<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission file number 0-21042
-------
Molten Metal Technology, Inc.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1659959
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400-2 Totten Pond Road
Waltham, MA 02154
----------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 487-9700
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, 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.
Common Stock, $.01 par value 23,418,128
- - ---------------------------- ---------------------------
Class Outstanding at May 13, 1996
<PAGE> 2
MOLTEN METAL TECHNOLOGY, INC.
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
Consolidated Balance Sheet - March 31, 1996 and December 31, 1995 3
Consolidated Statement of Operations for the quarters ended
March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows for the quarters ended
March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 8-9
PART II - OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- - ----------
* No information provided due to the inapplicability of item.
<PAGE> 3
MOLTEN METAL TECHNOLOGY, INC. AND SUSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,126,285 $ 6,644,856
Short-term investments 68,432,802 79,631,394
Accounts receivable 1,221,771 1,917,858
Accounts receivable from affiliate 20,043,269 15,412,196
Prepaid expenses and other current assets 3,111,215 2,309,398
------------ ------------
Total current assets 107,935,342 105,915,702
Restricted cash and investments 5,696,477 7,432,817
Fixed assets, net 39,975,106 34,679,390
Intangible assets, net 3,945,271 3,501,680
Investment in affiliate 1,204,106 834,794
Other assets 1,360,743 971,618
------------ ------------
$160,117,045 $153,336,001
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 195,043 $ 195,043
Accounts payable 14,147,330 9,827,490
Accrued expenses 2,963,891 1,713,557
Accrued interest 315,773 789,455
Deferred revenue from affiliate 2,333,333 4,083,334
------------ ------------
Total current liabilities 19,955,370 16,608,879
------------ ------------
Long-term debt 22,836,249 22,883,962
------------ ------------
Due to related parties 1,474,586 1,474,586
------------ ------------
Deferred income from affiliate 4,413,363 2,459,918
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 3,000 shares authorized, no shares
issued or outstanding -- --
Common stock, $.01 par value, 40,000,000 shares authorized; shares
issued and outstanding: 23,057,330 at March 31, 1996 and
22,746,854 at December 31, 1995 230,573 227,469
Additional paid-in capital 148,206,109 146,641,721
Valuation allowance for short-term investments (575,686) (311,163)
Accumulated deficit (36,423,519) (36,638,947)
------------ ------------
111,437,477 109,919,080
Less: Deferred compensation -- (10,424)
------------ ------------
Total stockholders' equity 111,437,477 109,908,656
------------ ------------
$160,117,045 $153,336,001
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE> 4
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Revenue:
Research and development ("R&D") $ 1,257,808 $ 2,642,194
Construction, R&D and consulting from affiliate 17,365,736 233,503
Technology transfer from affiliate 3,750,000 1,750,000
----------- -----------
22,373,544 4,625,697
----------- -----------
Operating expenses:
Cost of revenue - R&D 1,178,331 2,642,194
Cost of revenue - construction, R&D and
consulting from affiliate 15,144,941 251,473
R&D 4,708,163 3,687,455
Selling, general and administrative ("SG&A") 2,418,332 1,941,520
----------- -----------
23,449,767 8,522,642
Equity income from affiliate 369,312 --
----------- -----------
Loss from operations (706,911) (3,896,945)
Other income (expense):
Interest income 1,354,729 1,372,274
Interest expense (432,390) (479,121)
----------- -----------
Net income (loss) $ 215,428 $(3,003,792)
=========== ===========
Net income (loss) per share $ 0.01 $ (0.14)
=========== ===========
Weighted average common and common equivalent
shares outstanding 27,493,890 22,201,430
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 215,428 $(3,003,792)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,316,704 1,281,661
Equity income from affiliate (369,312) --
Compensation expense related to common stock option 10,424 15,624
Decrease (increase) in accounts receivable 696,087 (2,642,194)
Decrease (increase) in accounts receivable from affiliate (4,631,073) 85,462
Increase in prepaid expenses and other current assets (801,817) (750,327)
Increase in other assets (401,696) (9,447)
Increase in accounts payable 4,319,840 287,010
Increase in accrued expenses 1,250,334 805,522
Decrease in accrued interest (473,682) (468,333)
Decrease in deferred revenue (1,750,001) (1,750,000)
Increase in deferred income 1,953,445 --
----------- -----------
Net cash provided by (used in) operating activities 1,334,681 (6,148,814)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (6,544,481) (2,244,104)
Purchase of intangible assets (498,959) (249,092)
Redemption of short-term investments, net 10,934,069 10,040,752
Decrease in restricted cash 1,736,340 59,581
----------- -----------
Net cash provided by investing activities 5,626,969 7,607,137
----------- -----------
Cash flows from financing activities:
Proceeds from issuances of common stock 1,567,492 150,532
Principal repayments of long-term debt (47,713) (48,495)
----------- -----------
Net cash provided by financing activities 1,519,779 102,037
----------- -----------
Increase in cash and cash equivalents 8,481,429 1,560,360
Cash and cash equivalents at beginning of period 6,644,856 12,063,883
----------- -----------
Cash and cash equivalents at end of period $15,126,285 $13,624,243
=========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Molten Metal Technology, Inc. (the "Company") is an environmental technology
company commercializing pollution prevention and waste recycling methods that
are broadly applicable to a wide variety of hazardous, non-hazardous and
radioactive wastes. The Company developed its core technology, Catalytic
Extraction Processing ("CEP"), to dissolve waste compounds to their constituent
elements in a molten metal bath and reconfigure the elements into useful raw
materials.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Net income (loss) per share is determined by dividing net income (loss) by the
weighted average number of common and common equivalent shares outstanding
during the period. Common share equivalents consist of common stock which may be
issuable upon exercise of outstanding stock options and warrants. Common share
equivalents have been excluded from the weighted average number of common shares
in loss periods since their effect is anti-dilutive.
Certain reclassifications have been made for consistent presentation. The
reclassifications have no effect on the net loss for the period ending March 31,
1995.
The information furnished is unaudited and reflects all adjustments (consisting
of only normal recurring adjustments) which, in the opinion of management, are
necessary for a fair presentation of the financial position and results of
operations for the interim periods. The accompanying financial statements should
be read in conjunction with the Company's audited financial statements and
related footnotes for the year ended December 31, 1995 which are included in the
Company's annual report on Form 10-K for the year ended December 31, 1995. The
results of operations for the quarter ended March 31, 1996 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. EQUITY TRANSACTIONS
During the quarter ended March 31, 1996, 310,476 shares of common stock were
issued upon the exercise of options.
NOTE 3. EXPANSION OF PARTNERSHIP
In March 1996, the Company and Lockheed Martin Corporation("LMC") executed an
agreement to expand their partnership (M4 Environmental L.P. or "M4") through
the acquisition by M4 of the Retech division of Lockheed Environmental Systems &
6
<PAGE> 7
Technologies Co., an indirect wholly-owned subsidiary of LMC. The Retech
division designs and manufactures metallurgical equipment and waste processing
systems that utilize a plasma technology. Under this agreement, LMC contributed
approximately half of the assets of the Retech division to M4, and the Company
purchased substantially all of the remaining assets of the Retech division for
307,735 shares of its common stock, and then immediately contributed these
assets to M4. Pursuant to the agreement, the number of shares issued to LMC will
be adjusted based on information to be included in the closing balance sheet of
Retech. In addition, the Company and LMC agreed to restructure certain aspects
of their joint venture agreement. LMC has increased its equity commitment to M4
from $50 million to $75 million, has agreed to provide up to $150 million in
project debt guarantees for M4 CEP projects through 2004, subject to various
conditions, and has agreed to provide a $15 million working capital facility to
M4. The expanded M4 Partnership will continue to be owned by the Company and LMC
on a 50/50 basis. As part of this restructuring, M4 and LMC have agreed to
"team" in response to certain major procurement opportunities for the Department
of Defense, the Department of Energy and the United States Enrichment
Corporation. Under this teaming arrangement, LMC, through its Energy and
Environmental Sector ("LMC/EES"), would serve as the prime contractor, with
responsibility for overall contract management and customer interface, and M4
would be responsible for providing and managing all waste processing
technologies necessary to perform the teamed project. Also, M4 will have the
right to fulfill LMC's other waste processing requirements, subject to certain
limitations.
The Company accounts for its investment in M4 using the equity method. During
the quarter ended March 31, 1996, the Company recognized approximately $369,000
in equity income from M4, reflecting the Company's share of revenues earned by
M4. Under the partnership agreement, the Company and LMC share equally in M4's
revenues and all expenses are allocated to LMC until the capital accounts of the
Company and LMC are equal. Thereafter, the Company and LMC will share equally in
the profits or losses of M4. The Company anticipates that its capital account
will become equal to LMC's capital account within one year. The related effect
on the Company's equity in income of M4 could have a material adverse effect on
future results of operations.
NOTE 4. SUBSEQUENT EVENT
In May 1996, the Company issued $143,750,000 of Convertible Subordinated Notes
Due 2006 (the "Notes"). The Notes have a term of ten years and bear interest at
the rate of 5.50% per year. The Notes are convertible into shares of the
Company's common stock at a conversion price of $38.75 per share, which
represents a 25% premium over the closing price of the Company's common stock on
April 25, 1996.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
<TABLE>
Revenue for the first quarter of 1996 increased to $22,374,000 from $4,626,000
in the first quarter of 1995. The following table compares sources of revenue
for the quarters ended March 31, 1996 and 1995:
<CAPTION>
Quarter ended March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Engineering and construction $16,485,000 $ 84,000
R&D and consulting 2,139,000 2,792,000
Technology transfer 3,750,000 1,750,000
----------- ----------
$22,374,000 $4,626,000
=========== ==========
</TABLE>
The increase in engineering and construction revenue is due to the development
of CEP systems for M4 as the Company continues to escalate commercial
activities. R&D and consulting revenue decreased from 1995 due to a reduction in
billings under a cost-sharing contract with the United States Department of
Energy (the "DOE"). For the quarter ended March 31, 1996, certain costs that
were reimbursable under the DOE contract in the prior year were not covered due
to limited funding. The Company has received a unilateral modification from the
DOE, with a funding limitation of $2,000,000, for work on an enhancement to its
current statement of work. The Company plans to submit a proposal to the US
government in response to this modification, which, if approved, could result in
additional revenues in 1996. Technology transfer fees increased in 1996 as a
result of the recognition of plant start-up fees from M4. The existence and
timing of the Company's commercial sales and operations and related revenue will
depend on a number of factors, including the ability of the Company and its
affiliates to successfully market, permit and build CEP systems on a timely
basis for their target markets, and no assurances can be made in this regard.
Cost of revenue for the first quarter of 1996 increased to $16,323,000 from
$2,894,000 in the first quarter of 1995. The increase is primarily attributable
to an increase in engineering and construction activities in connection with the
development of CEP systems for M4.
R&D expenses for the first quarter of 1996 increased to $4,708,000 from
$3,687,000 in the first quarter of 1995. The increase reflects an increase in
costs associated with the continued development of CEP and the performance of
internally funded CEP demonstrations. SG&A expenses for the first quarter of
1996 increased to $2,418,000 from $1,942,000 in the first quarter of 1995. The
increase reflects the hiring of additional personnel and the expansion of
corporate infrastructure. The Company anticipates that total expenses will
continue to increase as commercial activities escalate. The classification of
expenses between cost of revenue, R&D and SG&A
8
<PAGE> 9
will depend on the number and amount of future cost reimbursement contracts and
the related absorption of R&D and SG&A expenses into cost of revenue.
Equity income from affiliate for the first quarter of 1996 increased to $369,000
from $0 in the first quarter of 1995 reflecting the Company's share of revenue
earned by M4. Interest income for the first quarter of 1996 decreased to
$1,355,000 from $1,372,000 in the first quarter of 1995. The decrease is due to
lower average investment balances for the first quarter of 1996 compared to the
first quarter of 1995. Interest expense for the first quarter of 1996 decreased
to $432,000 from $479,000 in the first quarter of 1995. The decrease is a result
of a greater proportion of interest costs related to amounts capitalized for the
construction of CEP systems during the first quarter of 1996.
FINANCIAL CONDITION
As of March 31, 1996, the Company's cash, cash equivalents and short-term
investments decreased by approximately $2,717,000 from December 31, 1995. The
decrease was primarily a result of the net effect of cash used for the
engineering, construction and acquisition of fixed assets offset by cash
provided by operations, issuances of stock and decreases in restricted cash. For
the remainder of 1996, the Company expects to incur significant additional
expenditures related to the engineering, construction and start-up of commercial
CEP systems owned by itself and through joint ventures. The Company intends to
seek debt financing to finance or re-finance a substantial portion of these
expenditures. The amount, timing and effect on liquidity of capital
expenditures, including equity contributions to joint ventures, to be made by
the Company in connection with the development of commercial CEP systems will
depend on a number of factors, including the number of systems to be developed,
the timing of the development of such CEP systems, the terms of the development
arrangements with the Company's customers and partners and the extent to which
the Company is able to obtain financing for such CEP systems.
As of March 31, 1996, accounts receivable and accounts receivable from affiliate
increased by approximately $3,935,000 from December 31, 1995 due to billings
under construction contracts with M4. As of March 31, 1996, accounts payable
increased by approximately $4,320,000 from December 31, 1995 due to purchasing
activities related to construction contracts with M4. Deferred revenue decreased
by $1,750,000 from December 31, 1995 to March 31, 1996. The decrease is a result
of revenue recognized for technology transfer fees received under agreements
with M4.
During the quarter ended March 31, 1996, the Company earned revenue from M4
relating to services provided for the engineering and construction of CEP
systems. For items that are capitalized by M4, the portion of the gross profit
representing the Company's ownership interest related to such revenue has been
deferred, and will be recognized over the period that the related assets are
depreciated by M4. As of March 31, 1996, the related deferred income increased
by $1,953,000 from December 31, 1995 due to billings under construction
contracts with M4.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 8, 1996, the Company held its Annual Meeting of Stockholders to consider
and vote upon the following four proposals:
(1) A proposal to elect seven (7) directors of the Company to serve until the
next Annual Meeting of Stockholders and until their successors are duly
elected and qualified.
(2) A proposal to approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock from 40,000,000 to 100,000,000.
(3) A proposal to ratify the adoption and approval by the Board of Directors of
amendments to the Company's Amended and Restated 1989 Long Term Incentive
Compensation Plan to modify the automatic option grants for non-employee
directors of the Company.
(4) A proposal to ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the current fiscal year.
Results with respect to the voting on each of the above proposals were as
follows:
Election of Directors: FOR WITHHELD
---------- --------
James B. Anderson 20,155,984 14,974
William M. Haney, III 20,156,384 14,574
Peter A. Lewis 20,155,984 14,974
Christopher J. Nagel 20,156,259 14,699
John T. Preston 20,156,384 14,574
Maurice F. Strong 20,155,763 15,195
Robert A. Swanson 20,156,284 14,674
FOR AGAINST ABSTAIN NO VOTE
---------- --------- ------- -------
Approval to increase authorized
shares of common stock 15,964,412 4,054,592 41,784 110,170
Approval to amend the Amended
and Restated 1989 Long Term
Incentive Compensation Plan 17,891,188 1,926,305 54,638 298,827
Approval of Price Waterhouse LLP
as independent accountants 20,136,814 21,226 12,918 0
10
<PAGE> 11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Computation of Primary and Fully-Diluted Net Income (Loss) Per Share
27 - Financial Data Schedule
(b) Reports on Form 8-K - None.
11
<PAGE> 12
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.
MOLTEN METAL TECHNOLOGY, INC.
-----------------------------
Date: May 13, 1996 By: /S/ Benjamin T. Downs
------------ ---------------------
Benjamin T. Downs
Executive Vice President of Finance
and Administration, Treasurer
(Principal Financial Officer and
Authorized Signatory)
12
<PAGE> 1
MOLTEN METAL TECHNOLOGY, INC.
<TABLE>
COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME (LOSS) PER SHARE
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY NET INCOME (LOSS) PER SHARE:
Net income (loss) $ 215,428 $(3,003,792)
=========== ===========
Weighted average common shares outstanding 22,859,947 22,201,430
Incremental shares from use of treasury stock method for
stock options and warrants (i) 4,633,943 --
----------- -----------
Common and common equivalent shares, where applicable 27,493,890 22,201,430
=========== ===========
Net income (loss) per share $ 0.01 $ (0.14)
=========== ===========
NET INCOME (LOSS) PER SHARE ASSUMING FULL DILUTION:
Net income (loss) $ 215,428 $(3,003,792)
=========== ===========
Weighted average common shares outstanding 22,859,947 22,201,430
Incremental shares from use of treasury stock method for
stock options and warrants (i) 4,633,943 --
----------- -----------
Common and common equivalent shares, where applicable 27,493,890 22,201,430
=========== ===========
Net income (loss) per share $ 0.01 $ (0.14)
=========== ===========
<FN>
(i) For the quarter ended March 31, 1995, the incremental shares from the use
of the treasury stock method for stock options and warrants have been
excluded from the computation since their effect is anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,126,285
<SECURITIES> 68,432,802
<RECEIVABLES> 21,265,040
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 107,935,342
<PP&E> 50,689,302
<DEPRECIATION> 10,714,196
<TOTAL-ASSETS> 160,117,045
<CURRENT-LIABILITIES> 19,955,370
<BONDS> 22,836,249
<COMMON> 230,573
0
0
<OTHER-SE> 111,206,904
<TOTAL-LIABILITY-AND-EQUITY> 160,117,045
<SALES> 0
<TOTAL-REVENUES> 22,373,544
<CGS> 0
<TOTAL-COSTS> 16,323,272
<OTHER-EXPENSES> 7,126,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 432,390
<INCOME-PRETAX> 215,428
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,428
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
