SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarter Ended
December 28, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-9549
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Class Outstanding at January 24, 1997
---------------------------- -------------------------------
Common Stock, $.10 par value 18,100,828
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO TERRATECH INC.
Consolidated Balance Sheet
(Unaudited)
Assets
December 28, March 30,
(In thousands) 1996 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 60,350 $ 31,182
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $23,266 and $7,007) 23,308 7,004
Accounts receivable, less allowances of
$3,079 and $2,861 53,543 44,397
Unbilled contract costs and fees 27,892 21,113
Inventories:
Raw materials and supplies 2,404 3,822
Work in process and finished goods 533 61
Prepaid and refundable income taxes 7,909 9,556
Prepaid expenses 4,217 4,442
-------- --------
180,156 121,577
-------- --------
Property, Plant and Equipment, at Cost 136,679 126,129
Less: Accumulated depreciation and amortization 48,830 43,173
-------- --------
87,849 82,956
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $2,108 in fiscal 1996) - 2,098
-------- --------
Long-term Held-to-maturity Investments,
at Amortized Cost (quoted market value
of $26,083 and $24,963) 25,594 24,251
-------- --------
Other Assets 18,569 12,931
-------- --------
Cost in Excess of Net Assets of Acquired Companies 92,992 89,843
-------- --------
$405,160 $333,656
======== ========
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THERMO TERRATECH INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
December 28, March 30,
(In thousands except share amounts) 1996 1996
-----------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 16,320 $ 10,922
Notes payable and current maturities of
long-term obligations (includes $38,000 and
$15,000 due to parent company) 39,690 19,711
Billings in excess of revenues earned 2,889 2,076
Accrued payroll and employee benefits 10,898 9,930
Accrued income taxes 1,742 -
Other accrued expenses 9,605 7,871
Due to parent company 1,677 5,059
-------- --------
82,821 55,569
-------- --------
Deferred Income Taxes 3,830 3,558
-------- --------
Other Deferred Items 919 980
-------- --------
Long-term Obligations:
4 5/8% Subordinated convertible debentures
(Note 2) 111,850 -
6 1/2% Subordinated convertible debentures 13,370 18,182
4 7/8% Subordinated convertible debentures 37,950 37,950
Other (includes $73,000 due to parent
company in fiscal 1996; Note 2) 29,508 99,252
-------- --------
192,678 155,384
-------- --------
Minority Interest 33,933 32,295
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 75,000,000
shares authorized; 18,304,424 and 17,598,013
shares issued 1,830 1,760
Capital in excess of par value 62,462 59,419
Retained earnings 28,018 24,474
Treasury stock at cost, 139,796 and 34,531 shares (1,360) (410)
Cumulative translation adjustment 3 635
Net unrealized gain (loss) on available-for-sale
investments 26 (8)
-------- --------
90,979 85,870
-------- --------
$405,160 $333,656
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO TERRATECH INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
---------------------------
December 28, December 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues:
Service revenues $68,417 $50,822
Product revenues 7,281 4,756
------- -------
75,698 55,578
------- -------
Costs and Operating Expenses:
Cost of service revenues 56,651 38,930
Cost of product revenues 6,217 4,012
Selling, general and administrative expenses 9,273 7,620
Product and new business development expenses 239 259
------- -------
72,380 50,821
------- -------
Operating Income 3,318 4,757
Interest Income 1,795 1,236
Interest Expense (includes $554 and $1,331
to parent company) (3,090) (2,801)
Equity in Earnings of Unconsolidated Subsidiary 118 -
Gain on Sale of Investments 31 100
Other Income 159 -
------- -------
Income Before Provision for Income Taxes
and Minority Interest 2,331 3,292
Provision for Income Taxes 1,321 1,399
Minority Interest Expense 108 295
------- -------
Net Income $ 902 $ 1,598
======= =======
Earnings per Share $ .05 $ .09
======= =======
Weighted Average Shares 18,231 18,313
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO TERRATECH INC.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
---------------------------
December 28, December 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues:
Service revenues $191,404 $147,440
Product revenues 19,181 13,364
-------- --------
210,585 160,804
-------- --------
Costs and Operating Expenses:
Cost of service revenues 157,454 110,810
Cost of product revenues 15,837 11,770
Selling, general and administrative expenses 27,547 24,269
Product and new business development expenses 813 817
Write-off of cost in excess of net assets of
acquired company - 4,995
-------- --------
201,651 152,661
-------- --------
Operating Income 8,934 8,143
Interest Income 5,442 4,002
Interest Expense (includes $1,936 and $4,229
to parent company) (9,660) (8,033)
Equity in Earnings of Unconsolidated Subsidiary 677 -
Gain on Issuance of Stock by Subsidiaries
(Note 3) 1,475 2,742
Gain on Sale of Investments 197 180
Loss on Sale of Assets - (569)
Other Income 206 -
-------- --------
Income Before Provision for Income Taxes
and Minority Interest 7,271 6,465
Provision for Income Taxes 3,042 3,835
Minority Interest Expense 419 1,106
-------- --------
Net Income $ 3,810 $ 1,524
======== ========
Earnings per Share $ .20 $ .08
======== ========
Weighted Average Shares 18,798 18,163
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO TERRATECH INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
---------------------------
December 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income $ 3,810 $ 1,524
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,749 9,283
Write-off of cost in excess of net asset
of acquired company - 4,995
Loss on sale of assets - 569
Equity in earnings of unconsolidated
subsidiary (677) -
Minority interest expense 419 1,106
Provision for losses on accounts receivable 490 (47)
Increase (decrease) in deferred income
taxes (32) 91
Gain on issuance of stock by subsidiaries (1,475) (2,742)
Gain on sale of investments (197) (180)
Other noncash expenses 330 54
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (8,361) (2,013)
Inventories and unbilled contract
costs and fees (5,475) (1,716)
Other current assets (91) (187)
Current liabilities 4,080 (2,411)
-------- --------
Net cash provided by operating activities 2,570 8,326
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (4,191) (43,117)
Purchase of minority interest in Thermo Terra
Tech joint venture - (34,267)
Purchases of available-for-sale investments (38,799) (31,000)
Proceeds from sale and maturities of
available-for-sale investments 24,821 29,295
Purchases of property, plant and equipment (12,323) (12,279)
Proceeds from sale of property, plant and
equipment 426 683
Purchase of other assets (456) (383)
-------- --------
Net cash used in investing activities $(30,522) $(91,068)
-------- --------
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THERMO TERRATECH INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
---------------------------
December 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of subordinated
convertible debentures (Note 2) $112,398 $ 36,889
Issuance of note payable to parent company - 35,000
Repayment of notes payable to parent
company (Note 2) (50,000) (4,000)
Proceeds from issuance of Company and
subsidiary common stock (Note 3) 5,095 7,405
Repurchase of Company and subsidiary
common stock (6,606) -
Repurchase of subordinated convertible
debentures (2,878) -
Issuance of short-term obligations 803 2,178
Repayment of note payable (909) (660)
Dividends paid by subsidiary to minority
shareholders (450) (393)
Issuance of note receivable - (401)
Metal Treating, Inc. transfer to parent
company (266) (373)
-------- --------
Net cash provided by financing activities 57,187 75,645
-------- --------
Exchange Rate Effect on Cash (67) (402)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 29,168 (7,499)
Cash and Cash Equivalents at Beginning of Period 31,182 35,808
-------- --------
Cash and Cash Equivalents at End of Period $ 60,350 $ 28,309
======== ========
Noncash Activities:
Fair value of assets of acquired companies $ 13,000 $ 68,533
Cash paid for acquired companies (4,500) (45,005)
Issuance of subsidiary common stock, stock
options, and warrants for acquired companies (2,006) (11,210)
Issuance of short- and long-term obligations
for acquired company (2,265) -
-------- --------
Liabilities assumed of acquired companies $ 4,229 $ 12,318
======== ========
Conversions of subordinated convertible
debentures $ 4,812 $ -
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO TERRATECH INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo TerraTech Inc. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
December 28, 1996, the results of operations for the three- and
nine-month periods ended December 28, 1996 and December 30, 1995, and the
cash flows for the nine-month periods ended December 28, 1996 and
December 30, 1995. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of March 30, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report, as amended, on Form 10-K/A for the fiscal year ended March 30,
1996, filed with the Securities and Exchange Commission.
Certain amounts in fiscal 1996 have been reclassified to conform to
the fiscal 1997 financial statement presentation. Certain of these
reclassifications are required to present consistent classification of
expenses within the Company's consulting and design services business.
Historical financial results have been restated to include Metal
Treating, Inc. (Metal Treating), acquired in October 1996 in a
transaction accounted for in a manner similar to the pooling-of-interests
method (Note 4).
2. Subordinated Convertible Debentures
In May 1996, the Company issued and sold $115.0 million principal
amount of 4 5/8% subordinated convertible debentures due 2003 for net
proceeds of $112.4 million. The debentures are convertible into shares of
the Company's common stock at a price of $15.90 per share and are
guaranteed on a subordinated basis by Thermo Electron Corporation (Thermo
Electron). In May 1996, the Company repaid its $15.0 million and $35.0
million promissory notes to Thermo Electron with proceeds from the
debenture offering.
3. Transaction in Stock of Subsidiary
In September 1996, the Company's majority-owned Thermo EuroTech N.V.
(Thermo EuroTech) subsidiary sold 1,105,000 shares of its common stock in
a private placement at $4.25 per share, for net proceeds of $4.3 million,
resulting in a gain of $1.5 million. Following the private placement, the
Company owned 53% of Thermo EuroTech's outstanding common stock.
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THERMO TERRATECH INC.
4. Acquisitions
During the first nine months of fiscal 1997, the Company and a
majority-owned subsidiary acquired two companies for $2.9 million in
cash, 311,040 shares of Thermo Remediation's common stock, valued at $2.0
million, and the issuance of $2.3 million of short- and long-term
obligations.
These acquisitions have been accounted for using the purchase method
of accounting and their results of operations have been included in the
accompanying financial statements from the dates of acquisition. The cost
of these acquisitions exceeded the estimated fair value of the net assets
acquired by $8.4 million, which is being amortized over 40 years.
Allocation of the purchase price for these acquisitions was based on an
estimate of the fair values of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation. Pro forma
data is not presented since these acquisitions were not material to the
Company's results of operations and financial position.
In October 1996, the Company acquired Metal Treating from Thermo
Electron in exchange for $1.6 million in cash. Metal Treating provides
heat treating services, including carburizing, vacuum hardening, silver
and copper brazing, and aluminum heat treating, primarily in the
Milwaukee and southeastern Wisconsin areas. Because the Company and Metal
Treating were deemed for accounting purposes to be under control of their
common majority owner, Thermo Electron, the transaction has been
accounted for at historical cost in a manner similar to the
pooling-of-interests method. Accordingly, all historical information
presented has been restated to include the results of Metal Treating.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Item 5 - Other Information"
in the Company's Quarterly Report on Form 10-Q for the quarter ended
September 28, 1996, filed with the Securities and Exchange Commission.
Overview
The Company is a provider of environmental services and infra-
structure planning and design, encompassing a range of specializations
within the remediation and recycling, consulting and design, and
laboratory-testing industries. The Company also provides metal-treating
services and thermal-processing systems used to treat primary metals and
9PAGE
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THERMO TERRATECH INC.
Overview (continued)
metal parts. The Company's environmental services businesses are affected
by several factors, particularly extreme weather variations, government
spending, and regulation of remediation activities.
Remediation and Recycling - In December 1995, the Company's
majority-owned Thermo Remediation Inc. (Thermo Remediation) subsidiary
acquired Remediation Technologies, Inc. (ReTec), a provider of integrated
environmental services such as remediation of industrial sites
contaminated with organic wastes and residues. In September 1996, Thermo
Remediation acquired IEM Sealand Corporation (IEM Sealand), a provider of
construction services for the remediation of hazardous wastes under
contracts with federal and state governments and other public- and
private-sector clients. Through its Thermo Nutech subsidiary, Thermo
Remediation provides services to remove radioactive contaminants from
sand, gravel, and soil, as well as health physics, radiochemistry
laboratory, and radiation dosimetry services. Through its TPS
Technologies Inc. division, Thermo Remediation is also a national leader
in the design and operation of facilities for the remediation of
nonhazardous soil and operates a network of such facilities serving
customers in more than a dozen states along the East and West coasts. In
addition, Thermo Remediation's Thermo Fluids subsidiary collects, tests,
processes, and recycles used motor oil and other industrial oils. The
Company's majority-owned Thermo EuroTech N.V. (Thermo EuroTech)
subsidiary, located in the Netherlands, provides wastewater treatment
services as well as services to test, remove, and install underground
storage tanks. Through its North Refinery subsidiary, Thermo EuroTech
specializes in converting "off-spec" and contaminated petroleum fluids
into usable oil products.
Consulting and Design - The Company's wholly owned Killam Associates
subsidiary provides environmental consulting and engineering services and
specializes in wastewater treatment and water resources management. In
November 1996, the Company acquired Carlan Consulting Group, Inc.
(Carlan), a provider of transportation and environmental consulting and
professional engineering and architectural services. The Company's wholly
owned Bettigole Andrews Clark & Killam and Normandeau Associates
subsidiaries provide both private- and public-sector clients with a range
of consulting services that address transportation planning and design,
and natural resource management issues, respectively.
Laboratory Testing - The Company's wholly owned Thermo Analytical
subsidiary operates a network of analytical laboratories that provide
environmental testing services to commercial and government clients
throughout the U.S. The May 1995 acquisition of Lancaster Laboratories,
Inc. (Lancaster Laboratories) expanded the Company's range of contract
services beyond environmental testing to the pharmaceutical- and
food-testing industries.
Metal Treating - The Company performs metallurgical processing
services using thermal-treatment equipment at locations in California,
Minnesota, and Wisconsin. The Company also designs, manufactures, and
installs advanced custom-engineered, thermal-processing systems through
its equipment division located in Michigan.
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THERMO TERRATECH INC.
Results of Operations
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
Total revenues in the third quarter of fiscal 1997 increased 36% to
$75.7 million from $55.6 million in the third quarter of fiscal 1996.
Revenues from remediation and recycling services increased to $38.0
million in fiscal 1997 from $19.7 million in fiscal 1996, primarily due
to the inclusion of $10.1 million of revenues from IEM Sealand, acquired
in September 1996, and an additional $8.5 million of revenues from ReTec,
acquired in December 1995. Revenues from soil-remediation services
decreased 33% resulting from declines in the volume of soil processed due
to over capacity in the industry and competitive pricing pressures. The
Company also believes that several states have reduced their compliance
requirements and/or relaxed their enforcement activities. The Company
expects this trend to continue for the foreseeable future. Revenues from
consulting and design services remained relatively unchanged at $18.1
million in fiscal 1997 and $17.9 million in fiscal 1996. Revenues from
laboratory-testing services, excluding radiochemistry laboratory services
included in remediation and recycling services, decreased slightly to
$9.4 million in fiscal 1997 from $9.9 million in fiscal 1996.
Metal-treating revenues increased to $11.6 million in fiscal 1997 from
$8.4 million in fiscal 1996, primarily due to an increase in demand for
thermal-processing equipment at existing businesses.
The gross profit margin decreased to 17% in the third quarter of
fiscal 1997 from 23% in the third quarter of fiscal 1996, primarily due
to a decrease in gross profit margins from remediation and recycling
services due to lower margins on soil processed resulting from
competitive pricing pressures and, to a lesser extent, lower volumes of
soil processed at the Company's traditionally higher-margin soil-
remediation centers. The decrease also resulted from the inclusion of
lower-margin revenues from ReTec and IEM Sealand.
Selling, general and administrative expenses as a percentage of
revenues decreased to 12% in the third quarter of fiscal 1997 from 14% in
the third quarter of fiscal 1996, primarily due to lower expenses as a
percentage of revenues at acquired companies.
Interest income increased to $1.8 million in the third quarter of
fiscal 1997 from $1.2 million in the third quarter of fiscal 1996,
primarily as a result of interest income earned on invested proceeds from
the Company's issuance of 4 5/8% subordinated convertible debentures in
May 1996 (Note 2). Interest expense increased to $3.1 million in fiscal
1997 from $2.8 million in fiscal 1996, primarily due to an increase in
average long-term borrowings as a result of the Company's issuance of
4 5/8% subordinated convertible debentures, offset in part by the
repayment of promissory notes to Thermo Electron Corporation (Thermo
Electron) with proceeds from the Company's 4 5/8% subordinated
convertible debentures.
The effective tax rate was 57% in the third quarter of fiscal 1997
and 42% in the third quarter of fiscal 1996. The effective tax rate
exceeded the statutory federal income tax rate, primarily due to the
nondeductible amortization of cost in excess of net assets of acquired
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THERMO TERRATECH INC.
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
(continued)
companies and the impact of state income taxes. The increase in the
effective tax rate in fiscal 1997 results from the larger relative effect
of nondeductible amortization.
Minority interest expense decreased to $0.1 million in the third
quarter of fiscal 1997 from $0.3 million in the third quarter of fiscal
1996, due to lower earnings from the Company's majority-owned
subsidiaries.
First Nine Months of Fiscal 1997 Compared With First Nine Months of
Fiscal 1996
Total revenues in the first nine months of fiscal 1997 increased 31%
to $210.6 million from $160.8 million in the first nine months of fiscal
1996. Revenues from remediation and recycling services increased to $96.6
million in fiscal 1997 from $52.2 million in fiscal 1996, primarily due
to an additional $30.2 million of revenues from ReTec, acquired in
December 1995, and the inclusion of $12.6 million of revenues from IEM
Sealand, acquired in September 1996. Revenues from soil-remediation
services decreased 21%, primarily due to the reasons discussed in the
results of operations for the third quarter. Revenues from consulting and
design services increased to $58.2 million in fiscal 1997 from $56.1
million in fiscal 1996, primarily due to increased revenues from a major
contract, offset in part by lower revenues from federal government
contracts. Revenues from laboratory-testing services, excluding
radiochemistry laboratory services included in remediation and recycling
services, decreased slightly to $26.9 million in fiscal 1997 from $27.6
million in fiscal 1996. Metal-treating revenues increased to $31.7
million in fiscal 1997 from $25.3 million in fiscal 1996, primarily due
to an increase in demand for thermal-processing equipment at existing
businesses.
The gross profit margin decreased to 18% in the first nine months of
fiscal 1997 from 24% in the first nine months of fiscal 1996, primarily
due to the reasons discussed in the results of operations for the third
quarter. This decline is also due to a decrease in gross profit margins
for laboratory-testing services due to costs incurred related to efforts
to eliminate redundant capabilities at regional laboratories. These
decreases were offset in part by higher gross profit margins from metal-
treating services as a result of an increase in revenues.
Selling, general and administrative expenses as a percentage of
revenues decreased to 13% in the first nine months of fiscal 1997 from
15% in the first nine months of fiscal 1996, primarily due to lower
expenses as a percentage of revenues at acquired companies and a decline
in expenses related to the consolidation of administrative functions
within the consulting and design services business.
Interest income increased to $5.4 million in the first nine months of
fiscal 1997 from $4.0 million in the first nine months of fiscal 1996,
primarily as a result of interest income earned on invested proceeds from
the Company's issuance of 4 5/8% subordinated convertible debentures in
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THERMO TERRATECH INC.
First Nine Months of Fiscal 1997 Compared With First Nine Months of
Fiscal 1996 (continued)
May 1996 (Note 2). Interest expense increased to $9.7 million in fiscal
1997 from $8.0 million in fiscal 1996, primarily due to the reasons
discussed in the results of operations for the third quarter and Thermo
Remediation's issuance of 4 7/8% subordinated convertible debentures in
May 1995.
Equity in earnings of unconsolidated subsidiary in the first nine
months of fiscal 1997 represents ReTec's proportionate share of income
from a joint venture.
During the first nine months of fiscal 1997 and 1996, the Company
recorded gains of $1.5 million and $2.7 million, respectively, from the
issuance of stock by subsidiaries (Note 3).
The effective tax rate in the first nine months of fiscal 1997
exceeded the statutory federal income tax rate primarily due to the
nondeductible amortization of cost in excess of net assets of acquired
companies and the impact of state income taxes, offset in part by the
nontaxable gain on issuance of stock by subsidiaries. The effective tax
rate in fiscal 1996 exceeded the federal statutory rate, primarily due to
the nondeductible write-off of cost in excess of net assets of acquired
company and the loss on sale of assets, offset in part by the nontaxable
gains on issuance of stock by subsidiaries.
Minority interest expense decreased to $0.4 million in the first nine
months of fiscal 1997 from $1.1 million in the first nine months of
fiscal 1996, due to lower earnings from the Company's majority-owned
subsidiaries.
Liquidity and Capital Resources
Consolidated working capital increased to $97.3 million at December
28, 1996 from $66.0 million at March 30, 1996. Cash, cash equivalents,
and short- and long-term available-for-sale investments were $83.7
million at December 28, 1996, compared with $40.3 million at March 30,
1996. Of the $83.7 million balance at December 28, 1996, $25.9 million
was held by Thermo Remediation and the remainder by the Company and its
wholly owned subsidiaries. In addition, at December 28, 1996, the Company
had $25.6 million of long-term held-to-maturity investments, compared
with $24.3 million at March 30, 1996. During the first nine months of
fiscal 1997, $2.6 million of cash was provided by operating activities.
In the first nine months of fiscal 1997, the Company funded increases in
accounts receivable and unbilled contract costs and fees of $8.4 million
and $5.5 million, respectively. The increase in accounts receivable is
primarily due to higher revenues at Thermo Remediation's IEM Sealand,
ReTec, and Thermo Fluids divisions. The increase in unbilled contract
costs and fees was due to an increase in thermal-processing equipment
contracts, remediation contracts at ReTec, and consulting and design
services contracts. This use of cash was offset in part by an increase in
current liabilities, primarily due to a $5.1 million increase in accounts
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THERMO TERRATECH INC.
Liquidity and Capital Resources (continued)
payable resulting from an increase in the volume of business at Thermo
Remediation's IEM Sealand and ReTec divisions.
In May 1996, the Company issued and sold $115.0 million principal
amount of 4 5/8% subordinated convertible debentures due 2003 for net
proceeds of $112.4 million (Note 2). The debentures are guaranteed on a
subordinated basis by Thermo Electron. In May 1996, the Company repaid
its $15.0 million and $35.0 million promissory notes to Thermo Electron
with proceeds from the debenture offering.
The Boards of Directors of the Company and Thermo Remediation each
authorized the repurchase, through August 23, 1997 and September 10,
1997, respectively, of up to $10.0 million of their own securities. Any
such purchases would be funded from working capital. Through December 28,
1996, the Company and Thermo Remediation had expended $4.1 million and
$5.4 million, respectively, under these authorizations.
In the first nine months of fiscal 1997, $4.5 million was expended
for acquisitions by the Company and a majority-owned subsidiary (Note 4).
The Company also expended $12.3 million for purchases of property, plant
and equipment. The Company has no material commitments for the
acquisition of businesses or for capital expenditures. Such expenditures
will largely be affected by the number and size of the complementary
businesses that can be acquired or developed during the year. The Company
believes that it has adequate resources to meet the financial needs of
its current operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
14PAGE
<PAGE>
THERMO TERRATECH INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 5th day of February
1997.
THERMO TERRATECH INC.
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Vice President and
Chief Financial Officer
15PAGE
<PAGE>
THERMO TERRATECH INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMO TERRATECH INC.
Computation of Earnings per Share
Three Months Ended Nine Months Ended
-------------------------- ------------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
-----------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 902,000 $ 1,598,000 $ 3,810,000 $ 1,524,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 18,231,029 18,312,716 18,112,460 18,162,804
Add: Shares issuable
from assumed
exercise of
options and
warrants (as
determined by
the application
of the treasury
stock method) - - 685,903 -
----------- ----------- ----------- ----------
Weighted average
shares outstanding,
as adjusted (b) 18,231,029 18,312,716 18,798,363 18,162,804
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .05 $ .09 $ .20 $ .08
=========== =========== =========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
TERRATECH INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 28,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> DEC-28-1996
<CASH> 60,350
<SECURITIES> 23,308
<RECEIVABLES> 56,622
<ALLOWANCES> 3,079
<INVENTORY> 2,937
<CURRENT-ASSETS> 180,156
<PP&E> 136,679
<DEPRECIATION> 48,830
<TOTAL-ASSETS> 405,160
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<BONDS> 192,678
0
0
<COMMON> 1,830
<OTHER-SE> 89,149
<TOTAL-LIABILITY-AND-EQUITY> 405,160
<SALES> 19,181
<TOTAL-REVENUES> 210,585
<CGS> 15,837
<TOTAL-COSTS> 173,291
<OTHER-EXPENSES> 813
<LOSS-PROVISION> 490
<INTEREST-EXPENSE> 9,660
<INCOME-PRETAX> 6,852
<INCOME-TAX> 3,042
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<EPS-PRIMARY> .20
<EPS-DILUTED> 0
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