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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 2, 1999
[ ] 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
245 Winter Street
Waltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 the filing
requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 29, 1999, was approximately $37,397,000.
As of January 29, 1999, the Registrant had 61,282,228 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
January 2, 1999, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 27, 1999, are incorporated by reference into
Part III.
PART I
Item 1. Business
(a) General Development of Business
Thermo Fibertek Inc. (the Company or the Registrant) designs and
manufactures stock-preparation, accessories, and water-management systems 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; accessory equipment and related
consumables important to the efficient operation of papermaking machines; and
water-management systems essential for draining, purifying, and recycling
process water. The Company is a leading equipment manufacturer for the worldwide
papermaking and paper recycling industries. The Company's products and systems
can be found in the majority of the world's pulp and paper mills. In addition,
the Company, through its Thermo Fibergen Inc. subsidiary, designs, builds, owns,
and operates plants to help pulp and paper mill customers "close the loop" in
their water and solids systems on a long-term contract basis. The plants clean
and recycle water and long fiber for reuse in the papermaking process. In July
1998, the Company completed construction, and began operating, its first plant.
Thermo Fibergen also employs patented technology to produce absorbing granules
from papermaking byproducts. These granules are used as agricultural carriers,
oil- and grease-absorbents, and cat box fillers.
The Company's predecessors have been in operation for more than 100 years,
and the Company has a large, stable customer base that includes most papermakers
worldwide. The Company seeks to expand its business through the introduction of
new products and technologies to these customers. The Company currently
manufactures its products in several countries in Europe and North America, and
licenses certain of its products for manufacture in South America and the
Pacific Rim.
In July 1998, Thermo Fibertek acquired Goslin Birmingham, a division of
Green Bay Packaging Inc., for $1.3 million in cash, which is subject to a
post-closing adjustment. Goslin manufactures evaporators and recausticizing
systems that concentrate and recycle process chemicals used during pulping, and
products that remove condensate gases.
In February 1999, Thermo Fibertek sold its Thermo Wisconsin Inc.
subsidiary for $13.0 million in cash, subject to a post-closing adjustment.
Thermo Wisconsin manufactures and markets dryers and pollution-control
equipment.
In September 1996, the Company's Thermo Fibergen subsidiary sold 4,715,000
units, each unit consisting of one share of Thermo Fibergen common stock and one
redemption right, in an initial public offering at $12.75 per unit for net
proceeds of $55.8 million. The common stock and redemption rights began trading
separately on December 13, 1996. Holders of a redemption right have the option
to require Thermo Fibergen to redeem one share of Thermo Fibergen common stock
at $12.75 per share in September 2000 or September 2001. A redemption right may
only be exercised if the holder owns a share of Thermo Fibergen common stock.
The redemption rights are guaranteed, on a subordinated basis, by Thermo
Electron Corporation. The Company has agreed to reimburse Thermo Electron in the
event Thermo Electron is required to make a payment under the guarantee.
As of January 2, 1999, the Company owned 10,419,950 shares of Thermo
Fibergen common stock, representing 71% of such outstanding common stock, and
Thermo Electron owned 266,800 shares of Thermo Fibergen common stock,
representing 2% of such outstanding common stock. During 1998*, Thermo Electron
purchased these shares of Thermo Fibergen common stock in the open market at a
total cost of $2.1 million.
The Company is a majority-owned subsidiary of Thermo Electron. As of
January 2, 1999, Thermo Electron owned 55,845,630 shares of the Company's common
stock, representing 91% of such outstanding common stock. Thermo Electron is a
world leader in monitoring, analytical, and biomedical instrumentation;
biomedical products including heart-assist devices, respiratory-care equipment,
and mammography systems; and paper recycling and
- --------------------
* References to 1998, 1997, and 1996 herein are for the fiscal years ended
January 2, 1999, January 3, 1998, and December 28, 1996, respectively
2
papermaking equipment. Thermo Electron also develops alternative-energy systems
and clean fuels, provides a range of services including industrial outsourcing
and environmental-liability management, and conducts research and development in
advanced imaging, laser communications, and electronic information-management
technologies. During 1998, Thermo Electron purchased 748,200 shares of the
Company's common stock in the open market at a total cost of $8.7 million.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report on Form
10-K. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
"seeks," "estimates," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements, including those detailed under the heading
"Forward-looking Statements" in the Registrant's 1998 Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) Financial Information About Segments
Financial information concerning the Company's segments is summarized in
Note 13 to Consolidated Financial Statements in the Registrant's 1998 Annual
Report to Shareholders, which information is incorporated herein by reference.
(c) Description of Business
(i) Principal Products and Services
The Company organizes and manages its business by individual functional
operating entity. The Company has combined its operating entities into three
segments: Pulp and Papermaking Equipment and Systems, Water- and Fiber-recovery
Services and Products, and Dryers and Pollution-control Equipment. In
classifying operational entities into a particular segment the Company
aggregated businesses with similar economic characteristics, products and
services, production processes, customers, and methods of distribution.
Pulp and Papermaking Equipment and Systems
Stock-preparation Equipment
The Company develops, designs, and manufactures custom-engineered systems
that remove debris, impurities, and ink from wastepaper, and process it into a
fiber mix used to produce either white or brown grades of recycled paper. The
Company offers products relating to key aspects of the recycling process. Some
of the systems include:
Pulping and Trash Removal Systems, including specialized high- and
low-consistency pulpers that blend wastepaper with water and certain chemicals
to form pulp with minimal contaminant breakdown, thus increasing the efficiency
of debris removal; and detrashing equipment.
Screening Systems, including course screens to remove metals and sand from
the pulp mixture, as well as fine screens to remove microscopic particles such
as glue and plastic.
3
Cleaning Systems, including forward cleaners to remove heavyweight
contaminants such as metal and sand and reverse cleaners for the removal of
lightweight contaminants such as glue and plastic.
De-inking Systems, including the patented MAC CELL(R) that uses the latest
generation of Autoclean injectors to produce small air bubbles in the bottom of
the pulp slurry. The ink bonds to the air bubbles and rises to the surface,
where it is removed through a unique propellant system. The efficiency of this
unit and the reduced floor space required for equivalent ink removal make the
MAC CELL one of the most critical components within a de-inking system.
Reject-handling and Water-treatment Systems, including gravity-type
strainers and in-line filtration designed to recapture "good" fiber rejected
with debris in the primary process line, as well as compactors and sand
separators.
In addition, the Company designs, develops, and manufactures products for
the virgin pulping process, including:
Chemi-Washer (R), a horizontal belt washer used in the virgin pulping
process. The Chemi-Washer consumes less energy than other commercial washing
systems and significantly decreases the amount of water used and effluent
produced.
Evaporators, Recausticizing, and Condensate-treatment systems, used during
pulping to concentrate and recycle process chemicals and to remove condensate
gases.
Revenues from the Company's stock-preparation equipment product line were
$107.5 million, $88.8 million, and $53.9 million in 1998, 1997, and 1996,
respectively.
Accessories
The Company designs, develops, and manufactures a wide range of
accessories that continuously clean the rolls of a papermaking machine, remove
the sheet (web) from the roll, automatically cut the web during sheet breaks,
and remove curl from the sheet. These functions are critical for paper
manufacturers because they help manufacturers avoid potential catastrophic
damage to the papermaking equipment while reducing expensive machine downtime
and improving paper quality. Accessories include:
Doctors and related equipment, that shed the sheet from the roll during
sheet breaks and startups and keep rolls clean by removing stock accumulations,
water rings, fuzz, pitch, and filler buildup.
Profiling Systems, that help ensure a uniform gloss on the web and control
moisture and curl within the sheet.
Revenues from the Company's accessories product line were $77.8 million,
$83.0 million, and $82.2 million in 1998, 1997, and 1996, respectively.
Water-management
The Company designs, develops, and manufactures equipment used to drain
water from the pulp slurry, form the sheet web, and reuse the process water.
These water-management systems include:
Formation Tables, consisting of free-draining elements and
vacuum-augmented elements to control the amount of water removed from the pulp
slurry to form the paper web.
Showers and Felt-conditioning Systems, used to clean and condition the
fabrics and felts, which in turn are used to transport the paper web through
various stages of the papermaking machine.
4
Water-filtration Systems, consisting of pressure, gravity, and
vacuum-assisted filters and strainers used to remove extraneous contaminants
from the process water before reuse and to recover reusable fiber for recycling
back into the pulp slurry.
Revenues from the Company's water-management product line were $36.9
million, $44.1 million, and $40.0 million in 1998, 1997, and 1996, respectively.
Water- and Fiber-recovery Services and Products
The Company, through its Thermo Fibergen subsidiary, designs, builds,
owns, and operates plants to help pulp and paper mill customers "close the loop"
in their water and solids systems on a long-term contract basis. The plants
clean and recycle water and long fiber for reuse in the papermaking process. In
July 1998, the Company completed construction, and began operating, its first
fiber-recovery and water-clarification facility, providing clean water and long
fiber to a mill under a ten-year contract. The fiber-recovery and
water-clarification facility is located in South Carolina in a building adjacent
to the mill. The Company's facility is designed to operate 24 hours a day, seven
days a week. The paper mill pumps its used process water directly into the
Company's system. The facility recovers and returns long fiber to the mill while
removing short fiber and minerals, and clarifies water which is recycled for
reuse in the papermaking process. The paper mill pays the Company a monthly fee
for these services.
In addition, Thermo Fibergen also employs patented technology to produce
absorbing granules from papermaking byproducts used as agricultural carriers,
oil-and-grease absorbents, and cat box fillers. The agricultural carriers are
used to deliver agricultural chemicals for professional turf, home lawn and
garden, agricultural row-crop, and mosquito-control applications.
Dryers and Pollution-control Equipment
The Company, through its Thermo Wisconsin subsidiary, manufactured and
marketed dryers and pollution-control equipment for the printing, papermaking,
and converting industries. The Company's dryers transfer heat efficiently from
the dryer to the paper web resulting in significant energy savings and improved
paper and printing quality. The Company's thermal incinerators reduce volatile
organic compounds (VOCs) that are produced when solvents contained in the
printed or coated material evaporate.
In February 1999, Thermo Fibertek sold this business.
(ii) and (xi) New Products; Research and Development
The Company believes that it has a reputation as a technological innovator
in the market niches it serves, although rapid technological obsolescence is not
characteristic of the Company's business. The Company, which maintains active
programs for the development of new products using both new and existing
technologies, has technology centers in Europe and the U.S. dedicated to
specific research projects and markets.
For recycling equipment, the Company maintains a stock-preparation pilot
laboratory adjacent to the manufacturing facility at its E. & M. Lamort, S.A.
(Lamort) subsidiary and one at Thermo Black Clawson's Middletown, Ohio,
facility, both of which contain all equipment necessary to replicate a
commercial stock-preparation system. A customer's wastepaper can be tested to
determine the exact system configuration that would be recommended for its
future facility. The testing laboratories are also used to evaluate prototype
equipment, enabling research teams to quickly and thoroughly evaluate new
designs. In addition, the Company works closely with its customers in the
development of products, typically field testing new products on the customers'
papermaking machines. In the U.S., one facility houses an operation for
continued development of accessory products, while another is devoted to
development of new water-management products.
5
Thermo Fibergen's mobile pilot plant is used to demonstrate its
fiber-recovery and water-clarification process, and to test the effluent streams
of mills in the United States and Canada. During 1998, Thermo Fibergen continued
its research and development efforts relating to these systems. In addition,
Thermo Fibergen's GranTek subsidiary's processing center in Green Bay,
Wisconsin, contains a pilot plant that is used to develop cellulose-based
products and processes that are employed at its main facility. Development of a
nontoxic, noncorrosive, biodegradable deicer was completed in 1998. Other
products in development include controlled-release granules for carrying
fertilizers, and cellulose-fiber-reinforced composite materials.
The Company seeks to develop a broad range of equipment for all facets of
the markets it serves. Over the next several years the Company expects to focus
its research and development efforts on the advancement of paper recycling
equipment to further improve the quality of recycled paper.
Research and development expenses for the Company were $7.0 million, $6.8
million, and $5.5 million in 1998, 1997, and 1996, respectively.
(iii) Raw Materials
Raw materials, components, and supplies for all of the Company's
significant products are available either from a number of different suppliers
or from alternative sources that could be developed without a material adverse
effect on the Company's business. To date, the Company has experienced no
difficulties in obtaining these materials.
(iv) Patents, Licenses, and Trademarks
The Company protects its intellectual property rights by applying for and
obtaining patents when appropriate. The Company also relies on technical
know-how, trade secrets, and trademarks to maintain its competitive position.
The Company has numerous U.S. and foreign patents expiring on various dates
ranging from 1999 to 2016.
Third parties have certain rights in two of the Company's patents that
were jointly developed with such parties. The initial development of the
Company's Gyroclean equipment was provided by Centre Technique du Papier (CTP),
to which the Company provided further design refinement and applications
expertise. The Company currently holds an exclusive long-term, worldwide license
for a patent on technology that CTP developed. The Company and CTP have joint
ownership of a second patent on technology that was jointly developed.
The Company maintains a worldwide network of licensees and cross-licensees
of products with other companies servicing the pulp, papermaking, converting,
and paper recycling industries. The Company holds an exclusive worldwide license
for certain de-inking cells under an agreement that extends until 2007. The
Company also has license arrangements with several companies with regard to
accessory equipment. Thermo Fibergen has granted two companies nonexclusive
licenses under two of its patents to sell cellulose-based granules produced at
an existing site for sale in the oil- and grease-absorption and cat box filler
markets.
(v) Seasonal Influences
Pulp and Papermaking Equipment and Systems
There are no material seasonal influences on the segment's sales of
products and services.
Water- and Fiber-recovery Services and Products
A substantial portion of the revenues of the Water- and Fiber-recovery
Services and Products segment are from the sale of cellulose-based products in
the agricultural-carrier market. The Company's primary customers in this market,
chemical formulators, typically purchase carriers during the winter and spring
for the cultivation and planting season. As a result, the segment earns a
disproportionately high share of its revenues from its agricultural-carrier
products during the first two quarters of the year. The Company believes that
its entrance into the oil- and grease-absorption, cat box filler, and
international agricultural row-crop markets, if successful, may mitigate the
seasonality of the sales of this segment.
6
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on the Company's working
capital.
(vii) Dependency on a Single Customer
No single customer accounted for more than 10% of the Company's revenues
in any of the past three years.
(viii) Backlog
The Company's backlog of firm orders for the Pulp and Papermaking
Equipment and Systems segment was $49.5 million and $51.3 million at year-end
1998 and 1997, respectively. The backlog of firm orders for the Water- and
Fiber-recovery Products and Services segment was $0.4 million and $0.2 million
at year-end 1998 and 1997, respectively. In addition, the Water- and
Fiber-recovery Products and Services segment has a ten-year contract to provide
clean water and long fiber to a mill. The contract may be canceled by either
party within six months after the end of the fourth year of the contract, or
thereafter by the paper mill with one year's notice, if certain benefits or
profitability levels are not achieved. The Company anticipates that
substantially all of the backlog at January 2, 1999, will be shipped or
completed during the next twelve months. Certain of these orders may be canceled
by the customer upon payment of a cancellation fee.
The backlog of firm orders for the Dryers and Pollution-control Equipment
segment, sold in February 1999, was $5.9 million and $8.6 million at year-end
1998 and 1997, respectively.
(ix) Government Contracts
Not applicable.
(x) Competition
The Company faces significant competition in each of its principal
markets. The Company competes principally on the basis of quality, price,
service, technical expertise, and product innovation. The Company believes that
the reputation it has established over more than 100 years for quality products
and in-depth process knowledge provides it with a competitive advantage. In
addition, a significant portion of the Company's business is generated from its
existing customer base. To maintain this base, the Company has emphasized
service and a problem-solving relationship with its customers.
Pulp and Papermaking Equipment and Systems
The Company is a leading supplier of stock-preparation equipment for the
preparation of wastepaper to be used in the production of recycled paper. There
are several major competitors that supply various pieces of equipment for this
process. The Company's principal competitors on a worldwide basis are Voith
Sulzer Papiertechnik, Beloit Corporation, Ahlstrom Machine Company, Kvaerner
Pulping Technologies, Sunds Defibrator Inc., and Maschinenfabrik Andritz AG.
Various competitors tend to specialize in segments within the white- and
brown-paper markets. The Company competes in this market primarily on the basis
of systems knowledge, product innovation, and price.
The Company is a leading supplier of specialty accessory equipment for
papermaking machines. Because of the high capital costs of papermaking machines
and the role of the Company's accessories in maintaining the efficiency of these
machines, the Company generally competes in this market on the basis of service,
technical expertise, and performance.
7
The Company is a leading supplier of water-management systems. Various
competitors exist in the formation table, conditioning and cleaning systems, and
filtration systems markets. JWI Group/Johnson Foils is a major supplier of
formation tables while a variety of smaller companies compete within the
cleaning and conditioning, and filtration markets. In each of these areas,
process knowledge, application experience, product quality, service, and price
are key factors.
Water- and Fiber-recovery Services and Products
The Company expects that its principal competitors for access to
papermaking byproducts will be landfills, which currently have a large market
share in both North America and Europe. The Company believes, however, that
landfill costs will tend to increase over time and that regulations governing
landfills will become more strict, particularly in Europe. The balance of the
papermaking byproducts produced in the U.S. and Europe is currently incinerated
or used to manufacture composting materials, egg cartons, and other low-value
industrial products. The Company competes principally on the basis of price and
its ability to offer long-term environmentally acceptable byproduct management
alternatives.
Certain companies are seeking to develop technologies and services to
treat and process papermaking byproducts that are similar to those of the
Company. No assurance can be given that such technologies and services will not
be superior to those of the Company. As other companies attempt to provide
landfill services or byproduct processing capabilities, or both, to the pulp and
paper industry, the Company expects to encounter increasing competition.
The Company believes that its approach to the management of environmental
problems associated with papermaking byproducts and its ability to take
advantage of the Company's name recognition, financial strength, and experience
constitute significant competitive advantages.
The Company believes that it is currently the only producer of paper-based
agricultural carriers. In this market, the Company's principal competitors in
the U.S. are producers of clay-based agricultural carriers for row crops and
professional turf protection, including Oil-Dri Corporation of America,
Floridin/Engelhard, Aimcor, and American Colloid, and producers of corncob-based
granules traditionally used in the home lawn and garden and professional turf
markets, including The Andersons, Mt. Pulaski, Green Products, Independence Cob,
and Junior Weisner. The Company's principal competitive advantages are that its
agricultural carrier product is virtually dust-free and is more uniform in
absorptivity and particle-size distribution than are clay- and corncob-based
granular carriers. In addition, it is also chemically neutral, requiring little
or no chemical deactivation.
As the Company attempts to develop new markets for the components of the
papermaking byproducts it processes, the Company will encounter competition from
established companies within those markets. Some of these competitors may have
substantially greater financial, marketing, and other resources than those of
the Company, and the Company expects that such competition may be intense. The
Company believes that in the absorbing-products industry price is a significant
competitive factor and therefore, expects that the demand for the Company's
products in such markets will be significantly influenced by the Company's
prices for such products.
(xii) Environmental Protection Regulations
The Company believes that compliance by the Company with federal, state,
and local environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
As of January 2, 1999, the Company employed approximately 1,300 people.
Approximately 30 employees at the Company's Pointe Claire, Quebec, Canada,
operation are represented by a labor union under a collective bargaining
agreement expiring August 31, 1999. Approximately 5 employees at the Company's
Middletown, Ohio, operation are
8
PART II
represented by a labor union under a collective bargaining agreement expiring
November 1, 2000. Approximately 40 employees at the Company's Guadalajara,
Mexico, operation are represented by a labor union under an annual collective
bargaining agreement. In addition, employees of the Company's subsidiaries in
France and England are represented by trade unions. The Company has had no work
stoppages and considers its relations with employees and unions to be good.
(d) Financial Information About Geographic Areas
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 13 to Consolidated Financial Statements
in the Registrant's 1998 Annual Report to Shareholders, which information is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive
Officer)
---------------------------- ------ --------------------------------------------------------
William A. Rainville 57 President and Chief Executive Officer (1991)
Thomas M. O'Brien 47 Executive Vice President, Finance (1994)
Jonathan W. Painter 40 Executive Vice President, Operations (1997)
Jan-Eric Bergstedt 63 Vice President (1996)
Bruno Lamort de Gail 64 Vice President (1991)
Edward J. Sindoni 54 Vice President; President, Thermo Web Systems, Inc. (1994)
Theo Melas-Kyriazi 39 Chief Financial Officer (1998)
Paul F. Kelleher 56 Chief Accounting Officer (1991)
Each executive officer serves until his successor is chosen or appointed
by the Board of Directors and qualified or until earlier resignation, death, or
removal. Messrs. Rainville, Lamort de Gail, and Kelleher have held comparable
positions for at least five years with the Company or with its parent company,
Thermo Electron. Mr. Painter was Vice President, Strategic Planning of the
Company from 1993 to 1994, Treasurer of Thermo Electron from 1994 to 1997, and
became an Executive Officer of the Company in 1997. Mr. Bergstedt has been a
Vice President of the Company since November 1993, and was designated an
Executive Officer in 1996. Mr. O'Brien has been Executive Vice President,
Finance of the Company since September 1998, and was Vice President, Finance of
the Company from November 1991 until September 1998, and was designated an
Executive Officer in 1994. Mr. Sindoni has been Vice President of the Company
since November 1991, President of the Company's Thermo Web Systems, Inc.
subsidiary since January 1993, was Senior Vice President of Thermo Web Systems
Inc. from 1987 to January 1993, and was designated an executive officer in 1994.
Mr. Melas-Kyriazi was appointed Chief Financial Officer of the Company and
Thermo Electron on January 1, 1999. He joined Thermo Electron in 1986 as
Assistant Treasurer, and became Treasurer in 1988. He was named President and
Chief Executive Officer of ThermoSpectra Corporation, a public subsidiary of
Thermo Instrument Systems Inc., in 1994, a position he held until becoming Vice
President of Corporate Strategy for Thermo Electron in 1998. Mr. Melas-Kyriazi
remains a Vice President of Thermo Electron. Messrs. Melas-Kyriazi and Kelleher
are full-time employees of Thermo Electron, but devote such time to the affairs
of the Company as the Company's needs reasonably require.
9
Item 2. Properties
The Company believes that its facilities are in good condition and are
suitable and adequate for its present operations and that suitable space is
readily available if any leases are not extended. The location and general
character of the Company's principal properties by segment as of January 2,
1999, are:
Pulp and Papermaking Equipment and Systems
The Company owns approximately 1,150,000 square feet and leases
approximately 43,000 square feet, under leases expiring at various dates ranging
from 1999 to 2006, of manufacturing, engineering, and office space. The
Company's principal engineering and manufacturing space is located in Auburn,
Massachusetts; Guadalajara, Mexico; Queensbury, New York; Middletown, Ohio;
Pointe Claire, Quebec, Canada; Vitry-le-Francois, France; and Bury, England.
Water- and Fiber-recovery Services and Products
The Company owns approximately 26,000 square feet and leases approximately
39,000 square feet, under leases expiring at various dates ranging from 1999 to
2001, of manufacturing, engineering, and office space located principally in
Green Bay, Wisconsin; Bedford, Massachusetts; and Cowpens, South Carolina.
Dryers and Pollution-control Equipment
The Company leased approximately 164,000 square feet of manufacturing and
office space under a lease expiring in June 1999. The business located at this
facility was sold in February 1999 and the lease was assumed by the acquirer.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information concerning the market and market price for the Registrant's
Common Stock, $.01 par value, and dividend policy is included under the sections
labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
Item 6. Selected Financial Data
The information required under this item is included under the sections
labeled "Selected Financial Information" and "Dividend Policy" in the
Registrant's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1998 Annual Report to Shareholders and is
incorporated herein by reference.
10
PART IV
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required under this item is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1998 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of January 2, 1999,
and Supplementary Data are included in the Registrant's 1998 Annual Report to
Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the caption
"Election of Directors" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year. The information
concerning delinquent filers pursuant to Item 405 of Regulation S-K is
incorporated herein by reference from the material contained under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" under the caption
"Stock Ownership" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive Compensation"
in the Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship with
Affiliates" in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the close of the fiscal year.
11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1)The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2)The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3)Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders'
Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 12, 1999 THERMO FIBERTEK INC.
By: /s/ William A. Rainville
William A. Rainville
President, Chief Executive Officer, and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of March 12, 1999.
Signature Title
By: /s/ William A. Rainville President, Chief Executive Officer, and
William A. Rainville Director
By: /s/ Theo Melas-Kyriazi Chief Financial Officer
Theo Melas-Kyriazi
By: /s/ Paul F. Kelleher Chief Accounting Officer
Paul F. Kelleher
By: /s/ Walter J. Bornhorst Director
Walter J. Bornhorst
By: /s/ George N. Hatsopoulos Director
George N. Hatsopoulos
By: /s/ John N. Hatsopoulos Director
John N. Hatsopoulos
By: /s/ Francis L. McKone Director
Francis L. McKone
By: /s/ Donald E. Noble Chairman of the Board and Director
Donald E. Noble
13
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Thermo Fibertek Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Thermo Fibertek Inc.'s Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 10, 1999. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in Item 14 on page 12 is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the consolidated financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 10, 1999
14
SCHEDULE II
THERMO FIBERTEK INC.
Valuation and Qualifying Accounts
(In thousands)
Description Provision Accounts Accounts Other (a) Balance
Balance at Charged Recovered Written at End
Beginning to of Year
of Expense Off
Year
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- ----------
Allowance for Doubtful Accounts
Year Ended January 2, 1999 $2,565 $ 248 $ 15 $ (657) $ 60 $2,231
Year Ended January 3, 1998 $1,948 $ 362 $ - $ (576) $ 831 $2,565
Year Ended December 28, 1996 $2,552 $ (450) $ 74 $ (202) $ (26) $1,948
Description Balance at Established Other
Beginning as Cost of Activity (c) Balance
of Year Acquisitions Charged at End
to of Year
Reserve
- ---------------------------------------- ------------- ------------ ------------ ------------- ------------
Accrued Acquisition Expenses (b)
Year Ended January 2, 1999 $ 675 $ 80 $ (387) $ (219) $ 149
Year Ended January 3, 1998 $ - $ 945 $ (270) $ - $ 675
Year Ended December 28, 1996 $ 71 $ - $ (71) $ - $ -
Description Balance at Provision Activity
Beginning Charged to Charged to Balance
of Expense Reserve at End
Year of Year
- ------------------------------------------------------ ------------ ------------ ------------- ------------
Accrued Restructuring Costs (d)
Year Ended January 2, 1999 $ 197 $ - $ (163) $ 34
Year Ended January 3, 1998 $ - $1,063 $ (866) $ 197
(a) Includes allowances of businesses acquired during the year, as described in
Note 3 to Consolidated Financial Statements in the Registrant's 1998 Annual
Report to Shareholders, and the effect of foreign currency translation.
(b) The nature of activity in this account is described in Note 3 to
Consolidated Financial Statements in the Registrant's 1998 Annual Report to
Shareholders.
(c) Represents reversal of accrued acquisition expenses and corresponding
reduction of cost in excess of net assets of acquired companies resulting
from finalization of restructuring plans.
(d) The nature of activity in this account is described in Note 11 to
Consolidated Financial Statements in the Registrant's 1998 Annual Report to
Shareholders.
15
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
2.1 Share Redemption Agreement, dated as of December 22, 1994, by and
among the Registrant, Fiberprep Inc., and Aikawa Iron Works Co., Ltd.
(filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K
relating to events occurring on January 2, 1995 [File No 1-11406] and
incorporated herein by reference).
2.2 Asset Purchase Agreement dated as of May 22, 1997 among BC
Acquisition Corp., Thermo Fibertek Inc., The Black Clawson Company,
Black Clawson Shartle Mfg. Co. Inc., Black Clawson International,
Ltd., Black Clawson Canada Fibre Processing Ltd., Black Clawson
Europe S.A. and Carl C. Landegger (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K relating to events occurring
on May 22, 1997 [File No 1-11406] and incorporated herein by
reference).
3.1 Certificate of Incorporation, as amended, of the Registrant (filed as
Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1997 [File No. 1-11406] and incorporated
herein by reference).
3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-51172] and
incorporated herein by reference).
4.1 - 4.4 Reserved.
4.5 Fiscal Agency Agreement dated as of July 16, 1997, among the
Registrant, Thermo Electron, and Bankers Trust Company as fiscal
agent, relating to $153 million principal amount of 4 1/2%
Convertible Subordinated Debentures due 2004 (filed as Exhibit 4 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 28, 1997 [File No. 1-11406] and incorporated herein by
reference).
10.1 Exchange Agreement dated as of December 28, 1991, between
Thermo Electron and the Registrant (filed as Exhibit 10(a) to
the Registrant's Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
10.2 Amended and Restated Corporate Services Agreement dated January 3,
1993, between Thermo Electron and the Registrant (filed as Exhibit
10(b) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993 [File No. 1-11406] and incorporated herein
by reference).
10.3 Thermo Electron Corporate Charter, as amended and restated effective
January 3, 1993 (filed as Exhibit 10(e) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993 [File
No. 1-11406] and incorporated
herein by reference).
10.4 Thermo Web Systems, Inc. (formerly Thermo Electron Web Systems,
Inc.) Retirement Plan, as amended (filed as Exhibit 10(g) to
the Registrant's Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
10.5 Noncompetition Agreement dated May 30, 1990, between Thermo
Electron and Bruno Lamort de Gail (filed as Exhibit 10(h) to
the Registrant's Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
10.6 Lamort Retirement Plan (filed as Exhibit 10(i) to the
Registrant's Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
16
Exhibit
Number Description of Exhibit
10.7 Lamort Retirement Plan for Key Employees (filed as Exhibit
10(j) to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-51172] and incorporated herein by reference).
10.8 Severance Agreement dated January 8, 1988, between Thermo Electron
and William A. Rainville (filed as Exhibit 10(p) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-51172] and
incorporated herein by reference).
10.9 Employment Agreement dated as of May 30, 1990, between the Registrant
and Bruno Lamort de Gail (filed as Exhibit 10(q) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-51172] and
incorporated herein by reference).
10.10 Form of Indemnification Agreement for officers and directors (filed
as Exhibit 10(s) to the Registrant's Registration Statement on Form
S-1 [Reg. No. 33-51172] and incorporated herein by reference).
10.11 Tax Allocation Agreement dated as of December 28, 1991, between the
Registrant and Thermo Electron (filed as Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 [File No. 1-11406] and incorporated
herein by reference).
10.12 Amended and Restated Master Repurchase Agreement dated as of December
28, 1996 (filed as Exhibit 10.12 to the Registrant's Annual Report on
Form 10-K for the year ended December 28, 1996 [File No. 1-11406] and
incorporated herein by reference).
10.13 Assignment Agreement dated as of December 22, 1994, between Thermo
Electron and TE Great Lakes, Inc. (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 [File No. 1-11406] and
incorporated herein by reference).
10.14 Management Services Agreement dated as of December 22, 1994, between
TE Great Lakes, Inc. and Fiberprep (filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 [File No. 1-11406] and
incorporated herein by reference).
10.15 Equipment Supply Agreement dated as of December 22, 1994, between TE
Great Lakes, Inc. and Fiberprep (filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 [File No. 1-11406] and
incorporated herein by reference).
10.16 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 9, 1997, between the Registrant and
Thermo Electron (filed as Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the year ended January 3, 1998, [File No.
1-11406] and incorporated herein by reference).
10.17 Form of Guarantee of Thermo Electron relating to Thermo
Fibergen's Redemption Rights (filed as Exhibit 4.1 to Thermo
Fibergen's Registration Statement on Form S-1 [Reg. No.
333-07585] and incorporated herein by reference).
10.18 Guarantee Agreement among Thermo Fibergen, Thermo Electron, and
the Representatives of the Underwriters (filed as Exhibit 4.2
to Thermo Fibergen's Registration Statement on Form S-1 [Reg.
No. 333-07585] and incorporated herein by reference).
17
Exhibit
Number Description of Exhibit
10.19 Form of Thermo Fibergen's Redemption Right Certificate (filed
as Exhibit 4.4 to Thermo Fibergen's Registration Statement on
Form S-1 [Reg. No. 333-07585] and incorporated herein by
reference).
10.20 Incentive Stock Option Plan of the Registrant (filed as Exhibit
10(k) to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-51172] and incorporated herein by reference).
10.21 Nonqualified Stock Option Plan of the Registrant (filed as
Exhibit 10(l) to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-51172] and incorporated herein by
reference).
10.22 Equity Incentive Plan of the Registrant (filed as Attachment A to the
Proxy Statement dated May 3, 1994, of the Registrant [File No.
1-11406] and incorporated herein by reference).
10.23 Deferred Compensation Plan for Directors of the Registrant
(filed as Exhibit 10(m) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-51172] and incorporated
herein by reference).
10.24 Directors' Stock Option Plan of the Registrant (filed as Exhibit
10.23 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 [File No. 1-11406] and incorporated
herein by reference).
10.25 Thermo Fibergen Equity Incentive Plan (filed as Exhibit 10.11
to Thermo Fibergen's Registration Statement on Form S-1
[Registration No. 333-07585] and incorporated herein by
reference).
10.26 Thermo Fibertek - Thermo Fibergen Nonqualified Stock Option Plan
(filed as Exhibit 10.25 to the Registrant's Annual Report on Form
10-K for the year ended December 28, 1996 [File No. 1-11406] and
incorporated herein by reference).
In addition to the stock-based compensation plans of the Registrant,
the executive officers of the Registrant may be granted awards under
stock-based compensation plans of Thermo Electron for services
rendered to the Registrant. The terms of such plans are substantially
the same as those of the Registrant's Equity Incentive Plan.
10.27 Restated Stock Holding Assistance Plan and Form of Promissory Note
(filed as Exhibit 10.27 to the Registrant's Annual Report on Form
10-K for the year ended January 3, 1998 [File No. 1-11406] and
incorporated herein by reference).
13 Annual Report to Shareholders for the year ended January 2, 1999
(only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.