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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 30, 1997
KTI, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 33-85234 22-2665282
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
7000 Boulevard East, Guttenberg, New Jersey 07093
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code- (201) 854-7777
Not Applicable
(Former name and former address, as changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 30, 1997, KTI, Inc., a New Jersey corporation (the Company or
the Registrant) purchased a 49.5% limited partnership interest in Penobscot
Energy Recovery Company, Limited Partnership, a Maine limited partnership
("PERC") from The Prudential Insurance Company of America ("Prudential") for
approximately $11.7 million in cash. In addition the Company assumed certain
liabilities of Prudential by the payment of cash in the amount of $200,000 to
Prudential and the issuance of Letters of Credit to Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") for approximately $3.9 million,
replacing obligations of Prudential to Morgan Guaranty. At the same time, the
Company purchased an option for $300,000 to buy the remaining 14.8% interest of
Prudential in PERC for a price of $2.1 million. The option to purchase
Prudential's remaining limited partnership interest terminates on October 31,
1998.
With this purchase, the Company's interest in PERC has increased to 56.5%.
Prudential owns a 14.8% limited partnership interest. A subsidiary of Pacificorp
holds the remaining 28.7% interest in PERC, 3% as a general partner and 25.7% as
a limited partner.
PERC is located in Orrington, Maine and owns a 25 megawatt waste-to-energy
power generating plant. Power is produced by processing approximately 250,000
tons of municipal solid waste received from 230 communities in Maine. The power
is sold to Bangor Hydro-Electric Company under a long-term power supply
contract. PERC had $30.3 million of revenue and $6.1 million of net income in
1996. For the nine months ended on September 30, 1997, PERC had revenue of $23.1
million and net income of $4.8 million.
ITEM 5. OTHER EVENTS.
In early October 1997, WEXFORD KTI LLC converted all of its $5 million
principal amount Convertible Subordinated Promissory Note dated as of October
23, 1996 into 618,609 shares of the Company's common stock.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTOR.
Kenneth A. Rubin, an Officer of WEXFORD KTI LLC, resigned as a
director of the Company. No disagreement exists, to the knowledge of the
Company, between Mr. Rubin and the Company as to the Company's operations,
policies or
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the business acquired.
The audited balance sheet of Penobscot Energy Recovery Company, Limited
Partnership, as of December 31, 1996 and 1995 and the related statements of
income, changes in partners' capital and cash flow for each of the three years
in the period ended December 31, 1996 were included in the Registrant's Form
10-K for the fiscal year ended December 31, 1996.
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(b) Pro Forma Financial information.
The following pro forma condensed combined financial statements are based
on the historical financial statements of the company and of PERC at December
31, 1996 and September 30, 1997. The pro forma condensed combined statement of
operations assumes that the Company purchased PERC at the beginning of the
stated period. The Company's financial statements on Form 10-Q for the quarterly
period ended September 30, 1997 consolidate PERC for balance sheet purposes.
Accordingly, no pro forma balance sheet is included herein.
The pro forma condensed combined statements of operations are not
necessarily indicative of operating results which would have been achieved had
this transaction been completed at the beginning of the respective periods and
should not be construed as representative of future operations.
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<TABLE>
<CAPTION>
KTI, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
PRO FORMA PRO FORMA
KTI, INC. PERC ADJUSTMENTS KTI, INC.
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Electric Power Revenues $ 20,820,860 $ 18,478,405 $ 39,299,265
Gain on Sale of Capacity 33,203,252 33,203,252
Waste Processing Revenues 11,024,265 11,807,454 (530,786)(1) 22,300,933
Other Waste Handling Revenues 3,459,546 3,459,546
------------- ------------- ------------- -------------
Total Revenues 68,507,923 30,285,859 (530,786) 98,262,996
COSTS AND EXPENSES
Electric power and waste
Processing operating costs 26,453,290 15,660,582 (319,685)(2) 41,263,401
(530,786)(1)
Selling, general, and
administrative expenses 2,389,008 5,353,385 7,742,393
Interest, net 4,463,873 3,170,785 7,634,658
------------- ------------- ------------- -------------
Total Costs and Expenses 33,306,171 24,184,752 (850,471) 56,640,452
Equity in net income (loss) of
partnerships
PERC 332,655 (332,655)(3)
Loss of Sale of Investment (296,459) (296,459)
------------- ------------- ------------- -------------
Income (loss) before minority interest 35,237,948 6,101,107 (12,970) 41,326,085
Minority Interest 18,609,797 2,653,982(4) 21,263,779
------------- ------------- ------------- -------------
Net Income (loss) available for
Shareholders 16,628,151 6,101,107 (2,666,952) 20,062,306
Preferred Dividends 1,015,000(5) 1,015,000
------------- ------------- ------------- -------------
Net Income for Common Shareholders $ 16,628,151 $ 6,101,107 $ (3,681,952) $ 19,047,306
============= ============= ============= =============
Pro forma earnings (loss) per common share and
common share equivalent:
Primary: ------------- -------------
Net income $ 2.61 $ 3.00
============= =============
Pro forma weighted average number
of common shares and common share
equivalents outstanding 6,359,593 6,359,593
Fully Diluted: ------------- -------------
Net income $ 2.40 $ 2.54
============= =============
Pro forma weighted average number
of common shares and common share
equivalents outstanding 6,925,976 987,234(6) 7,913,210
</TABLE>
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<TABLE>
<CAPTION>
KTI, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
PRO FORMA PRO FORMA
KTI, INC. ADJUSTMENTS KTI, INC.
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Electric Power Revenues $ 30,389,250 $ 30,389,250
Waste Processing Revenues 19,513,711 19,513,711
Other Waste Handling Revenues 16,096,812 16,096,812
------------ ------------
Total Revenues 65,999,773 65,999,773
COSTS AND EXPENSES
Electric Power and Waste
Processing Operating Costs 50,180,577 $ (239,764)(a) 49,940,813
Selling, General, and
Administrative 2,375,680 2,375,680
Interest, Net 3,699,876 3,699,876
------------ ------------ ------------
Total Costs and Expenses 56,256,133 (239,764) 56,016,369
------------ ------------ ------------
Income from Continuing Operations
before Minority Interest and
Extraordinary Items 9,743,640 239,764 9,983,404
Pre-acquisition Earnings Minority
Interest (3,983,766) 3,983,766 (b)
Minority Interest in Subsidiaries (1,229,287) (2,527,335)(c) (3,756,622)
------------ ------------ ------------
Net Income 4,530,587 1,696,195 6,226,782
Preferred Dividends 759,164(d) 759,164
------------ ------------ ------------
Net Income available to Common
Shareholders $ 4,530,587 $ 937,030 $ 5,467,617
============ ============ ============
Earnings (loss) per common share
and common share equivalent
Primary:
------------ ------------
Net Income $ 0.59 $ 0.71
============ ============
Weighted Average number of common
shares and common share equivalents
outstanding 7,726,900 7,726,900
Fully diluted: ------------ ------------
Net Income $ 0.59 $ 0.71
============ ============
Weighted Average number of common
shares and common share equivalents
outstanding 7,726,900 987,234(e) 8,714,134
</TABLE>
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KTI, INC.
SEPTEMBER 30, 1997 AND DECEMBER 30, 1996
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF TRANSACTION
On September 30, 1997, KTI, Inc. (the Company or the Registrant) purchased a
49.5% limited partnership interest in Penobscot Energy Recovery Company, Limited
Partnership, a Maine limited partnership ("PERC") from The Prudential Insurance
Company of America ("Prudential") for approximately $11.7 million in cash. In
addition, the Company assumed certain liabilities of Prudential by the payment
of cash in the amount of $200,000 to Prudential and the issuance of Letters of
Credit to Morgan Guaranty Trust Company of New York ("Morgan Guaranty") for
approximately $3.9 million, replacing obligations of Prudential to Morgan
Guaranty.
2. PRO FORMA ADJUSTMENTS
NINE MONTHS ENDING SEPTEMBER 30, 1997.
(a) Reduction in depreciation of property, plant, and equipment as a result
of the write down of assets in purchase accounting.
(b) Elimination of pre-acquisition earnings in PERC (93% of PERC's net
income, representing that share of PERC prior to the acquisition which
was not owned by the Company)
(c) Additional minority interest reflecting the 43.5% of PERC currently not
owned by the Company
(d) Dividends on $11,600,000 portion of 8.75% Preferred Stock issue,
computed from January 1, 1997
(e) Additional shares from Preferred Stock issue at $11.75 per share
YEAR ENDED DECEMBER 31, 1996
(1) Management fees charged by the Company to PERC and included as revenue
by the Company, but also included as a cost by PERC
(2) Reduction in depreciation of property, plant, and equipment as a result
of the write down of assets in purchase accounting.
(3) Elimination of the Company's equity earnings in PERC, which was 7% of
net income.
(4) Additional minority interest, reflecting the consolidation of PERC into
the Company and the recording of a 43.5% minority interest.
(5) Dividends on $11,600,000 portion of 8.75% Preferred Stock issue,
computed from January 1, 1997.
(6) Additional shares from Preferred Stock issue at $11.75 per share.
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(c) Exhibits.
Exhibit Number Description
- -------------- -----------
4.1 PURCHASE AND OPTION AGREEMENT by and between PERC Management
Company Limited Partnership and The Prudential Insurance
Company of America dated September 30, 1997. The exhibits to
the PURCHASE AND OPTION AGREEMENT do not contain information
which is material to an investment decision.
4.2 SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT
AND CERTIFICATE OF LIMITED PARTNERSHIP OF PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP dated as of September
29, 1997.
4.3 ASSIGNMENT AND ASSUMPTION AGREEMENT between The Prudential
Insurance Company of America and PERC Management Company
Limited Partnership dated as of September 29, 1997 re
Penobscot Energy Recovery Company, Limited Partnership.
4.4 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE OF
ASSIGNMENT DATED as of September 29, 1997 to the Reimbursement
Agreement dated as of May 28, 1991 of Penobscot Energy
Recovery Company, Limited Partnership in favor of Morgan
Guaranty Trust Company of New York re Penobscot Energy
Recovery Company, Limited Partnership.
4.5 ASSIGNMENT AND ASSUMPTION AGREEMENT between The Prudential
Insurance Company of America and PERC Management Company
Limited Partnership dated as of September 29, 1997 re
Orrington Waste Ltd., Limited Partnership.
4.6 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE OF
ASSIGNMENT DATED as of September 29, 1997 to the Reimbursement
Agreement dated as of May 28, 1991 of Penobscot Energy
Recovery Company, Limited Partnership in favor of Morgan
Guaranty Trust Company of New York re Orrington Waste Ltd.,
Limited Partnership.
4.7 News release dated October 1, 1997.
4.8 Letter of Kenneth A. Rubin dated September 22, 1997.
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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 hereunto duly authorized.
KTI, Inc.
(the Registrant)
Dated: October 7, 1997 By: /s/ Martin J. Sergi
-----------------------------
Name: Martin J. Sergi
Title: President
