SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
AMENDMENT NO. 1 ON FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
September 19, 1997
________________________________________
THE RANDERS GROUP INCORPORATED
(Exact name of Registrant as specified in its charter)
Delaware 0-18095 38-2788025
(State or other (Commission) (I.R.S. Employer
jurisdiction of File Number) Identification Number)
incorporation or
organization)
570 Seminole Road
Norton Shores, Michigan 49444
(Address of principal executive offices) (Zip Code)
(616) 733-0036
(Registrant's telephone number including area code)
PAGE
<PAGE>
FORM 8-K/A
Item 2. Acquisition or Disposition of Assets
On September 19, 1997, The Randers Group Incorporated (the
"Company") agreed to acquire The Killam Group Inc. ("The Killam Group"),
a wholly owned subsidiary of Thermo TerraTech Inc. ("Thermo TerraTech"),
in exchange for the right to receive new shares of the Company's common
stock, par value $.0001 per share ("Common Stock"), equal to the book
value of The Killam Group as of the closing date, divided by $0.625.
Based on the unaudited book value of The Killam Group as of June 28,
1997, which was $65,963,000, the Company would issue 105,540,800 new
shares of its Common Stock to Thermo TerraTech. Before giving effect to
the shares to be issued in connection with this transaction, Thermo
TerraTech owned approximately 53.3% of the outstanding Common Stock of
the Company. Upon such issuance, Thermo TerraTech would own approximately
94.4% of the Company's outstanding Common Stock.
The Killam Group is an engineering, design and construction
management company that addresses the manufacturing and infrastructure
requirements of industry and local governments. The Killam Group had
revenues of $64,374,000 for the fiscal year ended March 29, 1997.
The acquisition will be made pursuant to a Stock Purchase Agreement
dated September 19, 1997 (the "Agreement"), between the Company and
Thermo TerraTech. The shares of the Company's Common Stock to be issued
in connection with the acquisition will be so issued as soon as such
shares are listed for trading upon the American Stock Exchange. The
exchange requires that the listing be approved by the holders of a
majority of the Company's outstanding shares present and voting at a
shareholders' meeting. Thermo TerraTech has agreed to vote all of the
shares of the Company's Common Stock held by it as of the record date of
the meeting in favor of the listing of the Company's shares and all
matters related thereto. Because Thermo TerraTech owns a majority of the
outstanding shares of Common Stock of the Company before giving effect to
the issuance of the shares to be issued pursuant to the Agreement,
approval of these transactions by the Company's shareholders is assured.
The consideration to be paid for The Killam Group was based on the
Company's determination of the fair market value of the transferred
businesses. Prior to the execution of the Agreement, Cazenove
Incorporated, an investment banking firm, provided a written opinion to
the Board of Directors of the Company indicating that, as of September
12, 1997, the book value of The Killam Group approximated its fair market
value.
For accounting purposes, The Killam Group will be treated as the
continuing entity, as if it has acquired the Company. Financial reports
filed by the Company for periods after May 12, 1997, the date Thermo
TerraTech acquired a majority interest in the Company, will be restated
to include combined results for the Company and The Killam Group. For
reports covering periods prior to May 12, 1997, results will be restated
to solely report The Killam Group's historical operating results in place
of the previously reported results for the Company.
The Company has no present intention to use The Killam Group's
assets for purposes materially different from the purposes for which such
assets were used prior to the acquisition. However, Thermo TerraTech and
the Company will review the combined and respective businesses, assets,
corporate structure, capitalization, operations, policies, management and
personnel of The Killam Group and of the Company, 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 businesses.
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>
The Killam Group
Combined Financial Statements
1997
PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Report of Independent Public Accountants
To The Killam Group:
We have audited the accompanying combined balance sheet of The
Killam Group (Note 1) as of March 29, 1997, and March 30, 1996, and the
related combined statements of income, cash flows and parent company
investment for each of the three years in the period ended March 29,
1997. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these combined 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 combined financial statements referred to above
present fairly, in all material respects, the financial position of The
Killam Group as of March 29, 1997, and March 30, 1996, and the results of
their operations and their cash flows for each of the three years in the
period ended March 29, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
June 18, 1997
2PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Combined Statement of Income
Three Months Ended Year Ended
------------------- -----------------------------
June 28, June 29, March 29, March 30, April 1,
(In thousands) 1997 1996 1997 1996 1995
-----------------------------------------------------------------------
(Unaudited)
Revenues (Note 8) $15,534 $17,722 $64,374 $58,515 $27,735
------- ------- ------- ------- -------
Costs and Operating
Expenses:
Cost of revenues 11,424 13,439 48,048 45,012 22,095
Selling, general
and administrative
expenses (Note 7) 2,661 2,342 9,555 8,131 4,125
------- ------- ------- ------- -------
14,085 15,781 57,603 53,143 26,220
------- ------- ------- ------- -------
Operating Income 1,449 1,941 6,771 5,372 1,515
Interest Income 15 26 110 173 5
Interest Expense (9) (42) (184) (257) (38)
Loss on Sale of
Assets (Note 9) - - - (569) -
------- ------- ------- ------- -------
Income Before Provision
for Income Taxes 1,455 1,925 6,697 4,719 1,482
Provision for Income
Taxes (Note 4) 677 896 3,117 2,340 789
------- ------- ------- ------- -------
Net Income $ 778 $ 1,029 $ 3,580 $ 2,379 $ 693
======= ======= ======= ======= =======
The accompanying notes are an integral part of these combined financial
statements.
3PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Combined Balance Sheet
June 28, March 29, March 30,
(In thousands) 1997 1997 1996
------------------------------------------------------------------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 807 $ 1,737 $ 794
Accounts receivable, less allowances
of $428, $706 and $576 11,028 11,613 12,031
Unbilled contract costs and fees 11,259 8,113 6,970
Prepaid income taxes (Note 4) 1,346 1,431 1,646
Prepaid expenses 563 478 703
Due from parent company 183 - -
------- ------- -------
25,186 23,372 22,144
------- ------- -------
Property, Plant and Equipment at Cost, Net 9,102 9,035 8,781
------- ------- -------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 41,501 41,654 39,781
------- ------- -------
Other Assets 955 1,373 1,187
------- ------- -------
$76,744 $75,434 $71,893
======= ======= =======
Liabilities and Parent Company Investment
Current Liabilities:
Notes payable (Note 5) $ 640 $ 648 $ 628
Accounts payable 2,610 2,023 2,747
Accrued payroll and employee benefits 3,074 3,124 3,554
Other accrued expenses 1,120 1,503 1,230
Due to parent company - 36 901
------- ------- -------
7,444 7,334 9,060
------- ------- -------
Deferred Income Taxes (Note 4) 1,096 1,096 1,205
------- ------- -------
Other Deferred Items 1,009 1,013 1,020
------- ------- -------
Long-term Obligations (Note 5) 1,232 1,260 1,883
------- ------- -------
Commitments and Contingencies (Note 6)
Parent Company Investment 65,963 64,731 58,725
------- ------- -------
$76,744 $75,434 $71,893
======= ======= =======
The accompanying notes are an integral part of these combined financial
statements.
4PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Combined Statement of Cash Flows
Three Months Ended Year Ended
------------------ -----------------------------
June 28, June 29, March 29, March 30, April 1,
(In thousands) 1997 1996 1997 1996 1995
-----------------------------------------------------------------------------
(Unaudited)
Operating Activities:
Net income $ 778 $ 1,029 $ 3,580 $ 2,379 $ 693
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 556 451 2,137 2,010 567
Loss on sale of assets
(Note 9) - - - 569 -
Provision for losses on
accounts receivable - - 149 208 11
Other noncash (income)
expense 24 11 (193) (155) (89)
Increase (decrease) in
deferred income taxes - - (109) 52 66
Changes in current
accounts, excluding the
effects of transfers of
businesses from parent
company:
Accounts receivable 585 (698) 590 (1,125) (1,656)
Unbilled contract
costs and fees (3,146) (822) (764) (1,110) 1,087
Other current assets - 185 523 296 (413)
Accounts payable 587 1,565 (896) 774 (355)
Other current
liabilities (789) (1,161) (1,487) 1,797 (1,713)
------- ------- ------- ------- -------
Net cash provided by (used in)
operating activities (1,405) 560 3,530 5,695 (1,802)
------- ------- ------- ------- -------
Investing Activities:
Purchases of property, plant
and equipment (349) (173) (1,003) (1,303) (258)
Proceeds from sale of
machinery, equipment and
leasehold improvements 8 - 106 134 -
------- ------ ------- ------- -------
Net cash used in investing
activities $ (341) $ (173) $ (897) $(1,169) $ (258)
------- ------- ------- ------- -------
5PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Combined Statement of Cash Flows (continued)
Three Months Ended Year Ended
------------------ -----------------------------
June 28, June 29, March 29, March 30, April 1,
(In thousands) 1997 1996 1997 1996 1995
-----------------------------------------------------------------------------
(Unaudited)
Financing Activities:
Repayment of note payable $ (28) $ (28) $ (671) $ (628) $ (141)
Net transfer (to) from
parent company 454 475 (1,304) (3,932) 2,274
Cash acquired from transfer
of businesses from
parent company - - 285 - 1,145
(Issuance) repayment of
note receivable 390 - - (390) -
------- ------- ------- ------- -------
Net cash provided by
(used in) financing
activities 816 447 (1,690) (4,950) 3,278
------- ------- ------- ------- -------
Increase (Decrease) in Cash
and Cash Equivalents (930) 834 943 (424) 1,218
Cash and Cash Equivalents
at Beginning of Period 1,737 794 794 1,218 -
------- ------- ------- ------- -------
Cash and Cash Equivalents
at End of Period $ 807 $ 1,628 $ 1,737 $ 794 $ 1,218
======= ======= ======= ======= =======
Cash Paid For:
Interest $ 16 $ 33 $ 205 $ 259 $ -
======= ======= ======= ======= =======
Income taxes $ - $ - $ - $ - $ -
======= ======= ======= ======= =======
Noncash Activities:
Fair value of assets
of acquired businesses
transferred from parent
company $ - $ - $ 4,435 $ - $53,972
Transfer from parent
company of acquired
businesses - - (3,730) - (42,733)
------- ------- ------- ------- -------
Liabilities assumed
of acquired
businesses $ - $ - $ 705 $ - $11,239
======= ======= ======= ======= =======
The accompanying notes are an integral part of these combined financial
statements.
6PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Combined Statement of Parent Company Investment
June 28, March 29, March 30, April 1,
(In thousands) 1997 1997 1996 1995
------------------------------------------------------------------------
(Unaudited)
Parent Company Investment
Balance at beginning of period $64,731 $58,725 $60,278 $14,578
Net income 778 3,580 2,379 693
Transfer of acquired
businesses from
parent company (Note 2) - 3,730 - 42,733
Net transfer (to) from
parent company 454 (1,304) (3,932) 2,274
------- ------- ------- -------
Balance at end of period $65,963 $64,731 $58,725 $60,278
======= ======= ======= =======
The accompanying notes are an integral part of these combined financial
statements.
7PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
The Killam Group ("the Company") is comprised of several wholly
owned subsidiaries of Thermo TerraTech Inc. ("Thermo TerraTech"),
including CarlanKillam Consulting Group, Inc. and subsidiaries and Thermo
Consulting & Design, Inc. and subsidiaries. The Company provides a wide
range of comprehensive environmental consulting and professional
engineering services to private- and public-sector clients. These
services include the design and inspection of water supply and wastewater
treatment facilities; investigations of alternative methods to clean up
hazardous-waste sites; assistance in obtaining government permits;
transportation-related and similar types of infrastructure engineering,
survey, and land-use planning; and support services including mechanical,
electrical, and structural engineering.
Relationship with Thermo Electron Corporation
As of March 29, 1997, Thermo TerraTech is an 82%-owned subsidiary of
Thermo Electron Corporation ("Thermo Electron").
Principles of Combination
The accompanying combined financial statements include the accounts
of the Company and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
The accompanying combined financial statements include the assets,
liabilities, income and expenses of the Company as included in Thermo
TerraTech's consolidated financial statements. The accompanying financial
statements do not include Thermo TerraTech's general corporate debt,
which is used to finance the operations of all of their respective
business segments, or an allocation of Thermo TerraTech's interest
expense.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
March 31. References to fiscal 1997, 1996 and 1995 are for the fiscal
years ended March 29, 1997, March 30, 1996 and April 1, 1995,
respectively.
Revenue Recognition
Revenues and profits on contracts are recognized using the
percentage-of-completion method. The percentage of completion is
determined by relating the actual costs incurred to date to management's
estimate of total costs to be incurred on each contract. If a loss is
indicated on any contract in process, a provision is made currently for
the entire loss. Revenues earned on contracts in process in excess of
billings are classified as unbilled contract costs and fees in the
accompanying balance sheet. There are no significant amounts included in
the accompanying balance sheet that are not expected to be recovered from
existing contracts at current contract values, or that are not expected
to be collected within one year, including amounts that are billed but
not paid under retainage provisions.
8PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Income Taxes
The Company and Thermo TerraTech have a tax allocation agreement
under which the Company is included in Thermo TerraTech's consolidated
federal and certain state income tax returns. The agreement provides that
in years in which the Company has taxable income, it will pay to Thermo
TerraTech amounts comparable to the taxes the Company would have paid had
it filed separate tax returns. If Thermo TerraTech's equity ownership of
the Company were to drop below 80%, the Company would be required to file
its own income tax returns.
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," the Company recognizes
deferred income taxes based on the expected future tax consequences of
differences between the financial statement basis and the tax basis of
assets and liabilities, calculated using enacted tax rates in effect for
the year in which the differences are expected to be reflected in the tax
return.
Cash and Cash Equivalents
The cash receipts and cash disbursements of the Company's operations
are combined with other Thermo TerraTech corporate cash transactions and
balances, except for certain payroll accounts.
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: building and
improvements, 30 to 40 years; machinery and equipment, 3 to 10 years; and
leasehold improvements, the lesser of the term of the lease or the life
of the asset. Machinery, equipment and leasehold improvements consist of
the following:
1997 1996
-----------------------------------------------------------------------
Land and building $ 6,008 $ 5,839
Machinery, equipment and leasehold improvements 5,855 4,857
------- -------
11,863 10,696
Less: Accumulated depreciation and amortization 2,828 1,915
------- -------
$ 9,035 $ 8,781
======= =======
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
businesses is amortized using the straight-line method over 40 years.
Accumulated amortization was $5,405,000 and $4,295,000 at fiscal year-end
1997 and 1996, respectively. The Company assesses the future useful life
of this asset whenever events or changes in circumstances indicate that
9PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
the current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired businesses in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, accounts receivable, notes payable, accounts payable,
and long-term obligations. Their respective carrying amounts in the
accompanying balance sheet, excluding long-term obligation (Note 5),
approximate fair value due to their short-term nature. The fair value of
the Company's long-term obligation at fiscal year-end 1997 and 1996
approximated book value based on borrowing rates available to the Company
at the respective year ends.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Interim Financial Statements
The financial statements as of June 28, 1997, and for the
three-month periods ended June 28, 1997 and June 29, 1996, are unaudited
but, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair presentation of results for these
interim periods. The results of operations for the three-month period
ended June 28, 1997 are not necessarily indicative of the results to be
expected for the entire year.
2. Acquisitions
In November 1996, Thermo TerraTech acquired Carlan Consulting Group,
Inc. (Carlan), a provider of transportation and environmental consulting
and professional engineering and architectural services for $3,460,000.
In February 1995, Thermo TerraTech acquired all of the outstanding
capital stock of Engineering, Technology and Knowledge Corporation (ETKC)
from Nord Est S.A., a French industrial company (Nord Est), for a total
purchase price of $34,940,000. ETKC's sole subsidiary, Elson T. Killam
Associates, Inc. (Killam Associates), is a leading provider of
comprehensive environmental consulting and professional engineering
services in selected areas of the U.S. Thermo TerraTech has also agreed
to pay, after the third anniversary date of the closing, an amount equal
to 30% of the amount by which Killam Associates' cumulative net income
for the three-year period ending on such anniversary exceeds
10PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
2. Acquisitions (continued)
$13,000,000. As of March 29, 1997, the Company does not believe Killam
Associates' cumulative net income for the three years ending on the
anniversary of the closing will exceed $13,000,000. In a related
transaction, certain members of Killam Associates' senior management (the
Killam Management) exchanged outstanding options to purchase shares of
Killam Associates' capital stock for options to purchase shares of Thermo
TerraTech's common stock, which options were valued at $6,923,000.
Additional options to purchase shares of Killam Associates' capital stock
were canceled in exchange for cash payments to the Killam Management in
the aggregate amount of $1,922,000.
Immediately subsequent to Thermo TerraTech's acquisition of Carlan
and Killam Associates, Thermo TerraTech contributed these businesses to
the Company.
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 respective dates of
acquisition. The aggregate cost of these acquisitions exceeded the
estimated fair value of the acquired net assets by $34,511,000, which is
being amortized over 40 years. Allocation of the purchase price was based
on estimates of the fair value of the net assets acquired and, for the
acquisition completed in fiscal 1997, is subject to adjustment, although
the Company has no information which indicates that the final allocation
of purchase price will be different than the preliminary estimate.
Based on unaudited data, the following table presents selected
financial information for the Company and Killam Associates on a pro
forma basis, assuming the companies had been combined since the beginning
of fiscal 1995. The acquisition of Carlan was not material to the
Company's results of operations.
(In thousands) 1995
-----------------------------------------------------------------------
Revenues $62,882
Net income 2,387
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of Killam Associates been made at the beginning of fiscal
1995.
3. Employee Benefit Plans
Employee Stock Purchase Program
Substantially all of the Company's full-time employees are eligible
to participate in an employee stock purchase program sponsored by Thermo
TerraTech and Thermo Electron. Under this program, shares of Thermo
TerraTech's and Thermo Electron's common stock can be purchased at the
end of a 12-month period at 95% of the fair market value at the beginning
of the period, and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common
stock could be purchased at 85% of the fair market value at the beginning
of the period, and the shares purchased were subject to a one year resale
11PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
3. Employee Benefit Plans (continued)
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages.
401(k) Savings Plan and Employee Stock Ownership Plan
The majority of the Company's full-time U.S. employees are eligible
to participate in Thermo Electron's 401(k) savings plan and, prior to
January 1, 1995, in Thermo Electron's employee stock ownership plan
(ESOP). Contributions to the 401(k) savings plan are made by both the
employee and the Company. Company contributions are based upon the level
of employee contributions. Certain subsidiaries of the Company also have
a defined contribution retirement plan and 401(k) savings plan. For these
plans, the Company contributed and charged to expense $1,130,000,
$1,100,000, and $347,000 in fiscal 1997, 1996 and 1995, respectively.
Effective December 31, 1994, the ESOP was split into two plans: ESOP I,
covering employees of Thermo Electron's corporate office and its wholly
owned subsidiaries and ESOP II, covering employees of certain of Thermo
Electron's majority-owned subsidiaries, including the Company. Also,
effective December 31, 1994, the ESOP II plan was terminated, and as a
result, the Company's employees are no longer eligible to participate in
an ESOP.
Pension Plan
In connection with the Company's acquisition of Killam Associates,
the Company acquired an obligation related to a noncontributory defined
benefit retirement plan for salaried employees. This plan was frozen at
the date of acquisition and the Company realized a curtailment gain
calculated at that point in time, which was considered in the allocation
of the purchase price. Upon freezing the plan, all participants who had
nothbeendcredited withathewmaximumxyearsbofeservicencontinueetoireceive
Benefits under the plan are based on years of service and employees'
compensation during the last years of employment. Funds are contributed
to a trustee as necessary to provide for current service and for any
unfunded projected benefit obligation over a reasonable period. The
Company has not been required to provide any funding.
Pension income was $190,000 and $121,000 in fiscal 1997 and 1996,
respectively. Pension expense of $194,000 was recorded in fiscal 1995.
The net periodic pension income (expense) for fiscal 1997, 1996 and 1995
included the following components:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Service cost $ - $ - $ (134)
Interest cost on projected benefit obligation (677) (613) (199)
Return on plan assets 964 1,689 499
Amortization of unrecognized obligation (97) (955) (360)
------- ------- -------
$ 190 $ 121 $ (194)
======= ======= =======
12PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
3. Employee Benefit Plans (continued)
The funded status of the Company's defined benefit pension plan is
as follows:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits $ 9,543 $ 8,092
Nonvested benefits 20 40
------- -------
Projected benefit obligation 9,563 8,132
Plan assets at fair value (10,456) (9,769)
------- -------
Plan assets greater than projected benefit obligation (893) (1,637)
Unrecognized net gain 21 955
------- -------
Prepaid pension costs $ (872) $ (682)
======= =======
Actuarial assumptions used to determine the net periodic pension
costs were:
1997 1996 1995
-----------------------------------------------------------------------
Discount rate 7.5% 8% 8%
Rate of increase in salary levels 0% 5% 5%
Expected long-term rate of return on assets 9% 9% 9%
Other Postretirement Benefits
In addition to providing pension benefits, Killam Associates
provided other postretirement benefits for employees who met certain age
and length-of-service requirements. Under Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," the expected cost of these postretirement
benefits must be charged to expense during the years that the employees
render service. At the time the Company acquired Killam Associates, the
postretirement benefit plan was frozen and the Company recorded the
accumulated postretirement obligation calculated as of that date.
The following table reconciles the plan's funded status to the
accrued postretirement healthcare cost liability as reflected on the
balance sheet as of March 29, 1997 and March 30, 1996:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation:
Retirees $350 $300
Other fully eligible participants 575 550
---- ----
925 850
Unrecognized net gain 70 113
---- ----
Accrued postretirement health care cost liability $995 $963
==== ====
13PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
3. Employee Benefit Plans (continued)
Net postretirement healthcare cost in fiscal 1997, 1996 and 1995
included the following components:
1997 1996 1995
-----------------------------------------------------------------------
Interest cost on accumulated
postretirement benefit obligation $ 91 $ 69 $ 15
Amortization of transition obligation
over 20 years (11) (29) (15)
---- ---- ----
Net postretirement health care cost $ 80 $ 40 $ -
==== ==== ====
For measurement purposes, the following table illustrates the annual
rate of increase in the per capita cost of covered healthcare claims:
Annual Rate
-----------------
Pre-65 Post-65
------ -------
1997 8% 6%
1996 9% 7%
1995 10% 8%
The pre-65 rate decreases gradually to 6% for 1999 and remains at
that level thereafter. The healthcare cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed healthcare cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
March 29, 1997 by $127,000 and the aggregate of the service and interest
cost components of net postretirement health care cost for the year then
ended by $10,000. The discount rate used in determining the accumulated
postretirement benefit obligations was 8 percent in fiscal 1997 and 1996.
4. Income Taxes
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Currently payable:
Federal $2,306 $1,360 $ 579
State 654 386 169
------ ------ ------
2,960 1,746 748
------ ------ ------
Net deferred:
Federal 121 460 32
State 36 134 9
------ ------ ------
157 594 41
------ ------ ------
$3,117 $2,340 $ 789
====== ====== ======
14PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
4. Income Taxes (continued)
Provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal
income tax rate of 34% to income before provision for income taxes due to
the following:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Provision for income taxes at statutory
rate $2,277 $1,604 $ 504
Increases resulting from:
State income taxes, net of federal tax 455 343 117
Amortization of cost in excess of net
assets of acquired companies 363 366 156
Other, net 22 27 12
------ ------ ------
$3,117 $2,340 $ 789
====== ====== ======
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1997 1996
------------------------------------------------------------
Prepaid income taxes:
Reserves and other accruals $ 924 $1,184
Accrued compensation 507 462
------ ------
$1,431 $1,646
====== ======
Deferred income taxes:
Depreciation $1,096 $1,205
====== ======
5. Short- and Long-term Obligations
Short-term Obligations
The Company has a $500,000 installment note payable outstanding at
fiscal year end 1997 and 1996, payable in September 1997 and bearing
interest at 6.7% and 6.2%, respectively.
Long-term Obligations
The Company's long-term obligation at fiscal year-end 1997 and 1996
consists of a mortgage on a building, bearing interest at 6.75%, due in
2008. The annual requirements for this long-term obligation as of March
29, 1997 are $110,000 per year in fiscal 1998 through 2002, and $710,000
in fiscal 2003 and thereafter. Total requirements of long-term
obligations are $1,260,000.
15PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
6. Commitments and Contingencies
Operating Leases
The Company leases portions of its office and operating facilities
under various operating lease arrangements. The accompanying statement of
income includes expenses from operating leases of $2,068,000, $1,593,000
and $865,000 in fiscal 1997, 1996 and 1995, respectively. Future minimum
payments due under noncancelable operating leases at March 29, 1997, are
$1,839,000 in fiscal 1998; $1,273,000 in fiscal 1999; $1,075,000 in
fiscal 2000; $949,000 in fiscal 2001, $899,000 in fiscal 2002; and
$727,000 in fiscal 2003 and thereafter. Total future minimum lease
payments are $6,762,000.
Contingencies
The Company is contingently liable with respect to lawsuits and
other matters that arose in the ordinary course of business. In the
opinion of management, these contingencies will not have a material
effect upon the financial position of the Company or its results of
operations.
7. Related Party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company paid Thermo Electron
annually an amount equal to 1.0% of the Company's revenues. Prior to
January 1, 1996, the Company paid an annual fee equal to 1.20% of the
Company's revenues. Prior to January 1, 1995, the Company paid an annual
fee equal to 1.25% of the Company's revenues. The annual fee is reviewed
and adjusted annually by mutual agreement of the parties. For these
services, the Company was charged $644,000, $589,000 and $340,000 in
fiscal 1997, 1996 and 1995, respectively. Management believes that the
service fee charged by Thermo Electron is reasonable and that such fees
are representative of the expenses the Company would have incurred on a
stand-alone basis. The corporate services agreement is renewed annually
but can be terminated upon 30 days' prior notice by the Company or upon
the Company's withdrawal from the Thermo Electron Corporate Charter (the
Thermo Electron Corporate Charter defines the relationship among Thermo
Electron and its majority-owned subsidiaries). For additional items such
as employee benefit plans, insurance coverage and other identifiable
costs, Thermo Electron charges the Company based upon costs attributable
to the Company.
8. Significant Customers
No customer accounted for 10% or more of the Company's total
revenues in fiscal 1997 and 1996. Sales to two customers accounted for
10% and 16% of the Company's total revenues in fiscal 1995.
16PAGE
<PAGE>
The Killam Group 1997 Financial Statements
Notes to Combined Financial Statements
9. Loss on Sale of Assets
In fiscal 1996, the Company sold to a management group the assets
of a small civil engineering design office in Williston, Vermont, that
was no longer included in the geographic expansion plans of the Company.
An intangible asset of $569,000 associated with this office was not
recovered in the sale price and, accordingly, was written off. This
noncash expense is nondeductible for tax purposes. Sales and earnings of
this office were not material to the Company.
10. Subsequent Events
In May 1997, Thermo TerraTech purchased a controlling interest in
The Randers Group Incorporated (Randers), a provider of design
engineering, project management, and construction services for industrial
clients in the manufacturing, pharmaceutical, and chemical-processing
industries. Thermo TerraTech purchased 7,100,000 shares of Randers common
stock from certain members of Randers' management, and 420,000 shares
from Thermo Power Corporation, an affiliate of the Company, at a price of
$0.625 per share, for an aggregate cost of approximately $4,700,000.
Following these transactions, Thermo TerraTech owns approximately 53.3%
of Randers' outstanding common stock. In addition, Thermo Electron owns
approximately 8.9% of Randers' outstanding common stock. Randers had
revenues of $12.4 million in calendar 1996.
Thermo TerraTech has also entered into a definitive agreement to
transfer the Company to Randers in exchange for newly issued shares of
Randers common stock. The exact price for these businesses is still under
negotiation, but in no event would it be less than the book value of the
Company as of the closing of the transfer. The number of new shares of
Randers common stock to be issued to Thermo TerraTech would equal the
agreed price divided by $0.625. Upon such issuance, Thermo TerraTech
would own approximately 94.4% of Randers' outstanding common stock.
The transfer is subject to several conditions, including, approval
of the transaction by Randers' shareholders, and receipt of all required
regulatory approvals, including continued listing of the Randers common
stock on the American Stock Exchange following the transaction. However,
because Thermo TerraTech currently owns approximately 53.3% of Randers'
outstanding common stock, approval by Randers shareholders is assured.
For accounting purposes, the Company will be treated as the continuing
entity, as if it has acquired Randers.
17PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
(b)Pro Forma Combined Condensed Financial Information
For accounting purposes, The Killam Group will be treated as the
continuing entity, as if it has acquired the Company.
The following unaudited pro forma combined condensed statement of
income sets forth the results of operations for the fiscal year ended
March 29, 1997, and the three months ended June 28, 1997, as if the
acquisition of the Company by The Killam Group had occurred at the
beginning of fiscal 1997. The unaudited pro forma combined condensed
balance sheet sets forth the financial position as of June 28, 1997, as
if the acquisition had occurred as of that date.
The pro forma combined condensed statement of income for the fiscal
year ended March 29, 1997, includes the results of operations of The
Killam Group for the fiscal year ended March 29, 1997 and of the Company
for the year ended December 31, 1996. The pro forma combined condensed
statement of income for the three months ended June 28, 1997, includes
the results of operations of The Killam Group and the Company for the
three months ended June 28, 1997.
The acquisition has been accounted for using the purchase method of
accounting. The pro forma results of operations are not necessarily
indicative of future operations or the actual results that would have
occurred had the acquisition of the Company been consummated at the
beginning of fiscal 1997. 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
THE RANDERS GROUP INCORPORATED
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
Year Ended March 29, 1997
Historical Pro Forma
------------------- ------------------------
Randers Killam
Group Group Adjustments Combined
------- -------- ----------- --------
(In thousands except per share amounts)
Revenues $ 12,401 $ 64,374 $ - $ 76,775
-------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues 9,200 48,048 - 57,248
Selling, general,
and administrative
expenses 1,844 9,555 225 11,624
-------- -------- -------- --------
11,044 57,603 225 68,872
-------- -------- -------- --------
Operating Income 1,357 6,771 (225) 7,903
Interest Expense, Net (62) (74) - (136)
-------- -------- -------- --------
Income Before Provision
for Income Taxes 1,295 6,697 (225) 7,767
Provision for Income
Taxes 475 3,117 (50) 3,542
-------- -------- -------- --------
Net Income $ 820 $ 3,580 $ (175) $ 4,225
======== ======== ======== ========
Earnings per Share $ .06 $ .04
======== ========
Weighted Average Shares 14,116 105,541 119,657
======== ======== ========
5PAGE
<PAGE>
FORM 8-K/A
THE RANDERS GROUP INCORPORATED
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
Three Months Ended June 28, 1997
Historical Pro Forma
------------------- ------------------------
Randers Killam
Group Group Adjustments Combined
------- -------- ----------- --------
(In thousands except per share amounts)
Revenues $ 2,447 $ 15,534 $ - $ 17,981
-------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues 1,757 11,424 - 13,181
Selling, general,
and administrative
expenses 510 2,661 49 3,220
-------- -------- -------- --------
2,267 14,085 49 16,401
-------- -------- -------- --------
Operating Income 180 1,449 (49) 1,580
Interest Income
(Expense), Net (21) 6 - (15)
-------- -------- -------- --------
Income Before Provision
for Income Taxes 159 1,455 (49) 1,565
Provision for Income
Taxes 65 677 (10) 732
-------- -------- -------- --------
Net Income $ 94 $ 778 $ (39) $ 833
======== ======== ======== ========
Earnings per Share $ .01 $ .01
======== ========
Weighted Average Shares 14,116 105,541 119,657
======== ======== ========
6PAGE
<PAGE>
FORM 8-K/A
THE RANDERS GROUP INCORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET (Unaudited)
As of June 28, 1997
Historical Pro Forma
------------------- ------------------------
Randers Killam
Group Group Adjustments Combined
------- -------- ----------- --------
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,159 $ 807 $ - $ 1,966
Accounts receivable, net 1,447 11,028 - 12,475
Unbilled contract costs
and fees 746 11,259 - 12,005
Prepaid income taxes 85 1,346 1,431
Prepaid expenses 53 563 - 616
Due from parent company - 183 - 183
------- ------- ------- -------
3,490 25,186 - 28,676
------- ------- ------- -------
Property, Plant, and
Equipment, at Cost, Net 2,532 9,102 - 11,634
------- ------- ------- -------
Other Assets 4 955 - 959
------- ------- ------- -------
Cost in Excess of Net Assets
of Acquired Companies 129 41,501 4,053 45,683
------- ------- ------- -------
$ 6,155 $76,744 $ 4,053 $86,952
======= ======= ======= =======
7PAGE
<PAGE>
FORM 8-K/A
THE RANDERS GROUP INCORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET (Unaudited) (continued)
As of June 28, 1997
Historical Pro Forma
------------------- ------------------------
Randers Killam
Group Group Adjustments Combined
------- -------- ----------- --------
(In thousands)
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Accounts payable $ 238 $ 2,610 $ - $ 2,848
Notes payable and current
maturities of long-term
debt 96 640 - 736
Accrued payroll and
employee benefits 306 3,074 - 3,380
Other accrued expenses 61 1,120 - 1,181
------- ------- ------- -------
701 7,444 - 8,145
------- ------- ------- -------
Deferred Income Taxes - 1,096 - 1,096
------- ------- ------- -------
Other Deferred Items - 1,009 - 1,009
------- ------- ------- -------
Long-term Obligations 921 1,232 - 2,153
------- ------- ------- -------
Shareholders' Investment:
Common stock 1 - 11 12
Capital in excess of par
value 1,537 - 73,000 74,537
Retained earnings 2,995 - (2,995) -
Parent company investment - 65,963 (65,963) -
------- ------- ------- -------
4,533 65,963 4,053 74,549
------- ------- ------- -------
$ 6,155 $76,744 $ 4,053 $86,952
======= ======= ======= =======
8PAGE
<PAGE>
FORM 8-K/A
THE RANDERS GROUP INCORPORATED
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
Note 1 - Basis of Presentation
The allocation of the purchase price is based on an estimate of the fair
market value of the net assets acquired and is subject to adjustment. To
date, no information has been gathered that would cause the Company to
believe that the final allocation of the purchase price will be materially
different than the preliminary estimate.
Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of
Income (In thousands, except in text)
Three Months
Year Ended Ended
March 29, 1997 June 28, 1997
-------------- -------------
Debit (Credit)
Selling, General, and Administrative Expenses
Service fee of 1.0% of the revenues for
the year ended December 31, 1996, and
the three-month period ended June 28, 1997,
for services that would have been provided
under a services agreement between
The Randers Group and Thermo Electron $ 124 $ 24
Amortization over 40 years of $4,053,000
of cost in excess of net assets of
acquired companies created by the
acquisition of The Randers Group 101 25
------- -------
225 49
------- -------
Provision for Income Taxes
Income tax benefit associated with the
adjustments above (excluding amortization
of cost in excess of net assets of acquired
companies), calculated at the Company's
statutory income tax rate of 40% (50) (10)
------- -------
Weighted Average Shares
Issuance of 105,540,800 shares of the Company's
common stock in connection with The Killam
Group transaction 105,541 105,541
------- -------
9PAGE
<PAGE>
FORM 8-K/A
THE RANDERS GROUP INCORPORATED
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited) (continued)
Note 3 - Pro Forma Adjustments to Pro Forma Combined Condensed Balance Sheet
(In thousands, except in text)
June 28, 1997
-------------
Debit (Credit)
Cost in Excess of Net Assets of Acquired Companies
Adjust balance for excess of cost over fair value of pro rata
share of the net assets acquired of The Randers Group $ 4,053
-------
Shareholders' Investment
Elimination of The Randers Group retained earnings,
issuance of 105,540,800 shares of common stock for the
acquisition of The Randers Group and initial
capitalization of the Killam Group (4,053)
-------
10PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial
Information and Exhibits
(c)Exhibits
2 Stock Purchase Agreement entered on September 19,
1997, by and between Thermo TerraTech Inc. and The
Randers Group Incorporated (incorporated by reference
from Exhibit (vii) to Amendment No. 4 to Schedule 13D
filed by Thermo Electron Corporation and Thermo
TerraTech Inc. on October 1, 1997). Pursuant to Item
601(b)(2) of regulation S-K, schedules and exhibits
to this Agreement have been omitted. The Company
hereby undertakes to furnish supplementally a copy of
such schedules and exhibits to the Commission upon
request.
10 Agreement by and among Thermo TerraTech Inc., The
Randers Group Incorporated, Thomas R. Eurich, Michael
J. Krivitzky, Thomas J. McEnhill, Bruce M. Bourdon
and David A. Wiegerink previously filed.
23 Consent of Arthur Andersen LLP
99.1 Opinion of Cazenove Incorporated dated September 12,
1997 previously filed.
99.2 Press Release of The Randers Group Incorporated,
dated September 22, 1997 previously filed.
99.3 Press Release of Thermo TerraTech Inc., dated
September 23, 1997 (incorporated by reference from
Exhibit (viii) to Amendment No. 4 to Schedule 13D
filed by Thermo Electron Corporation and Thermo
TerraTech Inc. on October 1, 1997).
11PAGE
<PAGE>
FORM 8-K
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 7th day of October
1997.
THE RANDERS GROUP INCORPORATED
David A. Wiegerink
-----------------------------
David A. Wiegerink, Vice President
Finance and Administration
Principal Accounting Officer
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our report (and to all references to our Firm) included in or made a part
of The Randers Group Incorporated's Amendment No. 1 on Form 8-K/A.
Arthur Andersen LLP
Boston, Massachusetts
October 2, 1997
