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 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-12636
THERMO REMEDIATION INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-3203761
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1964 South Orange Blossom Trail
Apopka, Florida 32703
(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 26, 1996
---------------------------- ----------------------------
Common Stock, $.01 par value 12,859,106
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO REMEDIATION INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, March 30,
(In thousands) 1996 1996
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 17,548 $ 26,247
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $14,128 and $7,007) 14,128 7,004
Accounts receivable, less allowances
of $862 and $786 15,577 15,115
Unbilled contract costs and fees 3,076 2,094
Prepaid income taxes 1,183 2,836
Prepaid expenses 2,072 2,196
Due from parent company and Thermo Electron 2,371 564
-------- --------
55,955 56,056
-------- --------
Property, Plant and Equipment, at Cost 54,039 52,119
Less: Accumulated depreciation and amortization 15,281 14,516
-------- --------
38,758 37,603
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $2,094 and $2,108) 2,073 2,098
-------- --------
Other Assets 15,341 11,724
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 25,635 28,321
-------- --------
$137,762 $135,802
======== ========
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THERMO REMEDIATION INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, March 30,
(In thousands except share amounts) 1996 1996
--------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 3,211 $ 3,362
Accrued payroll and employee benefits 3,190 2,539
Deferred revenue 1,063 936
Billings in excess of revenues earned 282 630
Accrued interest 321 776
Accrued income taxes 663 57
Other accrued expenses 1,018 1,413
-------- --------
9,748 9,713
-------- --------
Deferred Income Taxes 2,137 2,137
-------- --------
Long-term Obligations:
4 7/8% Subordinated convertible debentures 37,950 37,950
3 7/8% Subordinated convertible note, due
to parent company 2,650 2,650
-------- --------
40,600 40,600
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 20,000,000
shares authorized; 12,859,376 and 12,800,189
shares issued 129 128
Capital in excess of par value 82,267 81,353
Retained earnings 2,925 1,910
Treasury stock at cost, 2,154 shares (31) (31)
Net unrealized loss on available-for-sale
investments (13) (8)
-------- --------
85,277 83,352
-------- --------
$137,762 $135,802
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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THERMO REMEDIATION INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $23,520 $13,181
------- -------
Costs and Operating Expenses:
Cost of revenues 19,038 9,157
Selling, general and administrative expenses 2,902 2,166
New business development expenses 296 276
------- -------
22,236 11,599
------- -------
Operating Income 1,284 1,582
Interest Income 491 595
Interest Expense (includes $26 and $71 to
related party) (550) (371)
Equity in Earnings of Unconsolidated Subsidiary 279 -
Gain on Sale of Investments 140 80
------- -------
Income Before Provision for Income Taxes 1,644 1,886
Provision for Income Taxes 616 706
------- -------
Net Income $ 1,028 $ 1,180
======= =======
Earnings per Share $ .08 $ .10
======= =======
Weighted Average Shares 13,254 12,145
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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THERMO REMEDIATION INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
--------------------
June 29, July 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 1,028 $ 1,180
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,277 1,310
Equity in earnings of unconsolidated
subsidiary (279) -
Gain on sale of investments (140) (80)
Provision for losses on accounts receivable 84 -
Other noncash expenses 405 -
Changes in current accounts:
Accounts receivable (235) (920)
Other current assets (1,232) (337)
Billings in excess of revenues earned (348) 103
Due from parent company and Thermo
Electron (1,807) (2,648)
Other current liabilities 1,383 766
-------- -------
Net cash provided by (used in)
operating activities 136 (626)
-------- --------
Investing Activities:
Purchases of available-for-sale investments (15,857) (23,203)
Proceeds from sale and maturities of
available-for-sale investments 8,890 5,580
Purchases of property, plant and equipment (2,301) (2,566)
Purchase of other assets (521) -
Other 52 (58)
-------- --------
Net cash used in investing
activities (9,737) (20,247)
-------- --------
Financing Activities:
Net proceeds from issuance of subordinated
convertible debentures - 36,889
Repayment of note payable to Thermo Electron - (4,000)
Net proceeds from issuance of Company
common stock 120 6,675
Other 782 -
-------- --------
Net cash provided by financing
activities $ 902 $ 39,564
-------- --------
5PAGE
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THERMO REMEDIATION INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
--------------------
June 29, July 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents $ (8,699) $ 18,691
Cash and Cash Equivalents at Beginning of Period 26,247 792
-------- --------
Cash and Cash Equivalents at End of Period $ 17,548 $ 19,483
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
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THERMO REMEDIATION INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Remediation 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 June 29, 1996,
the results of operations for the three-month periods ended June 29, 1996
and July 1, 1995, and the cash flows for the three-month periods ended
June 29, 1996 and July 1, 1995. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of March 30, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended March 30, 1996, filed with the Securities and
Exchange Commission.
Certain amounts in fiscal 1996 have been reclassified to conform to
the fiscal 1997 financial statement presentation.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a leading national provider of industrial-remediation
services, nuclear-remediation services, soil-remediation services, and
waste-fluids recycling services.
In December 1995, the Company acquired Remediation Technologies, Inc.
(ReTec), a provider of consulting, engineering, and on-site services to
help clients manage problems associated with environmental compliance,
waste management, and the remediation of industrial sites contaminated with
organic wastes and residues.
The Company's Thermo Nutech division provides services to remove
radioactive contaminants from sand, gravel, and soil, as well as health
physics services, radiochemistry laboratory services, and radiation
dosimetry services.
The Company, through its TPS Technologies Inc. division, is also a
national leader in the design and operation of nonhazardous soil-
remediation facilities and operates a network of such facilities serving
customers in more than a dozen states along the East and West Coasts.
7PAGE
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THERMO REMEDIATION INC.
Overview (continued)
The Company's Thermo Fluids subsidiary collects, tests, processes, and
recycles used motor oil and other industrial oils.
The Company's soil-remediation business is affected by several
factors, including enactment and enforcement of environmental legislation
regarding underground storage tanks, the availability of state funding for
environmental cleanup, economic cycles, extreme weather variations, and
local competition. Since the soil-remediation centers compete locally,
these factors vary from site to site. The Company's ReTec and Thermo Nutech
businesses are affected by several factors, particularly, extreme weather
variations, government spending, and regulation of remediation activities.
Results of Operations
First Quarter Fiscal 1997 Compared With First Quarter Fiscal 1996
Revenues in the first quarter of fiscal 1997 were $23,520,000,
compared with $13,181,000 in the first quarter of fiscal 1996, an increase
of 78%. Revenues increased primarily due to the inclusion of $10,494,000 in
revenues from ReTec, which was acquired in December 1995. Revenues from
nuclear services increased 4% due to higher revenues from a long-term
environmental restoration contract for the U.S. Department of Energy's
(DOE's) Hanford site (Hanford) and related health physics services, largely
offset by a decrease in radiochemistry laboratory work, reflecting a
reduction in spending at the DOE and delays in federal government budget
appropriations. Revenues from soil-remediation services decreased 8%
resulting from declines in the volume and price of soil processed due to
competitive pricing pressures and ongoing regulatory uncertainties in
several states. Revenues from fluids-recycling services increased 12% due
to the addition of a new facility in Nevada.
The gross profit margin decreased to 19% in the first quarter of
fiscal 1997 from 31% in the first quarter of fiscal 1996, primarily due to
the inclusion of lower-margin revenues from ReTec. The gross profit margin
on nuclear services decreased due to higher operating costs, declining
revenues from higher-margin radiochemistry laboratory work, and increased
revenues from the lower-margin Hanford contract. The gross profit margin on
soil-remediation services decreased primarily due to competitive pricing
pressures.
Selling, general and administrative expenses as a percentage of
revenues decreased to 12% in the first quarter of fiscal 1997 from 16% in
the first quarter of fiscal 1996, due to the efficiencies associated with
increased revenues and, to a lesser extent, additional cost-control
measures.
Interest income decreased to $491,000 in the first quarter of fiscal
1997 from $595,000 in the first quarter of fiscal 1996 as a result of lower
average invested balances following the acquisition of ReTec in December
1995. Interest expense increased to $550,000 in the first quarter of fiscal
1997 from $371,000 in the first quarter of fiscal 1996, primarily due to
the issuance of subordinated convertible debentures in May 1995.
8PAGE
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THERMO REMEDIATION INC.
First Quarter Fiscal 1997 Compared With First Quarter Fiscal 1996
(continued)
Equity in earnings of unconsolidated subsidiary in the first quarter
of fiscal 1997 represents ReTec's proportionate share of income from a
joint venture.
The effective tax rate was 37% in the first quarters of fiscal 1997
and 1996, which is higher than the Company's federal statutory income tax
rate primarily due to the impact of state income taxes.
Liquidity and Capital Resources
Working capital, including cash, cash equivalents, and short-term
available-for-sale investments, was $46,207,000 at June 29, 1996, compared
with $46,343,000 at March 30, 1996. Cash, cash equivalents, and short- and
long-term available-for-sale investments were $33,749,000 at June 29, 1996,
compared with $35,349,000 at March 30, 1996.
During the three months ended June 29, 1996, the Company expended
$2,301,000 on purchases of property, plant and equipment. During the
remainder of fiscal 1997, the Company expects to make capital expenditures
of approximately $3,600,000, primarily to expand the fluids-recycling
services business. Although the Company has no material commitments for
capital expenditures, such expenditures will largely be affected by the
number of complementary businesses that can be acquired or developed during
the year. On July 31, 1996, the Company entered into a nonbinding
memorandum of understanding with respect to the possible acquisition of a
remediation contracting firm, for a purchase price equal to $1.8 million in
cash and 324,000 shares of the Company's common stock. The completion of
this transaction is subject to several conditions, including completion of
the Company's due diligence investigation and negotiation of a definitive
agreement. Accordingly, no assurances can be given that this transaction
will be completed. The Company believes that it has adequate resources to
meet its financial needs for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
9PAGE
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THERMO REMEDIATION INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 6th day of August 1996.
THERMO REMEDIATION INC.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and
Chief Financial Officer
10PAGE
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THERMO REMEDIATION INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMO REMEDIATION INC.
Computation of Earnings per Share
Three Months Ended
--------------------------
June 29, July 1,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $ 1,028,000 $ 1,180,000
----------- -----------
Shares:
Weighted average shares outstanding 12,832,975 12,145,406
Add: Shares issuable from assumed exercise
of options and warrants (as determined
by the application of the treasury
stock method) 420,982 -
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 13,253,957 12,145,406
----------- -----------
Primary Earnings per Share (a) / (b) $ .08 $ .10
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
REMEDIATION INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> JUN-29-1996
<CASH> 17,548
<SECURITIES> 14,128
<RECEIVABLES> 16,439
<ALLOWANCES> 862
<INVENTORY> 0
<CURRENT-ASSETS> 55,955
<PP&E> 54,039
<DEPRECIATION> 15,281
<TOTAL-ASSETS> 137,762
<CURRENT-LIABILITIES> 9,748
<BONDS> 37,950
0
0
<COMMON> 129
<OTHER-SE> 85,148
<TOTAL-LIABILITY-AND-EQUITY> 137,762
<SALES> 0
<TOTAL-REVENUES> 23,520
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<TOTAL-COSTS> 19,038
<OTHER-EXPENSES> 296
<LOSS-PROVISION> 84
<INTEREST-EXPENSE> 550
<INCOME-PRETAX> 1,644
<INCOME-TAX> 616
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</TABLE>
