-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K9scNPx6VUw/RUzS+o+71cgwMomMbJBP8RQz/NazSDFidt4291sLmGB8cZRYZcfN ivOzHD9kqk06HSl6VI0nGw== 0000950132-99-000039.txt : 19990125 0000950132-99-000039.hdr.sgml : 19990125 ACCESSION NUMBER: 0000950132-99-000039 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981223 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL TECHNOLOGY CORP CENTRAL INDEX KEY: 0000731190 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 330001212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09037 FILM NUMBER: 99511519 BUSINESS ADDRESS: STREET 1: 2790 MOSSIDE BLVD CITY: MONROEVILLE STATE: PA ZIP: 15146 BUSINESS PHONE: 4123727701 MAIL ADDRESS: STREET 1: 2790 MOSSIDE BLVD CITY: MONROEVILLE STATE: PA ZIP: 15146 8-K 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) December 23, 1998 THE IT GROUP, INC. (Exact Name of Registrant as Specified in Charter) Delaware 1-9037 33-0001212 (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) 2790 Mosside Boulevard 15146-2792 Monroeville, PA (Zip Code) (Address of Principal Executive Offices) Registrant's telephone number, including area code: (412) 372-7701 INTERNATIONAL TECHNOLOGY CORPORATION (Former Name or Former Address, if Changed Since Last Report) INFORMATION TO BE INCLUDED IN THE REPORT Item 5. Other Events. On December 28, 1998, The IT Group, Inc., a Delaware corporation, announced that it had completed all steps necessary to change its name from International Technology Corporation to The IT Group, Inc. A copy of The ITC Group, Inc.'s press release dated December 28, 1998, is filed as an exhibit to this Current Report on Form 8-K. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Businesses Acquired. 1. Consolidated Statement of Operations for the year ended October 31, 1997. 2. Consolidated Balance Sheet at October 31, 1997. 3. Consolidated Statement of Cash Flows for the year ended October 31, 1997. *4. Notes to Consolidated Financial Statements. **5. Condensed Consolidated Balance Sheets at July 31, 1998 (Unaudited) and October 31, 1997. **6. Condensed Consolidated Statements of Operations for the Quarters ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited). **7. Condensed Consolidated Statements of Operations for the Nine months ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited). **8. Condensed Consolidated Statements of Cash Flows for the Nine months ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited). **9. Notes to Condensed Consolidated Financial Statements (Unaudited). ____________________________ * The portions of the Notes to Consolidated Financial Statements related to the periods covered by the financial statements identified in numbers 1 through 3 above are incorporated herein by reference from the Annual Report on Form 10-K for the fiscal year ended October 31, 1997 filed by Fluor Daniel GTI, Inc. Portions of the Notes to Consolidated Financial Statements relating to periods not covered by numbers 1 through 3 above are not incorporated herein by reference. ** Incorporated herein by reference from the Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1998 filed by Fluor Daniel GTI, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended October 31, 1997 ------------------------------------- (In thousands, except per share information) Revenues................................................................... $190,536 Cost of revenues........................................................... 150,826 -------- Gross profit............................................................... 39,710 Selling, general and administrative expenses............................... 39,766 Indirect expenses.......................................................... -- License and other income................................................... 576 -------- Income (loss) before investment and interest income........................ 520 Investment and interest income, net........................................ 770 -------- Income before provision for income taxes................................... 1,290 Provision for income taxes................................................. 535 -------- Net income................................................................. $ 755 ======== Earnings per common shares(2).............................................. $0.09 Shares used to compute earnings per common share........................... 8,267
________________ (1) Represents the historical results of Fluor Daniel Environmental Services, Inc. ("FDESI"), the predecessor entity of Fluor Daniel GTI, Inc. ("Fluor Daniel GTI") for accounting purposes. (2) Share price information for the periods prior to the merger has been omitted since FDESI, the predecessor entity of Fluor Daniel GTI for accounting purposes, had no publicly traded equity securities CONSOLIDATED BALANCE SHEETS
October 31, 1997 -------------------------------------- (In thousands, except share amounts) Assets Current assets: Cash and cash equivalents................................................. $ 3,588 Marketable securities..................................................... 7,396 Accounts receivable, less allowance of $2,049 at October 31, 1997......... 38,548 Unbilled revenues......................................................... 25,567 Deferred income taxes..................................................... 1,328 Other current assets and prepaid expenses................................. 3,125 -------- Total current assets.................................................... 79,552 Deferred income taxes..................................................... 3,508 Property, plant and equipment, net........................................ 6,624 Goodwill, net of accumulated amortization of $1,456 at October 31, 1997... 11,654 Other assets.............................................................. 1,798 -------- Total assets.............................................................. $103,136 ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable.......................................................... $ 8,266 Accrued salaries and benefits............................................. 5,553 Advance billings on contracts............................................. 380 Other accrued liabilities................................................. 5,465 Income taxes payable...................................................... 109 -------- Total current liabilities............................................... 19,773 Commitments and contingencies: Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued at October 31, 1997...................................................... -- Common Stock, $.001 par value, 25,000,000 shares authorized, 8,323,790 issued and outstanding at October 31, 1997............................... 8 Capital in excess of par value............................................ 82,163 Retained earnings......................................................... 1,580 Cumulative currency translation adjustment................................ (388) -------- Total stockholders' equity.............................................. 83,363 -------- Total liabilities and stockholders' equity.............................. $103,136 ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended October 31, 1997 -------------------------------------- (In thousands) Cash flows from operating activities: Net income................................................................ $ 755 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization........................................... 3,915 Deferred income taxes................................................... (932) Loss on fixed assets.................................................... -- Allowance for doubtful accounts, net.................................... 309 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable and unbilled revenues............................ 931 Other current assets and prepaid expenses............................ (600) Other assets......................................................... 1,615 Accounts payable..................................................... 232 Accrued salaries and benefits........................................ 1,530 Advance billings on contract......................................... (72) Other accrued liabilities............................................ (440) Income taxes payable................................................. 8 Advances from (to) parent............................................... -- ------- Net cash provided (used) for operating activities.......................... 7,251 Cash flows from investing activities: Expenditures for property, plant and equipment............................ (2,493) Sale of fixed assets...................................................... 335 Purchase of marketable securities......................................... (9,950) Sale of marketable securities............................................. 6,655 Investments in and advances to joint ventures............................. 558 Other..................................................................... (1,687) Cash acquired in merger with Groundwater Technology, Inc.................. -- Cash paid to shareholders................................................. -- ------- Net cash used in investing activities...................................... (6,582) Cash flows from financing activities: Proceeds from sale of stock under employee stock plans.................. 799 Cash received from Fluor Daniel, Inc.................................... -- ------- Net cash provided by financing activities................................. 799 Effect of exchange rate changes on cash and cash equivalents.............. (432) Net increase in cash and cash equivalents................................. 1,036 Cash and cash equivalents at beginning of year............................ 2,552 ------- Cash and cash equivalents at end of year.................................. $ 3,588 ======= Supplemental disclosures of cash flow information: Received net assets from merger with Groundwater Technology, Inc........ -- Income taxes paid....................................................... $ 1,085 Issuance of common stock in connection with previous business combinations........................................................... $ 361
________________ (1) Represents the historical results of FDESI, the predecessor entity of Fluor Daniel GTI for accounting purposes. (b) Pro Forma Financial Information. 1. Unaudited Pro Forma Consolidated Financial Statements. 2. Unaudited Pro Forma Consolidated Balance Sheet as of September 25, 1998. 3. Notes to Unaudited Pro Forma Consolidated Balance Sheet. 4. Unaudited Pro Forma Consolidated Statement of Operations for the (a) Six Months ended September 25, 1998; and (b) Year ended March 27, 1998. 5. Notes to Unaudited Pro Forma Consolidated Statements of Operations. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The Unaudited Pro Forma Consolidated Statements of Operations of The IT Group, Inc. (ITC) for the year ended March 27, 1998 and the six months ended September 25, 1998 (the "Pro Forma Statements of Operations"), and the Unaudited Pro Forma Consolidated Balance Sheet of ITC as of September 25, 1998 (the "Pro Forma Balance Sheet") and together with the Pro Forma Statements of Operations (the "Pro Forma Financial Statements"), have been prepared to illustrate the effect of the Merger Agreement. Pursuant to the Merger Agreement, ITC made the Offer to acquire 8,411,766 shares of Fluor Daniel GTI, Inc. (FDGTI) Common Stock for $8.25 per share, which was consummated on December 2, 1998. ITC's transaction costs estimated to approximate $2 million have been included or disclosed where appropriate within the Pro Forma Financial Statements or notes thereto. The transaction is being financed through ITC existing credit facilities. The Pro Forma Financial Statements do not reflect anticipated cost savings from the FDGTI acquisition, or any synergies that are anticipated to result from the FDGTI acquisition, and there can be no assurance that any such cost savings or synergies will occur. The Pro Forma Statements of Operations give pro forma effect to the Merger as if it had occurred on March 28, 1997. The Pro Forma Balance Sheet gives pro forma effect to the Merger as if it occurred on September 25, 1998. The Pro Forma Financial Statements do not purport to be indicative of the results of operations or financial position of ITC that would have actually been obtained had such transactions been completed as of the assumed dates and for the period presented, or which may be obtained in the future. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that ITC believes are reasonable. The Pro Forma Financial Statements should be read in conjunction with the separate historical consolidated financial statements of ITC and FDGTI and the related notes thereto, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations" of ITC and FDGTI, all of which are incorporated by reference from their respective Forms 10-K and on an interim basis from the Forms 10-Q of ITC and FDGTI filed with the Securities and Exchange Commission. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities in the accompanying Pro Forma Financial Statements based on available information. The actual allocation of purchase price and the resulting effect on income from operations may differ from the pro forma amounts included herein. The difference if any is not anticipated to be material. These pro forma adjustments represent ITC's preliminary determination of purchase accounting adjustments and are based upon available information and certain assumptions that ITC believes to be reasonable. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET September 25, 1998
ITC FDGTI FDGTI September 25, July 31, Pro Forma Pro Forma 1998 1998 Adjustments Consolidated ----------------- ---------------- ---------------- --------------- (In Thousands) Assets ------ Current assets: Cash and cash equivalents............ $ 31,350 $ 3,845 $ (8,102) (b) $ 27,093 Marketable securities................ -- 13,295 (13,295) (b) -- Receivables, net..................... 280,998 63,213 -- 344,211 Prepaid and other current assets..... 18,748 3,508 -- 22,256 Deferred income taxes................ 12,144 1,283 -- 13,427 ----------------- ---------------- ---------------- --------------- Total current assets.................... 343,240 85,144 (21,397) 406,987 Net property, plant, and equipment...... 45,814 5,225 (2,441) (a) 48,598 Intangible assets, net.................. 331,283 11,164 5,392 (a) 347,839 Deferred income taxes................... 86,716 3,508 5,724 (a) 95,948 Other assets............................ 16,708 1,544 -- 18,252 Long-term assets of discontinued operations............................. 40,048 -- -- 40,048 ----------------- ---------------- ---------------- --------------- Total assets............................ $863,809 $106,585 $(12,722) $957,672 ================= ================ ================ =============== Liabilities and Stockholders' Equity -------------------- Current liabilities: Accounts payable..................... $126,007 $ 9,456 $ -- $135,463 Accrued liabilities.................. 72,406 12,474 10,681 (a) 95,561 Billings in excess of revenues....... 5,415 361 -- 5,776 Short-term debt, including current portion of long-term debt.......... 13,416 -- -- 13,416 Transition accrual................... -- -- 7,900 (a) 7,900 Accrued transaction liability........ -- -- 1,457 (a) 1,457 Employee obligations................. -- -- 1,534 (a) 1,534 Net current liabilities of discontinued operations......................... 9,706 -- -- 9,706 ----------------- ---------------- ---------------- --------------- Total current liabilities............... 226,950 22,291 21,572 270,813 Long-term debt.......................... 326,423 -- 50,000 (b) 376,423 8% convertible subordinated debentures.. 44,548 -- -- 44,548 Long-term accrued liabilities of discontinued operations, net......... 500 -- -- 500 Other long-term accrued liabilities..... 31,601 -- -- 31,601 Minority interest....................... 557 -- -- 557 Commitments and contingencies........... -- -- -- -- Stockholders' equity: Preferred stock...................... 6,628 -- -- 6,628 Common stock......................... 226 8 (8) (c) 226 Treasury stock at cost............... (74) -- -- (74) Additional paid-in capital........... 348,447 82,716 (82,716) (c) 348,447 Retained earnings (deficit).......... (121,997) 1,570 (1,570) (c) (121,997) ----------------- ---------------- ---------------- --------------- Total stockholders' equity.............. 233,230 84,294 (84,294) 233,230 ----------------- ---------------- ---------------- --------------- Total liabilities and stockholders' equity $863,809 $106,585 $(12,722) $957,672 ================= ================ ================ ===============
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET September 25, 1998 (a)--The estimated purchase price and preliminary adjustments to historical book value of FDGTI as a result of the Offer together with the related financing are as follows (dollars in thousands): Purchase price: Estimated cash consideration (see (b) below)......................................... $ 69,397 Asset acquisition costs.............................................................. 2,000 Book value of net assets acquired FDGTI.............................................. (84,294) ---------------- $(12,897) ================ Preliminary allocation of purchase price in excess of net assets acquired: Write down to fair value duplicate information technology systems and equipment...... $ (2,441) Increase in deferred tax assets related to acquired assets and liabilities having a new basis....................................................................... 5,724 Accrued liabilities, including legal costs........................................... (10,681) Accrued transaction liability........................................................ (1,457) FDGTI employee benefit accruals which will be charged to expense prior to acquisition....................................................................... (1,534) * Transition accrual, including severance ($3.5 million) and lease termination costs ($4.4 million) recognized in accordance with EITF 95-3............................ (7,900) Estimated goodwill adjustment........................................................ 5,392 ---------------- $(12,897) ================
The Pro Forma Balance Sheet includes an estimated transition accrual of $7.9 million for severance and lease termination. The transition plan will be finalized, approved, and communicated as soon as practical. There are no known significant unresolved liabilities anticipated by management in the transition plan. Primarily as a result of FDGTI and ITC operating within the same industry for many of the same customers, management does not believe that identifiable intangibles, other than residual goodwill, were acquired in the transaction. *Amount to be recognized in FDGTI's historic income statement prior to Merger. (b)--Reflects the financing for the Offer on December 3, 1998 as follows (dollars in thousands): Sources of financing: Revolving credit facility............................................................ $50,000 Consolidated cash of ITC and FDGTI................................................... 8,102 Marketable securities of FDGTI....................................................... 13,295 ---------------- Total sources of financing............................................................. $71,397 ================ Uses of financing amounts: Cash consideration for Offer (8,411,766 @ $8.25)..................................... $69,397 Estimated fees and expenses.......................................................... 2,000 ---------------- Total uses of financing amounts........................................................ $71,397 ================
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued) For purposes of the Pro Forma Financial Statements, 8,411,766 shares of FDGTI Common Stock was acquired by ITC. The 8,411,766 shares represent all the outstanding Common Stock of FDGTI on December 3, 1998. Fees and expenses represent asset acquisition costs of approximately $2.0 million consisting primarily of investment banking, legal and accounting fees. (c)--The elimination of FDGTI's equity amounts consists of the following (dollars in thousands): Common Stock: Common stock......................................................................... $ 8 Paid-in capital: Paid-in capital...................................................................... $82,716 Retained earnings: Retained earnings.................................................................... $ 1,570
(d)--To recognize the following employee benefit costs and stock option repurchase transactions reflected in FDGTI's historical income statement prior to closing (dollars in thousands): Stock options--cash paid for outstanding stock options.................................. $ 429 Bonuses and severance.................................................................. 1,105 ---------------- $1,534 * ================
* Amount to be recognized in the FDGTI's historical income statement prior to the Merger. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued) As of October 31, 1998 and December 3, 1998, there were 1,286,883 FDGTI Options outstanding. See footnote 9 to the financial statements at October 31, 1997 included in FDGTI's Form 10-K for additional information regarding FDGTI Options. The pro forma adjustment for stock options of $429,000 was paid for all 1,286,883 FDGTI Options outstanding. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Six Months ended September 25, 1998
ITC FDGTI FDGTI Six-Month Six-Month and Period ended Period ended Consolidated September 25, July 31, Pro Forma Pro Forma 1998 (a) 1998 (a) Adjustments Consolidated ------------- ------------ ------------- ------------ (In Thousands, Except Per Share Data) Revenues................................ $485,375 $101,362 $-- $586,737 Cost and expenses: Cost of revenues..................... 427,764 83,555 -- 511,319 Selling, general, and administrative expenses........................... 27,228 16,376 (177) (e) 43,427 Special charges...................... 24,971 -- -- 24,971 ------------- ------------ ------------- ------------ Operating income (loss)................. 5,412 1,431 7,020 Interest income (expense), net.......... (16,871) 381 (2,588) (f) (19,078) Other, net.............................. 67 (279) -- (212) ------------- ------------ ------------- ------------ Income (loss) from continuing operations before income taxes.................. (11,392) 1,533 (12,270) Provision for income taxes.............. (2,431) (1,017) 453 (g) (3,901) ------------- ------------ ------------- ------------ Net income (loss)....................... (13,823) 516 (16,171) Less preferred dividends................ (3,138) -- (3,138) ------------- ------------ ------------- ------------ Net income (loss) applicable to common stock................................ $ (16,961) $ 516 $ (19,309) ============= ============ ============ Basic and diluted loss per share........ $ (.85) (h) ============ Weighted average shares outstanding (000s) basic and diluted............. 17,256 22,636
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year ended March 27, 1998
OHM Beneco FDGTI ITC FDGTI Eleven Months Two Months OHM and and Year ended Year ended ended ended Beneco Consolidated Pro Forma March 27, January 31, February 25, May 31, Pro Forma Pro Forma Consoli- 1998 (a) 1998 (a) 1998 (a) 1997 (a) Adjustments Adjustments dated ---------- ----------- ------------- ---------- ----------- ------------ ---------- (In Thousands, Except Per Share Data) Revenues................. $442,216 $189,889 $477,642 $9,368 $-- $-- $1,119,115 Cost and expenses: Cost of revenues...... 391,126 151,293 416,597 9,228 -- -- 968,244 Selling, general, and administrative expenses............ 31,774 37,779 42,745 763 4,404 (b) (354) (e) 117,111 Special charges....... 14,248 -- 40,777 -- -- -- 55,025 ---------- ----------- ------------- ---------- ---------- Operating income (loss).. 5,068 817 (22,477) (623) (21,265) Interest income (expense), net........ (7,969) 825 (4,256) 55 (15,645)(c) (5,177) (f) (32,167) Equity in net earnings of affiliate.......... -- -- (2,182) -- 2,182 (d) -- -- Write-down of investment in NSC................ -- -- (14,949) -- 14,949 (d) -- -- Other income (expense), net................... 716 83 (441) -- -- -- 358 ---------- ----------- ------------- ---------- ---------- Income (loss) from continuing operations before income taxes... (2,185) 1,725 (44,305) (568) (53,074) (Provision) benefit for income taxes...... (4,175) (715) 14,323 -- -- 5,705 (g) 15,138 ------------- ------------ --------------- ------------- ----------- Income (loss) from continuing operations. (6,360) 1,010 (29,982) (568) (37,936) Less preferred dividends. (6,167) -- -- -- (6,167) ------------- ------------ --------------- ------------- ----------- Income (loss) from continuing operations applicable to common stock $ (12,527) $ 1,010 $ (29,982) $ (568) $ (44,103) ============= ============ =============== ============= =========== Basic and diluted loss per share........ $(1.95)(h) Weighted average shares outstanding (000s).... 9,737 22,649
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS September 25, 1998 General - ------- (a)--The Pro Forma Statements of Operations assume that the Merger occurred on March 28, 1997, the first day of ITC's fiscal 1998. FDGTI has a fiscal year end of October 31st. Therefore, for purposes of the Pro Forma Statement of Operations for the year ended March 27, 1998, FDGTI's historical statement of operations for the twelve months ended January 31, 1998 (within 93 days of ITC fiscal year end) was consolidated with ITC's historical statement of operations for the fiscal year ended March 27, 1998. For purposes of the Pro Forma Statement of Operations for the six-month period ended September 25, 1998, FDGTI's historical statement of operations for the six-month period ended July 31, 1998 was consolidated with ITC's historical statement of operations for the six-month period ended September 25, 1998. In January 1998, the Company entered into a merger agreement to acquire OHM Corporation (OHM). The transaction was effected through a two-step process consisting of (a) the acquisition of 54% of the total outstanding shares through a cash tender offer, which was consummated on February 25, 1998, at $11.50 per share for 13,933,000 shares of OHM common stock, for a total consideration of approximately $160,200,000 plus, approximately $4,600,000 in asset acquisition costs and (b) the acquisition on June 11, 1998 of the remaining 46% of the total outstanding shares through the exchange of 12,900,000 shares of Company common stock and cash payment of approximately $30,800,000. This transaction was accounted for as a step acquisition. The effects of the first step was to include 100% of OHM revenues and expenses in the historic statement of operations of ITC from February 25, 1998 to March 27, 1998 with a minority interest of 46%. The effects of the second step of the merger were not included in the March 27, 1998 historic financial statements because the issuance of the additional ITC shares was subject to shareholder approval which was not received until June 11, 1998. The pro forma results of OHM for the year ended March 27, 1998 have been included in the Unaudited Pro Forma Consolidated Statements of Operations for the year ended March 27, 1998, assuming both steps of the transaction occurred on March 28, 1997. Effective June 1, 1997, OHM acquired all of the outstanding stock of Beneco Enterprises, Inc. (Beneco), for an aggregate purchase price of $14,700,000. The pro forma results of Beneco for the period April 1, 1997 through May 31, 1997 have been included in the Unaudited Pro Forma Consolidated Statements of Operations for the year ended March 27, 1998, respectively. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued) OHM and Beneco Pro Forma - ------------------------ (b)--The acquisition of OHM was accounted for as a purchase. Under purchase accounting, the total purchase price was allocated to the tangible and intangible assets and liabilities of OHM based upon their estimated fair values. The following represents ITC's purchase adjustments on the Pro Forma Statements of Operations (dollars in thousands):
Year ended March 27, 1998 ---------------- SG&A ---------------- Depreciation.................................................................................... $ (828) Amortization of intangibles and goodwill........................................................ 6,283 Net capitalization (amortization) of deferred proposal costs.................................... (1,051) ---------------- Total increase (decrease)....................................................................... $ 4,404 ================
The adjustments for pro forma depreciation relate to the reduction in depreciation as a result of the write-down to fair value of facilities, duplicate management information systems and equipment. The adjustments related to duplicate management information systems and equipment represent the elimination of the actual historical depreciation expense recorded by OHM during the respective periods as the fair value of these costs is estimated to be zero. The adjustments to estimated pro forma amortization relate to the increase in amortization expense resulting from the increase of goodwill. Goodwill is being amortized over 40 years. OHM has historically capitalized the cost associated with preparing large proposals when the recoverability was evaluated as probable. The costs associated with successful awards are then amortized over the life of the related contract. ITC has not assigned any fair value to these deferred amounts in the allocation of the purchase price. This adjustment eliminates the effect of assigning no value to these proposal costs. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued) OHM and Beneco Pro Forma (continued) - ------------------------------------ (c)--Reflects adjustments for additional interest expense assuming the OHM Merger Credit Facilities were drawn upon on March 28, 1997. The increase in interest expense and the addition to amortization of deferred financing costs reflect the change in term loans and their related rates based on LIBOR plus 2.5% per annum (dollars in thousands):
Additional Year ended Drawn March 27, Rate Amount 1998 --------------- --------------- ---------------- Merger Credit Facilities: Term loan (LIBOR + 2.5%)................................. 8.5% $191,000 $15,100 Amortization of capitalized financing fees............... 545 ---------------- Total adjustment............................................ $15,645 ================
Financing fees capitalized are being amortized over the period of the credit facility. (d)--Removes NSC equity earnings and other amounts because its shares were distributed to the stockholders of OHM concurrent with the OHM offer. FDGTI Pro Forma - --------------- (e)--The acquisition of FDGTI will also be accounted for by the purchase method of accounting. For purposes of presentation, estimated fair values are based upon preliminary valuations which are not yet finalized. The actual allocation of purchase price and the resulting effect on income from operations may differ from the pro forma amounts included herein. Such difference is not anticipated to be material. The following represents ITC's preliminary estimate of the effect of the FDGTI purchase adjustments on the Pro Forma Statements of Operations (dollars in thousands):
Six Months Year ended ended March 27, September 25, 1998 1998 ---------------- ------------------ SG&A SG&A ---------------- ------------------ Depreciation................................................................ $(488) $ (244) Amortization of intangibles and goodwill.................................... 134 67 ---------------- ------------------ Total increase (decrease)................................................... $ (354) $ (177) ================ ==================
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued) FDGTI Pro Forma (continued) - --------------------------- The adjustments for estimated pro forma depreciation relate to the reduction in depreciation as a result of the write-down to fair value of duplicate management information systems and equipment. The adjustments related to duplicate management information systems and equipment represent the elimination of the actual historical depreciation expense recorded by FDGTI during the respective periods as the fair value of these costs is estimated to be zero. The adjustments to estimated pro forma amortization relate to the increase in amortization expense resulting from the increase in goodwill of $5,392 which is being amortized over 40 years. (f)--Reflect adjustments for additional interest expense and a decrease interest income assuming the Revolving Credit Facility and cash and marketable securities were used for the acquisition as of March 28, 1997 (dollars in thousands):
Six Months Additional Year ended ended Drawn March 27, September 25, Rate Amount 1998 1998 -------------- --------------- --------------- ----------------- Revolver credit facility (LIBOR + 2%)............. 8% $50,000 $4,000 $ 2,000 Foregone interest income.......................... 1,177 588 -------------- ----------------- $5,177 $2,588 =============== =================
As a result of the utilization of $8,102 and $13,295 in cash and marketable securities to fund the acquisition, lost investment earnings are estimated using the average rate of interest earned in 1998 of 5.5%. Consolidated Pro Forma - ---------------------- (g)--Adjustment to reflect income taxes as the amount which would have been recognized on a consolidated basis assuming the merged entity would generate future taxable income sufficient to realize the deferred tax benefit recognized. The difference between the statutory rate and the effective rates is primarily related to nontax-deductible goodwill amortization and increases to the deferred tax valuation allowance as follows (dollars in thousands):
Six Months Year ended ended March 27, September 25, 1998 1998 -------------------------------------- Pro forma loss before taxes.................................................. $(53,074) $(12,270) Permanent difference related to goodwill amortization........................ 9,598 4,799 ---------------- ------------------ Estimated pro forma taxable loss............................................. (43,476) (7,471) Estimated statutory tax rate................................................. 40% 40% ---------------- ------------------ (17,390) (2,988) Deferred tax asset valuation allowance adjustment ........................... 2,252 6,889 ---------------- ------------------ Pro forma tax (benefit) expense ............................................. $(15,138) $ 3,901 ================ ==================
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued) Consolidated Pro Forma (continued) - ---------------------------------- The increase in the deferred tax asset valuation allowance is mainly the result of capital losses incurred for financial statement purpose in the historical financial statements. These losses are not recoverable until capital gains of equivalent amounts are realized. See ITC's March 27, 1998 and September 25, 1998 Forms 10-K and 10-Q for additional information regarding the adjustment to the deferred tax asset valuation. (h)--Basic and diluted loss per share has been calculated utilizing the basic and diluted weighted average of ITC shares outstanding during the periods adjusted for approximately 12,900,000 shares of Company common stock issued June 11, 1998 for the OHM acquisition assuming the 12,900,000 shares were outstanding as of the beginning of the periods presented. (i)--Before interest income, the estimated pro forma effect, on the consolidated debt, with a variable interest rate ($389,839,000 principal amount at September 25, 1998) of a 1/8% change in the assumed interest rates on pro forma results of operations is approximately $485,000 and $242,500 for the year ended March 27, 1998 and the six-month period ended September 25, 1998, respectively. (c) Exhibits. Exhibit No. Description - ----------- ----------- 3(i).1 Certificate of Amendment of Certificate of Incorporation of International Technology Corporation, dated as of December 21, 1998, as filed with the Delaware Secretary of State on December 23, 1998. 99.1 Press Release, dated December 28, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly changed this report to be signed on its behalf by the undersigned hereunto duly authorized. THE IT GROUP, INC. Date: January 22, 1999 By: /s/ James G. Kirk ----------------------------------------- James G. Kirk Vice President, General Counsel and Secretary EXHIBIT INDEX Exhibit No. Description Tab No. - --- ----------- ------- 3(i).1 Certificate of Amendment of Certificate of Incorporation 1 of International Technology Corporation, dated as of December 21, 1998, as filed with the Delaware Secretary of State on December 23, 1998. 99.1 Press Release, dated December 28, 1998. 2 EX-3.I.1 2 AMENDED CERTIFICATE OF INCORPORATION Exhibit 3(i).1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF INTERNATIONAL TECHNOLOGY CORPORATION International Technology Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: 1. Article FIRST of the Corporation's Certificate of Incorporation is hereby amended pursuant to Section 242 of the Delaware General Corporation Law to read as follows: FIRST: The name of the corporation is: THE IT GROUP, INC. 2. The foregoing amendment of the Corporation's Certificate of Incorporation has been duly approved by the Board of Directors of the Corporation. 3. The foregoing amendment has been duly approved by written consent of the required majority of shareholders, in lieu of a meeting of shareholders, in accordance with Section 228(d) of the Delaware General Corporation Law. Holders of the Corporation's Common Stock, $0.01 par value, and the Corporation's 6% Convertible Preferred Stock (the "Preferred Stock") were entitled to notice of and to consent with respect to the action. As of October 22, 1998, the record date established by the Board of Directors of the Corporation, the number of outstanding shares of Common Stock was 22,628,433, and the number of outstanding shares of Preferred Stock was 45,819. The affirmative vote of a majority of shares of the Common Stock and Preferred Stock voting (on an as-converted basis) as a single class, and the affirmative vote of at least a majority of the shares of the Preferred Stock, was required to approve the amendment. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50% of each such class. 4. IN WITNESS WHEREOF, this corporation has caused this certificate to be signed by Richard R. Conte, its Vice President, and James M. Redwine, its Assistant Secretary, this 2_day of December, 1998. /s/ Richard R. Conte -------------------------------- Richard R. Conte, Vice President /s/ James M. Redwine ------------------------------- James M. Redwine, Assistant Secretary EX-99.1 3 PRESS RELEASE DATED DECEMBER 28, 1998 Exhibit 99.1 [Letterhead of The IT Group, Inc. 2790 Mosside Boulvard Monroeville, PA 15146-2792 Tel. 412.372.7701 Fax. 412.373.7135] [LOGO OF THE IT GROUP] N E W S R E L E A S E Release Date: FOR IMMEDIATE RELEASE Investor Contact: Richard R. Conte (412) 372-7701 Media Contact: William L. Mulvey (202) 682-1147 THE IT GROUP STOCK LISTINGS NOW UNDER "IT Gp" Pittsburgh, Pennsylvania -- December 28, 1998 -- The IT Group, Inc. (NYSE: ITX) announced today that future communications and reports will reflect its new name and that stock quotations in newspapers should now be listed under IT Gp, rather than IT Corp as in the past. The IT Group's common stock and depositary shares will continue to trade under the symbols ITX and ITXpr, respectively. The name change from International Technology Corporation to The IT Group, Inc. became official on December 24, 1998. The IT Group is a leading diversified services company offering a full range of consulting, facilities management, engineering & construction and remedial services. The new name properly identifies a group of diverse, yet complementary companies that have expanded capabilities and are well positioned to serve the needs of clients. More information on The IT Group can be found on the Internet at www.theitgroup.com. ### -----END PRIVACY-ENHANCED MESSAGE-----