SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):
December 8, 1995
________________________________________
THERMO TERRATECH INC.
(Formerly Thermo Process Systems Inc.)
(Exact name of Registrant as specified in its charter)
Delaware 1-9549 04-2925807
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or File Number) Identification Number)
organization)
81 Wyman Street
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
(617) 622-1000
(Registrant's telephone number
including area code)
PAGE
<PAGE>
FORM 8-K/A
Item 2. Acquisition or Disposition of Assets
On December 8, 1995, Thermo TerraTech Inc. (formerly Thermo Process
Systems Inc.), through its Thermo Remediation Inc. subsidiary ("Thermo
Remediation"), acquired all of the issued and outstanding capital stock
of Remediation Technologies, Inc. ("ReTec") for a combination of cash
and securities having an aggregate value of approximately $29.7 million.
The purchase price consisted of approximately $18.5 million in cash and
units consisting of (i) 227,250 shares of Thermo Remediation's common
stock and (ii) warrants to purchase 75,750 additional shares of Thermo
Remediation's common stock at an exercise price of $14.85 per share,
such units having an aggregate value of approximately $3.7 million. In
addition, Thermo Remediation assumed outstanding ReTec stock options and
converted such options into options to purchase up to 897,000 shares of
Thermo Remediation's common stock. The shares of common stock issuable
upon exercise of such options are subject to certain restrictions on
resale, which lapse ratably over a period of five years. As converted,
such options have a weighted average exercise price of $4.24 per share
and were valued in the aggregate at approximately $7.5 million.
ReTec, based in Concord, Massachusetts, is an integrated
environmental services firm, with 15 offices nationwide, focusing
primarily on the remediation of former and active industrial sites
contaminated with organic wastes and residues.
The acquisition was made pursuant to an Agreement and Plan of
Merger dated as of December 1, 1995 (the "Merger Agreement"), among
Thermo Remediation, TRI Acquisition Inc., a wholly owned subsidiary of
Thermo Remediation ("Acquisition") and ReTec. Under the terms of the
Merger Agreement, which became effective on December 8, 1995, (i)
Acquisition merged with and into ReTec, (ii) outstanding shares of
ReTec's common stock were canceled and converted into the right to
receive the purchase price, (iii) each outstanding share of
Acquisition's common stock was canceled and converted into one share of
the common stock of ReTec, and (iv) ReTec became a wholly owned
subsidiary of Thermo Remediation.
The consideration paid for ReTec was based on Thermo Remediation's
determination of the fair market value of ReTec's business, and the
terms of the merger agreement were determined by arms' length
negotiation among the parties. The consideration for the acquisition was
subject to certain escrow arrangements. The accompanying pro forma
combined condensed financial statements have been prepared as if such
consideration had been transferred to the sellers on December 8, 1995,
the effective date of the merger.
Thermo Remediation has no present intention to use ReTec's assets
for purposes materially different from the purposes for which such
assets were used prior to the acquisition. However, Thermo Remediation
will review ReTec's business and assets, corporate structure,
capitalization, operations, properties, policies, management and
personnel and, upon completion of this review, may develop alternative
plans or proposals, including mergers, transfers of a material amount of
assets or other transactions or changes relating to such business.
2PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
------------------------------------------------------------
Information and Exhibits
------------------------
(a) Financial Statements of Business Acquired.
Attached hereto.
3PAGE
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Remediation Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of Remediation
Technologies, Inc. and subsidiary as of December 31, 1994, and the related
consolidated statements of earnings, stockholders' equity and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. We did not audit the financial statements of ReTec/Tetra, L.C., a
Texas limited liability company in which the Company has a 50% interest
accounted for in the accompanying consolidated financial statements on the
equity method. The Company's investment in ReTec/Tetra, L.C. at December
31, 1994 was $5,100,195 and the Company's share of the net income of
ReTec/Tetra, L.C. for 1994 was $634,183. The financial statements of
ReTec/Tetra, L.C. were audited by other auditors whose report thereon has
been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for ReTec/Tetra, L.C., is based solely upon
the report of the other auditors.
We conducted our audit 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 audit and the
report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Remediation Technologies, Inc.
and subsidiary at December 31, 1994, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The consolidated financial statements of Remediation Technologies, Inc. and
subsidiary as of December 31, 1993 were audited by other auditors whose
report dated April 29, 1994, expressed an unqualified opinion on those
statements.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 1, 1995
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, 1994 and 1993
Assets (note 6) 1994 1993
------ ---- ----
Current assets:
Cash and cash equivalents $ 625,338 1,519,177
Accounts receivable and unbilled sales
net of allowance for doubtful accounts
of $208,000 in 1994 and $100,000 in 1993 11,071,821 9,748,178
Costs and estimated earnings in excess of
billings on uncompleted contracts (note 4) 62,234 22,336
Deferred income taxes 143,930 40,138
Prepaid federal income taxes 544,726 -
Prepaid expenses and other assets 78,211 128,171
----------- -----------
Total current assets 12,526,260 11,458,000
----------- -----------
Property and equipment, at cost
(notes 2, 7, and 8):
Furniture and fixtures 289,857 224,973
Equipment 3,099,267 2,719,689
Leasehold improvements 233,358 151,619
----------- -----------
3,622,482 3,096,281
Less accumulated depreciation
and amortization 2,469,958 2,022,368
----------- -----------
Net property and equipment 1,152,524 1,073,913
----------- -----------
Other assets:
Investment in joint venture (note 2) 5,100,195 3,866,012
Intangible assets, net of accumulated
amortization of $405,760 in 1994 and
$368,569 in 1993 (note 5) 137,924 175,115
Deposits 50,783 47,938
----------- -----------
Total other assets 5,288,902 4,089,065
----------- -----------
$18,967,686 16,620,978
=========== ===========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, 1994 and 1993 (continued)
Liabilities and Stockholders' Equity 1994 1993
------------------------------------ ---- ----
Current liabilities:
Accounts payable and accrued expenses $ 4,159,662 3,822,191
Accrued payroll and related costs 953,088 761,858
Bank overdraft payable - 235,145
Deferred revenue 128,890 84,077
Accrued federal and state income taxes 126,724 186,961
Note payable - revolving bank line of
credit (note 6) - 810,000
Current installments of notes payable
(note 7) 17,608 319,157
Current installments of capital lease
obligation (note 8) 3,358 3,345
Accrued bonus and profit-sharing contribution
(note 14) 704,092 560,991
Billings in excess of costs and estimated
earnings on uncompleted contracts (note 4) 331,745 26,115
----------- -----------
Total current liabilities 6,425,167 6,809,840
----------- -----------
Long-term debt:
Notes payable, excluding current
installments (note 7) 1,500,000 1,739,644
Capital lease obligation, excluding current
installments (note 8) 5,735 11,470
----------- -----------
Total long-term debt 1,505,735 1,751,114
----------- -----------
Total liabilities 7,930,902 8,560,954
----------- -----------
Commitments (notes 13 and 15)
Stockholders' equity (notes 7, 9, 10 and 11):
Common stock (Class B), $.01 par value,
authorized 125,000 shares; issued
125,000 shares in 1994 and 1993 1,250 1,250
Common stock (Class A), $.01 par value
Authorized 1,875,000 shares; issued 598,458
shares in 1994 and 563,707 shares in 1993 5,985 5,637
Preferred stock, $.01 par value.
Authorized 1,000,000 shares; none issued - -
Additional paid-in capital 3,848,024 3,746,235
Retained earnings 8,254,236 5,251,987
----------- -----------
12,109,495 9,005,109
Less treasury stock at cost, 87,259 shares
in 1994 and 81,241 shares in 1993 1,072,711 945,085
----------- -----------
Total stockholders' equity 11,036,784 8,060,024
----------- -----------
$18,967,686 16,620,978
=========== ===========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements Of Earnings
For the Years Ended December 31, 1994 and 1993
% of % of
1994 Revenues 1993 Revenues
---- -------- ---- --------
Project revenues $ 39,018,387 100.0% 32,580,118 100.0%
Direct project costs 22,250,859 57.0% 18,838,786 57.8%
------------- ------ ------------- ------
Gross profit 16,767,528 43.0% 13,741,332 42.2%
Selling, general and
administrative expenses 12,280,661 31.5% 10,248,156 31.5%
------------- ------ ------------- ------
Earnings from
operations before
income taxes 4,486,867 11.5% 3,493,176 10.7%
------------- ------ ------------- ------
Other income (expense):
Gain on sale of property
and equipment, net 21,374 - 1,839 -
Equity in net income
(loss) of joint
venture (note 2) 634,183 1.6% (124,224) (.4%)
Interest, net (131,181) (.3%) (67,329) (.2%)
------------- ------ ------------- ------
Total other income
(expense) 524,376 1.3% (189,714) (.6%)
------------- ------ ------------- ------
Earnings before
income taxes 5,011,243 12.8% 3,303,462 10.1%
Income tax expense
(note 12) 2,008,994 5.1% 1,330,835 4.1%
------------- ------ ------------- ------
Net earnings $ 3,002,249 7.7% 1,972,627 6.0%
============= ====== ============= ======
Net earnings per common and
common equivalent share:
Primary $ 3.45 2.45
============= =============
Fully diluted $ 3.38 2.39
============= =============
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements Of Stockholders' Equity
For the Years Ended December 31, 1994 and 1993
<CAPTION>
Common Stock Common Stock Preferred
Class B Class A Stock
------- ------- -----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 125,000 $ 1,250 563,707 $ 5,637 - $ -
Exercise of common
stock option at
$13.00 per share - - 3,000 30 - -
Exercise of common
stock option at
$2.25 per share - - 5,000 50 - -
Exercise of common
stock option at
$1.25 per share - - 18,500 185 - -
Exercise of common
stock option at
$1.00 per share - - 7,000 70 - -
Issuance of common
stock for cash and
other consideration at:
$22.00 per share - - 291 3 - -
$16.00 per share - - 960 10 - -
Repurchase of 6,018
shares of common
stock - - - - - -
Net earnings - - - - - -
------- -------- ------- -------- ------- -------
Balance at
December 31, 1994 125,000 $ 1,250 598,458 $ 5,985 - $ -
======= ======== ======= ======== ======= =======
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements Of Stockholders' Equity
For the Years Ended December 31, 1994 and 1993 (continued)
<CAPTION>
Additional Total
Paid-In Retained Treasury Stockholder's
Capital Earnings Stock Equity
----------- --------- -------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 3,746,235 $5,251,987 $ (945,085) $ 8,060,024
Exercise of common stock option at
$13.00 per share 38,970 - - 39,000
Exercise of common stock option at
$2.25 per share 11,200 - - 11,250
Exercise of common stock option at
$1.25 per share 22,940 - - 23,125
Exercise of common stock option at
$1.00 per share 6,930 - - 7,000
Issuance of common stock for cash and
other consideration at:
$22.00 per share 6,399 - - 6,402
$16.00 per share 15,350 - - 15,360
Repurchase of 6,018 shares of common
stock - - (127,626) (127,626)
Net earnings - 3,002,249 - 3,002,249
----------- ---------- ----------- ---------
Balance at December 31, 1994 $ 3,848,024 $8,254,236 $(1,072,711) $11,036,784
=========== ========== =========== ===========
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements Of Stockholders' Equity (continued)
<CAPTION>
Common Stock Common Stock Preferred
Class B Class A Stock
------- ------- -----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 - $ - 552,677 $ 5,527 - $ -
Issuance of Class B
common stock for
cash at:
$16.00 per share 125,000 1,250 - - - -
Issuance of Class A
common stock for
cash at:
$13.00 per share - - 1,000 10 - -
16.00 per share - - 675 7 - -
Exercise of common
stock option at
$4.00 per share - - 2,500 25 - -
Exercise of common
stock option at
$6.20 per share - - 1,000 10 - -
Exercise of common
stock option at
$6.60 per share - - 4,000 40 - -
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements Of Stockholders' Equity
For the Years Ended December 31, 1994 and 1993 (continued)
Common Stock Common Stock Preferred
Class B Class A Stock
------- ------- ---
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
Exercise of common
stock option at
$8.50 per share - $ - 1,855 $ 18 - $ -
Repurchase of 35,580
shares of common stock - - - - - -
Net earnings - - - - - -
-------- -------- --------- -------- ------- --------
Balance at
December 31, 1993 125,000 $ 1,250 563,707 $ 5,637 - $ -
======== ======== ========= ======== ======= ========
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Stockholders' Equity (continued)
<CAPTION>
Additional Total
Paid-In Retained Treasury Stockholder's
Capital Earnings Stock Equity
---------- --------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $1,665,427 $3,279,360 $ (375,805) $4,574,509
Issuance of Class B common stock for cash at:
$16.00 per share 1,998,750 - - 2,000,000
Issuance of Class A common stock for cash at:
$13.00 per share 12,990 - - 13,000
$16.00 per share 10,793 - - 10,800
Exercise of common stock option at:
$ 4.00 per share 9,975 - - 10,000
Exercise of common stock option at:
$6.20 per share 6,190 - - 6,200
Exercise of common
stock option at
$6.60 per share 26,360 - - 26,400
Exercise of common
stock option at
$8.50 per share 15,750 - - 15,768
Repurchase of 35,580
shares of common
stock - - (569,280) (569,280)
Net earnings - 1,972,627 - 1,972,627
---------- ---------- ----------- ----------
Balance at
December 31, 1993 $3,746,235 $5,251,987 $ (945,085) $8,060,024
========== ========== =========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993
1994 1993
---- ----
Increase (decrease) in cash and cash
equivalents:
Cash flows from operating activities:
Net earnings $ 3,002,249 1,972,627
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 607,394 588,135
Company's share of joint venture
(income) loss (634,183) 124,224
Gain on sale of property and equipment,
net (21,374) (1,839)
Changes in operating assets and
liabilities:
Accounts receivable and unbilled sales,
net (1,323,643) (4,476,745)
Costs and estimated earnings in excess
of billings on uncompleted contracts (39,898) 38,110
Deferred income taxes (103,792) (155,732)
Prepaid expenses and other assets 49,960 (93,860)
Deposits (2,845) (4,677)
Accounts payable and accrued expenses 337,471 1,889,821
Accrued payroll and related costs 191,230 224,088
Bank overdraft payable (235,145) 235,145
Deferred revenue 44,813 62,795
Accrued bonus and profit sharing
contribution 143,101 418,911
Billings in excess of costs and
estimated earnings on uncompleted
contracts 305,630 4,595
Accrued federal and state income
taxes (60,238) 54,790
Prepaid federal income taxes (544,726) -
----------- ---------
Net cash provided by operating
activities 1,716,004 880,388
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment (692,896) (619,457)
Proceeds from disposal of property and
equipment 65,457 19,198
Capital contributed to joint venture (600,000) (1,900,023)
----------- -----------
Net cash used by investing
activities $(1,227,439) (2,500,282)
----------- -----------
PAGE
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REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993 (continued)
1994 1993
---- ----
Cash flows from financing activities:
Proceeds from notes payable $ - 1,500,000
Principal repayments of notes payable (541,193) (319,156)
Repayments under capital lease
obligations (5,722) (2,390)
Net advances (repayments) under bank line
of credit (810,000) 180,000
Proceeds from issuance of common stock 102,137 2,082,168
Purchase of treasury stock (127,626) (435,280)
----------- -----------
Net cash provided (used) by
financing activities (1,382,404) 3,005,342
----------- -----------
Net increase (decrease) in cash and cash
equivalents (893,839) 1,385,448
Cash and cash equivalents at beginning
of year 1,519,177 133,729
----------- -----------
Cash and cash equivalents at end of year $ 625,338 1,519,177
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 180,263 67,329
=========== ==========
Cash paid for income taxes $ 2,705,430 1,434,678
=========== ==========
Supplemental disclosure of non-cash investing and financing activities:
In September, 1993 the Company acquired equipment valued at $17,205 under a
capital lease obligation for the same amount.
During 1993, the Company exchanged cash plus equipment with a net book
value of $4,388 for other like kind equipment.
In April, 1993, the Company received 8,000 shares of its stock valued at
$128,000 in repayment of certain notes receivable from stockholders.
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 1994 and 1993
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(a) Nature of Business
------------------
Remediation Technologies, Inc. ("the Company") and its wholly-owned
subsidiary, ReTec Thermal, Inc. (formerly known as MoTec, Inc.), are
environmental engineering companies which provide engineering
consulting and field services to industrial and governmental clients.
The Companies specialize in the application of innovative technologies
for on-site treatment and remediation at hazardous waste sites.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, ReTec Thermal, Inc. All
significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Revenue Recognition
-------------------
Revenue on contracts without a fixed price (time and material) is
recognized as the work is performed in accordance with specific terms
of each contract. Revenue on fixed fee and cost plus fixed fee
contracts is recognized on a percentage of completion method as
applied to the contract. The percentage of completion is determined
by relating costs incurred to date to total estimated costs. Contract
costs include all direct material, labor and subcontract costs and
those indirect costs related to contract performance. Selling,
general and administrative costs are charged to expense as incurred.
Changes in estimated profit on contracts are reflected during the
period in which the change in estimate is made.
Revenues recognized in excess of amounts billed are classified as
current assets under costs and estimated earnings in excess of
billings on uncompleted contracts. It is anticipated that the
incurred costs associated with contract work in progress at December
31, 1994, will be billed and collected in 1995. Amounts received from
clients in excess of revenues recognized to date are classified as
current liabilities under billings in excess of costs and estimated
earnings on uncompleted contracts. The entire amount of anticipated
losses on contracts is charged to earnings as soon as such losses can
be estimated.
PAGE
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REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(continued)
(d) Earnings Per Common and Common Equivalent Share
-----------------------------------------------
The computations of earnings per common and common equivalent share
are based on the weighted average number of shares outstanding during
the period after consideration of the dilutive effect of stock options
and warrants.
The following average shares were used for the computation of primary
and fully diluted earnings per share:
1994 1993
---- ----
Primary 874,704 808,678
Fully diluted 889,451 827,022
(e) Depreciation and Amortization
-----------------------------
Depreciation of property and equipment is provided using accelerated
methods over the estimated useful lives of the assets. Organization
costs and goodwill are amortized on a straight-line basis over five
and forty years, respectively. The costs of other intangible assets
are also amortized on a straight-line basis over their respective
estimated useful lives.
(f) Income Taxes
------------
The Company utilizes an asset and liability approach in accounting for
income taxes as required by Statement of Financial Accounting
Standards No. 109 (SFAS 109). SFAS 109 requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected future events
other than enactments of changes in the tax law or rates.
The provision for income taxes includes federal and state income taxes
currently payable and those deferred because of temporary differences
between financial statement and tax bases of assets and liabilities.
(g) Statement of Cash Flows
-----------------------
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(continued)
(h) Concentration of Credit Risk
----------------------------
Financial instruments which subject the Company to credit risk consist
principally of temporary cash investments and trade receivables. The
Company places its temporary cash investments ($102,697 and $1.5
million at December 31, 1994 and 1993, respectively) with high quality
financial institutions. At times such investments may be in excess of
the FDIC limit. The Company's policy with respect to the credit risk
of trade receivables is to evaluate, prior to contract signing, each
customer's financial condition and determine the amount of open credit
to be extended. The Company's three largest customers accounted for
approximately 28% of sales in 1994 and 35% in 1993. The same
customers accounted for approximately 26% and 29% of accounts
receivable at December 31, 1994 and 1993, respectively.
(i) Fair Value of Financial Instruments
-----------------------------------
The Company adopted Statement of Financial Accounting Standards No.
107, Disclosures about Fair Value of Financial Statements, which
requires that the Company estimate and disclose the fair value of each
material class of financial instrument (as defined by Statement 107)
for which it is practicable to estimate that value. In accordance
with Statement 107, the Company has identified its material financial
instruments as cash and cash equivalents, trade receivables and
payables, and notes payable. The carrying amount of cash and cash
equivalents, trade receivables and trade payables approximate fair
value because of the short-term nature of these financial instruments.
The fair value of the Company's notes payable is estimated based on
market values for similar instruments. At December 31, 1994 and 1993,
the difference between the carrying value of notes payable and their
estimated fair value is not material.
(2) Investment in Joint Venture
---------------------------
The Company's wholly-owned subsidiary, ReTec Thermal, Inc., has a 50%
ownership interest in a venture known as ReTec/Tetra, L.C. ("the joint
venture"), a Texas limited liability company formed in August, 1992,
for the purpose of engaging in on-site hazardous waste remediation
services. The investment in the joint venture is accounted for using
the equity method.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(2) Investment in Joint Venture (continued)
---------------------------
Summarized financial information of the joint venture at December 31,
1994 and 1993 is as follows:
1994 1993
---- ----
Assets:
Current assets $ 2,063,187 1,273,451
Property and equipment 8,424,327 6,353,859
Other assets 500,960 568,988
------------ ----------
$ 10,988,474 8,196,298
============ ==========
Liabilities and equity:
Current liabilities $ 1,863,623 1,539,814
Equity 9,124,851 6,656,484
------------ ----------
$ 10,988,474 8,196,298
============ ==========
Net sales $ 11,267,503 2,565,236
============ ==========
Net income (loss) $ 1,268,366 (248,449)
============ ==========
Company's equity in net income (loss) $ 634,183 (124,224)
============ ==========
During 1994 and 1993, the Company contributed an additional $600,000
and $1,900,023, respectively, to the capital of the joint venture.
The Company's equity in the joint venture was $5,100,195 and
$3,866,012 at December 31, 1994 and 1993, respectively.
(3) Related Party Transactions
--------------------------
The Company recognized revenue of approximately $80,000 and $360,000
in 1994 and 1993, respectively, from ReTec/Tetra, L.C. for services
rendered on behalf of the joint venture. At December 31, 1994 and
1993, $6,998 and $68,490, respectively, was due to the Company from
ReTec/Tetra, L.C.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(4) Costs and Estimated Earnings on Uncompleted Contracts
-----------------------------------------------------
Costs and estimated earnings on uncompleted contracts pertain to
fixed-price contracts accounted for using the percentage of completion
method as applied to the contract.
1994 1993
---- ----
Costs incurred on uncompleted
contracts $ 2,804,901 236,727
Estimated earnings 109,550 28,973
----------- ----------
2,914,451 265,700
Less: Billings to date 3,183,962 269,479
----------- ----------
$ (269,511) (3,779)
=========== ==========
Included in accompanying balance
sheets under the following captions:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 62,234 22,336
Billings in excess of costs and
estimated earnings on uncompleted
contracts 331,745 26,115
----------- ----------
$ (269,511) (3,779)
=========== ==========
(5) Intangible Assets
-----------------
The components of intangible assets, net of accumulated amortization,
are as follows at December 31, 1994 and 1993:
1994 1993
---- ----
Patent $ 104,203 138,937
Goodwill 32,521 33,482
License agreement 1,200 2,400
Organization costs - 296
---------- ----------
$ 137,924 175,115
========== ==========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(6) Bank Line of Credit
-------------------
At December 31, 1994 and 1993, the Company had a revolving bank line
of credit available in an amount determined based on a percentage of
eligible accounts receivable. The maximum amount available under the
line of credit is $4,000,000. Advances under the line of credit are
payable on demand and bear interest at the bank's prime rate plus
1/2%. The Company is also charged a fee of 1/2% on the unused portion
of the facility. Borrowings are secured by substantially all assets
of the Company. There were no outstanding borrowings at December 31,
1994. There was $810,000 outstanding under this line of credit at
December 31, 1993.
(7) Notes Payable
-------------
Notes payable at December 31, 1994 and 1993 consisted of the
following:
1994 1993
---- ----
$1,500,000 subordinated note payable
dated October 28, 1993 bearing interest
at 8%. Interest only is payable on a
quarterly basis until November, 1996 at
which time the Company is required to
begin making quarterly installments of
principal under the note of $93,750 plus
interest through August, 2000. A
redemption premium of 6% in 1995, 4% in
1996 and 2% in 1997 is payable with
respect to any principal installments
made in excess of the required amounts.
The note was issued pursuant to a
related Warrant Purchase Agreement under
which the Company issued to the lender
warrants to purchase 46,875 shares of
Class A common stock at a purchase price
of $16.00 per share (note 11). $1,500,000 $1,500,000
$1,000,000 term note payable to a bank
dated July 12, 1991 bearing interest at
the bank's prime rate plus 1%. The
debt was incurred to finance the
purchase of certain equipment which was
contributed to the joint venture (note
2) in 1992. The note was repaid in
full during 1994. - 428,571
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(7) Notes Payable (continued)
-------------
1994 1993
---- ----
$158,355 unsecured term note payable to
a former stockholder dated September 29,
1989. Proceeds from the note were used
to fund the purchase of treasury shares
of common stock from the former
stockholder. The note was repaid in
full during 1994. The weighted average
interest rate over the term of the note
was 9% per annum. - 95,014
$18,345 unsecured term note payable to
the estate of a former stockholder dated
December 17, 1990. Proceeds from the
note were used to fund the purchase of
treasury shares of common stock from the
estate. The note is payable in five
equal annual principal installments of
$3,669 beginning December 17, 1991.
Interest on the note accrues on the
unpaid principal balance at a bank's
prime interest rate and is payable
annually. 3,669 7,338
$69,695 unsecured term note payable to the
estate of a former stockholder dated December
17, 1990. Proceeds from the note were used
to fund the purchase of treasury shares of
common stock from the estate. The note will
be paid in five equal annual principal
installments of $13,939 beginning December
17, 1991. Interest on the note accrues on
the unpaid principal balance at a bank's
prime interest rate and is also payable
annually. 13,939 27,878
---------- ----------
Total notes payable 1,517,608 2,058,801
Less current installments of notes payable 17,608 319,157
---------- ----------
Notes payable, excluding current
installments $1,500,000 1,739,644
========== ==========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(7) Notes Payable (continued)
-------------
The aggregate maturities of notes payable are as follows:
1995 $ 17,608
1996 93,750
1997 375,000
1998 375,000
1999 375,000
2000 281,250
----------
$1,517,608
==========
(8) Capital Lease Obligation
------------------------
1994 1993
---- ----
September, 1993 agreement with a leasing
company. The obligation is payable in 36
monthly principal and interest installments
of $550 through August, 1996. Equipment
capitalized under the lease in the amount of
$17,205 is included in the balance sheet
as equipment at December 31, 1994 and 1993. $ 9,093 14,815
Less current installments of capital lease
obligation 3,358 3,345
---------- ----------
Capital lease obligation, net of current
installments $ 5,735 11,470
========== ==========
Minimum payments under the capital lease obligation for the remainder
of the lease term are as follows:
1995 $ 6,600
1996 4,400
----------
11,000
Less amount representing
interest at 9.9% 1,907
----------
Present value of net minimum
lease payments $ 9,093
==========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(9) Capital Stock
-------------
In March, 1993 the Company restated its certificate of incorporation
to provide for the establishment of a second class of common stock.
The restated certificate of incorporation authorized the issuance of
125,000 shares of $.01 par value Class B common stock and provided
that each share of previously authorized common stock be reclassified
as Class A common stock.
The total number of shares of all classes of capital stock that the
Company is authorized to issue was increased from 2,000,000 at
December 31, 1992 to 3,000,000 consisting of 1,875,000 shares of Class
A common stock, 125,000 shares of Class B common stock and 1,000,000
shares of preferred stock.
The Company's capital structure was amended as discussed above to
facilitate a March, 1993 stock purchase agreement under which the
Company sold all 125,000 authorized shares of its Class B common stock
to Advent International (109,375 shares) and Edison Ventures (15,625
shares) for $2,000,000 ($16.00 per share). The proceeds from the sale
were used for working capital and general corporate purposes, for
repayment of loans and for funding of the ReTec/Tetra, L.C. joint
venture.
The Class B common stock ranks senior to the Company's Class A common
stock as to liquidation rights and is convertible to Class A common
stock upon the approval of the shareholders of a majority of the
outstanding shares of Class B common stock. The number of shares of
Class A common stock to which a holder of Class B common stock is
entitled to receive upon conversion is initially one share of Class A
common stock for each share of Class B common stock converted. The
ratio increases upon the dilutive issuance of Class A common stock or
convertible securities. The Class B common stock shares also possess
certain registration and demand rights.
In 1994, the Company entered into an agreement with a stockholder of
the Company which requires the Company to repurchase, at the
discretion of the stockholder, a portion of the Company's stock owned
by the stockholder at any time during the next four years. The
purchase price will be fair market value of the Company's stock with
the total repurchased by the Company not to exceed $80,000 per year.
The agreement was dependent on the execution of a four-year employment
and noncompete agreement with the stockholder. In connection with the
agreement, the Company repurchased 3,633 shares from the stockholder
during 1994. At December 31, 1994, the stockholder owned 7,950 shares
and had options to purchase an additional 30,000 shares at exercise
prices ranging from $1.00 to $6.00.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(10) Stock Option Plan
-----------------
In 1986, the Company adopted the 1986 Stock Option Plan for which
150,000 shares of common stock were reserved for issuance to
employees. In 1988, 1991, 1993 and 1994 the stock option plan was
amended and, in total, an additional 250,000 shares of common stock
were reserved (100,000 in 1988, 75,000 in 1991, 50,000 in 1993 and
25,000 in 1994) to increase the total shares of common stock that have
been reserved to 400,000. Options granted under the plan may be
qualified or non-qualified. The options are granted at prices
determined by the Board of Directors or designee and are exercisable
ratably over a two to four-year period from the date of grant. At
December 31, 1994, there were outstanding incentive stock options for
the purchase of 317,097 shares and non-qualified options for the
purchase of 6,000 shares. At December 31, 1993, there were
outstanding incentive stock options for the purchase of 319,495 shares
and non-qualified options for the purchase of 6,000 shares.
Stock option activity is summarized as follows:
Outstanding
Options
-------
Shares Number of Price Per
Available Shares Share
--------- ------ -----
Balance at December 31, 1992 10,250 314,750
Additional options reserved 50,000 -
Options granted (20,600) 20,600 $16.00
Options exercised 9,355 (9,355) $ 4.00 - 8.50
Options canceled 500 (500) $14.00
------- -------
Balance at December 31, 1993 49,505 325,495 $ 1.00 - 16.00
Additional options reserved 25,000 -
Options granted (32,102) 32,102 $16.00 - 27.50
Options exercised 33,500 (33,500) $ 1.00 - 13.00
Options canceled 1,000 (1,000) $13.00
------- -------
Balance at December 31, 1994 76,903 323,097 $ 1.00 - 27.50
======= =======
At December 31, 1994 and 1993, 275,012 and 268,360 shares were
exercisable, respectively.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(11) Common Stock Warrants
---------------------
At December 31, 1994 and 1993, there was a warrant outstanding to
purchase 46,875 shares of Class A common stock for $16.00 per share.
The warrant is exercisable in full or in part until the later of
August 31, 2000 or at such time as all principal and interest on the
related note is paid in full. The warrant was issued in October, 1993
in conjunction with the issuance of a $1.5 million subordinated note
payable (note 7). All shares issuable under the warrant possess
certain demand and registration rights, separate from those rights of
the Class B common stockholders.
(12) Income Tax Expense
------------------
Income tax expense (benefit) at December 31, 1994 and 1993 consists of
the following:
Current Deferred Total
------- -------- -----
1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ----
Federal $1,655,709 1,149,597 (87,720) (120,206) 1,567,989 1,029,391
State 457,077 336,970 (16,072) (35,526) 441,005 301,444
---------- --------- -------- -------- --------- ---------
$2,112,786 1,486,567 (103,792) (155,732) 2,008,994 1,330,835
========== ========= ======== ======== ========== =========
The following is a reconciliation between federal income tax expense
at the statutory rate and the Company's actual federal tax expense for
the year ended December 31, 1994.
Federal income tax at statutory rate $1,703,822
State income taxes, net of federal income tax
benefit 287,592
Other 17,580
----------
$2,008,994
==========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1994 are presented
below.
Accounts receivable, principally due to allowance
for doubtful accounts $ 86,476
Other accrued liabilities 57,454
-----------
Total deferred tax assets $ 143,930
===========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(13) Leases
------
The Company leases its office facilities under operating leases
expiring at various dates to 1999. Future minimum lease payments for
the next five years under non-cancelable operating leases as of
December 31, 1994, are as follows:
1995 $ 979,749
1996 861,865
1997 520,650
1998 441,249
1999 89,588
----------
$2,893,101
==========
Rental expense for the years ended December 31, 1994 and 1993 amounted
to $1,125,134 and $896,153, respectively.
(14) Employee Benefit Plan
---------------------
In 1987, the Company adopted an Employee Savings and Profit Sharing
Plan ("the Plan") in accordance with Section 401(k) of the Internal
Revenue Code. The Plan allows employees to defer up to 15% of their
income on a pretax basis through contributions to the Plan up to
prescribed Internal Revenue Code limitations. In line with the
provisions of the Plan, the Company will contribute 100% (50% in 1993)
of each employee's contribution up to the first six percent of salary.
In addition, the Company may make, at its discretion, a contribution
from profits in an amount determined by the Board of Directors. The
Company contributed $519,202 and $401,770 to the Plan in 1994 and
1993, respectively.
(15) Loan Guarantees
---------------
The Company has guaranteed repayment of up to $500,000 of amounts
advanced to ReTec/Tetra, L.C. under a revolving promissory note and
$2,040,000 under an advancing promissory note with a bank. There were
no advances outstanding under the guaranteed notes at December 31,
1994 and 1993.
PAGE
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Remediation Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Remediation
Technologies, Inc. and subsidiary as of December 31, 1993 and 1992, and
the related consolidated statements of earnings, stockholders' equity and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements
of ReTec/Tetra, L.C., a Texas Limited Liability company in which the
Company has a 50% interest accounted for in the accompanying consolidated
financial statements on the equity method. The Company's investment in
ReTec/Tetra, L.C. at December 31, 1993 and 1992 was $3,866,012 and
$2,090,213, respectively, and the Company's share of the net loss of
ReTec/Tetra, L.C. for 1993 and 1992 was $124,224 and $285,302,
respectively. The financial statements of ReTec/Tetra, L.C. were audited
by other auditors whose reports thereon have been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
ReTec/Tetra, L.C., is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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
and the reports of other auditors provide a reasonable basis for our
opinion.
In our opinion based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Remediation Technologies, Inc.
and subsidiary at December 31, 1993 and 1992, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Nardella & Taylor
Lexington, Massachusetts
April 29, 1994
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, 1993 and 1992
Assets (note 8) 1993 1992
------ ---- ----
Current assets:
Cash and cash equivalents $ 1,519,177 133,729
Accounts receivable and unbilled sales
net of allowance for doubtful accounts
of $100,000 at December 31, 1993 9,748,178 5,271,433
Costs and estimated earnings in excess of
billings on uncompleted contracts (note 5) 22,336 60,446
Deferred income taxes 40,138 -
Prepaid expenses and other assets 128,171 34,311
Notes receivable (note 6) - 128,000
----------- -----------
Total current assets 11,458,000 5,627,919
----------- -----------
Property and equipment, at cost
(notes 2, 3, 9 and 10):
Furniture and fixtures 224,973 178,140
Equipment 2,719,689 2,247,771
Leasehold improvements 151,619 124,942
----------- -----------
3,096,281 2,550,853
Less accumulated depreciation
and amortization 2,022,368 1,568,462
----------- -----------
Net property and equipment 1,073,913 982,391
----------- -----------
Other assets:
Investment in joint venture (note 3) 3,866,012 2,090,213
Deposits 47,938 43,261
Organization costs, net of accumulated
amortization of $23,002 in 1993 and $19,582
in 1992 (note 2) 296 3,716
Goodwill, net of accumulated amortization
of $4,705 in 1993 and $3,745 in 1992
(note 2) 33,482 34,441
Other intangible assets, net of
accumulated amortization of $340,862 in 1993
and $284,888 in 1992 (notes 2 and 7) 141,337 197,312
----------- -----------
Total other assets 4,089,065 2,368,943
----------- -----------
$16,620,978 8,979,253
=========== ===========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Balance Sheets
December 31, 1993 and 1992 (continued)
Liabilities and Stockholders' Equity 1993 1992
------------------------------------ ---- ----
Current liabilities:
Accounts payable and accrued expenses $ 3,822,191 1,926,370
Accrued payroll and related costs 761,858 537,770
Bank overdraft payable 235,145 -
Deferred revenue 84,077 21,282
Accrued Federal and state income taxes 186,961 132,171
Deferred income taxes - 115,594
Note payable - revolving bank line of
credit (note 8) 810,000 630,000
Current installments of notes payable (note 9) 319,157 319,157
Current installments of capital lease
obligation (note 10) 3,345 -
Accrued bonus and profit-sharing contribution
(note 16) 560,991 142,080
Billings in excess of costs and estimated
earnings on uncompleted contracts (note 5) 26,115 21,520
----------- -----------
Total current liabilities 6,809,840 3,845,944
----------- -----------
Long-term debt:
Notes payable, excluding current
installments (note 9) 1,739,644 558,800
Capital lease obligation, excluding current
installments (note 10) 11,470 -
----------- -----------
Total long-term debt 1,751,114 558,800
----------- -----------
Total liabilities 8,560,954 4,404,744
----------- -----------
Commitments (notes 15, 16 and 17)
Stockholders' equity (notes 9, 11, 12 and 13):
Common stock (Class B), $.01 par value,
authorized 125,000 shares; issued
125,000 shares in 1993 and none in 1992 1,250 -
Common stock (Class A), $.01 par value.
Authorized 1,875,000 shares; issued 563,707
shares in 1993 and 552,677 shares in 1992. 5,637 5,527
Preferred stock, $.01 par value.
Authorized 1,000,000 shares; none issued. - -
Additional paid-in capital 3,746,235 1,665,427
Retained earnings 5,251,987 3,279,360
----------- -----------
9,005,109 4,950,314
Less 81,241 shares of treasury stock, at cost,
in 1993 and 45,661 shares in 1992 945,085 375,805
----------- -----------
Total stockholders' equity 8,060,024 4,574,509
----------- -----------
$16,620,978 8,979,253
=========== ===========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Earnings
For the Years Ended December 31, 1993 and 1992
% of % of
1993 Revenues 1992 Revenues
---- -------- ---- --------
Project revenues $32,580,118 100.0% 23,167,793 100.0%
Direct project costs 18,838,786 57.8% 13,098,682 56.5%
----------- ------ ----------- ------
Gross profit 13,741,332 42.2% 10,069,111 43.5%
Selling, general and
administrative expenses
(notes 15 and 16) 10,248,156 31.5% 8,578,907 37.1%
----------- ------ ----------- ------
Earnings from
operations before
income taxes 3,493,176 10.7% 1,490,204 6.4%
Other income (expense):
Gain on sale of property and
equipment, net (note 3) 1,839 674,756
Equity in net loss of joint
venture (notes 2 and 3) (124,224) (285,302)
Interest, net (67,329) (170,857)
----------- -----------
Total other income
(expense) (189,714) .6% 218,597 .9%
----------- ------ ----------- ------
Earnings before
income taxes 3,303,462 10.1% 1,708,801 7.3%
Income tax expense (note 14) 1,330,835 4.1% 661,578 2.8%
----------- ------ ----------- ------
Net earnings (note 2) $ 1,972,627 6.0% 1,047,223 4.5%
=========== ===== =========== ======
Net earnings per common and
common equivalent share:
Primary $ 2.45 1.48
=========== ===========
Fully diluted $ 2.39 1.47
=========== ===========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1993
<CAPTION>
Common Stock Common Stock Preferred
Class B Class A Stock
------- ------- ----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 - $ - 552,677 $ 5,527 - $ -
Issuance of Class B
common stock for cash
at:
$16.00 per share 125,000 1,250 - - - -
Issuance of Class A
common stock for cash
at:
$13.00 per share - - 1,000 10 - -
$16.00 per share - - 675 7 - -
Exercise of common
stock option at
$4.00 per share - - 2,500 25 - -
Exercise of common
stock option at
$6.20 per share - - 1,000 10 - -
Exercise of common
stock option at
$6.60 per share - - 4,000 40 - -
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1993 (continued)
Common Stock Common Stock Preferred
Class B Class A Stock
------- ------- -----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
Exercise of common
stock option at
$8.50 per share - $ - 1,855 $ 18 - $ -
Repurchase of 35,580
shares of common
stock - - - - - -
Net earnings - - - - - -
------- -------- ------- -------- ------- -------
Balance at
December 31, 1993 125,000 $ 1,250 563,707 $ 5,637 - $ -
======= ======== ======= ======== ======= =======
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1993 (continued)
<CAPTION>
Additional Total
Paid-In Retained Treasury Stockholder's
Capital Earnings Equity
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $1,665,427 $3,279,360 $ (375,805) $4,574,509
Issuance of Class B common stock
for cash at:
$16.00 per share 1,998,750 - - 2,000,000
Issuance of Class A common stock
for cash at:
$13.00 per share 12,990 - - 13,000
$16.00 per share 10,793 - - 10,800
Exercise of common stock option at
$4.00 per share 9,975 - - 10,000
Exercise of common stock option at
$6.20 per share 6,190 - - 6,200
Exercise of common stock option at
$6.60 per share 26,360 - - 26,400
Exercise of common stock option at
$8.50 per share 15,750 - - 15,768
Repurchase of 35,580 shares of
common stock - - (569,280) (569,280)
Net earnings - 1,972,627 - 1,972,627
---------- ---------- ---------- ----------
Balance at December 31, 1993 $3,746,235 $5,251,987 $ (945,085) $8,060,024
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1992 (continued)
<CAPTION>
Common Stock Common Stock Peferred
Class B Class A Stock
------- ------- -----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 - $ - 542,796 $ 5,428 - $ -
Exercise of common
stock option at:
$9.40 per share - - 1,100 11 - -
Exercise of common
stock option at:
$8.50 per share - - 133 2 - -
Exercise of common
stock option at:
$6.90 per share - - 3,000 30 - -
Exercise of common
stock option at:
$6.20 per share - - 3,000 30 - -
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1992 (continued)
Common Stock Common Stock Peferred
Class B Class A Stock
------- ------- -----
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
Issuance of common
stock for cash and
other consideration
at:
$14.00 per share - $ - 714 $ 7 - $ -
$13.00 per share - - 1,934 19 - -
Repurchase of 5,478
shares of common
stock - - - - - -
Net earnings - - - - - -
-------- -------- -------- -------- ----- --------
Balance at
December 31, 1992 - $ - 552,677 $ 5,527 - $ -
======== ======== ======== ======== ====== ========
</TABLE>
PAGE
<PAGE>
<TABLE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1992 (continued)
<CAPTION>
Additional Total
Paid-In Retained Treasury Stockholders'
Capital Earnings Stock Equity
------- -------- ----- ------
<S> <C> <C> <C> <C>
Balance at
December 31, 1991 $1,579,618 $2,232,137 $ (320,825) $3,496,358
Exercise of common
stock option at:
$9.40 per share 10,329 - - 10,340
Exercise of common
stock option at:
$8.50 per share 1,128 - - 1,130
Exercise of common
stock option at:
$6.90 per share 20,670 - - 20,700
Exercise of common
stock option at:
$6.20 per share 18,570 - - 18,600
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 1992 (continued)
Additional Total
Paid-In Retained Treasury Stockholders'
Capital Earnings Stock Equity
------- -------- ----- ------
Issuance of common
stock for cash and
other consideration
at:
$14.00 per share 9,989 - - 9,996
$13.00 per share 25,123 - - 25,142
Repurchase of 5,478
shares of common
stock - - (54,980) (54,980)
Net earnings - 1,047,223 - 1,047,223
---------- ---------- ---------- ----------
Balance at
December 31, 1992 $1,665,427 $3,279,360 $ (375,805) $4,574,509
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1993 and 1992
1993 1992
---- ----
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings $ 1,972,627 1,047,223
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 588,135 748,217
Share of joint venture loss 124,224 285,302
Gain on sale of property and equipment, net (1,839) (600,000)
Changes in operating assets and liabilities:
Accounts receivable and unbilled sales, net (4,476,745) (383,044)
Costs and estimated earnings in excess of
billings on uncompleted contracts 38,110 401,742
Deferred income taxes (40,138) -
Prepaid expenses and other assets (93,860) 1,230
Deposits (4,677) (4,624)
Accounts payable and accrued expenses 1,889,821 (583,984)
Accrued payroll and related costs 224,088 145,073
Bank overdraft payable 235,145 -
Deferred revenue 62,795 18,097
Accrued bonus and profit sharing
contribution 418,911 122,251
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,595 (14,108)
Accrued Federal and state income taxes 54,790 132,171
Deferred income taxes (115,594) (115,595)
Prepaid Federal and state income taxes - 99,973
----------- -----------
Net cash provided by operating
activities 880,388 1,299,924
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (619,457) (842,880)
Proceeds from disposal of property and
equipment 19,198 49,645
Capital contributed to joint venture (1,900,023) -
----------- -----------
Net cash used by investing activities $(2,500,282) (793,235)
----------- -----------
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1993 and 1992 (continued)
1993 1992
---- ----
Cash flows from financing activities:
Proceeds from notes payable $ 1,500,000 -
Principal repayments of notes payable (319,156) (319,159)
Repayments under capital lease obligation (2,390) -
Net advances (repayments) under Bank line of
credit 180,000 (130,000)
Proceeds from issuance of common stock 2,082,168 85,908
Purchase of treasury stock (435,280) (54,980)
----------- -----------
Net cash provided (used) by
financing activities 3,005,342 (418,231)
----------- -----------
Net increase in cash 1,385,448 88,458
Cash and cash equivalents at beginning of year 133,729 45,271
----------- -----------
Cash and cash equivalents at end of year $ 1,519,177 133,729
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 67,329 181,305
=========== ===========
Cash paid for income taxes $ 1,434,678 545,029
=========== ===========
Supplemental disclosure of non-cash investing and financing activities:
In August, 1992 the Company contributed property and equipment with a net
book value of $1,775,515 in exchange for a 50% interest in ReTec/Tetra,
L.C., a joint venture.
In September, 1993 the Company acquired equipment valued at $17,205 under a
capital lease obligation for the same amount.
During 1993, the Company exchanged cash plus equipment with a net book
value of $4,388 for other like kind equipment.
In April, 1993, the Company received 8,000 shares of its stock valued at
$128,000 in repayment of certain notes receivable from stockholders
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(a) Nature of Business
------------------
Remediation Technologies, Inc. ("the Company") and its wholly-owned
subsidiary, ReTec Thermal, Inc. (formerly known as MoTec, Inc.), are
environmental engineering companies which provide engineering
consulting and field services to industrial and governmental clients.
The Companies specialize in the application of innovative technologies
for on-site treatment and remediation at hazardous waste sites.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of ReTec
Thermal, Inc., the Company's wholly-owned subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) Revenue Recognition
-------------------
Revenue on contracts without a fixed price (time and material) is
recognized as the work is performed in accordance with specific terms
of each contract. Revenue on fixed fee and cost plus fixed fee
contracts is recognized on a percentage of completion method as
applied to the contract. The percentage of completion is determined
by relating costs incurred to date to total estimated costs. Changes
in estimated profit on contracts are reflected during the period in
which the change in estimate is made. The entire amount of
anticipated losses on contracts is charged to earnings as soon as such
losses can be estimated.
(d) Earnings Per Common and Common Equivalent Share
-----------------------------------------------
The computations of earnings per common share and common equivalent
are based on the weighted average number of shares outstanding during
the period after consideration of the dilutive effect of stock options
and warrants.
The following average shares were used for the computation of primary
and fully diluted earnings per share:
1993 1992
---- ----
Primary 808,678 716,439
Fully diluted 827,022 716,439
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(continued)
(e) Depreciation and Amortization
-----------------------------
Depreciation of property and equipment is provided using accelerated
methods over the estimated useful lives of the assets. Organization
costs and goodwill are amortized on a straight-line basis over five
and forty years, respectively. The costs of other intangible assets
are also amortized on a straight-line basis over their respective
estimated useful lives.
(f) Income Taxes
------------
The Company utilizes an asset and liability approach in accounting for
income taxes as required by Statement of Accounting Standards No. 109
(SFAS 109). SFAS 109 requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of changes
in the tax law or rates.
The provision for income taxes includes Federal and state income taxes
currently payable and those deferred because of temporary differences
between financial statement and tax bases of assets and liabilities.
As of December 31, 1993, the only temporary difference between the
financial statement carrying amounts and tax bases of company assets
and liabilities relates to the use of a reserve for doubtful accounts
for financial reporting purposes.
Temporary differences between the financial statement carrying amounts
and tax bases of assets and liabilities that gave rise to a
significant portion of the deferred tax liability at December 31, 1992
resulted from the Company's use of the accrual basis of accounting for
financial reporting purposes and the cash basis for income tax
purposes prior to 1990.
(g) Statement of Cash Flows
-----------------------
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with maturity of three
months or less to be cash equivalents.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
(continued)
(h) Concentration of Credit Risk
----------------------------
Financial instruments which subject the Company to credit risk consist
principally of temporary cash investments and trade receivables. The
Company places its temporary cash investments ($1.5 million at
December 31, 1993) with high quality financial institutions. At times
such investments may be in excess of the FDIC limit. The Company's
policy with respect to the credit risk of trade receivables is to
evaluate, prior to contract signing, each customer's financial
condition and determine the amount of open credit to be extended. The
Company's three largest customers accounted for approximately 35% of
sales in 1993 and 37% in 1992. The same customers accounted for
approximately 29% and 30% of accounts receivable at December 31, 1993
and 1992, respectively.
(2) Acquisition
-----------
In February, 1989, the Company's subsidiary, formerly named ReTec
Acquisitions, Inc. acquired the assets of MoTec, Inc., (now known as
ReTec Thermal, Inc.) an environmental contractor, for $895,966
including related expenses. The Company accounted for the acquisition
using the purchase method. Accordingly, the assets of MoTec, Inc.
have been recorded at their estimated fair values at the date of
acquisition. The excess of purchase price over the fair value of the
tangible and intangible assets acquired ("goodwill") is being
amortized on a straight-line basis over 40 years. Direct costs
incurred as a result of the acquisition ("organization costs") are
being amortized on a straight-line basis over 5 years.
The allocation of the purchase price and related costs is summarized
below:
Property and equipment $368,454
Patent 272,200
Noncompetition agreement 200,000
Goodwill 38,186
Organization costs 17,126
--------
$895,966
========
In 1992, the subsidiary's name was changed to ReTec Thermal, Inc. and
all assets and liabilities held by the subsidiary prior to the change
were transferred to the Company. The only asset currently held by the
Company's subsidiary is a 50% ownership interest in the ReTec/Tetra,
L.C. (note 3).
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 1993 and 1992 (continued)
(2) Acquisition (continued)
-----------
The consolidated statements of earnings for the years ended December
31, 1993 and 1992 include a net loss of $124,224 and $285,302,
respectively from the operations of the Company's subsidiary. This
net loss represents the subsidiary's share of the net loss of
ReTec/Tetra, L.C. (note 3).
(3) Investment in Joint Venture
---------------------------
The Company's wholly-owned subsidiary, ReTec Thermal, Inc., has a 50%
ownership interest in a venture known as ReTec/Tetra, L.C. ("the joint
venture"), a Texas Limited Liability Company formed in August, 1992,
for the purpose of engaging in on-site hazardous waste remediation
services. The investment in the joint venture is accounted for using
the equity method.
Summarized financial information of the joint venture at December 31,
1993 and 1992 is as follows:
1993 1992
---- ----
Assets:
Current assets $1,273,451 438,694
Property and equipment 6,353,859 1,792,190
Other assets 568,988 624,970
---------- ----------
$8,196,298 2,855,854
========== ==========
Liabilities and equity:
Current liabilities $1,539,814 250,920
Equity 6,656,484 2,604,934
---------- ----------
$8,196,298 2,855,854
========== ==========
Net sales $2,565,236 353,865
========== ==========
Net loss $ (248,449) (570,605)
========== ==========
Company's equity in net loss $ (124,224) (285,302)
========== ==========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 1993 and 1992 (continued)
(3) Investment in Joint Venture (continued)
---------------------------
The Company contributed property and equipment with a book value of
$1,775,515 and technology with a fair market value of $600,000 to the
joint venture in exchange for its 50% interest. During 1993 the
Company contributed an additional $1,902,364 to the capital of the
joint venture. The Company's equity in the joint venture was
$3,866,012 and $2,090,213 at December 31, 1993 and 1992, respectively.
(4) Related Party Transaction
-------------------------
The Company recognized revenue of approximately $360,000 and $473,000
in 1993 and 1992, respectively, from ReTec/Tetra, L.C. for services
rendered on behalf of the joint venture.
(5) Costs and Estimated Earnings on Uncompleted Contracts
-----------------------------------------------------
Costs and estimated earnings on uncompleted contracts pertain to
fixed-price contracts accounted for using the percentage of completion
method as applied to the contract.
1993 1992
---- ----
Costs incurred on uncompleted
contracts $236,727 336,829
Estimated earnings 28,973 27,149
-------- --------
265,700 363,978
Less: Billings to date 269,479 325,052
-------- --------
$(3,779) 38,926
======== ========
Included in accompanying balance
sheets under the following captions:
Costs and estimated earnings in
in excess of billings on
uncompleted contracts $ 22,336 60,446
Billings in excess of costs and
estimated earnings on uncompleted
contracts 26,115 21,520
-------- --------
$(3,779) 38,926
======== ========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(6) Notes Receivable
----------------
At December 31, 1992, the Company had notes receivable due from
stockholders amounting to $128,000. In April, 1993 the Company
received from stockholders 8,000 shares of its Class A common stock as
repayment of the notes. The $128,000 cost of redemption is included
in treasury stock at December 31, 1993.
(7) Intangible Assets
-----------------
The components of other intangible assets, net of accumulated
amortization, and their estimated remaining useful lives were as
follows at December 31, 1993:
Estimated Remaining
Life
-------------------
License agreement 24 months $ 2,400
Patent 48 months 138,937
---------
$ 141,337
=========
(8) Bank Line of Credit
-------------------
At December 31, 1993 and 1992, the Company had a revolving Bank line
of credit available in an amount determined based on a percentage of
eligible accounts receivable. The maximum amount available under the
line of credit is $4,000,000. Advances under the line of credit are
payable on demand and bear interest at the Bank's prime rate plus
1/2%. The Company is also charged a fee of 1/2% on the unused portion
of the facility. Borrowings are secured by substantially all assets
of the Company. There was $810,000 and $630,000 outstanding under
this line of credit at December 31, 1993 and 1992, respectively.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(9) Notes Payable
-------------
Notes payable at December 31, 1993 and 1992 consisted of the
following:
1993 1992
---- ----
$1,500,000 subordinated note payable
dated October 28, 1993 bearing interest
at 8%. Interest only is payable on a
quarterly basis until November, 1996 at
which time the Company is required to
begin making quarterly installments of
principal under the note of $93,750 plus
interest through August, 2000. A
redemption premium of 8% in 1994, 6% in
1995, 4% in 1996 and 2% in 1997 is
payable with respect to any principal
installments made in excess of the
required amounts. The note was issued
pursuant to a related Warrant Purchase
Agreement under which the Company issued
to the lender warrants to purchase
46,875 shares of Class A common stock at
a purchase price of $16.00 per share
(note 13). $1,500,000 -
$1,000,000 term note payable to a Bank
dated July 12, 1991 bearing interest at
the Bank's prime rate plus 1%.
Principal under the note of $71,429 plus
interest is payable quarterly through
June 30, 1995. The debt was incurred to
finance the purchase of certain
equipment which was contributed to the
joint venture (note 3) in 1992. The
note is secured by shares of common
stock in the Company's wholly owned
subsidiary, ReTec Thermal, Inc. 428,571 714,285
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(9) Notes Payable (continued)
-------------
1993 1994
---- ----
$158,355 unsecured term note payable to
a former stockholder dated September 29,
1989. Proceeds from the note were used
to fund the purchase of treasury shares
of common stock from the former
stockholder. The note will be paid in
ten equal annual principal installments
of $15,836 and interest installments of
$8,839 beginning September 29, 1990.
The weighted average interest rate over
the term of the note is 9% per annum. 95,014 110,848
$18,345 unsecured term note payable to
the estate of a former stockholder dated
December 17, 1990. Proceeds from the
note were used to fund the purchase of
treasury shares of common stock from the
estate. The note will be paid in five
equal annual principal installments of
$3,669 beginning December 17, 1991.
Interest on the note accrues on the
unpaid principal balance at a Bank's
prime interest rate and is payable
annually. 7,338 11,007
$69,695 unsecured term note payable to the
estate of a former stockholder dated
December 17, 1990. Proceeds from the
note were used to fund the purchase of
treasury shares of common stock from the
estate of a former stockholder. The
note will be paid in five equal annual
principal installments of $13,939
beginning December 17, 1991. Interest
on the note accrues on the unpaid
principal balance at a Bank's prime
interest rate and is also payable
annually. 27,878 41,817
---------- ----------
Total notes payable 2,058,801 877,957
Less current installments of notes payable 319,157 319,157
---------- ----------
Notes payable, excluding current
installments $1,739,644 558,800
========== ==========
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(9) Notes Payable (continued)
-------------
The aggregate maturities of notes payable for the next five years are
as follows:
1994 $319,157
1995 176,302
1996 109,586
1997 390,836
1998 390,836
(10) Capital Lease Obligation
------------------------
1993 1992
---- ----
September, 1993 agreement with a leasing
company. The obligation is payable in
36 monthly principal and interest
installments of $550 through August,
1996. Equipment capitalized under the
lease in the amount of $17,205 is
included in the balance sheet
as equipment at December 31, 1993. $ 14,815 -
Less current installments of capital lease
obligation 3,345 -
---------- ----------
Capital lease obligation, net of current
installments $ 11,470 -
========== ==========
Minimum payments under the lease obligation for the remainder of the
lease term are as follows:
1994 $ 6,600
1995 6,600
1996 4,400
-------
17,600
Less amount representing
interest at 9.9% 2,785
-------
Present value of net minimum
lease payments $14,815
=======
(11) Capital Stock
-------------
In March, 1993 the Company restated its certificate of incorporation
to provide for the establishment of a second class of common stock.
The restated certificate of incorporation authorized the issuance of
125,000 shares of $.01 par value Class B common stock and provided
that each share of previously authorized common stock be reclassified
as Class A common stock.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(11) Capital Stock (continued)
-------------
The total number of shares of all classes of capital stock that the
Corporation has authority to issue was increased from 2,000,000 at
December 31, 1992 to 3,000,000 consisting of 1,875,000 shares of Class
A common stock, 125,000 shares of Class B common stock and 1,000,000
shares of preferred stock.
The Company's capital structure was amended as discussed above to
facilitate a March, 1993 stock purchase agreement under which the
Company sold all 125,000 authorized shares of its Class B common stock
to Advent International (109,375 shares) and Edison Ventures (15,625
shares) for $2,000,000 ($16.00 per share). The proceeds from the sale
were used for working capital and general corporate purposes, for
repayment of loans and for funding of the ReTec/Tetra joint venture.
The Class B common stock ranks senior to the Company's Class A common
stock as to liquidation rights and is convertible to Class A common
stock upon the approval of the shareholders of a majority of the
outstanding shares of Class B common stock. The number of shares of
Class A common stock to which a holder of Class B common stock is
entitled to receive upon conversion is initially one share of Class A
common stock for each share of Class B common stock converted. The
ratio increases upon the dilutive issuance of Class A common stock or
convertible securities. The Class B common stock shares also possess
certain registration and demand rights.
(12) Stock Option Plan
-----------------
In 1986, the Company adopted the 1986 Stock Option Plan for which
150,000 shares of common stock were reserved for issuance to
employees. In 1988, 1991, and 1993 the stock option plan was amended
and, in total, an additional 225,000 shares of common stock were
reserved (100,000 in 1988, 75,000 in 1991, and 50,000 in 1993) to
increase the total shares of common stock that have been reserved to
375,000. Options granted under the plan may be qualified or
non-qualified. The options are granted at prices determined by the
Board of Directors or designee and are exercisable ratably over a two
to four-year period from the date of grant. At December 31, 1993,
there were outstanding incentive stock options for the purchase of
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(12) Stock Option Plan (continued)
-----------------
319,495 shares and non-qualified options for the purchase of 6,000
shares. At December 31, 1992, there were outstanding incentive stock
options for the purchase of 306,250 shares and non-qualified options
for the purchase of 8,500 shares. Stock option activity is summarized
as follows:
Outstanding
Options
-------------------------
Shares Number of Price Per
Available Shares Share
--------- --------- ---------
Balance at December 31, 1991 20,350 304,650
Options granted (19,600) 19,600 $ 13.00 - 14.00
Options exercised 7,233 (7,233) $ 6.20 - 9.40
Options canceled 2,267 (2,267) $ 8.50 - 9.40
------- -------
Balance at December 31, 1992 10,250 314,750
Additional options reserves 50,000 -
Options granted (20,600) 20,600 $ 16.00
Options exercised 9,355 (9,355) $ 4.00 - 8.50
Options canceled 500 (500) $ 14.00
------- -------
Balance at December 31, 1993 49,505 325,495 $ 1.00 - 16.00
======= =======
At December 31, 1993 and 1992, 268,360 and 240,949 shares were
exercisable, respectively.
(13) Common Stock Warrants
---------------------
At December 31, 1993 there was a warrant outstanding to purchase
46,875 shares of Class A common stock for $16.00 per share. The
warrant is exercisable in full or in part until the later of August
31, 2000 or at such time as all principal and interest on the related
note is paid in full. The warrant was issued in October, 1993 in
conjunction with the issuance of a $1.5 million subordinated note
payable (note 9). All shares issuable under the warrant possess
certain demand and registration rights, separate from those rights of
the Class B common stockholders.
PAGE
<PAGE>
REMEDIATION TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(14) Income Tax Expense
------------------
Income tax expense at December 31, 1993 and 1992 consists of the
following:
Current Deferred Total
------- -------- -----
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
Federal $ 1,149,597 629,362 (120,206) (95,858) 1,029,391 533,504
State 336,970 147,810 (35,526) (19,736) 301,444 128,074
----------- ------- -------- -------- --------- -------
$ 1,486,567 777,172 (155,732) (115,594) 1,330,835 661,578
=========== ======= ======== ======== ========= =======
(15) Leases
------
The Company leases its office facilities under operating leases
expiring at various dates to 1999. Future minimum lease payments for
the next five years under non-cancelable operating leases as of
December 31, 1993 are:
1994 $ 769,652
1995 756,330
1996 624,564
1997 346,696
1998 291,396
----------
Total $2,788,638
==========
Rental expense for the years ended December 31, 1993 and 1992 amounted
to $896,153 and $758,363, respectively.
(16) Employee Benefit Plan
---------------------
In 1987, the Company adopted an Employee Savings and Profit Sharing
Plan ("the Plan") in accordance with Section 401(k) of the Internal
Revenue Code. The Plan allows employees to defer up to 15% of their
income on a pretax basis through contributions to the Plan up to
prescribed Internal Revenue Code limitations. In line with the
provisions of the Plan, the Company will contribute 50% of each
employee's contribution up to the first six percent of salary. In
addition, the Company may make, at its discretion, a contribution from
profits in an amount determined by the Board of Directors. The
Company contributed $401,770 and $334,898 to the Plan in 1993 and
1992, respectively.
(17) Loan Guarantee
--------------
The Company has guaranteed repayment of up to $500,000 of amounts
advanced to ReTec/Tetra, L.C. under a revolving promissory note with a
Bank. There were no advances outstanding under the guaranteed note at
December 31, 1993.
PAGE
<PAGE>
Remediation Technologies, Inc.
Consolidated Balance Sheets (Unaudited) (In thousands)
September 30, 1995 December 31, 1994
------------------ -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 313 $ 625
Accounts receivable and unbilled sales,
net of allowance for doubtful accounts
of $279 and $208 12,132 11,072
Costs and estimated earnings in excess of
billings on uncompleted contracts - 62
Notes receivable 102 -
Deferred income taxes 74 144
Prepaid federal income taxes - 545
Prepaid expenses and other assets 85 78
------- -------
Total current assets 12,706 12,526
------- -------
Property and Equipment, at Cost 4,298 3,623
Less: Accumulated depreciation and
amortization 2,854 2,470
------- -------
Net property and equipment 1,444 1,153
------- -------
Investment in Joint Venture 5,087 5,100
------- -------
Other Assets 227 189
------- -------
$19,464 $18,968
======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
PAGE
<PAGE>
Remediation Technologies, Inc.
Consolidated Balance Sheets (Unaudited) (In thousands except share amounts)
(continued)
September 30, 1995 December 31, 1994
------------------ -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of note payable and
capital lease obligation $ 21 $ 21
Accounts payable and accrued expenses 2,770 4,160
Billings in excess of costs and estimated
earnings on uncompleted contracts - 332
Deferred revenue 19 128
Accrued payroll and employee benefits 1,844 1,657
Accrued federal and state income taxes 27 127
------- -------
Total current liabilities 4,681 6,425
------- -------
Long-term Debt:
Note payable 1,500 1,500
Capital lease obligations - 6
------- -------
Total long-term debt 1,500 1,506
------- -------
Contingency (Note 2)
Stockholders' Equity:
Common stock (Class B), $.01 par value,
125,000 shares authorized, issued and
outstanding 1 1
Common stock (Class A), $.01 par value,
1,875,000 shares authorized; 514,047 and
598,458 shares issued in 1995 and 1994 6 6
Preferred stock, $.01 par value, 1,000,000
shares authorized; none issued - -
Stock options outstanding 22 -
Additional paid-in capital 3,864 3,848
Retained earnings 10,501 8,254
------- -------
14,394 12,109
Less: treasury stock at cost, 89,111
and 87,259 shares (1,111) (1,072)
------- -------
Total stockholders' equity 13,283 11,037
------- -------
$19,464 $18,968
======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
PAGE
<PAGE>
Remediation Technologies, Inc.
Consolidated Statement of Earnings (Unaudited) (In thousands except per
share amounts)
Nine Months Ended
September 30,
-----------------
1995 1994
------ ------
Project revenues $31,785 $26,794
Direct project costs 18,058 14,145
------- -------
Gross profit 13,727 12,649
------- -------
Selling, general and administrative expenses 9,913 9,016
------- -------
Earnings from operations before income taxes 3,814 3,633
------- -------
Other income (expense):
Gain on sale of property and equipment, net 5 1
Equity in net income (loss) of joint venture (14) 761
Interest, net (62) (123)
------- -------
Total other income (expense) (71) 639
------- -------
Earnings before income taxes 3,743 4,272
Income tax expense 1,497 1,752
------- -------
Net earnings $ 2,246 $ 2,520
======= =======
Net earnings per common and common equivalent
share:
Primary $ 2.53 $ 2.91
======= =======
Fully diluted $ 2.53 $ 2.90
======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
PAGE
<PAGE>
Remediation Technologies, Inc.
Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Nine Months Ended
September 30,
-----------------
1995 1994
------ ------
Operating Activities:
Net earnings $ 2,246 $ 2,520
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 412 393
Company's share of joint venture income 13 (761)
Changes in current accounts:
Accounts receivable (1,330) 2,412
Other current assets 584 66
Accounts payable (593) (1,413)
Bank overdraft payable - (1,239)
Other current liabilities (969) (709)
------- -------
Net cash provided by operating activities 363 1,269
------- -------
Investing Activities:
Purchases of property, plant and equipment (722) (508)
Proceeds from sale of property, plant and
equipment 47 32
Capital contributed to joint venture - (612)
-------- -------
Net cash used in investing activities (675) (1,088)
-------- -------
Financing Activities:
Purchase of treasury stock - (30)
------- -------
Net cash used in financing activities - (30)
------- -------
Increase (Decrease) in Cash and Cash Equivalents (312) 151
Cash and Cash Equivalents at Beginning of Period 625 1,519
------- -------
Cash and Cash Equivalents at End of Period $ 313 $ 1,670
======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
PAGE
<PAGE>
Remediation Technologies, Inc.
Notes to Consolidated Financial Statements - September 30, 1995 (Unaudited)
1. General
The interim consolidated financial statements presented have been
prepared by Remediation Technologies, 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 nine-month periods ended September 30, 1995 and 1994, (b) the financial
position at September 30, 1995, and (c) the cash flows for the nine-month
periods ended September 30, 1995 and 1994. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 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 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 this
Amendment No. 1 on Form 8-K/A.
2. Contingency
On August 22, 1995, Scaltech, Inc. (Scaltech), a competitor of
ReTec/Tetra L.C. (ReTec/Tetra), a 50% owned joint venture of a wholly owned
subsidiary of the Company, filed a complaint against ReTec/Tetra in the
United States District Court in the Southern District of Texas. Scaltech
alleged that ReTec/Tetra offered services to certain of its clients that
infringed patents owned by Scaltech. The allegations involve certain
Retec/Tetra processes for producing delayed coker quench streams.
ReTec/Tetra subsequently filed a counterclaim, which Scaltech answered.
The parties are now engaged in discovery relating to the litigation.
ReTec/Tetra is unable to predict the outcome of this matter, although an
unfavorable resolution could have a material adverse effect on
ReTec/Tetra's financial condition, results of operations and cash flows.
PAGE
<PAGE>
Report of Independent Auditors
------------------------------
The Supervisory Board
RETEC/TETRA L.C.
We have audited the accompanying balance sheets of RETEC/TETRA L.C. (a
Limited Liability Corporation) ("the Company") as of December 31, 1994,
1993, and 1992, and the related statements of operations, members' equity,
and cash flows for the years ended December 31, 1994 and 1993, and the
period from August 1, 1992 (date of inception) to December 31, 1992. 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 RETEC/TETRA L.C. at
December 31, 1994, 1993, and 1992, and the results of its operations and
its cash flows for the years ended December 31, 1994 and 1993, and the
period from August 1, 1992 (date of inception) to December 31, 1992, in
conformity with generally accepted accounting principles.
As discussed in Note B to the financial statements, in 1993 the Company
changed its methods of depreciation.
ERNST & YOUNG LLP
Houston, Texas
February 28, 1995
PAGE
<PAGE>
RETEC/TETRA L.C.
BALANCE SHEETS
December 31,
1994 1993 1992
----------- ----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 205,127 $ 182,339 $ 83,726
Trade accounts receivable 1,547,846 972,725 208,638
Accounts receivable from
related parties 359 5,088 126,665
Prepaid expenses and other
current assets 310,109 113,299 19,665
----------- ----------- -----------
Total Current Assets 2,063,441 1,273,451 438,694
Property, Plant and Equipment
Treatment plant equipment 2,926,399 3,591,467 1,653,542
Machinery and equipment 6,905,683 1,425,642 -
Automobiles and other equipment 348,709 415,617 16,052
Construction in progress 468,704 1,725,599 360,328
----------- ----------- -----------
10,649,495 7,158,325 2,029,922
Less accumulated depreciation (2,225,168) (804,466) (237,732)
------------ ------------ -----------
Net Property, Plant and
Equipment 8,424,327 6,353,859 1,792,190
Other Assets:
Technology, patents and
licenses, net of accumulated
amortization of $169,178 in
1994, $98,150 in 1993, and
$27,630 in 1992 500,705 568,988 624,970
----------- ----------- -----------
Total Assets $10,988,473 $ 8,196,298 $ 2,855,854
============ =========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,224,287 $ 539,846 $ 8,960
Accounts payable to related
parties 108,479 563,821 178,139
Accrued expenses 530,857 436,147 63,822
----------- ----------- -----------
Total Current Liabilities 1,863,623 1,539,814 250,921
Members' Equity
Invested capital 8,675,539 7,475,539 3,175,539
Retained earnings (deficit) 449,311 (819,055) (570,606)
----------- ------------ -----------
Total Members' Equity 9,124,850 6,656,484 2,604,933
----------- ----------- -----------
Total Liabilities and Members'
Equity $10,988,473 $ 8,196,298 $ 2,855,854
=========== =========== ===========
See Accompanying NotesPAGE
<PAGE>
RETEC/TETRA L.C.
STATEMENTS OF OPERATIONS
Period From
August 1,
1992 (date
of incep-
Year Ended Year Ended tion) to
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
Revenues $11,267,503 $ 2,565,236 $ 353,865
Cost of Revenues 8,753,558 1,855,834 495,949
----------- ----------- ----------
Gross Profit 2,513,945 709,402 (142,084)
General and administrative
expenses 1,371,927 1,053,865 428,522
----------- ----------- ----------
Operating gain (loss) 1,142,018 (344,463) (570,606)
Gain on sale of fixed assets 126,348 96,014 -
----------- ----------- ----------
Net income (loss) $ 1,268,366 $ (248,449) $ (570,606)
=========== =========== ==========
See Accompanying Notes
PAGE
<PAGE>
RETEC/TETRA L.C.
STATEMENTS OF MEMBERS' EQUITY
TETRA Remediation
Technologies, Inc. Technologies, Inc. Total
------------------ ------------------ ----------
Balance at August 1, 1992 $ - $ - $ -
Capital Contribution 800,000 2,375,539 3,175,539
1992 net loss (285,303) (285,303) (570,606)
----------- ----------- ----------
Balance at December 31, 1992 514,697 2,090,236 2,604,933
Capital Contribution 2,400,000 1,900,000 4,300,000
1993 net loss (124,225) (124,224) (248,449)
---------- ---------- ----------
Balance at December 31, 1993 2,790,472 3,866,012 6,656,484
Capital Contribution 600,000 600,000 1,200,000
1994 net gain 634,183 634,183 1,268,366
---------- ---------- ----------
Balance at December 31, 1994 $4,024,655 $5,100,195 $9,124,850
========== ========== ==========
See Accompanying Notes
PAGE
<PAGE>
RETEC/TETRA L.C.
STATEMENTS OF CASH FLOWS
Period From
August 1,
1992 (date
of incep-
Year Ended Year Ended tion) to
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
Operating Activities:
Net income (loss) $ 1,268,366 $ (248,449) $ (570,606)
Adjustments to reconcile net
income (loss) to cash provided
by operating activities:
Depreciation and amortization 1,511,421 644,287 265,362
Gain of the sale of fixed
assets (126,348) (96,014) -
Changes in operating assets
and liabilities:
Accounts receivable (570,392) (642,510) (335,303)
Prepaid expenses and other
current assets (196,810) (7,070) (19,665)
Trade accounts payable and
accrued expenses 323,810 1,288,893 250,921
----------- ----------- -----------
Net cash provided by
operating activities 2,210,047 939,137 (409,291)
Investing Activities:
Acquisition of TRW Environmental
Services property 0 (1,000,000) -
Purchase of property, plant
and equipment (3,557,572) (4,242,323) (254,383)
Purchase of patents, royalties
and technologies (2,745) (14,537) (52,600)
Proceeds from sale of assets . 173,058 116,336 -
----------- ----------- -----------
Net cash used in investing
activities (3,387,259) (5,140,524) (306,983)
Financing Activities:
Capital investment - TETRA 600,000 2,400,000 800,000
Capital investment - RETEC 600,000 1,900,000 -
----------- ----------- -----------
Net cash provided by
financing activities 1,200,000 4,300,000 800,000
Increase in cash and cash
equivalents 22,788 98,613 83,726
Cash and Cash Equivalents at
Beginning of Period 182,339 83,726 -
----------- ----------- -----------
Cash and Cash Equivalents at End
of Period $ 205,127 $ 182,339 $ 83,726
=========== =========== ===========
See Accompanying NotesPAGE
<PAGE>
RETEC/TETRA L.C.
Notes To Financial Statements
December 31, 1994, 1993 and 1992
NOTE A - ORGANIZATION AND OPERATIONS
RETEC/TETRA L.C. ("The Company") was formed August 1, 1992 as a
50%/50% joint venture with RETEC/Thermal (RETEC), a wholly-owned subsidiary
of Remediation Technologies, Inc. and TETRA/Thermal, (TETRA) a wholly-owned
subsidiary of Tetra Technologies, Inc. The joint venture was established
to market RETEC's proprietary thermal desorption process and TETRA's
process operations expertise to the nation's petroleum refineries.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
Financial instruments which subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's policy
is to evaluate, prior to contract signing, each customer's financial
condition and determine the amount of open credit to be extended; generally
collateral is not required. The trade receivables primarily include
activity with major petroleum refinery companies. The two largest
contracts accounted for 54% and 20% of revenues in 1994 and 46% and 20% of
revenues in 1993.
Property, Plant and Equipment
Property, plant, and equipment are stated at the value per the
formation agreement of the assets contributed by RETEC upon formation of
the venture and at cost for assets purchased. Expenditures that increase
the useful lives of assets are capitalized. The costs of repairs and
maintenance are charged to operations as incurred. Assets contributed at
the Company's formation are depreciated using a declining-balance method
converting to the straight-line method. All assets acquired subsequent to
formation are depreciated using the straight-line method. The estimated
useful lives of assets are as follows:
Treatment plant equipment ....... 2 to 7 years
Machinery and Equipment ........ 2 to 5 years
Automobiles and other equipment . 2 to 4 years
Technology, Patents and Licenses
Technology, patents and licenses, which relate to proprietary waste
treatment processes contributed by RETEC, are stated at the value per the
formation agreement. Patents and licenses are amortized over the estimated
useful lives generally ranging from five to ten years. Technologies are
amortized over estimated useful lives from eight to ten years.
Income Taxes
The Company has elected to be treated as a partnership for federal
income tax purposes. RETEC and TETRA include their respective shares of
the net income(loss) of the Company in their federal and state tax returns.
PAGE
<PAGE>
RETEC/TETRA L.C.
Notes To Financial Statements
December 31, 1994, 1993 and 1992
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allocation of Joint Venture Profit and Loss
In accordance with the formation agreement, net income(loss) is to be
allocated to RETEC and TETRA in accordance with their partnership
interests.
Operating Leases
The Company periodically enters into operating leases for various
pieces of equipment. Aggregate rental expense under these agreements was
$585,176 and $229,222 in 1994 and 1993, respectively. Minimum future
annual lease payments under non-cancelable operating leases are as follows
for the years ending December 31:
1995 -$108,538; 1996 - $105,248; 1997 - $32,159; 1998 - $13,606; 1999 -
$6,803; Grand total is $266,354.
NOTE C - RELATED PARTY TRANSACTIONS
The Company was billed approximately $1,108,360 in 1994, and
$1,291,000 in 1993 by the owners, primarily Tetra, for administrative
services and materials rendered on behalf of the Company.
NOTE D - CAPITAL CONTRIBUTIONS
The Company was initially capitalized with TETRA contributing $800,000
in cash and RETEC contributing thermal plant equipment valued at $1,775,539
and thermal desorption process technology valued at $600,000. Each partner
contributed $600,000 in 1994 and $1.4 million in 1993 in additional capital
to fund the construction of two new projects. Additionally, TETRA
contributed $500,000 of working capital in 1993. TETRA is obligated under
the formation agreement to provide additional working capital required by
the Company in the amount of $1,075,540.
NOTE E - ACQUISITIONS
In September 1993, the Company acquired the assets of the
Environmental Services Division of TRW for $1 million, with each partner
contributing $500,000. The TRW Division prepared refinery K-waste for
disposal.
NOTE F - DEBT
The Company has credit agreements that consist of a $500,000 revolving
credit agreement and a $2,040,000 advancing promissory note which will
convert to a term note. The revolving note is committed through December
15, 1995 with a commitment fee of 3/8% on the unused portion of the loan.
The advancing promissory note is due on or before February 15, 2000. Both
agreements bear interest at the prime rate . There were no borrowings
under these agreements at December 31, 1994. Subsequent to December 31,
1994, the Company drew $800,000 under the advancing promissory note to fund
new capital expenditures.
PAGE
<PAGE>
ReTec/Tetra L.C.
Consolidated Balance Sheets (Unaudited) (In thousands)
September 30, December 31,
1995 1994
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 122 $ 205
Accounts receivable 1,458 1,548
Prepaid expenses and other current assets 613 310
------- -------
Total Current Assets 2,193 2,063
------- -------
Property, Plant and Equipment, at Cost 15,075 10,649
Less: Accumulated depreciation and
amortization (4,411) (2,225)
------- -------
Net Property, Plant and Equipment 10,664 8,424
------- -------
Other Assets 521 501
------- -------
Total Assets $13,378 $10,988
======= =======
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Accounts payable $ 641 $ 1,333
Other accrued expenses 441 530
------- -------
Total Current Liabilities 1,082 1,863
------- -------
Notes Payable 3,198 -
------- -------
Contingency (Note 2)
Members' Equity:
Invested capital 8,676 8,676
Retained earnings 422 449
------- -------
Total Members' Equity 9,098 9,125
------- -------
Total Liabilities and Members' Equity $13,378 $10,988
======= =======
The accompanying notes are an integral part of these financial statements.
PAGE
<PAGE>
ReTec/Tetra L.C.
Statements of Operations (Unaudited) (In thousands)
Nine Months Ended
September 30,
-----------------
1995 1994
------- ------
Revenues $7,222 $8,733
Cost of Revenues 5,403 5,546
------ ------
Gross Profit 1,819 3,187
General and Administrative Expenses 1,698 1,580
------ ------
Operating Gain 121 1,607
Interest Expense and Other Income, Net (146) (87)
------ ------
Net Income (Loss) $ (25) $1,520
====== ======
The accompanying notes are an integral part of these financial statements.
PAGE
<PAGE>
ReTec/Tetra L.C.
Statements of Cash Flows (Unaudited) (In thousands)
Nine Months Ended
September 30,
-------------------
1995 1994
------- ------
Operating Activities:
Net income (loss) $ (25) $ 1,520
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,680 1,009
Gain on sale of investments 23 (128)
Changes in current accounts:
Accounts receivable 90 (1,052)
Other current assets (351) (170)
Current liabilities (783) (22)
------- -------
Net cash provided by operating activities 634 1,157
------- -------
Investing Activities:
Purchases of property, plant and equipment (3,950) (2,546)
Proceeds from sale of property, plant and equipment 61 174
Purchase of patent (26) (3)
------- -------
Net cash used in investing activities (3,915) (2,375)
------- -------
Financing Activities:
Capital investment - TETRA - 600
Capital investment - RETEC - 600
Issuance of note payable 3,198 -
------- -------
Net cash provided by financing activities 3,198 1,200
------- -------
Decrease in Cash and Cash Equivalents (83) (18)
Cash and Cash Equivalents at Beginning of Period 205 182
------- -------
Cash and Cash Equivalents at End of Period $ 122 $ 164
======= =======
The accompanying notes are an integral part of these financial statements.
PAGE
<PAGE>
ReTec/Tetra L.C.
Notes to Financial Statements - September 30, 1995 (Unaudited)
1. General
The interim financial statements presented have been prepared by
ReTec/Tetra L.C. (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 nine-month
periods ended September 30, 1995 and 1994, (b) the financial position at
September 30, 1995, and (c) the cash flows for the nine-month periods ended
September 30, 1995 and 1994. Interim results are not necessarily
indicative of results for a full year.
The balance sheet presented as of December 31, 1994, has been derived
from the financial statements that have been audited by the Company's
independent public accountants. The financial statements and notes do not
contain certain information included in the annual financial statements and
notes of the Company. The financial statements and notes included herein
should be read in conjunction with the financial statements and notes
included in this Amendment No. 1 on Form 8-K/A.
2. Contingency
On August 22, 1995, Scaltech, Inc. ("Scaltech"), a competitor of the
Company, filed a complaint against the Company in the United States
District Court in the Southern District of Texas. Scaltech alleged that
the Company offered services to certain of its clients that infringed
patents owned by Scaltech. The allegations involve certain of the
Company's processes for producing delayed coker quench streams. The
Company subsequently filed a counterclaim, which Scaltech answered. The
parties are now engaged in discovery relating to the litigation. The
Company is unable to predict the outcome of this matter, although an
unfavorable resolution could have a material adverse effect on the
Company's financial condition, results of the operations and cash flows.
PAGE
<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 financial
statements set forth the results of operations for the year ended April 1,
1995 and the six months ended October 1, 1994 and September 30, 1995, as if
the acquisition of Remediation Technologies, Inc. (ReTec) by Thermo
Remediation had occurred at the beginning of 1994 and the financial
position as of September 30, 1995, as if the acquisition had occurred as of
that date. ReTec has a financial year which differs from the Company's
fiscal year end, therefore, the pro forma combined statement of income for
the year ended April 1, 1995 includes the historical results of operations
for ReTec for the calendar year ended December 31, 1994. The pro forma
combined statements of income for the six months ended October 1, 1994 and
September 30, 1995 include the historical results of operations for ReTec,
derived by subtracting the first quarter of calendar 1994 and 1995 from its
results of operations for the nine months ended October 1, 1994 and
September 30, 1995, respectively. The pro forma combined balance sheet
includes the historical financial position for ReTec as of September 30,
1995.
The acquisition will be 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 ReTec 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.
4PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
Year Ended April 1, 1995
Historical Pro Forma
------------------- ---------------------
Thermo
TerraTech ReTec Adjustments Combined
--------- ------- ----------- --------
(In thousands except per share amounts)
Revenues $133,803 $ 39,018 $ - $172,821
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 98,552 22,251 - 120,803
Selling, general and
administrative expenses 26,257 12,281 1,009 39,547
Product and new business
development expenses 883 - - 883
-------- -------- -------- --------
125,692 34,532 1,009 161,233
-------- -------- -------- --------
Operating Income 8,111 4,486 (1,009) 11,588
Interest and Other Income
(Expense), Net 467 (109) (936) (578)
Gain on Issuance of Stock by
Subsidiaries 1,343 - 1,399 2,742
Gain on Sale of Investments 1,092 - - 1,092
Equity in Net Income of
Joint Venture - 634 - 634
-------- -------- -------- --------
Income Before Provision for
Income Taxes and Minority
Interest 11,013 5,011 (546) 15,478
Provision for Income Taxes 2,630 2,009 (570) 4,069
Minority Interest Expense 4,268 - 555 4,823
-------- -------- -------- --------
Net Income $ 4,115 $ 3,002 $ (531) $ 6,586
======== ======== ======== ========
Earnings per Share $ .24 $ .38
======== ========
Weighted Average Shares 17,143 17,143
======== ========
5PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
Six Months Ended October 1, 1994
Historical Pro Forma
------------------ ---------------------
Thermo
TerraTech ReTec Adjustments Combined
--------- ------- ----------- --------
(In thousands except per share amounts)
Revenues $59,879 $18,970 $ - $78,849
------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues 44,476 10,113 - 54,589
Selling, general and
administrative expenses 11,497 6,074 498 18,069
Product and new business
development expenses 356 - - 356
------- ------- ------- -------
56,329 16,187 498 73,014
------- ------- ------- -------
Operating Income 3,550 2,783 (498) 5,835
Interest and Other Income
(Expense), Net 465 (79) (400) (14)
Gain on Issuance of Stock by
Subsidiaries 897 - 1,399 2,296
Gain on Sale of Investments 611 - - 611
Equity in Net Income of
Joint Venture - 325 - 325
------- ------- ------- -------
Income Before Provision for
Income Taxes and
Minority Interest 5,523 3,029 501 9,053
Provision for Income Taxes 1,076 1,242 (255) 2,063
Minority Interest Expense 2,538 - 397 2,935
------- ------- ------- -------
Net Income $ 1,909 $ 1,787 $ 359 $ 4,055
======= ======= ======= =======
Earnings per Share $ .11 $ .24
======= =======
Weighted Average Shares 17,071 17,071
======= =======
6PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
Six Months Ended September 30, 1995
Historical Pro Forma
------------------ ---------------------
Thermo
TerraTech ReTec Adjustments Combined
--------- ------- ----------- --------
(In thousands except per share amounts)
Revenues $103,638 $ 23,171 $ - $126,809
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 71,694 13,633 - 85,327
Selling, general and
administrative expenses 23,233 6,796 539 30,568
Product and new business
development expenses 558 - - 558
Write-off of cost in excess
of net assets of acquired
company 4,995 - - 4,995
-------- -------- -------- --------
100,480 20,429 539 121,448
-------- -------- -------- --------
Operating Income 3,158 2,742 (539) 5,361
Interest and Other Expense, Net (2,466) (35) (569) (3,070)
Gain on Issuance of Stock by
Subsidiaries 2,742 - - 2,742
Gain on Sale of Investments 80 - - 80
Loss on Sale of Assets (569) - - (569)
Equity in Net Income of
Joint Venture - 19 - 19
--------- -------- -------- --------
Income Before Provision for
Income Taxes and Minority
Interest 2,945 2,726 (1,108) 4,563
Provision for Income Taxes 2,344 1,090 (339) 3,095
Minority Interest Expense 811 - 280 1,091
-------- -------- -------- --------
Net Income (Loss) $ (210) $ 1,636 $ (1,049) $ 377
======== ======== ======== ========
Earnings (Loss) per Share $ (.01) $ .02
======== ========
Weighted Average Shares 17,362 17,362
======== ========
7PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET (Unaudited)
September 30, 1995
Historical Pro Forma
------------------- ----------------------
Thermo
TerraTech ReTec Adjustments Combined
--------- ------- ----------- --------
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 39,544 $ 313 $(19,992) $ 19,865
Short-term available-for-sale
investments 25,469 - - 25,469
Accounts receivable, net 36,224 12,132 - 48,356
Unbilled contract costs and fees 16,396 - - 16,396
Inventories 4,254 - - 4,254
Prepaid income taxes 9,012 74 2,974 12,060
Prepaid expenses and other assets 4,637 187 - 4,824
-------- -------- -------- --------
135,536 12,706 (17,018) 131,224
-------- -------- -------- --------
Property, Plant and Equipment, Net 76,666 1,444 - 78,110
-------- -------- -------- --------
Long-term Available-for-sale
Investments 2,108 - - 2,108
-------- -------- -------- --------
Long-term Held-to-maturity
Investments 23,395 - - 23,395
-------- -------- -------- --------
Investment in Joint Venture - 5,087 (5,087) -
-------- -------- -------- --------
Other Assets 12,435 227 - 12,662
-------- -------- -------- --------
Cost in Excess of Net Assets of
Acquired Companies 68,183 - 20,851 89,034
-------- -------- -------- --------
$318,323 $ 19,464 $ (1,254) $336,533
======== ======== ======== ========
8PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET (Continued)(Unaudited)
September 30, 1995
Historical Pro Forma
------------------- ---------------------
Thermo
TerraTech ReTec Adjustments Combined
--------- ------- ----------- --------
(In thousands except per share amounts)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 10,222 $ 2,555 $ - $ 12,777
Notes payable and current
maturities of long-term
obligations 2,925 - - 2,925
Billings in excess of revenues
earned 3,084 - - 3,084
Accrued payroll and employee
benefits 8,671 1,844 - 10,515
Accrued and current deferred
income taxes 1,475 - - 1,475
Other accrued expenses 8,273 282 2,319 10,874
Due to parent company 4,605 - - 4,605
-------- -------- -------- --------
39,255 4,681 2,319 46,255
-------- -------- -------- --------
Deferred Income Taxes 4,157 - - 4,157
-------- -------- -------- --------
Other Deferred Items 1,103 - - 1,103
-------- -------- -------- --------
Long-term Obligations, Including
$88,000 Due to Parent Company 169,999 1,500 (1,500) 169,999
-------- -------- -------- --------
Minority Interest 26,700 - 4,605 31,305
-------- -------- -------- --------
Shareholders' Investment:
Common stock 1,746 7 (7) 1,746
Capital in excess of par value 53,600 3,864 1,342 58,806
Stock options outstanding - 22 (22) -
Treasury stock (799) (1,111) 1,111 (799)
Retained earnings 21,517 10,501 (9,102) 22,916
Net unrealized loss on available-
for-sale investment (23) - - (23)
Cumulative translation adjustment 1,068 - - 1,068
-------- -------- -------- --------
77,109 13,283 (6,678) 83,714
-------- -------- -------- --------
$318,323 $ 19,464 $ (1,254) $336,533
======== ======== ======== ========
9PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of
Income (In thousands, except in text)
Year Ended Six Months Ended
---------- -------------------------------
April 1, October 1, September 30,
1995 1994 1995
---------- ---------------- -------------
Debit (Credit)
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Service fee of 1.25% of the
revenues of ReTec through
December 31, 1994 and 1.2%
through September 30, 1995,
for services provided under
a services agreement between
Thermo Remediation and
Thermo Electron $ 488 $ 237 $ 278
Amortization over 40 years of
cost in excess of net assets of
acquired companies created by the
acquisition of ReTec 521 261 261
-------- -------- --------
1,009 498 539
-------- -------- --------
INTEREST AND OTHER INCOME
(EXPENSE), NET
Interest Income
Decrease attributable to the lower
cash position as a result of the
net cash payment of $18,462,000
to acquire ReTec and $1,500,000 to
repay ReTec's long-term obligation,
calculated using an average interest
rate of 5.29% in fiscal 1995, 4.61%
for the six months ended October 1,
1994, and 6.30% for the six months
ended September 30, 1995 1,056 460 629
Interest Expense
Decrease due to the repayment at
time of acquisition of Retec's
$1,500,000 long-term obligation,
bearing interest at 8% (120) (60) (60)
-------- -------- -------
936 400 569
-------- -------- -------
10PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of
Income (In thousands, except in text)(continued)
Year Ended Six Months Ended
---------- -----------------------------
April 1, October 1, September 30,
1995 1994 1995
----------- -------------- -------------
Debit (Credit)
GAIN ON ISSUANCE OF STOCK BY
SUBSIDIARIES
Gain on issuance of 227,250 shares
of Thermo Remediation common stock
for the acquisition of ReTec $ (1,399) $ (1,399) $ -
-------- -------- ---------
INCOME TAX PROVISION
Income tax benefit associated with
the adjustments above (excluding
amortization of cost in excess of
net assets of acquired companies
and gain on issuance of stock by
subsidiaries), calculated at the
Company's statutory income tax
rate of 40% (570) (255) (339)
-------- -------- ---------
MINORITY INTEREST EXPENSE
Reflects Thermo Remediation's
minority shareholders' interest
in ReTec's net income and the pro
forma adjustments to the pro forma
combined condensed statement of
income 555 397 280
-------- -------- ---------
11PAGE
<PAGE>
FORM 8-K/A
THERMO TERRATECH INC.
and
REMEDIATION TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed
Balance Sheet (In thousands)
September 30, 1995
Debit (Credit)
------------------
CASH AND CASH EQUIVALENTS
Cash payment to acquire ReTec $(18,520)
Interest earned on acquisition cash held in escrow 58
Cash payment to repay ReTec's long-term obligation
and related interest payable at time of acquisition (1,530)
--------
(19,992)
--------
PREPAID INCOME TAXES
Record tax effect of pro forma adjustments 2,974
--------
INVESTMENT IN JOINT VENTURE
Write off investment in ReTec/Tetra L.C. joint venture,
subject to adjustment upon final determination as to
disposition of investment (5,087)
--------
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Excess of cost over the fair value of the net assets
acquired of ReTec 20,851
--------
OTHER ACCRUED EXPENSES
Estimated acquisition reserves (1,322)
Legal, accounting and other professional fees associated
with acquisition (997)
--------
(2,319)
--------
LONG-TERM OBLIGATIONS
Repayment of ReTec's long-term obligation at time of
acquisition 1,500
--------
MINORITY INTEREST
Effect of common stock and stock options issued by Thermo
Remediation (4,605)
--------
SHAREHOLDERS' INVESTMENT
Elimination of ReTec's equity accounts 13,283
Effect of common stock and stock options issued by Thermo
Remediation (6,605)
--------
6,678
--------
12PAGE
<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 19th day of January,
1996.
THERMO TERRATECH INC.
By: Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
13<PAGE>
Exhibit 23.1
The Board of Directors
Remediation Technologies, Inc.:
We consent to the inclusion herein of our report dated March 1, 1995, with
respect to the consolidated balance sheet of Remediation Technologies, Inc.
and subsidiary as of December 31, 1994, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the year
then ended.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 17, 1996
<PAGE>
Exhibit 23.2
The Board of Directors
Thermo TerraTech Inc.:
We consent to the inclusion herein of our report dated April 29, 1994, with
respect to the consolidated balance sheets of Remediation Technologies,
Inc. and subsidiary as of December 31, 1993 and 1992, and the related
consolidated statements of earnings, stockholders' equity and cash flows
for the years then ended.
Nardella & Taylor
Lexington, Massachusetts
January 12, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 28, 1995, with respect
to the financial statements of RETEC/TETRA L.C. as of December 31, 1994,
1993 and 1992 and for the years ended December 31, 1994 and 1993, and the
period from August 1, 1992 to December 31, 1992 included in this Current
Report (Form 8-K/A) of Thermo TerraTech Inc. dated December 8, 1995.
We also consent to the incorporation by reference in the following
Registration Statements of Thermo TerraTech Inc. and in each related
Prospectus of our report dated February 28, 1995, with respect to the
financial statements of RETEC/TETRA L.C. as of December 31, 1994, 1993 and
1992 and for the years ended December 31, 1994 and 1993, and the period
from August 1, 1992 to December 31, 1992 included in this Current Report
(Form 8-K/A) dated December 8, 1995.
Registration Statement No. 33-16462 on Form S-8
Registration Statement No. 33-16464 on Form S-8
Registration Statement No. 33-16465 on Form S-8
Registration Statement No. 33-31478 on Form S-3
Registration Statement No. 33-40185 on Form S-3
Registration Statement No. 33-52824 on Form S-8
Registration Statement No. 033-65283 on Form S-8
Registration Statement No. 033-65281 on Form S-8
Registration Statement No. 33-87648 on Form S-2
Registration Statement No. 33-86194 on Form S-8
Ernest & Young LLP
Houston, Texas
January 17, 1996
