SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
AMENDMENT NO. 1 ON FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
February 6, 1995
________________________________________
THERMO PROCESS SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9549 04-2925807
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification Number)
incorporation or
organization)
12068 Market Street 48150
Livonia, Michigan (Zip Code)
(Address of principal executive offices)
(617) 622-1000
(Registrant's telephone number
including area code)
PAGE
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FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
On February 6, 1995, Thermo Process Systems Inc. (the "Company")
acquired all of the issued and outstanding capital stock of Engineering,
Technology and Knowledge Corporation ("ETKC") from Nord Est S.A., a French
industrial company ("Nord Est"). ETKC's sole subsidiary, Elson T. Killam
Associates, Inc. ("Killam Associates"), is a leading provider of
comprehensive environmental consulting and professional engineering
services in New Jersey, Pennsylvania, Ohio and New York.
The purchase price for ETKC's stock was $12.6 million in cash and a
zero coupon promissory note with a face value of $28 million and a present
value of $22.3 million, payable in February and May, 1998. The purchase
price is subject to a post-closing adjustment. In addition, the Company has
guaranteed the payment by ETKC and/or Killam Associates of approximately
$1.7 million in indebtedness. The Company has also agreed to pay, after the
third anniversary date of the closing, an amount equal to 30% of the amount
by which ETKC's cumulative net income for the three-year period ending on
such anniversary exceeds $13 million.
In a related transaction, certain members of Killam Associates' senior
management (the "Killam Management") exchanged outstanding options to
purchase shares of Killam Associates' capital stock for options to purchase
an aggregate of 847,678 shares of the Company's common stock, valued at
$6.9 million. Additional options to purchase shares of Killam Associates'
capital stock were canceled in exchange for cash payments to the Killam
Management in the aggregate amount of $1.9 million.
The Company borrowed the cash portion of the purchase price, including
cash used to collateralize the promissory note delivered to Nord Est, from
Thermo Electron Corporation pursuant to a $38 million promissory note that
bears interest at the Commercial Paper Composite Rate plus 25 basis points
and is due June 1, 1997. Thermo Electron Corporation owns approximately 80%
of the outstanding capital stock of the Company.
(a) Financial Statements of Business Acquired
Attached hereto.
2PAGE
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Engineering, Technology and Knowledge Corporation
-------------------------------------------------
Consolidated Financial Statements
---------------------------------
For the Three Years Ending December 31, 1994, 1993, and 1992
------------------------------------------------------------
Together With
-------------
Report of Independent Public Accountants
----------------------------------------
3PAGE
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Engineering, Technology and Knowledge:
We have audited the accompanying consolidated balance sheets of
Engineering, Technology and Knowledge Corporation (a Delaware corporation)
and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholder's equity and cash flows for
each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Engineering, Technology
and Knowledge Corporation and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 24, 1995
4PAGE
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ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Balance Sheets - December 31, 1994 and 1993
1994 1993
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,422,000 $ 1,318,000
Accounts receivable, net of the
allowance for doubtful accounts
of $728,000 and $476,000,
respectively 11,415,000 11,475,000
Prepaid expenses and other
current assets 1,844,000 1,782,000
----------- -----------
Total current assets 14,681,000 14,575,000
Properties and Equipment, net of
accumulated depreciation of
$5,212,000 and $4,597,000,
respectively 9,114,000 8,849,000
Goodwill, net of accumulated
amortization of $1,003,000 and
$830,000, respectively 3,607,000 3,780,000
Other Assets 427,000 988,000
----------- -----------
Total assets $27,829,000 $28,192,000
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
5PAGE
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ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Balance Sheets - December 31, 1994 and 1993 (continued)
1994 1993
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,039,000 $ 826,000
Current portion of long-term debt 1,334,000 1,710,000
Accrued expenses and other current
liabilities 3,349,000 4,100,000
----------- -----------
Total current liabilities 5,722,000 6,636,000
Long-term Debt 2,430,000 3,270,000
Other Liabilities 3,695,000 3,271,000
----------- -----------
Total liabilities 11,847,000 13,177,000
----------- -----------
Commitments and Contingencies
Shareholder's Equity:
Preferred stock, par value $0.01 per
share; 500,000 shares authorized,
none issued 0 0
Common stock:
Class A (voting), par value $0.01 per
share; 1,500,000 shares authorized;
1,221,429 shares issued and
outstanding 12,000 12,000
Class B (nonvoting), par value $0.01 per
share; 500,000 shares authorized, 64,286
shares issued and outstanding 1,000 1,000
Paid-in capital 12,243,000 12,243,000
Retained earnings 3,726,000 2,759,000
----------- -----------
Total shareholder's equity 15,982,000 15,015,000
----------- -----------
Total liabilities and shareholder's
equity $27,829,000 $28,192,000
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
6PAGE
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ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Statements of Income for the Years Ended December 31, 1994,
1993, and 1992
1994 1993 1992
----------- ----------- -----------
Gross Revenues $41,662,000 $40,195,000 $40,787,000
Direct Cost of Outside
Services (5,847,000) (7,611,000) (7,889,000)
----------- ----------- -----------
Net revenues 35,815,000 32,584,000 32,898,000
Operating Expenses:
Salaries and related costs 24,192,000 23,627,000 21,516,000
General and administrative
expenses 6,695,000 4,714,000 7,842,000
Depreciation and amortization 940,000 799,000 711,000
----------- ----------- -----------
Income from operations 3,988,000 3,444,000 2,829,000
Interest (Expense) Income, Net (57,000) 5,000 (245,000)
Other (Expense) Income (186,000) (184,000) 98,000
----------- ----------- -----------
Income before provision
for income taxes 3,745,000 3,265,000 2,682,000
Provision for Income Taxes 978,000 1,555,000 1,566,000
----------- ----------- -----------
Net income $ 2,767,000 $ 1,710,000 $ 1,116,000
=========== =========== ===========
The accompanying notes to consolidated financial statements are an integral
part of this statement.
7PAGE
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ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994,
1993, and 1992
1994 1993 1992
----------- ----------- -----------
Cash Flows From Operating Activities:
Net income $ 2,767,000 $ 1,710,000 $ 1,116,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 940,000 799,000 711,000
Decrease (increase) in
accounts receivable, net 60,000 944,000 (691,000)
Decrease (increase) in
prepaid expenses and
other assets 454,000 406,000 (1,298,000)
Increase (decrease) in
accounts payable 213,000 (1,999,000) 2,060,000
(Decrease) increase in
accrued expenses and
other current liabilities (751,000) 1,231,000 (581,000)
Decrease in income taxes
payable 0 0 (1,465,000)
Increase in other long-term
liabilities 424,000 187,000 1,489,000
----------- ----------- -----------
Net cash provided by
operating activities 4,107,000 3,278,000 1,341,000
----------- ----------- -----------
Cash Flows From Investing Activities:
Payments for acquisition of
properties and equipment (987,000) (3,213,000) (789,000)
----------- ----------- -----------
Cash Flows From Financing Activities:
Capital contribution 0 0 1,256,000
Dividends (1,800,000) (1,300,000) (229,000)
Borrowings 500,000 2,880,000 2,500,000
Debt repayments (1,716,000) (2,300,000) (4,117,000)
----------- ----------- -----------
Net cash used in
financing activities (3,016,000) (720,000) (590,000)
----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents 104,000 (655,000) (38,000)
Cash and Cash Equivalents at
Beginning of Year 1,318,000 1,973,000 2,011,000
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,422,000 $ 1,318,000 $ 1,973,000
=========== =========== ===========
Supplemental Disclosure of Noncash Items:
During 1992, the Company declared noncash dividends of $1,124,000.
The accompanying notes to consolidated financial statements are an integral
part of these statements.
8PAGE
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ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Statements of Shareholder's Equity For the Years Ended
December 31, 1994, 1993, and 1992
Class A Class B
Common Stock Common Stock
(voting) (nonvoting)
------------------- ---------------
Shares Amount Shares Amount
--------- ------- ------ ------
Balance, December 31, 1991 1,221,429 $12,000 64,286 $1,000
Capital contribution from
parent 0 0 0 0
Net income, 1992 0 0 0 0
Dividends 0 0 0 0
--------- ------- ------ ------
Balance, December 31, 1992 1,221,429 12,000 64,286 1,000
Net income, 1993 0 0 0 0
Dividends 0 0 0 0
--------- ------- ------ ------
Balance, December 31, 1993 1,221,429 12,000 64,286 1,000
Net income, 1994 0 0 0 0
Dividends 0 0 0 0
--------- ------- ------ ------
Balance, December 31, 1994 1,221,429 $12,000 64,286 $1,000
========= ======= ====== ======
The accompanying notes to consolidated financial statements are an integral
part of these statements.
9PAGE
<PAGE>
ENGINEERING, TECHNOLOGY AND KNOWLEDGE CORPORATION
Consolidated Statements of Shareholder's Equity For the Years Ended
December 31, 1994, 1993, and 1992 (continued)
Paid-in Retained
Capital Earnings
----------- -----------
Balance, December 31, 1991 $10,987,000 $ 2,586,000
Capital contribution from
parent 1,256,000 0
Net income, 1992 0 1,116,000
Dividends 0 (1,353,000)
----------- -----------
Balance, December 31, 1992 12,243,000 2,349,000
Net income, 1993 0 1,710,000
Dividends 0 (1,300,000)
----------- -----------
Balance, December 31, 1993 12,243,000 2,759,000
Net income, 1994 0 2,767,000
Dividends 0 (1,800,000)
----------- -----------
Balance, December 31, 1994 $12,243,000 $ 3,726,000
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
10PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of Engineering, Technology and
Knowledge Corporation (the Company) include the accounts of all of its
wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. The Company provides engineering and
environmental consulting services predominantly in the United States and is
wholly-owned by a French company.
Cash and Cash Equivalents
Cash and cash equivalents consist of unrestricted deposits with banks
and highly liquid investments with an original maturity of three months or
less.
Recognition of Revenue
The Company recognizes revenue generally at the time services are
performed. On fixed price contracts, revenue is recognized on the basis of
the estimated percentage of completion of services rendered. On
reimbursement type contracts, revenue is recognized as costs are incurred
and include applicable fees earned related to such costs. Materials and
subcontract costs reimbursed by clients are included in gross revenues.
Anticipated losses are recognized when the losses are reasonably
determinable by management.
Income Taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standard No. 109 and reflect the tax effect of temporary
differences between the financial statement income and taxable income
reflected on the tax return.
Goodwill
The excess of the cost over the fair value of net assets of acquired
businesses is amortized on a straight-line basis for periods ranging from 5
to 40 years.
Properties and Equipment
Properties and equipment are depreciated or amortized over the
estimated useful lives on a straight-line basis ranging from 3 to 40 years
or, in the case of leasehold improvements, over the lesser of the estimated
useful lives or the term of the lease.
11PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (continued)
2. Accounts Receivable
1994 1993
----------- -----------
Accounts receivable:
Billed $ 8,533,000 $ 7,478,000
Unbilled 3,610,000 4,473,000
----------- -----------
12,143,000 11,951,000
Less: Allowance for doubtful
accounts (728,000) (476,000)
----------- -----------
$11,415,000 $11,475,000
=========== ===========
3. Properties and Equipment
Properties and equipment consist of the following:
1994 1993
----------- -----------
Land $ 674,000 $ 670,000
Building and improvements 6,395,000 6,333,000
Office equipment and furniture 7,257,000 6,443,000
----------- -----------
14,326,000 13,446,000
Less: Accumulated depreciation
and amortization (5,212,000) (4,597,000)
----------- -----------
$ 9,114,000 $ 8,849,000
=========== ===========
4. Short and Long-term Borrowings
In February, 1987, the Company entered into a revolving credit
agreement with Banque Nationale de Paris and Credit National which provides
for borrowings up to $2,200,000. The Credit Agreement is required to be
repaid on demand. The Company has agreed to pay a facility fee of .75% per
annum on the unutilized portion. Interest on borrowings is payable at
1.375% plus the LIBOR rate (7.8125% at December 31, 1994). The Company had
a $700,000 outstanding balance under the Credit Agreement at December 31,
1994.
In September, 1992, the Company entered into a $2,500,000 loan with
Nord-Est. The loan is payable in equal annual payments of $500,000 due on
September 25 each year until final payment is made on September 25, 1997.
Interest on the loan is payable at .5% plus the LIBOR rate. The Company had
a $1,500,000 outstanding balance at December 31, 1994.
12PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (continued)
4. Short and Long-term Borrowings (continued)
In November, 1993, the Company entered into a $1,650,000 mortgage loan
with Midlantic National Bank to acquire an office facility next to the
Corporate offices. The mortgage loan is payable in monthly payments of
$9,167 due through December 12, 2008. Interest on the mortgage loan is
payable at 6.75% per annum. The Company had a $1,540,000 outstanding
balance under the mortgage loan at December 31, 1994.
The Company has one other debt agreement, aggregating $24,000 at
December 31, 1994.
Substantially all of the Company's assets are pledged as collateral in
connection with the agreements described above.
Cash paid during the years ended December 31, 1994, 1993 and 1992 were
$255,000, $203,000 and $240,000, respectively. Interest rates on borrowings
at December 31, 1994 ranged from approximately 5.25% to 6.75% with the
weighted average rate approximating 6.34%.
Long-term debt matures as follows:
1995 $1,334,000
1996 610,000
1997 610,000
1998 110,000
1999 110,000
Thereafter 990,000
----------
$3,764,000
==========
5. Leases
The Company leases certain office space and equipment under various
operating leases. Future minimum lease payments under operating leases are
as follows:
1995 $ 460,000
1996 344,000
1997 63,000
1998 6,000
----------
Total minimum lease payments $ 873,000
==========
Rental expense was approximately $810,000, $972,000 and $1,187,000 for
the years ended December 31, 1994, 1993 and 1992, respectively.
13PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (continued)
6. Income Taxes
Income tax expense consists of the following:
1994 1993 1992
---------- ---------- ----------
Current:
Federal $ 452,000 $1,280,000 $1,223,000
State 497,000 501,000 614,000
---------- ---------- ----------
949,000 1,781,000 1,837,000
---------- ---------- ----------
Deferred:
Federal 25,000 (192,000) (191,000)
State 4,000 (34,000) (80,000)
---------- ---------- ----------
29,000 (226,000) (271,000)
---------- ---------- ----------
Total $ 978,000 $1,555,000 $1,566,000
========== ========== ==========
Cash paid during the years ended December 31, 1994, 1993 and 1992 for
income taxes amounted to $1,733,000, $2,190,000 and $2,042,000,
respectively.
Income tax expense for the years ended December 31, 1994, 1993 and
1992 differs from amounts computed by applying the U. S. Federal income tax
rate (34%) to earnings before taxes primarily as a result of state taxes,
the amortization of goodwill, the nondeductibility of certain expenses paid
by the Company and additionally in 1994, the reversal of certain tax
liabilities deemed no longer needed by the Company's management as the
Company has settled its IRS audit through 1992.
Deferred taxes represent differences between the tax basis of an asset
or liability and its reported amount in the financial statements that will
result in taxable or deductible amounts in future years when the reported
amount of the asset or liability is recovered or settled, respectively.
Such temporary differences include: depreciation for tax return purposes in
excess of book, allowance for doubtful accounts and certain accruals.
7. Pension and Other Postretirement Benefits
The Company's pension plan, which is a noncontributory defined benefit
retirement plan for salaried employees, covers substantially all salaried
employees. Benefits under the plan are based on years of service and
employee's compensation during the last years of employment. In the
Company's plan, funds are contributed to a trustee as necessary to provide
for current service and for any unfunded projected benefit obligation over
a reasonable period. Contributions amounted to $819,000, $834,000 and
$1,027,000 during 1994, 1993 and 1992, respectively.
14PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (continued)
7. Pension and Other Postretirement Benefits (continued)
Pension expense in 1994, 1993 and 1992 was $672,000, $690,000 and
$696,000, respectively. The Company uses the services of an actuary to
calculate the amount of pension expense and contributions to the trustee of
the plan. The net periodic pension cost for 1994, 1993 and 1992 included
the following components:
1994 1993 1992
--------- --------- ---------
Service cost - benefits earned
during the year $ 536,000 $ 526,000 $ 515,000
Interest cost on projected
benefit obligation 706,000 665,000 578,000
Actual return on plan assets 70,000 (586,000) (345,000)
Net amortization and deferral (640,000) 85,000 (52,000)
--------- --------- ---------
Net periodic pension cost $ 672,000 $ 690,000 $ 696,000
========= ========= =========
The assumed rate of return for the Company's plan was 9% for 1994 and
1993 and 6.3% in 1992. The assumed discount rate used in calculating the
projected benefit obligation was 8% and 8.5% at December 31, 1994, 1993 and
1992, respectively. In addition, the assumed annual increase in
compensation over employees' estimated remaining working lives was 5% for
1994 and 6% for 1993 and 1992.
Presented below are the plan's funded status and amounts recognized in
the Company's consolidated balance sheet at December 31, 1994 and 1993 for
its defined benefit pension plan:
1994 1993
----------- -----------
Actuarial present value of
benefit obligation:
Vested $ 7,234,000 $ 5,880,000
Nonvested 173,000 170,000
----------- -----------
Accumulated benefit obligation $ 7,407,000 $ 6,050,000
=========== ===========
Projected benefit obligation $ 9,984,000 $ 9,681,000
Less: Fair value of assets (7,784,000) (7,194,000)
----------- -----------
Projected benefit obligation
in excess of plan assets 2,200,000 2,487,000
Unrecognized transition obligation (483,000) (543,000)
Unrecognized net loss (1,953,000) (2,033,000)
----------- -----------
Prepaid pension cost $ 236,000 $ 89,000
=========== ===========
15PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (continued)
7. Pension and Other Postretirement Benefits (continued)
In addition to providing pension benefits, the Company provides other
postretirement benefits for employees. Substantially all of the Company's
employees may become eligible for those benefits if they reach normal
retirement age while working for the Company. The cost of retiree health
care is expensed as paid. In 1994, 1993 and 1992, the Company's cost for
providing other postretirement benefits aggregated $31,000, $30,000 and
$27,000, respectively.
In December 1990, the Financial Accounting Standards Board issued
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions." This standard required that the expected cost of these
benefits must be charged to expense during the years that the employees
render service. This was a significant change from the Company's current
policy of recognizing these costs on the cash basis. The Company is not
required to adopt this standard until 1995. If the Company were to adopt
this accounting standard prospectively on January 1, 1995 and amortize the
accumulated post retirement benefit obligation over twenty years the impact
on the Company's results of operations is approximately $964,000.
8. Savings Plan
The Company's Salaried Employees Savings and Investment Plan (the
Savings Plan) is qualified under Sections 401(a)(17) and 401(k) of the
Code. All employees of the Company, including executive officers, are
eligible to participate in the Savings Plan upon completion of one year of
employment. Under the salary deferral provisions, participating employees
may elect to defer between 2% and 16% of their compensation but not to
exceed a fixed dollar limit adjusted annually for inflation. Employees may
also make nondeductible contributions between 1% and 16% of their
compensation provided that total contributions may not exceed 16%. Elective
contributions made by employees are fully vested at all times. The Company
provides matching monthly contributions equal to 50% of the lesser of (a)
the aggregate of the employee's contributions to the Plan or (b) 6% of
compensation for such month. Matching contributions fully vest at the time
a mandatory contribution is made. Benefits under the Savings Plan are
payable in a single lump sum or in installments upon termination of
employment, although in-service withdrawals are permitted under certain
circumstances.
9. Stock Option Plan
On December 15, 1987, an incentive stock option plan was adopted by
Elson T. Killam Associates, Inc. (Killam), a wholly-owned subsidiary of the
Company. Under the plan, a total of 2,662.5 shares of Killam, representing
20% equity interest in the subsidiary if fully granted and exercised, were
reserved for grant at option prices not less than fair market value at the
date of grant. Options become exercisable in 25% annual increments
beginning one year from the date of grant. Options for 1,590 shares were
outstanding at December 31, 1994, all of which were exercisable. No options
were granted, terminated or exercised in 1994 and 1993. All options have an
exercise price of $563.38 per share.
16PAGE
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Engineering, Technology and Knowledge Corporation
Notes to Consolidated Financial Statements - December 31, 1994 (concluded)
9. Stock Option Plan (continued)
In the absence of a public market for Killam shares, the plan provides
a formula for the determination of fair market value to establish exercise
price and in stipulated circumstances including retirement, the redemption
price at which the Company would repurchase the stock. Accordingly, the
plan is accounted for as a variable plan with compensation accrued for the
difference between the formula price and exercise price. During 1994, 1993
and 1992, compensation expense recorded associated with the options
aggregated $438,000, $1,331,000 and $280,000, respectively.
The plan further provides that an option holder may obtain a loan from
Killam for an amount up to 90% of the option exercise price in exchange for
an interest-bearing promissory note. No loans are currently outstanding. To
the extent that Killam achieves certain financial goals in 1996 and beyond
as defined in the agreement, shareholders with such loans outstanding may
be entitled to special performance bonuses which may only be applied to
reduce or eliminate amounts outstanding under the promissory notes,
including interest. As of December 31, 1994, the required performance
measures had been achieved but compliance cannot be determined until the
stipulated future dates established in the agreement.
10. Legal Proceedings
The Company and its consolidated subsidiaries are involved in legal
proceedings which are incidental to its business. In the opinion of
management, the final outcome of any pending legal proceedings will not
have a material adverse effect on the consolidated operations or financial
position of the Company.
17PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
(b) Pro Forma Combined Condensed Financial Information
The following unaudited pro forma combined condensed
statement of income sets forth the results of operations for
the nine months ended December 31, 1994 and the year ended
April 2, 1994, as if the acquisition of Engineering,
Technology and Knowledge Corporation (referred to as Killam
Associates in the following pro forma combined condensed
financial information) by the Company had occurred at the
beginning of fiscal 1994. The unaudited pro forma combined
condensed balance sheet sets forth the financial position as
of December 31, 1994, as if the acquisition had occurred as
of that date and assuming there is no post-closing purchase
price adjustment. The pro forma combined condensed statement
of income for the nine months ended December 31, 1994
includes the results of operations of the Company for the
nine months ended December 31, 1994 and Killam Associates'
for the nine months ended December 31, 1994, derived by
subtracting Killam Associates' results of operations for the
first quarter of 1994 from its results of operations for the
twelve months ended December 31, 1994. The pro forma combined
condensed statement of income for the twelve months ended
April 2, 1994 includes the results of operations of the
Company for the fiscal year ended April 2, 1994, and of
Killam Associates for the year ended December 31, 1993.
Killam Associates' results of operations for the first
quarter of calendar 1994 are not included in either the pro
forma combined condensed statement of income for the nine
months ended December 31, 1994 or for the twelve months ended
April 2, 1994. Killam Associates' revenues and net income for
the first quarter of calendar 1994 were $9,505,000 and
$508,000, respectively. The acquisition has been accounted
for using the purchase method of accounting. The pro forma
results of operations are not necessarily indicative of
future operations or the actual results that would have
occurred had the acquisition of Killam Associates been
consummated at the beginning of fiscal 1994. The financial
statements filed under part (a) of this item should be read
in conjunction with these pro forma combined condensed
financial statements.
18PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
Nine Months Ended December 31, 1994
--------------------------------------------
Historical Pro Forma
--------------------- ---------------------
Thermo Killam
Process Associates Adjustments Combined
-------- ---------- ----------- --------
(In thousands except per share amounts)
Revenues $ 94,550 $ 32,157 $ - $126,707
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 70,666 23,920 - 94,586
Selling, general and
administrative expenses 16,769 5,358 196 22,323
New business development
expenses 643 - - 643
-------- -------- -------- --------
88,078 29,278 196 117,552
-------- -------- -------- --------
Operating Income 6,472 2,879 (196) 9,155
Gain on Issuance of Stock by
Subsidiary 1,058 - - 1,058
Interest Income 2,203 153 1,238 3,594
Interest Expense (1,039) (176) (1,238) (2,453)
Interest Expense, Related
Party (480) - (1,861) (2,341)
Other Income (Expense) 749 (86) - 663
-------- -------- -------- --------
Income Before Income Taxes
and Minority Interest 8,963 2,770 (2,057) 9,676
Income Tax Provision (1,978) (511) 613 (1,876)
Minority Interest Expense (3,934) - - (3,934)
-------- -------- -------- --------
Net Income $ 3,051 $ 2,259 $ (1,444) $ 3,866
======== ======== ======== ========
Earnings per Share $ 0.18 $ 0.23
======== ========
Weighted Average Shares 17,099 17,099
======== ========
See notes to pro forma combined condensed financial statements.
19PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
Year Ended
April 2, Dec. 31, April 2,
1994 1994 1994
-------- -------- --------
Historical Pro Forma
------------------- -----------------------
Thermo Killam
Process Associates Adjustments Combined
------- ---------- ----------- --------
(In thousands except per share amounts)
Revenues $110,131 $ 40,195 $ - $150,326
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 84,142 31,238 - 115,380
Selling, general and
administrative expenses 21,195 5,513 (631) 26,077
New business development
expenses 447 - - 447
Costs associated with
divisional restructuring 2,661 - - 2,661
-------- -------- -------- --------
108,445 36,751 (631) 144,565
-------- -------- -------- --------
Operating Income 1,686 3,444 631 5,761
Gain on Issuance of Stock by
Subsidiary 4,488 - - 4,488
Interest Income 1,955 144 1,650 3,749
Interest Expense (1,387) (139) (1,650) (3,176)
Interest Expense, Related
Party - - (2,481) (2,481)
Other Income (Expense) 645 (184) - 461
-------- -------- -------- --------
Income Before Income Taxes,
Minority Interest and
Cumulative Effect of
Change in Accounting
Principle 7,387 3,265 (1,850) 8,802
Income Tax (Provision)
Benefit 40 (1,555) 460 (1,055)
Minority Interest Expense (4,018) - - (4,018)
-------- -------- -------- --------
Income Before Cumulative
Effect of Change in
Accounting Principle $ 3,409 $ 1,710 $ (1,390) $ 3,729
======== ======== ======== ========
Earnings per Share Before
Cumulative Effect of
Change in Accounting
Principle $ 0.20 $ 0.22
======== ========
Weighted Average Shares 16,863 16,863
======== ========
See notes to pro forma combined condensed financial statements.
20PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
December 31, 1994
(Unaudited)
Historical Pro Forma
-------------------- ----------------------
Thermo Killam
Process Associates Adjustments Combined
------- ---------- ----------- --------
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 43,564 $ 1,422 $ 662 $ 45,648
Short-term available-
for-sale investments,
at quoted market value 5,992 - - 5,992
Accounts receivable, net 21,273 7,805 - 29,078
Unbilled contract costs
and fees 9,811 3,610 - 13,421
Inventories 2,388 - - 2,388
Prepaid expenses 3,405 1,844 - 5,249
Prepaid and refundable
income taxes 2,283 - - 2,283
-------- -------- -------- --------
88,716 14,681 662 104,059
-------- -------- -------- --------
Property, Plant and
Equipment, at Cost 74,424 14,326 (6,217) 82,533
Less: Accumulated
depreciation and
amortization 32,806 5,212 (5,212) 32,806
-------- -------- -------- --------
41,618 9,114 (1,005) 49,727
-------- -------- -------- --------
Long-term Available-for-sale
Investments, at Quoted
Market Value 10,390 - - 10,390
-------- --------- -------- --------
Long-term Held-to-maturity
Investments, at Amortized
Cost - - 22,300 22,300
-------- --------- -------- --------
Other Assets 11,545 427 - 11,972
-------- --------- -------- --------
Cost in Excess of Net Assets
of Acquired Companies 37,689 3,607 27,992 69,288
-------- --------- -------- --------
$189,958 $ 27,829 $ 49,949 $267,736
======== ========= ======== ========
See notes to pro forma combined condensed financial statements.
21PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
December 31, 1994
(Unaudited)
Historical Pro Forma
-------------------- ----------------------
Thermo Killam
Process Associates Adjustments Combined
------- ---------- ----------- --------
(In thousands)
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Accounts payable $ 7,912 $ 1,039 $ - $ 8,951
Other accrued liabilities 20,728 4,683 1,100 26,511
Due to parent company 3,440 - - 3,440
-------- -------- -------- --------
32,080 5,722 1,100 38,902
-------- -------- -------- --------
Deferred Income Taxes
and Other Liabilities 1,882 3,695 (2,392) 3,185
-------- -------- -------- --------
Long-term Obligations:
Due to parent company 15,000 - 38,000 53,000
Other 19,085 2,430 22,300 43,815
-------- -------- -------- --------
34,085 2,430 60,300 96,815
-------- -------- -------- --------
Minority Interest 55,643 - - 55,643
-------- -------- -------- --------
Shareholders' Investment:
Common stock 1,741 13 (13) 1,741
Capital in excess of
par value 46,923 12,243 (5,320) 53,846
Retained earnings 20,663 - - 20,663
Treasury stock (3,030) 3,726 (3,726) (3,030)
Cumulative translation
adjustment 55 - - 55
Net unrealized loss on
available-for-sale
investments (84) - - (84)
-------- -------- -------- --------
66,268 15,982 (9,059) 73,191
-------- -------- -------- --------
$189,958 $ 27,829 $ 49,949 $267,736
======== ======== ======== ========
See notes to pro forma combined condensed financial statements.
22PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The allocation of the purchase price is based on an estimate
of the fair value of the net assets acquired and is subject
to adjustment. To date, no information has been gathered that
would cause the Company to believe that the final allocation
of the purchase price will be materially different than the
preliminary estimate.
Note B - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of
Income
Nine Months Ended Year Ended
December 31, 1994 April 2, 1994
----------------- -------------
(In thousands, except in text)
Debit (Credit)
Selling, General and Administrative
Expenses
Amortization over 40 years of
"Cost in excess of net assets of
acquired companies" of $27,992,000
created by the acquisition of
Killam Associates $ 525 $ 700
Reversal of compensation expense
associated with options to purchase
shares of Killam Associates' capital
stock that were cancelled at the
time of acquisition (329) (1,331)
------- -------
196 (631)
------- -------
Interest Income
Increase in interest income due to
purchase of investment to collateralize
promissory note, calculated using
an effective interest rate of 7.2% (1,238) (1,650)
------- -------
Interest Expense
Increase in interest expense due to
zero coupon promissory note issued
at a discount, imputed at an effective
interest rate of 7.2% 1,238 1,650
------- -------
23PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note B - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of
Income (continued)
Nine Months Ended Year Ended
December 31, 1994 April 2, 1994
----------------- -------------
(In thousands, except in text)
Debit (Credit)
Interest Expense, Related Party
Increase in interest expense due to
the issuance of a $38,000,000 promissory
note, due to parent company, calculated
using an interest rate of 6.53%, the
rate in existence at the time the
note was issued $ 1,861 $ 2,481
------- -------
Income Tax Provision
Reduction in income taxes associated
with adjustments above, excluding the
adjustment for amortization of "Cost
in excess of net assets of acquired
companies," calculated at the
Company's statutory income tax rate
of 40% (613) (460)
------- -------
24PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note C - Pro Forma Adjustments to Pro Forma Combined Condensed Balance
Sheet
December 31, 1994
-------------------
(In thousands,
except in text)
Debit (Credit)
Cash and Cash Equivalents
Cash payment to acquire Killam Associates $(12,566)
Cash payment to the Killam Management to cancel
options to purchase shares of Killam Associates'
capital stock (1,922)
Cash payment to partially repay Killam Associates'
debt and related interest at the time of
acquisition (200)
Cash payment to pay acquisition closing costs (350)
Proceeds of promissory note, due to parent company 38,000
Purchase of investment to collateralize promissory
note delivered to Nord Est (22,300)
--------
662
--------
Property, Plant and Equipment, at Cost
Record Killam Associates' property and equipment
at fair market value (1,005)
--------
Long-term Held-to-maturity Investments
Purchase of investment to collateralize promissory
note delivered to Nord Est. 22,300
--------
Cost in Excess of Net Assets of Acquired Companies
Excess of cost over the fair value of net assets
acquired 27,992
--------
Other Accrued Liabilities
Partial repayment of Killam Associates' short-term
debt at time of acquisition 200
Estimated acquisition and other reserves (1,300)
--------
(1,100)
--------
25PAGE
<PAGE>
FORM 8-K/A
THERMO PROCESS SYSTEMS INC.
and
ELSON T. KILLAM ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note C - Pro Forma Adjustments to Pro Forma Combined Condensed Balance
Sheet (continued)
December 31, 1994
------------------
(In thousands,
except in text)
Debit (Credit)
Other Liabilities
Reversal of liability relating to outstanding options
to purchase shares of Killam Associates' capital
stock that were exchanged for options to purchase
847,678 shares the Company's common stock $ 3,442
Curtailment of pension and other postretirement
benefits and recognition of obligation thereunder (1,050)
--------
2,392
--------
Long-term Obligations
Promissory note, due to parent company (38,000)
Present value of zero coupon promissory note, due to
Nord Est. (22,300)
--------
(60,300)
--------
Shareholders' Investment
Elimination of Killam Associates' equity accounts 15,982
Issuance of options to purchase 847,678 shares
of the Company's common stock. The value of the
stock options was calculated based on the
difference between the exercise price of the
options and the market value of the underlying
shares on the date the options were granted. (6,923)
--------
9,059
--------
26
PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
(c) Exhibits
23 Consent of Arthur Andersen LLP.
27PAGE
<PAGE>
FORM 8-K/A
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, on this 21st day of April 1995.
THERMO PROCESS SYSTEMS INC.
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Thermo Process Systems Inc.:
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of
this Form 8-K.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 19, 1995
