SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended July 4, 1998.
[ ] 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 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
----------------------------- ----------------------------
Common Stock, $1.00 par value 166,053,791
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
THERMO ELECTRON CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
July 4, January 3,
(In thousands) 1998 1998
- --------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 610,950 $ 593,580
Short-term available-for-sale investments
at quoted market value (amortized cost
of $1,307,872 and $925,855) 1,310,377 929,118
Accounts receivable, less allowances of
$54,944 and $55,698 797,291 797,399
Unbilled contract costs and fees 71,409 69,375
Inventories:
Raw materials and supplies 284,811 260,458
Work in process 121,723 108,327
Finished goods 192,586 174,804
Prepaid income taxes 119,649 118,182
Prepaid expenses 46,770 42,955
---------- ----------
3,555,566 3,094,198
---------- ----------
Property, Plant, and Equipment, at Cost 1,237,841 1,159,913
Less: Accumulated depreciation and
amortization 421,620 370,867
---------- ----------
816,221 789,046
---------- ----------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $89,930 and $49,581) 95,202 63,306
---------- ----------
Other Assets 161,787 157,108
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Note 6) 1,807,433 1,692,211
---------- ----------
$6,436,209 $5,795,869
========== ==========
2
<PAGE>
THERMO ELECTRON CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
July 4, January 3,
(In thousands except share amounts) 1998 1998
- --------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 119,120 $ 176,912
Accounts payable 248,104 251,677
Accrued payroll and employee benefits 130,695 140,698
Accrued income taxes 84,615 57,923
Accrued installation and warranty costs 71,385 72,710
Deferred revenue 60,120 54,999
Other accrued expenses (Note 6) 325,910 337,316
---------- ----------
1,039,949 1,092,235
---------- ----------
Deferred Income Taxes and Other Deferred Items 152,128 149,884
---------- ----------
Long-term Obligations:
Senior convertible obligations 187,292 187,824
Subordinated convertible obligations (Note 3) 1,689,183 1,473,015
Nonrecourse tax-exempt obligations 33,700 37,600
Other 39,807 44,468
---------- ----------
1,949,982 1,742,907
---------- ----------
Minority Interest 840,411 719,622
---------- ----------
Common Stock of Subsidiaries Subject to
Redemption ($95,262 redemption value) 93,806 93,312
---------- ----------
Shareholders' Investment (Note 7):
Preferred stock, $100 par value, 50,000
shares authorized; none issued
Common stock, $1 par value, 350,000,000
shares authorized; 166,968,457 and
159,206,337 shares issued 166,968 159,206
Capital in excess of par value 1,078,997 843,709
Retained earnings 1,161,918 1,034,640
Treasury stock at cost, 104,406 and
95,684 shares (4,002) (3,839)
Accumulated other comprehensive items (Note 4) (43,948) (35,807)
---------- ----------
2,359,933 1,997,909
---------- ----------
$6,436,209 $5,795,869
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMO ELECTRON CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
---------------------
July 4, June 28,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues:
Product and service revenues $899,968 $834,748
Research and development contract revenues 47,831 40,268
-------- --------
947,799 875,016
-------- --------
Costs and Operating Expenses:
Cost of product and service revenues 520,351 481,859
Expenses for research and development and
new lines of business (a) 94,035 81,480
Selling, general, and administrative expenses 223,817 213,167
Restructuring and other nonrecurring costs
(income), net (Note 8) 4,112 (2,849)
-------- --------
842,315 773,657
-------- --------
Operating Income 105,484 101,359
Gain on Issuance of Stock by Subsidiaries (Note 2) 14,601 15,214
Other Income (Expense), Net (Note 3) 7,327 (3,623)
-------- --------
Income Before Income Taxes, Minority Interest,
and Extraordinary Item 127,412 112,950
Provision for Income Taxes 51,093 42,026
Minority Interest Expense 16,697 14,766
-------- --------
Income Before Extraordinary Item 59,622 56,158
Extraordinary Item, Net of Provision for Income
Taxes and Minority Interest of $3,582 (Note 3) 2,163 -
-------- --------
Net Income $ 61,785 $ 56,158
======== ========
Earnings per Share (Notes 3 and 5):
Basic $ .37 $ .37
======== ========
Diluted $ .34 $ .34
======== ========
Weighted Average Shares (Notes 3 and 5):
Basic 166,168 150,173
======== ========
Diluted 183,329 175,813
======== ========
(a) Includes costs of:
Research and development contracts $ 40,634 $ 34,619
Internally funded research and
development 53,018 46,230
Other expenses for new lines of business 383 631
-------- --------
$ 94,035 $ 81,480
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO ELECTRON CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
-----------------------
July 4, June 28,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues:
Product and service revenues $1,800,965 $1,557,373
Research and development contract revenues 91,097 81,148
---------- ----------
1,892,062 1,638,521
---------- ----------
Costs and Operating Expenses:
Cost of product and service revenues 1,054,045 912,661
Expenses for research and development and
new lines of business (a) 186,183 160,021
Selling, general, and administrative expenses 449,841 398,497
Restructuring and other nonrecurring costs,
net (Note 8) 4,112 4,951
---------- ----------
1,694,181 1,476,130
---------- ----------
Operating Income 197,881 162,391
Gain on Issuance of Stock by Subsidiaries
(Note 2) 54,206 48,880
Other Income (Expense), Net (Note 3) 4,958 (726)
---------- ----------
Income Before Income Taxes, Minority Interest,
and Extraordinary Item 257,045 210,545
Provision for Income Taxes 91,887 70,423
Minority Interest Expense 40,766 31,906
---------- ----------
Income Before Extraordinary Item 124,392 108,216
Extraordinary Item, Net of Provision for Income
Taxes and Minority Interest of $4,844 (Note 3) 2,886 -
---------- ----------
Net Income $ 127,278 $ 108,216
========== ==========
Earnings per Share (Notes 3 and 5):
Basic $ .78 $ .72
========== ==========
Diluted $ .71 $ .65
========== ==========
Weighted Average Shares (Notes 3 and 5):
Basic 162,650 150,122
========== ==========
Diluted 179,955 175,869
========== ==========
(a) Includes costs of:
Research and development contracts $ 79,361 $ 70,957
Internally funded research and
development 105,609 87,834
Other expenses for new lines of business 1,213 1,230
---------- ----------
$ 186,183 $ 160,021
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMO ELECTRON CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
--------------------------
July 4, June 28,
(In thousands) 1998 1997
- -------------------------------------------------------------------------
Operating Activities:
Net income $ 127,278 $ 108,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 78,600 63,604
Restructuring and other nonrecurring
costs, net (Note 8) 4,112 4,951
Provision for losses on accounts
receivable 3,777 5,221
Change in deferred income taxes (3,779) (2,706)
Minority interest expense 40,766 31,906
Gain on issuance of stock by
subsidiaries (Note 2) (54,206) (48,880)
Gain on sale of investments, net (5,252) (596)
Extraordinary item, net (Note 3) (2,886) -
Other noncash items 9,142 9,732
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 20,782 (41,041)
Inventories (29,532) (32,060)
Other current assets (5,388) (11,623)
Accounts payable (21,453) (8,506)
Other current liabilities (29,751) (21,078)
----------- -----------
Net cash provided by operating activities 132,210 57,140
----------- -----------
Investing Activities:
Acquisitions, net of cash acquired
(Note 6) (121,685) (602,667)
Purchases of available-for-sale
investments (1,484,823) (411,644)
Proceeds from sale and maturities of
available-for-sale investments 1,073,609 860,385
Purchases of property, plant, and
equipment (74,226) (48,797)
Proceeds from sale of property, plant,
and equipment 8,994 9,071
Increase in other assets (6,795) (4,213)
Other 9,036 7,754
----------- -----------
Net cash used in investing activities $ (595,890) $ (190,111)
----------- -----------
6
<PAGE>
THERMO ELECTRON CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
--------------------------
July 4, June 28,
(In thousands) 1998 1997
- -------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of long-term
obligations $ 243,973 $ 116,531
Repayment of long-term obligations (44,618) (32,207)
Net proceeds from issuance of Company and
subsidiary common stock (Note 7) 474,060 101,982
Purchases of subsidiary common stock and
debentures (165,874) (161,221)
Decrease in short-term notes payable (26,041) (3,844)
Other 2,178 (3,782)
----------- -----------
Net cash provided by financing activities 483,678 17,459
----------- -----------
Exchange Rate Effect on Cash (2,628) (10,154)
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents 17,370 (125,666)
Cash and Cash Equivalents at Beginning of
Period 593,580 414,404
----------- -----------
Cash and Cash Equivalents at End of Period $ 610,950 $ 288,738
=========== ===========
Noncash activities:
Conversions of subsidiary convertible
obligations $ 16,980 $ 15,854
=========== ===========
Fair value of assets of acquired companies $ 198,278 $ 760,665
Cash paid for acquired companies (132,568) (647,586)
Issuance of subsidiary common stock and
stock options for acquired companies (8,250) (2,080)
----------- -----------
Liabilities assumed of acquired
companies $ 57,460 $ 110,999
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
THERMO ELECTRON CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Electron Corporation (the Company) without audit and, in the opinion
of management, reflect all adjustments of a normal recurring nature necessary
for a fair statement of the financial position at July 4, 1998, the results of
operations for the three- and six-month periods ended July 4, 1998, and June 28,
1997, and the cash flows for the six-month periods ended July 4, 1998, and June
28, 1997. Certain prior period amounts have been reclassified to conform to the
presentation in the current financial statements. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of January 3, 1998, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K, as amended, for the fiscal year ended
January 3, 1998, filed with the Securities and Exchange Commission.
2. Transactions in Stock of Subsidiaries
Gain on issuance of stock by subsidiaries in the accompanying statement of
income for the six-month period ended July 4, 1998, resulted primarily from the
following:
Public offering of 5,175,000 shares of Trex Medical Corporation common stock
at $13.75 per share for net proceeds of $66.9 million resulted in a gain of
$23.8 million that was recorded by ThermoTrex Corporation.
Private placement of 781,921 shares of Thermo Trilogy Corporation common
stock at $8.25 per share for net proceeds of $6.0 million resulted in a gain
of $2.2 million that was recorded by Thermo Ecotek Corporation.
Initial public offering of 3,300,000 shares of ONIX Systems Inc. common
stock at $14.50 per share for net proceeds of $43.2 million resulted in a
gain of $10.0 million that was recorded by Thermo Instrument Systems Inc.
Private placement of 1,543,000 shares of Thermo Coleman Corporation common
stock at $10.00 per share for net proceeds of $14.3 million resulted in a
gain of $7.2 million.
8
<PAGE>
2. Transactions in Stock of Subsidiaries (continued)
Public offering of 3,000,000 shares of Thermo BioAnalysis Corporation common
stock at $18.125 per share for net proceeds of $51.5 million resulted in a
gain of $8.3 million that was recorded by Thermo Instrument.
Conversion of $1.8 million of Thermo Optek Corporation 5% subordinated
convertible debentures, convertible at $13.94 per share, into 127,646 shares
of Thermo Optek common stock resulted in a gain of $0.9 million that was
recorded by Thermo Instrument.
Conversion of $4.0 million of ThermoQuest Corporation 5% subordinated
convertible debentures, convertible at $16.50 per share, into 239,393 shares
of ThermoQuest common stock resulted in a gain of $1.8 million that was
recorded by Thermo Instrument.
3. Other Income (Expense), Net and Extraordinary Item
Other Income (Expense), Net
The components of other income (expense), net, in the accompanying statement
of income are as follows:
Three Months Ended Six Months Ended
--------------------- --------------------
July 4, June 28, July 4, June 28,
(In thousands) 1998 1997 1998 1997
- --------------------------------------------------------------------------
Interest income $ 28,464 $ 18,167 $ 52,229 $ 43,119
Interest expense (26,360) (21,486) (51,967) (42,898)
Equity in loss of
unconsolidated
subsidiaries (186) (537) (474) (247)
Gain on sale of
investments, net 5,412 46 5,252 596
Other (3) 187 (82) (1,296)
-------- -------- -------- --------
$ 7,327 $ (3,623) $ 4,958 $ (726)
======== ======== ======== ========
Extraordinary Item
In June 1998, Thermedics Inc. offered holders of its noninterest-bearing
subordinated convertible debentures due 2003, convertible at $31.125 per share,
the opportunity to exchange such debentures for newly issued 2 7/8% subordinated
convertible debentures due 2003, convertible at $14.928 per share. Holders of
$21.7 million principal amount of outstanding debentures exchanged such
debentures for $15.9 million principal amount of newly issued debentures.
Thermedics recognized an extraordinary gain on this transaction in accordance
with the provisions of Emerging Issues Task Force Pronouncement No. 96-19. In
addition,
9
<PAGE>
3. Other Income (Expense), Net and Extraordinary Item (continued)
earlier in the second quarter of 1998, Thermedics repurchased $2.7 million
principal amount of noninterest-bearing subordinated convertible debentures for
$2.0 million in cash, which also resulted in an extraordinary gain recorded by
Thermedics. The combined extraordinary gain resulting from these transactions
was $2.2 million, net of taxes and minority interest of $3.6 million.
During the first quarter of 1998, Thermedics and one of its majority-owned
subsidiaries repurchased $11.5 million principal amount of their subordinated
convertible debentures for $9.3 million in cash, resulting in an extraordinary
gain of $0.7 million, net of taxes and minority interest of $1.3 million.
The extraordinary gains recorded by the Company increased basic and diluted
earnings per share by $.01 in the second quarter of 1998 and $.02 in the first
six months of 1998.
4. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
pronouncement sets forth requirements for disclosure of the Company's
comprehensive income and accumulated other comprehensive items. In general,
comprehensive income combines net income and "other comprehensive items," which
represents certain amounts that are reported as components of shareholders'
investment in the accompanying balance sheet, including foreign currency
translation adjustments and unrealized net of tax gains and losses on
available-for-sale investments. During the second quarter of 1998 and 1997, the
Company's comprehensive income totaled $57.9 million and $54.7 million,
respectively. During the first six months of 1998 and 1997, the Company's
comprehensive income totaled $120.1 million and $89.4 million, respectively.
5. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended Six Months Ended
--------------------- ---------------------
(In thousands except July 4, June 28, July 4, June 28,
per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------
Basic
Net income $ 61,785 $ 56,158 $127,278 $108,216
-------- -------- -------- --------
Weighted average shares 166,168 150,173 162,650 150,122
-------- -------- -------- --------
Basic earnings per share $ .37 $ .37 $ .78 $ .72
======== ======== ======== ========
10
<PAGE>
5. Earnings per Share (continued)
Three Months Ended Six Months Ended
--------------------- ---------------------
(In thousands except July 4, June 28, July 4, June 28,
per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------
Diluted
Net income $ 61,785 $ 56,158 $127,278 $108,216
Effect of:
Convertible debentures 3,667 4,959 7,334 9,918
Majority-owned
subsidiaries'
dilutive securities (2,500) (1,562) (6,676) (3,421)
-------- -------- -------- --------
Income available to common
shareholders, as
adjusted $ 62,952 $ 59,555 $127,936 $114,713
-------- -------- -------- --------
Weighted average shares 166,168 150,173 162,650 150,122
Effect of:
Convertible debentures 15,476 23,820 15,476 23,820
Stock options 1,685 1,820 1,829 1,927
-------- -------- -------- --------
Weighted average shares,
as adjusted 183,329 175,813 179,955 175,869
-------- -------- -------- --------
Diluted earnings per
share $ .34 $ .34 $ .71 $ .65
======== ======== ======== ========
The computation of diluted earnings per share for each period excludes the
effect of assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of July 4, 1998, there were 2,230,000 of such
options outstanding, with exercise prices ranging from $36.68 to $43.46 per
share.
6. Acquisitions
The Company and its majority-owned subsidiaries made several acquisitions
during the first six months of 1998 for $121.7 million in cash, net of cash
acquired, and the issuance of subsidiary common stock valued at $8.3 million,
subject to post-closing adjustments. These acquisitions have been accounted for
using the purchase method of accounting, and their 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 $111.1 million, which is being
amortized over periods not exceeding 40 years. Allocation of the purchase price
for these acquisitions was based on estimates of the fair value of the net
assets acquired and is subject to adjustment upon finalization of the purchase
price allocations. The Company has gathered no information that indicates the
final allocations will differ materially from the preliminary estimates. Pro
forma results have not been presented as the results of the acquired businesses
were not material to the Company's results of operations.
11
<PAGE>
6. Acquisitions (continued)
During 1996, Thermo Instrument undertook a restructuring of a substantial
portion of the businesses constituting the Scientific Instruments Division of
Fisons plc, acquired in March 1996. In March 1997, Thermo Instrument finalized
its plan for restructuring the acquired businesses. At January 3, 1998, the
remaining reserve for these restructuring activities totaled $11.1 million.
During the first six months of 1998, Thermo Instrument expended $1.2 million for
restructuring costs, primarily for severance and abandoned-facility payments. At
July 4, 1998, the remaining reserve for restructuring these businesses was $9.9
million, which is included in other accrued expenses in the accompanying 1998
balance sheet and primarily represents ongoing severance and abandoned-facility
payments.
7. Sale of Common Stock
In April 1998, the Company sold 7,475,000 shares of its common stock at
$40.625 per share for net proceeds of $290.2 million.
8. Restructuring and Other Nonrecurring Costs
During the second quarter of 1998, ThermoLase Corporation recorded $1.9
million of restructuring costs for severance and the write-off of fixed assets
in connection with certain actions including the relocation of its headquarters
from California to Texas. In addition, five former employees of Thermo
Instrument's Epsilon Industrial, Inc. subsidiary had sought damages in an
arbitration proceeding for alleged breaches of agreements entered into with such
employees prior to Epsilon's acquisition by Thermo Instrument. The arbitrators
rendered a decision with respect to such claims during the second quarter of
1998 and Thermo Instrument recorded $1.4 million of nonrecurring costs related
to the resolution of this matter. The Company's SensorMedics Corporation
subsidiary recorded $0.8 million of restructuring costs during the second
quarter of 1998, primarily severance, in connection with a reorganization of a
subsidiary in the Netherlands.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. 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 under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K, as
amended, for the fiscal year ended January 3, 1998, filed with the Securities
and Exchange Commission.
12
<PAGE>
Results of Operations
Second Quarter 1998 Compared With Second Quarter 1997
Sales in the second quarter of 1998 were $947.8 million, an increase of
$72.8 million, or 8%, over the second quarter of 1997. Segment income, excluding
restructuring and other nonrecurring costs of $4.1 million in 1998 and
restructuring and other nonrecurring income, net, of $2.8 million in 1997,
described below, increased 10% to $117.1 million in 1998 from $106.5 million in
1997. (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/income, increased to $105.5 million in 1998 from $101.4 million in 1997.
Instruments
Sales from the Instruments segment were $395.4 million in 1998, compared
with $405.2 million in 1997. Sales decreased primarily due to an $18.4 million
decline in sales at ThermoQuest Corporation, which resulted principally from a
decrease in sales of analytical instruments of $15.6 million. Of that decrease,
$9.0 million was attributable to a decline in revenues from Europe and North
America, primarily due to orders being received late in the quarter, and $4.0
million was attributable to lower sales in Asia due to unstable economic
conditions in that region. The remainder of the decrease in ThermoQuest's sales
resulted primarily from an affiliated company no longer using ThermoQuest's
sales offices as a distributor for certain products and the unfavorable effects
of currency translation due to the strengthening of the U.S. dollar relative to
foreign currencies in countries in which ThermoQuest operates. ThermoQuest's
backlog at July 4, 1998, increased by $7.2 million from the end of the first
quarter of 1998. In addition, the effect of lower sales at Thermo Optek
Corporation, primarily due to lower sales to the semiconductor industry and
lower sales in Asia, was offset in part by higher sales at ONIX Systems Inc. due
to the inclusion of revenues from acquisitions and increased sales of
industry-specific instruments to the production segment of the oil and gas
industry. In total, acquisitions made by Thermo Instrument Systems Inc. added
$15.0 million of sales in 1998, and the unfavorable effects of currency
translation decreased Thermo Instrument's revenues by $7.2 million in 1998.
Thermo Instrument's backlog decreased $29.1 million during the first six months
of 1998 to $269.8 million. Backlog decreased primarily at Thermo Optek and at
ThermoSpectra Corporation, principally as a result of a slowdown in the
semiconductor and related industries.
Segment income margin (segment income margin is segment income as a
percentage of sales), excluding restructuring and other nonrecurring costs of
$1.4 million in 1998 and $0.8 million in 1997, increased to 15.2% in 1998 from
14.8% in 1997 due to improvements at acquired businesses. Five former employees
of Thermo Instrument's Epsilon Industrial, Inc. subsidiary had sought damages in
an arbitration proceeding for alleged breaches of agreements entered into with
such employees prior to Epsilon's acquisition by Thermo Instrument. The
arbitrators rendered a decision with respect to such claims during the second
quarter of 1998 and Thermo Instrument recorded $1.4 million of
13
<PAGE>
Second Quarter 1998 Compared With Second Quarter 1997 (continued)
nonrecurring costs related to the resolution of this matter. Restructuring and
other nonrecurring costs of $0.8 million in 1997 represents severance for
employees terminated at one of ThermoSpectra's business units. ThermoSpectra
expects to undertake additional restructuring activities during the remainder of
1998, which will result in additional charges.
Biomedical Products
Sales from the Biomedical Products segment were $165.6 million in 1998, an
increase of $21.0 million, or 15%, over the 1997 period. Sales increased due to
the inclusion of revenues from acquired businesses. In addition, increased
demand at Trex Medical Corporation was offset by a decrease in revenues of $4.0
million at ThermoLase Corporation, primarily due to lower demand at its
hair-removal business and the inclusion in 1997 of $1.1 million of fees from
international licensing arrangements. Rather than continuing to open additional
spas, ThermoLase intends to concentrate its resources on attempting both to
increase the capacity utilization of its existing spas and to expand its
physician-licensing program and international licensing arrangements. In
response to the decrease in revenues, ThermoLase significantly reduced its
prices in April 1998 in an attempt to establish an optimum price point that will
result in increased demand and higher revenues. There can be no assurance such
strategy will be successful.
Segment income, excluding restructuring costs of $2.7 million in 1998,
increased to $16.8 million in 1998 from $11.7 million in 1997. This increase
resulted from improvements at existing businesses, primarily at Trex Medical and
Bird Medical Technologies, Inc. and, to a lesser extent, the inclusion of
segment income from acquired businesses. These increases were offset in part by
an increase in segment loss at ThermoLase to $6.0 million in 1998 from $5.4
million in 1997, primarily due to the decrease in revenues described above. The
effect of operating each spa below maximum capacity, as ThermoLase works to
develop its client base and expand its product lines, will continue to have a
negative effect on ThermoLase's segment income. ThermoLase believes that
improvements in the efficacy and duration of its SoftLight(R) hair-removal
process, as well as increased spa utilization by broadening spa services and
products offered, are critical elements in its ability to improve profitability.
The degree to which ThermoLase's recent pricing structure changes are successful
will also affect its segment income. Restructuring costs of $2.7 million in 1998
include $1.9 million recorded by ThermoLase in connection with certain actions,
including the relocation of its headquarters from California to Texas, and $0.8
million recorded by SensorMedics Corporation in connection with the
reorganization of a subsidiary in the Netherlands.
14
<PAGE>
Second Quarter 1998 Compared With Second Quarter 1997 (continued)
Advanced Technology
Sales from the Advanced Technology segment increased 8% to $108.3 million in
1998 from $100.0 million in 1997. Revenues from Thermo Sentron Inc. increased to
$21.6 million in 1998 from $18.5 million in 1997, primarily due to the inclusion
of $2.6 million of sales from acquired businesses and, to a lesser extent,
increased demand, offset in part by the unfavorable effects of currency
translation. Sales from ThermoTrex Corporation's business units increased $4.3
million in 1998, primarily as a result of the inclusion of $3.8 million in sales
from acquired businesses at its Trex Communications Corporation subsidiary.
Sales at Thermo Coleman Corporation were $41.5 million in 1998, compared with
$37.8 million in 1997. This increase resulted from higher revenues from
government contracts, offset in part by a decline of $0.5 million in sales as a
result of lower sales of kiosk units at its Thermo Information Solutions Inc.
subsidiary, which has substantially exited this business. Sales at Thermedics
Detection Inc. decreased 7% to $24.0 million in 1998, primarily due to $1.9
million of sales in the 1997 period of its Alexus(R) systems in connection with
the fulfillment of a mandated product-line upgrade from The Coca-Cola Company to
its existing installed base. Sales at Thermo Voltek Corp. decreased to $10.7
million in 1998 from $11.9 million in 1997, due to lower demand for
electromagnetic-compatibility test instruments.
Segment income decreased to $7.8 million in 1998 from $9.1 million in 1997.
This decrease resulted from lower segment income at Thermedics Detection,
primarily due to lower sales, offset in part by an increase in profitability at
Thermo Voltek principally due to cost reductions as a result of organizational
changes made in 1997.
Alternative Energy
Sales from the Alternative Energy segment increased to $126.4 million in
1998 from $89.0 million in 1997. Within this segment, revenues from Thermo
Ecotek Corporation increased to $50.7 million in 1998 from $43.5 million in
1997. Thermo Ecotek's increase in revenues was due in part to higher contractual
energy rates at certain facilities and the inclusion of $2.0 million of revenues
from newly acquired power operations in the Czech Republic. From various dates
in 1998 onward, no further rate increases will occur in Thermo Ecotek's four
California energy facilities. Revenues from Thermo Ecotek's Thermo Trilogy
Corporation biopesticide subsidiary increased by $2.1 million to $7.8 million,
primarily due to the inclusion of revenues from an acquired business. Sales at
Thermo Power Corporation increased to $64.9 million in 1998 from $33.8 million
in 1997, primarily due to the inclusion of $34.3 million of sales from Peek plc,
acquired in November 1997.
Segment income, excluding restructuring and other nonrecurring income, net,
of $3.7 million in 1997, was $16.1 million in 1998, compared with $12.5 million
in 1997. Thermo Ecotek's segment income was $10.5 million in 1998, compared with
$9.2 million in 1997. The increase resulted primarily from higher profitability
at Thermo Trilogy, due to contributions from an acquired business and, to a
lesser extent, higher
15
<PAGE>
Second Quarter 1998 Compared With Second Quarter 1997 (continued)
contractual energy rates, a well as the inclusion of results of the newly
acquired Czech Republic power operations. Segment income at Thermo Power
improved to $5.4 million in 1998 from $1.3 million in 1997, primarily due to
contributions from Peek. Due to funding patterns of government entities, as well
as seasonality, Peek has historically experienced higher sales and segment
income in the second and fourth calendar quarters and lower amounts in the first
and third calendar quarters. The 1997 period included restructuring and other
nonrecurring income, net, of $3.7 million, which consisted of $5.0 million of
previously established litigation reserves that were reversed upon settlement of
a related matter and $1.3 million of costs, primarily severance, related to
restructuring activities at Peter Brotherhood Ltd.
Industrial Outsourcing
Sales in the Industrial Outsourcing segment were $87.4 million in 1998, an
increase of $14.2 million, or 19%, over 1997. Revenues from Thermo TerraTech
Inc.'s environmental-liability management services increased to $40.0 million in
1998 from $30.7 million in 1997, primarily due to higher demand at certain
business units and, to a lesser extent, the inclusion of $4.4 million of sales
from acquired businesses. In addition, revenues from Thermo Remediation Inc.'s
soil-remediation services increased $1.8 million due to an increase in the
volume of soil processed. These increases were offset in part by a $4.2 million
decrease in revenues at one of Thermo Remediation's business units resulting
from a decline in the number of contracts in process. Revenues from Thermo
TerraTech's engineering and design services increased $2.2 million in 1998,
primarily due to the inclusion of $3.5 million of revenues from an acquired
business, offset in part by the effect on revenues of the postponement of
several major contracts. Sales of metallurgical services increased $2.6 million
in 1998, principally due to increased demand for existing services.
Segment income was $6.9 million in 1998, compared with $5.8 million in 1997.
Segment income increased in 1998 principally as a result of the increase in
sales of metallurgical services and improved profitability in that business.
Paper Recycling
Sales in the Paper Recycling segment increased to $66.3 million in 1998 from
$65.3 million in 1997. Sales from Thermo Fibertek Inc. increased 17% to $63.6
million in 1998 from $54.5 million in 1997, primarily due to an increase in
revenues of $8.7 million from Thermo Black Clawson, acquired in May 1997. In
addition, an increase in revenues from Thermo Fibertek's recycling business
resulting from higher demand was offset in part by a decrease in revenues of
$2.6 million at its accessories business due to lower demand. The unfavorable
effects of currency translation reduced Thermo Fibertek's revenues by $1.0
million in 1998. Sales from Thermo TerraTech's thermal-processing equipment
business, which was sold in October 1997, were $7.4 million in 1997.
16
<PAGE>
Second Quarter 1998 Compared With Second Quarter 1997 (continued)
Segment income margin was 13.9% in 1998, compared with 11.5% in 1997. This
increase primarily resulted from improvements at Thermo Fibertek and the
inclusion in 1997 of lower segment income margins from Thermo TerraTech's
thermal-processing equipment business.
Gain on Issuance of Stock by 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. The Company believes that this strategy provides
additional motivation and incentives for the management of the subsidiary
through the establishment of subsidiary-level stock option programs, as well as
capital to support the subsidiary's growth. As a result of the sale of stock by
subsidiaries and the issuance of stock by subsidiaries upon conversion of
convertible debentures, 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. The Company recorded gains of $14.6
million in 1998 (Note 2) and $15.2 million in 1997 as a result of such
transactions. Minority interest expense increased to $16.7 million in 1998 from
$14.8 million in 1997. Minority interest expense includes $1.9 million in 1998
and $2.4 million in 1997 related to gains recorded by the Company's
majority-owned subsidiaries as a result of the sale of stock by their
subsidiaries.
Other Matters
The Company is currently assessing the potential impact of the year 2000 on
the processing of date-sensitive information by the Company's computerized
information systems and on products sold as well as products purchased by the
Company. The Company believes that its internal information systems and current
products are either year 2000 compliant or will be so prior to the year 2000
without incurring material costs. There can be no assurance, however, that the
Company will not experience unexpected costs and delays in achieving year 2000
compliance for its internal information systems and current products, which
could result in a material adverse effect on the Company's future results of
operations.
The Company is presently assessing the effect that the year 2000 issue may
have on its previously sold products. The Company is also assessing whether its
key suppliers are adequately addressing this issue and the effect this might
have on the Company. The Company has not completed its analysis and is unable to
conclude at this time that the year 2000 issue as it relates to its previously
sold products and products purchased from key suppliers is not reasonably likely
to have a material adverse effect on the Company's future results of operations.
17
<PAGE>
First Six Months 1998 Compared With First Six Months 1997
Sales in the first six months of 1998 were $1,892.1 million, an increase of
$253.5 million, or 15%, over the first six months of 1997. Segment income,
excluding restructuring and other nonrecurring costs, net, of $4.1 million in
1998 and $5.0 million in 1997, described below, increased 19% to $217.9 million
in 1998 from $183.2 million in 1997. Operating income, which includes
restructuring and other nonrecurring costs, increased 22% to $197.9 million in
1998 from $162.4 million in 1997.
Instruments
Sales from the Instruments segment increased $69.0 million, or 9%, to $803.3
million in 1998. Sales increased primarily due to acquisitions made by Thermo
Instrument, which added $96.6 million of sales in 1998. Sales increased at ONIX
Systems due to higher sales of industry-specific instruments to the production
segment of the oil and gas industry and at Metrika Systems Corporation as a
result of higher demand at its finished-materials business and, to a lesser
extent, at its raw-materials 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 $15.7 million in 1998. At ThermoQuest, revenues from Asia decreased by $12.0
million due to economic uncertainty in that region. Revenues decreased at Thermo
Optek due to lower sales to the semiconductor industry and lower sales in Asia.
Segment income margin, excluding restructuring and other nonrecurring costs
of $1.4 million in 1998 and $0.8 million in 1997, improved to 15.1% in 1998 from
14.4% in 1997. The improvement was primarily due to the effect in the 1997
period of an adjustment to expense of $3.2 million relating to the sale of
inventories revalued at the time of the acquisition of Life Sciences
International PLC. Restructuring and other nonrecurring costs of $1.4 million in
1998 and $0.8 million in 1997 are discussed in the results of operations for the
second quarter.
Biomedical Products
Sales from the Biomedical Products segment were $331.6 million in 1998, an
increase of $50.0 million, or 18%, over the 1997 period. Sales increased due to
the inclusion of $31.5 million of sales from acquired businesses as well as
increased demand at Trex Medical, Bird Medical, and, to a lesser extent, Thermo
Cardiosystems Inc. These increases were offset in part by a decrease in revenues
of $7.5 million at ThermoLase, primarily due to lower demand at its hair-removal
business and the inclusion in 1997 of $2.4 million of fees from international
licensing arrangements.
Segment income, excluding restructuring costs of $2.7 million in 1998,
increased to $33.4 million in 1998 from $20.1 million in 1997. This increase
resulted substantially from improvements at existing businesses, primarily at
Bird Medical and Trex Medical as a result of higher revenues and, to a lesser
extent, the inclusion of segment income from acquired businesses. These
increases were offset in part by an increase in segment
18
<PAGE>
First Six Months 1998 Compared With First Six Months 1997 (continued)
loss at ThermoLase to $13.9 million in 1998 from $10.7 million in 1997,
primarily due to the decrease in revenues described above, as well as increased
fixed costs associated with operating more spas. Restructuring costs of $2.7
million in the first six months of 1998 are discussed in the results of
operations for the second quarter.
Advanced Technology
Sales from the Advanced Technology segment increased to $209.2 million in
1998 from $196.4 million in 1997. Revenues from Thermo Sentron increased to
$40.6 million in 1998 from $36.5 million in 1997, primarily due to the inclusion
of $3.5 million of sales from acquired businesses and, to a lesser extent,
increased demand, offset in part by the unfavorable effects of currency
translation. Sales at Thermo Voltek increased to $22.2 million in 1998 from
$21.6 million in 1997, due to the inclusion of $1.0 million of sales from an
acquired business, offset in part by a decrease in sales of
electromagnetic-compatibility test instruments. Sales from ThermoTrex's business
units increased $9.0 million in 1998, primarily as a result of the inclusion of
$7.0 million in sales from acquired businesses at its Trex Communications
subsidiary. Sales at Thermo Coleman were $78.4 million in 1998, compared with
$75.6 million in 1997. This increase was due to higher revenues from government
contracts, offset in part by lower sales of kiosk units by its Thermo
Information Solutions subsidiary, which has substantially exited this business.
Sales at Thermedics Detection decreased 7% to $47.7 million in 1998, primarily
due to lower sales of its Alexus systems in connection with the fulfillment in
1997 of a mandated product-line upgrade from The Coca-Cola Company to its
existing installed base. This decrease was offset in part by higher sales of
Thermedics Detection's InScan(R) product.
Segment income decreased to $14.0 million in 1998 from $15.9 million in
1997. This decrease resulted primarily from lower segment income at Thermedics
Detection and Thermo Coleman, due to lower sales and lower- margin contracts,
respectively, offset in part by an increase in profitability at Thermo Voltek,
principally due to organizational changes made in 1997.
Alternative Energy
Sales from the Alternative Energy segment increased to $250.1 million in
1998 from $167.8 million in 1997. Within this segment, revenues from Thermo
Ecotek increased to $98.0 million in 1998 from $82.2 million in 1997. Thermo
Ecotek's increase in revenues was a result of the inclusion of $4.4 million of
revenues from newly acquired power operations in the Czech Republic and, to a
lesser extent, higher contractual energy rates at several facilities. Revenues
from Thermo Ecotek's Thermo Trilogy biopesticide subsidiary increased by $6.5
million to $15.9 million in 1998, primarily due to the inclusion of revenues
from an acquired business. Sales at Thermo Power increased to $133.5 million in
1998 from $62.7 million in 1997, due to the inclusion of $73.3 million of sales
from Peek, acquired in November 1997. Sales at Peter Brotherhood declined to
$18.7 million in 1998 from $22.9 million in 1997, due to the disposal of several
business units in 1997.
19
<PAGE>
First Six Months 1998 Compared With First Six Months 1997 (continued)
Segment income, excluding restructuring and other nonrecurring income, net,
of $3.7 million in 1997, was $23.8 million in 1998, compared with $17.2 million
in 1997. Thermo Ecotek's segment income was $16.9 million in 1998, compared with
$13.6 million in 1997. The increase resulted primarily from higher contractual
energy rates, the inclusion of results of the newly acquired Czech Republic
power operations, and improved profitability at Thermo Trilogy. Segment income
at Thermo Power improved to $6.7 million in 1998 from $2.0 million in 1997,
primarily due to contributions from Peek. Restructuring and other nonrecurring
income, net, in the 1997 period is discussed in the results of operations for
the second quarter.
Industrial Outsourcing
Sales in the Industrial Outsourcing segment were $169.1 million in 1998, an
increase of $27.4 million, or 19%, over 1997. Revenues from Thermo TerraTech's
environmental-liability management services increased to $76.3 million in 1998
from $61.2 million in 1997, primarily due to the inclusion of $9.2 million of
sales from acquired businesses and, to a lesser extent, higher demand at certain
business units. In addition, revenues from Thermo Remediation's soil-remediation
services increased 12% to $10.1 million due to an increase in the volume of soil
processed. These increases were offset in part by an $8.9 million decrease in
revenues at one of Thermo Remediation's business units resulting from a decline
in the number of contracts in process. Revenues from Thermo TerraTech's
engineering and design services increased $6.9 million in 1998, due to the
inclusion of $7.4 million of revenues from an acquired business, offset in part
by lower revenues from existing businesses. Sales of metallurgical services
increased $5.0 million in 1998, principally due to increased demand for existing
services.
Segment income, excluding restructuring and other nonrecurring costs of $7.8
million in 1997, was $8.8 million in 1998, compared with $10.2 million in 1997.
Segment income declined in 1998 due to a loss incurred at one of Thermo
Remediation's business units due to losses on certain remedial-construction
contracts and a decline in the number of contracts in process. This decrease in
segment income was offset in part by higher income from other business units
within the segment, principally due to higher revenues. Restructuring and other
nonrecurring costs of $7.8 million in 1997 were recorded to write down certain
capital equipment and intangible assets, including cost in excess of net assets
of acquired companies, in response to a severe downturn in Thermo Remediation's
soil-remediation business. This resulted in the closure of two soil-remediation
sites during 1997 and reduced cash flows at certain other sites, such that
analysis indicated that the investment in these assets would not be recovered.
20
<PAGE>
First Six Months 1998 Compared With First Six Months 1997 (continued)
Paper Recycling
Sales in the Paper Recycling segment increased to $131.6 million in 1998
from $121.3 million in 1997. Sales from Thermo Fibertek increased 27% to $125.9
million in 1998 from $99.2 million in 1997, primarily due to an increase in
revenues of $26.1 million from Thermo Black Clawson, acquired in May 1997. The
unfavorable effects of currency translation reduced Thermo Fibertek's revenues
by $2.5 million in 1998. Sales from Thermo TerraTech's thermal-processing
equipment business, which was sold in October 1997, were $15.3 million in 1997.
Segment income margin was 12.9% in 1998, compared with 11.5% in 1997. This
increase primarily resulted from improvements at Thermo Fibertek and the
inclusion in 1997 of lower segment income margins from Thermo TerraTech's
thermal-processing equipment business.
Gain on Issuance of Stock by Subsidiaries
As a result of the sale of stock by subsidiaries and the issuance of stock
by subsidiaries upon conversion of convertible debentures, the Company recorded
gains of $54.2 million in 1998 (Note 2) and $48.9 million in 1997. Minority
interest expense increased to $40.8 million in 1998 from $31.9 million in 1997.
Minority interest expense includes $14.3 million in 1998 and $11.9 million in
1997 related to gains recorded by the Company's majority-owned subsidiaries as a
result of the sale of stock by their subsidiaries.
Liquidity and Capital Resources
Consolidated working capital was $2,515.6 million at July 4, 1998, compared
with $2,002.0 million at January 3, 1998. Included in working capital were cash,
cash equivalents, and short-term available-for-sale investments of $1,921.3
million at July 4, 1998, compared with $1,522.7 million at January 3, 1998. In
addition, the Company had $95.2 million of long-term available-for-sale
investments at July 4, 1998, compared with $63.3 million at January 3, 1998. Of
the total $2,016.5 million of cash, cash equivalents, and short- and long-term
available-for-sale investments at July 4, 1998, $1,492.6 million was held by the
Company's majority-owned subsidiaries and the balance was held by the Company
and its wholly owned subsidiaries.
Cash provided by operating activities was $132.2 million during the first
six months of 1998. Cash of $29.5 million was used to fund increases in
inventories, principally at Thermo Instrument, in part to increase finished
goods inventory at Thermo BioAnalysis Corporation's liquid-handling business and
in part to replenish year-end inventory levels at ThermoQuest's European sales
offices and to build up ThermoQuest's inventories in preparation for a new
product release. In addition, the Company used $21.5 million of cash to fund a
decrease in accounts payable, resulting principally from the timing of payments,
and $29.8 million of cash to fund a decrease in other current liabilities,
21
<PAGE>
Liquidity and Capital Resources (continued)
primarily at Thermo Instrument. The decrease in other current liabilities at
Thermo Instrument resulted principally from a reduction of accrued payroll and
related benefits at ThermoQuest and payments made for accrued acquisition
expenses. A decrease in accounts receivable provided $20.8 million of cash,
primarily at Thermo Instrument, resulting principally from lower revenues at
ThermoQuest and Thermo Optek, management efforts at Thermo Optek to reduce its
investment in accounts receivable, and the timing of cash collections at Metrika
Systems. The decrease in accounts receivable was offset in part by an increase
at Trex Medical, primarily due to increased sales and, to a lesser extent,
slower customer payment patterns as a result of increased export and direct
sales at a majority of its operations, extended payment terms for a significant
customer, and a shift from OEM sales to direct and dealer sales at one of its
subsidiaries.
During the first six months of 1998, the Company's primary investing
activity, excluding available-for-sale investments activity, included
acquisitions and the purchase of property, plant, and equipment. During the
first six months of 1998, the Company expended $121.7 million, net of cash
acquired, for acquisitions and expended $74.2 million for purchases of property,
plant, and equipment.
The Company's financing activities provided $483.7 million of cash in the
first six months of 1998. Net proceeds from the issuance of long-term
obligations totaled $244.0 million. Net proceeds from the issuance of Company
and subsidiary stock, which includes $290.2 million of proceeds from the April
1998 sale of Company common stock (Note 7), totaled $474.1 million. In addition,
the Company used $44.6 million of cash for the repayment of long-term
obligations and $26.0 million of cash to fund a decrease in short-term notes
payable.
During the first six months of 1998, an aggregate principal amount of $17.0
million subsidiary convertible obligations were converted into shares of
subsidiary common stock.
During the first six months of 1998, the Company and its majority-owned
subsidiaries expended $165.9 million to purchase common stock and debentures of
certain of the Company's majority-owned subsidiaries. These purchases were made
pursuant to authorizations by the Company's and certain majority-owned
subsidiaries' Boards of Directors. As of July 4, 1998, $34.8 million and $7.6
million remained under the Company's and its majority-owned subsidiaries'
authorizations, respectively. In July 1998, the Board of Directors of the
Company authorized the repurchase of $100.0 million of its securities and those
of its majority-owned subsidiaries. In addition, in July and August 1998, the
Boards of Directors of certain majority-owned subsidiaries authorized the
repurchase of $35.0 million and 4 million shares of such subsidiaries' common
stock, or the equivalent in outstanding convertible debentures, in open market
or negotiated transactions. In addition to these authorizations, Thermedics Inc.
has presented a proposal to its Thermo Voltek subsidiary to acquire, through a
merger, all of the outstanding shares of Thermo Voltek's common
22
<PAGE>
Liquidity and Capital Resources (continued)
stock that Thermedics does not own, including the redemption of Thermo Voltek's
$5.3 million principal amount of 3 3/4% subordinated convertible debentures due
2000, for a total transaction cost estimated to be approximately $27 million.
The Company has no material commitments for purchases of property, plant,
and equipment and expects that for the remainder of 1998, such expenditures will
approximate the current level of expenditures. Since July 4, 1998, the Company
and its majority-owned subsidiaries have expended $52 million on acquisitions of
businesses and as of August 12, 1998, the Company's majority-owned subsidiaries
had agreements or nonbinding letters of intent to acquire new businesses
totaling approximately $51 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.
Market Risk
The Company's exposure to market risk from changes in foreign currency
exchange rates, interest rates, and equity prices has not changed materially
from its exposure at year-end 1997.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On June 2, 1998, at the Annual Meeting of Shareholders, the
shareholders reelected a class of four incumbent directors to a three-year
term expiring in 2001. The directors reelected at the meeting were: Dr.
Elias P. Gyftopoulos, Mr. Frank Jungers, Dr. Frank E. Morris, and Mr.
Donald E. Noble. Dr. Gyftopoulos received 135,019,458 shares voted in
favor of his election and 853,822 shares voted against; Mr. Jungers
received 120,949,861 shares voted in favor of his election and 14,923,419
shares voted against; Dr. Morris received 134,577,140 shares voted in
favor of his election and 1,296,140 shares voted against; and Mr. Noble
received 134,963,550 shares voted in favor of his election and 909,730
shares voted against. No abstentions or broker nonvotes were recorded on
the election of directors.
At the Annual Meeting, the shareholders also approved a proposal to amend
the Company's employee stock purchase plan and reserve an additional 750,000
shares of common stock as follows: 133,028,752 shares voted in favor of the
proposal, 2,495,714 shares voted against, and 348,814 shares abstained. No
broker nonvotes were recorded on the proposal.
A shareholder proposal to endorse the CERES Principles was defeated by the
shareholders at the Annual Meeting as follows: 9,053,276 shares voted in favor
of the proposal, 99,411,722 shares voted against, 3,761,379 shares abstained,
and 23,646,903 broker nonvotes were recorded on the proposal.
23
<PAGE>
Item 5 - Other Information
Pursuant to recent amendments to the rules relating to proxy statements
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
shareholders of the Company are hereby notified that any shareholder proposal
not included in the Company's proxy materials for its 1999 Annual Meeting of
Shareholders (the Annual Meeting) in accordance with Rule 14a-8 under the
Exchange Act will be considered untimely for the purposes of Rules 14a-4 and
14a-5 under the Exchange Act if notice thereof is received by the Company after
March 15, 1999. Management proxies will be authorized to exercise discretionary
voting authority with respect to any shareholder proposal not included in the
Company's proxy materials for the Annual Meeting unless (a) the Company receives
notice of such proposal by March 15, 1999, and (b) the conditions set forth in
Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met.
On August 12, 1998, the Company issued a press release concerning a
proposed corporate reorganization including several of its subsidiaries.
See Exhibit 99.
Item 6 - Exhibits
See Exhibit Index on page immediately preceding exhibits.
24
<PAGE>
THERMO ELECTRON CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 12th day of August 1998.
THERMO ELECTRON CORPORATION
Paul F. Kelleher
------------------------------
Paul F. Kelleher
Senior Vice President, Finance
and Administration
John N. Hatsopoulos
------------------------------
John N. Hatsopoulos
President and Chief Financial
Officer
25
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- -------------------------------------------------------------------------------
3 Amended and Restated Bylaws of the Registrant.
10.1 Amended and Restated Equity Incentive Plan.
10.2 Description of Arrangements Regarding Stock Owndership By
Officers of the Registrant.
27.1 Financial Data Schedule for the Six Months Ended July 4, 1998.
27.2 Restated Financial Data Schedule for the Quarter ended April 4,
1998.
99 Press Release dated August 12, 1998.
26
Exhibit 3
As amended and effective as of June 3, 1998
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>
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>
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.
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.
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 thirteen 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 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 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 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 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 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 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 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.
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 10.1
As amended effective 6/3/97
[21]
THERMO ELECTRON CORPORATION
EQUITY INCENTIVE PLAN
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
Thermo Electron Corporation (the "Company") and its Stockholders the benefits
arising from capital stock ownership by employees and Directors of, and
consultants to, the Company and its subsidiaries or other persons who are
expected to make significant contributions to the future growth and success of
the Company and its subsidiaries. The Plan is intended to accomplish these goals
by enabling the Company to offer such persons equity-based interests,
equity-based incentives or performance-based stock incentives in the Company, or
any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company (the
"Board"). The Board shall have full power to interpret and administer the Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan and
Awards, and full authority to select the persons to whom Awards will be granted
("Participants"), determine the type and amount of Awards to be granted to
Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of three or more members of the Board,
each of whom shall be deemed a "disinterested person" within the meaning of Rule
16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the
"Exchange Act"). As to Awards granted to Participants who are not reporting
persons subject to Section 16 of the Exchange Act, the Board may delegate any or
all of its responsibilities to the Company's Operating Committee or to other
appropriate officers of the Company.
<PAGE>
3. Effective Date
The Plan shall be effective as of April 6, 1989, subject to the approval of
the Plan by a majority of the votes cast by the holders of the Company's Common
Stock at the next annual meeting of Stockholders. Grants of Awards under the
Plan made prior to such approval shall be effective when made (unless otherwise
specified by the Board at the time of grant), but shall be conditioned on and
subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of
shares of Common Stock reserved and available for distribution under the Plan
shall be 13,544,311 shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the Participant
for delivery of such shares terminates without having been exercised in full, is
forfeited or is otherwise terminated without a payment being made to the
Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its
subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last two sentences of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided, however, that the maximum number of
shares permitted to be granted under any Award or combination of Awards to any
Participant during any one calendar year may not exceed 1% of the shares of
Common Stock outstanding at the beginning of such calendar year.
<PAGE>
6. Types of Awards (continued)
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that are not intended to meet the requirements
of Section 422A ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased upon
exercise of an option shall be determined by the Board, provided however, the
exercise price shall not be less than 50% of the fair market value of such stock
on the date of grant or, alternatively, the par value per share of Common Stock,
provided further, in the case of reporting persons subject to Section 16 of the
Exchange Act, the exercise price may not be less than 50% of the fair market
value of the stock on the date of grant unless a lower price is permissible
under Rule 16b-3.
6.1.2 Option Grants. The granting of an option shall take place at the time
specified by the Board. Options shall be evidenced by option agreements. Such
agreements shall conform to the requirements of the Plan, and may contain such
other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or times
(which may be immediately or in such installments as the Board shall determine)
and on such terms and conditions as the Board shall specify. The option
agreements shall specify the terms and conditions applicable in the event of an
option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
<PAGE>
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option
shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a
payment in cash, shares of Common Stock, deferred stock or restricted stock, or
an option previously granted, based on such terms and conditions as the Board
shall establish and communicate to the option holder at the time that such offer
is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan
and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422A of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent Stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined by the Board. An incentive stock
option may not be granted after the tenth anniversary of the date on which the
Plan was adopted by the Board and the latest date on which an incentive stock
option may be exercised shall be the tenth anniversary (fifth anniversary, in
the case of any incentive stock option granted to a more than ten percent
Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced
by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
<PAGE>
6.2.2 Restrictions. Until the restrictions specified in a restricted stock
agreement shall lapse, restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of, and upon certain conditions
specified in the restricted stock agreement, must be resold to the Company for
the price, if any, specified in such agreement. The restrictions shall lapse at
such time or times, and on such conditions, as the Board may specify. The Board
may at any time accelerate the time at which the restrictions on all or any part
of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock shall
be determined by the Board, in its sole discretion, but such price may not be
less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that
any or all the Common Stock delivered pursuant to an Award will be restricted
stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any
Participant shares of Common Stock free of restrictions under the Plan for a
price determined by the Board, but which may not be less than the par value per
share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to
receive shares of deferred stock which is Common Stock to be delivered in the
future. Delivery of the Common Stock will take place at such time or times, and
on such conditions, as the Board may specify. The Board may at any time
accelerate the time at which delivery of all or any part of the Common Stock
will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time
any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise by delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
<PAGE>
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to
receive, without payment, an amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the
time any Award described in this Section 6 is granted, impose the condition (in
addition to any conditions specified or authorized in this Section 6 of the
Plan) that performance goals be met prior to the Participant's realization of
any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common Stock
to be acquired pursuant to an Award shall be the price determined by the Board,
provided that such price shall not be less than the par value of the Common
Stock. Notwithstanding anything in the Plan to the contrary, so long as is
required for the Plan to constitute a "plan" under Rule 16b-3 of the Exchange
Act, no Common Stock may be issued to a reporting person subject to Section 16
of the Exchange Act unless (a) issued at a purchase price not in excess of the
par value of the Common Stock or (b) sold by the Company for a price not less
than 50% of the fair market value of the Common Stock on the date of grant of
the related Award. Except as otherwise provided in the Plan, the Board may
determine the method of payment of the exercise price or purchase price of an
Award granted under the Plan and the form of payment. The Board may determine
that all or any part of the purchase price of Common Stock pursuant to an Award
has been satisfied by past services rendered by the Participant. The Board may
agree at any time, upon request of the Participant, to defer the date on which
any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the grant
to the Participant of any Award, in connection with the purchase of Common Stock
under the Award or with the payment of any obligation incurred or recognized as
a result of the Award. The Board will have full authority to decide whether the
loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the loan is to be repaid and the conditions, if
any, under which it may be forgiven.
<PAGE>
8. Loans and Supplemental Grants (continued)
In connection with any Award, the Board may at the time such Award is made
or at a later date, provide for and make a cash payment to the Participant not
to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the Participant's
income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the Plan that
were not previously exercisable and vested shall become fully exercisable
and vested.
(b) Awards of restricted stock and other stock-based Awards subject to
restrictions and to the extent not fully vested, shall become fully vested
and all such restrictions shall lapse so that shares issued pursuant to such
Awards shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the passage of
time, continued employment or affiliation, will be waived and removed as to
deferred stock Awards and performance Awards. Performance of other
conditions (other than conditions relating solely to the passage of time,
continued employment or affiliation) will continue to apply unless otherwise
provided in the agreement evidencing the Awards or in any other agreement
between the Participant and the Company or unless otherwise agreed by the
Board.
9.2 Definition of "Change in Control"
"Change in Control" means any one of the following events: (i) when, without
the prior approval of the Prior Directors of the Company, any Person is or
becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act
and the Rules and Regulations thereunder), together with all Affiliates and
Associates (as such terms are used in Rule 12b-2 of the General Rules and
Regulations of the Exchange Act) of such Person, directly or indirectly, of 25%
or more of the outstanding Common Stock of the Company, (ii) the failure of the
Prior Directors to constitute a majority of the Board of Directors at any time
within two years following any Electoral Event, or (iii) any other event that
the Prior Directors shall determine constitutes an effective change in the
control of the
<PAGE>
9.2 Definition of "Change in Control" (continued)
Company. As used in the preceding sentence, the following capitalized
terms shall have the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any "affiliate" of
any such natural person or entity as such term is defined in Rule 405 under
the Securities Act of 1933 and any "group" (within the meaning of such term
in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's Board of
Directors immediately prior to any Electoral Event (or, if there has been no
Electoral Event, those persons sitting on the Company's Board of Directors
on the date of this Agreement) and any future director of the Company who
has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(c) "Electoral Event" shall mean any contested election of Directors, or any
tender or exchange offer for the Company's Common Stock, not approved by the
Prior Directors, by any Person other than the Company or a subsidiary of the
Company.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing the
Award, the receipt of an Award will not give a Participant rights as a
Stockholder with respect to any shares covered by an Award until the date of
issue of a stock certificate to the Participant for such shares.
<PAGE>
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an Award an
amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered, the
Board will have the right to require that the Participant or other appropriate
person remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Board with regard
to such requirements, prior to the delivery of any Common Stock. If and to the
extent that such withholding is required, the Board may permit the Participant
or such other person to elect at such time and in such manner as the Board
provides to have the Company hold back from the shares to be delivered, or to
deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
10.5 Nontransferability of Awards
Except as may be authorized by the Board, in its sole discretion, no Award
(other than an Award in the form of an outright transfer of cash or Common Stock
not subject to any restrictions) may be transferred other than by the laws of
descent and distribution, and during a Participant's lifetime an Award requiring
exercise may be exercised only by him or her (or in the event of incapacity, the
person or persons properly appointed to act on his or her behalf). The Board
may, in its discretion, determine the extent to which Awards granted to a
Participant may be transferable, and such provisions permitting or acknowledging
transfer shall be set forth in the written agreement evidencing the Award
executed and delivered by or on behalf of the Company and the Participant.
<PAGE>
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to common Stockholders other than normal cash
dividends, the Board will make (i) appropriate adjustments to the maximum number
of shares that may be delivered under the Plan under Section 4 above, and (ii)
appropriate adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provisions of Awards affected by such change.
(b) The Board may also make appropriate adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions, repurchases or similar corporate
transactions, or any other event, if it is determined by the Board that
adjustments are appropriate to avoid distortion in the operation of the Plan,
but no such adjustments other than those required by law may adversely affect
the rights of any Participant (without the Participant's consent) under any
Award previously granted.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued employment with the Company or any subsidiary
or interfere in any way the right of the Company or subsidiary to terminate any
employment relationship at any time or to increase or decrease the compensation
of such person. Except as specifically provided by the Board in any particular
case, the loss of existing or potential profit in Awards granted under the Plan
will not constitute an element of damages in the event of termination of an
employment relationship even if the termination is in violation of an obligation
of the Company to the employee.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Board at the time. For purposes of this Plan, transfer of employment between the
Company and its subsidiaries shall not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and the
amount of any compensation deemed to be received by an employee as a result of
any exercise or purchase of Common Stock pursuant to an Award or sale of shares
received under the Plan, will not constitute "earnings" or "compensation" with
respect to which any other employee benefits of such employee are determined,
including without limitation benefits under any pension, stock ownership, stock
purchase, life insurance, medical, health, disability or salary continuation
plan.
<PAGE>
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls on a
Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are foreign
nationals or employed outside the United States or both, on such terms and
conditions different from those specified in the Plan, as may, in the judgment
of the Board, be necessary or desirable to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment, unless approved by the Stockholders,
shall be effective if it would cause the Plan to fail to satisfy the
requirements of the federal tax law or regulation relating to incentive stock
options or the requirements of Rule 16b-3 (or any successor rule) of the
Exchange Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any Participant under any Award
previously granted without such Participant's consent.
Exhibit 10.2
Description of Arrangements Regarding Stock Ownership
By Officers
The Human Resources Committee of the Board of Directors of Thermo Electron
Corporation ("Thermo Electron") approved an arrangement whereby each officer of
Thermo Electron is awarded a special annual bonus provided that neither the
officer has not sold Thermo Electron shares beneficially owned by the officer
for a period of three years. The bonus is equal to 10% percent of the officer's
salary in the year of the award, and is payable upon the completion of the
three-year holding requirement and annually thereafter, provided the officer
continues to comply with the holding requirement. The arrangement may be altered
or discontinued at any time by the Human Resources Committee of the Board of
Directors of Thermo Electron.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ELECTRON CORPORATION'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 4, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> JUL-04-1998
<CASH> 610,950
<SECURITIES> 1,310,377
<RECEIVABLES> 852,235
<ALLOWANCES> 54,944
<INVENTORY> 599,120
<CURRENT-ASSETS> 3,555,566
<PP&E> 1,237,841
<DEPRECIATION> 421,620
<TOTAL-ASSETS> 6,436,209
<CURRENT-LIABILITIES> 1,039,949
<BONDS> 1,949,982
0
0
<COMMON> 166,968
<OTHER-SE> 2,192,965
<TOTAL-LIABILITY-AND-EQUITY> 6,436,209
<SALES> 1,800,965
<TOTAL-REVENUES> 1,892,062
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<TOTAL-COSTS> 1,133,406<F2>
<OTHER-EXPENSES> 110,934
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<F2>THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS:
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ELECTRON CORPORATION'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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<RECEIVABLES> 831,113
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0
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<FN>
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</TABLE>
Investor Contact: 781-622-1111
Media Contact: 781-622-1252
THERMO ELECTRON PROPOSES CORPORATE REORGANIZATION
WALTHAM, Mass., August 12, 1998 -- Thermo Electron Corporation (NYSE-TMO) today
announced that its board of directors has authorized a proposed corporate
reorganization. The goals of the plan are to:
*Reduce the complexity of the company's corporate structure,
*Consolidate and strategically realign certain businesses to enhance
their competitive market positions and improve management coordination,
and
*Increase the liquidity in the public markets for stock of the company's
publicly traded subsidiaries by providing larger market floats.
The proposed reorganization is expected to reduce the number of Thermo
Electron's majority-owned public subsidiaries from 23 to 15. The company expects
to promptly begin implementation of the reorganization, although it may take up
to two years to complete all aspects of the plan.
George N. Hatsopoulos, chairman of Thermo Electron, said, "We firmly
believe that spinouts continue to offer many advantages. The strategy is dynamic
- - allowing us to respond to changes in the marketplace and revamp those parts of
the structure that no longer meet our goals for a public subsidiary. In some
cases, the potential rewards for some of our companies have become out of line
with the risks. We will continue to closely monitor the performance of our
spinouts to assess their viability in the public markets. I wish to stress that
the benefits we anticipate from this reorganization are long term. We do not
anticipate any material benefits in the short term."
John N. Hatsopoulos, president and chief financial officer of Thermo
Electron, added, "Our number one goal for this plan is to simplify our company.
We also expect that larger, more closely aligned businesses will strengthen our
competitive positions. Larger size should create better liquidity for investors
by increasing the public float, and, we believe, keep in proper perspective some
of the problems experienced by our smaller subsidiaries."
The proposed corporate reorganization is best outlined in four general
categories:
1.Reorganization of biomedical businesses. The wholly owned biomedical
group of Thermo Electron, called Thermo Biomedical, would be transferred
to Thermo Electron's Thermedics subsidiary to better position the company
to expand its presence in that marketplace, while creating a focused
company for healthcare investors. Thermo Biomedical, which includes Bear
Medical Systems Inc.; Bird Products Corporation; Bird Life Design
Corporation; Stackhouse Inc.; SensorMedics Corporation; Medical Data
Electronics, Inc.; and Nicolet Biomedical Inc., had unaudited 1997
revenues of
-more-
<PAGE>
$232 million. These companies would be transferred from Thermo Electron
to Thermedics in exchange for Thermedics shares.
2.Realignment of instrument companies. First, Thermedics' non-biomedical
public subsidiaries - Thermo Sentron, Thermedics Detection, and Thermo
Voltek (if not sold to an unaffiliated third party) - would be transferred
to Thermo Electron's Thermo Instrument Systems subsidiary, creating
efficiencies by aligning these industrial instrumentation businesses with
the instrument family of companies for a better strategic fit. Thermedics'
majority ownership in each of these subsidiaries would be transferred to
Thermo Electron for shares of Thermedics common stock held by Thermo
Electron. Thermo Electron, in turn, would transfer these equity interests
to Thermo Instrument Systems in exchange for cash. If Thermo Voltek is not
sold to an unaffiliated third party, it would become a wholly owned
subsidiary of Thermo Instrument Systems.
Second, two public Thermo Instrument Systems subsidiaries - Metrika
Systems and ONIX Systems - and Thermo Sentron, would be merged to form one
combined majority-owned public subsidiary of Thermo Instrument Systems.
The company believes that the combined entity, with complementary
products, technologies, and distribution networks, would be better able to
address the market for industrial sensors and advanced process control
systems. Shareholders of each of the three companies would receive shares
of common stock in the combined entity in exchange for their shares in the
subsidiaries.
Third, ThermoSpectra, a public subsidiary of Thermo Instrument
Systems, along with Thermedics Detection, would be taken private and
become wholly owned subsidiaries of Thermo Instrument Systems.
ThermoSpectra and Thermedics Detection shareholders would receive cash or
Thermo Instrument Systems common stock in exchange for their shares of
common stock of ThermoSpectra or Thermedics Detection.
3.Consolidation of industrial outsourcing companies. The public and private
subsidiaries of Thermo Electron's Thermo TerraTech subsidiary - Thermo
Remediation, The Randers Group, and Thermo EuroTech - would be
consolidated into Thermo TerraTech to strengthen the group's ability to
compete in the industrial and environmental outsourcing markets, as well
as enhance their ability to withstand adverse market conditions.
Shareholders of each of these subsidiaries would receive common stock in
Thermo TerraTech in exchange for their shares in the subsidiaries.
4.Other strategic reorganizations. Thermo Coleman, a private subsidiary of
Thermo Electron, would be merged into Thermo Electron's ThermoTrex
subsidiary, consolidating the company's R&D and government-contract work
within one entity to offer greater efficiencies and enhance opportunities
to develop and commercialize technologies. Thermo Coleman shareholders
would receive shares of ThermoTrex common stock in exchange for their
Thermo Coleman shares.
Also, Thermo Power, a public subsidiary of Thermo Electron, would be
taken private and become a wholly owned subsidiary of Thermo Electron.
Shareholders of Thermo Power would receive cash or Thermo Electron common
stock in exchange for their shares of Thermo Power common stock.
-more-
All convertible debentures previously issued by subsidiaries that will no
longer be majority-owned entities following this reorganization will be assumed
by the surviving public parent company, and will be convertible into common
stock of that company. Thermo Electron's guarantee of each of these convertible
debentures will not be affected by the proposed reorganization.
While these transactions will generate numerous costs, including
investment banking fees, legal fees, and government filings, the company does
not believe that any significant restructuring charges will be necessary.
The company also plans to divest of certain non-strategic businesses,
totaling approximately $100 million in revenues, that no longer fit its profile
for long-term growth potential.
<PAGE>
Proposed Corporate Reorganization
Boldface type indicates public entity(*)
*Thermo Electron *Thermo Instrument
Thermo Power Thermedics Detection
Tecomet ThermoSpectra
Peter Brotherhood Thermo Voltek
Napco *ThermoQuest
*Thermo BioAnalysis
*Thermo Ecotek *Thermo Optek
*Thermo Vision
*Thermo Fibertek *New Co. (Thermo Sentron, Metrika
*Thermo Fibergen Systems, ONIX Systems)
*Thermo TerraTech *ThermoTrex
Thermo Remediation Thermo Coleman
Randers Group *Trex Medical
Thermo EuroTech *ThermoLase
*Thermedics
Thermo Biomedical
*Thermo Cardiosystems
All of these transactions will be subject to numerous conditions,
including establishment of prices and exchange ratios, confirmation of
anticipated tax consequences, approval by the board of directors (including the
independent directors) of each of the affected majority-owned subsidiaries,
negotiation and execution of definitive purchase and sale or merger agreements,
clearance by the Securities and Exchange Commission of registration statements
and/or proxy materials regarding the proposed transactions, and, where
appropriate, fairness opinions from investment banking firms. Any such
transactions that will involve a public offering of securities will be made only
by means of a prospectus.
-more-
Thermo Electron Corporation is a world leader in analytical and monitoring
instruments; biomedical products including heart-assist devices,
respiratory-care equipment, and mammo-graphy systems; and paper recycling and
papermaking equipment. The company also develops alternative-energy systems and
clean fuels, provides a range of services including industrial outsourcing and
environmental-liability management, and conducts research and development in
advanced imaging, laser communications, and electronic information-management
technologies. With annual worldwide sales of $3.6 billion, Thermo Electron has
approximately 22,000 employees and operations in 23 countries. Headquarters are
in Waltham, Massachusetts. More information is available on the Internet at
http://www.thermo.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. Important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements are
set forth under the heading "Forward-looking Statements" in Exhibit 13 to the
company's annual report on Form 10-K, as amended, for the year ended January 3,
1998. These include risks and uncertainties relating to: the company's spinout
and acquisition strategies, competition, international operations, technological
change, possible changes in governmental regulations, regulatory approval
requirements, capital spending and government funding policies, dependence on
intellectual property rights, and the potential impact of the year 2000 on
processing date-sensitive information. In addition to the foregoing risks, the
proposed corporate reorganization is subject to the risk that the contemplated
benefits of the plan will not be achieved.
