SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 28, 1996
[ ] 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 24, 1997, was approximately $5,267,295,000.
As of January 24, 1997, the Registrant had 149,925,557 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 28, 1996, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 3, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business
Thermo Electron Corporation and its subsidiaries (the Company or the
Registrant) develop, manufacture, and market environmental monitoring and
analysis instruments; biomedical products including heart-assist devices,
respiratory-care equipment, and mammography systems; paper-recycling and
papermaking equipment; alternative-energy systems; industrial process
equipment; and other specialized products. The Company also provides a
range of services for the personal care, environmental, laboratory
analysis, and metals-processing industries, and conducts advanced-
technology research and development. The Company performs its business
through divisions and wholly owned subsidiaries, as well as
majority-owned subsidiaries that are partially owned by the public or by
private investors.
A key element in the Company's growth has been its ability to
commercialize innovative products and services emanating from research
and development activities conducted at the Company's various
subsidiaries and divisions. The Company's strategy has been to identify
business opportunities arising from social, economic, and regulatory
issues, and to seek a leading market share through the application of
proprietary technology. As part of this strategy, the Company continues
to focus on the acquisition of complementary businesses that can be
integrated into its existing core businesses to leverage access to new
markets.
The Company believes that maintaining an entrepreneurial atmosphere
is essential to its continued growth and development. To preserve this
atmosphere, the Company has 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. The Company's wholly and majority-owned
subsidiaries are provided with centralized corporate development,
administrative, financial, and other services that would not be available
to many independent companies of similar size. As of March 19, 1997, the
Company had 22 subsidiaries that have sold minority equity interests, 19
of which are publicly traded and three of which are privately held.
The Company is a Delaware corporation and was incorporated in 1956.
The Company completed its initial public offering in 1967 and was listed
on the New York Stock Exchange in 1980.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
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not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the caption "Forward-looking
Statements" in the Registrant's 1996 Annual Report to Shareholders
incorporated herein by reference.
(b) Financial Information About Industry Segments
The Company's products and services are divided into six segments:
Instruments, Alternative-energy Systems, Process Equipment, Biomedical
Products, Environmental Services, and Advanced Technologies. Products or
services within a particular segment are provided by more than one
subsidiary, and certain subsidiaries' products or services are included
in more than one segment. The principal products and services offered by
the Company in the six industry segments are described below. Financial
information concerning the Company's industry segments is summarized in
Note 14 to Consolidated Financial Statements in the Registrant's 1996*
Annual Report to Shareholders and is incorporated herein by reference.
(c) Description of Business
(i) Principal Products and Services
Instruments
The Company, through its Thermo Instrument Systems Inc. subsidiary,
is a worldwide leader in the development, manufacture, and marketing of
instruments used to identify and analyze air pollution, radioactivity,
complex chemical compounds, toxic metals, and other elements in a broad
range of liquids, solids, and gases. Thermo Instrument also provides
instruments that control, monitor, image, inspect, and measure various
industrial processes and life sciences phenomena.
Thermo Instrument historically has expanded both through the
acquisition of companies and product lines and through the internal
development of new products and technologies. During the past several
years, Thermo Instrument has completed a number of complementary
acquisitions that have provided additional technologies, specialized
manufacturing or product development expertise, and broader capabilities
in marketing and distribution.
In March 1996, Thermo Instrument completed the acquisition of a
substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons plc, (Fisons) a wholly owned subsidiary of
Rhone-Poulenc Rorer Inc., for approximately 123.5 million British pounds
sterling in cash (approximately $188.9 million) and the assumption of
approximately 30.8 million British pounds sterling of indebtedness
* References to 1996, 1995, and 1994 herein are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
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(approximately $47.2 million). The purchase price is subject to a
post-closing adjustment based on the net assets of the acquired
businesses. The businesses acquired from Fisons substantially added to
Thermo Instrument's research, development, manufacture, and sale of
analytical instruments to industrial and research laboratories worldwide.
Following the acquisition, certain of the Fisons businesses have been
sold by Thermo Instrument to its public subsidiaries with complementary
technologies and markets.
On March 12, 1997, Thermo Instrument declared unconditional in all
respects its cash tender offer for all outstanding shares of Life
Sciences International PLC (Life Sciences) for 135 pence per share
(approximately $2.16 per share). As of that date, Thermo Instrument had
received acceptances representing approximately 91% of the Life Sciences
shares outstanding and Thermo Instrument owned an additional 3% of the
outstanding Life Sciences shares. There are approximately 175 million
Life Sciences shares outstanding. Thermo Instrument has established March
26, 1997, as the date for payment for all shares as to which acceptance
has been received. In addition, Thermo Instrument expects to repay
approximately $72 million of Life Sciences's debt, net of acquired cash
expected to be used. Life Sciences, a London Stock Exchange-listed
company, manufactures laboratory science equipment, appliances,
instruments, consumables, and reagents for the research, clinical, and
industrial markets.
Thermo Instrument adopted the Company's spinout strategy in an
effort to more clearly focus its many analytical technologies on specific
niche markets. To date, Thermo Instrument has completed initial public
offerings of ThermoSpectra Corporation, ThermoQuest Corporation, Thermo
Optek Corporation, and Thermo BioAnalysis Corporation, and a private
equity offering of Metrika Systems Corporation.
ThermoSpectra develops, manufactures, and markets precision imaging,
inspection, and measurement instrumentation based on high-speed data
acquisition and digital-processing technologies to provide industrial and
research customers with integrated systems that address their specific
needs.
ThermoQuest is a leading manufacturer of commercial mass
spectrometers that identify and measure the components of a sample for
organic or inorganic compounds in the pharmaceutical, environmental,
chemical, and food and beverage industries, and in forensic sciences.
ThermoQuest also produces high performance liquid chromatographs, gas
chromatographs, and related equipment used principally in the research
and development and production monitoring of pharmaceuticals and
chemicals, and for environmental monitoring.
Thermo Optek is a worldwide leader in the development, manufacture,
and marketing of analytical instruments that use a range of optical
spectroscopy and energy-based techniques. Thermo Optek's instruments are
used in the quantitative and qualitative chemical analysis of elements
and molecular compounds in a variety of solids, liquids, and gases.
Thermo BioAnalysis develops, manufactures, and markets instruments
and information management systems used in biochemical research and
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production, as well as clinical diagnostics. Thermo BioAnalysis focuses
on three principal product areas: life sciences instrumentation,
information management systems, and health physics instrumentation.
Metrika Systems manufactures process optimization systems that
provide on-line, real-time analysis of the elemental composition of bulk
raw materials in basic materials production processes, including coal,
cement, and minerals. In addition, Metrika Systems manufactures
industrial gauging and process control instruments and systems used
principally by manufacturers of web-type materials, such as sheet metal,
rubber, and plastic foils, to measure and control parameters such as
thickness and coating weight of such materials.
Thermo Instrument also has a number of wholly owned businesses that
manufacture monitoring instruments for three principal markets: the
detection and measurement of nuclear radiation; the monitoring of air
pollutants including toxic and combustible gases; and process monitoring
instruments and control systems for the oil, gas, and petrochemical
industries.
Alternative-energy Systems
The Company's Alternative-energy Systems segment includes the
operation of independent (non-utility) power plants. This segment also
includes the manufacture, sale, and servicing of industrial refrigeration
systems; natural gas and marine engines; packaged cooling and
cogeneration systems; and steam turbines and compressors.
Through its Thermo Ecotek Corporation subsidiary, the Company
designs, develops, owns, and operates independent (non-utility) electric
power generation facilities that use environmentally responsible fuels
including agricultural and wood wastes, referred to as "biomass." Thermo
Ecotek currently operates seven biomass facilities. Its facilities are
developed and operated through joint ventures or limited partnerships in
which it has a majority interest, or through wholly owned subsidiaries.
Thermo Ecotek intends to pursue development of power-generation
projects both in the U.S. and overseas. In 1996, Thermo Ecotek formed a
joint venture in Italy to develop, own, and operate biomass-fueled
electric power facilities, and in January 1997, announced an agreement to
jointly develop a 30-megawatt power project in the Czech Republic.
Thermo Ecotek is expanding beyond biomass power generation into
other products and processes that protect the environment. In August
1995, Thermo Ecotek, through two wholly owned subsidiaries, entered into
a Limited Partnership Agreement with KFx Wyoming, Inc., a subsidiary of
KFx Inc. (in which Thermo Ecotek has a 17.8% interest), to develop,
construct, and operate a coal-beneficiation plant in Gillette, Wyoming.
The plant is expected to begin commercial operation later in 1997 and
will employ patented "clean coal" technology to remove excess moisture
and increase energy from subbituminous coal extracted from Wyoming's
Powder River Basin.
In May 1996, Thermo Ecotek acquired the assets, subject to certain
liabilities, of the biopesticides division of W.R. Grace & Co. (renamed
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Thermo Trilogy), which develops, manufactures, and markets
environmentally friendly products for agricultural pest control. In
January 1997, Thermo Trilogy acquired the assets of biosys, inc., a
producer of pheromone, neem/azadiractin, nematodes, and virus-based
biopesticide products, as well as disease-resistant sugar cane.
The Company, through its Thermo Power Corporation subsidiary,
manufactures, markets, and services industrial refrigeration equipment,
natural gas engines for vehicular and stationary applications, marine
engines, fork-lift engines, and commercial cooling and cogeneration
units.
Through its industrial refrigeration business, Thermo Power supplies
standard and custom-designed industrial refrigeration systems used
primarily by the food-processing, petrochemical, and pharmaceutical
industries. Thermo Power's refrigeration packages can be designed for use
with any common refrigerant, but approximately 80% of the units produced
operate on ammonia, a cost-effective and environmentally safe substance
compared with conventional refrigerants based on chlorofluorocarbons.
Thermo Power is also a supplier of both remanufactured and new commercial
cooling equipment for sale or rent.
Thermo Power's engine segment develops, manufactures, markets, and
services gasoline engines for recreational boats; propane and gasoline
engines for lift trucks; and natural gas engines for fleet vehicles and
stationary industrial applications, including cogeneration units, cooling
and refrigeration systems, and compressor drives. Many of Thermo Power's
products are powered by its low-emission TecoDrive(R) engines, which run
solely on compressed natural gas (CNG). Through its privately held
ThermoLyte Corporation subsidiary, Thermo Power is developing and
commercializing a family of lighting products.
The Company's Alternative-energy Systems segment also includes a
U.K.-based manufacturer of steam turbines and compressors.
Process Equipment
The Company designs, manufactures, and sells advanced, custom-
engineered processing machinery; paper-recycling and papermaking
equipment; and thermal-processing and electroplating systems.
Through its Thermo Fibertek Inc. subsidiary, the Company designs and
manufactures processing machinery, accessories, and water-management
systems for the paper and paper-recycling industries. Thermo Fibertek's
custom-engineered systems remove debris, impurities, and ink from
wastepaper, and process it into a fiber mix used to produce recycled
paper. Thermo Fibertek's principal products include custom-engineered
systems and equipment for the preparation of wastepaper for conversion
into recycled paper, accessory equipment and related consumables
important to the efficient operation of papermaking machines, and
water-management systems essential for draining, purifying, and recycling
process water.
A wholly owned subsidiary of the Company entered into a $145 million
contract in December 1994 for engineering, procurement, and construction
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services for an office wastepaper de-inking facility located in
Menominee, Michigan. Thermo Fibertek supplied more than $16 million of
equipment and services under the contract over a two-year period.
Construction of the project was completed in 1996, with startup testing
currently under way.
In September 1996, Thermo Fibergen Inc. became a majority-owned
public subsidiary of Thermo Fibertek. Thermo Fibergen's principal
business consists of conducting research and development to commercialize
equipment and systems for recovering materials from papermaking sludge
generated by plants that produce virgin and recycled pulp and paper.
Thermo Fibergen's GranTek Inc. subsidiary uses a patented process to
convert papermaking sludge into granules that are used as carriers for
agricultural chemicals.
In February 1997, Thermo Fibertek entered into a letter of intent to
acquire the assets, subject to certain liabilities, of the
stock-preparation business of The Black Clawson Company (Black Clawson)
for approximately $110 million in cash. Black Clawson is a leading
supplier of recycling equipment used in processing fiber for the
manufacture of "brown paper," such as that used for corrugated boxes. The
transaction is subject to various conditions of closing.
Through a wholly owned subsidiary, the Company also manufactures
electroplating systems and related waste-treatment equipment and
accessories, as well as aqueous systems for cleaning metal parts without
using ozone-damaging solvents.
Biomedical Products
The Company's Biomedical Products segment comprises a number of
diverse medical products businesses, both wholly and publicly owned. Its
wholly owned Thermo Biomedical group made two acquisitions in 1996:
SensorMedics Corporation, a leading provider of systems for pulmonary
function diagnosis and a producer of respiratory gas analyzers,
physiological testing equipment, and automated sleep analysis systems;
and Medical Data Electronics, a manufacturer of patient-monitoring
systems.
Also part of the Company's Thermo Biomedical group is International
Technidyne Corporation, a leading manufacturer of hemostasis management
products, including blood coagulation-monitoring instruments, and a
producer of skin-incision devices that can draw minute but medically
significant blood samples through precisely controlled incisions.
Nicolet Biomedical Inc., wholly owned subsidiary of the Company, is
a leading manufacturer of biomedical instruments for assessing muscle,
nerve, sleep, hearing, and brain blood-flow disorders, various neurologic
disorders, and for related work in clinical neurophysiology. These
instruments are used in hospitals, clinics, universities, private-
practice medical offices, and medical research facilities.
Another wholly owned subsidiary of the Company, Bird Medical
Technologies, Inc. develops, manufactures, and sells respiratory care
equipment and accessories and infection-control products to hospitals,
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subacute care facilities, outpatient surgical centers, doctors, dentists,
the military, as well as other manufactures.
Thermo Cardiosystems Inc., a public subsidiary of Thermedics Inc.,
has developed an implantable left ventricular-assist system (LVAS) called
HeartMate(TM) that, when implanted alongside the natural heart, is
designed to take over the pumping function of the left ventricle for
patients whose hearts are too damaged or diseased to beat adequately on
their own. Thermo Cardiosystems has two versions of the LVAS: a pneumatic
(or air driven) system that can be controlled by either a bedside console
or portable unit, and an electric system that features an internal
electric motor powered by an external battery-pack worn by the patient.
In April 1994, Thermo Cardiosystems received the European Conformity
Mark (CE Mark) for commercial sale of the air-driven LVAS in all European
Community countries. In October 1994, the U.S. Food and Drug
Administration (FDA) granted approval for commercial sale of the
air-driven LVAS in the United States. The electric version of the LVAS,
which received the CE Mark in August 1995, is currently being used in
clinical trials in the U.S. for patients awaiting heart transplants and
may not be sold commercially in this country until it has received FDA
approval. In December 1995, the FDA approved the protocol for conducting
clinical trials using Thermo Cardiosystems' electric LVAS as an
alternative to medical therapy. In December 1996, the Company began
actively working with the FDA on the premarket approval application for
commercial approval of the electric LVAS used as a bridge to transplant.
In Europe, the device is used both as a bridge to transplant and as an
alternative to heart transplants.
In December 1996, Thermo Cardiosystems acquired the business of
Nimbus Medical, Inc., a research and development organization involved
for more than 20 years in ventricular-assist device and total
artificial-heart technology, including high-speed rotary blood pumps,
which are relatively small and could potentially provide cardiac support
in small adults and children.
Trex Medical Corporation, a public subsidiary of ThermoTrex
Corporation, designs, manufactures, and markets a range of medical
imaging systems. It is the world's leading manufacturer of mammography
equipment and minimally invasive stereotactic breast-biopsy systems. Trex
Medical also manufactures general-purpose and specialty radiographic
systems. In 1996, Trex Medical significantly expanded its product lines
through the acquisition of two businesses. XRE Corporation, acquired in
May, designs, manufactures, and markets specialized X-ray systems used in
the diagnosis and treatment of coronary artery disease and other vascular
conditions. Continental X-Ray Corporation, acquired in September,
produces a broad line of general-purpose and specialty X-ray systems,
including radiographic/fluoroscopic systems used in hospitals to diagnose
gastrointestinal disorders, and electrophysiology products that aid
doctors in diagnosing cardiac arrhythmia.
Trex Medical has developed a full-view digital imaging system that
is currently in clinical trials, and plans to submit a 510(k) application
to the FDA in 1997 to gain clearance to market this system commercially.
The advantage of digital imaging is that the radiologist can manipulate
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and enhance the image quality to scrutinize subtle differences that may
go undetected on film-based X-rays. After introducing the digital imaging
system for mammography applications, the most technically challenging
imaging modality, Trex Medical plans to develop its flat-panel digital
technology for use in other of its products.
ThermoLase Corporation, a public subsidiary of ThermoTrex, operates
a national network of Spa Thira salons that offer its patented
SoftLight(TM) hair-removal system, for which it received FDA clearance in
April 1995. The SoftLight system uses a low-energy, dermatology laser in
combination with a lotion to remove hair. ThermoLase currently has 10
spas open in the U.S., with two additional spas in development.
ThermoLase also plans to submit a 510(k) application in 1997 for its
laser-based skin-rejuvenation system, based on data from its clinical
trials.
In January 1996, ThermoLase formed a joint venture to market the
SoftLight process in Japan for both hair removal and skin-rejuvenation,
if and when available. In November, ThermoLase entered into a license
agreement with a medical supply and service company in Saudi Arabia, to
market its hair-removal process in that country. A joint venture was also
established with a leading provider of premium hair- and skin-care
services in France in November 1996.
To complement its Spa Thira salons, ThermoLase has commenced a
program to license the SoftLight hair-removal process to qualified
service providers for use in their practices.
ThermoLase also manufactures and markets skin-care, bath, and body
products sold through department stores, salons, and spas, including the
lotion that is an integral part of the SoftLight hair-removal system.
Environmental Services
Through its Thermo TerraTech Inc. subsidiary, the Company provides
environmental and infrastructure planning and design services, with
specialization in the areas of municipal and industrial water quality
management, bridge and highway construction and reconstruction, and
natural resource management. Thermo TerraTech also offers comprehensive
environmental testing and analysis through a national network of
laboratories serving the environmental, food, and pharmaceutical
industries.
Thermo Remediation Inc., a public subsidiary of Thermo TerraTech,
provides services for the recycling of industrial fuel waste, and offers
nuclear remediation and health physics services at radioactively
contaminated sites. Thermo Remediation also operates centers that
thermally treat soil to remove and destroy petroleum contamination from
industrial sites and from former manufactured-gas plants, refineries, and
other sources. Thermo Remediation also offers other remedial solutions,
depending on the location, type, and extent of contamination, including
bioremediation and the application of risk-based corrective actions.
A majority-owned subsidiary of Thermo TerraTech, Thermo EuroTech
N.V., provides wastewater treatment services and specializes in
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converting "off-spec" and contaminated petroleum fluids into usable oil
products.
In addition, metallurgical heat-treating services are provided for
customers in the automotive, aerospace, defense, and other industries.
The Company also provides metallurgical fabrication services, principally
on high-temperature materials, for customers in the aerospace, medical,
electronics, and nuclear industries.
Advanced Technologies
ThermoTrex conducts sponsored research and development and is
attempting to commercialize new products based on advanced technologies
developed in its laboratories. Sponsored research and development,
conducted principally for the U.S. government, includes basic and applied
research in communication, avionics, X-ray detection, signal processing,
advanced-materials technology, and lasers.
ThermoTrex is currently developing a number of technologies that it
believes have future commercial potential. These include a laser
communication system called lasercom, intended to help alleviate capacity
constraints on existing communication systems; a passive microwave camera
intended to "see" through clouds and fog to enhance safety in aerial
navigation; and direct digital imaging systems for medical equipment to
improve image quality for more accurate clinical diagnoses.
Through a public subsidiary of Thermedics, Thermo Sentron Inc., the
Company designs and manufactures high-speed precision-weighing and
inspection equipment for packaging lines and industrial production.
Thermo Sentron serves two principal markets, packaged goods and bulk
materials, both of which use its products to meet quality and
productivity objectives. Customers for Thermo Sentron's checkweighers are
in the food-processing, pharmaceutical, mail-order, and other
packaged-goods businesses. Thermo Sentron also sells metal detectors with
a patented self-test feature, used to inspect packaged products for metal
contamination, to food-processing and pharmaceutical companies. Its
bulk-materials product line includes conveyor-belt scales, solid
level-measurement and conveyor-monitoring systems, and sampling systems,
all sold to customers in the mining and material-processing industries,
as well as to electric utilities, chemical, and other manufacturing
companies.
Thermedics manufactures electrode-based chemical-measurement
products used in the agriculture, biomedical research, food processing,
pharmaceutical, sewage treatment, and many other industries. In
laboratories, manufacturing plants, and in the field, Thermedics'
products permit these industries to determine the presence and amount of
relevant chemicals. Thermedics also manufactures on-line process monitors
used by power plants and semiconductor manufacturers to detect
contaminants in high-purity water.
Thermedics Detection Inc., a public subsidiary of Thermedics,
manufactures quality-assurance and explosives-detection products. Much of
its technology involves rapid contents analysis. Thermedics Detection
provides high-speed X-ray imaging systems that monitor liquid fill-level
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and other container characteristics for the beverage and other industries
that assure the quality of refillable plastic containers that are
principally used outside the United States. Moisture Systems Corporation
and Rutter & Co., B.V., acquired by Thermedics Detection in January 1996,
design, manufacture, and sell instruments that use near-infrared
spectroscopy to measure moisture and other product components, including
fat, protein, solvents, and other substances in numerous consumer and
industrial products. Thermedics Detection also recently introduced an
ultra-high-speed gas chromatograph that permits manufacturers to conduct
laboratory-quality analysis for near on-line process-control
applications.
Thermedics Detection incorporates trace-detection technologies in
products that screen baggage, people, and electronic equipment for the
presence of a range of explosives. Its explosives detectors are in place
at airports and border crossings and in forensics investigations, such as
the attempt to identify the cause of the crash of TWA Flight 800.
Thermedics Detection also has developed a lower-cost product designed for
use in conjunction with its trace explosives detectors, and an automated
system that can detect traces of explosives on people.
Thermo Voltek Corp., a public subsidiary of Thermedics, designs,
manufactures, and markets electromagnetic compatibility (EMC) testing
instruments that simulate pulsed electromagnetic interference, radio
frequency interference, and changes in AC voltage, to allow manufacturers
of electronic systems and integrated circuits to test for resistance to
those conditions. Thermo Voltek also manufactures high-voltage
power-conversion systems and programmable power amplifiers, provides EMC
consulting and systems-integration services, and distributes EMC-related
products.
The Company's wholly owned Coleman Research Corporation subsidiary
provides systems integration, systems engineering, and analytical
services to government and commercial customers in fields of information
technology, software engineering, energy, the environment, launch
systems, advanced radar and imaging, and health systems.
Publicly and Privately Held Subsidiaries
In 1983, the Company adopted a strategy of having certain
subsidiaries sell a minority interest in a public or private offering to
outside investors. An important goal of this strategy is to provide the
entrepreneurial atmosphere and focused performance incentives of a
separate business. As of March 19, 1997, the Company had 22 subsidiaries
that have sold minority equity interests, 19 of which are publicly traded
and three of which are privately held.
Thermedics Inc. develops, manufactures, and markets product quality
assurance systems, precision weighing and inspection equipment,
explosives-detection devices, microweighing and electrochemistry
instruments, as well as biomaterials and other biomedical products.
Thermedics' products are included in the Biomedical Products and Advanced
Technologies segments.
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Thermo Cardiosystems Inc., a majority-owned subsidiary of
Thermedics, develops, manufactures, and markets implantable left
ventricular-assist systems and develops artificial hearts. Thermo
Cardiosystems' products are included in the Biomedical Products
segment.
Thermo Voltek Corp., a majority-owned subsidiary of Thermedics,
designs, manufactures, and markets electromagnetic compatibility
(EMC) testing instruments, high-voltage power-conversion systems,
and programmable power amplifiers; provides EMC consulting and
systems-integration services; and distributes EMC-related products.
Thermo Voltek's products and services are included in the Advanced
Technologies segment.
Thermo Sentron Inc., a majority-owned subsidiary of Thermedics,
develops, manufactures, and markets high-speed precision-weighing
and inspection equipment for producers of bulk materials and for
packaging lines in the food-processing, pharmaceutical, mail-order,
and other diverse industries. Thermo Sentron's products are included
in the Advanced Technologies segment.
Thermedics Detection Inc., a majority-owned subsidiary of
Thermedics, develops, manufactures, and markets high-speed detection
and measurement products used for product quality assurance,
explosives detection, and laboratory analysis. Thermedics
Detection's products are included in the Advanced Technologies
segment.
Thermo Instrument Systems Inc. develops, manufactures, and markets
analytical instruments used to identify complex chemical compounds, toxic
metals, and other elements in a broad range of liquids and solids, as
well instruments used to monitor radioactivity and air pollution, and to
control, image, inspect, and measure various industrial processes and
life sciences phenomena. Thermo Instrument's products represent the
Company's Instruments segment.
ThermoSpectra Corporation, a majority-owned subsidiary of Thermo
Instrument, develops, manufactures, and markets precision imaging,
inspection, and measurement instrumentation based on high-speed data
acquisition and digital-processing technologies.
ThermoQuest Corporation, a majority-owned subsidiary of Thermo
Instrument, develops, manufactures, and sells mass spectrometers,
liquid chromatographs, and gas chromatographs for the
pharmaceutical, environmental, and industrial markets.
Thermo Optek Corporation, a majority-owned subsidiary of Thermo
Instrument, develops, manufactures, and markets optical and
energy-based analytical instruments used in the quantitative and
qualitative chemical analysis of elements and molecular compounds in
solids, liquids, and gases. In addition, through its wholly owned
Thermo Vision Corporation subsidiary, Thermo Optek addresses the
photonics marketplace for optical components, imaging systems,
analytical instruments, and lasers.
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Thermo BioAnalysis Corporation, a majority-owned subsidiary of
Thermo Instrument, develops, manufactures, and markets instruments
and information management systems used in biochemical research and
production, as well as clinical diagnostics and health physics.
Metrika Systems Corporation, a majority-owned, privately held
subsidiary of Thermo Instrument, develops, manufactures, and markets
systems to optimize on-line industrial processes, such as the
production of raw materials and web-type materials, by employing
proprietary, ultra-high speed measurement and analysis technologies.
Thermo TerraTech Inc. provides environmental services and infrastructure
planning and design encompassing a range of specializations within
consulting and design, soil and water remediation, and laboratory
testing. Thermo TerraTech also provides metal-treating services. Thermo
TerraTech's products and services are included in the Environmental
Services and Process Equipment segments.
Thermo Remediation Inc., a majority-owned subsidiary of Thermo
TerraTech, provides environmental services including industrial
remediation, nuclear remediation, hazardous waste remedial cleanup,
soil remediation, and waste fluids recycling. Thermo Remediation's
services are included in the Environmental Services segment.
Thermo EuroTech N.V., a majority-owned, privately held subsidiary of
Thermo TerraTech, provides environmental services in The
Netherlands, including recycling waste oils and refinery and
drilling wastes. Thermo EuroTech's services are included in the
Environmental Services segment.
Thermo Power Corporation manufactures, markets, and services industrial
refrigeration equipment, natural gas engines for vehicular and stationary
applications, natural gas-fueled cooling and cogeneration systems,
lift-truck engines, and marine engines. Thermo Power also conducts
sponsored research and development on advanced systems for clean
combustion and high-efficiency gas-fueled devices. Thermo Power's
products are included in the Alternative-energy Systems segment.
ThermoLyte Corporation, a majority-owned, privately held subsidiary
of Thermo Power, is developing a line of propane-powered lighting
products.
ThermoTrex Corporation manufactures and markets medical imaging
equipment, has developed a laser-based system for the removal of unwanted
hair, and develops advanced technologies that are being developed for
potential incorporation into commercial products for the medical imaging,
personal-care, avionics, and communications industries. ThermoTrex's
products are included in the Company's Biomedical Products and Advanced
Technologies segments.
ThermoLase Corporation, a majority-owned subsidiary of ThermoTrex,
offers laser-based hair-removal services and manufactures skin-care
and other personal-care products sold through department stores,
salons, and spas. ThermoLase's products and services are included in
the Biomedical Products segment.
13PAGE
<PAGE>
Trex Medical Corporation, a majority-owned subsidiary of ThermoTrex,
designs, manufactures, and markets mammography equipment and
minimally invasive stereotactic breast-biopsy systems used for the
detection of breast cancer, as well as general-purpose X-ray systems
and interventional X-ray imaging equipment. Trex Medical's products
are included in the Biomedical Products segment.
Thermo Fibertek Inc. develops, manufactures, and markets a range of
equipment and accessory products for the domestic and international paper
and paper-recycling industry, including de-inking and stock-preparation
equipment and water-management systems. Thermo Fibertek's products are
included in the Process Equipment segment.
Thermo Fibergen Inc., a majority-owned subsidiary of Thermo
Fibertek, is developing and commercializing equipment and systems to
recover materials from pulp reside, or sludge, generated by paper
and pulp mills. Thermo Fibergen also produces granules from
papermaking sludge that are sold as carriers for agricultural
chemicals.
Thermo Ecotek Corporation develops and operates independent (non-utility)
power plants that use clean combustion technology and alternative-energy
sources, such as agricultural waste. The Company is also involved in
engineered clean-coal production, as well as the development and
production of botanical-based biopesticides for the agricultural
industry. Thermo Ecotek's operations are included in the Alternative-
energy Systems segment.
(ii) New Products
The Company's business includes the development and introduction of
new products and may include entry into new business segments. The
Company has made no commitments to new products that require the
investment of a material amount of the Company's assets, nor does it have
any definitive plans to enter new business segments that would require
such an investment (see Section (xi) "Research and Development").
(iii) Raw Materials
Certain raw materials used in the manufacturer of Thermo
Cardiosystem's LVAS are available from only one or two suppliers. Thermo
Cardiosystems is making efforts to minimize the risks associated with
sole sources and ensure long-term availability, including qualifying
alternative materials or developing alternative sources for materials and
components supplied by a single source. Although the Company believes
that it has adequate supplies of materials and components to meet demand
for the LVAS for the foreseeable future, no assurance can be given that
the Company will not experience shortages of certain materials or
components in the future that could cause delays in the Thermo
Cardiosystems' LVAS development program or adversely affect Thermo
Cardiosystems' ability to manufacture and ship LVAS to meet demand.
Except as described above, in the opinion of management, the Company
has a readily available supply of raw materials for all of its
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<PAGE>
significant products from various sources and does not anticipate any
difficulties in obtaining the raw materials essential to its business.
(iv) Patents, Licenses, and Trademarks
The Company considers patents to be important in the present
operation of its business; however, the Company does not consider any
patent, or related group of patents, to be of such importance that its
expiration or termination would materially affect the Company's business
taken as a whole. The Company seeks patent protection for inventions and
developments made by its personnel and incorporated into its products or
otherwise falling within its fields of interest. Patent rights resulting
from work sponsored by outside parties do not always accrue exclusively
to the Company and may be limited by agreements or contracts.
The Company protects some of its technology as trade secrets and,
where appropriate, uses trademarks or registers its products. It also
enters into license agreements with others to grant and/or receive rights
to patents and know-how.
(v) Seasonal Influences
Thermo Ecotek earns a disproportionately high share of its income in
the months of May through October due to the rate structures under the
power sales agreements relating to its California plants, which provide
strong incentives to operate during this period of high demand.
Conversely, Thermo Ecotek historically has operated at a marginal profit
during the first quarter due to the rate structure under these
agreements.
While Thermo TerraTech conducts significant operations year-round,
the majority of its businesses experience seasonal fluctuations due to
adverse weather during winter months. Such seasonal influences may have a
material effect on its revenues. A number of Thermo TerraTech's
operations were affected by adverse weather during the first quarter of
1996.
There are no other material seasonal influences on the Company's
sales of products and services.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended
to customers that would have a material adverse effect on the Company's
working capital.
(vii) Dependency on a Single Customer
No single customer accounted for more than 10% of the Company's
total revenues in any of the past three years. The Advanced Technologies
segment derived approximately 16%, 27%, and 13% of its revenues in 1996,
1995, and 1994, respectively, from contracts with various agencies of the
U.S. government and approximately 23% of its revenues in 1994 from one
customer for a process-detection instrument. In connection with the
development of power plants, Thermo Ecotek typically enters into
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long-term power supply contracts with a single customer for the sale of
power generated by each plant. The Alternative-energy Systems segment
derived 16% of its revenues in 1996, 1995, and 1994, from Pacific Gas &
Electric and 16%, 15%, and 19% of its revenues in 1996, 1995, and 1994,
respectively, from Southern California Edison.
(viii) Backlog
The Company's backlog of firm orders at year-end 1996 and 1995 was
as follows:
(In thousands) 1996 1995
-------------------------------------------------------------------------
Instruments $266,600 $188,700
Alternative-energy Systems 118,500 112,900
Process Equipment 52,300 114,800
Biomedical Products 107,700 87,800
Environmental Services 118,200 76,500
Advanced Technologies 148,600 117,200
-------- --------
$811,900 $697,900
======== ========
The Process Equipment segment backlog in 1995 includes $54 million
for the design and construction of an office wastepaper de-inking
facility completed in 1996.
Backlog includes the uncompleted portion of research and development
contracts and the uncompleted portion of certain equipment contracts that
are accounted for using the percentage-of-completion method. The Company
believes approximately 95% of the 1996 backlog will be filled during
1997.
(ix) Government Contracts
Approximately 5% of the Company's total revenues in 1996 were
derived from contracts or subcontracts with the federal government, which
are subject to renegotiation of profits or termination. The Company does
not have any knowledge of threatened or pending renegotiation or
termination of any material contract or subcontract.
(x) Competition
The Company is engaged in many highly competitive industries. The
nature of the competition in each of the Company's markets is described
below:
Instruments
The Company is among the principal manufacturers of analytical
instrumentation. Within the markets for the Company's analytical
instrument products, the Company competes with several large corporations
with broad product offerings, such as Hewlett-Packard Co., Perkin-Elmer
Corp., Varian Associates, Inc., and Hitachi, Ltd., and numerous smaller
companies that address only particular segments of the industry or
16PAGE
<PAGE>
specific geographic areas. The Company's instruments business generally
competes on the basis of technical advances that result in new products
and improved price/performance ratios, reputation among customers as a
quality leader for products and services, and active research and
application-development programs. To a lesser extent, the Company
competes on the basis of price.
Alternative-energy Systems
The worldwide independent power market consists of numerous
companies, ranging from small startups to multinational industrial
companies. In addition, a number of regulated utilities have created
subsidiaries that compete as non-utility generators. Non-utility
generators often specialize in market "niches," such as a specific
technology or fuel (for example, gas-fired cogeneration,
refuse-to-energy, hydropower, geothermal, wind, solar, wood, or coal) or
a specific region of the country where they believe they have a market
advantage. However, many non-utility generators, including the Company,
seek to develop projects on a best-available-fuel basis. The Company
competes primarily on the basis of project experience, technical
expertise, capital resources, and power pricing.
The Company's sale of industrial refrigeration systems is subject to
intense competition. The industrial refrigeration market is mature,
highly fragmented, and extremely dependent on close customer contacts.
Major industrial refrigeration companies, of which the Company is one,
account for approximately one-half of worldwide sales, with the balance
generated by many smaller companies. The Company competes principally on
the basis of its advanced control systems and overall quality,
reliability, service, and price. The Company believes it is a leader in
remanufactured refrigeration equipment. The Company competes in this
market based on price, delivery time, and customized equipment.
The Company's sale of packaged cogeneration systems is subject to
intense competition, both direct and indirect. Direct competitors consist
of companies that sell cogeneration products resembling those sold by the
Company as well as electric utilities' pricing programs. Indirect
competitors include manufacturers of conventional heating and cooling
systems.
Competition in the market for natural gas engines for vehicles is
intense. Current and potential competitors include major automotive and
natural gas companies and other companies that have substantially greater
financial resources than those of the Company.
The Company has experienced intense competition in the marine engine
business in recent years as some of its former customers have been
acquired by competitors following the vertical integration of the boating
industry. Competition is primarily on the basis of quality, reliability,
and service.
Process Equipment
The Company faces significant competition in the markets for paper-
recycling and water handling equipment and papermachine accessories, and
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<PAGE>
competes in these markets primarily on the basis of quality, service,
technical expertise, and product innovation. The Company is a leading
supplier of de-inking systems for paper recycling and accessory equipment
for papermaking machines, and competes in these markets primarily on the
basis of service, technical expertise, and performance.
The market for thermal-processing systems is subject to intense
competition worldwide. The Company is aware of at least eight companies
that market a number of products comparable to the Company's, but
competition for particular projects is typically limited to fewer
companies. The Company competes on the basis of several factors,
including technical performance, product quality and reliability, timely
delivery, and price.
Biomedical Products
Competition in the markets for most of the Company's biomedical
products, including those manufactured by Thermo Cardiosystems,
ThermoTrex, International Technidyne, Nicolet Biomedical, Bird Medical
Technologies, SensorMedics, and Medical Data Electronics, is based to a
large extent upon technical performance.
The Company is aware of one other company that has submitted a PMA
application with the FDA for an implantable LVAS that would compete with
Thermo Cardiosystems' LVAS. The Company is unaware whether this PMA
application has been accepted for filing by the FDA. Also, the Company is
aware of one other company that has received approval by the FDA Advisory
Panel on Circulatory System Devices and subsequent commercial approval
for its cardiac-assist device. This is an external device that is
positioned on the outside of the patient's chest and is intended for
short-term use in the hospital environment. The Company is also aware
that a total artificial heart is currently undergoing clinical trials.
The requirement of obtaining FDA approval for commercial sale of an LVAS
is a significant barrier to entry into the U.S. market for these devices.
There can be no assurance, however, that FDA regulations will not change
in the future, reducing the time and testing required for others to
obtain FDA approval. In addition, other research groups and companies are
developing cardiac-assist systems using alternative technologies or
concepts, one or more of which might prove functionally equivalent to or
more suitable than the Company's systems. Among products that have been
approved for commercial sale, the Company competes primarily on the basis
of performance, service capability, reimbursement status, and price.
The Company is one of a number of competitors in the markets for
mammography and general radiographic systems and is one of two
competitors in the market for stereotactic breast-biopsy systems. The
Company competes in these markets primarily on the basis of product
features, product performance, and reputation, as well as price and
service. The markets in which the Company competes with these products
are characterized by rapid technological change. The Company believes
that in order for it to be competitive in these markets it will be
important for it to continue to be technologically innovative.
The Company's SoftLight laser hair-removal system competes with
other laser-based systems, electrolysis, and other hair-removal products.
18PAGE
<PAGE>
In March 1997, Laser Industries Ltd., Mehl/Biophile International Corp.,
and Palomar Medical Technologies Inc. each announced that it had received
clearance from the FDA to market its laser-based system for the removal
of unwanted facial and body hair. The laser-based hair-removal market is
characterized by rapid technological change and the Company believes that
it must continue to be technologically innovative in order to compete in
this market. In addition, the SoftLight system will compete with
electrolysis providers, many of whom are small practitioners with
well-established networks of client relationships. Finally, the SoftLight
system competes with razors, hot wax, and other hair-removal products.
Environmental Services
The Company competes in the market for soil-remediation services
based on its ability to offer customers superior protection from
environmental liabilities. However, with relaxed regulatory standards in
many states, the Company faces intense competition in local markets from
landfills, other treatment technologies, and from companies competing
with similar technologies, limiting the volume of soil to be treated and
the prices that can be charged by the Company. Pricing is therefore a
major competitive factor for the Company.
The Company's metallurgical services business competes in specialty
machining services. Competition is based principally on services
provided, turnaround time, and price.
Hundreds of independent analytical testing laboratories and
consulting firms compete for environmental services business nationwide.
Many of these firms use equipment and processes similar to those of the
Company. Competition is based not only on price, but also on reputation
for accuracy, quality, and the ability to respond rapidly to customer
requirements. In addition, many industrial companies have their own
in-house analytical testing capabilities. The Company believes that its
competitive strength lies in certain niche markets within which the
Company is recognized for its expertise.
Advanced Technologies
In its contract research and development business, the Company not
only competes with other companies and institutions that perform similar
services, but must also rely on the ability of government agencies and
other clients to obtain allocations of research and development monies to
fund contracts with the Company. The Company competes for research and
development programs principally on the basis of technical innovations.
As government funding becomes more scarce, particularly for defense
projects, the competition for such funding will become more intense. In
addition, as the Company's programs move from the development stage to
commercialization, competition is expected to intensify.
Thermedics' electrode-based chemical-measurement products compete
with several international companies. In the markets for these products,
Thermedics competes on the basis of performance, service, technology, and
price.
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<PAGE>
Thermo Sentron competes with several international and regional
companies in the market for its products. Thermo Sentron's competitors in
the packaged goods market differ from those in the bulk materials market.
The principal competitive factors in both markets are customer service
and support, quality, reliability, and price.
Thermedics Detection's product quality assurance systems compete
with chemical-detection systems manufactured by several companies and
with other technologies and processes for product quality assurance.
Competition in the markets for all of the Company's detection products is
based primarily on performance, service, and price.
There are a number of competitors in the market for instruments that
detect explosives, including makers of other chemical-detection
instruments as well as enhanced X-ray detectors. The Company expects that
the Federal Aviation Administration (FAA) will purchase trace detection
systems as part of the initial deployment of explosives-detection systems
in the United States. The Company believes that companies, if any, whose
devices are ultimately required by the FAA will have a substantial
competitive advantage in the United States.
Thermo Voltek is a leading supplier of pulsed electromagnetic
interference testing equipment. The Company competes in this market
primarily on the basis of performance, technical expertise, reputation,
and price. In the market for power amplifiers, Thermo Voltek competes
with several companies worldwide primarily on the basis of technical
expertise, reputation, and price.
(xi) Research and Development
During 1996, 1995, and 1994, the Company expended $299,271,000,
$269,329,000, and $229,200,000, respectively, on research and
development. Of these amounts, $144,823,000, $167,120,000, and
$149,645,000, respectively, were sponsored by customers and $154,448,000,
$102,209,000, and $79,555,000, respectively, were Company-sponsored.
(xii) Environmental Protection Regulations
The Company believes that compliance with federal, state, and local
environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
At December 28, 1996, the Company employed approximately 17,760
persons.
(d) Financial Information about Exports by Domestic Operations and about
Foreign Operations
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 14 to Consolidated Financial
Statements in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
20PAGE
<PAGE>
(e) Executive Officers of the Registrant
Present Title (Year First
Name Age Became Executive Officer)
------------------------ --- --------------------------------------
George N. Hatsopoulos(1) 70 Chairman of the Board, Chief Executive
Officer, and Director (1956)
John N. Hatsopoulos(1) 62 President and Chief Financial Officer
(1968)
Peter G. Pantazelos 66 Executive Vice President (1968)
Arvin H. Smith 67 Executive Vice President (1983)
William A. Rainville 55 Senior Vice President (1993)
John W. Wood Jr. 53 Senior Vice President (1995)
Paul F. Kelleher 54 Vice President, Finance and
Administration (1982)
(1) George N. Hatsopoulos and John N. Hatsopoulos are brothers.
Each executive officer serves until his successor is chosen or
appointed and qualified or until earlier resignation, death, or removal.
All executive officers, except Messrs. John Hatsopoulos, Rainville, and
Wood, have held comparable positions with the Company for at least the
last five years. Mr. John Hatsopoulos has been President of the Company
since January 1997 and Chief Financial Officer of the Company since 1988.
Mr. Rainville has been a Senior Vice President of the Company since 1993
and was a Vice President of the Company from 1986 to 1993. Mr. Wood has
been President and Chief Executive Officer of Thermedics Inc. since 1984
and was a Vice President of the Company from 1994 to 1995, prior to
becoming a Senior Vice President of the Company in 1995.
Item 2. Properties
The location and general character of the Company's principal
properties by industry segment as of December 28, 1996, are as follows:
Instruments
The Company owns approximately 1,973,000 square feet of office,
engineering, laboratory, and production space, principally in California,
Colorado, Florida, New Mexico, Texas, Wisconsin, England, and Germany,
and leases approximately 2,281,000 square feet of office, engineering,
laboratory, and production space principally in California, Connecticut,
Massachusetts, Ohio, Texas, Wisconsin, and England, under leases expiring
from 1997 to 2017.
Alternative-energy Systems
The Company owns approximately 371,000 square feet of office,
engineering, and production space, principally in Pennsylvania, England,
and Massachusetts, and leases approximately 392,000 square feet of
office, engineering, laboratory, and production space principally in
Illinois, Michigan, and England, under leases expiring from 1997 to 2006.
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<PAGE>
The Company operates four independent power plants in California,
Maine, and New Hampshire, under leases expiring from 2000 to 2010. The
Company owns three independent power plants in New Hampshire and
California and a coal-beneficiation plant in Wyoming.
Process Equipment
The Company owns approximately 1,105,000 square feet of office,
laboratory, and production space, principally in France, Connecticut,
Massachusetts, and New York, and leases approximately 325,000 square feet
of office, engineering, and production space principally in Wisconsin and
Michigan, under leases expiring from 1997 to 2004.
Biomedical Products
The Company owns approximately 412,000 square feet of office and
production space in Illinois, California, Connecticut, and New Jersey,
and leases approximately 1,068,000 square feet of office, engineering,
laboratory, and production space in Texas, Massachusetts, California, New
York, Connecticut, and Illinois, under leases expiring from 1997 to 2012.
Environmental Services
The Company owns approximately 840,000 square feet of office,
laboratory, and production space, principally in California, The
Netherlands, Pennsylvania, and Minnesota, and leases approximately
550,000 square feet of office, engineering, laboratory, and production
space principally in California, Pennsylvania, Massachusetts, New
Hampshire, and New York, under leases expiring from 1997 to 2008.
The Company owns approximately 96 acres of land from which it
provides soil-remediation services principally in Maryland, South
Carolina, and California, and leases approximately 29 acres of land from
which it provides soil-remediation and fluid-recycling services in
principally New York, Arizona, Washington, and Virginia, under leases
expiring from 1997 to 2006.
Advanced Technologies and Corporate Headquarters
The Company owns approximately 153,000 square feet of office space
principally in Massachusetts and New York, and leases approximately
1,108,000 square feet of office, engineering, and laboratory space
principally in Florida, Massachusetts, California, and Minnesota, under
leases expiring from 1997 to 2013.
The Company believes that its facilities are in good condition and
are suitable and adequate to meet its current needs, and that suitable
replacements are available on commercially reasonable terms for any
leases that expire in 1997 in the event that the Company is unable to
renew such leases on reasonable terms.
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<PAGE>
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for the
Registrant's common stock, $1.00 par value, and related matters, is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1996 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required under this item is included under the
sections "Ten Year Financial Summary" and "Dividend Policy" in the
Registrant's 1996 Annual Report to Shareholders and is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of December
28, 1996, are included in the Registrant's 1996 Annual Report to
Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not Applicable.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a), (d) Financial Statements and Schedules
(1) The financial statements set forth in the list below are
filed as part of this Report.
(2) The financial statement schedule set forth in the list
below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by
reference are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Schedule included herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 19, 1997
THERMO ELECTRON CORPORATION
By: George N. Hatsopoulos
---------------------
George N. Hatsopoulos
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated, as of March 19, 1997.
Signature Title
--------- -----
By:George N. Hatsopoulos Chief Executive Officer, Chairman
----------------------
George N. Hatsopoulos of the Board, and Director
By:John N. Hatsopoulos President and Chief Financial
----------------------
John N. Hatsopoulos Officer
By:Paul F. Kelleher Vice President, Finance and Adminis-
----------------------
Paul F. Kelleher tration (Chief Accounting officer)
By:John M. Albertine Director
----------------------
John M. Albertine
By:Peter O. Crisp Director
----------------------
Peter O. Crisp
By:Elias P. Gyftopoulos Director
----------------------
Elias P. Gyftopoulos
By:Frank Jungers Director
----------------------
Frank Jungers
By:Robert A. McCabe Director
----------------------
Robert A. McCabe
By:Frank E. Morris Director
----------------------
Frank E. Morris
By:Donald E. Noble Director
----------------------
Donald E. Noble
By:Hutham S. Olayan Director
----------------------
Hutham S. Olayan
By:Roger D. Wellington Director
----------------------
Roger D. Wellington
26PAGE
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of
Thermo Electron Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
Electron Corporation's Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
February 12, 1997 (except with respect to the matter discussed in Note 16
as to which the date is March 12, 1997). Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule listed in Item 14 on page 25 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 12, 1997
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SCHEDULE II
THERMO ELECTRON CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Balance Provision
at Charged Accounts Balance
Beginning to Accounts Written at End
Description of Year Expense Recovered Off Other(a) of Year
- ------------------------------------------------------------------------------
Year Ended
December 28, 1996
Allowance for
Doubtful
Accounts $29,318 $ 6,002 $ 760 $(8,994) $ 7,235 $34,321
Year Ended
December 30, 1995
Allowance for
Doubtful
Accounts $21,664 $ 5,534 $ 5 $(6,422) $ 8,537 $29,318
Year Ended
December 31, 1994
Allowance for
Doubtful
Accounts $14,174 $ 4,225 $ 268 $(4,649) $ 7,646 $21,664
(a) Allowances of businesses acquired during the year as described in Note 3
to Consolidated Financial Statements in the Registrant's 1996 Annual
Report to Shareholders and the effect of foreign currency translation.
28PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------
2.1 Amended and Restated Asset and Stock Purchase Agreement
dated March 29, 1996, among the Registrant, Thermo
Instrument, and Fisons plc (filed as Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 30, 1996 [File No. 1-8002] and incorporated
herein by reference). Pursuant to Item 601(b)(2) of
Regulation S-K, schedules to this Agreement have been
omitted. The Registrant hereby undertakes to furnish
supplementally a copy of such schedules to the Commission
upon request.
3.1 Restated Certificate of Incorporation of the Registrant, as
amended (filed as Exhibit 3(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June
29, 1996 [File No. 1-8002] and incorporated herein by
reference).
3.2 By-laws of the Registrant, as amended.
4.1 Fiscal Agency Agreement dated as of April 15, 1994, between
the Registrant and Chemical Bank, pertaining to the
Registrant's 5% Senior Convertible Debentures due 2001
(filed as Exhibit 4.1 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended April 2, 1994 [File No.
1-8002] and incorporated herein by reference).
Fiscal Agency Agreement dated as of January 3, 1996,
between the Registrant and Chemical Bank pertaining to the
Registrant's 4 1/4% Subordinated Convertible Debentures due
2003 (filed as Exhibit 4.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-8002] and incorporated herein by
reference).
The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A)
of Regulation S-K, to furnish to the Commission upon
request, a copy of each instrument with respect to other
long-term debt of the Registrant or its consolidated
subsidiaries.
4.2 Rights Agreement dated as of January 19, 1996, between the
Registrant and The First National Bank of Boston, which
includes as Exhibit A the Form of Certificate of
Designations, as Exhibit B the Form of Rights Certificate,
and as Exhibit C the Summary of Rights to Purchase
Preferred Stock (filed as Exhibit 1 to the Registrant's
Registration Statement on Form 8-A, declared effective by
the Commission on January 31, 1996 [File No. 1-8002] and
incorporated herein by reference).
29PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------
10.1 Thermo Electron Corporate Charter as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993 [File No. 1-8002] and incorporated
herein by reference).
10.2 Form of Severance Benefit Agreement with officers (filed as
Exhibit 10.15 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 29, 1990 [File No.
1-8002] and incorporated herein by reference).
10.3 Form of Indemnification Agreement with directors and
officers (filed as Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 29,
1990 [File No. 1-8002] and incorporated herein by
reference).
10.4 Loan and Reimbursement Agreement dated as of December 1,
1991, among North County Resource Recovery Associates;
Union Bank of Switzerland; National Westminster Bank PLC
and Banque Paribas, New York Branch, as lead managers;
Credit Local de France as co-lead manager; and Union Bank
of Switzerland as issuing bank and as agent (filed as
Exhibit 10.39 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by reference).
10.5 Amended and Restated Reimbursement Agreement dated as of
December 31, 1993, among Chemical Trust Company of
California as Owner Trustee; Delano Energy Company Inc.;
ABN AMRO Bank N.V., Boston Branch, for itself and as Agent;
The First National Bank of Boston, as Co-agent; Barclays
Bank PLC, as Co-agent; Societe Generale, as Co-agent; and
BayBank, as Lead Manager (filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-8002] and incorporated
herein by reference).
10.6 Amended and Restated Participation Agreement dated as of
December 31, 1991, among Delano Energy Company Inc.; Thermo
Ecotek Corporation (formerly Thermo Energy Systems
Corporation); Chemical Trust Company of California, as
Owner Trustee; ABN AMRO Bank N.V., Boston Branch, as
Co-agent; Bank of Montreal, as Co-agent; Barclays Bank PLC,
as Co-agent; Society Generale, as Co-agent; BayBank, as
Lead Manager; and ABN AMRO Bank N.V., Cayman Island Branch,
and joined in by the Registrant (filed as Exhibit 10.6 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 [File No. 1-8002] and
incorporated herein by reference).
30PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------------
10.7 Turnkey Engineering, Procurement, Construction, and Initial
Operation Agreement for a de-inking pulp facility dated as
of November 1, 1994, between the Registrant, as contractor,
and Great Lakes Pulp Partners I, L.P., as owner (filed as
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 [File No.
1-8002] and incorporated herein by reference). Pursuant to
Item 601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Company hereby undertakes
to furnish supplementally a copy of such schedules to the
Commission upon request.
10.8 Stock Holdings Assistance Plan and Form of Promissory Note.
10.9 - 10.20 Reserved.
10.21 Deferred Compensation for Directors of the Registrant
(filed as Exhibit 10.5 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 3, 1987 [File
No. 1-8002] and incorporated herein by reference). (Maximum
number of shares issuable is 679,218 shares, after
adjustment to reflect share increases approved in 1986 and
1992 and 3-for-2 stock splits effected in October 1986,
October 1993, May 1995, and June 1996.)
10.22 Amended and Restated Directors' Stock Option Plan of the
Registrant (filed as Exhibit 10.25 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 [File No. 1-8002] and incorporated herein
by reference).
10.23 Incentive Stock Option Plan of the Registrant (filed as
Exhibit 4(d) to the Registrant's Registration Statement on
Form S-8 [Reg. No. 33-8993] and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Registrant's Nonqualified
Stock Option Plan is 13,552,734 shares, after adjustment to
reflect share increases approved in 1984 and 1986, share
decrease approved in 1989, and 3-for-2 stock splits
effected in October 1986, October 1993, May 1995, and June
1996.)
31PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------------
10.24 Nonqualified Stock Option Plan of the Registrant (filed as
Exhibit 4(e) to the Registrant's Registration Statement on
Form S-8 [Reg. No. 33-8993] and incorporated herein by
reference). (Plan amended in 1984 to extend expiration date
to December 14, 1994; maximum number of shares issuable in
the aggregate under this plan and the Registrant's
Incentive Stock Option Plan is 13,552,734 shares, after
adjustment to reflect share increases approved in 1984 and
1986, share decrease approved in 1989, and 3-for-2 stock
splits effected in October 1986, October 1993, May 1995,
and June 1996.)
10.25 Equity Incentive Plan of the Registrant (filed as Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 2, 1994 [File No. 1-8002] and
incorporated herein by reference). (Plan amended in 1989 to
restrict exercise price for SEC reporting persons to not
less than 50% of fair market value or par value; maximum
number of shares issuable is 10,575,000 shares, after
adjustment to reflect 3-for-2 stock splits effected in
October 1993, May 1995, and June 1996, and share increase
approved in 1994.)
10.26 Thermo Electron Corporation - Thermedics Inc. Nonqualified
Stock Option Plan (filed as Exhibit 4 to a Registration
Statement on Form S-8 of Thermedics [Reg. No. 2-93747] and
incorporated herein by reference). (Maximum number of
shares issuable is 450,000 shares, after adjustment to
reflect share increase approved in 1988, 5-for-4 stock
split effected in January 1985, 4-for-3 stock split
effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993.)
10.27 Thermo Electron Corporation - Thermo Instrument Systems
Inc. (formerly Thermo Environmental Corporation)
Nonqualified Stock Option Plan (filed as Exhibit 4(c) to a
Registration Statement on Form S-8 of Thermo Instrument
[Reg. No. 33-8034] and incorporated herein by reference).
(Maximum number of shares issuable is 421,875 shares, after
adjustment to reflect 3-for-2 stock splits effected in July
1993 and April 1995, 5-for-4 stock split effected in
December 1995.)
32PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------
10.28 Thermo Electron Corporation - Thermo Instrument Systems
Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.12
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1987 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 600,285 shares, after adjustment to
reflect share increase approved in 1988, 3-for-2 stock
splits effected in January 1988, July 1993 and April 1995,
and 5-for-4 stock split effected in December 1995.)
10.29 Thermo Electron Corporation - Thermo TerraTech Inc.
(formerly Thermo Process Systems Inc.) Nonqualified Stock
Option Plan (filed as Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 3, 1987 [File No. 1-8002] and incorporated herein
by reference). (Maximum number of shares issuable is
108,000 shares, after adjustment to reflect 6-for-5 stock
splits effected in July 1988 and March 1989 and 3-for-2
stock split effected in September 1989.)
10.30 Thermo Electron Corporation - Thermo Power Corporation
(formerly Tecogen Inc.) Nonqualified Stock Option Plan
(filed as Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 3, 1987
[File No. 1-8002] and incorporated herein by reference).
(Amended in September 1995 to extend the plan expiration
date to December 31, 2005.)
10.31 Thermo Electron Corporation - Thermo Cardiosystems Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.11 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 250,000 shares, after adjustment to
reflect share increases approved in 1990, 1992, and 1997,
3-for-2 stock split effected in January 1990, 5-for-4 stock
split effected in May 1990, 2-for-1 stock split effected in
November 1993, and 3-for-2 stock split effected in May
1996.)
10.32 Thermo Electron Corporation - Thermo Ecotek Corporation
(formerly Thermo Energy Systems Corporation) Nonqualified
Stock Option Plan (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 1990 [File No. 1-8002] and incorporated
herein by reference). (Maximum number of shares issuable is
487,500 shares, after adjustment to reflect 3-for-2 stock
split effected in October 1996.)
33PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------
10.33 Thermo Electron Corporation - ThermoTrex Corporation
(formerly Thermo Electron Technologies Corporation)
Nonqualified Stock Option Plan (filed as Exhibit 10.13 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 225,000 shares, after adjustment to
reflect 3-for-2 stock split effected in October 1993 and
share increase approved in March 1997.)
10.34 Thermo Electron Corporation - Thermo Fibertek Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.14 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 900,000 shares, after adjustment to
reflect 2-for-1 stock split effected in September 1992 and
3-for-2 stock split effected in September 1995 and June
1996.)
10.35 Thermo Electron Corporation - Thermo Voltek Corp. (formerly
Universal Voltronics Corp.) Nonqualified Stock Option Plan
(filed as Exhibit 10.17 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by reference).
(Maximum number of shares issuable is 86,250 shares, after
adjustment to reflect 3-for-2 stock split effected in
November 1993, share increase approved in September 1995,
and 3-for-2 stock split effected in August 1996.)
10.36 Thermo Electron Corporation - Thermo BioAnalysis
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.31 to Thermo Power's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995 [File No.
1-10573] and incorporated herein by reference). (Maximum
number of shares issuable is 150,000 shares, after share
increase approved in March 1997.)
10.37 Thermo Electron Corporation - ThermoLyte Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.32 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference). (Maximum number of
shares issuable is 150,000 shares, after share increase
approved in March 1997.)
10.38 Thermo Electron Corporation - Thermo Remediation Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.33 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
34PAGE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------
10.39 Thermo Electron Corporation - ThermoSpectra Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.34 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
10.40 Thermo Electron Corporation - ThermoLase Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.35 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
10.41 Thermo Electron Corporation - ThermoQuest Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.41 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.42 Thermo Electron Corporation - Thermo Optek Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.42 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.43 Thermo Electron Corporation - Thermo Sentron Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.43 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.44 Thermo Electron Corporation - Trex Medical Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.44 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.45 Thermo Electron Corporation - Thermo Fibergen Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.19 to
Trex Medical's Annual Report on Form 10-K for the fiscal
year ended September 28, 1996 [File No. 1-11827] and
incorporated herein by reference).
11 Computation of earnings per share.
13 Annual Report to Shareholders for the year ended December
28, 1996 (only those portions incorporated herein by
reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
35<PAGE>
Exhibit 3.2
As amended and effective as of January 17, 1997
THERMO ELECTRON CORPORATION
BY-LAWS
TABLE OF CONTENTS
-----------------
Title Page
Article I - Offices ..................................... 1
Article II - Stockholders ............................... 1
Section 1.Annual Meeting ........................... 1
Section 2.Special Meetings ......................... 1
Section 3.Notice of Meetings ....................... 1
Section 4.Quorum ................................... 2
Section 5.Voting ................................... 2
Section 6.Presiding Officer and Secretary .......... 2
Section 7.Proxies .................................. 2
Section 8.Judges ................................... 2
Section 9.List of Stockholders ..................... 3
Article III- Directors .................................. 3
Section 1.Number, Election and Tenure .............. 3
Section 2.Vacancies ................................ 3
Section 3.Resignations ............................ 4
Section 4.Meetings ................................. 4
Section 5.Quorum ................................... 4
Section 6.Compensation of Directors ................ 4
Section 7.Committees ............................... 5
PAGE
<PAGE>
Title Page
Article IV - Officers and Agents ........................ 5
Section 1.General Provisions ....................... 5
Section 2.The President ............................ 5
Section 3.Vice Presidents .......................... 6
Section 4.Chief Financial Officer .................. 6
Section 5.The Treasurer ........................... 6
Section 6.The Secretary ............................ 6
Section 7.Assistant Treasurer ...................... 7
Section 8.Assistant Secretary ...................... 7
Section 9.Other Officers ........................... 7
Section 10.Delegation of Duties .................... 7
Article V - Capital Stock ............................... 7
Section 1.Certificates for Shares .................. 7
Section 2.Transfer of Shares of Stock .............. 7
Section 3.Lost, Stolen or Destroyed Certificates ... 8
Section 4.Closing of Transfer Books; Record Date ... 8
Section 5.Maintenance of Stock Ledger .............. 8
Article VI - Seal ....................................... 9
Article VII - Waiver .................................... 9
Article VIII - Checks, Notes, Drafts, etc. .............. 9
Article IX - Amendments ................................. 9
PAGE
<PAGE>
THERMO ELECTRON CORPORATION
BY-LAWS
ARTICLE I - OFFICES
The principal office of the Corporation in the State of
Delaware is located at 100 West Tenth Street in the City of
Wilmington, County of New Castle, State of Delaware, and the name
of the resident agent in charge thereof is called The Corporation
Trust Company. The Corporation may also have offices at such
other places, within or without the State of Delaware, as the
Board of Directors may from time to time determine.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation for the election of directors and
for the transaction of such other business as may properly come
before the meeting shall be held in the Corporation's offices in
Waltham, Massachusetts, or at such other place within or without
the State of Delaware, and at such time, as may be specified in
the notice of meeting or waiver thereof, on the second Wednesday
in May in each year or on such other date within six months of
the end of the Corporation's fiscal year as may be fixed by the
Board of Directors.
Section 2. Special Meetings. A special meeting of the
stockholders of the Corporation, unless otherwise regulated by
statute, may be called by the President and shall be called by
the President, the Secretary or an Assistant Secretary when
directed to do so by resolution of the Board of Directors at a
duly convened meeting of the Board, or at the request in writing
of a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed meeting. On
failure of any officer above specified to call such special
meeting when duly requested, the signers of such request may call
such special meeting over their own signatures. Special meetings
shall be held at such place within or without the State of
Delaware as may be specified in the call thereof. Business
transacted at all special meetings shall be confined to the
objects stated in the call.
Section 3. Notice of Meetings. Written notice of every
meeting of the stockholders shall be served by the Secretary or
an Assistant Secretary, either personally or by mail upon each
stockholder of record entitled to vote at such meeting, at least
ten days before the meeting. If mailed, the notice of a meeting
shall be directed to a stockholder at his last known post office
address. The notice of every meeting of the stockholders shall
state the purpose or purposes for which the meeting is called and
the time when and the place where it is to be held.
PAGE
<PAGE>
2
Section 4. Quorum. Except as otherwise provided by law or
by the Certificate of Incorporation, at any meeting of the
stockholders there must be present in person or by proxy the
holders of record of a majority of all shares of stock issued and
outstanding and entitled to vote upon any question to be
considered at the meeting in order to constitute a quorum for the
transaction of any business, but a lesser interest may adjourn
the meeting from time to time without notice other than
announcement at the meeting until a quorum be present, and
thereupon any business may be transacted at the adjourned meeting
which might have been transacted at the meeting originally
called. Except as otherwise provided by law, or by the
Certificate of Incorporation or by these By-Laws, the vote of a
majority of the shares present and entitled to vote at a meeting
shall decide any question brought before such meeting.
Section 5. Voting. At every meeting of the stockholders,
except as may be otherwise provided in the Certificate of
Incorporation or in these By-Laws, every stockholder of the
Corporation entitled to vote thereat shall be entitled to one
vote for each share of stock entitled to vote standing in his
name on the books of the Corporation at the time of the meeting,
or, if a record date shall have been fixed as hereinafter
provided, on such record date; but, except where the transfer
books of the Corporation shall have been closed or a record date
shall have been fixed, no share of stock shall be voted on at any
election for directors which shall have been transferred on the
books of the Corporation within 20 days next preceding such
election of directors. No person may be elected a director
unless his name shall have first been put before the meeting or
the stockholders by nomination of one of the stockholders. Upon
the demand of any stockholder entitled to vote, the vote for
directors, or the vote upon any question before a meeting, shall
be by ballot, but otherwise the method of voting shall be
discretionary with the presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all meetings
of the stockholders, the President of the Corporation, or in his
absence a Vice President or if none be present, the appointee of
the meeting, shall preside. The Secretary of the Corporation, or
in his absence an Assistant Secretary, or if none be present the
appointee of the Presiding Officer of the meeting, shall act as
Secretary of the meeting.
Section 7. Proxies. Any stockholder entitled to vote at any
meeting of stockholders may vote either in person or by proxy,
but no proxy shall be voted on after three years from its date,
unless such proxy provides for a longer period. Every proxy must
be executed in writing by the stockholder himself, or by his duly
authorized attorney, and dated, but need not be sealed, witnessed
or acknowledged. Proxies shall be delivered to the Secretary of
the Corporation before the meeting or to the Judges at the
meeting.
PAGE
<PAGE>
3
Section 8. Judges. At each meeting of the stockholders at
which the vote for directors or the vote upon any question before
the meeting is taken by ballot, the polls shall be opened and
closed by, and the proxies and ballots shall be received and
taken in charge by, and all questions touching on the
qualifications of voters and the validity of proxies and the
acceptance and rejection of the same shall be decided by two
Judges. Such Judges may be appointed by the Board of Directors
before the meeting, but if no such appointment shall have been
made, they shall be appointed by the meeting. If for any reason
any Judge previously appointed shall fail to attend or refuse or
be unable to serve, a Judge in his place shall be appointed by
the meeting. Any appointment of Judges by the meeting shall be
by per capita vote of the stockholders present and entitled to
vote.
Section 9. List of Stockholders. At least ten days prior to
every election of directors a complete list of the stockholders
entitled to vote at such election, arranged in alphabetical order
and indicating the number of voting shares held by each, shall be
prepared and certified by the Secretary or an Assistant
Secretary. Such list shall be filed at the place where the
election is to be held and shall, at all times during the usual
hours for business and during the whole time of said election, be
opened to the examination of any stockholder.
ARTICLE III - DIRECTORS
Section 1. Number, Election and Tenure. Except as may be
otherwise specifically provided by law, the Restated Certificate
of Incorporation or by these By-Laws, the power, business,
property and affairs of the Corporation shall be exercised and
managed by a board of directors which shall consist of not less
than eight or more than twelve directors. Within such limit, the
number of directors shall be determined by resolution of the
board of directors. The board of directors shall be divided into
three classes as nearly as equal in number as possible. If the
number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. Such
classes shall consist of one class of directors who shall be
elected for a three-year term expiring at the annual meeting of
stockholders held in 1986; a second class of directors who shall
be elected for a three-year term expiring at the annual meeting
of stockholders held in 1987; and a third class of directors who
shall be elected for a three-year term expiring at the annual
meeting of stockholders held in 1988. At each annual meeting of
stockholders beginning in 1986, the successors of the class of
directors whose term expires at that annual meeting shall be
elected for a three-year term. A director shall hold office
until the annual meeting for the year in which his term expires
and until his successor shall be elected and shall qualify, or
until his earlier death, resignation, retirement,
disqualification or removal. Except as provided in Section 2 of
PAGE
<PAGE>
4
this Article, directors shall be elected by a plurality of the
votes cast at the annual meeting of stockholders. No director
need be a stockholder.
Section 2. Vacancies. Any vacancy on the Board of Directors
that results from an increase in the number of directors may be
filled only by a majority of the Board of Directors then in
office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled only by a
majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of
directors shall be elected for the same remaining term as that of
his predecessor in office. Any additional director of any class
elected to fill a vacancy resulting from an increase in any such
class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in
the number of directors shorten the term of any incumbent
director.
Section 3. Resignations. Any director may resign from his
office at any time by delivering his resignation in writing to
the Corporation, and the acceptance of such resignation, unless
required by the terms thereof, shall not be necessary to make
such resignation effective.
Section 4. Meetings. The Board of Directors may hold its
meetings in such place or places within or without the State of
Delaware as the Board from time to time by resolution may
determine or as shall be specified in the respective notices or
waivers of notice thereof, and the directors may adopt such rules
and regulations for the conduct of their meetings and the
management of the Corporation, not inconsistent with these
By-Laws, as they may deem proper. An annual meeting of the Board
for the election of officers shall be held within three days
following the day on which the annual meeting of the stockholders
for the election of directors shall have been held. The Board of
Directors from time to time by resolution may fix a time and
place (or varying times and places) for the annual and other
regular meetings of the Board; provided, that, unless a time and
place is so fixed for any annual meeting of the Board, the same
shall be held immediately following the annual meeting of the
stockholders at the same place at which such meeting shall have
been held. No notice of the annual or other regular meetings of
the Board need be given. Other meetings of the Board of
Directors shall be held whenever called by the President or by
any two of the directors for the time being in office; and the
Secretary or an Assistant Secretary shall give notice of each
such meeting to each director by mailing the same not later than
the second day before the meeting, or personally or by
telegraphing, cabling or telephoning the same not later than the
day before the meeting. No notice of a meeting need be given if
all directors are present in person. Any business may be
transacted at any meeting of the Board of Directors, whether or
PAGE
<PAGE>
5
not specified in a notice of the meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of the Board, and such
written consent is filed with the minutes of proceedings of the
Board.
Section 5. Quorum. Except as may be otherwise specifically
provided by law, the Restated Certificate of Incorporation or
these By-Laws, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors. If there be
less than a quorum at any meeting of the Board of Directors, a
majority of those present (or if only one be present, then that
one) may adjourn the meeting from time to time, without notice
other than announcement at the meeting which shall be so
adjourned, until a quorum shall be present.
Section 6. Compensation of Directors. The Board of
Directors shall have the power to fix the compensation of
directors and members of committees of the Board. The directors
may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors, as well as
a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending
committee meetings.
Section 7. Committees. The Board of Directors may, by
resolution or resolutions, passed by a majority of the whole
Board, from time to time designate an Executive Committee and
such other committee or committees as it may determine, each
committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in said resolution or
resolutions, shall have and may exercise any powers of the Board
of Directors in the management of the business and affairs of the
Corporation, and may have the power to authorize the seal of the
corporation to be affixed to all papers which may require it.
Any action required or permitted to be taken at any meeting of
the committee may be taken without a meeting, if prior to such
action a written consent thereto is signed by all members of such
committee, and such written consent is filed with the minutes of
proceedings of the committee.
ARTICLE IV - OFFICERS AND AGENTS
Section 1. General Provisions. The officers of the
Corporation shall be a President, a Chief Financial Officer, a
Treasurer and a Secretary, and may include one or more Vice
Presidents, one or more Assistant Treasurers and one or more
PAGE
<PAGE>
6
Assistant Secretaries, all of whom shall be appointed by the
Board of Directors as soon as may be after the election of
directors in each year. The President shall be chosen from among
the directors. Any two offices, except those of President and
Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than
one capacity if such instrument is required by law or by these
By-Laws to be executed, acknowledged or verified by any two or
more officers. Each of such officers shall serve until the
annual meeting of the Board of Directors next succeeding his
appointment and until his successor shall have been chosen and
shall have qualified. The Board of Directors may appoint such
officers, agents and employees as it may deem necessary or
proper, who shall respectively have such authority and perform
such duties as may from time to time be prescribed by the Board
of Directors. All officers, agents and employees appointed by
the Board of Directors shall be subject to removal at any time by
the affirmative vote of a majority of the whole Board. Other
agents and employees may be removed at any time by the Board of
Directors, by the officer appointing them, or by any other
superior upon whom such power of removal may be conferred by the
Board of Directors. The salaries of the officers of the
Corporation shall be fixed by the Board of Directors, but this
power may be delegated to any officer.
Section 2. The President. The President shall be the
principal executive officer of the Corporation and shall preside
at all meetings of the stockholders and of the Board of
Directors. Subject to the control of the Board of Directors, he
shall have general charge of the business and affairs of the
Corporation and shall keep the Board fully advised. At the
direction of the Board of Directors, he shall have power in the
name of the Corporation and on its behalf to execute any and all
deeds, mortgages, contracts, agreements and other instruments in
writing. He shall employ and discharge employees and agents of
the Corporation, except such as shall hold their offices by
appointment of the Board of Directors, but he may delegate these
powers to other officers as to employees under their immediate
supervision. He shall have such powers and perform such duties
as generally pertain to the office of President, as well as such
further powers and duties as may be prescribed by the Board of
Directors. The President shall have full power and authority on
behalf of the Corporation to execute any stockholders' consents
and to attend and act and to vote in person or by proxy at any
meetings of stockholders of any corporation in which the
Corporation may own stock, and at any such meeting shall possess
and may exercise any and all of the rights and powers incident to
the ownership of such stock and which, as the owner thereof, the
Corporation might have possessed and exercised if present. The
Board of Directors, by resolution from time to time, may confer
like powers upon any other person or persons.
Section 3. Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board of Directors or
PAGE
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7
the President may from time to time prescribe, and shall perform
such other duties as may be prescribed in these By-Laws. In the
absence or inability to act of the President, the Vice President
next in order as designated by the Board of Directors or, in the
absence of such designation, senior in length of service in such
capacity who shall be present and able to act, shall perform all
the duties and may exercise any of the powers of the President,
subject to the control of the Board of Directors. The
performance of any duty by a Vice President shall be conclusive
evidence of his power to act.
Section 4. Chief Financial Officer. The Board of Directors
shall designate the President or a Vice President to serve as the
Chief Financial Officer of the Corporation. The Chief Financial
Officer shall be responsible for the financial records and
affairs of the Corporation and shall have such further powers and
duties as are incident to the position of Chief Financial
Officer, subject to the direction of the President and the Board
of Directors. The Chief Financial Officer shall supervise the
activities of the Treasurer of the Corporation, who shall be
subordinate to and report to the Chief Financial Officer. The
Chief Financial Officer shall perform such of the duties of the
President on behalf of the Corporation as may be assigned to him
from time to time by the Board of Directors, the Chairman of the
Board or the President.
Section 5. The Treasurer. The Treasurer shall have the care
and custody of all funds and securities of the Corporation which
may come into his hands and shall deposit the same to the credit
of the Corporation in such bank or banks or other depository or
depositories as the Board of Directors may designate. He may
endorse all commercial documents requiring endorsements for or on
behalf of the Corporation and may sign all receipts and vouchers
for payments made to the Corporation. He shall be subordinate to
and responsible to the President or Vice President who is
designated Chief Financial Officer by the Board of Directors. He
shall render an account of his transactions to the Board of
Directors as often as they shall require the same and shall at
all reasonable times exhibit his books and accounts to any
director; shall cause to be entered regularly in books kept for
that purpose full and accurate account of all moneys received and
paid by him on account of the Corporation; and shall have such
further powers and duties as are incident to the position of
Treasurer, subject to the control of the Board of Directors. He
may be required by the Board of Directors to give a bond for the
faithful discharge of his duties in such sum and with such surety
as the Board may require.
Section 6. The Secretary. The Secretary shall keep the
minutes of all meetings of the Board of Directors and of the
stockholders and shall attend to the giving and serving of all
notices of the Corporation. He shall have custody of the seal of
the Corporation and shall affix the seal to all certificates of
shares of stock of the Corporation and to such other papers or
PAGE
<PAGE>
8
documents as may be proper and, when the seal is so affixed, he
shall attest the same by his signature wherever required. He
shall have charge of the stock certificate book, transfer book
and stock ledger, and such other books and papers as the Board of
Directors may direct. He shall, in general, perform all the
duties of Secretary, subject to the control of the Board of
Directors.
Section 7. Assistant Treasurers. In the absence or
inability of the Treasurer to act, any Assistant Treasurer may
perform all the duties and exercise all of the powers of the
Treasurer, subject to the control of the Board of Directors. The
performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Treasurer shall also perform such
other duties as the Treasurer or the Board of Directors may from
time to time assign to him.
Section 8. Assistant Secretaries. In the absence or
inability of the Secretary to act, any Assistant Secretary may
perform all the duties and exercise all the powers of the
Secretary, subject to the control of the Board of Directors. The
performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Secretary shall also perform such
other duties as the Secretary or the Board of Directors may from
time to time assign to him.
Section 9. Other Officers. Other officers shall perform
such duties and have such powers as may from time to time be
assigned to them by the Board of Directors.
Section 10. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board may confer, for the time
being, the powers or duties, or any of them, of such officer upon
any other officer, or upon any director.
ARTICLE V - CAPITAL STOCK
Section 1. Certificate for Shares. Certificates for shares
of stock of the Corporation certifying the number and class of
shares owned shall be issued to each stockholder in such form not
inconsistent with the Certificate of Incorporation and these
By-Laws, as shall be approved by the Board of Directors. The
certificates for the shares of each class shall be numbered and
registered in the order in which they are issued and shall be
signed by the Chairman, the President or a Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and the seal of the Corporation shall be
affixed thereto. All certificates exchanged or returned to the
Corporation shall be cancelled.
Section 2. Transfer of Shares of Stock. Transfers of
shares shall be made only upon the books of the Corporation by
the holder, in person or by attorney lawfully constituted in
writing, and on the surrender of the certificate or certificates
PAGE
<PAGE>
9
for such shares properly assigned. The Board of Directors shall
have the power to make all such rules and regulations, not
inconsistent with the Certificate of Incorporation and these
By-Laws, as they may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of
the Corporation.
Section 3. Lost, Stolen or Destroyed Certificates. The
Board of Directors, in their discretion, may require the owner of
any certificate of stock alleged to have been lost, stolen or
destroyed, or his legal representatives, to give the Corporation
a bond in such sum as they may direct, to indemnify the
Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate, as a condition of the issue of a new certificate of
stock in the place of any certificate theretofore issued alleged
to have been lost, stolen or destroyed. Proper and legal
evidence of such loss, theft or destruction shall be procured for
the Board, if required. The Board of Directors, in their
discretion, may refuse to issue such new certificate, save upon
the order of some court having jurisdiction in such matters.
Section 4. Closing of Transfer Books: Record Date. The
Board of Directors shall have power to close the stock transfer
books of the Corporation for a period not exceeding 50 days
preceding the date of any meeting of stockholders or the date for
payment of any dividend or the date for allotment of rights or
the date when any change or conversion or exchange of capital
stock shall go into effect or for a period of not exceeding 50
days in connection with obtaining the consent of stockholders for
any purpose; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the Board of Directors may fix in
advance a date, not exceeding 50 days preceding the date of any
meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall
go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such
meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent,
and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights,
or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any
such record date fixed as aforesaid.
Section 5. Maintenance of Stock Ledger. The original or a
duplicate stock ledger containing the names and addresses of the
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10
stockholders, and the number of shares held by them,
respectively, shall at all times, during the usual hours for
business, be open to the examination of every stockholder at the
principal office or place of business of the Corporation in the
State of Delaware.
ARTICLE VI - SEAL
The seal of the Corporation shall consist of a flat-faced
circular die with the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware"
inscribed thereon.
ARTICLE VII - WAIVER
Whenever any notice whatever is required to be given by
statute or under the provisions of the Certificate of
Incorporation or By-Laws of this Corporation a waiver thereof in
writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed
equivalent thereto.
PAGE
<PAGE>
11
ARTICLE VIII - CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and
other orders or obligations for the payment of money shall be
signed by such officer or officers or person or persons as the
Board of Directors shall from time to time determine.
ARTICLE IX - AMENDMENTS
These By-Laws, or any of them, may be altered, amended or
repealed, and new By-Laws may be adopted, (1) by the
stockholders, at any annual meeting, or at any special meeting
called for that purpose, as provided and subject to the
limitations set forth in the Restated Certificate of
Incorporation or (2) by the Board of Directors, (a) at any duly
convened meeting by a majority vote of the whole Board, or (b)
without a meeting by prior written consent signed by all members
of the Board and filed with the minutes of proceedings of the
Board, but any such action of the Board of Directors may be
amended or repealed by the stockholders at any annual meeting or
any special meeting called for that purpose as provided and
subject to the limitations set forth in the Restated Certificate
of Incorporation. The time and place, as fixed by these By-Laws,
of the annual meeting of the stockholders for the election of
directors shall not be changed within 60 days next before the day
on which the election is to be held, and a notice of any change
shall be given to each stockholder entitled to vote there at
least 20 days before the election is held, in person or by letter
mailed to his last known post office address.
Exhibit 10.8
THERMO ELECTRON CORPORATION
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Electron
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 Stock
Holding Policy.
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: Thermo Electron Corporation, a Delaware
corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect 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 Thermo Electron Corporation Stock Holding
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy 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
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<PAGE>
interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and 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 Stock Holding
Policy, 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 Stock Holding Policy 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 Stock Holding Policy 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 Stock Holding Policy.
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 Stock
Holding Policy, 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 from the
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payment of annual cash incentive compensation (referred to as
bonus) to the Key Employee by the Company, beginning with the
first such bonus payment to occur after the date of the Note
evidencing the Loan, and on each of the next four bonus payment
dates, provided that the Committee may, in its sole and absolute
discretion, authorize such other maturity and repayment schedule
as the Committee may determine. Each Loan shall also become
immediately due and payable in 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
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy 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 Stock Holding Policy 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.
3PAGE
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The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMO ELECTRON CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Electron Corporation (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), 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 an
amount equal to 20% of the initial principal amount of the Note
from the payment of annual cash incentive compensation (referred
to as bonus) to the Employee by the Company, beginning with the
first such bonus payment to occur after the date of this Note,
and on each of the next four bonus payment dates. Any amount
remaining unpaid under this Note, 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 Holding 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;
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(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee, 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
Holding 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
Thermo Electron Corporation
Computation of Earnings per Share
1996 1995 1994
------------ ----------- -----------
Computation of Fully Diluted
Earnings per Share:
Income:
Income per primary
computation $190,816,000 $139,582,000 $104,711,000
Add: Convertible debt
interest, net of tax 23,522,000 15,561,000 15,934,000
------------ ------------ ------------
Income applicable to common
stock assuming full
dilution (a) $214,338,000 $155,143,000 $120,645,000
------------ ------------ ------------
Shares:
Weighted average shares
outstanding 141,524,607 126,626,183 116,500,455
Add: Shares issuable from
assumed conversion of
convertible debentures 31,735,258 30,023,096 33,553,283
Shares issuable from
assumed exercise of
options (as determined
by the application of the
treasury stock method) 2,440,465 2,596,257 1,175,319
------------ ------------ ------------
Weighted average shares
outstanding, as
adjusted (b) 175,700,330 159,245,536 151,229,057
------------ ------------ ------------
Fully Diluted Earnings Per
Share (a) / (b) $ 1.22 $ .97 $ .80
============ ============ ============
Exhibit 13
THERMO ELECTRON CORPORATION
Consolidated Financial Statements
1996
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Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Income
(In thousands except per share amounts) 1996 1995 1994
-----------------------------------------------------------------------
Revenues:
Product and service revenues $2,766,002 $2,075,748 $1,559,744
Research and development
contract revenues 166,556 194,543 169,447
---------- ---------- ----------
2,932,558 2,270,291 1,729,191
---------- ---------- ----------
Costs and Operating Expenses:
Cost of product and service
revenues 1,657,746 1,239,762 928,645
Expenses for research and
development and new lines of
business (a) 301,457 272,809 233,099
Selling, general, and
administrative expenses 689,248 510,564 384,715
Restructuring and other
nonrecurring costs (Note 11) 37,641 21,938 650
---------- ---------- ----------
2,686,092 2,045,073 1,547,109
---------- ---------- ----------
Operating Income 246,466 225,218 182,082
Gain on Issuance of Stock by
Subsidiaries (Note 9) 126,599 80,815 25,283
Other Income (Expense), Net
(Note 10) 1,486 (7,225) (989)
---------- ---------- ----------
Income Before Income Taxes and
Minority Interest 374,551 298,808 206,376
Provision for Income Taxes
(Note 8) 110,845 98,711 70,703
Minority Interest Expense 72,890 60,515 30,962
---------- ---------- ----------
Net Income $ 190,816 $ 139,582 $ 104,711
========== ========== ==========
Earnings per Share:
Primary $ 1.35 $ 1.10 $ .90
========== ========== ==========
Fully diluted $ 1.22 $ .97 $ .80
========== ========== ==========
Weighted Average Shares:
Primary 141,525 126,626 116,500
========== ========== ==========
Fully diluted 175,700 159,246 151,229
========== ========== ==========
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Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Income (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
(a) Includes costs of:
Research and development
contracts $ 144,823 $ 167,120 $ 149,645
Internally funded research
and development 154,448 102,209 79,555
Other expenses for new lines
of business 2,186 3,480 3,899
---------- ---------- ----------
$ 301,457 $ 272,809 $ 233,099
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
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Thermo Electron Corporation 1996 Financial Statements
Consolidated Balance Sheet
(In thousands) 1996 1995
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 414,404 $ 462,861
Short-term available-for-sale investments,
at quoted market value (amortized cost of
$1,428,564 and $588,471; Note 2) 1,431,881 593,802
Accounts receivable, less allowances
of $34,321 and $29,318 616,545 493,313
Unbilled contract costs and fees 77,155 74,941
Inventories 432,960 332,786
Prepaid income taxes (Note 8) 129,802 75,685
Prepaid expenses 29,082 23,204
---------- ----------
3,131,829 2,056,592
---------- ----------
Property, Plant, and Equipment, at Cost, Net 704,447 715,588
---------- ----------
Long-term Available-for-sale Investments, at
Quoted Market Value (amortized cost of $58,500
and $60,780; Note 2) 68,807 61,845
---------- ----------
Long-term Held-to-Maturity Investments
(quoted market value of $26,083 and $24,942;
Note 2) 25,594 23,819
---------- ----------
Other Assets 127,632 101,138
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Notes 3, 8, and 11) 1,082,935 827,357
---------- ----------
$5,141,244 $3,786,339
========== ==========
4PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable and current maturities of
long-term obligations (Note 5) $ 153,787 $ 112,280
Accounts payable 203,643 172,823
Accrued payroll and employee benefits 122,079 93,930
Accrued income taxes 61,534 52,055
Accrued installation and warranty costs 69,006 37,267
Deferred revenue 45,715 24,014
Other accrued expenses (Note 3) 257,448 247,077
---------- ----------
913,212 739,446
---------- ----------
Deferred Income Taxes (Note 8) 81,726 60,096
---------- ----------
Other Deferred Items 81,020 69,830
---------- ----------
Long-term Obligations (Note 5):
Senior convertible obligations 369,997 458,925
Subordinated convertible obligations 1,009,470 343,076
Tax-exempt obligations - 128,567
Nonrecourse tax-exempt obligations 77,900 94,700
Other 92,975 92,809
---------- ----------
1,550,342 1,118,077
---------- ----------
Minority Interest 684,050 471,648
---------- ----------
Commitments and Contingencies (Note 6)
Common Stock of Subsidiaries Subject to
Redemption ($81,179 and $18,450
redemption value; Note 1) 76,525 17,513
---------- ----------
Shareholders' Investment (Notes 4 and 7):
Preferred stock, $100 par value, 50,000
shares authorized; none issued
Common stock, $1 par value, 350,000,000
shares authorized; 149,996,979 and 89,006,032
shares issued 149,997 89,006
Capital in excess of par value 801,793 614,363
Retained earnings 795,312 604,496
Treasury stock at cost, 15,520 and 11,574
shares (570) (536)
Cumulative translation adjustment (504) 608
Deferred compensation (Note 4) (58) (2,271)
Net unrealized gain on available-for-sale
investments (Note 2) 8,399 4,063
---------- ----------
1,754,369 1,309,729
---------- ----------
$5,141,244 $3,786,339
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1996 1995 1994
----------------------------------------------------------------------------
Operating Activities:
Net income $ 190,816 $ 139,582 $ 104,711
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 115,167 85,869 65,028
Restructuring and other
nonrecurring costs (Note 11) 37,641 21,938 650
Equity in losses of unconsolidated
subsidiaries 28 203 4,019
Provision for losses on accounts
receivable 6,002 5,534 4,225
Increase in deferred income
taxes 20,869 4,277 9,403
Gain on issuance of stock by
subsidiaries (Note 9) (126,599) (80,815) (25,283)
(Gain) loss on sale of property,
plant, and equipment 81 (547) (15,025)
Gain on sale of investments (9,840) (9,305) (4,851)
Minority interest expense 72,890 60,515 30,962
Other noncash expenses 15,649 19,583 9,809
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (17,078) (52,649) (8,526)
Inventories (1,298) (32,267) 10,017
Other current assets (35,657) (9,447) (9,713)
Accounts payable (14,307) 19,198 804
Other current liabilities (29,859) 27,427 16,295
----------- ----------- ----------
Net cash provided by operating
activities 224,505 199,096 192,525
----------- ----------- ----------
Investing Activities:
Acquisitions, net of cash acquired
(Note 3) (366,317) (330,698) (173,764)
Purchases of available-for-sale
investments (1,644,094) (570,064) (748,879)
Purchases of long-term held-to-
maturity investments - (22,300) -
Proceeds from sale and maturities of
available-for-sale investments 835,935 617,145 495,361
Purchases of property, plant, and
equipment (124,541) (64,016) (65,525)
Proceeds from sale of property,
plant, and equipment 10,500 5,702 21,391
Increase in other assets (26,144) (19,750) (7,097)
Decrease in net restricted funds - - 23,420
Other 3,385 (147) (565)
----------- ----------- -----------
Net cash used in investing activities $(1,311,276) $ (384,128) $ (455,658)
----------- ----------- -----------
6PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1996 1995 1994
----------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of
long-term obligations (Note 5) $ 953,376 $ 203,387 $ 368,620
Repayment and repurchase of
long-term obligations (63,793) (18,012) (27,176)
Net proceeds from issuance of
Company and subsidiary common
stock (Note 9) 303,954 173,326 60,601
Purchases of subsidiary common
stock (140,903) (97,789) (101,481)
Increase (decrease) in short-
term notes payable (13,391) 1,438 16,683
Other (1,279) (226) 987
----------- ----------- -----------
Net cash provided by financing
activities 1,037,964 262,124 318,234
----------- ----------- -----------
Exchange Rate Effect on Cash 350 2,764 1,915
----------- ----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents (48,457) 79,856 57,016
Cash and Cash Equivalents at
Beginning of Year 462,861 383,005 325,989
----------- ----------- -----------
Cash and Cash Equivalents at End
of Year $ 414,404 $ 462,861 $ 383,005
=========== =========== ===========
See Note 12 for supplemental cash flow information.
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1996 1995 1994
----------------------------------------------------------------------
Common Stock, $1 Par Value
Balance at beginning of year $ 89,006 $ 53,558 $ 50,484
Issuance of stock under employees'
and directors' stock plans 892 571 153
Conversions of convertible
obligations 13,449 6,047 2,921
Acquisition through pooling-
of-interests (Note 3) - 1,143 -
Effect of three-for-two stock
splits 46,650 27,687 -
---------- ---------- ----------
Balance at end of year 149,997 89,006 53,558
---------- ---------- ----------
Capital in Excess of Par Value
Balance at beginning of year 614,363 493,058 474,193
Issuance of stock under employees'
and directors' stock plans 8,172 5,293 2,429
Tax benefit related to employees'
and directors' stock plans 12,821 9,666 -
Conversions of convertible
obligations 254,842 150,787 63,013
Acquisition through pooling-
of-interests (Note 3) - 17,888 -
Effect of three-for-two stock
splits (46,650) (27,687) -
Effect of majority-owned
subsidiaries' equity
transactions (41,755) (34,642) (46,577)
---------- ---------- ----------
Balance at end of year 801,793 614,363 493,058
---------- ---------- ----------
Retained Earnings
Balance at beginning of year 604,496 472,396 367,685
Net income 190,816 139,582 104,711
Acquisition through pooling-
of-interests (Note 3) - (6,645) -
Net loss of SensorMedics
Corporation for the quarter
ended December 30, 1995
(Note 3) - (837) -
---------- ---------- ----------
Balance at end of year $ 795,312 $ 604,496 $ 472,396
---------- ---------- ----------
8PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Treasury Stock
Balance at beginning of year $ (536) $ (1,631) $ (1,212)
Activity under employees' and
directors' stock plans (34) 1,095 (419)
---------- ---------- ----------
Balance at end of year (570) (536) (1,631)
---------- ---------- ----------
Cumulative Translation Adjustment
Balance at beginning of year 608 (3,557) (13,591)
Translation adjustment (1,112) 4,193 10,034
Acquisition through pooling-of-
interests (Note 3) - (28) -
---------- ---------- ----------
Balance at end of year (504) 608 (3,557)
---------- ---------- ----------
Deferred Compensation
Balance at beginning of year (2,271) (2,657) (3,839)
Amortization of deferred
compensation 296 386 1,182
ESOP II loan repayment (Note 4) 1,917 - -
---------- ---------- ----------
Balance at end of year (58) (2,271) (2,657)
---------- ---------- ----------
Net Unrealized Gain (Loss) on
Available-for-sale Investments
Balance at beginning of year 4,063 (3,681) -
Effect of change in accounting
principle (Note 2) - - 2,868
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) 4,336 7,744 (6,549)
---------- ---------- ----------
Balance at end of year 8,399 4,063 (3,681)
---------- ---------- ----------
Total Shareholders' Investment $1,754,369 $1,309,729 $1,007,486
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
9PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Significant Accounting Policies
Nature of Operations
Thermo Electron Corporation and its subsidiaries (the Company)
develop, manufacture, and market environmental monitoring and analysis
instruments; biomedical products including heart-assist devices,
respiratory-care equipment, and mammography systems; paper-recycling and
papermaking equipment; alternative-energy systems; industrial process
equipment; and other specialized products. The Company also provides
environmental, laboratory, and metallurgical services and conducts
advanced-technology research and development.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Thermo Electron and its majority- and wholly owned
subsidiaries. All material intercompany accounts and transactions have
been eliminated. Majority-owned public subsidiaries consist of Thermedics
Inc., Thermo Instrument Systems Inc., Thermo TerraTech Inc., Thermo Power
Corporation, ThermoTrex Corporation, Thermo Fibertek Inc., and Thermo
Ecotek Corporation. Thermo Cardiosystems Inc., Thermo Voltek Corp.,
Thermo Sentron Inc., and Thermedics Detection Inc. are majority-owned,
public subsidiaries of Thermedics. ThermoSpectra Corporation, ThermoQuest
Corporation, Thermo Optek Corporation, and Thermo BioAnalysis Corporation
are majority-owned, public subsidiaries of Thermo Instrument. Thermo
Remediation Inc. is a majority-owned, public subsidiary of Thermo
TerraTech. ThermoLase Corporation and Trex Medical Corporation are
majority-owned, public subsidiaries of ThermoTrex. Thermo Fibergen Inc.
is a majority-owned, public subsidiary of Thermo Fibertek. Metrika
Systems Corporation is a majority-owned, privately held subsidiary of
Thermo Instrument. Thermo EuroTech N.V. is a majority-owned, privately
held subsidiary of Thermo TerraTech. ThermoLyte Corporation is a
majority-owned, privately held subsidiary of Thermo Power. The Company
accounts for investments in businesses in which it owns between 20% and
50% using the equity method.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1996, 1995, and 1994 are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
Revenue Recognition
For the majority of its operations, the Company recognizes revenues
upon shipment of its products, or upon completion of services it renders.
The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment. Deferred revenue in the
accompanying balance sheet consists primarily of unearned revenue on
service contracts. Substantially all of the deferred revenue in the
accompanying 1996 balance sheet will be recognized within one year.
Revenues and profits on substantially all contracts are recognized using
the percentage-of-completion method. Revenues recorded under the
percentage-of-completion method were $421.1 million in 1996, $472.0
10PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Significant Accounting Policies (continued)
million in 1995, and $319.8 million in 1994. The percentage of completion
is determined by relating either the actual costs or actual labor
incurred to date to management's estimate of total costs or total labor,
respectively, to be incurred on each contract. If a loss is indicated on
any contract in process, a provision is made currently for the entire
loss. The Company's contracts generally provide for billing of customers
upon the attainment of certain milestones specified in each contract.
Revenues earned on contracts in process in excess of billings are
classified as unbilled contract costs and fees in the accompanying
balance sheet. There are no significant amounts included in the
accompanying balance sheet that are not expected to be recovered from
existing contracts at current contract values, or that are not expected
to be collected within one year, including amounts that are billed but
not paid under retainage provisions.
Gain on Issuance of Stock by Subsidiaries
At the time a subsidiary sells its stock to unrelated parties at a
price in excess of its book value, the Company's net investment in that
subsidiary increases. If at that time the subsidiary is an operating
entity and not engaged principally in research and development, the
Company records the increase as a gain.
If gains have been recognized on issuances of a subsidiary's stock
and shares of the subsidiary are subsequently repurchased by the
subsidiary, by the subsidiary's parent, or by the Company, gain
recognition does not occur on issuances subsequent to the date of a
repurchase until such time as shares have been issued in an amount
equivalent to the number of repurchased shares. Such transactions are
reflected as equity transactions, and the net effect of these
transactions is reflected in the accompanying statement of shareholders'
investment as the effect of majority-owned subsidiaries' equity
transactions.
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 4). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
Income Taxes
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred
income taxes based on the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
Primary earnings per share has been computed based on the weighted
average number of shares outstanding during the year. Because the effect
of the assumed exercise of the Company's stock options would be
11PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Significant Accounting Policies (continued)
immaterial, they have been excluded from the primary earnings per share
calculation. Fully diluted earnings per share has been computed assuming
the conversion of the Company's convertible obligations and elimination
of the related interest expense, as well as the exercise of stock options
and their related income tax effects.
Stock Splits
All share and per share information, except as noted below, has been
restated to reflect three-for-two stock splits, effected in the form of
50% stock dividends, which were distributed in June 1996 and May 1995.
Share information in the accompanying 1995 balance sheet has not been
restated for the stock split distributed in June 1996.
Cash and Cash Equivalents
Cash equivalents consists principally of U.S. government agency
securities, corporate notes, commercial paper, money market funds, and
other marketable securities purchased with an original maturity of three
months or less. These investments are carried at cost, which approximates
market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
or weighted average basis) or market value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
(In thousands) 1996 1995
----------------------------------------------------------------------
Raw materials and supplies $236,297 $175,346
Work in process 80,614 72,768
Finished goods 116,049 84,672
-------- --------
$432,960 $332,786
======== ========
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: buildings and
improvements, 5 to 40 years; alternative-energy and waste-recycling
facilities, 5 to 25 years; machinery and equipment, 2 to 20 years; and
leasehold improvements, the shorter of the term of the lease or the life
of the asset.
12PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Significant Accounting Policies (continued)
Property, plant, and equipment consists of the following:
(In thousands) 1996 1995
----------------------------------------------------------------------
Land $ 55,430 $ 47,848
Buildings 206,406 175,165
Alternative-energy and waste-recycling
facilities 247,361 382,257
Machinery, equipment, and leasehold
improvements 500,992 372,546
---------- ----------
1,010,189 977,816
Less: Accumulated depreciation and
amortization 305,742 262,228
---------- ----------
$ 704,447 $ 715,588
========== ==========
Other Assets
Other assets in the accompanying balance sheet includes the costs of
acquired trademarks, patents, product technology, and other specifically
identifiable intangible assets. These assets are being amortized using
the straight-line method over their estimated useful lives, which range
from 3 to 20 years. These assets were $39.9 million and $39.5 million,
net of accumulated amortization of $38.0 million and $31.5 million, at
year-end 1996 and 1995, respectively.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
companies is amortized using the straight-line method principally over 40
years. Accumulated amortization was $96.4 million and $65.6 million at
year-end 1996 and 1995, respectively. The Company assesses the future
useful life of this asset whenever events or changes in circumstances
indicate that the current useful life has diminished. The Company
considers the future undiscounted cash flows of the acquired companies in
assessing the recoverability of this asset. If impairment has occurred,
any excess of carrying value over fair value is recorded as a loss.
Common Stock of Subsidiaries Subject to Redemption
In March 1995, ThermoLyte sold 1,845,000 units, each unit consisting
of one share of ThermoLyte common stock and one redemption right, at
$10.00 per unit, for net proceeds of $17.3 million. Holders of the common
stock issued in the offering will have the option to require ThermoLyte
to redeem, in December 1998 or 1999, any or all of their shares at $10.00
per share.
In September 1996, Thermo Fibergen sold 4,715,000 units, each unit
consisting of one share of Thermo Fibergen common stock and one
redemption right, at $12.75 per unit, for net proceeds of $55.8 million.
The common stock and redemption rights began trading separately on
December 13, 1996. Holders of a redemption right have the option to
require Thermo Fibergen to redeem, in September 2000 and 2001, one share
13PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Significant Accounting Policies (continued)
of Thermo Fibergen common stock at $12.75 per share. The redemption
rights carry terms that generally provide for their expiration if the
closing price of Thermo Fibergen's common stock exceeds $19 1/8 for 20 of
any 30 consecutive trading days prior to September 2001.
The difference between the redemption value and the original carrying
amount of common stock of subsidiaries subject to redemption is accreted
over the period through the first redemption period. The accretion is
charged to minority interest expense in the accompanying statement of
income. The redemption rights are guaranteed on a subordinated basis by
the Company.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
and losses are included in the accompanying statement of income and are
not material for the three years presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation
Certain amounts in 1995 and 1994 have been reclassified to conform to
the presentation in the 1996 financial statements. The historical
information for 1995 has been restated to reflect the June 1996
acquisition of SensorMedics Corporation, which has been accounted for
under the pooling-of-interests method (Note 3). The historical financial
information for periods prior to 1995 has been restated to reflect the
March 1995 acquisition of Coleman Research Corporation, which has been
accounted for under the pooling-of-interests method (Note 3).
2. Available-for-sale and Held-to-maturity Investments
Effective January 2, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with SFAS No. 115, certain of 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 gain (loss) on available-for-sale
investments." Effect of change in accounting principle in the
14PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale and Held-to-maturity Investments (continued)
accompanying 1994 statement of shareholders' investment represents the
unrealized gain, net of related tax effects, pertaining to
available-for-sale investments held by the Company on January 2, 1994.
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 are as follows:
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
--------------------------------------------------------------------------
1996
Government agency
securities $ 804,852 $ 804,142 $ 761 $ (51)
Corporate bonds 581,804 581,424 482 (102)
Other 114,032 101,498 12,855 (321)
---------- ---------- ---------- ----------
$1,500,688 $1,487,064 $ 14,098 $ (474)
========== ========== ========== ==========
1995
Government agency
securities $ 367,208 $ 366,659 $ 574 $ (25)
Corporate bonds 194,628 192,422 2,223 (17)
Tax-exempt securities 16,275 16,247 28 -
Other 77,536 73,923 3,885 (272)
---------- ---------- ---------- ----------
$ 655,647 $ 649,251 $ 6,710 $ (314)
========== ========== ========== ==========
Short- and long-term available-for-sale investments in the
accompanying 1996 balance sheet include equity securities of $34.4 million,
debt securities of $1,212.3 million with contractual maturities of one year
or less, debt securities of $252.4 million with contractual maturities of
more than one year through five years, and debt securities of $1.6 million
with contractual maturities of more than five years. Actual maturities 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, the issuer, or both 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. The net gain on sale of
investments resulted from gross realized gains of $11.2 million, $9.8
million, and $6.7 million and gross realized losses of $1.4 million, $0.5
million, and $1.8 million in 1996, 1995, and 1994, respectively, relating
to the sale of available-for-sale investments.
15PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale and Held-to-maturity Investments (continued)
Held-to-maturity investments in the accompanying balance sheet
represents investments in U.S. treasury bonds that mature in February and
May 1998. It is the Company's intent to hold these securities to
maturity.
3. Acquisitions
In June 1996, the Company acquired SensorMedics in exchange for
1,289,781 shares of the Company's common stock, including 156,590 shares
reserved for issuance upon exercise of assumed stock options and
warrants. SensorMedics manufactures systems for pulmonary function and
sleep-disorder diagnosis, as well as high-frequency ventilation for
pediatric and neonatal care. SensorMedics also manufactures and markets
respiratory-gas analyzers, physiological testing equipment and recorders,
and pulse oximeters. The acquisition has been accounted for under the
pooling-of-interests method.
In March 1995, the Company acquired Coleman Research in exchange for
6,003,336 shares of the Company's common stock, including 304,292 shares
reserved for issuance upon exercise of assumed stock options. Coleman
Research provides systems integration, systems engineering, and
analytical services to government and commercial customers in the fields
of information technology, energy, the environment, software engineering,
launch systems, advanced radar and imaging, and health systems. The
acquisition has been accounted for under the pooling-of-interests method.
Historical financial information presented for 1995 and 1994 has been
restated to include the acquisitions of SensorMedics and Coleman
Research, respectively. Revenues and net income (loss) for 1995 and 1994,
as previously reported by the separate entities prior to the acquisitions
and as restated for the combined Company, are as follows:
(In thousands) 1995 1994
------------------------------------------------------------------------
Revenues:
Previously reported $2,207,417 $1,585,348
SensorMedics 62,874 -
Coleman Research - 143,843
---------- ----------
$2,270,291 $1,729,191
========== ==========
Net Income (Loss):
Previously reported $ 140,080 $ 103,410
SensorMedics (498) -
Coleman Research - 1,301
---------- ----------
$ 139,582 $ 104,711
========== ==========
16PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
3. Acquisitions (continued)
All historical financial information has been restated to include the
acquisition of Coleman Research. Historical information for periods prior
to 1995 has not been restated to include SensorMedics due to
immateriality. The 1995 financial information combines the September 30
fiscal year-end financial information of SensorMedics and the calendar
year-end financial information of the Company. SensorMedics' revenues and
net loss of $14,769,000 and $837,000, respectively, for the three months
ended December 30, 1995, have not been included in the combined 1995
statement of income.
On March 29, 1996, Thermo Instrument completed the acquisition of a
substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons plc (Fisons), a wholly owned subsidiary of
Rhone-Poulenc Rorer Inc., for approximately 123.5 million British pounds
sterling in cash (approximately $188.9 million) and the assumption of
approximately 30.8 million British pounds sterling of indebtedness
(approximately $47.2 million). The purchase price is subject to
post-closing adjustments equal to the amounts by which the net tangible
assets and net debt of the acquired businesses on the closing date are
greater or less than certain target amounts agreed to by the parties.
Thermo Instrument and Fisons are attempting to agree on the required
adjustment to the purchase price based on their respective calculations
of the net tangible assets of the acquired businesses. If the parties are
unable to reach agreement, a firm of independent public accountants will
be appointed to determine the adjustment. Any adjustment would affect the
purchase price allocation, including the amount allocated to cost in
excess of net assets of acquired companies.
In 1996, in addition to the acquisitions of SensorMedics and the
Fisons businesses, the Company and its majority-owned subsidiaries made
several other acquisitions for an aggregate of $194.8 million in cash,
the issuance of common stock of the Company and its majority-owned
subsidiaries valued at $2.4 million, and the issuance of $26.6 million in
debt, subject to post-closing adjustments. In 1995, in addition to the
acquisition of Coleman Research, the Company and its majority-owned
subsidiaries made several other acquisitions for an aggregate of $339.1
million in cash, the issuance of common stock and stock options of the
Company's majority-owned subsidiaries valued at $19.0 million, and the
issuance of $22.3 million in debt. In 1994, the Company and its
majority-owned subsidiaries made several acquisitions for an aggregate of
$174.3 million in cash.
These acquisitions, except for SensorMedics and Coleman Research,
have been accounted for using the purchase method of accounting, and the
acquired companies' results have been included in the accompanying
financial statements from their respective dates of acquisition. The
aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $696.7 million, which is being amortized
principally over 40 years. Allocation of the purchase price for these
acquisitions was based on estimates of the fair value of the net assets
acquired and, for acquisitions completed in 1996, is subject to
adjustment upon finalization of the purchase price allocation. Pro forma
data is not presented since the acquisitions were not material to the
Company's results of operations.
17PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
3. Acquisitions (continued)
In connection with the acquisition of a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons,
Thermo Instrument has undertaken a restructuring of the acquired
businesses. In accordance with the requirements of Emerging Issues Task
Force Pronouncement (EITF) 95-3, Thermo Instrument is in the process of
completing a plan that includes reductions in staffing levels,
abandonment of excess facilities, and other costs associated with exiting
certain activities of the acquired businesses. As part of the cost of the
acquisition, Thermo Instrument established reserves totaling $38.1
million for estimated severance, excess facilities, and other exit costs
associated with the acquisition, $19.0 million of which was expended
during 1996, primarily for severance. Unresolved matters at year-end 1996
include completing the identification of specific employees for
termination and locations to be abandoned or consolidated, among other
decisions concerning the integration of the acquired businesses into
Thermo Instrument. In accordance with EITF 95-3, finalization of Thermo
Instrument's plan for restructuring the acquired businesses will not
occur beyond one year from the date of the acquisition. Any changes in
estimates of these costs prior to such finalization will be recorded as
adjustments to cost in excess of net assets of acquired companies.
4. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has stock-based compensation plans for its key employees,
directors, and others, which permit the award of stock-based incentives
in the stock of the Company and its majority-owned subsidiaries. The
Company has a nonqualified stock option plan, adopted in 1974, and an
incentive stock option plan, adopted in 1981, which permit the award of
stock options to key employees. The incentive stock option plan expired
in 1991, and no grants were made after that date. An equity incentive
plan, adopted in 1989, permits the grant of a variety of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the Board Committee), including restricted
stock, stock options, stock bonus shares, or performance-based shares. To
date, only nonqualified stock options have been awarded under this plan.
The option recipients and the terms of options granted under these plans
are determined by the Board Committee. Generally, options presently
outstanding under these plans are exercisable immediately, but are
subject to certain transfer restrictions and the right of the Company to
repurchase shares issued upon exercise of the options at the exercise
price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a five to ten year period, depending on the
term of the option, which generally ranges from seven to twelve years.
Certain options have three-year terms, and the repurchase rights lapse in
their entirety on the second anniversary of the grant date. In addition,
under certain options, shares acquired upon exercise are restricted from
resale until retirement or other events. Nonqualified options are
generally granted at fair market value, although the Board Committee has
18PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
discretion to grant options at a price at or above 85% of the fair market
value on the date of grant. Incentive stock options must be granted at
not less than the fair market value of the Company's stock on the date of
grant. Generally, stock options have been granted at fair market value.
The Company also has a directors' stock option plan, adopted in 1993,
that provides for the annual grant of stock options of the Company and
its majority-owned subsidiaries to outside directors pursuant to a
formula approved by the Company's shareholders. Options awarded under
this plan are exercisable six months after the date of grant and expire
three to seven years after the date of grant. In addition to the
Company's stock-based compensation plans, certain officers and key
employees may also participate in stock-based compensation plans of the
Company's majority-owned subsidiaries.
Employee Stock Purchase Plan
----------------------------
Substantially all of the Company's full-time U.S. employees are
eligible to participate in an employee stock purchase plan sponsored by
the Company. Under this plan, shares of the Company's common stock can be
purchased at the end of a 12-month period at 95% of the fair market value
at the beginning of the period, and the shares purchased are subject to a
six-month resale restriction. Prior to November 1, 1995, shares of the
Company's common stock could be purchased at 85% of the fair market value
at the beginning of the period, and the shares purchased were subject to
a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
Participants of employee stock purchase programs sponsored by the
Company's majority-owned public subsidiaries may also elect to purchase
shares of the common stock of the subsidiary by which they are employed
under the same general terms described above. During 1996, 1995, and
1994, the Company issued 285,448 shares, 330,444 shares, and 218,754
shares, respectively, of its common stock under this plan.
Employee Stock Ownership Plan
-----------------------------
The Company's Employees Stock Ownership Plan (ESOP) was split into
two plans effective December 31, 1994: ESOP I and ESOP II. The ESOP I
covers eligible full-time U.S. employees of the Company's corporate
office and its wholly owned subsidiaries. The ESOP II, terminated
effective December 31, 1994, covered employees of certain of the
Company's majority-owned subsidiaries. The Company loaned funds to the
ESOP to purchase shares of common stock of the Company and its
majority-owned subsidiaries. The shares purchased by the ESOP were
recorded as deferred compensation in the accompanying balance sheet. The
loan to the ESOP II was repaid in full in 1996. The loan repayment was
recorded as a reduction in deferred compensation in the accompanying
balance sheet. Annual contributions are made by the Company to the ESOP
I, and, through December 31, 1994, were made to the ESOP II.
Contributions are recorded as expense in the accompanying statement of
income. Shares are allocated to the plan participants based on employee
compensation. For these plans, the Company charged to expense $0.2
million, $0.3 million, and $1.1 million in 1996, 1995, and 1994,
respectively.
19PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards in 1996 and 1995 under the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net income and earnings per share would have
been as follows:
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Net income:
As reported $190,816 $139,582
Pro forma 181,880 137,587
Primary earnings per share:
As reported 1.35 1.10
Pro forma 1.29 1.09
Fully diluted earnings per share:
As reported 1.22 .97
Pro forma 1.17 .96
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation expense may not be representative of the amount to be
expected in future years. Pro forma compensation expense for options
granted is reflected over the vesting period; therefore, future pro forma
compensation expense may be greater as additional options are granted.
The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1996 1995
-----------------------------------------------------------------------
Volatility 24% 24%
Risk-free interest rate 6.1% 6.0%
Expected life of options 5.2 years 5.0 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
20PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
Stock Option Activity
A summary of the Company's stock option activity is as follows:
1996 1995 1994
----------------- ----------------- ------------------
Weighted Weighted Range of
Number Average Number Average Number Option
(Shares in of Exercise of Exercise of Prices
thousands) Shares Price Shares Price Shares per Share
- -------------------------------------------------------------------------------
Options outstanding, $ 3.23-
beginning of year 8,302 $17.46 7,878 $14.92 6,663 $18.81
Assumed upon
acquisition
of Sensor-
Medics 150 14.97 - - - -
Assumed upon
acquisition
of Coleman - - 304 5.65 - -
17.19-
Granted 1,183 39.03 1,330 27.85 1,641 20.05
4.10-
Exercised (1,125) 10.71 (1,099) 8.69 (315) 13.91
5.13-
Forfeited (89) 26.97 (111) 16.67 (111) 18.39
------ ------ -----
Options outstanding, $ 3.23-
end of year 8,421 $21.24 8,302 $17.46 7,878 $20.05
====== ====== ====== ====== ===== ======
$ 3.23-
Options exercisable 8,406 $21.23 8,262 $17.51 7,878 $20.05
====== ====== ====== ====== ===== ======
Options available
for grant 1,291 2,397 3,627
====== ====== =====
Weighted average
fair value per
share of options
granted during
year $13.03 $ 9.39
====== ======
21PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
A summary of the status of the Company's stock options at December
28, 1996, is as follows:
Options Outstanding
-------------------------------
Weighted
Average Weighted
Number Remaining Average
Range of of Contractual Exercise
Exercise Prices Shares Life Price
------------------------------------------------------------------------
(Shares in thousands)
$ 5.55 - $10.70 365 1.1 years $ 8.63
10.71 - 21.39 5,642 6.8 years 16.86
21.40 - 32.09 884 6.2 years 26.08
32.10 - 42.79 1,530 8.8 years 37.63
-----
$ 5.55 - $42.79 8,421 6.9 years $21.24
=====
The information disclosed above for options outstanding at December
28, 1996, does not differ materially for options exercisable.
401(k) Savings Plan
The Company's 401(k) savings plan covers the majority of the
Company's eligible full-time U.S. employees. Contributions to the plan
are made by both the employee and the Company. Company contributions are
based on the level of employee contributions. For this plan, the Company
contributed and charged to expense $10.1 million, $7.6 million, and $6.6
million in 1996, 1995, and 1994, respectively.
Other Retirement Plans
Certain of the Company's subsidiaries offer retirement plans,
separate from the Company's 401(k) savings plan. These retirement plans
cover approximately 20% of the Company's U.S. employees. The majority of
these subsidiaries offer 401(k) savings plans; however, one subsidiary
offers a money purchase plan, and two subsidiaries offer profit-sharing
plans. Company contributions to the 401(k) savings plans are based on the
level of employee contributions. Company contributions to the money
purchase plan and profit-sharing plans are based on formulas determined
by the Company. For these plans, the Company contributed and charged to
expense $8.8 million, $8.2 million, and $5.8 million in 1996, 1995, and
1994, respectively.
22PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Long-term Obligations and Other Financing Arrangements
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
5% Senior convertible debentures,
due 2001, convertible at $21.00 per share $ 175,216 $ 309,000
4 5/8% Senior convertible debentures,
due 1997, convertible at $14.33 per share - 82,325
4 1/4% Subordinated convertible debentures,
due 2003, convertible at $37.80 per share 585,000 -
4 7/8% Subordinated convertible debentures,
due 1997, convertible at $14.33 per share - 55,000
4 1/2% Senior convertible debentures,
due 2003, convertible into shares
of Thermo Instrument at $43.07 per share 172,500 -
3 3/4% Senior convertible debentures,
due 2000, convertible into shares of
Thermo Instrument at $16.93 per share 22,281 67,600
6 5/8% Subordinated convertible debentures,
due 2001, convertible into shares of
Thermo Instrument at $9.38 per share - 22,275
5% Subordinated convertible debentures,
due 2000, convertible into shares of
ThermoQuest at $16.50 per share 86,250 86,250
5% Subordinated convertible debentures,
due 2000, convertible into shares of
Thermo Optek at $14.85 per share 86,250 86,250
4 7/8% Subordinated convertible debentures,
due 2000, convertible into shares of
Thermo Remediation at $17.92 per share 34,950 34,950
Noninterest-bearing subordinated convertible
debentures due 2003, convertible into
shares of Thermedics at $32.68 per share 65,000 -
6 1/2% Subordinated convertible debentures,
due 1998, convertible into shares of
Thermedics at $10.42 per share - 8,037
Noninterest-bearing subordinated convertible
debentures, due 1997, convertible into shares
of Thermo Cardiosystems at $14.49 per share 3,755 11,642
3 3/4% Subordinated convertible debentures,
due 2000, convertible into shares of Thermo
Voltek at $7.83 per share 9,345 25,240
4 5/8% Subordinated convertible debentures,
due 2003, convertible into shares of
Thermo TerraTech at $15.90 per share 111,850 -
6 1/2% Subordinated convertible debentures,
due 1997, convertible into shares of
Thermo TerraTech at $10.33 per share 8,620 13,432
23PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Long-term Obligations and Other Financing Arrangements (continued)
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Noninterest-bearing subordinated convertible
debentures, due 2001, convertible into
shares of Thermo Ecotek at $13.56 per share $ 22,205 $ -
8.1% Nonrecourse tax-exempt obligation,
payable in semiannual installments, with
final payment in 2000 51,200 59,100
6.0% Nonrecourse tax-exempt obligation,
payable in semiannual installments, with
final payment in 2000 43,500 49,700
Tax-exempt obligations - 132,047
Other 113,289 104,476
---------- ----------
1,591,211 1,147,324
Less: Current maturities 40,869 29,247
---------- ----------
$1,550,342 $1,118,077
========== ==========
The debentures that are convertible into subsidiary common stock have
been issued by the respective subsidiaries and are guaranteed by the
Company, on a subordinated basis in most cases.
In lieu of issuing all or a portion of Thermo Instrument's common
stock upon conversion of the 4 1/2% senior convertible debentures due
2003 issued by Thermo Instrument, Thermo Instrument has the option to
deliver shares of the Company's common stock with an aggregate value
equal to the market value of Thermo Instrument's common stock otherwise
issuable upon such conversion. The Company has agreed to sell at market
prices such number of shares of its common stock to Thermo Instrument as
may be required to exercise such option.
In the event of a change in control of the Company (as defined in the
related fiscal agency agreement) that has not been approved by the
continuing members of the Company's Board of Directors, each holder of
the 5% and 4 1/4% convertible debentures issued by the Company will have
the right to require the Company to buy all or part of the holder's
debentures, at par value plus accrued interest, within 50 calendar days
after the date of expiration of a specified approval period. In addition,
certain of the obligations convertible into subsidiary common stock
become exchangeable for common stock of the Company at an exchange price
equal to 50% of the average price of the Company's common stock for the
30 trading days preceding the change in control.
Nonrecourse tax-exempt obligations represent obligations issued by
the California Pollution Control Financing Authority (CPCFA), the
proceeds of which were used to finance two alternative-energy facilities
(Delano I and Delano II) located in Delano, California. The obligations
are payable only by a subsidiary of Thermo Ecotek and are not guaranteed
by the Company, except under limited circumstances. As required by the
financing bank group, Thermo Ecotek entered into interest rate swap
agreements that effectively convert these obligations from floating rates
24PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Long-term Obligations and Other Financing Arrangements (continued)
to the fixed rates described above. These swaps have terms expiring in
2000, commensurate with the final maturity of the debt. During 1996 and
1995, the average variable rate received under the interest rate swap
agreements was 3.5% and 3.8%, respectively.
Tax-exempt obligations in the accompanying 1995 balance sheet
represent obligations issued by the CPCFA in January 1992, the proceeds
of which were used to finance the construction of a waste-recycling
facility in San Diego County, California. This facility was sold during
1996 and the buyer assumed obligations under the outstanding debt. Of
these tax-exempt obligations, $93 million carried fixed rates of interest
ranging from 7.2% to 8.5%, and $39 million carried a floating rate of
interest that varied weekly based on short-term, tax-exempt markets. The
interest rate ranged from 3.9% to 6.7% in 1996 and 4.3% to 7.5% in 1995.
The annual requirements for long-term obligations are as follows:
(In thousands)
-----------------------------------------
1997 $ 40,869
1998 95,730
1999 40,596
2000 268,890
2001 199,521
2002 and thereafter 945,605
----------
$1,591,211
==========
See Note 13 for fair value information pertaining to the Company's
long-term obligations.
Notes payable and current maturities of long-term obligations in the
accompanying balance sheet includes $112.9 million and $83.0 million in
1996 and 1995, respectively, of short-term bank borrowings by certain of
the Company's subsidiaries. The weighted average interest rate for these
borrowings was 5.4% at year-end 1996 and 1995.
6. Commitments and Contingencies
Operating Leases
The Company leases portions of its office and operating facilities
under various operating lease arrangements. The accompanying statement of
income includes expenses from operating leases of $48.0 million, $31.9
million, and $24.3 million in 1996, 1995, and 1994, respectively. Future
minimum payments due under noncancelable operating leases at December 28,
1996, are $42.2 million in 1997; $34.5 million in 1998; $27.6 million in
1999; $24.1 million in 2000; $21.7 million in 2001; and $86.8 million in
2002 and thereafter. Total future minimum lease payments are $236.9
million.
25PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Commitments and Contingencies (continued)
Litigation and Related Contingencies
In a lawsuit relating to the Company's waste-recycling facility in
San Diego County, California, a third party, from which the Company
acquired certain development rights, alleges that fees totaling $7.9
million plus interest from 1992 and legal costs are due and payable by
the Company in connection with construction of the facility. The third
party also alleges tort claims for conversion and intentional
interference with contractual relations and seeks punitive damages under
such claims. The Company contends that no additional fees are payable
because the facility actually built was substantially different from the
one contemplated in the agreement with the third-party developer. The
trial is expected to occur during 1997. During 1996, the Company sold the
waste-recycling facility.
The Company has been sued by third-party developers of an
alternative-energy facility, constructed by the Company and its
subcontractors in 1988 and 1989 and leased and operated by a partnership
including Thermo Ecotek. The third-party developers seek $25 million in
damages for alleged misrepresentation, breach of contract, and other
causes of action. The dispute arises out of the development,
construction, and subsequent operating performance of the facility.
ThermoTrex is a defendant in a lawsuit brought by Fischer Imaging
Corporation, which alleges that the prone breast-biopsy systems of the
Lorad division of ThermoTrex's Trex Medical subsidiary infringe a Fischer
patent on a precision mammographic needle-biopsy system. Lorad's
cumulative revenues from this product totaled approximately $73.8 million
through December 28, 1996.
In December 1996, five employees of Thermo Instrument's Epsilon
Industrial Inc. subsidiary commenced an arbitration proceeding alleging
that Epsilon, Thermo Instrument, and certain affiliates of Thermo
Instrument breached the terms of certain agreements entered into with
such employees at the time that a predecessor of Epsilon acquired the
assets and business of a company formerly owned by such employees. The
employees are claiming damages of $36 million resulting from the alleged
failure of Thermo Instrument and its affiliates to use best efforts to
develop and promote certain products acquired at that time.
The Company intends to vigorously defend these matters. In the
opinion of management, the ultimate liability for all such matters,
together with the liability for all other pending legal proceedings,
asserted legal claims, and known potential legal claims that are probable
of assertion, will not be material to the Company's financial position,
but could materially affect the results of operations or cash flows for a
particular quarter or annual period.
7. Common Stock
At December 28, 1996, the Company had reserved 42,886,567 unissued
shares of its common stock for possible issuance under stock-based
compensation plans, for possible conversion of the Company's convertible
debentures, and for possible exchange of certain subsidiaries'
convertible obligations into common stock of the Company. Certain of the
subsidiaries' obligations are exchangeable into common stock of the
26PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
7. Common Stock (continued)
Company in the event of a change in control (as defined in the related
fiscal agency agreement) that has not been approved by the continuing
members of the Company's Board of Directors (Note 5). The exchange price
would be equal to 50% of the average price of the Company's common stock
for the 30 trading days preceding the change in control.
In January 1996, the Company redeemed the share purchase rights
outstanding under its previously existing shareholder rights plan for
$.02 per right, or $.006 per share of the Company's common stock
outstanding. Simultaneously with this redemption, the Company distributed
rights under a new shareholder rights plan adopted by the Company's Board
of Directors to holders of outstanding shares of the Company's common
stock. Each right entitles the holder to purchase one ten-thousandth of a
share of Series B Junior Participating Preferred Stock, $100 par value,
at a purchase price of $250 per share, subject to adjustment. The rights
will not be exercisable until the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated
persons (an Acquiring Person) has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of
common stock (the Stock Acquisition Date), or (ii) 10 business days
following the commencement of a tender offer or exchange offer for 15% or
more of the outstanding shares of common stock.
In the event that a person becomes the beneficial owner of 15% or
more of the outstanding shares of common stock, except pursuant to an
offer for all outstanding shares of common stock approved by the outside
Directors, each holder of a right (except for the Acquiring Person) will
thereafter have the right to receive, upon exercise, that number of
shares of common stock that equals the exercise price of the right
divided by one half of the current market price of the common stock. In
the event that, at any time after any person has become an Acquiring
Person, (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving
corporation or its common stock is changed or exchanged (other than a
merger that follows an offer approved by the outside Directors), or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a right (except for the Acquiring Person)
shall thereafter have the right to receive, upon exercise, the number of
shares of common stock of the acquiring company that equals the exercise
price of the right divided by one half of the current market price of
such common stock.
At any time until 10 days following the Stock Acquisition Date, the
Company may redeem the rights in whole, but not in part, at a price of
$.01 per right (payable in cash or stock). The rights expire on January
29, 2006, unless earlier redeemed or exchanged.
27PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
8. Income Taxes
The components of income before income taxes and minority interest
are as follows:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Domestic $313,069 $256,738 $165,761
Foreign 61,482 42,070 40,615
-------- -------- --------
$374,551 $298,808 $206,376
======== ======== ========
The components of the provision for income taxes are as follows:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Currently payable:
Federal $ 85,024 $ 72,932 $ 30,089
Foreign 31,851 17,751 16,343
State 18,445 19,892 9,672
-------- -------- --------
135,320 110,575 56,104
-------- -------- --------
Deferred (prepaid), net:
Federal (19,994) (9,717) 11,355
Foreign (2,275) 232 (243)
State (2,206) (2,379) 3,487
-------- -------- --------
(24,475) (11,864) 14,599
-------- -------- --------
$110,845 $ 98,711 $ 70,703
======== ======== ========
The Company and its majority-owned subsidiaries receive a tax
deduction upon exercise of nonqualified stock options by employees for
the difference between the exercise price and the market price on the
date of exercise. The provision for income taxes that is currently
payable does not reflect $24.5 million, $20.5 million, and $3.5 million,
of tax benefits of the Company and its majority-owned subsidiaries from
employee exercises of stock options that have been allocated to capital
in excess of par value, directly or through the effect of majority-owned
subsidiaries' equity transactions, in 1996, 1995, and 1994, respectively.
In addition, the provision for income taxes that is currently payable
does not reflect $6.5 million, $3.0 million, and $0.1 million of tax
benefits used to reduce cost in excess of net assets of acquired
companies in 1996, 1995, and 1994, respectively. The deferred provision
for income taxes does not reflect $5.9 million of tax benefits used to
reduce cost in excess of net assets of acquired companies in 1995.
The provision for income taxes in the accompanying statement of
income differs from the provision calculated by applying the statutory
28PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
8. Income Taxes (continued)
federal income tax rate of 35% to income before income taxes and minority
interest due to the following:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Provision for income taxes at
statutory rate $131,093 $104,583 $ 72,232
Increases (decreases) resulting from:
Gain on issuance of stock by
subsidiaries (44,310) (28,285) (8,849)
State income taxes, net of federal
tax 10,555 11,314 8,317
Investment and research and
development tax credits - - (2,786)
Foreign tax rate and tax law
differential 8,528 3,785 1,422
Amortization and write-off of cost
in excess of net assets of acquired
companies 8,643 7,484 3,450
Reduction in valuation allowance (3,212) (2,104) -
Other, net (452) 1,934 (3,083)
-------- -------- --------
$110,845 $ 98,711 $ 70,703
======== ======== ========
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1996 1995
------------------------------------------------------------
Prepaid income taxes:
Reserves and accruals $ 77,489 $ 34,212
Net operating loss and credit
carryforwards 76,866 35,462
Inventory basis difference 22,906 20,683
Accrued compensation 14,435 12,551
Allowance for doubtful accounts 6,764 5,758
Capitalized costs and joint
venture equity 5,253 4,821
Other, net 1,192 2,888
-------- --------
204,905 116,375
Less: Valuation allowance 75,103 40,690
-------- --------
$129,802 $ 75,685
======== ========
Deferred income taxes:
Depreciation $ 68,587 $ 55,608
Intangible assets 8,254 2,806
Other 4,885 1,682
-------- --------
$ 81,726 $ 60,096
======== ========
29PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
8. Income Taxes (continued)
The valuation allowance relates to the uncertainty surrounding the
realization of tax loss carryforwards and the realization of tax benefits
attributable to accrued acquisition expenses and certain other tax assets
of the Company and certain subsidiaries. Of the year-end 1996 valuation
allowance, $69.8 million will be used to reduce cost in excess of net
assets of acquired companies when any portion of the related deferred tax
asset is recognized. During 1996, the valuation allowance increased
primarily due to the establishment of valuation allowances for tax loss
carryforwards of acquired businesses.
At year-end 1996, the Company had foreign and federal net operating
loss carryforwards of $169 million and $6.4 million, respectively. Use of
the carryforwards is limited based on the future income of certain
subsidiaries. The federal net operating loss carryforwards expire in the
years 2008 through 2010. Of the foreign net operating loss carryforwards,
$45 million expire in the years 1997 through 2004, and the remainder do
not expire.
The Company has not recognized a deferred tax liability for the
difference between the book basis and tax basis of its investment in the
common stock of its domestic subsidiaries (such difference relates
primarily to unremitted earnings and gains on issuance of stock by
subsidiaries) because the Company does not expect this basis difference
to become subject to tax at the parent level. The Company believes it can
implement certain tax strategies to recover its investment in its
domestic subsidiaries tax-free.
A provision has not been made for U.S. or additional foreign taxes on
$168 million of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
The Company believes that any additional U.S. tax liability due upon
remittance of such earnings would be immaterial due to available U.S.
foreign tax credits.
9. Transactions in Stock of Subsidiaries
Gain on issuance of stock by subsidiaries in the accompanying
statement of income results primarily from the following transactions:
1996
Initial public offering of 3,450,000 shares of ThermoQuest common
stock at $15.00 per share for net proceeds of $47.8 million resulted in a
gain of $27.2 million that was recorded by Thermo Instrument.
Private placements of 300,000 and 383,500 shares of Thermedics
Detection common stock at $10.00 and $10.75 per share, respectively, for
aggregate net proceeds of $7.0 million resulted in a gain of $5.7 million
that was recorded by Thermedics.
Initial public offering of 2,875,000 shares of Thermo Sentron common
stock at $16.00 per share for net proceeds of $42.3 million resulted in a
gain of $18.0 million that was recorded by Thermedics.
Initial public offering of 3,450,000 shares of Thermo Optek common
stock at $13.50 per share for net proceeds of $42.9 million resulted in a
gain of $25.1 million that was recorded by Thermo Instrument.
30PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
9. Transactions in Stock of Subsidiaries (continued)
Initial public offering of 2,875,000 shares of Trex Medical common
stock and sale of 871,832 shares of Trex Medical common stock in a
concurrent rights offering at $14.00 per share and private placements of
100,000 and 300,000 shares of Trex Medical common stock at $10.75 and
$14.50 per share, respectively, for aggregate net proceeds of $54.3
million resulted in an aggregate gain of $28.3 million that was recorded
by ThermoTrex.
Initial public offering of 1,670,000 shares of Thermo BioAnalysis
common stock at $14.00 per share for net proceeds of $20.8 million
resulted in a gain of $9.8 million that was recorded by Thermo
Instrument.
Private placement of 1,935,667 shares of Metrika Systems common stock
at $7.50 per share for net proceeds of $13.5 million resulted in a gain
of $9.6 million that was recorded by Thermo Instrument.
1995
Initial public offering of 3,500,334 shares of Thermo Ecotek common
stock at $8.50 per share for net proceeds of $27.5 million resulted in a
gain of $7.9 million.
Private placement of 1,601,500 shares of Thermo BioAnalysis common
stock at $10.00 per share for net proceeds of $14.9 million resulted in a
gain of $9.5 million that was recorded by Thermo Instrument.
Private placement of 500,000 shares of Thermo Remediation common
stock at $13.25 per share for net proceeds of $6.6 million resulted in a
gain of $1.6 million that was recorded by Thermo TerraTech.
Private placements of 150,000 and 50,000 shares of ThermoLase common
stock at $13.75 and $12.825 per share, respectively, and a public
offering of 2,250,000 shares of ThermoLase common stock at $25.25 per
share, for aggregate net proceeds of $55.3 million resulted in an
aggregate gain of $34.7 million that was recorded by ThermoTrex.
Initial public offering of 1,725,000 shares of ThermoSpectra common
stock at $14.00 per share and a private placement of 202,000 shares of
ThermoSpectra common stock at $15.72 per share, for aggregate net
proceeds of $24.9 million resulted in an aggregate gain of $10.6 million
that was recorded by Thermo Instrument.
Conversion of $9.1 million of Thermo Voltek 3 3/4% subordinated
convertible debentures convertible at $7.83 per share into 1,163,098
shares of Thermo Voltek common stock resulted in a gain of $3.5 million
that was recorded by Thermedics.
Private placement of 1,862,000 shares of Trex Medical common stock at
$10.25 per share for net proceeds of $17.6 million resulted in a gain of
$12.8 million that was recorded by ThermoTrex.
1994
Public offering of 1,610,000 shares of ThermoTrex common stock at
$15.375 per share for net proceeds of $23.0 million resulted in a gain of
$7.9 million.
Initial public offering of 5,349,572 shares of ThermoLase common
stock at $3.00 per share for net proceeds of $14.8 million resulted in a
gain of $8.6 million that was recorded by ThermoTrex.
31PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
9. Transactions in Stock of Subsidiaries (continued)
Private placements of 1,505,000 shares of ThermoSpectra common stock
at $10.00 per share for net proceeds of $14.0 million resulted in a gain
of $6.5 million that was recorded by Thermo Instrument.
Conversion of $3.7 million of Thermedics 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.
The Company's ownership percentage in these subsidiaries changed
primarily as a result of the transactions listed above, as well as the
Company's purchases of shares of its majority-owned subsidiaries' stock,
the subsidiaries' purchases of their own stock, the issuance of
subsidiaries' stock by the Company or by the subsidiaries under
stock-based compensation plans or in other transactions, and the
conversion of convertible obligations held by the Company, its
subsidiaries, or by third parties.
The Company's ownership percentages at year end were as follows:
1996 1995 1994
---- ---- ----
Thermedics 55% 51% 51%
Thermo Cardiosystems (a) 54% 55% 58%
Thermo Voltek (a) 51% 59% 71%
Thermo Sentron (a) 73% 100% 100%
Thermedics Detection (b) 94% 100% 100%
Thermo Instrument 82% 86% 83%
ThermoSpectra (c) 73% 72% 86%
ThermoQuest (c) 93% 100% 100%
Thermo Optek (c) 93% 100% 100%
Thermo BioAnalysis (c) 67% 80% 100%
Metrika Systems (d) 84% 100% 100%
Thermo TerraTech 81% 81% 80%
Thermo Remediation (e) 68% 69% 65%
Thermo EuroTech (f) 53% 62% 64%
Thermo Power 64% 63% 60%
ThermoLyte (g) 78% 78% 100%
ThermoTrex 51% 51% 50%
ThermoLase (h) 64% 65% 69%
Trex Medical (h) 79% 91% 100%
Thermo Fibertek 84% 81% 81%
Thermo Fibergen (i) 68% 100% 100%
Thermo Ecotek 82% 83% 97%
____________________
(a) Reflects combined ownership by Thermedics and Thermo Electron.
(b) Reflects ownership by Thermedics.
(c) Reflects combined ownership by Thermo Instrument and Thermo
Electron.
(d) Reflects ownership by Thermo Instrument.
(e) Reflects combined ownership by Thermo TerraTech and Thermo Electron.
(f) Reflects ownership by Thermo TerraTech.
(g) Reflects ownership by Thermo Power.
(h) Reflects ownership by ThermoTrex.
(i) Reflects ownership by Thermo Fibertek.
32PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
10. Other Income (Expense), Net
The components of other income (expense), net, in the accompanying
statement of income are as follows:
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Interest income $ 94,109 $ 62,146 $ 43,280
Interest expense (96,695) (77,861) (59,844)
Equity in losses of unconsolidated
subsidiaries (28) (203) (4,019)
Gain on sale of investments, net 9,840 9,305 4,851
Gain on sale of land - - 14,698
Other income (expense), net (5,740) (612) 45
-------- -------- --------
$ 1,486 $ (7,225) $ (989)
======== ======== ========
11. Restructuring and Other Nonrecurring Costs
Restructuring and other nonrecurring costs in 1996 includes a
write-off of $12.7 million of cost in excess of net assets of acquired
company and certain other intangible assets at Thermedics' Corpak
subsidiary, as a result of Thermedics no longer intending to further
invest in this business and analysis that indicates that the expected
future undiscounted cash flows from this business will be insufficient to
recover Thermedics' investment. The 1996 amount also includes $11.4
million of costs recorded by SensorMedics primarily as a result of its
merger with the Company, including employee compensation that became
payable as a result of the merger with the Company, certain investment
banking fees and other related transaction costs, the settlement of a
pre-acquisition legal dispute, and severance costs for terminated
employees (Note 3). In addition, $4.4 million was recorded by the
Company's wholly owned Peter Brotherhood Ltd. subsidiary primarily for
the write-off of a nontrade receivable and severance costs, and $3.5
million and $4.9 million were recorded by Thermo Instrument and Thermo
Cardiosystems, respectively, for the write-off of acquired technology in
connection with an acquisition at each subsidiary. These amounts
represent the portion of the purchase price allocated to technology in
development at acquired businesses, based on estimated replacement costs.
The 1995 amount includes $11.5 million to write off the Company's
net investment in a waste-recycling facility in San Diego County,
California, that was subsequently sold in 1996; $5.0 million to write off
the cost in excess of net assets of acquired companies at Thermo
TerraTech's thermal-processing equipment business due to this asset no
longer being recoverable based on discontinuing investment in this
business and analysis that indicates that the expected cash flows from
this business will be insufficient to recover Thermo TerraTech's
investment; $2.5 million to write off the cost in excess of net assets of
acquired companies at the Company's Napco subsidiary; and $2.9 million of
other nonrecurring costs.
The 1994 amount represents severance costs and, to a lesser extent,
the costs to write off leasehold improvements at ThermoTrex's East Coast
division.
33PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
12. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Cash Paid For:
Interest $ 86,449 $ 72,714 $ 47,745
Income taxes $ 91,536 $ 51,184 $ 27,456
Noncash Activities:
Conversions of the Company's and
subsidiaries' convertible
obligations $ 390,494 $ 212,979 $ 89,625
Sale of waste-recycling facility $ 112,553 $ - $ -
Assumption by buyer of waste-
recycling facility debt $ 109,862 $ - $ -
Acquisition of asset under
capital lease $ - $ 47,101 $ -
Fair value of assets of acquired
companies $ 673,662 $ 521,558 $ 250,404
Cash paid for acquired companies (383,685) (339,075) (174,330)
Issuance of the Company's and
subsidiaries' common stock
and stock options for acquired
companies (2,351) (18,990) -
Issuance of long-term obligations
for acquired companies (26,560) (22,300) -
--------- --------- ---------
Liabilities assumed of
acquired companies $ 261,066 $ 141,193 $ 76,074
========= ========= =========
13. Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale and held-to-maturity investments,
accounts receivable, notes payable and current maturities of long-term
obligations, accounts payable, long-term obligations, forward exchange
contracts, and interest rate swaps. The carrying amount of these
financial instruments, with the exception of available-for-sale
investments, long-term obligations, forward exchange contracts, and
interest rate swaps, approximates fair value due to their short-term
nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on
quoted market prices. See Note 2 for fair value information pertaining to
these financial instruments. Held-to-maturity investments in the
accompanying balance sheet are carried at amortized cost. The fair values
of held-to-maturity investments are disclosed on the accompanying balance
sheet and were determined based on quoted market prices.
34PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
13. Fair Value of Financial Instruments (continued)
The Company enters into forward exchange contracts to hedge certain
firm purchase and sale commitments denominated in currencies other than its
subsidiaries' local currencies, principally U.S. dollars, British pounds
sterling, French francs, and Japanese yen. The purpose of the Company's
foreign currency hedging activities is to protect the Company's local
currency cash flows related to these commitments from fluctuations in
foreign exchange rates. The amounts of such forward exchange contracts at
year-end 1996 and 1995 were $19.7 million and $34.2 million, respectively.
Thermo Ecotek has interest rate swap agreements relating to its
nonrecourse tax-exempt obligations. The interest rate swap agreements are
with a different counterparty than the holders of the underlying debt. The
Company believes, however, that the credit risks associated with these
swaps are minimal because the agreements are with a large, reputable bank.
The notional amount of the swap agreement was $95.7 million and $110.0
million at year-end 1996 and 1995, respectively.
The carrying amount and fair value of the Company's long-term
obligations and off-balance-sheet financial instruments are as follows:
1996 1995
----------------------- -----------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
Long-term obligations:
Convertible
obligations $1,379,467 $1,616,239 $ 802,001 $1,354,682
Other long-term
obligations 170,875 171,722 316,076 336,070
---------- ---------- ---------- ----------
$1,550,342 $1,787,961 $1,118,077 $1,690,752
========== ========== ========== ==========
Off-balance-sheet
financial instruments:
Forward exchange
contracts
receivable $ (1,370) $ (1,015)
Interest rate swaps
payable $ 1,643 $ 3,467
The fair value of long-term obligations was determined based on
quoted market prices and on borrowing rates available to the Company at the
respective year ends. The fair value of convertible obligations exceeds the
carrying amount primarily due to the market price of the Company's or
subsidiaries' common stock exceeding the conversion price of the
convertible obligations.
The fair value of forward exchange contracts and interest rate swap
agreements (used for hedging purposes) is the estimated amount that the
Company would pay or receive upon termination of the contract, taking into
account the change in foreign exchange rates on forward exchange contracts,
and market interest rates and the creditworthiness of the counterparties on
interest rate swap agreements.
35PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
14. Business Segment and Geographical Information
The Company's business segments include the following:
Instruments: analytical, monitoring, process control and
imaging, inspection, and measurement instruments
Alternative-energy Systems: biomass power plants,
biopesticides, industrial-refrigeration systems, natural
gas engines, cooling and cogeneration units, turbines and
compressors
Process Equipment: paper-recycling and papermaking
equipment, metallurgical-processing systems,
electroplating equipment
Biomedical Products: biomedical materials, mammography and
needle-biopsy systems, general-purpose X-ray systems,
respiratory-care equipment, skin-incision devices, blood
coagulation-monitoring equipment, left ventricular-assist
systems, neurophysiology monitoring instruments,
laser-based hair-removal system, personal-care products
Environmental Services: on-site industrial remediation,
environmental sciences, industrial-fluids recycling,
nuclear monitoring and cleanup, thermal soil-remediation,
laboratory analysis, metallurgical heat treating and
fabrication
Advanced Technologies: process-detection systems,
explosives-detection instruments, precision weighing and
inspection equipment, electronic test equipment,
power-conversion instruments, programmable power
amplifiers, systems integration and engineering,
development of avionics products and medical equipment
36PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
14. Business Segment and Geographical Information (continued)
(In thousands) 1996 1995 1994
--------------------------------------------------------------------------
Business Segment Information
Revenues:
Instruments $1,209,362 $ 782,662 $ 649,992
Alternative-energy Systems 339,813 325,912 285,410
Process Equipment 286,312 317,951 190,217
Biomedical Products 455,890 316,622 180,318
Environmental Services 273,894 210,503 141,438
Advanced Technologies 375,459 323,567 286,523
Intersegment Sales Elimination (a) (8,172) (6,926) (4,707)
---------- ---------- ----------
$2,932,558 $2,270,291 $1,729,191
========== ========== ==========
Income Before Income Taxes and
Minority Interest:
Instruments $ 138,869 $ 113,651 $ 105,440
Alternative-energy Systems 38,112 32,952 34,451
Process Equipment 36,115 29,071 20,730
Biomedical Products 16,444 27,167 15,579
Environmental Services 17,709 21,215 14,853
Advanced Technologies 28,040 23,842 14,585
---------- ---------- ----------
Total Segment Income (b) 275,289 247,898 205,638
Equity in Losses of Unconsolidated
Subsidiaries (28) (203) (4,019)
Corporate (c) 99,290 51,113 4,757
---------- ---------- ----------
$ 374,551 $ 298,808 $ 206,376
========== ========== ==========
Identifiable Assets:
Instruments $1,924,400 $1,372,813 $1,011,916
Alternative-energy Systems 617,154 695,849 577,781
Process Equipment 296,582 238,537 191,846
Biomedical Products 691,836 596,467 348,634
Environmental Services 396,901 335,726 192,523
Advanced Technologies 389,586 301,059 236,108
Corporate (d) 824,785 245,888 503,127
---------- ---------- ----------
$5,141,244 $3,786,339 $3,061,935
========== ========== ==========
Depreciation and Amortization:
Instruments $ 44,233 $ 25,257 $ 22,070
Alternative-energy Systems 24,253 25,186 16,078
Process Equipment 5,333 5,228 4,780
Biomedical Products 15,148 9,626 6,376
Environmental Services 12,918 11,197 8,382
Advanced Technologies 11,952 8,104 6,109
Corporate 1,330 1,271 1,233
---------- ---------- ----------
$ 115,167 $ 85,869 $ 65,028
========== ========== ==========
37PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
14. Business Segment and Geographical Information (continued)
(In thousands) 1996 1995 1994
--------------------------------------------------------------------------
Capital Expenditures:
Instruments $ 19,134 $ 10,313 $ 7,574
Alternative-energy Systems (e) 42,537 14,024 31,717
Process Equipment 4,265 3,686 3,231
Biomedical Products 29,731 9,768 7,650
Environmental Services 18,710 19,499 7,559
Advanced Technologies 9,412 6,266 7,653
Corporate 752 460 141
---------- ---------- ----------
$ 124,541 $ 64,016 $ 65,525
========== ========== ==========
Geographical Information
Revenues:
United States $2,171,879 $1,790,058 $1,386,462
United Kingdom 312,522 156,863 125,000
Other Europe 536,496 353,595 244,048
Other 146,998 117,354 91,145
Transfers among geographical
areas (a) (235,337) (147,579) (117,464)
---------- ---------- ----------
$2,932,558 $2,270,291 $1,729,191
========== ========== ==========
Income Before Income Taxes and
Minority Interest:
United States $ 212,341 $ 201,815 $ 182,177
United Kingdom 11,359 5,609 2,002
Other Europe 32,813 26,835 11,313
Other 18,776 13,639 10,146
---------- ---------- ----------
Total Segment Income (b) 275,289 247,898 205,638
Equity in Losses of Unconsolidated
Subsidiaries (28) (203) (4,019)
Corporate (c) 99,290 51,113 4,757
---------- ---------- ----------
$ 374,551 $ 298,808 $ 206,376
========== ========== ==========
Identifiable Assets:
United States $3,372,448 $2,939,286 $2,110,843
United Kingdom 340,005 171,438 125,902
Other Europe 516,558 340,289 261,366
Other 87,449 89,439 60,697
Corporate (d) 824,784 245,887 503,127
---------- ---------- ----------
$5,141,244 $3,786,339 $3,061,935
========== ========== ==========
Export Sales Included in United
States Revenues Above (f) $ 436,972 $ 340,736 $ 265,298
========== ========== ==========
38PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
14. Business Segment and Geographical Information (continued)
(a) Intersegment sales and transfers among geographical areas are
accounted for at prices that are representative of transactions with
unaffiliated parties.
(b) Segment income is income before corporate general and administrative
expenses, other income and expense, minority interest expense, and
income taxes.
(c) Includes corporate general and administrative expenses, other income
and expense, and gain on issuance of stock by subsidiaries.
(d) Primarily cash and cash equivalents, short- and long-term investments,
and property and equipment at the Company's Waltham, Massachusetts,
headquarters.
(e) Includes $36.9 million in 1996 for the construction of a coal-
beneficiation plant in Gillette, Wyoming.
(f) In general, export revenues are denominated in U.S. dollars.
15. Unaudited Quarterly Information
(In thousands except per share amounts)
1996(a) First Second Third Fourth
-------------------------------------------------------------------------
Revenues $652,385 $745,759 $739,981 $794,433
Gross profit 244,381 281,697 296,627 307,284
Net income 41,023 44,919 51,242 53,632
Earnings per share:
Primary .31 .32 .36 .36
Fully diluted .27 .29 .32 .33
1995(b) First Second Third Fourth
-------------------------------------------------------------------------
Revenues $493,174 $544,171 $585,988 $646,958
Gross profit 186,791 207,006 223,086 246,526
Net income 29,684 33,050 38,544 38,304
Earnings per share:
Primary .24 .26 .30 .29
Fully diluted .22 .23 .27 .26
(a)Results include nontaxable gains of $28.9 million, $43.5 million, $38.5
million, and $15.7 million in the first, second, third, and fourth
quarters, respectively, from the issuance of stock by subsidiaries.
(b)Results include nontaxable gains of $12.9 million, $9.7 million, $43.0
million, and $15.2 million in the first, second, third, and fourth
quarters, respectively, from the issuance of stock by subsidiaries.
39PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Notes to Consolidated Financial Statements
16. Subsequent Event
On March 12, 1997, Thermo Instrument declared unconditional in all
respects its cash tender offer for all outstanding shares of Life Sciences
International PLC (Life Sciences) for 135 British pence per share
(approximately $2.16 per share). As of that date, Thermo Instrument had
received acceptances representing approximately 91% of the Life Sciences
shares outstanding and Thermo Instrument owned an additional 3% of the
outstanding Life Sciences shares. There are approximately 175 million Life
Sciences shares outstanding. Thermo Instrument has established March 26,
1997, as the date for payment for all shares as to which acceptance has
been received. In addition, Thermo Instrument expects to repay
approximately $72 million of Life Science's debt, net of acquired cash
expected to be used. Life Sciences, a London Stock Exchange-listed company,
manufactures laboratory science equipment, appliances, instruments,
consumables, and reagents for the research, clinical, and industrial
markets.
40PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors
of Thermo Electron Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
Electron Corporation (a Delaware corporation) and subsidiaries as of
December 28, 1996, and December 30, 1995, and the related consolidated
statements of income, shareholders' investment, and cash flows for each
of the three years in the period ended December 28, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermo Electron Corporation and subsidiaries as of December 28, 1996, and
December 30, 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 28, 1996,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 12, 1997 (except with
respect to the matter discussed
in Note 16 as to which the date
is March 12, 1997)
41PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
caption "Forward-looking Statements."
Overview
The Company develops and manufactures a broad range of products that
are sold worldwide. The Company expands the product lines and services it
offers by developing and commercializing its own core technologies and by
making strategic acquisitions of complementary businesses. The majority
of the Company's businesses fall into four broad markets: environmental,
energy, process control, and selected general purpose analytical, health,
and safety instrumentation.
An important component of the Company's strategy is to establish
leading positions in its markets through the application of proprietary
technology, whether developed internally or acquired. A key contribution
to the growth of the Company's segment income (as defined in the results
of operations below), particularly over the last several years, has been
the ability to identify attractive acquisition opportunities, complete
those acquisitions, and derive a growing income contribution from the
newly acquired businesses as their profitability improves as they are
integrated into the Company's business segments.
The Company seeks to minimize its dependence on any specific product
or market by maintaining and diversifying its portfolio of businesses and
technologies. Similarly, the Company's goal is to maintain a balance in
its businesses between those affected by various regulatory cycles and
those more dependent on the general level of economic activity. Although
the Company is diversified in terms of technology, product offerings, and
geographic markets served, the future financial performance of the
Company as a whole will be largely affected by the strength of worldwide
economies and the continued adoption and diligent enforcement of
environmental, health, and safety regulations and standards, among other
factors.
The Company believes that maintaining an entrepreneurial atmosphere
is essential to its continued growth and development. In order to
preserve this atmosphere, the Company has 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
42PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview (continued)
subsidiaries, the issuance of stock by subsidiaries upon conversion of
convertible debentures, and similar transactions, the Company records
gains that represent the increase in the Company's net investment in the
subsidiaries and are classified as "Gain on issuance of stock by
subsidiaries" in the accompanying statement of income. These gains have
represented a substantial portion of the net income reported by the
Company in certain periods. 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.
In October 1995, the Financial Accounting Standards Board (FASB)
issued an exposure draft of a Proposed Statement of Financial Accounting
Standards, "Consolidated Financial Statements: Policy and Procedures"
(the Proposed Statement). The Proposed Statement would establish new
rules for how consolidated financial statements should be prepared. If
the Proposed Statement is adopted, there could be significant changes in
the way the Company records certain transactions of its controlled
subsidiaries. Among those changes, any sale of the stock of a subsidiary
that does not result in a loss of control would be accounted for as a
transaction in the equity of the consolidated entity with no gain or loss
being recorded. The FASB expects to issue a final statement or a revised
exposure draft in 1997.
Results of Operations
1996 Compared With 1995
Sales in 1996 were $2,932.6 million, an increase of $662.3 million,
or 29%, over 1995. Segment income, excluding restructuring and other
nonrecurring costs of $37.6 million in 1996 and $21.9 million in 1995
described below, increased 16% to $312.9 million in 1996 from $269.8
million in 1995. (Segment income is income before corporate general and
administrative expenses, other income and expense, minority interest
expense, and income taxes.) Operating income, which includes
restructuring and other nonrecurring costs, was $246.5 million in 1996,
compared with $225.2 million in 1995. Financial results for 1995 have
been restated to include SensorMedics, acquired in a pooling-of-interests
transaction in June 1996 (Note 3).
Instruments
-----------
Sales from the Instruments segment were $1,209.4 million in 1996, an
increase of $426.7 million, or 55%, over 1995. Sales increased primarily
due to acquisitions made by Thermo Instrument, which added $404 million
of sales in 1996. The remainder of the increase resulted primarily from
greater demand at Thermo Instrument's mass spectrometry business as a
result of recently introduced products and, to a lesser extent, greater
demand at the Fourier transform infrared spectrometry business. The
unfavorable effects of currency translation due to the strengthening of
the U.S. dollar relative to foreign currencies in countries in which
Thermo Instrument operates decreased revenues by $21.8 million in 1996.
Segment income margin (segment income margin is segment income as a
43PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
percentage of sales), excluding restructuring and other nonrecurring
costs of $3.5 million in 1996, declined to 11.8% in 1996 from 14.5% in
1995, primarily due to lower margins at acquired businesses.
Restructuring and other nonrecurring costs of $3.5 million represents the
write-off of acquired technology relating to the acquisition of a
substantial portion of the businesses comprising the Scientific
Instruments Division of Fisons (Note 3).
Alternative-energy Systems
--------------------------
Sales from the Alternative-energy Systems segment were $339.8 million
in 1996, compared with $325.9 million in 1995. Within this segment,
revenues from Thermo Ecotek were $154.3 million in 1996, compared with
$141.4 million in 1995. This increase resulted primarily from higher
contractual energy rates at all of Thermo Ecotek's facilities, except the
Hemphill plant in New Hampshire; increased revenues at the Delano plants
in California resulting from fewer days of scheduled and unscheduled
outages; and an acquisition that added $2.6 million in revenues. Pursuant
to Thermo Ecotek's utility contracts for its four plants in California,
there will be no further contractual energy rate increases beginning in
1998. Revenues from the Company's waste-recycling facility in southern
California were $9.2 million in 1996, compared with $20.8 million in
1995. This facility was sold in July 1996. Sales at Peter Brotherhood
declined 3% to $54.4 million as a result of lower demand for steam
turbines. Sales from Thermo Power were $122.1 million in 1996, compared
with $108.4 million in 1995. This increase resulted primarily from
increased demand for custom-designed industrial refrigeration packages,
remanufactured commercial cooling equipment, and the inclusion of
revenues from lift-truck engines, offset in part by declines in revenues
from marine-engine products and rental equipment.
Segment income from the Alternative-energy Systems segment was $42.5
million in 1996, compared with $44.5 million in 1995, excluding
restructuring and other nonrecurring costs of $4.4 million in 1996 and
$11.5 million in 1995. Thermo Ecotek had segment income of $39.3 million
in 1996, compared with $34.6 million in 1995. This improvement results
from increased revenues and, to a lesser extent, lower fuel costs.
Segment income from the Company's waste-recycling facility, excluding
restructuring and other nonrecurring costs of $11.5 million in 1995, was
$4.6 million in 1996 and $5.9 million in 1995. Results from this
facility, net of related interest expense (not included in segment
income), were approximately at the break-even level for both periods.
Segment income at Thermo Power declined by $3.9 million to $1.1 million
due to a change in sales mix, a cost increase in one of the major
components of its industrial refrigeration packages, higher depreciation
expense at NuTemp, and higher warranty expenses for marine-engine
products and at NuTemp. Although Thermo Power expects to phase in a new
manufacturer for the component that has increased in price, the cost
increase is expected to adversely affect its segment income margin in
1997. Peter Brotherhood incurred a segment loss of $2.5 million in 1996,
excluding restructuring and other nonrecurring costs, compared with a
loss of $1.1 million in 1995. The decline resulted from increased costs
to complete jobs in process as well as competitive pricing pressures.
44PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
Peter Brotherhood recorded restructuring and other nonrecurring costs of
$4.4 million in 1996 primarily for the write-off of a nontrade receivable
and severance costs.
The Company recorded restructuring and other nonrecurring costs of
$11.5 million for the Alternative-energy Systems segment in 1995. This
amount represents the Company's net investment in a waste-recycling
facility in southern California that contracted to process waste for San
Diego County (the County) under a long-term service agreement. During the
third quarter of 1995, the County paid the Company less than the amount
due under the long-term service agreement, and in October 1995, the
Company notified the County that the County was in default of the service
agreement. The County was a party to the financing arrangements for the
facility and was also in default of certain terms of such arrangements.
As a result of the County's default under the service agreement and
financing arrangements, the Company concluded that it would be unable to
recover its investment in the facility. In 1996, in settlement of these
matters, the facility was sold to the County for a nominal amount plus
the County's assumption of the facility debt.
Certain of Thermo Ecotek's plants have power-sales agreements with
utilities under which the rates paid for power will convert from fixed
rates to "avoided-cost" rates in the year 2000. Avoided-cost rates are
currently substantially less than the fixed rates. One of these plants,
located in Woodland, California, has conditions in its nonrecourse lease
agreement that require funding of a "power reserve" in years prior to
2000, based on projections of operating cash flow shortfalls in the year
2000 and thereafter. The power reserve represents funds available to make
lease payments in the event that revenues are not sufficient after the
Woodland plant converts to avoided-cost rates. Without sufficient
increases in avoided-cost rates or reductions in fuel costs and other
operating expenses by the year 2000, Thermo Ecotek expects to either
renegotiate its nonrecourse lease agreement or forfeit its interest in
the Woodland plant. Beginning in the fourth quarter of 1996, Thermo
Ecotek began to expense the funding of reserves required under the
nonrecourse lease agreement. As a result, the Company expects that the
results of the plant will be reduced to approximately breakeven in future
years. During 1996, the plant contributed $4.6 million of segment income.
Two of Thermo Ecotek's plants are located in New Hampshire and sell
power to Public Service Company of New Hampshire (PSNH). In January 1997,
PSNH's parent company, Northeast Utilities, disclosed in a filing with
the Securities and Exchange Commission that if a proposed deregulation
plan for the New Hampshire electric utility industry were adopted, PSNH
could default on certain financial obligations and seek bankruptcy
protection. In February 1997, the New Hampshire Public Utilities
Commission voted to adopt a deregulation plan, and in March 1997, PSNH
filed suit to block the plan. The effect of a PSNH bankruptcy or
deregulation of the electric utility industry in New Hampshire on Thermo
Ecotek's current rate orders for its two New Hampshire plants is
uncertain.
45PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
Process Equipment
-----------------
Sales in the Process Equipment segment were $286.3 million in 1996,
compared with $318.0 million in 1995. A wholly owned subsidiary of the
Company recorded revenues from a contract to design and construct an
office wastepaper de-inking facility of $58.0 million in 1996 and $77.0
million in 1995. This contract was substantially completed in the first
quarter of 1996. Sales from Thermo Fibertek declined 7%, to $192.2
million in 1996. Thermo Fibertek's revenues under a subcontract from
Thermo Electron to supply equipment and services for the office
wastepaper de-inking facility described above decreased $12.9 million.
Revenues from Thermo Fibertek's recycling business declined an additional
$7.5 million due to lower demand resulting from a severe drop in de-inked
pulp prices, offset in part by $2.2 million of revenues from a business
acquired during 1996. Revenues from Thermo Fibertek's accessories
business increased $8.8 million primarily due to increased demand. The
unfavorable effects of currency translation reduced Thermo Fibertek's
revenues by $1.7 million in 1996. Sales of Thermo TerraTech's
thermal-processing equipment increased $8.3 million in 1996 due to
increased demand, while sales of automated electroplating equipment by
the Company's wholly owned Napco subsidiary declined $6.4 million in
1996. Segment income margin, excluding restructuring and other
nonrecurring costs of $7.5 million in 1995, was 12.6% in 1996, compared
with 11.5% in 1995. This improvement results primarily from a
nonrecurring payment received under the office wastepaper de-inking
facility contract in 1996, which represents certain cost savings on the
contract, and increased revenues from Thermo TerraTech's
thermal-processing equipment business from depressed levels in 1995.
Restructuring and other nonrecurring costs of $7.5 million in 1995
represent the write-off of cost in excess of net assets of acquired
companies, of which $5.0 million was recorded by Thermo TerraTech, and
$2.5 million was recorded by Napco (Note 11).
Biomedical Products
-------------------
Sales in the Biomedical Products segment were $455.9 million in 1996,
an increase of $139.3 million, or 44%, over 1995. Sales increased due to
the inclusion of $111.7 million in sales from acquired businesses, as
well as increased demand for certain products at Trex Medical, Thermo
Cardiosystems' implantable left ventricular-assist systems (LVAS), and
ThermoLase's hair-removal business. Segment income margin, excluding
restructuring and other nonrecurring costs of $29.7 million in 1996,
improved to 10.1% in 1996 from 8.6% in 1995. This improvement resulted
primarily from higher margins at acquired businesses and increased sales
at existing businesses. As ThermoLase opens additional spas in 1997, the
effect of operating newer spas below maximum capacity while ThermoLase
develops its client base, as well as pre-opening costs, will have a
negative impact on its segment income margin. Restructuring and other
nonrecurring costs of $29.7 million in 1996 included a write-off of $12.7
million of cost in excess of net assets of acquired company and certain
46PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
other intangible assets at Thermedics' Corpak subsidiary, $11.4 million
of costs incurred by SensorMedics primarily as a result of its merger
with the Company, and $4.9 million for Thermo Cardiosystem's write-off of
acquired technology relating to a 1996 acquisition (Note 11).
Environmental Services
----------------------
Sales in the Environmental Services segment were $273.9 million in
1996, an increase of $63.4 million, or 30%, over 1995. Revenues from
Thermo TerraTech's remediation and recycling services increased to $121.2
million in 1996 from $67.5 million in 1995 due to the inclusion of $53.9
million in revenues from acquired businesses. This increase was offset in
part by a decline in revenues from soil-remediation services of $4.9
million in 1996 due to declines in the volume of soil processed as a
result of more relaxed regulatory standards in several states and
competitive pricing pressures; and by a decline in revenues at Thermo
TerraTech's radiochemistry laboratory businesses reflecting a reduction
in spending at the U.S. Department of Energy (DOE) and reduced federal
government budget appropriations. These trends are expected to continue
for the foreseeable future. Sales of metallurgical services were $45.7
million in 1996, compared with $42.8 million in 1995. Sales increased due
to increased demand for existing services, offset in part by a decline of
$2.9 million resulting from the closing of a small metallurgical services
division in 1995. Segment income, excluding restructuring and other
nonrecurring costs of $0.1 million in 1996 and $2.0 million in 1995, was
$17.8 million in 1996, compared with $23.2 million in 1995. Additional
segment income from acquisitions was more than offset by costs incurred
at Thermo EuroTech, relating primarily to the settlement of several
contract disputes, as well as the impact of severe winter weather in
early 1996, which affected all phases of Thermo EuroTech's business, and
by the effect of lower sales and income from the traditionally
higher-margin soil-remediation services. Restructuring and other
nonrecurring costs of $2.0 million in 1995 were recorded primarily as a
result of the decision to close a metallurgical services division.
Advanced Technologies
---------------------
Sales from the Advanced Technologies segment were $375.5 million in
1996, compared with $323.6 million in 1995. Sales increased $73.5 million
due to the inclusion of sales from acquired businesses. Increases were
offset in part by declines in revenues due to lower U.S. government
contract funding at Coleman Research and ThermoTrex due to increased
competition for government research and development funding. Segment
income, excluding restructuring and other nonrecurring costs of $1.0
million in 1995, was $28.0 million in 1996, compared with $24.8 million
in 1995. Segment income provided by acquired companies and additional
income from certain businesses were offset in part by lower segment
income at Coleman Research, as a result of lower revenues, and by a loss
incurred at ThermoTrex's advanced technology research center, resulting
from cost overruns and higher expenses to develop new lines of business.
47PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
Restructuring and other nonrecurring costs in 1995 primarily represent
the write-off of intangible assets at ThermoTrex's East Coast division
which was closed.
As a result of the sale of stock by subsidiaries, the issuance of
stock by subsidiaries upon conversion of convertible debentures, and
similar transactions, the Company recorded gains of $126.6 million in
1996 and $80.8 million in 1995. See Notes 1 and 9 for a more complete
description of these transactions. Minority interest expense increased to
$72.9 million in 1996 from $60.5 million in 1995. Minority interest
expense includes $38.2 million in 1996 and $28.6 million in 1995 related
to gains recorded by the Company's majority-owned subsidiaries as a
result of the sale of stock and the issuance of stock upon conversion of
convertible debentures, by their subsidiaries.
At year-end 1996, the Company was contingently liable with respect to
certain lawsuits (Note 6).
1995 Compared With 1994
Sales in 1995 were $2,270.3 million, an increase of $541.1 million,
or 31%, over 1994. Segment income, excluding restructuring and other
nonrecurring costs described below of $21.9 million in 1995 and $0.7
million in 1994, increased 31% to $269.8 million from $206.3 million in
1994. Operating income, which includes restructuring and other
nonrecurring costs, was $225.2 million, an increase of $43.1 million, or
24%, over 1994.
Instruments
-----------
Sales from the Instruments segment were $782.7 million in 1995, an
increase of $132.5 million, or 20%, over 1994. Sales increased primarily
due to acquisitions made by Thermo Instrument, which added $104 million
of sales in 1995. The remaining sales increase was substantially due to
the favorable effects of currency translation due to a weaker U.S. dollar
in 1995. Segment income margin was 14.5% in 1995, compared with 16.2% in
1994. Segment income margin declined due to lower margins at acquired
businesses and reduced shipments at Thermo Instrument's air-monitoring
instruments subsidiary.
Alternative-energy Systems
--------------------------
Sales from the Alternative-energy Systems segment were $325.9 million
in 1995, an increase of $40.5 million, or 14%, over 1994. Within this
segment, revenues from Thermo Ecotek were $141.4 million in 1995,
compared with $134.3 million in 1994. This increase results from a full
year of revenues from the Whitefield, New Hampshire, plant which did not
operate for most of the first half of 1994 due to major damage to the
turbine-generator, as well as higher contractual energy rates in 1995 at
all of Thermo Ecotek's facilities, excluding the facility in Hemphill,
New Hampshire. These increases were offset largely by utility-imposed
curtailment of power at the Woodland and Mendota plants in California.
The utility that purchases the electrical output of these California
plants has the right to curtail each plant's power output up to 1,000
hours per year during periods of low demand. The utility commonly
48PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1995 Compared With 1994 (continued)
experiences low demand following periods of heavy rain or snow, when
hydroelectric power is available. Revenues from the Company's
waste-recycling facility in San Diego County, California declined by $0.8
million due to a reduction in the amounts paid by the facility's
customer. The facility ceased processing waste during 1995 and the
Company wrote off its net investment in this facility in the third
quarter of 1995, as described in the results of operations for 1996.
Sales at Peter Brotherhood increased $18.1 million to $56.2 million as a
result of increased demand for steam turbines and, to a lesser extent,
increased demand for special purpose machinery over depressed 1994
levels. Sales from Thermo Power increased $16.5 million to $108.4
million, due primarily to increased demand for refrigeration packages and
marine engine-related products and, to a lesser extent, an acquisition in
May 1994.
Segment income from the Alternative-energy Systems segment, excluding
restructuring and other nonrecurring costs of $11.5 million in 1995, was
$44.5 million in 1995, compared with $34.5 million in 1994. Thermo Ecotek
had segment income of $34.6 million in 1995, compared with $26.9 million
in 1994. This improvement results from lower fuel costs at two of the
California plants and higher contractual energy rates in 1995, offset in
part by utility-imposed curtailment of power at the Woodland and Mendota
facilities. Segment income at Thermo Power declined to $5.1 million in
1995 from $5.3 million in 1994, reflecting an increase in expenditures
for research and development. Peter Brotherhood incurred a segment loss
of $1.1 million in 1995, compared with a loss of $0.8 million in 1994, as
a result of increased costs to complete jobs in process and competitive
pricing pressures. Restructuring and other nonrecurring costs of $11.5
million in 1995 represents the write-off of the Company's net investment
in its waste-recycling facility in San Diego County, California. This
facility was sold in July 1996.
Process Equipment
-----------------
Sales in the Process Equipment segment were $318.0 million in 1995,
compared with $190.2 million in 1994. A wholly owned subsidiary of the
Company recorded revenues from a contract to design and construct an
office wastepaper de-inking facility of $77.0 million. This contract was
substantially completed in the first quarter of 1996. Sales from Thermo
Fibertek increased $44.1 million to $206.7 million, primarily due to an
increase of $22.3 million in sales of paper-recycling equipment, which
included $14.7 million of sales under a subcontract from Thermo Electron
to supply equipment and services for the office wastepaper de-inking
facility described above, and due to increased demand at Thermo
Fibertek's paper-recycling business in France. Sales from Thermo
Fibertek's accessories and water-management businesses increased $12.5
million and $10.0 million, respectively, due principally to greater
demand. The favorable effects of currency translation increased revenues
by $2.7 million. Sales of Thermo TerraTech's thermal-processing equipment
and Napco's automated electroplating equipment increased $2.6 million and
$4.2 million, respectively, from depressed 1994 levels. Segment income
margin, excluding restructuring and other nonrecurring costs of $7.5
million in 1995, was 11.5% in 1995, compared with 10.9% in 1994. Thermo
49PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1995 Compared With 1994 (continued)
Fibertek's segment income margin improved to 16.2% from 12.9% in 1994,
primarily due to increased sales and an improved sales mix. During 1995,
the Process Equipment segment recorded restructuring and other
nonrecurring costs of $7.5 million to write off costs in excess of net
assets of acquired companies, of which $5.0 million was recorded by
Thermo TerraTech and $2.5 million was recorded by Napco (Note 11).
Biomedical Products
-------------------
Sales in the Biomedical Products segment were $316.6 million in 1995,
an increase of $136.3 million, or 76%, over 1994. This was due primarily
to the inclusion of $62.9 million in sales from SensorMedics, acquired in
June 1996 (Note 3); the inclusion of $31.6 million in sales from Bird
Medical Technologies, Inc. and Bennett X-Ray Corporation, acquired in the
third quarter of 1995; and increased demand for a number of the Company's
biomedical products. Sales of Trex Medical's mammography and
breast-biopsy systems increased 38% to $74.9 million; Thermo
Cardiosystems' LVAS sales increased 98% to $20.6 million; ThermoLase's
skin-care product sales increased 33% to $24.9 million; neurodiagnostic
monitoring equipment sales by the Company's wholly owned Nicolet
Biomedical Inc. subsidiary increased 12% to $53.1 million; and sales of
blood coagulation-monitoring products and skin-incision devices by the
Company's wholly owned International Technidyne Corporation subsidiary
increased 13% to $32.3 million. Segment income margin was 8.6% in 1995
and 1994. Improvements resulting from increased sales and price increases
for Thermo Cardiosystems' air-driven LVAS were offset by the inclusion of
lower-margin revenues at SensorMedics and increased expenses incurred by
ThermoLase to develop and commercialize its laser-based hair-removal
process.
Environmental Services
----------------------
Sales in the Environmental Services segment were $210.5 million in
1995, an increase of $69.1 million, or 49%, over 1994. Within this
segment, sales from Thermo Remediation were $57.4 million in 1995,
compared with $50.1 million in 1994. Sales from Thermo Remediation's
soil-remediation and fluids-recycling services increased due to
acquisitions, offset in part by lower sales at existing sites resulting
from ongoing uncertainties with respect to changing regulatory standards,
primarily in jurisdictions affecting two sites, as well as severe weather
conditions at one site, and competitive pricing pressures. Thermo
Remediation's sales from nuclear services at existing sites increased
primarily due to a long-term environmental restoration contract for the
DOE's Hanford site, offset in part by a decrease in radiochemistry
laboratory work, reflecting a reduction in spending at the DOE. Sales of
analytical laboratory and environmental consulting services increased
$59.8 million, to $100.6 million, due to the inclusion of sales from
acquired businesses. Sales of metallurgical services declined $2.0
million to $42.8 million, due to the effect of closing a small plant in
1995. Segment income margin, excluding restructuring and other
nonrecurring costs of $1.9 million in 1995, improved to 11.0% from 10.5%
in 1994, due primarily to higher sales, offset in part by higher legal
expenses incurred within the environmental consulting services
50PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1995 Compared With 1994 (continued)
operations. The restructuring and other nonrecurring costs included $1.5
million relating to the closing of a small metallurgical services
division in the second quarter of 1995.
Advanced Technologies
---------------------
Sales from the Advanced Technologies segment were $323.6 million in
1995, compared with $286.5 million in 1994. Sales increased $22.3 million
due to the inclusion of a full year of sales from Thermo Sentron Inc.,
acquired in March 1994, and sales from the Orion laboratory products
division of Analytical Technology, Inc., acquired in December 1995. Sales
at Thermo Voltek increased $12.7 million to $36.3 million, due to the
inclusion of $7.2 million in sales from acquired businesses and, to a
lesser extent, the introduction of a new product line and an increase in
demand. Sales at Coleman Research increased $20.7 million to $164.6
million due to increased contract funding. Sales of Thermedics
Detection's process-detection instruments declined $19.5 million to $18.5
million primarily due to lower demand from its principal customer, which
has substantially completed its deployment of these systems, and sales of
EGIS(R) explosives-detection systems declined $5.5 million to $4.6
million, primarily due to lower demand as a result of the shipment of
several large orders in 1994. Segment income, excluding restructuring and
other nonrecurring costs of $1.0 million in 1995 and $0.7 million in
1994, increased $9.6 million to $24.8 million as a result of improved
margins at Coleman Research and Thermo Sentron, primarily due to efforts
to control costs. These improvements were offset in part by a decline in
segment income from Thermedics Detection, primarily as a result of lower
sales. Restructuring and other nonrecurring costs of $1.0 million in 1995
were recorded by ThermoTrex as a result of the decision to close its East
Coast division.
As a result of the sale of stock by subsidiaries, the issuance of
stock by subsidiaries upon conversion of convertible debentures, and
similar transactions, the Company recorded gains of $80.8 million in 1995
and $25.3 million in 1994. See Notes 1 and 9 for a more complete
description of these transactions. Minority interest expense increased to
$60.5 million in 1995 from $31.0 million in 1994. Minority interest
expense includes $28.6 million in 1995 and $5.7 million in 1994 related
to gains recorded by the Company's majority-owned subsidiaries as a
result of the sale of stock and the issuance of stock upon conversion of
convertible debentures, by their subsidiaries.
Other expense, net, in the accompanying statement of income includes
a gain of $14.7 million in 1994 resulting from the sale of the Peter
Brotherhood facility in the United Kingdom. Also included is equity in
losses of unconsolidated subsidiaries, which represents the Company's
portion of results from entities in which the Company's ownership is 50%
or less, including the operation of the Dade County cogeneration
facility. The loss associated with the Dade County facility was $1.6
million in 1995 and $5.7 million in 1994. In September 1994, the joint
venture suspended operation of this plant.
51PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Consolidated working capital was $2,218.6 million at December 28,
1996, compared with $1,317.1 million at December 30, 1995. Included in
working capital were cash, cash equivalents, and short-term
available-for-sale investments of $1,846.3 million at December 28, 1996,
compared with $1,056.7 million at December 30, 1995. In addition, at
December 28, 1996, the Company had $68.8 million of long-term
available-for-sale investments and $25.6 million of long-term
held-to-maturity investments, compared with $61.8 million of long-term
available-for-sale investments and $23.8 million of long-term
held-to-maturity investments at December 30, 1995. Of the total $1,940.7
million of cash, cash equivalents, short- and long-term
available-for-sale and held-to-maturity investments at December 28, 1996,
$1,181.0 million was held by the Company's majority-owned subsidiaries
and the balance was held by the Company and its wholly owned
subsidiaries.
During 1996, $224.5 million of cash was provided by operating
activities. Cash provided by the Company's operating results was offset
in part by cash used to fund an increase in other current assets of $35.7
million, primarily for prepaid taxes. In addition, cash of $29.9 million
was used to decrease other current liabilities, primarily for
expenditures to restructure certain activities of acquired businesses.
During 1996, the Company's primary investing activities, excluding
purchases, sales, and maturities of available-for-sale investments,
included acquisitions and capital expenditures. In 1996, the Company
expended $366.3 million, net of cash acquired, for acquisitions and
$124.5 million for purchases of property, plant, and equipment.
The Company's financing activities provided $1,038.0 million of cash
in 1996. The Company and certain of its majority-owned subsidiaries
issued long-term obligations for net proceeds of $953.4 million. Net
proceeds from the issuance of Company and subsidiary common stock totaled
$304.0 million. In addition, the Company repaid and repurchased long-term
obligations of $63.8 million.
During 1996, an aggregate principal amount of $390.5 million of the
Company's and subsidiaries' convertible obligations was converted into
shares of the Company's or subsidiaries' common stock.
The Company intends, for the foreseeable future, to maintain at least
80% ownership of its Thermo Instrument, Thermo Fibertek, and Thermo
Ecotek 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 it 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. See Note 5 for a
description of outstanding convertible debentures issued by Thermo
Instrument and Thermo Ecotek. In addition, at December 28, 1996, Thermo
Instrument, Thermo Fibertek, and Thermo Ecotek had outstanding stock
options for 3,253,000 shares, 3,570,000 shares, and 1,420,000 shares,
52PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
respectively, exercisable at various prices and subject to certain
vesting schedules. The Company's other majority-owned subsidiaries also
have outstanding stock options and/or convertible debentures.
During 1996, the Company and its majority-owned subsidiaries expended
$140.9 million to purchase common stock of certain of the Company's
majority-owned subsidiaries. These purchases were made pursuant to
authorizations by the Company's and its majority-owned subsidiaries'
Boards of Directors. As of December 28, 1996, $60.6 million and $22.6
million remained under the Company's and the majority-owned subsidiaries'
authorizations, respectively. The amount of purchases in a given
reporting period may vary significantly.
In 1997, the Company expects to make capital expenditures of
approximately $140 million. In addition, as of March 18, 1997, the
Company had completed, or become obligated to complete, acquisitions
since year end, including the acquisition of Life Sciences (Note 16), for
an aggregate purchase price of $483 million, including the repayment of
debt. The Company also had agreements or nonbinding letters of intent to
acquire new businesses totaling approximately $120 million. Proposed
acquisitions of new businesses are subject to various conditions to
closing, and there can be no assurance that all proposed transactions
will be consummated.
As discussed above, a substantial percentage of the Company's
consolidated cash and 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 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. This credit may rank junior, pari passu with, or
senior in priority to payment of the other indebtedness of these members.
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.
53PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Forward-looking Statements
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 1997 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Risks Associated with Acquisition Strategy. One of the Company's
growth strategies is to supplement its internal growth with the
acquisition of businesses and technologies that complement or augment the
Company's existing product lines. Certain businesses acquired by the
Company within the past year, including businesses within the former
Scientific Instruments Division of Fisons plc, have had low levels of
profitability. In addition, businesses that the Company may seek to
acquire in the future may also be marginally profitable or unprofitable.
In order for any acquired businesses to achieve the level of
profitability desired by the Company, the Company must successfully
change operations and improve market penetration. No assurance can be
given that the Company will be successful in this regard. In addition,
promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers, the
need for regulatory approvals, including antitrust approvals, and the
high valuations of businesses resulting from historically high stock
prices in many countries. There can be no assurance that the Company will
be able to complete pending or future acquisitions. In order to finance
any such acquisitions, 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 may result in dilution to the Company's
shareholders.
Risks Associated with Spinout of Subsidiaries. The Company has
adopted a strategy of spinning out certain of its businesses into
separate subsidiaries and having these subsidiaries sell a minority
interest to outside investors. As a result of the sale of stock by
subsidiaries, the issuance of stock by subsidiaries upon conversion of
convertible debentures, and similar transactions, the Company records
gains that represent the increase in the Company's net investment in the
subsidiaries. These gains have represented a substantial portion of the
net income reported by the Company in certain periods. 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.
In October 1995, the Financial Accounting Standards Board (FASB)
issued an exposure draft of a Proposed Statement of Financial Accounting
Standards, "Consolidated Financial Statements: Policy and Procedures"
(the Proposed Statement). The Proposed Statement would establish new
rules for how consolidated financial statements should be prepared. If
the Proposed Statement is adopted, there could be significant changes in
the way the Company records certain transactions of its controlled
subsidiaries. Among those changes, any sale of the stock of a subsidiary
54PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Forward-looking Statements
that does not result in a loss of control would be accounted for as a
transaction in the equity of the consolidated entity with no gain or loss
being recorded. The FASB expects to issue a final statement or a revised
exposure draft in 1997.
Competition. The Company encounters and expects to continue to
encounter significant competition in the sale of its products and
services. The Company's competitors include a number of large
multinational corporations, some of which may be able to adapt more
quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of
their products than the Company. Competition could increase if new
companies enter the market or if existing competitors expand their
product lines or intensify efforts within existing product lines. There
can be no assurance that the Company's current products, products under
development, or ability to develop new technologies will be sufficient to
enable it to compete effectively.
Risks Associated With International Operations. International sales
account for a substantial portion of the Company's revenues, and the
Company intends to continue to expand its presence in international
markets. International revenues are subject to a number of risks,
including the following: fluctuations in exchange rates may affect
product demand and adversely affect the profitability in U.S. dollars of
products and services provided by the Company in foreign markets where
payment for the Company's products and services is made in the local
currency; agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign
customers may have longer payment cycles; foreign countries may impose
additional withholding taxes or otherwise tax the Company's foreign
income, impose tariffs, or adopt other restrictions on foreign trade;
U.S. export licenses may be difficult to obtain; and the protection of
intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not
have a material adverse impact on the Company's business and results of
operations.
Rapid and Significant Technological Change and New Products. The
markets for the Company's products are characterized by rapid and
significant technological change, evolving industry standards and
frequent new product introductions and enhancements. Many of the
Company's products and products under development are technologically
innovative and require significant planning, design, development, and
testing at the technological, product, and manufacturing process levels.
These activities require significant capital commitments and investment
by the Company. In addition, products that are competitive in the
Company's markets are characterized by rapid and significant
technological change due to industry standards that may change on short
notice and by the introduction of new products and technologies that
render existing products and technologies uncompetitive or obsolete.
There can be no assurance that any of the products currently being
developed by the Company, or those to be developed in the future, will be
technologically feasible or accepted by the marketplace, that any such
development will be completed in any particular time frame, or that the
Company's products or proprietary technologies will not become
uncompetitive or obsolete.
55PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Forward-looking Statements
Possible Adverse Effect from Changes in Governmental Regulations. The
Company competes in several markets which involve compliance by its
customers with federal, state, local, and foreign regulations, such as
environmental, health and safety, and food and drug regulations. The
Company develops, configures, and markets its products to meet customer
needs created by such regulations. These regulations may be amended or
eliminated in response to new scientific evidence or political or
economic considerations. Any significant change in regulations could
adversely affect demand for the Company's products in regulated markets.
Risks Associated with Dependence on Capital Spending Policies and
Government Funding. The Company's customers include pharmaceutical and
chemical companies, laboratories, universities, healthcare providers,
paper manufacturers, consumer product companies, government agencies, and
public and private research institutions. The capital spending of these
entities can have a significant effect on the demand for the Company's
products. Such spending is based on a wide variety of factors, including
the resources available to make purchases, the spending priorities among
various types of equipment, public policy, and the effects of different
economic cycles. Any decrease in capital spending by any of the customer
groups that account for a significant portion of the Company's sales
could have a material adverse effect on the Company's business and
results of operations.
Dependence on Patents and Proprietary Rights. The Company places
considerable importance on obtaining patent and trade secret protection
for significant new technologies, products, and processes because of the
length of time and expense associated with bringing new products through
the development process and to the marketplace. The Company's success
depends in part on its ability to develop patentable products and obtain
and enforce patent protection for its products both in the United States
and in other countries. The Company owns numerous United States and
foreign patents, and intends to file additional applications for patents
as appropriate to cover its products. No assurance can be given 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.
In addition, no assurance can be given that any issued patents owned by
or licensed to the Company will not be challenged, invalidated, or
circumvented, or that the rights granted thereunder will provide
competitive advantages to the Company. There can be no assurance that
third parties will not assert claims against the Company that the Company
infringes the intellectual property rights of such parties. The Company
could incur substantial costs and diversion of management resources with
respect to the defense of any such claims, which could have a material
adverse effect on the Company's business, financial condition, and
results of operations. Furthermore, parties making such claims could
secure a judgment awarding substantial damages, as well as injunctive or
other equitable relief, which could effectively block the Company's
ability to make, use, sell, distribute, or market its products and
services in the United States or abroad. In the event that a claim
relating to intellectual property is asserted against the Company, the
Company may seek licenses to such intellectual property. There can be no
assurance, however, that such licenses could be obtained on commercially
reasonable terms, if at all. The failure to obtain the necessary licenses
56PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Forward-looking Statements
or other rights could preclude the sale, manufacture, or distribution of
the Company's products and, therefore, could have a material adverse
effect on the Company's business, financial condition, and results of
operations.
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.
57PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Common Stock Market Information
The following table shows the market range for the Company's common
stock based on reported sales prices on the New York Stock Exchange
(symbol TMO) for 1996 and 1995. Prices have been restated to reflect
three-for-two stock splits, effected in the form of 50% stock dividends,
which were distributed in June 1996 and May 1995.
1996 1995
------------------ ------------------
Quarter High Low High Low
---------------------------------------------------------------------
First $42 1/12 $30 2/5 $22 5/6 $19 1/2
Second 44 3/8 38 4/5 27 1/3 21 7/9
Third 41 7/8 31 3/4 31 1/12 26 2/3
Fourth 41 1/8 29 3/4 34 2/3 28 1/4
As of January 24, 1997, the Company had 9,185 holders of record of
its common stock. This does not include holdings in street or nominee
names. The closing market price on the New York Stock Exchange for the
Company's common stock on January 24, 1997, was $35 7/8 per share.
Common stock of the Company's majority-owned public subsidiaries is
traded on the American Stock Exchange: Thermedics Inc. (TMD), Thermo
Cardiosystems Inc. (TCA), Thermo Voltek Corp. (TVL), Thermo Sentron Inc.
(TSR), Thermedics Detection Inc. (TDX), Thermo Instrument Systems Inc.
(THI), ThermoSpectra Corporation (THS), ThermoQuest Corporation (TMQ),
Thermo Optek Corporation (TOC), Thermo BioAnalysis Corporation (TBA),
Thermo TerraTech Inc. (TTT), Thermo Remediation Inc. (THN), Thermo Power
Corporation (THP), ThermoTrex Corporation (TKN), ThermoLase Corporation
(TLZ), Trex Medical Corporation (TXM), Thermo Fibertek Inc. (TFT), Thermo
Fibergen Inc. (TFG), and Thermo Ecotek Corporation (TCK).
Shareholder Services
Shareholders of Thermo Electron Corporation who desire information
about the Company are invited to contact John N. Hatsopoulos, President
and Chief Financial Officer, Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, (617) 622-1111.
A mailing list is maintained to enable shareholders whose stock is held
in street name, and other interested individuals, to receive quarterly
reports, annual reports, and press releases as quickly as possible.
Beginning in 1997, quarterly distribution will be limited to the second
quarter only. All quarterly reports and press releases are available
through the Internet from Thermo Electron's home page on the World Wide
Web (http://www.thermo.com).
Stock Transfer Agent
Bank of Boston is the stock transfer agent and maintains shareholder
activity records. The agent will respond to questions on issuance of
stock certificates, change of ownership, lost stock certificates, and
change of address. For these and similar matters, please direct inquiries
to:
Bank of Boston
c/o Boston EquiServe Limited Partnership
P.O. Box 8040
Boston, Massachusetts 02266-8040
(617) 575-3120
58PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, President
and Chief Financial Officer, Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Tuesday, June 3,
1997, at 4:00 p.m. at the Hyatt Regency Hotel, Hilton Head, South
Carolina.
59PAGE
<PAGE>
<TABLE>
Thermo Electron Corporation 1996 Financial Statements
Ten Year Financial Summary
(In millions except per share amounts)
<CAPTION>
1996(a) 1995 1994(b) 1993(c) 1992(d) 1991(e) 1990 1989 1988 1987
-------- -------- -------- -------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Income Data:
Revenues $2,932.6 $2,270.3 $1,729.2 $1,354.5 $999.2 $842.5 $744.5 $640.3 $553.7 $430.8
Gross Profit 1,130.0 863.4 650.9 482.3 326.7 256.5 233.8 176.0 157.4 121.9
Operating
Income 246.5 225.2 182.1 119.2 70.5 43.6 40.9 23.6 25.8 15.8
Income Before
Cumulative
Effect of
Change in
Accounting
Principle 190.8 139.6 104.7 76.9 60.9 48.5 35.5 27.3 23.3 21.2
Net Income 190.8 139.6 104.7 76.9 59.5 48.5 35.5 27.3 23.3 21.2
Earnings per
Share Before
Cumulative
Effect of
Change in
Accounting
Principle:
Primary 1.35 1.10 .90 .74 .64 .56 .46 .36 .32 .28
Fully diluted 1.22 .97 .80 .67 .60 .53 .43 .36 .32 .28
Earnings per
Share:
Primary 1.35 1.10 .90 .74 .62 .56 .46 .36 .32 .28
Fully diluted 1.22 .97 .80 .67 .59 .53 .43 .36 .32 .28
60PAGE
<PAGE>
Thermo Electron Corporation 1996 Financial Statements
Ten Year Financial Summary (continued)
(In millions)
1996(a) 1995 1994(b) 1993(c) 1992(d) 1991(e) 1990 1989 1988 1987
-------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Balance Sheet
Data:
Working Capital$2,218.6 $1,317.1 $1,150.7 $ 833.8 $ 508.7 $ 468.4 $244.1 $277.6 $220.1 $211.8
Total Assets 5,141.2 3,786.3 3,061.9 2,507.6 1,838.0 1,212.5 912.0 669.9 528.5 465.0
Long-term
Obligations 1,550.3 1,118.1 1,049.9 647.6 494.2 255.1 210.5 177.0 152.9 136.1
Minority
Interest 684.1 471.6 327.7 277.7 164.3 122.5 83.9 51.8 22.6 25.8
Common Stock of
Subsidiaries
Subject to
Redemption 76.5 17.5 - 14.5 5.5 5.5 8.7 13.1 - -
Shareholders'
Investment 1,754.4 1,309.7 1,007.5 873.7 563.8 489.5 314.1 229.2 196.4 175.3
(a)Reflects the issuance of $585.0 million principal amount of convertible debentures.
(b)Reflects the issuance of $345.0 million principal amount of convertible debentures.
(c)Reflects the Company's 1993 public offering of common stock for net proceeds of $246.0 million.
(d)Reflects the issuance of $260.0 million principal amount of convertible debentures and the
adoption in 1992 of Statement of Financial Accounting Standards No. 106, "Accounting for
Post-retirement Benefits Other Than Pensions."
(e)Reflects the issuance of $164.0 million principal amount of convertible debentures.
</TABLE>
Exhibit 21
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
As of February 28, 1997, the Registrant owned the following subsidiaries:
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Coleman Research Corporation Florida 100
Coleman Information Services Corporation Delaware 100
Coleman Services Incorporated Delaware 100
Traveller Information Services, Inc. Alabama 75
Nicolet Biomedical Inc. California 100
Eden Medical Electronics, Inc. Delaware 100
Eden Medizinische Elektronik GmbH Germany 100
Neuroscience Limited United Kingdom 100
Nicolet Biomedical Japan Inc. Japan 100
Nicolet Biomedical Ltd. United Kingdom 100
Nicolet Biomedical S.A.R.L. France 100
Peter Brotherhood Holdings Ltd. United Kingdom 100
Peter Brotherhood Limited United Kingdom 100
D.S.T. Pattern & Engineering Co. Ltd. United Kingdom 100
FES International Limited United Kingdom 100
Link Control Technology Ltd. United Kingdom 100
Machtech Ltd. United Kingdom 100
Peter Brotherhood Pension Fund Trustees Ltd. United Kingdom 100
Sensonics Ltd. United Kingdom 100
Thermo Electron Realty Limited United Kingdom 100
Turboflex Limited United Kingdom 100
T & A Nash (Penn) Limited United Kingdom 100
Torsiflex Limited United Kingdom 100
(50% of which shares are owned directly
by Peter Brotherhood Limited)
Vikram Brotherhood Turbines Ltd. United Kingdom 51*
Thermo Holdings Limited United Kingdom 100
SensorMedics Corporation Delaware 100
SensorMedics B.V. The Netherlands 100
SensorMedics Critical Care Corporation California 100
SensorMedics (Deutschland) GmbH Germany 100
SensorMedics FSC Corporation Virgin Islands 100
Termo Electron, S.A. de C.V. Mexico 100
The Thermo Electron Companies Inc. Wisconsin 100
Bird Medical Technologies, Inc. California 100
Bird International, Inc. U.S. Virgin 100
Islands
Bird Products Corporation California 100
Bird Life Design Corporation California 100
Stackhouse, Inc. California 100
Gulf Precision, Inc. Arizona 100
Seeley Enterprises, Inc. New Mexico 100
International Technidyne Corporation Delaware 100
International Technidyne Corporation Limited United Kingdom 100
Loftus Furnace Company Pennsylvania 100
Medical Data Electronics, Inc. Delaware 100
Met-Therm, Inc. Ohio 100
NAPCO, Inc. Connecticut 100
Page 1PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
North East Surgical Tool Corp. Massachusetts 100
Nicolet Biomedical of California Inc. California 100
North Carbondale Minerals, Inc. California 100
Overly, Inc. Wisconsin 100
Perfection Heat Treating Company Michigan 100
San Marcos Resource Recovery, Inc. California 100
Southern Ocean County Resource Recovery, Inc. New Jersey 100
Staten Island Cogeneration Corporation New York 100
TE Great Lakes Inc. Michigan 100
TEC Cogeneration Inc. Florida 100
South Florida Cogeneration Associates Florida 50*
TEC Energy Corporation California 100
North County Resource Recovery Associates California 100*
(50% of which is owned directly by
San Marcos Resource Recovery, Inc.)
Tecomet Inc. Massachusetts 100
Thermedics Inc. Massachusetts 55
Orion Foreign Sales Corp. U.S. Virgin 100
Islands
Orion Research Limited United Kingdom 100
Orion Research Puerto Rico, Inc. Delaware 100
Corpak Inc. Massachusetts 100
Walpak Company Illinois 100
Orion Research, Inc. Massachusetts 100
Russell pH Limited Scotland 100
Thermedics Detection Inc. Massachusetts 94
Rutter & Co. The Netherlands 100
Rutter Instrumentation S.A.R.L. France 90
Systech B.V. The Netherlands 50
ThermedeTec Corporation Delaware 100
Thermedics Detection de Argentina S.A. Argentina 100
(1% of which shares are owned
directly by Thermedics Detection Inc.)
Thermedics Detection de Mexico, S.A. Mexico 100
de C.V.
Thermedics Detection GmbH Germany 100
Thermedics Detection Limited United Kingdom 100
Thermedics Detection Scandinavia AS Norway 100
Thermo Sentron Inc. Delaware 73
(additionally, 2.53% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Ramsey France S.A.R.L. France 100
Ramsey Ingenieros S.A. Spain 100
Ramsey Italia S.R.L. Italy 100
Tecno Europa Elettromeccanica S.R.L. Italy 100
Ramsey Technology Inc. Massachusetts 100
Xuzhou Ramsey Technology Co., Limited China 50*
Thermo Sentron Australia Pty. Ltd.. Australia 100
Thermo Sentron B.V. The Netherlands 100
Page 2PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Thermo Sentron Canada Inc. Canada 100
Thermo Sentron GmbH Germany 100
Thermo Sentron Limited United Kingdom 100
Hitech Electrocontrols Limited United Kingdom 100
Hitech Licenses Ltd. United Kingdom 100
Hitech Metal Detectors Ltd. United Kingdom 100
Thermo Sentron SEC Corporation Massachusetts 100
Thermo Sentron (South Africa) Pty. Ltd. South Africa 100
TMD Securities Corporation Massachusetts 100
Thermo Cardiosystems Inc. Massachusetts 54
(additionally, .13% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Nimbus Inc. Massachusetts 100
TCA Securities Corporation Massachusetts 100
Thermo Voltek Corp. Delaware 52
(additionally, .53% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Comtest Europe B.V. The Netherlands 100
Comtest Instrumentation, B.V. The Netherlands 100
Comtest Italia S.R.L. Italy 100
Comtest Limited United Kingdom 100
TVL Securities Corporation Delaware 100
UVC Realty Corp. New York 100
Thermo Administrative Services Corporation Delaware 100
Thermo Amex Management Company Inc. Delaware 100
Thermo Amex Finance, L.P. Delaware 99*
Thermo Amex Convertible Growth Fund Delaware 99*
I., L.P.
Thermo Ecotek Corporation Delaware 82
Caribbean Cogeneration Company, Inc. Massachusetts 100
Delano Energy Company Inc. Delaware 100
Delano Operations Company, Inc. California 100
Eco Fuels Inc. Wyoming 100
EuroEnergy Group, B.V. Italy 50*
Gatepeak Corporation Delaware 100
KFP Operating Company, Inc. Delaware 100
Independent Power Services Corporation Nevada 100
SFS Corporation New Hampshire 100
TCK Fuels Inc. Delaware 100
KFx Fuel Partners, L.P. Delaware 95*
(2% of which is owned
directly by Eco Fuels Inc.)
Tenpeak Corporation Nevada 100
TES Securities Corporation Delaware 100
Thermendota, Inc. California 100
Mendota Biomass Power, Ltd. California 60*
MBPL Agriwaste Corporation California 100
Thermo Ecotek International Holdings Inc. Cayman Islands 100
Page 3PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Thermo Ecotek International Inc. Cayman Islands 100
TCK Cogeneration Dominicana Inc. Cayman Islands 100
(1% of which shares are owned directly by
Thermo Ecotek International Holdings Inc.)
TCK Dominicana Holdings Inc. Cayman Islands 100
(1% of which shares are owned directly by
Thermo Ecotek International Holdings Inc.)
Thermo EuroVentures sro Czech Republic 100
Thermo Electron of Maine, Inc. Maine 100
Gorbell/Thermo Electron Power Company Maine 80*
Thermo Electron of New Hampshire, Inc. New Hampshire 100
Hemphill Power and Light Company New Hampshire 66*
Thermo Electron of Whitefield, Inc. New Hampshire 100
Whitefield Power and Light Company New Hampshire 100*
(39% of which is owned
directly by SFS Corporation)
Thermo Fuels Company, Inc. California 100
Thermo Trilogy Corporation Delaware 100
AgriSense-BCS, Ltd. United Kingdom 100
Woodland Biomass Power, Inc. California 100
Woodland Biomass Power, Ltd. California 100*
(.1% of which is owned directly
by Thermo Ecotek Corporation)
Thermo Electron Foundation, Inc. Massachusetts 100
Thermo Electron Metallurgical Services, Inc. Texas 100
Thermo Fibertek Inc. Delaware 84
AES Equipos y Sistemas S.A. de C.V. Mexico 100
Enviroprint Inc. Delaware 100
Fibertek Construction Company, Inc. Maine 100
Thermo AES Canada Inc. Canada 100
Thermo Web Systems, Inc. Massachusetts 100
Fiberprep Inc. Delaware 95
(31.05% of which shares are owned
directly by E. & M. Lamort, S.A.)
Fiberprep Securities Corporation Delaware 100
Thermo Wisconsin, Inc. Wisconsin 100
Thermo Fibergen Inc. Delaware 69
GranTek Inc. Wisconsin 100
Thermo Fibertek U.K. Limited United Kingdom 100
Vickerys Holdings Limited United Kingdom 100
Vickerys Limited United Kingdom 100
Paperlines Limited New Zealand 100
Vickerys Projects Limited United Kingdom 100
Winterburn Limited United Kingdom 100
TMO Lamort Holdings Inc. Delaware 100
E. & M. Lamort, S.A. France 100
Lamort Equipementos Industrials Ltda. Brazil 60*
Lamort GmbH Germany 100
Lamort Iberia S.A. Spain 100
Lamort Italia S.R.L. Italy 100
Page 4PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Lamort Paper Services Ltd. United Kingdom 100
Nordiska Lamort Lodding A.B. Sweden 100
Thermo Instrument Systems Inc. Delaware 82
Analytical Instrument Development, Inc. Pennsylvania 100
Eberline Instrument Company Limited United Kingdom 100
Eberline Instrument Corporation New Mexico 100
Epsilon Industrial Inc. Texas 100
Flow Automation (UK) Limited United Kingdom 100
Gas Tech Inc. California 100
Gas Tech Australia, Pty. Ltd. Australia 50*
Gas Tech Partnership California 50*
Gastech Instruments Canada Ltd. Canada 100
Houston Atlas Inc. Texas 100
Metrika Systems Corporation Delaware 84
Eberline Radiometrie S.A. France 100
Gamma-Metrics California 100
Gamma-Metrics International F.S.C. Inc. Guam 100
Thermo Instrument Systems GmbH Germany 100
Eberline Instruments GmbH Germany 100
Thermo Instrument Systems Limited United Kingdom 100
National Nuclear Corporation California 100
Optek-Nicolet Holdings Inc. Wisconsin 100
Thermo Instrument Controls Limited United Kingdom 100
Thermo Optek Corporation Delaware 93
(additionally, .30% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
ARL Applied Research Laboratories S.A. Switzerland 100
Fisons Instruments (Proprietary) South Africa 100
Limited
Thermo Optek Wissenschaftliche Gerate Austria 100
GesmbH
ATI Acquisition Corp. Wisconsin 100
Mattson Instruments Limited United Kingdom 100
Thermo Elemental Limited United Kingdom 100
Thermo Optek Limited United Kingdom 100
Unicam Limited United Kingdom 100
Unicam Export Limited United Kingdom 100
Unicam Analytical Inc. Canada 100
Unicam Analytical Technology The The Netherlands 100
Netherlands B.V.
Unicam Italia SpA Italy 100
Unicam S.A. Belgium 100
Fisons Instruments Inc. Canada 100
Fisons Instruments Nordic AB Sweden 100
Nicolet Instrument Corporation Wisconsin 100
Nicolet Japan K.K. Japan 100
Spectra-Tech, Europe Limited United Kingdom 100
Spectra-Tech, Inc. Wisconsin 100
Page 5PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Nicolet Instrument GmbH Germany 100
Optek Securities Corporation Massachusetts 100
Planweld Holding Limited United Kingdom 100
Nicolet Instrument Limited United Kingdom 100
Planweld Limited United Kingdom 100
Hilger Analytical Limited United Kingdom 100
Thermo Electron Limited United Kingdom 100
Thermo Instrument Systems Japan Delaware 100
Holdings, Inc.
Nippon Jarrell-Ash Company, Ltd. Japan 100
Thermo Jarrell Ash Corporation Massachusetts 100
Baird Do Brazil Representacoes Ltda. Brazil 100
Beijing Baird Analytical Instrument China 100
Technology Co. Limited
Thermo Instrument Systems (F.E.) China 100
Limited
Thermo Instruments (Canada) Inc. Canada 100
Eberline Instruments (Canada) Ltd. Canada 100
Thermo Optek France S.A. France 100
Thermo Optek Holding B.V. The Netherlands 100
Baird Europe B.V. The Netherlands 100
Baird France S.A.R.L. France 100
Thermo Group B.V. The Netherlands 100
Thermo Vision Corporation Delaware 100
CID Technologies Inc. New York 100
Laser Science, Inc. Delaware 100
Oriel Instruments Corporation Delaware 100
Oriel Foreign Sales Corp. U.S. Virgin 100
Islands
Scientific Measurement Systems Inc. Colorado 100
ThermoSpectra Corporation Delaware 75
(additionally, .88% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Diametrix Detectors, Inc. Delaware 50
Gould Instrument Systems, Inc. Ohio 100
Kevex Instruments Inc. Delaware 100
Kevex X-Ray Inc. Delaware 100
Nicolet Instrument Technologies Inc. Wisconsin 100
NORAN Instruments Inc. Wisconsin 100
Park Acquisition Corp. Delaware 100
ThermoSpectra B.V. The Netherlands 100
Nicolet Technologies B.V. The Netherlands 100
Bakker Electronics Limited United Kingdom 100
NORAN Instruments B.V. The Netherlands 100
ThermoSpectra GmbH Germany 100
Gould Nicolet Messtechnik GmbH Germany 100
NORAN Instruments GmbH Germany 100
ThermoSpectra Limited United Kingdom 100
Nicolet Technologies Ltd. United Kingdom 100
Page 6PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Thermo Spectra S.A. France 100
Nicolet Technologies S.A.R.L. France 100
Quest-Finnigan Holdings Inc. Virginia 100
Quest-TSP Holdings Inc. Delaware 100
ThermoQuest Corporation Delaware 93
(50% of which shares are owned
directly by Quest-Finnigan Holdings Inc.)
(additionally, .12% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Finnigan FT/MS Inc. Delaware 100
Finnigan Corporation Delaware 100
Finnigan Instruments, Inc. New York 100
Finnigan International Sales, Inc. California 100
Finnigan MAT China, Inc. California 100
Finnigan MAT (Delaware), Inc. Delaware 100
Finnigan MAT Instruments, Inc. Nevada 100
Finnigan MAT International Sales, Inc. California 100
Finnigan MAT (Nevada), Inc. Nevada 100
Finnigan MAT AG Switzerland 100
Finnigan MAT Canada, Ltd. Canada 100
Finnigan MAT GmbH Germany 100
Finnigan MAT S.R.L. Italy 100
Thermo Separation Products S.R.L. Italy 100
Thermo Instruments Australia Pty Australia 100
Limited
ThermoQuest Ltd. United Kingdom 100
Finnigan MAT Ltd. United Kingdom 100
Finnigan MAT AB Sweden 100
Thermo Separation Products Ltd. United Kingdom 100
Finnigan Properties, Inc. California 100
Masslab Limited United Kingdom 100
ThermoQuest B.V. The Netherlands 100
Thermo Separation Products B.V. The Netherlands 100
Thermo Separation Products B.V. B.A. Belgium 100
ThermoQuest France S.A. France 100
Finnigan Automass S.A. France 100
Finnigan MAT S.A.R.L. France 100
Thermo Separation Products S.A. France 100
ThermoQuest Italia S.p.A. Italy 100
ThermoQuest Spain S.A. Spain 100
ThermoQuest Wissenschaftliche Gerate GmbH Austria 100
Thermo Separation Products AG Switzerland 100
Thermo Separation Products Inc. Delaware 100
ThermoQuest GmbH Germany 100
Thermo Separation Products GmbH Germany 100
ThermoQuest K.K. Japan 100
SID Instruments Inc. Delaware 100
FI Instruments Inc. Delaware 100
Page 7PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Fisons Instruments BV The Netherlands 100
Fisons Instruments NV Belgium 100
Fisons Instruments K.K. Japan 100
Fisons Instruments S.A. France 100
HB Instruments Inc. Delaware 100
NK Instruments Inc. Delaware 100
Thermo Capillary Electrophoresis Inc. Delaware 100
Thermo Haake Ltd. United Kingdom 100
Thermo Haake (U.K.) Limited United Kingdom 100
Thermo Instrument (S.E.A.) Pte Limited Singapore 100
Thermo Instrumentos Cientificos S.A. Spain 100
Thermo VG Systems Limited United Kingdom 100
Spectrace Instruments Inc. California 100
Thermo BioAnalysis Corporation Delaware 67
(4.7% of which shares are owned directly by
Quest-TSP Holdings Inc. and 2% of which
shares are owned directly by
Quest-Finnigan Holdings Inc.)
Dynatech Laboratories spol. s.r.o. Czech Republic 100
DYNEX Technologies (Asia) Inc. Delaware 100
DYNEX Technologies Inc. Virginia 100
Thermo BioAnalysis GmbH Germany 100
Dynatech Deutschland GmbH Germany 100
Thermo LabSystems Vertriebs GmbH Germany 100
Thermo BioAnalysis (Guernsey) Ltd. Channel Islands 100
Thermo BioAnalysis Holding, Limited United Kingdom 100
Dynex Technologies Limited United Kingdom 100
Thermo BioAnalysis Ltd. United Kingdom 100
Thermo FAST UK Limited United Kingdom 100
Thermo LabSystems Limited United Kingdom 100
Thermo BioAnalysis S.A. France 100
Thermo LabSystems S.A.R.L. France 100
Thermo LabSystem (Australia) Pty Limited Australia 100
Thermo LabSystems Inc. Massachusetts 100
Thermo Environmental Instruments Inc. California 100
Thermo Instrument Controls Inc. Delaware 100
Flow Automation Inc. Texas 100
Thermo Instrument Controls de Mexico, Mexico 100
S.A. de C.V.(1% of which shares are
owned directly by Thermo Instrument
Systems Inc.)
VG Gas Analysis Systems Inc. Massachusetts 100
Thermo Instruments do Brasil Ltda. Brazil 100
(1% of which shares are owned directly
by Thermo Jarrell Ash Corporation)
TN Technologies Inc. Texas 100
Kay-Ray/Sensall, Inc. Delaware 100
TN Technologies Canada Inc. Canada 100
VG Gas Analysis Limited United Kingdom 100
Van Hengel Holding B.V. The Netherlands 100
Page 8PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Eberline Monitoring GmbH Germany 100
Fisons Instruments Vertriebs GmbH Germany 100
Gebruder Haake GmbH Germany 100
Thermo Instrument Systems B.V. The Netherlands 100
Euroglas B.V. The Netherlands 100
Thermo Automation Services (ThAS) B.V. The Netherlands 100
This Analytical B.V. The Netherlands 100
This Gas Analysis B.V. The Netherlands 100
This Lab Systems B.V. The Netherlands 100
This Scientific B.V. The Netherlands 100
Thermo Instruments GmbH Germany 100
Thermo Jarrell Ash, S.A. Spain 100
TN Spectrace Europe B.V. The Netherlands 100
Westronics Inc. Texas 100
Thermo Leasing Corporation Delaware 100
Thermo Capital Company LLC Delaware 50*
Thermo Power Corporation Massachusetts 65
NuTemp, Inc. Illinois 100
Takepine Limited United Kingdom 100
Tecogen Securities Corporation Massachusetts 100
ThermoLyte Corporation Delaware 78
Thermo TerraTech Inc. Delaware 81
CarlanKillam Consulting Group, Inc. Florida 100
Carlan Consulting Group of Alabama, Inc. Alabama 100
CarlanKillam Construction Services, Inc. Florida 100
Holcroft (Canada) Limited Canada 100
Holcroft Corporation Delaware 100
Holcroft GmbH Germany 100
Metallurgical, Inc. Minnesota 100
Cal-Doran Metallurgical Services, Inc. California 100
Metal Treating Inc. Wisconsin 100
Normandeau Associates, Inc. New Hampshire 100
Thermo Analytical Inc. Delaware 100
Skinner & Sherman, Inc. Massachusetts 100
Thermo Consulting & Design Inc. Delaware 100
Engineering Technology and Knowledge Delaware 100
Corporation
Elson T. Killam Associates, Inc. New Jersey 100
Bettigole Andrews Clark & Killam New York 100
Associates Inc.
N. H. Bettigole Co., Inc. Delaware 100
N. H. Bettigole, P.A. New Jersey 100
N. H. Bettigole, P.C. New York 100
Duncan, Lagnese and Associates, Pennsylvania 100
Incorporated
E3-Killam, Inc. New York 100
Killam Associates, Inc. Ohio 100
Killam Management and Operational New Jersey 100
Services, Inc.
Page 9PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Fellows, Read & Associates, Inc. New Jersey 100
Killam Associates, New England Inc. Delaware 100
George A. Schock & Associates, Inc. New Jersey 100
Jennison Engineering, Inc. Vermont 100
Thermo EuroTech N.V. The Netherlands 53
Amerika Tankinstallaties B.V. The Netherlands 100
Grond- & Watersaneringstechniek The Netherlands 100
Nederland B.V.
High-Tech Trouble-Shooters B.V. The Netherlands 100
Jac. Amerika en Zonen B.V. The Netherlands 100
Refining & Trading Holland B.V. The Netherlands 100
Thermo Remediation Inc. Delaware 69
(additionally, 1.45% of the shares are owned
directly by The Thermo Electron Companies
Inc.)
Eberline Holdings Inc. Delaware 100
Eberline Analytical Corporation New Mexico 100
Thermo Hanford Inc. Delaware 100
TMA/NORCAL Inc. California 100
IEM Sealand Corporation Virginia 100
Remediation Technologies, Inc. Delaware 100
RETEC Thermal, Inc. Delaware 100
ReTec/Tetra L.C. Texas 50*
Thermo Fluids Inc. Delaware 100
TPS Technologies Inc. Florida 100
TPST Soil Recyclers of California Inc. California 100
California Hydrocarbon, Inc. Nevada 100
TPST Soil Recyclers of Maryland Inc. Maryland 100
Todds Lane Limited Partnership Maryland 100*
(1% of which is owned directly
by TPS Technologies Inc.)
TPST Soil Recyclers of New York Inc. New York 100
TPST Soil Recyclers of Oregon Inc. Oregon 100
TPST Soil Recyclers of South Carolina Delaware 100
Inc.
TPST Soil Recyclers of Virginia Inc. Delaware 100
TPST Soil Recyclers of Washington Inc. Washington 100
TMA/Hanford, Inc. Washington 100
Thermo Securities Corporation Delaware 100
Thermo Soil Recyclers Inc. Massachusetts 100
Thermo Technology Ventures Inc. Idaho 100
Plasma Quench Investment Limited Partnership Delaware 60*
ThermoTrex Corporation Delaware 51
ThermoLase Corporation Delaware 64
CBI Laboratories, Inc. Texas 100
ThermoDess S.A.S. France 50*
ThermoLase France L.L.C. Delaware 50*
ThermoLase Japan L.L.C. Wyoming 50*
ThermoTrex East Inc. Massachusetts 100
Trex Medical Corporation Delaware 79
Page 10PAGE
<PAGE>
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
STATE OR PERCENT
NAME JURISDICTION OF OF
INCORPORATION OWNERSHIP
------------------------------------------------------------------------------
Bennett X-Ray Corporation New York 100
Bennett International Corporation U.S. Virgin 100
Islands
Eagle X-Ray, Inc. New York 100
Island X-Ray Incorporated New York 100
Continental X-Ray Corporation Delaware 100
Thermo Lorad F.S.C. Inc. U.S. Virgin 100
Islands
Trex Communications Corporation Delaware 100
XRE Corporation Delaware 100
TMO, Inc. Massachusetts 100
TMOI Inc. Delaware 100
Thermo Biomedical Inc. Delaware 100
Thermo Electron Export Inc. Barbados 100
(equally owned among TMO, TMD, TCA, TCK, TFT,
THI, THP, TTT, TVL, TLZ, THS, TBA, TOC, TMQ
and TXM )
Thermo Electron (London) Ltd. United Kingdom 50*
Thermo Finance (UK) Limited United Kingdom 100
* Joint Venture/Partnership
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our reports dated February 12, 1997 (except with respect to
the matter discussed in Note 16 as to which the date is March 12, 1997)
included in or incorporated by reference into Thermo Electron Corporation's
Annual Report on Form 10-K for the year ended December 28, 1996 into the
Company's previously filed Registration Statement No. 33-00182 on Form S-8,
Registration Statement No. 33-8993 on Form S-8, Registration Statement No.
33-8973 on Form S-8, Registration Statement No. 33-16460 on Form S-8,
Registration Statement No. 33-16466 on Form S-8, Registration Statement No.
33-25052 on Form S-8, Registration Statement No. 33-37865 on Form S-8,
Registration Statement No. 33-37867 on Form S-8, Registration Statement No.
33-36223 on Form S-8, Registration Statement No. 33-52826 on Form S-8,
Registration Statement No. 33-52804 on Form S-8, Registration Statement No.
33-52806 on Form S-8, Registration Statement No. 33-52800 on Form S-8,
Registration Statement No. 33-37868 on Form S-3, Registration Statement No.
33-35657 on Form S-3, Registration Statement No. 33-34752 on Form S-3,
Registration Statement No. 33-39434 on Form S-3, Registration Statement No.
33-12748 on Form S-3, Registration Statement No. 33-39773 on Form S-3,
Registration Statement No. 33-40669 on Form S-3, Registration Statement No.
33-41256 on Form S-3, Registration Statement No. 33-42694 on Form S-3,
Registration Statement No. 33-43706 on Form S-3, Registration Statement No.
33-45401 on Form S-3, Registration Statement No. 33-45603 on Form S-3,
Registration Statement No. 33-50924 on Form S-3, Registration Statement No.
33-51187 on Form S-8, Registration Statement No. 33-51189 on Form S-8,
Registration Statement No. 33-54185 on Form S-3, Registration Statement No.
33-54347 on Form S-8, Registration Statement No. 33-54453 on Form S-8,
Registration Statement No. 33-59544 on Form S-3, Registration Statement No.
333-00197 on Form S-3, Registration Statement No. 033-65237 on Form S-8,
Registration Statement No. 033-61561 on Form S-8, Registration Statement
No. 033-58487 on Form S-8, Registration Statement No. 333-01277 on Form
S-3, Registration Statement No. 333-01809 on Form S-3, Registration
Statement No. 333-01893 on Form S-3, Registration Statement No. 333-19549
on Form S-3, Registration Statement No. 333-19535 on Form S-8, and
Registration Statement No. 333-19633-01 on Form S-3.
Arthur Andersen LLP
Boston, Massachusetts
March 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ELECTRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 414,404
<SECURITIES> 1,431,881
<RECEIVABLES> 650,866
<ALLOWANCES> 34,321
<INVENTORY> 432,960
<CURRENT-ASSETS> 3,131,829
<PP&E> 1,010,189
<DEPRECIATION> 305,742
<TOTAL-ASSETS> 5,141,244
<CURRENT-LIABILITIES> 913,212
<BONDS> 1,550,342
0
0
<COMMON> 149,997
<OTHER-SE> 1,604,372
<TOTAL-LIABILITY-AND-EQUITY> 5,141,244
<SALES> 2,766,002
<TOTAL-REVENUES> 2,932,558
<CGS> 1,657,746
<TOTAL-COSTS> 1,802,569<F1>
<OTHER-EXPENSES> 194,275<F2>
<LOSS-PROVISION> 6,002
<INTEREST-EXPENSE> 96,695
<INCOME-PRETAX> 301,661
<INCOME-TAX> 110,845
<INCOME-CONTINUING> 190,816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190,816
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.22
<FN>
<F1>THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS: "COST OF
PRODUCT AND SERVICE REVENUES" AND "RESEARCH AND DEVELOPMENT CONTRACTS".
<F2>THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS:
"RESTRUCTURING AND OTHER NONRECURRING COSTS", "INTERNALLY FUNDED RESEARCH
AND DEVELOPMENT" AND "OTHER EXPENSES FOR NEW LINES OF BUSINESS".
</FN>
</TABLE>
