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 1-12745
THERMEDICS DETECTION INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3106698
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
220 Mill Road
Chelmsford, Massachusetts 01824-4178
(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, $.10 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 $16,185,000.
As of January 28, 2000, the Registrant had 19,316,684 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 Thermedics Detection Inc. (the Company or the
Registrant) operate in two segments: Detection Instruments and Laboratory
Products. The Company's Detection Instruments segment develops, manufactures,
and markets high-speed detection and measurement systems used for quality
assurance and security applications. The Company's quality-assurance systems use
ultratrace chemical detectors, X-ray imaging, near-infrared spectroscopy,
high-speed gas chromatography, and other technologies to ensure the quality and
safety of in-process and finished products, primarily in the food, beverage,
pharmaceutical, forest products, chemical, and other consumer products
industries. The Company's security instruments use simultaneous trace particle-
and vapor-detection techniques based on its proprietary chemiluminescence and
high-speed gas chromatography technologies. Customers use the Company's security
instruments to detect plastic and other explosives at airports and border
crossings, for other high-security screening applications, and for forensic and
search applications. The Company also performs contract research and development
services for government and industry customers and earns service revenues
through long-term contracts.
Historically, principal product lines in the Company's Detection
Instruments segment were quality-assurance and security systems, including
ALEXUS(R) systems, which detect trace amounts of substances that would affect
product quality in refillable plastic beverage containers, and EGIS(R)
explosives detectors. The Company expanded its product lines to include
near-infrared analyzers through its acquisition of Moisture Systems Corporation
and Rutter & Co. B.V. (collectively, Moisture Systems) in January 1996. Also in
1996, the Company introduced its InScan(R) high-speed X-ray imaging system and
Flash-GC(TM) high-speed gas chromatography system. In 1998*, the Company
introduced a new line of benchtop explosives detectors based on its EGIS
technology. Additionally, in 1998, the Company introduced an offshoot of its
Flash-GC technology, called EZ Flash(TM). During 1999, the Company experienced a
decline in revenues, primarily in the Detection Instruments segment. This
decline was due in part to changes in the process of recycling plastic
containers in Europe. Previously, such containers had been sanitized and reused,
a process in which recyclers used the Company's ALEXUS systems. Recent recycling
trends in Europe involve melting and reforming plastic returnables. In addition,
the Company has not received approval of its upgraded EGIS explosive-detection
system from the Federal Aviation Administration (FAA), which resulted in a
decline in sales of this product line during 1999. Although the Company expects
to receive approval for this system, there can be no assurance of such approval
by any particular date, or at all.
In 1998, the Company acquired Orion Research, Inc., a leading manufacturer
of electrochemistry products, from its parent company, Thermedics Inc. Orion
constitutes the Laboratory Products segment. Orion's products determine the
quality of a wide variety of items, including food, water, and pharmaceuticals,
by measuring their pH, conductivity, dissolved oxygen, and specific ion
concentration.
The Company operated as a division of Thermedics until its incorporation
as a Massachusetts corporation in December 1990. A publicly traded subsidiary of
Thermo Electron Corporation, Thermedics develops, manufactures, and markets
diverse product lines, including implantable heart-assist devices and other
biomedical products, electronic-test instruments, and equipment that assures the
quality of a wide variety of consumer products and bulk materials. As of January
1, 2000, Thermedics owned 16,150,248 shares of the Company's outstanding common
stock, representing 84% of such stock outstanding. Thermedics is a 76%-owned
subsidiary of Thermo Electron. As of January 1, 2000, Thermo Electron owned
1,029,950 shares of the Company's outstanding common stock, representing 5% of
such stock outstanding. During 1999, Thermo Electron purchased 147,500 shares of
the Company's common stock for $1.3 million. Thermo Electron develops,
manufactures, and sells measurement and detection instruments used in virtually
every industry to monitor, collect, and analyze data that provide knowledge for
the user. For
- --------------------
* References to 1999, 1998, and 1997 herein are for the fiscal years ended
January 1, 2000, January 2, 1999, and January 3, 1998, respectively.
2
example, Thermo Electron's powerful analysis technologies help researchers sift
through data to unlock the mysteries of DNA or develop new drugs; allow
manufacturers to fabricate ever-smaller components required to carry greater
amounts of information, faster; or monitor and control industrial processes
on-line to ensure that critical quality standards are met efficiently.
On March 10, 2000, Thermedics commenced a cash tender offer for any and
all of the outstanding shares of the Company's common stock at $8.00 per share.
Thermedics has conditioned the tender offer on receiving acceptances from
holders of enough shares so that, when combined with its and Thermo Electron's
current share ownership, Thermedics' ownership of the Company will reach at
least 90%. If Thermedics achieves this 90% ownership threshold, it will acquire
all remaining outstanding shares of the Company's common stock through a "short
form" merger in Massachusetts. The Company would thereby become a private
subsidiary of Thermedics. The completion of this transaction is subject to
certain conditions, as outlined in Note 11 to Consolidated Financial Statements
in the Registrant's Fiscal 1999 Annual Report to Shareholders, which statements
are incorporated herein by reference.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities and 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 8 to Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Shareholders, which information is incorporated herein by reference.
(c) Description of Business
(i) Principal Products and Services
Detection Instruments
Quality-assurance Systems
The Company designs, manufactures, and markets high-speed measurement,
detection, and rejection equipment that uses ultratrace chemical detectors,
X-ray imaging, near-infrared spectroscopy, high-speed gas chromatography, and
other technologies for product quality and productivity applications.
ALEXUS. The Company's ALEXUS systems detect trace amounts of constituents
that would affect product quality in refillable plastic containers of soft
drinks, water, and other beverages. The Company's ALEXUS systems, introduced in
1992, have been installed on more than 300 bottling lines in more than 30
countries throughout the world, primarily in Europe and Latin America, by The
Coca-Cola Company, Perrier, and other major beverage producers.
During 1999, 1998, and 1997, the Company derived revenues of $7.6 million,
$11.1 million, and $19.2 million, respectively, from ALEXUS systems.
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InScan. The Company's InScan system uses high-speed X-ray imaging
technology to determine accurate fill volume, net volume, proper contents, and
package integrity of containers for the beverage, food, and other industries.
InScan uses a low-power X-ray to capture data. This data produces an instant,
detailed image of each container. InScan's proprietary software then
automatically compares the data to a predetermined profile used to generate
mathematical algorithms to determine whether the container is acceptable. InScan
incorporates a sophisticated, high-speed rejection system that automatically
removes unacceptable containers from the line. The Company's InScan systems are
currently used by major beer and soft drink companies in the U.S. and overseas,
including Miller, Molson, Coors, Guinness Brewing Company, and The Coca-Cola
Company. The Company has also sold systems to the household products industry,
the cosmetics industry, the personal-care products industry, and the food
industry.
During 1999, 1998, and 1997, the Company derived revenues of $2.7 million,
$3.8 million, and $3.3 million, respectively, from InScan systems.
Moisture Systems. The Company's Moisture Systems division designs,
manufactures, and markets equipment that uses near-infrared (NIR) spectroscopy
to measure moisture and other product constituents, including fats, proteins,
oils, flavorings, solvents, adhesives, and coatings, in a variety of products as
they move along manufacturing lines. The Company's systems are used across the
food, pharmaceutical, chemical, petrochemical, tobacco, forest products, paper
converting, plastics, textiles, corrugating, and other industries. In 1997, the
Company introduced the Quadra Beam 6600T, a system that combines an NIR sensor
with a processor that displays ingredient information to offer customers a less
expensive, easy-to-install, and space-saving on-line analyzer. In 1998, the
Company introduced the Quadra Beam 6600L, an explosion-proof analyzer designed
specifically for the on-line monitoring of volatile liquids and gases. Also in
1998, the Company launched its most powerful and cost-effective analyzer to
date, SPECTRA-QUAD, which can measure continuously up to three constituents in
products moving along product lines.
During 1999, 1998, and 1997, the Company derived revenues of $9.4 million,
$12.2 million, and $15.4 million, respectively, from Moisture Systems.
Flash-GC Gas Chromatography Systems. The Company designs, manufactures,
and markets high-speed gas chromatography systems that can analyze chemical
samples at speeds 20 to 50 times faster than conventional gas chromatography.
The Company currently markets its systems under the trade name Flash-GC for near
on-line process and quality-control applications that require high-speed
results. The Company is also targeting certain other segments of the
conventional gas chromatography market in which access to high-speed analysis
would be advantageous. The Flash-GC has applications in the food, flavors,
fragrance, chemical, pharmaceutical, forensic, and automotive industries, as
well as in medical and environmental laboratories. The Company is targeting only
those sectors of the laboratory and process gas chromatography market that are
expected to place a premium on near-instant analysis. In 1998, the Company
introduced the EZ-Flash, which is an upgrade kit that can be added to virtually
any conventional gas chromatograph to conduct chemical analyses up to 30 times
faster. Environmental-analysis and chemical companies have been the primary
buyers of this product.
Security Instruments
The Company designs, manufactures, and markets security instruments that
use trace particle- and vapor-detection techniques for forensics and search and
screening applications under the direction of police, border police,
transportation authorities, and carriers.
The Company's principal security instrument is the EGIS system, a highly
sensitive particle- and vapor-detection system for screening people, baggage,
packages, freight, and electronic equipment such as personal computers for the
presence of a wide range of explosives, including plastic explosives that have
proven difficult to detect using conventional methods. The EGIS system is
designed for stand-alone detection of explosives, both in carry-on items and on
personnel, and can be used in conjunction with enhanced X-ray and other advanced
imaging systems to provide a comprehensive explosives-detection system for
checked luggage. The Company also has developed SecurScan(TM), a walk-through
explosives detector.
4
The Company believes that the EGIS system is the most accurate and most
sensitive high-speed trace explosives-detection system available today. EGIS
employs the same high-speed gas chromatography technology used in the Flash-GC,
combined with chemiluminescent detection techniques to detect ultratrace
quantities of certain explosives and taggants, and to indicate the concentration
and type of explosive detected. Because EGIS' chemiluminescent detector responds
only to compounds of certain structures in the sample, rather than to the
thousands of compounds that may be contained in the sample, EGIS is more
selective than competing trace-detection systems, with fewer false-positive
readings. A processor in EGIS compares the chemical profile of the sample to the
known profiles of various explosives, including TNT, nitroglycerin, PETN,
Semtex, and C-4. Within seconds of the introduction of the sample into EGIS, the
system determines whether explosives are present, and, if so, identifies the
type and amount.
Initially developed with internal funds and contract funding from the FAA
and the U.S. Department of State, more than 275 EGIS units have been deployed to
date. The EGIS system currently operates in 26 countries and is in use for
carry-on and checked-luggage screening at more than 50 international airports.
EGIS is also used in government buildings and embassies, and at border crossings
and other locations where there is a high degree of concern for security. The
EGIS system has assisted in identifying explosives used in terrorist bombings,
including those in the Federal Building in Oklahoma City and the World Trade
Center in New York, as well as in Israel, Buenos Aires, and the United Kingdom.
In March 1996, the Company supplied the U.S. government with eight EGIS systems
to provide counter-terrorism support in Israel. The Bureau of Alcohol, Tobacco,
and Firearms and the Federal Bureau of Investigation used EGIS systems in their
attempt to identify the cause of the crash of TWA Flight 800.
During 1999, 1998, and 1997, the Company derived revenues of $3.8 million,
$8.3 million, and $10.3 million, respectively, from EGIS systems.
Laboratory Products
Electrochemistry Products
Through its Orion Research subsidiary, the Company manufactures a wide
range of electrochemistry products that determine the quality of many substances
by measuring their pH, specific ion concentration, dissolved oxygen, and
conductivity. These products include electrodes, which detect and communicate
measurements to meters, also supplied by Orion, that display the measurement
information in a convenient and useful format. Orion also provides a host of
reagents and standards. These products are used in the food, beverage,
pharmaceutical, chemical, environmental analysis, drinking water, wastewater
treatment, agricultural, biomedical research, and many other industries.
Titration Products
Orion's titration products are also used to measure pH, specific ion
concentration, conductivity, and dissolved oxygen, but in a more automated
manner, as well as to measure the moisture content of raw, in-process, or
finished products.
Orion designs, manufactures and markets automated potentiometric and Karl
Fischer volumetric and coulometric titrators for a variety of industries. The
target markets include the food and beverage, petrochemical, pharmaceutical,
chemical, water and wastewater, and paper industries. Orion titration systems
are designed specifically to analyze samples in either quality control or
research environments.
Orion's potentiometric titrators have been used in a wide range of
applications such as determining the amount of Vitamin C in beverages, hardness
in water, fluoride in toothpaste, surfactants in shampoos, and total acid number
in petrochemicals. Orion's Karl Fischer Titrators analyze moisture levels from
the parts-per-million to percentage range. Orion's most innovative titration
instrument is the Model TURBO2(R) with its built-in high-speed blender that
homogenizes whole samples in a moisture-free environment.
5
Process Products
Included in process products is a complete family of on-line water
analyzers designed to monitor concentrations of various chemicals and
contaminants. Targeted markets include the power, semiconductor, petrochemical,
and paper industries.
Orion's 1700 series on-line analyzers measure chlorine and fluoride in
wastewater, while the 1800 series measures specific ions and dissolved oxygen
analysis in pure and potable water.
Orion's on-line water analyzers are used in the power industry, in order
to read low levels of residual salts, ions, and dissolved oxygen in the
ultrapure water used in the steam cycle. Lower detection levels and extended
government regulations have made on-line measurements increasingly important.
(ii) and (xi) New Products; Research and Development
Detection Instruments
The Company maintains active programs for the development and introduction
of new products and improvements to existing products. The Company also seeks to
develop new applications for its existing products and technology. In 1998, the
Company evolved the InScan system into three distinct products. The InScan 100
Fill Level/Net Content System assures the proper fill level and net content of
containers. The InScan 200 Foreign Material Detection System detects metal,
stones, glass, and other objects in packages. The InScan 300 Package Integrity
Analysis System provides package integrity information for small packages,
including verifying the presence and location of various components in packages.
The Company also made progress in creating a wider and higher tunnel for all of
its InScan systems, which will allow larger containers to be examined.
In addition, the Company has been exploring a number of improvements to
its security product line. In 1998, the Company introduced a new family of
benchtop explosives detectors - the EGIS II, the more sensitive EGIS III, and
EGIS IV, the Company's most sensitive explosives detector to date. With this
family of products, the Company believes it can better meet various customers'
analytical needs as well as budget. The Company also is working to extend the
capabilities of its SecurScan walk-through detector to not only detect traces of
explosives, but also illicit drugs and metal-based weapons. In addition, the
Company plans to broaden its product line to include a chemical and biological
warfare detection system.
Laboratory Products
New Orion laboratory products for 1999 included the SensorLink(R) system
for dissolved oxygen and WineMaster(TM) Analysis System. SensorLink records
dissolved oxygen measurements directly into custom computer software. WineMaster
incorporates special chemical testing for the wine industry into turnkey
measurements. Two process product introductions for on-line pH and on-line
silica monitors will allow unattended continuous measurement of these critical
parameters in ultrapure and other waters used in industrial facilities.
Company-funded research and development expenses were $8.0 million in
1999, and $9.6 million in 1998 and 1997. Contract research and development
revenues were $0.9 million, $3.0 million, and $1.4 million in 1999, 1998, and
1997, respectively.
(iii)Raw Materials
Supplies purchased by the Company are available either from a number of
different suppliers or from alternative sources that could be developed without
a material adverse effect on the Company's business. To date, the Company has
experienced no difficulties in obtaining these materials.
6
(iv) Patents, Licenses, and Trademarks
The Company's policy is to protect its intellectual property rights by
appropriate means, including applying for patents. The Company also enters into
licensing agreements with other companies in which it grants or receives rights
to specific patents and technical know-how. The Company owns 34 U.S. patents,
and has filed applications for five additional United States patents. The
Company's U.S. patents, more than 60% of which were issued after 1990, have
expiration dates ranging from 2000 through 2015. The Company also owns
corresponding patents, or has filed corresponding applications, in a number of
jurisdictions throughout the world. In addition, the Company has an exclusive,
perpetual, royalty-free license under ten patents covering the use of
near-infrared and very near-infrared emitting diodes for on-line spectral
measurements. The Company owns several patents covering certain aspects of its
chemiluminescent analysis technology and high-speed gas chromatography
technology. The Company believes that these patents provide the Company with
competitive advantages in the markets for certain of its products. 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
Sales to The Coca-Cola Company, included in the Detection Instruments
segment, accounted for 5%, 7%, and 13% of the Company's total revenues in 1999,
1998, and 1997, respectively. Sales to Fisher Scientific and VWR Scientific,
both included in the Laboratory Products segment, accounted for 13% and 12% of
total revenues, respectively, in 1999, and 10% and 10% of total revenues,
respectively, in 1998.
(viii)Backlog
The Company's backlog of firm orders was as follows:
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------- -------- --------
Detection Instruments $2,160 $ 4,494
Laboratory Products 2,441 1,571
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$4,601 $ 6,065
====== =======
Certain of these 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 decrease in
the backlog for the Detection Instruments segment primarily resulted from a
decrease in sales of the Company's ALEXUS systems and EGIS explosive-detection
systems. The Company does not believe that the size of its backlog is
necessarily indicative of intermediate or long-term trends in its business.
(ix) Government Contracts
The Company's security instruments are subject to regulation by the FAA,
corresponding foreign governmental authorities, The International Civil Aviation
Organization, and the United Nations organization, which are responsible
7
for establishing standard practices for the aviation industry on a worldwide
basis. Sales of the Company's security instruments for use in airports have been
and will continue to be dependent upon governmental initiatives to require or
support the screening of baggage, carry-on items, and people with advanced
explosives-detection equipment. Substantially all of such systems have been
installed at airports in countries in which the applicable government or
regulatory authority overseeing the operations of the airport has mandated such
screening. Such mandates are influenced by many factors outside of the control
of the Company, including political and budgetary concerns of governments,
airlines, and airports. To date, the FAA has not mandated the use of any
explosives-detection system.
(x) Competition
The markets for the Company's products are highly competitive. Competitors
may develop superior products or products of similar quality for sale at the
same or lower prices. Moreover, there can be no assurance that the Company's
products will not be rendered obsolete by new industry standards or changing
technology. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. The Company employs a variety of
sales methods for its products and services that are designed to fit the needs
of particular customer groups.
Detection Instruments
Quality-assurance Systems
The Company's quality-assurance systems compete with detection systems
manufactured by numerous companies. The Company believes, however, that these
companies are generally focused on particular niches in the process detection
systems market, only in some of which the Company competes. The ALEXUS system
encounters competition throughout the world, but primarily in the
German-speaking areas of Europe, with products offered by Walter Grassle GmbH of
Germany and Sudtronics S.A. of Switzerland. InScan competes with gamma-based
beverage fill-height detectors offered by a number of companies, including
Industrial Dynamics Company, based in California, and Heuft Systemtechnik GmbH,
based in Germany. ALEXUS systems are also sold through Krones GmbH, a large
German turnkey plant contractor for new bottling lines. Competition in the
moisture-detection market is highly fragmented. The Company's principal
competitor in this market is Infrared Engineering Limited, based in England. The
Company sells and services both its InScan and Moisture Systems equipment
through a mix of direct sales, manufacturers' representatives, and original
equipment manufacturer relationships around the world. The Company also operates
factory service centers for these products. The Flash-GC and EZ Flash systems
are new technologies competing in the developing high-speed gas chromatography
market segment. The Company's Flash-GC and EZ Flash compete principally against
high-speed gas chromatographs offered by ChromFast, based in Michigan. The
Company's gas chromatography systems are sold through a direct sales and
services organization. The Company is currently attempting to recruit additional
direct sales representatives for certain regions of the United States.
Competition in the markets for each of the Company's quality-assurance
systems is based primarily on performance, durability, service and, to a lesser
extent, price. The Company believes that its systems' performance and speed, as
well as the Company's reputation for developing superior new technologies and
for the innovative application of existing technologies to a variety of
high-speed production environments and product quality assurance problems, are
competitive advantages.
Security Instruments
In the security instrument market, the Company competes with a small
number of companies, including other makers of chemical trace detection
instruments, and, to a lesser degree, makers of enhanced X-ray detectors.
Competition in this market is based primarily on performance, including speed,
accuracy, and the range of explosives that can be detected; ease of use;
service; and price. The Company's principal competitor in the trace detection
market is Barringer Technologies Inc., a Canadian firm that has placed several
trace detectors in airport applications.
8
The Company's security instruments are sold to a few key decision-makers
around the world, primarily government agencies or private companies fulfilling
government regulations. Accordingly, sales are made by a small, specialized
direct sales force, supported by a broader service organization, from offices
shared with ALEXUS systems sales and service organizations.
Laboratory Products
The Company's Laboratory Products segment competes with several
international companies. The Company competes on the basis of performance,
service, technology, and price. Competitors include Corning, Fisher Scientific,
Mettler-Toledo, and Beckman Coulter. The two major titration competitors are
Metrohm, distributed by Brinkmann in the United States, and Mettler-Toledo.
Other competitors in the market for titration products are Radiometer, Kyoto,
ManTech, and Denver Instruments. Ninety-five percent of the process products
market is the power industry in which Orion competes with manufacturers such as
Hach, Waltron, and Swan. Other competitors of process products are Foxboro,
Polymetron, and Honeywell.
(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 460 full-time
employees.
(d) Financial Information About Geographic Areas
Financial information about geographic areas is summarized in Note 8 to
Consolidated Financial Statements in the Registrant's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
(e) Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer)
------------------ --- ---------------------------------------------------------
James Barbookles 51 Chief Executive Officer and President (1997)
Theo Melas-Kyriazi 40 Chief Financial Officer (1998)
Paul F. Kelleher 57 Chief Accounting Officer (1990)
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. Mr. Barbookles has been President
and Chief Executive Officer of the Company since November 1997. Mr. Barbookles joined Orion in 1989 as
Vice President of Research, Development, and Engineering and was promoted to President and Chief
Operating Officer in 1993. Mr. Melas-Kyriazi was appointed Chief Financial Officer of the Company and
Thermo Electron on January 1, 1999. Mr. Melas-Kyriazi 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, then a public subsidiary of Thermo Instrument Systems Inc. In 1998, he
became Vice President of Corporate Strategy for Thermo Electron. Mr. Melas-Kyriazi remains a Vice
President of Thermo Electron. Mr. Kelleher has held comparable positions for at least five years with
Thermedics or Thermo Electron. Messrs. Melas-Kyriazi and Kelleher are full-time employees of Thermo
Electron, but devote such portions of their time to the Company's affairs as the Company's needs
reasonably require.
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Item 2. Properties
The location and general character of the Company's principal properties
by segment as of January 1, 2000 are as follows.
Detection Instruments
The Detection Instruments segment operates from one principal facility, an
111,000-square foot office, engineering, laboratory, and manufacturing facility
in Chelmsford, Massachusetts, under a lease expiring in 2006, subject to one
five-year renewal option at the election of the Company. The Detection
Instruments segment also leases approximately 9,000 square feet of office and
manufacturing space in Enschede, Holland, under a lease expiring in 2001. In
addition, the Detection Instruments segment leases approximately 12,000 square
feet of office and engineering space throughout the world for its sales and
service operations under leases expiring at various dates through 2002.
Laboratory Products
The Laboratory Products segment operates primarily from a 115,000-square
foot office, engineering, laboratory, and manufacturing facility in Beverly,
Massachusetts, under a lease expiring in 2006. In addition, the Laboratory
Products segment leases approximately 12,000 square feet of office and
manufacturing space in Puerto Rico under a lease expiring in 2009 and owns
approximately 14,000 square feet of office, engineering, laboratory, and
manufacturing space in the United Kingdom.
The Company believes that these facilities are adequate for its present
operations. The Company believes suitable alternate space is available for lease
on acceptable terms in the event the Company does not renew leases expiring in
the near future.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of the 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, $.10 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.
11
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
Reports of Independent Public Accountants
Financial Statement Schedule 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.
12
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 16, 2000 THERMEDICS DETECTION INC.
By: /s/ James Barbookles
James Barbookles
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, as of March 16, 2000.
Signature Title
By: /s/ James Barbookles President, Chief Executive Officer, and
James Barbookles 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/ John T. Keiser Chairman of the Board and Director
John T. Keiser
By: /s/ Earl R. Lewis Director
Earl R. Lewis
13
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Thermedics Detection Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Thermedics Detection Inc.'s
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 10, 2000 (except with respect to
the matter discussed in Note 11, as to which the date is March 10, 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 10, 2000
14
SCHEDULE II
THERMEDICS DETECTION INC.
Valuation and Qualifying Accounts
(In thousands)
Description Provision Accounts Accounts Other (a) Balance
Balance at Charged to Recovered at End
Beginning Expense Written of Year
of Year Off
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- ----------
Allowance for Doubtful Accounts
Year Ended January 1, 2000 $1,149 $ 728 $ - $ (148) $ (15) $1,714
Year Ended January 2, 1999 $1,127 $ 301 $ 1 $ (395) $ 115 $1,149
Year Ended January 3, 1998 $1,455 $ 201 $ 7 $ (530) $ (6) $1,127
Description Balance at Established Activity Other (c) Balance
Beginning as Cost of Charged at End
of Year Acquisitions to of Year
Reserve
- ------------------------------------------- ------------- ------------ ----------- ----------- ----------
Accrued Acquisition Expenses (b)
Year Ended January 3, 1998 $ 580 $ - $ (476) $ (104) $ -
(a) Includes 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 reduction of cost in excess of net assets of acquired companies
for accrued acquisition expenses no longer necessary after finalization of
restructuring plan.
15
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
2.1* Asset Purchase Agreement dated as of January 25, 1996, among the Registrant, Moisture
Systems Corporation, and certain Affiliates of Moisture Systems Corporation. Pursuant to
Item 601(b)(2) of Regulation S-K, schedules to this Agreement have been omitted. The
Registrant hereby undertakes to furnish supplementally a copy of such schedules to the
Commission upon request.
2.2* Share Purchase Agreement dated as of January 25, 1996, among the Registrant, Rutter
Holding B.V., and certain Affiliates of Rutter Holding B.V. Pursuant to Item 601(b)(2)
of Regulation S-K, schedules to this Agreement have been omitted. The Registrant hereby
undertakes to furnish supplementally a copy of such schedules to the Commission upon
request.
2.3 Agreement and Plan of Reorganization dated as of May 6, 1998, by
and among the Registrant, Orion Acquisition Inc., Thermedics
Inc., and Orion Research, Inc. (incorporated by reference herein
from Exhibit 2.3 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended April 4, 1998 [File No. 1-12745]).
Pursuant to Item 601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Registrant hereby undertakes to
furnish supplementally a copy of such schedules to the Commission
upon request.
3.1* Articles of Organization of the Registrant, as amended.
3.2 Amended and Restated By-Laws of the Registrant (incorporated by reference herein from
Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July
3, 1999 [File No. 1-12745]).
4.1* Specimen Common Stock Certificate.
4.2* Specimen Rights Certificate.
10.1* Corporate Services Agreement dated as of March 20, 1996, between
Thermo Electron Corporation and the Registrant.
10.2 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993
(incorporated by reference herein from 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]).
10.3* Tax Allocation Agreement dated as of March 20, 1996, between
Thermedics Inc. and the Registrant.
10.4* Reserved.
10.5 Reserved.
10.6 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 10, 1997, between Thermedics and
the Registrant (incorporated by reference herein from Exhibit
10.6 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998 [File No. 1-12745]).
16
Exhibit
Number Description of Exhibit
10.7* Equity Incentive Plan of the Registrant.
10.8* Deferred Compensation Plan for Directors of the Registrant. 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
Thermedics 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.
10.9* $21.2 Million Principal Amount Promissory Note due March 1998,
issued by the Registrant to Thermedics.
10.10* Form of Indemnification Agreement for Officers and Directors.
10.11* Reserved.
10.12 Stock Holdings Assistance Plan and Form of Promissory Note (incorporated by reference
herein from Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 [File No. 1-12745]).
10.13 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between the Registrant and
Thermo Electron Corporation (incorporated by reference herein
from Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-12745]).
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.
Each exhibit above that is marked with an asterisk (*) is incorporated by
reference to the correspondingly numbered exhibit to the Company's Registration
Statement on Form S-1 [File No. 333-31987].