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
April 2, 1994.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617)622-1000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Class Outstanding at April 29, 1994
----------------------------- -----------------------------
Common Stock, $1.00 par value 48,273,963
PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of April 2, 1994 and
January 1, 1994 (In thousands)
April 2, January 1,
1994 1994
---------- ----------
Current Assets:
Cash and cash equivalents $ 257,554 $ 325,744
Short-term available-for-sale investments,
at market value (amortized cost of
$341,493) (Note 4) 342,460 -
Short-term investments - 374,450
Accounts receivable, net 307,745 267,377
Unbilled contract costs and fees 35,188 32,574
Inventories:
Raw materials and supplies 133,941 110,437
Work in process and finished goods 100,460 82,385
Prepaid income taxes 53,977 39,258
Prepaid expenses 13,621 12,318
---------- ----------
1,244,946 1,244,543
---------- ----------
Assets Related to Projects Under Construction:
Restricted funds - 34,100
Facilities under construction - 128,040
---------- ----------
- 162,140
---------- ----------
Property, Plant and Equipment, at Cost 740,707 581,894
Less: Accumulated depreciation and
amortization 144,761 134,423
---------- ----------
595,946 447,471
---------- ----------
Long-term Available-for-sale Investments,
at Market Value (amortized cost of
$67,910) (Note 4) 68,387 -
---------- ----------
Long-term Marketable Securities - 43,630
---------- ----------
Other Assets 103,793 102,347
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies 555,699 473,579
---------- ----------
$2,568,771 $2,473,710
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(a) Consolidated Balance Sheet - Liabilities and Shareholders'
Investment as of April 2, 1994 and January 1, 1994 (In thousands
except share amounts)
April 2, January 1,
1994 1994
---------- ----------
Current Liabilities:
Notes payable $ 46,181 $ 45,851
Accounts payable 102,585 85,278
Accrued payroll and employee benefits 59,070 49,029
Accrued income taxes 15,382 7,713
Accrued installation and warranty costs 28,405 26,049
Other accrued expenses 218,639 202,326
----------- -----------
470,262 416,246
----------- -----------
Deferred Income Taxes and Other Items 108,568 106,539
Liabilities Related to Projects Under
Construction:
Payables and accrued expenses - 10,680
Tax-exempt obligations - 142,069
----------- -----------
- 152,749
----------- -----------
Long-term Obligations:
Senior convertible obligations (Note 5) 275,000 275,000
Subordinated convertible obligations 258,831 238,386
Tax-exempt obligations 133,569 -
Nonrecourse tax-exempt obligations 108,800 108,800
Other 24,751 25,275
----------- -----------
800,951 647,461
----------- -----------
Minority Interest 297,982 277,681
----------- -----------
Common Stock of Subsidiary Subject to
Redemption ($15,390 redemption value) 14,584 14,511
----------- -----------
Shareholders' Investment:
Common stock, $1 par value, 100,000,000
shares authorized; 48,073,252 and
47,950,580 shares issued 48,073 47,951
Capital in excess of par value 459,462 467,076
Retained earnings 384,679 362,138
----------- -----------
892,214 877,165
Treasury stock at cost, 39,113 and 31,898
shares (1,549) (1,212)
Cumulative translation adjustment (11,646) (13,591)
Deferred compensation (3,515) (3,839)
Net unrealized gain on available-for-sale
investments (Note 4) 920 -
----------- -----------
876,424 858,523
----------- -----------
$2,568,771 $2,473,710
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(b) Consolidated Statement of Income for the three months ended
April 2, 1994 and April 3, 1993 (In thousands except per share
amounts)
Three Months Ended
-------------------
April 2, April 3,
1994 1993
--------- ---------
Revenues:
Product sales and revenues $311,208 $256,207
Service revenues 32,386 29,574
Research and development contract revenues 6,882 6,982
--------- ---------
350,476 292,763
--------- ---------
Costs and Expenses:
Cost of products 185,020 160,688
Cost of services 23,044 21,998
Expenses for research and development and new
lines of business (a) 23,384 20,975
Selling, general and administrative expenses 82,090 66,618
Costs associated with divisional and product
restructuring - 5,845
--------- ---------
313,538 276,124
--------- ---------
Gain on Issuance of Stock by
Subsidiaries (Note 2) 8,494 11,101
Other Expense, Net (Note 3) (3,242) (3,268)
--------- ---------
Income Before Income Taxes and Minority Interest 42,190 24,472
Provision for Income Taxes 14,101 5,530
Minority Interest Expense 5,548 3,494
--------- ---------
Net Income $ 22,541 $ 15,448
========= =========
Earnings per Share:
Primary $ .47 $ .38
========= =========
Fully diluted $ .42 $ .34
========= =========
Weighted Average Shares:
Primary 47,959 40,580
========= =========
Fully diluted 59,320 52,330
========= =========
(a) Includes costs of:
Research and development contracts $ 5,542 $ 5,296
Internally funded research and development 16,839 14,769
Other expenses for new lines of business 1,003 910
--------- ---------
$ 23,384 $ 20,975
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(c) Condensed Consolidated Statement of Cash Flows for the three
months ended April 2, 1994 and April 3, 1993 (In thousands)
Three Months Ended
-------------------
April 2, April 3,
1994 1993
--------- ---------
Operating Activities:
Net cash provided by operating activities $ 19,010 $ 11,093
--------- ---------
Investing Activities:
Acquisitions, net of cash acquired (133,508) (86,519)
Purchases of property, plant and equipment (12,385) (13,241)
Proceeds from sale of property, plant and
equipment 1,269 792
Purchases of long-term investments - (15,744)
Proceeds from sale of long-term investments - 1,025
Purchases of available-for-sale investments (132,464) -
Proceeds from sale and maturities of
available-for-sale investments 148,539 -
Increase in short-term investments - (13,581)
Decrease in assets related to construction
projects 23,420 4,419
Other (9,009) 168
--------- ---------
Net cash used in investing activities (114,138) (122,681)
--------- ---------
Financing Activities:
Net proceeds from issuance of long-term
obligations 32,138 -
Repayment and repurchase of long-term
obligations (10,332) (696)
Proceeds from issuance of Company and
subsidiary common stock 24,181 52,420
Purchases of Company and subsidiary common
stock (19,068) (22,646)
Other (501) (324)
--------- ---------
Net cash provided by financing activities 26,418 28,754
--------- ---------
Exchange Rate Effect on Cash 520 (379)
--------- ---------
Decrease in Cash and Cash Equivalents (68,190) (83,213)
Cash and Cash Equivalents at Beginning of Period 325,744 190,601
--------- ---------
Cash and Cash Equivalents at End of Period $257,554 $107,388
========= =========
Cash Paid (Refunded) For:
Interest $ 15,885 $ 12,559
Income taxes $ 7,724 $ (1,739)
Noncash Financing Activities:
Conversions of convertible obligations $ 11,855 $ 10,960
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - April 2, 1994
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Electron Corporation (the Company) without audit
and, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the results of
operations for the three-month periods ended April 2, 1994 and
April 3, 1993, (b) the financial position at April 2, 1994, and (c)
the cash flows for the three-month periods ended April 2, 1994 and
April 3, 1993. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of January 1, 1994 has
been derived from the consolidated financial statements which have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted
by Form 10-Q and do not contain certain information included in the
annual financial statements and notes of the Company. The consolidated
financial statements and notes included herein should be read in
conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 1994, filed with the Securities and Exchange Commission.
2. Transactions in Stock of Subsidiaries
"Gain on issuance of stock by subsidiaries" in the accompanying
statement of income for the three-month period ended April 2, 1994,
resulted primarily from the following:
A public offering of 1,610,000 shares of ThermoTrex Corporation
common stock in March 1994 at $15.375 per share for net proceeds
of $23.0 million resulted in a gain of $7.3 million.
The conversion of $3.7 million of Thermedics Inc. 6 1/2%
subordinated convertible debentures, convertible at $10.42 per
share, into 357,597 shares of Thermedics Inc. common stock
resulted in a gain of $1.0 million.
6PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - April 2, 1994
(continued)
3. Other Expense
The components of "Other expense, net" in the accompanying
statement of income are:
Three Months Ended
------------------
April 2, April 3,
(In thousands) 1994 1993
--------------------------------------------------------------------
Royalty income $ 400 $ 565
Interest income 7,199 5,118
Interest expense (10,289) (7,856)
Equity in losses of unconsolidated subsidiaries (1,207) (1,091)
Gain (loss) on sale of investments 611 (47)
Other income, net 44 43
-------- --------
$(3,242) $(3,268)
======== ========
4. Available-for-sale Investments
Effective January 2, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with SFAS
No. 115, the Company's debt and marketable equity securities are
considered "Available-for-sale investments" in the accompanying
balance sheet and are carried at market value, with the difference
between cost and market value, net of related tax effects, recorded
currently as a component of shareholders' investment titled "Net
unrealized gain on available-for-sale investments." "Net unrealized
gain on available-for-sale investments" consists of (1) an unrealized
gain, net of related tax effects, of $2,868,000 that was recorded as a
cumulative effect of change in accounting principle adjustment and
(2) an unrealized loss, net of related tax effects, of $1,948,000
relating to the decline in the market value of available-for-sale
investments for the three-month period ended April 2, 1994.
7PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
(d) Notes to Consolidated Financial Statements - April 2, 1994
(continued)
4. Available-for-sale Investments (continued)
The aggregate market value, cost basis, and gross unrealized gains
and losses of short- and long-term available-for-sale investments, by
major security type as of April 2, 1994, are as follows:
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
----------------------------------------------------------------------
Government agency
securities $127,356 $127,159 $ 801 $ 604
Corporate bonds 205,795 205,606 875 686
Tax-exempt securities 31,378 31,702 2 326
Other 46,318 44,936 1,989 607
-------- -------- -------- --------
$410,847 $409,403 $ 3,667 $ 2,223
======== ======== ======== ========
Available-for-sale investments in the accompanying balance sheet at
April 2, 1994, include $98,087,000 with contractual maturities of one
year or less, $259,314,000 with contractual maturities of one year
through five years, and $53,446,000 with contractual maturities over
five years. Expected maturities may differ from contractual maturities
as a result of the Company's intent to sell these securities prior to
maturity and as a result of put and call options that enable either
the Company and/or the issuer to redeem these securities at an earlier
date.
The cost of available-for-sale investments that were sold was based
on specific identification in determining realized gains and losses
recorded in the accompanying statement of income. Gain on sale of
investments for the three-month period ended April 2, 1994 resulted
from gross realized gains of $894,000 and gross realized losses of
$283,000 relating to the sale of available-for-sale investments.
5. Issuance of Senior Convertible Obligations
On April 15, 1994, the Company issued and sold $345.0 million
principal amount of 5% senior convertible debentures due 2001. The
debentures are convertible into shares of the Company's common stock
at a conversion price of $47 1/4 per share.
8PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
First Quarter 1994 Compared With First Quarter 1993
Sales for the first quarter of 1994 were $350.5 million, an
increase of $57.7 million, or 20%, over the first quarter of 1993.
Segment income was $42.0 million, compared with $27.3 million in 1993,
an increase of 54%. (Segment income is income before corporate general
and administrative expenses, costs associated with divisional and
product restructuring, other income and expense, minority interest
expense, and income taxes.)
Sales from the Instruments segment were $147.6 million in 1994, an
increase of $23.7 million, or 19%, over the first quarter of 1993.
Sales increased principally due to acquisitions made by Thermo
Instrument Systems Inc. during 1993 and due to its acquisition of
several businesses within the EnviroTech Measurements & Controls group
of Baker Hughes Incorporated on March 16, 1994. Segment income margin
(segment income margin is segment income as a percentage of sales) was
17.9% in 1994, compared with 16.6% in 1993. Segment income margin
improved principally due to changes in product mix and continuing
efforts to reduce costs.
Sales from the Alternative-energy Systems segment were $62.0
million in 1994, an increase of $6.5 million, or 12%, over 1993.
Within this segment, sales from the Energy Systems group, which
consist of revenues from the operation of power plants and a
waste-recycling facility and, in 1993, revenues from construction of
large alternative-energy facilities, increased to $32.2 million from
$29.3 million in 1993. Increased revenues from the Energy Systems
group resulted primarily from an additional power plant and a waste-
recycling facility in operation during the first quarter of 1994 and
annual contractual energy rate increases under certain power sales
contracts. In addition, revenues increased due to improved performance
and the absence of utility-imposed curtailments of power output at two
California plants. These increases were offset in part by the absence
of construction revenues in the first quarter of 1994, compared with
$6.8 million in 1993, and by a decrease of $1.8 million in revenues
from an alternative-energy facility that suffered major damage to its
turbine-generator in January 1994, which will interrupt its operations
for approximately six months. The Company expects that the cost of
repairs and lost profits will be substantially reimbursed under the
terms of its business insurance policies. Sales from Thermo Power
Corporation were $22.0 million, compared with $18.7 million in 1993.
This increase resulted primarily from increased demand for industrial
refrigeration systems. Sales of Peter Brotherhood Ltd. steam turbines
and compressors were slightly above 1993 levels.
9PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
First Quarter 1994 Compared With First Quarter 1993 (continued)
Segment income from the Alternative-energy Systems segment was $3.5
million in 1994, an increase of $6.2 million over a loss of $2.7
million in 1993. The Energy Systems group had segment income of $3.0
million, an increase of $6.4 million, compared with a loss of $3.4
million in 1993. The Energy Systems group improvement resulted
primarily from an additional power plant in operation in the first
quarter of 1994, annual contractual energy rate increases under
certain power sales contracts, and lower lease expense, offset in part
by depreciation expense, resulting from the December 1993 purchase of
the Delano I facility in Delano, California. To a lesser extent, this
improvement resulted from improved performance and the absence of
utility-imposed curtailments of power output at two California plants.
Segment income increased $0.1 million at Thermo Power, while segment
income margins declined to 3.8% from 4.0% in 1993, as a result of
increased pricing pressures for industrial refrigeration systems.
Segment income declined $0.4 million at Peter Brotherhood due to
increased price competition.
Sales in the Process Equipment segment were $43.0 million in 1994,
compared with $37.5 million in 1993, an increase of 15%. Within this
segment, sales from Thermo Fibertek Inc. were $35.2 million, compared
with $28.2 million in 1993. Sales at Thermo Fibertek increased by $8.9
million as a result of the acquisition of the Engineered Systems
Division of Albany International Corp. in June 1993. This increase was
offset in part by a decline of $1.5 million in sales of environmental
process systems, which are sold by Thermo Fibertek's Vickerys
subsidiary, due to lower demand. Sales of Holcroft heat-treating
systems, which remain depressed, were $4.1 million, compared with $5.1
million in 1993. Sales of automated electroplating equipment from the
Company's wholly owned Napco, Inc. subsidiary declined to $3.7 million
from $4.2 million in 1993, due to continuing weak demand. The Process
Equipment segment income margin was 9.6%, compared with 8.8% in 1993.
Thermo Fibertek's segment income margin improved to 11.5% from 11.1%
in 1993, primarily due to changes in product mix at Thermo Fibertek's
European operations and, to a lesser extent, at Thermo Fibertek's
North American accessories businesses. Segment income declined
slightly at Holcroft as a result of lower sales, and improved slightly
at Napco as a result of efforts taken to reduce costs.
Sales in the Biomedical Products segment were $41.0 million in
1994, an increase of $10.0 million over $31.0 million in 1993. Sales
increased $3.9 million due to the inclusion of sales from CBI
Laboratories, Inc., a manufacturer of skin-care and other
personal-care products, which was acquired by the Company's ThermoTrex
Corporation subsidiary in December 1993. Sales of ThermoTrex's
mammography and biopsy systems increased $3.3 million, sales of Thermo
Cardiosystems Inc.'s implantable left ventricular-assist devices
10PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
First Quarter 1994 Compared With First Quarter 1993 (continued)
increased $1.4 million, and sales of Thermedics Inc.'s fragrance
samplers increased $1.5 million, due to increased demand. Segment
income margin improved to 6.2%, compared with 5.9% in 1993, as a
result of the increased sales.
Sales in the Services segment were $32.4 million in 1994, compared
with $29.6 million in 1993. Within this segment, sales from
soil-remediation services increased $3.0 million, primarily as a
result of higher production at regional centers in operation longer
than one year and, to a lesser extent, the acquisition of a fluids
recovery company by Thermo Remediation Inc. in November 1993. Sales of
metallurgical services were about the same level as 1993, while sales
of environmental sciences and engineering services declined by 8% as a
result of project delays due to severe weather conditions in the
Northeast and as a result of reduced or delayed government spending.
Segment income margin improved to 10.5% from 8.5% in 1993 due to
increased sales and efforts to reduce costs.
Sales from the Advanced Technologies segment were $25.3 million,
compared with $15.6 million in 1993. Sales increased $4.2 million due
to increased demand, principally from one customer, for Thermedics'
high-speed product quality assurance system. Sales also increased $3.8
million due to the inclusion of sales from Comtest Instrumentation,
which was acquired by Thermo Voltek Corp. in August 1993, and sales
from Ramsey Technology Inc., which was acquired by Thermedics on March
16, 1994. Segment income margin was 7.7%, compared with 11.3% in 1993.
This decline resulted primarily from higher costs associated with the
worldwide service organization for Thermedics' high-speed product
quality assurance system and, to a lesser extent, increased research
and development expenses at ThermoTrex to develop and commercialize
new products.
In 1983, the Company adopted a strategy of spinning out certain of
its businesses into separate subsidiaries and having these
subsidiaries sell a minority interest to outside investors. The
Company believes that this strategy provides additional motivation and
incentives for the management of the subsidiaries through the
establishment of subsidiary-level stock option incentive programs, as
well as capital to support the subsidiaries' growth. As a result of
the sale of stock by subsidiaries, the issuance of shares by
subsidiaries upon conversion of indebtedness, and similar
transactions, the Company recorded gains of $8.5 million in the first
quarter of 1994 and $11.1 million in 1993. Although the Company
expects to continue this strategy in the future, its goal is to
continue increasing segment income over the next few years so that
gains generated by sales of stock by its subsidiaries will represent a
decreasing portion of net income. The size and timing of these
11PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
First Quarter 1994 Compared With First Quarter 1993 (continued)
transactions are dependent on market and other conditions that are
beyond the Company's control. Accordingly, there can be no assurance
that the Company will be able to generate gains from such transactions
in the future.
"Other expense, net" in the accompanying statement of income
includes equity in losses of unconsolidated subsidiaries, which
represents the Company's portion of results from entities in which the
Company's ownership percentage is 50% or less, primarily the operation
of the Dade County cogeneration facility. This plant, which is
operated by a 50/50 joint venture of subsidiaries of the Company and
Rolls-Royce, Inc., supplies electricity and chilled water to the Dade
County Downtown Government Center complex in Miami, Florida. The
complex is not currently using the plant's full capacity, and efforts
continue to market the excess power and cooling services. The loss was
$1.2 million in 1994 and $1.1 million in 1993.
Financial Condition
Liquidity and Capital Resources
Consolidated working capital was $774.7 million at April 2, 1994,
compared with $828.3 million at January 1, 1994. Included in working
capital were cash and short-term investments of $600.0 million at
April 2, 1994, compared with $700.2 million at January 1, 1994. In
addition, at April 2, 1994, the Company had $68.4 million of long-term
marketable securities, compared with $43.6 million at January 1, 1994.
During the first quarter of 1994, the Company expended $133.5
million, net of cash acquired, for acquisitions, and $12.4 million for
purchases of property, plant and equipment. In early 1994, the Company
completed construction of a waste-recycling facility in San Diego
County, California. Because this facility was not sold to a third
party, the Company is obligated under its service agreement with San
Diego County to contribute $15.0 million of equity to the project in
1994. The Company has no material commitments for purchases of
property, plant and equipment and expects that, for 1994, such
expenditures will approximate the 1993 level. During the first quarter
of 1994, the Company and its majority-owned subsidiaries expended
$19.1 million to purchase common stock of the Company and its
subsidiaries. The Company expects that these purchases will continue.
Subsequent to the end of the quarter, the Company issued and sold
$345.0 million principal amount of 5% senior convertible debentures
due 2001.
12PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources (continued)
A substantial percentage of the Company's consolidated cash and
short-term investments is held by subsidiaries that are not wholly
owned by the Company. This percentage may vary significantly over
time. Pursuant to the Thermo Electron Corporate Charter (the Charter),
to which each of the majority-owned subsidiaries of the Company is a
party, the combined financial resources of Thermo Electron and its
subsidiaries allow the Company to provide banking, credit, and other
financial services to its subsidiaries so that each member of the
Thermo Electron group of companies may benefit from the financial
strength of the entire organization. Toward that end, the Charter
states that each member of the group may be required to provide
certain credit support to the consolidated entity. Nonetheless, the
Company's ability to access assets held by its majority-owned
subsidiaries through dividends, loans, or other transactions is
subject in each instance to a fiduciary duty owed to the minority
shareholders of the relevant subsidiary. In addition, dividends
received by Thermo Electron from a subsidiary that does not
consolidate with Thermo Electron for tax purposes are subject to tax.
Therefore, under certain circumstances, a portion of the Company's
consolidated cash and short-term investments may not be readily
available to Thermo Electron Corporation or certain of its
subsidiaries.
The Company intends for the foreseeable future to maintain at least
80% ownership of its Thermo Instrument and Thermo Fibertek
subsidiaries, which is required in order to continue to file a
consolidated federal income tax return with these subsidiaries. In
addition, the Company intends to maintain greater than 50% ownership
of its other majority-owned subsidiaries so that the Company may
continue to consolidate these subsidiaries for financial reporting
purposes. This may require the purchase by the Company of additional
shares or convertible debentures of these companies from time to time
as the number of outstanding shares issued by these companies
increases, either in the open market or directly from the
subsidiaries, at prevailing market prices. If the Company were to lose
its ability to consolidate for tax purposes with Thermo Instrument
and/or Thermo Fibertek, the Company would incur an additional tax
liability, which could be substantial.
13PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
PART II - Other Information
Item 1 - Legal Proceedings
The Company participates in the operation of the Dade County
(Florida) Downtown Government Center cogeneration facility through a
joint venture with Rolls-Royce, Inc. The joint venture's previously
disclosed lawsuit against Dade County (see Item 3 of the Company's
Annual Report on Form 10-K for the year ended January 1, 1994),
including counterclaims by Dade County, have been dismissed with
prejudice by agreement of the parties. The terms of the dismissal
include: (a) payment by Dade County, net of amounts paid by the joint
venture, of $1,500,000, (b) (i) a joint request, filed on March 31,
1994, that the Federal Energy Regulatory Commission ("FERC") hold its
proceedings in abeyance for 60 days, and (ii) a joint request that
FERC vacate its previous order, which the parties contemplate filing
on or before May 30, 1994, and (c) a joint request that the Florida
Public Service Commission ("FPSC") dismiss the petition brought before
it by Dade County, which request has not yet been acted upon by the
FPSC.
The settlement also contemplates certain initiatives designed to
improve the financial performance of the joint venture's facility,
including one or more of the following: (a) Dade County creating a
municipal utility to purchase all of the facility's power, and if
Florida Power & Light ("FPL") refuses to wheel excess power, obtaining
an order from FERC requiring FPL to wheel electricity in excess of
that used at the Downtown Government Center project to other County
facilities, (b) the joint venture's acquisition of the generating
equipment from Florida Energy Partners and subsequent transfer of such
equipment to Dade County, and if FPL refuses self-service wheeling,
the obtaining of an order from FPSC requiring FPL to permit
self-service wheeling by the County of excess electricity from the
facility to other County facilities, and (c) construction by the joint
venture, at its expense, of a transmission line to transmit
electricity to other County facilities.
Because these initiatives have numerous and complex conditions and
requirements associated with them, the implementation of some of which
may be opposed by FPL or which need the approval of other third
parties, no assurances can be given as to the likelihood that any one
of them will be successful. Moreover, if either FERC or FPSC does not
grant the aforementioned requests, FERC or FPSC, as the case may be,
could impose liabilities or otherwise issue rulings which could result
in the joint venture being in default under its arrangements with
Florida Energy Partners, the potential consequences of which include
facility regulation or shut-down, refund liability and other
consequences as described in the Company's last Form 10-K.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
14PAGE
FORM 10-Q
April 2, 1994
THERMO ELECTRON CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized as of the 9th day
of May 1994.
THERMO ELECTRON CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Vice President, Finance
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
15PAGE
EXHIBIT INDEX
Exhibit Number Document Page
-------------- -------- ----
4.1 Fiscal Agency Agreement dated as of
April 15, 1994 between the Registrant and
Chemical Bank, pertaining to the Registrant's
5% Senior Convertible Debentures due 2001
11 Statement re: Computation of earnings per share
16