View:
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 March 30, 1996.
[ ] 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.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(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 April 26, 1996
---------------------------- -----------------------------
Common Stock, $.01 par value 40,668,398
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO FIBERTEK INC.
Consolidated Balance Sheet
(Unaudited)
Assets
March 30, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 53,898 $ 57,028
Available-for-sale investments, at quoted
market value (amortized cost of $1,505
and $2,781) 1,506 2,784
Accounts receivable, less allowances of
$2,541 and $2,552 36,092 43,085
Unbilled contract costs and fees 1,941 1,921
Inventories:
Raw materials and supplies 14,678 14,283
Work in process 6,604 7,577
Finished goods 5,943 5,242
Prepaid income taxes and other current assets 11,004 10,356
-------- --------
131,666 142,276
-------- --------
Property, Plant and Equipment, at Cost 49,510 49,976
Less: Accumulated depreciation and amortization 28,865 28,767
-------- --------
20,645 21,209
-------- --------
Other Assets 1,215 1,298
-------- --------
Cost in Excess of Net Assets of Acquired Companies 34,125 34,888
-------- --------
$187,651 $199,671
======== ========
2PAGE
THERMO FIBERTEK INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 30, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 18,227 $ 20,747
Accrued payroll and employee benefits 8,551 11,115
Billings in excess of contract costs and fees 2,727 3,018
Customer deposits 1,929 1,598
Accrued warranty costs 10,410 9,759
Accrued income taxes (includes $3,150 and
$1,521 due to related party) 4,338 4,430
Other accrued expenses 8,609 9,868
Due to parent company 644 10,859
-------- --------
55,435 71,394
-------- --------
Deferred Income Taxes and Other Deferred Items 3,274 3,031
-------- --------
Long-term Obligations 15,038 15,041
-------- --------
Minority Interest 240 574
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 75,000,000 shares
authorized; 40,709,541 and 40,623,919 shares
issued 407 406
Capital in excess of par value 65,413 65,222
Retained earnings 51,492 46,287
Treasury stock at cost, 46,343 and 33,223 shares (991) (446)
Cumulative translation adjustment (2,658) (1,840)
Net unrealized gain on available-for-sale
investments 1 2
-------- --------
113,664 109,631
-------- --------
$187,651 $199,671
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
THERMO FIBERTEK INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
March 30, April 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues (includes $319 and $539
from related party) $48,980 $43,736
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $213 and
$272 for related party revenues) 28,192 25,949
Selling, general and administrative expenses 11,741 11,602
Research and development expenses 1,273 880
------- -------
41,206 38,431
------- -------
Royalty Income 274 231
------- -------
Operating Income 8,048 5,536
Interest Income 735 737
Interest Expense (includes $131 and $295
to related party) (172) (348)
------- -------
Income Before Provision for Income Taxes
and Minority Interest Expense 8,611 5,925
Provision for Income Taxes 3,399 2,291
Minority Interest Expense 6 51
------- -------
Net Income $ 5,206 $ 3,583
======= =======
Earnings per Share:
Primary $ .13 $ .09
======= =======
Fully diluted $ .12 $ .09
======= =======
Weighted Average Shares:
Primary 40,623 40,470
======= =======
Fully diluted 42,904 42,459
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
THERMO FIBERTEK INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 5,206 $ 3,583
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,083 1,122
Provision for losses on accounts receivable 42 479
Minority interest expense 6 51
Deferred income tax expense 215 144
Gain on sale of property, plant and equipment (314) (19)
Changes in current accounts:
Accounts receivable 6,577 3,954
Inventories and unbilled contract costs
and fees (391) (1,434)
Other current assets (684) (241)
Accounts payable (2,148) 2,316
Other current liabilities (3,807) (2,183)
-------- -------
Net cash provided by operating activities 5,785 7,772
-------- --------
Investing Activities:
Redemption of Fiberprep stock - (12,783)
Proceeds from sale and maturities of available-
for-sale investments 1,250 -
Purchases of property, plant and equipment (663) (506)
Proceeds from sale of property, plant and
equipment 548 21
Other 143 70
-------- --------
Net cash provided by (used in) investing
activities 1,278 (13,198)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common stock 555 4
Issuance (repayment) of short-term obligation
to parent company (10,400) 10,400
Repayment of long-term obligations (2) (183)
-------- --------
Net cash provided by (used in)
financing activities (9,847) 10,221
-------- --------
5PAGE
THERMO FIBERTEK INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (346) $ 818
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (3,130) 5,613
Cash and Cash Equivalents at Beginning of Period 57,028 37,250
-------- --------
Cash and Cash Equivalents at End of Period $ 53,898 $ 42,863
======== ========
Cash Paid For:
Interest $ 173 $ 365
Income taxes $ 3,166 $ 1,675
Noncash Activities:
Issuance of Company common stock in connection
with the redemption of Fiberprep stock $ - $ 1,428
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
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 (a) the results of operations for the
three-month periods ended March 30, 1996 and April 1, 1995, (b) the
financial position at March 30, 1996, and (c) the cash flows for the
three-month periods ended March 30, 1996 and April 1, 1995. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, 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 December 30, 1995, filed with the Securities and
Exchange Commission.
2. Subsequent Event
In April 1996 the Company entered into an agreement with Tree Free
Fiber (Tree Free) to supply $50.5 million in engineering, procurement, and
construction services for a new paper-recycling facility, contingent upon
Tree Free receiving permits and securing approximately $80.0 million in
financing. Pursuant to this agreement, the Company has loaned $6.0 million
to Tree Free which, contingent upon Tree Free receiving the aforementioned
financing, will be treated as subordinated debt payable over a three-year
period.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Description of Business
The Company designs and manufactures processing machinery and
accessories 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, and accessory
equipment and related consumables important to the efficient operation of
papermaking machines. Because the Company has significant foreign
operations, particularly in Europe, the Company's financial performance and
competitive position can be affected by currency exchange rate fluctuations
affecting the relationship between the U.S. dollar and foreign currencies.
The Company reduces its exposure to currency fluctuations through the use
of forward contracts.
7PAGE
THERMO FIBERTEK INC.
Results of Operations
First Quarter 1996 Compared With First Quarter 1995
---------------------------------------------------
Revenues increased 12% to $49.0 million in the first quarter of 1996
from $43.7 million in the first quarter of 1995. Revenues from the
Company's North American and French accessories businesses increased $2.3
million and $1.8 million, respectively, due principally to an increase in
demand. The favorable effects of currency translation due to a weaker U.S.
dollar increased revenues by $0.6 million.
The gross profit margin increased to 42% in the first quarter of 1996
from 41% in the first quarter of 1995. Significant margin improvement at
the Company's North American accessories business and at the Company's
European subsidiaries was offset in part by a decrease in margins at the
Company's Fiberprep subsidiary as a result of warranty reserves recorded in
the first quarter of 1996 for a large de-inking project.
Selling, general and administrative expenses as a percentage of
revenues decreased to 24% in the first quarter of 1996 from 27% in the
first quarter of 1995, due primarily to an increase in revenues. Research
and development expenses increased to $1.3 million in the first quarter of
1996 from $0.9 million in the first quarter of 1995, largely due to
continued development in 1996 of technology to recover fiber and other
valuable materials found in the residue of papermaking and paper-recycling
operations.
Interest expense decreased to $172,000 in 1996 from $348,000 in 1995,
due primarily to the January 1996 repayment of a $10.4 million promissory
note to Thermo Electron Corporation (Thermo Electron).
The effective tax rate was 39% in the first quarter of 1996 and 1995.
This tax rate exceeds the statutory federal income tax rate due primarily
to state income taxes, offset in part by the effect of lower foreign tax
rates.
Liquidity and Capital Resources
Consolidated working capital was $76.2 million at March 30, 1996,
compared with $70.9 million at December 30, 1995. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$55.4 million at March 30, 1996, compared with $59.8 million at December
30, 1995. Of the $55.4 million balance at March 30, 1996, $3.0 million was
held by Fiberprep, and the remainder by the Company and its wholly owned
subsidiaries. During the first quarter of 1996, $5.8 million of cash was
provided by operating activities. Cash provided by a decrease in accounts
receivable was substantially offset by the effect of a reduction in
accounts payable and other current liabilities. During the first quarter
of 1996 the Company repaid a $10.4 million promissory note to Thermo
Electron.
8PAGE
THERMO FIBERTEK INC.
Liquidity and Capital Resources (continued)
At March 30, 1996, $18.2 million of the Company's cash and cash
equivalents were held by its Lamort subsidiary. Repatriation of this cash
into the United States is subject to a 5% withholding tax in France and
could also be subject to a United States tax.
In the remainder of 1996, the Company plans to make capital
expenditures of approximately $3.9 million. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
9PAGE
THERMO FIBERTEK 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 3rd day of May 1996.
THERMO FIBERTEK INC.
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Chief Financial Officer
10PAGE
THERMO FIBERTEK INC.
Exhibit Index
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMO FIBERTEK INC.
Computation of Earnings per Share
Three Months Ended
--------------------------
March 30, April 1,
1996 1995
--------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 5,206,000 $ 3,583,000
Add: Convertible debt interest, net of tax 79,000 79,000
----------- -----------
Income applicable to common stock
assuming full dilution (a) $ 5,285,000 $ 3,662,000
----------- -----------
Shares:
Weighted average shares outstanding 40,623,013 40,469,861
Add: Shares issuable from assumed conversion
of subordinated convertible obligation 1,258,742 1,258,742
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 1,021,990 730,509
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 42,903,745 42,459,112
----------- -----------
Fully Diluted Earnings per Share (a) / (b) $ .12 $ .09
=========== ===========