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 June 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-13876
THERMOSPECTRA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3242970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class Outstanding at July 26, 1996
---------------------------- ----------------------------
Common Stock, $.01 par value 12,437,934
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOSPECTRA CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 17,461 $ 20,306
Available-for-sale investments, at quoted
market value (amortized cost of $3,006) 3,006 -
Accounts receivable, less allowances of
$1,339 and $1,095 29,269 23,653
Inventories:
Raw materials and supplies 10,732 7,973
Work in process 6,051 3,949
Finished goods 5,831 6,350
Prepaid income taxes 5,110 4,376
Other current assets 1,498 1,015
-------- --------
78,958 67,622
-------- --------
Property, Plant and Equipment, at Cost 26,689 19,496
Less: Accumulated depreciation and
amortization 5,591 4,148
-------- --------
21,098 15,348
-------- --------
Patents, Trademarks and Other Assets 5,351 4,571
-------- --------
Equity Investment in Joint Venture 2,480 2,429
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 43,494 32,947
-------- --------
$151,381 $122,917
======== ========
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THERMOSPECTRA CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 10,182 $ 7,719
Accrued payroll and employee benefits 4,380 3,627
Accrued installation and warranty expenses 2,457 2,310
Deferred revenue 4,071 2,216
Accrued income taxes 2,580 2,120
Other accrued expenses 10,912 11,368
Due to parent company (Note 2) 22,736 2,301
-------- --------
57,318 31,661
-------- --------
Deferred Income Taxes and Other Deferred Items 1,500 1,431
-------- --------
Long-term Obligation, Due to Parent Company 7,300 7,300
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized; 12,437,400 and 12,432,000 shares
issued 124 124
Capital in excess of par value 77,009 76,955
Retained earnings 8,726 5,728
Treasury stock at cost, 157 shares (3) -
Cumulative translation adjustment (593) (282)
-------- --------
85,263 82,525
-------- --------
$151,381 $122,917
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $31,281 $22,193
------- -------
Costs and Operating Expenses:
Cost of revenues 16,201 11,421
Selling, general and administrative expenses 9,255 6,858
Research and development expenses 3,319 2,196
------- -------
28,775 20,475
------- -------
Operating Income 2,506 1,718
Interest Income 239 171
Interest Expense, Related Party (102) (260)
Other Income - 184
------- -------
Income Before Provision for Income Taxes 2,643 1,813
Provision for Income Taxes 1,081 780
------- -------
Net Income $ 1,562 $ 1,033
======= =======
Earnings per Share $ .13 $ .10
======= =======
Weighted Average Shares 12,436 10,505
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
--------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
-------------------------------------------------------------------------
Revenues $58,208 $36,642
------- -------
Costs and Operating Expenses:
Cost of revenues 30,340 18,562
Selling, general and administrative expenses 17,076 11,254
Research and development expenses 6,075 3,635
------- -------
53,491 33,451
------- -------
Operating Income 4,717 3,191
Interest Income 512 418
Interest Expense, Related Party (209) (380)
Other Income - 184
------- -------
Income Before Provision for Income Taxes 5,020 3,413
Provision for Income Taxes 2,022 1,468
------- -------
Net Income $ 2,998 $ 1,945
======= =======
Earnings per Share $ .24 $ .18
======= =======
Weighted Average Shares 12,435 10,547
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
------------------
June 29, July 1,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Operating Activities:
Net income $ 2,998 $ 1,945
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,158 1,353
Provision for losses on accounts receivable 146 79
Other noncash expenses 293 203
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (100) 118
Inventories 964 (1,761)
Other current assets (307) 551
Accounts payable 939 249
Due to parent company (1,092) 1,118
Other current liabilities (2,838) (1,084)
------- -------
Net cash provided by operating activities 3,161 2,771
------- -------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (994) (26,086)
Purchases of available-for-sale investments (3,000) -
Proceeds from sale of available-for-sale investments - 4,855
Purchases of property, plant and equipment (1,940) (441)
Proceeds from sale of property, plant and equipment 55 452
Other (89) (101)
------- -------
Net cash used in investing activities (5,968) (21,321)
------- -------
Financing Activities:
Proceeds from issuance of obligation to Thermo
Electron Corporation - 15,000
Net proceeds from issuance of Company common stock 51 -
------- -------
Net cash provided by financing activities 51 15,000
------- -------
Exchange Rate Effect on Cash (89) (181)
------- -------
Decrease in Cash and Cash Equivalents (2,845) (3,731)
Cash and Cash Equivalents at Beginning of Period 20,306 14,439
------- -------
Cash and Cash Equivalents at End of Period $17,461 $10,708
======= =======
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THERMOSPECTRA CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
------------------
June 29, July 1,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $30,178 $48,570
Due to parent company for acquisition (Note 2) (21,527) -
Cash paid for acquired companies (998) (28,043)
------- -------
Liabilities assumed of acquired companies $ 7,653 $20,527
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOSPECTRA CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoSpectra 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 June 29,
1996, the results of operations for the three- and six-month periods ended
June 29, 1996, and July 1, 1995, and the cash flows for the six-month
periods ended June 29, 1996, and July 1, 1995. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995, filed with the Securities and
Exchange Commission.
2. Acquisition
On March 29, 1996, Thermo Instrument Systems Inc. (Thermo Instrument)
acquired a substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons, plc (Fisons), a wholly owned subsidiary of
Rhone-Poulenc Rorer, Inc. Pursuant to an agreement executed on August 5,
1996, the Company acquired Kevex Instruments, a manufacturer of X-ray
microanalyzers and X-ray microfluorescence instruments, and Kevex X-Ray, a
manufacturer of microfocus X-ray tubes, (the Kevex businesses) from Thermo
Instrument for $21.5 million, subject to a post-closing adjustment to be
negotiated with Fisons by Thermo Instrument. To partially finance the
acquisition, the Company borrowed $15.0 million from Thermo Electron
Corporation (Thermo Electron). The purchase price was determined based on
the net book value of the Kevex businesses at March 29, 1996, and a pro
rata allocation of Thermo Instrument's total cost in excess of the net
assets recorded in connection with the acquisition of the Fisons
businesses. As of March 29, 1996, the Company and the Kevex businesses were
deemed for accounting purposes to be under control of their common majority
owner, Thermo Instrument, and, as a result, the accompanying 1996 financial
information includes the results of operations of the Kevex businesses from
March 29, 1996. Because the Company had not disbursed the funds in
connection with the acquisition of the Kevex businesses as of June 29,
1996, the purchase price for these businesses has been included in due to
parent company in the accompanying 1996 balance sheet.
The cost of the acquisition of the Kevex businesses exceeded the
estimated fair value of the acquired net assets by $10.2 million, which is
being amortized over 40 years.
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THERMOSPECTRA CORPORATION
2. Acquisition (continued)
Based on unaudited data, the following table presents selected
financial information for the Company and the Kevex businesses on a pro
forma basis, assuming the companies had been combined since the beginning
of 1995.
Three Six
Months Ended Months Ended
------------ -------------------
(In thousands except per July 1, June 29, July 1,
share amounts) 1995 1996 1995
--------------------------------------------------------------------------
Revenues $27,959 $64,199 $49,064
Net income (loss) (48) 755 (61)
Earnings (loss) per share - .06 (.01)
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the Kevex businesses been made at the beginning of 1995.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company develops, manufactures, and markets precision imaging,
inspection, and measurement instruments based on high-speed data
acquisition and digital processing technologies. These instruments are
generally combined with proprietary operations and analysis software to
provide industrial and research customers with integrated systems that
address their specific needs. The Company's products include digital
oscillographic recorders that continuously measure and monitor signals from
various sensors; digital storage oscilloscopes (DSOs) that are capable of
taking hundreds of millions of measurements per second of transient signals
or short bursts of data; data acquisition systems that combine the
attributes of DSOs and digital oscillographic recorders; X-ray
microanalyzers used as accessories to electron microscopes to provide
elemental materials analysis as a supplement to the microscope's imaging
capabilities; non-destructive X-ray inspection systems for process
monitoring and quality control applications; specialty X-ray tubes for
industrial and medical applications; and confocal laser scanning
microscopes that use laser light to generate precise optical images
primarily for life-science applications. The Company's growth strategy
includes acquiring complementary businesses, developing new applications
for its technology to address related market segments, and strengthening
its presence in selected geographic markets.
The acquisitions that the Company has historically made have generally
been businesses with strong technologies and a good reputation and presence
in the markets they compete in, but relatively poor profitability because
of high manufacturing and operating expenses. The Company's goal has been
to gradually reduce these expenses and thereby improve the acquired
companies' profitability. Businesses that the Company may acquire in the
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THERMOSPECTRA CORPORATION
Overview (continued)
future are likely to have these same financial characteristics. To realize
an attractive return on its investment in such future acquisitions, the
Company will likely need to successfully reduce those acquired companies'
expenses. Since the Company competes primarily on the basis of its
technology, the Company will also need to continually improve the
technology underlying the products of any company it acquires.
The Company conducts all of its manufacturing operations in the United
States, except for the production of certain DSOs, which are manufactured
in England. The Company sells its products on a worldwide basis. The
Company anticipates that a majority of its revenues will be from sales to
customers outside the United States. The Company's business activities
outside the United States are conducted through sales and service
subsidiaries and through third-party representatives and distributors. The
results of the Company's international operations are subject to foreign
currency fluctuations, and the exchange rate value of the dollar may have a
significant impact on both revenues and earnings. Where appropriate, the
Company uses forward contracts to reduce its exposure to currency
fluctuations.
Results of Operations
Second Quarter 1996 Compared With Second Quarter 1995
Revenues were $31.3 million in the second quarter of 1996, compared
with $22.2 million in the second quarter of 1995, an increase of 41%. The
increase in revenues resulted primarily from the inclusion of $6.1 million
of revenues from Kevex Instruments and Kevex X-Ray (the Kevex businesses),
which, for accounting purposes, were deemed to be acquired as of March 29,
1996 (Note 2), and the inclusion of $10.8 million of revenues from Gould
Instrument Systems, Inc. (GIS) for the full second quarter of 1996,
compared with $7.8 million of revenues for GIS for the partial second
quarter of 1995. GIS, a manufacturer of digital oscillographic recorders,
DSO's, and data acquisition systems, was acquired on May 10, 1995. Revenues
from existing operations increased approximately 3% in the second quarter
of 1996 from the second quarter of 1995 principally due to an increase in
demand, particularly in the Pacific Rim, for X-ray microanalyzers
manufactured by the Company's NORAN Instruments, Inc. (NORAN) subsidiary.
Revenues were negatively affected by approximately $0.6 million in the
second quarter of 1996 due to the strengthening in the value of the U.S.
dollar relative to the Japanese yen and other foreign currencies in
countries where the Company operates.
The Company's gross profit margin was relatively unchanged at 48.2% in
the second quarter of 1996 compared with 48.5% in the second quarter of
1995. An increase in the gross profit margin at GIS to 46% in the second
quarter of 1996 from 42% in the second quarter of 1995 due to changes in
product mix and manufacturing efficiencies was offset by the inclusion of
lower-margin revenues at the Kevex businesses. The gross profit margin for
the Kevex businesses was 39%. The Company's goal is to continue to increase
the gross profit margin at GIS and the Kevex businesses by improvements in
product mix and manufacturing efficiencies, although there can be no
assurance that the Company will be successful in these efforts.
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THERMOSPECTRA CORPORATION
Second Quarter 1996 Compared With Second Quarter 1995 (continued)
Selling, general and administrative expenses as a percentage of
revenues decreased to 30% in the second quarter of 1996 from 31% in the
second quarter of 1995 due principally to lower selling expenses as a
percentage of revenues at the acquired Kevex businesses. The Company
intends to increase selling efforts at Kevex X-Ray in an attempt to
increase sales to foreign and medical markets.
Research and development expenses as a percentage of revenues
increased to 11% in the second quarter of 1996 from 10% in the second
quarter of 1995. This increase is due to higher research and development
expenditures at NORAN as a result of development efforts on a confocal
microscope, which was released in the second quarter of 1996, in addition
to the inclusion of higher research and development expenses as a
percentage of revenues at Kevex X-Ray resulting from development efforts on
several new products scheduled to be introduced in 1996 and 1997.
The effective tax rate was 41% in the second quarter of 1996, compared
with 43% in the second quarter of 1995. The effective tax rates exceed the
statutory federal income tax rate due primarily to the impact of state
income taxes, nondeductible amortization of cost in excess of net assets of
acquired companies for certain of the Company's acquisitions and, in the
second quarter of 1995, the anticipated inability to provide a tax benefit
on losses incurred at certain foreign subsidiaries.
First Six Months 1996 Compared With First Six Months 1995
Revenues were $58.2 million in the first six months of 1996, compared
with $36.6 million in the first six months of 1995, an increase of 59%.
Revenues for the first six months of 1996 included $6.1 million of revenues
from the acquisition of the Kevex businesses and approximately $13.6
million of additional revenues from the acquisition of GIS. Revenues from
existing operations increased approximately 7% in the first six months of
1996 from the first six months of 1995 due primarily to the inclusion of
approximately $1.5 million of revenues related to unusually large shipments
of air bag inspection systems in the first quarter of 1996 at the Company's
Nicolet Imaging Systems (NIS) business and an increase in demand,
particularly in the Pacific Rim, for confocal laser scanning microscopes
and X-ray microanalyzers manufactured by NORAN. Revenues were negatively
affected by approximately $0.8 million in the first six months of 1996 due
to the strengthening in the value of the U.S. dollar relative to the
Japanese yen and other foreign currencies in countries where the Company
operates.
The gross profit margin decreased to 48% in the first six months of
1996 from 49% in the first six months of 1995. Higher gross profit margins
at the Company's Nicolet Instrument Technologies Inc. (NIT) subsidiary, a
manufacturer of DSOs, resulting from manufacturing efficiencies was more
than offset by the inclusion of lower-margin air bag inspection systems
shipped in the first quarter of 1996 and the inclusion of lower-margin
revenues at acquired companies.
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THERMOSPECTRA CORPORATION
First Six Months 1996 Compared With First Six Months 1995 (continued)
Selling, general and administrative expenses as a percentage of
revenues decreased to 29% in the first six months of 1996 from 31% in the
first six months of 1995 due principally to higher revenues at the
Company's existing operations and the inclusion of lower selling expenses
as a percentage of revenues at the acquired Kevex businesses, offset in
part by the inclusion of higher selling, general and administrative
expenses as a percentage of revenues at GIS.
Research and development expenses as a percentage of revenues were 10%
in both the first six months of 1996 and 1995. Higher research and
development expenditures at NORAN and NIT for products released in the
second quarter of 1996 and higher research and development expenditures as
a percentage of revenues at the acquired Kevex businesses were offset by
lower expenditures as a percentage of revenues at NIS.
Interest income increased to $0.5 million in the first six months of
1996 from $0.4 million in the first six months of 1995 principally due to
higher cash balances in 1996. Interest expense, related party, in the first
six months of 1996 and 1995 represents interest expense associated with a
$7.3 million promissory note issued to Thermo Instrument Systems Inc.
(Thermo Instrument) in 1994 and, in the first six months of 1995, interest
expense associated with a $15.0 million promissory note issued to Thermo
Electron Corporation (Thermo Electron) in May 1995. The $15.0 million note
was repaid in the third quarter of 1995.
The effective tax rate was 40% in the first six months of 1996,
compared with 43% in the first six months of 1995. The effective tax rates
exceed the statutory federal income tax rate due primarily to the impact of
state income taxes, nondeductible amortization of cost in excess of net
assets of acquired companies for certain of the Company's acquisitions and,
in 1995, the anticipated inability to provide a tax benefit on losses
incurred at certain foreign subsidiaries.
Liquidity and Capital Resources
Consolidated working capital was $21.6 million at June 29, 1996,
compared with $36.0 million at December 30, 1995. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$20.5 million at June 29, 1996, compared with $20.3 million at December 30,
1995. Cash provided by operating activities was $3.2 million in the first
six months of 1996, compared with $2.8 million in the first six months of
1995. Due to parent company included in the net cash provided by operating
activities section in the accompanying 1996 statement of cash flows
includes a receivable of $0.8 million from Thermo Instrument representing
the positive cash flow of the Kevex businesses in the second quarter of
1996.
Pursuant to an agreement executed on August 5, 1996, the Company
acquired the Kevex businesses from Thermo Instrument (Note 2) for $21.5
million, subject to a post-closing adjustment to be negotiated with Fisons
by Thermo Instrument. Due to parent company in the accompanying 1996
balance sheet includes a payable of $21.5 million for the acquisition of
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THERMOSPECTRA CORPORATION
Liquidity and Capital Resources (continued)
the Kevex businesses. Subsequent to the end of the quarter, the Company
paid the liability, net of the $0.8 million receivable described above, to
Thermo Instrument. In connection with the payment to Thermo Instrument, the
Company borrowed $15.0 million from Thermo Electron pursuant to a
promissory note due 1998 and bearing interest at the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each
quarter.
The Company expended $1.9 million during the first six months of 1996
for property, plant and equipment, including $1.3 million to purchase a
building previously leased by NIS. The Company plans to expend
approximately $1.0 million during the remainder of 1996 for the purchase of
property, plant and equipment.
Although the Company expects to have positive cash flow from its
operations, the Company anticipates it may require significant amounts of
cash to pursue the acquisition of complementary businesses. The Company
expects that it would seek to finance any such acquisitions through a
combination of internal funds, additional equity financing or convertible
debt financing from the capital markets and/or short-term borrowings from
Thermo Instrument or Thermo Electron. The Company believes that its
existing resources and cash provided by operations are sufficient to meet
the capital requirements of its existing businesses for the foreseeable
future.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On May 19, 1996, at the Annual Meeting of Shareholders, the
shareholders elected five directors to a one-year term expiring in 1997.
The directors reelected at the meeting were Dr. Elias P. Gyftopoulos, Earl
R. Lewis, Theo Melas-Kyriazi, Arvin H. Smith, and Michael P. Stansky. Each
nominee for director received 10,574,174 shares voted in favor of his
election and 3,600 shares voted against. No abstentions or broker non-votes
were recorded on the election of directors.
The shareholders also approved a proposal to adopt an employees' stock
purchase plan and to reserve 50,000 shares of the Company's common stock
for issuance thereunder as follows: 10,568,074 shares voted in favor, 6,700
shares voted against, and 3,000 shares abstained. No broker non-votes were
recorded on the proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMOSPECTRA 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 6th day of August 1996.
THERMOSPECTRA CORPORATION
Paul F. Kelleher
-------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
-------------------------
John N. Hatsopoulos
Chief Financial Officer
14PAGE
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THERMOSPECTRA CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
--------------------------------------------------------------------------
2 Asset Purchase Agreement dated as of August 5, 1996 between
the Company and Thermo Instrument Systems Inc.
10.1 $15,000,000 Promissory Note dated as of August 5, 1996
issued by the Company to Thermo Electron Corporation.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
EXHIBIT 2
ASSET PURCHASE AGREEMENT
This AGREEMENT is dated as of August 5, 1996 by and among NK
Instruments Inc., a Delaware corporation ("NK"), Kevex
Instruments Inc., a Delaware corporation ("New Kevex"), and
Thermo Instrument Systems Inc., a Delaware corporation
("Thermo").
WHEREAS, NK desires to sell all of NK's property and assets,
real, personal and mixed, tangible and intangible, subject to
certain liabilities, to New Kevex, and New Kevex desires to
purchase such assets, and to assume such liabilities;
NOW, THEREFORE, in consideration of the premises and mutual
promises and agreements set forth herein, the parties hereto
hereby agree as follows:
1. Purchase and Sale of Assets.
(a) NK hereby sells, assigns, transfers, conveys, and
delivers to New Kevex all of NK's property, assets and rights,
real, personal and mixed, tangible and intangible (collectively,
the "Assets"). In consideration for the Assets, New Kevex shall
pay to NK the sum of $21,527,000 in cash (the "Purchase
Price"). The Parties ackowledge and agree that such Purchase
Price represents the sum of (i) the net tangible assets of NK
(assumed to be $15,709,000) as of the date of NK's acquisition of
the business of Kevex, Inc., a Delaware corporation, and Kevex
X-ray, Inc., a California corporation (collectively, "Old
Kevex"), as part of the acquisition on March 29, 1996 by Thermo
and its subsidiaries of certain businesses of Fisons plc (the
"Fisons Businesses") pursuant to the Amended and Restated Asset
and Stock Purchase Agreement dated as of March 29, 1996 among
Thermo, Thermo Electron Corporation and Fisons plc (the "Restated
Agreement"), plus (ii) a percentage of the total goodwill
associated with Thermo's acquisition of the Fisons Businesses
equal to the sales of Old Kevex for the 1994 and 1995 fiscal
years relative to the total sales of the Fisons Businesses for
such years. The parties acknowledge that the purchase price paid
by Thermo for the Fisons Businesses is subject to a post-closing
adjustment based on the difference between the value of the net
tangible assets of the Fisons Businesses as shown on the closing
balance sheet dated as of March 29, 1996 (the "Closing Balance
Sheet") and the target net tangible asset value provided for in
the Restated Agreement. In the event of any such adjustment, the
Purchase Price shall be recalculated in accordance with the third
sentence of this paragraph to account for (A) any adjustment in
the net tangible assets (other than cash) of NK as shown on the
Closing Balance Sheet from $15,709,000, and (B) any adjustment in
the total goodwill associated with Thermo's acquisition of the
Fisons Businesses. If any such recalculation results in an
increase in the Purchase Price, New Kevex shall pay the amount of
such increase to NK, and if any such recalculation results in a
decrease in the Purchase Price, NK shall pay the amount of such
PAGE
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decrease to New Kevex. Any payment made pursuant to the
preceding sentence shall be made within ten days after the
Closing Balance Sheet has become final and shall also be
accompanied by interest from the date hereof calculated as
provided in Section 4.1 of the Restated Agreement.
(b) The Assets include, but are not limited to, the
following:
(i) all trade and other accounts receivable and notes
receivable;
(ii) all inventories of raw materials, work in process,
finished goods, supplies, packaging materials,
spare parts and similar items;
(iii) all machinery, equipment, tools and tooling,
furniture, fixtures, leasehold improvements and
motor vehicles;
(iv) all real property, leaseholds and subleaseholds in
real property, and easements, rights-of-way and
other appurtenants thereto;
(v) (A) all patents, patent applications, patent
disclosures and all related continuation,
continuation-in-part, divisional, reissue,
re-examination, utility, model, certificate of
invention and design patents, patent application,
registrations and applications for registrations,
(B) all trademarks, service marks, trade dress,
logos, trade names and corporate names and
registrations and applications for registration
thereof,
(C) all copyrights and registrations and
applications for registration thereof, mask works
and registrations and applications for
registration thereof, computer software, date and
documentation, trade secrets and confidential
business information, whether patentable or
nonpatentable and whether or not reduced to
practice, know-how, manufacturing and product
processes and techniques, research and development
information, copyrightable works, financial,
marketing and business data, pricing and cost
information, business and marketing plans and
customer and supplier lists and information, other
proprietary rights relating to any of the
foregoing (including without limitation remedies
against infringements thereof and rights of
protection of interest therein under the laws of
all jurisdictions) and copies and tangible
embodiments thereof;
(vi) all rights under contracts, agreements or
instruments;
(vii) all claims, prepayments, refunds, causes of
action, choses in actions, rights of recovery,
2PAGE
<PAGE>
rights of setoff and rights of recoupment,
including all rights under warranties;
(viii) all permits, licenses, registrations,
certificates, franchises, variances and other
similar rights;
(ix) all books, records, accounts, ledgers, files,
documents, correspondence, lists (customer or
otherwise), product and sales literature, drawings
or specifications, employment records,
manufacturing and technical manuals, advertising
and promotional materials, studies, reports and
other printed or written materials;
(x) securities, partnership, joint venture or other
equity interests in any other business entity; and
(xi) all claims and defenses relating to any of the
foregoing or to the liabilities assumed by New
Kevex pursuant to Section 2 below.
2. Assumption of Liabilities. From and after the date
hereof, New Kevex shall assume any and all liabilities,
commitments and obligations of NK of any nature, kind and
description except for the Excluded Liabilities (the
"Liabilities"). "Excluded Liabilities" means all liabilities,
commitments and obligations of NK or any of its subsidiaries that
result from any third party claim based upon the acts or
omissions of NK or such subsidiaries on or after March 29, 1996
and prior to the date hereof.
3. Further Assurances. At the request of New Kevex at any
time on or after the date hereof, NK will execute and deliver
such further instruments of transfer and conveyance and take such
other action as New Kevex reasonably may request effectively to
assign and transfer to New Kevex any of the Assets. At the
request of NK at any time on or after the date hereof, New Kevex
will execute and deliver such further instruments of assumption
and take such other action as NK may reasonably request
effectively to assume the Liabilities.
4. Regarding Certain Consents. Nothing in this Agreement
shall be construed as an attempt to assign any contract,
agreement, permit, franchise, or claim included in the Assets
that is, by its term or in law, nonassignable without the consent
of the other party or parties thereto, unless such consent shall
have been given, or as to which all the remedies for the
enforcement thereof enjoyed by NK would not, as a matter of law,
pass to New Kevex as an incident of the assignments provided for
by this Agreement. In order, however, to provide New Kevex the
full realization and value of every contract, agreement, permit,
franchise and claim of the character described in the preceding
sentence, NK, on and after the date hereof by itself or by its
agents, shall, at the request and expense and under the direction
of New Kevex, in the name of NK or otherwise as New Kevex shall
specify and as shall be permitted by law, take all such
reasonable action (including without limitation the appointment
3PAGE
<PAGE>
of New Kevex as an attorney-in-fact for NK) and do or cause to be
done all such things as shall in the opinion of New Kevex be
necessary or proper (a) to assure that the rights and obligations
of NK under such contracts, agreements, permits, franchises, and
claims shall be preserved for the benefit of New Kevex and (b) to
facilitate receipt of the consideration to be received by NK in
and under every such contract, agreement, permit, franchise, and
claim, which consideration NK shall hold for the benefit of, and
upon request of New Kevex shall deliver to, New Kevex.
5. NK's Representations and Warranties. NK represents and
warrants that:
(a) Organization and Standing. NK is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware.
(b) Approval of Transactions. NK has obtained all
necessary corporate authorizations and approvals, and has
taken all actions required for the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby.
(c) No Conflict. Neither the execution nor delivery
of this Agreement, nor the consummation of the transactions
herein contemplated, nor the fulfillment of or compliance
with the terms and provisions hereof will (1) conflict with
the Certificate of Incorporation or By-laws of NK, (2)
violate any current provisions of law, administrative
regulation, or court decree applicable to NK or (3) conflict
with or result in a breach of any of the terms, conditions
or provisions of or constitute default under any material
agreement or instrument to which NK is a party or by which
it is bound.
6. Kevex's Representations and Warranties.
(a) Organization and Standing. New Kevex is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Approval of Transactions. New Kevex has obtained
all necessary corporate authorizations and approvals, and
has taken all actions required for the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(c) No Conflict. Neither the execution nor delivery
of this Agreement, nor the consummation of the
transactions herein contemplated, nor the fulfillment of or
compliance with the terms and provisions hereof will
(1) conflict with the Certificate of
Incorporation or By-laws of New Kevex, (2) violate any current
provisions of law, administrative regulation, or court
4PAGE
<PAGE>
decree applicable to New Kevex or (3) conflict with or
result in a breach of any of the terms, conditions or provisions
of or constitute default under any material agreement or
instrument to which New Kevex is a party or by which it
is bound.
7. Indemnification.
(a) NK agrees to indemnify and hold harmless New Kevex
from any and all damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any
reasonable legal, accounting or other expenses for investigating
or defending any actions or threatened actions) incurred by New
Kevex as a result of (i) the Excluded Liabilities, (ii) the
inaccuracy of any representation or warranty contained in Section
5 hereof or (iii) the breach by NK of any provision hereof.
(b) New Kevex agrees to indemnify and hold harmless NK
from any and all damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any
reasonable legal, accounting or other expenses for investigating
or defending any actions or threatened actions) incurred by NK as
a result of (i) the Liabilities, (ii) the inaccuracy of any
representation or warranty contained in Section 6 hereof, or
(iii) the breach by New Kevex of any provision hereof.
(b) Whenever any claim shall arise for indemnification
hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the other party (the "Indemnifying
Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third party, the notice to
the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a
third party for which the Indemnified Party is entitled to
indemnification hereunder without the prior consent of the
Indemnifying Party, unless suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall
not have taken control of such suit after notification thereof as
provided in Section 7(c) of this Agreement.
(c) In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and expense
may, upon notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding if it acknowledges to the
Indemnified Party its obligations to indemnify the Indemnified
Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not
control) the defense of any such action, with its counsel and at
its own expense. If the Indemnifying Party does not assume the
5PAGE
<PAGE>
defense of any such claim or litigation resulting therefrom
within 30 days after the date the Indemnifying Party is notified
of such claim pursuant to Paragraph 7(b) hereof, (i) the
Indemnified Party may defend against such claim or litigation,
after giving notice of the same to the Indemnifying Party, on
such terms as are appropriate in the Indemnified Party's
reasonable judgment, and (ii) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense.
8. Restated Agreement. NK and Thermo hereby assign to New
Kevex, and New Kevex hereby accepts and asssumes, their
respective rights and obligations under the Restated Agreement,
and any agreements or instruments excuted by NK or Thermo in
connection therewith, but only to the extent such rights and
obligations relate primarily to the business and assets hereby
transferred to New Kevex. In furtherance of the foregoing, New
Kevex may enforce, in its own name and in the name and on behalf
of NK or Thermo, any of the rights of Thermo under Section 11 of
the Restated Agreement, and, if requested by New Kevex, NK and
Thermo shall take such actions, at their own expense, as New
Kevex shall reasonably request in order that New Kevex shall have
the full rights and benefits granted to it under this Section 8.
9. Transfer and Sales Tax. Notwithstanding any provisions
of law to the contrary, NK shall be responsible for and shall pay
(a) all sales and transfer taxes, and (b) all governmental
charges, if any, upon the sale or transfer of any of the Assets.
10. Effective Date. The transfer of the Assets shall be
deemed to be effective as of the date hereof.
11. Captions. The captions and headings to the various
sections, paragraphs and exhibits of this Agreement are for
convenience of reference only and shall not affect or control the
meaning or interpretation of any of the provisions of this
Agreement.
12. Integration. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
13. Notice of Communication. Any notice or other
communication shall be in writing and shall be personally
delivered, or sent by overnight or second day courier or by first
class mail, return receipt requested, to the party to whom such
notice or other communication is to be given or made at such
party's address set forth below, or to such other address as such
party shall designate by written notice to the other party as
follows:
If to NK or Thermo Instrument Systems Inc.:
Thermo Instrument Systems Inc.
6PAGE
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c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
If to New Kevex:
Kevex Instruments Inc.
c/o ThermoSpectra Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
provided that any notice of change of address, and any notice or
other communication given otherwise than as specified above shall
be effective only upon receipt; and further that any presumption
of receipt by the addressee shall be inoperable during the period
of any interruption in Postal Service.
14. Survival of Representations and Warranties. All
representations and warranties made by NK or New Kevex in this
Agreement shall survive the execution and delivery of this
Agreement.
15. Governing Law; Assignment. This Agreement is to be
construed, interpreted, applied and governed in all respects in
accordance with the laws of the Commonwealth of Massachusetts,
without regard to its conflict of laws provisions, is to take
effect as a sealed instrument, is binding upon and inures to the
benefit of the parties hereto and their respect successors and
assigns and may be canceled, modified or amended only by a
written instrument executed by NK and New Kevex. No party hereto
may assign its rights hereunder without prior written consent of
the other party.
7PAGE
<PAGE>
16. Guaranty. Thermo hereby unconditionally guarantees all
of the obligations of NK under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
NK INSTRUMENTS INC.
By /s/Earl R. Lewis
----------------
President
KEVEX INSTRUMENTS INC.
By /s/Theo Melas-Kyriazi
-----------------------
Theo Melas-Kyriazi
Vice President
THERMO INSTRUMENT SYSTEMS INC.
By:/s/Earl R. Lewis
----------------
Earl R. Lewis
Executive Vice President and
Chief Operating Officer
Exhibit 10.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, PLEDGED,
MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE
SECURITIES OR (2) UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
THERMOSPECTRA CORPORATION
Promissory Note Due August 5, 1998
Waltham, Massachusetts
August 5, 1996
For value received, ThermoSpectra Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to Thermo
Electron Corporation (hereinafter referred to as the "Payee"), or
registered assigns, on August 5, 1998, as described below, the
principal sum of fifteen million dollars ($15,000,000) or such
part thereof as then remains unpaid, to pay interest from the
date hereof on the whole amount of said principal sum remaining
from time to time unpaid at a rate per annum equal to the rate of
the Commercial Paper Composite Rate as reported by Merrill Lynch
Capital Markets, as an average of the last five business days of
the fiscal quarter, plus twenty-five (25) basis points, such
interest to be payable in arrears on the first day of each fiscal
quarter of the Company during the term set forth herein, until
the whole amount of the principal hereof remaining unpaid shall
become due and payable, and to pay interest on all overdue
principal and interest at a rate per annum equal to the rate of
interest announced from time to time by The First National Bank
of Boston at its head office in Boston, Massachusetts as its
"base rate" plus one percent (1%). Principal and all accrued but
unpaid interest shall be repaid on August 5, 1998. Principal and
interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office
of the Payee or at such other place as the legal holder may
designate from time to time in writing to the Company. Interest
shall be computed on an actual 360-day basis.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. All
prepayments shall be applied first to accrued interest and then
to principal.
1PAGE
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The then unpaid principal amount of, and interest
outstanding on, this Note shall be and become immediately due and
payable without notice or demand, at the option of the holder
hereof, upon the occurrence of any of the following events:
(a) the failure of the Company to pay any amount due
hereunder within ten (10) days of the date when due;
(b) any representation, warranty or statement made or
furnished to the Payee by the Company in connection with
this Note or the transaction from which it arises shall
prove to have been false or misleading in any material
respect as of the date when made or furnished;
(c) the failure of the Company to pay its debts as
they become due, the insolvency of the Company, the filing
by or against the Company of any petition under the U.S.
Bankruptcy Code (or the filing of any similar petition under
the insolvency law of any jurisdiction), or the making by
the Company of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver,
custodian or similar agent with respect to, or the taking by
any such person of possession of, any property of the
Company;
(d) the sale by the Company of all or substantially
all of its assets;
(e) the merger or consolidation of the Company with or
into any other corporation in a transaction in which the
Company is not the surviving entity;
(f) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Company or any liability or obligation of the Company to
the holder hereof; and
(g) the suspension of the transaction of the usual
business of the Company.
Upon surrender of this Note for transfer or exchange, a new
Note or new Notes of the same tenor dated the date to which
interest has been paid on the surrendered Note and in an
aggregate principal amount equal to the unpaid principal amount
of the Note so surrendered will be issued to, and registered in
the name of, the transferee or transferees. The Company may
treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all
other purposes.
2PAGE
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In case any payment herein provided for shall not be paid
when due, the Company further promises to pay all cost of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Payee in exercising
any right hereunder shall operate as a waiver of such right or of
any other right of the Payee, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the
same or any other right on any future occasion. The Company
hereby waives presentment, demand, notice of prepayment, protest
and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this
Note. The undersigned hereby assents to any indulgence and any
extension of time for payment of any indebtedness evidenced
hereby granted or permitted by the Payee.
This Note shall be governed by and construed in accordance
with, the laws of the Commonwealth of Massachusetts and shall
have the effect of a sealed instrument.
THERMOSPECTRA CORPORATION
By:________________________
Theo Melas-Kyriazi
President and Chief Executive
Officer
[Corporate Seal]
Attest:
____________________________
Sandra L. Lambert
Secretary
Exhibit 11
THERMOSPECTRA CORPORATION
Computation of Earnings per Share
Three Months Ended Six Months Ended
------------------------ ------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 1,562,000 $ 1,033,000 $ 2,998,000 $ 1,945,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 12,436,356 10,505,000 12,434,529 10,505,000
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 41,715
----------- ----------- ----------- -----------
Weighted average shares
outstanding,
as adjusted (b) 12,436,356 10,505,000 12,434,529 10,546,715
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .13 $ .10 $ .24 $ .18
=========== =========== =========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THERMOSPECTRA CORP.'S QUATERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE
29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 17,461
<SECURITIES> 3,006
<RECEIVABLES> 30,608
<ALLOWANCES> 1,339
<INVENTORY> 22,614
<CURRENT-ASSETS> 78,958
<PP&E> 26,689
<DEPRECIATION> 5,591
<TOTAL-ASSETS> 151,381
<CURRENT-LIABILITIES> 57,318
<BONDS> 0
0
0
<COMMON> 124
<OTHER-SE> 85,139
<TOTAL-LIABILITY-AND-EQUITY> 151,381
<SALES> 58,208
<TOTAL-REVENUES> 58,208
<CGS> 30,340
<TOTAL-COSTS> 30,340
<OTHER-EXPENSES> 6,075
<LOSS-PROVISION> 146
<INTEREST-EXPENSE> 209
<INCOME-PRETAX> 5,020
<INCOME-TAX> 2,022
<INCOME-CONTINUING> 2,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,998
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
