Exhibit 13














                                 Thermedics Inc.

                        Consolidated Financial Statements

                                     1999

<PAGE>
<TABLE>
<CAPTION>
Thermedics Inc.                                                                  1999 Financial Statements

                      Consolidated Statement of Operations
<S>                                                                              <C>       <C>       <C>
(In thousands except per share amounts)                                          1999      1998      1997
---------------------------------------------------------------------------  --------  --------  --------

Revenues (Note 12)                                                           $223,503  $208,644  $200,184
                                                                             --------  --------  --------

Costs and Operating Expenses:
 Cost of revenues                                                             123,746   114,222   103,677
 Selling, general, and administrative expenses (Note 8)                        66,529    57,182    53,817
 Research and development expenses                                             14,284    12,902    11,968
 Unusual costs (Note 16)                                                          831         -         -
                                                                             --------  --------  --------

                                                                              205,390   184,306   169,462
                                                                             --------  --------  --------

Operating Income                                                               18,113    24,338    30,722

Interest Income (includes $605 from related                                     3,860     5,584     6,208
 parties in 1999, 1998, and 1997; Note 8)
Interest Expense (includes $1,309 and $663 to                                  (2,581)   (1,777)     (597)
 related parties in 1999 and 1998, respectively; Note 3)
Gain on Issuance of Stock by Subsidiary (Note 10)                                   -         -    17,075
Gain on Sale of Investments (includes gain on sale of                               -        11       247
 related-party investments of $247 in 1997; Notes 2 and 8)
Equity in Earnings of Unconsolidated Subsidiaries                                 456       136       170
Other Income                                                                      548         -         -
                                                                             --------  --------  --------

Income from Continuing Operations Before Provision                             20,396    28,292    53,825
 for Income Taxes, Minority Interest, and Extraordinary Item
Provision for Income Taxes (Note 5)                                             7,343    10,688    13,781
Minority Interest Expense                                                       2,475     2,665     3,183
                                                                             --------  --------  --------

Income from Continuing Operations Before Extraordinary Item                    10,578    14,939    36,861
Income from Discontinued Operations (net of provision for                       3,723     4,074     4,631
 income taxes and minority interest of $6,824, $7,733, and
 $10,441; Note 16)
Provision for Loss on Disposal of Discontinued                                (27,522)        -         -
 Operations (net of income tax benefit of $2,583; Note 16)                   --------  --------  --------

Income (Loss) Before Extraordinary Item                                       (13,221)   19,013    41,492
Extraordinary Item (net of provision for income                                     -     4,597         -
 taxes of $3,078; Note 7)                                                    --------  --------  --------

Net Income (Loss)                                                            $(13,221) $ 23,610  $ 41,492
                                                                             ========  ========  ========

Earnings per Share from Continuing Operations Before Extraordinary
 Item (Note 14)
   Basic                                                                     $    .25  $    .36  $   1.00
                                                                             ========  ========  ========

   Diluted                                                                   $    .25  $    .35  $    .95
                                                                             ========  ========  ========


                                       2
<PAGE>
Thermedics Inc.                                                                  1999 Financial Statements

                Consolidated Statement of Operations (continued)

(In thousands except per share amounts)                                          1999      1998     1997
--------------------------------------------------------------------------- ---------- --------- -------

Earnings (Loss) per Share (Note 14)
 Basic                                                                      $   (.32)  $    .57  $  1.13
                                                                            ========   ========  =======

 Diluted                                                                    $   (.31)  $    .55  $  1.07
                                                                            ========   ========  =======

Weighted Average Shares (Notes 8 and 14)
 Basic                                                                         41,836    41,221   36,700
                                                                            =========  ========  =======

 Diluted                                                                       42,855    43,242   38,911
                                                                            =========  ========  =======






































The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>
Thermedics Inc.                                                                  1999 Financial Statements

                           Consolidated Balance Sheet

<S>                                                                                       <C>        <C>
(In thousands)                                                                            1999       1998
------------------------------------------------------------------------------------ ---------- ----------

Assets
Current Assets:
 Cash and cash equivalents (includes $35,256 under repurchase                         $ 22,337   $  81,950
   agreements with parent company in 1998)
 Advance to affiliate                                                                   46,285           -
 Short-term available-for-sale investments, at quoted                                   12,160           -
   market value (amortized cost of $12,160; Note 2)
 Accounts receivable, less allowances of $4,909 and $2,850                              58,208      44,883
 Inventories                                                                            42,992      40,958
 Deferred tax asset and prepaid expenses (Note 5)                                       12,401       9,478
 Net assets of discontinued operations (Note 16)                                        74,311      77,169
                                                                                      --------   ---------

                                                                                       268,694     254,438
                                                                                      --------   ---------

Property, Plant, and Equipment, at Cost, Net                                            13,049      11,354
                                                                                      --------   ---------

Due from Affiliate (Note 8)                                                                  -      10,000
                                                                                      --------   ---------

Other Assets                                                                             9,755       5,834
                                                                                      --------   ---------

Cost in Excess of Net Assets of Acquired Companies (Note 3)                            150,311     126,857
                                                                                      --------   ---------

                                                                                      $441,809   $ 408,483
                                                                                      ========   =========



                                       4
<PAGE>


Thermedics Inc.                                                                  1999 Financial Statements

                     Consolidated Balance Sheet (continued)

(In thousands except share amounts)                                                       1999       1998
------------------------------------------------------------------------------------ ---------- ----------

Liabilities and Shareholders' Investment
Current Liabilities:
 Note payable to parent company (Note 3)                                              $ 11,000   $  19,000
 Short-term obligations and current portion of long-term                                41,509       3,077
   obligations (includes advance from affiliate of $34,600 in 1999; Notes 3 and 7)
 Accounts payable                                                                       15,729      14,449
 Accrued payroll and employee benefits                                                  11,084       8,817
 Accrued income taxes                                                                    7,121       6,691
 Other accrued expenses                                                                 25,711      17,574
 Due to parent company and affiliated companies                                          3,121         998
                                                                                      --------   ---------

                                                                                       115,275      70,606
                                                                                      --------   ---------

Deferred Income Taxes and Other Deferred Items                                           1,260         191
                                                                                      --------   ---------

Long-term Obligations (Note 7)                                                          47,599      47,552
                                                                                      --------   ---------

Minority Interest                                                                       44,273      42,007
                                                                                      --------   ---------

Commitments and Contingency (Notes 6 and 13)

Shareholders' Investment (Notes 4, 8, and 9):
 Common stock, $.10 par value, 100,000,000 shares authorized;                            4,200       4,174
   41,996,564 and 41,739,308 shares issued
 Capital in excess of par value                                                        108,930     106,846
 Retained earnings                                                                     126,423     139,644
 Treasury stock at cost, 50,903 and 47,348 shares                                         (695)     (1,026)
 Deferred compensation                                                                  (1,009)          -
 Accumulated other comprehensive items                                                  (4,447)     (1,511)
                                                                                      --------   ---------

                                                                                       233,402     248,127
                                                                                      --------   ---------

                                                                                      $441,809   $ 408,483
                                                                                      ========   =========













The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                       5
<PAGE>
<TABLE>
<CAPTION>
Thermedics Inc.                                                                  1999 Financial Statements

                      Consolidated Statement of Cash Flows

<S>                                                                            <C>         <C>      <C>
(In thousands)                                                                 1999        1998     1997
------------------------------------------------------------------------- ---------- ----------- ---------

Operating Activities
 Net income (loss)                                                         $(13,221)  $  23,610   $ 41,492
 Adjustments to reconcile net income (loss) to income from
   continuing operations:
     Income from discontinued operations (Note 16)                           (3,723)     (4,074)    (4,631)
     Provision for loss on disposal of discontinued operations (Note 16)     27,522           -          -

 Income from continuing operations                                           10,578      19,536     36,861
 Adjustments to reconcile income from continuing operations
   to net cash provided by operating activities of
   continuing operations:
     Depreciation and amortization                                            9,130       7,177      6,203
     Gain on repurchase and exchange of subordinated                              -      (7,661)         -
       convertible debentures (Note 7)
     Minority interest expense                                                2,475       2,665      3,183
     Gain on issuance of stock by subsidiary (Note 10)                            -           -    (17,075)
     Provision for losses on accounts receivable                              1,795         610        369
     Gain on sale of investments, net (Note 2)                                    -         (11)      (247)
     Other noncash expenses                                                   2,039         218        257
     Changes in current accounts, excluding the effects of acquisitions:
        Accounts receivable                                                  (6,503)      1,553     (3,106)
        Inventories                                                           1,637        (859)    (4,746)
        Other current assets                                                 (1,117)       (471)      (555)
        Accounts payable                                                       (515)       (916)      (207)
        Other current liabilities                                            (3,608)     (3,342)     4,593
     Other                                                                      806         136         23
                                                                           --------   ---------   --------

          Net cash provided by continuing operations                         16,717      18,635     25,553
          Net cash provided by discontinued operations                        8,509      18,367     13,306
                                                                           --------   ---------   --------

          Net cash provided by operating activities                        $ 25,226   $  37,002   $ 38,859
                                                                           --------   ---------   --------



                                       6
<PAGE>

Thermedics Inc.                                                                  1999 Financial Statements

                Consolidated Statement of Cash Flows (continued)

(In thousands)                                                                 1999        1998     1997
------------------------------------------------------------------------- ---------- ----------- ---------

Investing Activities
 Acquisition of Thermo Voltek common stock (Note 13)                       $(20,482)  $       -   $      -
 Advances to affiliate, net                                                 (46,285)          -          -
 Acquisitions, net of cash acquired (Note 3)                                (28,395)    (43,976)    (2,837)
 Purchases of available-for-sale investments                                (12,190)          -     (8,000)
 Proceeds from sale of available-for-sale investments                             -       8,011      6,800
 Proceeds from maturities of available-for-sale investments                       -       1,500        247
 Proceeds from repayment of note receivable from affiliate (Note 8)          10,000           -          -
 Purchases of property, plant, and equipment                                 (4,846)     (5,040)    (3,818)
 Proceeds from sale of property, plant, and equipment                         1,634         207        192
 Other                                                                         (235)     (1,004)      (108)
                                                                           --------   ---------   --------

          Net cash used in continuing operations                           (100,799)    (40,302)    (7,524)
          Net cash provided by (used in) discontinued operations            (48,827)    (29,199)    23,567
                                                                           --------   ---------   --------

          Net cash provided by (used in) investing activities              (149,626)    (69,501)    16,043
                                                                           --------   ---------   --------

Financing Activities
 Proceeds from issuance of short-term obligations to affiliated               40,171          -          -
   companies (Note 3)
 Purchases of Company and subsidiaries' common stock                               -     (5,521)    (1,804)
 Proceeds from issuance of note payable to parent company (Note 3)                 -     21,000          -
 Repayment of note payable to parent company                                  (8,000)    (2,000)         -
 Repayment of notes payable (Note 3)                                          (9,692)         -          -
 Net increase (decrease) in short-term borrowings                              1,106     (2,140)     1,684
 Repayment and repurchase of long-term obligations (Note 7)                        -     (8,951)         -
 Net proceeds from issuance of Company and subsidiaries' common                  528        540     28,457
   stock (Note 10)
 Other                                                                           47         108          7
                                                                           --------   ---------   --------

          Net cash provided by continuing operations                          24,160      3,036     28,344
          Net cash provided by (used in) discontinued operations             (18,499)   (15,891)    20,064
                                                                           ---------  ---------   --------

          Net cash provided by (used in) financing activities              $   5,661  $ (12,855)  $ 48,408
                                                                           ---------  ---------   --------


                                       7
<PAGE>


(In thousands)                                                                 1999        1998     1997
------------------------------------------------------------------------- ---------- ----------- ---------

Exchange Rate Effect on Cash in Continuing Operations                      $     605  $     259   $  (1,532)
Exchange Rate Effect on Cash in Discontinued Operations                         (421)       191       2,434
                                                                           ---------  ---------   ---------

Increase (Decrease) in Cash and Cash Equivalents                            (118,555)   (44,904)    104,212
Cash and Cash Equivalents at Beginning of Year                               142,108    187,012      82,800
                                                                           ---------  ---------   ---------

                                                                              23,553    142,108     187,012
Cash of Discontinued Operations at End of Year                                (1,216)   (60,158)    (85,766)
                                                                           ---------  ---------   ---------

Cash and Cash Equivalents at End of Year                                   $  22,337  $  81,950   $ 101,246
                                                                           =========  =========   =========

Cash Paid For
 Interest                                                                  $   2,142  $   1,849   $     535
 Income taxes                                                              $   7,835  $  12,691   $  10,292

Noncash Activities
 Fair value of assets of acquired companies                                $  57,059  $  54,390   $   4,544
 Cash paid for acquired companies                                            (30,479)   (43,976)     (3,043)
                                                                           ---------  ---------   ---------

   Liabilities assumed of acquired companies                               $  26,580  $  10,414   $   1,501
                                                                           =========  =========   =========

 Issuance of subordinated convertible debentures in                        $       -  $  15,859   $       -
   connection with exchange offer                                          =========  =========   =========

 Issuance of Company common stock to parent company in                     $       -  $   8,040   $       -
  exchange for common stock of subsidiary                                  =========  =========   =========





















The accompanying notes are an integral part of these consolidated financial
statements.

                                       8
<PAGE>

Thermedics Inc.                                                                  1999 Financial Statements

               Consolidated Statement of Comprehensive Income and Shareholders' Investment

(In thousands)                                                                1999        1998      1997
------------------------------------------------------------------------ ---------- ----------- ----------

Comprehensive Income
Net Income (Loss)                                                          $(13,221)  $ 23,610    $41,492
                                                                           --------   --------    -------

Other Comprehensive Items, Net:
 Foreign currency translation adjustment                                     (2,936)       838     (1,996)
 Net unrealized losses on available-for-sale investments                          -        (17)       (49)
                                                                           --------   --------    -------

                                                                             (2,936)       821     (2,045)
 Minority interest (expense) income                                             561       (151)       144
                                                                           --------   --------    -------

                                                                           $(15,596)  $ 24,280    $39,591
                                                                           ========   ========    =======

Shareholders' Investment
Common Stock, $.10 Par Value:
 Balance at beginning of period                                            $  4,174   $  3,685    $ 3,684
 Activity under employees' and directors' stock plans                            26          1          1
 Issuance of Company common stock to parent company in                            -        488          -
   exchange for common stock of subsidiary (Note 8)                        --------   --------    -------

 Balance at end of period                                                     4,200      4,174      3,685
                                                                           --------   --------    -------

Capital in Excess of Par Value:
 Balance at beginning of period                                             106,846    113,913    138,433
 Activity under employees' and directors' stock plans                         1,289     (1,966)    (1,239)
 Tax benefit related to employees' and directors' stock plans                     -        280         55
 Issuance of Company common stock to parent company in                            -      7,552          -
   exchange for common stock of subsidiary (Note 8)
 Effect of majority-owned subsidiaries' equity transactions                     795    (12,933)   (23,336)
                                                                           --------   --------    -------

 Balance at end of period                                                   108,930    106,846    113,913
                                                                           --------   --------    -------

Retained Earnings:
 Balance at beginning of period                                             139,644    116,034     74,542
 Net income (loss)                                                          (13,221)    23,610     41,492
                                                                           --------   --------    -------

 Balance at end of period                                                   126,423    139,644    116,034
                                                                           --------   --------    -------

Treasury Stock:
 Balance at beginning of period                                              (1,026)    (3,449)    (4,729)
 Activity under employees' and directors' stock plans                           331      2,423      1,572
 Purchases of Company common stock                                                -          -       (292)
                                                                           --------   --------    -------

 Balance at end of period                                                  $   (695)  $ (1,026)   $(3,449)
                                                                           --------   --------    -------


                                       9
<PAGE>


Thermedics Inc.                                                                  1999 Financial Statements

         Consolidated Statement of Comprehensive Income and Shareholders' Investment (continued)

(In thousands)                                                                1999        1998      1997
------------------------------------------------------------------------ ---------- ----------- ----------

Deferred Compensation (Note 4):
 Balance at beginning of period                                            $      -    $      -    $      -
 Issuance of restricted stock under employees' stock plans                   (1,216)          -           -
 Amortization of deferred compensation                                          207           -           -
                                                                           --------    --------    --------

 Balance at end of period                                                    (1,009)          -           -
                                                                           --------    --------    --------

Accumulated Other Comprehensive Items:
 Balance at beginning of period                                              (1,511)     (2,332)       (287)
 Other comprehensive items                                                   (2,936)        821      (2,045)
                                                                           --------    --------    --------

 Balance at end of period                                                    (4,447)     (1,511)     (2,332)
                                                                           --------    --------    --------

                                                                           $233,402    $248,127    $227,851
                                                                           ========    ========    ========

































The accompanying notes are an integral part of these consolidated financial
statements.

                                       10
<PAGE>

Thermedics Inc.                                                                  1999 Financial Statements

                   Notes to Consolidated Financial Statements

1.    Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations
      Thermedics Inc. (the Company) develops, manufactures, and markets on-line
product quality assurance systems, security devices, and laboratory products
including electrochemistry and microweighing systems; precision weighing and
inspection equipment; and respiratory care products, as well as other medical
products.

Relationship with Thermo Electron Corporation
      The Company was incorporated in 1983 as a wholly owned subsidiary of
Thermo Electron Corporation. As of January 1, 2000, Thermo Electron owned
31,759,424 shares of the Company's common stock, representing 76% of such stock
outstanding.
      In January 2000, Thermo Electron updated its proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the Company. As a
part of this reorganization, the Company has made cash tender offers for all
outstanding shares of its Thermedics Detection Inc. and Thermo Sentron Inc.
subsidiaries. Also, the Company announced that it plans to seek a buyer for its
Thermo Cardiosystems Inc. subsidiary, in addition to the previously announced
plan to sell the Company's Power Electronics and Test Equipment business. Thermo
Electron also intends to take the Company private (Note 16).

Principles of Consolidation
      The accompanying financial statements include the accounts of the Company,
its wholly owned subsidiaries, and its majority-owned public subsidiaries,
Thermo Sentron and Thermedics Detection.  All material intercompany accounts and
transactions have been eliminated.

Basis of Presentation
      The results of operations of the Company's Thermo Cardiosystems and Thermo
Voltek subsidiaries, which represent the Heart Assist and Blood Testing Devices
segment and Power Electronics and Test Equipment segment, respectively, have
been classified as discontinued operations as a result of the Company's decision
to divest these businesses (Note 16). In addition, certain amounts in 1998 and
1997 have been reclassified to conform to the presentation in the 1999 financial
statements.

Fiscal Year
      The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1999, 1998, and 1997 are for the fiscal years ended January 1,
2000, January 2, 1999, and January 3, 1998, respectively. Fiscal 1999 and 1998
each included 52 weeks; fiscal 1997 included 53 weeks.

Revenue Recognition
      The Company recognizes the majority of its revenues upon shipment of its
products. The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment.

Gain on Issuance of Stock by Subsidiary
      At the time a subsidiary sells its stock to unrelated parties at a price
in excess of its book value, the Company's net investment in that subsidiary
increases. If at that time the subsidiary is an operating entity and not engaged
principally in research and development, the Company records the increase as a
gain.
      If gains have been recognized on issuances of a subsidiary's stock and
shares of the subsidiary are subsequently repurchased by the subsidiary, the
Company, or Thermo Electron, gain recognition does not occur on issuances
subsequent to the date of a repurchase until such time as shares have been
issued in an amount equivalent to the number of repurchased shares. Such
transactions are reflected as equity transactions, and the net effect of these
transactions is reflected in the accompanying statement of comprehensive income
and shareholders' investment as "Effect of majority-owned subsidiaries' equity
transactions."


                                       11
<PAGE>

1.    Nature of Operations and Summary of Significant Accounting Policies (continued)

Stock-based Compensation Plans
      The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 4). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to shareholders' investment.

Income Taxes
      In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.

Earnings (Loss) per Share
      Basic earnings (loss) per share have been computed by dividing net income
(loss) by the weighted average number of shares outstanding during the year.
Except where the effect would be antidilutive, diluted earnings (loss) per share
have been computed assuming the conversion of convertible obligations and the
elimination of the related interest expense, and the exercise of stock options,
as well as their related income tax effects (Note 14).

Cash and Cash Equivalents
      The Company, along with certain European-based subsidiaries of Thermo
Electron, participates in a notional pool arrangement with Barclays Bank. Under
this arrangement, Barclays notionally combines the positive and negative cash
balances held by the participants to calculate the net interest yield/expense
for the group. The benefit derived from this arrangement is then allocated based
on balances attributable to the respective participants. The Company has access
to a $6,040,000 line of credit under this arrangement. Thermo Electron
guarantees all of the obligations of each participant in this arrangement. At
year-end 1999, the Company had invested and borrowed $1,131,000 and $2,654,000,
respectively, under this arrangement. At year-end 1998, the Company had borrowed
$2,238,000 under this arrangement (Note 8). The interest rate for these
borrowings was 5.77% at year-end 1999.
      At year-end 1998, $35,256,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lent excess cash to Thermo Electron, which Thermo Electron
collateralized with investments principally consisting of corporate notes, U.S.
government-agency securities, commercial paper, money market funds, and other
marketable securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement were readily convertible
into cash by the Company. The repurchase agreement earned a rate based on the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. At year-end 1998, the Company's cash and cash
equivalents also included investments in commercial paper and short-term
certificates of deposit of the Company's foreign operations which had an
original maturity of three months or less. Effective June 1999, the Company
adopted a new cash management arrangement with Thermo Electron, described below,
that replaces the repurchase arrangement.
      In addition, at year-end 1999 and 1998, the Company's cash and cash
equivalents also included cash of the Company's foreign subsidiaries invested in
interest bearing accounts, which have original maturities of three months or
less.

                                       12
<PAGE>


1.    Nature of Operations and Summary of Significant Accounting Policies (continued)

Advance to/from Affiliate
      Effective June 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice.
      In addition, certain of the Company's European-based subsidiaries
participate in a new arrangement with a wholly owned subsidiary of Thermo
Electron. Interest under this arrangement is based on Euro market rates. The
other terms of this arrangement are similar to the domestic cash management
arrangement.
</TABLE>

Inventories
      Inventories are stated at the lower of cost (on a first-in, first-out
basis) or net realizable value and include materials, labor, and manufacturing
overhead. The components of inventories are as follows:

<TABLE>
<CAPTION>
<S>                                                                                      <C>        <C>
(In thousands)                                                                           1999       1998
---------------------------------------------------------------------------------- ----------- ----------

Raw Material and Supplies                                                             $16,308     $17,249
Work in Process                                                                         7,132       6,686
Finished Goods                                                                         19,552      17,023
                                                                                      -------     -------

                                                                                      $42,992     $40,958
                                                                                      =======     =======
      The Company periodically reviews its quantities of inventories on hand and
compares these amounts to expected usage of each particular product or product
line. The Company records as a charge to cost of revenues any amounts required
to reduce the carrying value of inventories to net realizable value.

Property, Plant, and Equipment
      The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings and improvements, 25 years;
machinery and equipment, 3 to 12 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset. Property, plant, and
equipment consists of the following:

(In thousands)                                                                           1999       1998
---------------------------------------------------------------------------------- ----------- ----------

Land and Buildings                                                                    $   245     $   918
Machinery, Equipment, and Leasehold Improvements                                       38,535      32,920
                                                                                      -------     -------

                                                                                       38,780      33,838
Less:  Accumulated Depreciation and Amortization                                       25,731      22,484
                                                                                      -------     -------

                                                                                      $13,049     $11,354
                                                                                      =======     =======

                                       13
<PAGE>


Thermedics Inc.                                                                  1999 Financial Statements

                   Notes to Consolidated Financial Statements

1.    Nature of Operations and Summary of Significant Accounting Policies (continued)

Other Assets
      Other assets in the accompanying balance sheet includes the cost of
acquired patents, trademarks, acquired technology, and deferred debt expenses
relating to the Company's issuance of subordinated convertible debentures. These
assets are amortized using the straight-line method over their estimated useful
lives, which range from 7 to 40 years. These assets were $6,669,000 and
$4,988,000, net of accumulated amortization of $2,103,000 and $1,128,000, at
year-end 1999 and 1998, respectively.

Cost in Excess of Net Assets of Acquired Companies
      The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $12,925,000 and $9,172,000 at year-end 1999 and 1998,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. Such events or circumstances generally include the occurrence of
operating losses or a significant decline in earnings associated with the
acquired business or asset. The Company considers the future undiscounted cash
flows of the acquired businesses in assessing the recoverability of this asset.
The Company assesses cash flows before interest charges and, when impairment is
indicated, writes the asset down to fair value. If quoted market values are not
available, the Company estimates fair value by calculating the present value of
future cash flows. If impairment has occurred, any excess of carrying value over
fair value is recorded as a loss.

Foreign Currency
      All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments, net of minority
interest, are reflected in the "Accumulated other comprehensive items" component
of shareholders' investment. Foreign currency transaction gains or losses are
included in the accompanying statement of operations and are not material for
the three years presented.

Comprehensive Income
      Comprehensive income combines net income (loss) and "other comprehensive
items," which represents foreign currency translation adjustments and unrealized
net of tax gains and losses on available-for-sale investments, reported as a
component of shareholders' investment in the accompanying balance sheet. At
year-end 1999 and 1998, the balance of accumulated other comprehensive items
represents the Company's cumulative translation adjustment.

Recent Accounting Pronouncement
      In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements."
SAB 101 includes requirements for when shipments may be recorded as revenue when
the terms of the sale include customer acceptance provisions or an obligation of
the seller to install the product. In such instances, SAB 101 generally requires
that revenue recognition occur at completion of installation and/or upon
customer acceptance. SAB 101 requires that companies conform their revenue
recognition practices to the requirements therein during the first quarter of
calendar 2000 through recording a cumulative net of tax effect of the change in
accounting. The Company has not completed the analysis to determine the effect
that SAB 101 will have on its financial statements.

Use of Estimates
      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


                                       14
<PAGE>


2.    Available-for-sale Investments

      The Company's debt securities are considered available-for-sale
investments in the accompanying balance sheet and are carried at market value,
with the difference between cost and market value, net of related tax effects
and minority interest, recorded in the "Accumulated other comprehensive items"
component of shareholders' investment (Note 15). At January 1, 2000, the Company
had short-term available-for-sale investments consisting of government-agency
securities with a market value and cost basis of $12,160,000.
      The cost of available-for-sale investments that were sold was based on
specific identification in determining realized gains and losses recorded in the
accompanying statement of operations. Gain on sale of investments resulted from
gross realized gains of $11,000 and $247,000 in 1998 and 1997, respectively.

3.    Acquisitions

      In July 1999, the Company acquired Erich Jaeger, GmbH, a medical products
company based in Germany, for $30,479,000 in cash, net of cash acquired,
including the repayment of certain of Jaeger's indebtedness, and the assumption
of $13,401,000 of Jaeger's indebtedness. Jaeger develops and manufactures
equipment for lung-function, cardio-respiratory, and sleep-disorder diagnosis
and monitoring. The Company financed this acquisition with $30,479,000 of
short-term borrowings from a wholly owned subsidiary of Thermo Electron, which
are due on demand and bear interest at prevailing German market rates, set at
the beginning of each month. The interest rate at January 1, 2000, was 3.95%. Of
the indebtedness assumed, the Company refinanced $9,692,000 with additional
borrowings from the wholly owned subsidiary of Thermo Electron, and expects to
repay the balance upon maturity in May 2000. Of the total borrowings from Thermo
Electron of $40,171,000 for the acquisition of Jaeger and payment of its
indebtedness, $34,600,000 is included in short-term obligations and current
portion of long-term obligations and $3,853,000 is included in due to parent
company and affiliated companies, net of currency effects, in the accompanying
1999 balance sheet.
      In June 1998, Thermo Sentron acquired the three businesses that
constituted the product-monitoring group of Graseby Limited (the
product-monitoring businesses), a subsidiary of Smiths Industries plc, for
$43,976,000 in cash, net of cash acquired, and the assumption of certain
liabilities. The U.K.-based product-monitoring businesses design, manufacture,
and distribute specialized packaged-goods equipment, including checkweighers and
metal detectors, for the food and pharmaceutical industries. To partially
finance this acquisition, the Company borrowed $21,000,000 from Thermo Electron
pursuant to a promissory note due December 1998, bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. The due date of this note has been extended to March 2000 and it
now bears interest at the 30-day Dealer Commercial Paper Rate plus 150 basis
points, set on the second business day of each fiscal month of Thermo Sentron.
As of year-end 1999, Thermo Sentron had repaid $10,000,000 principal amount of
the note. As of January 1, 2000, the interest rate on this promissory note was
7%.
      In July 1997, Thermo Sentron acquired Westerland Engineering Ltd. for
$1,961,000 in cash. To finance this acquisition, Thermo Sentron borrowed
$1,961,000, denominated in British pounds sterling, from a bank, pursuant to a
promissory note, which was repaid in January 1998 and bore interest at 7.94%.
Westerland is a U.K.-based manufacturer of process-weighing and control
equipment.
      In February 1997, Thermo Sentron acquired substantially all of the assets
of RCC Industrial Electronics Pty. Limited (RCCI) for $1,082,000 in cash and the
assumption of certain liabilities. RCCI is an Australian-based manufacturer of
in-motion checkweighers for the food and pharmaceutical industries.
      These acquisitions have been accounted for using the purchase method of
accounting, and their results of operations have been included in the
accompanying financial statements from their respective dates of acquisition.
The aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $69,226,000, which is being amortized over 40 years.
Allocation of the purchase price was based on an estimate of the fair value of
the net assets acquired.


                                       15
<PAGE>


3.    Acquisitions (continued)

      In connection with these acquisitions, the Company has undertaken
restructuring activities at the acquired businesses. The Company's restructuring
activities, which were accounted for in accordance with Emerging Issues Task
Force Pronouncement (EITF) 95-3, primarily have included reductions in staffing
levels and the abandonment of excess facilities. In connection with these
restructuring activities, as part of the cost of the acquisitions, the Company
established reserves as detailed below, primarily for severance and excess
facilities. In accordance with EITF 95-3, the Company finalized and, for the
acquisition completed in 1999, intends to finalize, its restructuring plans no
later than one year from the respective dates of the acquisitions. Accrued
acquisition expenses are included in other accrued expenses in the accompanying
balance sheet.
      A summary of the changes in accrued acquisition expenses for acquisitions
completed before and during 1997 is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S>                                                 <C>          <C>          <C>                   <C>
                                                       1997 Acquisitions
                                                     -----------------------
                                                                 Abandonment
                                                                   of Excess       Pre-1997
(In thousands)                                      Severance     Facilities   Acquisitions         Total
----------------------------------------------- -------------- -------------- -------------- -------------

Balance at December 28, 1996                         $      -       $      -       $    896       $    896
 Reserves established                                     237             62              -            299
 Usage                                                    (40)             -           (792)          (832)
 Currency translation                                       -              -           (104)          (104)
                                                     --------       --------       --------       --------

Balance at January 3, 1998                                197             62              -            259
 Usage                                                   (162)           (25)             -           (187)
                                                     --------       --------       --------       --------

Balance at January 2, 1999                                 35             37              -             72
 Usage                                                    (35)           (37)             -            (72)
                                                     --------       --------       --------       --------

Balance at January 1, 2000                           $      -       $      -       $      -       $      -
                                                     ========       ========       ========       ========

      The principal acquisition expenses for 1997 acquisitions were for
severance for 17 employees across all functions. The Company finalized its
restructuring plans for the 1997 acquisitions in 1998.
      A summary of accrued acquisition expenses for the product-monitoring
businesses is as follows:

                                                                 Abandonment
                                                                   of Excess
(In thousands)                                      Severance     Facilities          Other         Total
----------------------------------------------- -------------- -------------- -------------- -------------

Balance at January 3, 1998                            $     -        $     -        $     -        $     -
 Reserves established                                     537            772              -          1,309
 Usage                                                   (390)           (15)             -           (405)
 Currency translation                                      (5)            (6)             -            (11)
                                                      -------        -------        -------        -------

Balance at January 2, 1999                                142            751              -            893
 Reserves established                                     478          1,151             62          1,691
 Usage                                                   (400)          (646)           (22)        (1,068)
 Decrease due to finalization of restructuring           (228)          (211)             -           (439)
   plans, recorded as a decrease in cost in
   excess of net assets of acquired companies
 Currency translation                                       8             23              -             31
                                                      -------        -------        -------        -------

Balance at January 1, 2000                            $     -        $ 1,068        $    40        $ 1,108
                                                      =======        =======        =======        =======



                                       16
<PAGE>

3.    Acquisitions (continued)

      The principal acquisition expenses for the product-monitoring businesses
were for severance for 56 employees across all functions and for abandoned
operating facilities in North America with lease terms through 2001. A buyout
agreement has been finalized for one of the leases, effective June 2000. All
remaining obligations related to the lease have been accrued at year-end. The
Company finalized its restructuring plans for the product-monitoring businesses
in 1999. The amount established in 1999 at the product-monitoring businesses for
abandoned facilities represents leases for two operating facilities in England
with lease terms through 2009.
      A summary of accrued acquisition expenses for Jaeger is as follows:

                                                                 Abandonment
                                                                   of Excess
(In thousands)                                      Severance     Facilities          Other         Total
----------------------------------------------- -------------- -------------- -------------- -------------

Balance at January 2, 1999                             $    -         $    -         $    -         $    -
 Reserves established                                   2,335            680            431          3,446
 Usage                                                      -              -              -              -
 Currency translation                                    (146)           (42)           (27)          (215)
                                                       ------         ------         ------         ------

Balance at January 1, 2000                             $2,189         $  638         $  404         $3,231
                                                       ======         ======         ======         ======

      The principal acquisition expenses for Jaeger were for severance for 29
employees across all functions and for the abandonment of operating facilities
in Germany and the Netherlands with lease terms through 2003. The amounts
captioned as other primarily represent employee relocation costs. Unresolved
matters at January 1, 2000, primarily included completion of planned severances
and abandonment of excess facilities.

4.    Employee Benefit Plans

Stock-based Compensation Plans

Stock Option Plans
      The Company has stock-based compensation plans for its key employees,
directors, and others. These plans permit the grant of a variety of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the Board Committee), including restricted stock,
nonqualified and incentive stock options, stock bonus shares, or
performance-based shares. The option recipients and the terms of options granted
under these plans are determined by the Board Committee. Generally, options
granted to date are exercisable immediately, but are subject to certain transfer
restrictions and the right of the Company to repurchase shares issued upon
exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the term of the option, which may range from seven
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must be
granted at not less than the fair market value of the Company's stock on the
date of grant. To date, all options have been granted at fair market value. The
Company also has a directors' stock option plan that provides for the grant of
stock options to outside directors pursuant to a formula approved by the
Company's shareholders. Options awarded under this plan are exercisable
immediately and expire three to seven years after the date of grant. In addition
to the Company's stock-based compensation plans, certain officers and key
employees may also participate in stock-based compensation plans of Thermo
Electron.
      In November 1998, the Company's employees, excluding its officers and
directors, were offered the opportunity to exchange previously granted options
to purchase shares of Company common stock for an amount of options equal to
half of the number of options previously held, exercisable at a price equal to
the fair market value at the time of the exchange offer. Holders of options to
acquire 388,000 shares at a weighted average exercise price of $19.39 per share


                                       17
<PAGE>

4.    Employee Benefit Plans (continued)

elected to participate in this exchange and, as a result, received options to
purchase 194,000 shares of Company common stock at $10.81 per share, which are
included in the 1999 grants in the table below. The other terms of the new
options are the same as the exchanged options except that the holders may not
sell shares purchased pursuant to such new options for six months from the
exchange date. The options exchanged were canceled by the Company.
      In 1999, the Company awarded 140,000 shares of restricted common stock to
certain key employees. The shares had an aggregate value of $1,216,000 and vest
three years from the date of the award, assuming continued employment, with
certain exceptions. The Company has recorded the fair value of the restricted
stock as deferred compensation in the accompanying balance sheet and is
amortizing such amount over the vesting period.
      A summary of the Company's stock option activity is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S>                                              <C>     <C>         <C>      <C>         <C>    <C>
                                                       1999                1998                 1997
                                               ------------------  -------------------  ------------------
                                                         Weighted             Weighted           Weighted
                                                          Average              Average            Average
                                                         Exercise             Exercise           Exercise
                                                            Price                Price              Price
                                                 Number              Number              Number
                                                     of                  of                  of
(Shares in thousands)                            Shares              Shares              Shares
---------------------------------------------- --------- --------- --------- ---------- -------- ---------

Options Outstanding, Beginning of Year            1,548     $13.46    1,584     $14.93     1,664    $14.99
 Granted                                            153      9.54       628      13.52      111      19.00
 Assumed in merger with Thermo Voltek               620      6.66         -          -        -          -
   (Note 13)
 Exercised                                         (266)     4.33      (139)      7.91      (63)      7.92
 Forfeited                                         (223)    13.64      (137)     19.53     (128)     22.75
 Canceled due to exchange                             -         -      (388)     19.39        -          -
                                                  -----     -----     -----                ----

Options Outstanding, End of Year                  1,832     $12.13    1,548     $13.46     1,584    $14.93
                                                  =====     ======    =====     ======     =====    ======

Options Exercisable                               1,832     $12.13    1,545     $13.46     1,584    $14.93
                                                  =====     ======    =====     ======     =====    ======

Options Available for Grant                         756                 490                  296
                                                  =====               =====                =====
</TABLE>

      A summary of the status of the Company's stock options at January 1, 2000,
is as follows:
<TABLE>
<CAPTION>
<S>                                                  <C>              <C>                        <C>
                                                             Options Outstanding and Exercisable
                                                     -----------------------------------------------------
Range of Exercise Prices                                   Number             Weighted           Weighted
                                                               of              Average            Average
                                                           Shares            Remaining           Exercise
                                                   (In thousands)     Contractual Life              Price
---------------------------------------------- ------------------- -------------------- ------------------

$  5.00 - $11.02                                             989            4.0 years              $ 8.93
  11.03 -  17.05                                             642            5.8 years               15.36
  17.06 -  23.08                                             170            6.1 years               18.33
  23.09 -  29.11                                              31            7.2 years               28.15
                                                            ----

$  5.00 - $29.11                                           1,832            4.9 years              $12.13
                                                           =====



                                       18
<PAGE>


4.    Employee Benefit Plans (continued)

Employee Stock Purchase Program
      Substantially all of the Company's full-time U.S. employees are eligible
to participate in an employee stock purchase program sponsored by the Company
and Thermo Electron. Under this program, shares of the Company's and Thermo
Electron's common stock may be purchased at 85% of the lower of the fair market
value at the beginning or end of the period, and the shares purchased are
subject to a one-year resale restriction. Prior to the 1998 program year, the
applicable shares of common stock could be purchased at the end of a 12-month
period at 95% of the fair market value at the beginning of the period, and
shares purchased were subject to a six-month resale restriction. Shares are
purchased through payroll deductions of up to 10% of each participating
employee's gross wages. During 1999 and 1997, the Company issued 8,000 and 9,000
shares, respectively, of its common stock under this program.
No shares were issued under this program during 1998.

Pro Forma Stock-based Compensation Expense
      In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for its stock-based compensation plans. Had compensation cost for awards granted
after 1994 under the Company's stock-based compensation plans been determined
based on the fair value at the grant dates consistent with the method set forth
under SFAS No. 123, the effect on certain financial information of the Company
would have been as follows:

(In thousands except per share amounts)                                         1999       1998      1997
-------------------------------------------------------------------------- ---------- ---------- ---------

Income from Continuing Operations Before Extraordinary Item:
   As reported                                                              $ 10,578   $ 14,939   $ 36,861
   Pro forma                                                                   9,225     13,562     35,683
Basic Earnings per Share from Continuing Operations Before
 Extraordinary Item:
   As reported                                                                   .25        .36       1.00
   Pro forma                                                                     .22        .33        .97
Diluted Earnings per Share from Continuing Operations Before
 Extraordinary Item:
   As reported                                                                   .25        .35        .95
   Pro forma                                                                     .21        .32        .92

Net Income (Loss):
   As reported                                                              $(13,221)  $ 23,610   $ 41,492
   Pro forma                                                                 (16,001)    20,886     39,454
Basic Earnings (Loss) per Share:
   As reported                                                                  (.32)       .57       1.13
   Pro forma                                                                    (.38)       .51       1.08
Diluted Earnings (Loss) per Share:
   As reported                                                                  (.31)       .55       1.07
   Pro forma                                                                    (.37)       .49       1.01

      Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future years.
Pro forma compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.

                                       19
<PAGE>


4.    Employee Benefit Plans (continued)

      The weighted average fair value per share of options granted was $3.74,
$4.15, and $8.81 in 1999, 1998, and 1997, respectively. The fair value of each
option grant was estimated on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions:

                                                                                1999       1998      1997
-------------------------------------------------------------------------- ---------- ---------- ---------

Volatility                                                                       38%        38%        39%
Risk-free Interest Rate                                                         5.3%       4.8%       6.2%
Expected Life of Options                                                   4.5 years  4.1 years  5.6 years

      The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

401(k) Savings Plan
      The majority of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to the
401(k) savings plan are made by both the employee and the Company. Company
contributions to the 401(k) plan are based upon the level of employee
contributions. For these plans, the Company contributed and charged to expense
$1,002,000, $788,000, and $1,090,000 in 1999, 1998, and 1997, respectively.

5.    Income Taxes

      The components of income from continuing operations before provision for
income taxes, minority interest, and extraordinary item are as follows:

(In thousands)                                                                  1999       1998      1997
-------------------------------------------------------------------------- ---------- ---------- ---------

Domestic                                                                     $ 9,994    $18,227    $43,640
Foreign                                                                       10,402     10,065     10,185
                                                                             -------    -------    -------

                                                                             $20,396    $28,292    $53,825
                                                                             =======    =======    =======



                                       20
<PAGE>

5.    Income Taxes (continued)

      The components of the provision for income taxes for continuing operations
are as follows:

(In thousands)                                                                  1999       1998      1997
-------------------------------------------------------------------------- ---------- ---------- ---------

Currently Payable:
 Federal                                                                     $ 4,380    $ 4,184    $ 7,603
 State                                                                         1,085      1,795      1,905
 Foreign                                                                       3,241      3,779      2,589
                                                                             -------    -------    -------

                                                                               8,706      9,758     12,097
                                                                             -------    -------    -------

Net Deferred (Prepaid):
 Federal                                                                      (1,718)     1,066        763
 State                                                                          (279)       160        199
 Foreign                                                                         634       (296)       722
                                                                             -------    -------    -------

                                                                              (1,363)       930      1,684
                                                                             -------    -------    -------

                                                                             $ 7,343    $10,688    $13,781
                                                                             =======    =======    =======

      The total provision for income taxes included in the accompanying
statement of operations was as follows:

(In thousands)                                                                  1999       1998      1997
-------------------------------------------------------------------------- ---------- ---------- ---------

Continuing Operations                                                        $ 7,343    $10,688    $13,781
Discontinued Operations                                                        3,900      4,624      5,894
Loss on Disposal of Discontinued Operations                                   (2,583)         -          -
                                                                             -------    -------    -------

                                                                             $ 8,660    $15,312    $19,675
                                                                             =======    =======    =======

      The Company and its majority-owned subsidiaries receive a tax deduction
upon exercise of nonqualified stock options by employees for the difference
between the exercise price and the market price of the underlying common stock
on the date of exercise. The provision for income taxes that is currently
payable does not reflect $521,000 and $360,000 of such benefits of the Company
and its majority-owned subsidiaries that have been allocated to capital in
excess of par value, directly or through the effect of majority-owned
subsidiaries' equity transactions, in 1998, and 1997, respectively.

                                       21
<PAGE>

5.    Income Taxes (continued)

      The provision for income taxes for continuing operations in the
accompanying statement of operations differs from the provision calculated by
applying the statutory federal income tax rate of 35% to income from continuing
operations before provision for income taxes, minority interest, and
extraordinary item due to the following:

(In thousands)                                                                   1999      1998       1997
--------------------------------------------------------------------------- ---------- --------- ----------

Provision for Income Taxes at Statutory Rate                                  $ 7,139    $9,902    $18,839
Increases (Decreases) Resulting From:
 Gain on issuance of stock by subsidiaries                                          -         -     (5,976)
 State income taxes, net of federal tax                                           524     1,271      1,368
 Amortization and write-off of cost in excess                                     636       408        424
   of net assets of acquired companies
 Federal research and development tax credit                                   (1,198)        -          -
 Tax benefit of foreign sales corporation                                        (209)     (303)      (457)
 Foreign tax rate and regulation differential                                     234       (39)      (127)
 Other, net                                                                       217      (551)      (290)
                                                                              -------    ------    -------

                                                                              $ 7,343    $10,688   $13,781
                                                                              =======    =======   =======
</TABLE>

      Deferred tax asset and deferred income taxes in the accompanying balance
sheet consist of the following:

<TABLE>
<CAPTION>
<S>                                                                                        <C>        <C>
(In thousands)                                                                             1999       1998
-------------------------------------------------------------------------------------- --------- ----------

Deferred Tax Asset (Liability):
 Reserves and accruals                                                                    $4,208    $4,409
 Inventory basis difference                                                                3,085     1,631
 Depreciation and amortization                                                               572       786
 Accrued compensation                                                                      1,194       741
 Trademarks and other intangible assets                                                    (1,020)    (924)
 Other, net                                                                                  110        39
                                                                                          ------    ------

                                                                                          $8,149    $6,682
                                                                                          ======    ======
      The Company has not recognized a deferred tax liability for the difference
between the book basis and tax basis of its investment in the common stock of
its domestic subsidiaries (such difference relates primarily to unremitted
earnings and gains on issuance of stock by subsidiaries) because the Company
does not expect this basis difference to become subject to tax at the parent
level. The Company believes it can implement certain tax strategies to recover
its investment in its domestic subsidiaries tax-free.
      A provision has not been made for U.S. or additional foreign taxes on
$20,990,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company plans to keep
these amounts permanently reinvested overseas.


                                       22
<PAGE>

6.    Commitments and Contingency

Operating Leases
      In addition to the related-party operating lease discussed in Note 8, the
Company and its subsidiaries lease various office and manufacturing facilities
under operating lease arrangements expiring from 2000 through 2068. The
accompanying statement of operations includes expenses from operating leases of
$4,270,000, $4,593,000, and $4,033,000 in 1999, 1998, and 1997, respectively.
Future minimum payments due under these leases as of January 1, 2000, are
$4,572,000 in 2000, $4,110,000 in 2001, $3,242,000 in 2002, $2,368,000 in 2003,
$1,879,000 in 2004, and $16,087,000 in 2005 and thereafter. Total future minimum
lease payments are $32,258,000.

Contingency
      See Note 13 for a discussion of litigation concerning the Company's merger
with Thermo Voltek.

7.    Short- and Long-term Obligations and Other Financing Arrangements

Long-term Obligations

(In thousands except per share amounts)                                                    1999      1998
------------------------------------------------------------------------------------- ---------- ---------

Noninterest-bearing Subordinated Convertible                                            $31,565    $31,565
 Debentures, due 2003, Convertible at $32.68 per Share
2 7/8% Subordinated Convertible Debentures, due 2003,                                    15,859     15,859
 Convertible at $14.928 per Share
Other                                                                                       254        176
                                                                                        -------    -------

                                                                                         47,678     47,600
Less:  Current Maturity of Long-term Obligations                                             79         48
                                                                                        -------    -------

                                                                                        $47,599    $47,552
                                                                                        =======    =======
      Thermo Cardiosystems has $58,011,000 and $70,000,000 principal amount of 4
3/4% subordinated convertible debentures outstanding at year-end 1999 and 1998,
respectively. These obligations will be assumed by a buyer or paid from existing
cash balances at Thermo Cardiosystems upon the sale of the business and are
included in net assets of discontinued operations. The interest cost of this
debt is included in the results of discontinued operations in the accompanying
statement of operations. No allocation of interest expense of debt of the
Company's continuing operations has been made to discontinued operations.
      In June 1998, the Company offered holders of its noninterest-bearing
subordinated convertible debentures due 2003, convertible at $32.68 per share,
the opportunity to exchange such debentures for newly issued 2 7/8% subordinated
convertible debentures due 2003, convertible at $14.928 per share. Holders of
$21,724,000 principal amount of outstanding debentures exchanged such debentures
for $15,859,000 principal amount of newly issued debentures. This transaction
resulted in an extraordinary gain of $3,076,000, net of taxes of $2,071,000, in
accordance with the provisions of EITF No. 96-19. In addition, during 1998, the
Company repurchased $11,711,000 principal amount of subordinated convertible
debentures for $8,951,000 in cash, resulting in an extraordinary gain of
$1,521,000, net of taxes of $1,007,000.
      The Company's convertible obligations are guaranteed on a subordinated
basis by Thermo Electron. The Company has agreed to reimburse Thermo Electron in
the event Thermo Electron is required to make a payment under its guarantee of
the Company's obligations.
      See Note 11 for fair value information pertaining to the Company's
long-term obligations.


                                       23
<PAGE>


7.    Short- and Long-term Obligations and Other Financing Arrangements (continued)

Short-term Obligations and Other Financing Arrangements
      The Company, along with certain European-based subsidiaries of Thermo
Electron, participates in a cash management arrangement in the Netherlands with
a wholly owned subsidiary of Thermo Electron. Under this arrangement,
participants' balances are pooled for interest calculation purposes. Interest
under this arrangement is based on Euro market rates. The Company has access to
a $2,280,000 line of credit under this arrangement. Thermo Electron guarantees
all of the obligations of each participant in this arrangement. At year-end 1999
and 1998, the Company had borrowed $698,000 and $791,000, respectively, under
this arrangement. The interest rate for this borrowing was 3.95% at year-end
1999.
      See Notes 1 and 3 for additional short-term obligations of the Company.
      Unused lines of credit, including amounts discussed in Note 1, were
$11,042,000 as of year-end 1999.

8.    Related-party Transactions

Corporate Services Agreement
      The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company pays Thermo Electron annually an amount equal to 0.8% of the
Company's revenues. The Company paid an amount equal to 0.8% and 1.0% of the
Company's revenues in 1998 and 1997, respectively. The fee is reviewed and
adjusted annually by mutual agreement of the parties. The corporate services
agreement is renewed annually but can be terminated upon 30 days' prior notice
by the Company or upon the Company's withdrawal from the Thermo Electron
Corporate Charter (the Thermo Electron Corporate Charter defines the
relationships among Thermo Electron and its majority-owned subsidiaries). For
these services the Company was charged $1,788,000, $1,669,000, and $2,002,000 in
1999, 1998, and 1997, respectively. Management believes that the service fees
charged by Thermo Electron and its subsidiaries are reasonable and that such
fees are representative of the expenses the Company would have incurred on a
stand-alone basis. For additional items such as employee benefit plans,
insurance coverage, and other identifiable costs, Thermo Electron charges the
Company based upon costs attributable to the Company.

Research and Development Agreements
      Pursuant to a subcontract entered into in October 1993, which has been
completed, Thermedics Detection performed research and development services for
Thermo Coleman Corporation, which is the prime contractor under a contract with
the U.S. Department of Energy. Thermo Coleman is a private subsidiary of Thermo
Electron. Thermo Coleman paid Thermedics Detection $2,000 and $533,000 for
services rendered in 1998 and 1997, respectively.
      In December 1997, Thermedics Detection entered into a funded research and
development arrangement with ThermoLase Corporation, a publicly traded,
majority-owned subsidiary of Thermo Electron, to develop a cryogenic cooling
device for ThermoLase. ThermoLase agreed to purchase five prototype devices for
an aggregate purchase price of $303,000. The Company shipped these devices in
1998.

Distribution Agreement
      Pursuant to an international distributorship agreement, Thermedics
Detection appointed Arabian Business Machines Co. (ABM) as its exclusive
distributor of its security instruments in certain Middle Eastern countries. ABM
is a member of The Olayan Group. Ms. Hutham S. Olayan, a director of Thermo
Electron, is the president and a director of Olayan America Corporation, another
member of The Olayan Group, which is indirectly controlled by Suliman S. Olayan,
Ms. Olayan's father. Revenues recorded under this agreement totaled $147,000,
$248,000, and $480,000 in 1999, 1998, and 1997, respectively.


                                       24
<PAGE>


8.    Related-party Transactions (continued)

Other Related-party Transactions
      Thermedics Detection purchases an X-ray source that is used as a component
in its InScan(R) systems from Trex Medical Corporation, a publicly traded,
majority-owned subsidiary of Thermo Electron. Thermedics Detection paid Trex
Medical $81,000, $406,000, and $285,000 for these products in 1999, 1998, and
1997, respectively.

Operating Lease
      In January 2000, Thermo Sentron began negotiating an operating lease
arrangement for office facilities with an affiliate of Thermo Electron that is
expected to expire in 2015. Future minimum lease payments under this lease are
expected to be $600,000 in each of the years 2000 through 2004, and $6,900,000
in 2005 and thereafter. Total minimum lease payments are expected to be
$9,900,000.

Management Contract
      In 1998 and 1997, one of the Company's executive employees allocated a
portion of his salary, bonus, and travel expenses for the time he devoted to
Thermo Electron and Thermo Instrument. The Company was reimbursed $270,000 and
$194,000 in 1998 and 1997, respectively, under this arrangement.

Cash Management
      The Company invests excess cash and borrows short-term funds under
arrangements with Thermo Electron as discussed in Notes 1 and 3.

Short-term Available-for-sale Investments
      As of December 28, 1996, the Company's short-term available-for-sale
investments included $1,937,000 (amortized cost of $1,846,000) of 6 1/2%
subordinated convertible debentures due 1997, which were purchased on the open
market. The debentures had a par value of $1,800,000 and were issued by Thermo
TerraTech Inc., a majority-owned subsidiary of Thermo Electron. The debentures
were sold in 1997, resulting in a gain of $247,000, included in gain on sale of
investments, net, in the accompanying statement of operations.

Due from Affiliate
      Due from affiliate in the accompanying 1998 balance sheet represents
subordinated convertible notes due to the Company from Thermo Voltek. The first
note is a $6,000,000 principal amount note bearing interest at 6.75%, due 2002
and convertible into shares of Thermo Voltek at $4.27 per share. The second note
is a $4,000,000 principal amount note bearing interest at 5.0%, due 2003 and
convertible into shares of Thermo Voltek at $3.78 per share. Thermo Voltek
repaid these amounts to the Company in December 1999.

Common Stock
      On February 5, 1998, the Company's Board of Directors voted to issue
4,880,533 shares of its common stock to Thermo Electron in exchange for
3,355,705 shares of common stock of Thermo Cardiosystems. At a meeting of the
Company's shareholders on March 31, 1999, the shareholders approved the issuance
of the 4,880,533 shares. For purposes of computing weighted average shares, the
shares are considered to be outstanding as of February 5, 1998. The shares of
common stock were exchanged at their respective fair market values as of
February 5, 1998.

9.    Common Stock

      At January 1, 2000, the Company had reserved 4,286,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans and
possible issuance upon conversion of its subordinated convertible debentures.


                                       25
<PAGE>

10.   Transactions in Stock of Subsidiary

      In March 1997, Thermedics Detection sold 2,671,292 shares of its common
stock in an initial public offering at $11.50 per share, for net proceeds of
$28,078,000, resulting in a gain of $17,075,000. The Company owned 94% of
Thermedics Detection's common stock prior to the offering and 83% of Thermedics
Detection's common stock subsequently.

11.   Fair Value of Financial Instruments

      The Company's financial instruments consist mainly of cash and cash
equivalents, advance to affiliate, available-for-sale investments, accounts
receivable, due from affiliate, note payable to parent company, short-term
obligations and current portion of long-term obligations, accounts payable, due
to parent company and affiliated companies, and long-term obligations. The
carrying amount of these financial instruments, with the exception of
available-for-sale investments, due from affiliate, and long-term obligations,
approximates fair value due to their short-term nature.
      Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on quoted
market prices (Note 2).
      The fair value of the Company's due from affiliate, based on quoted market
prices, was $16,938,000 in 1998.
      The fair value of long-term obligations was determined based on quoted
market prices. The carrying amount and fair value of the Company's long-term
obligations are:
</TABLE>
<TABLE>
<CAPTION>
<S>                                                             <C>           <C>     <C>           <C>
                                                                          1999                1998
                                                                -------------------   --------------------
                                                                Carrying      Fair    Carrying       Fair
(In thousands)                                                    Amount      Value     Amount      Value
-------------------------------------------------------------- ---------- ---------- ---------- ----------

Convertible Obligations                                          $47,424    $33,990    $47,424    $ 38,271
Other Long-term Obligations                                          175        175        128         128
                                                                 -------    -------    -------    --------

                                                                 $47,599    $34,165    $47,552    $ 38,399
                                                                 =======    =======    =======    ========

      The fair value of convertible obligations at year-end 1999 and 1998 is
below the carrying amount primarily due to the conversion price of the
convertible obligations exceeding the market price of the Company's common
stock.

12.   Business Segments and Geographical Information

      The Company's continuing operations conduct business in three reportable
segments. The Quality Assurance and Security Products segment develops,
manufactures, and markets high-speed detection and measurement instruments,
security products, and laboratory products. The Precision Weighing and
Inspection Equipment segment develops, manufactures, and markets high-speed
precision weighing and inspection equipment. The Respiratory Care Products
segment develops and manufactures equipment for lung-function,
cardio-respiratory, and sleep disorder diagnosis and monitoring and represents
Jaeger, acquired in July 1999. The Company also develops, manufactures, and
markets enteral nutrition-delivery systems and a line of medical-grade polymers
used in medical disposables and in nonmedical, industrial applications,
including safety glass and automotive coatings.
      The Company's Quality Assurance and Security Products segment derived
revenues from laboratory products of $47,178,000, $51,302,000, and $53,054,000
in 1999, 1998, and 1997, respectively, and revenues from detection instruments
of $26,406,000, $40,273,000, and $51,320,000 in 1999, 1998, and 1997,
respectively.
</TABLE>



                                       26
<PAGE>

12.   Business Segments and Geographical Information (continued)

      The results of the Heart Assist and Blood Testing Devices and Power
Electronics and Test Equipment segments have been classified as discontinued
operations as a result of the Company's decision to divest these businesses
(Note 15).

<TABLE>
<CAPTION>
<S>                                                                          <C>          <C>       <C>
(In thousands)                                                               1999         1998      1997
------------------------------------------------------ --------------- ----------- ------------ ----------

Business Segment Information
Revenues:
   Quality Assurance and Security Products                               $ 73,584    $  91,575    $104,374
   Precision Weighing and Inspection Equipment                            107,786       98,763      78,695
   Respiratory Care Products                                               22,015            -           -
   Other                                                                   20,118       18,306      17,115
                                                                         --------    ---------    --------

                                                                         $223,503    $ 208,644    $200,184
                                                                         ========    =========    ========

Income from Continuing Operations Before Provision for Income Taxes, Minority
 Interest, and Extraordinary Item:
   Quality Assurance and Security Products                               $  5,045    $  12,935    $ 20,436
   Precision Weighing and Inspection Equipment                             10,703        8,881       8,711
   Respiratory Care Products                                                  543            -           -
   Other                                                                    4,142        4,043       3,679
   Corporate (a)                                                           (2,320)      (1,521)     (2,104)
                                                                         --------    ---------    --------

   Total operating income                                                  18,113       24,338      30,722
   Interest and other income, net                                           2,283        3,954      23,103
                                                                         --------    ---------    --------

                                                                         $ 20,396    $  28,292    $ 53,825
                                                                         ========    =========    ========

Total Assets:
   Quality Assurance and Security Products                               $136,026    $132,971     $146,224
   Precision Weighing and Inspection Equipment                            136,002     140,164      115,101
   Respiratory Care Products                                               57,016           -            -
   Other                                                                   13,257      12,893       10,525
   Corporate (b)                                                           25,197      45,286       37,161
   Discontinued operations (c)                                             74,311      77,169       71,168
                                                                         --------    --------     --------

                                                                         $441,809    $408,483     $380,179
                                                                         ========    ========     ========

Depreciation and Amortization:
   Quality Assurance and Security Products                               $  3,260    $  3,326     $  3,325
   Precision Weighing and Inspection Equipment                              3,490       2,894        1,905
   Respiratory Care Products                                                1,474           -            -
   Other                                                                      906         957          973
                                                                         --------    --------     --------

                                                                         $  9,130    $  7,177     $  6,203
                                                                         ========    ========     ========



                                       27
<PAGE>


12.   Business Segments and Geographical Information (continued)

(In thousands)                                                               1999         1998      1997
------------------------------------------------------ --------------- ----------- ------------ ----------

Capital Expenditures:
   Quality Assurance and Security Products                               $  1,436    $   2,775    $  1,887
   Precision Weighing and Inspection Equipment                              1,536        1,043         708
   Respiratory Care Products                                                1,185            -           -
   Other                                                                      689        1,222       1,223
                                                                         --------    ---------    --------

                                                                         $  4,846    $   5,040    $  3,818
                                                                         ========    =========    ========

Geographical Information
Revenues (d):
 United States                                                           $143,767    $148,976     $151,994
 England                                                                   36,393      27,533       13,783
 Germany                                                                   23,434       7,418        6,698
 Other                                                                     35,653      39,666       40,488
 Transfers among geographical areas (e)                                   (15,744)    (14,949)     (12,779)
                                                                         --------    --------     --------

                                                                         $223,503    $208,644     $200,184
                                                                         ========    ========     ========

Long-lived Assets (f):
 United States                                                           $  9,368    $  9,231     $  7,180
 England                                                                    1,729       1,828          944
 Germany                                                                    2,572         154          104
 Other                                                                      1,417       1,121        1,193
                                                                         --------    --------     --------

                                                                         $ 15,086    $ 12,334     $  9,421
                                                                         ========    ========     ========

Export Revenues Included in United States Revenues Above (g):            $ 35,774    $ 50,005     $ 56,974
                                                                         ========    ========     ========

(a) Primarily general and administrative expenses and, in 1999, unusual costs of $0.8 million.
(b) Primarily cash, cash equivalents, and short-term available-for-sale investments.
(c) Represents assets of discontinued operations, net of liabilities.
(d) Revenues are attributed to countries based on selling location.
(e) Transfers among geographical areas are accounted for at prices that are representative of
    transactions with unaffiliated parties.
(f) Includes property, plant, and equipment, net, and other long-term tangible assets.
(g) In general, export revenues are denominated in U.S. dollars.

13.   Merger with Thermo Voltek

      In March 1999, the Company acquired, through a merger, all of the
outstanding shares of Thermo Voltek that it did not previously own, other than
the shares owned by Thermo Electron Corporation. The total cost of the
acquisition is expected to be $25,732,000, including related expenses and the
repayment of Thermo Voltek's $5,250,000 principal amount of 3 3/4% subordinated
convertible debentures, which became due and payable at the election of the
holder following the merger, and Thermo Voltek's outstanding stock options. As
of January 1, 2000, the Company had


                                       28
<PAGE>

13.   Merger with Thermo Voltek (continued)

repaid $5,080,000 principal amount of Thermo Voltek's debentures. The Thermo
Voltek stock options were converted into stock options that are exercisable into
619,819 shares of Company common stock at a weighted average price of $6.33 per
share, with an aggregate value of $703,000 as of the date of the acquisition.
Subsequent to this transaction, the Company and Thermo Electron owned
approximately 97% and 3%, respectively, of the outstanding common stock of
Thermo Voltek. The cost of the acquisition exceeded the estimated fair value of
the incremental net assets by $10,050,000. Pro forma data is not presented since
the acquisition of the minority interest of Thermo Voltek was not material to
the Company's results of operations.
      In late March and early April 1998, four putative class actions were filed
in the Court of Chancery of the State of Delaware in and for New Castle County
by shareholders of Thermo Voltek, which were consolidated under the caption In
re Thermo Voltek Corp. Shareholders Litigation, Consolidated C.A. 16287 (the
Action) in October 1998. The complaint in the Action names the Company, Thermo
Voltek, Thermo Electron, and directors of Thermo Voltek as defendants and
alleges, among other things, that Thermo Voltek's directors violated the
fiduciary duties of loyalty, good faith, and fair dealing that they owed to all
shareholders of Thermo Voltek other than the named defendants and the affiliates
of the named defendants because the proposed price of $7.00 per share to be paid
to Thermo Voltek's shareholders under the terms of the proposed Merger Agreement
was allegedly unfair and grossly inadequate. The complaints further allege that
the Company, Thermo Voltek, and Thermo Electron have violated their alleged
fiduciary duty of fair dealing by proposing the merger transaction at the time.
The parties are currently conducting discovery. Due to the inherent uncertainty
of litigation, the outcome of this matter cannot be estimated. The Company
expects, however, that any resolution will not materially affect its future
results of operations or financial position.

14.   Earnings (Loss) per Share

      Basic and diluted earnings (loss) per share were calculated as follows:

(In thousands except per share amounts)                                        1999        1998      1997
---------------------------------------------------------------- -------- ---------- ----------- ---------


Basic
Income from Continuing Operations                                           $ 10,578    $ 14,939    $36,861
Income from Discontinued Operations                                            3,723       4,074      4,631
Provision for Loss on Disposal of Discontinued                               (27,522)          -          -
Operations
Extraordinary Item                                                                 -       4,597          -
                                                                            --------    --------    -------

Net Income (Loss)                                                           $(13,221)   $ 23,610    $41,492
                                                                            --------    --------    -------

Weighted Average Shares                                                       41,836      41,221     36,700
                                                                            --------    --------    -------

Basic Earnings (Loss) per Share:
 Continuing operations                                                      $    .25    $    .36    $  1.00
 Discontinued operations                                                        (.57)        .10        .13
 Extraordinary item                                                                -         .11          -
                                                                            --------    --------   --------

                                                                            $   (.32)   $    .57    $  1.13
                                                                            ========    ========    =======



                                       29
<PAGE>


14.   Earnings (Loss) per Share (continued)

(In thousands except per share amounts)                                        1999        1998      1997
---------------------------------------------------------------- -------- ---------- ----------- ---------

Diluted
Income from Continuing Operations                                           $ 10,578    $ 14,939    $36,861
Income from Discontinued Operations                                            3,723       4,074      4,631
Provision for Loss on Disposal of Discontinued                               (27,522)          -          -
Operations
Extraordinary Item                                                                 -       4,597          -
                                                                            --------    --------    -------

Net Income (Loss)                                                            (13,221)     23,610     41,492
Effect of:
 Convertible obligations                                                           -         138          -
 Majority-owned subsidiaries' dilutive securities -                              (30)         (2)        (5)
   continuing operations
 Majority-owned subsidiaries' dilutive securities -                               (5)        (21)       (34)
   discontinued operations                                                  --------    --------    -------

Income (Loss) Available to Common Shareholders, as Adjusted                 $(13,256)   $ 23,725    $41,453
                                                                            --------    --------    -------

Weighted Average Shares                                                       41,836      41,221     36,700
Effect of:
 Convertible obligations                                                         966       1,928      1,989
 Stock options                                                                    53          93        222
                                                                            --------    --------    -------

Weighted Average Shares, as Adjusted                                          42,855      43,242     38,911
                                                                            --------    --------    -------

Diluted Earnings (Loss) per Share:
 Continuing operations                                                      $    .25    $    .35    $   .95
 Discontinued operations                                                        (.56)        .10        .12
 Extraordinary item                                                                -         .10          -
                                                                            --------    --------    -------

                                                                            $   (.31)   $    .55    $  1.07
                                                                            ========    ========    =======

      Options to purchase 1,710,000, 1,175,000, and 422,000 shares of common
stock were not included in the computation of diluted earnings (loss) per share
for 1999, 1998, and 1997, respectively, because their effect would have been
antidilutive due to the options' exercise prices exceeding the average market
price for the common stock. In addition, the computation of diluted earnings per
share for 1999 excludes the effect of assuming the conversion of the Company's
$15,859,000 principal amount of 2.875% subordinated convertible debentures,
convertible at $14.93 per share, because the effect would be antidilutive.

</TABLE>

                                       30
<PAGE>

15.   Unaudited Quarterly Information

(In thousands except per share amounts)
<TABLE>
<CAPTION>
<S>                                                              <C>    <C>          <C>          <C>
1999                                                             First  Second (a)   Third (b)    Fourth
----------------------------------------------------------- ----------- ----------- ----------- ---------

Revenues                                                      $ 51,960    $ 51,459    $ 55,876    $64,208
Gross Profit                                                    23,942      23,287      23,134     29,394
Income from Continuing Operations Before Extraordinary           1,692       2,930         930      5,026
Item
Net Income (Loss)                                                2,582     (25,297)      2,614      6,880
Earnings per Share from Continuing Operations
 Before Extraordinary Item:
   Basic                                                           .04         .07         .02        .12
   Diluted                                                         .04         .07         .02        .12
Earnings (Loss) per Share:
   Basic                                                           .06       (.61)         .06        .16
   Diluted                                                         .06       (.58)         .06        .16

1998                                                             First  Second (c)       Third    Fourth
----------------------------------------------------------- ----------- ----------- ----------- ---------

Revenues                                                      $ 47,765    $ 49,937    $ 57,113    $53,829
Gross Profit                                                    22,202      23,750      25,282     23,188
Income from Continuing Operations Before Extraordinary           3,795       3,875       3,711      3,558
Item
Income Before Extraordinary Item                                 5,409       5,274       4,278      4,052
Net Income (d)                                                   6,573       8,707       4,278      4,052
Earnings per Share from Continuing Operations
 Before Extraordinary Item:
   Basic                                                           .10         .09         .09        .09
   Diluted                                                         .09         .09         .09        .08
Earnings per Share:
   Basic                                                           .16         .21         .10        .10
   Diluted                                                         .16         .20         .10        .09

(a) Reflects $0.3 million and $32.5 million of restructuring and related costs
    from continuing operations and discontinued operations, respectively.
(b) Reflects the July 1999 acquisition of Jaeger.
(c) Reflects the June 1998 acquisition of the product-monitoring businesses.
(d) Reflects the effect of net of tax extraordinary gains of $1,164,000 and
    $3,433,000 in the first and second quarters, respectively, which increased
    basic earnings per share by $.03 and $.08 in the first and second quarters,
    respectively, and diluted earnings per share by $.03 and $.07 in the first
    and second quarters, respectively.


                                       31
<PAGE>

16.   Subsequent Events

Proposed Reorganization
      Thermo Electron has announced a proposed reorganization involving certain
of Thermo Electron's subsidiaries, including the Company. Under this plan, the
Company would take its Thermo Sentron and Thermedics Detection subsidiaries
private and seek a buyer for its Thermo Cardiosystems subsidiary. In addition,
the Company would will also be taken private by Thermo Electron.
      The Company has commenced cash tender offers of $15.50 per share for
Thermo Sentron and $8.00 for Thermedics Detection in order to bring its equity
ownership in each of these companies, when combined with Thermo Electron's
equity interest in each, to at least 90%. If these tender offers are successful,
each of these companies would then be taken private by the Company through a
short-form merger at the same cash prices as the tender offers. As of January 1,
2000, the Company owned approximately 74.2% of Thermo Sentron and 83.6% of
Thermedics Detection, respectively, and Thermo Electron owned approximately
12.4% of Thermo Sentron and 5.3% of Thermedics Detection, respectively. If the
Company and Thermo Electron successfully obtain ownership of at least 90% of the
outstanding Thermo Sentron and Thermedics Detection shares, the Company expects
to complete these transactions by the end of the second quarter of 2000.
      Thermo Electron has announced that it will conduct an exchange offer for
any and all of the outstanding shares of Company common stock held by public
shareholders. In the exchange offer, holders of Company common stock will
receive shares of Thermo Electron common stock in exchange for their shares of
the Company. On March 8, 2000, Thermo Electron announced the proposed exchange
ratio of 0.45 shares of Thermo Electron common stock for each share of Company
common stock. Thermo Electron, which owned approximately 75.7% of the
outstanding shares of Company common stock at January 1, 2000, will condition
the exchange offer on receiving acceptances from holders of enough shares so
that, when combined with its current share ownership, Thermo Electron's
ownership reaches at least 90%. If Thermo Electron achieves this 90% ownership
threshold, it would acquire all remaining outstanding shares of the Company
through a short-form merger. In the short-form merger, minority shareholders who
do not participate in the exchange offer would also receive shares of Thermo
Electron common stock in exchange for their Company common stock at the same
ratio. Thermo Electron plans to conduct the exchange offer for Company common
stock during the second quarter of 2000. If Thermo Electron successfully obtains
at least 90% of the outstanding Company shares, it expects to complete the
spin-in of the Company by the end of the second quarter of 2000.
      In addition, obligations under the Company's 2.875% subordinated
convertible debentures due June 1, 2003, and its noninterest-bearing
subordinated convertible debentures due June 1, 2003, would be assumed by Thermo
Electron in the short-form merger, and the debentures would be convertible into
Thermo Electron common stock.
      The tender offers and exchange offer will require review by the Securities
and Exchange Commission of necessary filings. The exchange offer and short-form
merger involving the Company would not require Company board or shareholder
approval.
      The Company incurred $0.8 million of unusual costs in 1999 in connection
with reorganization transactions, primarily investment banking fees.

                                       32
<PAGE>

16.   Subsequent Events (continued)

Discontinued Operations
      In May 1999, the Company announced its intention to sell Thermo Voltek,
which represents its Power Electronics and Test Equipment segment. In January
2000, Thermo Electron announced a reorganization plan under which it intends to
sell Thermo Cardiosystems, which represents the Company's Heart Assist and Blood
Testing Devices segment. In accordance with the provisions of APB No. 30
concerning reporting the effects of disposal of a segment of a business, the
Company classified the results of the Heart Assist and Blood Testing Devices and
Power Electronics and Test Equipment segments as discontinued in the
accompanying statement of operations. In addition, the net assets of the Heart
Assist and Blood Testing Devices and Power Electronics and Test Equipment
segments were classified as net assets of discontinued operations in the
accompanying balance sheet, and primarily consisted of inventories, accounts
receivable, and machinery and equipment, net of certain liabilities, principally
subordinated convertible debentures.
      Summary operating results of the Heart Assist and Blood Testing Devices
and Power Electronics and Test Equipment segments were as follows:
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                            <C>         <C>       <C>
(In thousands)                                                                 1999        1998      1997
------------------------------------------------------------------------- ---------- ----------- ---------

Revenues                                                                   $107,329   $ 104,788   $107,482
Costs and Expenses                                                           96,782      92,981     92,410
                                                                           --------   ---------   --------

Income from Discontinued Operations Before Income                            10,547      11,807     15,072
 Taxes and Minority Interest
Provision for Income Taxes                                                    3,900       4,624      5,894
Minority Interest Expense                                                     2,924       3,109      4,547
                                                                           --------   ---------   --------

Income from Discontinued Operations                                        $  3,723   $   4,074   $  4,631
                                                                           ========   =========   ========

      In 1999, the Company provided $27,522,000, net of a tax benefit of
$2,583,000, for the estimated loss on disposal of the Power Electronics and Test
Equipment segment. The Company expects the sale of the Heart Assist and Blood
Testing Devices segment to result in a gain. The Company expects to complete the
sale of the Power Electronics and Test Equipment segment in the first half of
2000 and the Heart Assist and Blood Testing Devices segment by the end of 2000.




                                       33
<PAGE>


Thermedics Inc.                                                                  1999 Financial Statements

                    Report of Independent Public Accountants

To the Shareholders and Board of Directors of Thermedics Inc.:

      We have audited the accompanying consolidated balance sheet of Thermedics
Inc. (a Massachusetts corporation and 76%-owned subsidiary of Thermo Electron
Corporation) and subsidiaries as of January 1, 2000, and January 2, 1999, the
related consolidated statements of operations, cash flows, and comprehensive
income and shareholders' investment for each of the three years in the period
ended January 1, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermedics
Inc. and subsidiaries as of January 1, 2000, and January 2, 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended January 1, 2000, in conformity with generally accepted
accounting principles.



                                                       Arthur Andersen LLP



Boston, Massachusetts
February 10, 2000 (except with respect to the matters
discussed in Note 16, as to which the date is March 8, 2000)


                                       34
<PAGE>

Thermedics Inc.                                                                  1999 Financial Statements

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

      Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed immediately after this Management's
Discussion and Analysis of Financial Condition and Results of Operations under
the heading "Forward-looking Statements."

Overview

      The Company's continuing operations conduct business in three reportable
segments: Quality Assurance and Security Products (Quality Assurance), Precision
Weighing and Inspection Equipment (Inspection Equipment), and Respiratory Care
Products. The Quality Assurance segment consists of the Company's Thermedics
Detection Inc. subsidiary, which develops, manufactures, and markets high-speed
detection and measurement instruments used in a variety of on-line industrial
process applications, security applications, and laboratory analyses. The
Inspection Equipment segment includes the Company's Thermo Sentron Inc.
subsidiary, which develops, manufactures, and markets high-speed
precision-weighing and inspection equipment for industrial production and
packaging lines. In June 1998, Thermo Sentron acquired the three businesses that
constituted the product-monitoring group of Graseby Limited (the
product-monitoring businesses), a subsidiary of Smiths Industries plc (Note 3).
      The Respiratory Care Products segment consists of Erich Jaeger GmbH, which
was acquired by the Company in July 1999 (Note 3). Jaeger, based in Germany,
develops and manufactures equipment for lung-function, cardio-respiratory, and
sleep disorder diagnosis and monitoring.
      The Company also develops and manufactures enteral nutrition-delivery
systems and a line of medical-grade polymers used in medical disposables and in
nonmedical, industrial applications, including safety glass and automotive
coatings.
      A significant amount of the Company's revenues is derived from sales of
products outside of the United States, through export sales and sales by the
Company's foreign subsidiaries. The Company expects an increase in the
percentage of revenues derived from international operations. During 1999, the
Company had exports from its U.S. and foreign operations to Asia of
approximately 6% of total revenues. Exports to Asia in 1999 were primarily to
Japan, South Korea, and China. Asia experienced a severe economic crisis, which
was characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's export sales were adversely affected by the unstable
economic conditions in Asia in 1998 and early 1999. Although the Company seeks
to charge its customers in the same currency as its operating costs, the
Company's financial performance and competitive position can be affected by
currency exchange rate fluctuations between the U.S. dollar and foreign
currencies. Where appropriate, the Company uses forward contracts to reduce its
exposure to currency fluctuations.
      Thermo Electron Corporation has announced a proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the Company (Note
16). Under this plan, the Company would take its Thermo Sentron and Thermedics
Detection subsidiaries private, and in turn would be taken private and become a
wholly owned subsidiary of Thermo Electron. In addition, Thermo Electron has
announced that the Company will divest of its Thermo Cardiosystems Inc. and
Thermo Voltek Corp. subsidiaries, which represent its Heart Assist and Blood
Testing Devices and Power Electronics and Test Equipment subsidiaries,
respectively.



                                       35
<PAGE>

Results of Operations

1999 Compared With 1998
      Total revenues were $223.5 million in 1999, compared with $208.6 million
in 1998. Revenues increased by $22.0 million due to the inclusion of revenues
from Jaeger, acquired in July 1999, which represents the Respiratory Care
Products segment. Revenues from the Inspection Equipment segment increased to
$107.8 million in 1999 from $98.8 million in 1998. Revenues increased by $15.9
million as a result of the acquisition of the product-monitoring businesses by
Thermo Sentron in June 1998. This increase was offset in part by decreases in
revenues of $5.2 million from existing businesses, primarily due to lower demand
in Europe, and $1.7 million due to the unfavorable effects of currency
translation as a result of the strengthening in value of the U.S. dollar
relative to currencies in foreign countries in which Thermo Sentron operates.
      Revenues from the Quality Assurance segment decreased to $73.6 million in
1999 from $91.6 million in 1998. Thermedics Detection's industrial process
instruments revenues decreased by $9.5 million, primarily due to lower revenues
from ALEXUS(R) systems and near-infrared analyzers. This decline was due in part
to changes in the process of recycling plastic containers in Europe. Previously,
such containers had been sanitized and reused, a process in which recyclers used
Thermedics Detection's ALEXUS systems. Recent recycling trends there involve
melting and reforming plastic returnables. Revenues from EGIS(R)
explosives-detection systems and related services decreased $4.5 million,
primarily due to lower shipments of security systems. During the first quarter
of 1998, Thermedics Detection completed shipments under a contract to provide
security systems to the FAA. Revenues under the contract totaled $2.6 million
during 1998. In addition, revenues from Thermedics Detection's laboratory
products decreased $4.1 million, primarily due to lower worldwide demand for
titration and electrochemistry products and the expiration of two private label
agreements.
      The Company's backlog, excluding acquisitions, decreased to $16.9 million
at year-end 1999 from $22.6 million at year-end 1998, primarily due to lower
demand at Thermo Sentron and Thermedics Detection.
      The gross profit margin was 45% in 1999 and 1998. The gross profit margin
in the Quality Assurance segment decreased to 52% in 1999 from 54% in 1998,
primarily due to provisions of $1.9 million for inventories deemed in excess
based on recent demand. To a lesser extent, the gross profit margin decreased
due to a charge to expense of $0.9 million related to the sale of inventory
revalued at the time Jaeger was acquired. These decreases were offset by an
increase in the gross profit margin in the Inspection Equipment segment to 40%
in 1999 from 38% in 1998, primarily due to manufacturing efficiencies achieved
as a result of cost-reduction measures at the product-monitoring businesses and,
to a lesser extent, improved margins from sales of Thermo Sentron's
packaged-goods products in North America.
      Selling, general, and administrative expenses increased to $66.5 million
in 1999 from $57.2 million in 1998, primarily due to the inclusion of $6.6
million of expenses from Jaeger. Selling, general, and administrative expenses
as a percentage of revenues increased to 30% in 1999 from 27% in 1998, primarily
due to decreased revenues in the Quality Assurance segment and, to a lesser
extent, the inclusion of higher selling, general, and administrative expenses as
a percentage of revenues at Jaeger.
      Research and development expenses increased to $14.3 million in 1999 from
$12.9 million in 1998, primarily due to the inclusion of $2.5 million of
expenses at Jaeger, offset in part by a $1.6 million decrease in expenses at
Thermedics Detection. This decrease was a result of efforts to reduce costs and
focus on the development of near-term commercially viable products.
      The Company recorded $0.8 million of unusual costs in 1999, representing
cash costs incurred in connection with reorganization transactions, primarily
investment banking fees.
      Interest income decreased to $3.9 million in 1999 from $5.6 million in
1998, primarily due to lower average invested balances as a result of cash
expended for the acquisition of the product-monitoring business in June 1998,
the repurchase of securities of the Company and certain of its majority-owned
subsidiaries in 1998, and the repayment of short- and long-term obligations.
Interest expense increased to $2.6 million in 1999 from $1.8 million in 1998,

                                       36
<PAGE>


1999 Compared With 1998 (continued)
primarily as a result of interest expense on borrowings used to partially
finance the acquisition of Jaeger and, to a lesser extent, the Company's
issuance of $15.9 million principal amount of 2.875% subordinated convertible
debentures in exchange for $21.7 million principal amount of noninterest-bearing
subordinated convertible debentures in July 1998.
      Equity in earnings of unconsolidated subsidiaries in the accompanying
statement of operations represents the Company's proportionate share of earnings
from joint ventures. Other income in 1999 represents foreign currency
translation gains arising from transactions denominated in German marks.
      The effective tax rate was 36% and 38% in 1999 and 1998, respectively. The
effective tax rate decreased in 1999 primarily due to an income tax credit of
$1.2 million recorded by the Company as a result of a favorable resolution of a
claim for prior-year research and development tax credits. The effective tax
rate exceeded the statutory federal income tax rate in 1998 primarily due to the
impact of state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies.
      Minority interest expense was relatively unchanged at $2.5 million in 1999
and $2.7 million in 1998.
      In accordance with Accounting Principles Board Opinion No. 30 concerning
reporting the effect of disposal of a segment of a business, the results of the
Company's Heart Assist and Blood Testing Devices and Power Electronics and Test
Equipment segments have been classified as discontinued operations in the
accompanying statement of operations (Note 16). Income from discontinued
operations was $3.7 million and $4.1 million in 1999 and 1998, respectively. In
addition, the Company provided $27.5 million, net of tax, for the estimated loss
on disposal of the Power Electronics and Test Equipment segment. The Company is
not currently aware of any known trends, events, or uncertainties involving
discontinued operations that it expects will materially affect its results of
operations, financial condition, or liquidity through the date that such
operations are disposed.
      In 1998, the Company recorded a gain of $4.6 million, net of related
income taxes of $3.1 million, on the repurchase and exchange of subordinated
convertible debentures (Note 7).

1998 Compared With 1997
      Total revenues increased to $208.6 million in 1998 from $200.2 million in
1997. Revenues from the Inspection Equipment segment increased to $98.8 million
in 1998 from $78.7 million in 1997. Revenues increased $24.6 million as a result
of acquisitions made by Thermo Sentron in 1998 and 1997. This increase was
offset in part by decreases in revenues of $2.3 million primarily due to lower
demand in the United Kingdom and $2.2 million due to the impact of a stronger
U.S. dollar relative to currencies in foreign countries in which Thermo Sentron
operates.
      Revenues from the Quality Assurance segment decreased to $91.6 million in
1998 from $104.4 million in 1997. Revenues from Thermedics Detection's
industrial process instruments and related services decreased by $9.1 million,
primarily due to lower revenues from ALEXUS and near-infrared analyzers, offset
in part by an increase in revenues from Thermedics Detection's InScan(R) product
line. Revenues in 1997 included $6.6 million from a mandated ALEXUS product-line
upgrade of The Coca-Cola Company's existing installed base. Revenues from EGIS
explosives-detection systems and related services decreased to $8.2 million in
1998 from $10.3 million in 1997, primarily due to lower shipments of security
systems. Thermedics Detection completed shipments under a contract with the FAA
during 1998, which contributed $2.6 million of revenues in 1998.
      The gross profit margin decreased to 45% in 1998 from 48% in 1997. The
gross profit margin at the Quality Assurance segment decreased to 54% in 1998
from 56% in 1997, primarily due to lower revenues and, to a lesser extent,
changes in product mix. The gross profit margin at the Inspection Equipment
segment decreased to 38% in 1998 from 40% in 1997, primarily due to the
inclusion of lower-margin revenues from the product-monitoring businesses.
      Selling, general, and administrative expenses increased to $57.2 million
in 1998 from $53.8 million in 1997, primarily due to the inclusion of $6.3
million of expenses from the product-monitoring businesses. This increase was
offset in part by a $1.8 million decrease in selling, general, and
administrative expenses at Thermedics Detection, primarily due to a reduction in
selling expenses in an effort to reduce costs. Selling, general, and
administrative expenses as a percentage of revenues were 27% in 1998 and 1997.


                                       37
<PAGE>


1998 Compared With 1997 (continued)
      Research and development expenses increased to $12.9 million in 1998 from
$12.0 million in 1997, primarily due to the inclusion of expenses from the
product-monitoring businesses.
      Interest income decreased to $5.6 million in 1998 from $6.2 million in
1997, primarily due to lower average invested balances as a result of cash
expended for the acquisition of the product-monitoring businesses and repurchase
of securities of the Company and certain of its majority-owned subsidiaries.
Interest expense increased to $1.8 million in 1998 from $0.6 million in 1997,
primarily as a result of interest expense on borrowings from Thermo Electron
Corporation used to partially finance the acquisition of the product-monitoring
businesses.
      As a result of the sale of stock by Thermedics Detection, the Company
recorded a gain of approximately $17.1 million in 1997 (Note 10). This gain
represents an increase in the Company's proportionate share of the subsidiary's
equity and is classified as gain on issuance of stock by subsidiary in the
accompanying statement of operations.
      The effective tax rates were 38% and 26% in 1998 and 1997, respectively.
The effective tax rate in 1998 exceeded the statutory federal income tax rate
primarily due to the impact of state income taxes and nondeductible amortization
of cost in excess of net assets of acquired companies. The effective tax rate in
1997 was below the statutory federal income tax rate primarily due to the
nontaxable gain on issuance of stock by subsidiary, offset in part by the impact
of state income taxes and nondeductible amortization of cost in excess of net
assets of acquired companies. Excluding the nontaxable gain in 1997, the
effective tax rate was 37%.
      Minority interest expense decreased to $2.7 million in 1998 from $3.2
million in 1997, primarily due to lower earnings at Thermo Sentron and
Thermedics Detection, offset in part by the Company's decreased ownership of
Thermedics Detection as a result of its offering of common stock.
      Income from discontinued operations decreased to $4.1 million in 1998 from
$4.6 million in 1997, primarily due to lower revenues at Thermo Voltek.
      In 1998, the Company recorded a gain of $4.6 million, net of related
income taxes of $3.1 million, on the repurchase and exchange of subordinated
convertible debentures.

Liquidity and Capital Resources

      Consolidated working capital was $153.4 million at January 1, 2000,
compared with $183.8 million at January 2, 1999. Cash, cash equivalents, and
short-term available-for-sale investments were $34.5 million at January 1, 2000,
compared with $82.0 million at January 2, 1999. Of the $34.5 million balance at
January 1, 2000, $20.3 million was held by the Company's majority-owned
subsidiaries, and the remainder by the Company and its wholly owned
subsidiaries. Also, at January 1, 2000, the Company had $46.3 million invested
in an advance to affiliate. Of the $46.3 million balance at January 1, 2000,
$34.2 million was advanced by the Company's majority-owned subsidiaries and the
remainder by the Company and its wholly owned subsidiaries. Prior to the use of
new cash management arrangements between the Company and Thermo Electron
Corporation, which became effective in 1999, such amounts were included in cash
and cash equivalents.
      During 1999, $25.2 million of cash was provided by operating activities,
including $16.7 million by the Company's continuing operations. Cash provided by
the Company's continuing operations was offset in part by $6.5 million of cash
used to fund an increase in accounts receivable, primarily due to the timing of
shipments at Jaeger, and $3.6 million of cash used to fund a decrease in other
current liabilities, primarily accrued payroll and employee benefits and accrued
interest.
      Excluding available-for-sale investments and advance to affiliate
activity, the Company's continuing operations' primary investing activity in
1999 was the acquisition of Jaeger (Note 3) for $28.4 million in cash, net of
cash acquired, and the assumption of debt. In addition, the Company acquired,
through a merger, all of the outstanding shares of Thermo Voltek that the
Company did not previously own, other than the shares owned by Thermo Electron,
for approximately $20.5 million in cash. The Company also expended $4.8 million
for purchases of property, plant, and equipment during 1999. Cash of $10.0
million was provided by the repayment to the Company of borrowings by Thermo
Voltek. During 2000, the Company expects to make capital expenditures of
approximately $5.3 million.


                                       38
<PAGE>



Liquidity and Capital Resources (continued)

      During 1999, the Company's financing activities of continuing operations
provided cash of $24.2 million. The Company borrowed $40.2 million from wholly
owned subsidiaries of Thermo Electron to finance the acquisition of Jaeger and
refinance $9.7 million of Jaeger's third-party borrowings. Cash of $8.0 million
was used to partially repay a short-term obligation to Thermo Electron.
      Thermo Electron and its wholly owned subsidiary have indicated their
willingness to require payment of the Company's short-term obligations of $11.0
million and $30.5 million, respectively, only to the extent that the Company's
cash flows permit. The Company and Thermo Electron have entered into an
agreement under which Thermo Electron has agreed to provide the Company with a
$20 million short-term line of credit to partially fund the spin-ins of Thermo
Sentron and Thermedics Detection. The Company believes that its existing
resources, in addition to its credit line from Thermo Electron, are sufficient
to meet the capital requirements of its existing operations for the foreseeable
future.

Market Risk

      The Company is exposed to market risk from changes in foreign currency
exchange rates, interest rates, and equity prices, which could affect its future
results of operations and financial condition. The Company manages its exposure
to these risks through its regular operating and financing activities.

Foreign Currency Exchange Rates
      The Company generally views its investment in foreign subsidiaries with a
functional currency other than the Company's reporting currency as long-term.
The Company's investment in foreign subsidiaries is sensitive to fluctuations in
foreign currency exchange rates. The functional currencies of the Company's
foreign subsidiaries are principally denominated in British pounds sterling and
German deutsche marks. The effect of a change in foreign exchange rates on the
Company's net investment in foreign subsidiaries is reflected in the
"Accumulated other comprehensive items" component of shareholders' investment. A
10% depreciation in year-end 1999 and 1998 functional currencies, relative to
the U.S. dollar, would result in a $8.8 million and $8.0 million reduction of
shareholders' investment, respectively.

Interest Rates
      Certain of the Company's short- and long-term available-for-sale
investments and subordinated convertible debentures are sensitive to changes in
interest rates. Interest rate changes would result in a change in the fair value
of these financial instruments due to the difference between the market interest
rate and the rate at the date of purchase or issuance of the financial
instrument. A 10% decrease in year-end 1999 and 1998 market interest rates would
result in a negative impact of $0.9 million and $1.6 million on the net fair
value of the Company's interest-sensitive financial instruments.

Equity Prices
      The Company's subordinated convertible debentures are sensitive to
fluctuations in the price of Company or subsidiary common stock into which the
obligations are convertible. Changes in equity prices would result in changes in
the fair value of the subordinated convertible debentures due to the difference
between the current market price and the market price at the date of issuance of
the financial instrument. A 10% increase in the year-end 1999 and 1998 market
equity prices would result in a negative impact of $0.9 million and $1.5
million, respectively, on the fair value of the Company's subordinated
convertible debentures.


                                       39
<PAGE>

Year 2000

      As of the date of this report, the Company has completed its year 2000
initiatives, which included: (i) testing and upgrading significant information
technology systems and facilities; (ii) testing and developing upgrades, where
necessary, for the Company's current products and certain discontinued products;
(iii) assessing the year 2000 readiness of its key suppliers, vendors, and
customers; and (iv) developing contingency plans.
      As a result of completing these initiatives, the Company believes that all
of its material information technology systems, critical non-information
technology systems, and its material products are year 2000 compliant. The
Company believes that all of the material products that it currently
manufactures and sells are year 2000 compliant or are not date sensitive. In
addition, the Company is not aware of any significant supplier or vendor that
has experienced material disruption due to year 2000 issues. The Company has
also developed a contingency plan to allow its primary business operations to
continue despite disruptions due to year 2000 problems, if any, that might yet
arise in the future. The costs incurred to date by the Company in connection
with the year 2000 issue have not been material.
      While the Company to date has been successful in minimizing negative
consequences arising from year 2000 issues, there can be no assurance that in
the future the Company's business operations or financial condition may not be
impacted by year 2000 problems, such as increased warranty claims, vendor and
supplier disruptions, or litigation relating to year 2000 issues.



                                       40
<PAGE>

Thermedics Inc.                                                                  1999 Financial Statements

                           Forward-looking Statements

      In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in 1999 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.

      Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of businesses and technologies that complement or
augment its existing product lines. Promising acquisitions are difficult to
identify and complete for a number of reasons, including competition among
prospective buyers and the need for regulatory approval, including antitrust
approvals. There can be no assurance that the Company will be able to complete
future acquisitions or that it will be able to successfully integrate any
acquired business. In order to finance such acquisitions, it may be necessary
for the Company to raise additional funds through public or private financings.
Financing, if available at all, may be on terms which are not favorable to the
Company.

      International Operations. Sales outside the U.S. have accounted for a
significant percentage of the Company's total revenues. The Company intends to
continue to expand its presence in international markets. International sales
are subject to a number of risks, including the following: agreements may be
difficult to enforce and receivables difficult to collect through a foreign
country's legal system; foreign customers may have longer payment cycles;
foreign countries may impose additional withholding taxes or otherwise tax the
Company's foreign income, impose tariffs, or adopt other restrictions on foreign
trade; fluctuations in exchange rates may affect product demand and adversely
affect the profitability in U.S. dollars of products and services provided by
the Company in foreign markets where payment for the Company's products and
services is made in the local currency; U.S. export licenses may be difficult to
obtain; and the protection of intellectual property in foreign countries may be
more difficult to enforce. There can be no assurance that any of these factors
will not have a material adverse effect on the Company's business and results of
operations. During 1999, the Company had exports from its U.S. and foreign
operations to Asia of approximately 6% of total revenues. Exports to Asia in
1999 were primarily to Japan, South Korea, and China. Asia experienced a severe
economic crisis in the late 1990's, which was characterized by sharply reduced
economic activity and liquidity, highly volatile foreign-currency-exchange and
interest rates, and unstable stock markets. The Company's export sales have been
adversely affected by the unstable economic conditions in Asia in 1998 and early
1999.

      Technological Change and Competition. The market for many of the Company's
products is characterized by changing technology, evolving industry standards,
and new product introductions. The Company's future success will depend, in
part, upon its ability to enhance its existing products and to develop and
introduce new products and technologies to meet changing customer requirements.
The Company is currently devoting significant resources toward the enhancement
of its existing products and the development of new products and technologies.
There can be no assurance that the Company will successfully complete the
enhancement and development of these products in a timely fashion, or that these
products will compete successfully with those of the Company's competitors.
Certain of the Company's competitors have greater resources, manufacturing and
marketing capabilities, technical staff, and production facilities than those of
the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than can the Company.
Competition could increase if new companies enter the market, or if existing
competitors expand their product lines.

      Intellectual Property Rights. The Company relies upon trade secret
protection and patents to protect its proprietary rights. There can be no
assurance that patents will issue from any pending or future patent applications
owned by or licensed to the Company, or that the claims allowed under any issued
patents will be sufficiently broad to protect the Company's technology. In the
absence of patent protection, the Company may be vulnerable to competitors who
attempt to copy the Company's products or gain access to its trade secrets and
know-how. Proceedings initiated by the Company to protect its proprietary rights
could result in substantial costs to the Company.

                                       41
<PAGE>

There can be no assurance that competitors of the Company will not initiate
litigation to challenge the validity of the Company's patents, or that they will
not use their resources to design comparable products that do not infringe the
Company's patents. There may also be pending or issued patents held by parties
not affiliated with the Company that relate to the Company's products or
technologies. The Company may need to acquire licenses to, or contest the
validity of, any such patents. There can be no assurance that any license
required under any such patent would be made available on acceptable terms, or
that the Company would prevail in any such contest. The Company could incur
substantial costs in defending itself in suits brought against it, or in suits
in which the Company may assert its patent rights against others. If the outcome
of any such litigation is unfavorable to the Company, the Company's business and
results of operations could be materially adversely affected. In addition, the
Company relies on trade secrets and proprietary know-how which it seeks to
protect, in part, by confidentiality agreements with its collaborators,
employees, and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach,
or that the Company's trade secrets will not otherwise become known or be
independently developed by competitors.

      Product Liability. Thermedics Detection faces an inherent business risk of
exposure to product liability claims relating to the use of their products.
Although Thermedics Detection currently maintains product liability insurance
against this risk, there can be no assurance that they will continue to be able
to obtain such coverage at economically feasible rates, if at all, or that such
coverage will be adequate in terms and scope to protect Thermedics Detection
completely in the event of a successful product liability claim.

      Effect of Government Regulations and Approvals on Market for Thermo
Sentron's Products. The market for certain of Thermo Sentron's products, both in
the United States and abroad, is subject to or influenced by various domestic
and foreign clean air and consumer protection laws. Thermo Sentron designs,
develops, and markets its products to meet customer needs created by existing
and anticipated regulations, and any changes in these regulations may adversely
affect consumer demand for Thermo Sentron's products. In addition, the marketing
of certain of Thermo Sentron's products is dependent upon the receipt of
regulatory and other approvals, including industry association approvals of the
design, construction, and accuracy of Thermo Sentron's products. Delays in
obtaining, or the failure to obtain, any such approvals could have a material
adverse effect on Thermo Sentron's business and results of operations.

      Dependence of Security Instruments Market on Government Regulation and
Airline Industry. Thermedics Detection's sales of its explosives-detection
systems for use in airports has been and will continue to depend on government
initiatives to require, or support, the screening of baggage, carry-on items,
and people with advanced explosives-detection equipment. Substantially all of
such systems have been installed at airports in countries in which the
applicable government or regulatory authority that oversees airport operations
has mandated such screening. Such mandates are influenced by many factors
outside of the control of the Company, including political and budgetary
concerns of governments, airlines, and airports. Of the more than 600 commercial
airports worldwide, more than 400 are located in the United States. Accordingly,
Thermedics Detection believes that the size of the market for
explosives-detection equipment is, and will increasingly be, significantly
influenced by United States government regulation.
      The FAA has not yet mandated the installation of automated
explosives-detection systems. Thermedics Detection's systems are trace detectors
for which no FAA certification process exists to date. Thermedics Detection has
received FAA approval for the Company's EGIS system for use by airlines in
screening carry-on electronic items and luggage searches. The EGIS II system has
passed FAA laboratory tests and is currently undergoing FAA operational testing
before deployment in use at airports. There can be no assurance that the final
step in the approval process for EGIS II will be successfully completed.

                                       42
<PAGE>

      Although the FAA has provided significant funding to Thermedics Detection
in connection with the development of its explosives-detection technology,
Thermedics Detection's systems may not ever meet all United States certification
standards. Any product using a technology ultimately recommended or required by
the FAA will have a significant competitive advantage in the market for
explosives-detection devices. Unless the FAA takes action with respect to a
particular explosives-detection product or technology, airlines will not be
required to purchase or upgrade their security systems, including upgrading
existing metal-detection equipment. Earnings of U.S. air carriers tend to
fluctuate significantly from time to time. Any depression in the financial
condition of such carriers would likely result in lower capital spending for
discretionary items. Moreover, there can be no assurance that additional
countries will require the implementation of effective explosives screening for
airline baggage, carry-on items, or people, or that, if required, Thermedics
Detection's systems will meet the certification or other requirements of the
applicable government authority. Even if Thermedics Detection's systems were to
meet the applicable requirements, Thermedics Detection may not be able to market
its systems effectively.
      From time to time, the United States government enacts legislation which
includes allocations to purchase explosives-detection systems and other advanced
security equipment, including trace detection equipment such as the systems
manufactured by Thermedics Detection, for carry-on and checked baggage
screening. The FAA has made purchases of, or placed orders for the purchase of,
security equipment under such legislation. There can be no assurance, however,
that this legislation will not be modified to reduce the funding for advanced
explosives equipment, that necessary appropriations will continue to be made to
fund further purchases of advanced explosives-detection equipment, that
trace-detection equipment such as the systems manufactured by Thermedics
Detection will be mandated, or that, even if further appropriations are made and
such equipment is mandated, any of Thermedics Detection's explosives-detection
systems will be purchased for installation at any airports in the United States.
Further, there can be no assurance that the U.S. will mandate the widespread use
of these systems after completion of the initial purchases.

      Significance of Certain Customers to Thermedics Detection. Sales of
industrial process instruments and related services to bottlers licensed by The
Coca-Cola Company (Coca-Cola Bottlers) were $3,939,000, $6,199,000, and
$13,194,000 in 1999, 1998, and 1997, respectively. Although the Company
anticipates that Thermedics Detection will continue to derive revenues from the
sale of upgrades and new systems to new plants, as well as services to The
Coca-Cola Bottlers, Thermedics Detection does not expect that revenues derived
from these customers will continue at a rate comparable to prior years. In
addition, sales to Fisher Scientific and VWR Scientific accounted for 13% and
12% of Thermedics Detection's total revenues, respectively, in 1999, and 10% and
10% of its total revenues, respectively, in 1998. Further, Thermedics Detection
intends to continue to develop and introduce new industrial process products for
the food, beverage, and other markets; however, there can be no assurance that
Thermedics Detection will be successful in the introduction of new industrial
process products or that any sales of these products will be sufficient to
maintain a rate of growth equivalent to prior years.

      Dependence Upon OEM Relationships. A portion of the Company's sales are
through Original Equipment Manufacturers (OEM) arrangements. The Company's sales
depend, in part, on the continuation of these OEM arrangements and the level of
end-user sales by such OEMs. There can be no assurance that the Company will be
able to maintain its existing, or establish new, OEM relationships.


                                       43
<PAGE>

      Risks Associated with Cash Management Arrangement with Thermo Electron.
The Company participates in a cash management arrangement with Thermo Electron.
Under this cash management arrangement, the Company lends its excess cash to
Thermo Electron on an unsecured basis. The Company has the contractual right to
withdraw its funds invested in the cash management arrangement upon 30 days'
prior notice. Thermo Electron is contractually required to maintain cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of all funds invested under the cash management arrangement by all Thermo
Electron subsidiaries other than wholly owned subsidiaries. The funds are held
on an unsecured basis and therefore are subject to the credit risk of Thermo
Electron. The Company's ability to receive its cash upon notice of withdrawal
could be adversely affected if participants in the cash management arrangement
demand withdrawal of their funds in an aggregate amount in excess of the 50%
reserve required to be maintained by Thermo Electron. In the event of a
bankruptcy of Thermo Electron, the Company would be treated as an unsecured
creditor and its right to receive funds from the bankruptcy estate would be
subordinated to secured creditors and would be treated on a pari passu basis
with all other unsecured creditors. Further, all cash withdrawn by the Company
from the cash management arrangement within one year before the bankruptcy would
be subject to rescission. The inability of Thermo Electron to return the
Company's cash on a timely basis or at all could have a material adverse effect
on the Company's results of operations and financial position.


</TABLE>

                                       44
<PAGE>
<TABLE>
<CAPTION>
Thermedics Inc.                                                                  1999 Financial Statements

                         Selected Financial Information

<S>                                                 <C>         <C>        <C>        <C>           <C>
(In thousands except per share amounts)             1999 (a)    1998 (b)   1997 (c)   1996 (d)      1995
-------------------------------------------------- ---------- ----------- ---------- ---------- ---------

Statement of Operations Data
Revenues                                            $223,503   $ 208,644   $200,184   $179,608   $118,835
Income from Continuing Operations Before              10,578      14,939     36,861     21,808      6,644
 Extraordinary Item
Income (Loss) Before Extraordinary Item              (13,221)     19,013     41,492     29,138     17,174
Net Income (Loss)                                    (13,221)     23,610     41,492     29,138     17,174
Earnings per Share from Continuing Operations
 Before Extraordinary Item:
   Basic                                                 .25         .36       1.00        .60        .20
   Diluted                                               .25         .35        .95        .57        .20
Earnings (Loss) per Share:
   Basic                                               (.32)         .57       1.13        .80        .51
   Diluted                                             (.31)         .55       1.07        .75        .49

Balance Sheet Data
Working Capital                                     $153,419   $ 183,832   $213,866   $184,051   $ 71,833
Total Assets                                         441,809     408,483    380,179    349,086    267,445
Long-term Obligations                                 47,599      47,552     65,021     65,014      8,319
Shareholders' Investment                             223,402     248,127    227,851    211,643    171,799

(a) Reflects the July 1999 acquisition of Jaeger.
(b) Reflects an extraordinary gain of $4.6 million, net of taxes, and the June
    1998 acquisition of the product-monitoring business.
(c) Reflects a nontaxable gain of $17.1 million from the issuance of stock by subsidiary.
(d) Reflects the January 1996 acquisition of Moisture Systems and Rutter, the May 1996 issuance of $65.0
    million principal amount of noninterest-bearing subordinated convertible
    debentures, and nontaxable gains of $23.7 million from the issuance of stock
    by subsidiaries.


                                       45
<PAGE>


Thermedics Inc.                                                                  1999 Financial Statements
</TABLE>
Common Stock Market Information
      The Company's common stock is traded on the American Stock Exchange under
the symbol TMD. The following table sets forth the high and low sale prices of
the Company's common stock for 1999 and 1998, as reported in the consolidated
transaction reporting system.
<TABLE>
<CAPTION>
<S>                                                                 <C>         <C>       <C>         <C>
                                                                          1999                 1998
                                                                -------------------   --------------------
Quarter                                                             High        Low       High        Low
-------------------------------------------------------------- ---------- ---------- ---------- ----------

First                                                            $11 3/8  $  6 1/2  $17 13/16      $14 5/8
Second                                                             9 5/16    6 1/8   17 15/16       12 3/8
Third                                                              9 5/8     5 5/8   13  9/16        7 1/2
Fourth                                                             6 3/8     4 7/8   11  1/4         6 5/8

      As of January 28, 2000, the Company had 1,959 holders of record of its
common stock. This does not include holdings in street or nominee names. The
closing market price on the American Stock Exchange for the Company's common
stock on January 28, 2000 was $6 1/8 per share.
      Common stock of the Company's majority-owned public subsidiaries is traded
on the American Stock Exchange:  Thermo Sentron Inc. (symbol TSR) and Thermedics
Detection Inc. (symbol TDX).

Shareholder Services
      Shareholders of Thermedics Inc. who desire information about the Company
are invited to contact the Investor Relations Department, Thermedics Inc., 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, (781) 622-1111.
A mailing list is maintained to enable shareholders whose stock is held in
street name, and other interested individuals, to receive Company information as
quickly as possible. Company information is available from Thermo Electron's
Internet site (http://www.thermo.com/subsid/tmd1.html).

Stock Transfer Agent
      BankBoston N.A. is the stock transfer agent and maintains shareholder
activity records. The agent will respond to questions on issuance of stock
certificates, change of ownership, lost stock certificates, and change of
address. For these and similar matters, please direct inquiries to:

      BankBoston N.A.
      c/o Boston EquiServe Limited Partnership
      P.O. Box 8040
      Boston, Massachusetts 02266-8040
      (781) 575-3120

Dividend Policy
      The Company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use earnings
to finance expansion and growth. Payment of dividends will rest within the
discretion of the Company's Board of Directors and will depend upon, among other
factors, the Company's earnings, capital requirements, and financial condition.

Form 10-K Report
      A copy of the Annual Report on Form 10-K for the fiscal year ended January
1, 2000, as filed with the Securities and Exchange Commission, may be obtained
at no charge by writing to the Investor Relations Department, Thermedics Inc.,
81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046.
</TABLE>