SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarter Ended
September 30, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-9549
THERMO PROCESS SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Class Outstanding at October 27, 1995
---------------------------- -------------------------------
Common Stock, $.10 par value 17,391,348
PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of September 30, 1995 and
April 1, 1995 (In thousands) (Unaudited)
September 30, April 1,
1995 1995
------------- --------
Current Assets:
Cash and cash equivalents $ 39,544 $ 35,808
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $25,478 and $5,179) 25,469 5,155
Accounts receivable, less allowances of
$3,157 and $3,560 36,224 27,949
Unbilled contract costs and fees 16,396 16,481
Inventories:
Raw materials and supplies 3,309 2,705
Work in process and finished goods 945 27
Prepaid expenses 4,637 3,788
Prepaid income taxes 9,012 8,228
-------- --------
135,536 100,141
-------- --------
Property, Plant and Equipment, at Cost 113,158 92,794
Less: Accumulated depreciation and amortization 36,492 33,057
-------- --------
76,666 59,737
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $2,137 and $10,687) 2,108 10,564
-------- --------
Long-term Held-to-maturity Investments,
at Amortized Cost (quoted market value
of $24,219 and $22,810) 23,395 22,569
-------- --------
Other Assets 12,435 12,146
-------- --------
Cost in Excess of Net Assets of Acquired Companies
(Notes 3 and 5) 68,183 66,516
-------- --------
$318,323 $271,673
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(a)Consolidated Balance Sheet - Liabilities and Shareholders' Investment
as of September 30, 1995 and April 1, 1995 (In thousands except share
amounts) (Unaudited)
September 30, April 1,
1995 1995
------------- --------
Current Liabilities:
Accounts payable $ 10,222 $ 9,612
Notes payable and current maturities of
long-term obligations (includes $4,000
due to parent company in fiscal 1995) 2,925 4,652
Billings in excess of revenues earned 3,084 1,555
Accrued payroll and employee benefits 8,671 6,845
Accrued and current deferred income taxes 1,475 1,773
Other accrued expenses 8,273 7,892
Due to parent company 4,605 3,116
-------- --------
39,255 35,445
-------- --------
Deferred Income Taxes 4,157 4,116
-------- --------
Other Deferred Items 1,103 1,057
-------- --------
Long-term Obligations:
6 1/2% Subordinated convertible debentures 18,547 18,547
4 7/8% Subordinated convertible debentures (Note 4) 37,950 -
Other (includes $88,000 and $53,000 due
to parent company) (Note 2) 113,502 78,304
-------- --------
169,999 96,851
-------- --------
Minority Interest 26,700 56,603
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 30,000,000
shares authorized; 17,458,362 and 17,414,322
shares issued 1,746 1,741
Capital in excess of par value 53,600 53,559
Retained earnings 21,517 21,727
Treasury stock at cost, 67,014 and
71,072 shares (799) (864)
Cumulative translation adjustment 1,068 1,526
Net unrealized loss on available-for-sale
investments (23) (88)
-------- --------
77,109 77,601
-------- --------
$318,323 $271,673
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(b)Consolidated Statement of Operations for the three months ended
September 30, 1995 and October 1, 1994 (In thousands except per share
amounts) (Unaudited)
Three Months Ended
--------------------------
September 30, October 1,
1995 1994
------------- ----------
Revenues:
Service revenues $48,736 $27,756
Product revenues 5,046 3,259
------- -------
53,782 31,015
------- -------
Costs and Operating Expenses:
Cost of service revenues 32,797 20,102
Cost of product revenues 4,445 2,706
Selling, general and administrative expenses 11,547 6,043
Product and new business development expenses 282 221
Write-off of cost in excess of net assets of
acquired company (Note 5) 4,995 -
------- -------
54,066 29,072
------- -------
Operating Income (Loss) (284) 1,943
Interest Income 1,406 787
Interest Expense (includes $1,690 and $190
to parent company) (2,959) (537)
Gain on Issuance of Stock by Subsidiaries - 668
Loss on Sale of Assets (Note 6) (569) -
------- -------
Income (Loss) Before Provision for Income Taxes
and Minority Interest (2,406) 2,861
Provision for Income Taxes 1,320 476
Minority Interest Expense 433 1,357
------- -------
Net Income (Loss) $(4,159) $ 1,028
======= =======
Earnings (Loss) per Share $ (.24) $ .06
======= =======
Weighted Average Shares 17,373 17,123
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(b)Consolidated Statement of Operations for the six months ended
September 30, 1995 and October 1, 1994 (In thousands except per share
amounts) (Unaudited)
Six Months Ended
----------------------------
September 30, October 1,
1995 1994
------------- ----------
Revenues:
Service revenues $ 95,030 $ 53,352
Product revenues 8,608 6,527
-------- --------
103,638 59,879
-------- --------
Costs and Operating Expenses:
Cost of service revenues 63,936 38,959
Cost of product revenues 7,758 5,517
Selling, general and administrative expenses 23,233 11,497
Product and new business development expenses 558 356
Write-off of cost in excess of net assets
of acquired company (Note 5) 4,995 -
-------- --------
100,480 56,329
-------- --------
Operating Income 3,158 3,550
Interest Income 2,766 1,425
Interest Expense (includes $2,898 and $274 to
parent company) (5,232) (960)
Gain on Issuance of Stock by Subsidiaries
(Note 4) 2,742 897
Gain on Sale of Investments (includes $608 on sale
of related party debentures in fiscal 1995) 80 611
Loss on Sale of Assets (Note 6) (569) -
-------- --------
Income Before Provision for Income Taxes and
Minority Interest 2,945 5,523
Provision for Income Taxes 2,344 1,076
Minority Interest Expense 811 2,538
-------- --------
Net Income (Loss) $ (210) $ 1,909
======== ========
Earnings (Loss) per Share $ (.01) $ .11
======== ========
Weighted Average Shares 17,362 17,071
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(c)Consolidated Statement of Cash Flows for the six months ended
September 30, 1995 and October 1, 1994 (In thousands) (Unaudited)
Six Months Ended
--------------------------
September 30, October 1,
1995 1994
------------- ---------
Operating Activities:
Net income (loss) $ (210) $ 1,909
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 5,870 3,166
Write-off of cost in excess of net assets of
acquired company (Note 5) 4,995 -
Loss on sale of assets (Note 6) 569 -
Minority interest expense 811 2,538
Provision for losses on accounts receivable (21) (168)
Other noncash expenses 191 879
Increase in deferred income taxes 93 -
Gain on issuance of stock by subsidiaries
(Note 4) (2,742) (897)
Gain on sale of investments (80) (611)
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable (3,150) (1,481)
Inventories and unbilled contract costs and fees (803) 37
Other current assets (999) (705)
Current liabilities 3,457 585
-------- --------
Net cash provided by operating activities 7,981 5,252
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 3) (25,404) (5,491)
Purchase of minority interest in Thermo Terra
Tech joint venture (Note 2) (34,267) -
Purchases of available-for-sale investments (23,299) -
Proceeds from sale and maturities of
available-for-sale investments 11,630 16,795
Purchases of property, plant and equipment (8,557) (3,106)
Proceeds from sale of property, plant and equipment 594 56
Purchase of other assets (26) (120)
-------- --------
Net cash provided by (used in) investing
activities $(79,329) $ 8,134
-------- --------
6PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(c)Consolidated Statement of Cash Flows for the six months ended
September 30, 1995 and October 1, 1994 (In thousands) (Unaudited)
(continued)
Six Months Ended
--------------------------
September 30, October 1,
1995 1994
------------- ---------
Financing Activities:
Net proceeds from issuance of subordinated
convertible debentures (Note 4) $ 36,889 $ -
Issuance of notes to parent company (Note 2) 35,000 15,000
Repayment of note payable to parent company (Note 4) (4,000) -
Proceeds from issuance of Company and subsidiary
common stock (Note 4) 6,959 3,187
Issuance of short-term obligations 2,178 -
Repayment of note payable (618) -
Dividends paid by subsidiary to minority
shareholders (551) (343)
Issuance of note receivable (401) (700)
Other - (138)
-------- --------
Net cash provided by financing activities 75,456 17,006
-------- --------
Exchange Rate Effect on Cash (372) 530
-------- --------
Increase in Cash and Cash Equivalents 3,736 30,922
Cash and Cash Equivalents at Beginning of Period 35,808 15,976
-------- --------
Cash and Cash Equivalents at End of Period $ 39,544 $ 46,898
======== ========
Cash Paid For:
Interest $ 3,573 $ 928
Income taxes $ 2,846 $ 956
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - September 30, 1995
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Process Systems Inc. (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of (a) the results of operations for
the three- and six-month periods ended September 30, 1995 and October 1,
1994, (b) the financial position at September 30, 1995, and (c) the cash
flows for the six-month periods ended September 30, 1995 and October 1,
1994. Interim results are not necessarily indicative of results for a full
year.
The consolidated balance sheet presented as of April 1, 1995, has been
derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are presented as permitted by Form 10-Q and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended April 1, 1995, filed with the Securities and Exchange
Commission.
2. Dissolution of Thermo Terra Tech Joint Venture
Effective April 2, 1995, the Company and Thermo Instrument Systems
Inc. (Thermo Instrument) dissolved their Thermo Terra Tech joint venture
and the Company purchased the businesses formerly operated by the joint
venture from Thermo Instrument for $34,267,000 in cash. As a result of this
transaction, the Company increased its ownership in the businesses operated
by the joint venture from 51% to 100%. Based on unaudited data, if the
acquisition of Thermo Instrument's share of such businesses by the Company
had occurred at the beginning of fiscal 1995, net income and earnings per
share on a pro forma basis would have been $1,321,000 and $.08,
respectively, for the three months ended October 1, 1994, and $2,409,000
and $.14, respectively, for the six months ended October 1, 1994. The
Company borrowed the purchase price from Thermo Electron Corporation
(Thermo Electron) through the issuance of a $35,000,000 promissory note due
May 13, 1997 and bearing interest at the Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter.
In June 1995, the Company transferred three businesses formerly
operated by the joint venture, collectively known as the Nuclear Services
Group (renamed Thermo Nutech), to the Company's Thermo Remediation Inc.
(Thermo Remediation) subsidiary in exchange for 1,583,360 shares of Thermo
Remediation common stock.
8PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - September 30, 1995
(continued)
3. Acquisition
On May 10, 1995, the Company acquired substantially all of the assets
of Lancaster Laboratories, Inc. and its affiliate Clewmark Holdings
(collectively Lancaster Laboratories). Lancaster Laboratories, based in
Lancaster, Pennsylvania, is a provider of high-quality analytical services
to the environmental, food, and pharmaceutical industries. The purchase
price for the assets was $19,207,000 in cash, plus the assumption of
approximately $5,333,000 in bank indebtedness existing as of the closing of
the acquisition. The Company has also agreed to pay an additional $600,000
as a result of Lancaster Laboratories having achieved certain performance
goals through the period ending September 30, 1995.
The acquisition of Lancaster Laboratories has been accounted for using
the purchase method of accounting, and its results of operations have been
included in the accompanying financial statements from the date of
acquisition. The aggregate cost of this acquisition exceeded the estimated
fair value of the acquired net assets by $7,736,000, which is being
amortized over 40 years. Allocation of the purchase price for this
acquisition was based on an estimate of the fair value of the net assets
acquired and is subject to adjustment.
Based on unaudited data, the following table presents selected
financial information for the Company and Lancaster Laboratories on a pro
forma basis, assuming the companies had been combined from the beginning of
fiscal 1995.
Three Months Ended Six Months Ended
------------------ -------------------------
(In thousands except October 1, September 30, October 1,
per share amounts) 1994 1995 1994
--------------------------------------------------------------------------
Revenues $38,821 $106,204 $74,887
Net Income (Loss) 1,261 (164) 1,933
Earnings (Loss) per
Share .07 (.01) .11
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition been made at the beginning of fiscal 1995.
9PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - September 30, 1995
(continued)
4. Subsidiary Debenture Offering and Private Placement of Subsidiary
Common Stock
On May 4, 1995, Thermo Remediation issued and sold $37,950,000
principal amount of 4 7/8% subordinated convertible debentures due 2000.
The debentures are convertible into shares of Thermo Remediation's common
stock at a conversion price of $17.92 per share and are guaranteed on a
subordinated basis by Thermo Electron. The Company has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a payment
under the guarantee. In addition, in May 1995, Thermo Remediation sold
500,000 shares of its common stock in a private placement at $13.25 per
share for net proceeds of $6,625,000, resulting in a gain of $2,742,000. In
June 1995, Thermo Remediation repaid its $4,000,000 note payable to Thermo
Electron with proceeds from the offerings. As of September 30, 1995, the
Company owned 67.7% of Thermo Remediation's outstanding common stock.
5. Write-off of Cost in Excess of Net Assets of Acquired Company
Following the purchases of Killam Associates in February 1995, the
businesses formerly operated by the Thermo Terra Tech joint venture from
Thermo Instrument in April 1995, and Lancaster Laboratories in May 1995,
the primary growth focus of the Company has become environmental
infrastructure services. The Company no longer expects to reinvest in the
thermal-processing equipment business to the extent necessary to recover
the "Cost in excess of net assets of acquired company" acquired with that
business. Accordingly, the Company wrote off $4,995,000 of "Cost in excess
of net assets of acquired company" associated with the thermal-processing
equipment business. This noncash expense is nondeductible for tax purposes.
6. Loss on Sale of Assets
During September 1995, the Company sold to a management group the
assets of a small civil engineering design office in Williston, Vermont
that was no longer included in the geographic expansion plans of the
Company. An intangible asset of $569,000 associated with this office was
not recovered in the sale price and, accordingly, has been written off.
This noncash expense is nondeductible for tax purposes. Sales and earnings
of this office were not material to the Company.
10PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a provider of environmental services and infrastructure
planning and design, encompassing a range of specializations within the
consulting and design, remediation and recycling, laboratory testing, and
metal-treating industries.
Consulting and Design - The Company's Bettigole Andrews & Clark and
Normandeau Associates subsidiaries provide both private and public sector
clients with a range of consulting services that address transportation
planning and design, and natural resource management issues, respectively.
In February 1995, the Company acquired Elson T. Killam Associates Inc.
(Killam Associates), which provides environmental consulting and
engineering services and specializes in wastewater treatment and water
resources management.
Remediation and Recycling - The Company's majority-owned Thermo
Remediation Inc. (Thermo Remediation) subsidiary operates a network of
soil-remediation centers, serving customers in more than a dozen states by
providing thermal treatment of soil to remove and destroy petroleum
contamination caused by leaking underground and aboveground storage tanks,
spills, and other sources. In addition, Thermo Remediation's Thermo Fluids
subsidiary, located in Arizona, offers fluids-recycling services including
waste motor oil and wastewater treatment throughout Arizona and in
neighboring states. Through its Thermo Nutech subsidiary, Thermo
Remediation provides services to remove radioactive contaminants from sand,
gravel, and soil, as well as health physics, radiochemistry laboratory, and
radiation dosimetry services. Thermo Nutech was formerly part of the Thermo
Terra Tech joint venture. The Company's majority-owned J. Amerika N.V. (J.
Amerika) subsidiary, to be renamed Thermo EuroTech N.V., located in the
Netherlands, provides wastewater treatment services as well as services to
test, remove and install underground storage tanks. In March 1995, J.
Amerika acquired Refining and Trading Holland B.V. (North Refinery), which
specializes in converting "off-spec" and contaminated petroleum fluids into
usable oil products.
Laboratory Testing - Thermo Analytical operates a network of
analytical laboratories that provide environmental testing services to
commercial and government clients throughout the U.S. The May 1995
acquisition of Lancaster Laboratories expands the Company's range of
contract services beyond environmental testing to the pharmaceutical- and
food-testing industries.
Metal Treating - The Company performs metallurgical processing
services, using thermal-treatment equipment at locations in California and
Minnesota. The Company also designs, manufactures, and installs advanced
custom-engineered, thermal-processing systems through its equipment
division located in Michigan.
11PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
Second Quarter Fiscal 1996 Compared With Second Quarter Fiscal 1995
-------------------------------------------------------------------
Total revenues in the second quarter of fiscal 1996 increased 73% to
$53.8 million from $31.0 million in the second quarter of fiscal 1995.
Consulting and design services revenues were $18.4 million in fiscal 1996,
compared with $8.4 million in fiscal 1995. This increase results from the
inclusion of revenues from Killam Associates which was acquired in February
1995. Revenues from remediation and recycling services were $17.1 million
in fiscal 1996, compared with $14.2 million in fiscal 1995. An increase in
revenues of $3.7 million resulted from the inclusion of revenues from
businesses acquired in fiscal 1995 and, to a lesser extent, an increase in
revenues from a long-term environmental restoration contract for the U.S.
Department of Energy's (DOE's) Hanford site (Hanford). These increases were
offset in part by lower revenues resulting from a decrease in the volume of
soil processed as a result of the regulatory uncertainties at one site,
competitive pricing pressures at several locations and, to a lesser extent,
a decrease in radiochemistry laboratory work, reflecting a reduction in
spending at the DOE. Revenues from laboratory testing services, excluding
the radiochemistry laboratory services included in remediation and
recycling services, increased to $10.2 million in the second quarter of
fiscal 1996, from $2.1 million in fiscal 1995, reflecting the inclusion of
revenues from Lancaster Laboratories, which was acquired in May 1995. Metal
treating revenues increased to $8.1 million in fiscal 1996 from $6.3
million in fiscal 1995, due primarily to an increase in equipment sales.
The gross profit margin increased to 31% in the second quarter of
fiscal 1996 from 26% in the second quarter of fiscal 1995, due primarily to
the inclusion of higher-margin Killam Associates revenues, offset in part
by lower margins from remediation and recycling services revenues due
primarily to a lower gross profit margin associated with revenues from the
Hanford contract and a decrease in revenues from radiochemistry laboratory
work.
During the second quarter of fiscal 1996, the Company wrote off
$4,995,000 of "Cost in excess of net assets of acquired company" related to
its thermal-processing equipment business (Note 5). In addition, the
Company incurred a loss of $569,000 as a result of the sale of an
engineering office (Note 6). These noncash expenses are nondeductible for
tax purposes.
Selling, general and administrative expenses as a percentage of
revenues increased to 21% in the second quarter of fiscal 1996 from 19% in
the second quarter of fiscal 1995 due primarily to the inclusion of higher
selling, general and administrative expenses as a percentage of revenues at
Killam Associates.
12PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Second Quarter Fiscal 1996 Compared With Second Quarter Fiscal 1995
-------------------------------------------------------------------
(continued)
Net interest expense was $1.6 million in the second quarter of fiscal
1996, compared with net interest income of $250,000 in the second quarter
of fiscal 1995. This change resulted primarily from funds expended to
purchase the businesses formerly operated by the Thermo Terra Tech joint
venture from Thermo Instrument Systems Inc. (Thermo Instrument), as well as
Killam Associates and Lancaster Laboratories. These expenditures were made
from existing funds and borrowings from Thermo Electron Corporation (Thermo
Electron). In addition, interest expense increased in fiscal 1996 due to
the issuance of the 4 7/8% subordinated convertible debentures by Thermo
Remediation in May 1995.
As a result of the sale of stock by J. Amerika, the Company recorded a
gain of $668,000 in the second quarter of fiscal 1995. The gain represents
an increase in the Company's proportionate share of the subsidiary's equity
and is classified as "Gain on issuance of stock by subsidiaries" in the
accompanying statement of operations.
The effective tax rate in the second quarter of fiscal 1996 was higher
than the federal statutory rate due primarily to the nondeductible
write-off of "Cost in excess of net assets of acquired company" and the
"Loss on sale of assets." In fiscal 1995, the effective tax rate was less
than the federal statutory rate due to the exclusion of income taxed
directly to a minority partner.
Minority interest expense decreased to $433,000 in the second quarter
of fiscal 1996 from $1.4 million in the second quarter of fiscal 1995 due
primarily to the Company's purchase of the businesses formerly operated by
the Thermo Terra Tech joint venture from Thermo Instrument, effective April
2, 1995 (Note 2).
First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995
-----------------------------------------------------------------------
Total revenues in the first six months of fiscal 1996 increased 73% to
$103.6 million from $59.9 million in the first six months of fiscal 1995.
Consulting and design services revenues were $38.2 million in fiscal 1996,
compared with $16.2 million in fiscal 1995. This increase results from the
inclusion of revenues from Killam Associates, which was acquired in
February 1995 and, to a lesser extent, the inclusion of revenues from RMC
Environmental Services, Inc. (RMC) for the full six months of fiscal 1996,
compared with approximately two months in fiscal 1995. Revenues from
remediation and recycling services were $32.5 million in fiscal 1996,
compared with $27.3 million in fiscal 1995. An increase in revenues of $6.7
million resulted from the inclusion of revenues from businesses acquired in
fiscal 1995, as well as an increase in revenues from the Hanford contract.
These increases were offset in part by lower revenues resulting from a
decrease in the volume of soil processed as a result of regulatory
13PAGE
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Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995
-----------------------------------------------------------------------
(continued)
uncertainties at one site, competitive pricing pressures at several
locations and, to a lesser extent, a decrease in radiochemistry laboratory
work, reflecting a reduction in spending at the DOE. Revenues from
laboratory testing services, excluding the radiochemistry laboratory
services included in remediation and recycling services, increased to $17.7
million in fiscal 1996 from $4.0 million in fiscal 1995, reflecting the
inclusion of revenues from Lancaster Laboratories, which was acquired in
May 1995. Metal treating revenues increased to $15.3 million in fiscal 1996
from $12.4 million in fiscal 1995, due primarily to an increase in
equipment sales.
The gross profit margin increased to 31% in the first six months of
fiscal 1996 from 26% in the first six months of fiscal 1995, due to the
reasons discussed in the results of operations for the second quarter.
Selling, general and administrative expenses as a percentage of
revenues increased to 22% in the first six months of fiscal 1996 from 19%
in the first six months of fiscal 1995 due primarily to the inclusion of
higher selling, general and administrative expenses as a percentage of
revenues at Killam Associates.
Net interest expense was $2.5 million in the first six months of
fiscal 1996, compared with net interest income of $465,000 in the first six
months of fiscal 1995. This change resulted primarily from funds expended
to purchase from the businesses formerly operated by the Thermo Terra Tech
joint venture from Thermo Instrument, as well as Killam Associates and
Lancaster Laboratories. These expenditures were made from existing funds
and borrowings from Thermo Electron. In addition, interest expense
increased in fiscal 1996 due to the issuance of the 4 7/8% subordinated
convertible debentures by Thermo Remediation in May 1995.
As a result of the sale of stock by Thermo Remediation in fiscal 1996
and 1995 and by J. Amerika in fiscal 1995, the Company recorded gains of
$2,742,000 in the first six months of fiscal 1996 and $897,000 in the first
six months of fiscal 1995. The gains represent increases in the Company's
proportionate share of the subsidiaries equity and are classified as "Gain
on issuance of stock by subsidiaries" in the accompanying statement of
operations (Note 4).
14PAGE
<PAGE>
Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Six Months Fiscal 1996 Compared With First Six Months Fiscal 1995
-----------------------------------------------------------------------
(continued)
The effective tax rate in the first six months of fiscal 1996 was
higher than the federal statutory rate due primarily to the nondeductible
write-off of "Cost in excess of net assets of acquired company" and the
"Loss on sale of assets," offset in part by the nontaxable gains on
issuance of stock by subsidiary. In fiscal 1995, the effective tax rate was
less than the federal statutory rate due to the exclusion of income taxed
directly to a minority partner.
Minority interest expense decreased to $811,000 in the first six
months of fiscal 1996 from $2.5 million in the first six months of fiscal
1995 due primarily to the Company's purchase of the businesses formerly
operated by the Thermo Terra Tech joint venture from Thermo Instrument,
effective April 2, 1995 (Note 2).
Financial Condition
Liquidity and Capital Resources
-------------------------------
Consolidated working capital, including cash, cash equivalents, and
short-term available-for-sale investments, was $96.3 million at September
30, 1995, compared with $64.7 million at April 1, 1995. Cash, cash
equivalents, and short- and long-term available-for-sale investments were
$67.1 million at September 30, 1995, compared with $51.5 million at April
1, 1995. Of the $67.1 million balance at September 30, 1995, $51.8 million
was held by Thermo Remediation and the remainder by the Company and its
wholly owned subsidiaries. During the first six months of fiscal 1996, the
Company expended an aggregate of $59.0 million, net of cash acquired, to
purchase Lancaster Laboratories and to purchase the businesses formerly
operated by the Thermo Terra Tech joint venture from Thermo Instrument
(Notes 2 and 3). Balance sheet changes between April 1, 1995 and September
30, 1995 primarily reflect the acquisition of Lancaster Laboratories, and
Thermo Remediation's issuance of convertible debentures and private
placement of common stock discussed below. In addition, the Company
expended $8.6 million on property, plant and equipment, primarily relating
to two new soil-remediation sites under construction. The Company plans to
expend an additional $2.8 million on these sites in the remainder of fiscal
1996.
In May 1995, Thermo Remediation issued and sold $38 million principal
amount of 4 7/8% subordinated convertible debentures due 2000. In addition,
in May 1995, Thermo Remediation sold 500,000 shares of its common stock in
a private placement for net proceeds of $6.6 million. In June 1995, Thermo
Remediation repaid its $4.0 million note payable to Thermo Electron with
proceeds from the offerings.
15PAGE
<PAGE>
Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
Although the Company has no material capital expenditure commitments,
except as noted above, such expenditures will largely be affected by the
number and size of the complementary businesses that can be acquired or
developed during the year. Thermo Electron has indicated its intention to
require the Company's indebtedness to Thermo Electron be repaid to the
extent that the Company's liquidity and cash flow permit. Accordingly, the
Company believes that it has adequate resources to meet the financial needs
of its current operations for the foreseeable future.
Part II - Other Information
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
16PAGE
<PAGE>
Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 6th day of November
1995.
THERMO PROCESS SYSTEMS INC.
Paul F. Kelleher
----------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
----------------------------
John N. Hatsopoulos
Vice President and
Chief Financial Officer
17PAGE
<PAGE>
Form 10-Q
September 30, 1995
THERMO PROCESS SYSTEMS INC.
EXHIBIT INDEX
Exhibit Number Document Page
-------------- ------------------------------------------------ ----
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
PROCESS SYSTEMS INC.'S RESULTS OF OPERATIONS ON FORM 10-Q FOR THE PERIOD ENDED
9/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 39,544
<SECURITIES> 25,469
<RECEIVABLES> 36,224
<ALLOWANCES> 3,157
<INVENTORY> 4,254
<CURRENT-ASSETS> 135,536
<PP&E> 113,158
<DEPRECIATION> 36,492
<TOTAL-ASSETS> 318,323
<CURRENT-LIABILITIES> 39,255
<BONDS> 81,999
<COMMON> 1,746
0
0
<OTHER-SE> 75,363
<TOTAL-LIABILITY-AND-EQUITY> 318,323
<SALES> 8,608
<TOTAL-REVENUES> 103,638
<CGS> 7,758
<TOTAL-COSTS> 71,694
<OTHER-EXPENSES> 5,553
<LOSS-PROVISION> (21)
<INTEREST-EXPENSE> 5,232
<INCOME-PRETAX> 2,945
<INCOME-TAX> 2,344
<INCOME-CONTINUING> (210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
