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, 2000
[ ] 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 Identification No.)
incorporation or organization)
8 Alfred Circle
Bedford, Massachusetts 01730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 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 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, 2000
---------------------------- -------------------------------
Common Stock, $.01 par value 11,458,649
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMO FIBERGEN INC.
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, January 1,
(In thousands) 2000 2000
------------------------------------------------------------------------------- ------------- ----------
Current Assets:
Cash and cash equivalents (Note 6) $43,432 $ 51
Advance to affiliate (Note 6) - 5,087
Available-for-sale investments, at quoted market value
(amortized cost of $5,154 and $46,470) 5,183 46,405
Accounts receivable, less allowance of $30 809 1,164
Inventories:
Raw materials and supplies 534 364
Finished goods 1,130 453
Other current assets (Note 5) 2,609 197
Due from parent company and affiliated companies 297 377
------- -------
53,994 54,098
------- -------
Property, Plant, and Equipment, at Cost (Note 5) 12,392 13,308
Less: Accumulated depreciation and amortization 3,169 3,246
------- -------
9,223 10,062
------- -------
Other Assets (Note 5) 4,748 4,416
------- -------
Cost in Excess of Net Assets of Acquired Company 3,686 3,862
------- -------
$71,651 $72,438
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2
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THERMO FIBERGEN INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 30, January 1,
(In thousands except share amounts) 2000 2000
------------------------------------------------------------------------------- ------------- ----------
Current Liabilities:
Accounts payable $ 399 $ 920
Accrued payroll and employee benefits 416 385
Accrued income taxes 677 290
Other accrued liabilities 1,252 2,326
Common stock subject to redemption, 4,715,000 shares issued;
2,001,049 and 4,715,000 shares outstanding (Note 7) 60,116 59,344
------- -------
62,860 63,265
------- -------
Deferred Income Taxes 512 512
------- -------
Minority Interest 2,505 3,021
------- -------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares authorized;
10,011,500 and 10,000,000 shares issued 100 100
Capital in excess of par value 11,170 11,102
Treasury stock at cost, 553,900 and 554,400 shares (5,515) (5,520)
Accumulated other comprehensive items (Note 2) 19 (42)
------- -------
5,774 5,640
------- -------
$71,651 $72,438
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
3
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THERMO FIBERGEN INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-------------------------
September 30, October 2,
(In thousands except per share amounts) 2000 1999
------------------------------------------------------------------------------- ------------- ----------
Revenues $ 1,276 $ 2,266
------- -------
Costs and Operating Expenses:
Cost of revenues 1,227 1,328
Selling, general, and administrative expenses 877 781
Research and development expenses 275 331
Gain on sale of property (Note 5) (729) -
------- -------
1,650 2,440
------- -------
Operating Loss (374) (174)
Interest Income 816 678
------- -------
Income Before Provision for Income Taxes and Minority Interest 442 504
Provision for Income Taxes (389) (202)
Minority Interest Income 260 -
------- -------
Net Income $ 313 $ 302
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .02 $ .02
======= =======
Weighted Average Shares (Note 3):
Basic 14,173 14,307
======= =======
Diluted 14,510 14,959
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
4
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THERMO FIBERGEN INC.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-------------------------
September 30, October 2,
(In thousands except per share amounts) 2000 1999
------------------------------------------------------------------------------- ------------- ----------
Revenues $ 5,755 $ 6,593
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Costs and Operating Expenses:
Cost of revenues 4,013 3,667
Selling, general, and administrative expenses 3,008 2,518
Research and development expenses 878 990
Gain on sale of property (Note 5) (729) -
------- -------
7,170 7,175
------- -------
Operating Loss (1,415) (582)
Interest Income 2,204 2,021
------- -------
Income Before Provision for Income Taxes and Minority Interest 789 1,439
Provision for Income Taxes (573) (576)
Minority Interest Income 516 -
------- -------
Net Income $ 732 $ 863
======= =======
Earnings per Share (Note 3):
Basic $ .05 $ .06
======= =======
Diluted $ .05 $ .05
======= =======
Weighted Average Shares (Note 3):
Basic 14,167 14,451
======= =======
Diluted 14,532 15,730
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
5
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THERMO FIBERGEN INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-------------------------
September 30, October 2,
(In thousands) 2000 1999
------------------------------------------------------------------------------- ------------- ----------
Operating Activities:
Net income $ 732 $ 863
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,377 989
Minority interest income (516) -
Gain on sale of property (Note 5) (729) -
Other noncash items 2 -
Changes in current accounts, excluding the effect of disposition:
Accounts receivable 355 (568)
Inventories (896) (88)
Other current assets (45) (16)
Accounts payable (350) 275
Other current liabilities 534 1,002
-------- --------
Net cash provided by operating activities 464 2,457
-------- --------
Investing Activities:
Acquisition of capital equipment and technology (1,200) -
Proceeds from sale of property (Note 5) 200 -
Payment received on note for sale of property (Note 5) 200 -
Purchases of available-for-sale investments (18,500) (61,825)
Proceeds from maturities of available-for-sale investments 59,816 63,681
Advances to affiliate, net (Note 6) 5,087 (6,658)
Purchases of property, plant, and equipment (2,900) (469)
Proceeds from sale of property, plant, and equipment 20 -
-------- --------
Net cash provided by (used in) investing activities 42,723 (5,271)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common stock 114 -
Purchases of Company common stock - (1,598)
Purchases of Company common stock from Thermo Electron - (2,227)
Change in due from parent company and affiliated companies 80 (72)
-------- --------
Net cash provided by (used in) financing activities 194 (3,897)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 43,381 (6,711)
Cash and Cash Equivalents at Beginning of Period 51 6,748
-------- --------
Cash and Cash Equivalents at End of Period $ 43,432 $ 37
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
6
<PAGE>
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 September 30, 2000, the results of
operations for the three- and nine-month periods ended September 30, 2000, and
October 2, 1999, and the cash flows for the nine-month periods ended September
30, 2000, and October 2, 1999. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of January 1, 2000, 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 January 1, 2000,
filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents unrealized net of tax gains and losses on available-for-sale
investments, reported as a component of shareholders' investment in the
accompanying balance sheet. During the third quarter of 2000 and 1999, the
Company had comprehensive income of $335,000 and $263,000, respectively. During
the first nine months of 2000 and 1999, the Company had comprehensive income of
$793,000 and $797,000, respectively.
</TABLE>
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, October 2, September 30, October 2,
(In thousands except per share amounts) 2000 1999 2000 1999
--------------------------------------------- ------------- ---------- ------------- ----------
Basic
Net Income $ 313 $ 302 $ 732 $ 863
------- ------- ------- -------
Weighted Average Shares 14,173 14,307 14,167 14,451
------- ------- ------- -------
Basic Earnings per Share $ .02 $ .02 $ .05 $ .06
======= ======= ======= =======
Diluted
Net Income $ 313 $ 302 $ 732 $ 863
------- ------- ------- -------
Weighted Average Shares 14,173 14,307 14,167 14,451
Effect of:
Redemption rights 286 610 313 1,257
Stock options 51 42 52 22
------- ------- ------- -------
Weighted Average Shares, as Adjusted 14,510 14,959 14,532 15,730
------- ------- ------- -------
Diluted Earnings per Share $ .02 $ .02 $ .05 $ .05
======= ======= ======= =======
7
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THERMO FIBERGEN INC.
3. Earnings per Share (continued)
Options to purchase 20,000 shares of common stock for the 2000 periods and
the third quarter of 1999, and 158,000 shares of common stock for the first nine
months of 1999, were not included in the computation of diluted earnings per
share because the options' exercise prices were greater than the average market
price for the common stock and their effect would have been antidilutive.
4. Business Segment Information
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, October 2, September 30, October 2,
(In thousands) 2000 1999 2000 1999
--------------------------------------------- ------------- ---------- ------------- ----------
Revenues:
Cellulose-based Products $ 1,040 $ 1,922 $ 4,800 $ 5,558
Fiber-recovery and Water-clarification
Services (a) 236 344 955 1,035
------- ------- ------- -------
$ 1,276 $ 2,266 $ 5,755 $ 6,593
======= ======= ======= =======
Income Before Provision for Income Taxes
and Minority Interest:
Cellulose-based Products $ (742) $ 277 $(1,071) $ 797
Fiber-recovery and Water-clarification
Services (a) 368 (451) (344) (1,379)
------- ------- ------- -------
Total operating loss (374) (174) (1,415) (582)
Interest income 816 678 2,204 2,021
------- ------- ------- -------
$ 442 $ 504 $ 789 $ 1,439
======= ======= ======= =======
(a) The Company sold its fiber-recovery and water-clarification services plant on September 5, 2000.
Results include a gain of $729,000 on this sale in the 2000 periods.
5. Sale of Fiber-recovery and Water-clarification Services Plant
On September 5, 2000, the Company sold substantially all of the assets of
its fiber-recovery and water-clarification services plant for $3,600,000. The
purchase price consists of an initial payment of $200,000 at the date of closing
and a note receivable to be paid in seventeen monthly payments of $200,000, plus
interest at 9.5 percent, beginning September 28, 2000. The note receivable is
secured by a letter of credit. The Company recognized a pretax gain of $729,000
on the sale.
6. Advance to Affiliate
Effective August 2000, the Company no longer participates in a domestic
cash management arrangement with Thermo Electron Corporation. Amounts previously
invested in this arrangement are included in cash and cash equivalents in the
September 30, 2000, balance sheet and primarily include investments in
commercial paper and U.S. government-agency and U.S. Treasury securities.
8
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THERMO FIBERGEN INC.
7. Redemption Rights
During the month of September 2000, holders of the Company's common stock
and common stock redemption rights surrendered 2,713,951 shares of Company
common stock at a redemption price of $12.75 per share. In October 2000, the
Company remitted $34,603,000 for the shares, using available working capital to
fund the payment. The accrued liability for the payment is included in common
stock subject to redemption in the September 30, 2000, balance sheet. Following
the redemption period, 2,001,049 redemption rights, redeemable in September
2001, remain outstanding, for a total redemption value of $25,513,000. The
redemption rights are guaranteed, on a subordinated basis, by Thermo Electron.
As of September 30, 2000, there were 1,027,349 shares of Company common stock
held by persons other than Thermo Electron or Thermo Fibertek Inc.
8. Proposed Spin Off of Thermo Fibertek Inc.
On January 31, 2000, Thermo Electron announced that, as part of a major
reorganization plan, it plans to spin off its equity interest in Thermo Fibertek
as a dividend to Thermo Electron shareholders. The distribution is subject to
receipt of a favorable ruling from the Internal Revenue Service regarding the
tax treatment of the spin off, and other customary conditions. Under the plan,
the Company will remain a majority-owned subsidiary of Thermo Fibertek. Thermo
Electron will continue to guarantee any remaining obligation of the Company
under its redemption rights following the spin off.
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 heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 2000, filed with the Securities and Exchange
Commission.
Overview
The Company organizes and manages its business by individual functional
operating entity. The Company's two operating entities constitute the Company's
business segments: Fiber-recovery and Water-clarification Services, and
Cellulose-based Products. Through its Fiber-recovery and Water-clarification
Services segment, the Company designs, owns, and operates plants to help pulp
and paper mills improve product quality, reduce costs, and close the loop in
their water and solids systems on a long-term contract basis. Prior to September
2000, the Company owned and operated one such plant in South Carolina, which it
began operating in July 1998 under a 10-year contract. The Company sold this
plant to the host mill in September 2000 (Note 5), although it intends to
continue operating in this line of business and is pursuing other similar
projects.
The Cellulose-based Products segment includes the Company's GranTek
subsidiary, which employs patented technology to produce biodegradable absorbing
granules from papermaking byproducts that are marketed and sold as Biodac(R)
agricultural carriers, Gran-sorb(TM) oil and grease absorbents, and PaPurr(R)
(pronounced "paper") cat box fillers. Biodac(R) is used to deliver agricultural
chemicals for professional turf, home lawn and garden, agricultural row-crop,
and mosquito-control applications. Through its 51%-owned NEXT Fiber Products
Inc. subsidiary, formed in October 1999, the Company develops, produces, and
markets fiber-based composites primarily for the building industry, used for
applications such as fencing, decking, and siding. The Company began
construction of the composites manufacturing facility, located in Green Bay,
Wisconsin, in the first quarter of 2000 and began limited-scale production in
June 2000. The Company expects to continue to improve the manufacturing process
throughout 2000.
9
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THERMO FIBERGEN INC.
Results of Operations
Third Quarter 2000 Compared With Third Quarter 1999
---------------------------------------------------
Revenues decreased to $1,276,000 in the third quarter of 2000 from
$2,266,000 in the third quarter of 1999. Revenues decreased $117,000 due to the
September 2000 sale of the fiber-recovery and water-clarification services plant
(Note 5). Revenues decreased in the Cellulose-based Products segment as a result
of a $760,000 decrease in sales of Biodac and a $270,000 decrease in sales of
cat box filler, offset in part by $150,000 in sales from the Company's new
fiber-based composites business. The decreased sales of Biodac resulted from
decreased demand from two of the Company's largest customers, offset in part by
a net increase in demand from other customers. Sales to one customer decreased
$440,000 due to the timing of a large order that was shipped in the first
quarter of 2000. Sales to this customer were relatively unchanged in the first
nine months of 2000, compared with the first nine months of 1999. Sales to the
other customer decreased $430,000, primarily due to decreased demand for the
customer's product as a result of recent federal regulations that prohibit a
certain insecticide that the customer used in its product. Although the customer
has announced the introduction of a replacement product that is expected to be
in production before year-end, there can be no assurance that future sales to
this customer will not be adversely affected. The introduction of the Company's
cat box filler in late 1998 resulted in high initial shipment levels, primarily
during the second and third quarters of 1999, as customers built inventory. As a
result of these high initial shipments and decreased demand, sales are lower in
2000 compared to 1999.
The gross profit margin decreased to 4% in the third quarter of 2000 from
41% in the third quarter of 1999, primarily due to decreased sales without a
corresponding decrease in costs and higher gas prices at GranTek, and the
inclusion of $300,000 of overhead costs at the Company's new fiber-based
composites business. The gross profit margin at GranTek decreased to 26% in 2000
from 41% in 1999, primarily due to a suspension of production for five weeks
that resulted from the decline in sales.
Selling, general, and administrative expenses as a percentage of revenues
increased to 69% in the third quarter of 2000 from 34% in the third quarter of
1999, principally due to the inclusion of $300,000 of costs related to the
fiber-based composites business and decreased Cellulose-based Products revenues.
The increase in selling, general, and administrative expenses was offset in part
by a $150,000 decrease in selling costs in the Fiber-recovery and
Water-clarification Services segment. The Company expects that selling, general,
and administrative expenses will increase as it expands its fiber-based
composites business.
Research and development expenses decreased to $275,000 in the third
quarter of 2000 from $331,000 in the third quarter of 1999, primarily due to a
reduction of costs in the Fiber-recovery and Water-clarification Services
segment as the Company focuses its research and development efforts on the
fiber-based composites business. The Company expects to increase its research
and development expenses as it develops new products at its fiber-based
composites business.
In September 2000, the Company sold its fiber-recovery and
water-clarification services plant for $3,600,000, resulting in a gain of
$729,000 (Note 5).
Interest income increased to $816,000 in the third quarter of 2000 from
$678,000 in the third quarter of 1999, principally due to an increase in average
interest rates during the period and, to a lesser extent, the inclusion of
interest earned on the note receivable from the September 2000 sale of the
fiber-recovery and water-clarification services plant. Interest income will
decline in future periods due to the October 2000 purchase of Company common
stock from common stock redemption rightholders for $34,603,000 in cash (Note
7).
The effective tax rate was 88% in the third quarter of 2000, compared with
40% in the third quarter of 1999. The effective tax rate increased in 2000 due
to an increase in the valuation allowance for losses at its majority-owned
fiber-based composites business. In addition, the effective tax rate exceeded
the statutory federal income tax rate due to the impact of state income taxes
and certain nondeductible expenses.
Minority interest income in the third quarter of 2000 represents the
minority investor's share of losses in the Company's NEXT Fiber Products
subsidiary.
10
<PAGE>
THERMO FIBERGEN INC.
First Nine Months 2000 Compared With First Nine Months 1999
-----------------------------------------------------------
Revenues decreased to $5,755,000 in the first nine months of 2000 from
$6,593,000 in the first nine months of 1999. This decrease was primarily in the
Cellulose-based Products segment as a result of a $520,000 decrease in sales of
Biodac and a $370,000 decrease in sales of cat box filler, for the reasons
discussed in the results of operations for the quarter, offset in part by
$150,000 in sales from the Company's new fiber-based composites business. The
lower sales of Biodac resulted from decreased demand in the second and third
quarters of 2000 from one of the Company's largest customers, as discussed in
the results of operations for the third quarter.
The gross profit margin decreased to 30% in the first nine months of 2000
from 44% in the first nine months of 1999, primarily due to the inclusion of
$600,000 of overhead costs at the fiber-based composites business. In addition,
the gross profit margin decreased due to lower sales without a corresponding
decrease in costs and higher gas prices at GranTek, as discussed in the results
of operations for the third quarter.
Selling, general, and administrative expenses as a percentage of revenues
increased to 52% in the first nine months of 2000 from 38% in the first nine
months of 1999, principally due to the inclusion of $800,000 of costs related to
the fiber-based composites business, offset in part by a $230,000 decrease in
costs at GranTek, primarily as a result of lower selling expenses.
Research and development expenses decreased to $878,000 in the first nine
months of 2000 from $990,000 in the first nine months of 1999, primarily due to
a reduction of costs in the Fiber-recovery and Water-clarification Services
segment as the Company focuses its research and development efforts on the
fiber-based composites business.
In September 2000, the Company sold its fiber-recovery and
water-clarification services plant for $3,600,000, resulting in a gain of
$729,000 (Note 5).
Interest income increased slightly to $2,204,000 in the first nine months
of 2000 from $2,021,000 in the first nine months of 1999, principally due to an
increase in average interest rates during the period, offset in part by the
effect of a decrease in average invested balances resulting primarily from the
use of cash to fund purchases of Company common stock in 1999 and purchases of
capital equipment and technology by the Company's NEXT Fiber Products subsidiary
in late 1999 and early 2000.
The effective tax rate was 73% in the first nine months of 2000, compared
with 40% in the first nine months of 1999. The effective tax rate increased in
2000 due to an increase in the valuation allowance for losses at its fiber-based
composites business. In addition, the effective tax rate exceeded the statutory
federal income tax rate due to the impact of state income taxes and certain
nondeductible expenses.
Minority interest income in the first nine months of 2000 represents the
minority investor's share of losses in the Company's NEXT Fiber Products
subsidiary.
Liquidity and Capital Resources
The Company had negative working capital of $8,866,000 and $9,167,000 at
September 30, 2000, and January 1, 2000, respectively. Included in working
capital at September 30, 2000, are cash, cash equivalents, and
available-for-sale investments of $48,615,000, compared with $46,456,000 at
January 1, 2000. In addition, the Company had $5,087,000 invested in an advance
to affiliate at January 1, 2000 (Note 6).
During the month of September 2000, holders of the Company's common stock
and common stock redemption rights surrendered 2,713,951 shares of Company
common stock at a redemption price of $12.75 per share. In October 2000, the
Company remitted $34,603,000 for the shares, using available working capital to
fund the payment. The accrued liability for the payment is included in common
stock subject to redemption in the September 30, 2000, balance sheet. Following
the redemption period, 2,001,049 redemption rights, redeemable in September
2001,
11
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THERMO FIBERGEN INC.
Liquidity and Capital Resources (continued)
remain outstanding, for a total redemption value of $25,513,000. The redemption
rights are guaranteed, on a subordinated basis, by Thermo Electron. As of
September 30, 2000, there were 1,027,349 shares of Company common stock held by
persons other than Thermo Electron or Thermo Fibertek.
During the first nine months of 2000, $464,000 of cash was provided by
operating activities. A net decrease in accounts receivable provided $355,000,
primarily at GranTek due to decreased sales. The Company used $896,000 of cash
to increase inventories, primarily at GranTek. The Company used $350,000 to
reduce accounts payable during the period, primarily at GranTek. An increase in
accrued income taxes and liabilities for the composites manufacturing business
contributed to a net $534,000 increase in other accrued liabilities.
During the first nine months of 2000, the Company's primary investment
activities involved the purchases and maturities of available-for-sale
investments and the withdrawal of funds that were advanced to Thermo Electron
under a domestic cash management arrangement. The Company no longer participates
in this arrangement (Note 6). On September 5, 2000, the Company sold
substantially all of the assets of its fiber-recovery and water-clarification
services plant for $3,600,000 (Note 5). The purchase price consists of an
initial payment of $200,000 at the date of closing and a note receivable to be
paid in seventeen monthly payments of $200,000, plus interest at 9.5%, beginning
September 28, 2000. In addition, the Company used $2,900,000 for purchases of
property, plant, and equipment, including $2,429,000 for the composites
manufacturing facility. The Company's NEXT Fiber Products subsidiary used
$1,200,000 of cash to pay for the 1999 purchase of capital equipment and
technology related to the development of fiber-based composites. The Company has
a remaining obligation for this purchase of $500,000, which is included in other
accrued liabilities in the accompanying September 30, 2000, balance sheet. The
Company has options to acquire the 49% equity interest in NEXT Fiber Products
not owned by the Company, exercisable during the months of October 2001, 2002,
or 2003, for pre-established multiples of NEXT Fiber Products' pre-tax earnings.
During the remainder of 2000, the Company plans to make expenditures for
property, plant, and equipment of approximately $1,600,000, primarily at NEXT
Fiber Products. The Company may make additional capital expenditures to expand
its fiber-based composites business. Thermo Fibertek has agreed to lend the
Company up to $5 million on commercially reasonable terms, to satisfy its common
stock redemption obligation in September 2001 and for working capital needs.
Thermo Fibertek will seek repayment of amounts advanced only to the extent
permitted by Thermo Fibergen's cash flows. The Company believes that the
availability of this funding from Thermo Fibertek, if required, will enable the
Company to continue operations as a going concern for the forseeable future.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
The Company's exposure to market risk from changes in equity prices and
interest rates has not changed materially from year-end 1999.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
--------------------------------------------------
(d) Use of Proceeds
The Company sold 4,715,000 Units (each Unit consisting of one share of the
Company's common stock and one redemption right, which enables the holder to
sell one share of the Company's common stock to the Company during the month of
September 2000 or the month of September 2001 for $12.75 in cash), pursuant to a
Registration Statement on Form S-1 (File No. 333-07585), which was declared
effective by the Securities and Exchange Commission on September 13, 1996. The
managing underwriters of the offering were NatWest Securities Limited, Lehman
Brothers, and Oppenheimer & Co., Inc. The aggregate gross proceeds of the
offering were $60,116,250. The
12
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THERMO FIBERGEN INC.
Item 2 - Changes in Securities and Use of Proceeds (continued)
--------------------------------------------------
Company's total expenses in connection with the offering were $4,335,250, of
which $3,913,450 was for underwriting discounts and commissions, $401,800 was
for other expenses paid to persons other than directors or officers of the
Company, persons owning more than 10% of any class of equity securities of the
Company, or affiliates of the Company (collectively, Affiliates), and $20,000
was paid to Thermo Electron for certain corporate services rendered in
connection with the offering. The Company's net proceeds from the offering were
$55,781,000. As of September 30, 2000, the Company had expended $10,353,000 of
such net proceeds for the purchase of property, plant, and equipment, including
$3,573,000 for the construction of a water-clarification and fiber-recovery
facility, $1,700,000 for the acquisition of capital equipment and technology
related to the fiber-based composites business, and $2,775,000 for the
composites manufacturing facility. The Company has invested, from time to time,
the balance of such net proceeds primarily in investment grade interest- or
dividend-bearing instruments. As of September 30, 2000, remaining net proceeds
of $45,428,000 were invested directly with persons other than Affiliates. On
October 5, 2000, the Company used $34,603,000 of such remaining net proceeds to
purchase shares of Company common stock that were redeemed by redemption
holders.
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On September 15, 2000, the Company filed a Current Report on Form 8-K
dated as of September 5, 2000, with respect to the sale of substantially all of
the assets of its fiber-recovery and water-clarification services plant.
13
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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 2000.
THERMO FIBERGEN INC.
--------------------------------------------
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
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THERMO FIBERGEN INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------------------
10.1 Bill of Sale by and among Thermo Fibergen Inc. (as Seller) and
LINPAC, Inc. (as Buyer), dated as of September 5, 2000 (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated as
of September 5, 2000 [File No. 1-9549] and incorporated herein by
reference).
27 Financial Data Schedule.
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