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 30, 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 April 26, 1996
---------------------------- -----------------------------
Common Stock, $.01 par value 12,435,450
PAGE
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PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOSPECTRA CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
March 30, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 21,474 $ 20,306
Accounts receivable, less allowances of
$1,108 and $1,095 23,317 23,653
Inventories:
Raw materials and supplies 8,363 7,973
Work in process 3,750 3,949
Finished goods 4,277 6,350
Prepaid income taxes 4,220 4,376
Other current assets 1,205 1,015
-------- --------
66,606 67,622
-------- --------
Property, Plant and Equipment, at Cost 20,356 19,496
Less: Accumulated depreciation and
amortization 4,777 4,148
-------- --------
15,579 15,348
-------- --------
Patents, Trademarks and Other Assets 4,474 4,571
-------- --------
Equity Investment in Joint Venture 2,450 2,429
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 33,702 32,947
-------- --------
$122,811 $122,917
======== ========
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THERMOSPECTRA CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 30, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 8,298 $ 7,719
Accrued payroll and employee benefits 3,164 3,627
Accrued installation and warranty expenses 2,225 2,310
Deferred revenue 1,920 2,216
Accrued income taxes 2,739 2,120
Other accrued expenses 9,495 11,368
Due to parent company 2,370 2,301
-------- --------
30,211 31,661
-------- --------
Deferred Income Taxes and Other Deferred Items 1,507 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; 12,434,050 and 12,432,000 shares
issued and outstanding 124 124
Capital in excess of par value 76,976 76,955
Retained earnings 7,164 5,728
Cumulative translation adjustment (471) (282)
-------- --------
83,793 82,525
-------- --------
$122,811 $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
-----------------------
March 30, April 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $26,927 $14,449
------- -------
Costs and Operating Expenses:
Cost of revenues 14,139 7,141
Selling, general and administrative expenses 7,821 4,396
Research and development expenses 2,756 1,439
------- -------
24,716 12,976
------- -------
Operating Income 2,211 1,473
Interest Income 273 247
Interest Expense, Related Party (107) (120)
------- -------
Income Before Provision for Income Taxes 2,377 1,600
Provision for Income Taxes 941 688
------- -------
Net Income $ 1,436 $ 912
======= =======
Earnings per Share $ .12 $ .09
======= =======
Weighted Average Shares 12,433 10,588
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 1,436 $ 912
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 995 482
Provision for losses on accounts receivable 36 73
Other noncash expenses 120 68
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable 118 (352)
Inventories 1,774 (795)
Other current assets (202) 892
Accounts payable 438 (355)
Other current liabilities (1,838) (678)
------- -------
Net cash provided by operating
activities 2,877 247
------- -------
Investing Activities:
Acquisition, net of cash acquired - (1,956)
Purchases of available-for-sale investments - (87)
Purchases of property, plant and equipment (1,660) (284)
Other (34) (52)
------- -------
Net cash used in investing
activities (1,694) (2,379)
------- -------
Financing Activities:
Net proceeds from issuance of Company
common stock 21 -
------- -------
Exchange Rate Effect on Cash (36) (40)
------- -------
Increase (Decrease) in Cash and Cash Equivalents 1,168 (2,172)
Cash and Cash Equivalents at Beginning of Period 20,306 14,439
------- -------
Cash and Cash Equivalents at End of Period $21,474 $12,267
======= =======
Cash Paid For:
Interest $ 107 $ 219
Income taxes $ 336 $ 15
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 (a) the results of operations for
the three-month periods ended March 30, 1996 and April 1, 1995, (b) the
financial position at March 30, 1996, and (c) the cash flows for the
three-month periods ended March 30, 1996 and April 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.
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; 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.
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THERMOSPECTRA CORPORATION
Overview (continued)
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
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
First Quarter 1996 Compared With First Quarter 1995
Revenues were $26.9 million in the first quarter of 1996, compared
with $14.4 million in the first quarter of 1995, an increase of 86%.
Revenues increased $10.6 million due to the inclusion of revenues from
Gould Instrument Systems, Inc. (GIS), a manufacturer of digital
oscillographic recorders, DSOs, and data acquisition systems, which was
acquired on May 10, 1995. Revenues from existing operations increased
approximately 14% in the first quarter of 1996 from the first quarter of
1995, due to the inclusion of approximately $1.5 million of revenues
related to unusually large shipments of air bag inspection systems at the
Company's Nicolet Imaging Systems (NIS) business and due to an increase in
demand, particularly in the Pacific Rim, for confocal laser scanning
microscopes manufactured by the Company's NORAN Instruments, Inc. (NORAN)
subsidiary.
The gross profit margin decreased to 47.5% in the first quarter of
1996 from 50.6% in the first quarter of 1995. A higher gross profit margin
at the Company's Nicolet Instrument Technologies Inc. (NIT) subsidiary, a
manufacturer of DSOs, resulting from manufacturing efficiencies was more
than offset by a lower gross profit margin at NIS attributable to the
inclusion of lower-margin air bag inspection systems revenues and the
inclusion of lower-margin revenues at GIS. GIS's gross profit margin in the
first quarter of 1996 was 44.4%, compared with a gross profit margin of
43.0% for the period from May 10, 1995 to December 30, 1995. The Company's
goal is to continue to increase the gross profit margin at GIS by
improvements in product mix and manufacturing efficiencies, although there
can be no assurance that the Company will be successful in these efforts.
7PAGE
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THERMOSPECTRA CORPORATION
First Quarter 1996 Compared With First Quarter 1995 (continued)
Selling, general and administrative expenses as a percentage of
revenues decreased to 29% in the first quarter of 1996 from 30% in the
first quarter of 1995 due principally to higher revenues at the Company's
existing operations, offset in part by higher selling, general and
administrative expenses as a percentage of revenues at GIS.
Research and development expenses as a percentage of revenues was 10%
in both the first quarter of 1996 and 1995. Higher research and development
expenditures at NORAN and NIT as a result of new product introductions
scheduled for release in the second quarter of 1996 were offset by lower
expenditures as a percentage of revenues at NIS due to higher revenues in
the first quarter of 1996.
Interest income was relatively unchanged in the first quarter of 1996,
compared with the first quarter of 1995. Interest expense, related party
represents interest expense associated with a $7.3 million promissory note
issued to Thermo Instrument Systems Inc. (Thermo Instrument) in September
1994.
The effective tax rate was 40% in the first quarter of 1996, compared
with 43% in the first quarter of 1995. These rates exceeded 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 first
quarter of 1995, the anticipated inability to provide a tax benefit on
losses incurred at certain foreign subsidiaries.
Liquidity and Capital Resources
Consolidated working capital was $36.4 million at March 30, 1996,
compared with $36.0 million at December 30, 1995. Included in working
capital are cash and cash equivalents of $21.5 million at March 30, 1996,
compared with $20.3 million at December 30, 1995. Cash provided by
operating activities was $2.9 million in the three months ended March 30,
1996. The Company plans to expend approximately $3.0 million for the
purchase of property, plant and equipment in 1996, including $1.3 million
that was expended in the first quarter of 1996 to purchase a building
previously leased by NIS.
In March 1996, Thermo Instrument completed the acquisition of a
substantial portion of the Scientific Instruments Division of Fisons plc
(Fisons). The Company has had discussions with Thermo Instrument regarding
the acquisition of the Kevex division of Fisons, a manufacturer of X-ray
microanalyzers, X-ray microfluorescence instruments, and microfocus X-ray
tubes with annual revenues of approximately $27 million. No assurance can
be given that the Company will ultimately acquire Kevex, and the timing and
terms of the acquisition, including price, would be subject to negotiation
between the Company and Thermo Instrument.
8PAGE
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THERMOSPECTRA CORPORATION
Liquidity and Capital Resources (continued)
Although the Company expects to have positive cash flow from its
existing 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 Corporation. 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 6 - Exhibits
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
9PAGE
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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 7th day of May 1996.
THERMOSPECTRA CORPORATION
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Chief Financial Officer
10PAGE
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THERMOSPECTRA CORPORATION
Exhibit Index
Exhibit
Number Description of Exhibit Page
--------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMOSPECTRA CORPORATION
Computation of Earnings per Share
Three Months Ended
-------------------------
March 30, April 1,
1996 1995
- - -------------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net income (a) $ 1,436,000 $ 912,000
----------- -----------
Shares:
Weighted average shares outstanding 12,432,700 10,505,000
Add: Shares issuable from assumed exercise
of options (as determined by the
application of the treasury stock method) - 83,430
----------- -----------
Weighted average shares outstanding, as adjusted (b) 12,432,700 10,588,430
----------- -----------
Primary Earnings per Share (a) / (b) $ .12 $ .09
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THERMOSPECTRA CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 21,474
<SECURITIES> 0
<RECEIVABLES> 24,425
<ALLOWANCES> 1,108
<INVENTORY> 16,390
<CURRENT-ASSETS> 66,606
<PP&E> 20,356
<DEPRECIATION> 4,777
<TOTAL-ASSETS> 122,811
<CURRENT-LIABILITIES> 30,211
<BONDS> 0
<COMMON> 124
0
0
<OTHER-SE> 83,669
<TOTAL-LIABILITY-AND-EQUITY> 122,811
<SALES> 26,927
<TOTAL-REVENUES> 26,927
<CGS> 14,139
<TOTAL-COSTS> 14,139
<OTHER-EXPENSES> 2,756
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 107
<INCOME-PRETAX> 2,377
<INCOME-TAX> 941
<INCOME-CONTINUING> 1,436
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 1,436
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
