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
July 2, 1994.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186
(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 29, 1994
----------------------------- ----------------------------
Common Stock, $1.00 par value 48,314,678
<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of July 2, 1994 and
January 1, 1994 (In thousands)
July 2, January 1,
1994 1994
---------- ----------
Current Assets:
Cash and cash equivalents $ 289,697 $ 325,744
Short-term available-for-sale investments,
at market value (amortized cost of $663,420)
(Note 4) 662,454 -
Short-term investments - 374,450
Accounts receivable, net 309,311 267,377
Unbilled contract costs and fees 33,570 32,574
Inventories:
Raw materials and supplies 126,371 110,437
Work in process and finished goods 112,508 82,385
Prepaid income taxes 50,020 39,258
Prepaid expenses 13,836 12,318
---------- ----------
1,597,767 1,244,543
---------- ----------
Assets Related to Projects Under Construction:
Restricted funds - 34,100
Facilities under construction - 128,040
---------- ----------
- 162,140
---------- ----------
Property, Plant and Equipment, at Cost 750,286 581,894
Less: Accumulated depreciation and
amortization 156,777 134,423
---------- ----------
593,509 447,471
---------- ----------
Long-term Available-for-sale Investments,
at Market Value (amortized cost of $75,384)
(Note 4) 75,204 -
---------- ----------
Long-term Marketable Securities - 43,630
---------- ----------
Other Assets 106,732 102,347
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies 560,749 473,579
---------- ----------
$2,933,961 $2,473,710
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(a) Consolidated Balance Sheet - Liabilities and Shareholders'
Investment as of July 2, 1994 and January 1, 1994 (In thousands
except share amounts)
July 2, January 1,
1994 1994
---------- ----------
Current Liabilities:
Notes payable $ 47,807 $ 45,851
Accounts payable 98,161 85,278
Accrued payroll and employee benefits 62,273 49,029
Accrued income taxes 19,286 7,713
Accrued installation and warranty costs 28,743 26,049
Other accrued expenses 221,465 202,326
---------- ----------
477,735 416,246
---------- ----------
Deferred Income Taxes and Other Items 117,012 106,539
---------- ----------
Liabilities Related to Projects Under
Construction:
Payables and accrued expenses - 10,680
Tax-exempt obligations - 142,069
---------- ----------
- 152,749
---------- ----------
Long-term Obligations (Notes 5 and 6):
Senior convertible obligations 620,000 275,000
Subordinated convertible obligations 249,501 238,386
Tax-exempt obligations 130,907 -
Nonrecourse tax-exempt obligations 108,800 108,800
Other 23,740 25,275
---------- ----------
1,132,948 647,461
---------- ----------
Minority Interest 298,898 277,681
---------- ----------
Common Stock of Subsidiary Subject to
Redemption ($15,390 redemption value) 14,657 14,511
---------- ----------
Shareholders' Investment:
Common stock, $1 par value, 175,000,000
shares authorized; 48,357,097 and
47,950,580 shares issued 48,357 47,951
Capital in excess of par value 446,765 467,076
Retained earnings 408,829 362,138
Treasury stock at cost, 42,832 and 31,898
shares (1,693) (1,212)
Cumulative translation adjustment (5,600) (13,591)
Deferred compensation (3,194) (3,839)
Net unrealized loss on available-for-sale
investments (Note 4) (753) -
---------- ----------
892,711 858,523
---------- ----------
$2,933,961 $2,473,710
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
3<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(b) Consolidated Statement of Income for the three months ended
July 2, 1994 and July 3, 1993 (In thousands except per share
amounts)
Three Months Ended
-------------------
July 2, July 3,
1994 1993
--------- ---------
Revenues:
Product sales and revenues $ 355,161 $ 264,637
Service revenues 33,299 29,923
Research and development contract revenues 6,506 5,889
--------- ---------
394,966 300,449
--------- ---------
Costs and Expenses:
Cost of products 208,530 162,877
Cost of services 24,391 22,405
Expenses for research and development and
new lines of business (a) 26,611 21,479
Selling, general and administrative expenses 92,708 70,132
--------- ---------
352,240 276,893
--------- ---------
Gain on Issuance of Stock by Subsidiaries
(Note 2) 229 10,617
Other Income (Expense), Net (Note 3) 10,242 (3,244)
--------- ---------
Income Before Income Taxes and Minority Interest 53,197 30,929
Provision for Income Taxes 22,349 7,620
Minority Interest Expense 6,698 5,703
--------- ---------
Net Income $ 24,150 $ 17,606
========= =========
Earnings per Share:
Primary $ .50 $ .43
========= =========
Fully diluted $ .44 $ .39
========= =========
Weighted Average Shares:
Primary 48,269 40,630
========= =========
Fully diluted 65,530 52,410
========= =========
(a) Includes costs of:
Research and development contracts $ 5,317 $ 5,096
Internally funded research and development 20,498 15,050
Other expenses for new lines of business 796 1,333
--------- ---------
$ 26,611 $ 21,479
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
4<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(b) Consolidated Statement of Income for the six months ended
July 2, 1994 and July 3, 1993 (In thousands except per share
amounts)
Six Months Ended
-------------------
July 2, July 3,
1994 1993
--------- ---------
Revenues:
Product sales and revenues $ 666,369 $ 520,844
Service revenues 65,685 59,497
Research and development contract revenues 13,388 12,871
--------- ---------
745,442 593,212
--------- ---------
Costs and Expenses:
Cost of products 393,206 323,565
Cost of services 47,779 44,403
Expenses for research and development and
new lines of business (a) 49,995 42,454
Selling, general and administrative expenses 174,798 136,750
Costs associated with divisional and product
restructuring - 5,845
--------- ---------
665,778 553,017
--------- ---------
Gain on Issuance of Stock by Subsidiaries
(Note 2) 8,723 21,718
Other Income (Expense), Net (Note 3) 7,000 (6,512)
--------- ---------
Income Before Income Taxes and Minority Interest 95,387 55,401
Provision for Income Taxes 36,450 13,150
Minority Interest Expense 12,246 9,197
--------- ---------
Net Income $ 46,691 $ 33,054
========= =========
Earnings per Share:
Primary $ .97 $ .81
========= =========
Fully diluted $ .86 $ .73
========= =========
Weighted Average Shares:
Primary 48,114 40,605
========= =========
Fully diluted 62,425 52,385
========= =========
(a) Includes costs of:
Research and development contracts $ 10,859 $ 10,392
Internally funded research and development 37,337 29,819
Other expenses for new lines of business 1,799 2,243
--------- ---------
$ 49,995 $ 42,454
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
5<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(c) Condensed Consolidated Statement of Cash Flows for the six months
ended July 2, 1994 and July 3, 1993 (In thousands)
Six Months Ended
-------------------
July 2, July 3,
1994 1993
--------- ---------
Operating Activities:
Net cash provided by operating activities $ 73,838 $ 23,260
--------- ---------
Investing Activities:
Acquisitions, net of cash acquired (141,289) (112,781)
Purchases of property, plant and equipment (25,922) (20,232)
Proceeds from sale of property, plant and
equipment 17,245 1,959
Purchases of long-term investments - (14,061)
Proceeds from sale of long-term investments - 8,209
Purchases of available-for-sale investments (543,893) -
Proceeds from sale and maturities of
available-for-sale investments 234,722 -
Increase in short-term investments - (34,155)
Decrease in assets related to construction
projects 23,420 1,535
Other (5,190) (3,245)
--------- ---------
Net cash used in investing activities (440,907) (172,771)
--------- ---------
Financing Activities:
Net proceeds from issuance of long-term
obligations (Note 5) 368,405 -
Repayment and repurchase of long-term
obligations (12,112) (4,146)
Proceeds from issuance of Company and
subsidiary common stock 26,139 82,045
Purchases of Company and subsidiary common
stock (53,217) (36,655)
Other (11) 110
--------- ---------
Net cash provided by financing activities 329,204 41,354
--------- ---------
Exchange Rate Effect on Cash 1,818 (1,105)
--------- ---------
Decrease in Cash and Cash Equivalents (36,047) (109,262)
Cash and Cash Equivalents at Beginning of Period 325,744 190,601
--------- ---------
Cash and Cash Equivalents at End of Period $ 289,697 $ 81,339
========= =========
Cash Paid For:
Interest $ 22,519 $ 14,659
Income taxes $ 12,757 $ 4,248
Noncash Financing Activities:
Conversions of convertible obligations $ 26,285 $ 18,560
The accompanying notes are an integral part of these consolidated
financial statements.
6<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - July 2, 1994
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Electron 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- and six-month periods ended July 2, 1994 and
July 3, 1993, (b) the financial position at July 2, 1994, and (c) the
cash flows for the six-month periods ended July 2, 1994 and
July 3, 1993. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of January 1, 1994,
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
January 1, 1994, filed with the Securities and Exchange Commission.
2. Transactions in Stock of Subsidiaries
"Gain on issuance of stock by subsidiaries" in the accompanying
statement of income for the six-month period ended July 2, 1994,
resulted primarily from the following:
A public offering of 1,610,000 shares of ThermoTrex Corporation
common stock in March 1994 at $15.375 per share for net proceeds
of $23.0 million resulted in a gain of $7.3 million.
The conversion of $3.7 million of Thermedics Inc. 6 1/2%
subordinated convertible debentures, convertible at $10.42 per
share, into 357,597 shares of Thermedics common stock resulted in
a gain of $1.0 million.
7<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - July 2, 1994
(continued)
3. Other Income (Expense), Net
The components of "Other income (expense), net" in the
accompanying statement of income are:
Three Months Ended Six Months Ended
------------------ ------------------
July 2, July 3, July 2, July 3,
(In thousands) 1994 1993 1994 1993
--------------------------------------------------------------------
Royalty income $ 880 $ 429 $ 1,280 $ 994
Interest income 10,707 3,825 17,906 8,943
Interest expense (16,414) (7,629) (26,703) (15,485)
Equity in losses of
unconsolidated subsidiaries (631) (974) (1,838) (2,065)
Gain on sale of investments 3,720 914 4,331 867
Other income, net 11,980 191 12,024 234
-------- -------- -------- -------
$ 10,242 $ (3,244) $ 7,000 $ (6,512)
======== ======== ======== ========
4. Available-for-sale Investments
Effective January 2, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with SFAS
No. 115, the Company's debt and marketable equity securities are
considered "Available-for-sale investments" in the accompanying
balance sheet and are carried at market value, with the difference
between cost and market value, net of related tax effects, recorded
currently as a component of shareholders' investment titled "Net
unrealized loss on available-for-sale investments." "Net unrealized
loss on available-for-sale investments" consists of (1) an unrealized
gain, net of related tax effects, of $2,868,000 that was recorded as a
cumulative effect of change in accounting principle adjustment and
(2) an unrealized loss, net of related tax effects, of $3,621,000
relating to the decline in the market value of available-for-sale
investments for the six-month period ended July 2, 1994.
8<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - July 2, 1994
(continued)
4. Available-for-sale Investments (continued)
The aggregate market value, cost basis, and gross unrealized gains
and losses of short- and long-term available-for-sale investments, by
major security type, as of July 2, 1994, are as follows:
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
----------------------------------------------------------------------
Government agency
securities $270,998 $272,348 $ 578 $ 1,928
Corporate bonds 384,584 385,447 330 1,193
Tax-exempt securities 32,780 32,902 5 127
Other 49,296 48,107 2,082 893
-------- -------- -------- --------
$737,658 $738,804 $ 2,995 $ 4,141
======== ======== ======== ========
Available-for-sale investments in the accompanying balance sheet
at July 2, 1994, include $361,504,000 with contractual maturities of
one year or less, $336,185,000 with contractual maturities of over one
year through five years, and $39,969,000 with contractual maturities
of over five years. Expected maturities, as classified in the
accompanying balance sheet, may differ from contractual maturities as
a result of the Company's intent to sell these securities prior to
maturity and as a result of put and call options that enable either
the Company and/or the issuer to redeem these securities at an earlier
date.
The cost of available-for-sale investments that were sold was
based on specific identification in determining realized gains and
losses recorded in the accompanying statement of income. Gain on sale
of investments for the six-month period ended July 2, 1994, resulted
from gross realized gains of $5,579,000 and gross realized losses of
$1,248,000 relating to the sale of available-for-sale investments.
5. Issuance of Senior Convertible Obligations
On April 15, 1994, the Company issued and sold $345.0 million
principal amount of 5% senior convertible debentures due 2001. The
debentures are convertible into shares of the Company's common stock
at a conversion price of $47 1/4 per share.
9<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - July 2, 1994
(continued)
6. Subsequent Event
On July 20, 1994, the Company called for redemption on August 19,
1994, all of its outstanding 6 3/4% subordinated convertible
debentures due 2001. The redemption price is 103% of the principal
amount plus accrued interest to the redemption date. As of July 29,
1994, there was $59,675,000 principal amount of debentures
outstanding. As an alternative to redeeming for cash, the holders of
the debentures have the option of converting their debentures into
shares of the Company's common stock at a conversion price of $23.00
per share. The closing price of Thermo Electron common stock on the
New York Stock Exchange on July 29, 1994, was $39 7/8.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Second Quarter 1994 Compared With Second Quarter 1993
Sales for the second quarter of 1994 were $395.0 million, an
increase of $94.5 million, or 31%, over the second quarter of 1993.
Segment income was a record $48.9 million, compared with $28.4 million
in 1993, an increase of 72%. (Segment income is income before
corporate general and administrative expenses, costs associated with
divisional and product restructuring, other income and expense,
minority interest expense, and income taxes.)
Sales from the Instruments segment were $162.7 million in 1994, an
increase of $36.9 million, or 29%, over the second quarter of 1993.
Sales increased due to acquisitions made by Thermo Instrument Systems
Inc. during 1993 and its acquisition of several businesses within the
EnviroTech Measurements & Controls group of Baker Hughes Incorporated
on March 16, 1994. Segment income margin (segment income margin is
segment income as a percentage of sales) was 16.5% in 1994, compared
with 17.4% in 1993. Segment income margin declined principally due to
lower margins at the recently acquired businesses within the
EnviroTech Measurements & Controls group.
Sales from the Alternative-energy Systems segment were $70.9
million in 1994, an increase of $12.8 million, or 22%, over 1993.
Within this segment, sales from the Energy Systems group, which
consist of revenues from the operation of power plants and a
waste-recycling facility and, in 1993, revenues from construction of
large alternative-energy facilities, increased to $38.6 million from
$28.2 million in 1993. Increased revenues from the Energy Systems
group resulted primarily from an additional power plant and a
10<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Second Quarter 1994 Compared With Second Quarter 1993 (continued)
waste-recycling facility in operation during the second quarter of
1994 and, to a lesser extent, the absence of utility-imposed
curtailments of power output and improved performance at two
California plants. In addition, revenues increased due to annual
contractual energy rate increases under certain power sales contracts.
These increases were offset in part by the absence of construction
revenues in the second quarter of 1994, compared with $4.1 million in
1993. Sales from Thermo Power Corporation were $23.4 million, compared
with $19.7 million in 1993. Sales increased due to the inclusion of
$2.2 million in sales from NuTemp, Inc., which was acquired in May
1994, and due to increased demand for refrigeration packages, offset
in part by lower prices due to increased competition in the
refrigeration industry.
Segment income from the Alternative-energy Systems segment was
$7.4 million in 1994, compared with a loss of $0.3 million in 1993.
The Energy Systems group had segment income of $6.2 million, compared
with a loss of $0.6 million in 1993. The Energy Systems group
improvement resulted from the additional power plant and the
waste-recycling plant in operation during the second quarter of 1994,
the absence of utility-imposed curtailments of power output and
improved performance at two California plants, and annual contractual
energy rate increases under certain power sales contracts. In
addition, segment income improved as a result of lower lease expense,
offset in part by depreciation expense, resulting from the December
1993 purchase of the Delano I facility in Delano, California. Segment
income increased $0.8 million at Thermo Power as a result of increased
sales.
Sales in the Process Equipment segment were $45.8 million,
compared with $38.2 million in 1993, an increase of 20%. Within this
segment, sales from Thermo Fibertek Inc. were $39.8 million, compared
with $30.8 million in 1993. This increase reflects the inclusion of
$9.3 million in revenues from AES Engineered Systems, which was
acquired from Albany International Corp. on June 30, 1993, and a $3.1
million increase in revenues from Thermo Fibertek's North American
paper-recycling equipment business due to increased demand. These
increases were offset primarily by a decline of $2.1 million in
revenues due to a decrease in demand for the environmental process
systems sold by Thermo Fibertek's Vickerys subsidiary as a result of
changes in U.K. environmental regulations that required modifications
to Vickerys' equipment. Vickerys has completed modifications to its
equipment and is currently field testing its new design. Sales of
Holcroft heat-treating systems remained depressed at $3.3 million,
compared with $3.8 million in 1993. Sales of automated electroplating
equipment from the Company's wholly owned Napco, Inc. subsidiary
declined to $2.8 million from $3.6 million in 1993, due to continuing
11<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Second Quarter 1994 Compared With Second Quarter 1993 (continued)
weak demand. The Process Equipment segment income margin was 9.8%,
compared with 5.6% in 1993. Thermo Fibertek's segment income margin
improved to 12.3% from 10.1% in 1993, primarily due to increased sales
and to an improved sales mix. Segment income declined by $0.3 million
at Holcroft as a result of lower sales, and improved by $0.8 million
at Napco as a result of efforts to reduce operating costs and the
completion of jobs with cost overruns in the 1993 period.
Sales in the Biomedical Products segment were $43.3 million in
1994, an increase of $12.8 million, or 42%, over 1993. Sales increased
$4.6 million due to the inclusion of sales from CBI Laboratories,
Inc., a manufacturer of skin-care and other personal-care products,
which was acquired by the Company's ThermoLase Corporation subsidiary
in December 1993. Sales of ThermoTrex Corporation's mammography and
biopsy systems increased $4.2 million, and sales of Thermo
Cardiosystems Inc.'s implantable left ventricular-assist devices
increased $1.5 million due to increased demand. Segment income margin
improved to 9.3%, compared with 2.3% in 1993, as a result of increased
sales.
Sales in the Services segment were $33.3 million in 1994, compared
with $29.9 million in 1993. Within this segment, sales from Thermo
Remediation Inc. increased $2.4 million, primarily due to an increase
in the volume of soil processed at its soil-remediation centers and,
to a lesser extent, the inclusion of revenues from a fluids recovery
company acquired in November 1993. Sales of metallurgical services and
analytical laboratory and environmental consulting services were about
the same level as 1993. Segment income margin improved to 10.1% from
6.5% in 1993 due to increased sales and efforts to reduce costs.
Sales from the Advanced Technologies segment were $40.4 million,
compared with $18.4 million in 1993. Sales increased $18.3 million due
to the inclusion of sales from Ramsey Technology Inc., which was
acquired by Thermedics in March 1994, and sales from Comtest
Instrumentation, which was acquired by Thermo Voltek Corp. in August
1993. Sales also increased $1.9 million due to increased demand for
Thermedics' explosives-detection system. Segment income margin
declined to 7.0% in 1994, compared with 11.4% in 1993, as a result of
higher costs associated with the worldwide service organization for
Thermedics' high-speed product quality assurance system, lower margins
at acquired companies and, to a lesser extent, increased research and
development expenses at ThermoTrex to develop and commercialize new
products.
12<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Second Quarter 1994 Compared With Second Quarter 1993 (continued)
In 1983, the Company adopted a strategy of spinning out certain of
its businesses into separate subsidiaries and having these
subsidiaries sell a minority interest to outside investors. The
Company believes that this strategy provides additional motivation and
incentives for the management of the subsidiaries through the
establishment of subsidiary-level stock option incentive programs, as
well as capital to support the subsidiaries' growth. As a result of
the sale of stock by subsidiaries, the issuance of shares by
subsidiaries upon conversion of indebtedness, and similar
transactions, the Company recorded gains of $0.2 million in 1994 and
$10.6 million in 1993. Although the Company expects to continue this
strategy in the future, its goal is to continue increasing segment
income over the next few years so that gains generated by sales of
stock by its subsidiaries will represent a decreasing portion of net
income. The size and timing of these transactions are dependent on
market and other conditions that are beyond the Company's control.
Accordingly, there can be no assurance that the Company will be able
to generate gains from such transactions in the future.
"Other income (expense), net" in the accompanying statement of
income includes a gain of $12.0 million in 1994 resulting from the
sale of the Company's Peter Brotherhood Ltd. facility, in
Peterborough, England. Peter Brotherhood will relocate to a newly
constructed site in Peterborough later this year. Also included in
"Other income (expense), net" is equity in losses of unconsolidated
subsidiaries, which represents the Company's portion of results from
entities in which the Company's ownership percentage is 50% or less.
The loss was $0.6 million in 1994 and $1.0 million in 1993.
First Six Months 1994 Compared With First Six Months 1993
Sales for the first six months of 1994 were $745.4 million, an
increase of $152.2 million, or 26%, over the 1993 period. Segment
income was $90.8 million, an increase of $35.0 million, or 63%, over
the 1993 period.
Sales from the Instruments segment were $310.3 million, an
increase of $60.6 million, or 24%, over the 1993 period. Sales
increased due to acquisitions made by Thermo Instrument. Segment
income margin was 17% in both periods.
Sales from the Alternative-energy Systems segment were
$132.8 million in 1994, an increase of $19.3 million, or 17%, over
1993. Within this segment, sales from the Energy Systems group were
$70.8 million, compared with $57.5 million in 1993. Sales increased
due to the reasons discussed in the results of operations for the
13<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
First Six Months 1994 Compared With First Six Months 1993 (continued)
second quarter, offset in part by a decrease of $2.5 million in
revenues from the Company's Whitefield, New Hampshire plant, as a
result of an interruption of operations in January 1994, resulting
from damage to its turbine-generator. The Whitefield plant resumed
full operations in June 1994. Sales from Thermo Power were $45.4
million, compared with $38.4 million in 1993. This increase resulted
primarily from increased demand for refrigeration packages, offset in
part by lower prices due to increased competition in the refrigeration
industry and the inclusion of $2.2 million in sales from NuTemp, which
was acquired in May 1994.
Segment income from the Alternative-energy Systems segment was
$10.9 million in 1994, compared with a loss of $2.9 million in 1993.
Within this segment, the Energy Systems group had segment income of
$9.2 million, compared with a loss of $4.1 million in 1993. This
improvement is due to the same reasons discussed in the results of
operations for the second quarter. Segment income at Thermo Power
increased $0.9 million, as a result of increased sales.
Sales in the Process Equipment segment were $88.8 million,
compared with $75.7 million in 1993, an increase of 17%. Within this
segment, sales from Thermo Fibertek were $75.0 million, compared with
$58.9 million in 1993. This increase reflects the inclusion of $18.2
million in revenues from AES Engineered Systems, which was acquired on
June 30, 1993, and a $2.6 million increase in revenues from Thermo
Fibertek's North American paper-recycling equipment business due to
increased demand. These increases were offset in part by a decline of
$3.6 million in revenues due to a decrease in demand for the
environmental process systems sold by Thermo Fibertek's Vickerys
subsidiary as explained in the results of operations for the second
quarter and, to a lesser extent, by a decline of $1.4 million in
revenues due to the unfavorable effects of currency translation as a
result of a stronger U.S. dollar. Sales of Holcroft heat-treating
systems, which remain depressed, were $7.3 million, compared with $9.0
million in 1993. Sales of automated electroplating equipment from the
Company's wholly owned Napco subsidiary declined to $6.5 million from
$7.8 million in 1993, due to weak demand. The Process Equipment
segment income margin was 9.7%, compared with 7.2% in 1993. This
improvement results from the same factors as those discussed in the
results of operations for the second quarter.
Sales in the Biomedical Products segment were $84.3 million, an
increase of $22.8 million, or 37%, over 1993. Sales increased $8.5
million due to the inclusion of sales from CBI Laboratories, which was
acquired in December 1993. Sales of mammography and biopsy systems
14<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
First Six Months 1994 Compared With First Six Months 1993 (continued)
increased $7.4 million, while sales of Thermo Cardiosystems'
implantable left ventricular-assist devices increased $2.9 million,
sales of Thermedics' fragrance samplers increased $2.2 million, and
sales of blood coagulation-monitoring products at the Company's wholly
owned International Technidyne Corporation subsidiary increased $1.7
million, due to increased demand. Segment income margin improved to
7.8%, compared with 4.1% in 1993, as a result of the increased sales.
Sales in the Services segment were $65.7 million in 1994, compared
with $59.5 million in 1993. Within this segment, sales from Thermo
Remediation increased $5.5 million, primarily due to an increase in
the volume of soil processed at its soil-remediation centers and, to a
lesser extent, the inclusion of revenues from a fluids recovery
company acquired in November 1993. Sales of metallurgical services and
analytical laboratory and environmental consulting services were about
the same level as in 1993. Segment income margin improved to 10.3%
from 7.5% in 1993 due to increased sales and efforts to reduce costs.
Sales from the Advanced Technologies segment were $65.7 million,
compared with $34.0 million in 1993. Sales increased $22.1 million due
to the inclusion of sales from the Ramsey Technology and Comtest
Instrumentation acquisitions. Sales also increased $2.6 million due to
increased demand for Thermedics' explosives-detection system, $4.3
million due to increased demand, principally from one customer, for
Thermedics' high-speed product quality assurance systems and related
services, and $2.4 million at ThermoTrex due to increased funding
levels on government-sponsored contracts. Segment income margin
declined to 7.3% from 11.4% in 1993 due to lower margins at acquired
businesses and, to a lesser extent, costs associated with the
worldwide service organization for Thermedics' high-speed product
quality assurance system and increased research and development
expenses at ThermoTrex to develop and commercialize new products.
The Company recorded gains as a result of the sale of stock by
subsidiaries of $8.7 million in the 1994 period and $21.7 million in
the 1993 period.
15<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Financial Condition
Liquidity and Capital Resources
Consolidated working capital was $1,120.0 million at July 2, 1994,
compared with $828.3 million at January 1, 1994. Included in working
capital were cash and short-term investments of $952.2 million at
July 2, 1994, compared with $700.2 million at January 1, 1994. In
addition, at July 2, 1994, the Company had $75.2 million of long-term
marketable securities, compared with $43.6 million at January 1, 1994.
On April 15, 1994, the Company issued and sold $345.0 million
principal amount of 5% senior convertible debentures due 2001. During
the first six months of 1994, the Company expended $141.3 million, net
of cash acquired, for acquisitions, and $25.9 million for purchases of
property, plant and equipment. In early 1994, the Company completed
construction of a waste-recycling facility in San Diego County,
California. Because this facility was not sold to a third party, the
Company is obligated under its service agreement with San Diego County
to contribute $15.0 million of equity to the project in 1994. The
Company has no material commitments for purchases of property, plant
and equipment and expects that, for 1994, such expenditures will
approximate the 1993 level. During the first six months of 1994, the
Company and its majority-owned subsidiaries expended $53.2 million to
purchase common stock of the Company's subsidiaries. The Company
expects that these purchases will continue.
A substantial percentage of the Company's consolidated cash and
short-term investments is held by subsidiaries that are not wholly
owned by the Company. This percentage may vary significantly over
time. Pursuant to the Thermo Electron Corporate Charter (the Charter),
to which each of the majority-owned subsidiaries of the Company is a
party, the combined financial resources of Thermo Electron Corporation
and its subsidiaries allow the Company to provide banking, credit, and
other financial services to its subsidiaries so that each member of
the Thermo Electron group of companies may benefit from the financial
strength of the entire organization. Toward that end, the Charter
states that each member of the group may be required to provide
certain credit support to the consolidated entity. Nonetheless, the
Company's ability to access assets held by its majority-owned
subsidiaries through dividends, loans, or other transactions is
subject in each instance to a fiduciary duty owed to the minority
shareholders of the relevant subsidiary. In addition, dividends
received by Thermo Electron from a subsidiary that does not
consolidate with Thermo Electron for tax purposes, are subject to tax.
Therefore, under certain circumstances, a portion of the Company's
consolidated cash and short-term investments may not be readily
available to Thermo Electron or certain of its subsidiaries.
16<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources (continued)
The Company intends for the foreseeable future to maintain at
least 80% ownership of its Thermo Instrument and Thermo Fibertek
subsidiaries, which is required in order to continue to file a
consolidated federal income tax return with these subsidiaries. In
addition, the Company intends to maintain greater than 50% ownership
of its other majority-owned subsidiaries so that the Company may
continue to consolidate these subsidiaries for financial reporting
purposes. This may require the purchase by the Company of additional
shares or convertible debentures of these companies from time to time
as the number of outstanding shares issued by these companies
increases, either in the open market or directly from the
subsidiaries. If the Company were to lose its ability to consolidate
for tax purposes with Thermo Instrument and/or Thermo Fibertek, the
Company would incur additional tax liabilities, which could be
substantial.
PART II - Other Information
Item 1 - Legal Proceedings
The Company participates in the operation of the Dade County
(Florida) Downtown Government Center cogeneration facility through a
joint venture with Rolls-Royce, Inc. As disclosed in the Company's
Quarterly Report on Form 10-Q for the quarter ended April 2, 1994, the
joint venture's lawsuit against Dade County (see Item 3 of the
Company's Annual Report on Form 10-K for the year ended January 1,
1994), including counterclaims by Dade County, was dismissed with
prejudice by agreement of the parties. The terms of the dismissal
include: (a) payment by Dade County, net of amounts paid by the joint
venture, of $1,500,000, (b) a joint request that the Federal Energy
Regulatory Commission (FERC) terminate its proceedings and vacate its
previous order, and (c) a joint request that the Florida Public
Service Commission (FPSC) dismiss the petition brought before it by
Dade County. FERC has not acted upon the request made to it by the
joint venture. FPSC granted the request for dismissal. Since the
settlement with Dade County, Florida Power & Light (FPL) has filed (a)
a motion at FERC opposing the request made to FERC by the joint
venture, and (b) a motion at FPSC, similar to one previously filed at
FPSC by Dade County, seeking a declaration that the joint venture was
engaged in the retail sale of electricity without complying with the
rules governing public utilities.
The settlement also contemplates certain initiatives designed to
improve the financial performance of the joint venture's facility,
including one or more of the following: (a) Dade County creating a
municipal utility to purchase all of the facility's power, and if FPL
17<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
PART II - Other Information (continued)
Item 1 - Legal Proceedings (continued)
refuses to wheel excess power, obtaining an order from FERC requiring
FPL to wheel electricity in excess of that used at the Downtown
Government Center project to other County facilities, (b) the joint
venture's acquisition of the generating equipment from Florida Energy
Partners and subsequent transfer of such equipment to Dade County, and
if FPL refuses self-service wheeling, the obtaining of an order from
FPSC requiring FPL to permit self-service wheeling by the County of
excess electricity from the facility to other County facilities, and
(c) construction by the joint venture, at its expense, of a
transmission line to transmit electricity to other County facilities.
Because these initiatives have numerous and complex conditions and
requirements associated with them, the implementation of which has
been opposed by FPL and/or which need the approval of other third
parties, no assurances can be given as to the likelihood that any one
of them will be successful. Moreover, if FERC does not grant the
aforementioned request and rejects FPL's challenges, or FPSC rules in
favor of FPL, then FERC or FPSC, as the case may be, could impose
liabilities or otherwise issue rulings which could result in the joint
venture being in default under its arrangements with Florida Energy
Partners, the potential consequences of which include facility
regulation or shut-down, refund liability, and other consequences as
described in the Company's most recent Form 10-K.
The Company's wholly owned Napco, Inc. subsidiary has settled the
previously disclosed matter of "Timothy R.E. Keeney, Commissioner of
Environmental Protection vs. Napco, Inc." pertaining to alleged
violations of Connecticut state law relating primarily to labeling and
storage of on-site containers allegedly containing hazardous
materials, and related record-keeping matters. The subsidiary agreed
to pay the Connecticut Department of Environmental Protection a civil
penalty of $350,000 to settle this matter.
Item 4 - Submission of Matters to a Vote of Security Holders
On May 24, 1994, at the Annual Meeting of Shareholders, the
shareholders elected a class of three incumbent directors to a
three-year term expiring in 1997. The directors reelected at the
meeting were: Dr. John M. Albertine, Mr. Peter O. Crisp, and Mr. Roger
D. Wellington. Dr. Albertine received 38,886,390 shares voted in favor
of his election and 237,216 shares withheld, Mr. Crisp received
38,896,339 shares voted in favor of his election and 227,267 shares
withheld, and Mr. Wellington received 38,883,795 shares voted in favor
of his election and 239,811 shares withheld. No broker nonvotes were
recorded on the election of directors.
18<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON CORPORATION
PART II - Other Information (continued)
Item 4 - Submission of Matters to a Vote of Security Holders (continued)
The shareholders also approved a proposal to increase the
authorized common stock of the Company to 175 million shares as
follows: 37,331,700 shares voted in favor, 1,461,022 shares voted
against, and 330,884 shares abstained. A proposal to amend the
Company's equity incentive plan to comply with Section 162(m) of the
Internal Revenue Code and to increase the shares available under the
plan by 2,000,000 shares was also approved as follows: 33,806,443
shares voted in favor, 4,547,978 shares voted against and 769,185
shares abstained. No broker nonvotes were recorded on either proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
19<PAGE>
FORM 10-Q
July 2, 1994
THERMO ELECTRON 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 9th day
of August 1994.
THERMO ELECTRON CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Vice President, Finance
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
20<PAGE>
EXHIBIT INDEX
Exhibit Number Document Page
3(i) Amended and Restated Certificate of Incorp-
oration of the Registrant (filed as Exhibit 4.1
to the Registrant's Registration Statement on
Form S-8 [Reg. No. 33-54347] and incorporated
herein by reference)
10.1 Equity Incentive Plan, as amended, of the
Registrant
11 Statement re: Computation of earnings per share
21<PAGE>
Exhibt 10.1
As amended effective 5/24/94
[21]
THERMO ELECTRON CORPORATION
EQUITY INCENTIVE PLAN
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to
secure for Thermo Electron Corporation (the "Company") and its
Stockholders the benefits arising from capital stock ownership by
employees and Directors of, and consultants to, the Company and its
subsidiaries or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries. The Plan is intended to accomplish these goals by
enabling the Company to offer such persons equity-based interests,
equity-based incentives or performance-based stock incentives in the
Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the
Company (the "Board"). The Board shall have full power to interpret
and administer the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and Awards, and full authority to
select the persons to whom Awards will be granted ("Participants"),
determine the type and amount of Awards to be granted to Participants
(including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and
conditions relating to events of merger, consolidation, dissolution
and liquidation, change of control, vesting, forfeiture, restrictions,
dividends and interest, if any, on deferred amounts), waive compliance
by a participant with any obligation to be performed by him or her
under an Award, waive any term or condition of an Award, cancel an
existing Award in whole or in part with the consent of a Participant,
grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing
Awards under the Plan and change such forms from time to time. Any
interpretation by the Board of the terms and provisions of the Plan or
any Award thereunder and the administration thereof, and all action
taken by the Board, shall be final, binding and conclusive on all
parties and any person claiming under or through any party. No
Director shall be liable for any action or determination made in good
faith. The Board may, to the full extent permitted by law, delegate
any or all of its responsibilities under the Plan to a committee (the
"Committee") appointed by the Board and consisting of three or more
members of the Board, each of whom shall be deemed a "disinterested
person" within the meaning of Rule 16b-3 (or any successor rule) of
the Securities Exchange Act of 1934 (the "Exchange Act"). As to Awards
granted to Participants who are not reporting persons subject to
Section 16 of the Exchange Act, the Board may delegate any or all of
<PAGE>
2
its responsibilities to the Company's Operating Committee or to other
appropriate officers of the Company.
3. Effective Date
The Plan shall be effective as of April 6, 1989, subject to the
approval of the Plan by a majority of the votes cast by the holders of
the Company's Common Stock at the next annual meeting of Stockholders.
Grants of Awards under the Plan made prior to such approval shall be
effective when made (unless otherwise specified by the Board at the
time of grant), but shall be conditioned on and subject to such
approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total
number of shares of Common Stock reserved and available for
distribution under the Plan shall be 4,700,000 shares. Such shares may
consist, in whole or in part, of authorized and unissued shares or
treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been
exercised in full, is forfeited or is otherwise terminated without a
payment being made to the Participant in the form of Common Stock, or
if any shares of Common Stock subject to restrictions are repurchased
by the Company pursuant to the terms of any Award or are otherwise
reacquired by the Company to satisfy obligations arising by virtue of
any Award, such shares shall be available for distribution in
connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and
its subsidiaries, or other persons who are expected to make
significant contributions to the future growth and success of the
Company and its subsidiaries shall be eligible to receive Awards under
the Plan. The Board, or other appropriate committee or person to the
extent permitted pursuant to the last two sentences of Section 2,
shall from time to time select from among such eligible persons those
who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of
equity-based interest, equity-based incentive or performance-based
stock incentive in Common Stock of the Company or any combination
thereof. The type, terms and conditions and restrictions of an Award
shall be determined by the Board at the time such Award is made to a
Participant; provided, however, that the maximum number of shares
permitted to be granted under any Award or combination of Awards to
any Participant during any one calendar year may not exceed 1% of the
shares of Common Stock outstanding at the beginning of such calendar
year.
<PAGE>
3
An Award shall be made at the time specified by the Board and
shall be subject to such conditions or restrictions as may be imposed
by the Board and shall conform to the general rules applicable under
the Plan as well as any special rules then applicable under federal
tax laws or regulations or the federal securities laws relating to the
type of Award granted.
Without limiting the foregoing, Awards may take the following
forms and shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise
thereof to purchase Common Stock at a specified exercise price.
Options granted under the Plan may be either incentive stock options
("incentive stock options") that meet the requirements of Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), or
options that are not intended to meet the requirements of Section 422A
("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be
purchased upon exercise of an option shall be determined by the Board,
provided however, the exercise price shall not be less than 50% of the
fair market value of such stock on the date of grant or,
alternatively, the par value per share of Common Stock, provided
further, in the case of reporting persons subject to Section 16 of the
Exchange Act, the exercise price may not be less than 50% of the fair
market value of the stock on the date of grant unless a lower price is
permissible under Rule 16b-3.
6.1.2 Option Grants . The granting of an option shall take place
at the time specified by the Board. Options shall be evidenced by
option agreements. Such agreements shall conform to the requirements
of the Plan, and may contain such other provisions (including but not
limited to vesting and forfeiture provisions, acceleration, change of
control, protection in the event of merger, consolidations,
dissolutions and liquidations) as the Board shall deem advisable.
Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory
option.
6.1.3 Option Period. An option will become exercisable at such
time or times (which may be immediately or in such installments as the
Board shall determine) and on such terms and conditions as the Board
shall specify. The option agreements shall specify the terms and
conditions applicable in the event of an option holder's termination
of employment during the option's term.
Any exercise of an option must be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by
(1) any additional documents required by the Board and (2) payment in
full in accordance with Section 6.1.4 for the number of shares for
which the option is exercised.
6.1.4 Payment of Exercise Price . Stock purchased on exercise of
an option shall be paid for as follows: (1) in cash or by check
<PAGE>
4
(subject to such guidelines as the Company may establish for this
purpose), bank draft or money order payable to the order of the
Company or (2) if so permitted by the instrument evidencing the option
(or in the case of a non-statutory option, by the Board at or after
grant of the option), (i) through the delivery of shares of Common
Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market
value (determined in accordance with procedures prescribed by the
Board) equal to the exercise price, (ii) by delivery of a promissory
note of the option holder to the Company, payable on such terms as are
specified by the Board, (iii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or (iv) by any combination
of the permissible forms of payment.
6.1.5 Buyout Provision . The Board may at any time offer to buy
out for a payment in cash, shares of Common Stock, deferred stock or
restricted stock, or an option previously granted, based on such terms
and conditions as the Board shall establish and communicate to the
option holder at the time that such offer is made.
6.1.6 Special Rules for Incentive Stock Options . Each provision
of the Plan and each option agreement evidencing an incentive stock
option shall be construed so that each incentive stock option shall be
an incentive stock option as defined in Section 422A of the Code or
any statutory provision that may replace such Section, and any
provisions thereof that cannot be so construed shall be disregarded.
Instruments evidencing incentive stock options must contain such
provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the
Company and its subsidiaries. The exercise price of an incentive stock
option shall not be less than 100% (110% in the case of an incentive
stock option granted to a more than ten percent Stockholder of the
Company) of the fair market value of the Common Stock on the date of
grant, as determined by the Board. An incentive stock option may not
be granted after the tenth anniversary of the date on which the Plan
was adopted by the Board and the latest date on which an incentive
stock option may be exercised shall be the tenth anniversary (fifth
anniversary, in the case of any incentive stock option granted to a
more than ten percent Stockholder of the Company) of the date of
grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to
acquire shares of Common Stock upon payment of the purchase price
subject to restrictions specified in the instrument evidencing the
Award.
6.2.1 Restricted Stock Awards . Awards of restricted stock shall
be evidenced by restricted stock agreements. Such agreements shall
conform to the requirements of the Plan, and may contain such other
provisions (including restriction and forfeiture provisions, change of
control, protection in the event of mergers, consolidations,
dissolutions and liquidations) as the Board shall deem advisable.
<PAGE>
5
6.2.2 Restrictions. Until the restrictions specified in a
restricted stock agreement shall lapse, restricted stock may not be
sold, assigned, transferred, pledged or otherwise encumbered or
disposed of, and upon certain conditions specified in the restricted
stock agreement, must be resold to the Company for the price, if any,
specified in such agreement. The restrictions shall lapse at such time
or times, and on such conditions, as the Board may specify. The Board
may at any time accelerate the time at which the restrictions on all
or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares
of restricted stock will have all of the rights of a Stockholder with
respect to such shares including the right to receive dividends and to
vote such shares. Unless the Board otherwise determines, certificates
evidencing shares of restricted stock will remain in the possession of
the Company until such shares are free of all restrictions under the
Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted
stock shall be determined by the Board, in its sole discretion, but
such price may not be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may
provide that any or all the Common Stock delivered pursuant to an
Award will be restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion,
sell to any Participant shares of Common Stock free of restrictions
under the Plan for a price determined by the Board, but which may not
be less than the par value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award . A deferred stock Award entitles the
recipient to receive shares of deferred stock which is Common Stock to
be delivered in the future. Delivery of the Common Stock will take
place at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which
delivery of all or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock . The Board may,
at the time any Award described in this Section 6 is granted, provide
that, at the time Common Stock would otherwise by delivered pursuant
to the Award, the Participant will instead receive an instrument
evidencing the right to future delivery of deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the
recipient to receive, without payment, an amount, in cash or Common
Stock or a combination thereof (such form to be determined by the
Board), following the attainment of performance goals. Performance
goals may be related to personal performance, corporate
performance,departmental performance or any other category of
performance deemed by the Board to be important to the success of the
<PAGE>
6
Company. The Board will determine the performance goals, the period or
periods during which performance is to be measured and all other terms
and conditions applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions . The Board
may, at the time any Award described in this Section 6 is granted,
impose the condition (in addition to any conditions specified or
authorized in this Section 6 of the Plan) that performance goals be
met prior to the Participant's realization of any payment or benefit
under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of
Common Stock to be acquired pursuant to an Award shall be the price
determined by the Board, provided that such price shall not be less
than the par value of the Common Stock. Notwithstanding anything in
the Plan to the contrary, so long as is required for the Plan to
constitute a "plan" under Rule 16b-3 of the Exchange Act, no Common
Stock may be issued to a reporting person subject to Section 16 of the
Exchange Act unless (a) issued at a purchase price not in excess of
the par value of the Common Stock or (b) sold by the Company for a
price not less than 50% of the fair market value of the Common Stock
on the date of grant of the related Award. Except as otherwise
provided in the Plan, the Board may determine the method of payment of
the exercise price or purchase price of an Award granted under the
Plan and the form of payment. The Board may determine that all or any
part of the purchase price of Common Stock pursuant to an Award has
been satisfied by past services rendered by the Participant. The Board
may agree at any time, upon request of the Participant, to defer the
date on which any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after
the grant to the Participant of any Award, in connection with the
purchase of Common Stock under the Award or with the payment of any
obligation incurred or recognized as a result of the Award. The Board
will have full authority to decide whether the loan is to be secured
or unsecured or with or without recourse against the borrower, the
terms on which the loan is to be repaid and the conditions, if any,
under which it may be forgiven.
In connection with any Award, the Board may at the time such
Award is made or at a later date, provide for and make a cash payment
to the Participant not to exceed an amount equal to (a) the amount of
any federal, state and local income tax or ordinary income for which
the Participant will be liable with respect to the Award, plus (b) an
additional amount on a grossed-up basis necessary to make him or her
whole after tax, discharging all the Participant's income tax
liabilities arising from all payments under the Plan.
<PAGE>
7
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2,
the following provisions shall apply, unless the agreement evidencing
the Award otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the
Plan that were not previously exercisable and vested shall become
fully exercisable and vested.
(b) Awards of restricted stock and other stock-based Awards subject
to restrictions and to the extent not fully vested, shall become fully
vested and all such restrictions shall lapse so that shares issued
pursuant to such Awards shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the
passage of time, continued employment or affiliation, will be waived
and removed as to deferred stock Awards and performance Awards.
Performance of other conditions (other than conditions relating solely
to the passage of time, continued employment or affiliation) will
continue to apply unless otherwise provided in the agreement
evidencing the Awards or in any other agreement between the
Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means any one of the following events: (i)
when, without the prior approval of the Prior Directors of the
Company, any Person is or becomes the beneficial owner (as defined in
Section 13(d) of the Exchange Act and the Rules and Regulations
thereunder), together with all Affiliates and Associates (as such
terms are used in Rule 12b-2 of the General Rules and Regulations of
the Exchange Act) of such Person, directly or indirectly, of 25% or
more of the outstanding Common Stock of the Company, (ii) the failure
of the Prior Directors to constitute a majority of the Board of
Directors at any time within two years following any Electoral Event,
or (iii) any other event that the Prior Directors shall determine
constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have
the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is
defined in Rule 405 under the Securities Act of 1933 and any "group"
(within the meaning of such term in Rule 13d-5 under the Exchange
Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to any Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the
Company's Board of Directors on the date of this Agreement) and any
future director of the Company who has been nominated or elected by a
majority of the Prior Directors who are then members of the Board of
Directors of the Company; and
<PAGE>
8
(c) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company
or a subsidiary of the Company.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ
among Participants, prescribed by the Board from time to time. Such
instruments may be in the form of agreements to be executed by both
the Participant and the Company or certificates, letters or similar
instruments which need not be executed by the Participant but
acceptance of which will evidence agreement to the terms thereof. Such
instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events
of merger, consolidation, dissolution and liquidations, change of
control and restrictions affecting either the agreement or the Common
Stock issued thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument
evidencing the Award, the receipt of an Award will not give a
Participant rights as a Stockholder with respect to any shares covered
by an Award until the date of issue of a stock certificate to the
Participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common
Stock pursuant to the Plan or to remove any restriction from shares
previously delivered under the Plan (a) until all conditions of the
Award have been satisfied or removed, (b) until, in the opinion of the
Company's counsel, all applicable federal and state laws and
regulations have been complied with, (c) if the outstanding Common
Stock is at the time listed on any stock exchange, until the shares
have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been
approved by the Company's counsel. If the sale of Common Stock has not
been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such act and may require that the
certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the Participant's legal
representative, the Company will be under no obligation to deliver
Common Stock pursuant to such exercise until the Company is satisfied
as to the authority of such representative.
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9
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to
an Award an amount sufficient to satisfy all federal, state and local
withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be
delivered, the Board will have the right to require that the
Participant or other appropriate person remit to the Company an amount
sufficient to satisfy the withholding requirements, or make other
arrangements satisfactory to the Board with regard to such
requirements, prior to the delivery of any Common Stock. If and to the
extent that such withholding is required, the Board may permit the
Participant or such other person to elect at such time and in such
manner as the Board provides to have the Company hold back from the
shares to be delivered, or to deliver to the Company, Common Stock
having a value calculated to satisfy the withholding requirement.
10.5 Nontransferability of Awards
Except as otherwise specifically provided by the Board in the
case of Participants who are not reporting persons under Section 16 of
the Exchange Act, no Award (other than an Award in the form of an
outright transfer of cash or Common Stock not subject to any
restrictions) may be transferred other than by the laws of descent and
distribution, and during a Participant's lifetime an Award requiring
exercise may be exercised only by him or her (or in the event of
incapacity, the person or persons properly appointed to act on his or
her behalf).
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination
of shares, recapitalization or other change in the Company's
capitalization, or other distribution with respect to common
Stockholders other than normal cash dividends, the Board will make (i)
appropriate adjustments to the maximum number of shares that may be
delivered under the Plan under Section 4 above, and (ii) appropriate
adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards
affected by such change.
(b) The Board may also make appropriate adjustments to take into
account material changes in law or in accounting practices or
principles, mergers, consolidations, acquisitions, dispositions,
repurchases or similar corporate transactions, or any other event, if
it is determined by the Board that adjustments are appropriate to
avoid distortion in the operation of the Plan, but no such adjustments
other than those required by law may adversely affect the rights of
any Participant (without the Participant's consent) under any Award
previously granted.
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10
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will
confer upon any person any right to continued employment with the
Company or any subsidiary or interfere in any way the right of the
Company or subsidiary to terminate any employment relationship at any
time or to increase or decrease the compensation of such person.
Except as specifically provided by the Board in any particular case,
the loss of existing or potential profit in Awards granted under the
Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is
in violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall
be determined by the Board at the time. For purposes of this Plan,
transfer of employment between the Company and its subsidiaries shall
not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an
employee, and the amount of any compensation deemed to be received by
an employee as a result of any exercise or purchase of Common Stock
pursuant to an Award or sale of shares received under the Plan, will
not constitute "earnings" or "compensation" with respect to which any
other employee benefits of such employee are determined, including
without limitation benefits under any pension, stock ownership, stock
purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken
falls on a Saturday, Sunday or legal holiday, such action may be taken
on the next succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who
are foreign nationals or employed outside the United States or both,
on such terms and conditions different from those specified in the
Plan, as may, in the judgment of the Board, be necessary or desirable
to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated
by the Board. Subject to the last sentence of this Section 11, the
Board may at any time or times amend the Plan or any outstanding Award
for any purpose that may at the time be permitted by law, or may at
any time terminate the Plan as to any further grants of Awards. No
amendment, unless approved by the Stockholders, shall be effective if
it would cause the Plan to fail to satisfy the requirements of the
federal tax law or regulation relating to incentive stock options or
the requirements of Rule 16b-3 (or any successor rule) of the Exchange
<PAGE>
11
Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any Participant under any
Award previously granted without such Participant's consent.
Exhibit 11
THERMO ELECTRON CORPORATION
Computation of Earnings per Share
Three Months Ended Six Months Ended
----------------------- ----------------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
----------- ---------- ----------- ---------
Computation of Fully
Diluted Earnings
per Share:
Income:
Net income $24,150,000 $17,606,000 $46,691,000 $33,054,000
Add: Convertible
debenture interest,
net of tax 4,549,000 2,576,000 7,009,000 5,152,000
----------- ----------- ----------- -----------
Income applicable
to common stock
assuming full
dilution (a) $28,699,000 $20,182,000 $53,700,000 $38,206,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 48,269,210 40,629,600 48,113,900 40,604,595
Add: Shares
issuable from
assumed
exercise of
convertible
debentures 16,871,512 11,288,754 13,920,960 11,288,754
Shares
issuable from
assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) 388,930 491,432 390,017 491,432
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 65,529,652 52,409,786 62,424,877 52,384,781
----------- ----------- ----------- -----------
Fully Diluted
Earnings per Share
(a) / (b) $ .44 $ .39 $ .86 $ .73
=========== =========== ========== ===========
