SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 1, 2000
[ ] 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
incorporation or organization) (I.R.S. Employer Identification No.)
2215 Grand Avenue Parkway
Austin, Texas 78728-3812
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 28, 2000, was approximately $58,388,000.
As of January 28, 2000, the Registrant had 50,397,707 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
January 1, 2000, are incorporated by reference into Parts I and II.
The information required by Part III of Form 10-K will be filed as part of an
amendment to this Form 10-K no later than 120 days after January 1, 2000, and
such information is incorporated by reference from such filing.
PART I
Item 1. Business
(a) General Development of Business
The businesses of ThermoQuest Corporation (the Company or the Registrant)
are reported in two segments: Analytical Instruments and Scientific Equipment.
Businesses within the Analytical Instruments segment develop, manufacture, sell,
and service mass spectrometers, liquid chromatographs, gas chromatographs, and
multi-instrument combinations of these products, which are used in the
quantitative and qualitative analysis of chemical compounds at ultratrace levels
of detection. Businesses within this segment also supply a range of advanced
software for use with these instruments, as well as consumables for the
chromatography industry. Businesses included in the Company's Scientific
Equipment segment develop, manufacture, sell, and service scientific equipment
for the preparation and preservation of chemical samples. The Company's products
are used primarily by pharmaceutical companies for drug research, testing, and
quality control; by biotechnology researchers to study proteins and other
biological samples to gain knowledge about diseases and possible treatments; 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.
The Company is a leading manufacturer of mass spectrometers, liquid
chromatographs, and gas chromatographs. Many of the major developments in
advanced mass spectrometry were pioneered by the Company. The ion-trap mass
spectrometer, which employs the latest mass spectrometer technology, was first
commercialized by the Company. In 1995, the Company introduced two instruments
that integrate a highly sensitive, yet affordable, ion-trap mass spectrometer
with a liquid chromatograph or a gas chromatograph to form the industry's most
powerful benchtop liquid chromatograph/mass spectrometer (LC/MS) and gas
chromatograph/mass spectrometer (GC/MS) instruments.
An element of the Company's strategy is to combine its internal growth
with the acquisition of complementary products and technologies. Effective March
12, 1997, the Company acquired from Thermo Instrument Systems Inc. three
business units within the Laboratory Products Group of its Life Sciences
International PLC subsidiary, as well as Life Sciences' Hypersil operation, for
approximately $156.9 million. The Laboratory Products businesses develop,
manufacture, sell, and service scientific equipment for the preparation and
preservation of chemical samples. Hypersil develops, manufactures, and sells
liquid chromatography media and columns used in high-performance liquid
chromatography.
The Company was incorporated in June 1995 as a wholly owned subsidiary of
Thermo Instrument. In March and April 1996, the Company sold 3,450,000 shares of
its common stock in an initial public offering at $15.00 per share for net
proceeds of $47.8 million. In March 1997, the Company sold 1,768,500 shares of
its common stock for net proceeds of $24.8 million. As of January 1, 2000,
Thermo Instrument owned 45,521,405 shares of the Company's common stock,
representing 90% of such stock outstanding. Thermo Instrument is an 88%-owned
subsidiary of Thermo Electron Corporation. As of January 1, 2000, Thermo
Electron owned 159,880 shares of the Company's common stock, representing 0.32%
of such stock outstanding. Thermo Instrument and Thermo Electron are global
leaders in the development, manufacture, and sale of measurement and detection
instruments used in virtually every industry to monitor, collect, and analyze
data that provide knowledge for the user. For example, Thermo Instrument's and
Thermo Electron's powerful analysis technologies help researchers sift through
data to make the discoveries that will fight disease or prolong life; allow
manufacturers to fabricate ever-smaller components required to increase the
speed and quality of communications; or monitor and control industrial processes
on-line to ensure that critical quality standards are met efficiently and
safely.
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On January 31, 2000, the Company announced that Thermo Instrument will
acquire the publicly held shares of the Company's common stock for $17.00 per
share in cash, as outlined in Note 14 to Consolidated Financial Statements in
the Registrant's 1999* Annual Report to Shareholders, which statements are
incorporated herein by reference. This action is part of a major reorganization
plan under which Thermo Electron will spin in, spin off, and sell various
businesses to focus solely on its core measurement and detection instruments
business.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report on Form
10-K. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
"seeks," "estimates," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements, including those detailed under the heading
"Forward-looking Statements" in the Registrant's 1999 Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) Financial Information About Segments
Financial information concerning the Company's segments is summarized in
Note 11 to Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Shareholders, which information is incorporated herein by reference.
(c) Description of Business
The Company develops, manufactures, sells, and services mass
spectrometers, liquid chromatographs, gas chromatographs, and multi-instrument
combinations of these products, which are used in the quantitative and
qualitative analysis of chemical compounds at ultratrace levels of detection, as
well as instrument software and supplies for the chromatography industry. The
Company also develops, manufactures, sells, and services scientific equipment
for the preparation and preservation of chemical samples.
(i) Principal Products and Services
MARKETS
The markets for the Company's products are highly specialized as a result
of the differing needs of the industries in which they are used. The Company
actively seeks to cross-sell its products among the various industries it
serves, particularly by adding its liquid chromatograph or gas chromatograph
input devices to its mass spectrometer products, and by introducing customers to
the sample preparation and preservation equipment and chromatography consumables
produced by the businesses acquired by the Company in 1997. The major markets in
which the Company sells its products are:
Pharmaceutical. In the pharmaceutical industry, the Company's products are
used in the identification of newly synthesized or discovered drug candidates,
to measure drugs and metabolites in clinical studies, and for quality assurance
of drugs in production.
- --------------------
* References to 1999, 1998, and 1997 herein are for the fiscal years ended
January 1, 2000, January 2, 1999, and January 3, 1998, respectively.
3
Biotechnology. Researchers are using the Company's products to study
genomes, proteins, and peptides in animals, plants, and humans to determine the
factors influencing disease, as well as good health, and to develop possible
treatments or even cures.
Environmental. A second major market for the Company's products is
environmental analysis. This market is driven to a great degree by federal,
state, local, and foreign environmental regulations, which provide specific
methods with respect to the testing of air, water, and soil for contaminants.
Industrial/Chemical. Industrial and chemical customers typically utilize
the Company's products for quality control and to test for contaminants in
substances used in a particular manufacturing application.
Food and Beverage. Customers in the food and beverage industry primarily
use the Company's products for quality control. In addition to assuring the
correct balance of ingredients, customers in these industries must respond both
to environmental and health regulations and to societal concerns regarding
product contamination.
Forensic Sciences. The Company's products are used in a variety of
forensic applications, including testing for illicit drug use by employees or
athletes, testing body fluids to determine causes of death, testing to determine
the identity of substances suspected to be illegal, and testing for the presence
of substances of evidentiary significance for use in criminal investigations.
TECHNOLOGY
Analytical Instruments
Mass Spectrometers. A mass spectrometer is an instrument in which the
chemical compound to be analyzed is broken down into electrically charged
fragments (ions), and then sorted according to their mass-to-charge ratios. All
mass spectrometers consist of a device for introducing samples, an ionization
source, a mass analyzer that separates ions according to mass ratios, a detector
that converts the ions into an electrical signal, a signal processor that
amplifies the electrical signal, and a computer that organizes and displays
information in a convenient and useful manner. The resulting data creates a
"fingerprint" that is then compared to a database for identification. Mass
spectrometers are the most powerful tools for the identification and
quantification of chemical substances. A gas or liquid chromatograph is used to
separate complex mixtures of chemicals into discrete components, which can then
be analyzed based on the chromatograph results alone or can be introduced into a
mass spectrometer to give additional information and to specifically identify
unknown components.
The Company has pioneered many of the significant developments in mass
spectrometry and holds numerous U.S. and international patents relating to mass
spectrometry, with additional patents pending. The Company has a distinguished
record of being the first to commercialize new technologies developed in its own
laboratories as well as from an extensive worldwide network of university
collaborators. Examples include the first computerized GC/MS quadrupole system,
the first commercial chemical ionization ion source, the first commercial triple
quadrupole MS/MS system, the first commercial ion-trap system, and the first
commercial ion-trap MS/MS system.
The Company currently manufactures three types of mass spectrometers:
Magnetic Sector Mass Spectrometers. Magnetic sector mass spectrometers are
generally used in high-resolution applications where an accurate analysis of
molecular weight is required to determine the elemental composition of unknown
samples. Magnetic sector instruments are typically purchased by universities and
pharmaceutical and chemical companies for use in research applications.
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Quadrupole Mass Spectrometers. Single quadrupole mass spectrometers are
typically utilized in environmental and forensic laboratories, which require
dependable, routine analyses that meet applicable regulatory requirements, such
as those promulgated by the U.S. Environmental Protection Agency. Although
lacking the resolution of some types of magnetic sector mass spectrometers,
these instruments provide reliable performance at a relatively low price. Single
quadrupoles are frequently combined to form MS/MS spectrometers for use in more
complex analyses such as molecular structure analysis. Together with the
Company's triple stage quadrupoles, the most powerful type of quadrupole mass
spectrometer, single quadrupoles comprise a complete family of quadrupole mass
spectrometers.
Ion-trap Mass Spectrometers. The Company developed the first commercial
ion-trap mass spectrometer. The ability to trap and integrate the intensities of
ions has made the ion trap the most sensitive method of mass analysis for
certain applications. Ion traps are smaller, mechanically simpler, and therefore
easier to maintain than other types of mass spectrometers. While other types of
mass spectrometers separate and analyze a continuous stream of ions, ion-trap
mass spectrometers trap ions in a confined space using an electric field, which
can be adjusted to eject ions as a function of their mass-to-charge ratio. An
advantage of ion-trap mass spectrometers is that, through software, MS/MS
analysis can be performed in a single ion-trap mass spectrometer, theoretically
to an infinite number of stages (MS(n)). The Company has recently introduced ion
traps that incorporate an external ion source, such as those found in quadrupole
and magnetic sector mass spectrometers, which use sophisticated ionization
techniques to increase the specificity and detection limits of the instrument.
Due to their relative mechanical simplicity and small size, ion traps are
well suited for coupling with chromatographs to form benchtop LC/MS and GC/MS
instruments. Benchtop LC/MS(n) instruments were not commercially available until
the Company introduced the first such instrument in June 1995. Through
significant advancements in integration techniques and information technology,
the Company has developed the benchtop GCQ (GC/MS(n)) and LCQ (LC/MS(n))
instruments, which combine ion-trap mass spectrometers with chromatographs.
These instruments allow users to combine GC and LC with MS(n) in a benchtop
format, and offer high performance at a competitive price for appropriate
applications.
Liquid Chromatographs. High performance liquid chromatography (HPLC) is an
analytical technique used to separate, identify, and quantify complex mixtures
of primarily organic chemicals. In HPLC, the sample is introduced into a solvent
stream that is being pumped at a high pressure through a liquid chromatography
column. The column, both through physical and chemical properties, separates the
complex mixtures into discrete bands, allowing identification. The separated
sample is then passed through a detector that measures the sample using various
technologies, including ultraviolet and visible light absorption, changes in
refractive index, fluorescence, and conductivity. The data produced by the
detector is converted to an electronic form and transmitted for display and
manipulation on a personal computer. For complex mixtures, the HPLC may be
coupled with a mass spectrometer to give additional information and specifically
identify unknown components.
Gas Chromatographs. Like HPLC, gas chromatography is an analytical
technique used to separate, identify, and quantify complex mixtures of primarily
organic chemicals. Although gas chromatographs are generally easier to use and
have higher resolution than liquid chromatographs, only a relatively small
percentage of compounds can be converted to gaseous form for analysis in a gas
chromatograph. In gas chromatography, samples are introduced typically by
syringe injection and are converted into the gas phase by heating. The sample
passes through an analytical column, and the various components of the sample
mixture are separated into discrete bands that are suitable for analysis by
detectors. Detectors can be assembled in various configurations to facilitate
analysis of different chemical and physical properties in a sample mixture. The
data produced by the detector is converted to electronic form and transmitted
for display and manipulation on a personal computer. For complex mixtures, where
compounds cannot be adequately separated and identified by gas chromatography,
the gas chromatograph can be coupled with a mass spectrometer to give additional
information and specifically identify unknown components.
High-performance Liquid Chromatography Columns. These tubes are packed
with materials that have the ability to separate complex mixtures into their
individual ingredients.
5
Scientific Equipment
Sample Preparation Equipment
Biological Safety Cabinet. This cabinet protects the researcher, the
sample being examined, and the laboratory environment by providing a partially
enclosed work space that uses a combination of fans to circulate air and filters
to trap harmful biological substances.
Cell Culture Incubator. This device controls temperature, relative
humidity, and carbon dioxide and oxygen levels to provide the perfect in-vitro
environment for cell growth. Cell culture incubators are used in research and
clinical laboratories throughout the world for growing mammalian cells,
bacteria, and viruses.
Centrifugal Vacuum Concentrator. This equipment uses a rotational spinning
concentrator, refrigerated vapor trap, and vacuum source to dry multiple samples
for analysis, without losing portions of them, or cross-contaminating them.
Centrifuge. This equipment is used to prepare laboratory samples for
analysis by spinning them around a central axis to separate materials of
different specific gravities.
Electrophoresis System. This system prepares a biological sample for
analysis by using electricity to separate DNA/RNA and protein molecules based
upon electrophoretic mobility.
Orbital Shaker. This equipment, used in research and fermentation
laboratories, provides a controlled orbital motion for biological cultures in
glass flasks. The orbital agitation of the culture provides increased oxygen for
optimal cell growth. Combination incubators/orbital shakers provide precise
conditions of temperature and orbital agitation.
Sample Preservation Equipment
Ultralow Temperature Freezer. This specially designed cascade
refrigeration system is designed to store all types of biological material,
providing storage temperatures down to -86 degrees Celsius.
Cryopreservation System. This vacuum-insulated equipment controls liquid
nitrogen to produce extremely low temperatures, as low as -196 degrees Celsius,
in order to store biological material, such as bone marrow, cornea, heart
valves, spermatozoa, bacteria, and viruses, for very long periods of time.
SALES AND MARKETING
The Company markets its products in larger international markets through
its own direct worldwide sales force, and in smaller markets through a network
of dealers and distributors. In addition, the Company sells certain of its
liquid and gas chromatographs as well as scientific equipment pursuant to
original equipment manufacturer (OEM) arrangements under which third parties
purchase and resell the Company's products. The Company's sales force is
supported throughout the world by a customer support group that provides
training, instrument servicing, and parts replacements.
(ii) and (xi) New Products; Research and Development
The Company maintains active programs for the development of new
technologies and the enhancement of existing products. Research and development
expenses for the Company were $29.0 million, $31.5 million, and $28.2 million in
1999, 1998, and 1997, respectively.
6
(iii) Raw Materials
Raw materials, components, and supplies purchased by the Company are
either available from a number of different suppliers or from alternative
sources that could be developed without a material adverse effect on the
Company. To date, the Company has experienced no material difficulties in
obtaining these materials.
(iv) Patents, Licenses, and Trademarks
The Company's policy is to protect its intellectual property rights,
including applying for and obtaining patents when appropriate. The Company holds
numerous patents expiring at various dates related to its technologies, with
additional patents pending. The Company also enters into licensing agreements
expiring at various dates with other companies pursuant to which it has obtained
rights to specific patents and technical know-how. The Company also considers
technical know-how, trade secrets, and trademarks to be important to its
business.
(v) Seasonal Influences
There are no significant seasonal influences on the Company's sales of its
products.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on the Company's working
capital.
(vii) Dependency on a Single Customer
No single customer accounted for 10% or more of the Company's total
revenues in any of the past three years.
(viii) Backlog
The Company's backlog of firm orders was as follows:
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------- ---------- ---------
Analytical Instruments $67,737 $48,719
Scientific Equipment 8,272 8,512
------- -------
$76,009 $57,231
======= =======
The Company includes in its backlog only orders confirmed with a purchase
order for products and related services scheduled to be shipped or rendered
within one year. Certain of such firm orders are cancelable by the customer upon
payment of a cancellation charge. The Company believes that substantially all of
the backlog at January 1, 2000, will be shipped or completed during 2000. The
Company does not believe that the level of, or changes in the level of, its
backlog is necessarily a meaningful indicator of future results of operations.
(ix) Government Contracts
Not applicable.
7
(x) Competition
The Company competes in each of its markets primarily on technical
performance, customer service and support, and price.
Analytical Instruments
The Company's principal competitors in the mass spectrometry market
include the Chemical Analysis Group of Hewlett-Packard Company, the MicroMass
Group of Waters Corporation, Shimadzu Corporation, and PerkinElmer Corporation.
The Company's principal competitors in the liquid chromatography market include
Waters, Agilent, Shimadzu, and PerkinElmer. In the gas chromatography market,
the Company competes with numerous companies including Agilent, Varian
Associates, Inc., PerkinElmer, and Shimadzu. The Company's principal competitors
in the chromatography consumables market include Waters, Agilent, Merck
Corporation, Phenomenex Inc., and numerous regional suppliers.
Scientific Equipment
The Company's principal competitors in the scientific equipment market
include Jouan S.A., NuAire Inc., Sanyo Electric Co. Ltd., and Labconco
Corporation.
(xii) Environmental Protection Regulations
The Company believes that compliance by the Company with federal, state,
and local environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
As of January 1, 2000, the Company employed approximately 1,950 people.
(d) Financial Information About Exports by Domestic Operations and About
Geographic Areas
Financial information about exports by domestic operations and about
geographic areas is summarized in Note 11 to Consolidated Financial Statements
in the Registrant's 1999 Annual Report to Shareholders, which information is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer)
------------------------ --- ---------------------------------------------------------
Dr. Richard W.K. Chapman 55 Chief Executive Officer and President (1995)
Lewis H. Rosenblum 57 Vice President (1999)
Theo Melas-Kyriazi 40 Chief Financial Officer (1998)
Paul F. Kelleher 57 Chief Accounting Officer (1995)
Each executive officer serves until his successor is chosen or appointed by the Board of Directors
and qualified or until his earlier resignation, death, or removal. Dr. Chapman has been Chief Executive
Officer and President of the Company since its inception in June 1995. Dr. Chapman served as President
of Finnigan Corporation, a subsidiary of the Company, from 1992 to 1995. Mr. Rosenblum was appointed
Vice President of the Company in February 1999. He has served as President of the Company's Scientific
Equipment Group since March 1997, when that business was acquired as part of the Life Sciences
acquisition. Mr. Rosenblum served as President of the Laboratory Products Group of Life Sciences from
1996 to 1997. From 1991 to 1996, he was President of Forma Scientific, Inc. Mr. Melas-
8
Kyriazi was appointed Chief Financial Officer of the Company and Thermo Electron
on January 1, 1999. He joined Thermo Electron in 1986 as Assistant Treasurer,
and became Treasurer in 1988. In 1994, he was named President and Chief
Executive Officer of ThermoSpectra Corporation, formerly a public subsidiary of
Thermo Instrument. In 1998, he became Vice President of Corporate Strategy for
Thermo Electron. Messrs. Melas-Kyriazi and Kelleher are full-time employees of
Thermo Electron, but devote such time to the affairs of the Company as the
Company's needs reasonably require.
Item 2. Properties
The location and general character of the Company's principal properties
by segment as of January 1, 2000, are:
Analytical Instruments
The Company owns approximately 614,000 square feet of office, engineering,
laboratory, and production space, principally in California, Texas, Florida,
Italy, and Germany; and leases approximately 169,000 square feet of office space
under leases expiring from 2000 through 2005, principally in Florida,
California, England, France, Japan, and Germany. As of January 1, 2000, the
Company had a $6.2 million mortgage loan that is secured by 200,000 square feet
of property in California with a net book value of $14.6 million.
Scientific Equipment
The Company owns approximately 360,000 square feet of office, engineering,
laboratory, and production space in Ohio and Massachusetts; and leases
approximately 82,000 square feet of office space under leases expiring from 2000
through 2014, principally in New York and England.
The Company believes that its facilities are in good condition and are
suitable and adequate for its present operations and that suitable space is
readily available if any of such leases are not extended. With respect to leases
expiring in the near future, in the event the Company does not renew such
leases, the Company believes suitable alternate space is available for lease on
acceptable terms.
Item 3. Legal Proceedings
On January 23, 1997, the Company's Finnigan subsidiary filed complaints
against Bruker-Franzen Analytik GmbH and its U.S. affiliate, and Hewlett-Packard
Company, for alleged violation of two U.S. patents owned by Finnigan. The
patents pertain to methods used in ion-trap mass spectrometers. The complaint
was filed in the U.S. District Court for the District of Massachusetts. Finnigan
has asked for damages to compensate for the infringement, and for injunctions
against further infringement.
The District Court action was stayed pending completion of a parallel
investigation by the United States International Trade Commission (ITC). In
April 1998, the ITC determined that the defendants did not engage in unfair
practices in U.S. import trade with respect to the Finnigan patents, and that
the Finnigan patents are invalid and/or not infringed. Finnigan appealed the
ITC's determination with respect to one of its patents to the United States
Court of Appeals for the Federal Circuit (CAFC). The CAFC issued its decision in
June 1999 affirming the ITC's determination of noninfringement but reversing the
ITC's determination of invalidity.
Bruker presented counterclaims in the ITC investigation. The counterclaims
were removed to the District Court in Massachusetts and also stayed. These
claims allege that the Finnigan patents are invalid and unenforceable and are
not infringed by the mass spectrometers manufactured 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.
9
The stays on both cases in the District Court in Massachusetts have been
lifted and the cases are proceeding in the District Court.
In February 1999, Finnigan filed complaints against Bruker-Franzen
Analytik GmbH and Hewlett-Packard GmbH, in District Court in Dusseldorf,
Germany, for violation of four German patents owned by Finnigan. The patents
pertain to methods used in ion-trap mass spectrometers. Bruker and
Hewlett-Packard have challenged the validity of these patents in Federal Patent
Court in Munich. Bruker has filed a complaint against Finnigan in District Court
in Dusseldorf for alleged violation of two German patents owned by Bruker.
There can be no assurance as to the outcome of these matters or that an
unfavorable resolution would not have a material adverse effect on the Company's
future results of operations and financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information concerning the market and market price for the Registrant's
common stock, $.01 par value, and dividend policy is included under the sections
labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
Item 6. Selected Financial Data
The information required under this item is included under the sections
labeled "Selected Financial Information" and "Dividend Policy" in the
Registrant's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of January 1, 2000,
and Supplementary Data are included in the Registrant's 1999 Annual Report to
Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
The information required by Items 10, 11, 12, and 13 of Form 10-K will be
filed as part of an amendment to this Form 10-K no later than 120 days after
January 1, 2000, the end of the Registrant's fiscal year covered by this Form
10-K.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1)The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2)The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3)Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders'
Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 15, 2000 THERMOQUEST CORPORATION
By: /s/ Richard W.K. Chapman
Richard W.K. Chapman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below, as of March 15, 2000.
Signature Title
By: /s/ Richard W.K. Chapman President, Chief Executive Officer, and
Richard W.K. Chapman Director
By: /s/ Theo Melas-Kyriazi Chief Financial Officer
Theo Melas-Kyriazi
By: /s/ Paul F. Kelleher Chief Accounting Officer
Paul F. Kelleher
By: /s/ Frank Jungers Director
Frank Jungers
By: /s/ Earl R. Lewis Chairman of the Board and Director
Earl R. Lewis
By: /s/ Anthony J. Pellegrino Director
Anthony J. Pellegrino
By: /s/ Michael E. Porter Director
Michael E. Porter
13
Report of Independent Public Accountants
To the Shareholders and Board of Directors of ThermoQuest Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in ThermoQuest Corporation's
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 15, 2000 (except with respect to
the matter discussed in Note 14, as to which the date is March 6, 2000). Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed in Item 14 on page 12 is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
consolidated financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 15, 2000
14
SCHEDULE II
THERMOQUEST CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Description Balance at Provision Accounts Accounts Other (a) Balance
Beginning Charged to Recovered Written at End
of Year Expense Off of Year
- ----------------------------------- ----------- ------------ ------------ ----------- ----------- ----------
Allowance for Doubtful Accounts
Year Ended January 1, 2000 $ 4,065 $ 687 $ 222 $ (784) $ (231) $3,959
Year Ended January 2, 1999 $ 4,361 $ 825 $ 90 $(1,357) $ 146 $4,065
Year Ended January 3, 1998 $ 4,459 $ 549 $ 33 $ (760) $ 80 $4,361
Description Balance at Established Activity Other (c) Balance
Beginning as Cost of Charged to at End
of Year Acquisitions Reserve of Year
- ----------------------------------- ----------- ------------ ------------ ----------- ----------
Accrued Acquisition Expenses (b)
Year Ended January 1, 2000 $ 331 $ - $ (320) $ (11) $ -
Year Ended January 2, 1999 $ 377 $ 331 $ (362) $ (15) $ 331
Year Ended January 3, 1998 $ 357 $ 971 $ (789) $ (162) $ 377
Description Balance at Provision Activity Other (f) Balance
Beginning Charged to Charged to at End
of Year Expense (e) Reserve of Year
- ----------------------------------- ----------- ------------- ----------- ----------- -----------
Restructuring Reserves (d)
Year Ended January 1, 2000 $1,634 $ (326) $(1,063) $ (178) $ 67
Year Ended January 2, 1999 $ - $3,660 $(2,010) $ (16) $1,634
(a) Includes allowance of businesses acquired during the year as described in
Note 2 to Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Shareholders and the effect of foreign currency translation.
(b) The nature of activity in this account is described in Note 2 to
Consolidated Financial Statements in the Registrant's 1999 Annual Report to
Shareholders.
(c) Represents reversal of accrued acquisition expenses and corresponding
reduction in cost in excess of net assets of acquired companies resulting
from finalization of restructuring plans and the effect of foreign currency
translation.
(d) The nature of activity in this account is described in Note 9 to
Consolidated Financial Statements in the Registrant's 1999 Annual Report to
Shareholders.
(e) Reflects reversal in 1999 of previously recorded restructuring costs.
Excludes provision in 1998 of $0.9 million for an asset write-down.
(f) Represents the effect of foreign currency translation.
15
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
2.1 Stock Purchase Agreement dated as of November 4, 1996, between SID Instruments Inc. and
the Registrant (filed as Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 28, 1996 [File No. 1-14262] and incorporated herein by
reference).
2.2 Stock Purchase Agreement dated as of November 4, 1996, among SID Instruments Inc., Thermo
Instrument, and Finnigan MAT (Nevada) Inc. (filed as Exhibit 2.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 [File No. 1-14262]
and incorporated herein by reference).
2.3 Asset and Share Purchase Agreement dated as of July 30, 1997, between the Registrant and
Thermo Instrument (filed as Exhibit 2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 28, 1997 [File No. 1-14262] and incorporated herein by
reference).
3.1 Certificate of Incorporation, as amended, of the Registrant (filed as Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1 [Reg. No. 333-00276] and incorporated
herein by reference).
3.2 By-laws of the Registrant (filed as Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 [Reg. No. 333-00276] and incorporated herein by reference).
10.1 Corporate Services Agreement dated as of June 30, 1995, between Thermo Electron and the
Registrant (filed as Exhibit 10.1 to the Registrant's Registration Statement on Form S-1
[Reg. No. 333-00276] and incorporated herein by reference).
10.2 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993
(filed as Exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference).
10.3 Tax Allocation Agreement dated as of June 30, 1995, between Thermo Electron and the
Registrant (filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-1
[Reg. No. 333-00276] and incorporated herein by reference).
10.4 Master Cash Management, Guarantee Reimbursement and Loan Agreement dated June 1, 1999, by
and between the Registrant and Thermo Electron (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999 [File No. 1-14262] and
incorporated herein by reference).
10.5 Amended and Restated Master Guarantee Reimbursement and Loan Agreement dated December 2,
1997, by and among Thermo Instrument and the Registrant (filed as Exhibit 10.6 to the
Registrant's Annual Report to Shareholders for the fiscal year ended January 3, 1998
[File No. 1-14262] and incorporated herein by reference).
10.6 Amended and Restated Equity Incentive Plan of the Registrant (filed as
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 3, 1999 [File No.
1-14262] and incorporated herein by reference).
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of Thermo
Electron and Thermo Instrument for services rendered to the
Registrant or to such affiliated corporations. The terms of such
plans are substantially the same as those of the Registrant's
Equity Incentive Plan.
16
Exhibit
Number Description of Exhibit
10.7 Amended and Restated Deferred Compensation Plan for Directors of the Registrant (filed as
Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July
3, 1999 [File No. 1-14262] and incorporated herein by reference).
10.8 Amended and Restated Directors Stock Option Plan of the Registrant (filed as Exhibit 10.4
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
[File No. 1-14262] and incorporated herein by reference).
10.9 Form of Indemnification Agreement for Officers and Directors (filed as Exhibit 10.10 to
the Registrant's Registration Statement on Form S-1 [Reg. No. 333-00276] and incorporated
herein by reference).
10.10 Fiscal Agency Agreement dated as of August 3, 1995, among the Registrant, Thermo
Electron, and The Chase Manhattan Bank (formerly Chemical Bank) (filed as Exhibit 10.12
to the Registrant's Registration Statement on Form S-1 [Reg. No. 333-00276] and
incorporated herein by reference).
10.11 Deed of Trust and Security Agreement dated February 22, 1989, between the Registrant (as
successor-in-interest to Finnigan Properties, Inc.) and the Northwestern Mutual Life
Insurance Company (filed as Exhibit 10.13 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 333-00276] and incorporated herein by reference).
10.12 Indemnification Agreement dated as of November 4, 1996, between Thermo Instrument and the
Registrant (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 28, 1996 [File No. 1-14262] and incorporated herein by
reference).
10.13 Amended and Restated Stock Holding Assistance Plan and Form of Promissory Note (filed as
Exhibit 10.14 to the Registrant's Annual Report to Shareholders for the fiscal year ended
January 3, 1998 [File No. 1-14262] and incorporated herein by reference).
13 Annual Report to Shareholders for the year ended January 1, 2000
(only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.