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 September 28, 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 October 25, 1996
---------------------------- -------------------------------
Common Stock, $.01 par value 12,439,645
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOSPECTRA CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
September 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 14,501 $ 20,306
Available-for-sale investments, at quoted
market value (amortized cost of $3,038) 3,038 -
Accounts receivable, less allowances of
$1,555 and $1,095 26,926 23,653
Inventories:
Raw materials and supplies 9,987 7,973
Work in process 7,483 3,949
Finished goods 7,122 6,350
Prepaid income taxes 5,128 4,376
Other current assets 1,097 1,015
-------- --------
75,282 67,622
-------- --------
Property, Plant and Equipment, at Cost 26,792 19,496
Less: Accumulated depreciation and
amortization 6,320 4,148
-------- --------
20,472 15,348
-------- --------
Patents, Trademarks and Other Assets 5,222 4,571
-------- --------
Equity Investment in Joint Venture 2,457 2,429
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 42,475 32,947
-------- --------
$145,908 $122,917
======== ========
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THERMOSPECTRA CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 28, December 30,
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 9,149 $ 7,719
Accrued payroll and employee benefits 4,911 3,627
Accrued installation and warranty expenses 2,542 2,310
Deferred revenue 3,504 2,216
Accrued income taxes 3,130 2,120
Other accrued expenses 10,238 11,368
Due to affiliates 1,479 2,301
-------- --------
34,953 31,661
-------- --------
Deferred Income Taxes and Other Deferred Items 1,522 1,431
-------- --------
Long-term Obligations, Due to Thermo Instrument
and Thermo Electron (Note 2) 22,300 7,300
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized; 12,439,950 and 12,432,000 shares
issued 124 124
Capital in excess of par value 77,034 76,955
Retained earnings 10,416 5,728
Treasury stock at cost, 305 shares (5) -
Cumulative translation adjustment (436) (282)
-------- --------
87,133 82,525
-------- --------
$145,908 $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
---------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $30,329 $26,605
------- -------
Costs and Operating Expenses:
Cost of revenues 15,237 13,600
Selling, general and administrative expenses 9,196 8,210
Research and development expenses 3,300 2,681
Other nonrecurring income, net (Note 3) (185) -
------- -------
27,548 24,491
------- -------
Operating Income 2,781 2,114
Interest Income 228 142
Interest Expense, Related Party (239) (216)
------- -------
Income Before Provision for Income Taxes 2,770 2,040
Provision for Income Taxes 1,080 823
------- -------
Net Income $ 1,690 $ 1,217
======= =======
Earnings per Share $ .14 $ .11
======= =======
Weighted Average Shares 12,439 11,510
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
----------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
-----------------------------------------------------------------------
Revenues $88,537 $63,247
------- -------
Costs and Operating Expenses:
Cost of revenues 45,577 32,162
Selling, general and administrative expenses 26,272 19,464
Research and development expenses 9,375 6,316
Other nonrecurring income, net (Note 3) (185) -
------- -------
81,039 57,942
------- -------
Operating Income 7,498 5,305
Interest Income 740 560
Interest Expense, Related Party (448) (596)
Other Income - 184
------- -------
Income Before Provision for Income Taxes 7,790 5,453
Provision for Income Taxes 3,102 2,291
------- -------
Net Income $ 4,688 $ 3,162
======= =======
Earnings per Share $ .38 $ .29
======= =======
Weighted Average Shares 12,436 10,868
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOSPECTRA CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
---------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income $ 4,688 $ 3,162
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,341 2,383
Restructuring reserve (Note 3) 683 -
Provision for losses on accounts receivable 182 107
Other noncash expenses 550 326
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 2,012 (137)
Inventories (944) (2,139)
Other current assets 82 903
Accounts payable (138) (1,559)
Due to affiliates (822) 661
Other current liabilities (3,507) (2,452)
Other - (7)
-------- -------
Net cash provided by operating
activities 6,127 1,248
-------- -------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (22,521) (26,120)
Refund of acquisition purchase price (Note 3) 1,103 -
Purchases of available-for-sale investments (3,000) -
Proceeds from sale and maturities of available-
for-sale investments - 4,855
Purchases of property, plant and equipment (2,343) (657)
Proceeds from sale of property, plant and
equipment 77 497
Other (273) (188)
-------- -------
Net cash used in investing activities (26,957) (21,613)
-------- -------
Financing Activities:
Net proceeds from issuance of Company common
stock 74 21,858
Proceeds from issuance of long-term obligations
to Thermo Electron Corporation 15,000 15,000
Repayment of long-term obligation to Thermo
Electron Corporation - (15,000)
-------- -------
Net cash provided by financing
activities $ 15,074 $21,858
-------- -------
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THERMOSPECTRA CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
---------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (49) $ (182)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (5,805) 1,311
Cash and Cash Equivalents at Beginning of Period 20,306 14,439
-------- --------
Cash and Cash Equivalents at End of Period $ 14,501 $ 15,750
======== ========
Noncash Activities:
Fair value of assets of acquired companies $ 30,264 $ 48,570
Cash paid for acquired companies (22,525) (28,043)
-------- --------
Liabilities assumed of acquired companies $ 7,739 $ 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
September 28, 1996, the results of operations for the three- and
nine-month periods ended September 28, 1996 and September 30, 1995, and
the cash flows for the nine-month periods ended September 28, 1996 and
September 30, 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 two businesses that were
formerly part of Fisons from Thermo Instrument for $21.5 million, subject
to a post-closing adjustment to be negotiated with Fisons by Thermo
Instrument. The companies acquired were 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). 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 of acquired companies
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
statements include the results of the Kevex businesses from March 29,
1996.
The cost of the Kevex businesses exceeded the estimated fair value
of the acquired net assets by $10.5 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 Nine
Months Ended Months Ended
------------- ----------------------------
(In thousands except per September 30, September 28, September 30,
share amounts) 1995 1996 1995
------------------------------------------------------------------------
Revenues $33,744 $94,528 $82,808
Net income 866 2,618 975
Earnings per share .08 .21 .09
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.
3. Other Nonrecurring Items
During the third quarter of 1996, the Company finalized
negotiations in connection with amounts claimed for the discontinuance of
the Acqulab product line, which was sold to the Company as part of the
purchase of Gould Instrument Systems Inc. (GIS) in May 1995. Of the $2.0
million settlement received, approximately $1.0 million has been recorded
as a reduction of the purchase price for the unrealized earning potential
of the Acqulab product line, approximately $0.9 million represents
reimbursement for expenses incurred subsequent to the acquisition of GIS
for the ongoing development of Acqulab, and $0.1 million relates to an
adjustment to the postretirement benefit accrual at the time of
acquisition.
At the end of the third quarter of 1996, the Company's GIS
subsidiary commenced a $0.7 million plan of restructuring which included
the termination of approximately 25 employees and the write down of fixed
assets associated with the Acqulab product line. The Company plans to
complete the restructuring plan in the fourth quarter of 1996.
For financial statement purposes, the Company recorded the $0.7
million restructuring expenses and the $0.9 million reimbursement of
expenses incurred by GIS associated with the Acqulab product line as
other nonrecurring income, net in the accompanying statement of income.
The remaining $1.1 million received under the settlement agreement was
recorded as an adjustment to the purchase price paid for GIS, resulting
in a reduction of cost in excess of net assets of acquired companies in
the accompanying 1996 balance sheet. The accompanying balance sheet
includes a $0.4 million reserve associated with the staff reductions
described above.
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THERMOSPECTRA CORPORATION
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.
These statements involve a number of risks and uncertainties, including
those detailed in Item 5 of this Quarterly Report on Form 10-Q.
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
signal measurement systems which consist of 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, and 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 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
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THERMOSPECTRA CORPORATION
Overview (continued)
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
Third Quarter 1996 Compared With Third Quarter 1995
Revenues were $30.3 million in the third quarter of 1996, compared
with $26.6 million in the third quarter of 1995, an increase of 14%. The
increase in revenues resulted from the inclusion of $5.5 million of
revenues from the acquisition of Kevex Instruments and Kevex X-Ray (the
Kevex businesses) (Note 2) and an aggregate $1.1 million due to higher
demand for products manufactured by the Company's NORAN Instruments Inc.
(NORAN) subsidiary, a manufacturer of X-ray microanalyzers and confocal
laser scanning microscopes and Nicolet Imaging Systems (NIS) division, a
manufacturer of X-ray inspection systems. These increases were offset in
part by a decline in revenues due to decreased demand for digital signal
measurement systems manufactured by the Company's Gould Instruments
Systems Inc. (GIS) and Nicolet Instrument Technologies Inc. (NIT)
subsidiaries and an approximate $0.5 million reduction in revenues due to
the strengthening in the value of the U.S. dollar relative to the
currencies in foreign countries where the Company operates.
The Company's gross profit margin increased slightly to 50% in the
third quarter of 1996, compared with 49% in the third quarter of 1995.
Increased gross profit margins at GIS and NIT due to changes in product
mix and manufacturing efficiencies were offset in part by the inclusion
of lower-margin revenues at the acquired Kevex businesses.
Selling, general and administrative expenses as a percentage of
revenues decreased to 30% in the third quarter of 1996 from 31% in the
third quarter of 1995 due principally to lower selling expenses as a
percentage of revenues at Kevex X-Ray.
Research and development expenses as a percentage of revenues were
relatively unchanged at 11% in the third quarter of 1996, compared with
10% in the third quarter of 1995.
Other nonrecurring income, net, represents $0.9 million, of an
aggregate settlement of $2.0 million, for costs incurred by GIS in
connection with its Acqulab product line, offset in part by a $0.7
million restructuring reserve established in the third quarter of 1996
(Note 3).
The effective tax rate was 39% in the third quarter of 1996,
compared with 40% in the third quarter of 1995. The effective tax rates
exceed the statutory federal income tax rate due primarily to the impact
of state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies for certain of the Company's
acquisitions.
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THERMOSPECTRA CORPORATION
First Nine Months 1996 Compared With First Nine Months 1995
Revenues were $88.5 million in the first nine months of 1996,
compared with $63.2 million in the first nine months of 1995, an increase
of 40%. Revenues for the first nine months of 1996 included $11.5 million
of additional revenues from the acquisition of the Kevex businesses and
$11.4 million of additional revenues from the Company's GIS subsidiary,
which was acquired in May 1995. Revenues from the Company's other
operations increased approximately 5% in the first nine months of 1996,
compared with the first nine months of 1995, due to the inclusion of
approximately $1.5 million of revenues related to shipments of airbag
inspection systems in the first quarter of 1996 at NIS and an increase in
demand for products manufactured by NORAN. Revenues were negatively
affected by approximately $1.2 million in the first nine 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 was 49% in the first nine months of both
1996 and 1995. Increased gross profit margins at GIS and NIT due to
changes in product mix and manufacturing efficiencies were offset by the
inclusion of lower-margin revenues from airbag inspection systems shipped
in the first quarter of 1996 and the inclusion of lower-margin revenues
at the acquired Kevex businesses. The gross profit margin for the
combined Kevex businesses was 42%. 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.
Selling, general and administrative expenses as a percentage of
revenues decreased to 30% in the first nine months of 1996 from 31% in
the first nine months of 1995 due principally to lower selling expenses
as a percentage of revenues at Kevex X-Ray.
Research and development expenses as a percentage of revenues were
relatively unchanged at 11% in the first nine months of 1996, compared
with 10% in the first nine months of 1995.
Interest income increased to $740,000 in the first nine months of
1996 from $560,000 in the first nine months of 1995 principally due to
interest earned on higher cash balances in 1996. Interest expense,
related party, in the first nine months of 1996 represents interest
expense associated with a $7.3 million promissory note issued to Thermo
Instrument Systems Inc. (Thermo Instrument) in 1994 and interest expense
associated with a $15.0 million promissory note issued to Thermo Electron
Corporation (Thermo Electron) in August 1996. Interest expense, related
party, in the first nine months of 1995 represents interest expense
associated with the $7.3 million promissory note issued to Thermo
Instrument and a $15.0 million promissory note issued to Thermo Electron
in May 1995. The $15.0 million note issued to Thermo Electron in May 1995
was repaid in the third quarter of 1995.
The effective tax rate was 40% in the first nine months of 1996,
compared with 42% in the first nine months of 1995. The effective tax
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THERMOSPECTRA CORPORATION
First Nine Months 1996 Compared With First Nine Months 1995 (continued)
rates exceed the statutory federal income tax rate due primarily to the
impact of state income taxes and nondeductible amortization of cost in
excess of net assets of acquired companies for certain of the Company's
acquisitions.
Liquidity and Capital Resources
Consolidated working capital was $40.3 million at September 28,
1996, compared with $36.0 million at December 30, 1995, an increase of
$4.3 million. Included in working capital are cash, cash equivalents, and
available-for-sale investments of $17.5 million at September 28, 1996,
compared with $20.3 million at December 30, 1995. Cash provided by
operating activities increased to $6.1 million in the first nine months
of 1996, from $1.2 million in the first nine months of 1995, due
principally to higher income and increased accounts receivable
collections.
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 in connection with the negotiations for the
settlement of the final purchase price for all of the businesses of
Fisons acquired by Thermo Instrument in March 1996. In connection with
the acquisition of the Kevex businesses from Thermo Instrument, the
Company borrowed $15.0 million from Thermo Electron pursuant to a
promissory note due August 1998 and bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
During the third quarter of 1996, the Company received a $2.0
million settlement in connection with the acquisition of GIS (Note 3). Of
the $2.0 million settlement received, $1.1 million was recorded as a
reduction in the purchase price of GIS and $0.9 million represented
reimbursement of expenses incurred by GIS in connection with its Acqulab
product line and was included in the accompanying statement of income.
The Company expended $2.3 million during the first nine months of
1996 for property, plant and equipment, including $1.3 million to
purchase a building previously leased by NIS. The Company has no material
commitments for capital expenditures for the remainder of 1996.
Although the Company expects to generate 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, although
there is no agreement with Thermo Instrument or Thermo Electron under
which such parties are obligated to lend funds to the Company. 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.
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THERMOSPECTRA CORPORATION
PART II - OTHER INFORMATION
Item 5 - Other Information
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1996 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Uncertainty of Growth. Certain of the markets in which the Company
competes have been flat or declining over the past several years. The
Company has identified a number of strategies it believes will allow it
to grow its business, including: acquiring complementary businesses;
developing new applications for its technologies; and strengthening its
presence in selected geographic markets. No assurance can be given that
the Company will be able to successfully implement these strategies, or
that these strategies will result in growth of the Company's business.
Potential Increased Competition. The Company predominantly sells
its products in the high-performance segment of the markets in which it
competes. The products in this segment are generally characterized by
superior engineering and performance and compete more on product
specifications than on price. The other segments of these markets are
dominated by companies with substantially greater financial resources
than those of the Company. If these larger companies enter the
high-performance segment of the market, no assurance can be given that
the Company will be able to successfully compete against them.
Need to Respond to Technological Change. Many of the Company's
products are primarily marketed based on their technology. In order to be
successful, the Company believes that it will be important to continually
improve the technology underlying its products. No assurance can be given
that the Company will be able to do so or that a competitor of the
Company will not develop technology or products that will render the
Company's competing products non-competitive or obsolete.
Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of underperforming businesses and technologies
that complement or augment the Company's existing product lines.
Promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the
need for regulatory approvals, including antitrust approvals. There can
be no assurance that the Company will be able to integrate any acquired
businesses or make such businesses profitable.
Inability to Raise Future Capital; Possible Dilution. In order to
finance the acquisitions that are part of the Company's growth strategy,
it may be necessary for the Company to raise additional funds either
through public or private financings. Any equity or debt financing, if
available at all, may be on terms which are not favorable to the Company
and, in the case of an equity financing, could result in dilution to the
Company's stockholders.
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THERMOSPECTRA CORPORATION
Item 5 - Other Information (continued)
Possible Adverse Impact of Significant International Operations.
The Company expects that international sales will continue to represent a
significant portion of its revenues. In fiscal 1995, international sales
accounted for over 50% of the Company's total pro forma revenues. These
sales carry a number of inherent risks, including risks associated with
currency exchange, tariffs and other potential trade barriers,
potentially reduced protection for intellectual property, the impact of
recessionary environments in economies outside the United States, and
generally longer receivable collection patterns.
Risks Associated with Protection, Defense and Use of Intellectual
Property. The Company holds many patents relating to various aspects of
its products, and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to the
Company's products are protected from unauthorized use by third parties
only to the extent that they are covered by valid and enforceable patents
or are maintained in confidence as trade secrets. There can be no
assurance that patents will issue from any pending or future patent
applications owned by or licensed to the Company or that the claims
allowed under any issued patents will be sufficiently broad to protect
the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the
Company's products or gain access to its trade secrets and know-how.
Proceedings initiated by the Company to protect its proprietary rights
could result in substantial costs to the Company. There can be no
assurance that competitors of the Company will not initiate litigation to
challenge the validity of the Company's patents, or that they will not
use their resources to design comparable products that do not infringe
the Company's patents. There may also be pending or issued patents held
by parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that
any license required under any such patent would be made available on
acceptable terms or that the Company would prevail in any such contest.
The Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patent
rights against others. If the outcome of any such litigation is
unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected. In addition, the
Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its
collaborators, employees, and consultants. There can be no assurance that
these agreements will not be breached, that the Company would have
adequate remedies for any breach or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.
Item 6 - Exhibits and Report on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMOSPECTRA CORPORATION
Item 6 - Exhibits and Report on Form 8-K (continued)
(b) Report on Form 8-K
On August 19, 1996, the Company filed a Current Report on Form 8-K
pertaining to its acquisition of substantially all of the assets of NK
Instruments Inc., a wholly owned subsidiary of the Company's parent,
Thermo Instruments Inc. On October 1, 1996, the Company filed an
amendment on Form 8-K/A, the purpose of which was to file the financial
information required by Form 8-K concerning this acquisition.
16PAGE
<PAGE>
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 5th day of November
1996.
THERMOSPECTRA CORPORATION
Paul F. Kelleher
---------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------
John N. Hatsopoulos
Chief Financial Officer
17PAGE
<PAGE>
THERMOSPECTRA CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
-----------------------------------------------------------------------
10 Stock Holdings Assistance Plan and Form of
Promissory Note.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
EXHIBIT 10
THERMOSPECTRA CORPORATION
STOCK HOLDINGS ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit ThermoSpectra
Corporation (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the
Guidelines.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: ThermoSpectra Corporation, a Delaware
corporation.
Guidelines: The Stock Holdings Guidelines for Key Employees
of the Company, as established by the Committee from time to
time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The ThermoSpectra Corporation Stock Holdings
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Guidelines shall be administered by the
Committee, which shall have authority to interpret the Plan and
the Guidelines and, subject to their provisions, to prescribe,
amend and rescind any rules and regulations and to make all other
determinations necessary or desirable for the administration
thereof. The Committee's interpretations and decisions with
regard to the Plan and the Guidelines and such rules and
PAGE
<PAGE>
regulations as may be established thereunder shall be final and
conclusive. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or the
Guidelines, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Guidelines that is made in good
faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Guidelines is, in the
judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Guidelines. Such Loans
may be used solely for the purpose of acquiring Common Stock
(other than upon the exercise of stock options or under employee
stock purchase plans) in open market transactions or from the
Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Guidelines,
as the Committee shall determine in its sole and absolute
discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments
commencing on the first anniversary date of the making of such
Loan. Each Loan shall also become immediately due and payable in
2PAGE
<PAGE>
full, without demand, upon the occurrence of any of the events
set forth in the Note; provided that the Committee may, in its
sole and absolute discretion, authorize an extension of the time
for repayment of a Loan upon such terms and conditions as the
Committee may determine.
3PAGE
<PAGE>
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Guidelines in any respect, or terminate the Plan or the
Guidelines at any time. No such amendment or termination,
however, shall alter or otherwise affect the terms and conditions
of any Loan then outstanding to Key Employee without such Key
Employee's written consent, except as otherwise provided herein
or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Guidelines by the Company, the Board of Directors of the
Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Guidelines shall become effective upon
approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A
THERMOSPECTRA CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to ThermoSpectra Corporation (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company, on
each of the first four anniversary dates of the date hereof, an
amount equal to 20% of the initial principal amount of the Note.
Payment of the final 20% of the initial principal amount, if no
demand has been made by the Company, shall be due and payable on
the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holdings Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
5PAGE
<PAGE>
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee 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 Employee; or
(d) 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 Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, 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 Employee 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
Company.
This Note has been made pursuant to the Company's Stock
Holdings Assistance Plan and shall be governed by and construed
in accordance with, such Plan and the laws of the State of
Delaware and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMOSPECTRA CORPORATION
Computation of Earnings per Share
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 1,690,000 $ 1,217,000 $ 4,688,000 $ 3,162,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 12,438,565 11,509,670 12,435,875 10,839,890
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 27,810
----------- ----------- ----------- -----------
Weighted average shares
outstanding,
as adjusted (b) 12,438,565 11,509,670 12,435,875 10,867,700
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .14 $ .11 $ .38 $ .29
=========== =========== =========== ===========
<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
SEPTEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 14,501
<SECURITIES> 3,038
<RECEIVABLES> 28,481
<ALLOWANCES> 1,555
<INVENTORY> 24,592
<CURRENT-ASSETS> 75,282
<PP&E> 26,792
<DEPRECIATION> 6,320
<TOTAL-ASSETS> 145,908
<CURRENT-LIABILITIES> 34,953
<BONDS> 0
0
0
<COMMON> 124
<OTHER-SE> 87,009
<TOTAL-LIABILITY-AND-EQUITY> 145,908
<SALES> 88,537
<TOTAL-REVENUES> 88,537
<CGS> 45,577
<TOTAL-COSTS> 45,577
<OTHER-EXPENSES> 9,190
<LOSS-PROVISION> 182
<INTEREST-EXPENSE> 448
<INCOME-PRETAX> 7,790
<INCOME-TAX> 3,102
<INCOME-CONTINUING> 4,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,688
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
