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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):
November 12, 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), exercised its option to purchase an additional 14.8% limited
partnership interest in Penobscot Energy Recovery Company, Limited Partnership,
a Maine limited partnership ("PERC") from the Prudential Insurance Company of
America ("Prudential") for $2.1 million in cash.
With this purchase, the Company's interest in PERC has increased to
71.3%. Energy National, Inc., a subsidiary of NRG Energy, 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 $23.8 million and net income of $5.2 million.
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.
(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
KTI, INC. PERC PRO FORMA PRO FORMA
ADJUSTMENTS KTI, INC.
------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
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 from continuing operations before minority
interest 35,237,948 6,101,107 (12,970) 41,326,085
Minority Interest 18,609,797 1,751,018(4) 20,360,815
------------ ------------ ------------ ------------
Income from continuing operations available for
Shareholders 16,628,151 6,101,107 (1,763,988) 20,965,270
Preferred Dividends 1,198,750(5) 1,198,750
------------ ------------ ------------ ------------
Income from continuing operations for Common
Shareholders $ 16,628,151 $ 6,101,107 $ (2,962,738) $ 19,766,520
============ ============ ============ ============
Income from continuing operations per common share
and common share equivalent:
Primary:
------------ ------------
Income from continuing operations $ 2.61 $ 3.11
============ ============
Weighted average number of common shares 6,359,593 6,359,593
and common share equivalents outstanding
Fully Diluted:
------------ ------------
Income from continuing operations $ 2.40 $ 2.59
============ ============
Weighted average number of common shares 6,925,976 1,165,957(6) 8,091,933
and common share equivalents outstanding
</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 50,180,577 $ (239,764)(a) 49,940,813
Operating Costs
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 9,743,640 239,764 9,983,404
Interest
Pre-acquisition Earnings Minority Interest (3,983,766) 3,983,766 (b)
Minority Interest in Subsidiaries (1,229,287) (1,229,399)(c) (2,458,686)
------------ ------------ ------------
Income from continuing operations 4,530,587 2,994,131 7,524,718
Preferred Dividends 896,599(d) 896,599
------------ ------------ ------------
Income from continuing operations
available to Common Shareholders $ 4,530,587 $ 2,097,532 $ 6,628,119
============ ============ ============
Income from continuing operations per common
share and common share equivalent
Primary:
------------ ------------
Income from continuing operations $ 0.59 $ 0.86
============ ============
Weighted Average number of common shares and 7,726,900 7,726,900
common share equivalents outstanding
Fully diluted:
------------ ------------
Income from continuing operations $ 0.59 $ 0.85
============ ============
Weighted Average number of common shares and 7,726,900 1,165,957(e) 8,892,857
common share equivalents outstanding
</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
14.8% 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 $2.1 million
in cash.
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 28.7% of PERC currently not
owned by the Company
(d) Dividends on $13,700,000 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 28.7% minority interest.
(5) Dividends on $13,700,000 portion of 8.75% Preferred Stock issue, computed
from January 1, 1996.
(6) Additional shares from Preferred Stock issue at $11.75 per share.
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(c) Exhibits.
Exhibit Number Description
-------------- -----------
4.1 News release dated November 13, 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: January 22, 1998 By: /s/ Martin J. Sergi
-------------------------------
Name: Martin J. Sergi
Title: President
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NEWS RELEASE
FOR IMMEDIATE RELEASE
KTI ACQUIRES ADDITIONAL 14.8% OF PENOBSCOT ENERGY
RECOVERY COMPANY RAISING OWNERSHIP TO 71.3%
GUTTENBERG, N. J. (NOV. 13, 1997) -- KTI, Inc. (Nasdaq: KTIE) announced
today that it has increased its ownership in the Penobscot Energy Recovery
Company (PERC) to 71.3% by purchasing the remaining 14.8% limited partner
interest held by Prudential Insurance Company of America for $2.1 million. KTI
exercised an option granted in September to acquire Prudential's remaining
interest.
The other 28.7% of PERC is owned by Energy National, Inc. (ENI), a
subsidiary of NRG Energy, which is also a general partner of PERC.
Located in Orrington, Maine, PERC processes approximately 250,000 tons of
municipal solid waste a year from 230 Maine communities and generates 25
megawatts of electricity which is sold to Bangor Hydro Electric Company. PERC
generated $30.3 million in revenue and net income of $6.1 million in 1996. For
the nine months ended Sept. 30, 1997, PERC had revenues of $23.8 million and
$5.2 million of net income.
Martin J. Sergi, president of KTI, said, "We're pleased we have been able
to further increase our ownership in PERC. This is consistent with our strategy
to maximize our ownership of the waste to energy facilities which we operate.
This purchase, which is accretive to earnings, will further enhance our
operating results."
KTI is an award winning environmental company engaged in integrated waste
processing and management in diversified services and markets. The company
handles over 1.5 million tons of material a year and is best known for its
expertise in the waste-to-energy sector. KTI was organized in 1983 to develop
and own waste-to-energy facilities with the dual purpose of providing a means of
disposal for non-hazardous municipal solid waste and of generating electricity
from alternative fuel sources. Since then, KTI's operations have expanded to
include the development of an integrated waste management business providing not
only municipal solid waste handling and disposal services, but also wood waste
processing, ash and municipal waste recycling, specialty waste disposal,
transportation facilitation services and transfer station operations.
