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 June 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-11757
THERMO OPTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3283973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8E Forge Parkway
Franklin, Massachusetts 02038
(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 [ ] No [ X ]
The Registrant became subject to the filing
requirements of the Securities Exchange Act of
1934 on June 6, 1996, the date its Registration
Statements on Form S-1 and Form 8-A became
effective, and has filed all reports required to
be filed thereunder since such date.
Indicate the number of shares outstanding of each
of the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at July 26, 1996
---------------------------- ----------------------------
Common Stock, $.01 par value 48,450,000
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO OPTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, December 30,
(In thousands) 1996 1995
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Current Assets:
Cash and cash equivalents $106,280 $116,890
Accounts receivable, less allowances of
$6,081 and $5,669 62,832 62,250
Unbilled contract costs and fees 1,029 1,130
Inventories:
Raw materials and supplies 30,684 29,523
Work in process and finished goods 19,125 13,463
Prepaid expenses 5,182 4,221
Prepaid income taxes 12,167 11,955
Due from Thermo Electron Corporation and
affiliated companies 447 -
-------- --------
237,746 239,432
-------- --------
Property, Plant and Equipment, at Cost 62,197 58,646
Less: Accumulated depreciation and
amortization 18,751 16,645
-------- --------
43,446 42,001
-------- --------
Patents and Other Assets 11,272 11,400
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 144,076 140,049
-------- --------
$436,540 $432,882
======== ========
2PAGE
THERMO OPTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, December 30,
(In thousands except share amounts) 1996 1995
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Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 17,671 $ 18,041
Accounts payable 15,836 19,657
Accrued payroll and employee benefits 8,093 7,551
Accrued commissions 5,204 5,301
Accrued income taxes 4,800 5,401
Deferred revenue 8,613 8,858
Other accrued expenses 29,081 30,027
Due to Thermo Electron Corporation and
affiliated companies - 55
-------- --------
89,298 94,891
-------- --------
Deferred Income Taxes 12,271 12,293
-------- --------
Other Deferred Items 3,385 3,631
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 4,604 4,829
-------- --------
100,854 101,079
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 100,000,000
shares authorized; 48,000,000 and 45,000,000
shares issued and outstanding 480 450
Capital in excess of par value 216,010 215,342
Retained earnings 15,097 5,262
Cumulative translation adjustment (855) (66)
-------- --------
230,732 220,988
-------- --------
$436,540 $432,882
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
THERMO OPTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
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Revenues $ 73,259 $ 51,780
-------- --------
Costs and Operating Expenses:
Cost of revenues 36,973 25,932
Selling, general and administrative expenses 21,618 14,858
Research and development expenses 4,800 3,320
-------- --------
63,391 44,110
-------- --------
Operating Income 9,868 7,670
Interest Income 1,084 23
Interest Expense (1,593) (326)
-------- --------
Income Before Provision for Income Taxes 9,359 7,367
Provision for Income Taxes 3,820 3,058
-------- --------
Net Income $ 5,539 $ 4,309
======== ========
Earnings per Share $ .12 $ .10
======== ========
Weighted Average Shares 45,758 45,157
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
THERMO OPTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
----------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $142,927 $102,642
-------- --------
Costs and Operating Expenses:
Cost of revenues 72,733 51,642
Selling, general and administrative expenses 42,944 29,196
Research and development expenses 9,734 6,531
-------- --------
125,411 87,369
-------- --------
Operating Income 17,516 15,273
Interest Income 2,625 36
Interest Expense (3,184) (729)
-------- --------
Income Before Provision for Income Taxes 16,957 14,580
Provision for Income Taxes 7,122 6,051
-------- --------
Net Income $ 9,835 $ 8,529
======== ========
Earnings per Share $ .22 $ .19
======== ========
Weighted Average Shares 45,458 45,157
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
THERMO OPTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
June 29, July 1,
(In thousands) 1996 1995
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Operating Activities:
Net income $ 9,835 $ 8,529
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,559 3,301
Provision for losses on accounts receivable 710 380
Other noncash expenses 979 563
Increase in deferred income taxes 20 81
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable 1,469 (1,310)
Inventories and unbilled contract costs
and fees 69 (148)
Other current assets (931) 848
Accounts payable (6,452) (1,547)
Other current liabilities (2,966) (4,370)
Other 3 -
-------- --------
Net cash provided by operating
activities 7,295 6,327
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (15,454) (12,593)
Cash payment to parent company for acquisition
of Mattson and Unicam (Note 2) (36,558) -
Purchases of property, plant and equipment (2,714) (1,074)
Other 180 (88)
-------- --------
Net cash used in investing
activities (54,546) (13,755)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock (Note 3) 37,255 -
Repayment of long-term obligations (221) (396)
Transfer from parent company to fund
acquisition of Baird - 12,926
Net transfer to parent company - (1,245)
-------- --------
Net cash provided by financing
activities $ 37,034 $ 11,285
-------- --------
6PAGE
THERMO OPTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
----------------------
June 29, July 1,
(In thousands) 1996 1995
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Exchange Rate Effect on Cash $ (393) $ 374
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (10,610) 4,231
Cash and Cash Equivalents at Beginning of Period 116,890 3,258
-------- --------
Cash and Cash Equivalents at End of Period $106,280 $ 7,489
======== ========
Noncash Activities:
Fair value of assets of acquired companies $ 22,491 $ 20,901
Cash paid for acquired companies (16,870) (12,926)
-------- --------
Liabilities assumed of acquired companies $ 5,621 $ 7,975
======== ========
Cash paid to parent company for acquisition
of Mattson and Unicam (Note 2) $(36,558) $ -
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
THERMO OPTEK CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Optek 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 June 29,
1996, the results of operations for the three- and six-month periods ended
June 29, 1996 and July 1, 1995, and the cash flows for the six-month
periods ended June 29, 1996 and July 1, 1995. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, 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 Registration Statement on
Form S-1 (Reg. No. 333-03630), filed with the Securities and Exchange
Commission.
2. Acquisitions
On December 1, 1995, Thermo Instrument Systems Inc. (Thermo
Instrument) acquired the assets of the analytical instruments division of
Analytical Technology, Inc. (ATI). On April 11, 1996, the Company acquired
the Mattson Instruments (Mattson) and Unicam divisions of ATI from Thermo
Instrument for $36.6 million in cash. Mattson is a manufacturer of Fourier
transform infrared (FT-IR) spectroscopy instruments and Unicam is a
manufacturer of atomic absorption and ultraviolet/visable spectroscopy
instruments. Because, as of December 30, 1995, the Company, Mattson, and
Unicam were deemed for accounting purposes to be under control of their
common majority owner, Thermo Instrument, the accompanying 1995 historical
financial information includes the results of operations of Mattson and
Unicam from December 1, 1995, the date these businesses were acquired by
Thermo Instrument. Because the Company had not disbursed the funds in
connection with the acquisitions of Mattson and Unicam as of December 30,
1995, the transfer of these businesses was recorded as a contribution of
capital in excess of par value as of December 1, 1995. The $36.6 million
payment from the Company to Thermo Instrument was accounted for as a
reduction of capital in excess of par value as of April 11, 1996.
In February 1996, the Company acquired Oriel Corporation (Oriel) and
Corion Corporation (Corion) for an aggregate $16.9 million in cash. The
acquisitions of Oriel and Corion 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 cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $51 million, which is being amortized over 40
8PAGE
THERMO OPTEK CORPORATION
2. Acquisitions (continued)
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 for the Company, Mattson, and Unicam on a pro forma
basis, assuming the companies had been combined since the beginning of
1995. The effect of the acquisitions of Oriel and Corion are not included
in the pro forma data since these acquisitions were not material to the
Company's results of operations and financial position.
Three Months Six Months
Ended Ended
------------ ------------
(In thousands except per share amounts) July 1, 1995 July 1, 1995
--------------------------------------------------------------------------
Revenues $ 67,516 $135,926
Net income 3,656 6,015
Earnings per share .08 .13
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisitions of Mattson and Unicam been made at the beginning of 1995.
In connection with the acquisitions of Mattson and Unicam, the Company
established reserves totaling $11.6 million for estimated severance, excess
facilities, and other exit costs associated with the acquisitions, $2.7
million of which was expended during the six months ended June 29, 1996.
The Company expects to substantially complete its review and restructuring
of Mattson's and Unicam's operations over the one-year period following the
acquisitions. Any changes in estimates of these costs will be recorded as
adjustments to cost in excess of net assets of acquired companies. These
reserves are included in other accrued expenses in the accompanying balance
sheet.
3. Initial Public Offering
In June 1996, the Company sold 3,000,000 shares of its common stock in
an initial public offering at $13.50 per share for net proceeds of
approximately $37.3 million.
Subsequent to the end of the quarter, the underwriters of the
Company's initial public offering exercised their over-allotment option to
purchase an additional 450,000 shares of the Company's common stock at
$13.50 per share for net proceeds of approximately $5.7 million. Following
the initial public offering and the exercise of the over-allotment option,
Thermo Instrument owned 93% of the Company's outstanding common stock.
9PAGE
THERMO OPTEK CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's principal operating units include Thermo Jarrell Ash
Corporation (TJA), a manufacturer and distributor of atomic absorption and
atomic emission spectrometry products, and Nicolet Instrument Corporation
(Nicolet), a manufacturer and distributor of Fourier transform infrared
(FT-IR) and FT-Raman spectrometry products. Both TJA and Nicolet have
worldwide sales and service organizations with a strong overseas presence
in Europe, Japan, and China.
The Company's strategy is to supplement its internal growth with the
acquisition of businesses and technologies that complement and augment its
existing product lines. In December 1995, Thermo Instrument Systems Inc.
(Thermo Instrument) acquired the assets of the analytical instruments
division of Analytical Technology, Inc. (ATI). In April 1996, the Company
acquired the Mattson Instruments (Mattson) and Unicam divisions of ATI from
Thermo Instrument. For accounting purposes, the Company's acquisition of
Mattson and Unicam is deemed to have occurred in December 1995 (Note 2).
Mattson is a manufacturer of FT-IR spectroscopy instruments, and Unicam is
a manufacturer of AA and ultraviolet/visible spectroscopy instruments. In
February 1996, the Company acquired Oriel Corporation (Oriel), a
manufacturer and distributor of electro-optical instruments and components
and Corion Corporation (Corion), a manufacturer of commercial optical
filters.
Results of Operations
Second Quarter 1996 Compared With Second Quarter 1995
Revenues were $73.3 million in the second quarter of 1996, compared
with $51.8 million in the second quarter of 1995, an increase of 41%.
Revenues increased $12.5 million and $7.4 million due to the acquisitions
of Mattson and Unicam in December 1995 and Oriel and Corion in February
1996, respectively. Revenues also increased due to greater product demand,
primarily at Nicolet as a result of two recently introduced products,
offset in part by a decrease of $2.8 million in revenues due to the
unfavorable effects of currency translation as a result of the
strengthening of the U.S. dollar relative to foreign currencies in
countries where the Company operates.
The gross profit margin remained relatively unchanged at 49.5% in the
second quarter of 1996, compared with 49.9% in the second quarter of 1995.
Selling, general and administrative expenses as a percentage of
revenues increased to 29.5% in the second quarter of 1996 from 28.7% in the
second quarter of 1995 primarily due to the inclusion of higher costs as a
percentage of revenues at Unicam as a result of higher international
selling and administrative costs. The Company is in the process of
consolidating certain international selling and administrative functions of
Unicam with existing TJA and Nicolet entities. Research and development
10PAGE
THERMO OPTEK CORPORATION
Second Quarter 1996 Compared With Second Quarter 1995 (continued)
expenses as a percentage of revenues increased to 6.6% in 1996 from 6.4% in
1995 primarily due to the inclusion of higher research and development
costs as a percentage of revenues at Mattson and Unicam.
Interest income increased to $1.1 million in the second quarter of
1996 from $23,000 in the second quarter of 1995 primarily as a result of
interest income earned on invested proceeds from the Company's October 1995
issuance of $96.3 million principal amount of 5% subordinated convertible
debentures. Interest expense increased to $1.6 million in 1996 from $0.3
million in 1995 primarily due to interest on the Company's 5% subordinated
convertible debentures.
The effective tax rate was 40.8% in the second quarter of 1996,
compared with 41.5% in the second quarter of 1995. 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.
First Six Months 1996 Compared With First Six Months 1995
Revenues were $142.9 million in the first six months of 1996, compared
with $102.6 million in the first six months of 1995, an increase of 39%.
Revenues increased $26.0 million and $10.9 million due to the acquisitions
of Mattson and Unicam in December 1995 and Oriel and Corion in February
1996, respectively. Revenues also increased due to greater product demand,
primarily at Nicolet as a result of two recently introduced products,
offset in part by a decrease of $3.6 million in revenues due to the
unfavorable effects of currency translation as a result of the
strengthening of the U.S. dollar relative to foreign currencies in
countries where the Company operates.
The gross profit margin decreased to 49.1% in the first six months of
1996 from 49.7% in the first six months of 1995 primarily due to the
inclusion of lower-margin revenues at Mattson and Unicam.
Selling, general and administrative expenses as a percentage of
revenues increased to 30.0% in the first six months of 1996 from 28.4% in
the first six months of 1995 primarily due to the reasons discussed in the
results of operations for the second quarter. Research and development
expenses as a percentage of revenues increased to 6.8% in 1996 from 6.4% in
1995 primarily due to the inclusion of higher research and development
costs as a percentage of revenues at Mattson and Unicam.
Interest income increased to $2.6 million in the first six months of
1996 from $36,000 in the first six months of 1995. Interest expense
increased to $3.2 million in 1996 from $0.7 million in 1995. The reasons
for these increases are the same as those discussed in the results of
operations for the second quarter.
The effective tax rate was 42.0% in the first six months of 1996,
compared with 41.5% in the first six months of 1995. The effective tax
rates exceeded the statutory federal income tax rate primarily due to the
11PAGE
THERMO OPTEK CORPORATION
First Six Months 1996 Compared With First Six Months 1995 (continued)
impact of state income taxes and nondeductible amortization of cost in
excess of net assets of acquired companies.
Liquidity and Capital Resources
Consolidated working capital was $148.4 million at June 29, 1996,
compared with $144.5 million at December 30, 1995. Included in working
capital are cash and cash equivalents of $106.3 million at June 29, 1996,
compared with $116.9 million at December 30, 1995. Cash provided by
operating activities was $7.3 million for the first six months of 1996.
Accounts payable decreased $6.5 million due to the payment for inventories
received in the fourth quarter of 1995 and other current liabilities
decreased $3.0 million due to the payment of income taxes and other fees to
Thermo Electron Corporation (Thermo Electron) and affiliated companies.
The Company's investing activities used $54.5 million of cash in the
first six months of 1996. The Company expended an aggregate $52.0 million,
net of cash acquired, for acquisitions, including the acquisitions of
Mattson and Unicam, and $2.7 million for the purchase of property, plant
and equipment.
The Company's financing activities provided $37.0 million of cash in
the first six months of 1996. In June 1996, the Company sold 3,000,000
shares of its common stock for net proceeds of approximately $37.3 million
(Note 2).
Subsequent to the end of the quarter, the underwriters of the
Company's initial public offering exercised their over-allotment option to
purchase an additional 450,000 shares of its common stock for net proceeds
of approximately $5.7 million (Note 2).
During the remainder of 1996, the Company plans to make expenditures
of approximately $2.0 million for property, plant and equipment. Although
the Company expects 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, although there is no
agreement with Thermo Instrument or Thermo Electron under which such
parties are obligated to lend funds to the Company. In March 1996, Thermo
Instrument acquired a substantial portion of the businesses comprising the
Scientific Instruments Division of Fisons plc (Fisons). The Company is
discussing with Thermo Instrument the terms pursuant to which the Company
would acquire A.R.L. Applied Research Laboratories S.A. (ARL), a
Switzerland-based former subsidiary of Fisons. For the potential ARL
acquisition, if consummated, the Company expects to expend between $28
million and $38 million and assume debt of approximately $12 million. The
Company anticipates funding the purchase price for ARL from existing cash
balances. No assurance can be given that the Company will ultimately
acquire these businesses, and the timing and terms of the acquisitions,
12PAGE
THERMO OPTEK CORPORATION
Liquidity and Capital Resources (continued)
including price, would be subject to negotiation between the Company and
Thermo Instrument. The Company believes that its existing resources are
sufficient to meet the capital requirements of its existing businesses for
the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
13PAGE
THERMO OPTEK 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 6th day of August 1996.
THERMO OPTEK CORPORATION
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Chief Financial Officer
14PAGE
THERMO OPTEK CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
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11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.