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 March 29, 1997

    [   ] Transition Report Pursuant to Section 13 or 15(d) of the
          Securities Exchange Act of 1934

                          Commission file number 1-9549
                              THERMO TERRATECH INC.
             (Exact name of Registrant as specified in its charter)
    Delaware                                                       04-2925807
    (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
           Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange 
             Title of each class                     on which registered
         ----------------------------              -----------------------
         Common Stock, $.10 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 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 May 23, 1997, was approximately $29,800,000.
    As of May 23, 1997, the Registrant had 17,568,428 shares of Common Stock
    outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
    Portions of the Registrant's Fiscal 1997 Annual Report to Shareholders
    for the year ended March 29, 1997, 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 September 24, 1997, are
    incorporated by reference into Part III.
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                                       PART I

    Item 1. Business

    (a) General Development of Business

        Thermo TerraTech Inc. (the Company or the Registrant) provides
    environmental services and infrastructure planning and design services
    encompassing a broad range of specializations, including remediation of
    soil and fluids, consulting and design, laboratory-testing, and metal-
    treating.

        The Company's majority-owned, publicly held Thermo Remediation Inc.
    (Thermo Remediation) subsidiary is a national provider of environmental
    services, including industrial, nuclear, and soil remediation, as well as
    waste-fluids recycling. A recent severe downturn in the Company's
    soil-recycling business and relaxed compliance requirements and
    enforcement activities, which resulted in overcapacity in the industry
    and competitive pricing pressures, have led to operating losses at
    certain sites beginning in fiscal 1997. As a result, during fiscal 1997,
    the Company wrote-down $7.8 million of certain assets associated with its
    soil-remediation business. The Company expects that closure of two sites
    with small operating losses and a write-down of certain assets at two
    other sites, at which current volumes of soil being processed were
    insufficient to recover the Company's investment, will improve operating
    results beginning in fiscal 1998. Revenues and operating losses,
    exclusive of the write-down, at the two sites being closed, aggregated
    $2.9 million and $0.6 million, respectively, in fiscal 1997. In September
    1996, Thermo Remediation acquired IEM Sealand Corporation (IEM Sealand),
    a provider of construction services for the remediation of hazardous
    wastes. As of March 29, 1997, the Company owned 69% of Thermo
    Remediation's common stock and holds a $2.7 million principal amount 3
    7/8% subordinated convertible note due 2000 issued by Thermo Remediation,
    convertible into shares of Thermo Remediation common stock at a
    conversion price of $9.83 per share.

        The Company's majority-owned Thermo EuroTech N.V. (Thermo EuroTech)
    subsidiary, located in the Netherlands, specializes in processing
    "off-spec" mixtures of oil. In fiscal 1997, Thermo EuroTech sold its J.
    Amerika division, which resulted in a loss of $1.5 million. J. Amerika's
    revenues and operating loss were $4.0 million and $0.6 million,
    respectively, in fiscal 1997. As of March 29, 1997, the Company owned 53%
    of the outstanding common stock of Thermo EuroTech.

        Through its Killam Associates subsidiary, the Company offers
    engineering, consulting, and design services in the areas of municipal
    and industrial water quality management; bridge and highway construction
    and reconstruction; and natural resource management. In November 1996,
    the Company acquired Carlan Consulting Group, Inc. (Carlan), a provider
    of transportation and environmental consulting and professional
    engineering and architectural services. In May 1997, the Company
    purchased a controlling interest in The Randers Group Incorporated
    (Randers), a provider of design engineering, project management, and
    construction services for industrial clients in the manufacturing,
    pharmaceutical, and chemical-processing industries. The Company purchased

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    7,100,000 shares of Randers common stock from certain members of Randers'
    management, and 420,000 shares from Thermo Power Corporation, an
    affiliate of the Company, at a price of $0.625 per share, for an
    aggregate cost of approximately $4.7 million. Following these
    transactions, the Company owned approximately 53.3% of Randers'
    outstanding common stock. In addition, Thermo Electron Corporation
    (Thermo Electron), which owns a majority of the Company's outstanding
    common stock, owned approximately 8.9% of Randers' outstanding common
    stock.

        The Company's Thermo Analytical Inc. subsidiary operates analytical
    laboratories that provide comprehensive laboratory-based environmental
    testing, analysis, and related services to detect and measure organic
    contaminants in samples of soil, water, air, industrial wastes, mixed
    wastes, and biological materials. The Company's Lancaster Laboratories
    Inc. subsidiary, based in Lancaster, Pennsylvania, is a provider of
    high-quality analytical and consulting services to the environmental,
    pharmaceutical, and food industries.

        The Company performs metallurgical processing services using
    thermal-treatment equipment at locations in California, Minnesota, and
    Wisconsin. The Company also designs, manufactures, and installs
    computer-controlled, custom-engineered, thermal-processing systems used
    to treat primary metal and metal parts. In October 1996, the Company
    acquired Metal Treating, Inc. (Metal Treating) from Thermo Electron in
    exchange for $1.6 million in cash. Metal Treating provides heat-treating
    services, including carburizing, vacuum hardening, silver and copper
    brazing, and aluminum heat treating, primarily in the Milwaukee and
    southeastern Wisconsin areas. Because the Company and Metal Treating were
    deemed for accounting purposes to be under control of their common
    majority owner, Thermo Electron, the transaction has been accounted for
    at historical cost in a manner similar to a pooling-of-interests.
    Accordingly, all historical information presented has been restated to
    include the results of Metal Treating.

        In May 1996, the Company issued and sold $115.0 million principal
    amount of 4 5/8% subordinated convertible debentures due 2003 for net
    proceeds of $112.4 million. The debentures are convertible into shares of
    the Company's common stock at a price of $15.90 per share and are
    guaranteed on a subordinated basis by Thermo Electron. The Company repaid
    its $15.0 million and $35.0 million promissory notes to Thermo Electron
    with proceeds from the debenture offering.

        The Company was incorporated on May 30, 1986, as an indirect, wholly
    owned subsidiary of Thermo Electron. Prior to its incorporation, the
    Company's operations were conducted by two wholly owned subsidiaries of
    Thermo Electron. As of March 29, 1997, Thermo Electron owned 14,705,658
    shares of the common stock of the Company, representing 82% of such stock
    outstanding. Thermo Electron is a world leader in environmental
    monitoring and analysis instruments, biomedical products such as
    heart-assist devices and mammography systems, papermaking and recycling
    equipment, biomass electric power generation, and other specialized
    products and technologies. Thermo Electron also provides a range of
    services related to environmental quality.
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        Thermo Electron may repurchase shares of the Company's or Thermo
    Remediation's common stock from time to time in the open market or in
    negotiated transactions. During fiscal 19971, Thermo Electron purchased
    203,700 shares and 30,000 shares of the Company's and Thermo
    Remediation's common stock, respectively, in the open market for a total
    price of $2,309,000 and $314,000, respectively.

    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 caption "Forward-looking
    Statements" in the Registrant's Fiscal 1997 Annual Report to Shareholders
    incorporated herein by reference.

    (b) Financial Information About Industry Segments

        The Company conducts business in one segment, environmental services.
    The Company's principal services are: remediation and recycling,
    consulting and design, and laboratory-based testing. The Company also
    provides specialized metal-treating services including the design,
    manufacture, and installation of advanced custom-engineered thermal-
    processing systems.

    (c) Description of Business

        (i) Principal Services and Products

    Remediation and Recycling Services

        Through Thermo Remediation's ReTec subsidiary, the Company provides
    environmental consulting and remediation construction management to
    clients in the railroad transportation, refining, chemical, wood-
    treating, gas, and electric utility industries across the nation. ReTec's
    consulting, engineering, and on-site services offer a broad array of
    remedial solutions, all of which are applied from a risk management
    perspective, to help clients manage problems associated with
    environmental compliance, waste management, and the remediation of
    industrial sites contaminated with organic wastes and residues. ReTec
    provides particular expertise in bioremediation, and in managing wastes
    from manufactured-gas plants, refineries, and railroad properties. ReTec
    operates from offices in 20 cities and numerous field sites across the
    country.

        Thermo Remediation's IEM Sealand subsidiary performs cleanups of
    hazardous-waste sites for government and industry as a prime construction

    1 References to fiscal 1997, 1996, and 1995 herein are for the fiscal
      years ended March 29, 1997, March 30, 1996, and April 1, 1995,
      respectively.
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    contractor and completes predesigned remedial action contracts at sites
    containing hazardous, toxic, and radioactive waste. Under contracts with
    federal and state governments, and other public- and private-sector
    clients, IEM Sealand also provides project management and construction
    services for the remediation of hazardous wastes. Most of IEM Sealand's
    contract work is obtained in a bid process with the job being awarded to
    the lowest qualified bidder.

        Through Thermo Remediation's Thermo Nutech subsidiary, the Company
    provides services to remove radioactive contaminants from soil, as well
    as health physics services, radiochemistry laboratory services, radiation
    dosimetry services, radiation-instrument calibration and repair services,
    and radiation-source production. As part of its radiation and
    nuclear/health physics services, the Company provides site surveys for
    radioactive materials and on-site samples, as well as analysis in support
    of decontamination programs and dosimetry services to measure personnel
    exposure. As part of its on-site services, the Company usually performs a
    preliminary survey using portable radiation-detection equipment. As a
    result of this survey, samples are taken at critical locations and are
    then analyzed radiometrically and radiochemically in a mobile laboratory
    facility at the site or at one of the Company's laboratories. This data
    is then used to plan cleanup operations. A substantial part of the
    Company's health physics services has been performed under the U.S.
    Department of Energy's (DOE's) remedial action programs, including the
    Hanford site. The Company also supplies reusable thermo luminescent
    dosimeter badges. These badges, worn by personnel working in areas where
    radioactive material may be present, are periodically returned to the
    Company for processing to determine the level of radiation exposure. In
    addition, using its proprietary segmented-gate system technology, the
    Company removes radioactive contaminants from soil at the Defense Nuclear
    Fund's site at Johnston Island in the Pacific.

        Through Thermo Remediation's TPS Technologies subsidiary, the Company
    designs and operates facilities for the remediation of nonhazardous soil
    and operates a network of such facilities along the East and West Coasts.
    The Company's soil-remediation centers are environmentally secure
    facilities for receiving, storing, and processing petroleum-contaminated
    soils. Each site consists principally of a soil-remediation unit (SRU)
    and a soil-storage area. The market for remediation of
    petroleum-contaminated soils, as with many other waste markets, was
    created by environmental regulations. The market for soil-remediation
    services is driven largely by state programs to enforce the EPA's
    underground storage tanks (UST) regulations and to fund cleanups. UST
    compliance requirements and attendant remediation costs are often beyond
    the financial capabilities of many individuals and smaller companies.
    Therefore, several states have significantly reduced compliance
    requirements and altered regulatory approaches and standards in order to
    reduce the costs of cleanup. More lenient regulatory standards has
    already resulted in lower levels of cleanup activity in most states where
    the Company conducts business, which has had a material adverse effect on
    the Company's business. The recent severe downturn in the Company's
    soil-recycling business and relaxed compliance requirements and
    enforcement activities, which resulted in overcapacity in the industry
    and competitive pricing pressures, have led to operating losses at
    certain sites beginning in fiscal 1997. As a result, during fiscal 1997,

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    the Company wrote-down $7.8 million of certain assets associated with its
    soil-remediation business. The Company expects that closure of two sites
    with small operating losses and a write-down of certain assets at two
    other sites, at which current volumes of soil being processed were
    insufficient to recover the Company's investment, will improve operating
    results beginning in fiscal 1998. Revenues and operating losses,
    exclusive of the write-down, at the two sites being closed aggregated
    $2.9 million and $0.6 million, respectively, fiscal 1997. In addition,
    underground and aboveground tank regulations, clean water legislation,
    and real estate transfer and financing transactions also influence demand
    for soil-remediation services.

        Thermo Remediation, through its Thermo Fluids subsidiary, collects,
    tests, processes, and recycles used motor oil and other industrial oils.
    In addition, the Company collects and recycles oily water and oil
    filters. Thermo Fluids has processing facilities located in Phoenix and
    Tucson, Arizona, and Las Vegas, Nevada. From these sites, Thermo Fluids
    operates a fleet of oil and water collection trucks to pick up waste oils
    and oily water.

        Through its North Refinery division, the Company's majority-owned
    Thermo EuroTech subsidiary, located in the Netherlands, specializes in
    processing "off-spec" mixtures of oil that contain water, ash, and
    sediment into commercially tradable end products used in blending.
    Although a large percentage of North Refinery's oil feedstock has
    historically come from the former Soviet Union, North Refinery no longer
    receives any oil from that nation as a result of political and economic
    changes that make transportation of waste oil difficult. To overcome this
    loss of supply, North Refinery has taken steps to replace and diversify
    its feedstock suppliers. However, no assurance can be given that it will
    not experience future disruptions in deliveries. The grant of a
    chemical-waste permit for the processing of a special classification of
    oil-contaminated liquids has also allowed North Refinery to begin
    processing chemical-waste streams. The end products of this process are
    commercial grade oils that can be blended to make diesel fuels and marine
    fuels or be used as a feed material. The Company's strategy is to use
    Thermo EuroTech as a platform from which to eventually provide a broad
    range of environmental remediation services throughout Western Europe.

        During fiscal 1997, 1996, and 1995, the Company derived revenues, of
    $127.1 million, $77.0 million, and $58.2 million, respectively, from
    remediation and recycling services.

    Consulting and Design Services

        The Company provides a wide range of comprehensive environmental
    consulting and professional engineering services to private- and
    public-sector clients. These services include the design and inspection
    of water supply and wastewater treatment facilities; investigations of
    different methods to clean up hazardous-waste sites; assistance in
    obtaining government permits; transportation-related and similar types of
    infrastructure engineering, survey, and land-use planning; and support
    services including mechanical, electrical, and structural engineering. In
    addition, the Company provides natural resource management services
    including environmental-impact studies.

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        Through its Killam Associates subsidiary, the Company specializes in
    the design, planning, and construction supervision of municipal and
    privately owned water-treatment plants, waste treatment plants, and
    hazardous-wastewater facilities. The Company provides full-service
    contract operations to plant owners in the public and private sectors.
    These services facilitate regulatory compliance; optimize day-to-day
    plant operations; reduce costs; provide competent, experienced personnel;
    and promote good community relations.

        In November 1996, the Company acquired Carlan, a provider of
    transportation and environmental consulting and professional engineering
    and architectural services. In May 1997, the Company purchased a
    controlling interest in Randers, a provider of design engineering,
    project management, and construction services for industrial clients in
    the manufacturing, pharmaceutical, and chemical-processing industries.

        Through its Bettigole Andrews Clark & Killam subsidiary, the Company
    provides a broad range of bridge and highway engineering services.

        The Company's Normandeau Associates subsidiary's environmental-impact
    assessments and mitigation/restoration studies help to determine water
    quality, promote the safety of wildlife, and assist clients in meeting
    environmental permitting and licensing requirements. Normandeau
    Associates also provides aquatic biology expertise and ecological risk
    assessment to electric utility plants throughout the country.

        A substantial portion of the Company's consulting and design services
    sales are made to existing customers on a repeat basis. Consulting and
    design services are often performed as multiyear studies. In addition to
    federal, state, and local governments, customers include public
    utilities, consulting and construction engineers, waste management
    companies, oil refineries, mining companies, chemical manufacturers,
    architectural and engineering firms, and a variety of service companies
    involved with real estate transactions.

        During fiscal 1997, 1996, and 1995, the Company derived revenues of
    $74.8 million, $74.0 million, and $40.3 million, respectively, from
    consulting and design services.

    Laboratory-testing Services

        The Company provides comprehensive laboratory-based services for the
    environmental, pharmaceutical, and food industries. These laboratories
    also provide analysis and related services to detect and measure
    hazardous wastes and radioactive materials.

        Analytical laboratory services consist of a comprehensive range of
    analytical tests to detect and measure organic contaminants, inorganic
    contaminants, and radioactive materials in samples of soil, water, air,
    industrial wastes, and biological materials. The Company has established
    detailed procedures and strict operating standards to ensure consistent
    performance and to allow it to participate in the Environmental
    Protection Agency's (EPA's) Contract Laboratory Program (CLP). The
    Company's environmental laboratory business has been negatively affected
    by reduced federal spending on environmental testing.

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        During fiscal 1997, 1996, and 1995, the Company derived revenues of
    $35.4 million, $35.5 million, and $8.6 million, respectively, from its
    laboratory-testing services. Revenues from laboratory-testing services
    exclude radiochemistry laboratory service included in remediation and
    recycling services.

    Metal-treating Services and Process Systems

        The Company performs metallurgical processing services using
    thermal-treatment equipment at locations in California and Minnesota.
    Through its equipment division located in Michigan, the Company also
    designs, manufactures, and installs computer-controlled, custom-
    engineered, thermal-processing systems used to treat primary metals and
    metal parts. In October 1996, the Company acquired Metal Treating from
    Thermo Electron in exchange for $1.6 million in cash. Metal Treating
    provides heat treating services, including carburizing, vacuum hardening,
    silver and copper brazing, and aluminum heat treating, primarily in the
    Milwaukee and southeastern Wisconsin areas.

        During fiscal 1997, 1996, and 1995, the Company derived revenues of
    $44.3 million, $35.8 million, and $29.9 million, respectively, from
    metal-treating services and process systems.

        (ii) New Products

        The Company has made no commitments to new products that would
    require the investment of a material amount of the Company's assets.

        (iii) Raw Materials

        Prior to fiscal 1996, a large percentage of North Refinery's oil
    feedstock came from the former Soviet Union. North Refinery no longer
    receives any oil from that nation as a result of political and economic
    changes that make transportation of waste oil difficult. To overcome this
    loss of supply, North Refinery has taken steps to replace and diversify
    its feedstock suppliers. However, no assurance can be given that it will
    not experience future disruptions in deliveries.

        The principal materials used by the Company in its manufacturing
    operations are fabricated steel, alloy castings, and ceramic and
    insulating refractory materials. To date, the Company has not experienced
    any difficulty in obtaining any of the materials or components used in
    its operations and does not foresee any such difficulty in the future.
    The Company has multiple sources for all of its significant raw material
    needs.

        (iv) Patents, Licenses, and Trademarks

        The Company currently owns or has rights under licenses to a number
    of U.S. patents. Although the Company believes that patent protection
    provides it with competitive advantages with respect to certain portions
    of its business and will continue to seek patent protection when

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    appropriate, the Company also believes that its business depends
    primarily upon trade secrets and the technical and marketing expertise of
    its personnel.

        (v) Seasonal Influences

        A majority of the Company's businesses experience seasonal
    fluctuations. A majority of the Company's soil-remediation sites, as well
    as the Company's fluids-recycling sites, experience declines in severe
    weather conditions. Site remediation work and certain environmental
    testing services, such as the services provided by ReTec, Lancaster
    Laboratories, Killam Associates, IEM Sealand, and Thermo Nutech, may
    decline in winter months as a result of severe weather conditions. In
    Europe, Thermo EuroTech may experience a decline in the feedstock
    delivered to its facilities during winter months, due to frozen
    waterways.

        (vi) Working Capital Requirements

        In general, 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

        See Government Contracts.

        (viii) Backlog

        The Company's backlog of firm orders was $108,721,000 and $95,719,000
    as of March 29, 1997, and March 30, 1996, respectively. These amounts
    include the backlog of all of the Company's subsidiaries, with the
    exception of soil-recycling, fluids-recycling, and metallurgical
    services, which are provided on a current basis pursuant to purchase
    orders. Included in the Company's backlog at fiscal year-end 1997 and
    1996 is the incomplete portion of contracts that are accounted for using
    the percentage-of-completion method. Of the fiscal 1997 backlog amount,
    substantially all orders are expected to be filled within the current
    fiscal year.

        (ix) Government Contracts

        Approximately 13%, 10%, and 6% of the Company's revenues in fiscal
    1997, 1996, and 1995, respectively, were derived from contracts or
    subcontracts with the federal government that are subject to
    renegotiation of profits or termination. The Company does not have any
    knowledge of threatened or pending renegotiation or termination of any
    material contract or subcontract.

        (x) Competition

    Remediation and Recycling Services

        Each of ReTec's offices is engaged in highly competitive, regional
    markets. ReTec's competition consists of numerous small firms offering

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    limited services, as well as much larger firms that offer an array of
    services. The principal competitive factors for ReTec are: reputation;
    experience; price; breadth and quality of services offered; and
    technical, managerial, and business proficiency.

         IEM Sealand competes with numerous regional or local companies as
    well as a number of national remediation contractors. IEM Sealand
    competes primarily based on price, as the vast majority of the contracts
    it seeks are awarded to the lowest bidder.

        Thermo Nutech faces competition from many large national competitors,
    and competes primarily on the basis of its proprietary technology and
    price.

        Competition in the soil-remediation business is intense. The
    Company's principal customers are landfills, including major landfill
    companies. The Company also currently competes with companies offering a
    wide range of disposal options, including other fixed-site,
    thermal-treatment facilities, operators of mobile thermal-treatment
    facilities, bioremediation and vapor-extraction technologies, and, in
    certain states, with asphalt plants and brick kilns that use the
    contaminated soil in their production processes. Competition in the
    soil-remediation market has always been highly localized, consisting
    mostly of single-site or single-unit operators. Competitive conditions
    limit the prices charged by the Company in each local market for
    soil-remediation services. Pricing is therefore a major competitive
    factor for the Company. Many existing landfills have relatively low
    operating costs and high margins that enable them to accept contaminated
    soil at relatively low prices. Reduced regulatory requirements in many
    regions of the United States have resulted in increased competition,
    overcapacity in the industry, and declining prices for all forms of soil
    treatment. The Company believes competition and price pressure will
    remain intense for the foreseeable future.

        Thermo Fluids operates the largest fleet of collection vehicles in
    Arizona and Nevada. Thermo Fluids competes with numerous smaller and
    several larger collection companies in its current market primarily based
    on quality of service and price.

        Thermo EuroTech faces competition for oil from other oil processors
    and blenders and from a company with a similar distillation technology in
    Italy. The market for blending oils is very large and oils such as Thermo
    EuroTech's end products represent a very small percentage of the total
    market. Thermo EuroTech competes primarily based on price.

    Consulting and Design Services

        The Company's consulting and design businesses are engaged in highly
    competitive markets in all of its service areas. These markets tend to be
    regional. In its geographic service area, competition consists of small,
    one- to three-person firms offering a limited scope of services, as well
    as much larger firms that may be regional, national, or international in
    the scope of services they offer. The principal competitive factors for
    the Company are: reputation; experience; price; breadth and quality of
    services offered; and technical, managerial, and business proficiency.

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    Laboratory-testing Services

        Hundreds of independent analytical testing laboratories and
    consulting firms compete for environmental services business nationwide.
    Many of these firms use equipment and processes similar to those of the
    Company. Competition is based not only on price, but also on reputation
    for accuracy, quality, and the ability to respond rapidly to customer
    requirements. In addition, many industrial companies have their own
    in-house analytical testing capabilities. The Company believes that its
    competitive strength lies in the quality of its services.

    Metal-treating Services and Process Systems

        The market for metal-treating services is typically regional and
    competitive. All regions in which the Company has facilities contain
    numerous competitors. In addition, in-house heat-treating facilities
    provide a major source of competition. The Company competes in this
    segment on the basis of services provided, turnaround time, and price.

        The market for thermal-processing systems is subject to intense
    competition worldwide. The Company is aware of at least eight companies
    that market a number of products comparable to the Company's, but
    competition for particular projects is typically limited to fewer
    companies. The Company competes on the basis of several factors,
    including technical performance, product quality and reliability, timely
    delivery, and often price. Certain products sold by the Company's
    competitors are less expensive than comparable products sold by the
    Company.

        (xi) 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.

        (xii) Number of Employees

        At March 29, 1997, the Company employed 2,407 persons.

    (d) Financial Information About Exports by Domestic Operations and About
        Foreign Operations

        The Company's exports by domestic operations and foreign operations
    are currently insignificant.

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    (e) Executive Officers of the Registrant

                                 Present Title (Fiscal Year First Became 
    Name                    Age  Executive Officer)
    ----------------------  ---  -------------------------------------------
    Dr. John P. Appleton    62   President and Chief Executive Officer
                                   (1993)
    John N. Hatsopoulos     62   Chief Financial Officer and Vice President 
                                   (1988)
    Emil C. Herkert         59   Vice President (1996)
    Jeffrey L. Powell       38   Vice President (1994)
    Paul F. Kelleher        54   Chief Accounting Officer (1986)

        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. All executive officers except Dr.
    Appleton, Mr. Powell, and Mr. Herkert have held comparable positions for
    at least five years, either with the Company or with its parent company,
    Thermo Electron. Dr. Appleton has served as a Vice President of Thermo
    Electron since 1975 in various managerial capacities. Mr. Powell has been
    President and Chief Executive Officer of Thermo Remediation since May
    1997. From January 1991 until May 1997, Mr. Powell was President of
    Thermo Remediation. He has also served as Chief Operating Officer since
    December 1993. Mr. Herkert has served as President of the Company's
    Killam Associates subsidiary since 1977. Messrs. Hatsopoulos 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.

    Item 2.  Properties

        The location and general character of the Company's principal
    properties as of March 29, 1997, are as follows:

        The Company owns approximately 375,000 square feet of office,
    engineering, laboratory, production, and manufacturing space, principally
    in Pennsylvania, Minnesota, New Jersey, California, Wisconsin, and New
    Mexico, and leases approximately 750,000 square feet of office,
    engineering, laboratory, production, and manufacturing space, pursuant to
    leases expiring in fiscal 1998 through 2009, principally in California,
    Michigan, Pennsylvania, South Carolina, Florida, Texas, Washington, New
    Jersey, New Mexico, New York, and Massachusetts.

        The Company also owns approximately 96 acres in Maryland, South
    Carolina, California, Florida, and Oregon, from which it provides
    soil-remediation services. The Company occupies approximately 22 acres
    principally in New York, Washington, California, Virginia, and South
    Carolina pursuant to leases expiring in fiscal 1998 through 2006, from
    which it provides soil-remediation services.

        The Company leases approximately eight acres on two sites in Arizona
    and one site in Nevada consisting of office space, fluids-recycling and
    maintenance facilities, and sites for fluids storage tanks.

                                       12PAGE
<PAGE>
        The Company occupies approximately 15 acres in Delfzijl, Holland,
    pursuant to a lease expiring in 2059, consisting of office space,
    distillation facilities, and oil storage tanks.

        The Company believes that these facilities are in good condition and
    are adequate for its present operations and that other suitable space is
    readily available if any of such leases are not extended.


    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 Shareholder 
             Matters

        Information concerning the market and market price for the
    Registrant's Common Stock, $.10 par value, and dividend policy are
    included under the sections labeled "Common Stock Market Information" and
    "Dividend Policy" in the Registrant's Fiscal 1997 Annual Report to
    Shareholders and is incorporated herein by reference.


    Item 6.  Selected Financial Data

        The information concerning the Registrant's selected financial data
    is included under the sections labeled "Selected Financial Information"
    and "Dividend Policy" in the Registrant's Fiscal 1997 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 Fiscal 1997 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 March 29,
    1997, are included in the Registrant's Fiscal 1997 Annual Report to
    Shareholders and are incorporated herein by reference.

                                       13PAGE
<PAGE>
    Item 9.  Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosures

        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.

                                       14PAGE
<PAGE>
                                     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 Operations
                      Consolidated Balance Sheet
                      Consolidated Statement of Cash Flows
                      Consolidated Statement of Shareholders' Investment
                      Notes to Consolidated Financial Statements
                      Report of Independent Public Accountants

              Financial Statements and Schedules filed herewith:

                      Financial Statements of Unconsolidated Subsidiary:
                      ReTec/Tetra L.C.

                      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 the notes thereto.

    (b)       Reports on Form 8-K

              None.

    (c)       Exhibits

              See Exhibit Index on the page immediately preceding exhibits.

                                      15PAGE
<PAGE>
                                   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 by the undersigned, thereunto duly authorized.

    Date: June 6, 1997                   THERMO TERRATECH INC.



                                         By: John P. Appleton
                                             --------------------
                                             John P. Appleton
                                             President and
                                             Chief Executive Officer

        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 June 6, 1997.

    Signature                        Title
    ---------                        -----

    By: John P. Appleton             President, Chief Executive Officer,
        ----------------------
        John P. Appleton               and Director


    By: John N. Hatsopoulos          Chief Financial Officer,
        ----------------------
        John N. Hatsopoulos            Vice President, and Director


    By: Paul F. Kelleher             Chief Accounting Officer
        ----------------------
        Paul F. Kelleher


    By: Brian D. Holt                Director
        ----------------------
        Brian D. Holt


    By: Donald E. Noble              Director
        ----------------------
        Donald E. Noble


    By:                              Director
        ----------------------
        William A. Rainville


    By:                              Chairman of the Board and Director
        ----------------------
        Polyvios C. Vintiadis

                                       16PAGE
<PAGE>
                         Report of Independent Auditors



    The Supervisory Board
    RETEC/TETRA L.C.


    We have audited the accompanying balance sheets of RETEC/TETRA L.C. (a
    Limited Liability Corporation) ("the Company") as of December 31, 1996
    and 1995, and the related statements of operations, members' equity, and
    cash flows for each of the years then ended. These financial statements
    are the responsibility of the Company's management. Our responsibility is
    to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
    standards. Those standards require that we plan and perform the audit to
    obtain reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a test
    basis, evidence supporting the amounts and disclosures in the financial
    statements. An audit also includes assessing the accounting principles
    used and significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that our audits
    provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
    present fairly, in all material respects, the financial position of
    RETEC/TETRA L.C. at December 31, 1996 and 1995, and the results of its
    operations and its cash flow for the years then ended, in conformity with
    generally accepted accounting principles.



                                                Ernst & Young LLP



    Houston, Texas
    February 27, 1997

                                       17PAGE
<PAGE>
                                RETEC/TETRA L.C.
                                 BALANCE SHEETS


                                                        December 31
                                                 --------------------------

                                                     1996           1995
                                                 -----------    -----------
    ASSETS
    Current assets:
      Cash                                       $   589,355    $   114,330
      Trade accounts receivable                    1,669,294      1,506,109
      Accounts receivable from parent
        corporations                                  19,981          4,139
      Prepaid expenses and other current assets      793,790        538,598
                                                 -----------    -----------
          Total current assets                     3,072,420      2,163,176

    Property, plant and equipment:
      Machinery and equipment                     17,966,893     13,881,832
      Automobiles and other equipment                475,673        360,679
      Construction in progress                     1,465,117      1,430,927
                                                 -----------    -----------
                                                  19,907,683     15,673,438
      Less accumulated depreciation               (7,645,348)    (4,475,376)
                                                 -----------    -----------
          Net property, plant and equipment       12,262,335     11,198,062

    Other assets:
      Technology, patents and licenses, net of
        accumulated amortization of $314,860
        in 1996 and $241,694 in 1995                 381,380        454,546
                                                 -----------    -----------
          Total assets                           $15,716,135    $13,815,784
                                                 ===========    ===========

    LIABILITIES AND MEMBERS' EQUITY
    Current liabilities:
      Trade accounts payable                     $   274,818    $ 1,035,316
      Payable to parent corporations                 129,853        270,114
      Accrued expenses                               574,009        368,874
      Current portion of notes payable             1,037,000        668,000
                                                 -----------    -----------
          Total current liabilities                2,015,680      2,342,304

    Long-term portion of notes payable             2,635,139      2,465,000

    Members' equity:
      Invested capital                             9,751,078      8,675,539
      Retained earnings                            1,314,238        332,941
                                                 -----------    -----------
          Total members' equity                   11,065,316      9,008,480
                                                 -----------    -----------
      Total liabilities and members' equity      $15,716,135    $13,815,784
                                                 ===========    ===========
                             See Accompanying Notes

                                       18PAGE
<PAGE>
                                RETEC/TETRA L.C.
                            STATEMENTS OF OPERATIONS


                                                   Year Ended December 31
                                                 --------------------------

                                                     1996           1995
                                                 -----------    -----------
    Revenues                                     $12,066,497    $ 9,417,408
    Cost of revenues                               9,040,440      8,176,145
                                                 -----------    -----------
    Gross profit                                   3,026,057      1,241,263
    General and administrative expenses            1,664,435      1,170,802
                                                 -----------    -----------
    Operating income                               1,361,622         70,461
    Other income                                      15,523              0
    Interest expense                                (386,843)      (163,165)
    Loss on sale of fixed assets                      (9,005)       (23,666)
                                                 -----------    -----------
    Net income (loss)                            $   981,297    $  (116,370)
                                                 ===========    ===========


                             See Accompanying Notes








                                       19PAGE
<PAGE>
                                RETEC/TETRA L.C.
                          STATEMENTS OF MEMBERS' EQUITY


                                      TETRA       Remediation
                                  Technologies,  Technologies,
                                       Inc.           Inc.          Total
                                  -------------  -------------   -----------

    Balance at August 1, 1992

      Capital contribution          $   800,000   $ 2,375,539   $ 3,175,539

      1992 net loss                    (285,303)     (285,303)     (570,606)
                                    -----------   -----------   -----------
    Balance at December 31, 1992        514,697     2,090,236     2,604,933

      Capital contribution            2,400,000     1,900,000     4,300,000

      1993 net loss                    (124,225)     (124,224)     (248,449)
                                    -----------   -----------   -----------
    Balance at December 31, 1993      2,790,472     3,866,012     6,656,484

      Capital contribution              600,000       600,000     1,200,000

      1994 net income                   634,183       634,183     1,268,366
                                    -----------   -----------   -----------
    Balance at December 31, 1994      4,024,655     5,100,195     9,124,850

      1995 net loss                     (58,185)      (58,185)     (116,370)
                                    -----------   -----------   -----------
    Balance at December 31, 1995      3,966,470     5,042,010     9,008,480

      Capital contribution            1,075,539             0     1,075,539

      1996 net income                   490,649       490,648       981,297
                                    -----------   -----------   -----------
    Balance at December 31, 1996    $ 5,532,658   $ 5,532,658   $11,065,316
                                    ===========   ===========   ===========


                             See Accompanying Notes




                                       20PAGE
<PAGE>
                                RETEC/TETRA L.C.
                            STATEMENTS OF CASH FLOWS


                                                    Year Ended December 31
                                                 --------------------------

                                                     1996           1995
                                                 -----------    -----------

    Operating activities:
      Net income (loss)                          $   981,297    $  (116,370)
      Adjustments to reconcile net income (loss)
        to cash provided by operating activities:
          Depreciation and amortization            3,251,037      2,344,990
          Loss on the sale of fixed assets             9,005         23,666
          Changes in operating assets and
            liabilities:
              Accounts receivable                   (179,027)        37,957
              Prepaid expenses and other
                current assets                      (255,192)      (228,489)
              Trade accounts payable and accrued
                expenses                            (695,624)      (189,320)
                                                 -----------    -----------
      Net cash provided by operating activities    3,111,496      1,872,434

    Investing activities:
      Purchase of property, plant and equipment   (4,252,649)    (5,135,545)
      Purchase of patents, royalties and
        technologies                                       0        (26,357)
      Proceeds from sale of assets                     1,500         65,671
                                                 -----------    -----------
      Net cash used in investing activities       (4,251,149)    (5,096,231)

    Financing activities:
      Proceeds from long-term debt                 3,585,000      3,340,000
      Principal payments on long-term debt        (3,045,861)      (207,000)
      Capital contribution - TETRA                 1,075,539              0
                                                 -----------    -----------
      Net cash provided by financing activities    1,614,678      3,133,000
    Increase (decrease) in cash                      475,025        (90,797)
    Cash at beginning of period                      114,330        205,127
                                                 -----------    -----------
    Cash at end of period                        $   589,355    $   114,330
                                                 ===========    ===========

    Supplemental Cash Flow Information:
      Interest paid                              $   426,370    $   163,165


                             See Accompanying Notes


                                       21PAGE
<PAGE>
                                RETEC/TETRA L.C.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1996


    NOTE A -- ORGANIZATION AND OPERATIONS

        RETEC/TETRA L.C. ("the Company") was formed August 1, 1992 as a joint
    venture with RETEC/Thermal (RETEC), a wholly-owned subsidiary of
    Remediation Technologies, Inc., owning 50% and TETRA/Thermal, (TETRA) a
    wholly-owned subsidiary of TETRA Technologies, Inc., owning the other
    50%. The Company installs and operates systems to process hazardous and
    non-hazardous wastes at petroleum refineries located primarily in the
    Gulf Coast region. In December 1995 Remediation Technologies, Inc. was
    acquired by Thermo Remediation Inc.


    NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Concentration of Credit Risk

        Financial instruments which subject the Company to concentrations of
    credit risk consist principally of trade receivables. The Company's
    policy is to evaluate, prior to contract signing, each customer's
    financial condition and determine the amount of open credit to be
    extended; generally collateral is not required. The trade receivables
    primarily include activity with major petroleum refinery companies.

    Property, Plant and Equipment

        Property, plant and equipment contributed by RETEC upon formation of
    the venture are stated at the value in the formation agreement and assets
    purchased subsequent are stated at cost. Expenditures that increase the
    useful lives of assets are capitalized. The costs of repairs and
    maintenance are charged to operations as incurred. Assets contributed at
    the Company's formation are depreciated using a declining-balance method
    converting to the straight-line method. All assets acquired subsequent to
    formation are depreciated using the straight-line method. The estimated
    useful lives of assets are as follows:

         Machinery and Equipment             2 to 10 years
         Automobiles and other equipment     2 to  5 years

    Technology, Patents and Licenses

        Technology, patents and licenses, which relate to proprietary waste
    treatment processes contributed by RETEC, were estimated at the stated
    value in the formation agreement. Patents and licenses are amortized over
    the estimated useful lives generally ranging from five to ten years.
    Technologies are amortized over estimated useful lives from eight to ten
    years.

                                        22PAGE
<PAGE>
                                RETEC/TETRA L.C.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1996


    NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)

    Income Taxes
        The Company has elected to be treated as a partnership for federal
    income tax purposes. RETEC and TETRA include their respective shares of
    the net income (loss) of the Company in their federal and state tax
    returns.

    Allocation of Joint Venture Profit and Loss

        In accordance with the formation agreement, net income (loss) is to
    be allocated to RETEC and TETRA in accordance with their partnership
    interests.

    Operating Leases

        The Company periodically enters into operating leases for various
    pieces of equipment and warehouse space. Aggregate rental expense under
    these agreements was $353,305 and $603,210 in 1996 and 1995,
    respectively. Minimum future annual lease payments under non-cancelable
    operating leases are as follows for the years ending December 31, 1997: -
    $72,188; 1998 - $51,385; 1999 - $31,868; 2000 - $3,591. The lease for
    warehouse space expires March 1997 but the Company expects to renew the
    lease.

    Use of Estimates

        Management is required to make estimates and assumptions that affect
    the amounts reported in the financial statements and accompanying notes.
    Actual results could differ from those estimates.

    Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
    to Be Disposed Of

        In March 1995, The Financial Accounting Standards Board issued
    Accounting for the Impairment of Long-Lived Assets and for Long-Lived
    Assets to Be Disposed Of (SFAS 121), which requires impairment losses to
    be recorded on long-lived assets used in operations when indicators of
    impairment are present and the discounted cash flows estimated to be
    generated by those assets are less than the assets' carrying amount. SFAS
    121 also addresses the accounting for long-lived assets that are expected
    to be disposed of. The Company adopted SFAS 121 in the first quarter of
    1996 and the effect of adoption was not material.

    Financial Instruments

        The carrying amount of the Company's financial instruments
    approximate fair market value.
                                        23PAGE
<PAGE>
                                RETEC/TETRA L.C.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1996


    NOTE C -- CAPITAL CONTRIBUTIONS

        The Company was initially capitalized with TETRA contributing
    $800,000 in cash and RETEC contributing thermal plant equipment valued at
    $1,775,539 and thermal desorption process technology valued at $600,000.
    Each partner contributed $600,000 in 1994 and $1.4 million in 1993 in
    additional capital to fund the construction of two new projects. In
    September 1993, the Company acquired the assets of the Environmental
    Services Division of TRW for $1 million, with each partner contributing
    $500,000. Additionally, TETRA contributed $500,000 of working capital in
    1993. In September 1996, TETRA contributed $1,075,540 toward the purchase
    of additional equipment to be used in future projects. 


    NOTE D -- LONG-TERM DEBT

    Long-term debt consists of the following:
                                                              December 31
                                                           -----------------
                                                             
                                                             (In thousands) 
                                                              1996      1995
                                                           -------   -------

    Revolving credit agreement of $500,000 with
      an interest rate of prime and a commitment
      fee of 3/8% on the unused portion of the loan.
      The agreement expired December 15, 1996.             $     -   $     -
    Promissory note payable to Texas Commerce Bank
      at fixed interest rate of 8.05%, payable $100,000
      quarterly plus interest and due June 15, 2000.
      The note is secured by the underlying equipment
      and is guaranteed by both parent corporations.         1,401     1,898
    Promissory note payable to Texas Commerce Bank at
      prime interest rate, payable $65,000 quarterly
      plus interest and due October 15, 2000. The note
      is secured by the underlying equipment and is
      guaranteed by both parent corporations.                  575     1,235
    Promissory note payable to Texas Commerce Bank
      at prime interest rate, payable $94,250 quarterly
      plus interest and due May 20, 2001. The note is
      secured by the underlying equipment and is
      guaranteed by both parent corporations.                1,696         -
                                                           -------   -------
                                                             3,672     3,133
    Less: Current portion                                   (1,037)     (668)
                                                           -------   -------
                                                           $ 2,635   $ 2,465
                                                           =======   =======
                                        24PAGE
<PAGE>
                                RETEC/TETRA L.C.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1996


    NOTE D -- LONG-TERM DEBT (con't)
        Scheduled maturities for the next five years are as follows: (In
    thousands)

                  1997                          $ 1,037
                  1998                            1,037
                  1999                              832
                  2000                              578
                  2001                              188
                                                -------
                                                $ 3,672
                                                =======

    NOTE E -- RELATED-PARTY TRANSACTIONS

        The Company was billed approximately $1,305,577 in 1996 and $922,164
    in 1995 by the owners, primarily TETRA, for administrative services and
    materials rendered on behalf of the Company.


    NOTE F -- COMMITMENTS AND CONTINGENCIES

        The Company is subject to litigation and other proceedings arising in
    the ordinary course of business. While the outcome of the litigation and
    other proceedings against the Company cannot be predicted with certainty,
    management does not expect these matters to have a material adverse
    impact on the Company.


                                        25PAGE
<PAGE>
                    Report of Independent Public Accountants
                    ----------------------------------------


    To the Shareholders and Board of Directors of Thermo TerraTech Inc.:

        We have audited, in accordance with generally accepted auditing
    standards, the consolidated financial statements included in Thermo
    TerraTech Inc.'s Annual Report to Shareholders incorporated by reference
    in this Form 10-K, and have issued our report thereon dated May 6, 1997
    (except with respect to the matters discussed in Note 17 as to which the
    date is May 12, 1997). 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 15 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
    May 6, 1997 




                                       26PAGE
<PAGE>
 SCHEDULE II

                              THERMO TERRATECH INC.

                        Valuation and Qualifying Accounts

                                 (In thousands)


                     Balance  Provision
                          at    Charged             Accounts           Balance
                   Beginning         to   Accounts  Written-            at End
Description          of Year    Expense  Recovered       off  Other(a) of Year
-----------------  ---------  ---------  ---------  --------  -------  -------
                                                              
Allowance for
  Doubtful Accounts

Year Ended
  March 29, 1997     $ 2,861    $   625   $     49  $  (516)   $  819  $ 3,838
    
Year Ended
  March 30, 1996 (b) $ 3,572    $    85   $     84  $(1,628)   $  748  $ 2,861

Year Ended
  April 1, 1995 (b)  $ 3,273    $   161   $   (579) $    88    $  629  $ 3,572

(a)  Includes allowances of businesses acquired during the year as described in
     Note 3 to Consolidated Financial Statements in the Registrant's fiscal
     1997 Annual Report to Shareholders and the effect of foreign currency
     translation. 

(b)  Historical results have been restated to reflect the acquisition of Metal
     Treating, Inc., accounted for at historical cost in a manner similar to a
     pooling-of-interests.








                                       27PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
      3.1     Restated Certificate of Incorporation, as amended (filed
              as Exhibit 99 to the Registrant's Registration Statement
              on Form S-2 [Registration No. 333-02269] and incorporated
              herein by reference).

      3.2     Bylaws of the Registrant (filed as Exhibit 3(b) to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended April 2, 1988 [File No. 1-9549] and
              incorporated herein by reference).

      4.1     Fiscal Agency Agreement dated August 4, 1989, among the
              Registrant, Thermo Electron Corporation, and Chemical
              Bank, as fiscal agent (filed as Exhibit B to the
              Registrant's Current Report on Form 8-K relating to the
              events occurring on August 4, 1989 [File No. 1-9549] and
              incorporated herein by reference).

      4.2     Fiscal Agency Agreement dated as of May 2, 1996, among
              the Registrant, Thermo Electron Corporation, and Chemical
              Bank, as Fiscal Agent (filed as Exhibit 4.2 to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended March 30, 1996 [File No. 1-9549] and
              incorporated herein by reference).
              The Registrant hereby agrees, pursuant to Item
              601(b)(4)(iii)(A) of Regulation S-K, to furnish to the
              Commission, upon request, a copy of each other instrument
              with respect to other long-term debt of the Company or
              its subsidiaries.

     10.1     Thermo Electron Corporate Charter as amended and restated
              effective January 3, 1993 (filed as Exhibit 10(a) to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended April 3, 1993 [File No. 1-9549] and
              incorporated herein by reference).

     10.2     Amended and Restated Corporate Services Agreement dated
              January 3, 1993, between Thermo Electron Corporation and
              the Registrant (filed as Exhibit 10(b) to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended April 3, 1993 [File No. 1-9549] and
              incorporated herein by reference).

     10.3     Agreement of Lease dated December 31, 1985, between
              Claridge Properties Ltd. and Thermo Electron Corporation
              (filed as Exhibit 10(c) to the Registrant's Registration
              Statement on Form S-1 [Reg. No. 33-6763] and incorporated
              herein by reference).

     10.4     Assignment of Lease dated December 31, 1985, between
              Thermo Electron Corporation and TMO, Inc. (filed as
              Exhibit 10(d) to the Registrant's Registration Statement
              on Form S-1 [Reg. No. 33-6763] and incorporated herein by
              reference).
                                       28PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
     10.5     Sublease dated March 30, 1986, between TMO, Inc. and
              Holcroft/Loftus, Inc. (filed as Exhibit 10(e) to the
              Registrant's Registration Statement on Form S-1 [Reg. No.
              33-6763] and incorporated herein by reference).

     10.6     Lease Amending Agreement dated January 1, 1995, between
              Claridge Properties Ltd., Thermo Electron Corporation,
              and TMO, Inc. (filed as Exhibit 10.6 to the Registrant's
              Annual Report on Form 10-K [File No. 1-9549] and
              incorporated by reference). 

     10.7     Exclusive License and Marketing Agreement dated March 22,
              1990, among TPS Technologies Inc., Holcroft Inc., and
              Thermo Soil Recyclers Inc. (filed as Exhibit 10(q) to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended March 30, 1990 [File No. 1-9549] and
              incorporated herein by reference).

     10.8     Form of Indemnification Agreement with Directors and
              Officers (filed as Exhibit 10(k) to the Registrant's
              Annual Report on Form 10-K for the fiscal year ended
              March 30, 1991 [File No. 1-9549] and incorporated herein
              by reference).

     10.9     Development Agreement dated September 15, 1991, between
              Thermo Electron Corporation and the Registrant (filed as
              Exhibit 10(l) to the Registrant's Quarterly Report on
              Form 10-Q for the fiscal quarter ended September 28, 1991
              [File No. 1-9549] and incorporated herein by reference).

     10.10    Amended and Restated Development Agreement dated January
              2, 1992, between Thermo Electron Corporation and the
              Registrant (filed as Exhibit 10(m) to the Registrant's
              Annual Report on Form 10-K for the fiscal year ended
              March 28, 1992 [File No. 1-9549] and incorporated herein
              by reference).

     10.11    Asset Transfer Agreement dated as of October 1, 1993,
              among the Registrant, TPS Technologies Inc., and Thermo
              Remediation Inc. (filed as Exhibit 2.3 to Thermo
              Remediation's Registration Statement on Form S-1 [Reg.
              No. 33-70544] and incorporated herein by reference).

     10.12    Exclusive License Agreement dated as of October 1, 1993,
              among the Registrant, TPS Technologies Inc., and Thermo
              Remediation Inc. (filed as Exhibit 2.4 to Thermo 
              Remediation's Registration Statement on Form S-1 [Reg.
              No. 33-70544] and incorporated herein by reference).


                                       29PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
     10.13    Non-Competition and Non-Disclosure Agreement dated as of
              October 1, 1993 among the Registrant, TPS Technologies
              Inc. and Thermo Remediation Inc. (filed as Exhibit 2.5 to
              Thermo Remediation's Registration Statement on Form S-1
              [Reg. No. 33-70544] and incorporated herein by
              reference).

     10.14    Tax Allocation Agreement dated as of June 1, 1992,
              between the Registrant and Thermo Remediation Inc. (filed
              as Exhibit 10.3 to Thermo Remediation's Registration
              Statement on Form S-1 [Reg. No. 33-70544] and
              incorporated herein by reference).

     10.15    Agreement of Partnership dated May 16, 1994, among Terra
              Tech Labs Inc. (a wholly owned subsidiary of the
              Registrant) and Eberline Analytical Corporation, Skinner
              & Sherman, Inc., TMA/NORCAL Inc., Normandeau Associates
              Inc., Bettigole Andrews & Clark Inc., Fellows, Read &
              Associates Inc., and Thermo Consulting Engineers Inc.
              (each a wholly owned subsidiary of Thermo Instrument
              Systems Inc.) (filed as Exhibit 1 to the Registrant's
              Current Report on Form 8-K relating to the events
              occurring on May 16, 1994 [File No. 1-9549] and
              incorporated herein by reference).

     10.16    Promissory Note dated May 16, 1994, issued by the
              Registrant to Thermo Electron Corporation (filed as
              Exhibit 2 to the Registrant's Current Report on Form 8-K
              relating to the events occurring on May 16, 1994 [File
              No. 1-9549] and incorporated herein by reference).

     10.17    Agreement of Dissolution of Partnership dated May 9, 1995
              among Thermo Terra Tech (the Partnership), Terra Tech
              Labs, Inc. (a wholly owned subsidiary of the Registrant)
              and Eberline Analytical Corporation, Skinner & Sherman,
              Inc., TMA/NORCAL Inc., Normandeau Associates Inc.,
              Bettigole Andrews & Clark Inc., Fellows, Read &
              Associates Inc., and Thermo Consulting Engineers Inc.
              (each a wholly owned subsidiary of Thermo Instrument
              Systems Inc.) (filed as Exhibit 2.1 to the Registrant's
              Current Report on Form 8-K relating to the events
              occurring on May 9, 1995 [File No. 1-9549] and
              incorporated herein by reference).

     10.18    Stock Purchase Agreement dated May 9, 1995, between the
              Registrant and Thermo Instrument Systems Inc. (filed as
              Exhibit 2.2 to the Registrant's Current Report on Form
              8-K relating to the events occurring on May 9, 1995 [File
              No. 1-9549] and incorporated herein by reference).


                                       30PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
     10.19    Note dated May 17, 1995, from the Registrant to Thermo
              Electron Corporation (filed as Exhibit 2.3 to the
              Registrant's Current Report on Form 8-K relating to the
              events occurring on May 9, 1995 [File No. 1-9549] and
              incorporated herein by reference).

     10.20    Stock Purchase and Note Issuance Agreement dated as of
              November 22, 1993, between the Registrant and Thermo
              Remediation Inc. (filed as Exhibit 10.11 to Thermo
              Remediation's Registration Statement on Form S-1 [Reg.
              No. 33-70544] and incorporated herein by reference).

     10.21    $2,650,000 principal amount Subordinated Convertible Note
              dated as of November 22, 1993, made by Thermo Remediation
              Inc., issued to the Registrant (filed as Exhibit 10.12 to
              Thermo Remediation's Registration Statement on Form S-1
              [Reg. No. 33-70544] and incorporated herein by
              reference).

     10.22    Asset Purchase Agreement dated as of November 19, 1993,
              by and among All Western Oil, Inc. and certain affiliates
              thereof and Thermo Fluids Inc. (filed as Exhibit 10.13 to
              Thermo Remediation's Registration Statement on Form S-1
              [Reg. No. 33-70544] and incorporated herein by
              reference).

     10.23    First Addendum to Asset Purchase Agreement dated as of
              August 7, 1994, among All Western Oil, Inc. et al. and
              Thermo Fluids Inc. (filed as Exhibit 10.1 to Thermo
              Remediation's Quarterly Report on Form 10-Q for the
              fiscal quarter ended October 1, 1994 [File No. 1-12636]
              and incorporated herein by reference).

     10.24    Promissory Note in the principal amount of $700,000,
              dated August 7, 1994 (filed as Exhibit 10.2 to Thermo
              Remediation's Quarterly Report on Form 10-Q for the
              fiscal quarter ended October 1, 1994 [File No. 1-12636]
              and incorporated herein by reference).

     10.25    Security Agreement dated as of August 7, 1994, among All
              Western Oil, Inc. et al. and Thermo Fluids Inc. (filed as
              Exhibit 10.3 to Thermo Remediation's Quarterly Report on
              Form 10-Q for the fiscal quarter ended October 1, 1994
              [File No. 1-12636] and incorporated herein by reference).



                                       31PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
     10.26    Stock Purchase and Sale Agreement made and entered into
              on February 6, 1995, to be effective as of January 29,
              1995, by and between Nord Est S.A., the Registrant, and
              Emil C. Herkert, Kenneth L. Zippler, Franklin O.
              Williamson, Jr., Fletcher N. Platt, Jr., Eugene J.
              Destefano, Meint Olthof, and Stanley P. Kaltnecker, Jr.
              (filed as Exhibit 1 to the Registrant's Current Report on
              Form 8-K relating to the events occurring on February 6,
              1995 [File No. 1-9549] and incorporated herein by
              reference).

     10.27    Agreement and Plan of Merger dated as of June 28, 1995,
              by and among the Registrant, Eberline Acquisition Inc.,
              Thermo Remediation Inc., and Eberline Holdings Inc.
              (filed as Appendix B to Thermo Remediation's Proxy
              Statement for the Annual Meeting held on December 13,
              1995 [File No. 1-12636] and incorporated herein by
              reference).

     10.28    $28,000,000 Secured Promissory Note dated as of January
              29, 1995, issued by the Registrant to Nord Est S.A.
              (filed as Exhibit 2 to the Registrant's Current Report on
              Form 8-K relating to the events occurring on February 6,
              1995 [File No. 1-9549] and incorporated herein by
              reference).

     10.29    $38,000,000 Promissory Note dated as of February 21,
              1995, issued by the Registrant to Thermo Electron
              Corporation (filed as Exhibit 3 to the Registrant's
              Current Report on Form 8-K relating to the events
              occurring on February 6, 1995 [File No. 1-9549] and
              incorporated herein by reference).

     10.30    Asset Purchase Agreement by and among Thermo Analytical
              Inc. (as Buyer); Lancaster Laboratories, Inc. and
              Clewmark Holdings (as Sellers); and Earl H. Hess, Anita
              F. Hess, Kenneth E. Hess, J. Wilson Hershey, and Carol D.
              Hess (as the principal owners of Sellers) (filed as
              Exhibit 1 to the Registrant's Current Report on Form 8-K
              relating to the events occurring on May 10, 1995 [File
              No. 1-9549] and incorporated herein by reference).

     10.31    Agreement and Plan of Merger dated as of the first day of
              December 1995, by and among Thermo Remediation Inc., TRI
              Acquisition Inc., and Remediation Technologies, Inc.
              (filed as Exhibit 2(a) to the Registrant's Current Report
              on Form 8-K relating to the events occurring on December
              8, 1995 [File No. 1-9549] and incorporated herein by
              reference).

                                       32PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
     10.32    Purchase and Sale Agreement dated as of December 20,
              1994, by and among TPS Technologies Inc., TPST Soil
              Recyclers of Maryland Inc., Rafich Corporation, Harry
              Ratrie, John C. Cyphers, and J. Thomas Hood (filed as
              Exhibit 1 to Thermo Remediation's Current Report on Form
              8-K for the events occurring on December 21, 1994 [File
              No. 1-12636] and incorporated herein by reference).

     10.33    Stock Purchase Agreement entered into on March 29, 1995,
              by and among Stalt Holding, B.V., Beheersmaatschappij J.
              Amerika N.V., A.J. Van Es, J.B. Van Es and D.A. Slager,
              and the Registrant (filed as Exhibit 1 to the
              Registrant's Current Report on Form 8-K relating to the
              events occurring on March 29, 1995 [File No. 1-9549] and
              incorporated herein by reference).

     10.34    Master Repurchase Agreement dated January 1, 1994,
              between the Registrant and Thermo Electron Corporation
              (filed as Exhibit 10.21 to the Registrant's Annual Report
              on Form 10-K for the fiscal year ended April 2, 1994
              [File No. 1-9549] and incorporated herein by reference).

     10.35    Master Reimbursement Agreement dated January 1, 1994,
              between the Registrant, Thermo Electron Corporation, and
              Thermo Remediation Inc. (filed as Exhibit 10.22 to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended April 2, 1994 [File No. 1-9549] and
              incorporated herein by reference).

     10.36    Incentive Stock Option Plan of the Registrant (filed as
              Exhibit 10(h) to the Registrant's Registration Statement
              on Form S-1 [Reg. No. 33-6763] and incorporated herein by
              reference). (Maximum number of shares issuable in the
              aggregate under this plan and the Registrant's
              Nonqualified Stock Option Plan is 1,850,000 shares, after
              adjustment to reflect share increases approved in 1987,
              1989, and 1992, 6-for-5 stock splits effected in
              July 1988 and March 1989, and 3-for-2 stock split
              effected in September 1989).

     10.37    Nonqualified Stock Option Plan of the Registrant (filed
              as Exhibit 10(i) to the Registrant's Registration
              Statement on Form S-1 [Reg. No. 33-6763] and incorporated
              herein by reference). (Maximum number of shares issuable
              in the aggregate under this plan and the Registrant's
              Incentive Stock Option Plan is 1,850,000 shares, after
              adjustment to reflect share increases approved in 1987,
              1989, and 1992, 6-for-5 stock splits effected in
              July 1988 and March 1989, and 3-for-2 stock split
              effected in September 1989).

                                       33PAGE
<PAGE>
                                  EXHIBIT INDEX

    Exhibit
    Number    Description of Exhibit
    ------------------------------------------------------------------------
      10.38   Deferred Compensation Plan for Directors of the
              Registrant (filed as Exhibit 10(k) to the Registrant's
              Registration Statement on Form S-1 [Reg. No. 33-6763] and
              incorporated herein by reference).

      10.39   Equity Incentive Plan (filed as Exhibit 10.63 to
              Thermedics Inc.'s Annual Report on Form 10-K for the
              fiscal year ended January 1, 1994 [File No. 1-9567] and
              incorporated herein by reference) (Maximum number of
              shares issuable is 1,750,000 shares, after adjustment to
              reflect share increase approved in 1994).

      10.40   Directors Stock Option Plan, as amended and restated
              effective January 1, 1995 (filed as Exhibit 10.39 to the
              Registrant's Annual Report on Form 10-K for the fiscal
              year ended April 1, 1995 [File No. 1-9549] and
              incorporated herein by reference).

      10.41   Thermo TerraTech Inc. (formerly Thermo Process Systems
              Inc.)- Thermo Remediation Inc. Nonqualified Stock Option
              Plan (filed as Exhibit 10(l) to the Registrant's
              Quarterly Report on Form 10-Q for the fiscal quarter
              ended January 1, 1994 [File No. 1-9549] 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
              or to such affiliated corporations. Thermo Electron's
              plans were filed as Exhibits 10.21 through 10.45 to the
              Annual Report on Form 10-K of Thermo Electron for the
              year ended December 28, 1996 [File No. 1-8002] and are
              incorporated herein by reference.

      10.42   Restated Stock Holdings Assistance Plan and Form of
              Executive Loan.

      11      Computation re: Earnings (Loss) per share.

      13      Annual Report to Shareholders for the fiscal year ended
              March 29, 1997 (only those portions incorporated herein
              by reference).

      21      Subsidiaries of the Registrant.

      23.1    Consent of Arthur Andersen LLP.

      23.2    Consent of Ernst & Young LLP.

      27      Financial Data Schedule.