10-Q 1 a2073939z10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------------- FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 26, 2002 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to_________ Commission file number 1-4737 ---------------------- HIGH VOLTAGE ENGINEERING CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS (State or other jurisdiction of incorporation) 04-2035796 (I.R.S. Employer Identification No.) 401 Edgewater Place, Suite 680, Wakefield, MA 01880 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (781) 224-1001 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. (1) Yes /X/ No / / (2) Yes / / No /X/ Number of Common Shares outstanding at March 20, 2002: 1,082.7429 shares. CONTENTS

~~OCTOBER~~PART ~~27,~~I ~~APRIL~~- ~~28,~~FINANCIAL ~~2001~~INFORMATION ~~2001~~ITEM ~~-----------~~1. -~~----------~~ ~~(Unaudited)~~FINANCIAL ~~(Audited)~~STATEMENTS ~~ASSETS~~Consolidated ~~CURRENT~~Balance ~~ASSETS:~~Sheets ~~Cash~~at ~~and~~January ~~cash~~26, ~~equivalents.........................~~2002 $(Unaudited) ~~13,570~~and $April 2628,~~932~~ ~~Restricted~~2001 ~~cash~~(Audited)................................... ~~2,514 29,472 Accounts receivable, net~~.......................... ~~122,365~~3 ~~81,358~~Consolidated ~~Refundable~~Statements ~~income~~of ~~taxes...........................~~Operations ~~1,366~~for ~~495~~the ~~Inventories.......................................~~Three ~~60,202 61,631 Costs~~ and ~~earnings~~Nine inMonths ~~excess~~ended ofJanuary ~~billings.......... 8~~26,~~091~~ ~~13,032~~2002 ~~Prepaid~~(Unaudited) ~~expenses~~ and ~~other~~January ~~current assets......... 12~~27,~~246~~ ~~8,694~~2001 ~~---------- ---------- Total current assets~~(Unaudited)..............~~..............~~ ~~220,354~~4 ~~221,614~~Consolidated ~~PROPERTY,~~Statements ~~PLANT~~of ~~AND~~Stockholders' ~~EQUIPMENT,~~Deficiency ~~NET..................~~for ~~82,479~~the ~~82,980~~Nine ~~INVESTMENT~~Months INended ~~JOINT~~January ~~VENTURE......................... 2~~26,~~737~~ ~~2,040~~2002 ~~ASSETS~~(Unaudited) ~~HELD~~and ~~FOR~~for ~~SALE................................~~the ~~2,451~~Years 2ended April 28,~~510~~ ~~OTHER~~2001 ~~ASSETS~~(Audited) and April 29, ~~NET~~2000 (Audited)................................... ~~29,957 69,447 COST IN EXCESS OF NET ASSETS ACQUIRED, NET~~..~~........~~ ~~31,073~~5 ~~33,032~~Consolidated ~~----------~~Statements ~~----------~~of $Cash ~~369,051~~Flows $for ~~411,623~~the ~~==========~~Nine ~~==========~~Months ~~LIABILITIES~~ended ~~AND~~January ~~STOCKHOLDERS'~~26, ~~DEFICIENCY~~2002 ~~CURRENT~~(Unaudited) ~~LIABILITIES:~~and ~~Current~~January ~~maturities of long-term debt obligations.. $ 8~~27,~~333~~ $2001 ~~8,805 Foreign credit line~~(Unaudited)..........................~~.....~~ ~~9,692~~ 6~~,075~~ ~~Accounts~~Notes ~~payable~~to Consolidated Financial Statements (Unaudited)..................... 8 ITEM 2.~~............~~ ~~64,329~~- ~~73,157~~MANAGEMENT'S ~~Accrued~~DISCUSSION ~~interest~~AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. ~~4,423 4,104 Accrued liabilities~~......................~~.........~~ ~~40,524~~17 ~~43,529~~ITEM ~~Billings~~3. in- ~~excess~~QUANTITATIVE ofAND ~~costs.......................~~QUALITATIVE ~~2,887~~DISCLOSURES ~~4,296~~ABOUT ~~Advance~~MARKET ~~payments by customers~~RISK.........~~............~~ ~~20,294~~23 ~~18,886~~PART ~~Federal,~~II ~~foreign~~- ~~and~~OTHER ~~state~~INFORMATION ~~income~~ITEM ~~taxes payable~~1... ~~1,869~~- ~~12,519~~LEGAL ~~Deferred income taxes~~PROCEEDINGS............................. ~~1,950 3,336 Redeemable put warrants~~.....................~~......~~ ~~2,900~~24 ITEM 2~~,900~~. -~~---------~~ ~~----------~~CHANGES ~~Total~~IN ~~current liabilities~~SECURITIES....................... ~~157,201 177,607 LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES~~...... ~~211,498 211,588 DEFERRED INCOME TAXES~~................. 25 ITEM 3.~~.............~~ ~~13,519~~- ~~13,519~~DEFAULTS ~~OTHER~~UPON ~~LIABILITIES~~SENIOR SECURITIES.................................... ~~24,186~~25 ~~28,249~~ITEM ~~REDEEMABLE~~4. ~~PREFERRED~~- ~~STOCK~~SUBMISSION ~~(AGGREGATE~~OF ~~LIQUIDATION~~MATTERS ~~PREFERENCE~~TO OFA ~~$52,224~~VOTE AS OF ~~OCTOBER~~SECURITY ~~27, 2001)~~HOLDERS..... ~~49,989 46,122 MINORITY INTEREST~~...........~~........................~~ 1425 59ITEM ~~COMMITMENTS~~5. ~~AND~~- ~~CONTINGENCIES~~OTHER ~~STOCKHOLDERS' DEFICIENCY Common stock~~INFORMATION...................................... ~~1 1 Paid-in-capital~~............ 25 ITEM 6.~~......................~~ ~~20,140~~- ~~20,140~~EXHIBITS ~~Accumulated~~AND ~~deficit~~REPORTS ON FORM 8-K................................... ~~(107,750)~~25 ~~(86,215) Common stock warrants~~SIGNATURES............................. ~~2,813 2,813 Other comprehensive (loss)~~........................ ~~(2,560) (2,260) ---------- ---------- Total stockholders' deficiency~~.................. ~~(87,356) (65,521) ---------- ---------- $ 369,051 $ 411,623 ========== ==========~~26

2 PART I FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)

~~THREE~~JANUARY ~~MONTHS ENDED SIX MONTHS ENDED -------------------------- -------------------------- OCTOBER 27~~26, ~~OCTOBER~~APRIL 28, ~~OCTOBER~~2002 ~~27, OCTOBER 28,~~ 2001 ~~2000 2001 2000~~ ----------- -~~----------~~ ----------- ~~-----------~~ (Unaudited) (~~Unaudited~~Audited) ~~(Unaudited)~~ASSETS ~~(Unaudited)~~CURRENT ~~Net~~ASSETS: ~~sales~~Cash and cash equivalents.........................~~.............~~ $ 9819,~~186~~345 $ ~~102~~26,~~130~~932 $Restricted ~~192,908 $ 205,592 Cost of sales~~cash................................... 754,~~230~~784 8329,~~520~~472 ~~149,741~~Accounts ~~163~~receivable,~~912~~ ~~-----------~~net.......................... ~~-----------~~109,981 ~~-----------~~81,853 ~~----------- Gross profit~~Inventories....................................... 2261,~~956~~574 1861,~~610~~631 ~~43,167~~Costs ~~41,680~~and ~~Administrative~~earnings ~~and~~in ~~selling~~excess ~~expenses~~of billings............ 1813,~~897~~375 1613,~~231~~032 ~~36,917~~Prepaid ~~34,723~~expenses ~~Research~~ and ~~development~~other ~~expenses~~current assets.........~~.....~~ 411,~~134~~886 ~~3,885~~ 8,~~412~~694 ~~8,153~~---------- ~~Other~~--------- Total current assets............................ 220,945 221,614 PROPERTY, PLANT AND EQUIPMENT, NET.................. 180,~~383~~733 182,~~785~~980 ~~1,620~~INVESTMENT ~~2,307~~IN ~~-----------~~JOINT ~~----------- ----------- ----------- Loss from operations~~VENTURE......................... ~~(1,458) (~~3,~~291)~~118 (32,~~782)~~040 ~~(3,503)~~ASSETS ~~Interest~~HELD ~~expense~~FOR SALE................................ (62,~~613)~~422 (52,~~336)~~510 ~~(12,655)~~OTHER ~~(10~~ASSETS,~~461)~~ ~~Interest income~~NET................................... ~~352~~28,961 4969,447 ~~652~~COST ~~124~~IN ~~-----------~~EXCESS ~~-----------~~OF NET ASSETS ACQUIRED, NET.......... 29,910 33,032 ----------- ----------- ~~Loss~~$ ~~from~~366,089 ~~continuing~~$ ~~operations~~411,623 ~~before~~========== ~~income~~========= ~~taxes~~LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES: Current maturities of long-term debt obligations.. $ 4,755 ~~discontinued~~$ ~~operations~~8,805 ~~and~~Foreign ~~extraordinary~~credit ~~items~~line............................... (711,~~719)~~305 (86,~~578)~~075 ~~(15~~Accounts payable.................................. 63,~~785)~~514 ~~(13~~73,~~840)~~157 ~~Income~~Accrued ~~taxes~~interest................................... ~~472~~8,147 ~~141 1~~4,~~556~~104 ~~600~~Accrued ~~-----------~~liabilities............................... ~~-----------~~41,848 ~~----------- ----------- Loss from continuing operations~~43,529 ~~before~~Billings ~~discontinued~~in ~~operations~~excess ~~and~~of ~~extraordinary items~~costs....................... 6,446 4,296 Advance payments by customers..................... (819,~~191)~~898 (818,~~719)~~886 ~~(17~~Federal,~~341)~~ ~~(14,440)~~foreign ~~Discontinued~~and ~~operations~~state ~~Income~~income ~~from~~taxes ~~discontinued~~payable... ~~operations~~1,593 ~~net~~12,519 ofDeferred income taxes............................. --1,731 ~~535 -- 966 Extraordinary loss~~3,336 ~~net~~Redeemable ofput ~~income taxes~~warrants........................... --2,900 ~~(365)~~2,900 ~~(327) (365)~~ ----------- ----------- ~~-----------~~Total ~~-----------~~current ~~NET LOSS~~liabilities....................... 162,137 177,607 LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES...... 213,741 211,588 DEFERRED INCOME TAXES............................... (814,~~191)~~486 ~~(8,549) (17,668) (~~13,~~839)~~519 ~~Preferred~~OTHER ~~dividends~~LIABILITIES............................ ~~(1,809) (1,213) (3,525) (2,609) Accretion of redeemable preferred stock~~........ ~~(171)~~23,619 ~~(111)~~28,249 ~~(342)~~REDEEMABLE PREFERRED STOCK (~~222)~~AGGREGATE ~~-----------~~LIQUIDATION ~~-----------~~PREFERENCE ~~-----------~~OF ~~-----------~~$53,982 ~~Net~~AS ~~loss~~OF ~~applicable~~JANUARY to26, ~~common~~2002)..... ~~stockholders~~51,993 46,122 MINORITY INTEREST................................... $45 ~~(10,171)~~59 $COMMITMENTS ~~(9,873)~~AND $CONTINGENCIES ~~(21,535)~~STOCKHOLDERS' $DEFICIENCY ~~(16,670)~~Common ~~=========== =========== =========== =========== Net loss per common share: Continuing operations~~stock........................ ~~$(9,391~~.~~51) $(9,273~~.~~31) $(19,582~~.~~64) $(15,947~~.~~37) Income from discontinued operations~~.......... --1 ~~494.00~~1 Paid-in- ~~891~~capital.~~97 Extraordinary items~~.......................... ~~-- (337~~.~~03) (301~~.~~94) (337~~.~~03)~~..... ~~-----------~~20,140 ~~-----------~~20,140 ~~------------~~Accumulated ~~------------ Net loss applicable to common stockholders~~deficit............................... $(9119,~~391.51~~743) $(986,~~116.34~~215) ~~$(19,884.58)~~Common ~~$(15,392.43) =========== =========== ============ ============ Weighted average common~~ stock ~~outstanding~~warrants............................. 12,~~083~~813 12,~~083~~813 ~~1,083~~Other ~~1,083~~comprehensive ~~Weighted~~(loss)........................ ~~average~~(3,143) ~~common~~(2,260) ~~stock~~---------- ~~and~~--------- ~~dilutive~~Total ~~equivalents~~stockholders' ~~outstanding~~deficiency..................~~....~~ 1(99,~~276~~932) 1(65,~~270~~521) 1---------- --------- $ 366,~~276~~089 1$ 411,~~256~~623 ======= ===~~====~~ ======= ==~~=====~~

See accompanying notes to consolidated financial statements. 3 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

~~COMMON~~THREE ~~OTHER~~MONTHS ~~COMMON~~ENDED ~~PAID-IN~~NINE ~~ACCUMULATED~~MONTHS ~~STOCK~~ENDED ~~COMPREHENSIVE STOCK CAPITAL DEFICIT WARRANTS (LOSS) TOTAL~~ -------------------------- ----------------------------- JANUARY 26, JANUARY 27, JANUARY 26, JANUARY 27, 2002 2001 2002 2001 ----------- ---------- ------------ ----------- ~~Balance,~~(Unaudited) ~~April~~(Unaudited) ~~24,~~(Unaudited) ~~1999~~ (~~Audited~~Unaudited) Net sales................. .....................$ 190,479 $ 1994,~~527~~258 $ ~~(62~~283,~~342)~~387 $ 2299,~~200~~850 $Cost ~~(347)~~of $sales.................................. ~~(40~~70,~~961)~~456 ~~Net~~73,855 ~~loss~~220,197 238,419 ----------- ---------- ------------ ----------- Gross profit................................. ~~(27~~20,~~108)~~023 ~~(27~~20,~~108)~~403 ~~Preferred~~63,190 ~~stock~~61,431 ~~dividends~~Administrative and selling expenses............ (417,~~965)~~069 (417,~~965)~~609 ~~Accretion~~53,986 of51,680 ~~redeemable~~Research ~~preferred~~and ~~stock~~development expenses.............. ~~(448)~~4,055 ~~(448)~~3,656 ~~Change~~12,467 in11,809 ~~foreign~~Restructuring ~~currency~~charge........................... ~~translation~~127 144 127 144 Other.......................................... ~~(86)~~2,201 ~~(86)~~149 3,821 2,456 ----------- ---------- ------------ ----------- Loss from operations......................... (3,429) (1,155) (7,211) (4,658) Interest expense............................... (6,408) (5,772) (19,063) (16,233) Interest income................................ 347 122 999 246 ----------- ---------- ------------ ~~Balance,~~----------- ~~April~~Loss 29from continuing operations before income taxes, ~~2000~~discontinued ~~(Audited)~~operations and extraordinary items.................... ~~1 19~~(9,~~527~~490) (946,~~863~~805) ~~2,200~~ (~~433~~25,275) (7320,~~568~~645) ~~Net~~Income ~~income~~taxes................................... 15499 200 2,~~354~~055 15800 ----------- ---------- ------------ ----------- Loss from continuing operations,~~354~~ ~~Preferred~~before ~~stock~~discontinued ~~dividends~~operations and extraordinary items...................................... (69,~~101~~989) (67,~~101~~005) ~~Accretion~~(27,330) of(21,445) ~~redeemable~~Discontinued ~~preferred~~operations: ~~stock~~Income from discontinued operations, net of income taxes........................ -- 618 -- 1,584 Extraordinary loss, net of income taxes........ -- (~~605~~165) (~~605~~327) ~~Issuable~~(530) ~~shares~~----------- of---------- ~~common~~------------ ~~stock~~----------- ~~and~~NET ~~common stock warrants~~LOSS....................................... ~~613~~(9,989) ~~613~~(6,552) 1(27,~~226~~657) ~~Change~~(20,391) inPreferred ~~foreign currency translation~~dividends............................ (1,~~451~~832) (1,~~451~~530) ~~Pension~~(5,357) ~~liability~~(4,139) ~~adjustment~~Accretion of redeemable preferred stock........ (~~376~~172) (~~376~~214) ~~------~~(514) ~~---------~~(436) ----------- ---------- ------------ ----------- ~~Balance,~~Net ~~April~~loss ~~28,~~applicable ~~2001~~to ~~(Audited)~~common stockholders.................................$ ~~1 20~~(11,~~140~~993) $ (868,~~215~~296) ~~2,813~~$ (233,~~260~~528) $ (6524,~~521~~966) =========== ========== =========== =========== Net loss per common share: Continuing operations.................... ....$(1711,~~668~~073.87) $(178,~~668~~078.49) ~~Preferred~~$ ~~stock dividends...~~ (330,~~525~~656.51) $(324,~~525~~025.85) ~~Accretion~~Income offrom ~~redeemable~~discontinued ~~preferred stock~~operations........... ~~(342)~~-- ~~(342)~~570.64 ~~Change~~-- in1,462.60 ~~foreign~~Extraordinary ~~currency translation~~items.......................... ~~(60)~~-- (60152.35) ~~Pension liability adjustment~~ (~~240~~301.94) (~~240~~489.38) ------ -----~~----~~ ----------- --------- --~~----------~~ ----------- ~~Balance,~~Net ~~October~~loss ~~27,~~applicable ~~2001~~to ~~(Unaudited)~~common stockholders............... ................$ ~~1 $ 20~~(11,~~140~~073.87) $ (~~107~~7,~~750~~660.20) $ ~~2,813 $~~ (230,~~560~~958.45) $ (8723,~~356~~052.63) =========== ========== =========== =========== Weighted average common stock outstanding...... 1,083 1,083 1,083 1,083 Weighted average common stock and dilutive equivalents outstanding...................... 1,276 1,276 1,276 1,276 =========== ========== =========== ===========

See accompanying notes to consolidated financial statements. 4 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (DOLLARS IN THOUSANDS)

~~SIX~~ACCUMULATED ~~MONTHS~~COMMON ~~ENDED~~OTHER COMMON PAID-IN ACCUMULATED STOCK COMPREHENSIVE STOCK CAPITAL DEFICIT WARRANTS (LOSS) TOTAL ------ -------- ---------- --------- ~~OCTOBER 27, OCTOBER 28, 2001 2000~~ ------------ ----------- ~~(Unaudited)~~Balance, ~~(Unaudited)~~April ~~Cash~~24, ~~flows~~1999 ~~from operating activities: Net loss~~(Audited).................~~...............................~~ $~~(17~~ 1 $ 19,~~668)~~527 $ (1362,~~839~~342) ~~Adjustments~~$ to2,200 ~~reconcile~~$ ~~net loss to net cash~~ (~~used in~~347) ~~provided~~$ ~~by operating activities: Income from discontinued operations~~(40,961) ~~net~~Net ~~of income taxes~~loss....................~~...........................~~ -- (~~966~~27,108) ~~Extraordinary item~~(27,108) ~~net~~Preferred ofstock ~~income taxes~~dividends...~~............~~ ~~327 365 Depreciation and amortization......................... 10~~(4,~~137~~965) ~~9,384 Non-cash interest..................................... 719 540 Deferred income taxes.................................~~ (14,~~386~~965) ~~874~~Accretion ~~Undistributed~~of ~~earnings~~redeemable ofpreferred ~~affiliate~~stock...........~~........~~ (~~929~~448) ~~101~~ (~~Gain~~448) ~~loss~~Change onin ~~sale~~foreign ofcurrency ~~assets~~translation...............~~..........~~ (~~417~~86) 56(86) ~~Change~~------ in-------- ~~assets~~--------- ~~and~~--------- ~~liabilities~~------------ ~~net~~---------- ofBalance, ~~effects~~April ~~of business acquisition: Accounts receivable~~29, ~~net~~2000 (Audited).................~~...........~~ ~~9,702~~1 419,~~593~~527 ~~Refinanced Receivables Purchase Facility............~~ (1094,~~279~~863) 42,~~693~~200 ~~Refundable~~(433) ~~Income~~(73,568) ~~taxes.............................~~Net ~~-- 580 Inventories~~income..................~~.......................~~ 115,~~429~~354 (115,~~049)~~354 ~~Costs~~Preferred ~~and~~stock ~~earnings in excess of billings~~dividends...~~.........~~ 4(6,~~941~~101) (36,~~059~~101) ~~Prepaid~~Accretion ~~expenses~~of ~~and~~redeemable ~~other~~preferred ~~current assets~~stock........... (~~3,552~~605) (~~5,787~~605) ~~Other~~Issuable ~~assets........................................~~shares ~~(2,886)~~of ~~(1,623)~~common ~~Accounts~~stock ~~payable, accrued interest~~ and ~~accrued~~common ~~liabilities~~stock warrants..................~~.....................~~ ~~(16,635)~~613 (8613 1,~~460)~~226 ~~Billings~~Change in ~~excess~~foreign ofcurrency ~~cost~~translation...............~~...........~~ (1,~~409~~451) ~~474 Advance payments by customers.......................~~ (1,~~408~~451) ~~10,769~~Pension ~~Federal,~~liability ~~foreign~~adjustment ~~and~~(376) ~~state income taxes payable.....~~ (~~11,798~~376) 24 ------~~---~~ --------- ~~Net cash (used in) continuing operations............ (38,296) (2,330) Net cash provided by discontinued operations........~~ -- ~~1,784~~ --------- --------- ~~Net cash (used in) operating activities............. (38,296) (546)~~ ------------ ---------- ~~Cash flows from investing activities: Additions to property~~Balance, ~~plant~~April ~~and equipment~~28, ~~continuing~~2001 ~~operations..........................................~~ (~~3,762~~Audited) ~~(5,303) Additions to property, plant and equipment, discontinued operations~~.................~~.........................~~ ~~-- (~~1~~,618)~~ ~~Acquisition of Vivirad-High Voltage Corporation~~20,140 ~~net of cash acquired...................................... --~~ (286,~~281~~215) ~~Other................................................... 891 1~~2,~~061~~813 ~~--------- --------- Net cash~~ (~~used in) investing activities............. (~~2,~~871~~260) (865,~~141~~521) ~~--------- --------- Cash flows from financing activities:~~ Net ~~proceeds (payments) on foreign credit line~~loss.......... ~~3,593 (209) Net decrease (increase) in restricted cash~~..........~~....~~ ~~26,958~~ (~~180) Principal payments on long-term obligations............. (1~~27,~~948~~657) (227,~~464~~657) ~~Net~~Preferred ~~(payments)~~stock ~~borrowings under credit agreements~~dividends...~~....~~ (15,~~752~~357) 7(5,~~747~~357) ~~Proceeds~~Accretion ~~from the issue~~ of ~~long-term~~redeemable ~~obligations,~~preferred ~~net of issuance costs~~stock...........~~..........................~~ ~~244~~(514) ~~1,526 Minority interest.......................................~~ (45514) --Change ~~Cash~~in ~~overdraft,~~foreign ~~continuing~~currency ~~operations~~translation...............~~....~~ ~~818~~(643) ~~4,493~~(643) ~~Cash~~Pension ~~overdraft,~~liability ~~discontinued~~adjustment ~~operations.................~~(240) --(240) ~~167~~ ------~~---~~ --------- ~~Net cash provided by financing activities............. 27,868 11,080~~ --------- --------- ~~Effect of foreign exchange rate changes on cash............ (63) (206)~~ ------------ ---------- ~~Net~~Balance, ~~(decrease)~~January ~~increase~~26, in2002 ~~cash and cash equivalents~~(Unaudited).... ~~(13,362) 2,187 Cash and cash equivalents, beginning of the period~~........... ~~26,932~~$ ~~5,307~~1 ~~---------~~$ ~~---------~~20,140 ~~Cash~~$(119,743) ~~and~~$ ~~cash equivalents~~2,813 ~~end of the period............~~ $ 13(3,~~570~~143) $ 7(99,~~494~~932) ====== ======== ========= ========= ============ ==========

See accompanying notes to consolidated financial statements. 5 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)

~~SIX~~NINE MONTHS ENDED --------------------------- ~~OCTOBER~~JANUARY 2726, ~~OCTOBER~~JANUARY 2827, 2002 2001 ~~2000~~ ----------- ----------- (Unaudited) (Unaudited) ~~Supplemental Disclosure of~~ Cash ~~Flows~~flows ~~Information:~~from ~~Cash~~operating ~~paid for~~activities: ~~Interest~~Net loss................................................ $ 11(27,~~534~~657) $ 10(20,~~452~~391) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Income from discontinued operations, net of income taxes............................................... 14-- (1,~~858~~584) ~~537~~Extraordinary ~~Supplemental~~item, ~~Schedule~~net of income taxes............... 327 530 Depreciation and amortization......................... 15,010 14,212 Non-cash ~~Investing~~interest..................................... 1,065 789 Deferred income taxes................................. (638) 149 Undistributed earnings of affiliate................... (1,234) (12) (Gain) loss on sale of assets......................... (424) 576 Change in assets and ~~Financing~~liabilities ~~Activities~~net of effects of business acquisition: ~~Preferred~~Accounts ~~stock~~receivable, ~~dividends~~net............................ 22,086 (3,573) Refinanced Receivables Purchase Facility............ (10,279) 8,071 Refundable income taxes............................. 1,366 1,075 Inventories......................................... 57 (6,601) Costs and earnings in excess of billings............ (343) 169 Prepaid expenses and other current assets........... (3,192) (4,739) Other assets........................................ (2,255) (2,397) Accounts payable, accrued interest and accrued liabilities....................................... (12,140) (2,749) Billings in excess of cost.......................... 2,150 (1,079) Advance payments by customers....................... 1,012 14,218 Federal, foreign and state income taxes payable..... (12,074) 422 ---------- ---------- Net cash (used in) continuing operations............ (27,163) (2,914) Net cash provided by discontinued operations........ -~~kind~~- 4,148 ---------- ---------- Net cash (used in) provided by operating activities. (27,163) 1,234 ---------- ---------- Cash flows from investing activities: Additions to property, plant and ~~issuable~~equipment, ~~preferred~~continuing ~~stock~~operations.......................................... ~~dividends~~(6,816) (8,049) Additions to property, plant and equipment, discontinued operations.......................................... -in-~~kind~~ (1,975) Acquisition of Vivirad-High Voltage Corporation, net of cash acquired...................................... $-- (2,281) Other................................................... 1,008 1,121 ---------- ---------- Net cash (used in) investing activities............. (5,808) (11,184) ---------- ---------- Cash flows from financing activities: Net proceeds (payments) on foreign credit line.......... 5,547 (169) Net decrease (increase) in restricted cash.............. 24,688 (3,~~525~~637) $Principal payments on long-term obligations............. (2,~~609~~111) ~~Leased~~(3,351) ~~asset~~Net ~~additions~~(payments) borrowings under credit agreements....... (1,633) 14,981 Proceeds from the issue of long-term obligations, net of issuance costs..................................... 16 1,343 Minority interest....................................... (14) -- Cash overdraft, continuing operations................... (11) 4,751 Cash overdraft, discontinued operations................. -- 138 ---------- ---------- Net cash provided by financing activities............. 26,482 14,056 ---------- ---------- Effect of foreign exchange rate changes on cash............ (1,098) (2,~~965~~097) ~~198~~---------- ---------- Net (decrease) increase in cash and cash equivalents.... (7,587) 2,009 Cash and cash equivalents, beginning of the period...... 26,932 5,307 ---------- ---------- Cash and cash equivalents, end of the period............ $ 19,345 $ 7,316 ========== ==========

6 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)

~~OCTOBER~~NINE 27MONTHS ENDED -------------------------- JANUARY 26, ~~APRIL~~JANUARY 2827, ~~2001~~2002 2001 ----------- ----------- (Unaudited) (~~Audited~~Unaudited) ~~Raw~~Supplemental ~~materials~~Disclosure of Cash Flows Information: Cash paid for: Interest................................................ $ 2913,~~563~~832 $ 3213,~~267~~318 ~~Work-in-process~~Income taxes............................................ 2315,~~949~~223 241,~~776~~279 ~~Finished~~Supplemental ~~goods~~Schedule of Non-cash Investing and Financing Activities: Preferred stock dividends-in-kind and issuable preferred stock dividends-in-kind............................... 6$ 5,~~690~~357 $ 4,~~588~~139 ~~-----------~~Leased ~~-----------~~asset ~~Total~~additions.................................. ~~$ 60~~2,~~202~~935 ~~$ 61,631 =========== ===========~~198

See accompanying notes to consolidated financial statements. 7 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements of High Voltage Engineering Corporation and Subsidiaries (the "Company") include the accounts of the Company and its domestic and foreign subsidiaries after all significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments, which are of a normal and recurring nature, necessary to fairly present the financial position for the interim periods presented. The Company operates on a 52 or 53 week fiscal year. The results of operations for the nine months ended January 26, 2002 and January 27, 2001 are for 39 week periods, respectively. The terms "fiscal 2002", and "fiscal 2001" refer to the Company's fiscal years ended April 27, 2002, and April 28, 2001, respectively. The consolidated financial statements do not contain all disclosures included in financial statements normally prepared in accordance with accounting principles generally accepted in the United States of America pursuant to SEC rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company as of and for the fiscal year ended April 28, 2001, as filed with the SEC on August 2, 2001, and are not necessarily indicative of the results that may be expected for the year ending April 27, 2002. LIQUIDITY The ability of the Company to satisfy its obligations under existing indebtedness and preferred stock will be primarily dependent upon the future financial and operating performance of its operating units and upon the Company's ability to renew or refinance borrowings, or to raise additional equity capital as necessary. The Company expects it will be able to refinance its principal payment obligations under its outstanding indebtedness prior to maturity of the Senior Notes. See Note 3. RECLASSIFICATION Certain reclassifications have been made to the fiscal 2001 consolidated financial statements in order to conform with the current year's presentation. NOTE 2 -- INVENTORIES Inventories consisted of the following as of:

~~OPERATING~~JANUARY ~~DEPRECIATION~~26, ~~NET~~APRIL ~~INCOME~~28, ~~IDENTIFIABLE~~2002 ~~AND~~2001 ~~CAPITAL SALES (LOSS) ASSETS AMORTIZATION EXPENDITURES~~ --------- --~~-------~~ ------------ ~~------------~~(Unaudited) ~~------------~~(Audited) ~~SIX~~Raw ~~MONTHS ENDED OCTOBER 28, 2000 Industrial power control~~materials........................... $~~134,699~~ ~~$ (1~~29,~~231)~~251 $ ~~172~~32,~~449~~267 ~~$ 2,881 $ 1,897 Advanced surface analysis~~Work-in-process........ ~~41,744 (1,702) 108,818 5,172 3,221 Customized monitoring instrumentation~~ ................. 2924,~~149~~160 124,~~332~~776 ~~39,354~~Finished ~~1,218 363 Corporate~~goods.......................... ~~-- (1~~8,~~902)~~163 354,~~691~~588 ~~113 20~~ --------- -~~---------~~ ------------ ~~----------- ------------ Consolidated (Unaudited)~~Total....... ~~$205,592 $ (3,503) $ 356,312 $ 9,384 $ 5,501 ========= ========== ============ =========== ============ SIX MONTHS ENDED OCTOBER 27, 2001 Industrial power control~~......... ~~$130,224 $ 645 $ 195,611 $ 3,102 $ 4,400 Advanced surface analysis~~........ ~~38,227 (3,818) 116,586 5,778 2,008 Customized monitoring instrumentation~~ ........~~.......~~ ~~24,457 1,126 42,042 1,179 297 Corporate........................ -- (1,735) 14,812 78 22 --------- ---------- ------------ ----------- ------------ Consolidated (Unaudited).......~~ $~~192,908~~ ~~$ (3~~61,~~782)~~574 $ ~~369~~61,~~051~~631 ~~$ 10,137 $ 6,727~~ ========= =~~=========~~ ==========~~== =========== ============~~

8 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 3 - ACQUISITIONS, DIVESTITURES AND OTHER TRANSACTIONS On November 20, 2000, the Company entered into the Refinanced Receivables Purchase Facility for the purpose of refinancing the existing Receivable Purchase Facility. In connection with the above, the Company recorded an extraordinary loss of $306, net of taxes, to write off the deferred financing costs of the Receivable Purchase Facility. Through June 11, 2001, the Company maintained the Refinanced Receivables Purchase Facility with High Voltage Funding Corporation ("HV-FC") a limited purpose subsidiary of the Company. Under the Refinanced Receivables Purchase Facility, the domestic subsidiaries of the Company would sell a defined pool of trade accounts receivable ("Pool Assets"), and the related rights inherited from the Company and its domestic subsidiaries to HV-FC. HV-FC owned all of its assets and sold participating interests up to a limit of $25,000 in such assets to a third party which, in turn, purchased and received ownership and security interests in those assets. On June 11, 2001, the Company terminated the Refinanced Receivables Purchase Facility and purchased certain outstanding accounts receivable for $25,000. As a result, accounts receivable increased and other assets decreased in the accompanying balance sheets by $50,214 and $39,935, respectively for the nine months ended January 26, 2002. In connection with the above, the Company has recorded an extraordinary loss of $327, net of taxes, to write off the deferred financing costs of the Refinanced Receivables Purchase Facility. On November 30, 2000, the Company entered into the Financing Agreement for the purpose of refinancing the existing Revolving Credit Facility. In connection with the above the Company recorded an extraordinary loss of $224, net of taxes, to write off deferred financing costs and prepayment penalties of the Revolving Credit Facility. On June 19, 2001, the Company signed an amendment to the Financing Agreement ("Amended and Restated Financing Agreement"). The Amended and Restated Financing Agreement amends certain financial ratios and restates the Refinanced Revolving Credit Facility, Term Loan A, and Term Loan B to a combined $25,000 revolving credit facility ("New Revolving Credit Facility") with a sub-facility of $5,000 for the issuance of letters of credit. Availability under the New Revolving Credit Facility is limited to the sum of (i) 85% of eligible receivables, (ii) 50% of eligible joint venture receivables, (iii) 125% of the appraised orderly liquidation value of the eligible inventory less certain reserves as is reasonable and customary by the lenders and (iv) $5,000. Interest under the New Revolving Credit Facility is computed and payable monthly at the lender's reference rate plus 2.5%. On January 25, 2002, the Company amended certain financial covenants of the Amended and Restated Financing Agreement for the period January 25, 2002 through April 28, 2002. At January 26, 2002, $21,500 was outstanding under the Amended and Restated Financing Agreement. On March 7, 2001, the Company completed the sale of substantially all the net assets of its Anderson Power division and all the capital stock of Anderson Power Products Ireland B.V. (together "Anderson") to Ideal Industries, Inc. for $78,722 in cash. The Company recorded a gain on the disposal in fiscal 2001 of $34,270, net of income taxes and transaction related expenses. Revenues attributable to Anderson discontinued operations were approximately $21,862 for the first nine months of fiscal 2001. As a result of this sale, the Company's consolidated results of operations have been restated to reclassify the results of operations of Anderson to discontinued operations. The Asset Sale Proceeds, as defined, received by the Company in connection with the disposition of Anderson was subject to a covenant of the Senior Notes Indenture, which requires the Company to apply the net cash received to (i), repay debt ranking PARI PASSU to the Senior Notes within 180 days, (ii) contractually commit to acquisitions, capital expenditures or investments relating to the Company's presently conducted business within 180 days and paid within 360 days or (iii) offer to repurchase the Senior Notes pursuant to an Excess Proceeds Offer, as defined. The Company has invested a portion of the Asset Sale Proceeds through the purchase of certain receivables in connection with the termination of the Refinanced Receivables Purchase Facility and invested in certain capital expenditures. The Asset Sale Proceeds was included in restricted cash at April 28, 2001. 9 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 3 - ACQUISITIONS, DIVESTITURES AND OTHER TRANSACTIONS (CONTINUED) On June 2, 2000, Physical Electronics, Inc. and subsidiaries ("PHI") acquired all of the outstanding shares of Vivirad U.S.A Corporation ("Holdings"), the holding company of Vivirad-High Voltage Corporation together ("VHV") pursuant to a Stock Purchase Agreement ("Agreement") among PHI, the Company, VHV, and Holdings, and Vivirad S.A. ("Seller"), a French corporation and the sole stockholder of Holdings. Under the Agreement, the Seller received in exchange for the stock of Holdings an aggregate purchase price of $2,281. The acquisition has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon an assessment by management. The excess of the purchase price over the fair value of the net assets acquired has been recorded as cost in excess of assets acquired, which is being amortized on a straight-line basis over approximately two years. The net purchase price of $2,281 has been allocated entirely to cost in excess of assets acquired. The operating results of VHV have been included in the Company's consolidated statement of operations from the dates of acquisition. The unaudited pro forma financial information for VHV for the first nine months of fiscal 2001 has not been presented because the effect of the transaction would not have been material to the results of operations of the Company. NOTE 4 - CONTINGENCIES The nature of the Company's business is such that it is regularly involved in legal proceedings incidental to its business and the Company believes that none of these proceedings are material. In March 1998, the Company's Robicon Corporation subsidiary initiated litigation against Toshiba International Corporation ("Toshiba") in the United States District Court for the Western District of Pennsylvania alleging infringement of one of Robicon's Perfect Harmony patents. In June 1998, Toshiba filed suit against Robicon and several other defendants in the United States District Court for the Southern District of Texas alleging, among other things, false and disparaging comments concerning Toshiba, interference with contract, violation of the Texas Competition and Trade Practices Statute and civil conspiracy to restrict Toshiba's business and cause the wrongful termination of a purchase order of one of its customers. Damages under each section are claimed to be in excess of $75, the federal statutory minimum, in addition to a claim for punitive damages. In its suit, Toshiba has also claimed that Robicon is infringing a patent held by Toshiba and requested a declaratory judgment that Robicon's patent, which is the subject of the Pennsylvania action, is invalid. In March 1999, the Texas District Court dismissed without prejudice all claims except the alleged patent infringement by Robicon and the request for declaratory judgment. These claims were then transferred to the Western District of Pennsylvania. Also in March 1999, Toshiba filed a petition in Harris County, Texas in which it realleged the claims dismissed by the Texas district court, citing the additional costs by Toshiba to reinstate its purchase order and damages to its reputation not exceeding $5,000. On November 29, 1999, the Pennsylvania district court granted Robicon's Motion to dismiss Toshiba's patent infringement claim against Robicon. The only remaining transferred claim is Toshiba's request for declaratory judgment. In November 1999, Toshiba filed a motion to dismiss without prejudice all of the claims pending in Harris County, Texas pursuant to a Tolling Agreement which permitted Toshiba one (1) year to re-file its claims. In December 1999, the Texas state court granted Toshiba's motion. Toshiba did not re-file its claims prior to the expiration of the Tolling Agreement. There has been no substantive change in the status of this litigation. Certain other claims, suits and complaints have been filed or are pending against the Company. In the opinion of the Company, all such matters are without merit or are of such kind, or involve such amounts, as would not have a material effect on the consolidated financial position or the results of operations of the Company if resolved unfavorably to the Company. If estimates change, there are no assurances these items will not require additional accruals by the Company. 10 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 5 - SEGMENT DATA The Company operates in three industry segments. Each segment operates independently with its own management team and manufacturing facilities and maintains its own independent market identity. During the fourth quarter of fiscal 2001, the Company revised the grouping within the reportable segments to more accurately reflect how the operations are managed. The Industrial Power Control segment includes Ansaldo Sistemi Industriali S.p.A. ("ASI") and Robicon Corporation and subsidiaries ("Robicon"), together operated as "ASIRobicon". The Advanced Surface Analysis segment has two main components, equipment sales and analytical services. The segment consists of PHI and High Voltage Engineering Europa, B.V. ("HVE Europa") together operated as "Phymetrics". The results of operations of VHV have been included with the results of operations of HVE Europa. The third industry segment, Customized Monitoring Instrumentation, reflect the results of operations of Maxima Technologies, Inc. and subsidiaries ("Maxima").

~~RESTRICTED~~OPERATING ~~UNRESTRICTED~~DEPRECIATION ~~ELIMINATION~~NET ~~SUBSIDIARIES~~INCOME ~~SUBSIDIARIES~~IDENTIFIABLE ~~ADJUSTMENTS~~AND ~~TOTAL~~CAPITAL SALES (LOSS) ASSETS AMORTIZATION EXPENDITURES --------- --------- ------------ ------------- ------------ ~~ASSETS~~NINE ~~CURRENT~~MONTHS ~~ASSETS~~ENDED ~~Cash~~JANUARY ~~and~~27, ~~cash~~2001 ~~equivalents~~Industrial power control.........~~...............~~ $ 10195,~~143~~402 $ 3(1,~~427~~447) $ --173,945 $ 134,~~570~~366 ~~Restricted~~$ ~~cash.................................. 2~~3,~~380~~593 ~~134~~Advanced --surface ~~2,514 Accounts receivable, net~~analysis........~~.................~~ 5063,~~516~~424 71(3,~~849~~159) --109,848 ~~122~~7,~~365~~897 ~~Refundable~~4,209 ~~income~~Customized ~~taxes~~monitoring instrumentation ...............~~...........~~ 41,024 1,~~366~~521 --37,491 -- 1,~~366~~802 ~~Inventories~~424 Corporate........................~~..............~~ ~~47,406 12,796~~ -- 60(1,~~202~~573) ~~Costs and earnings in excess of billings......... 2~~43,~~562~~334 ~~5,529~~147 --21 ~~8,091 Prepaid expenses and other current assets........ 3,167 9,079~~ -- ~~12,246~~ -------~~-----~~ ---------~~---~~ ------------ ----------- ~~Total current assets........................... 117,540 102,814~~ -- ~~220,354 PROPERTY, PLANT AND EQUIPMENT, NET................. 54,901 27,578~~ -- ~~82,479 INVESTMENT IN JOINT VENTURE........................ 2,737~~ -- -- ~~2,737 ASSETS HELD FOR SALE............................... 2,451~~ -- -- ~~2,451 OTHER ASSETS, NET.................................. 22,294 7,663~~ -- ~~29,957~~Consolidated ~~COST IN EXCESS OF NET ASSETS ACQUIRED~~(Unaudited).......~~.......~~ ~~31,073~~$ ~~-- -- 31~~299,~~073~~850 ~~INTERCOMPANY~~$ ~~ACCOUNTS, NET......................... 18,206~~ (174,~~684~~658) ~~(522) -- ------------ ------------ ----------- -----------~~ $ ~~249~~364,~~202~~618 $ ~~120~~14,~~371~~212 $ ~~(522) $ 369~~8,~~051~~247 ========= ========= ============ ============ ============ ~~LIABILITIES~~NINE ~~AND~~MONTHS ~~STOCKHOLDERS'~~ENDED ~~DEFICIENCY~~JANUARY ~~CURRENT~~26, ~~LIABILITIES~~2002 ~~Current~~Industrial ~~maturities~~power ~~of long-term debt obligations~~control.........~~...........................~~ $ 1196,~~474~~171 $ 62,~~859~~205 $ --194,013 $ 84,~~333~~209 ~~Foreign~~$ ~~credit line.............................. 1~~6,~~023~~436 ~~8,669~~Advanced --surface ~~9,692 Accounts Payable and accrued expense~~analysis........~~.....~~ 4653,~~078~~312 63(8,~~198~~373) ~~-- 109~~114,~~276~~244 ~~Billings in excess of costs...................... 717 2~~8,~~170~~920 -- 2,~~887~~575 ~~Advance~~Customized ~~payments~~monitoring byinstrumentation ~~customers~~...............~~.....~~ 1233,~~550~~904 71,~~744~~167 ~~-- 20~~39,~~294~~180 ~~Federal, foreign and state income taxes payable........................................ 600~~ 1,~~269~~756 --655 ~~1,869 Deferred income taxes~~Corporate........................~~....~~ ~~1,118 832~~ -- 1(2,~~950~~210) ~~Redeemable put warrants.......................... 2~~18,~~900~~652 --125 --85 ~~2,900~~ ---------~~---~~ --------- --- --------- -- ----------- ~~Total current liabilities...................... 66,460 90,741~~ -- ~~157,201 LONG~~-~~TERM OBLIGATIONS, LESS CURRENT MATURITIES..... 182,868 28,630~~ -- ~~211,498 DEFERRED INCOME TAXES.............................. 13,519~~ -- -- ~~13,519 OTHER LIABILITIES.................................. 5,375 18,811~~ --- ~~24,186~~Consolidated ~~REDEEMABLE PREFERRED STOCK~~ (~~AGGREGATE LIQUIDATION PREFERENCE OF $52,224~~Unaudited).......~~....................~~ ~~49,989~~$ ~~-- -- 49~~283,~~989~~387 ~~MINORITY~~$ ~~INTEREST.................................. 14 -- -- 14 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY, NET......................~~ (697,~~023~~211) ~~(17,811) (522) (87,356) ------------ ------------ ----------- -----------~~ $ ~~249~~366,~~202~~089 $ ~~120~~15,~~371~~010 $ ~~(522) $ 369~~9,~~051~~751 ========= ========= ============ ============= ============

11 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 5 - SEGMENT DATA (CONTINUED) The following represents the supplemental consolidating balance sheet for the Company's restricted and unrestricted subsidiaries at January 26, 2002.

RESTRICTED UNRESTRICTED ELIMINATION SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ------------ ------------ ------------ ----------- ~~Net~~ASSETS ~~sales~~CURRENT ASSETS Cash and cash equivalents........................ $ 15,243 $ 4,102 $ -- $ 19,345 Restricted cash.................................. ~~$ 108~~4,~~859~~280 $504 86-- 4,~~247~~784 $Accounts (2receivable,~~198)~~ $net......................... ~~192~~41,~~908~~894 ~~Cost~~68,087 of-- ~~sales~~109,981 Inventories...................................... 8148,~~254~~782 7012,~~685~~792 (2-- 61,~~198)~~574 ~~149~~Costs and earnings in excess of billings......... 1,~~741~~188 12,187 -- 13,375 Prepaid expenses and other current assets........ 3,383 8,503 -- 11,886 -------- --- --------- -- --------- --- --------- ~~Gross~~Total ~~profit~~current assets........................... 114,770 106,175 -- 220,945 PROPERTY, PLANT AND EQUIPMENT, NET................. 2753,~~605~~616 1527,~~562~~117 -- 4380,~~167~~733 ~~Administrative~~INVESTMENT ~~and~~IN ~~selling~~JOINT ~~expenses~~VENTURE........................ 243,~~248~~118 ~~12,669~~-- -- 363,~~917~~118 ~~Research~~ASSETS ~~and~~HELD ~~development~~FOR ~~expenses~~SALE............................... 62,~~903~~422 ~~1,509~~-- -- 82,~~412~~422 ~~Other~~OTHER ASSETS, ~~net~~NET.................................. 22,379 6,582 -- 28,961 COST IN EXCESS OF NET ASSETS ACQUIRED.............. 129,~~045~~910 ~~575~~-- -- 129,~~620~~910 INTERCOMPANY ACCOUNTS, NET......................... 21,007 (20,318) (689) -- ----------- ------------ ------------ ----------- $ 247,222 $ 119,556 $ (~~Loss~~689) ~~income~~$ ~~from~~366,089 ~~operations~~=========== =========== ============ ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Current maturities of long-term debt obligations.................................... (4$ 1,~~591)~~387 ~~809~~$ 3,368 $ -- (3$ 4,~~782)~~755 ~~Interest~~Foreign ~~expense~~credit line..............................~~.....~~ ~~(10~~1,~~507)~~337 (29,~~148)~~968 -- ~~(12~~11,~~655)~~305 ~~Interest~~Accounts ~~income~~Payable and accrued expense............. 48,311 65,198 -- 113,509 Billings in excess of costs....................... ~~376~~2,670 ~~276~~3,776 -- ~~652~~6,446 ~~------------~~Advance ~~------------~~payments ~~-----------~~by customers.................... 12,384 7,514 --~~---------~~ ~~Loss~~19,898 ~~from~~Federal, ~~continuing~~foreign ~~operations~~and ~~before~~state income taxes ~~and extraordinary item~~payable........................................ ~~(14,722)~~363 (1,~~063)~~230 -- ~~(15~~1,~~785)~~593 ~~Income~~Deferred income taxes............................ 961 770 -- 1,731 Redeemable put warrants.......................... ~~481 1~~2,~~075~~900 -- 1-- 2,~~556~~900 ------------ ------------ ------------ --------- Total current liabilities...................... 70,313 91,824 -- ~~Loss~~162,137 ~~from~~LONG-TERM ~~operations~~OBLIGATIONS, ~~before~~LESS ~~extraordinary~~CURRENT ~~item~~MATURITIES..... 186,489 27,252 -- 213,741 DEFERRED INCOME TAXES.............................. 13,518 968 -- 14,486 OTHER LIABILITIES.................................. ~~(15~~5,~~203)~~361 (218,~~138)~~258 -- 23,619 REDEEMABLE PREFERRED STOCK (17AGGREGATE LIQUIDATION PREFERENCE OF $53,~~341~~982)........................... ~~Extraordinary loss~~51,993 ~~net~~-- of-- ~~income~~51,993 ~~taxes~~MINORITY INTEREST.................................. ~~(327)~~45 -- -- 45 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY, NET...................... (~~327~~80,497) (18,746) (689) (99,932) ------------ ----------- ------------ ----------- ~~NET~~$ ~~LOSS...........................................~~247,222 $ ~~(15~~119,~~530)~~556 $ (~~2,138~~689) $ ~~-- $ (17~~366,~~668)~~089 ============ =========== ============ =========~~== Supplemental Data: Depreciation and Amortization.................. $ 8,138 $ 1,999 $ -- $ 10,137 Capital Expenditures........................... 3,031 3,696 -- 6,727~~

12 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 5 - SEGMENT DATA (CONTINUED) The following represents the supplemental consolidating statement of operation for the Company's restricted and unrestricted subsidiaries for the nine months ended January 26, 2002.

RESTRICTED UNRESTRICTED ELIMINATION SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ------------ ------------ ----------- ----------- ~~ASSETS~~Net ~~CURRENT ASSETS Cash and cash equivalents~~sales........................ ~~$ 1,348 $ 6,146 $ -- $ 7,494 Restricted cash~~..................~~................~~ ~~4,121~~$ ~~120 -- 4~~157,~~241~~767 ~~Accounts~~$ ~~receivable~~128,907 ~~net.........................~~$ 16(3,~~337~~287) ~~64,519~~$ ~~-- 80~~283,~~856~~387 ~~Refundable~~Cost ~~income~~of ~~taxes~~sales.......................... ~~495 -- -- 495 Inventories~~............~~..........................~~ 38118,~~103~~151 13105,~~402~~333 ~~-- 51,505 Costs and earnings in excess of billings.........~~ (3,~~889 6,584 -- 10,473 Prepaid expenses and other current assets........ 5,170 11,881 (170~~287) 16220,~~881~~197 ------------ ------------ ------------ ----------- ~~Total~~Gross ~~current assets~~profit........................... ~~69,463 102,652 (170) 171,945 PROPERTY, PLANT AND EQUIPMENT, NET~~.........~~........~~ 6039,~~631~~616 2923,~~448~~574 -- 9063,~~079~~190 ~~INVESTMENT~~Administrative INand ~~JOINT~~selling ~~VENTURE~~expenses................~~........~~ 234,~~772~~960 --19,026 -- 253,~~772~~986 ~~ASSETS~~Research ~~HELD~~and ~~FOR~~development ~~SALE~~expenses..................~~.............~~ 10,~~904~~348 152,119 -- 1012,~~919~~467 ~~OTHER~~Restructuring ~~ASSETS, NET~~Charge...............................~~...~~ ~~40,676~~127 ~~2,500~~-- -- 43127 Other,~~176~~ ~~COST IN EXCESS OF NET ASSETS ACQUIRED~~net.............. ~~37,421 -- -- 37,421 INTERCOMPANY ACCOUNTS, NET~~........................... 112,~~070~~621 71,~~059~~200 ~~(18,129)~~ -- 3,821 ------------ ------------ ------------ ----------- ~~$ 232,937 $ 141,674 $~~ (~~18,299~~Loss) $income ~~356,312~~from ~~============ ============ =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Current maturities of long-term debt obligations~~operations...................~~.................~~ $(8,440) 21,~~991~~229 ~~$ 109 $~~ -- ~~$ 3~~(7,~~100~~211) ~~Foreign~~Interest ~~credit line~~expense.............................. ~~1,599 -- -- 1,599 Accounts Payable and accrued expense~~.....~~........~~ 51(15,~~932~~745) 76(3,~~949~~318) -- ~~128~~(19,~~881~~063) ~~Billings~~Interest ~~in excess of costs~~income...................... ~~180 6,082 -- 6,262 Advance payments by customers~~..............~~......~~ ~~9,842~~474 ~~8,377~~525 -- ~~18,219~~999 ~~Federal,~~------------ ~~foreign~~----------- ~~and~~------------ ~~state~~--------- Loss from continuing operations before income taxes ~~payable~~and extraordinary item..........~~..............................~~ 2(23,~~641~~711) ~~847~~(1,564) -- 3(25,~~488~~275) ~~Deferred~~Income ~~income~~ taxes............................ ~~2,036 69 (170) 1,935 Redeemable put warrants~~...........~~...............~~ 2588 1,~~900~~467 -- -- 2,~~900~~055 ------------ ------------ ------------ ----------- ~~Total~~Loss ~~current~~from ~~liabilities......................~~operations ~~74,121~~before ~~92,433~~extraordinary ~~(170) 166,384 LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES~~item..... ~~181,241 20,597 -- 201,838 DEFERRED INCOME TAXES~~.............................. ~~6,448 -- -- 6,448 OTHER LIABILITIES~~......~~............................~~ 7(24,~~891~~299) 20(3,~~632~~031) -- ~~28,523 REDEEMABLE PREFERRED STOCK~~ (~~AGGREGATE LIQUIDATION PREFERENCE OF $45~~27,~~863~~330)~~...........................~~ ~~42,247~~Extraordinary ~~-- -- 42~~loss,~~247~~ ~~COMMITMENTS~~net ~~AND~~of ~~CONTINGENCIES~~income ~~STOCKHOLDERS' DEFICIENCY, NET~~taxes............~~..........~~ (~~79,011~~327) ~~8,012~~-- ~~(18,129)~~-- (~~89,128~~327) ------------ ------------ ------------ ----------- $NET ~~232,937~~LOSS........................................... $ ~~141~~(24,~~674~~626) $ (183,~~299~~031) $ ~~356~~-- $ (27,~~312~~657) ============ ============ ============ =========== Supplemental Data: Depreciation and Amortization.................. $ 12,343 $ 2,667 $ -- $ 15,010 Capital Expenditures........................... 4,539 5,212 -- 9,751

13 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 5 - SEGMENT DATA (CONTINUED) The following represents the supplemental consolidating balance sheet for the Company's restricted and unrestricted subsidiaries at January 27, 2001.

RESTRICTED UNRESTRICTED ELIMINATION SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ------------ ------------ ------------ ----------- ~~Net~~ASSETS ~~sales~~CURRENT ASSETS Cash and cash equivalents........................ $ 1,823 $ 5,493 $ -- $ 7,316 Restricted cash.................................. ~~$ 112~~7,~~144~~578 $120 94-- 7,~~646~~698 $Accounts (1receivable,~~198)~~ $net......................... ~~205~~9,~~592~~174 ~~Cost~~69,407 of-- ~~sales~~78,581 Inventories...................................... 8241,~~720~~755 8215,~~390~~302 (1-- 57,~~198)~~057 ~~163~~Costs and earnings in excess of billings......... 3,333 3,912 -- 7,245 Prepaid expenses and other current assets........ 5,639 10,375 (181) 15,833 ---------- -- ---------- ------------ ----------- ~~Gross~~Total ~~profit~~current assets........................... 69,302 104,609 (181) 173,730 PROPERTY, PLANT AND EQUIPMENT, NET................. 2958,~~424~~863 1232,~~256~~766 -- 4191,~~680~~629 ~~Administrative~~INVESTMENT ~~and~~IN ~~selling~~JOINT ~~expenses~~VENTURE........................ 242,~~245~~662 ~~10,478~~-- -- 342,~~723~~662 ~~Research~~ASSETS ~~and~~HELD ~~development~~FOR ~~expenses~~SALE............................... 72,~~020~~539 1-- -- 2,~~133~~539 NET ASSETS OF DISCONTINUED OPERATIONS.............. 6,976 -- 8-- 6,~~153~~976 ~~Other~~OTHER ASSETS, ~~net~~NET.................................. 48,548 2,599 -- 51,147 COST IN EXCESS OF NET ASSETS ACQUIRED.............. 235,~~332~~935 ~~(25)~~-- -- 235,~~307~~935 INTERCOMPANY ACCOUNTS, NET......................... 11,139 6,546 (17,685) -- ---------- -- ----------- ------------ ----------- $ 235,964 $ 146,520 $ (~~Loss~~17,866) ~~income~~$ ~~from~~364,618 ~~operations~~============ ============ ============ ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Current maturities of long-term debt obligations.................................... (4$ 3,~~173)~~506 ~~670~~$ 119 $ -- ($ 3,~~503)~~625 ~~Interest~~Foreign ~~expense~~credit line.............................. 1,639 -- -- 1,639 Accounts payable and accrued liabilities......... (952,~~167)~~535 (180,~~294)~~729 -- ~~(10~~133,~~461)~~264 ~~Interest~~Billings ~~income~~in excess of costs...................... 1,095 3,614 -- 4,709 Advance payments by customers.................... ~~118~~11,154 610,514 -- ~~124~~21,668 ~~------------~~Federal, ~~------------~~foreign ~~-----------~~and ~~-----------~~state ~~Loss~~income ~~from~~taxes ~~continuing~~payable........................................ ~~operations~~2,446 ~~before~~1,330 ~~income~~-- ~~taxes~~3,776 ~~discontinued~~Deferred ~~operations~~income ~~and extraordinary item~~taxes............................ ~~(13~~1,~~222)~~223 163 (~~618~~181) ~~-- (13~~1,~~840)~~205 ~~Income~~Redeemable ~~taxes~~put ~~(credit)~~warrants..........................~~....~~ ~~(369)~~2,900 ~~969~~-- -- ~~600~~2,900 ------------ ------------ ------------ --------- Total current liabilities...................... 76,498 96,469 (181) 172,786 LONG--TERM ~~Loss~~OBLIGATIONS, ~~from~~LESS ~~continuing~~CURRENT ~~operations~~MATURITIES..... ~~before~~187,524 ~~discontinued~~22,317 ~~operations~~-- ~~and~~209,841 ~~extraordinary~~DEFERRED ~~item~~INCOME TAXES.............................. 6,453 -- -- 6,453 OTHER LIABILITIES.................................. ~~(12~~7,~~853)~~662 (122,~~587)~~447 -- ~~(14~~30,~~440)~~109 ~~Discontinued~~REDEEMABLE ~~operations:~~PREFERRED ~~Income~~STOCK ~~from~~(AGGREGATE ~~discontinued~~LIQUIDATION ~~operations,~~PREFERENCE ~~net~~OF ~~of income taxes~~$47,299)...........................~~...~~ ~~966~~43,991 -- -- ~~966~~43,991 ~~Extraordinary~~COMMITMENTS ~~loss,~~AND ~~net~~CONTINGENCIES ofSTOCKHOLDERS' ~~income~~DEFICIENCY, ~~taxes~~NET...................... (~~365~~86,164) --5,287 --(17,685) (~~365~~98,562) ------------ ------------ ------------ ----------- ~~NET~~$ ~~LOSS...........................................~~235,964 $ ~~(12~~146,~~252)~~520 $ (117,~~587~~866) $ ~~-- $ (13~~364,~~839)~~618 ============ ============ ============ =========~~== Supplemental Data: Depreciation and Amortization.................. $ 7,781 $ 1,603 $ -- $ 9,384 Capital Expenditures........................... 4,702 799 -- 5,501~~

14 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 5 - SEGMENT DATA (CONTINUED) The following represents the supplemental consolidating statement of operation for the Company's restricted and unrestricted subsidiaries for the nine months ended January 27, 2001.

NOTE 6 - COMPREHENSIVE LOSS As of January 26, 2002, accumulated comprehensive loss consisted of foreign currency translation of $2,527 and pension liability adjustments of $616, net of taxes. 15 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 144 ("SFAS No. 144"), Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and is effective for fiscal years beginning after December 15, 2001. The Company is currently evaluating the impact of SFAS No. 144. In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets. SFAS No. 141 is effective for all business combinations completed after June 30, 2001. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, however, certain provisions of this statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. Major provisions of these statements and their effective dates for the Company are as follows: (i) all business combinations initiated after June 30, 2001 must use the purchase method of accounting;(ii) under certain conditions intangible assets acquired in a business combination must be recorded separately from goodwill; (iii) goodwill and intangible assets with indefinite lives acquired after June 30, 2001, will not be amortized. Effective April 28, 2002, all previously recognized goodwill and intangible assets with indefinite lives (i) will no longer be subject to amortization; (ii) will be tested for impairment annually and whenever there is an impairment indicator; and (iii) will be assigned to reporting units for purposes of impairment testing and segment reporting. The Company is currently evaluating the impact of SFAS No. 141 and SFAS No. 142 will have on its financial reporting requirements. Effective April 29, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivative instruments be reported on the balance sheet at fair value and that changes in a derivative's fair value be recognized currently in earnings unless specific hedge criteria are met. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized as a charge or credit to earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized as a charge or credit to earnings. The Company does use derivative instruments to manage exposures to foreign currency, commodity price, and interest rate risks. There were no derivative instruments outstanding at January 26, 2002, which would have a material effect on the consolidated financial statements. The Company's objectives for holding derivatives are to minimize these risks using the most effective methods to eliminate or reduce the impacts of these exposures. In March 2000, the FASB issued Interpretation ("FIN") No. 44, Accounting For Certain Transactions Involving Stock Compensation, an Interpretation Of Accounting Principles Board Opinion No. 25. Adoption of FIN No. 44 did not have a material impact on the Company's financial position or results of operations. In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company adopted SAB 101 in fiscal 2001. The adoption did not have a material impact on the Company's financial position or results of operations. 16 HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) NOTE 8 - EURO CONVERSION On January 1, 1999, member countries of the European Monetary Union (EMU) began a three-year transition from their national currencies to a new common currency, the euro. In January 2002, euro currency was issued and by July 2002, the respective national currencies will be withdrawn. The Company has significant operations in member countries of the EMU. The Company has implemented a plan to address the euro's impact on information systems, currency exchange rate risk and commercial contracts. Costs of the euro conversion to date have not been material. Management believes that future conversion costs will not have a material impact on the operations, cash flows or financial condition of the Company. However, there are uncertainties as to the future costs associated with the euro conversion which may affect the Company's expectations. ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except as otherwise indicated, the following discussion relates to the Company on a historical basis without giving effect to certain acquisitions completed by the Company. This report may make forward-looking statements regarding future events or the future financial performance of the Company. We caution you that these statements are only predictions and that actual events or results may differ materially. We refer you to documents the Company files from time to time with the Securities and Exchange Commission. These documents identify and describe important factors that can cause the after-results to differ materially from those contained in any forward-looking statements we may make. The following discussion should be read in conjunction with the Selected Historical Consolidated Financial Data and the consolidated financial statements and notes thereto contained elsewhere in this document. The consolidated financial statements of the Company include the accounts of High Voltage Engineering Corporation and its subsidiaries after elimination of material intercompany transactions and balances. As a result of the sale by the Company of substantially all of the assets of the Company's Anderson division on March 7, 2001, the Company's consolidated results have been restated to reclassify the results of such operations as discontinued operations. As used in this filing, the terms "fiscal 2002" and "fiscal 2001" refer to the Company's fiscal years ended April 27, 2002 and April 28, 2001, respectively. The Company operates on a 52 or 53 week fiscal year. The nine months ended January 26, 2002 and January 27, 2001 include the results of operations of the Company for 39 week periods, respectively. The Company's products and services are divided into three segments: Industrial Power Control segment includes Ansaldo Sistemi Industriali S.p.A. ("ASI") and Robicon Corporation and subsidiaries ("Robicon"), together operated as "ASIRobicon". The Advanced Surface Analysis segment has two main components, equipment sales and analytical services. The segment consists of Physical Electronics, Inc. and subsidiaries ("PHI") and High Voltage Engineering Europa, B.V. ("HVE Europa") together operated as "Phymetrics". The third industry segment, Customized Monitoring Instrumentation, reflect the results of operations of Maxima Technologies, Inc. and subsidiaries ("Maxima"). Financial information concerning the Company's industry segments is summarized in Note 5 to the Notes to the Consolidated Financial Statements included in Item 1, herein. 17 SEASONALITY; VARIABILITY OF OPERATING RESULTS The majority of the Company's operating units have historically recorded the strongest operating results in the fourth quarter of the fiscal year due in part to seasonal considerations and other factors. The timing of orders placed by the Company's customers has varied with, among other factors, the introduction of new products, product life cycles, customer attempts to manage inventory levels, competitive conditions, general economic conditions and the availability of funding for scientific and educational research. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of the Company's operating units. ACQUISITION OF VIVIRAD-HIGH VOLTAGE CORPORATION On June 2, 2000, PHI acquired all of the outstanding shares of Vivirad U.S.A Corporation ("Holdings"), the holding company of VHV pursuant to a Stock Purchase Agreement ("Agreement") among PHI, the Company, VHV, and Holdings, and Vivirad S.A. ("Seller"), a French corporation and the sole stockholder of Holdings. Under the Agreement, the Seller received in exchange for the stock of Holdings an aggregate purchase price of $2.3 million. The unaudited pro forma financial information for the first half of fiscal 2001 has not been presented because the effect of the transaction would not have been material to the results of operations. The results of operations of VHV have been included in the results of operations of HVE Europa. CONSOLIDATED Net sales for the first nine months of fiscal 2002 were $283.4 million, which was a decrease of $16.5 million or 5.5% from the same period in fiscal 2001. The following discussion does not address the financial results of the first nine months of fiscal 2001 for VHV, which was acquired on June 2, 2000, because the results of operations for VHV were deemed immaterial. The Company reported a net loss from continuing operations before extraordinary item and discontinued operations of $27.3 million for the first nine months of fiscal 2002 compared to an operating loss of $21.4 million for the same period in fiscal 2001. The primary differences in the results of operations of the first nine months of fiscal 2002 as compared to the first nine months of fiscal 2001 were: (i) lower sales volume due to the depressed semiconductor market, served by Phymetrics, continued downward trend in the off-highway equipment, heavy truck and specialty vehicles markets served by Maxima and a weak global economy, (ii) offset by higher margins primarily in the Industrial Power Control segment(iii) increase in operating expenses, (iv) higher foreign tax provisions and (v) higher interest costs due to higher levels of debt. SEGMENT ANALYSIS: THREE MONTHS ENDED JANUARY 26, 2002 COMPARED TO THREE MONTHS ENDED JANUARY 27, 2001 THE INDUSTRIAL POWER CONTROL SEGMENT reported net sales of $65.9 million for the third quarter of fiscal 2002 which was an increase of $5.2 million, or 8.6%, from the third quarter of fiscal 2001. Net sales for Robicon increased $2.3 million or 10.7% during the third quarter of fiscal 2002 as compared to the third quarter of fiscal 2001. The increase in net sales was due to a 47% volume increase in the Medium Voltage product line due to stronger energy and utility markets partially offset by weakness in products serving industrial markets due to the economic slowdown and lower capital spending. Net sales for ASI increased $3.0 million or 7.5% during the third quarter of fiscal 2002 as compared to the third quarter of fiscal 2001. The increase in net sales is due primarily to higher volume of Synchronous AC motors, Medium Voltage Drives and Power Control Systems due to strong demand in Europe partially offset by weakness in the systems and projects businesses serving the Metals industry. Service revenue at ASI increased approximately 12.4% in the third quarter of fiscal 2002 as compared to the third quarter of fiscal 2001. Order levels remain strong but decreased at ASI due to lower orders in Germany and in the United States which had included certain specific large orders during fiscal 2001. 18 Operating income for the third quarter of fiscal 2002 of $1.6 million increased $1.8 million compared to a loss of $216,000 in the third quarter of fiscal 2001. The operating income increase for the segment was due to the higher sales volume combined with continued operational and efficiency improvements in the manufacturing units in the United States and Europe coupled with an improved sales mix and a larger proportion of high margin service revenue. Operating income for Robicon in the third quarter of fiscal 2002 of $1.1 million was an increase of $1.4 million compared to an operating loss of $229,000 in the third quarter of fiscal 2001. The improvement in the operating results for Robicon was primarily due to higher sales volume, improved margins due to production efficiencies and benefits from improved purchasing efficiencies and $650,000 of income related to a change in certain employee benefit programs during the third quarter of fiscal 2002 compared to the same period in the prior year. Operating income for ASI was $420,000 for the third quarter of fiscal 2002 or an increase of $407,000 compared to operating income of $13,000 million in the third quarter of fiscal 2001. The increase was primarily a result of higher sales volume combined with the continued benefits of restructuring and operational improvements made in the segment. THE ADVANCED SURFACE ANALYSIS SEGMENT reported net sales of $15.1 million for the third quarter of fiscal 2002 which was a decrease of $6.6 million, or 30.4% from the third quarter of fiscal 2001. The decrease in net sales was primarily due to lower sales in the semiconductor markets during the third quarter of fiscal 2002 compared to the same period in fiscal 2001. Equipment sales declined as customers plans were adjusted for reductions in capital expenditure budgets. Additionally, the sales mix of products sold has also contributed to the decrease in third quarter sales of fiscal 2002 as compared to the same period in fiscal 2001 with a larger percentage of sales to Ulvac-PHI. Analytical service sales declined 34.4% during the third quarter of fiscal 2002 as compared to fiscal 2001. The decline is due to extended holiday shutdown with in the customer base during the third quarter of fiscal 2002. Operating loss increased $3.1 million to a loss of $4.6 million during the third quarter of fiscal 2002 compared to $1.5 million during the third quarter of fiscal 2001. The decrease is primarily due to a decline in the gross margin percentage of 2.9% at PHI and CE&A in the third quarter of fiscal 2002. The decrease in equipment sales margin was due to reduced sales volume to semiconductor customers, and the mix of higher sales to Ulvac-PHI which has lower gross margins since it resells the equipment in Japan. The decrease in gross margin in analytical services is due to a high percentage of fixed cost thus a decline in analytical services sales has a greater effect on the decrease in gross margin. Also contributing to the increase in operating loss is $1.6 million of other expenses related to reorganization efforts at PHI during the third quarter of fiscal 2002. THE CUSTOMIZED MONITORING INSTRUMENTATION SEGMENT reported net sales of $9.4 million for the third quarter of fiscal 2002 which is a decrease of $2.4 million or 20.4% as compared to the third quarter of fiscal 2001. The decrease in net sales is primarily a result of reduced volume from the continued weakness in OEM and distribution channels in all major markets. New products such as the digital tachometer and instrument clusters partially offset the sales reduction. Operating income for the third quarter of fiscal 2002 decreased $148,000 to $41,000 compared to the third quarter of fiscal 2001. This decrease is the result of a reduction in gross margin of 0.7% during the third quarter of fiscal 2002 as compared to the third quarter of fiscal 2001 primarily due to continued consolidation and reduced volume by OEM's partially offset by material cost reductions, reduced headcount and the mix of products sold. NINE MONTHS ENDED JANUARY 26, 2002 COMPARED TO THE NINE MONTHS ENDED JANUARY 27, 2001 THE INDUSTRIAL POWER CONTROL SEGMENT reported net sales of $196.2 million for the nine months ended January 26, 2002, which was an increase of $0.8 million or 0.4% from the nine months ended January 27, 2001. Net sales for Robicon increased $6.9 million or 11.3% during the first nine months of fiscal 2002 as compared to the first nine months of fiscal 2001. The increase in net sales was primarily attributable to the increased volume in the Medium Voltage product line and higher service revenues due to stronger energy and utility markets, partially offset by weakness in products serving industrial markets. Net sales for ASI decreased $6.1 million or 4.6% during the first nine months of fiscal 2002 as compared to the first nine months of fiscal 2001. The decrease in net sales is primarily due to lower revenue for ASI in Germany and in the United States, which included certain specific contracts during the first nine months of fiscal 2001. 19 Order levels remain strong but decreased at ASI due to lower orders in Germany and in the United States, which included certain specific large orders during fiscal 2001. Backlog at Robicon increased $19.1 million or 36.2% to $71.9 million compared to backlog at April 28, 2001 of $52.8 million. Backlog at ASI has decreased $10.6 million or 9.2% to $104.6 million compared to the backlog at April 28, 2001 of $115.2 million primarily due to the orders decline in Germany and in the United States. Operating income for the segment increased $3.7 million to $2.2 million during the nine months ended January 26, 2002 as compared to an operating loss of $1.4 million for the same period in fiscal 2001. This increase in operating income was primarily due to improved gross margins of 4.3% or $8.4 million during the first nine months of fiscal 2002 compared to the same period in fiscal 2001 as a result of the sales mix of higher margin products, improved production and purchasing efficiencies at ASI and Robicon and $650,000 of income at Robicon related to a change in certain employee benefit programs offset by an increase in operating expenses primarily at ASI in the first nine months of fiscal 2002, compared to the same period in fiscal 2001 related to investments in sales channel and infrastructure. THE ADVANCED SURFACE ANALYSIS SEGMENT reported net sales of $53.3 million for the nine months ended January 26, 2002 which is a decrease of $10.1 million from the nine months ended January 27, 2001. The decrease is the result of the continued softening in the semiconductor markets, the weakened economy resulting in many companies canceling or postponing capital expenditures and closing for extended holiday breaks during December and January in fiscal 2002 compared to the same period in fiscal 2001. Operating loss increased $5.2 million to $8.4 million for the nine months ended January 26, 2002 compared to the nine months ended January 27, 2001. The increase in operating loss is primarily due to the decrease in equipment sales margin due to reduced sales volume to semiconductor customers, the mix of sales to Ulvac-PHI which has lower gross margins, reduced gross margin due to volume in analytical services; continued pressure on the equipment sales margin due to the weakened worldwide economy and continued weakness in the semiconductor markets. Also contributing to the increase in operating loss is $2.8 million of other expenses related to reorganization efforts at PHI during the first nine months of fiscal 2002. The Company has implemented cost reduction plans that resulted in reduced headcount, outsourcing of certain subassemblies and reduction of many variable costs to help offset the reduced gross margin. THE CUSTOMIZED MONITORING INSTRUMENTATION SEGMENT reported net sales of $33.9 million for the nine months ended January 26, 2002, which was a decrease of $7.1 million or 17.4% from the nine months ended January 27, 2001. The reduction in this segment was primarily a result of reduced volume from the continued weakness in OEM and distribution channels in all major markets. New products such as the digital tachometer and instrument clusters partially offset the sales reduction. The operating income decreased $354,000 to $1.2 million during the nine months ended January 27, 2001 as compared to the nine months ended January 27, 2001 due to the sales volume decline and 0.5% decline in the gross margin partially due to reduced volume by the OEM's and the overall weak economy on a worldwide basis. In an effort to reverse the sales and gross margin decline trend, the Company is focusing on certain market niches across all product lines where the year to date sales have exceeded the same period sales during the first nine months of fiscal 2001. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs are primarily for working capital, capital expenditures and acquisitions. The Company's primary sources of liquidity have been funds provided by operations, proceeds from the sale of discontinued operations, asset sales and proceeds from financing activities. The Company has made significant acquisitions, which are inherently subject to risk. The successful integration of the acquired operations and the substantial demands on the attention of senior management may adversely impact their ability to manage the Company's existing businesses. 20 On March 7, 2001, the Company completed the sale of substantially all the net assets of its Anderson Power division and all the capital stock of Anderson Power Products Ireland B.V. (together "Anderson") to Ideal Industries, Inc. for $78.7 million in cash. The Asset Sale Proceeds, as defined, received by the Company in connection with the disposition of Anderson was subject to a covenant of the Senior Notes Indenture which requires the Company to apply the net cash received to (i) repay debt ranking pari passu to the Senior Notes within 180 days, (ii) contractually commit to acquisitions, capital expenditures or investments relating to the Company's presently conducted business within 180 days and paid within 360 days or (iii) offer to purchase the Senior Notes pursuant to an Excess Proceeds Offer, as defined. In connection with the sale of Anderson the Company has invested a portion of the Asset Sale Proceeds through the purchase of certain receivables in connection with the termination of the Refinanced Receivables Purchase Facility, and invested in certain capital expenditures. On November 20, 2000, the Company entered into the Refinanced Receivables Purchase Facility for the purpose of refinancing the existing Receivable Purchase Facility. In connection with the above the Company recorded an extraordinary loss of $306,000, net of taxes, to write off the deferred financing costs of the Receivable Purchase Facility. Through June 11, 2001, the Company maintained a Refinanced Receivables Purchase Facility with High Voltage Funding Corporation ("HV-FC") a limited purpose subsidiary of the Company. Under the Refinanced Receivables Purchase Facility, the domestic subsidiaries of the Company would sell a defined pool of trade accounts receivable ("Pool Assets"), and the related rights inherited from the Company and its domestic subsidiaries to HV-FC. HV-FC owned all of its assets and sold participating interests up to a limit of $25.0 million in such assets to a third party which, in turn, purchased and received ownership and security interests in those assets. On June 11, 2001, the Company terminated the Refinanced Receivables Purchase Facility and purchased certain outstanding accounts receivable for $25.0 million. As a result, the change in accounts receivable and other assets in the accompanying balance sheets include $50.2 million and $39.9 million, respectively for the nine months ended January 26, 2002. In connection with the above, the Company has recorded an extraordinary loss of $327,000, net of taxes, to write off the deferred financing costs of the Refinanced Receivables Purchase Facility. On November 30, 2000, the Company entered into the Financing Agreement for the purpose of refinancing the existing Revolving Credit Facility. In connection with the above the Company recorded an extraordinary loss of $224,000, net of taxes, to write off deferred financing costs and prepayment penalties of the Revolving Credit Facility. On June 19, 2001, the Company signed an amendment to the Financing Agreement ("Amended and Restated Financing Agreement"). The Amended and Restated Financing Agreement amends certain financial ratios and restates the Refinanced Revolving Credit Facility, Term Loan A, and Term Loan B to a combined $25,000 revolving credit facility ("New Revolving Credit Facility") with a sub-facility of $5.0 million for the issuance of letters of credit. Availability under the New Revolving Credit Facility is limited to the sum of (i) 85% of eligible receivables, (ii) 50% of eligible joint venture receivables, (iii) 125% of the appraised orderly liquidation value of the eligible inventory less certain reserves as is reasonable and customary by the lenders and (iv) $5.0 million. Interest under the New Revolving Credit Facility is computed and payable monthly at the lender's reference rate plus 2.5%. The Amended and Restated Financing Agreement contains restrictive provisions relating to the maintenance of certain financial ratios, as defined in the respective agreements, restrictions on the payment of common stock dividends, and restriction on leases, capital expenditures, borrowings, the acquisition or disposition of material assets and other matters. On January 25, 2002, the Company amended certain financial covenants of the Amended and Restated Financing Agreement for the period January 25, 2002 through April 27, 2002. At January 26, 2002, $21.5 million was outstanding under the Amended and Restated Financing Agreement. As of January 26, 2002, the Company had total indebtedness (including redeemable put warrants) of $232.7 million and mandatory redeemable preferred stock with an aggregate liquidation preference of $54.0 million. The change in total indebtedness of $3.3 million as compared to $229.4 at April 28, 2001 is the result of an net increase of $4.2 million in unrestricted subsidiary borrowings partially offset by an $0.8 million net decrease in restricted subsidiary debt. 21 As of January 26, 2002, the Company had outstanding and issuable redeemable put warrants representing 6.25% of its fully diluted common stock. The holders of such warrants have the right to require the Company to purchase all or any portion of such warrants or any shares of common stock issued upon the exercise of such warrants at the greater of (i) a valuation prepared by an independent financial advisor or (ii) a formula value calculated as 8.0x the Company's EBITDA (as defined therein) less preferred stock and debt outstanding plus excess cash. The ability of the Company to satisfy its obligations under existing indebtedness and preferred stock will be primarily dependent upon the future financial and operating performance of its operating units and upon the Company's ability to renew or refinance borrowings, or to raise additional equity capital as necessary. The Company expects it will be able to refinance its principal payment obligations under its outstanding indebtedness prior to maturity of the Senior Notes. The Company's working capital was $58.3 million at January 26, 2002. The Company's cash flows used in continuing operations were $27.2 million during the first nine months of fiscal 2002 which includes $15.2 million of federal, state and foreign income tax related to the sale of the Company's Anderson division and certain tax obligations in Italy and The Netherlands, $13.2 million in cash interest payments, $2.8 million of post employment payments in Italy and $1.8 million of advance payments partially offset by improved accounts receivable collections and customer advances as compared to cash used in continuing operations of $2.9 million in the first nine months of fiscal 2001. The Company's principal source of liquidity is operating cash flows, including improvements in working capital turns, the refinancing of existing indebtedness and occasional asset sales. If there was a further decrease in demand for the Company's products and services due to either economic or competitive conditions, there could be a reduction in liquidity due to (i) lower margins, since the Company might not be able to cut costs in the full amount of revenue decreases, (ii) lower working capital turns due to a longer inventory-to-receivables cycle time, or reduced customer advance progress payments, or slower receivable payments from customers, during such economic conditions, or (iii) reduced collateral available for financing due to lower, or overall older receivables held during such economic conditions or a period of reduced sales. The Company invested $9.8 million in capital expenditures during the first nine months of fiscal 2002 including $5.2 million at ASI for facility upgrades and investment in information technology and $1.7 million in upgrades and additions to PHI's demo and lab equipment. NEW ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS No. 144"), Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and is effective for fiscal years beginning after December 15, 2001. The Company is currently evaluating the impact of SFAS No. 144. In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS 142 Goodwill and Intangible Assets. SFAS No. 141 is effective for all business combinations completed after June 30, 2001. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001; however, certain provisions of this statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. Major provisions of these statements and their effective dates for the Company are as follows: (i) all business combinations initiated after June 30, 2001 must use the purchase method of accounting;(ii) under certain conditions intangible assets acquired in a business combination must be recorded separately from goodwill; (iii) goodwill and intangible assets with indefinite lives acquired after June 30, 2001, will not be amortized. Effective April 28, 2002, all previously recognized goodwill and intangible assets with indefinite lives (i)will no longer be subject to amortization; (ii) will be tested for impairment annually and whenever there is an impairment indicator; and (iii) will be assigned to reporting units for purposes of impairment testing and segment reporting. The Company is currently evaluating the impact of SFAS No. 141 and SFAS No. 142 will have on its financial reporting requirements. 22 Effective April 29, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivative instruments be reported on the balance sheet at fair value and that changes in a derivative's fair value be recognized currently in earnings unless specific hedge criteria are met. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized as a charge or credit to earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized as a charge or credit to earnings. The Company does use derivative instruments to manage exposures to foreign currency, commodity price, and interest rate risks. There were no derivative instruments outstanding at January 26, 2002, which would have a material effect on the consolidated financial statements. The Company's objectives for holding derivatives are to minimize these risks using the most effective methods to eliminate or reduce the impacts of these exposures. In March 2000, the FASB issued Interpretation ("FIN") No. 44, Accounting For Certain Transactions Involving Stock Compensation, an Interpretation Of Accounting Principles Board Opinion No. 25. Adoption of FIN No. 44 did not have a material impact on the Company's financial position or results of operations. In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company adopted SAB 101 in fiscal 2001. The adoption did not have a material impact on the Company's financial position or results of operations. EURO CONVERSION On January 1, 1999, member countries of the European Monetary Union (EMU) began a three-year transition from their national currencies to a new common currency, the euro. In January 2002, euro currency was issued and by July 2002, the respective national currencies will be withdrawn. The Company has significant operations in member countries of the EMU. The Company has implemented a plan to address the euro's impact on information systems, currency exchange rate risk and commercial contracts. Costs of the euro conversion to date have not been material. Management believes that future conversion costs will not have a material impact on the operations, cash flows or financial condition of the Company. However, there are uncertainties as to the future costs associated with the euro conversion which may affect the Company's expectations. Factors that could influence the amount and timing of future costs include the success of the Company in identifying systems and programs, the nature and amount of programming required to upgrade or replace each of the affected programs or systems, the availability, rate and magnitude of related labor and consulting costs and the ability of the Company to successfully renegotiate or amend its commercial contracts. ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary market risks for the Company is interest rate risk and foreign currency risk. Other risks dealing with contingencies are described in Note 4 to the Company's notes to the consolidated financial statements included under Item 1 provided elsewhere herein and in Item 1 of Part II of this report. INTEREST RATE RISK The Company's exposure to interest rate risk is limited to the Company's borrowing arrangements under the revolving credit facility. The interest rates on the Company's other long-term debt are fixed and primarily matures in fiscal 2005. The Company has not, to date, engaged in derivative transactions, such as interest rate swaps, caps or collars, in order to reduce it risk, nor does the Company have any plans to do so in the future. A 100 basis point increase in interest rates would not negatively impact the earnings of the Company. 23 FOREIGN CURRENCY RISK The Company manufactures product in the U.S., Italy, The Netherlands, Spain Germany, France, England and Mexico and sells products worldwide. Therefore the Company's operating results are subject to fluctuations in foreign currency exchange rates, as well as the translation of its foreign operations into U.S. dollars. The risks associated with operating in foreign currencies could adversely affect the Company's future operating results. Additionally, currency fluctuations could improve the competitive position of the Company's foreign competition if the value of the U.S. Dollar rises in relation to the local currencies of such competition. The Company sometimes enters into forward exchange contracts to manage exposure related to certain foreign currency commitments, certain foreign currency denominated balance sheet positions and anticipated foreign currency denominated expenditures. All forward exchange contracts are designated as and effective as a hedge and are highly inversely correlated to the hedged item. If a derivative contract terminates prior to maturity, the investment is shown at its fair value with the resulting gain or loss reflected in operating results. Gains and losses on contracts to hedge identifiable foreign currency commitments are deferred and accounted for as part of the related foreign currency transaction. Gains and losses on all other forward exchange contracts are included in current income. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The nature of the Company's business is such that it is regularly involved in legal proceedings incidental to its business and the Company believes that none of these proceedings are material. In March 1998, the Company's Robicon Corporation subsidiary initiated litigation against Toshiba International Corporation ("Toshiba") in the United States District Court for the Western District of Pennsylvania alleging infringement of one of Robicon's Perfect Harmony patents. In June 1998, Toshiba filed suit against Robicon and several other defendants in the United States District Court for the Southern District of Texas alleging, among other things, false and disparaging comments concerning Toshiba, interference with contract, violation of the Texas Competition and Trade Practices Statute and civil conspiracy to restrict Toshiba's business and cause the wrongful termination of a purchase order of one of its customers. Damages under each section are claimed to be in excess of $75,000, the federal statutory minimum, in addition to a claim for punitive damages. In its suit, Toshiba has also claimed that Robicon is infringing a patent held by Toshiba and requested a declaratory judgment that Robicon's patent, which is the subject of the Pennsylvania action, is invalid. In March 1999, the Texas District Court dismissed without prejudice all claims except the alleged patent infringement by Robicon and the request for declaratory judgment. These claims were then transferred to the Western District of Pennsylvania. Also in March 1999, Toshiba filed a petition in Harris County, Texas in which it realleged the claims dismissed by the Texas district court, citing the additional costs by Toshiba to reinstate its purchase order and damages to its reputation not exceeding $5.0 million. On November 29, 1999, the Pennsylvania district court granted Robicon's Motion to dismiss Toshiba's patent infringement claim against Robicon. The only remaining transferred claim is Toshiba's request for declaratory judgment. In November 1999, Toshiba filed a motion to dismiss without prejudice all of the claims pending in Harris County, Texas pursuant to a Tolling Agreement, which permitted Toshiba one (1) year to re-file its claims. In December 1999, the Texas state court granted Toshiba's motion. Toshiba did not re-file its claims prior to the expiration of the Tolling Agreement. There has been no substantive change in the status of this litigation. Certain other claims, suits and complaints have been filed or are pending against the Company. In the opinion of the Company, all such matters are without merit or are of such kind, or involve such amounts, as would not have a material effect on the consolidated financial position or the results of operations of the Company if resolved unfavorably to the Company. If estimates change, there is no assurances these items will not require additional accruals by the Company. 24 ITEM 2. - CHANGES IN SECURITIES None. ITEM 3. - DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. - OTHER INFORMATION None. ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. 25 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 hereto duly authorized. HIGH VOLTAGE ENGINEERING CORPORATION Dated: March 20, 2002 By: /s/ Joseph W. McHugh, Jr. ---------------------------------------- Joseph W. McHugh, Jr. Chief Financial Officer and Principal Accounting Officer 26

Filing Compare · HIGH VOLTAGE ENGINEERING CORP