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 June 28, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-12137
THERMO FIBERGEN INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3311544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Alfred Circle
Bedford, Massachusetts 01730
(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 July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 14,715,000
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO FIBERGEN INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, December 28,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $47,828 $58,388
Available-for-sale investments, at quoted
market value (amortized cost of $10,009) 10,009 -
Accounts receivable, less allowance of $30 in
1997 and 1996 1,283 738
Inventories 225 312
Other current assets 19 64
------- -------
59,364 59,502
------- -------
Property, Plant, and Equipment, at Cost 6,546 6,359
Less: Accumulated depreciation and amortization 961 538
------- -------
5,585 5,821
------- -------
Other Assets 927 969
------- -------
Cost in Excess of Net Assets of Acquired Company 4,619 4,741
------- -------
$70,495 $71,033
======= =======
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THERMO FIBERGEN INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, December 28,
(In thousands except share amounts) 1997 1996
-----------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 278 $ 429
Accrued payroll and employee benefits 279 181
Accrued income taxes 210 -
Other accrued liabilities 751 649
Due to parent company and affiliated
companies 34 1,766
------- -------
1,552 3,025
------- -------
Common Stock Subject to Redemption ($60,116
redemption value), 4,715,000 shares issued
and outstanding 56,632 56,087
------- -------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000
shares authorized; 10,000,000 shares
issued and outstanding 100 100
Capital in excess of par value 11,549 12,094
Retained earnings (accumulated deficit) 662 (273)
------- -------
12,311 11,921
------- -------
$70,495 $71,033
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
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THERMO FIBERGEN INC.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
-----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
----------------------------------------------------------------------
Revenues $ 1,598 $ -
------- -------
Costs and Operating Expenses:
Cost of revenues 744 -
Selling, general, and administrative expenses 699 -
Research and development expenses 470 345
------- -------
1,913 345
------- -------
Operating Loss (315) (345)
Interest Income 883 168
------- -------
Income (Loss) Before Income Taxes 568 (177)
Income Taxes - -
------- -------
Net Income (Loss) $ 568 $ (177)
======= =======
Earnings (Loss) per Share $ .04 $ (.02)
======= =======
Weighted Average Shares 16,088 10,073
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO FIBERGEN INC.
Consolidated Statement of Operations
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
----------------------------------------------------------------------
Revenues $ 3,124 $ -
------- -------
Costs and Operating Expenses:
Cost of revenues 1,546 -
Selling, general, and administrative expenses 1,458 -
Research and development expenses 923 548
------- -------
3,927 548
------- -------
Operating Loss (803) (548)
Interest Income 1,738 267
------- -------
Income (Loss) Before Income Taxes 935 (281)
Income Taxes - -
------- -------
Net Income (Loss) $ 935 $ (281)
======= =======
Earnings (Loss) per Share $ .06 $ (.03)
======= =======
Weighted Average Shares 16,743 10,073
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
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THERMO FIBERGEN INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
-----------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income (loss) $ 935 $ (281)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 587 -
Changes in current accounts:
Accounts receivable (545) -
Inventories 87 -
Other current assets 45 (17)
Accounts payable (151) -
Other current liabilities 410 38
-------- --------
Net cash provided by (used in) operating
activities 1,368 (260)
-------- --------
Investing Activities:
Purchases of available-for-sale investments (10,000) -
Purchases of property, plant, and equipment (187) (219)
Other (9) (11)
-------- --------
Net cash used in investing activities (10,196) (230)
-------- --------
Financing Activities:
Cash transfer from parent company in
connection with capitalization of the
Company - 12,500
Transfer from parent company prior to
capitalization of the Company - 94
Increase (decrease) in due to parent company
and affiliated companies (1,732) 409
-------- --------
Net cash provided by (used in) financing
activities (1,732) 13,003
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (10,560) 12,513
Cash and Cash Equivalents at Beginning of
Period 58,388 -
-------- --------
Cash and Cash Equivalents at End of Period $ 47,828 $ 12,513
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
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THERMO FIBERGEN INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Fibergen 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 June
28, 1997, the results of operations for the three- and six-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
six-month periods ended June 28, 1997, and June 29, 1996. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 28, 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 December 28, 1996, filed
with the Securities and Exchange Commission.
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.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996, filed with the Securities and Exchange
Commission.
Overview
The Company is developing and commercializing equipment and systems
to recover materials from papermaking sludge generated by plants that
produce virgin and recycled pulp and paper. Through its GranTek Inc.
(GranTek) subsidiary, acquired in July 1996, the Company employs patented
technology to produce absorbing granules from papermaking sludge. These
granules, marketed under the trade name Biodac(R), are currently used as
a carrier to deliver agricultural chemicals for professional turf, home
lawn and garden, agricultural row crop, and mosquito-control
applications.
7PAGE
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THERMO FIBERGEN INC.
Overview (continued)
The Company currently intends to limit the pace and amount of its
research and development on both its fiber-recovery system and on new
products, if any, that may be developed from recovered fibers and other
components of papermaking sludge, so that its internally funded research
and development expenditures will be approximately equivalent to the
interest or dividend income earned on its cash balances, plus the
Company's operating earnings before research and development expenses, if
any.
Results of Operations
Second Quarter 1997 Compared With Second Quarter 1996
Revenues of $1,598,000 for the second quarter of 1997 represent
revenues from GranTek, acquired in July 1996.
The gross profit margin was 53% in the second quarter of 1997.
Selling, general, and administrative expenses as a percentage of
revenues were 44% in the second quarter of 1997. Included in selling,
general, and administrative expenses are expenses at GranTek, as well as
general and administrative expenses relating to the development of the
Company's fiber-recovery system.
Research and development expenses increased to $470,000 in the second
quarter of 1997 from $345,000 in the second quarter of 1996, primarily
due to the inclusion of $162,000 of expenses at GranTek. The Company
expects that its spending on research and development will continue to
increase over amounts incurred in 1996.
Interest income increased to $883,000 in the second quarter of 1997
from $168,000 in the second quarter of 1996, primarily due to an increase
in average invested balances resulting from the proceeds from the
Company's September 1996 initial public offering.
The Company has not recorded a provision for income taxes in the
second quarter of 1997 due to the expected benefit of net operating loss
carryforwards.
First Six Months 1997 Compared With First Six Months 1996
Revenues of $3,124,000 for the first six months of 1997 represent
revenues from GranTek, acquired in July 1996.
The gross profit margin was 51% in the first six months of 1997.
Selling, general, and administrative expenses as a percentage of
revenues were 47% in the first six months of 1997.
Research and development expenses increased to $923,000 in the first
six months of 1997 from $548,000 in the first six months of 1996. This
increase was due to the inclusion of $279,000 of expenses at GranTek, the
acceleration of the Company's research and development efforts associated
8PAGE
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THERMO FIBERGEN INC.
First Six Months 1997 Compared With First Six Months 1996 (continued)
with the Company's fiber-recovery system, and expenditures on research
and development relating to the extraction and purification of minerals.
Interest income increased to $1,738,000 in the first six months of
1997 from $267,000 in the first six months of 1996, primarily due to an
increase in average invested balances resulting from the proceeds from
the Company's September 1996 initial public offering, as well as cash
received in connection with the initial capitalization of the Company in
February 1996.
The Company has not recorded a provision for income taxes in the
first six months of 1997 due to the expected benefit of net operating
loss carryforwards.
Liquidity and Capital Resources
Consolidated working capital was $57,812,000 at June 28, 1997,
compared with $56,477,000 at December 28, 1996. Included in working
capital at June 28, 1997, are cash, cash equivalents, and
available-for-sale investments of $57,837,000, compared with $58,388,000
at December 28, 1996.
During the first six months of 1997, $1,368,000 of cash was provided
by operating activities. Cash provided by the Company's operating results
was offset in part by an increase in accounts receivable of $545,000.
During the first six months of 1997, the Company invested $10,000,000
in available-for-sale investments and expended $187,000 for purchases of
property, plant, and equipment. Cash used in financing activities during
the first six months of 1997 resulted from cash used to reduce due to
parent company and affiliated companies.
The Company's common stock subject to redemption is redeemable by
holders of redemption rights in September 2000 and 2001 for a total
redemption value of $60,116,000. The redemption rights are guaranteed, on
a subordinated basis, by Thermo Electron Corporation.
In the remainder of 1997, the Company plans to make expenditures for
property, plant, and equipment of approximately $250,000. In addition,
the Company may make additional capital expenditures for the construction
of one or more fiber-recovery plants. Construction of fiber-recovery
plants is dependent upon the Company entering into long-term contracts
with paper mills, under which the Company will charge fees to accept the
mills' papermaking sludge. The Company does not currently have such
agreements in place nor is there any assurance that the Company will be
able to obtain such contracts. The Company anticipates it will require
significant amounts of cash to complete the commercialization of its
fiber-recovery system. The Company expects to finance commercialization
of its fiber-recovery system through a combination of internal funds,
additional debt or equity financing, and/or short-term borrowings from
Thermo Fibertek and Thermo Electron, although there is no agreement with
9PAGE
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THERMO FIBERGEN INC.
Liquidity and Capital Resources (continued)
Thermo Fibertek or Thermo Electron under which such parties would be
obligated to lend funds to the Company. The Company believes that its
existing resources will be sufficient to meet the Company's capital
requirements for the foreseeable future.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On June 2, 1997, at the Annual Meeting of Shareholders, the
shareholders reelected five incumbent directors to a one-year term
expiring in 1998. The directors reelected at the meeting were: Anne T.
Barrett, Francis L. McKone, Yiannis A. Monovoukas, Jonathan W. Painter,
and William A. Rainville. Each director received 13,031,160 shares voted
in favor of his or her election and 30,100 shares voted against. No
abstentions or broker nonvotes were recorded on the election of
directors.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
10PAGE
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THERMO FIBERGEN 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 31st day of July
1997.
THERMO FIBERGEN INC.
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
11PAGE
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THERMO FIBERGEN INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------
11 Statement re: Computation of Earnings (Loss) per Share.
27 Finacial Data Schedule.
Exhibit 11
THERMO FIBERGEN INC.
Computation of Earnings (Loss) per Share
Three Months Ended Six Months Ended
------------------------- --------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------------------------------------------------------------------------------
Computation of Primary
Earnings (Loss) per Share:
Net Income (Loss) (a) $ 568,000 $ (177,000) $ 935,000 $ (281,000)
----------- ----------- ----------- ----------
Shares:
Weighted average shares
outstanding 14,715,000 10,000,000 14,715,000 10,000,000
Add: Shares issuable
from assumed
exercise of
redemption
rights (as
determined by
the application
of the reverse
treasury stock
method) 1,372,722 - 2,028,322 -
Shares issuable
from assumed
exercise of
options (as
determined
by the applica-
tion of the
treasury stock
method) - 72,902 - 72,902
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 16,087,722 10,072,902 16,743,322 10,072,902
----------- ----------- ----------- -----------
Primary Earnings (Loss)
per Share (a) / (b) $ .04 $ (.02) $ .06 $ (.03)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
FIBERGEN INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> JUN-28-1997
<CASH> 47,828
<SECURITIES> 10,009
<RECEIVABLES> 1,313
<ALLOWANCES> 30
<INVENTORY> 225
<CURRENT-ASSETS> 59,364
<PP&E> 6,546
<DEPRECIATION> 961
<TOTAL-ASSETS> 70,495
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0
0
<COMMON> 100
<OTHER-SE> 12,211
<TOTAL-LIABILITY-AND-EQUITY> 70,495
<SALES> 3,124
<TOTAL-REVENUES> 3,124
<CGS> 1,546
<TOTAL-COSTS> 1,546
<OTHER-EXPENSES> 923
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</TABLE>
