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
December 31, 1994.
[ ] 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.)
12068 Market Street
Livonia, Michigan 48150
(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 January 27, 1995
---------------------------- -------------------------------
Common Stock, $.10 par value 17,165,190
PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of December 31, 1994 and
April 2, 1994 (In thousands)
December 31, April 2,
1994 1994
------------ --------
Current Assets:
Cash and cash equivalents $ 43,564 $ 15,976
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $5,834 and $22,483) (includes $812
and $3,371 of related party debentures) 5,992 23,123
Accounts receivable, less allowances of
$3,229 and $3,260 21,273 18,513
Unbilled contract costs and fees 9,811 9,394
Inventories:
Raw materials and supplies 1,967 1,908
Work in process 421 485
Prepaid expenses 3,405 2,091
Prepaid and refundable income taxes 2,283 2,081
-------- --------
88,716 73,571
-------- --------
Property, Plant and Equipment, at Cost 74,424 62,226
Less: Accumulated depreciation and amortization 32,806 29,776
-------- --------
41,618 32,450
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $10,690 and $11,543) 10,390 11,438
-------- --------
Other Assets 11,545 5,265
-------- --------
Cost in Excess of Net Assets of Acquired Companies
(Note 4) 37,689 32,710
-------- --------
$189,958 $155,434
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(a)Consolidated Balance Sheet - Liabilities and Shareholders' Investment
as of December 31, 1994 and April 2, 1994 (In thousands except share
amounts)
December 31, April 2,
1994 1994
------------ --------
Current Liabilities:
Accounts payable $ 7,912 $ 6,152
Notes payable (includes $4,000 due to parent
company) 4,982 975
Billings in excess of revenues earned 2,162 1,997
Accrued contract costs and billings in excess
of contract revenues 557 578
Accrued payroll and employee benefits 5,101 5,010
Accrued and current deferred income taxes 1,440 263
Other accrued expenses 6,486 4,419
Due to parent company 3,440 2,565
-------- --------
32,080 21,959
-------- --------
Deferred Income Taxes 1,882 2,167
-------- --------
Long-term Obligations:
6 1/2% Subordinated convertible debentures 18,547 18,547
Other (includes $15,000 due to parent company) 15,538 185
-------- --------
34,085 18,732
-------- --------
Minority Interest 55,643 50,017
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 30,000,000
shares authorized; 17,414,322 and 17,254,026
shares issued 1,741 1,725
Capital in excess of par value 46,923 46,456
Retained earnings 20,663 17,612
Treasury stock at cost, 249,132 and
267,371 shares (3,030) (2,911)
Cumulative translation adjustment 55 (669)
Net unrealized gain (loss) on available-for-sale
investments (84) 346
-------- --------
66,268 62,559
-------- --------
$189,958 $155,434
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(b)Consolidated Statement of Income for the three months ended December
31, 1994 and January 1, 1994 (In thousands except per share amounts)
Three Months Ended
------------------------
December 31, January 1,
1994 1994
------------ ---------
Revenues:
Service revenues $30,642 $24,012
Product revenues 4,029 3,210
------- -------
34,671 27,222
------- -------
Costs and Operating Expenses:
Cost of service revenues 22,901 18,291
Cost of product revenues 3,289 3,019
Selling, general and administrative expenses 5,272 6,023
New business development expenses 287 175
Costs associated with divisional restructuring - 2,661
------- -------
31,749 30,169
------- -------
Operating Income (Loss) 2,922 (2,947)
Gain on Issuance of Stock by Subsidiaries (Note 3) 161 3,637
Interest Income 778 435
Interest Expense (includes $206 for note to
parent company in fiscal 1995) (559) (327)
Gain on Sale of Related Party Debentures 138 -
------- -------
Income Before Income Taxes and Minority Interest 3,440 798
Income Tax (Provision) Benefit (902) 1,258
Minority Interest Expense (1,396) (975)
------- -------
Net Income $ 1,142 $ 1,081
======= =======
Earnings per Share $ .07 $ .06
======= =======
Weighted Average Shares 17,155 16,867
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(b)Consolidated Statement of Income for the nine months ended December 31,
1994 and January 1, 1994 (In thousands except per share amounts)
Nine Months Ended
------------------------
December 31, January 1,
1994 1994
------------ ----------
Revenues:
Service revenues $83,994 $69,480
Product revenues 10,556 10,960
Contract revenues from related party - 776
------- -------
94,550 81,216
------- -------
Costs and Operating Expenses:
Cost of service revenues 61,860 52,414
Cost of product revenues 8,806 9,626
Cost of contract revenues from related party - 776
Selling, general and administrative expenses 16,769 15,881
New business development expenses 643 175
Costs associated with divisional restructuring - 2,661
------- -------
88,078 81,533
------- -------
Operating Income (Loss) 6,472 (317)
Gain on Issuance of Stock by Subsidiaries (Note 3) 1,058 4,239
Interest Income 2,203 1,426
Interest Expense (includes $480 for note to
parent company in fiscal 1995) (1,519) (1,037)
Gain on Sale of Investments (includes $746 on sale
of related party debentures in fiscal 1995) 749 645
------- -------
Income Before Income Taxes, Minority
Interest and Cumulative Effect of Change
in Accounting Principle 8,963 4,956
Income Tax (Provision) Benefit (1,978) 580
Minority Interest Expense (3,934) (3,062)
------- -------
Income Before Cumulative Effect of
Change in Accounting Principle 3,051 2,474
Cumulative Effect of Change in Accounting Principle - 500
------- -------
Net Income $ 3,051 $ 2,974
======= =======
Earnings per Share Before Cumulative Effect of
Change in Accounting Principle $ .18 $ .15
======= =======
Earnings per Share $ .18 $ .18
======= =======
Weighted Average Shares 17,099 16,825
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(c)Consolidated Statement of Cash Flows for the nine months ended
December 31, 1994 and January 1, 1994 (In thousands)
Nine Months Ended
------------------------
December 31, January 1,
1994 1994
------------ ----------
Operating Activities:
Net income $ 3,051 $ 2,974
Adjustments to reconcile net income to net cash
provided by operating activities:
Costs associated with divisional restructuring - 2,661
Cumulative effect of change in
accounting principle - (500)
Depreciation and amortization 5,507 4,476
Minority interest expense 3,934 3,062
Provision for losses on accounts receivable 148 20
Other noncash expenses 371 6
Gain on issuance of stock by
subsidiaries (Note 3) (1,058) (4,239)
Gain on sale of investments (749) (645)
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable (1,629) (2,362)
Inventories and unbilled contract
costs and fees (66) (1,089)
Other current assets (1,177) 41
Current liabilities 1,695 1,278
Other - 65
-------- --------
Net cash provided by operating activities 10,027 5,748
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 4) (17,786) (2,650)
Proceeds from sales and maturities of
available-for-sale investments 18,250 -
Increase in short-term investments - (3,832)
Purchases of property, plant and equipment (4,524) (5,518)
Proceeds from sale of property, plant and
equipment 61 222
Purchase of other assets (445) (273)
-------- --------
Net cash used in investing activities (4,444) (12,051)
-------- --------
Financing Activities:
Environmental Services Businesses transfer
of cash to Thermo Instrument (Note 2) - (1,772)
Issuance of note receivable (700) -
Proceeds from issuance of Company and
subsidiaries common stock 3,865 14,931
Issuance of notes to parent company 19,000 -
Dividends paid by subsidiaries to minority
shareholders (343) (180)
Other (144) (89)
-------- --------
Net cash provided by financing activities $ 21,678 $ 12,890
-------- --------
6PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(c)Consolidated Statement of Cash Flows for the nine months ended
December 31, 1994 and January 1, 1994 (continued) (In thousands)
Nine Months Ended
------------------------
December 31, January 1,
1994 1994
------------ ----------
Exchange Rate Effect on Cash $ 327 $ (368)
-------- --------
Increase in Cash and Cash Equivalents 27,588 6,219
Cash and Cash Equivalents at Beginning of Period 15,976 19,165
-------- --------
Cash and Cash Equivalents at End of Period $ 43,564 $ 25,384
======== ========
Cash Paid For:
Interest $ 1,168 $ 1,227
Income taxes $ 1,461 $ 787
Noncash Activities:
See Note 2 for discussion of the environmental services joint venture.
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - December 31, 1994
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 nine-month periods ended December 31, 1994 and January 1,
1994, (b) the financial position at December 31, 1994, and (c) the cash
flows for the nine-month periods ended December 31, 1994 and January 1,
1994. Interim results are not necessarily indicative of results for a full
year.
The consolidated balance sheet presented as of April 2, 1994, 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 2, 1994, filed with the Securities and Exchange
Commission.
2. Joint Venture
As more fully discussed in the Company's Annual Report on Form 10-K
for the fiscal year ended April 2, 1994, the Company entered into an
agreement, effective April 4, 1994, with Thermo Instrument Systems Inc.
(Thermo Instrument), another public subsidiary of Thermo Electron
Corporation (Thermo Electron), establishing an environmental services joint
venture called Thermo Terra Tech.
Because the Company and the environmental services businesses
contributed to the joint venture by Thermo Instrument (the Environmental
Services Businesses) were deemed for accounting purposes to be under
control of their common majority owner, Thermo Electron, the transaction
has been accounted for at historical cost in a manner similar to a pooling
of interests. Accordingly, all historical financial information was
restated at fiscal year-end 1994 to include the accounts and operations of
the Environmental Services Businesses. For periods presented prior to April
4, 1994, amounts earned by the Environmental Services Businesses have been
allocated to Thermo Instrument through minority interest expense in the
accompanying financial statements.
3. Transactions in Stock of Subsidiaries
On September 30, 1994, the Company's J. Amerika N.V. subsidiary
completed a private placement in Europe of 547,000 shares of its common
stock, at $3.75 per share. Net proceeds from the sale were $1,917,000,
resulting in a gain of $668,000. On October 24, 1994, the Company's J.
Amerika N.V. subsidiary completed a private placement in Europe of 153,331
8PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - December 31, 1994
(continued)
3. Transactions in Stock of Subsidiaries (continued)
shares of its common stock, at $3.75 per share. Net proceeds from the sale
were $506,000, resulting in a gain of $161,000. As of December 31, 1994,
the Company owned 65% of the outstanding common stock of J. Amerika N.V.
On May 25, 1994, the Company's Thermo Remediation Inc. (Thermo
Remediation) subsidiary completed a private placement of 50,000 shares of
its common stock, at $14.50 per share. Net proceeds from the sale were
$715,000, resulting in a gain of $229,000. As of December 31, 1994, the
Company owned 65% of the outstanding common stock of Thermo Remediation
Inc.
4. Acquisition
On October 13, 1994, the Company's Thermo Remediation subsidiary
acquired a soil-remediation facility in South Tacoma, Washington (renamed
TPST Washington) from Woodworth & Company, Inc. The purchase price for TPST
Washington was $4.6 million in cash less an offset for the value of
unprocessed soil on site as of the date of acquisition. The acquisition has
been accounted for using the purchase method of accounting, and TPST
Washington's results of operations have been included in the accompanying
financial statements from the date of acquisition. Allocation of the
purchase price 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 TPST Washington on a pro forma
basis, assuming the companies had been combined since the beginning of
fiscal 1994.
Three Months Ended Nine Months Ended
------------------ -----------------
(In thousands except Dec. 31, Jan. 1, Dec. 31, Jan. 1,
per share amounts) 1994 1994 1994 1994
------------------------------------------------------------------------
Revenues $34,712 $28,294 $96,184 $84,236
Income Before Cumulative
Effect of Change in
Accounting Principle 1,135 1,180 3,101 2,709
Earnings per Share Before
Cumulative Effect of Change
in Accounting Principle .07 .07 .18 .16
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 1994.
5. Letter of Intent
In November 1994, the Company signed a letter of intent to acquire the
outstanding stock of Engineering Technology and Knowledge Corporation,
9PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
(d) Notes to Consolidated Financial Statements - December 31, 1994
(continued)
5. Letter of Intent (continued)
which conducts business as Killam Associates, Inc. (Killam Associates) from
Nord Est SA, a French industrial holding company, for a total purchase
price equal to approximately (a) $12.5 million in cash and (b) a $28.0
million promissory note, due 1998 with a present value of $22.3 million.
The Company also intends to exchange certain outstanding options to
purchase Killam Associates' stock for $1.9 million in cash and options to
purchase the Company's common stock valued at $6.7 million. To help finance
this acquisition, the Company intends to issue to Thermo Electron up to
$15.0 million of a promissory note. The Company currently expects to
consummate this acquisition by the end of February 1995. Killam Associates
is a leading provider of environmental consulting and professional
engineering services in selected areas of the United States. Killam
Associates' consolidated gross revenues were in excess of $40 million for
the year ended December 31, 1994.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Description of Business
The Company's business is divided into two segments as follows:
Services
The Company's majority-owned public subsidiary, Thermo Remediation
Inc. (Thermo Remediation), provides soil-remediation services at a network
of regional centers that serve customers in more than a dozen states. These
soil-remediation centers thermally treat soils to remove and destroy
petroleum contamination caused by leaking storage tanks, spills, and other
sources. Through Thermo Remediation's November 1993 acquisition of Thermo
Fluids, a fluids recovery company based in Arizona, the Company also
collects and recycles used motor oil and provides services such as
wastewater processing. The Company's majority-owned J. Amerika N.V.
(J. Amerika) subsidiary is a provider in the Netherlands of underground
tank removal and other environmental services. In January 1994, the Company
acquired Terra Tech Labs, Inc. (Terra Tech) which specializes in
fast-response testing of petroleum-contaminated soils and groundwater. The
Company formed an environmental services joint venture, Thermo Terra Tech,
effective April 4, 1994. The joint venture is comprised of the Company's
Terra Tech subsidiary and the environmental services businesses of Thermo
Instrument Systems Inc., which provide environmental science and consulting
services, laboratory-based testing, and nuclear-radiation safety services
(see Note 2 to Consolidated Financial Statements). In August 1994, Thermo
Terra Tech acquired RMC Environmental Services, Inc. (RMC), a
Pennsylvania-based environmental consulting and analytical laboratory
services firm specializing in environmental science, hydropower consulting,
and analytical laboratory services. The Company also performs metallurgical
processing services, using thermal-treatment equipment owned by the
Company.
10PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Process Systems
The Company designs, manufactures, and installs advanced
custom-engineered thermal-processing systems used in manufacturing to
impart desirable metallurgical properties, such as added tensile strength
and wear resistance, into treated parts.
Results of Operations
Third Quarter Fiscal 1995 Compared With Third Quarter Fiscal 1994
Total revenues in the third quarter of fiscal 1995 were $34.7 million,
compared with $27.2 million in the third quarter of fiscal 1994. Services
segment revenues increased 28% to $30.6 million in fiscal 1995 from $24.0
million in fiscal 1994. Revenues from analytical and consulting services
increased 27% to $17.8 million in fiscal 1995 from $14.0 million in fiscal
1994. This increase is due to the inclusion of revenues from Terra Tech,
which was acquired in January 1994, and RMC, which was acquired by Thermo
Terra Tech in August 1994 and, to a lesser extent, revenues generated from
a long-term environmental restoration contract for the U.S. Department of
Energy's Hanford site. Revenues from the Company's remediation services
increased 28% to $9.7 million in fiscal 1995, due primarily to an increase
in the volume of soil processed at the Company's soil-remediation centers
located in Southern California and Florida and, to a lesser extent, the
inclusion of revenues of $.8 million from the October 1994 and November
1993 acquisitions of TPST Washington and Thermo Fluids, respectively.
Metallurgical services revenues increased 28% to $3.1 million in fiscal
1995 from $2.4 million in fiscal 1994, due primarily to the Company's
transition to nongovernment business applications.
Process Systems segment revenues were $4.0 million in the third
quarter of fiscal 1995, compared with $3.2 million in the third quarter of
fiscal 1994. This business segment remains depressed and has encountered
significant competition. The Process Systems segment backlog was $4.1
million at December 31, 1994, compared with $6.4 million at October 1,
1994, and $5.6 million a year ago.
The Company's gross profit margin increased to 24% in the third
quarter of fiscal 1995 from 22% in the third quarter of fiscal 1994. The
Services segment gross profit margin increased slightly to 25% in fiscal
1995 from 24% in fiscal 1994. The gross profit margin at the metallurgical
services operations increased to 10% in fiscal 1995 from a negative 7% in
fiscal 1994 as a result of the Company's transition to nongovernment
business applications. The gross profit margin from analytical and
consulting services remained relatively unchanged at 21% in fiscal 1995,
compared with 22% in fiscal 1994. The Process Systems segment gross profit
margin increased to 18% in fiscal 1995 from 6% in fiscal 1994, due to more
profitable contracts in process during fiscal 1995, compared with fiscal
1994.
Selling, general and administrative expenses as a percentage of
revenues decreased to 15% in the third quarter of fiscal 1995 from 22% in
the third quarter of fiscal 1994, due primarily to an increase in total
revenues.
11PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Third Quarter Fiscal 1995 Compared With Third Quarter Fiscal 1994
(continued)
Net interest income increased to $219,000 in the third quarter of
fiscal 1995 from $108,000 in fiscal 1994, primarily as a result of higher
average investment balances following private placements and the initial
public offering of Thermo Remediation common stock, offset by interest
expense on $15.0 million borrowed from Thermo Electron Corporation (Thermo
Electron) in May 1994 to fund the Company's investment in Thermo Terra
Tech.
First Nine Months Fiscal 1995 Compared With First Nine Months Fiscal 1994
Total revenues in the first nine months of fiscal 1995 were $94.6
million, compared with $81.2 million in the first nine months of fiscal
1994. Services segment revenues, excluding contract revenues from related
party, increased 21% to $84.0 million in fiscal 1995 from $69.5 million in
fiscal 1994. Revenues from analytical and consulting services increased 15%
to $48.3 million in fiscal 1995 from $41.9 million in fiscal 1994.
Revenues from the Company's remediation services increased 35% to $26.8
million in fiscal 1995. Metallurgical services revenues increased to $8.9
million in fiscal 1995 from $7.8 million in fiscal 1994. These increases
are due to the reasons discussed in the results of operations for the third
quarter.
"Contract revenues from related party" in fiscal 1994 represents
funding under an agreement the Company entered into with Thermo Electron to
fund up to $4.0 million of the direct and indirect costs of the Company's
development of soil-remediation centers. The Company earned no profit from
this funding. As of October 2, 1993, funding under this agreement was
completed. Expenses incurred in connection with the development of
additional soil-remediation centers subsequent to October 2, 1993, are
included in "New business development expenses" in the accompanying
statement of income.
Process Systems segment revenues remained relatively unchanged at
$10.6 million in the first nine months of fiscal 1995 and $11.0 million in
the first nine months of fiscal 1994.
The Company's gross profit margin increased to 25% in the first nine
months of fiscal 1995 from 23% in the first nine months of fiscal 1994. The
Services segment gross profit margin increased to 26% in fiscal 1995 from
25% in fiscal 1994 due to a greater percentage of revenues derived from
higher-margin remediation services, despite a lower overall gross profit
margin on remediation services. The gross profit margin at the
metallurgical services operations increased to 17% in fiscal 1995 from 4%
in fiscal 1994 as a result of the Company's transition to nongovernment
business applications. The gross profit margin from analytical and
consulting services remained relatively unchanged at 22% in fiscal 1995 and
23% in fiscal 1994. The Process Systems segment gross profit margin
increased to 17% from 12% in 1994, due to more profitable contracts in
process during fiscal 1995, compared with fiscal 1994.
12PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Nine Months Fiscal 1995 Compared With First Nine Months Fiscal 1994
(continued)
Selling, general and administrative expenses as a percentage of
revenues decreased to 18% in the first nine months of fiscal 1995 from 20%
in the first nine months of fiscal 1994, due primarily to an increase in
total revenues.
During the first nine months of fiscal 1995, the Company's J. Amerika
and Thermo Remediation subsidiaries sold shares of common stock in private
placements, resulting in gains on issuance of stock by subsidiaries of
$829,000 and $229,000, respectively (see Note 3 to Consolidated Financial
Statements). During the first nine months of fiscal 1994, the Company's
Thermo Remediation subsidiary sold shares of common stock in a private
placement and an initial public offering, resulting in gains on issuance of
stock by subsidiary of $602,000 and $3,637,000, respectively.
Net interest income increased to $684,000 in the first nine months of
fiscal 1995 from $389,000 in fiscal 1994, due to the reasons discussed in
the results of operations for the third quarter.
The effective tax rates were a provision of 22% in the first nine
months of fiscal 1995 and a benefit of 12% in the first nine months of
fiscal 1994. These rates were lower than the statutory federal income tax
rate due primarily to the fact that no taxes were provided on the minority
interest portion of pretax income from the Thermo Terra Tech joint venture
and, to a lesser extent, the nontaxable gains on issuance of stock by
subsidiaries.
"Minority interest expense" in the accompanying statement of income
represents the portion of the Company's majority-owned subsidiaries' net
income allocated to minority shareholders. "Minority interest expense"
increased to $3.9 million in the first nine months of fiscal 1995 from $3.1
million in the corresponding period in 1994 due to higher profits at the
Company's majority-owned subsidiaries, offset in part by a reduction in the
minority ownership interest percentage of Thermo Terra Tech's net income
(see Note 2 to Consolidated Financial Statements).
During the first quarter of fiscal 1994, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." The adoption of SFAS No. 109 resulted in a cumulative tax benefit
of $500,000.
Financial Condition
Liquidity and Capital Resources
Consolidated working capital, including cash, cash equivalents, and
short-term available-for-sale investments, increased to $56.6 million at
December 31, 1994 from $51.6 million at April 2, 1994. Cash, cash
equivalents, and short- and long-term available-for-sale investments were
$59.9 million at December 31, 1994, compared with $50.5 million at April 2,
13PAGE
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Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
1994. Of the $59.9 million balance at December 31, 1994, $54.4 million was
held by the Company's majority-owned subsidiaries (including its 51%-owned
joint venture, Thermo Terra Tech) and the remainder by the Company and its
wholly owned subsidiaries. In May 1994, the Company borrowed $15 million
from Thermo Electron to fund the Company's investment in Thermo Terra Tech.
The loan from Thermo Electron may be prepaid in whole or in part without
penalty and is repayable in full on April 15, 1996. It is Thermo Electron's
intention to require the note to be repaid only to the extent that the
Company's cash flow and liquidity permit. During the first nine months of
fiscal 1995, the Company's Thermo Remediation and Thermo Terra Tech
subsidiaries expended $17.8 million, net of cash, for acquisitions. In
connection with the financing of acquisitions, Thermo Remediation issued to
Thermo Electron a $4,000,000 promissory note due June 1995. In September
1994 and October 1994, the Company's J. Amerika subsidiary completed
private placements of its common stock for net proceeds of $2.4 million. In
May 1994, the Company's Thermo Remediation subsidiary completed a private
placement of its common stock for net proceeds of $.7 million.
In November 1994, the Company signed a letter of intent to acquire
Engineering Technology and Knowledge Corporation, which conducts business
as Killam Associates, Inc. (Killam Associates) for $12.5 million in cash
and a $28.0 million promissory note, due 1998. The Company also intends to
exchange outstanding options to purchase Killam Associates' stock for cash
and options to purchase the Company's common stock. To help finance this
acquisition, the Company intends to issue to Thermo Electron up to $15.0
million of a promissory note (see Note 5 to Consolidated Financial
Statements). Although the Company has no other material capital expenditure
commitments, such expenditures will largely be affected by the number of
soil-remediation centers and other businesses that can be developed or
acquired during the year.
Part II - Other Information
Item 1 - Legal Proceedings
On January 31, 1995, the Company and its majority-owned subsidiary,
Thermo Remediation Inc. (TRI), filed a lawsuit in federal district court in
Delaware against Recycling Sciences International, Inc. (RSI) requesting a
declaratory judgment that six U.S. patents owned by RSI are invalid and not
infringed by TRI's soil remediation services and equipment, and asking the
court to enjoin RSI from asserting any of these patents against TRI or the
Company. The suit follows continued allegations by RSI that TRI's
activities in treating petroleum-contaminated soils infringe a number of
these patents and an offer of a non-exclusive patent license in return for
payments which the Company believes substantially exceed any value of a
license. The Company continues to believe that RSI's accusations are
unfounded and that the activities of TRI and the Company do not infringe
any valid claims of the patents.
14PAGE
<PAGE>
Form 10-Q
December 31, 1994
THERMO PROCESS SYSTEMS INC.
Part II - Other Information (continued)
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Report on Form 8-K
On December 22, 1994, the Company filed a Current Report on Form
8-K concerning the acquisition of a soil-remediation facility in South
Tacoma, Washington from Woodworth & Company, Inc.
15PAGE
<PAGE>
Form 10-Q
December 31, 1994
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 February
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
16PAGE
<PAGE>
EXHIBIT INDEX
Exhibit Number Document Page
-------------- ------------------------------------------------ ----
27 Financial Data Schedule
17<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
PROCESS SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-01-1995
<PERIOD-END> DEC-31-1994
<CASH> 43,564
<SECURITIES> 5,992
<RECEIVABLES> 21,273
<ALLOWANCES> 3,229
<INVENTORY> 2,388
<CURRENT-ASSETS> 88,716
<PP&E> 74,424
<DEPRECIATION> 32,806
<TOTAL-ASSETS> 189,958
<CURRENT-LIABILITIES> 32,080
<BONDS> 19,085
<COMMON> 1,741
0
0
<OTHER-SE> 64,527
<TOTAL-LIABILITY-AND-EQUITY> 189,958
<SALES> 10,556
<TOTAL-REVENUES> 94,550
<CGS> 8,806
<TOTAL-COSTS> 70,666
<OTHER-EXPENSES> 643
<LOSS-PROVISION> 148
<INTEREST-EXPENSE> 1,519
<INCOME-PRETAX> 8,963
<INCOME-TAX> 1,978
<INCOME-CONTINUING> 3,051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,051
<EPS-PRIMARY> .18
<EPS-DILUTED> 0
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