
Company common stock and $3.00 for a new unit consisting of one share of
Company common stock and one redemption right. The redemption right
entitles the holder to sell the related share of common stock to the
Company for $20.25 during the period from April 3, 2001, through April
30, 2001. The redemption right will expire and become worthless if the
closing price of Company common stock is at least $26.00 for 20 of any 30
consecutive trading days. The exchange offer terminated on April 2, 1997,
and resulted in the issuance of 2,000,000 units in exchange for
approximately $500,000 in cash, net of expenses, and 2,261,706 shares of
Company common stock. As a result of these transactions, subsequent to
March 29, 1997, the Company reclassified $40,500,000 from "Shareholders'
investment" to "Common stock subject to redemption," based on the
issuance of 2,000,000 redemption rights each carrying a maximum liability
to the Company of $20.25.
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 caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended September 28, 1996, filed with the Securities
and Exchange Commission.
Overview
The Company has developed a laser-based system called SoftLight(SM)
for the removal of unwanted hair. The SoftLight system uses a low-energy,
dermatology laser in combination with a lotion that absorbs the laser's
energy to disable hair follicles. In April 1995, the Company received
clearance from the U.S. Food and Drug Administration (FDA) to
commercially market services using the SoftLight system. The Company
began earning revenue from the SoftLight system in the first quarter of
fiscal 1996 as a result of opening its first commercial location (Spa
Thira) in La Jolla, California, in November 1995. As of March 29, 1997,
the Company had 10 spas open, three of which opened during the second
quarter of fiscal 1997. In addition, the Company has signed leases for
five additional sites.
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THERMOLASE CORPORATION
Overview (continued)
In June 1996, the Company commenced a program to license to
physicians and others the right to perform the Company's patented
SoftLight hair-removal procedure. In this program, the Company licenses
its technology and receives a one-time fee and a per-procedure royalty
that varies depending on the location treated. The Company also provides
the licensees with the lasers and lotion that are necessary to perform
the service.
The Company is marketing the SoftLight system internationally through
joint ventures and other licensing arrangements. In January 1996, the
Company established a joint venture in Japan. In fiscal 1997, the Company
entered into several international arrangements, establishing a joint
venture in France in November 1996 and four 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; and in
Switzerland in April 1997.
In March 1997, the Company filed with the FDA a 510(k) application
seeking clearance to market its laser skin-resurfacing technology
(formerly called skin-rejuvenation). This technology, which uses the same
laser as the Company's hair-removal system, is designed to improve the
skin's texture and elasticity and to smooth wrinkles.
The Company also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. (CBI) subsidiary, which also
manufactures the lotion used in the SoftLight hair-removal process.
Results of Operations
Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996
Revenues increased 66% to $11,666,000 in the second quarter of fiscal
1997 from $7,020,000 in the second quarter of fiscal 1996. The Company
earned revenues from hair-removal services of $5,155,000 in fiscal 1997,
compared with $1,080,000 in fiscal 1996. The increase in revenues
resulted primarily from an increase in the number of spas to 10, three of
which opened during the second quarter of fiscal 1997, compared with one
spa in La Jolla in the second quarter of fiscal 1996. Under the current
pricing structure, the majority of spa clients pay a fixed fee in advance
to receive a series of treatments, as necessary. Consequently, the
Company defers revenue related to such payments, which is recognized over
the anticipated treatment period. As the Company collects further data
concerning the number of treatments required and duration of the
treatment period, the period of revenue recognition may be affected.
Revenues also increased as a result of fees from the Company's
physicians' licensing program, which was not in effect in the second
quarter of fiscal 1996. In addition, revenues from hair-removal services
in the second quarter of fiscal 1997 included $1,338,000 of minimum
guaranteed payments relating to the Company's international licensing
arrangements, including a $1,000,000 payment received upon granting
technology rights under one such agreement, compared with $667,000 in the
second quarter of fiscal 1996. The amount of minimum guaranteed payments
recorded by the Company will vary depending on the Company's ability
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THERMOLASE CORPORATION
Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996
(continued)
to enter into additional international licensing arrangements and the
terms of any such arrangements. Revenues at CBI increased to $6,511,000
in fiscal 1997 from $5,940,000 in fiscal 1996. A portion of CBI's
revenues are derived from sales to large retailers, which have a
relatively long buying cycle that results in quarterly variations in
revenues. The Company estimates that CBI will continue to represent a
decreasing portion of total revenues as revenues from hair-removal
services increase.
The gross profit margin in the second quarter of fiscal 1997 was 17%,
compared with 37% in the second quarter of fiscal 1996. The Company's
hair-removal business reported gross profit of negative $97,000 in fiscal
1997, compared with gross profit of $349,000 in fiscal 1996. Each period
was significantly impacted by the early operations of the Spa Thira
business, which has been operating below maximum capacity as the Company
develops a client base and continues refining its operating procedures,
and due to pre-opening costs incurred in connection with new spa
openings, offset in part in fiscal 1997, and more than offset in fiscal
1996, by the effect of physician licensing fees and minimum guaranteed
payments relating to international licensing arrangements, which have a
relatively high gross profit margin. The gross profit margin in fiscal
1997 was also impacted by increased local advertising costs. As the
Company continues to open additional Spa Thira locations in fiscal 1997,
the effect of operating each spa below maximum capacity as the Company
develops its client base, as well as pre-opening costs, will have a
negative impact on the Company's gross profit margin. The gross profit
margin from the sale of skin-care and other personal-care products at CBI
declined to 33% in fiscal 1997 from 38% in fiscal 1996, as a result of a
continued shift to lower-margin products at CBI.
Selling, general, and administrative expenses as a percentage of
revenues increased to 52% in the second quarter of fiscal 1997 from 36%
in the second quarter of fiscal 1996. The increase was primarily due to
costs related to expanding the Company's personal-care service
organization for its Spa Thira salons and licensing programs, including
the hiring of senior management and administrative staff; national
advertising costs for the physicians' licensing program; and legal costs
associated with obtaining and protecting the Company's patent rights.
Research and development expenses increased to $1,393,000 in the
second quarter of fiscal 1997 from $1,061,000 in the second quarter of
fiscal 1996. The Company expects its research and development expenses to
continue to exceed fiscal 1996 levels, due to increased pre-clinical and
clinical research related to improving the effectiveness of the Company's
hair-removal process and developing its skin-resurfacing process, and the
investigation of other health and beauty applications for its proprietary
laser technology.
Interest income decreased to $438,000 in the second quarter of fiscal
1997 from $907,000 in the second quarter of fiscal 1996, primarily as a
result of lower average invested balances, which resulted primarily from
property and equipment expenditures for the Company's Spa Thira salons
and licensing programs.
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THERMOLASE CORPORATION
Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996
(continued)
The effective tax rate in each period differs from the statutory
federal income tax rate due to nondeductible amortization of cost in
excess of net assets of acquired company, incurred in connection with the
acquisition of CBI, and the impact of state income taxes.
First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996
Revenues increased 41% to $20,276,000 in the first six months of
fiscal 1997 from $14,420,000 in the first six months of fiscal 1996. The
Company earned revenues from hair-removal services of $7,719,000 in
fiscal 1997, compared with $1,138,000 in fiscal 1996. The increase in
revenues resulted primarily from an increase in the number of spas to 10,
six of which opened during fiscal 1997, compared with one spa in La Jolla
in the first six months of fiscal 1996. Revenues also increased as a
result of fees from the Company's physicians' licensing program, which
was not in effect in the first six months of fiscal 1996. In addition,
revenues from hair-removal services included $1,646,000 of international
licensing fees in fiscal 1997, compared with $667,000 in fiscal 1996.
Revenues at CBI decreased to $12,557,000 in fiscal 1997 from $13,282,000
in fiscal 1996, due to an unusually large order shipped to a single
customer in the first quarter of fiscal 1996, offset in part by an
increase in revenues from other customers.
The gross profit margin in the first six months of fiscal 1997 was
19%, compared with 34% in the first six months of fiscal 1996. The
Company's hair-removal business reported revenues of $7,719,000 and gross
profit of negative $345,000 in fiscal 1997, compared with revenues of
$1,138,000 and gross profit of negative $32,000 in fiscal 1996. The gross
profit margin was affected in both periods by the factors discussed in
the results of operations for the second quarter. The gross profit margin
from the sale of skin-care and other personal-care products at CBI
declined to 33% in fiscal 1997 from 37% in fiscal 1996, due to the reason
described in the results of operations for the second quarter.
Selling, general, and administrative expenses as a percentage of
revenues increased to 51% in the first six months of fiscal 1997 from 35%
in the first six months of fiscal 1996, due to the reasons described in
the results of operations for the second quarter.
Research and development expenses increased to $2,302,000 in the
first six months of fiscal 1997 from $1,586,000 in the first six months
of fiscal 1996, due to the reasons described in the results of operations
for the second quarter.
Interest income decreased to $1,054,000 in the first six months of
fiscal 1997 from $1,845,000 in the first six months of fiscal 1996, due
to the reason described in the results of operations for the second
quarter.
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THERMOLASE CORPORATION
First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996
(continued)
The effective tax rate in each period differs from the statutory
federal income tax rate due to nondeductible amortization of cost in
excess of net assets of acquired company, incurred in connection with the
acquisition of CBI, and the impact of state income taxes.
Liquidity and Capital Resources
Consolidated working capital was $23,766,000 at March 29, 1997,
compared with $47,197,000 at September 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$25,965,000 at March 29, 1997, compared with $52,055,000 at September 28,
1996. Operating activities used $4,166,000 of cash during the first six
months of fiscal 1997, primarily due to the Company's loss before income
taxes, offset in part by $1,760,000 of cash provided by an increase in
deferred revenue.
During the first six months of fiscal 1997, the Company expended
$18,495,000 for purchases of property and equipment, including the
purchase of laser systems at an aggregate cost of $7,830,000 from Trex
Medical Corporation, a majority-owned subsidiary of ThermoTrex
Corporation (ThermoTrex). The Company has committed to purchase
additional laser systems at an aggregate cost of $3,500,000.
In September 1996, the Company's Board of Directors authorized the
repurchase by the Company of up to $10,000,000 of Company common stock
through August 28, 1997, in market transactions or pursuant to the
exercise by investors of standardized put options written on the
Company's common stock. During the first six months of fiscal 1997, the
Company repurchased 137,500 shares of its common stock in market
transactions for $2,179,000. Subsequent to March 29, 1997, the Company
settled all of its outstanding put options by repurchasing 145,800 shares
of its common stock for an aggregate price of $2,613,000 (Note 3). In
April 1997, the Company's Board of Directors authorized the repurchase by
the Company, through April 25, 1998, of up to an additional $10,000,000
of its common stock.
In November 1996, the Company entered into a joint venture agreement
to market its SoftLight system in France, as well as its laser-based
skin-resurfacing process, if and when available. During the first six
months of fiscal 1997, the Company contributed $1,119,000 to the joint
venture, and has committed to provide up to an additional $4,000,000 to
fund its working capital requirements, in exchange for the Company's 50%
stake in the joint venture.
On March 6, 1997, the Company commenced an exchange offer whereby its
shareholders had the opportunity to exchange one share of existing
Company common stock and $3.00 for a new unit consisting of one share of
Company common stock and one redemption right. The redemption right
entitles the holder to sell the related share of common stock to the
Company for $20.25 during the period from April 3, 2001, through April
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THERMOLASE CORPORATION
Liquidity and Capital Resources (continued)
30, 2001. The redemption right will expire and become worthless if the
closing price of Company common stock is at least $26.00 for 20 of any 30
consecutive trading days. The exchange offer terminated on April 2, 1997,
and resulted in the issuance of 2,000,000 units in exchange for
approximately $500,000 in cash, net of expenses, and 2,261,706 shares of
Company common stock (Note 3).
The Company has signed leases to open five additional Spa Thiras. In
total, the Company plans to open between 10 and 20 spas in various parts
of the United States during fiscal 1997. Depending on the size of the
spa, each facility will require approximately $1,500,000 to $2,500,000
for such items as leasehold improvements and laser systems. In addition,
the Company expects to expend $4,000,000 to $5,000,000 during the
remainder of fiscal 1997 for equipment related to its licensing programs.
Accordingly, the Company's future capital expenditures will largely be
affected by the number of Spa Thira locations that can be developed and
the number of physicians and other domestic and international licensees
engaged in its licensing programs. The Company expects that it will
finance its capital requirements through a combination of internal funds,
additional debt or equity financing, and/or short-term borrowings from
ThermoTrex or Thermo Electron Corporation, ThermoTrex's parent, although
it has no agreement with these companies to ensure that funds will be
available on acceptable terms or at all.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
In April 1997, the Company issued 2,000,000 units, each consisting of
one share of Company common stock and one redemption right. The
redemption right entitles the holder to sell the related share of common
stock to the Company for $20.25 during the period from April 3, 2001,
through April 30, 2001 (Note 3).
Item 4 - Submission of Matters to a Vote of Security Holders
On March 12, 1997, at the Annual Meeting of Shareholders, the
shareholders elected ten incumbent directors to a one-year term expiring
in 1998. The Directors elected at the meeting were: Mr. Gary S.
Weinstein, Dr. Carliss Y. Baldwin, Dr. Elias P. Gyftopoulos, Mr. John C.
Hansen, Mr. Robert C. Howard, Mr. Paul F. Kelleher, Mr. Anthony J.
Pellegrino, Mr. Firooz Rufeh, Dr. Kenneth Y. Tang, and Dr. Nicholas T.
Zervas. Dr. Baldwin, Mr. Hansen, Mr. Kelleher, Mr. Pellegrino, and Dr.
Tang each received 34,500,497 shares voted in favor of his or her
election and 47,125 shares voted against. Dr. Gyftopoulos, Mr. Rufeh, Mr.
Weinstein, and Dr. Zervas each received 34,500,397 shares voted in favor
of his election and 47,225 shares voted against. Mr. Howard received
34,500,297 shares voted in favor of his election and 47,325 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.
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THERMOLASE 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 2nd day of May 1997.
THERMOLASE CORPORATION
Paul F. Kelleher
---------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
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THERMOLASE CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
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4.1 Form of Unit Certificate (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-4 [Reg. No.
333-19633] and incorporated herein by reference).
4.2 Guarantee Agreement between the Company and Thermo Electron
Corporation dated March 5, 1997.
27 Financial Data Schedule.
Exhibit 4.2
-----------
GUARANTEE AGREEMENT
This Guarantee Agreement, dated March 5, 1997 (the "Agreement"), is
entered into by and between ThermoLase Corporation, a Delaware
corporation (the "Corporation" or "ThermoLase"), and Thermo Electron
Corporation, a Delaware corporation ("Thermo Electron"). Capitalized
terms not otherwise defined herein shall have the meanings set forth in
the Offer to Exchange of the Corporation dated March 6, 1997 (the "Offer
to Exchange").
WHEREAS, pursuant to the Offer to Exchange, the Corporation has
offered to exchange one unit (each, a "Unit"), consisting of one share of
Common Stock, par value $0.01 per share, of the Corporation (the "Common
Stock") and one redemption right (a "Redemption Right") for each share of
Common Stock (each, an "Exchange Share"), plus an additional payment of
$3.00, payable either in cash or in additional shares of Common Stock.
No more than 2,000,000 Exchange Shares will be accepted for exchange.
Each Redemption Right will entitle the holder thereof to sell the related
share of Common Stock to the Company for $20.25 during the first 20
business days after the fourth anniversary of the Expiration Date (as
defined in the Offer to Exchange).
WHEREAS, the issuance and sale of the Units will be materially
enhanced by the existence of a subordinated guarantee by Thermo Electron
of the Corporation's obligations under the Redemption Rights;
NOW, THEREFORE, FOR VALUE RECEIVED, the parties hereby agree as
follows:
1. Thermo Electron hereby agrees to guarantee, as provided in the
Guarantee dated the date hereof and attached hereto as Exhibit A, on a
subordinated basis, the due and punctual payment of any amounts due from
the Corporation to holders of Units pursuant to the Corporation's
obligation to redeem shares of its outstanding Common Stock during the
Redemption Period, in case of the failure of the Corporation to make any
such payment punctually when and as the same shall become due and
payable. For purposes of this Agreement, the guarantee of the Redemption
Rights referred to in the preceding sentence shall be referred to as the
"Guarantee."
2. The text of the Guarantee shall be endorsed on the back of each
Unit Certificate and shall be executed and attested by duly authorized
officers of Thermo Electron under its corporate seal. Such signatures
may be manual or facsimile.
3. Upon the failure or prospective failure of the Corporation to
meet its redemption obligations during the Redemption Period, the
Corporation shall deliver to Thermo Electron, at the earliest practicable
time, a statement of the failure or the prospective failure of the
Corporation to meet its obligations and the correct amount to be paid in
respect of such redemption. Failure of the Corporation to deliver such
PAGE
<PAGE>
statement shall not relieve Thermo Electron of its obligations under this
Agreement or the Guarantee.
4. The Corporation hereby covenants to cause notice of the
commencement of the Redemption Period to be published in the Wall Street
Journal, and to be mailed to the holders of record of the Redemption
Rights, not less than 30 nor more than 45 days prior to the commencement
of the Redemption Period. The Corporation hereby further covenants that
in the event of the occurrence prior to the expiration of the Redemption
Rights of a merger or consolidation of the Corporation with or into
another entity (other than a merger in which the Corporation is the
surviving entity) or the sale of all or substantially all of the assets
of the Corporation, or in the event of the reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, the holders of Units shall have
the rights set forth in the Offer to Exchange under the heading
"Description of Securities -- The Units."
5. This Agreement may be amended only by written amendment signed
by the parties, and no such amendment that dilutes or impairs the rights
of the holders of the Units shall be effective against such holders
without the consent of the holders of a majority of the then outstanding
Units other than Thermo Electron and its subsidiaries.
6. This Agreement is effective as of the date hereof and shall
terminate on the date that the redemption obligations of the Corporation
have been satisfied in full.
7. This Agreement has been entered into for the benefit of the
holders of the Units from time to time and such holders are third party
beneficiaries hereof.
Executed as a sealed instrument.
THERMOLASE CORPORATION THERMO ELECTRON CORPORATION
By: John Hansen By: John Hatsopoulos
------------------ ------------------------
Title: President Title: President
------------------- ---------------------
PAGE
<PAGE>
EXHIBIT A
1. FOR VALUE RECEIVED, Thermo Electron Corporation, a corporation
duly organized and existing under the laws of the State of Delaware
(herein called the "Guarantor"), hereby unconditionally guarantees to the
holder of the Rights represented by the Certificate upon which this
Guarantee is endorsed (the "Holder") the due and punctual payment of any
amounts due from ThermoLase Corporation ("ThermoLase") to the Holder
pursuant to ThermoLase's obligation to redeem shares of its outstanding
Common Stock during the Redemption Period, as that term is defined on the
face of this Certificate, in case of the failure of ThermoLase to make
any such payment punctually when and as the same shall become due and
payable.
2. The Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of ThermoLase's redemption obligations and shall be
applicable without regard to the provisions of Section 160 of the
Delaware General Corporation Law (with respect to the impairment of the
capital of ThermoLase) or other legal prohibition or impediment and
irrespective of the absence of any action to enforce the same, any waiver
or consent by the Holder, the recovery of any judgment against ThermoLase
or any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor. The Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of ThermoLase, any right to require a proceeding first against
ThermoLase, protest or notice with respect to redemption of ThermoLase's
Common Stock as provided in this Certificate relating to redemption of
ThermoLase's Common Stock and of this Guarantee.
3. (a) Prior to satisfaction in full of the aforesaid redemption
obligations and this Guarantee, the Guarantor will not merge or
consolidate with, or sell or convey all or substantially all of its
assets to, any other corporation or entity, unless (i) either (A) the
Guarantor shall be the surviving corporation in the case of a merger or
(B) the surviving, resulting or transferee corporation or entity shall
expressly assume the due and punctual performance of all of the covenants
and obligations of the Guarantor under this Guarantee and (ii) the
Guarantor or such successor corporation, as the case may be, shall not,
immediately after such merger, consolidation, sale or conveyance, be in
default in the performance of any covenants or obligations of the
Guarantor under this Guarantee.
(b) Upon any merger, consolidation, sale, conveyance or
assumption as provided in Section 3(a), the successor or assuming
corporation shall succeed to and be substituted for, and may exercise
every right and power of and be subject to all the obligations of, the
Guarantor under this Guarantee with the same effect as if such successor
or assuming corporation had been named as the guarantor therein and
herein and the Guarantor shall be released from its liability as obligor
under this Guarantee.
PAGE
<PAGE>
4. (a) The Guarantor, for itself, its successors and assigns,
covenants and agrees, and each Holder by his acceptance of the Units
likewise covenants and agrees, that all obligations of the Guarantor
relating to payment of any amounts due for the redemption of ThermoLase's
Common Stock pursuant to the terms set forth in this Certificate are
hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full
of all Senior Indebtedness of the Guarantor.
"Senior Indebtedness" shall mean the principal of, premium, if any,
and interest and other amounts due on or with respect to the following,
whether outstanding at the date hereof or thereafter incurred or created:
(i) indebtedness of the Guarantor for money borrowed by
the Guarantor (including, without limitation, purchase money
obligations), whether or not evidenced by debentures, bonds, notes or
other corporate debt securities or similar instruments issued by the
Guarantor (including the principal of, premium, if any, and interest on
the Guarantor's 5% Senior Convertible Debentures due 2001); provided,
however, that Senior Indebtedness shall not include (i) the Guarantor's
obligations with respect to its outstanding 4 1/4% Convertible
Subordinated Debentures due 2003, which rank pari passu with the
obligations represented by this Guarantee in right of payment, (ii) the
Guarantor's subordinated guarantees of the principal, premium, if any,
and interest on the Non-Interest Bearing Convertible Subordinated
Debentures due 2003 issued by Thermedics Inc., the Non-Interest Bearing
Convertible Subordinated Debentures due 2001 issued by Thermo Ecotek
Corporation, the 6 1/2% Convertible Subordinated Debentures due 1997 and
the 4 5/8% Convertible Subordinated Debentures due 2003 issued by Thermo
TerraTech Inc., the Non-Interest Bearing Convertible Subordinated
Debentures due 1997 issued by Thermo Cardiosystems Inc., the 3 3/4%
Convertible Subordinated Debentures due 2000 issued by Thermo Voltek
Corp., the 4 7/8% Convertible Subordinated Debentures due 2000 issued by
Thermo Remediation Inc., the 5% Convertible Subordinated Debentures due
2000 issued by ThermoQuest Corporation or the 5% Convertible Subordinated
Debentures due 2000 issued by Thermo Optek Corporation, which rank pari
passu with the obligations represented by this Guarantee in right of
payment, or (iii) the Guarantor's subordinated guarantees of the
obligations to redeem the common stock of ThermoLyte Corporation and
Thermo Fibergen, Inc., which rank pari passu with the obligations
represented by this Guarantee in right of payment;
(ii) obligations to reimburse any bank or other person in
respect of amounts paid under letters of credit;
(iii) leases of real property, equipment or other
assets, which leases are capitalized in the Guarantor's financial
statements in accordance with generally accepted accounting principles;
(iv) commitment, standby and other fees due and payable to
financial institutions with respect to credit facilities available to the
Guarantor;
PAGE
<PAGE>
(v) obligations of the Guarantor under interest rate or
currency swaps, floors, caps or other similar arrangements intended to
hedge interest rates or currency exposure;
(vi) indebtedness secured by any mortgage, pledge, lien or
other encumbrance on property which is owned or held by the Guarantor
subject to such mortgage, pledge, lien or encumbrance, whether or not the
indebtedness secured thereby shall have been assumed by the Guarantor;
(vii) obligations of the Guarantor constituting
guarantees of indebtedness of or joint obligations with another or others
which would be included in the preceding clauses (i), (ii), (iii), (iv),
(v) or (vi) (including the Guarantor's guarantee of the principal of,
premium, if any, and interest on the 3 3/4% Senior Convertible Debentures
due 2000 of Thermo Instrument Systems Inc. and the 4 1/2% Senior
Convertible Debentures due 2003 of Thermo Instrument Systems Inc.); and
(viii) modifications, renewals, extensions or
refundings of any of the indebtedness, leases, fees or obligations
referred to in the preceding clauses (i), (ii), (iii), (iv), (v), (vi) or
(vii) or debentures, notes or other evidences of indebtedness issued in
exchange therefor; provided, however, that Senior Indebtedness shall not
include any particular indebtedness, lease, fee or obligation,
modification, renewal, extension or refunding or exchanged securities if,
under the express provisions of the instrument creating or evidencing the
same, or pursuant to which the same is outstanding, such indebtedness,
lease, fee or obligation or such modification, renewal, extension or
refunding thereof or exchanged securities are stated to be not superior
in right of payment to the Guarantees.
(b) (i) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other
similar proceedings in connection therewith, relative to the Guarantor or
to its creditors as such, or to its property, or in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
the Guarantor, or in the event of any assignment for the benefit of
creditors of the Guarantor or any marshaling of assets of the Guarantor,
then the holders of all Senior Indebtedness of the Guarantor shall first
be entitled to receive payment in full of the principal of and premium,
if any and interest, including interest thereon accruing after the
commencement of any such proceeding, on all Senior Indebtedness of the
Guarantor before the holders of any of the Units, shall be entitledto
receive any payment on account of the obligations of the Guarantor
pursuant to Section 1, and to that end the holders of Senior Indebtedness
of the Guarantor shall be entitled to receive for application in payment
thereof any payment or distribution of any kind or character, whether in
cash, property or securities, which may be payable or deliverable in any
such proceedings in respect to obligations of the Guarantor relating to
the Redemption Rights other than securities of the Guarantor as
reorganized or readjusted or securities of the Guarantor or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in this
Section 4 with respect to the obligations of the Guarantor relating to
the Redemption Rights, to the payment of all Senior Indebtedness of the
PAGE
<PAGE>
Guarantor, provided that the rights of the holders of Senior Indebtedness
of the Guarantor are not altered by such reorganization or readjustment.
For the purposes of this Section, no consolidation, merger, conveyance or
transfer made pursuant to the provisions of Section 3 shall be deemed to
be a liquidation, reorganization, dissolution or other winding up of the
Guarantor.
(ii) If under the circumstances set forth in paragraph
(b)(i) of this Section, and notwithstanding the provisions thereof, any
payment or distribution of assets of the Guarantor of any kind, whether
in cash, property, or securities (other than securities of the Guarantor
as reorganized or readjusted or securities of the Guarantor or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinated, at least to the extent provided in this
Section with respect to the obligations of the Guarantor relating to the
Redemption Rights, to the payment of all Senior Indebtedness of the
Guarantor provided that the rights of the holders of Senior Indebtedness
of the Guarantor are not altered by such reorganization or readjustment)
shall be received by the holders of the Units in respect of the
obligations of the Guarantor before the principal of (and premium, if
any) and interest on all Senior Indebtedness of the Guarantor is paid in
full, such payment or distribution shall be paid over to the holders of
Senior Indebtedness of the Guarantor, ratably, for application to the
payment of the principal of (and premium, if any) and interest on all
Senior Indebtedness of the Guarantor remaining unpaid until all the
principal of (and premium, if any) and interest on all Senior
Indebtedness of the Guarantor shall have been paid in full, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness of the Guarantor.
(iii) Upon any distribution of assets of the Guarantor
referred to in this Section, the holders of the Units shall be entitled
to rely upon any final order or decree of a court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and the holders of the Units
shall be entitled to rely upon a certificate of the liquidating trustee
or agent or other person making any distribution to the holders of the
Units for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Indebtedness of the Guarantor
and other indebtedness of the Guarantor, theamount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section.
(c) (i) Upon the maturity of any Senior Indebtedness of the
Guarantor by lapse of time, acceleration or otherwise, all principal
thereof (and premium, if any) and interest due thereon, including
interest thereon accruing after the commencement of any proceeding of the
type referred to in paragraph (i) of Section (b) above, shall first be
paid in full, or such payment duly provided for in cash, before any
payment, directly or indirectly, is made on account of the obligations of
the Guarantor relating to the Redemption Rights.
(ii) Upon the happening of an event of default with
respect to any Senior Indebtedness of the Guarantor, as defined therein
PAGE
<PAGE>
or in the instrument under which it is outstanding, permitting the
holders to accelerate the maturity thereof, then, unless and until such
event of default shall have been cured or waived or shall have ceased to
exist, no payment shall be made by the Guarantor, directly or indirectly,
on account of the obligations of the Guarantor relating to the Redemption
Rights.
(d) In case cash, securities or other property otherwise
payable or deliverable to the holders of the Units on account of the
Guarantee shall have been applied, pursuant to Section (b) or (c), to the
payment of Senior Indebtedness of the Guarantor, then, upon the payment
in full of the principal of (and premium, if any) and interest on all
Senior Indebtedness of the Guarantor, the holders of the Units shall be
subrogated to any rights of any holders of Senior Indebtedness of the
Guarantor, to receive any further payments or distributions applicable to
Senior Indebtedness of the Guarantor until the obligation of the
Guarantor in respect of this Guarantee shall have been discharged in
full, and such payments or distributions received by the holders of the
Units by reason of such subrogation, of cash, securities or other
property that otherwise would be paid or distributed to the holders of
Senior Indebtedness of the Guarantor, shall, as between the Guarantor and
its creditors other than the holders of Senior Indebtedness of the
Guarantor, on the one hand, and the holders of the Units on account of
this Guarantee, on the other hand, be deemed to be a payment by the
Guarantor on account of Senior Indebtedness of the Guarantor and not on
account of the Redemption Rights.
(e) No present or future holder of any Senior Indebtedness of
the Guarantor shall be prejudiced in any way in the right to enforce the
subordination of this Guarantee by any act or failure to act on the part
of the Guarantor. The provisions of this Section 4 are solely for the
purpose of defining the relative rights of the holders of Senior
Indebtedness of the Guarantor, on the one hand, and the holders of the
Units on account of this Guarantee, on the other hand, against the
Guarantor and its assets, and nothing contained in this Section 4 shall
impair, as between the Guarantor and the holder of any Units, the
obligation of the Guarantor, which isunconditional and absolute, to
perform in accordance with the terms of this Guarantee or prevent the
holder of any Units, upon default hereunder or under the terms of the
Units, from exercising all rights, powers and remedies otherwise provided
herein or therein or by applicable law, all subject to the rights of the
holders of Senior Indebtedness of the Guarantor under this Section 4 to
receive cash, property or securities otherwise payable or deliverable to
the holders of the Units on account of this Guarantee.
(f) Nothing contained in this Section 4 shall prevent at any
time, except under the conditions described in Section 4(b) and (c)
hereof or during the pendency of any dissolution, winding up, liquidation
or reorganization proceedings therein referred to, the Guarantor from
performing its obligations under this Guarantee.
5. The Guarantor shall be subrogated to all rights of the holders
of the Units against ThermoLase in respect of any amounts paid by the
Guarantor pursuant to the provisions of this Guarantee to the end that
PAGE
<PAGE>
the Guarantor shall be entitled to receive the shares of ThermoLase
Common Stock as to which it makes payments in respect of ThermoLase's
redemption obligations hereunder.
6. This Guarantee shall be governed by and construed in accordance
with the laws of Commonwealth of Massachusetts.
7. The Guarantor hereby certifies and warrants that all acts,
conditions and things required to be done and performed and to have
happened precedent to the creation and issuance of this Guarantee and to
constitute the same a valid obligation of the Guarantor have been done
and performed and have happened in due compliance with all applicable
laws.
8. By his acceptance hereof, each Holder acknowledges and agrees
that this Guarantee supersedes any and all prior guarantees by Guarantor
to such Holder with respect to any redemption obligations of ThermoLase
as to its Common Stock.
9. The Holder shall at all times be a beneficiary under, and shall
be entitled to enforce, that certain Guarantee Agreement dated as of
March 5, 1997 by and between the Guarantor and ThermoLase. A copy of
such Guarantee Agreement will be provided to the Holder, without charge,
upon written request to the Guarantor.
WITNESS the facsimile seal of the Guarantor and the facsimile
signatures of its duly authorized officers.
Dated: March 5, 1997
______________________ ______________________
Secretary [Seal] President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOLASE
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 11,715
<SECURITIES> 14,250
<RECEIVABLES> 4,868
<ALLOWANCES> 393
<INVENTORY> 4,119
<CURRENT-ASSETS> 39,928
<PP&E> 38,363
<DEPRECIATION> 3,509
<TOTAL-ASSETS> 88,675
<CURRENT-LIABILITIES> 16,162
<BONDS> 0
0
0
<COMMON> 408
<OTHER-SE> 68,499
<TOTAL-LIABILITY-AND-EQUITY> 88,675
<SALES> 12,557
<TOTAL-REVENUES> 20,276
<CGS> 8,407
<TOTAL-COSTS> 16,471
<OTHER-EXPENSES> 2,302
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,709)
<INCOME-TAX> (2,621)
<INCOME-CONTINUING> (5,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,088)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
