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 September 27, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-14262
THERMOQUEST CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0407461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2215 Grand Avenue Parkway
Austin, Texas 78728-3812
(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 September 27, 1997
---------------------------- ---------------------------------
Common Stock, $.01 par value 50,957,965
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOQUEST CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
September 27, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 70,058 $174,978
Available-for-sale investments, at quoted
market value (amortized cost of $1,661
and $7,430) 1,663 7,452
Accounts receivable, less allowances of
$4,464 and $4,459 105,299 73,669
Inventories:
Raw materials and supplies 22,971 10,923
Work in process and finished goods 49,253 43,089
Prepaid expenses 2,442 1,003
Prepaid income taxes 12,860 11,469
-------- --------
264,546 322,583
-------- --------
Property, Plant, and Equipment, at Cost 87,675 67,225
Less: Accumulated depreciation and
amortization 20,795 16,297
-------- --------
66,880 50,928
-------- --------
Patents and Other Assets 3,180 4,368
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 3) 261,370 157,191
-------- --------
$595,976 $535,070
======== ========
2PAGE
THERMOQUEST CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 27, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 13,303 $ 16,732
Accounts payable 23,794 18,249
Accrued payroll and employee benefits 18,532 15,339
Accrued installation and warranty expenses 12,428 9,899
Deferred revenue 9,853 9,353
Customer deposits 3,537 6,542
Accrued income taxes 18,778 14,290
Other accrued expenses 19,058 14,475
Due to parent company and affiliates 8,125 839
-------- --------
127,408 105,718
-------- --------
Deferred Income Taxes 5,405 5,405
-------- --------
Accrued Pension and Other Deferred Items 14,583 16,340
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 84,250 96,250
Other 8,021 8,343
-------- --------
92,271 104,593
-------- --------
Shareholders' Investment (Note 4):
Common stock, $.01 par value, 100,000,000
shares authorized; 50,958,072 and
48,450,000 shares issued 510 485
Capital in excess of par value 298,707 261,921
Retained earnings (Note 3) 65,851 39,787
Treasury stock at cost, 107 shares in 1997 (2) -
Cumulative translation adjustment (8,758) 807
Net unrealized gain on available-for-sale
investments 1 14
-------- --------
356,309 303,014
-------- --------
$595,976 $535,070
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $109,303 $ 78,155
-------- --------
Costs and Operating Expenses:
Cost of revenues 56,716 40,395
Selling, general, and administrative
expenses 27,197 20,728
Research and development expenses 7,209 5,822
-------- --------
91,122 66,945
-------- --------
Operating Income 18,181 11,210
Interest Income 2,592 2,519
Interest Expense (includes $1,484 to parent
company in 1997; Note 3) (3,242) (1,902)
-------- --------
Income Before Provision for Income Taxes 17,531 11,827
Provision for Income Taxes 7,620 5,099
-------- --------
Net Income $ 9,911 $ 6,728
======== ========
Earnings per Share:
Primary $ .20 $ .14
======== ========
Fully diluted $ .19 $ .14
======== ========
Weighted Average Shares:
Primary 50,580 48,450
======== ========
Fully diluted 56,486 54,436
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $315,198 $227,146
-------- --------
Costs and Operating Expenses:
Cost of revenues 164,616 120,529
Selling, general, and administrative
expenses 77,453 57,544
Research and development expenses 21,172 16,605
-------- --------
263,241 194,678
-------- --------
Operating Income 51,957 32,468
Interest Income (includes $420 from related
party in 1997) 8,547 6,528
Interest Expense (includes $3,126 to parent
company in 1997; Note 3) (8,405) (5,501)
-------- --------
Income Before Provision for Income Taxes 52,099 33,495
Provision for Income Taxes 22,672 14,238
-------- --------
Net Income $ 29,427 $ 19,257
======== ========
Earnings per Share:
Primary $ .59 $ .41
======== ========
Fully diluted $ .56 $ .40
======== ========
Weighted Average Shares:
Primary 49,795 47,419
======== ========
Fully diluted 55,938 53,510
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 29,427 $ 19,257
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,416 6,948
Provision for losses on accounts
receivable 716 56
Other noncash expenses 862 1,060
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (19,827) 6,110
Inventories (2,714) (1,908)
Other current assets (52) (581)
Accounts payable 5,378 (1,654)
Other current liabilities (526) 7,406
Other 760 1,189
--------- ---------
Net cash provided by operating activities 24,440 37,883
--------- ---------
Investing Activities:
Acquisitions, net of cash acquired (Note 3) (154,304) (32,408)
Purchases of available-for-sale investments - (7,250)
Proceeds from sale and maturities of
available-for-sale investments 5,600 -
Purchases of property, plant, and equipment (4,028) (3,160)
Proceeds from sale of property, plant,
and equipment 2,516 346
Other 164 (245)
--------- ---------
Net cash used in investing activities (150,052) (42,717)
--------- ---------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 4) 24,981 47,778
Decrease in short-term obligations (2,049) (1,844)
Repayment of long-term obligations (1,465) (1,016)
Other - (143)
--------- ---------
Net cash provided by financing activities $ 21,467 $ 44,775
--------- ---------
6PAGE
THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (775) $ (742)
--------- ---------
Increase (Decrease) in Cash and Cash
Equivalents (104,920) 39,199
Cash and Cash Equivalents at Beginning
of Period 174,978 120,354
--------- ---------
Cash and Cash Equivalents at End of Period $ 70,058 $ 159,553
========= =========
Noncash Activities:
Fair value of assets of acquired companies $ 185,634 $ 69,651
Cash paid for acquired companies (160,411) (33,148)
Stock issuable to parent company for
acquired companies (16) -
--------- ---------
Liabilities assumed of acquired companies $ 25,207 $ 36,503
========= =========
Conversions of convertible debentures $ 12,000 $ -
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
THERMOQUEST CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoQuest Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
September 27, 1997, the results of operations for the three- and
nine-month periods ended September 27, 1997, and September 28, 1996, and
the cash flows for the nine-month periods ended September 27, 1997, and
September 28, 1996. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 28, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 28,
1996, filed with the Securities and Exchange Commission.
2. Presentation
Certain amounts in 1996 have been reclassified to conform to the
presentation in the 1997 financial statements.
3. Acquisitions
In March 1997, Thermo Instrument Systems Inc. (Thermo Instrument)
acquired approximately 95% of the outstanding shares of Life Sciences
International PLC (Life Sciences), a London Stock Exchange-listed
company. Subsequently, Thermo Instrument acquired the remaining shares of
Life Sciences' capital stock. In July 1997, the Company agreed to acquire
three business units within Life Sciences' Laboratory Products Group, as
well as Life Sciences' Hypersil operations, from Thermo Instrument. The
Laboratory Products businesses develop, manufacture, and sell laboratory
equipment and supplies to the research and analytical chemistry
laboratory marketplace. Hypersil develops, manufactures, and sells liquid
chromatography media and columns used in high performance liquid
chromatography in the pharmaceutical, food and beverage, chemical
production, and forensic science markets, and for many other applications
in analytical laboratories. The aggregate purchase price for the
Laboratory Products businesses and Hypersil was approximately $160.4
million, which consisted of: (i) $107.3 million in cash, (ii) 1,000
shares of the Company's common stock valued at $15,750, and (iii) the
assumption of $53.1 million of debt payable to Thermo Instrument. The
purchase price represents the sum of the net tangible book value of the
Laboratory Products businesses and Hypersil as of June 28, 1997, plus a
percentage of Thermo Instrument's total cost in excess of net assets
acquired associated with its acquisition of Life Sciences, based on the
aggregate 1996 revenues of the Laboratory Products businesses and
8PAGE
THERMOQUEST CORPORATION
3. Acquisitions (continued)
Hypersil relative to Life Sciences' 1996 consolidated revenues. The cash
portion of the purchase price, which was paid in September 1997 together
with interest calculated at the 90-day Commercial Paper Composite Rate
plus 25 basis points, is subject to a post-closing adjustment based on
final determination of the net tangible book value of the acquired
businesses and a final calculation of Thermo Instrument's total cost in
excess of net assets acquired associated with the acquisition of Life
Sciences. The 1,000 shares of common stock to be issued to Thermo
Instrument will be issued as soon as they are listed on the American
Stock Exchange.
Because the Company, the Laboratory Products businesses, and Hypersil
were deemed for accounting purposes to be under control of their common
majority owner, Thermo Instrument, the transaction has been accounted for
in a manner similar to a pooling of interests. Accordingly, the Company's
1997 historical financial information has been restated to include the
results of the Laboratory Products businesses and Hypersil from March 12,
1997, the date these businesses were acquired by Thermo Instrument. The
purchase price included $3.4 million for the increase in the net book
value from the date the businesses were acquired by Thermo Instrument to
June 28, 1997. This amount was recorded as a reduction in retained
earnings.
The cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by approximately $111 million, which is being
amortized over 40 years. Allocation of the purchase price for these
acquisitions was based on estimates of the fair value of the net assets
acquired and is subject to adjustment upon finalization of the purchase
price allocation.
Based on unaudited data, the following table presents selected
financial information of the Company, the Laboratory Products businesses,
and Hypersil on a pro forma basis, assuming the companies had been
combined since the beginning of 1996.
Three Nine
Months Ended Months Ended
------------- -----------------------------
(In thousands except September 28, September 27, September 28,
per share amounts) 1996 1997 1996
------------------------------------------------------------------------
Revenues $113,752 $338,501 $331,774
Net income 7,777 27,197 19,868
Earnings per share:
Primary .16 .55 .42
Fully diluted .16 .52 .41
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the Laboratory Products businesses and Hypersil been made
at the beginning of 1996.
9PAGE
THERMOQUEST CORPORATION
4. Sale of Shares
In March 1997, the Company sold 1,768,500 shares of its common stock
for net proceeds of $24.8 million.
5. Litigation
The Company's Finnigan Corporation (Finnigan) subsidiary has filed
complaints against Bruker-Franzen Analytik GmbH and its U.S. affiliate
(Bruker), and Hewlett-Packard Company (Hewlett-Packard), for alleged
violation of two key U.S. patents owned by Finnigan. The patents pertain
to methods used in ion-trap mass spectrometers.
One of Finnigan's complaints was filed in the United States District
Court for the District of Massachusetts and the other was filed with the
United States International Trade Commission (ITC) in Washington, DC.
Finnigan has asked for damages to compensate for the infringements, for
injunctions against further infringement, and for an order excluding
further imports into the U.S. of ion-trap mass spectrometers that use the
patented methods.
The ITC has instituted an investigation in response to Finnigan's
complaint, and is expected to complete that investigation by April 1998.
The District Court action has, at the request of Hewlett-Packard and
Bruker, been stayed pending completion of the ITC investigation.
Bruker presented counterclaims in the ITC investigation. The
counterclaims, which have been removed to the District Court in
Massachusetts, allege that the Finnigan patents are invalid and
unenforceable and are not infringed by the mass spectrometers co-marketed
by Bruker. They also allege that Finnigan has violated U.S. and
Massachusetts antitrust laws and engaged in unfair competition by
attempting to maintain a monopoly position and restrain trade through
enforcement of allegedly fraudulently obtained patents. Bruker has asked
for judgment consistent with its counterclaims, and for three times the
antitrust damages (including attorneys' fees) it has sustained.
There can be no assurance as to the outcome of these matters.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended,
10PAGE
THERMOQUEST CORPORATION
for the year ended December 28, 1996, filed with the Securities and
Exchange Commission.
Overview
The Company develops, manufactures, and sells analytical products
including mass spectrometers, liquid chromatographs, and gas
chromatographs. These analytical instruments are used in the quantitative
and qualitative chemical analysis of organic and inorganic compounds at
ultra-trace levels of detection. The Company's analytical products are
used primarily by pharmaceutical companies for drug research, testing,
and quality control; by environmental laboratories for testing water,
air, and soil samples for compliance with environmental regulations; by
chemical companies for research and quality control; by manufacturers for
testing in certain industrial applications, such as the manufacture of
silicon chips, and for quality control; by food and beverage companies
for quality control and to test for product contamination; and in
forensic applications.
Effective March 12, 1997, the Company acquired three business units
within the Laboratory Products Group of Life Sciences International (Life
Sciences), as well as Life Sciences' Hypersil operations, from Thermo
Instrument Systems Inc. (Thermo Instrument; Note 3). The Laboratory
Products businesses develop, manufacture, and sell scientific equipment
including centrifuges, ultra low-temperature freezers, incubators,
orbital shakers, vacuum concentrators, and electrophoresis equipment.
These products are used in a variety of laboratories, including
pharmaceutical, medical, industrial, and environmental laboratories
worldwide. Hypersil develops, manufactures, and sells liquid
chromatography media and columns used in high performance liquid
chromatography. These products are sold to a variety of laboratories
worldwide, including pharmaceutical, industrial, and research
laboratories, and to the food and beverage industry.
The Company sells its products on a worldwide basis. Although the
Company seeks to charge its customers in the same currency as its
operating costs, the Company's financial performance and competitive
position can be affected by currency exchange rate fluctuations. Where
appropriate, the Company uses forward contracts to reduce its exposure to
currency fluctuations.
Results of Operations
Third Quarter 1997 Compared With Third Quarter 1996
Revenues increased 40% to $109.3 million in the third quarter of 1997
from $78.2 million in the third quarter of 1996. Revenues increased $38.6
million due to the acquisition of three business units within Life
Sciences' Laboratory Products Group, as well as Life Sciences' Hypersil
operations, from Thermo Instrument, effective March 12, 1997 (Note 3).
This increase in revenues was offset in part by a decrease of $5.8
million in revenues due to the strengthening of the U.S. dollar relative
to foreign currencies in countries in which the Company operates and a
decrease in revenues from the Company's existing businesses, primarily
11PAGE
THERMOQUEST CORPORATION
Third Quarter 1997 Compared With Third Quarter 1996 (continued)
due to lower revenues from the Company's German sales operations as a
result of an economic downturn in Germany.
The gross profit margin was 48.1% in the third quarter of 1997,
compared with 48.3% in the third quarter of 1996. An increase in the
gross profit margin primarily due to a shift in product mix was offset by
the inclusion of lower-margin revenues from the Laboratory Products
businesses. The gross profit margin for the Laboratory Products
businesses was 40% in the third quarter of 1997. The Company's goal is to
increase the gross profit margin at the Laboratory Products businesses by
improving product mix and manufacturing efficiencies, although there can
be no assurance that the Company will be successful in these efforts.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 24.9% in the third quarter of 1997 from 26.5% in
the third quarter of 1996, primarily due to lower selling costs
associated with the Laboratory Products businesses. Research and
development expenses as a percentage of revenues decreased to 6.6% in
1997 from 7.4% in 1996, primarily due to lower research and development
expenditures as a percentage of revenues at the Laboratory Products
businesses.
Interest income was $2.6 million in the third quarter of 1997,
compared with $2.5 million in the third quarter of 1996. An increase in
interest income primarily as a result of interest income earned on
invested proceeds from the Company's sale of its common stock in March
1997 (Note 4) was offset by a reduction in cash as a result of the cash
payment of $160.4 million to Thermo Instrument in September 1997 for the
acquisition of the Laboratory Products businesses and Hypersil, and to a
lesser extent, a reduction in cash as a result of the acquisition of CE
Instruments and MassLab Instruments (MassLab) in 1996. Interest expense
increased to $3.2 million in 1997 from $1.9 million in 1996, primarily
due to the inclusion of interest expense on debt assumed as part of the
acquisition of the Laboratory Products businesses and Hypersil, which was
repaid to Thermo Instrument in September 1997 (Note 3).
The effective tax rate was 43.5% in the third quarter of 1997,
compared with 43.1% in the third quarter of 1996. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes and nondeductible amortization of cost in
excess of net assets of acquired companies.
The Company is involved in a patent infringement proceeding relating
to its ion-trap mass spectrometers (Note 5).
First Nine Months 1997 Compared With First Nine Months 1996
Revenues increased 39% to $315.2 million in the first nine months of
1997 from $227.1 million in the first nine months of 1996. Revenues
increased $86.0 million due to the acquisition of three business units
within Life Sciences' Laboratory Products Group, as well as Life
Sciences' Hypersil operations, from Thermo Instrument, effective March
12, 1997 (Note 3). In addition, revenues increased $14.5 million at the
12PAGE
THERMOQUEST CORPORATION
First Nine Months 1997 Compared With First Nine Months 1996 (continued)
Company's existing mass spectrometry business, due in part to the
continued success of a liquid chromatograph/ion-trap mass spectrometer
instrument introduced in the first quarter of 1996, and increased $9.2
million due to the inclusion for the full nine months of 1997 of CE
Instruments and MassLab, which were acquired from Thermo Instrument,
effective March 29, 1996. These increases were offset in part by a
decrease of $14.9 million in revenues due to the strengthening of the
U.S. dollar relative to foreign currencies in countries in which the
Company operates and, to a lesser extent, a decrease in revenues at
certain of the Company's existing operations due to increased
competition. In addition, revenues in the first quarter of 1996 included
$2.6 million from the sale of products manufactured by third parties.
The gross profit margin increased to 47.8% in the first nine months
of 1997 from 46.9% in the first nine months of 1996. The increase in the
gross profit margin was primarily due to the increase in sales of
higher-margin mass spectrometry products, offset in part by the inclusion
of lower-margin revenues from the Laboratory Products businesses, which
recorded an adjustment to expense of $1.0 million in the first quarter of
1997 relating to the revaluation of the finished goods inventories
acquired by the Company. The gross profit margin for the Laboratory
Products businesses was 39% in the first nine months of 1997.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 24.6% in the first nine months of 1997 from 25.3%
in the first nine months of 1996. Research and development expenses as a
percentage of revenues decreased to 6.7% in 1997 from 7.3% in 1996. The
reasons for these decreases are discussed in the results of operations
for the third quarter.
Interest income increased to $8.5 million in the first nine months of
1997 from $6.5 million in the first nine months of 1996, primarily as a
result of interest income earned on invested proceeds from the Company's
initial public offering of common stock in March and April 1996 and sale
of common stock in March 1997 and, to a lesser extent, the inclusion of
interest income from the Laboratory Products businesses. The increase in
interest income was offset in part by a reduction in cash as a result of
the acquisition of CE Instruments and MassLab in 1996 and, to a lesser
extent, the cash payment of $160.4 million to Thermo Instrument in
September 1997 for the acquisition of the Laboratory Products businesses
and Hypersil (Note 3). Interest expense increased to $8.4 million in 1997
from $5.5 million in 1996, primarily due to the inclusion of interest
expense on debt assumed in connection with the acquisition of the
Laboratory Products businesses and Hypersil, which was repaid to Thermo
Instrument in September 1997 (Note 3).
The effective tax rate was 43.5% in the first nine months of 1997,
compared with 42.5% in the first nine months of 1996. The effective tax
rates exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes and nondeductible amortization of cost in
excess of net assets of acquired companies.
13PAGE
THERMOQUEST CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $137.1 million at September 27,
1997, compared with $216.9 million at December 28, 1996. Included in
working capital are cash, cash equivalents, and available-for-sale
investments of $71.7 million at September 27, 1997, compared with $182.4
million at December 28, 1996. Cash provided by operating activities was
$24.4 million in the first nine months of 1997. Accounts receivable
increased $19.8 million primarily due to increased shipments at the end
of the third quarter of 1997 and a competitive trend to commercial terms
of 30 days from the Company's past practice of generally obtaining
deposits on certain systems.
At September 27, 1997, $21.9 million of the Company's cash and cash
equivalents was held by its foreign subsidiaries. While this cash can be
used outside of the United States, including for acquisitions,
repatriation of this cash into the United States would be subject to
foreign withholding taxes and could also be subject to a United States
tax.
The Company's investing activities used $150.1 million of cash in the
first nine months of 1997. The Company expended $154.3 million, net of
cash acquired, for acquisitions (Note 3) and $4.0 million for purchases
of property, plant, and equipment. The Company recorded proceeds of $2.5
million from the sale of property, plant, and equipment, primarily from
the sale of a building acquired in connection with the acquisition of the
Laboratory Products businesses. During the remainder of 1997, the Company
plans to expend approximately $2.0 million for property, plant, and
equipment.
The Company's financing activities provided $21.5 million of cash in
the first nine months of 1997. In March 1997, the Company sold 1,768,500
shares of its common stock for net proceeds of $24.8 million (Note 4).
During the first nine months of 1997, the Company used $3.5 million of
cash for the repayment of short- and long-term borrowings.
Although the Company expects to have positive cash flow from its
existing operations, the Company anticipates it will require significant
amounts of cash to pursue the acquisition of complementary businesses.
The Company expects that it will finance acquisitions through a
combination of internal funds, additional debt or equity financing from
the capital markets, or short-term borrowings from Thermo Instrument or
Thermo Electron Corporation, although there is no agreement with these
companies to ensure that funds will be available on acceptable terms or
at all. The Company believes that its existing resources are sufficient
to meet the capital requirements of its existing businesses for the
foreseeable future.
14PAGE
THERMOQUEST CORPORATION
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
(d) Use of Proceeds
The Company sold 3,450,000 shares of its common stock pursuant to a
Registration Statement on Form S-1 (File No. 333-00276), which was
declared effective by the Securities and Exchange Commission on March 18,
1996. The managing underwriters of the offering were NatWest Securities
Limited, Lehman Brothers, Cazenove & Co., and Fahnestock & Co., Inc. The
aggregate gross proceeds of the offering were $51,750,000. The Company's
total expenses in connection with the offering were $3,972,000, of which
$3,364,000 was for underwriting discounts and commissions and $608,000
was for other expenses paid to persons other than directors or officers
of the Company, persons owning more than 10 percent of any class of
equity securities of the Company, or affiliates of the Company. The
Company's net proceeds from the offering were $47,778,000. In June 1996,
the Company expended $4,100,000 of such net proceeds for the acquisition
of the Automass division of Analytical Technology, Inc. from Thermo
Instrument. In September 1996, the Company expended $27,300,000 of such
net proceeds for the acquisition of CE Instruments and MassLab, formerly
divisions within the Scientific Instruments Division of Fisons plc, from
Thermo Instrument. In September 1997, the Company expended the balance of
such net proceeds, together with other funds, for the acquisition of
three business units within Life Sciences' Laboratory Products Group, as
well as Life Sciences' Hypersil operations, from Thermo Instrument.
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 August 14, 1997, the Company filed a Current Report on Form 8-K
pertaining to its acquisition of three business units within the
Laboratory Products Group of the Life Sciences International PLC
subsidiary of Thermo Instrument Systems Inc. On October 14, 1997, the
Company filed an amendment on Form 8-K/A, the purpose of which was to
file the financial information required by Form 8-K concerning this
acquisition.
15PAGE
THERMOQUEST CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 4th day of November
1997.
THERMOQUEST CORPORATION
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
16PAGE
THERMOQUEST CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.