-----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, Bd8ogiut8D/77Lqu5XM+o8lHbR5xBxgu4jSKoHhotaAVEZrXNutYEkdMNpvcEKyC 3ygm1oWdR/RWhGn3Pqm6tQ== 0000796038-96-000035.txt : 19961106 0000796038-96-000035.hdr.sgml : 19961106 ACCESSION NUMBER: 0000796038-96-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961104 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO TERRATECH 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: 96653283 BUSINESS ADDRESS: STREET 1: 81 WYMAN ST STREET 2: P O BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02154-9046 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET STREET 2: P O BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02154-9046 FORMER COMPANY: FORMER CONFORMED NAME: THERMO PROCESS SYSTEMS INC DATE OF NAME CHANGE: 19920703 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 28, 1996. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-9549 THERMO TERRATECH 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 25, 1996 ---------------------------- ------------------------------- Common Stock, $.10 par value 18,254,067 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMO TERRATECH INC. Consolidated Balance Sheet (Unaudited) Assets September 28, March 30, (In thousands) 1996 1996 ------------------------------------------------------------------------ Current Assets: Cash and cash equivalents $ 68,733 $ 31,182 Short-term available-for-sale investments, at quoted market value (amortized cost of $28,369 and $7,007) 28,426 7,004 Accounts receivable, less allowances of $3,022 and $2,861 50,833 44,397 Unbilled contract costs and fees 25,053 21,113 Inventories: Raw materials and supplies 2,630 3,822 Work in process and finished goods 795 61 Prepaid and refundable income taxes 7,871 9,556 Prepaid expenses 5,249 4,442 -------- -------- 189,590 121,577 -------- -------- Property, Plant and Equipment, at Cost 132,766 126,129 Less: Accumulated depreciation and amortization 46,767 43,173 -------- -------- 85,999 82,956 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $2,108 in fiscal 1996) - 2,098 -------- -------- Long-term Held-to-maturity Investments, at Amortized Cost (quoted market value of $25,632 and $24,963) 25,138 24,251 -------- -------- Other Assets 19,094 12,931 -------- -------- Cost in Excess of Net Assets of Acquired Companies 90,814 89,843 -------- -------- $410,635 $333,656 ======== ======== 2PAGE THERMO TERRATECH INC. Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment September 28, March 30, (In thousands except share amounts) 1996 1996 ----------------------------------------------------------------------- Current Liabilities: Accounts payable $ 13,597 $ 10,922 Notes payable and current maturities of long-term obligations (includes $38,000 and $15,000 due to parent company) 44,312 19,711 Billings in excess of revenues earned 1,487 2,076 Accrued payroll and employee benefits 8,811 9,930 Accrued income taxes 845 - Other accrued expenses 13,193 7,871 Due to parent company 3,552 5,059 -------- -------- 85,797 55,569 -------- -------- Deferred Income Taxes 3,591 3,558 -------- -------- Other Deferred Items 950 980 -------- -------- Long-term Obligations: 4 5/8% Subordinated convertible debentures (Note 2) 113,850 - 6 1/2% Subordinated convertible debentures 13,382 18,182 4 7/8% Subordinated convertible debentures 37,950 37,950 Other (includes $73,000 due to parent company in fiscal 1996) (Note 2) 26,489 99,252 -------- -------- 191,671 155,384 -------- -------- Minority Interest 36,473 32,295 -------- -------- Shareholders' Investment: Common stock, $.10 par value, 75,000,000 shares authorized; 18,278,210 and 17,598,013 shares issued 1,828 1,760 Capital in excess of par value 63,092 59,419 Retained earnings 27,204 24,474 Treasury stock at cost, 24,143 and 34,531 shares (282) (410) Cumulative translation adjustment 274 635 Net unrealized gain (loss) on available-for-sale investments 37 (8) -------- -------- 92,153 85,870 -------- -------- $410,635 $333,656 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE THERMO TERRATECH INC. Consolidated Statement of Operations (Unaudited) Three Months Ended ---------------------------- September 28, September 30, (In thousands except per share amounts) 1996 1995 ------------------------------------------------------------------------ Revenues: Service revenues $61,121 $49,452 Product revenues 6,148 5,046 ------- ------- 67,269 54,498 ------- ------- Costs and Operating Expenses: Cost of service revenues 50,995 36,686 Cost of product revenues 4,902 4,445 Selling, general and administrative expenses 9,727 8,300 Product and new business development expenses 275 282 Write-off of cost in excess of net assets of acquired company - 4,995 ------- ------- 65,899 54,708 ------- ------- Operating Income (Loss) 1,370 (210) Interest Income 2,017 1,406 Interest Expense (includes $553 and $1,690 to parent company) (3,462) (2,959) Equity in Earnings of Unconsolidated Subsidiary 280 - Gain on Issuance of Stock by Subsidiary (Note 3) 1,475 - Gain on Sale of Investments 19 - Loss on Sale of Assets - (569) Other Income 47 - ------- ------- Income Before Provision for Income Taxes and Minority Interest 1,746 (2,332) Provision for Income Taxes 207 1,350 Minority Interest Expense 89 433 ------- ------- Net Income (Loss) $ 1,450 $(4,115) ======= ======= Earnings (Loss) per Share $ .08 $ (.24) ======= ======= Weighted Average Shares 18,848 17,373 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMO TERRATECH INC. Consolidated Statement of Operations (Unaudited) Six Months Ended ---------------------------- September 28, September 30, (In thousands except per share amounts) 1996 1995 ------------------------------------------------------------------------ Revenues: Service revenues $122,987 $ 96,618 Product revenues 11,900 8,608 -------- -------- 134,887 105,226 -------- -------- Costs and Operating Expenses: Cost of service revenues 100,803 71,880 Cost of product revenues 9,620 7,758 Selling, general and administrative expenses 18,274 16,649 Product and new business development expenses 574 558 Write-off of cost in excess of net assets of acquired company - 4,995 -------- -------- 129,271 101,840 -------- -------- Operating Income 5,616 3,386 Interest Income 3,647 2,766 Interest Expense (includes $1,382 and $2,898 to parent company) (6,570) (5,232) Equity in Earnings of Unconsolidated Subsidiary 559 - Gain on Issuance of Stock by Subsidiaries (Note 3) 1,475 2,742 Gain on Sale of Investments 166 80 Loss on Sale of Assets - (569) Other Income 47 - -------- -------- Income Before Provision for Income Taxes and Minority Interest 4,940 3,173 Provision for Income Taxes 1,721 2,436 Minority Interest Expense 311 811 -------- -------- Net Income (Loss) $ 2,908 $ (74) ======== ======== Earnings (Loss) per Share $ .15 $ - ======== ======== Weighted Average Shares 18,839 17,362 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE THERMO TERRATECH INC. Consolidated Statement of Cash Flows (Unaudited) Six Months Ended ---------------------------- September 28, September 30, (In thousands) 1996 1995 ------------------------------------------------------------------------ Operating Activities: Net income (loss) $ 2,908 $ (74) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 6,523 5,960 Write-off of cost in excess of net asset of acquired company - 4,995 Loss on sale of assets - 569 Equity in earnings of unconsolidated subsidiary (559) - Minority interest expense 311 811 Provision for losses on accounts receivable 388 (21) Other noncash expenses - 194 Increase (decrease) in deferred income taxes (22) 91 Gain on issuance of stock by subsidiaries (1,475) (2,742) Gain on sale of investments (166) (80) Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (5,850) (3,018) Inventories and unbilled contract costs and fees (3,423) (803) Other current assets (1,153) (1,026) Current liabilities 5,997 3,473 Other (87) - -------- -------- Net cash provided by operating activities 3,392 8,329 -------- -------- Investing Activities: Acquisitions, net of cash acquired (1,681) (25,404) Purchase of minority interest in Thermo Terra Tech joint venture - (34,267) Purchases of available-for-sale investments (39,027) (23,299) Proceeds from sale and maturities of available-for-sale investments 19,915 11,630 Purchases of property, plant and equipment (8,262) (8,609) Proceeds from sale of property, plant and equipment 393 594 Purchase of other assets (413) (26) -------- -------- Net cash used in investing activities $(29,075) $(79,381) -------- -------- 6PAGE THERMO TERRATECH INC. Consolidated Statement of Cash Flows (continued) (Unaudited) Six Months Ended ---------------------------- September 28, September 30, (In thousands) 1996 1995 ------------------------------------------------------------------------ Financing Activities: Net proceeds from issuance of subordinated convertible debentures (Note 2) $112,429 $ 36,889 Issuance of note payable to parent company - 35,000 Repayment of notes payable to parent company (Note 2) (50,000) (4,000) Proceeds from issuance of Company and subsidiary common stock (Note 3) 4,720 6,959 Repurchase of Company common stock (1,865) - Repurchase of subordinated convertible debentures (1,078) - Issuance of short-term obligations 560 2,178 Repayment of note payable (901) (618) Dividends paid by subsidiary to minority shareholders (450) (551) Issuance of note receivable - (401) Metal Treating, Inc. transfer to parent company (178) (296) -------- -------- Net cash provided by financing activities 63,237 75,160 -------- -------- Exchange Rate Effect on Cash (3) (372) -------- -------- Increase in Cash and Cash Equivalents 37,551 3,736 Cash and Cash Equivalents at Beginning of Period 31,182 35,808 -------- -------- Cash and Cash Equivalents at End of Period $ 68,733 $ 39,544 ======== ======== Noncash Activities: Fair value of assets of acquired companies $ 6,476 $ 28,201 Cash paid for acquired companies (1,705) (25,836) Issuance of subsidiary common stock for acquired company (2,006) - -------- -------- Liabilities assumed of acquired companies $ 2,765 $ 2,365 ======== ======== Conversions of subordinated convertible debentures $ 4,800 $ - The accompanying notes are an integral part of these consolidated financial statements. 7PAGE THERMO TERRATECH INC. Notes to Consolidated Financial Statements 1. General The interim consolidated financial statements presented have been prepared by Thermo TerraTech 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 the financial position at September 28, 1996, the results of operations for the three- and six-month periods ended September 28, 1996 and September 30, 1995, and the cash flows for the six-month periods ended September 28, 1996 and September 30, 1995. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of March 30, 1996, 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 March 30, 1996, filed with the Securities and Exchange Commission. Certain amounts in fiscal 1996 have been reclassified to conform to the fiscal 1997 financial statement presentation. Certain of these reclassifications are required to present consistent classification of expenses within the Company's consulting and design services business. Historical financial results have been restated to include Metal Treating, Inc. (Metal Treating), which was acquired in October 1996 in a transaction accounted for under the pooling-of-interests method (Note 4). 2. Subordinated Convertible Debentures In May 1996, the Company issued and sold $115.0 million principal amount of 4 5/8% subordinated convertible debentures due 2003 for net proceeds of $112.4 million. The debentures are convertible into shares of the Company's common stock at a price of $15.90 per share and are guaranteed on a subordinated basis by Thermo Electron Corporation (Thermo Electron). In September 1996, the Company repurchased $1,150,000 principal amount of these debentures, resulting in no material gain or loss. In May 1996, the Company repaid its $15.0 million and $35.0 million promissory notes to Thermo Electron with proceeds from the offering. 3. Transaction in Stock of Subsidiary In September 1996, the Company's majority-owned Thermo EuroTech N.V. (Thermo EuroTech) subsidiary sold 1,105,000 shares of its common stock in a private placement at $4.25 per share, for net proceeds of $4.4 8PAGE THERMO TERRATECH INC. 3. Transaction in Stock of Subsidiary (continued) million, resulting in a gain of $1.5 million. Following the private placement, the Company owned 53% of Thermo EuroTech's outstanding common stock. 4. Subsequent Event In October 1996, the Company acquired Metal Treating from Thermo Electron in exchange for $1.6 million in cash. Metal Treating provides heat treating services, including carburizing, vacuum hardening, silver and copper brazing, and aluminum heat treating, primarily to the Milwaukee and southeastern Wisconsin areas. Because the Company and Metal Treating 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 the pooling-of-interests method. Accordingly, all historical information presented has been restated to include the results of Metal Treating. The purchase price of $1.6 million is included in due to parent company in the accompanying balance sheet. Revenues and net income (loss) as previously reported by the separate entities prior to the acquisition and as restated for the combined Company are as follows: Three Three Six Months Ended Months Ended Months Ended ------------- -------------- -------------- (In thousands) June 29, 1996 Sept. 30, 1995 Sept. 30, 1995 ------------------------------------------------------------------------ Revenues: Previously reported $ 66,888 $ 53,782 $103,638 Metal Treating 739 716 1,588 Elimination (9) - - -------- -------- -------- $ 67,618 $ 54,498 $105,226 ======== ======== ======== Net Income (Loss): Previously reported $ 1,438 $ (4,159) $ (210) Metal Treating 20 44 136 -------- -------- -------- $ 1,458 $ (4,115) $ (74) ======== ======== ======== 9PAGE THERMO TERRATECH INC. Item 2 - 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. These statements involve a number of risks and uncertainties, including those detailed in Item 5 of this Quarterly Report on Form 10-Q. Overview The Company is a provider of environmental services and infrastructure planning and design, encompassing a range of specializations within the remediation and recycling, consulting and design, and laboratory-testing industries. The Company also provides metal-treating services and thermal-processing systems used to treat primary metals and metal parts. The Company's environmental services businesses are affected by several factors, particularly extreme weather variations, government spending, and regulation of remediation activities. Remediation and Recycling - In December 1995, the Company's majority-owned Thermo Remediation Inc. (Thermo Remediation) subsidiary acquired Remediation Technologies, Inc. (ReTec), a provider of integrated environmental services such as remediation of industrial sites contaminated with organic wastes and residues. In September 1996, Thermo Remediation acquired IEM Sealand Corporation (IEM Sealand), a provider of construction services for the remediation of hazardous wastes under contracts with federal and state governments, and other public and private sector clients. 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. Through its TPS Technologies Inc. division, Thermo Remediation is also a national leader in the design and operation of nonhazardous soil-remediation facilities and operates a network of such facilities serving customers in more than a dozen states along the East and West coasts. In addition, Thermo Remediation's Thermo Fluids subsidiary collects, tests, processes, and recycles used motor oil and other industrial oils. The Company's majority-owned Thermo EuroTech N.V. (Thermo EuroTech) subsidiary, located in the Netherlands, provides wastewater treatment services as well as services to test, remove, and install underground storage tanks. Through its North Refinery subsidiary, Thermo EuroTech specializes in converting "off-spec" and contaminated petroleum fluids into usable oil products. Consulting and Design - The Company's wholly owned Killam Associates subsidiary provides environmental consulting and engineering services and specializes in wastewater treatment and water resources management. The Company's wholly owned 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. 10PAGE THERMO TERRATECH INC. Overview (continued) Laboratory Testing - The Company's wholly owned Thermo Analytical subsidiary 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, Inc. (Lancaster Laboratories) expanded 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, Minnesota, and Wisconsin. The Company also designs, manufactures, and installs advanced custom-engineered, thermal-processing systems through its equipment division located in Michigan. Results of Operations Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996 Total revenues in the second quarter of fiscal 1997 increased 23% to $67.3 million from $54.5 million in the second quarter of fiscal 1996. Revenues from remediation and recycling services increased to $30.8 million in fiscal 1997 from $17.1 million in fiscal 1996, primarily due to the inclusion of $13.7 million in revenues in fiscal 1997 from ReTec and IEM Sealand, which were acquired in December 1995 and September 1996, respectively, and, to a lesser extent, higher revenues from health physics services. Revenues from soil-remediation services decreased 21% resulting from declines in the volume of soil processed due to reduced compliance requirements and/or relaxed enforcement activities in several states and competitive pricing pressures. Revenues from consulting and design services remained relatively unchanged at $18.7 million in fiscal 1997 and $18.4 million in fiscal 1996. Revenues from laboratory-testing services, excluding the radiochemistry laboratory services included in remediation and recycling services, decreased to $8.3 million in fiscal 1997 from $10.2 million in fiscal 1996, largely due to reduced federal spending. Metal-treating revenues increased to $10.2 million in fiscal 1997 from $8.8 million in fiscal 1996, primarily due to an increase in demand for thermal-processing equipment at existing businesses. The gross profit margin decreased to 17% in the second quarter of fiscal 1997 from 25% in the second quarter of fiscal 1996, primarily due to a decrease in gross profit margins for remediation and recycling services due to lower volumes of soil processed at the Company's traditionally higher-margin soil-remediation centers and, to a lesser extent, lower margins on the soil processed due to competitive pricing pressures, and the inclusion of lower-margin revenues from ReTec. This decline is also due to a decrease in gross profit margins for laboratory-testing services due to costs incurred related to efforts to eliminate redundant capabilities at regional laboratories. These decreases were offset in part by higher gross profit margins from metal-treating services resulting from an increase in revenues. 11PAGE THERMO TERRATECH INC. Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996 (continued) 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. In addition, the Company incurred a loss of $569,000 as a result of the sale of an engineering office. These noncash expenses are nondeductible for tax purposes. Selling, general and administrative expenses as a percentage of revenues decreased to 14% in the second quarter of fiscal 1997 from 15% in the second quarter of fiscal 1996, primarily due to efficiencies associated with an increase in revenues and lower expenses as a percentage of revenues at acquired companies. Interest income increased to $2.0 million in the second quarter of fiscal 1997 from $1.4 million in the second quarter of fiscal 1996, primarily as a result of interest income earned on invested proceeds from the Company's issuance of 4 5/8% subordinated convertible debentures in May 1996 (Note 2). Interest expense increased to $3.5 million in fiscal 1997 from $3.0 million in fiscal 1996, primarily due to interest on the Company's 4 5/8% issuance of subordinated convertible debentures, offset in part by a decrease in interest expense due to the repayment of promissory notes to Thermo Electron Corporation (Thermo Electron) with proceeds from the Company's 4 5/8% subordinated convertible debentures. Equity in earnings of unconsolidated subsidiary in the second quarter of fiscal 1997 represents ReTec's proportionate share of income from a joint venture. As a result of the sale of stock by Thermo EuroTech, the Company recorded a gain of $1.5 million in the second quarter of fiscal 1997 (Note 3). 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 subsidiary in the accompanying statement of operations. The effective tax rate in the second quarter of fiscal 1997 was lower than the statutory federal income tax rate primarily due to the nontaxable gain on issuance of stock by subsidiary, offset in part by nondeductible amortization of cost in excess of net assets of acquired companies and the impact of state income taxes. The effective tax rate in fiscal 1996 was higher than the federal statutory rate primarily due to the nondeductible write-off of cost in excess of net assets of acquired company and the loss on sale of assets. Minority interest expense decreased to $0.1 million in the second quarter of fiscal 1997 from $0.4 million in the second quarter of fiscal 1996, due to a reduction in earnings from the Company's majority-owned subsidiaries. 12PAGE THERMO TERRATECH INC. First Six Months of Fiscal 1997 Compared With First Six Months of Fiscal 1996 Total revenues in the first six months of fiscal 1997 increased 28% to $134.9 million from $105.2 million in the first six months of fiscal 1996. Revenues from remediation and recycling services increased to $58.7 million in fiscal 1997 from $32.5 million in fiscal 1996, primarily due to the inclusion of $24.2 million in revenues from ReTec and IEM Sealand, which were acquired in December 1995 and September 1996, respectively. This increase in revenues is also due to an increase in revenues at Thermo EuroTech and, to a lesser extent, higher revenues from health physics services and 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 a decrease in radiochemistry laboratory work, reflecting ongoing reductions in spending at the DOE as well as a shift in DOE spending from investigative work performed by the Company's laboratories to cleanup work. Revenues from soil-remediation services decreased 15% primarily due to the reasons discussed in the results of operations for the second quarter. Revenues from consulting and design services increased to $40.2 million in fiscal 1997 from $38.2 million in fiscal 1996, primarily due to increased revenues from two major contracts, offset in part by lower revenues from federal government contracts, reflecting a reduction in spending and delays in budget appropriations. Revenues from laboratory-testing services, excluding the radiochemistry laboratory services included in remediation and recycling services, remained relatively constant at $17.6 million in fiscal 1997 and $17.7 million in fiscal 1996. Metal-treating revenues increased to $20.1 million in fiscal 1997 from $16.9 million in fiscal 1996, primarily due to an increase in demand for thermal-processing equipment at existing businesses. The gross profit margin decreased to 18% in the first six months of fiscal 1997 from 24% in the first six months of fiscal 1996, primarily due to the reasons discussed in the results of operations for the second quarter. Selling, general and administrative expenses as a percentage of revenues decreased to 14% in the first six months of fiscal 1997 from 16% in the first six months of fiscal 1996, primarily due to efficiencies associated with an increase in revenues, a decline in expenses related to the consolidation of administrative functions within the consulting and design services business, and lower expenses as a percentage of revenues at acquired companies. Interest income increased to $3.6 million in the first six months of fiscal 1997 from $2.8 million in the first six months of fiscal 1996, primarily as a result of interest income earned on invested proceeds from the Company's issuance of 4 5/8% subordinated convertible debentures in May 1996 (Note 2). Interest expense increased to $6.6 million in fiscal 1997 from $5.2 million in fiscal 1996, primarily due to interest on the Company's 4 5/8% subordinated convertible debentures and Thermo Remediation's issuance of 4 7/8% subordinated convertible debentures in 13PAGE THERMO TERRATECH INC. First Six Months of Fiscal 1997 Compared With First Six Months of Fiscal 1996 (continued) May 1995, offset in part by a decrease in interest expense due to the repayment of promissory notes to Thermo Electron with proceeds from the Company's 4 5/8% subordinated convertible debentures. During the first six months of fiscal 1997 and 1996, the Company recorded gains of $1.5 million and $2.7 million, respectively, from the sale of stock by subsidiaries (Note 3). The effective tax rate in the first six months of fiscal 1997 was lower than the statutory federal income tax rate primarily due to the nontaxable gain on issuance of stock by subsidiaries offset in part by nondeductible amortization of cost in excess of net assets of acquired companies and the impact of state income taxes. The effective tax rate in fiscal 1996 was higher than the federal statutory rate primarily due 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 subsidiaries. Minority interest expense decreased to $0.3 million in the first six months of fiscal 1997 from $0.8 million in the first six months of fiscal 1996, due to a reduction in earnings from the Company's majority-owned subsidiaries. Liquidity and Capital Resources Consolidated working capital, including cash, cash equivalents, and short-term available-for-sale investments, increased to $103.8 million at September 28, 1996 from $66.0 million at March 30, 1996. Cash, cash equivalents, and short- and long-term available-for-sale investments were $97.2 million at September 28, 1996, compared with $40.3 million at March 30, 1996. Of the $97.2 million balance at September 28, 1996, $28.7 million and $4.4 million was held by Thermo Remediation and Thermo EuroTech, respectively, and the remainder by the Company and its wholly owned subsidiaries. In addition, at September 28, 1996, the Company had $25.1 million of long-term held-to-maturity investments, compared with $24.3 million at March 30, 1996. During the first six months of fiscal 1997, $3.4 million of cash was provided by operating activities. In the first six months of fiscal 1997, the Company funded increases in accounts receivable and unbilled contract costs and fees of $5.8 million and $3.4 million, respectively. The increase in accounts receivable is primarily due to higher revenues at Thermo Remediation's IEM Sealand, Thermo NuTech, and Thermo Fluids divisions. The increase in unbilled contract costs and fees was due to an increase in thermal-processing equipment contracts, remediation contracts at ReTec, and consulting and design services contracts. These uses of cash were largely offset by an increase in other current liabilities, including $3.0 million in accrued interest related to the 4 5/8% convertible debentures (Note 2). In May 1996, the Company issued and sold $115.0 million principal amount of 4 5/8% subordinated convertible debentures due 2003 for net proceeds of $112.4 million (Note 2). The debentures are guaranteed on a 14PAGE THERMO TERRATECH INC. Liquidity and Capital Resources (continued) subordinated basis by Thermo Electron. In September 1996, the Company repurchased $1,150,000 principal amount of these debentures. In May 1996, the Company repaid its $15.0 million and $35.0 million promissory notes to Thermo Electron with proceeds from the offering. The Boards of Directors of the Company and Thermo Remediation each authorized the repurchase, through August 23, 1997 and September 10, 1997, respectively, of up to $10.0 million of their own securities. Any such purchases would be funded from working capital. Through September 28, 1996, the Company and Thermo Remediation had expended $.1 million and $1.8 million, respectively, under these authorizations. In the first six months of fiscal 1997, the Company expended $1.7 million for acquisitions and $8.3 million for purchases of property, plant and equipment. During the remainder of fiscal 1997, the Company expects to expend an additional $3.0 million for purchases of property, plant and equipment. In October 1996, the Company signed a definitive agreement to acquire the stock of privately held Carlan Consulting Group, Inc., a provider of transportation and environmental consulting and professional engineering services, located in Pensacola and Tampa, Florida, for approximately $3.3 million. The completion of this transaction is subject to several conditions, including completion of the Company's due diligence investigation. The Company has no other material commitments for the acquisition of businesses or for capital expenditures. Such expenditures will largely be affected by the number and size of the complementary businesses that can be acquired or developed during the year. 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 4 - Submission of Matters to a Vote of Security Holders On September 25, 1996, at the Annual Meeting of Shareholders, the shareholders elected six incumbent directors to one-year terms expiring in 1997. The directors reelected at the meeting were: John P. Appleton, John N. Hatsopoulos, Donald E. Noble, William A. Rainville, Paul E. Tsongas, and Polyvios C. Vintiadis. Dr. Appleton received 16,788,646 shares voted in favor of election and 263,051 shares voted against; Mr. Hatsopoulos, Mr. Rainville, and Mr. Vintiadis each received 16,788,749 shares voted in favor of election and 262,948 shares voted against; Mr. Noble received 16,787,849 shares voted in favor of election and 263,848 shares voted against; and Mr. Tsongas received 16,788,748 shares voted in favor of election and 262,949 shares voted against. No abstentions or broker nonvotes were recorded on the election of directors. The shareholders also approved a proposal to amend the Company's Restated Certificate of Incorporation to increase the Company's authorized common stock, $.10 par value per share, from 30 million 15PAGE THERMO TERRATECH INC. Item 4 - Submission of Matters to a Vote of Security Holders (continued) shares to 75 million shares as follows: 16,579,935 shares voted in favor, 440,862 shares voted against, 12,300 shares abstained, and 18,600 broker nonvotes were recorded on the proposal. Item 5 - Other Information 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 fiscal 1997 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Dependence on Environmental Regulation. Federal, state and local environmental laws govern each of the markets in which the Company conducts business, as well as many of the Company's operations. The markets for many of the Company's services, including industrial remediation services, nuclear remediation services, hazardous waste remedial construction services, soil-remediation services, waste-fluids recycling services, consulting and design services, and laboratory services, and the standards governing most aspects of the construction and operation of the Company's facilities, were directly or indirectly created by, and are dependent on, the existence and enforcement of those laws. There can be no assurance that these laws and regulations will not change in the future, requiring new technologies or stricter standards with which the Company must comply. In addition, there can be no assurance that these laws and regulations will not be made more lenient in the future, thereby reducing the size of the markets addressed by the Company. Any such change in such federal, state and local environmental laws and regulations may have a material adverse effect on the Company's business. Responsibility for establishing and enforcing certain federal policies, such as the federal underground storage tank policy, has been delegated to the states, which are not only required to establish regulatory programs, but also are permitted to mandate more stringent requirements than are otherwise required by federal law. Currently, many states are considering adopting a "risk-based" approach to prioritizing site cleanups and setting cleanup standards, which attempts to balance the costs of remediation against the potential harm to human health and the environment from leaving sites unremediated. Although the Company believes that it will be able to take advantage of this shift toward a risk-based approach, there can be no assurance that these policies, if implemented, will not reduce the size of the potential market addressed by the Company. Potential Environmental and Regulatory Liability. The Company's operations are subject to comprehensive laws and regulations related to the protection of the environment. Among other things, these laws and regulations impose requirements to control air, soil, and water pollution, and regulate health, safety, zoning, land use, and the 16PAGE THERMO TERRATECH INC. Item 5 - Other Information (continued) handling and transportation of hazardous and nonhazardous materials. Such laws and regulations also impose liability for remediation and cleanup of environmental contamination, both on-site and off-site, resulting from past and present operations. These requirements may also be imposed as conditions of operating permits or licenses that are subject to renewal, modification or revocation. Existing laws and regulations, and new laws and regulations, may require the Company to modify, supplement, replace, or curtail its operating methods, facilities, or equipment at costs which may be substantial without any corresponding increase in revenue. The Company is also potentially subject to monetary fines, penalties, remediation, cleanup, or stop orders, injunctions, or orders to cease or suspend certain of its practices. The outcome of any proceedings and associated costs and expenses could have a material adverse impact on the Company's business. In addition, the Company's Thermo NuTech and IEM Sealand divisions are subject to numerous laws and regulations related to the protection of human health and safety. Such laws and regulations may pose liability on the Company for exposure of its employees to radiation or other hazardous contamination or failure to isolate and remove radioactive or other hazardous contaminants from soil. The Company endeavors to operate its business to minimize its exposure to environmental and other regulatory liabilities. In entering into contracts with its customers, the Company seeks to maximize its insulation from regulatory liabilities associated with the contaminated soil, oil, and other wastes it handles. Although no claims giving rise to such liabilities have been asserted by the Company's customers or employees to date, there can be no assurance that such claims cannot or will not be asserted against the Company. Uncertainty of Funding. Remediation compliance requirements and attendant costs are often beyond the financial capabilities of many individuals and small companies. To address this problem, some states have established tax-supported trust funds to assist in the financing of compliance and site remediation. As a consequence, in many of the states in which the Company markets its soil-remediation services, the majority, and in some cases virtually all, of the soil remediated by the Company is paid for by large companies and/or these state trust funds. Any substantial decrease in this funding could have a material adverse effect on the Company's business and financial performance. Many states have realized that the number of sites requiring remediation and the costs of compliance are substantially higher than were originally estimated. As a result, several states have relaxed enforcement activities and others have reduced compliance requirements in order to reduce the costs of cleanup. These factors have already resulted in lower levels of cleanup activity in some states. Continued de-emphasis on enforcement activities and/or further reductions in compliance requirements is having a material adverse effect on the Company's business. The Company depends on funding from the federal and state governments, and their agencies and instrumentalities, for compensation for its services. For example, Thermo NuTech provides a large portion of its services directly or indirectly to the U.S. Department of Energy (DOE) and the Company's consulting and design businesses perform 17PAGE THERMO TERRATECH INC. Item 5 - Other Information (continued) significant amounts of services for state and municipal government. Thermo NuTech has experienced a decrease in its radiochemistry laboratory work as a result of ongoing reductions in spending at the DOE as well as a shift in DOE spending from investigative work to cleanup work. Continued declines in spending by DOE and other governmental agencies could have a material adverse effect on the Company's business. Competition. The markets for many of the Company's services are regional and are characterized by intense competition from numerous local competitors. Some of the Company's competitors have greater technical and financial resources 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 services than the Company. Competition could increase if new companies enter the market or if existing competitors expand their service lines. There can be no assurance that the Company's current technology, technology under development, or ability to develop new technologies will be sufficient to enable it to compete effectively with its competitors. Seasonal Influences. A majority of the Company's businesses experience seasonal fluctuations. A majority of the Company's soil-remediation sites, as well as the Company's fluids-recycling sites, experience declines in severe weather conditions. Site remediation work and certain environmental testing services, such as the services provided by ReTec, Killam Associates, IEM Sealand, and Thermo NuTech, may also decline in winter months as a result of severe weather conditions. In Europe, Thermo EuroTech may experience a decline in the feedstock delivered to its facilities during winter months, due to frozen waterways. The Company's operations were adversely affected by severe weather in the last quarter of fiscal 1996. Possible Obsolescence Due to Technological Change. Technological developments are expected to continue at a rapid pace in the environmental services industry. The Company's technologies could be rendered obsolete or uneconomical by technological advances by one or more companies that address the Company's markets or by future entrants into the industry. There can be no assurance that the Company would have the resources to, or otherwise would be successful in, developing responses to technological advances by others. Risks Associated with Acquisition Strategy. The Company's strategy includes the acquisition of businesses that complement or augment the Company's existing services. Promising acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory approvals, including antitrust approvals. Any acquisitions completed by the Company may be made at substantial premiums over the fair value of the net assets of the acquired companies. There can be no assurance that the Company will be able to complete future acquisitions or that the Company will be able to successfully integrate any acquired businesses. In order to finance such acquisitions, it may be necessary for the Company to raise additional funds through public or private financings. Any equity or debt financing, 18PAGE THERMO TERRATECH INC. Item 5 - Other Information (continued) if available at all, may be on terms which are not favorable to the Company and, in the case of equity financing, may result in dilution to the Company's stockholders. Risks Associated with Spin-Out of Subsidiaries. The Company has adopted a strategy of spinning out certain of its businesses into separate subsidiaries and having these subsidiaries sell a minority interest to outside investors. As a result of the sale of stock by subsidiaries, the issuance of stock by subsidiaries upon conversion of convertible debentures and similar transactions, the Company records gains that represent the increase in the Company's net investment in the subsidiaries. These gains have represented a substantial portion of the net income reported by the Company in certain periods. The size and timing of these transactions are dependent on market and other conditions that are beyond the Company's control. Accordingly, there can be no assurance that the Company will be able to generate gains from such transactions in the future. In addition, in October 1995, the Financial Accounting Standards Board ("FASB") issued an exposure draft of a Proposed Statement of Financial Accounting Standards, "Consolidated Financial Statements: Policy and Procedures" (the "Proposed Statement"). The Proposed Statement would establish new rules for how consolidated financial statements should be prepared. If the Proposed Statement is adopted, there could be significant changes in the way the Company records certain transactions of its controlled subsidiaries. Among those changes, any sale of the stock of a subsidiary that does not result in a loss of control would be accounted for as a transaction in equity of the consolidated entity with no gain or loss being recorded. The FASB expects to issue a final statement or a revised exposure draft in calendar 1997. No Assurance of Development and Commercialization of Technology Under Development. The Company is currently engaged in the development of several technologies which may ultimately be commercialized to provide services to customers. For example, the Company's Thermo Fluids division is currently engaged in developing technology to enhance the quality of the fuel oils produced in its fluids recycling business. There are a number of technological challenges that the Company must successfully address to complete any of its development efforts. Technology development involves a high degree of risk, and returns to investors are dependent upon successful development and commercialization of such technology. There can be no assurance that any of the technology currently being developed by the Company, or those to be developed in the future by the Company, will be technologically feasible or accepted by the marketplace, or that any such development will be completed in any particular timeframe. Item 6 - Exhibits See Exhibit Index on the page immediately preceding exhibits. 19PAGE THERMO TERRATECH 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 1st day of November 1996. THERMO TERRATECH INC. Paul F. Kelleher -------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos -------------------- John N. Hatsopoulos Vice President and Chief Financial Officer 20PAGE THERMO TERRATECH INC. EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------------------------------------------------------------------- 3 Certificate of Amendment to Certificate of Incorporation filed with Secretary of State of Delaware on October 31, 1996. 10.1 Stock Holdings Assistance Plan and Form of Promissory Note. 10.2 Stock Purchase Agreement between the Thermo Electron Companies Inc. and Thermo TerraTech Inc. dated October 30, 1996. 11 Statement re: Computation of earnings per share. 27 Financial Data Schedule. EX-3 2 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF THERMO TERRATECH INC. Thermo TerraTech Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows, pursuant to Section 242 of the General Corporation Law of the State of Delaware: 1. That Article FOURTH of the Restated Certificate of Incorporation of the Corporation, as restated on July 24, 1986 and amended on September 29, 1988, October 19, 1989 and December 14, 1995, is hereby further amended to increase the number of authorized shares of the Corporation's Common Stock, $.10 par value per share, from 30 million shares to 75 million shares and that such amendment is hereby effected by deleting said Article in its entirety and inserting the following in substitution therefor: "FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is: Seventy-Five Million (75,000,000) shares, and the par value of each such share is Ten Cents ($.10)." 2. That the Board of Directors of the Corporation by unanimous written consent as of July 22, 1996, duly adopted the following resolutions: RESOLVED, that it is in the best interests of the Corporation that the authorized common stock of the Corporation, $.10 par value, be increased to 75 million shares, and that, upon the approval of such increase by the Corporation's Stockholders, the proper officers of the Corporation be, and each of them hereby are, authorized, empowered and directed to execute on behalf of the Corporation a Certificate of Amendment to the Corporation's Restated Certificate of Incorporation to reflect such increase, and to file, or cause to be filed, such Certificate of Amendment with the Secretary of State of the State of Delaware. RESOLVED, that the Board of Directors recommend to the Stockholders for approval at the Annual Meeting the increase in authorized shares of the Corporation's common stock to 75 million shares as previously approved by the Directors. PAGE 3. That on September 25, 1996, at the Corporation's Annual Meeting of Stockholders, the Amendment to the Corporation's Restated Certificate of Incorporation was duly adopted by the affirmative vote of Stockholders of the Corporation holding a majority of the shares of Common Stock, $.10 par value per share, of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Certificate of Amendment has been executed on behalf of the undersigned corporation by its duly authorized officer and attested to by its duly authorized Secretary this 31st day of October, 1996. THERMO TERRATECH INC. By:_______________________________ John P. Appleton Chief Executive Officer ATTEST: By:__________________________ Sandra L. Lambert Secretary EX-10.1 3 THERMO TERRATECH INC. STOCK HOLDINGS ASSISTANCE PLAN SECTION 1. Purpose. The purpose of this Plan is to benefit Thermo TerraTech Inc. (the "Company") and its stockholders by encouraging Key Employees to acquire and maintain share ownership in the Company, by increasing such employees' proprietary interest in promoting the growth and performance of the Company and its subsidiaries and by providing for the implementation of the Guidelines. SECTION 2. Definitions. The following terms, when used in the Plan, shall have the meanings set forth below: Committee: The Human Resources Committee of the Board of Directors of the Company as appointed from time to time. Common Stock: The common stock of the Company and any successor thereto. Company: Thermo TerraTech Inc., a Delaware corporation. Guidelines: The Stock Holdings Guidelines for Key Employees of the Company, as established by the Committee from time to time. Key Employee: Any employee of the Company or any of its subsidiaries, including any officer or member of the Board of Directors who is also an employee, as designated by the Committee, and who, in the judgment of the Committee, will be in a position to contribute significantly to the attainment of the Company's strategic goals and long-term growth and prosperity. Loans: Loans extended to Key Employees by the Company pursuant to this Plan. Plan: The Thermo TerraTech Inc. Stock Holdings Assistance Plan, as amended from time to time. SECTION 3. Administration. The Plan and the Guidelines shall be administered by the Committee, which shall have authority to interpret the Plan and the Guidelines and, subject to their provisions, to prescribe, amend and rescind any rules and regulations and to make all other determinations necessary or desirable for the administration thereof. The Committee's interpretations and decisions with regard to the Plan and the Guidelines and such rules and regulations as may be established thereunder shall be final and conclusive. The Committee may correct any defect or supply any PAGE omission or reconcile any inconsistency in the Plan or the Guidelines, or in any Loan in the manner and to the extent the Committee deems desirable to carry it into effect. No member of the Committee shall be liable for any action or omission in connection with the Plan or the Guidelines that is made in good faith. SECTION 4. Loans and Loan Limits. The Committee has determined that the provision of Loans from time to time to Key Employees in such amounts as to cause such Key Employees to comply with the Guidelines is, in the judgment of the Committee, reasonably expected to benefit the Company and authorizes the Company to extend Loans from time to time to Key Employees in such amounts as may be requested by such Key Employees in order to comply with the Guidelines. Such Loans may be used solely for the purpose of acquiring Common Stock (other than upon the exercise of stock options or under employee stock purchase plans) in open market transactions or from the Company. Each Loan shall be full recourse and evidenced by a non-interest bearing promissory note substantially in the form attached hereto as Exhibit A (the "Note") and maturing in accordance with the provisions of Section 6 hereof, and containing such other terms and conditions, which are not inconsistent with the provisions of the Plan and the Guidelines, as the Committee shall determine in its sole and absolute discretion. SECTION 5. Federal Income Tax Treatment of Loans. For federal income tax purposes, interest on Loans shall be imputed on any interest free Loan extended under the Plan. A Key Employee shall be deemed to have paid the imputed interest to the Company and the Company shall be deemed to have paid said imputed interest back to the Key Employee as additional compensation. The deemed interest payment shall be taxable to the Company as income, and may be deductible to the Key Employee to the extent allowable under the rules relating to investment interest. The deemed compensation payment to the Key Employee shall be taxable to the employee and deductible to the Company, but shall also be subject to employment taxes such as FICA and FUTA. SECTION 6. Maturity of Loans. Each Loan to a Key Employee hereunder shall be due and payable on demand by the Company. If no such demand is made, then each Loan shall mature and the principal thereof shall become due and payable in five equal annual installments commencing on the first anniversary date of the making of such Loan. Each Loan shall also become immediately due and payable in full, without demand, upon the occurrence of any of the events set forth in the Note; provided that the Committee may, in its 2PAGE sole and absolute discretion, authorize an extension of the time for repayment of a Loan upon such terms and conditions as the Committee may determine. 3PAGE SECTION 7. Amendment and Termination of the Plan. The Committee may from time to time alter or amend the Plan or the Guidelines in any respect, or terminate the Plan or the Guidelines at any time. No such amendment or termination, however, shall alter or otherwise affect the terms and conditions of any Loan then outstanding to Key Employee without such Key Employee's written consent, except as otherwise provided herein or in the promissory note evidencing such Loan. SECTION 8. Miscellaneous Provisions. (a) No employee or other person shall have any claim or right to receive a Loan under the Plan, and no employee shall have any right to be retained in the employ of the Company due to his or her participation in the Plan. (b) No Loan shall be made hereunder unless counsel for the Company shall be satisfied that such Loan will be in compliance with applicable federal, state and local laws. (c) The expenses of the Plan shall be borne by the Company. (d) The Plan shall be unfunded, and the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the making of any Loan under the Plan. (e) Except as otherwise provided in Section 7 hereof, by accepting any Loan under the Plan, each Key Employee shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan or the Guidelines by the Company, the Board of Directors of the Company or the Committee. (f) The appropriate officers of the Company shall cause to be filed any reports, returns or other information regarding Loans hereunder, as may be required by any applicable statute, rule or regulation. SECTION 9. Effective Date. The Plan and the Guidelines shall become effective upon approval and adoption by the Committee. 4PAGE EXHIBIT A THERMO TERRATECH INC. Promissory Note $_________ Dated:____________ For value received, ________________, an individual whose residence is located at _______________________ (the "Employee"), hereby promises to pay to Thermo TerraTech Inc. (the "Company"), or assigns, ON DEMAND, but in any case on or before [insert date which is the fifth anniversary of date of issuance] (the "Maturity Date"), the principal sum of [loan amount in words] ($_______), or such part thereof as then remains unpaid, without interest. Principal shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Company or at such other place as the Company may designate from time to time in writing to the Employee. Unless the Company has already made a demand for payment in full of this Note, the Employee agrees to repay the Company, on each of the first four anniversary dates of the date hereof, an amount equal to 20% of the initial principal amount of the Note. Payment of the final 20% of the initial principal amount, if no demand has been made by the Company, shall be due and payable on the Maturity Date. This Note may be prepaid at any time or from time to time, in whole or in part, without any premium or penalty. The Employee acknowledges and agrees that the Company has advanced to the Employee the principal amount of this Note pursuant to the Company's Stock Holdings Assistance Plan, and that all terms and conditions of such Plan are incorporated herein by reference. The unpaid principal amount of this Note shall be and become immediately due and payable without notice or demand, at the option of the Company, upon the occurrence of any of the following events: (a) the termination of the Employee's employment with the Company, with or without cause, for any reason or for no reason; (b) the death or disability of the Employee; (c) the failure of the Employee to pay his or her debts as they become due, the insolvency of the Employee, 5PAGE the filing by or against the Employee of any petition under the United States Bankruptcy Code (or the filing of any similar petition under the insolvency law of any jurisdiction), or the making by the Employee of an assignment or trust mortgage for the benefit of creditors or the appointment of a receiver, custodian or similar agent with respect to, or the taking by any such person of possession of, any property of the Employee; or (d) the issuance of any writ of attachment, by trustee process or otherwise, or any restraining order or injunction not removed, repealed or dismissed within thirty (30) days of issuance, against or affecting the person or property of the Employee or any liability or obligation of the Employee to the Company. In case any payment herein provided for shall not be paid when due, the Employee further promises to pay all costs of collection, including all reasonable attorneys' fees. No delay or omission on the part of the Company in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Company, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Employee hereby waives presentment, demand, notice of prepayment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. The undersigned hereby assents to any indulgence and any extension of time for payment of any indebtedness evidenced hereby granted or permitted by the Company. This Note has been made pursuant to the Company's Stock Holdings Assistance Plan and shall be governed by and construed in accordance with, such Plan and the laws of the State of Delaware and shall have the effect of a sealed instrument. _______________________________ Employee Name: _________________ ________________________ Witness EX-10.2 4 Stock Purchase Agreement This Stock Purchase Agreement dated October 30, 1996 is entered into by The Thermo Electron Companies Inc., a Wisconsin corporation (the "Seller"), and Thermo TerraTech Inc., a Delaware corporation (the "Buyer"), and Thermo Electron Corporation, a Delaware corporation, as guarantor of certain obligations of the Seller (the "Guarantor"). WHEREAS, Seller owns 100% of the issued and outstanding shares (the "Shares") of the capital stock of Metal Treating Inc. (the "Corporation"); and WHEREAS, Buyer wishes to purchase, and Seller wishes to sell, the Shares, upon the terms and conditions set forth below; NOW, THEREFORE, in consideration of the promises set forth below and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: 1. DELIVERY OF OUTSTANDING SHARES. At the Closing (as defined in Section 3 hereof), and subject to the terms and conditions contained in this Agreement, Seller shall transfer to Buyer and Buyer shall acquire from Seller, all right, title and interest in and to the Shares, free and clear of all liens, encumbrances, charges, equities or restrictions. 2. PURCHASE PRICE. In exchange for the Shares, and subject to the terms and conditions contained in this Agreement, Buyer shall pay to Seller at the Closing $1,600,000 in cash (the "Purchase Price"). 3. TIME AND PLACE OF CLOSING. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place immediately upon the execution of this Agreement by the parties hereto or at such other time and place as the parties may agree. 4. CLOSING DELIVERIES. At the Closing, in addition to the taking of such other action as may be provided in this Agreement, (i) Seller shall deliver certificates for the Shares to Buyer, duly endorsed by Seller or accompanied by duly executed stock powers, (ii) Buyer shall deliver the Purchase Price to Seller, and (iii) Seller and Buyer shall each deliver such closing certificates, documents and opinions of counsel, if any, as may be requested the other. 5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to Buyer that, as of the Closing Date: PAGE (a) Organization and Qualification. Seller is a corporation validly existing and in good standing under the laws of the State of Wisconsin. (b) Authority. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby to be performed by Seller, have been duly and validly authorized by all necessary corporate action on the part of Seller. This Agreement constitutes the valid and binding obligation of Seller enforceable against Seller in accordance with the terms hereof. (c) Ownership of Shares; Authority to Transfer. The Shares are not encumbered and are freely transferable by Seller. Seller holds good and marketable title to the Shares to be transferred to Buyer hereunder and no third party is entitled to claim any right thereto or make any claim thereon. The transfer of the Shares to Buyer pursuant to this Agreement will vest in Buyer title to the Shares, free and clear of all liens, claims, equities, options, calls, voting trusts, agreements, commitments and encumbrances whatsoever. (d) Buyer acknowledges that, prior to the date of this agreement, it has managed the corporation for the benefit of seller and that buyer's knowledge of the business, assets and liabilities of the corporation is superior to that of the seller. accordingly, Seller disclaims any representations or warranties with respect to the Corporation or ITS Business, assets and/or liabilities. THE TRANSFER OF THE SHARES TO BUYER IS MADE "AS IS" AND ALL WARRANTIES OF CONDITION, MERCHANTABILITY, QUALITY OR FITNESS FOR USE, OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED, WITH THE EXCEPTION OF WARRANTIES OF TITLE SET FORTH HEREIN ARE HEREBY DISCLAIMED. 6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller that, as of the Closing Date: (a) Organization and Qualification. Buyer is a corporation validly existing and in good standing under the laws of the State of Delaware. (b) Authority. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby to be performed by Buyer, have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement constitutes the valid and binding obligation of Buyer enforceable against Buyer in accordance with the terms hereof. 7. ASSUMPTION OF LIABILITY BY SELLER. Notwithstanding any other provision in this Agreement, as between Buyer and Seller, Seller hereby assumes, and agrees to hold the Corporation and Buyer harmless from and against, any liabilities now existing or which the Corporation or the Buyer may incur hereafter as a - 2 -PAGE result of the existence of certain contamination identified in an environmental site assessment report dated August 30, 1996 with respect to certain property adjacent to property owned by the Corporation; provided, however, that Seller does not assume any liability for any contamination which may have been caused, or which may in the future be caused by acts or omissions of the Corporation itself. The Guarantor hereby guarantees the obligations of the Seller as set forth in this Section 7. 8. FURTHER ASSURANCES. From time to time and at any time after the Closing, and without further expense to the requesting party, each party will execute and furnish to the requesting party all documents and will do or cause to be done all other things that the requesting party may reasonably request in order to give full effect to this Agreement and to effectuate the intent of the parties. 9. CONFIDENTIALITY OF INFORMATION. Seller and Guarantor agree that (a) they have obtained confidential and proprietary information about the Corporation, including, but not limited to, the Corporation's business plans, strategies, customer lists, and financial and statistical information and (b) they will not disclose, directly or indirectly, such information or use it for any purpose other than for Buyer's benefit. 10. SUCCESSORS AND ASSIGNS. Each and every provision hereof shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. 11. ENTIRE AGREEMENT. This Agreement constitutes the full and complete agreement of the parties hereto with respect to the subject matter hereof. 12. CAPTIONS. Titles or captions of sections contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. 13. COUNTERPARTS. This Agreement may be executed in counterparts, all of which together shall for all purposes constitute one Agreement, binding on the parties hereto notwithstanding that such parties have not signed the same counterpart. 14. APPLICABLE LAW. This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted, construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. 15. CREDITORS. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of any party hereto. - 3 -PAGE IN WITNESS WHEREOF, the parties have executed this Agreement on October 30, 1996. SELLER: BUYER: THE THERMO ELECTRON THERMO TERRATECH INC. COMPANIES INC. By: John A. Wielgosz By: John P. Appleton John A. Wielgosz John P. Appleton Treasurer President GUARANTOR: THERMO ELECTRON CORPORATION By: Jonathan W. Painter Jonathan W. Painter Treasurer EX-11 5 Exhibit 11 THERMO TERRATECH INC. Computation of Earnings per Share Three Months Ended Six Months Ended ------------------------ ---------------------- Sept. 28, Sept. 30, Sept. 28, Sept. 30, 1996 1995 1996 1995 ----------------------------------------------------------------------------- Computation of Primary Earnings (Loss) per Share: Net Income (Loss) (a) $ 1,450,000 $(4,115,000) $ 2,908,000 $ (74,000) ----------- ----------- ----------- ------------ Shares: Weighted average shares outstanding 18,213,925 17,372,817 18,053,176 17,361,796 Add: Shares issuable from assumed exercise of options and warrants (as determined by the application of the treasury stock method) 633,850 - 786,250 - ----------- ----------- ----------- ------------ Weighted average shares outstanding, as adjusted (b) 18,847,775 17,372,817 18,839,426 17,361,796 ----------- ----------- ----------- ------------ Primary Earnings (Loss) per Share (a) / (b) $ .08 $ (.24) $ .15 $ - =========== =========== =========== ============ EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO TERRATECH INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-29-1997 SEP-28-1996 68,733 28,426 53,855 3,022 3,425 189,590 132,766 46,767 410,635 85,797 191,671 0 0 1,828 90,325 410,635 11,900 134,887 9,620 110,423 574 388 6,570 4,940 1,721 2,908 0 0 0 2,908 .15 0
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