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 June 28, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-13572
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3072335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
(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 July 25, 1997
---------------------------- ----------------------------
Common Stock, $.10 par value 24,415,388
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 81,693 $ 63,238
Restricted funds 13,597 18,936
Accounts receivable and unbilled revenues 30,203 28,061
Inventories 14,754 11,299
Prepaid income taxes and other current
assets 4,385 4,953
-------- --------
144,632 126,487
-------- --------
Property, Plant, and Equipment, at Cost 323,441 309,384
Less: Accumulated depreciation and
amortization 60,891 46,618
-------- --------
262,550 262,766
-------- --------
Due from Parent Company 13,551 12,116
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $8,504 and $6,004) 15,941 20,254
-------- --------
Restricted Funds 20,635 14,112
-------- --------
Other Assets 22,148 13,410
-------- --------
$479,457 $449,145
======== ========
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THERMO ECOTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, September 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term obligations $ 27,646 $ 24,806
Accounts payable 3,184 1,517
Lease obligations payable 5,714 1,812
Accrued interest 5,559 3,159
Accrued income taxes 1,858 1,858
Other accrued expenses 17,771 15,532
Due to parent company 1,113 1,586
-------- --------
62,845 50,270
-------- --------
Long-term Obligations:
Nonrecourse tax-exempt obligations 59,500 77,900
4% Subordinated convertible debentures,
due to parent company 68,500 68,500
Noninterest-bearing subordinated
convertible debentures 15,048 31,727
4 7/8% Subordinated convertible debentures
(Note 3) 50,000 -
Capital lease obligations 24,872 31,154
-------- --------
217,920 209,281
-------- --------
Deferred Income Taxes 45,803 42,633
-------- --------
Other Deferred Items 17,952 13,958
-------- --------
Minority Interest 3,044 3,316
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000
shares authorized; 25,764,337 and
16,174,636 shares issued 2,576 1,617
Capital in excess of par value 91,761 74,740
Retained earnings 53,898 45,048
Treasury stock at cost 1,478,541 and
21,413 shares (20,889) (481)
Cumulative translation adjustment 10 -
Net unrealized gain on available-for-sale
investments 4,537 8,763
-------- --------
131,893 129,687
-------- --------
$479,457 $449,145
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $43,524 $35,316
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $903 and $1,008
to related parties) 28,842 24,464
Selling, general, and administrative expenses
(includes $435 and $397 to parent company) 6,054 3,098
------- -------
34,896 27,562
------- -------
Operating Income 8,628 7,754
Interest Income 1,379 1,398
Interest Expense (includes $685 to parent
company in fiscal 1997 and 1996) (3,648) (3,688)
------- ------
Income Before Provision for Income Taxes and
Minority Interest 6,359 5,464
Provision for Income Taxes 2,398 2,101
Minority Interest Expense 363 340
------- -------
Net Income $ 3,598 $ 3,023
======= =======
Earnings per Share:
Primary $ .14 $ .11
======= =======
Fully diluted $ .11 $ .09
======= =======
Weighted Average Shares:
Primary 26,155 26,708
======= =======
Fully diluted 39,687 37,535
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
---------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $120,712 $103,117
-------- --------
Costs and Operating Expenses:
Cost of revenues (includes $3,508 and $4,121
to related parties) 83,977 75,213
Selling, general, and administrative expenses
(includes $1,234 and $1,232 to parent company) 14,523 8,273
-------- --------
98,500 83,486
-------- --------
Operating Income 22,212 19,631
Interest Income 3,641 3,767
Interest Expense (includes $2,055 to parent
company in fiscal 1997 and 1996) (10,292) (11,152)
-------- -------
Income Before Provision for Income Taxes and
Minority Interest 15,561 12,246
Provision for Income Taxes 5,756 4,646
Minority Interest Expense 955 915
-------- --------
Net Income $ 8,850 $ 6,685
======== ========
Earnings per Share:
Primary $ .33 $ .27
======== ========
Fully diluted $ .27 $ .22
======== ========
Weighted Average Shares:
Primary 26,752 24,970
======== ========
Fully diluted 37,581 35,850
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
---------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 8,850 $ 6,685
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest expense 955 915
Depreciation and amortization 15,560 15,308
Increase in deferred income taxes 5,757 4,646
Changes in current accounts, excluding the
effect of acquisition:
Restricted funds 5,339 (3,277)
Accounts receivable and unbilled
revenues (812) 2,112
Inventories (1,145) 1,035
Other current assets 588 753
Accounts payable (843) 1,346
Lease obligations payable 3,508 4,250
Due to parent company (473) 817
Other current liabilities 3,191 1,529
-------- --------
Net cash provided by operating activities 40,475 36,119
-------- --------
Investing Activities:
Acquisition, net of cash acquired (Note 2) (10,865) (7,974)
Funding of long-term restricted funds (6,523) (1,942)
Increase in other deferred items 4,575 -
Increase in other assets (2,655) (3,004)
Purchases of property, plant, and equipment (11,788) (25,128)
-------- --------
Net cash used in investing activities (27,256) (38,048)
-------- --------
Financing Activities:
Net proceeds from issuance of subordinated
convertible debentures (Note 3) 48,470 35,942
Repayment of long-term obligations (21,842) (18,946)
Proceeds from issuance of Company common stock 1,622 5,120
Purchases of Company common stock (21,779) -
Distribution to minority partner (1,227) (827)
-------- --------
Net cash provided by financing activities 5,244 21,289
-------- --------
Exchange Rate Effect on Cash (8) -
-------- --------
Increase in Cash and Cash Equivalents 18,455 19,360
Cash and Cash Equivalents at Beginning of Period 63,238 49,159
-------- --------
Cash and Cash Equivalents at End of Period $ 81,693 $ 68,519
======== ========
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THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
---------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ 14,950 $ 8,774
Cash paid for acquired company (11,223) (7,974)
-------- --------
Liabilities assumed of acquired company $ 3,727 $ 800
======== ========
Conversion of noninterest-bearing subordinated
convertible debentures $ 16,679 $ -
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Ecotek Corporation (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 June
28, 1997, the results of operations for the three- and nine-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
nine-month periods ended June 28, 1997, and June 29, 1996. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of September 28, 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 on Form 10-K, as amended, for the fiscal year ended September 28,
1996, filed with the Securities and Exchange Commission.
2. Acquisition
On January 17, 1997, the Company, through its wholly owned
subsidiary, Thermo Trilogy Corporation, acquired substantially all of the
assets of biosys, inc. (biosys), a biopesticide company, for $11.2
million in cash. The acquisition has been accounted for using the
purchase method of accounting and its results of operations have been
included in the financial statements of the Company from the date of
acquisition. The aggregate cost of this acquisition approximated the fair
market value of the net assets acquired. Allocation of the purchase price
for this acquisition was based on an estimate of the fair value of the
net assets acquired and is subject to adjustment based on finalization of
purchase price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company and biosys on a pro forma basis,
assuming the companies had been combined since the beginning of fiscal
1996.
Three
Months
Ended Nine Months Ended
-------- -------------------
(In thousands except June 29, June 28, June 29,
per share amounts) 1996 1997 1996
-----------------------------------------------------------------------
Revenues $ 41,948 $125,629 $120,473
Net income (loss) 1,007 1,987 (5,615)
Earnings (loss) per share:
Primary .04 .07 (.22)
Fully diluted .03 .05 (.22)
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THERMO ECOTEK CORPORATION
2. Acquisition (continued)
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of biosys been made at the beginning of fiscal 1996.
3. Subordinated Convertible Debentures
In April 1997, the Company issued and sold at par $50 million
principal amount of 4 7/8% subordinated convertible debentures due 2004
for net proceeds of $48.5 million. The debentures are convertible into
shares of the Company's common stock at a conversion price of $16.50 per
share and are guaranteed on a subordinated basis by Thermo Electron
Corporation.
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 "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended September 28, 1996, filed with the Securities
and Exchange Commission.
Overview
The Company earns revenues primarily from the operation of
independent electric power-generation facilities through joint ventures,
limited partnerships, or wholly owned subsidiaries (the Operating
Companies). Each Operating Company sells power under a long-term
power-sales agreement. The profitability of operating the Company's
facilities depends on the price received for power under the power-sales
agreements with power purchasers, on plant performance or availability,
on the degree to which utilities exercise curtailment rights granted
under power-sales agreements, and on the fuel, operating, and maintenance
costs for the facilities.
Curtailment rights allow a utility to require an Operating Company to
curtail power output up to pre-established annual levels during periods
of low system demand. Utilities commonly experience low system demand
when hydroelectric power is available, generally following periods of
heavy rain or snow. The contractually allowable maximum for such
curtailment at each of the Company's Woodland and Mendota plants is 1,000
hours per calendar year, which was reached at both plants in calendar
1995 and 1996. The Woodland and Mendota plants each experienced
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THERMO ECOTEK CORPORATION
Overview (continued)
approximately 700 hours of curtailment from October 1996 through June
1997, and each expects to experience curtailment during the remainder of
fiscal 1997.
The Company earns a higher share of its income in May to October due
to the rate structures under the power-sales agreements relating to its
California plants, which provide strong incentives to operate during this
period of high demand. Conversely, the Company has historically operated
at a loss or marginal profitability during the second fiscal quarter due
to the rate structure under these agreements. The Company's profitability
is also dependent on the amount of development expenses that it incurs.
The Company is expanding beyond biomass power generation into other
environmentally responsible products and processes. Thermo Trilogy
Corporation (Thermo Trilogy), a wholly owned subsidiary, develops,
manufactures, and markets environmentally friendly products used for pest
control. Derived from seeds of the tropical neem tree and specially
developed microbials, these biopesticides safely and effectively control
insects, fungi, and mites on numerous crops. In January 1997, Thermo
Trilogy acquired substantially all of the assets of biosys, inc. (biosys)
for approximately $11.2 million in cash (Note 2). Based in Columbia,
Maryland, biosys produces pheromone, neem/azadirachtin, nematode, and
virus-based biopesticide products, as well as disease-resistant sugar
cane.
The Company has also entered the field of engineered clean fuels
through a partnership agreement with KFx Inc. (KFx). The Company is
committed to provide 95% of the total costs for the design, construction,
and operation of the first full-scale coal-beneficiation facility to use
a patented "clean coal" technology (K-Fuel technology). Once completed,
the Gillette, Wyoming, facility will use the K-Fuel technology to
transform high-moisture, low-energy coal into a low-moisture,
high-energy, solid fuel.
The Company plans to expand its energy operations into international
markets and has begun business development efforts in India, Italy, and
the Czech Republic. The Company expects the cost of business development
efforts to increase as it expands into these markets due to increased
complexity inherent in foreign market development. In addition, the
amount of cash required to fund equity investments is expected to
increase due to the financing requirements of lenders in foreign markets.
Results of Operations
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
Revenues increased 23% to $43.5 million in the third quarter of
fiscal 1997 from $35.3 million in the third quarter of fiscal 1996. The
increase was primarily due to the inclusion in fiscal 1997 of $5.7
million in revenues from Thermo Trilogy, acquired in May 1996, including
biosys, acquired in January 1997, compared with $.5 million from Thermo
Trilogy in fiscal 1996. Revenues also increased as a result of higher
10PAGE
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THERMO ECOTEK CORPORATION
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
(continued)
contractual energy rates at all of the Company's facilities, except the
Hemphill plant. Pursuant to the Company's utility contracts for its four
plants in California, there will be no further contractual energy rate
increases beginning in calendar 1998.
The gross profit margin increased to 34% in the third quarter of
fiscal 1997 from 31% the third quarter of fiscal 1996. The improvement
results primarily from the inclusion of higher-margin Thermo Trilogy
revenues, as well as higher contractual energy rates at most of the
Company's power plants.
The Company's plants have power-sales agreements under which
utilities presently purchase power at fixed rates. Certain of these
arrangements contain provisions under which the utilities will convert
from fixed rates to "avoided-cost" rates at specified dates. Avoided-cost
rates are currently substantially less than the Operating Companies'
fixed rates. The Woodland plant, which converts to avoided-cost rates in
March 2000, has conditions in its nonrecourse lease agreement that
require the funding of a "power reserve" in years prior to 2000, based on
projections of operating cash flow shortfalls in 2000 and thereafter. The
power reserve represents funds available to make lease payments in the
event that revenues are not sufficient after the plant converts to
avoided-cost rates.
Although it is difficult to predict future levels of avoided costs,
based on current estimates, avoided costs are expected to be lower in
2000 than the rates currently being paid. If the Woodland plant were to
operate at projected avoided-cost rates, substantial losses would result,
primarily due to nonrecourse lease obligations that extend beyond 2000.
Absent sufficient reductions in fuel prices and other operating costs,
the Company would either renegotiate its nonrecourse lease for the
Woodland plant or forfeit its interest in the plant. In November 1996,
the Company began to record as an expense the funding of reserves
required under Woodland's nonrecourse lease agreement to cover projected
shortfalls in lease payments beginning in 2000. Although the Company
recorded $1.0 million of operating income from Woodland during the first
quarter of fiscal 1997, the Company does not expect to record additional
operating income at Woodland during the remainder of fiscal 1997 and
thereafter. The Woodland plant had operating income of $5.1 million in
the full 1996 fiscal year.
The resolution of the rate order renegotiations with Public Service
Company of New Hampshire (PSNH) is still pending. In January 1997, PSNH's
parent company, Northeast Utilities, disclosed in a filing with the
Securities and Exchange Commission that if a proposed deregulation plan
for the New Hampshire electric utility industry were adopted, PSNH could
default on certain financial obligations and seek bankruptcy protection.
In February 1997, the New Hampshire Public Utilities Commission (PUC)
voted to adopt a deregulation plan, and in March 1997, PSNH filed suit to
block the plan. In March 1997, the federal district court issued a
temporary restraining order, which temporarily prohibits the PUC from
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THERMO ECOTEK CORPORATION
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
(continued)
implementing the deregulation plan as it affects PSNH, pending a
determination by the court whether PSNH's claim may now be heard by the
court. In April 1997, the court ruled that it could now hear the case and
ordered that this restraining order would continue indefinitely pending
the outcome of the suit. In addition, in March 1997, the Company, along
with a group of other biomass power producers, filed a motion with the
PUC seeking clarification of the PUC's proposed deregulation plan
regarding several issues, including purchase requirements and payment of
current rate order prices with respect to the Company's energy output.
The effect of a PSNH bankruptcy or deregulation of the electric utility
industry in New Hampshire on the Company's current rate orders for its
two New Hampshire plants is uncertain.
During the first quarter of fiscal 1997, a fire occurred at the
Company's Gillette, Wyoming, coal-beneficiation facility that is
currently under construction. Damage from the fire was restricted to an
oil heater and auxiliary oil storage tank and is unrelated to the plant's
four coal processors. Substantially all repair costs are expected to be
covered by insurance proceeds. The fire has caused certain delays with
respect to the commencement of commercial operations of the facility. In
addition, the Company is currently experiencing certain construction
problems including issues relating to the flow of materials within the
facility and design and operation of certain pressure-release equipment
which will further delay the commencement of the facility's commercial
operations. The Company is exploring certain legal remedies it may have
against the contractor related to the foregoing matter. The Company
expects to complete repairs and resolve these construction problems in
time to begin commercial operation of the facility by the end of calendar
1997. However, because the technology being developed at the facility is
new and untested, no assurance can be given that other difficulties will
not arise or that the Company will be able to correct these construction
problems and commence commercial operations prior to the end of calendar
1997, or at all.
Selling, general, and administrative expenses as a percentage of
revenues were 13.9% in the third quarter of fiscal 1997, compared with
8.8% in the third quarter of fiscal 1996. The change resulted primarily
from the inclusion of higher selling, general, and administrative
expenses as a percentage of revenues at Thermo Trilogy.
Interest income was unchanged in the third quarter of fiscal 1997 at
$1.4 million. Interest income earned on invested proceeds from the
Company's April 1997 issuance of 4 7/8% subordinated convertible
debentures (Note 3) was offset by a reduction in invested funds due to
cash expended for the repurchase of Company common stock, the biosys
acquisition, construction of the Gillette, Wyoming, coal- beneficiation
facility, and the purchase of additional shares of KFx common stock.
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THERMO ECOTEK CORPORATION
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
(continued)
Interest expense remained virtually unchanged in the third quarter of
fiscal 1997. A decrease in interest expense due to lower outstanding debt
related to the Company's Delano and Mendota plants was largely offset by
interest expense related to the April 1997 issuance of 4 7/8%
subordinated convertible debentures.
The effective tax rate was 38% in the third quarter of fiscal 1997
and 1996. These rates exceed the statutory federal income tax rate as a
result of state income taxes, offset in part by the exclusion of income
taxed directly to a minority partner.
Minority interest expense represents the allocation of income from
plant operations to a minority partner in an Operating Company.
First Nine Months Fiscal 1997 Compared With First Nine Months Fiscal 1996
Revenues increased 17% to $120.7 million in the first nine months of
fiscal 1997 from $103.1 million in the first nine months of fiscal 1996.
The increase was primarily due to the inclusion in fiscal 1997 of $10.3
million in revenues from Thermo Trilogy, including operations from the
biosys acquisition in January 1997, compared with $.5 million in fiscal
1996 as well as higher contractual energy rates at all of the Company's
facilities, except the Hemphill plant.
The gross profit margin increased to 30% in the first nine months of
fiscal 1997 from 27% the first nine months of fiscal 1996. The
improvement results primarily from the inclusion of higher-margin Thermo
Trilogy revenues, as well as the effect of higher contractual energy
rates.
Selling, general, and administrative expenses as a percentage of
revenues were 12.0% in the first nine months of fiscal 1997, compared
with 8.0% in the first nine months of fiscal 1996. The change resulted
primarily from the inclusion of higher selling, general, and
administrative expenses as a percentage of revenues at Thermo Trilogy.
Interest income decreased to $3.6 million in the first nine months of
fiscal 1997 from $3.8 million in the first nine months of fiscal 1996.
The decrease resulted primarily from lower average invested balances due
to amounts expended for the repurchase of the Company's common stock, the
biosys acquisition, construction of the Gillette, Wyoming,
coal-beneficiation facility, and the purchase of additional shares of KFx
common stock in fiscal 1997.
Interest expense decreased to $10.3 million in the first nine months
of fiscal 1997 from $11.2 million in the first nine months of fiscal
1996, due to lower outstanding debt related to the Company's Delano and
Mendota plants, partly offset by interest expense related to the April
1997 issuance of 4 7/8% subordinated convertible debentures.
The effective tax rates were 37% and 38% in the first nine months of
fiscal 1997 and 1996, respectively. These rates exceed the statutory
federal income tax rate as a result of state income taxes, offset in part
by the exclusion of income taxed directly to a minority partner.
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THERMO ECOTEK CORPORATION
Liquidity and Capital Resources
Working capital was $81.8 million at June 28, 1997, compared with
$76.2 million at September 28, 1996. The Company had cash, cash
equivalents, and current restricted funds of $95.3 million at June 28,
1997, compared with $82.2 million at September 28, 1996. At June 28,
1997, current restricted funds held in trust pursuant to certain lease
and debt agreements totaled $13.6 million. The use of cash and cash
equivalents of $9.5 million at June 28, 1997, was also restricted by the
terms of certain lease and financing agreements. These restrictions limit
the ability of the Operating Companies to transfer funds to the Company
in the form of dividends, loans, advances, or other distributions. Until
such time, if ever, as projections of avoided costs change, all cash
flows from the Woodland Operating Company, other than cash distributed to
the Company for taxes on the income of the Operating Company, will be
restricted from distribution to the Company. During the first nine months
of fiscal 1997, the Company's operating activities provided cash and
restricted funds of $35.2 million.
During the first nine months of fiscal 1997, the Company's investing
activities used cash of $27.3 million. In January 1997, the Company,
through its wholly owned subsidiary, Thermo Trilogy, acquired
substantially all of the assets of biosys, inc., a biopesticide company,
for $11.2 million in cash. The Company, through its Limited Partnership
Agreement with KFx Wyoming, Inc., expended $10.2 million (net of
insurance proceeds related to fire damage) for the construction of a
coal-beneficiation facility in Gillette, Wyoming, and $1.6 million on the
purchase of other property, plant, and equipment. The Company expects to
fund approximately an additional $5 - $10 million of construction and
related costs prior to commercial operation of the coal-beneficiation
facility. In January 1997, the Company purchased an additional 1,250,000
shares of KFx common stock for $2.5 million in cash, bringing its total
equity interest in KFx to approximately 18%.
The Company is committed to contribute $15.0 million for a minority
interest in a 185-megawatt combined cycle, steam-turbine
electric-generation facility located in Puerta Plata, Dominican Republic.
Funding is expected to occur during calendar 1997, assuming certain
conditions are met.
During the first nine months of fiscal 1997, the Company's financing
activities provided $5.2 million of cash. In April 1997, the Company
issued and sold at par $50 million principal amount of 4 7/8% convertible
debentures due 2004 for net proceeds of $48.5 million. The Company used
cash of $21.8 million for the repayment of a long-term obligation related
to two of its California plants. In April 1997, the Company's Board of
Directors approved the repurchase, through April 16, 1998, of up to $20.0
million of its own securities. Through June 28, 1997, the Company had
purchased $19.7 million in common stock under this authorization. Any
such purchases are funded from working capital.
Although the Company's projects are designed to produce positive cash
flow over the long term, the Company will have to obtain significant
amounts of funds from time to time to meet project development
requirements, including the funding of equity investments. As the Company
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THERMO ECOTEK CORPORATION
Liquidity and Capital Resources (continued)
acquires, invests in, or develops future plants or technologies, the
Company expects to finance them with nonrecourse debt and to fund equity
contributions through internal funds, raising additional equity, or
through borrowings from third parties or Thermo Electron Corporation
(Thermo Electron). While Thermo Electron has expressed its willingness to
provide funds to the Company to help finance the Company's equity
investments in future projects, the Company has no agreements with Thermo
Electron that assure funds will be available on acceptable terms, or at
all.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated April 10, 1997,
pertaining to the sale by the Company at par $50 million of 4 7/8%
Convertible Subordinated Debentures due 2004.
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THERMO ECOTEK CORPORATION
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 4th day of August
1997.
THERMO ECOTEK CORPORATION
Paul F. Kelleher
---------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
16PAGE
<PAGE>
THERMO ECOTEK CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 11
THERMO ECOTEK CORPORATION
Computation of Earnings per Share
Three Months Ended
--------------------------
June 28, June 29,
1997 1996
--------------------------------------------------------------------------
Net income (a) $ 3,598,000 $ 3,023,000
Add: Convertible debenture interest,
net of tax income 749,000 411,000
----------- -----------
Income applicable to common stock assuming
full dilution (b) $ 4,347,000 $ 3,434,000
=========== ===========
Shares:
Weighted average shares outstanding 24,460,207 23,462,775
Add: Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 313,031 562,146
Shares issuable from assumed conversion
of noninterest-bearing subordinated
convertible debentures 1,382,074 2,683,232
----------- -----------
Weighted average shares - primary (c) 26,155,312 26,708,153
Add: Incremental shares issuable from assumed
exercise of options (as determined by
the application of the treasury stock
method) 12,560 10,564
Shares issuable from assumed conversion
of 4% subordinated convertible debentures 10,821,484 10,815,789
Shares issuable from assumed conversion
of 4 7/8% subordinated convertible
debentures 2,697,303 -
----------- -----------
Weighted averages shares - fully diluted (d) 39,686,659 37,534,506
=========== ===========
Primary earnings per share (a) / (c) $ .14 $ .11
=========== ===========
Fully diluted earnings per share (b) / (d) $ .11 $ .09
=========== ===========
PAGE
<PAGE>
Exhibit 11
THERMO ECOTEK CORPORATION
Computation of Earnings per Share (continued)
Nine Months Ended
--------------------------
June 28, June 29,
1997 1996
--------------------------------------------------------------------------
Net income (a) $ 8,850,000 $ 6,685,000
Add: Convertible debenture interest,
net of tax 1,254,000 1,233,000
----------- ----------
Income applicable to common stock assuming
full dilution (b) $10,104,000 $ 7,918,000
=========== ===========
Shares:
Weighted average shares outstanding 24,668,633 23,356,959
Add: Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 405,018 508,337
Shares issuable from assumed conversion
of noninterest-bearing subordinated
convertible debentures 1,678,576 1,104,303
----------- -----------
Weighted average shares - primary (c) 26,752,227 24,969,599
Add: Incremental shares issuable from
assumed exercise of options
(as determined by the application
of the treasury stock method) 7,597 64,374
Shares issuable from assumed
conversion of 4% subordinated
convertible debentures 10,821,484 10,815,789
----------- -----------
Weighted average shares - fully diluted (d) 37,581,308 35,849,762
=========== ===========
Primary earnings per share (a) / (c) $ .33 $ .27
=========== ===========
Fully diluted earnings per share (b) / (d) $ .27 $ .22
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ECOTEK CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE
28, 1997 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> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 81,693
<SECURITIES> 0
<RECEIVABLES> 30,203
<ALLOWANCES> 0
<INVENTORY> 14,754
<CURRENT-ASSETS> 144,632
<PP&E> 323,441
<DEPRECIATION> 60,891
<TOTAL-ASSETS> 479,457
<CURRENT-LIABILITIES> 62,845
<BONDS> 149,420
0
0
<COMMON> 2,576
<OTHER-SE> 129,317
<TOTAL-LIABILITY-AND-EQUITY> 479,457
<SALES> 120,712
<TOTAL-REVENUES> 120,712
<CGS> 83,977
<TOTAL-COSTS> 83,977
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,292
<INCOME-PRETAX> 15,561
<INCOME-TAX> 5,756
<INCOME-CONTINUING> 8,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,850
<EPS-PRIMARY> .33
<EPS-DILUTED> .27
</TABLE>
