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 1, 1995. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-10574 THERMO VOLTEK CORP. (Exact name of Registrant as specified in its charter) Delaware 13-1946800 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 470 Wildwood Street, P.O. Box 2878 Woburn, Massachusetts 01888-1578 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at July 28, 1995 ---------------------------- ----------------------------- Common Stock, $.05 par value 4,277,425 PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. PART I - Financial Information Item 1 - Financial Statements (a) Consolidated Balance Sheet - Assets as of July 1, 1995 and December 31, 1994 (In thousands) July 1, December 31, 1995 1994 ------- ------------ Current Assets: Cash and cash equivalents $ 4,954 $ 8,955 Available-for-sale investments, at quoted market value (amortized cost of $28,804 and $28,589) (includes $1,582 and $299 of related party investments) 29,068 28,105 Accounts receivable, less allowances of $425 and $343 6,898 6,161 Unbilled contract costs and fees 649 273 Inventories: Raw materials 2,570 1,996 Work in process 2,770 1,541 Finished goods 2,679 1,939 Prepaid income taxes 185 441 Other current assets 324 331 ------- ------- 50,097 49,742 ------- ------- Property, Plant and Equipment, at Cost 6,440 5,689 Less: Accumulated depreciation and amortization 4,059 3,583 ------- ------- 2,381 2,106 ------- ------- Other Assets 947 980 ------- ------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 12,649 9,396 ------- ------- $66,074 $62,224 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 2PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (a) Consolidated Balance Sheet - Liabilities and Shareholders' Equity as of July 1, 1995 and December 31, 1994 (In thousands except share amounts) July 1, December 31, 1995 1994 ------- ------------ Current Liabilities: Notes payable $ 1,160 $ 781 Accounts payable 3,437 2,698 Accrued payroll and employee benefits 939 879 Accrued commissions 495 329 Customer deposits 942 489 Accrued and current deferred income taxes 760 270 Other accrued expenses 1,468 926 Due to parent company and Thermo Electron Corporation 612 1,380 ------- ------- 9,813 7,752 ------- ------- Subordinated Convertible Obligations, Including $11,500 Due to Parent Company 44,851 46,000 ------- ------- Shareholders' Equity: Common stock, $.05 par value, 10,000,000 shares authorized; 4,155,545 and 4,038,445 shares issued 208 202 Capital in excess of par value 12,323 11,237 Accumulated deficit (1,839) (2,857) Treasury stock at cost, 5,954 and 6,000 shares (51) (50) Cumulative translation adjustment 611 260 Net unrealized gain (loss) on available-for-sale investments 158 (320) ------- ------- 11,410 8,472 ------- ------- $66,074 $62,224 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 3PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (b) Consolidated Statement of Income for the three months ended July 1, 1995 and July 2, 1994 (In thousands except per share amounts) Three Months Ended --------------------- July 1, July 2, 1995 1994 ------- -------- Revenues $ 8,554 $ 5,476 ------- ------- Costs and Operating Expenses: Cost of revenues 4,512 2,765 Selling, general and administrative expenses 2,648 1,834 Research and development expenses 592 386 ------- ------- 7,752 4,985 ------- ------- Operating Income 802 491 Interest Income 495 389 Interest Expense (includes $177 for notes to related party in 1995 and 1994) (570) (546) ------- ------- Income Before Provision for Income Taxes 727 334 Provision for Income Taxes 124 66 ------- ------- Net Income $ 603 $ 268 ======= ======= Earnings per Share: Primary $ .14 $ .07 ======= ======= Fully diluted $ .10 $ .06 ======= ======= Weighted Average Shares: Primary 4,250 3,987 ======= ======= Fully diluted 9,019 4,795 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (b) Consolidated Statement of Income for the six months ended July 1, 1995 and July 2, 1994 (In thousands except per share amounts) Six Months Ended --------------------- July 1, July 2, 1995 1994 ------- -------- Revenues $15,862 $10,404 ------- ------- Costs and Operating Expenses: Cost of revenues 8,332 5,274 Selling, general and administrative expenses 5,090 3,472 Research and development expenses 1,046 739 ------- ------- 14,468 9,485 ------- ------- Operating Income 1,394 919 Interest Income 1,033 743 Interest Expense (includes $354 for notes to related party in 1995 and 1994) (1,134) (1,090) Other Income 14 - ------- ------- Income Before Provision for Income Taxes 1,307 572 Provision for Income Taxes 289 106 ------- ------- Net Income $ 1,018 $ 466 ======= ======= Earnings per Share: Primary $ .25 $ .12 ======= ======= Fully diluted $ .18 $ .11 ======= ======= Weighted Average Shares: Primary 4,077 3,976 ======= ======= Fully diluted 9,013 4,794 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 5PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (c) Consolidated Statement of Cash Flows for the six months ended July 1, 1995 and July 2, 1994 (In thousands) Six Months Ended --------------------- July 1, July 2, 1995 1994 ------- ------- Operating Activities: Net income $ 1,018 $ 466 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 720 437 Provision for losses on accounts receivable 70 24 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 471 24 Inventories and unbilled contract costs and fees (1,919) 213 Other current assets 125 (113) Accounts payable 374 38 Other current liabilities (224) 187 Other (11) 27 ------- ------- Net cash provided by operating activities 624 1,303 ------- ------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (4,000) - Purchases of available-for-sale investments (7,500) (5,294) Proceeds from sale and maturities of available-for-sale investments 7,000 - Purchases of property, plant and equipment (494) (349) Other 334 (133) ------- ------- Net cash used in investing activities (4,660) (5,776) ------- ------- Financing Activities: Issuance of short-term obligations 273 - Repurchase of long-term obligations (132) - Net proceeds from issuance of Company common stock 117 150 Repayment of note receivable - 48 ------- ------- Net cash provided by financing activities $ 258 $ 198 ------- ------- 6PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (c) Consolidated Statement of Cash Flows for the six months ended July 1, 1995 and July 2, 1994 (In thousands) (continued) Six Months Ended --------------------- July 1, July 2, 1995 1994 ------- ------- Exchange Rate Effect on Cash $ (223) (26) ------- ------ $ Decrease in Cash and Cash Equivalents (4,001) (4,301) Cash and Cash Equivalents at Beginning of Period 8,955 21,458 ------- ------- Cash and Cash Equivalents at End of Period $ 4,954 $17,157 ======= ======= Cash Paid For: Interest $ 1,049 $ 994 Income taxes $ 72 $ 59 Noncash Financing Activities: Conversions of convertible obligations $ 1,000 $ - The accompanying notes are an integral part of these consolidated financial statements. 7PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (d) Notes to Consolidated Financial Statements - July 1, 1995 1. General The interim consolidated financial statements presented have been prepared by Thermo Voltek Corp. (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three- and six-month periods ended July 1, 1995 and July 2, 1994, (b) the financial position at July 1, 1995, and (c) the cash flows for the six-month periods ended July 1, 1995 and July 2, 1994. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of December 31, 1994, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the Securities and Exchange Commission. 2. Acquisition On March 1, 1995, the Company acquired substantially all of the assets, subject to certain liabilities, of Kalmus Engineering Incorporated and R. F. Power Labs, Incorporated (collectively, Kalmus) for approximately $3.6 million in cash. The Company paid an additional $160,000 in purchase price on August 2, 1995 as a post-closing adjustment based on the value of the net assets acquired from Kalmus. Kalmus is a manufacturer of radio frequency power amplifiers and systems used to test products for immunity to radiated or conducted radio frequency interference and for medical imaging and telecommunications applications. The acquisition has been accounted for using the purchase method of accounting, and Kalmus' results of operations have been included in the accompanying financial statements from the date of acquisition. The cost of this acquisition exceeded the estimated fair value of the acquired net assets by $3.0 million, which is being amortized over 40 years. Allocation of the purchase price for this acquisition was based on an estimate of the fair value of the net assets acquired and is subject to adjustment. 8PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. (d) Notes to Consolidated Financial Statements - July 1, 1995 (continued) 2. Acquisition (continued) Based on unaudited data, the following table presents selected financial information for the Company and Kalmus on a pro forma basis, assuming the companies had been combined since the beginning of 1994. Three Months Ended Six Months Ended ------------------ -------------------- (In thousands except July 2, July 1, July 2, per share amounts) 1994 1995 1994 ----------------------------------------------------------------------- Revenues $ 6,227 $16,587 $12,262 Net income 312 1,220 672 Earnings per share: Primary .08 .30 .17 Fully diluted .07 .20 .15 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition of Kalmus been made at the beginning of 1994. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Description of Business The Company designs, manufactures, and markets instruments that test electronic and electrical systems and components for immunity to pulsed electromagnetic interference (pulsed EMI) through its KeyTek Instrument division (KeyTek), and designs, manufactures, and markets high-voltage power conversion systems, modulators, fast-response protection systems, and related high-voltage equipment for industrial, medical, and environmental processes, and for defense and scientific research applications, through its Universal Voltronics division. Through its Comtest Instrumentation B.V. and Comtest Limited subsidiaries (collectively, Comtest), the Company provides electromagnetic compatibility (EMC) consulting and systems-integration services, distributes a range of EMC-related products, and manufactures and markets specialized power supplies for telecommunications equipment. In July 1994, Comtest acquired Verifier Systems Limited (Verifier), which manufactures a line of electrostatic discharge test equipment that performs electrical stress tests for semiconductor devices. In March 1995, the Company acquired Kalmus Engineering Incorporated and R. F. Power Labs, Incorporated (collectively, Kalmus), which manufacture radio frequency power amplifiers and systems used to test products for immunity to radiated or conducted radio frequency interference and for medical imaging and telecommunications applications. 9PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations Second Quarter 1995 Compared With Second Quarter 1994 Revenues increased 56% to $8,554,000 in the second quarter of 1995 from $5,476,000 in the second quarter of 1994, due primarily to the inclusion of $1,350,000 in revenues from Kalmus, which was acquired on March 1, 1995, the inclusion of $800,000 in revenues from Verifier, which was acquired in July 1994, and an increase of $445,000 in revenues from Comtest that resulted primarily from the favorable effects of currency translation due to a weaker U.S. dollar in 1995. The balance of the increase in sales resulted from greater demand at KeyTek and, to a lesser extent, Universal Voltronics. The gross profit margin decreased to 47% in the second quarter of 1995 from 50% in the second quarter of 1994, due primarily to higher European sales in one of KeyTek's product lines in 1995, which have lower margins due to competitive pricing pressure and, to a lesser extent, higher costs associated with the introduction of a new product by Universal Voltronics. These decreases were offset in part by the inclusion of higher-margin Verifier revenues. Selling, general and administrative expenses as a percentage of revenues decreased to 31% in the second quarter of 1995 from 33% in the second quarter of 1994 due primarily to a decline in operating costs at KeyTek and Universal Voltronics on a higher revenue base. Research and development expenses as a percentage of revenues remained relatively unchanged at 6.9% in the second quarter of 1995, compared with 7.0% in the second quarter of 1994. Interest income increased to $495,000 in the second quarter of 1995 from $389,000 in the first quarter of 1994, due primarily to higher prevailing interest rates in 1995. Interest expense increased to $570,000 in the second quarter of 1995 from $546,000 in the second quarter of 1994, due primarily to the inclusion of interest expense associated with borrowings under Comtest's outstanding line of credit. The effective tax rates in 1995 and 1994 were below the statutory federal income tax rate due to the utilization of tax net operating loss carryforwards. First Six Months 1995 Compared With First Six Months 1994 Revenues increased 52% to $15,862,000 in the first six months of 1995 from $10,404,000 in the first six months of 1994, due primarily to the inclusion of $1,644,000 in revenues from Kalmus, the inclusion of $1,550,000 in revenues from Verifier, and an increase of $1,078,000 in revenues from Comtest that resulted from the favorable effects of currency translation due to a weaker U.S. dollar in 1995 and, to a lesser extent, greater demand. The balance of the increase in sales resulted from greater demand at KeyTek and, to a lesser extent, Universal Voltronics. 10PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Six Months 1995 Compared With First Six Months 1994 (continued) The gross profit margin decreased to 47% in the first six months of 1995 from 49% in the first six months of 1994, due primarily to higher European sales in one of KeyTek's product lines in 1995, which have lower margins due to competitive pricing pressure and, to a lesser extent, higher costs associated with an upgraded product at KeyTek. These decreases were offset in part by the inclusion of higher-margin Verifier revenues. Selling, general and administrative expenses as a percentage of revenues decreased to 32% in the first six months of 1995 from 33% in the first six months of 1994. Research and development expenses as a percentage of revenues decreased to 6.6% in the first six months of 1995 from 7.1% in the first six months of 1994. The decreases in selling, general and administrative expenses and in research and development expenses as a percentage of revenues are due to an increase in total revenues. Interest income increased to $1,033,000 in the first six months of 1995 from $743,000 in the first six months of 1994. Interest expense increased to $1,134,000 in the first six months of 1995 from $1,090,000 in the first six months of 1994. The reasons for these increases are the same as those discussed in the results of operations for the second quarter. The effective tax rates in 1995 and 1994 were below the statutory federal income tax rate due to the utilization of tax net operating loss carryforwards. Financial Condition Liquidity and Capital Resources Working capital was $40,284,000 at July 1, 1995, compared with $41,990,000 at December 31, 1994. Included in working capital are cash, cash equivalents, and available-for-sale investments of $34,022,000 at July 1, 1995, compared with $37,060,000 at December 31, 1994. During the first six months of 1995, $624,000 of cash was provided by operating activities. In March 1995, the Company acquired substantially all of the assets, subject to certain liabilities, of Kalmus for approximately $3.6 million in cash. The Company paid an additional $160,000 in purchase price on August 2, 1995 as a post-closing adjustment based on the value of the net assets acquired from Kalmus (Note 2). PART II - Other Information Item 4 - Submission of Matters to a Vote of Security Holders On May 22, 1995, at the Annual Meeting of Shareholders, the shareholders elected six incumbent directors to a one-year term expiring in 1996. The directors reelected at the meeting were: Elias P. Gyftopoulos, William W. Hoover, Sandra L. Lambert, Theo Melas-Kyriazi, Peter Richman, and John W. Wood Jr. Each nominee for director received 3,596,291 shares voted in favor of election and 2,972 shares voted against. No broker nonvotes were recorded on the election of directors. 11PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. PART II - Other Information (continued) Item 4 - Submission of Matters to a Vote of Security Holders (continued) The shareholders also approved a proposal to amend the directors stock option plan to change the formula for the award of stock options to purchase common stock of the Company to its outside Directors as follows: 3,570,426 shares voted in favor, 20,460 shares voted against, and 8,377 shares abstained. No broker nonvotes were recorded on this proposal. A proposal to adopt an equity incentive plan and to reserve 200,000 shares for issuance thereunder was also approved by the shareholders as follows: 3,567,151 shares voted in favor, 17,784 shares voted against, and 14,328 shares abstained. No broker nonvotes were recorded on this proposal. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on the page immediately preceding exhibits. (b) Reports on Form 8-K On April 27, 1995, the Company filed certain historical financial statements of Kalmus Engineering Incorporated and R. F. Power Labs, Incorporated (collectively, Kalmus) and pro forma combined condensed financial statements as part of an amendment to the Form 8-K that was filed on March 16, 1995, pertaining to the acquisition of Kalmus. 12PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. 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 4th day of August 1995. THERMO VOLTEK CORP. Paul F. Kelleher ------------------------ Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ------------------------ John N. Hatsopoulos Chief Financial Officer 13PAGE FORM 10-Q July 1, 1995 THERMO VOLTEK CORP. EXHIBIT INDEX Exhibit Number Description of Exhibit Page ------- ----------------------------------------------------- ---- 11 Statement re: Computation of earnings per share. 27 Financial Data Schedule.