-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lzs0Lgp72wYZ1Hc61SS8CL4anon5GewhpK8lmpe+4543NAMigvAd2usRdAKiBnoV ohVKi/5bob1wKP8yFO8Lxg== 0000796038-95-000023.txt : 19951107 0000796038-95-000023.hdr.sgml : 19951107 ACCESSION NUMBER: 0000796038-95-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951106 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO PROCESS SYSTEMS INC CENTRAL INDEX KEY: 0000796038 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] 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: 95587633 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 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 September 30, 1995. [ ] 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.) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02254-9046 (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 October 27, 1995 ---------------------------- ------------------------------- Common Stock, $.10 par value 17,391,348 PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. PART I - Financial Information Item 1 - Financial Statements (a) Consolidated Balance Sheet - Assets as of September 30, 1995 and April 1, 1995 (In thousands) (Unaudited) September 30, April 1, 1995 1995 ------------- -------- Current Assets: Cash and cash equivalents $ 39,544 $ 35,808 Short-term available-for-sale investments, at quoted market value (amortized cost of $25,478 and $5,179) 25,469 5,155 Accounts receivable, less allowances of $3,157 and $3,560 36,224 27,949 Unbilled contract costs and fees 16,396 16,481 Inventories: Raw materials and supplies 3,309 2,705 Work in process and finished goods 945 27 Prepaid expenses 4,637 3,788 Prepaid income taxes 9,012 8,228 -------- -------- 135,536 100,141 -------- -------- Property, Plant and Equipment, at Cost 113,158 92,794 Less: Accumulated depreciation and amortization 36,492 33,057 -------- -------- 76,666 59,737 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $2,137 and $10,687) 2,108 10,564 -------- -------- Long-term Held-to-maturity Investments, at Amortized Cost (quoted market value of $24,219 and $22,810) 23,395 22,569 -------- -------- Other Assets 12,435 12,146 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Notes 3 and 5) 68,183 66,516 -------- -------- $318,323 $271,673 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (a)Consolidated Balance Sheet - Liabilities and Shareholders' Investment as of September 30, 1995 and April 1, 1995 (In thousands except share amounts) (Unaudited) September 30, April 1, 1995 1995 ------------- -------- Current Liabilities: Accounts payable $ 10,222 $ 9,612 Notes payable and current maturities of long-term obligations (includes $4,000 due to parent company in fiscal 1995) 2,925 4,652 Billings in excess of revenues earned 3,084 1,555 Accrued payroll and employee benefits 8,671 6,845 Accrued and current deferred income taxes 1,475 1,773 Other accrued expenses 8,273 7,892 Due to parent company 4,605 3,116 -------- -------- 39,255 35,445 -------- -------- Deferred Income Taxes 4,157 4,116 -------- -------- Other Deferred Items 1,103 1,057 -------- -------- Long-term Obligations: 6 1/2% Subordinated convertible debentures 18,547 18,547 4 7/8% Subordinated convertible debentures (Note 4) 37,950 - Other (includes $88,000 and $53,000 due to parent company) (Note 2) 113,502 78,304 -------- -------- 169,999 96,851 -------- -------- Minority Interest 26,700 56,603 -------- -------- Shareholders' Investment: Common stock, $.10 par value, 30,000,000 shares authorized; 17,458,362 and 17,414,322 shares issued 1,746 1,741 Capital in excess of par value 53,600 53,559 Retained earnings 21,517 21,727 Treasury stock at cost, 67,014 and 71,072 shares (799) (864) Cumulative translation adjustment 1,068 1,526 Net unrealized loss on available-for-sale investments (23) (88) -------- -------- 77,109 77,601 -------- -------- $318,323 $271,673 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (b)Consolidated Statement of Operations for the three months ended September 30, 1995 and October 1, 1994 (In thousands except per share amounts) (Unaudited) Three Months Ended -------------------------- September 30, October 1, 1995 1994 ------------- ---------- Revenues: Service revenues $48,736 $27,756 Product revenues 5,046 3,259 ------- ------- 53,782 31,015 ------- ------- Costs and Operating Expenses: Cost of service revenues 32,797 20,102 Cost of product revenues 4,445 2,706 Selling, general and administrative expenses 11,547 6,043 Product and new business development expenses 282 221 Write-off of cost in excess of net assets of acquired company (Note 5) 4,995 - ------- ------- 54,066 29,072 ------- ------- Operating Income (Loss) (284) 1,943 Interest Income 1,406 787 Interest Expense (includes $1,690 and $190 to parent company) (2,959) (537) Gain on Issuance of Stock by Subsidiaries - 668 Loss on Sale of Assets (Note 6) (569) - ------- ------- Income (Loss) Before Provision for Income Taxes and Minority Interest (2,406) 2,861 Provision for Income Taxes 1,320 476 Minority Interest Expense 433 1,357 ------- ------- Net Income (Loss) $(4,159) $ 1,028 ======= ======= Earnings (Loss) per Share $ (.24) $ .06 ======= ======= Weighted Average Shares 17,373 17,123 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (b)Consolidated Statement of Operations for the six months ended September 30, 1995 and October 1, 1994 (In thousands except per share amounts) (Unaudited) Six Months Ended ---------------------------- September 30, October 1, 1995 1994 ------------- ---------- Revenues: Service revenues $ 95,030 $ 53,352 Product revenues 8,608 6,527 -------- -------- 103,638 59,879 -------- -------- Costs and Operating Expenses: Cost of service revenues 63,936 38,959 Cost of product revenues 7,758 5,517 Selling, general and administrative expenses 23,233 11,497 Product and new business development expenses 558 356 Write-off of cost in excess of net assets of acquired company (Note 5) 4,995 - -------- -------- 100,480 56,329 -------- -------- Operating Income 3,158 3,550 Interest Income 2,766 1,425 Interest Expense (includes $2,898 and $274 to parent company) (5,232) (960) Gain on Issuance of Stock by Subsidiaries (Note 4) 2,742 897 Gain on Sale of Investments (includes $608 on sale of related party debentures in fiscal 1995) 80 611 Loss on Sale of Assets (Note 6) (569) - -------- -------- Income Before Provision for Income Taxes and Minority Interest 2,945 5,523 Provision for Income Taxes 2,344 1,076 Minority Interest Expense 811 2,538 -------- -------- Net Income (Loss) $ (210) $ 1,909 ======== ======== Earnings (Loss) per Share $ (.01) $ .11 ======== ======== Weighted Average Shares 17,362 17,071 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (c)Consolidated Statement of Cash Flows for the six months ended September 30, 1995 and October 1, 1994 (In thousands) (Unaudited) Six Months Ended -------------------------- September 30, October 1, 1995 1994 ------------- --------- Operating Activities: Net income (loss) $ (210) $ 1,909 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 5,870 3,166 Write-off of cost in excess of net assets of acquired company (Note 5) 4,995 - Loss on sale of assets (Note 6) 569 - Minority interest expense 811 2,538 Provision for losses on accounts receivable (21) (168) Other noncash expenses 191 879 Increase in deferred income taxes 93 - Gain on issuance of stock by subsidiaries (Note 4) (2,742) (897) Gain on sale of investments (80) (611) Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (3,150) (1,481) Inventories and unbilled contract costs and fees (803) 37 Other current assets (999) (705) Current liabilities 3,457 585 -------- -------- Net cash provided by operating activities 7,981 5,252 -------- -------- Investing Activities: Acquisitions, net of cash acquired (Note 3) (25,404) (5,491) Purchase of minority interest in Thermo Terra Tech joint venture (Note 2) (34,267) - Purchases of available-for-sale investments (23,299) - Proceeds from sale and maturities of available-for-sale investments 11,630 16,795 Purchases of property, plant and equipment (8,557) (3,106) Proceeds from sale of property, plant and equipment 594 56 Purchase of other assets (26) (120) -------- -------- Net cash provided by (used in) investing activities $(79,329) $ 8,134 -------- -------- 6PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (c)Consolidated Statement of Cash Flows for the six months ended September 30, 1995 and October 1, 1994 (In thousands) (Unaudited) (continued) Six Months Ended -------------------------- September 30, October 1, 1995 1994 ------------- --------- Financing Activities: Net proceeds from issuance of subordinated convertible debentures (Note 4) $ 36,889 $ - Issuance of notes to parent company (Note 2) 35,000 15,000 Repayment of note payable to parent company (Note 4) (4,000) - Proceeds from issuance of Company and subsidiary common stock (Note 4) 6,959 3,187 Issuance of short-term obligations 2,178 - Repayment of note payable (618) - Dividends paid by subsidiary to minority shareholders (551) (343) Issuance of note receivable (401) (700) Other - (138) -------- -------- Net cash provided by financing activities 75,456 17,006 -------- -------- Exchange Rate Effect on Cash (372) 530 -------- -------- Increase in Cash and Cash Equivalents 3,736 30,922 Cash and Cash Equivalents at Beginning of Period 35,808 15,976 -------- -------- Cash and Cash Equivalents at End of Period $ 39,544 $ 46,898 ======== ======== Cash Paid For: Interest $ 3,573 $ 928 Income taxes $ 2,846 $ 956 The accompanying notes are an integral part of these consolidated financial statements. 7PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - September 30, 1995 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 six-month periods ended September 30, 1995 and October 1, 1994, (b) the financial position at September 30, 1995, and (c) the cash flows for the six-month periods ended September 30, 1995 and October 1, 1994. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of April 1, 1995, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended April 1, 1995, filed with the Securities and Exchange Commission. 2. Dissolution of Thermo Terra Tech Joint Venture Effective April 2, 1995, the Company and Thermo Instrument Systems Inc. (Thermo Instrument) dissolved their Thermo Terra Tech joint venture and the Company purchased the businesses formerly operated by the joint venture from Thermo Instrument for $34,267,000 in cash. As a result of this transaction, the Company increased its ownership in the businesses operated by the joint venture from 51% to 100%. Based on unaudited data, if the acquisition of Thermo Instrument's share of such businesses by the Company had occurred at the beginning of fiscal 1995, net income and earnings per share on a pro forma basis would have been $1,321,000 and $.08, respectively, for the three months ended October 1, 1994, and $2,409,000 and $.14, respectively, for the six months ended October 1, 1994. The Company borrowed the purchase price from Thermo Electron Corporation (Thermo Electron) through the issuance of a $35,000,000 promissory note due May 13, 1997 and bearing interest at the Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. In June 1995, the Company transferred three businesses formerly operated by the joint venture, collectively known as the Nuclear Services Group (renamed Thermo Nutech), to the Company's Thermo Remediation Inc. (Thermo Remediation) subsidiary in exchange for 1,583,360 shares of Thermo Remediation common stock. 8PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - September 30, 1995 (continued) 3. Acquisition On May 10, 1995, the Company acquired substantially all of the assets of Lancaster Laboratories, Inc. and its affiliate Clewmark Holdings (collectively Lancaster Laboratories). Lancaster Laboratories, based in Lancaster, Pennsylvania, is a provider of high-quality analytical services to the environmental, food, and pharmaceutical industries. The purchase price for the assets was $19,207,000 in cash, plus the assumption of approximately $5,333,000 in bank indebtedness existing as of the closing of the acquisition. The Company has also agreed to pay an additional $600,000 as a result of Lancaster Laboratories having achieved certain performance goals through the period ending September 30, 1995. The acquisition of Lancaster Laboratories has been accounted for using the purchase method of accounting, and its results of operations have been included in the accompanying financial statements from the date of acquisition. The aggregate cost of this acquisition exceeded the estimated fair value of the acquired net assets by $7,736,000, which is being amortized over 40 years. Allocation of the purchase price for this acquisition 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 Lancaster Laboratories on a pro forma basis, assuming the companies had been combined from the beginning of fiscal 1995. Three Months Ended Six Months Ended ------------------ ------------------------- (In thousands except October 1, September 30, October 1, per share amounts) 1994 1995 1994 -------------------------------------------------------------------------- Revenues $38,821 $106,204 $74,887 Net Income (Loss) 1,261 (164) 1,933 Earnings (Loss) per Share .07 (.01) .11 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 1995. 9PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. (d) Notes to Consolidated Financial Statements - September 30, 1995 (continued) 4. Subsidiary Debenture Offering and Private Placement of Subsidiary Common Stock On May 4, 1995, Thermo Remediation issued and sold $37,950,000 principal amount of 4 7/8% subordinated convertible debentures due 2000. The debentures are convertible into shares of Thermo Remediation's common stock at a conversion price of $17.92 per share and 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 the guarantee. In addition, in May 1995, Thermo Remediation sold 500,000 shares of its common stock in a private placement at $13.25 per share for net proceeds of $6,625,000, resulting in a gain of $2,742,000. In June 1995, Thermo Remediation repaid its $4,000,000 note payable to Thermo Electron with proceeds from the offerings. As of September 30, 1995, the Company owned 67.7% of Thermo Remediation's outstanding common stock. 5. Write-off of Cost in Excess of Net Assets of Acquired Company Following the purchases of Killam Associates in February 1995, the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument in April 1995, and Lancaster Laboratories in May 1995, the primary growth focus of the Company has become environmental infrastructure services. The Company no longer expects to reinvest in the thermal-processing equipment business to the extent necessary to recover the "Cost in excess of net assets of acquired company" acquired with that business. Accordingly, the Company wrote off $4,995,000 of "Cost in excess of net assets of acquired company" associated with the thermal-processing equipment business. This noncash expense is nondeductible for tax purposes. 6. Loss on Sale of Assets During September 1995, the Company sold to a management group the assets of a small civil engineering design office in Williston, Vermont that was no longer included in the geographic expansion plans of the Company. An intangible asset of $569,000 associated with this office was not recovered in the sale price and, accordingly, has been written off. This noncash expense is nondeductible for tax purposes. Sales and earnings of this office were not material to the Company. 10PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company is a provider of environmental services and infrastructure planning and design, encompassing a range of specializations within the consulting and design, remediation and recycling, laboratory testing, and metal-treating industries. Consulting and Design - The Company's Bettigole Andrews & Clark and Normandeau Associates subsidiaries provide both private and public sector clients with a range of consulting services that address transportation planning and design, and natural resource management issues, respectively. In February 1995, the Company acquired Elson T. Killam Associates Inc. (Killam Associates), which provides environmental consulting and engineering services and specializes in wastewater treatment and water resources management. Remediation and Recycling - The Company's majority-owned Thermo Remediation Inc. (Thermo Remediation) subsidiary operates a network of soil-remediation centers, serving customers in more than a dozen states by providing thermal treatment of soil to remove and destroy petroleum contamination caused by leaking underground and aboveground storage tanks, spills, and other sources. In addition, Thermo Remediation's Thermo Fluids subsidiary, located in Arizona, offers fluids-recycling services including waste motor oil and wastewater treatment throughout Arizona and in neighboring states. Through its Thermo Nutech subsidiary, Thermo Remediation provides services to remove radioactive contaminants from sand, gravel, and soil, as well as health physics, radiochemistry laboratory, and radiation dosimetry services. Thermo Nutech was formerly part of the Thermo Terra Tech joint venture. The Company's majority-owned J. Amerika N.V. (J. Amerika) subsidiary, to be renamed Thermo EuroTech N.V., located in the Netherlands, provides wastewater treatment services as well as services to test, remove and install underground storage tanks. In March 1995, J. Amerika acquired Refining and Trading Holland B.V. (North Refinery), which specializes in converting "off-spec" and contaminated petroleum fluids into usable oil products. Laboratory Testing - Thermo Analytical operates a network of analytical laboratories that provide environmental testing services to commercial and government clients throughout the U.S. The May 1995 acquisition of Lancaster Laboratories expands the Company's range of contract services beyond environmental testing to the pharmaceutical- and food-testing industries. Metal Treating - The Company performs metallurgical processing services, using thermal-treatment equipment at locations in California and Minnesota. The Company also designs, manufactures, and installs advanced custom-engineered, thermal-processing systems through its equipment division located in Michigan. 11PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations Second Quarter Fiscal 1996 Compared With Second Quarter Fiscal 1995 ------------------------------------------------------------------- Total revenues in the second quarter of fiscal 1996 increased 73% to $53.8 million from $31.0 million in the second quarter of fiscal 1995. Consulting and design services revenues were $18.4 million in fiscal 1996, compared with $8.4 million in fiscal 1995. This increase results from the inclusion of revenues from Killam Associates which was acquired in February 1995. Revenues from remediation and recycling services were $17.1 million in fiscal 1996, compared with $14.2 million in fiscal 1995. An increase in revenues of $3.7 million resulted from the inclusion of revenues from businesses acquired in fiscal 1995 and, to a lesser extent, an increase in revenues from a long-term environmental restoration contract for the U.S. Department of Energy's (DOE's) Hanford site (Hanford). These increases were offset in part by lower revenues resulting from a decrease in the volume of soil processed as a result of the regulatory uncertainties at one site, competitive pricing pressures at several locations and, to a lesser extent, a decrease in radiochemistry laboratory work, reflecting a reduction in spending at the DOE. Revenues from laboratory testing services, excluding the radiochemistry laboratory services included in remediation and recycling services, increased to $10.2 million in the second quarter of fiscal 1996, from $2.1 million in fiscal 1995, reflecting the inclusion of revenues from Lancaster Laboratories, which was acquired in May 1995. Metal treating revenues increased to $8.1 million in fiscal 1996 from $6.3 million in fiscal 1995, due primarily to an increase in equipment sales. The gross profit margin increased to 31% in the second quarter of fiscal 1996 from 26% in the second quarter of fiscal 1995, due primarily to the inclusion of higher-margin Killam Associates revenues, offset in part by lower margins from remediation and recycling services revenues due primarily to a lower gross profit margin associated with revenues from the Hanford contract and a decrease in revenues from radiochemistry laboratory work. During the second quarter of fiscal 1996, the Company wrote off $4,995,000 of "Cost in excess of net assets of acquired company" related to its thermal-processing equipment business (Note 5). In addition, the Company incurred a loss of $569,000 as a result of the sale of an engineering office (Note 6). These noncash expenses are nondeductible for tax purposes. Selling, general and administrative expenses as a percentage of revenues increased to 21% in the second quarter of fiscal 1996 from 19% in the second quarter of fiscal 1995 due primarily to the inclusion of higher selling, general and administrative expenses as a percentage of revenues at Killam Associates. 12PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Second Quarter Fiscal 1996 Compared With Second Quarter Fiscal 1995 ------------------------------------------------------------------- (continued) Net interest expense was $1.6 million in the second quarter of fiscal 1996, compared with net interest income of $250,000 in the second quarter of fiscal 1995. This change resulted primarily from funds expended to purchase the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument Systems Inc. (Thermo Instrument), as well as Killam Associates and Lancaster Laboratories. These expenditures were made from existing funds and borrowings from Thermo Electron Corporation (Thermo Electron). In addition, interest expense increased in fiscal 1996 due to the issuance of the 4 7/8% subordinated convertible debentures by Thermo Remediation in May 1995. As a result of the sale of stock by J. Amerika, the Company recorded a gain of $668,000 in the second quarter of fiscal 1995. The 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 subsidiaries" in the accompanying statement of operations. The effective tax rate in the second quarter of fiscal 1996 was higher than the federal statutory rate due primarily to the nondeductible write-off of "Cost in excess of net assets of acquired company" and the "Loss on sale of assets." In fiscal 1995, the effective tax rate was less than the federal statutory rate due to the exclusion of income taxed directly to a minority partner. Minority interest expense decreased to $433,000 in the second quarter of fiscal 1996 from $1.4 million in the second quarter of fiscal 1995 due primarily to the Company's purchase of the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument, effective April 2, 1995 (Note 2). First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995 ----------------------------------------------------------------------- Total revenues in the first six months of fiscal 1996 increased 73% to $103.6 million from $59.9 million in the first six months of fiscal 1995. Consulting and design services revenues were $38.2 million in fiscal 1996, compared with $16.2 million in fiscal 1995. This increase results from the inclusion of revenues from Killam Associates, which was acquired in February 1995 and, to a lesser extent, the inclusion of revenues from RMC Environmental Services, Inc. (RMC) for the full six months of fiscal 1996, compared with approximately two months in fiscal 1995. Revenues from remediation and recycling services were $32.5 million in fiscal 1996, compared with $27.3 million in fiscal 1995. An increase in revenues of $6.7 million resulted from the inclusion of revenues from businesses acquired in fiscal 1995, as well as an increase in revenues from the Hanford contract. These increases were offset in part by lower revenues resulting from a decrease in the volume of soil processed as a result of regulatory 13PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995 ----------------------------------------------------------------------- (continued) uncertainties at one site, competitive pricing pressures at several locations and, to a lesser extent, a decrease in radiochemistry laboratory work, reflecting a reduction in spending at the DOE. Revenues from laboratory testing services, excluding the radiochemistry laboratory services included in remediation and recycling services, increased to $17.7 million in fiscal 1996 from $4.0 million in fiscal 1995, reflecting the inclusion of revenues from Lancaster Laboratories, which was acquired in May 1995. Metal treating revenues increased to $15.3 million in fiscal 1996 from $12.4 million in fiscal 1995, due primarily to an increase in equipment sales. The gross profit margin increased to 31% in the first six months of fiscal 1996 from 26% in the first six months of fiscal 1995, due to the reasons discussed in the results of operations for the second quarter. Selling, general and administrative expenses as a percentage of revenues increased to 22% in the first six months of fiscal 1996 from 19% in the first six months of fiscal 1995 due primarily to the inclusion of higher selling, general and administrative expenses as a percentage of revenues at Killam Associates. Net interest expense was $2.5 million in the first six months of fiscal 1996, compared with net interest income of $465,000 in the first six months of fiscal 1995. This change resulted primarily from funds expended to purchase from the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument, as well as Killam Associates and Lancaster Laboratories. These expenditures were made from existing funds and borrowings from Thermo Electron. In addition, interest expense increased in fiscal 1996 due to the issuance of the 4 7/8% subordinated convertible debentures by Thermo Remediation in May 1995. As a result of the sale of stock by Thermo Remediation in fiscal 1996 and 1995 and by J. Amerika in fiscal 1995, the Company recorded gains of $2,742,000 in the first six months of fiscal 1996 and $897,000 in the first six months of fiscal 1995. The gains represent increases in the Company's proportionate share of the subsidiaries equity and are classified as "Gain on issuance of stock by subsidiaries" in the accompanying statement of operations (Note 4). 14PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995 ----------------------------------------------------------------------- (continued) The effective tax rate in the first six months of fiscal 1996 was higher than the federal statutory rate due primarily to the nondeductible write-off of "Cost in excess of net assets of acquired company" and the "Loss on sale of assets," offset in part by the nontaxable gains on issuance of stock by subsidiary. In fiscal 1995, the effective tax rate was less than the federal statutory rate due to the exclusion of income taxed directly to a minority partner. Minority interest expense decreased to $811,000 in the first six months of fiscal 1996 from $2.5 million in the first six months of fiscal 1995 due primarily to the Company's purchase of the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument, effective April 2, 1995 (Note 2). Financial Condition Liquidity and Capital Resources ------------------------------- Consolidated working capital, including cash, cash equivalents, and short-term available-for-sale investments, was $96.3 million at September 30, 1995, compared with $64.7 million at April 1, 1995. Cash, cash equivalents, and short- and long-term available-for-sale investments were $67.1 million at September 30, 1995, compared with $51.5 million at April 1, 1995. Of the $67.1 million balance at September 30, 1995, $51.8 million was held by Thermo Remediation and the remainder by the Company and its wholly owned subsidiaries. During the first six months of fiscal 1996, the Company expended an aggregate of $59.0 million, net of cash acquired, to purchase Lancaster Laboratories and to purchase the businesses formerly operated by the Thermo Terra Tech joint venture from Thermo Instrument (Notes 2 and 3). Balance sheet changes between April 1, 1995 and September 30, 1995 primarily reflect the acquisition of Lancaster Laboratories, and Thermo Remediation's issuance of convertible debentures and private placement of common stock discussed below. In addition, the Company expended $8.6 million on property, plant and equipment, primarily relating to two new soil-remediation sites under construction. The Company plans to expend an additional $2.8 million on these sites in the remainder of fiscal 1996. In May 1995, Thermo Remediation issued and sold $38 million principal amount of 4 7/8% subordinated convertible debentures due 2000. In addition, in May 1995, Thermo Remediation sold 500,000 shares of its common stock in a private placement for net proceeds of $6.6 million. In June 1995, Thermo Remediation repaid its $4.0 million note payable to Thermo Electron with proceeds from the offerings. 15PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Liquidity and Capital Resources (continued) ------------------------------- Although the Company has no material capital expenditure commitments, except as noted above, such expenditures will largely be affected by the number and size of the complementary businesses that can be acquired or developed during the year. Thermo Electron has indicated its intention to require the Company's indebtedness to Thermo Electron be repaid to the extent that the Company's liquidity and cash flow permit. Accordingly, the Company believes that it has adequate resources to meet the financial needs of its current operations for the foreseeable future. Part II - Other Information Item 6 - Exhibits See Exhibit Index on the page immediately preceding exhibits. 16PAGE Form 10-Q September 30, 1995 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 November 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 17PAGE Form 10-Q September 30, 1995 THERMO PROCESS SYSTEMS INC. EXHIBIT INDEX Exhibit Number Document Page -------------- ------------------------------------------------ ---- 27 Financial Data Schedule. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO PROCESS SYSTEMS INC.'S RESULTS OF OPERATIONS ON FORM 10-Q FOR THE PERIOD ENDED 9/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-30-1996 SEP-30-1995 39,544 25,469 36,224 3,157 4,254 135,536 113,158 36,492 318,323 39,255 81,999 1,746 0 0 75,363 318,323 8,608 103,638 7,758 71,694 5,553 (21) 5,232 2,945 2,344 (210) 0 0 0 (210) (.01) 0
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