Exhibit 13
Thermedics Inc.
Consolidated Financial Statements as of December 30, 1995
PAGE
Thermedics Inc.
Consolidated Statement of Income
(In thousands except per share amounts) 1995 1994 1993
-------------------------------------------------------------------------
Revenues (Note 14) $175,754 $155,111 $ 80,220
-------- -------- --------
Costs and Operating Expenses:
Cost of revenues 97,290 87,597 45,965
Selling, general and administrative
expenses (Note 9) 47,933 42,734 20,757
Expenses for research and development 11,087 10,445 6,434
-------- -------- --------
156,310 140,776 73,156
-------- -------- -------
Operating Income 19,444 14,335 7,064
Interest Income 9,073 7,273 6,065
Interest Expense (3,677) (3,206) (2,383)
Gain on Issuance of Stock by
Subsidiary (Note 12) 3,455 - -
Gain on Sale of Investments 421 203 409
Other Income 14 719 491
-------- -------- ------
Income Before Provision for Income
Taxes and Minority Interest 28,730 19,324 11,646
Provision for Income Taxes (Note 6) 9,154 7,334 4,623
Minority Interest Expense 4,455 1,153 353
-------- -------- --------
Net Income $ 15,121 $ 10,837 $ 6,670
======== ======== ========
Earnings per Share $ .45 $ .33 $ .22
======== ======== ========
Weighted Average Shares 33,660 32,878 30,291
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
Thermedics Inc.
Consolidated Balance Sheet
(In thousands) 1995 1994
--------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 37,370 $ 37,043
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $76,682 and $72,731) (Notes 2 and 9) 77,916 71,680
Accounts receivable, less allowances
of $3,982 and $3,640 41,327 33,645
Unbilled contract costs and fees 1,582 497
Inventories 42,679 26,801
Prepaid income taxes and expenses (Note 6) 8,645 4,676
-------- --------
209,519 174,342
-------- --------
Property, Plant and Equipment, at Cost, Net 12,933 10,727
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $39,795 and $46,863) (Note 2) 39,953 45,426
-------- --------
Other Assets 4,171 5,582
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Notes 3 and 6) 101,574 55,490
-------- --------
$368,150 $291,567
======== ========
3PAGE
Thermedics Inc.
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1995 1994
-------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable and current maturities of
long-term obligations (includes $38,000 due
to parent company in 1995) (Notes 3 and 8) $ 47,420 $ 10,576
Accounts payable 16,336 9,481
Accrued payroll and employee benefits 8,893 7,369
Deferred revenue 1,705 2,463
Customer deposits 2,162 2,546
Accrued income taxes 2,340 582
Accrued warranty costs 3,637 3,380
Other accrued expenses (Note 3) 15,307 7,675
Due to parent company 1,606 1,940
-------- --------
99,406 46,012
-------- --------
Deferred Income Taxes and Other Deferred
Items (Note 6) 2,173 1,565
-------- --------
Long-term Obligations (Note 8) 45,201 82,551
-------- --------
Minority Interest 54,360 29,674
-------- --------
Commitments and Contingency (Notes 7 and 10)
Shareholders' Investment (Notes 4 and 11):
Common stock, $.10 par value, 50,000,000
shares authorized; 33,986,050 and
33,303,135 shares issued 3,399 3,330
Capital in excess of par value 120,665 102,975
Retained earnings 42,187 27,066
Treasury stock at cost, 2,146 and 14,671 shares (42) (310)
Cumulative translation adjustment (88) 326
Net unrealized gain (loss) on available-for-sale
investments (Note 2) 889 (1,622)
-------- --------
167,010 131,765
-------- --------
$368,150 $291,567
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
Thermedics Inc.
Consolidated Statement of Cash Flows
(In thousands) 1995 1994 1993
--------------------------------------------------------------------------
Operating Activities:
Net income $ 15,121 $ 10,837 $ 6,670
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,678 4,208 2,434
Gain on issuance of stock by
subsidiary (Note 12) (3,455) - -
Provision for losses on accounts
receivable 689 1,190 92
Gain on sale of investments (421) (203) (409)
Minority interest expense 4,455 1,153 353
Other noncash expenses 962 1,382 816
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable 221 (1,750) (4,730)
Inventories and unbilled contract
costs and fees (10,304) 7,090 (9,478)
Prepaid income taxes and expenses (1,957) 112 (1,601)
Accounts payable 3,468 (7,362) 1,771
Other current liabilities (5) 2,430 13,242
Other 461 (129) (63)
--------- --------- ---------
Net cash provided by operating
activities 14,913 18,958 9,097
--------- --------- ---------
Investing Activities:
Acquisitions, net of cash acquired
(Note 3) (56,560) (44,657) (1,069)
Purchases of property, plant and
equipment (4,407) (3,220) (3,444)
Purchases of available-for-sale
investments (101,246) (78,303) -
Proceeds from sale and maturities of
available-for-sale investments 104,786 77,677 -
Increase in short-term investments - - (51,304)
Purchases of long-term investments - - (9,960)
Proceeds from sale of long-term
investments - - 10,982
Other 399 266 (498)
--------- --------- ---------
Net cash used in investing
activities $ (57,028) $ (48,237) $ (55,293)
--------- --------- ---------
5PAGE
Thermedics Inc.
Consolidated Statement of Cash Flows (continued)
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company
and subsidiary common stock $ 4,515 $ 2,020 $ 31,766
Purchases of Company and subsidiary
common stock (179) (8,064) -
Proceeds from issuance of note
payable to parent company (Note 3) 38,000 - -
Net proceeds from issuance of long-term
obligations (Note 8) - 31,968 33,483
Other 608 134 -
--------- --------- ---------
Net cash provided by financing
activities 42,944 26,058 65,249
--------- --------- ---------
Exchange Rate Effect on Cash (502) 85 (37)
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents 327 (3,136) 19,016
Cash and Cash Equivalents at Beginning
of Year 37,043 40,179 21,163
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 37,370 $ 37,043 $ 40,179
========= ========= =========
Cash Paid For:
Interest $ 3,328 $ 2,884 $ 2,241
Income taxes $ 6,489 $ 4,980 $ 5,624
Noncash Activities:
Fair value of assets of acquired
companies $ 67,394 $ 65,493 $ 4,725
Cash paid for acquired companies (56,879) (44,743) (1,085)
--------- --------- ---------
Liabilities assumed of acquired
companies $ 10,515 $ 20,750 $ 3,640
========= ========= =========
Issuance of Company common stock to
parent company in exchange for
subsidiary common stock $ - $ 936 $ -
Conversions of Company and subsidiaries'
convertible obligations (Note 8) $ 37,317 $ 9,745 $ 9,190
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
Thermedics Inc.
Consolidated Statement of Shareholders' Investment
Common
Stock, Capital in
$.10 Par Excess of Retained
(In thousands) Value Par Value Earnings
-------------------------------------------------------------------------
Balance January 2, 1993 $ 1,866 $ 58,188 $ 9,559
Net income - - 6,670
Public offering of Company
common stock 215 29,765 -
Issuance of stock under
employees' and directors'
stock plans 17 1,604 -
Tax benefit related to
employees' and directors'
stock plans - 300 -
Conversions of subordinated
convertible debentures 47 7,061 -
Effect of three-for-two
stock split 1,072 (1,072) -
Effect of majority-owned
subsidiaries' equity
transactions - (510) -
Expiration of subsidiary's
redemption rights - 2,943 -
Translation adjustment - - -
------- -------- --------
Balance January 1, 1994 3,217 98,279 16,229
Net income - - 10,837
Issuance of stock under
employees' and directors'
stock plans 14 1,079 -
Tax benefit related to
employees' and directors'
stock plans - 668 -
Conversions of subordinated
convertible debentures 92 9,316 -
Issuance of stock to parent
company (Note 11) 7 929 -
Effect of majority-owned
subsidiaries' equity
transactions - (7,296) -
Effect of change in accounting
principle (Note 2) - - -
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) - - -
Translation adjustment - - -
-------- -------- --------
Balance December 31, 1994 $ 3,330 $102,975 $ 27,066
7PAGE
Thermedics Inc.
Consolidated Statement of Shareholders' Investment (continued)
Common
Stock, Capital in
$.10 Par Excess of Retained
(In thousands) Value Par Value Earnings
-------------------------------------------------------------------------
Net income $ - $ - $ 15,121
Issuance of stock under
employees' and directors'
stock plans 7 378 -
Tax benefit related to
employees' and directors'
stock plans - 434 -
Conversions of subordinated
convertible debentures 62 6,259 -
Effect of majority-owned
subsidiaries' equity
transactions - 9,858 -
Capital contribution from
parent company - 761 -
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) - - -
Translation adjustment - - -
-------- -------- --------
Balance December 30, 1995 $ 3,399 $120,665 $ 42,187
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
8PAGE
Thermedics Inc.
Consolidated Statement of Shareholders' Investment (continued)
Net
Unrealized
Gain (Loss)
Cumulative on Available-
Treasury Translation for-sale
(In thousands) Stock Adjustment Investments
--------------------------------------------------------------------------
Balance January 2, 1993 $ (290) $ - $ -
Net income - - -
Public offering of Company
common stock - - -
Issuance of stock under
employees' and directors'
stock plans 18 - -
Tax benefit related to
employees' and directors'
stock plans - - -
Conversions of subordinated
convertible debentures - - -
Effect of three-for-two
stock split - - -
Effect of majority-owned
subsidiaries' equity
transactions - - -
Expiration of subsidiary's
redemption rights - - -
Translation adjustment - (2) -
-------- --------- --------
Balance January 1, 1994 (272) (2) -
Net income - - -
Issuance of stock under
employees' and directors'
stock plans (38) - -
Tax benefit related to
employees' and directors'
stock plans - - -
Conversions of subordinated
convertible debentures - - -
Issuance of stock to parent
company (Note 11) - - -
Effect of majority-owned
subsidiaries' equity
transactions - - -
Effect of change in accounting
principle (Note 2) - - 1,185
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) - - (2,807)
Translation adjustment - 328 -
-------- -------- --------
Balance December 31, 1994 $ (310) $ 326 $ (1,622)
9PAGE
Thermedics Inc.
Consolidated Statement of Shareholders' Investment (continued)
Net
Unrealized
Gain (Loss)
Cumulative on Available-
Treasury Translation for-sale
(In thousands) Stock Adjustment Investments
--------------------------------------------------------------------------
Net income $ - $ - $ -
Issuance of stock under
employees' and directors'
stock plans 268 - -
Tax benefit related to
employees' and directors'
stock plans - - -
Conversions of subordinated
convertible debentures - - -
Effect of majority-owned
subsidiaries' equity
transactions - - -
Capital contribution from
parent company - - -
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) - - 2,511
Translation adjustment - (414) -
-------- -------- --------
Balance December 30, 1995 $ (42) $ (88) $ 889
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
10PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermedics Inc. (the Company) develops, manufactures, and markets precision
weighing and inspection equipment, electrochemistry and microweighing
products, product quality assurance systems, electronic test instruments
and explosives-detection devices, as well as implantable heart-assist
systems and other biomedical products.
Relationship with Thermo Electron Corporation
The Company was incorporated in 1983 as a wholly owned subsidiary of Thermo
Electron Corporation (Thermo Electron). As of December 30, 1995, Thermo
Electron owned 17,315,326 shares of the Company's common stock,
representing 51% of such stock outstanding (Note 15).
Principles of Consolidation
The accompanying financial statements include the accounts of the Company,
its wholly owned subsidiaries, and its majority-owned public subsidiaries,
Thermo Cardiosystems Inc. (Thermo Cardiosystems) and Thermo Voltek Corp.
(Thermo Voltek). All material intercompany accounts and transactions have
been eliminated. The Company's percentage ownership of its majority-owned
public subsidiaries at year-end was as follows:
1995 1994 1993
---- ---- ----
Thermo Cardiosystems 52% 55% 54%
Thermo Voltek 50% 60% 53%
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1995, 1994, and 1993 are for the fiscal years ended
December 30, 1995, December 31, 1994, and January 1, 1994, respectively.
Cash and Cash Equivalents
As of December 30, 1995, $25,685,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Company in effect lends excess cash to Thermo Electron,
which Thermo Electron collateralizes with investments principally
consisting of U.S. government agency securities, corporate notes,
commercial paper, money market funds, and other marketable securities, in
the amount of at least 103% of such obligation. The Company's funds subject
to the repurchase agreement are readily convertible into cash by the
Company and have an original maturity of three months or less. The
repurchase agreement earns a rate based on the Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter. As of
December 30, 1995, the Company's cash equivalents were also invested in
U.S. government agency discount notes and money market preferred stock,
which have an original maturity of three months or less. Cash equivalents
are carried at cost, which approximates market value.
11PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Available-for-sale Investments
Pursuant to Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
effective January 2, 1994, the Company's short- and long-term debt and
marketable equity securities are accounted for at market value (Note 2).
Prior to 1994, these investments were carried at the lower of cost or
market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market value and include materials, labor, and manufacturing
overhead. The components of inventories are as follows:
(In thousands) 1995 1994
------------------------------------------------------------------------
Raw materials and supplies $21,517 $13,223
Work in process and finished goods 21,162 13,578
------- -------
$42,679 $26,801
======= =======
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: buildings and
improvements -- 5 to 25 years, machinery and equipment -- 3 to 10 years,
and leasehold improvements -- the shorter of the term of the lease or the
life of the asset. Property, plant and equipment consist of the following:
(In thousands) 1995 1994
------------------------------------------------------------------------
Land and building $ 2,944 $ 2,686
Machinery, equipment and leasehold improvements 27,358 21,681
------- -------
30,302 24,367
Less: Accumulated depreciation and amortization 17,369 13,640
------- -------
$12,933 $10,727
======= =======
Other Assets
Other assets in the accompanying balance sheet includes the cost of
acquired patents, trademarks, and other specifically identifiable
intangible assets. These assets are being amortized using the straight-line
method over their estimated useful lives, which range from 2 to 40 years.
These assets were $2,916,000 and $3,037,000, net of accumulated
amortization of $2,245,000 and $1,762,000, at year-end 1995 and 1994,
respectively.
12PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over periods not exceeding 40
years. Accumulated amortization was $6,343,000 and $4,634,000 at year-end
1995 and 1994, respectively. The Company assesses the future useful life of
this asset whenever events or changes in circumstances indicate that the
current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired companies in assessing the
recoverability of this asset.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment, titled
"Cumulative translation adjustment." In 1994, the Company recorded foreign
currency transaction gains of $635,000 on the repayment of intercompany
borrowings, denominated in U.S. dollars, by several of the Company's
foreign subsidiaries. The borrowings resulted from the acquisition of
Ramsey Technology, Inc. by the Company. Foreign currency transaction gains
are included in other income in the accompanying 1994 statement of income.
There were no foreign currency transaction gains and losses in 1995, and
the foreign currency transactions gains and losses included in the
accompanying 1993 statement of income were immaterial.
Revenue Recognition
In general, the Company recognizes revenues upon shipment of its products.
The Company provides a reserve for its estimate of warranty costs at the
time of shipment. Revenues and profits on substantially all contracts are
recognized using the percentage-of-completion method. Revenues recorded
under the percentage-of-completion method were $8,521,000 in 1995,
$2,253,000 in 1994, and $5,087,000 in 1993. The percentage of completion is
determined by relating either the actual costs or actual labor incurred to
date to management's estimate of total costs or total labor, respectively,
to be incurred on each contract. If a loss is indicated on any contract in
process, a provision is made currently for the entire loss. The Company's
contracts generally provide for billing of customers upon the attainment of
certain milestones specified in each contract or for billing customers
monthly as costs are incurred on a cost-plus-fixed-fee basis. Revenues
earned on contracts in process in excess of billings are classified as
unbilled contract costs and fees in the accompanying balance sheet. There
are no significant amounts included in the accompanying balance sheet that
are not expected to be recovered from existing contracts at current
contract values, or that are not expected to be collected within one year,
including amounts that are billed but not paid under retainage provisions.
Gain on Issuance of Stock by Subsidiary
At the time a subsidiary sells its stock to unrelated parties at a price in
excess of its book value, the Company's net investment in that subsidiary
increases. If at that time the subsidiary is an operating entity and not
engaged principally in research and development, the Company records the
increase as a gain.
13PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
If gains have been recognized on issuances of a subsidiary's stock and
shares of the subsidiary are subsequently repurchased by the subsidiary,
the Company, or Thermo Electron, gain recognition does not occur on
issuances subsequent to the date of a repurchase until such time as shares
have been issued in an amount equivalent to the number of repurchased
shares. Such transactions are reflected as equity transactions and the net
effect of these transactions is reflected in the accompanying statement of
shareholders' investment as "Effect of majority-owned subsidiaries' equity
transactions."
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company
recognizes deferred income taxes based on the expected future tax
consequences of differences between the financial statement basis and the
tax basis of assets and liabilities calculated using enacted tax rates in
effect for the year in which the differences are expected to be reflected
in the tax return.
Earnings per Share
Earnings per share have been computed based on the weighted average number
of shares outstanding during the year. Because the effect of the assumed
exercise of stock options would be immaterial, they have been excluded from
the earnings per share calculation. Fully diluted earnings per share have
not been presented because the effect of the assumed exercise of stock
options and the assumed conversion of the Company's subordinated
convertible debentures would be immaterial.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liablilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Available-for-sale Investments
Effective January 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." In accordance with
SFAS No. 115, the Company's debt and marketable equity securities are
considered available-for-sale investments in the accompanying balance sheet
and are carried at market value, with the difference between cost and
market value, net of related tax effects, recorded currently as a component
of shareholders' investment titled "Net unrealized gain (loss) on
available-for-sale investments." Effect of change in accounting principle
in the accompanying 1994 statement of shareholders' investment represents
the unrealized gain, net of related tax effects, pertaining to
available-for-sale investments held by the Company on January 2, 1994.
14PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
2. 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 December 30, 1995 and December 31, 1994, are as
follows:
1995 Gross Gross
Unrealized Unrealized
(In thousands) Market Value Cost Basis Gains Losses
--------------------------------------------------------------------------
Government agency securities $ 99,373 $ 98,434 $ 1,020 $ (81)
Corporate bonds 10,612 10,169 454 (11)
Money market preferred stock 6,297 6,287 28 (18)
Other 1,587 1,587 - -
-------- -------- -------- --------
$117,869 $116,477 $ 1,052 $ (110)
======== ======== ======== ========
1994 Gross Gross
Unrealized Unrealized
(In thousands) Market Value Cost Basis Gains Losses
--------------------------------------------------------------------------
Government agency securities $ 92,316 $ 94,148 $ 2 $ (1,834)
Corporate bonds 12,100 12,491 9 (400)
Money market preferred stock 7,194 7,455 - (261)
Other 5,496 5,500 - (4)
-------- -------- -------- --------
$117,106 $119,594 $ 11 $ (2,499)
======== ======== ======== ========
Short- and long-term available-for-sale investments in the
accompanying 1995 balance sheet include $59,595,000 with contractual
maturities of one year or less, $51,005,000 with contractual maturities of
more than one year through five years, and $7,269,000 with contractual
maturities of more than five years. Actual maturities may differ from
contractual maturities as a result of the Company's intent to sell these
securities prior to maturity and as a result of put and call options that
enable either the Company 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 recorded in the
accompanying statement of income. Gain on sale of investments in 1995
resulted from gross realized gains of $439,000 and gross realized losses of
$18,000 relating to the sale of available-for-sale investments. Gain on
sale of investments in 1994 resulted from gross realized gains of $241,000
and gross realized losses of $38,000 relating to the sale of
available-for-sale investments.
15PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
3. Acquisitions
In December 1995, the Company acquired the Orion laboratory products
division (Orion) of Analytical Technology, Inc. for approximately $52.7
million in cash, which included the repayment of $8.6 million of debt,
subject to a post-closing adjustment. To partially finance this
acquisition, the Company borrowed $38.0 million from Thermo Electron
pursuant to a promissory note due December 1996, and bearing interest at
the Commercial Paper Composite Rate plus 25 basis points. The balance of
the purchase price was funded from the Company's working capital. Orion
manufactures electrochemistry, microweighing, process, and other
instruments used to analyze the chemical composition of foods, beverages,
and pharmaceuticals and detect contaminants in environmental and
high-purity water samples. Additionally, in 1995, one of the Company's
majority-owned subsidiaries made an acquisition for $3.8 million in cash.
In March 1994, the Company acquired substantially all of the assets,
subject to certain liabilities, of Ramsey Technology, Inc. (Ramsey), a
business of Baker Hughes Incorporated, for a cash purchase price of $41.9
million. In January 1996, Ramsey was contributed by the Company to its
newly formed Thermo Sentron Inc. (Thermo Sentron) subsidiary in exchange
for shares of Thermo Sentron common stock. Thermo Sentron designs,
develops, manufactures, and sells high-speed precision weighing and
inspection equipment for industrial production and packaging lines.
Additionally, in 1994, the Company and one of its majority-owned
subsidiaries made two other acquisitions for an aggregate of $2.8 million
in cash.
In August 1993, Thermo Voltek acquired Comtest Instrumentation B.V., a
Netherlands-based company, and Comtest Limited, a U.K. operation
(collectively, Comtest), for $831,000 in cash and the repayment of $238,000
of Comtest's debt. Comtest distributes products used to test electronic
equipment for electromagnetic compatibility (EMC), provides EMC-related
consulting services, and manufactures specialized power supplies for
telecommunications equipment.
These acquisitions have been accounted for using the purchase method
of accounting, and their results of operations have been included in the
accompanying financial statements from their respective dates of
acquisition. The aggregate cost of the acquisitions in 1995, 1994, and
1993, exceeded the estimated fair value of the acquired net assets by $86.4
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, for
acquisitions completed in 1995, is subject to adjustment upon finalization
of the purchase price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company, Orion, Thermo Sentron, and Comtest
on a pro forma basis, assuming the Company and Orion had been combined
since the beginning of 1994 and the Company, Thermo Sentron and Comtest had
been combined since the beginning of 1993. The effect on the Company's
financial statements of the acquisitions not included in the pro forma data
was not material to the Company's results of operations and financial
position.
(In thousands except per share amounts) 1995 1994 1993
-------------------------------------------------------------------------
Revenues $218,920 $212,392 $142,307
Net income 17,186 12,821 5,943
Earnings per share .51 .39 .20
16PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
3. Acquisitions (continued)
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisitions been made at the beginning of 1994 or 1993, as applicable.
Other accrued expenses in the accompanying balance sheet include
$2,454,000 and $3,080,000 at year-end 1995 and 1994, respectively, for
estimated severance, relocation, and other reserves associated with
acquisitions.
4. Stock-based Compensation Plans
The Company has stock-based compensation plans for its key employees,
directors, and others. Two of these plans, adopted in 1983, permitted the
grant of nonqualified and incentive stock options. These plans expired
during 1993. A third plan, adopted in 1993, permits the grant of a variety
of stock and stock-based awards as determined by the human resources
committee of the Company's Board of Directors (the Board Committee),
including restricted stock, stock options, stock bonus shares, or
performance-based shares. To date, only nonqualified stock options have
been awarded under this plan. The option recipients and the terms of
options granted under this plan are determined by the Board Committee.
Generally, options granted to date are exercisable immediately, but are
subject to certain transfer restrictions and the right of the Company to
repurchase shares issued upon exercise of the options at the exercise
price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over periods ranging from four to ten years after
the first anniversary of the grant date, depending on the term of the
option, which may range from seven to twelve years. Nonqualified stock
options may be granted at any price determined by the Board Committee,
although incentive stock options must be granted at not less than the fair
market value of the Company's stock on the date of grant. To date, all
options have been granted at fair market value. The Company also has a
directors' stock option plan, adopted in 1991, that provides for the grant
of stock options to outside directors pursuant to a formula approved by the
Company's shareholders. Options awarded under this plan are exercisable six
months after the date of grant and expire three or seven years after the
date of grant. In addition to the Company's stock-based compensation plans,
certain officers and key employees may also participate in stock-based
compensation plans of Thermo Electron or its majority-owned subsidiaries.
17PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
4. Stock-based Compensation Plans (continued)
No accounting recognition is given to options granted at fair market
value until they are exercised. Upon exercise, net proceeds, including tax
benefits realized, are credited to equity. A summary of the Company's stock
option information is as follows:
1995 1994 1993
----------------- ----------------- -----------------
Range of Range of Range of
(In thousands Number Option Number Option Number Option
except per of Prices of Prices of Prices
share amounts) Shares per Share Shares per Share Shares per share
--------------------------------------------------------------------------
Options outstanding, $ 4.70- $ 4.70- $ 4.70-
beginning of year 1,773 $16.45 1,669 $16.45 936 $10.65
13.00- 12.43- 8.47-
Granted 27 21.40 366 14.53 1,035 16.45
4.70- 4.70- 4.70-
Exercised (74) 16.28 (195) 10.65 (261) 10.65
Lapsed or 5.00- 5.00- 5.00-
cancelled (169) 16.28 (67) 16.28 (41) 10.00
----- ----- -----
Options outstanding, $ 4.70- $ 4.70- $ 4.70-
end of year 1,557 $21.40 1,773 $16.45 1,669 $16.45
===== ===== =====
$ 4.70- $ 4.70- $ 4.70-
Options exercisable 1,557 $21.40 1,771 $16.45 1,665 $16.28
===== ===== =====
Options available
for grant 545 457 770
===== ===== =====
5. Employee Benefit Plans
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by the Company or
its majority-owned public subsidiaries. Prior to the November 1995 plan
year, shares of the Company's or its majority-owned public subsidiaries',
and shares of Thermo Electron's common stock could be purchased at the end
of a 12-month plan year at 85% of the fair market value at the beginning of
the plan year, and the shares purchased were subject to a one-year resale
restriction. Effective November 1, 1995, the applicable shares of common
stock may be purchased at 95% of the fair market value at the beginning of
the plan year, and the shares purchased are subject to a six-month resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages. During 1995, 1994, and 1993,
the Company issued 14,552 shares, 13,711 shares, and 36,080 shares,
respectively, of its common stock under this plan.
18PAGE
Thermedics Inc.
5. Employee Benefit Plans (continued)
401(k) Savings Plan and Employee Stock Ownership Plan
The majority of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan and, prior to 1995, in
Thermo Electron's employee stock ownership plan (ESOP). Contributions to
the 401(k) savings plan are made by both the employee and the Company.
Company contributions are based upon the level of employee contributions.
For these plans, the Company contributed and charged to expense $1,011,000,
$942,000, and $412,000 in 1995, 1994, and 1993, respectively. Effective
December 31, 1994, the ESOP was split into two plans: ESOP I, covering
employees of Thermo Electron's corporate office and its wholly owned
subsidiaries and ESOP II, covering employees of certain of Thermo
Electron's majority-owned subsidiaries, including the Company. Also,
effective December 31, 1994, the ESOP II plan was terminated and as a
result, the Company's employees are no longer eligible to participate in an
ESOP.
6. Income Taxes
The components of income before provision for income taxes and minority
interest are as follows:
(In thousands) 1995 1994 1993
--------------------------------------------------------------------------
Domestic $25,020 $17,761 $10,244
Foreign 3,710 1,563 1,402
------- ------- -------
$28,730 $19,324 $11,646
======= ======= =======
The components of the provision for income taxes are as follows:
(In thousands) 1995 1994 1993
--------------------------------------------------------------------------
Currently payable:
Federal $ 7,541 $ 5,390 $ 3,417
State 1,546 1,335 1,169
Foreign 1,783 998 111
------- ------- -------
10,870 7,723 4,697
------- ------- -------
Prepaid:
Federal (1,373) (331) (35)
State (343) (58) (13)
Foreign - - (26)
------- ------- -------
(1,716) (389) (74)
------- ------- -------
$ 9,154 $ 7,334 $ 4,623
======= ======= =======
The provision for income taxes that is currently payable does not
reflect $3,935,000, $668,000, and $300,000 of tax benefits of the Company
and its majority-owned subsidiaries allocated to capital in excess of par
value, directly or through the effect of majority-owned subsidiaries'
equity transactions, in 1995, 1994, and 1993, respectively, or $89,000 of
tax benefits used to reduce cost in excess of net assets of acquired
companies in 1993.
19PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal
income tax rates of 35% in 1995 and 1994 and 34% in 1993 to income before
provision for income taxes and minority interest due to the following:
(In thousands) 1995 1994 1993
--------------------------------------------------------------------------
Provision for income taxes at statutory rate $10,056 $ 6,763 $ 3,960
Increases (decreases) resulting from:
State income taxes, net of federal tax 782 830 763
Reduction in valuation allowance (854) - -
Gain on issuance of stock by subsidiary (1,206) - -
Tax-exempt investment income (115) (113) (215)
Tax benefit of foreign sales corporation (323) (833) -
Amortization of cost in excess of
net assets of acquired companies 232 296 199
Current losses of subsidiaries not
benefited and foreign tax rate
differential 485 363 1
Nondeductible expenses 137 88 54
Other, net (40) (60) (139)
------- ------- -------
$ 9,154 $ 7,334 $ 4,623
======= ======= =======
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1995 1994
----------------------------------------------------------------
Prepaid income taxes:
Inventory reserves $ 1,926 $ 1,328
Reserves and accruals 1,042 1,242
Warranty reserves 1,142 1,100
Federal tax loss carryforwards 1,016 964
State tax loss carryforwards 829 774
General business credit carryforward 260 132
Accrued compensation 1,013 881
Allowance for doubtful accounts 684 451
Available-for-sale investments (116) 364
Other, net 207 446
------- -------
8,003 7,682
Less: Valuation allowance 1,516 3,951
------- -------
$ 6,487 $ 3,731
======= =======
Deferred income taxes, net:
Trademarks and other intangible assets $ 1,627 $ 1,249
Available-for-sale investments - (502)
Difference in book and tax basis
of fixed assets 348 585
------- -------
$ 1,975 $ 1,332
======= =======
20PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The valuation allowance relates primarily to the uncertainty
surrounding the realizability of net operating loss and credit
carryforwards, and other tax assets of certain subsidiaries. The decrease
in the valuation allowance is due primarily to reduced uncertainty
surrounding the realizability of such future tax benefits and was recorded
in part as a reduction of the 1995 provision for income taxes and as an
increase to capital in excess of par value.
As of December 30, 1995, federal and state tax attributes existed at
Thermo Voltek, which are not consolidated for federal tax purposes. Thermo
Voltek had federal and state tax net operating loss carryforwards of
approximately $3,000,000 expiring in 1998 through 2006 and general business
credits of approximately $132,000 expiring in 1996 through 2004. These tax
assets and the related valuation allowance are included above. The
carryforwards of Thermo Voltek are limited to a tax benefit of
approximately $240,000 per year under Sections 382 and 383 of the U.S.
Internal Revenue Code.
The Company has not recognized a deferred tax liability for the
difference between the book basis and tax basis of the common stock of its
domestic subsidiaries (such difference relates primarily to unremitted
earnings and gains on issuance of stock by subsidiaries) because the
Company does not expect this basis difference to become subject to tax at
the parent level. The Company believes it can implement certain tax
strategies to recover its investment in its domestic subsidiaries tax-free.
A provision has not been made for U.S. or additional foreign taxes on
$3,371,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company currently
plans to keep these amounts permanently reinvested overseas. The Company
believes that any additional U.S. tax liability due upon remittance of such
earnings would be immaterial due to available U.S. foreign tax credits.
7. Commitments
The Company leases various office and manufacturing facilities under
noncancellable operating lease arrangements expiring between 1996 and 2003.
The accompanying statement of income includes expenses from operating
leases of $3,403,000, $2,081,000, and $882,000 in 1995, 1994, and 1993,
respectively. Future minimum payments due under noncancellable operating
leases as of December 30, 1995, are $3,291,000 in 1996; $2,326,000 in 1997;
$1,959,000 in 1998; $1,341,000 in 1999; $731,000 in 2000; and $419,000 in
2001 and thereafter. Total future minimum lease payments are $10,067,000.
21PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
8. Short- and Long-term Obligations and Other Financing Arrangements
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1995 1994
--------------------------------------------------------------------------
6 1/2% Subordinated convertible debentures,
due 1998, convertible at $10.42 per share $ 8,037 $14,435
3 3/4% Subordinated convertible debentures,
due 2000, convertible into shares of
Thermo Voltek at $11.75 per share 25,240 34,500
Noninterest-bearing subordinated convertible
debentures, due 1997, convertible into shares
of Thermo Cardiosystems at $21.74 per share 11,642 33,000
5 1/2% Subordinated convertible notes, due 2002,
convertible into shares of Thermo Cardiosystems
at $9.88 per share - 450
Other 282 166
------- -------
$45,201 $82,551
======= =======
The Company's convertible obligations are guaranteed on a subordinated
basis by Thermo Electron. The Company has agreed to reimburse Thermo
Electron in the event Thermo Electron is required to make a payment under
its guarantee of Thermo Voltek's or Thermo Cardiosystems' obligations.
In lieu of issuing shares of Thermo Voltek common stock upon the
conversion of the 3 3/4% subordinated convertible debentures due 2000,
Thermo Voltek has the option to pay holders of the debentures cash equal to
the weighted average market price of Thermo Voltek's common stock on the
trading date prior to conversion.
During 1995, 1994, and 1993, convertible obligations of $37,317,000,
9,745,000, and 9,190,000, respectively, were converted into common stock of
the Company.
See Note 13 for the fair value of the Company's long-term obligations.
The Company borrowed $38,000,000 from Thermo Electron pursuant to a
promissory note due December 1996, to partially finance the acquisition of
Orion in December 1995 (Note 3).
Several of the Company's foreign subsidiaries have lines of credit
under which an aggregate of approximately $13,800,000 may be borrowed at a
current rate as determined by each country's local market. The lines of
credit are denominated in local currency. Amounts borrowed under these
agreements are included in notes payable and current maturities of
long-term obligations in the accompanying balance sheet and are guaranteed
by either the Company or Thermo Electron. The weighted average interest
rate on these borrowings was 8.5% and 7.7% at year-end 1995 and 1994,
respectively.
9. Related Party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management,
certain employee benefit administration, tax advice and preparation of tax
22PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
returns, centralized cash management, and certain financial and other
services, for which the Company paid Thermo Electron annually an amount
equal to 1.20% of the Company's revenues in fiscal 1995 and 1.25% of the
Company's revenues in fiscal 1994 and 1993. Beginning in fiscal 1996, the
Company will pay an annual fee equal to 1.0% of the Company's revenues. The
annual fee is reviewed and adjusted annually by mutual agreement of the
parties. The corporate services agreement is renewed annually but can be
terminated upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron
Corporate Charter defines the relationships among Thermo Electron and its
majority-owned subsidiaries). In addition, the Company utilizes data
processing and contract administration services of two majority-owned
subsidiaries of Thermo Electron, which are charged based on actual usage.
For these services, as well as the administrative services provided by
Thermo Electron, the Company was charged $2,142,000, $1,964,000, and
$1,086,000 in 1995, 1994, and 1993, respectively. Management believes that
the service fees charged by Thermo Electron and its subsidiaries are
reasonable and that such fees are representative of the expenses the
Company would have incurred on a stand-alone basis. For additional items
such as employee benefit plans, insurance coverage, and other identifiable
costs, Thermo Electron charges the Company based upon costs attributable to
the Company.
Distribution Agreements
Pursuant to international distributorship agreements, the Company appointed
Arabian Business Machines Co. (ABM) and Olayan Financing Company (OFC) as
its exclusive distributors of the Company's security instruments in certain
Middle Eastern countries. ABM and OFC are members of The Olayan Group. Ms.
Hutham S. Olayan, a Director of Thermo Electron, is the President and a
Director of Olayan America Corporation and Competrol Real Estate Limited,
two other members of The Olayan Group, which are indirectly controlled by
Suliman S. Olayan, Ms. Olayan's father. Revenues recorded under this
agreement totaled $3,000, $42,000, and $33,000 in 1995, 1994, and 1993,
respectively. In addition, during 1994 the Company sold $1,240,000 of
security instruments directly to a customer in the Middle East and paid a
commission of $409,000 pursuant to the ABM distributor agreement.
Management Contract
Prior to 1994, the Company performed supervisory management services with
respect to International Technidyne Corporation (ITC), a wholly owned
subsidiary of Thermo Electron, in exchange for a fixed fee of $150,000 per
year, plus an incentive fee based on objective financial performance
criteria established on an annual basis by Thermo Electron and the Company.
Effective January 2, 1994, in lieu of the management fee, two executive
employees of the Company allocate a portion of their salary and bonus for
the time they devote to Thermo Electron in connection with certain
management responsibilities relating to ITC and Thermo Electron's other
biomedical businesses. In 1995, 1994, and 1993, the Company was reimbursed
$402,000, $84,000, and $266,000, respectively, under these arrangements.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
23PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
Short-term Available-for-sale Investments
At December 30, 1995, the Company's short-term available-for-sale
investments included $2,052,000 of 6 1/2% subordinated convertible
debentures due 1997, which were purchased on the open market for
$1,795,000. The debentures have a par value of $1,800,000 and were issued
by Thermo TerraTech Inc., a majority-owned subsidiary of Thermo Electron.
10. Contingency
Thermo Cardiosystems has received correspondence alleging that the textured
surface of its left ventricular-assist system's housing infringes the
intellectual property rights of another party. In general, an owner of
intellectual property can prevent others from using such property without a
license and is entitled to damages for unauthorized past usage. The Company
has investigated the bases of the allegation and, based on the opinion of
its counsel, believes that if Thermo Cardiosystems were sued on these
bases, it would have meritorious defenses.
11. Common Stock
At December 30, 1995, the Company had reserved 2,977,154 unissued shares of
its common stock for possible issuance under stock-based compensation plans
and possible issuance upon conversion of the 6 1/2% subordinated
convertible debentures (Note 15).
During 1994, the Company issued 66,265 shares of its common stock to
Thermo Electron in exchange for 124,800 shares of Thermo Voltek common
stock.
12. Transactions in Stock of Subsidiaries
During 1995, $9,111,000 principal amount of Thermo Voltek's subordinated
convertible debentures were converted into 775,399 shares of Thermo Voltek
common stock, resulting in gains of $3,455,000 from the issuance of stock
by subsidiary.
During 1995, $21,808,000 principal amount of Thermo Cardiosystems'
subordinated convertible obligations were converted into 1,027,984 shares
of Thermo Cardiosystems common stock. No gains were recorded on the
conversions of these convertible obligations as Thermo Cardiosystems was
principally engaged in research and development at the time the convertible
obligations were issued.
24PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
13. Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale investments, accounts receivable, notes
payable and current maturities of long-term obligations, accounts payable,
due to parent company, and long-term obligations. The carrying amounts of
these financial instruments, with the exception of available-for-sale
investments and long-term obligations, approximates fair value due to their
short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on quoted
market prices. See Note 2 for fair value information pertaining to these
financial instruments.
The fair value of long-term obligations was determined based on quoted
market prices. The fair value of convertible obligations at year-end 1995
exceeds the carrying amount primarily due to the market price of the
Company's or subsidiaries' common stock exceeding the conversion price of
the convertible obligations. The carrying amount and fair value of the
Company's long-term obligations are as follows:
1995 1994
--------------------- -----------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
-------------------------------------------------------------------------
Long-term
obligations:
Convertible
obligations $44,919 $95,589 $82,385 $78,284
Other long-term
obligations 282 282 166 166
------- ------- ------- -------
$45,201 $95,871 $82,551 $78,450
======= ======= ======= =======
25PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
14. Business Segments, Geographical Information and
Concentrations of Risk
The Company's principal businesses can be divided into two segments. The
Company's Instruments and Other Equipment segment develops, manufactures,
sells, and distributes precision equipment that weighs and inspects bulk
materials and packaged goods; electrochemistry, microweighing, and other
laboratory instruments; process detection instruments; explosives-detection
instruments; instruments that test electronic and electrical systems and
components for immunity to electromagnetic interference; high-voltage
power-conversion systems; and provides related consulting services. The
Company's Biomedical Products segment develops, manufactures, and sells
left ventricular-assist systems (LVAS) and other biomedical products.
The Company's Instruments and Other Equipment segment derived revenues
from precision weighing and inspection equipment of $67.5 million and $50.1
million in 1995 and 1994, respectively. In addition, this segment derived
revenues from process detection instruments of $16.2 million, $38.0
million, and $34.4 million and from electronic test instruments of $31.6
million, $19.0 million, and $13.2 million in 1995, 1994, and 1993,
respectively.
The Company's Biomedical Products segment derived revenues from LVAS
devices of $20.6 million, $10.4 million, and $3.5 million in 1995, 1994,
and 1993, respectively.
Certain raw materials used in the manufacture of Thermo Cardiosystems'
LVAS are available from only one supplier. While the Company believes that
it has adequate supplies of materials to meet demand for the LVAS for the
foreseeable future, no assurance can be given that the Company will not
experience shortages of certain materials in the future that could delay
shipments of the LVAS.
No customer represented 10% or more of the Company's total revenues in
1995. During 1994 and 1993, revenues derived from one customer represented
21% and 43% of the Company's total revenues, respectively.
26PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
14. Business Segments, Geographical Information and
Concentrations of Risk (continued)
Information for 1995, 1994, and 1993, with respect to the Company's
two business segments, is shown in the following table.
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------
Segment Information
Revenues:
Instruments and Other Equipment $136,742 $124,100 $ 60,120
Biomedical Products 39,012 31,011 20,100
-------- -------- --------
$175,754 $155,111 $ 80,220
======== ======== ========
Income before provision for income
taxes and minority interest:
Instruments and Other Equipment $ 14,778 $ 16,054 $ 10,733
Biomedical Products 7,128 1,337 (1,820)
Corporate (a) (2,462) (3,056) (1,849)
-------- -------- --------
Total operating income 19,444 14,335 7,064
Interest and other income, net 9,286 4,989 4,582
-------- -------- --------
$ 28,730 $ 19,324 $ 11,646
======== ======== ========
Identifiable assets:
Instruments and Other Equipment $213,755 $141,763 $ 84,302
Biomedical Products 128,170 117,475 82,209
Corporate and eliminations (b) 26,225 32,329 70,976
-------- -------- --------
$368,150 $291,567 $237,487
======== ======== ========
Depreciation and amortization:
Instruments and Other Equipment $ 4,040 $ 2,923 $ 1,235
Biomedical Products 1,609 1,256 1,132
Corporate 29 29 67
-------- -------- --------
$ 5,678 $ 4,208 $ 2,434
======== ======== ========
Capital expenditures:
Instruments and Other Equipment $ 2,669 $ 1,919 $ 2,389
Biomedical Products 1,715 1,278 1,039
Corporate 23 23 16
-------- -------- --------
$ 4,407 $ 3,220 $ 3,444
======== ======== ========
(a) Primarily general and administrative expenses.
(b) Primarily cash, cash equivalents, and short- and long-term
investments.
27PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
14. Business Segments, Geographical Information and
Concentrations of Risk (continued)
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------
Geographical Information
Revenues:
United States $127,729 $121,351 $ 79,001
Europe 43,018 31,640 6,918
Other 13,084 12,594 2,225
Transfer among geographical areas (c) (8,077) (10,474) (7,924)
-------- -------- --------
$175,754 $155,111 $ 80,220
======== ======== ========
Income before provision for income
taxes and minority interest:
United States $ 17,124 $ 15,292 $ 7,494
Europe 3,170 1,040 536
Other 1,612 1,059 883
Corporate (d) (2,462) (3,056) (1,849)
-------- -------- --------
Total operating income 19,444 14,335 7,064
Interest and other income, net 9,286 4,989 4,582
-------- -------- --------
$ 28,730 $ 19,324 $ 11,646
======== ======== ========
Identifiable assets:
United States $301,613 $225,569 $158,342
Europe 33,259 27,361 7,020
Other 7,053 6,308 1,149
Corporate and eliminations (e) 26,225 32,329 70,976
-------- -------- --------
$368,150 $291,567 $237,487
======== ======== ========
Export revenues included in United States
revenues above (f):
Europe $ 17,748 $ 21,455 $ 14,310
South America 5,357 9,011 14,728
Mexico 1,923 10,726 11,466
Other 15,098 14,412 3,686
-------- -------- --------
$ 40,126 $ 55,604 $ 44,190
======== ======== ========
(c) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(d) Primarily general and administrative expenses.
(e) Primarily cash, cash equivalents, and short- and long-term
investments.
(f) In general, export sales are denominated in U.S. dollars.
28PAGE
Thermedics Inc.
Notes to Consolidated Financial Statements
15. Subsequent Events
Transfer of Common Stock
On January 22, 1996, the Company issued 1,688,161 shares of its common
stock to Thermo Electron in exchange for 315,199 shares of Thermo Voltek
common stock and 529,965 shares of Thermo Cardiosystems common stock. The
shares of common stock were exchanged at their respective fair market
values on the date of the transaction.
Redemption of Convertible Debentures
On February 9, 1996, the Company called for redemption on March 11, 1996
all of the outstanding principal amount of its 6 1/2% subordinated
convertible debentures due 1998. The value of the securities into which the
debentures are convertible exceeded the redemption amount as of the notice
date of the redemption.
29PAGE
Report Of Independent Public Accountants
To the Shareholders and Board of Directors of Thermedics Inc.:
We have audited the accompanying consolidated balance sheets of Thermedics
Inc. (a Massachusetts corporation and 51%-owned subsidiary of Thermo
Electron Corporation) and subsidiaries as of December 30, 1995 and December
31, 1994, and the related consolidated statements of income, shareholders'
investment, and cash flows for each of the three years in the period ended
December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermedics Inc. and subsidiaries as of December 30, 1995 and December 31,
1994 and the results of their operations and their cash flows for each of
the three years in the period ended December 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements,
effective January 2, 1994, the Company changed its method of accounting for
investments in debt and marketable equity securities.
Arthur Andersen LLP
Boston, Massachusetts
February 7, 1996 (except with respect
to the matters discussed in Note 15
as to which the date is February 9, 1996)
30PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company's business can be divided into two segments: Instruments and
Other Equipment, and Biomedical Products. The Instruments and Other
Equipment segment includes Ramsey Technology, Inc., which was acquired in
March 1994 and was contributed by the Company in January 1996 to its newly
formed Thermo Sentron Inc. (Thermo Sentron) subsidiary in exchange for
shares of Thermo Sentron common stock. Thermo Sentron designs, develops,
manufactures, and sells high-speed precision weighing and inspection
equipment for industrial production and packaging lines. The Instruments
and Other Equipment segment also includes the Orion laboratory products
division (Orion) of Analytical Technology, Inc., which was acquired in
December 1995. Orion is a manufacturer of electrochemistry, microweighing,
process, and other instruments used to analyze the chemical compositions of
foods, beverages, and pharmaceuticals and detect contaminants in
environmental and high-purity water samples. The Instruments and Other
Equipment segment, through the Company's Thermedics Detection Inc.
(Thermedics Detection) subsidiary, also develops, manufactures, and markets
high-speed detection instruments, including the Alexus(R) system, a process
detection instrument used in product quality assurance applications, and
the EGIS(R) system, a security instrument used to detect explosives at
airports and other locations. Through the Company's Thermo Voltek Corp.
(Thermo Voltek) subsidiary, the Instruments and Other Equipment segment
also manufactures a line of electronic test instruments and high-voltage
power conversion systems.
As part of its Biomedical Products segment, the Company's Thermo
Cardiosystems Inc. (Thermo Cardiosystems) subsidiary has developed two
implantable left ventricular-assist systems (LVAS): a pneumatic, or
air-driven system, and an electric version. In October 1994, the Company
announced that the U.S. Food and Drug Administration (FDA) granted approval
for the commercial sale of the air-driven LVAS for use as a
bridge-to-transplant. With this approval, the air-driven system became
available for sale to cardiac centers throughout the United States. Thermo
Cardiosystems received the European Conformity Mark (CE Mark) for
commercial sale of the air-driven LVAS in all European Community countries
in April 1994, and, in August 1995, received the same approval for the
electric system. The electric version of the LVAS is currently being used
in the U.S. in clinical trials for patients awaiting heart transplants and,
late in 1995, the FDA approved the protocol for conducting clinical trials
of the electric LVAS as an alternative to heart transplant. Thermo
Cardiosystems' electric LVAS is being used in Europe as a
bridge-to-transplant and as an alternative to heart transplant. According
to terms set by the FDA, no profit can be earned from the sale of an LVAS
until the FDA has approved the device for commercial sale. With FDA
approval, the Company began earning a profit on the sale of its air-driven
LVAS in the fourth quarter of 1994. In October 1994, Thermo Cardiosystems
announced a price increase in the U.S. for its air-driven LVAS that was
phased in during a six-month period that more than doubled the average
price of the air-driven LVAS. The Company also develops and manufactures
enteral nutrition delivery systems and a line of medical-grade polymers,
used in medical disposables and nonmedical, industrial applications,
including safety glass and automotive coatings.
Approximately 27% of the Company's revenues originate outside of the
U.S. Although the Company seeks to charge its customers in the same
currency as its operating costs, the Company's financial performance and
31PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Overview (continued)
competitive position can be affected by currency exchange rate fluctuations
affecting the relationship between the U.S. dollar and foreign currencies.
Where appropriate, the Company uses forward contracts to reduce its
exposure to currency fluctuations.
In October 1995, the Financial Accounting Standards Board (FASB)
issued an exposure draft of a Proposed Statement of Financial Accounting
Standards, "Consolidated Financial Statements: Policy and Procedures"
(Proposed Statement). The Proposed Statement would establish new rules for
how consolidated financial statements should be prepared. If the Proposed
Statement is adopted, there could be significant changes in the way the
Company records certain transactions of its controlled subsidiaries,
including the following: (i) any sale of the stock of a subsidiary that
does not result in a loss of control would be accounted for as a
transaction in equity of the consolidated entity with no gain or loss being
recorded and (ii) under certain circumstances acquisitions could be
structured to significantly reduce the goodwill that is recorded and
consequently reduce the Company's future goodwill amortization associated
with the acquisition. The Company typically acquires technology companies
which are often characterized by significant amounts of goodwill. In
addition, under the Proposed Statement, a company that has made certain
equity investments of generally less than 20% ownership would record a gain
(or loss) upon increasing its investment level to the point of exerting
"significant influence," generally 20% or higher.
The FASB conducted a hearing concerning the Proposed Statement in
February 1996, at which Thermo Electron, along with other major companies
and many of the major accounting firms and accounting associations,
expressed their disagreement with various parts of the Proposed Statement.
The FASB expects to issue a final Statement by June 30, 1996, which could
become effective for fiscal years beginning after December 15, 1996.
Results of Operations
1995 Compared With 1994
Total revenues in 1995 were $175.8 million, compared with $155.1 million in
1994. Instruments and Other Equipment segment revenues increased 10% to
$136.7 million in 1995 from $124.1 million in 1994. Revenues increased
$17.4 million due to the inclusion of sales for a full year from Thermo
Sentron, which was acquired in March 1994. Revenues from Thermo Voltek
increased $12.7 million, due to the inclusion of an additional $7.2 million
in revenues from businesses acquired in 1994 and 1995, an increase of $3.1
million in revenues from Comtest due primarily to the introduction of a new
product line in 1995, and an increase of $2.3 million in revenues from
Keytek due to greater demand. Revenues at Thermedics Detection were $28.0
million in 1995, compared with $50.3 million in 1994. Revenues from
Thermedics Detection's process detection instruments declined to $16.2
million in 1995 from $38.0 million in 1994. This decline is due to a
decrease in demand from Thermedics Detection's principal customer, which
has substantially completed its deployment of Alexus product quality
assurance systems. While the Company has expanded its customer base and
continues to develop Alexus upgrades and new applications for its process
detection technology in the food and beverage market, no assurance can be
32PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
1995 Compared With 1994 (continued)
given that the Company will be able to significantly broaden the market for
its process detection systems.
Revenues from Thermedics Detection's EGIS explosives-detection system
declined to $8.0 million in 1995 from $10.1 million in 1994. The Company's
sales of the EGIS system have been made primarily to government entities
outside of the U.S. During 1993 and 1994, large orders from the U.K. and
German governments accounted for a significant portion of EGIS sales. These
orders have now been filled. Demand for this highly specialized product
will vary widely over time in a particular country, and among different
countries, due to many factors beyond the control of the Company, such as
budgetary constraints and social and political concerns about security. Due
to the nature of demand for the EGIS system, future sales levels will
depend, to a significant extent, upon the Company's ability to obtain large
orders from one or more government entities.
Biomedical Products segment revenues increased 26% to $39.0 million in
1995 from $31.0 million in 1994. Revenues from Thermo Cardiosystems
increased by $10.2 million to $20.6 million due in part to an increase in
the price of the LVAS. Revenues also increased due to a 43% increase in the
number of air-driven and electric LVAS units shipped during 1995 compared
with 1994. The increase in revenues from Thermo Cardiosystems was partially
offset by a decline of $2.8 million in revenues from Scent Seal fragrance
samplers. In June 1995, the Company entered into an agreement granting an
exclusive license to all of its patents and know-how relating to the Scent
Seal fragrance samplers to a third party in consideration for royalty
payments on future sales by the licensee. The Company recorded royalty
income of $197,000 in 1995.
The gross profit margin was 45% in 1995, compared with 44% in 1994.
The gross profit margin for the Instruments and Other Equipment segment was
43% in 1995, compared with 44% in 1994. This decline was due primarily to
lower gross margins at Thermedics Detection as a result of a lower sales
volume and, to a lesser extent, the inclusion of lower-margin research and
development contract revenues. In addition, Thermo Voltek's gross profit
margin decreased to 48% in 1995 from 49% in 1994 due primarily to higher
European sales in one product line, which has lower margins due to
competitive pricing pressures. These decreases were offset in part by
improved gross profit margins at Thermo Sentron due to a reduction in
operating expenses. The gross profit margin for the Biomedical Products
segment was 49% in 1995, compared with 42% in 1994, reflecting higher
margins at Thermo Cardiosystems resulting from the LVAS price increase and,
to a lesser extent, the increase in sales volume and improvements in
manufacturing efficiencies.
Selling, general and administrative expenses as a percentage of
revenues decreased to 27% in 1995 from 28% in 1994. This decline results
primarily from lower expenses as a percentage of revenues at Thermo
Cardiosystems as a result of a higher sales volume in 1995 and, to a lesser
extent, a reduction in operating expenses at Thermo Sentron. These
improvements were partially offset by higher expenses as a percentage of
revenues at Thermedics Detection due to a lower sales volume in 1995.
Research and development expenses as a percentage of revenues decreased to
6.3% in 1995 from 6.7% in 1994 due primarily to lower expenses as a
percentage of revenues at Thermo Cardiosystems as a result of an increase
in total revenues.
33PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
1995 Compared With 1994 (continued)
Interest income increased to $9.1 million in 1995 from $7.3 million in
1994 due to higher prevailing interest rates in 1995. Interest expense
increased to $3.7 million in 1995 from $3.2 million in 1994 as a result of
borrowings by Thermo Sentron's and Thermo Voltek's foreign subsidiaries,
offset in part by a decrease in interest expense due to conversions of
subordinated convertible obligations.
Gain on issuance of stock by subsidiary of $3.5 million in 1995
resulted from the conversion of $9.1 million principal amount of Thermo
Voltek's 3 3/4% subordinated convertible debentures.
The effective tax rate was 32% in 1995, compared with 38% in 1994. The
effective tax rate in 1995 was below the statutory federal income tax rate
due primarily to the nontaxable gain on issuance of stock by subsidiary and
the reduction of the valuation allowance no longer required, offset in part
by state income taxes (Note 6). The effective tax rate in 1994 was higher
than the statutory federal income tax rate due primarily to state income
taxes.
Minority interest expense increased to $4.5 million in 1995 from $1.2
million in 1994 due to higher net income at the Company's 52%-owned Thermo
Cardiosystems subsidiary and, to a lesser extent, the Company's 50%-owned
Thermo Voltek subsidiary.
1994 Compared With 1993
Total revenues in 1994 were $155.1 million, compared with $80.2 million in
1993, an increase of 93%. Instruments and Other Equipment segment revenues
more than doubled in 1994 to $124.1 million from $60.1 million in 1993.
This increase reflects the inclusion of $50.1 million in revenues from
Thermo Sentron, which was acquired in March 1994, $4.6 million in
additional revenues from Comtest, which was acquired by Thermo Voltek in
August 1993, and an increase of $4.1 million in revenues from the Company's
EGIS explosives-detection systems. Process detection instrument sales,
principally to one customer, were $38.0 million in 1994, compared with
$34.4 million in 1993.
Biomedical Products segment revenues increased 54% to $31.0 million in
1994 from $20.1 million in 1993. The improvement is primarily the result of
a $6.9 million increase in sales of Thermo Cardiosystems' LVAS to $10.4
million and additional revenues of $3.0 million from Scent Seal fragrance
samplers, which were introduced in the first quarter of 1993.
The Company's gross profit margin remained relatively unchanged at 44%
in 1994 and 43% in 1993. The gross profit margin for the Instruments and
Other Equipment segment remained unchanged at 44% in both 1994 and 1993.
Improved efficiencies in the worldwide service organization for process
detection instruments and, to a lesser extent, improved margins at
Universal Voltronics as a result of increased commercial sales relative to
lower-margin government contract revenues were offset by the inclusion of
lower-margin Thermo Sentron revenues. The gross profit margin for the
Biomedical Products segment was 42% in 1994, compared with 38% in 1993,
reflecting higher margins derived from Thermo Cardiosystems' LVAS due to
higher sales, manufacturing efficiencies, and the initial impact of the
price increase for the air-driven system which took effect in the fourth
quarter of 1994.
Operating income, before the inclusion of Thermo Cardiosystems'
results, was $15.3 million in 1994, compared with $10.2 million in 1993.
34PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
1994 Compared With 1993 (continued)
This improvement results primarily from higher sales, which resulted in
higher gross profit. Including Thermo Cardiosystems' operating losses of
$0.9 million in 1994 and $3.2 million in 1993, the Company reported
operating income of $14.3 million in 1994, compared with $7.1 million in
1993. Thermo Cardiosystems' lower operating loss resulted primarily from an
increased gross profit margin on higher revenues, partially offset by
increased expenses to develop and market its LVAS.
Interest income increased to $7.3 million in 1994 from $6.1 million in
1993. This increase is due to higher average invested amounts derived from
the issuance of $34.5 million principal amount of 3 3/4% subordinated
convertible debentures by Thermo Voltek in November 1993, and the issuance
of $33.0 million principal amount of noninterest-bearing subordinated
convertible debentures by Thermo Cardiosystems in January 1994. This
increase was offset in part by cash expended for the acquisition of Thermo
Sentron in March 1994. Interest expense increased to $3.2 million in 1994
from $2.4 million in 1993 due to the issuance of the 3 3/4% subordinated
convertible debentures by Thermo Voltek, partially offset by conversions of
the Company's 6 1/2% subordinated convertible debentures.
Other income includes $635,000 in 1994 relating to foreign currency
transaction gains.
The effective tax rate was 38% in 1994 and 40% in 1993. These rates
exceed the statutory federal income tax rate due primarily to state income
taxes (Note 6).
Liquidity and Capital Resources
Working capital, including cash, cash equivalents, and short-term
available-for-sale investments, was $110.1 million at December 30, 1995,
compared with $128.3 million at December 31, 1994. Cash, cash equivalents,
and short- and long-term available-for-sale investments were $155.2 million
at December 30, 1995, compared with $154.1 million at December 31, 1994. Of
the $155.2 million balance at December 30, 1995, $90.5 million was held by
Thermo Cardiosystems, $34.7 million by Thermo Voltek, and the remainder by
the Company and its wholly owned subsidiaries. During 1995, $14.9 million
of cash was provided by operating activities and the Company expended $4.4
million on purchases of property, plant and equipment.
In December 1995, the Company acquired Orion for approximately $52.7
million in cash, which included the repayment of $8.6 million of debt,
subject to a post-closing adjustment. To partially finance this
acquisition, the Company borrowed $38.0 million from Thermo Electron
pursuant to a promissory note due December 1996, and bearing interest at
the Commercial Paper Composite Rate plus 25 basis points. The balance of
the purchase price was funded from the Company's working capital. In
January 1996, the Company acquired the assets of Moisture Systems
Corporation, based in Hopkinton, Massachusetts, and certain affiliated
companies, as well as Netherlands-based Rutter & Co., for a total purchase
price of $20.5 million in cash and the assumption of certain liabilities.
In connection with these acquisitions, the Company borrowed $15.0 million
from Thermo Electron pursuant to a promissory note due February 1997, and
bearing interest at the Commercial Paper Composite Rate plus 25 basis
points. Thermo Electron has indicated its intention to require the
Company's indebtedness to Thermo Electron be repaid to the extent the
Company's liquidity and cash flow permit. On February 1, 1996, Thermo
35PAGE
Thermedics Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Liquidity and Capital Resources (continued)
Sentron filed a registration statement under the Securities Act of 1933
with the Securities and Exchange Commission covering shares of common stock
to be offered in its initial public offering.
The Company intends, for the foreseeable future, to maintain at least
50% ownership of Thermo Cardiosystems, Thermo Voltek and Thermo Sentron.
This may require the purchase by the Company of additional shares of common
stock or, if applicable, convertible debentures (which are then converted)
of these companies from time to time, if the number of the companies'
outstanding shares increases, whether as a result of conversion of
convertible notes or exercise of stock options issued by them, or
otherwise. These or any other purchases may be made either in the open
market or directly from Thermo Cardiosystems, Thermo Voltek or Thermo
Sentron, or pursuant to the conversion of all or part of Thermo Voltek's
subordinated convertible notes held by Thermedics. During 1995, the Company
expended $179,000 to purchase shares of Thermo Voltek common stock on the
open market.
In 1996, the Company expects to make capital expenditures of
approximately $6.6 million. The Company expects to continue to pursue its
strategy of expanding its business both through the continued development,
manufacture, and sale of new products, and through the possible acquisition
of companies that will provide additional marketing or manufacturing
capabilities and new products. The Company expects that it will finance
these acquisitions through a combination of internal funds, additional debt
or equity financing from the capital markets, or short-term borrowings from
Thermo Electron. The Company believes its existing resources are sufficient
to meet the capital requirements of its existing operations for the
foreseeable future.
36PAGE
Thermedics Inc.
Selected Financial Information
(In thousands
except per share amounts) 1995(a) 1994(b) 1993(c) 1992(d) 1991
- ------------------------------------------------------------------------------
Statement of Income Data:
Revenues $175,754 $155,111 $ 80,220 $ 45,778 $ 32,295
Net income 15,121 10,837 6,670 2,467 1,613
Earnings per share .45 .33 .22 .09 .06
Balance Sheet Data:
Working capital $110,113 $128,330 $133,003 $ 63,205 $ 78,359
Total assets 368,150 291,567 237,487 146,663 128,880
Long-term obligations 45,201 82,551 59,130 33,820 34,315
Common stock of subsidiary
subject to redemption - - - 5,468 5,486
Shareholders' investment 167,010 131,765 117,451 69,323 73,510
Quarterly Information (Unaudited)
(In thousands except per share amounts)
1995 First Second Third Fourth(a)
- -------------------------------------------------------------------------------
Revenues $ 43,858 $ 43,268 $ 41,224 $ 47,404
Gross profit 19,572 19,553 17,595 21,744
Net income 3,262 3,666 4,017 4,176
Earnings per share .10 .11 .12 .12
1994 First(b) Second Third Fourth
- -------------------------------------------------------------------------------
Revenues $ 27,293 $ 42,403 $ 41,578 $ 43,837
Gross profit 11,637 17,593 18,479 19,805
Net income 2,152 2,510 2,886 3,289
Earnings per share .07 .08 .09 .10
(a) Reflects the December 1995 acquisition of the Orion laboratory products
division of Analytical Technology, Inc.
(b) Reflects the January 1994 issuance of $33.0 million principal amount of
noninterest-bearing subordinated convertible debentures by Thermo
Cardiosystems Inc. and the March 1994 acquisition of Ramsey Technology, Inc.
(c) Reflects the May 1993 public offering of the Company's common stock for net
proceeds of $30.0 million, the August 1993 acquisition of Comtest
Instrumentation B.V. and Comtest Limited, and the November 1993 issuance of
$34.5 million principal amount of 3 3/4% subordinated convertible debentures
by Thermo Voltek Corp.
(d) Reflects the June 1992 acquisition of KeyTek Instrument.
37PAGE
Thermedics Inc.
Common Stock Market Information
The following table shows the market range for the Company's common stock
based on reported sales prices on the American Stock Exchange (symbol TMD)
for 1995 and 1994.
1995 1994
----------------- ----------------
Quarter High Low High Low
-----------------------------------------------------------------------
First $17 1/2 $12 1/2 $15 $11 7/8
Second 20 1/2 15 1/2 15 7/8 12
Third 21 3/4 17 3/4 15 7/8 12 7/8
Fourth 28 17 1/2 16 1/8 12 3/8
As of January 26, 1996, the Company had 2,328 holders of record of its
common stock. This does not include holdings in street or nominee names.
The closing market price on the American Stock Exchange for the Company's
common stock on January 26, 1996 was $26 1/4 per share.
Common stock of the following majority-owned public subsidiaries is
traded on the American Stock Exchange: Thermo Cardiosystems Inc. (symbol
TCA) and Thermo Voltek Corp. (symbol TVL).
Stock Transfer Agent
The Bank of Boston is the stock transfer agent and maintains shareholder
activity records. The agent will respond to questions on issuances of stock
certificates, changes of ownership, lost stock certificates, and changes of
address. For these and similar matters, please direct inquiries to:
The Bank of Boston
P.O. Box 644
Mail Stop: 45-02-09
Boston, Massachusetts 02102-0644
(617) 575-3120
Dividend Policy
The Company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use
earnings to finance expansion and growth. Payment of dividends will rest
within the discretion of the Company's Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
38PAGE
Thermedics Inc.
Shareholder Services
Shareholders of Thermedics Inc. who desire information about the Company
are invited to contact John N. Hatsopoulos, Chief Financial Officer,
Thermedics Inc., 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts
02254-9046, (617) 622-1111. A mailing list is maintained to enable
shareholders whose stock is held in street name, and other interested
individuals, to receive quarterly reports, annual reports, and press
releases as quickly as possible. Quarterly reports and press releases will
also be available through the Internet at Thermo Electron's home page on
the World Wide Web (http://www.thermo.com).
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended December
30, 1995, as filed with the Securities and Exchange Commission, may be
obtained at no charge by writing to John N. Hatsopoulos, Chief Financial
Officer, Thermedics Inc., 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, May 20, 1996, at
1:15 p.m. at the Turnberry Isle Resort & Club, Aventura, Florida.