-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GidaOFzuaS2Y5Vna65oI7Kjnwlrn2Vxs315IeDBI9IFNTLbF3shRsysFJwrGXX34 Y2rTAaeuEHQGqMJK6sJEZg== 0000796038-95-000002.txt : 19950517 0000796038-95-000002.hdr.sgml : 19950517 ACCESSION NUMBER: 0000796038-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950206 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO PROCESS SYSTEMS INC CENTRAL INDEX KEY: 0000796038 STANDARD INDUSTRIAL CLASSIFICATION: 3567 IRS NUMBER: 042925807 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09549 FILM NUMBER: 95505675 BUSINESS ADDRESS: STREET 1: 12068 MARKET ST CITY: LIVONIA STATE: MI ZIP: 48150 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 10-Q 1 TPI Q395 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------------------------------------- FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended December 31, 1994. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-9549 THERMO PROCESS SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925807 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12068 Market Street Livonia, Michigan 48150 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at January 27, 1995 ---------------------------- ------------------------------- Common Stock, $.10 par value 17,165,190 PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. PART I - Financial Information Item 1 - Financial Statements (a) Consolidated Balance Sheet - Assets as of December 31, 1994 and April 2, 1994 (In thousands) December 31, April 2, 1994 1994 ------------ -------- Current Assets: Cash and cash equivalents $ 43,564 $ 15,976 Short-term available-for-sale investments, at quoted market value (amortized cost of $5,834 and $22,483) (includes $812 and $3,371 of related party debentures) 5,992 23,123 Accounts receivable, less allowances of $3,229 and $3,260 21,273 18,513 Unbilled contract costs and fees 9,811 9,394 Inventories: Raw materials and supplies 1,967 1,908 Work in process 421 485 Prepaid expenses 3,405 2,091 Prepaid and refundable income taxes 2,283 2,081 -------- -------- 88,716 73,571 -------- -------- Property, Plant and Equipment, at Cost 74,424 62,226 Less: Accumulated depreciation and amortization 32,806 29,776 -------- -------- 41,618 32,450 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $10,690 and $11,543) 10,390 11,438 -------- -------- Other Assets 11,545 5,265 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 4) 37,689 32,710 -------- -------- $189,958 $155,434 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (a)Consolidated Balance Sheet - Liabilities and Shareholders' Investment as of December 31, 1994 and April 2, 1994 (In thousands except share amounts) December 31, April 2, 1994 1994 ------------ -------- Current Liabilities: Accounts payable $ 7,912 $ 6,152 Notes payable (includes $4,000 due to parent company) 4,982 975 Billings in excess of revenues earned 2,162 1,997 Accrued contract costs and billings in excess of contract revenues 557 578 Accrued payroll and employee benefits 5,101 5,010 Accrued and current deferred income taxes 1,440 263 Other accrued expenses 6,486 4,419 Due to parent company 3,440 2,565 -------- -------- 32,080 21,959 -------- -------- Deferred Income Taxes 1,882 2,167 -------- -------- Long-term Obligations: 6 1/2% Subordinated convertible debentures 18,547 18,547 Other (includes $15,000 due to parent company) 15,538 185 -------- -------- 34,085 18,732 -------- -------- Minority Interest 55,643 50,017 -------- -------- Shareholders' Investment: Common stock, $.10 par value, 30,000,000 shares authorized; 17,414,322 and 17,254,026 shares issued 1,741 1,725 Capital in excess of par value 46,923 46,456 Retained earnings 20,663 17,612 Treasury stock at cost, 249,132 and 267,371 shares (3,030) (2,911) Cumulative translation adjustment 55 (669) Net unrealized gain (loss) on available-for-sale investments (84) 346 -------- -------- 66,268 62,559 -------- -------- $189,958 $155,434 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (b)Consolidated Statement of Income for the three months ended December 31, 1994 and January 1, 1994 (In thousands except per share amounts) Three Months Ended ------------------------ December 31, January 1, 1994 1994 ------------ --------- Revenues: Service revenues $30,642 $24,012 Product revenues 4,029 3,210 ------- ------- 34,671 27,222 ------- ------- Costs and Operating Expenses: Cost of service revenues 22,901 18,291 Cost of product revenues 3,289 3,019 Selling, general and administrative expenses 5,272 6,023 New business development expenses 287 175 Costs associated with divisional restructuring - 2,661 ------- ------- 31,749 30,169 ------- ------- Operating Income (Loss) 2,922 (2,947) Gain on Issuance of Stock by Subsidiaries (Note 3) 161 3,637 Interest Income 778 435 Interest Expense (includes $206 for note to parent company in fiscal 1995) (559) (327) Gain on Sale of Related Party Debentures 138 - ------- ------- Income Before Income Taxes and Minority Interest 3,440 798 Income Tax (Provision) Benefit (902) 1,258 Minority Interest Expense (1,396) (975) ------- ------- Net Income $ 1,142 $ 1,081 ======= ======= Earnings per Share $ .07 $ .06 ======= ======= Weighted Average Shares 17,155 16,867 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (b)Consolidated Statement of Income for the nine months ended December 31, 1994 and January 1, 1994 (In thousands except per share amounts) Nine Months Ended ------------------------ December 31, January 1, 1994 1994 ------------ ---------- Revenues: Service revenues $83,994 $69,480 Product revenues 10,556 10,960 Contract revenues from related party - 776 ------- ------- 94,550 81,216 ------- ------- Costs and Operating Expenses: Cost of service revenues 61,860 52,414 Cost of product revenues 8,806 9,626 Cost of contract revenues from related party - 776 Selling, general and administrative expenses 16,769 15,881 New business development expenses 643 175 Costs associated with divisional restructuring - 2,661 ------- ------- 88,078 81,533 ------- ------- Operating Income (Loss) 6,472 (317) Gain on Issuance of Stock by Subsidiaries (Note 3) 1,058 4,239 Interest Income 2,203 1,426 Interest Expense (includes $480 for note to parent company in fiscal 1995) (1,519) (1,037) Gain on Sale of Investments (includes $746 on sale of related party debentures in fiscal 1995) 749 645 ------- ------- Income Before Income Taxes, Minority Interest and Cumulative Effect of Change in Accounting Principle 8,963 4,956 Income Tax (Provision) Benefit (1,978) 580 Minority Interest Expense (3,934) (3,062) ------- ------- Income Before Cumulative Effect of Change in Accounting Principle 3,051 2,474 Cumulative Effect of Change in Accounting Principle - 500 ------- ------- Net Income $ 3,051 $ 2,974 ======= ======= Earnings per Share Before Cumulative Effect of Change in Accounting Principle $ .18 $ .15 ======= ======= Earnings per Share $ .18 $ .18 ======= ======= Weighted Average Shares 17,099 16,825 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 5PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (c)Consolidated Statement of Cash Flows for the nine months ended December 31, 1994 and January 1, 1994 (In thousands) Nine Months Ended ------------------------ December 31, January 1, 1994 1994 ------------ ---------- Operating Activities: Net income $ 3,051 $ 2,974 Adjustments to reconcile net income to net cash provided by operating activities: Costs associated with divisional restructuring - 2,661 Cumulative effect of change in accounting principle - (500) Depreciation and amortization 5,507 4,476 Minority interest expense 3,934 3,062 Provision for losses on accounts receivable 148 20 Other noncash expenses 371 6 Gain on issuance of stock by subsidiaries (Note 3) (1,058) (4,239) Gain on sale of investments (749) (645) Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (1,629) (2,362) Inventories and unbilled contract costs and fees (66) (1,089) Other current assets (1,177) 41 Current liabilities 1,695 1,278 Other - 65 -------- -------- Net cash provided by operating activities 10,027 5,748 -------- -------- Investing Activities: Acquisitions, net of cash acquired (Note 4) (17,786) (2,650) Proceeds from sales and maturities of available-for-sale investments 18,250 - Increase in short-term investments - (3,832) Purchases of property, plant and equipment (4,524) (5,518) Proceeds from sale of property, plant and equipment 61 222 Purchase of other assets (445) (273) -------- -------- Net cash used in investing activities (4,444) (12,051) -------- -------- Financing Activities: Environmental Services Businesses transfer of cash to Thermo Instrument (Note 2) - (1,772) Issuance of note receivable (700) - Proceeds from issuance of Company and subsidiaries common stock 3,865 14,931 Issuance of notes to parent company 19,000 - Dividends paid by subsidiaries to minority shareholders (343) (180) Other (144) (89) -------- -------- Net cash provided by financing activities $ 21,678 $ 12,890 -------- -------- 6PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (c)Consolidated Statement of Cash Flows for the nine months ended December 31, 1994 and January 1, 1994 (continued) (In thousands) Nine Months Ended ------------------------ December 31, January 1, 1994 1994 ------------ ---------- Exchange Rate Effect on Cash $ 327 $ (368) -------- -------- Increase in Cash and Cash Equivalents 27,588 6,219 Cash and Cash Equivalents at Beginning of Period 15,976 19,165 -------- -------- Cash and Cash Equivalents at End of Period $ 43,564 $ 25,384 ======== ======== Cash Paid For: Interest $ 1,168 $ 1,227 Income taxes $ 1,461 $ 787 Noncash Activities: See Note 2 for discussion of the environmental services joint venture. The accompanying notes are an integral part of these consolidated financial statements. 7PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - December 31, 1994 1. General The interim consolidated financial statements presented have been prepared by Thermo Process Systems Inc. (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three- and nine-month periods ended December 31, 1994 and January 1, 1994, (b) the financial position at December 31, 1994, and (c) the cash flows for the nine-month periods ended December 31, 1994 and January 1, 1994. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of April 2, 1994, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1994, filed with the Securities and Exchange Commission. 2. Joint Venture As more fully discussed in the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1994, the Company entered into an agreement, effective April 4, 1994, with Thermo Instrument Systems Inc. (Thermo Instrument), another public subsidiary of Thermo Electron Corporation (Thermo Electron), establishing an environmental services joint venture called Thermo Terra Tech. Because the Company and the environmental services businesses contributed to the joint venture by Thermo Instrument (the Environmental Services Businesses) were deemed for accounting purposes to be under control of their common majority owner, Thermo Electron, the transaction has been accounted for at historical cost in a manner similar to a pooling of interests. Accordingly, all historical financial information was restated at fiscal year-end 1994 to include the accounts and operations of the Environmental Services Businesses. For periods presented prior to April 4, 1994, amounts earned by the Environmental Services Businesses have been allocated to Thermo Instrument through minority interest expense in the accompanying financial statements. 3. Transactions in Stock of Subsidiaries On September 30, 1994, the Company's J. Amerika N.V. subsidiary completed a private placement in Europe of 547,000 shares of its common stock, at $3.75 per share. Net proceeds from the sale were $1,917,000, resulting in a gain of $668,000. On October 24, 1994, the Company's J. Amerika N.V. subsidiary completed a private placement in Europe of 153,331 8PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - December 31, 1994 (continued) 3. Transactions in Stock of Subsidiaries (continued) shares of its common stock, at $3.75 per share. Net proceeds from the sale were $506,000, resulting in a gain of $161,000. As of December 31, 1994, the Company owned 65% of the outstanding common stock of J. Amerika N.V. On May 25, 1994, the Company's Thermo Remediation Inc. (Thermo Remediation) subsidiary completed a private placement of 50,000 shares of its common stock, at $14.50 per share. Net proceeds from the sale were $715,000, resulting in a gain of $229,000. As of December 31, 1994, the Company owned 65% of the outstanding common stock of Thermo Remediation Inc. 4. Acquisition On October 13, 1994, the Company's Thermo Remediation subsidiary acquired a soil-remediation facility in South Tacoma, Washington (renamed TPST Washington) from Woodworth & Company, Inc. The purchase price for TPST Washington was $4.6 million in cash less an offset for the value of unprocessed soil on site as of the date of acquisition. The acquisition has been accounted for using the purchase method of accounting, and TPST Washington's results of operations have been included in the accompanying financial statements from the date of acquisition. Allocation of the purchase price was based on an estimate of the fair value of the net assets acquired and is subject to adjustment. Based on unaudited data, the following table presents selected financial information for the Company and TPST Washington on a pro forma basis, assuming the companies had been combined since the beginning of fiscal 1994. Three Months Ended Nine Months Ended ------------------ ----------------- (In thousands except Dec. 31, Jan. 1, Dec. 31, Jan. 1, per share amounts) 1994 1994 1994 1994 ------------------------------------------------------------------------ Revenues $34,712 $28,294 $96,184 $84,236 Income Before Cumulative Effect of Change in Accounting Principle 1,135 1,180 3,101 2,709 Earnings per Share Before Cumulative Effect of Change in Accounting Principle .07 .07 .18 .16 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition been made at the beginning of fiscal 1994. 5. Letter of Intent In November 1994, the Company signed a letter of intent to acquire the outstanding stock of Engineering Technology and Knowledge Corporation, 9PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - December 31, 1994 (continued) 5. Letter of Intent (continued) which conducts business as Killam Associates, Inc. (Killam Associates) from Nord Est SA, a French industrial holding company, for a total purchase price equal to approximately (a) $12.5 million in cash and (b) a $28.0 million promissory note, due 1998 with a present value of $22.3 million. The Company also intends to exchange certain outstanding options to purchase Killam Associates' stock for $1.9 million in cash and options to purchase the Company's common stock valued at $6.7 million. To help finance this acquisition, the Company intends to issue to Thermo Electron up to $15.0 million of a promissory note. The Company currently expects to consummate this acquisition by the end of February 1995. Killam Associates is a leading provider of environmental consulting and professional engineering services in selected areas of the United States. Killam Associates' consolidated gross revenues were in excess of $40 million for the year ended December 31, 1994. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Description of Business The Company's business is divided into two segments as follows: Services The Company's majority-owned public subsidiary, Thermo Remediation Inc. (Thermo Remediation), provides soil-remediation services at a network of regional centers that serve customers in more than a dozen states. These soil-remediation centers thermally treat soils to remove and destroy petroleum contamination caused by leaking storage tanks, spills, and other sources. Through Thermo Remediation's November 1993 acquisition of Thermo Fluids, a fluids recovery company based in Arizona, the Company also collects and recycles used motor oil and provides services such as wastewater processing. The Company's majority-owned J. Amerika N.V. (J. Amerika) subsidiary is a provider in the Netherlands of underground tank removal and other environmental services. In January 1994, the Company acquired Terra Tech Labs, Inc. (Terra Tech) which specializes in fast-response testing of petroleum-contaminated soils and groundwater. The Company formed an environmental services joint venture, Thermo Terra Tech, effective April 4, 1994. The joint venture is comprised of the Company's Terra Tech subsidiary and the environmental services businesses of Thermo Instrument Systems Inc., which provide environmental science and consulting services, laboratory-based testing, and nuclear-radiation safety services (see Note 2 to Consolidated Financial Statements). In August 1994, Thermo Terra Tech acquired RMC Environmental Services, Inc. (RMC), a Pennsylvania-based environmental consulting and analytical laboratory services firm specializing in environmental science, hydropower consulting, and analytical laboratory services. The Company also performs metallurgical processing services, using thermal-treatment equipment owned by the Company. 10PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Process Systems The Company designs, manufactures, and installs advanced custom-engineered thermal-processing systems used in manufacturing to impart desirable metallurgical properties, such as added tensile strength and wear resistance, into treated parts. Results of Operations Third Quarter Fiscal 1995 Compared With Third Quarter Fiscal 1994 Total revenues in the third quarter of fiscal 1995 were $34.7 million, compared with $27.2 million in the third quarter of fiscal 1994. Services segment revenues increased 28% to $30.6 million in fiscal 1995 from $24.0 million in fiscal 1994. Revenues from analytical and consulting services increased 27% to $17.8 million in fiscal 1995 from $14.0 million in fiscal 1994. This increase is due to the inclusion of revenues from Terra Tech, which was acquired in January 1994, and RMC, which was acquired by Thermo Terra Tech in August 1994 and, to a lesser extent, revenues generated from a long-term environmental restoration contract for the U.S. Department of Energy's Hanford site. Revenues from the Company's remediation services increased 28% to $9.7 million in fiscal 1995, due primarily to an increase in the volume of soil processed at the Company's soil-remediation centers located in Southern California and Florida and, to a lesser extent, the inclusion of revenues of $.8 million from the October 1994 and November 1993 acquisitions of TPST Washington and Thermo Fluids, respectively. Metallurgical services revenues increased 28% to $3.1 million in fiscal 1995 from $2.4 million in fiscal 1994, due primarily to the Company's transition to nongovernment business applications. Process Systems segment revenues were $4.0 million in the third quarter of fiscal 1995, compared with $3.2 million in the third quarter of fiscal 1994. This business segment remains depressed and has encountered significant competition. The Process Systems segment backlog was $4.1 million at December 31, 1994, compared with $6.4 million at October 1, 1994, and $5.6 million a year ago. The Company's gross profit margin increased to 24% in the third quarter of fiscal 1995 from 22% in the third quarter of fiscal 1994. The Services segment gross profit margin increased slightly to 25% in fiscal 1995 from 24% in fiscal 1994. The gross profit margin at the metallurgical services operations increased to 10% in fiscal 1995 from a negative 7% in fiscal 1994 as a result of the Company's transition to nongovernment business applications. The gross profit margin from analytical and consulting services remained relatively unchanged at 21% in fiscal 1995, compared with 22% in fiscal 1994. The Process Systems segment gross profit margin increased to 18% in fiscal 1995 from 6% in fiscal 1994, due to more profitable contracts in process during fiscal 1995, compared with fiscal 1994. Selling, general and administrative expenses as a percentage of revenues decreased to 15% in the third quarter of fiscal 1995 from 22% in the third quarter of fiscal 1994, due primarily to an increase in total revenues. 11PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Third Quarter Fiscal 1995 Compared With Third Quarter Fiscal 1994 (continued) Net interest income increased to $219,000 in the third quarter of fiscal 1995 from $108,000 in fiscal 1994, primarily as a result of higher average investment balances following private placements and the initial public offering of Thermo Remediation common stock, offset by interest expense on $15.0 million borrowed from Thermo Electron Corporation (Thermo Electron) in May 1994 to fund the Company's investment in Thermo Terra Tech. First Nine Months Fiscal 1995 Compared With First Nine Months Fiscal 1994 Total revenues in the first nine months of fiscal 1995 were $94.6 million, compared with $81.2 million in the first nine months of fiscal 1994. Services segment revenues, excluding contract revenues from related party, increased 21% to $84.0 million in fiscal 1995 from $69.5 million in fiscal 1994. Revenues from analytical and consulting services increased 15% to $48.3 million in fiscal 1995 from $41.9 million in fiscal 1994. Revenues from the Company's remediation services increased 35% to $26.8 million in fiscal 1995. Metallurgical services revenues increased to $8.9 million in fiscal 1995 from $7.8 million in fiscal 1994. These increases are due to the reasons discussed in the results of operations for the third quarter. "Contract revenues from related party" in fiscal 1994 represents funding under an agreement the Company entered into with Thermo Electron to fund up to $4.0 million of the direct and indirect costs of the Company's development of soil-remediation centers. The Company earned no profit from this funding. As of October 2, 1993, funding under this agreement was completed. Expenses incurred in connection with the development of additional soil-remediation centers subsequent to October 2, 1993, are included in "New business development expenses" in the accompanying statement of income. Process Systems segment revenues remained relatively unchanged at $10.6 million in the first nine months of fiscal 1995 and $11.0 million in the first nine months of fiscal 1994. The Company's gross profit margin increased to 25% in the first nine months of fiscal 1995 from 23% in the first nine months of fiscal 1994. The Services segment gross profit margin increased to 26% in fiscal 1995 from 25% in fiscal 1994 due to a greater percentage of revenues derived from higher-margin remediation services, despite a lower overall gross profit margin on remediation services. The gross profit margin at the metallurgical services operations increased to 17% in fiscal 1995 from 4% in fiscal 1994 as a result of the Company's transition to nongovernment business applications. The gross profit margin from analytical and consulting services remained relatively unchanged at 22% in fiscal 1995 and 23% in fiscal 1994. The Process Systems segment gross profit margin increased to 17% from 12% in 1994, due to more profitable contracts in process during fiscal 1995, compared with fiscal 1994. 12PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Nine Months Fiscal 1995 Compared With First Nine Months Fiscal 1994 (continued) Selling, general and administrative expenses as a percentage of revenues decreased to 18% in the first nine months of fiscal 1995 from 20% in the first nine months of fiscal 1994, due primarily to an increase in total revenues. During the first nine months of fiscal 1995, the Company's J. Amerika and Thermo Remediation subsidiaries sold shares of common stock in private placements, resulting in gains on issuance of stock by subsidiaries of $829,000 and $229,000, respectively (see Note 3 to Consolidated Financial Statements). During the first nine months of fiscal 1994, the Company's Thermo Remediation subsidiary sold shares of common stock in a private placement and an initial public offering, resulting in gains on issuance of stock by subsidiary of $602,000 and $3,637,000, respectively. Net interest income increased to $684,000 in the first nine months of fiscal 1995 from $389,000 in fiscal 1994, due to the reasons discussed in the results of operations for the third quarter. The effective tax rates were a provision of 22% in the first nine months of fiscal 1995 and a benefit of 12% in the first nine months of fiscal 1994. These rates were lower than the statutory federal income tax rate due primarily to the fact that no taxes were provided on the minority interest portion of pretax income from the Thermo Terra Tech joint venture and, to a lesser extent, the nontaxable gains on issuance of stock by subsidiaries. "Minority interest expense" in the accompanying statement of income represents the portion of the Company's majority-owned subsidiaries' net income allocated to minority shareholders. "Minority interest expense" increased to $3.9 million in the first nine months of fiscal 1995 from $3.1 million in the corresponding period in 1994 due to higher profits at the Company's majority-owned subsidiaries, offset in part by a reduction in the minority ownership interest percentage of Thermo Terra Tech's net income (see Note 2 to Consolidated Financial Statements). During the first quarter of fiscal 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The adoption of SFAS No. 109 resulted in a cumulative tax benefit of $500,000. Financial Condition Liquidity and Capital Resources Consolidated working capital, including cash, cash equivalents, and short-term available-for-sale investments, increased to $56.6 million at December 31, 1994 from $51.6 million at April 2, 1994. Cash, cash equivalents, and short- and long-term available-for-sale investments were $59.9 million at December 31, 1994, compared with $50.5 million at April 2, 13PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Liquidity and Capital Resources (continued) 1994. Of the $59.9 million balance at December 31, 1994, $54.4 million was held by the Company's majority-owned subsidiaries (including its 51%-owned joint venture, Thermo Terra Tech) and the remainder by the Company and its wholly owned subsidiaries. In May 1994, the Company borrowed $15 million from Thermo Electron to fund the Company's investment in Thermo Terra Tech. The loan from Thermo Electron may be prepaid in whole or in part without penalty and is repayable in full on April 15, 1996. It is Thermo Electron's intention to require the note to be repaid only to the extent that the Company's cash flow and liquidity permit. During the first nine months of fiscal 1995, the Company's Thermo Remediation and Thermo Terra Tech subsidiaries expended $17.8 million, net of cash, for acquisitions. In connection with the financing of acquisitions, Thermo Remediation issued to Thermo Electron a $4,000,000 promissory note due June 1995. In September 1994 and October 1994, the Company's J. Amerika subsidiary completed private placements of its common stock for net proceeds of $2.4 million. In May 1994, the Company's Thermo Remediation subsidiary completed a private placement of its common stock for net proceeds of $.7 million. In November 1994, the Company signed a letter of intent to acquire Engineering Technology and Knowledge Corporation, which conducts business as Killam Associates, Inc. (Killam Associates) for $12.5 million in cash and a $28.0 million promissory note, due 1998. The Company also intends to exchange outstanding options to purchase Killam Associates' stock for cash and options to purchase the Company's common stock. To help finance this acquisition, the Company intends to issue to Thermo Electron up to $15.0 million of a promissory note (see Note 5 to Consolidated Financial Statements). Although the Company has no other material capital expenditure commitments, such expenditures will largely be affected by the number of soil-remediation centers and other businesses that can be developed or acquired during the year. Part II - Other Information Item 1 - Legal Proceedings On January 31, 1995, the Company and its majority-owned subsidiary, Thermo Remediation Inc. (TRI), filed a lawsuit in federal district court in Delaware against Recycling Sciences International, Inc. (RSI) requesting a declaratory judgment that six U.S. patents owned by RSI are invalid and not infringed by TRI's soil remediation services and equipment, and asking the court to enjoin RSI from asserting any of these patents against TRI or the Company. The suit follows continued allegations by RSI that TRI's activities in treating petroleum-contaminated soils infringe a number of these patents and an offer of a non-exclusive patent license in return for payments which the Company believes substantially exceed any value of a license. The Company continues to believe that RSI's accusations are unfounded and that the activities of TRI and the Company do not infringe any valid claims of the patents. 14PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. Part II - Other Information (continued) Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on the page immediately preceding exhibits. (b) Report on Form 8-K On December 22, 1994, the Company filed a Current Report on Form 8-K concerning the acquisition of a soil-remediation facility in South Tacoma, Washington from Woodworth & Company, Inc. 15PAGE Form 10-Q December 31, 1994 THERMO PROCESS SYSTEMS INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 6th day of February 1995. THERMO PROCESS SYSTEMS INC. Paul F. Kelleher ---------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ---------------------------- John N. Hatsopoulos Vice President and Chief Financial Officer 16PAGE EXHIBIT INDEX Exhibit Number Document Page -------------- ------------------------------------------------ ---- 27 Financial Data Schedule 17 EX-27 2 TPI Q395 F.D.S.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO PROCESS SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS APR-01-1995 DEC-31-1994 43,564 5,992 21,273 3,229 2,388 88,716 74,424 32,806 189,958 32,080 19,085 1,741 0 0 64,527 189,958 10,556 94,550 8,806 70,666 643 148 1,519 8,963 1,978 3,051 0 0 0 3,051 .18 0
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