SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
October 10, 1997
________________________________________
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9549 04-2925807
(State or other (Commission) (I.R.S. Employer
jurisdiction of File Number) Identification Number)
incorporation or
organization)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
(617) 622-1000
(Registrant's telephone number including area code)
PAGE
FORM 8-K
Item 2. Acquisition or Disposition of Assets
On October 10, 1997, Thermo TerraTech Inc. (the "Company") sold
substantially all of the assets of its Holcroft Division, excluding
certain accounts receivable, to Holcroft L.L.C., an affiliate of Madison
Capital Partners.
The Holcroft Division, based in Livonia, Michigan, designs and builds
large, custom engineered metallurgical-treatment systems used primarily
in the automotive industry.
The sale price for the transferred assets consisted of (i)
$11,417,000, in cash, including $520,000 withheld by Holcroft L.L.C.
pending a post-closing adjustment, (ii) two promissory notes for
principal amounts of $2,218,000 and $663,000, respectively, issued by
Holcroft L.L.C. to the Company, and (iii) the assumption by Holcroft
L.L.C. of certain liabilities of the Holcroft Division. The sale price is
subject to a post-closing adjustment, which would reduce the sale price
by an amount not to exceed $520,000, based on a final determination of
the net book value of the transferred assets as of September 27, 1997.
The $2,218,000 promissory note bears interest at a rate of 9.25%,
requires monthly interest payments and annual principal payments, and has
a five-year term. The note is secured by all of the assets of Holcroft
L.L.C., but is subject to a Subordination Agreement dated as of October
10, 1997, between the Company and Comerica Bank. The $663,000 promissory
note bears no interest for the first 30 days and interest at a rate of
10% thereafter. The note matures on August 10, 1998, requires monthly
interest payments as well as mandatory prepayments of principal based on
Holcroft L.L.C.'s collection of certain receivables of the Holcroft
Division, and is secured by certain receivables of the Holcroft Division.
The disposition was made pursuant to an Asset Purchase Agreement
dated as of October 10, 1997, between the Company and Holcroft L.L.C (the
"Asset Purchase Agreement"). The sale price for the assets of the
Holcroft Division was based on the Company's determination of the fair
market value of such assets, and the terms of the Asset Purchase
Agreement were determined by arms' length negotiation between the
parties.
In addition, the Company and Holcroft L.L.C. entered into a sublease
with a term commencing October 10, 1997, and ending December 31, 2004,
with an option for Holcroft L.L.C. to extend the term for an additional
five years, pursuant to which the Company subleases to Holcroft L.L.C.
office and manufacturing space located at 12068 Market Street, Livonia,
Michigan.
In a separate transaction, on October 6, 1997, Thermo Remediation
Inc., a majority-owned subsidiary of the Company, sold its 50% limited
liability company interest in RETEC/TETRA, L.C., a Texas limited
liability company (the "Joint Venture"), to TETRA Thermal, Inc. This
transaction was reported in a Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 21, 1997. The pro forma
adjustments for the sale of the Joint Venture are reflected in the pro
forma condensed financial information included in Item 7(b) of this
report.
2PAGE
FORM 8-K
Item 7. Financial Statements, Pro Forma Condensed Financial
Information and Exhibits
(a) Financial Statements
Not applicable.
(b) Pro Forma Condensed Financial Information
The following unaudited pro forma condensed statements of operations
set forth the results of operations for the fiscal year ended March 29,
1997, and the three months ended June 28, 1997, as if the disposition by
the Company of both the Holcroft Division and the interest in the Joint
Venture had occurred at the beginning of fiscal 1997. The unaudited pro
forma condensed balance sheet sets forth the financial position as of
June 28, 1997, as if the dispositions had occurred as of that date.
The pro forma results of operations are not necessarily indicative
of future operations or the actual results that would have occurred had
the sale of the Holcroft Division and the interest in the Joint Venture
been consummated at the beginning of fiscal 1997. These statements should
be read in conjunction with the accompanying notes herein and the
historical consolidated financial statements and related notes of the
Company included in its Annual Report on Form 10-K for the fiscal year
ended March 29, 1997, and Quarterly Report on Form 10-Q for the three
months ended June 28, 1997.
3PAGE
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (Unaudited)
Fiscal Year Ended March 29, 1997
Pro Forma Adjustments
---------------------
Thermo Joint
TerraTech Holcroft Venture Pro Forma
--------- -------- ------- ---------
(In thousands except per share amounts)
Revenues $278,503 $(27,119) $ - $251,384
-------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues 230,080 (22,677) - 207,403
Selling, general,
and administrative
expenses 35,466 (2,677) - 32,789
Product and new
business develop-
ment expenses 1,046 - - 1,046
Nonrecurring costs 7,800 - - 7,800
-------- -------- -------- --------
274,392 (25,354) - 249,038
-------- -------- -------- --------
Operating Income 4,111 (1,765) - 2,346
Interest Income 7,253 (33) - 7,220
Interest Expense (12,914) - - (12,914)
(includes $2,492 to
parent company)
Gain on Issuance of
Stock by Subsidiary 1,475 - - 1,475
Loss on Sale of Assets (1,482) - - (1,482)
Equity in Earnings of
Unconsolidated
Subsidiary 865 - (865) -
Other Income, Net 401 - - 401
-------- -------- -------- --------
Income (Loss) Before
Income Tax Provision
and Minority Interest (291) (1,798) (865) (2,954)
Income Tax Provision (1,705) 719 346 (640)
Minority Interest Income 1,834 - 163 1,997
-------- -------- -------- --------
Net Loss $ (162) $ (1,079) $ (356) $ (1,597)
======== ======== ======== ========
Loss per Share $ (.01) $ (.09)
======== ========
Weighted Average Shares 18,090 18,090
======== ========
4PAGE
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended June 28, 1997
Pro Forma Adjustments
---------------------
Thermo Joint
TerraTech Holcroft Venture Pro Forma
--------- -------- ------- ---------
(In thousands except per share amounts)
Revenues $72,519 $(7,409) $ - $65,110
------- ------- ------- -------
Costs and Operating
Expenses:
Cost of revenues 57,951 (6,131) - 51,820
Selling, general,
and administrative
expenses 9,938 (843) - 9,095
Product and new
business develop-
ment expenses 222 - - 222
------- ------- ------- -------
68,111 (6,974) - 61,137
------- ------- ------- -------
Operating Income 4,408 (435) - 3,973
Interest Income 1,403 - - 1,403
Interest Expense
(includes $1,164 to
parent company (3,133) - - (3,133)
Equity in Earnings of
Unconsolidated
Subsidiary 118 - (118) -
Other Income, Net 204 - - 204
------- ------- ------- -------
Income Before Income Tax
Provision and Minority
Interest 3,000 (435) (118) 2,447
Income Tax Provision (1,399) 174 47 (1,178)
Minority Interest
Expense (269) - 21 (248)
------- ------- ------- -------
Net Income $ 1,332 $ (261) $ (50) $ 1,021
======= ======= ======= =======
Earnings per Share $ .08 $ .06
======= =======
Weighted Average Shares 17,646 17,646
======= =======
5PAGE
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONDENSED BALANCE SHEET (Unaudited)
As of June 28, 1997
Pro Forma Adjustments
-------------------------------
Thermo Holcroft Joint
TerraTech Holcroft Adjustments Venture Pro Forma
--------- -------- ----------- ------- ---------
(In thousands)
ASSETS
Current Assets:
Cash and short-term
investments $ 45,973 $ - $10,897 $ 8,825 $ 65,695
Accounts receivable,
net 53,238 (4,225) 2,049 - 51,062
Note Receivable - - 663 - 663
Unbilled contract
costs and fees 40,447 (16,191) - - 24,256
Inventories 2,447 (1,606) - - 841
Prepaid income taxes 7,484 - - - 7,484
Prepaid expenses 5,457 (17) - - 5,440
-------- -------- ------- ------ --------
155,046 (22,039) 13,609 8,825 155,441
-------- -------- ------- ------ --------
Property, Plant, and
Equipment, at Cost,
Net 86,519 (738) - - 85,781
-------- -------- ------- ------ --------
Other Assets 20,344 - 2,218 (5,768) 16,794
-------- -------- ------- ------ --------
Cost in Excess of Net
Assets of Acquired
Companies 95,550 - - - 95,550
-------- -------- ------- ------ --------
$357,459 $(22,777) $15,827 $3,057 $353,566
======== ======== ======= ====== ========
6PAGE
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONDENSED BALANCE SHEET (Unaudited) (continued)
As of June 28, 1997
Pro Forma Adjustments
------------------------------
Thermo Holcroft Joint
TerraTech Holcroft Adjustments Venture Pro Forma
--------- -------- ----------- ------- ---------
(In thousands)
LIABILITIES AND
SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable and
current maturities
of long-term
obligations $ 44,351 $ - $ - $ - $ 44,351
Accounts payable 13,735 (1,891) - - 11,844
Accrued payroll and
employee benefits 11,363 (800) - - 10,563
Billings in excess
of cost 5,306 (4,207) - - 1,099
Other accrued
expenses 9,651 (1,236) 936 1,223 10,574
Due to parent
company 2,843 (232) - - 2,611
-------- -------- ------- ------ --------
87,249 (8,366) 936 1,223 81,042
-------- -------- ------- ------ --------
Deferred Income Taxes 5,297 - - - 5,297
-------- -------- ------- ------ --------
Other Deferred Items 1,009 - - - 1,009
-------- -------- ------- ------ --------
Long-term Obligations 152,994 - - - 152,994
-------- -------- ------- ------ --------
Minority Interest 29,635 - - 551 30,186
-------- -------- ------- ------ --------
Shareholders' Investment:
Common stock 1,830 - - - 1,830
Capital in excess of
par value 62,426 - - - 62,426
Retained earnings 25,378 - 480 1,283 27,141
Treasury stock, at
cost (6,937) - - - (6,937)
Cumulative translation
adjustment (1,431) - - - (1,431)
Net unrealized gain
on available-for-
sale investments 9 - - - 9
Parent company
investment - (14,411) 14,411 - -
-------- -------- ------- ------ --------
81,275 (14,411) 14,891 1,283 83,038
-------- -------- ------- ------ --------
$357,459 $(22,777) $15,827 $3,057 $353,566
======== ======== ======= ====== ========
7PAGE
FORM 8-K
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
As described in Item 2 of this Form 8-K, the selling prices were based on
an estimate of the fair market value of the net assets sold and are subject
to adjustment. To date, no information has been gathered that would cause the
Company to believe that the final selling prices will be materially different
than the preliminary estimates.
Note 2 - Pro Forma Adjustments to Pro Forma Condensed Statements of
Operations (In thousands)
Three Months
Year Ended Ended
March 29, 1997 June 28, 1997
-------------- -------------
Debit (Credit)
Equity in Earnings of Unconsolidated Subsidiary
Represents the reversal of the Company's
proportionate share of income from its
investment in the Joint Venture $ 865 $ 118
------- -------
Income Tax Provision
Income tax benefit associated with the
adjustments above, calculated at the Company's
statutory income tax rate of 40% (346) (47)
------- -------
Minority Interest Income (Expense)
Represents Thermo Remediation's minority
shareholders' interest in the pro forma
adjustments above related to the Joint Venture (163) (21)
------- -------
8PAGE
FORM 8-K
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 3 - Pro Forma Adjustments to Pro Forma Condensed Balance Sheet
(In thousands)
June 28, 1997
-------------
Debit (Credit)
Cash and Short-term Investments
Cash proceeds received from the sale of the
Holcroft Division $10,897
-------
Cash proceeds received from the sale of the
interest in the Joint Venture 8,825
-------
Accounts Receivable
Represents the Holcroft Division's accounts
receivable retained by the Company 2,049
-------
Note Receivable
Note receivable issued to the Company by the
acquirer, Holcroft L.L.C. 663
-------
Other Assets
Long-term note receivable issued to the
Company by the acquirer, Holcroft L.L.C.,
bearing interest at 9.25% 2,218
-------
Represents the Company's sale of its interest
in the Joint Venture (5,768)
-------
Other Accrued Expenses
Represents the tax effect related to the excess
of the expected proceeds received by the
Company from the sale of the Holcroft Division,
calculated at the Company's statutory income
tax rate of 40% (320)
Accruals established by the Company related
to liabilities retained and costs associated
with the sale of the Holcroft Division (616)
-------
(936)
-------
Represents the tax effect related to the
excess of the proceeds received by the
Company from the sale of its interest in the
Joint Venture, calculated at the Company's
statutory income tax rate of 40% (1,223)
-------
Minority Interest
Represents minority interest in the excess of the
proceeds received by the Company from the sale
of its interest in the Joint Venture over the
carrying value of the interest (551)
-------
9PAGE
FORM 8-K
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 3 - Pro Forma Adjustments to Pro Forma Condensed Balance Sheet
(In thousands) (continued)
June 28, 1997
-------------
Debit (Credit)
Shareholders' Investment
Retained Earnings
Represents the excess of the expected proceeds received
by the Company from the sale of the Holcroft Division
over the net book value, net of tax $ (480)
--------
Represents the excess of the proceeds received by the
Company from the sale of its interest in the Joint
Venture over the carrying value of the interest,
net of tax (1,283)
--------
Parent Company Investment
Elimination of the Holcroft Division's equity accounts (14,411)
--------
10PAGE
FORM 8-K
Item 7. Financial Statements, Pro Forma Condensed Financial
Information and Exhibits
(c) Exhibits
2.1 Asset Purchase Agreement dated as of October 10, 1997,
between the Company and Holcroft L.L.C. Pursuant to
Item 601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Registrant hereby
undertakes to furnish supplementally a copy of such
schedules to the Securities and Exchange Commission
upon request.
2.2 $2,218,000.00 Principal Promissory Note issued by
Holcroft L.L.C. to the Company.
2.3 $663,117.82 Principal Promissory Note issued by
Holcroft L.L.C. to the Company. Pursuant to Item
601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Registrant hereby
undertakes to furnish supplementally a copy of such
schedules to the Securities and Exchange Commission
upon request.
2.4 Subordination Agreement dated as of October 10, 1997,
between the Company and Comerica Bank.
2.5 Second Amendment to Sublease dated as of October 10,
1997, between the Company and TMO, Inc.
2.6 Sublease dated as of October 10, 1997, between the
Company and Holcroft L.L.C. Pursuant to Item
601(b)(2) of Regulation S-K, schedules to this
Agreement have been omitted. The Registrant hereby
undertakes to furnish supplementally a copy of such
schedules to the Securities and Exchange Commission
upon request.
11PAGE
FORM 8-K
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, on this 24th day of October
1997.
THERMO TERRATECH INC.
Paul F. Kelleher
-------------------------------
Paul F. Kelleher
Chief Accounting Officer