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 July 4, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-11406
THERMO FIBERTEK INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1762325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Winter Street
Waltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 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 31, 1998
---------------------------- ----------------------------
Common Stock, $.01 par value 61,934,169
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO FIBERTEK INC.
Consolidated Balance Sheet
(Unaudited)
Assets
July 4, January 3,
(In thousands) 1998 1998
- --------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $68,125
and $62,550 under repurchase agreement
with parent company) $121,093 $111,648
Available-for-sale investments, at quoted
market value (amortized cost of $35,720
and $36,273) 35,730 36,319
Accounts receivable, less allowances of
$2,064 and $2,565 47,693 53,408
Unbilled contract costs and fees 2,989 4,422
Inventories:
Raw materials and supplies 16,004 14,609
Work in process 6,491 6,426
Finished goods 11,416 10,925
Prepaid and refundable income taxes 6,699 7,457
Other current assets 1,755 2,256
-------- --------
249,870 247,470
-------- --------
Property, Plant, and Equipment, at Cost 65,099 61,059
Less: Accumulated depreciation and
amortization 34,581 32,723
-------- --------
30,518 28,336
-------- --------
Other Assets (Note 4) 15,429 14,437
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 126,675 128,695
-------- --------
$422,492 $418,938
======== ========
2
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THERMO FIBERTEK INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
July 4, January 3,
(In thousands except share amounts) 1998 1998
- --------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 21,339 $ 25,755
Accrued payroll and employee benefits 9,181 10,588
Billings in excess of contract costs and fees 6,375 5,548
Accrued warranty costs 6,700 8,620
Accrued income taxes 2,955 -
Other accrued expenses 16,414 18,512
Due to parent company and affiliated companies 1,470 1,451
-------- --------
64,434 70,474
-------- --------
Deferred Income Taxes and Other Deferred Items 4,265 4,267
-------- --------
Subordinated Convertible Debentures 153,000 153,000
-------- --------
Minority Interest 269 290
-------- --------
Common Stock of Subsidiary Subject to Redemption
($54,762 redemption value) 53,306 52,812
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 150,000,000
shares authorized; 63,358,087 and
63,331,887 shares issued 634 633
Capital in excess of par value 78,009 81,865
Retained earnings 92,186 82,607
Treasury stock at cost, 1,426,974 and
1,820,709 shares (15,368) (19,494)
Accumulated other comprehensive items (Note 3) (8,243) (7,516)
-------- --------
147,218 138,095
-------- --------
$422,492 $418,938
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMO FIBERTEK INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
July 4, June 28,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues $63,583 $54,511
------- -------
Costs and Operating Expenses:
Cost of revenues 37,464 32,650
Selling, general, and administrative expenses 15,472 14,506
Research and development expenses 1,757 1,587
------- -------
54,693 48,743
------- -------
Operating Income 8,890 5,768
Interest Income 2,102 1,665
Interest Expense (includes $771 to related
party in fiscal 1997) (1,847) (785)
------- --------
Income Before Provision for Income Taxes and
Minority Interest 9,145 6,648
Provision for Income Taxes 3,552 2,613
Minority Interest Expense 265 276
------- -------
Net Income $ 5,328 $ 3,759
======= =======
Earnings per Share (Note 2):
Basic $ .09 $ .06
======= =======
Diluted $ .08 $ .06
======= =======
Weighted Average Shares (Note 2):
Basic 61,805 61,244
======= =======
Diluted 75,281 64,170
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO FIBERTEK INC.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
-------------------
July 4, June 28,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues $125,913 $ 99,178
-------- --------
Costs and Operating Expenses:
Cost of revenues 74,516 58,186
Selling, general, and administrative expenses 31,716 27,481
Research and development expenses 3,624 2,863
-------- --------
109,856 88,530
------- -------
Operating Income 16,057 10,648
Interest Income 4,084 3,102
Interest Expense (includes $902 to related
party in fiscal 1997) (3,708) (941)
-------- --------
Income Before Provision for Income Taxes and
Minority Interest 16,433 12,809
Provision for Income Taxes 6,386 4,930
Minority Interest Expense 468 660
-------- --------
Net Income $ 9,579 $ 7,219
======== ========
Earnings per Share (Note 2):
Basic $ .16 $ .12
======== ========
Diluted $ .15 $ .11
======== ========
Weighted Average Shares (Note 2):
Basic 61,683 61,192
======== ========
Diluted 62,638 64,180
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMO FIBERTEK INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
July 4, June 28,
(In thousands) 1998 1997
- --------------------------------------------------------------------------
Operating Activities:
Net income $ 9,579 $ 7,219
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,447 3,089
Provision for losses on accounts
receivable 59 (7)
Minority interest expense 468 660
Other noncash items 207 (10)
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable 5,497 (4,813)
Inventories and unbilled contract
costs and fees (630) (494)
Prepaid income taxes and other
current assets 1,239 1,012
Accounts payable (3,823) (4,949)
Other current liabilities (299) (559)
--------- ---------
Net cash provided by operating activities 16,744 1,148
--------- ---------
Investing Activities:
Acquisition, net of cash acquired - (107,738)
Purchases of available-for-sale investments (23,150) (10,000)
Proceeds from sale and maturities of
available-for-sale investments 23,311 -
Purchases of property, plant, and equipment (4,534) (1,418)
Advances under notes receivable (Note 4) (2,910) (3,000)
Repayment of notes receivable - 3,000
Other 174 (69)
--------- ---------
Net cash used in investing activities (7,109) (119,225)
--------- ---------
Financing Activities:
Issuance of long-term obligation to parent
company - 110,000
Purchases of subsidiary common stock - (1,901)
Net proceeds from issuance of Company common
stock 272 604
Other - (9)
--------- ---------
Net cash provided by financing activities $ 272 $ 108,694
--------- ---------
6
<PAGE>
THERMO FIBERTEK INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
----------------------
July 4, June 28,
(In thousands) 1998 1997
- -------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (462) $ (4,017)
--------- ---------
Increase (Decrease) in Cash and Cash
Equivalents 9,445 (13,400)
Cash and Cash Equivalents at Beginning of
Period 111,648 109,805
--------- ---------
Cash and Cash Equivalents at End of Period $ 121,093 $ 96,405
========= =========
Noncash Activities:
Fair value of assets of acquired company $ - $ 129,271
Cash paid for acquired company - (107,750)
--------- ---------
Liabilities assumed of acquired company $ - $ 21,521
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
THERMO FIBERTEK INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Fibertek 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 July 4, 1998, the results of
operations for the three- and six-month periods ended July 4, 1998, and June 28,
1997, and the cash flows for the six-month periods ended July 4, 1998, and June
28, 1997. Interim results are not necessarily indicative of results for a full
year.
The consolidated balance sheet presented as of January 3, 1998, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998,
filed with the Securities and Exchange Commission.
2. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended Six Months Ended
------------------ -------------------
(In thousands except July 4, June 28, July 4, June 28,
per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------
Basic
Net income $ 5,328 $ 3,759 $ 9,579 $ 7,219
------- ------- ------- -------
Weighted average shares 61,805 61,244 61,683 61,192
------- ------- ------- -------
Basic earnings per share $ .09 $ .06 $ .16 $ .12
======= ======= ======= =======
Diluted
Net income $ 5,328 $ 3,759 $ 9,579 $ 7,219
Effect of:
Convertible obligations 1,033 79 - 158
Majority-owned subsidiary's
dilutive securities - (43) (9) (70)
------- ------- ------- -------
Income available to common
shareholders, as adjusted $ 6,361 $ 3,795 $ 9,570 $ 7,307
------- ------- ------- -------
Weighted average shares 61,805 61,244 61,683 61,192
Effect of:
Convertible obligations 12,645 1,888 - 1,888
Stock options 831 1,038 955 1,100
------- ------- ------- -------
Weighted average shares,
as adjusted 75,281 64,170 62,638 64,180
------- ------- ------- -------
Diluted earnings per share $ .08 $ .06 $ .15 $ .11
======= ======= ======= =======
8
<PAGE>
2. Earnings per Share (continued)
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the effect
would be antidilutive. As of July 4, 1998, there were 654,000 of such options
outstanding, with exercise prices ranging from $11.28 to $14.32 per share.
In addition, the computation of diluted earnings per share for the six
months ended July 4, 1998, excludes the effect of assuming the conversion of the
Company's $153.0 million principal amount of 4 1/2% subordinated convertible
debentures, convertible at $12.10 per share, because the effect would be
antidilutive.
3. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
pronouncement sets forth requirements for disclosure of the Company's
comprehensive income and accumulated other comprehensive items. In general,
comprehensive income combines net income and "other comprehensive items," which
represent certain amounts that are reported as components of shareholders'
investment in the accompanying balance sheet, including foreign currency
translation adjustments and unrealized net of tax gains and losses on
available-for-sale investments. During the second quarter of 1998 and 1997, the
Company had comprehensive income of $5,209,000 and $3,860,000, respectively.
During the first six months of 1998 and 1997, the Company had comprehensive
income of $8,854,000 and $2,790,000, respectively.
4. Notes Receivable
During 1996, the Company loaned $6.0 million to Tree-Free Fiber Company,
LLC (Tree-Free) in connection with a proposed engineering, procurement, and
construction project. This project was delayed due to weakness in pulp prices,
and will not proceed as a result of Tree-Free's recent insolvency. Tree-Free was
unable to repay the note upon its original maturity. The note is secured by
pari-passu liens on a tissue mill in Maine and stock representing partial
ownership of a tissue mill located in Mexico. In December 1997, a receiver was
appointed by the Superior Court of Maine to preserve and protect the collateral
for the loans made by the Company and other lenders to Tree-Free. In May 1998,
the Company purchased an assignment of Tree-Free's secured indebtedness to a
pari-passu lender for $2.9 million. In June 1998, the Company conducted a
foreclosure sale of the tissue mill and was the successful bidder. The closing
of the sale is in the process of being completed. The Company intends to sell
the mill as soon as practicable, or operate the mill with the intent of selling
it as a going concern. In July 1998, the Company reached an agreement in
principle in which the stock of the mill located in Mexico, which is owned by
Tree-Free, will be sold and the proceeds paid to the Company. The Company and
the receiver for Tree-Free
9
<PAGE>
4. Notes Receivable (continued)
have jointly requested authorization from the Superior Court of Maine to
transfer such stock. The Company believes that the fair value of the tissue mill
and the stock in the mill located in Mexico, net of amounts owed by Tree-Free to
a senior lender, is in excess of the carrying amount of the notes, net of
established reserves. However, no assurance can be given as to the outcome of a
sale of the collateral, the timing of any such sale, or the amount of the
proceeds that may be received therefrom.
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 heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998, filed with the Securities and Exchange
Commission.
Overview
The Company designs and manufactures processing machinery, accessories, and
water-management systems for the paper and paper recycling industries. The
Company's principal products include custom-engineered systems and equipment for
the preparation of wastepaper for conversion into recycled paper; accessory
equipment and related consumables important to the efficient operation of
papermaking machines; and water-management systems essential for draining,
purifying, and recycling process water. The Company's Thermo Black Clawson
subsidiary, acquired May 1997, is a leading supplier of recycling equipment used
in processing fiber for the manufacture of "brown paper," such as that used in
the manufacture of corrugated boxes. The Company's Thermo Fibergen Inc.
subsidiary is developing and commercializing technologies to recover valuable
components such as water, long cellulose fiber, and minerals, generated as
byproducts of the virgin and recycled papermaking process and to clarify and
recycle process water to be reused in papermaking. Thermo Fibergen also converts
papermaking byproducts into commercial products. In December 1997, Thermo
Fibergen entered into a ten-year contract with a paper mill to provide
fiber-recovery and water-clarification services to the paper mill, and also
entered into an engineering, procurement, and construction contract for the
construction of the facility to provide such services. Construction of the
fiber-recovery and water-clarification facility was completed in July 1998. The
Company has been able to test-run the facility, delivering clean water
10
<PAGE>
Overview (continued)
and long fiber to the mill. Through its GranTek Inc. subsidiary, Thermo
Fibergen employs patented technology to produce absorbing granules from
papermaking byproducts.
The Company's manufacturing facilities are principally located in the
U.S. and France. The manufacturing facility in France is located at the
Company's E. & M. Lamort, S.A. subsidiary, which primarily manufactures
recycling equipment and accessories.
The Company's products are primarily sold to the paper industry. Generally,
the financial condition of the paper industry corresponds both to changes in the
general economy and to a number of other factors, including paper and pulp
production capacity. The paper industry entered a severe downcycle in early 1996
and has not recovered. This cyclical downturn, which began adversely affecting
the Company's business during the second half of 1996, continues to have an
adverse effect on the Company's business. The timing of the recovery of the
financial condition of the paper industry cannot be predicted.
In 1997, approximately 37% of the Company's sales originated outside the
U.S., principally in Europe, and approximately 13% of the Company's revenues
were exports from the U.S. During 1997, the Company had exports from the
Company's U.S. and foreign operations to Asia of approximately 6% of total
revenues, a substantial portion of which represents sales from Thermo Black
Clawson, acquired May 1997. Exports to Asia in 1997 were primarily to China,
Japan, and South Korea. Asia is experiencing a severe economic crisis, which has
been characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's sales to Asia, other than to China, have been adversely
affected by the unstable economic conditions in that region. To date, the
Company's business in China has not been adversely affected by the Asian crisis.
Results of Operations
Second Quarter 1998 Compared With Second Quarter 1997
Revenues increased to $63.6 million in the second quarter of 1998 from $54.5
million in the second quarter of 1997, primarily due to an $8.7 million increase
in revenues from Thermo Black Clawson, acquired May 1997, resulting from the
inclusion of revenues for the full three-month period in 1998. In addition, an
increase in demand at Lamort improved revenues at the Company's recycling
business. These improvements were offset in part by a $2.6 million decrease in
revenues from the Company's assessories business, principally due to a decrease
in demand. The unfavorable effects of currency translation due to a stronger
U.S. dollar decreased 1998 revenues by $1.0 million.
The gross profit margin increased to 41% in the second quarter of 1998 from
40% in the second quarter of 1997, primarily due to improved margins at Thermo
Black Clawson and the Company's water-management
11
<PAGE>
Second Quarter 1998 Compared With Second Quarter 1997 (continued)
business. Margin improvement at the Company's water-management business
was principally due to a change in sales mix.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 24% in the second quarter of 1998 from 27% in the second quarter of
1997, primarily due to an increase in revenues and lower expenses as a
percentage of revenues at Thermo Black Clawson.
Research and development expenses increased to $1.8 million in the second
quarter of 1998 from $1.6 million in the second quarter of 1997, primarily due
to the inclusion of expenses at Thermo Black Clawson for the full three-month
period in 1998.
Interest income increased to $2.1 million in the second quarter of 1998 from
$1.7 million in the second quarter of 1997, primarily due to an increase in
average invested balances resulting from the remaining net proceeds from the
July 1997 sale of $153.0 million principal amount of 4 1/2% subordinated
convertible debentures, of which $103.4 million was used to finance the
acquisition of Thermo Black Clawson.
Interest expense increased to $1.8 million in the second quarter of 1998
from $0.8 million in the second quarter of 1997 as a result of the July 1997
issuance of subordinated convertible debentures.
The effective tax rate was 39% in the second quarter of 1998 and 1997. The
effective tax rate exceeded the statutory federal income tax rate primarily due
to the impact of state income taxes.
Minority interest expense primarily represents accretion of Thermo
Fibergen's common stock subject to redemption.
The Company is currently assessing the potential impact of the year 2000 on
the processing of date-sensitive information by the Company's computerized
information systems. The Company believes that its internal information systems
are either year 2000 compliant or will be so prior to the year 2000 without
incurring material costs. There can be no assurance, however, that the Company
will not experience unexpected costs and delays in achieving year 2000
compliance for its internal information systems, which could result in a
material adverse effect on the Company's future results of operations.
First Six Months 1998 Compared With First Six Months 1997
Revenues increased to $125.9 million in the first six months of 1998 from
$99.2 million in the first six months of 1997, primarily due to a $26.1 million
increase in revenues from Thermo Black Clawson, acquired May 1997, resulting
from the inclusion of revenues for the full six-month period in 1998. The
unfavorable effects of currency translation due to a stronger U.S. dollar
decreased 1998 revenues by $2.5 million.
12
<PAGE>
First Six Months 1998 Compared With First Six Months 1997 (continued)
The gross profit margin was unchanged at 41% in the first six months of 1998
and 1997. Margin improvement at the Company's water-management business,
principally due to a change in sales mix, was offset by the inclusion of
lower-margin revenues from Thermo Black Clawson for the full six-month period in
1998.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 25% in the first six months of 1998 from 28% in the first six
months of 1997, primarily due to an increase in revenues and lower expenses as a
percentage of revenues at Thermo Black Clawson.
Research and development expenses increased to $3.6 million in the first six
months of 1998 from $2.9 million in the first six months of 1997, primarily due
to the inclusion of expenses at Thermo Black Clawson for the full six-month
period in 1998.
Interest income increased to $4.1 million in the first six months of 1998
from $3.1 million in the first six months of 1997, primarily due to an increase
in average invested balances resulting from the remaining net proceeds from the
July 1997 sale of $153.0 million principal amount of 4 1/2% subordinated
convertible debentures, of which $103.4 million was used to finance the
acquisition of Thermo Black Clawson.
Interest expense increased to $3.7 million in the first six months of 1998
from $0.9 million in the first six months of 1997 as a result of the July 1997
issuance of subordinated convertible debentures.
The effective tax rate was 39% in the first six months of 1998 and 38% in
the first six months of 1997. These rates exceeded the statutory federal income
tax rate primarily due to the impact of state income taxes.
Minority interest expense decreased to $0.5 million in the first six months
of 1998 from $0.7 million in the first six months of 1997 due to a decrease in
Thermo Fibergen's net income. Minority interest expense primarily represents
accretion of Thermo Fibergen's common stock subject to redemption.
Liquidity and Capital Resources
Consolidated working capital was $185.4 million at July 4, 1998, compared
with $177.0 million at January 3, 1998. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $156.8 million at July
4, 1998, compared with $148.0 million at January 3, 1998. Of the $156.8 million
balance at July 4, 1998, $55.8 million was held by Thermo Fibergen, $7.0 million
was held by Fiberprep, and the remainder was held by the Company and its wholly
owned subsidiaries. At July 4, 1998, $35.7 million of the Company's cash and
cash equivalents was held by its foreign subsidiaries. Repatriation of this cash
into the U.S. would be subject to foreign withholding taxes and could also be
subject to a U.S. tax.
13
<PAGE>
Liquidity and Capital Resources (continued)
During the first six months of 1998, $16.7 million of cash was provided by
operating activities. Cash provided by a decrease in accounts receivable of $5.5
million was offset in part by a $3.8 million reduction of accounts payable. The
decrease in accounts receivable resulted primarily from payments for orders
shipped in late 1997.
During the first six months of 1998, the Company's primary investing
activities, excluding available-for-sale investments activity, were the purchase
of property, plant, and equipment for $4.5 million and an advance of $2.9
million under a note receivable (Note 4). During the first six months of 1998,
the Company's financing activities used $0.3 million in cash.
In July 1998, the Company's Board of Directors authorized the repurchase,
through July 15, 1999, of up to one million shares of its common stock, or the
equivalent in outstanding convertible debentures, in open market or negotiated
transactions. Any such purchases would be funded from working capital.
Thermo Fibergen's common stock is subject to redemption in September 2000 or
2001, the redemption value of which is $54.8 million.
At July 4, 1998, the Company had $59.9 million of undistributed foreign
earnings. The Company does not intend to repatriate undistributed foreign
earnings into the U.S., and does not expect that this will have a material
adverse effect on the Company's current liquidity.
During the remainder of 1998, the Company plans to make expenditures for
property, plant, and equipment of approximately $6 million, which includes
expenditures at Thermo Fibergen for the construction of a fiber-recovery and
water-clarification facility, which was completed in July 1998. In addition,
Thermo Fibergen may make additional capital expenditures for the construction of
additional fiber-recovery facilities. Construction of fiber-recovery facilities
is dependent upon Thermo Fibergen entering into long-term contracts with paper
mills, under which Thermo Fibergen will charge fees to process the mills'
papermaking byproducts. Thermo Fibergen currently has only one such agreement in
place and there is no assurance that Thermo Fibergen will be able to obtain such
additional contracts. The Company believes that its existing resources are
sufficient to meet the capital requirements of its existing operations for the
foreseeable future.
14
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters of a Vote of Security Holders
On June 1, 1998, at the Annual Meeting of Shareholders, the
shareholders reelected six incumbent directors to a one-year term expiring
in 1999. The directors reelected at the meeting were: Dr. Walter J.
Bornhorst, Dr. George N. Hatsopoulos, John N. Hatsopoulos, Francis L.
McKone, Donald E. Noble, and William A. Rainville. Dr. Bornhorst received
60,381,657 shares voted in favor of his election and 55,454 shares voted
against; Dr. G. Hatsopoulos and Mr. Rainville received 60,385,888 shares
voted in favor of his election and 51,223 shares voted against; Mr. J.
Hatsopoulos received 60,384,765 shares voted in favor of his election and
52,346 shares voted against; Mr. McKone received 60,385,663 shares voted
in favor of his election and 51,448 shares voted against; and Mr. Noble
received 60,384,721 shares voted in favor of his election and 52,390
shares voted against. No abstentions or broker nonvotes were recorded on
the election of directors.
Item 5 - Other Information
Pursuant to recent amendments to the rules relating to proxy statements
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
shareholders of the Company are hereby notified that any shareholder proposal
not included in the Company's proxy materials for its 1999 Annual Meeting of
Shareholders (the Annual Meeting) in accordance with Rule 14a-8 under the
Exchange Act will be considered untimely for the purposes of Rules 14a-4 and
14a-5 under the Exchange Act if notice thereof is received by the Company after
March 15, 1999. Management proxies will be authorized to exercise discretionary
voting authority with respect to any shareholder proposal not included in the
Company's proxy materials for the Annual Meeting unless (a) the Company receives
notice of such proposal by March 15, 1999, and (b) the conditions set forth in
Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
15
<PAGE>
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 7th day of August 1998.
THERMO FIBERTEK INC.
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
16
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------------------------------------------------------------------------------
27 Financial Data Schedule.
17
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
FIBERTEK INC.'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 4, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JUL-04-1998
<CASH> 121,093
<SECURITIES> 35,730
<RECEIVABLES> 49,757
<ALLOWANCES> 2,064
<INVENTORY> 33,911
<CURRENT-ASSETS> 249,870
<PP&E> 65,099
<DEPRECIATION> 34,581
<TOTAL-ASSETS> 422,492
<CURRENT-LIABILITIES> 64,434
<BONDS> 153,000
0
0
<COMMON> 634
<OTHER-SE> 146,584
<TOTAL-LIABILITY-AND-EQUITY> 422,492
<SALES> 125,913
<TOTAL-REVENUES> 125,913
<CGS> 74,516
<TOTAL-COSTS> 74,516
<OTHER-EXPENSES> 3,624
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 3,708
<INCOME-PRETAX> 16,433
<INCOME-TAX> 6,386
<INCOME-CONTINUING> 9,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,579
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
