-----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, OoU7KSjlR4y+9Z/BqAiJq/zjkoKsi0AqQ34L6R6mMX9uwVLtZm16RgTTzj0CsSRI hvCwzB7oLQp7BQ92Sw7S2A== 0000928385-99-002794.txt : 19990914 0000928385-99-002794.hdr.sgml : 19990914 ACCESSION NUMBER: 0000928385-99-002794 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GTS DURATEK INC CENTRAL INDEX KEY: 0000785186 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 222476180 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-14292 FILM NUMBER: 99710629 BUSINESS ADDRESS: STREET 1: 10100 OLD COLUMBIA ROAD CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103125100 MAIL ADDRESS: STREET 1: 10100 OLD COLUMBIA ROAD CITY: COLUMBIA STATE: MD ZIP: 21046 FORMER COMPANY: FORMER CONFORMED NAME: DURATEK CORP DATE OF NAME CHANGE: 19920703 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------------------- FORM 8-K/A Amendment No. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 30, 1999 GTS DURATEK, INC. (Exact Name of Registrant as Specified in Charter) Delaware 0-14292 22-2476180 (State or Other (Commission file number) (IRS Employer Jurisdiction of Identification No.) Incorporation) 10100 Old Columbia Road, Columbia, Maryland 21046 (Address of Principal Executive Offices) (Zip code) Registrant's telephone number, including area code: (410) 312-5100 (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets On June 30, 1999, GTS Duratek, Inc. (the "Company") acquired 100% of the outstanding capital stock of Frank W. Hake Associates, LLC ("Hake") from HakeTenn, Inc., a Delaware corporation and an affiliate of the Hake Group of Philadelphia, Pennsylvania, George T. Hamilton and Richard Wilson ("Sellers") for $12.9 million in cash and the assumption of certain liabilities. Hake is a specialist in the storage, transportation handling and processing of radioactive waste emanating from nuclear power generation plants throughout the United States. Hake also stores and services power generation equipment at its licensed facility in Memphis, Tennessee. The Company generally intends to continue the business of Hake and to use its assets and facilities for essentially the same purposes as they were used prior to the acquisition. The Company paid the cash portion of the purchase price out of available cash, principally from its credit facility with its bank. Under this facility, the Company has an acquisition line of credit to finance acquisitions or stock repurchases providing for borrowings up to $20 million. Borrowings under the line of credit bear interest at the LIBOR rate plus 2.25%. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired: Balance sheets of Frank W. Hake Associates, LLC as of December 31, 1998 and 1997 and the related statements of operations, members' equity and cash flows for the years then ended. Balance sheet of Frank W. Hake Associates, LLC as of June 30, 1999 (unaudited) and the related statements of operations and cash flows for the six months then ended (unaudited). (b) Pro Forma Financial Information: (i) Pro Forma Consolidated Balance Sheet at June 30, 1999. (ii) Pro Forma Consolidated Statement of Operations for the year ended December 31, 1998 and related notes. (iii) Pro Forma Consolidated Statement of Operations for the six months ended June 30, 1999 and related notes. (c) Exhibits. The following exhibits are filed with this report, and the foregoing description is modified by reference to such exhibits: (1) GTS Duratek, Inc. Press Release dated June 30, 1999, previously filed with the Company's Current Report on Form 8-K which was filed with the Securities and Exchange Commission on July 13, 1999. (2) Purchase and Sale Agreement between HakeTenn, Inc., George T. Hamilton and Richard Wilson and GTS Duratek, Inc. dated as of June 30, 1999, previously filed with the Company's Current Report on Form 8-K which was filed with the Securities and Exchange Commission on July 13, 1999. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GTS Duratek, Inc. /s/ Robert F. Shawver --------------------- Robert F. Shawver Executive Vice President and Chief Financial Officer Date: September 10, 1999 Frank W. Hake Associates, LLC Financial Statements For the Years Ended December 31, 1998 and 1997 Contents Page Independent Auditors' Report 5 Financial Statements Balance Sheets 6 Statements of Operations 7 Statements of Members' Equity 8 Statements of Cash Flows 9 Summary of Accounting Policies 10 Notes to Financial Statements 12 4 Independent Auditors' Report Board of Directors Frank W. Hake Associates, LLC Memphis, Tennessee We have audited the accompanying balance sheets of Frank W. Hake Associates, LLC as of December 31, 1998 and 1997, and the related statements of operations, members' equity and cash flows for 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 financial statements referred to above present fairly, in all material respects, the financial position of Frank W. Hake Associates, LLC at December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 9, the members (owners) of the Company sold their ownership in Frank W. Hake Associates, LLC to GTS Duratek, Inc., an unrelated company, on June 30, 1999. BDO Seidman, LLP May 21, 1999 Memphis, Tennessee 5 FRANK W. HAKE ASSOCIATES, LLC Balance Sheets December 31, 1998 and 1997
1998 1997 --------------- -------------- Assets Current assets: Cash and cash equivalents $ 67,510 83,911 Accounts receivable (note 6) 2,901,420 3,628,630 Prepaid expenses 200,023 60,623 Employee advances 9,955 8,441 --------------- -------------- Total current assets 3,178,908 3,781,605 Property, plant and equipment (notes 1 and 7): Buildings and improvements 4,243,840 3,892,839 Furniture and equipment 2,451,692 2,171,032 --------------- -------------- 6,695,532 6,063,871 Less accumulated depreciation (3,668,914) (3,502,227) --------------- -------------- Property, plant and equipment, net 3,026,618 2,561,644 --------------- -------------- Other assets 107,957 89,214 --------------- -------------- Total assets $ 6,313,483 6,432,463 =============== ============== Liabilities and Members' Equity Current liabilities Accounts payable -- trade $ 1,529,809 1,185,804 Advances from affiliates (note 1) 813,415 193,170 Billings in excess of costs and estimated earnings on uncompleted contracts (note 2) 607,690 701,905 Accrued waste disposal 1,154,633 1,449,095 Other accrued expenses 209,919 312,136 Current maturities of long-term debt (note 4) 210,446 333,594 --------------- -------------- Total current liabilities 4,525,912 4,175,704 Long-term debt, noncurrent portion (note 4) 360,223 548,421 --------------- -------------- Total liabilities 4,886,135 4,724,125 Commitments and contingencies (notes 5, 6, 8 and 9) Members' equity (note 9) 1,427,348 1,708,338 --------------- -------------- $ 6,313,483 6,432,463 =============== ==============
See accompanying summary of accounting policies and notes to financial statements. 6 FRANK W. HAKE ASSOCIATES, LLC Statements of Operations Years ended December 31, 1998 and 1997 1998 1997 --------------- ---------------- Net revenue (notes 2 and 6) $ 15,167,899 13,117,619 Direct costs 10,603,523 8,511,246 --------------- ---------------- Gross profit on sales 4,564,376 4,606,373 Selling, general and administrative expenses 4,654,089 3,809,493 --------------- ---------------- Operating income (loss) (89,713) 796,880 Interest expense, net (148,539) (176,768) Other income (loss), net (note 3) (22,839) 356 --------------- ---------------- Net income (loss) $ (261,091) 620,468 =============== ================ See accompanying summary of accounting policies and notes to financial statements. 7 FRANK W. HAKE ASSOCIATES, LLC Statements of Members' Equity Years ended December 31, 1998 and 1997
Retained earnings Total Paid-in (accumulated members' capital deficit) equity -------------- ------------- -------------- Balances, January 1, 1997 $ 503,548 (415,678) 87,870 Net income -- 620,468 620,468 Conversion of debt to equity (note 1) 1,000,000 -- 1,000,000 -------------- ------------- -------------- Balances, December 31, 1997 1,503,548 204,790 1,708,338 Net loss -- (261,091) (261,091) Distributions to members -- (19,899) (19,899) -------------- ------------- -------------- Balances, December 31, 1998 $ 1,503,548 (76,200) 1,427,348 ============== ============= ==============
See accompanying summary of accounting policies and notes to financial statements. 8 FRANK W. HAKE ASSOCIATES, LLC Statements of Cash Flows Years ended December 31, 1998 and 1997
1998 1997 ----------- ---------- Cash flows from operations: Net income (loss) $ (261,091) 620,468 Depreciation and amortization 323,199 378,598 Loss on disposal of equipment 29,082 -- Change in operating assets and liabilities: Accounts receivable 727,210 (804,717) Prepaid expenses and other assets (160,465) 35,952 Employee advances (1,514) 17,524 Accounts payable -- trade 344,004 (873,089) Billings in excess of costs and estimated earnings on uncompleted contracts (94,215) (3,699) Other accrued expenses (396,679) 1,144,066 ---------- ---------- Cash provided by operating activities 509,531 515,103 ---------- ---------- Cash flows from investing activities -- purchase of property and equipment (814,932) (406,455) ---------- ---------- Cash flows from financing activities: Advances from affiliates 620,245 72,815 Principal payments on long-term borrowings (311,346) (259,387) Distributions to members (19,899) -- ---------- ---------- Cash provided (used) by financing activities 289,000 (186,572) ---------- ---------- Net decrease in cash and cash equivalents (note 7) (16,401) (77,924) Cash and cash equivalents, beginning of year 83,911 161,835 ---------- ---------- Cash and cash equivalents, end of year $ 67,510 83,911 ========== ==========
See accompanying summary of accounting policies and notes to financial statements. 9 FRANK W. HAKE ASSOCIATES, LLC Summary of Accounting Policies Years ended December 31, 1998 and 1997 Summary of Accounting Policies (a) Business Frank W. Hake Associates, LLC (the "Company") is a Delaware corporation operating in Memphis, Tennessee, that treats and disposes of low-level radioactive-contaminated power plant equipment, and also stores new power plant equipment for its customers. The members' agreement establishing the Company as a limited liability company provides for the dissolution of the Company in March 2025, or sooner, as provided for in the agreement. The Company's majority member (owner) is Hake Partners, Inc. ("Hake Partners"). Hake Partners is owned by the shareholders of Frank W. Hake, Inc. As discussed in Note 9, the members (owners) sold their ownership in the Company to GTS Duratek, Inc., an unrelated company, effective June 30, 1999. (b) Use of Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (c) Property, Plant, Equipment and Depreciation Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using accelerated methods over the following estimated useful lives: Buildings and improvements 10 - 39 years Furniture and equipment 5 - 7 years (d) Cash and Cash Equivalents For statements of cash flows purposes , the Company considers cash on hand and in savings and checking accounts, and certificates of deposit purchased with maturities of 90 days or less, to be cash equivalents. 10 FRANK W. HAKE ASSOCIATES, LLC Summary of Accounting Policies Years ended December 31, 1998 and 1997 (e) Radio-Active Material Handling Revenue Revenues from the treatment and disposal of low-level radioactive- contaminated power plant equipment are recognized using the percentage-of-completion method. Contract costs include all direct labor costs, waste disposal costs, subcontracted labor and trucking costs, and supplies. Changes in total contract costs are recognized in the period they are determined. No contract losses are anticipated. (f) Taxes on Income The Company is treated as a "pass through" for income tax purposes. Accordingly, the Company pays no taxes on income and each member includes their portion of income in their respective tax returns. 11 FRANK W. HAKE ASSOCIATES, LLC Notes to Financial Statements December 31, 1998 and 1997 (1) Related Party Transactions During 1998 and 1997, all of the Company's employees were leased from Frank W. Hake, Inc. at cost (including compensation, benefits, payroll related taxes and workers compensation insurance). Subsequent to December 31, 1998, they have been employees of the Company. Advances from affiliates consist of amounts payable to Hake Partners, Inc., are non-interest bearing, and are due upon demand. Effective December 31, 1997, Hake Partners, Inc. converted $1,000,000 of advances to the Company to an equity interest. (2) Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts Billings in excess of costs and estimated earnings on uncompleted contracts consist of the following: December 31, -------------------------------- 1998 1997 ------------- ------------ Costs incurred on uncompleted contracts $ 3,124,726 8,879,668 Estimated earnings on uncompleted contracts 1,332,488 7,918,817 ------------- ------------ 4,457,214 16,798,485 Less billings to date 5,064,904 17,500,390 ------------- ------------ Billings in excess of costs and estimated earnings $ (607,690) (701,905) ============= ============ (3) Other Income (Loss), Net Other income (loss) consists of the following: December 31, -------------------------------- 1998 1997 ------------- ------------ $ (29,082) -- Net loss on disposal of equipment 6,243 356 Other ------------- ------------ $ (22,839) 356 ============= ============ 12 FRANK W. HAKE ASSOCIATES, LLC Notes to Financial Statements December 31, 1998 and 1997 (4) Long-term Debt Long-term debt at December 31, 1998 and 1997 consisted of the following: 1998 1997 -------- -------- Note payable to insurance company, bearing interest at 10% per annum, payable in monthly principal and interest installments of $21,500 through July 1, 2001, secured by four warehouses $ 570,669 746,145 Note payable to bank, repaid March 1998 -- 135,870 ---------- ---------- 570,669 882,015 Less current maturities (210,446) (333,594) ---------- ---------- Noncurrent portion $ 360,223 548,421 ========== ========== Future maturities of long-term debt at December 31, 1998 were as follows: 1999 $ 210,446 2000 232,461 2001 127,762 ---------- $ 570,669 ========== (5) Leases The Company leases certain equipment under noncancellable operating leases which expire at various dates through 2002. In most cases, management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases. Future minimum lease payments required under operating leases that have initial or remaining terms in excess of one year were as follows at December 31, 1998: 1999 $ 67,812 2000 55,297 2001 27,019 2002 4,344 ---------- $ 154,472 ========== 13 (Continued) FRANK W. HAKE ASSOCIATES, LLC Notes to Financial Statements December 31, 1998 and 1997 (6) Major Customers and Other Risks Sales to three customers comprised approximately 53% and 52% of the Company's net revenue for the years ended December 31, 1998 and 1997. Accounts receivable from these customers were approximately $1,269,131 and $2,038,000 at December 31, 1998 and 1997, respectively. The Company's principal customers are large corporations located throughout the United States. The industry in which the Company operates is highly regulated and subject to a broad range of federal, state and local environmental requirements, including those governing discharges to the air and water, the handling of radioactive wastes and the remediation of contamination associated with releases of radioactive substances. The Company is unable to predict what regulatory changes may occur or the impact on the Company of any particular change. However, the Company's operations and financial results could be adversely affected. The Company believes that it is currently in substantial compliance with applicable environmental requirements and does not anticipate the need to make substantial expenditures for environmental control measures. However, if a release of radioactive substances located on the Company's premises occurs, the Company may be held liable and may be required to pay the cost of remedying the condition. The amount of any such liability and removal cost could be material. (7) Supplemental Cash Flow Disclosure Interest paid by the Company for the years ended December 31, 1998 and 1997 was approximately $88,517 and $113,887, respectively. Effective December 31, 1997, Hake Partners, Inc. converted $1,000,000 of advances to the Company to an equity interest, creating a noncash decrease in advances from affiliates. (8) Waste Commitment The Company has committed to deliver a minimum volume of 200,000 cubic feet of non-mixed, low level radioactive waste material to an outside waste disposal site for burial. The Company has also committed to deliver a minimum of 13,000 pounds of mixed waste lead material for treatment and disposal. Management does not expect these commitments to have a material adverse impact on the Company's results of operations. (9) Subsequent Event Effective June 30, 1999, the members (owners) sold their ownership in the Company to GTS Duratek, Inc., an unrelated company. 14 FRANK W. HAKE ASSOCIATES, LLC Balance Sheet June 30, 1999 (Unaudited) Assets Current assets: Cash and cash equivalents $ 90,000 Accounts receivable 1,887,000 Prepaid expenses 275,000 Employee advances 9,000 ------------ Total current assets 2,261,000 ------------ Property, plant and equipment: Buildings and improvements 4,550,000 Furniture and equipment 2,880,000 ------------ 7,430,000 Less accumulated depreciation (3,848,371) ------------ Property, plant and equipment, net 3,581,629 ------------ Other assets 100,000 ------------ Total assets $ 5,942,629 ============ Liabilities and Members' Equity Current liabilities Accounts payable -- trade $ 1,506,216 Advances from affiliates 865,000 Billings in excess of costs and estimated earnings on uncompleted contracts 314,000 Accrued waste disposal 1,579,000 Other accrued expenses 230,842 Current maturities of long-term debt 225,000 ------------ Total current liabilities 4,720,058 Long-term debt, noncurrent portion 240,223 ------------ Total liabilities 4,960,281 Commitments and contingencies Members' equity 982,348 ------------ $ 5,942,629 ============ See accompanying notes to financial statements. 15 FRANK W. HAKE ASSOCIATES, LLC Statement of Operations Six Months Ended June 30, 1999 (Unaudited) Revenues $ 8,400,000 Cost of revenues 5,950,000 --------------- Gross profit 2,450,000 Selling, general and administrative expenses 2,705,000 --------------- Income (loss) from operations (255,000) Interest expense, net (190,000) --------------- Net loss $ (445,000) =============== See accompanying notes to financial statements. 16 FRANK W. HAKE ASSOCIATES, LLC Statement of Cash Flows Six Months Ended June 30, 1999 (Unaudited)
Cash flows from operations: Net loss $ (445,000) Depreciation 179,457 Change in operating assets and liabilities: Accounts receivable 1,014,420 Other assets 8,912 Prepaid expenses (74,977) Accounts payable -- trade (23,593) Billings in excess of costs and estimated earnings of uncompleted contracts (293,690) Accrued waste disposal 424,367 Other accrued expenses 20,923 -------------- Cash provided by operating activities 810,819 -------------- Cash flows from investing activities -- purchase of property and equipment (734,468) -------------- Cash flows from financing activities: Advances from affiliates 51,585 Principal payments of long-term borrowings (105,446) -------------- Cash used in financing activities (53,861) -------------- Net change in cash and cash equivalents 22,490 Cash and cash equivalents, beginning of period 67,510 -------------- Cash and cash equivalents, end of period $ 90,000 ==============
See accompanying notes to financial statements. 17 FRANK W. HAKE ASSOCIATES, LLC Notes to Financial Statements June 30, 1999 (Unaudited) (1) Basis of Presentation Frank W. Hake Associates, LLC (the Company) is a Delaware corporation operating in Memphis, Tennessee, that treats and disposes of low-level radioactive-contaminated power plant equipment, and also stores new power plant equipment for its customers. Effective June 30, 1999, the owners of the Company sold their ownership in the Company to GTS Duratek, Inc. Prior to the acquisition, the Company's majority owner was Hake Partners, Inc. Hake Partners, Inc. is owned by the shareholders of Frank W. Hake, Inc. The Company's financial statements as of and for the six months ended June 30, 1999 are unaudited and do not include all disclosures required under generally accepted accounting principles. Such financial statements reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of the 1999 interim period are not necessarily indicative of results to be expected for the entire year. 18 GTS DURATEK, INC. AND SUBSIDIARIES PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The pro forma financial information should be read in conjunction with the consolidated financial statements and related notes of GTS Duratek, Inc. and subsidiaries (the "Company"), not included herein, and the financial statements of Frank W. Hake Associates, LLC ("Hake"), included elsewhere herein. On June 30, 1999, the Company acquired 100% of the outstanding capital stock of Hake from HakeTenn, Inc., a Delaware corporation and an affiliate of the Hake Group of Philadelphia, Pennsylvania, George T. Hamilton and Richard Wilson for $12.9 million in cash and the assumption of certain liabilities, subject to a post-closing adjustment. The Company paid the cash portion of the purchase price out of available cash, principally from its credit facility with its bank. Hake is a specialist in the storage, transportation handling and processing of radioactive waste emanating from nuclear power generation plants throughout the United States. Hake also stores and services power generation equipment at its licensed facility in Memphis, Tennessee. As the acquisition was effective as of June 30, 1999, the Company's results of operations for the six months ended June 30, 1999 do not include the results of Hake. The Company has accounted for the transaction under the purchase method of accounting. The aggregate purchase price of approximately $17.8 million, which includes liabilities assumed and transaction costs, exceeded the fair value of Hake's tangible assets by approximately $11 million. Such amount has been allocated to intangible assets, principally goodwill, and is being amortized over 30 years. For purposes of the pro forma consolidated financial statements, the aggregate purchase price for Hake was as follows: Cash paid $12,957,682 Liabilities assumed 4,638,281 Transaction costs 199,016 ----------- $17,794,979 =========== The aggregate purchase price was allocated to acquired assets based upon their estimated fair values as follows: Current Assets $ 2,261,682 Due from Hake -- estimated post closing adjustment 900,000 Property, plant and equipment 3,500,000 Goodwill and other intangible assets 11,033,297 Other assets 100,000 ----------- $17,794,979 =========== Revenues from Hake, on an annualized basis, are expected to be approximately $15 million. The Company is still in the process of evaluating the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The final purchase price allocation will be affected by this and the actual amount of transaction costs. Such amounts could differ materially from the pro forma presentation. 19 GTS DURATEK, INC. AND SUBSIDIARIES PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Pro Forma Consolidated Balance Sheet The pro forma consolidated balance sheet as of June 30, 1999 is not presented herein as the acquisition of Hake was included as part of the consolidated balance sheet of GTS Duratek, Inc. and subsidiaries (GTS Duratek) as of June 30, 1999 found in the June 30, 1999 Form 10-Q filed with the Securities and Exchange Commission on August 13, 1999. Pro Forma Consolidated Statements of Operations The pro forma consolidated statements of operations for the year ended December 31, 1998 and the six months ended June 30, 1999 give effect to the Company's acquisition of Hake as if the transaction had occurred on January 1, 1998 and January 1, 1999, respectively. The pro forma consolidated statements of operations may not be indicative of the actual results that would have occurred with Hake under management and control of the Company's personnel. The pro forma adjustments include the following: (1) Depreciation and Amortization -- GTS Duratek estimates approximately $2.0 million of the purchase price will be allocated to buildings with a 20 year useful life and $1.5 million will be allocated to equipment with an average useful life of ten years. Depreciation and amortization included in the Hake statement of operations for the year ended December 31,1998 and the six months ended June 30, 1999 was approximately $323,000 and $180,000, respectively. Accordingly, the pro forma consolidated statements of operations reflect an adjustment to depreciation and amortization of $73,000 and $55,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. (2) Goodwill amortization -- Assuming the acquisition had taken place on January 1, 1998, amortization of the goodwill resulting for purchase accounting over a 30 year period would have been reflected in the pro forma consolidated statements of operations. Such amounts are estimated to be $350,000 and $175,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. (3) Management Fees -- Hake was charged a management fee by its parent of $72,000 and $36,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. Such fee will be eliminated following the acquisition and accordingly has been eliminated in the pro forma consolidated statements of operations. In addition, GTS Duratek believes that it can eliminate at least $1 million of costs on an annual basis as the result of synergies created by its Tennessee operations. These savings are not reflected in pro forma consolidated statements of operations. 20 GTS DURATEK, INC. AND SUBSIDIARIES PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (4) Interest expense -- Assuming the acquisition had taken place on January 1, 1998, interest expense would have increased as a result of additional line of credit borrowings for (i) the working capital needs of Hake during the year ended December 31, 1998 and the six months ended June 30, 1999, (ii) the net purchase price of $12,057,682 and (iii) transaction costs of $199,016. Accordingly, the pro forma consolidated statements of operations reflect a charge for additional interest expense of $1,042,000 and $521,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively, assuming borrowing under the Company's line of credit at a rate of 8.5%. (5) Income taxes -- Hake was treated as a "pass through" entity for income tax purposes prior to the acquisition. Accordingly, Hake paid no federal or state income taxes. Following the acquisition, results of Hake will be included in the determination of taxable income for GTS Duratek. Hake incurred net losses of $261,000 and $445,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. Accordingly, the income tax benefit of those losses, appropriately adjusted for permanent differences such as non-deductible goodwill, are reflected in the pro forma consolidated statements of operations. Such amounts were estimated to be $450,000 and $285,000 for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. 21 GTS DURATEK, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations (Unaudited) Year ended December 31, 1998
Pro forma Pro forma GTS Hake adjustments combined ----------------- --------------- ----------------- ---------------- Revenues $ 160,313,077 15,167,899 -- 175,480,976 Cost of revenues 123,839,031 10,603,523 -- 134,442,554 ----------------- --------------- --------------- ---------------- Gross profit 36,474,046 4,564,376 -- 41,038,422 (73,000) (1) 350,000 (2) Selling, general and administrative expenses 26,613,548 4,676,928 (72,000) (3) 31,495,476 Change for asset impairment 9,223,948 -- -- 9,223,948 ----------------- --------------- --------------- ---------------- Income (loss) from operations 636,550 (112,552) (205,000) 318,998 Interest expense, net (544,902) (148,539) (1,042,000) (4) (1,735,441) ----------------- --------------- --------------- ---------------- Income (loss) before income taxes (benefit) and proportionate share of loss of joint venture 91,648 (261,091) (1,247,000) (1,416,443) Income taxes (benefit) 627,000 -- (450,000) (5) 177,000 ----------------- --------------- --------------- ---------------- Income (loss) before proportionate share of loss of joint ventures (535,352) (261,091) (797,000) (1,593,443) Proportionate share of loss of joint ventures (1,474,000) -- (1,474,000) ----------------- --------------- --------------- ---------------- Net loss before cumulative effect of change in accounting principle (2,009,352) (261,091) (797,000) (3,067,443) Cumulative effect of change in accounting principle (420,000) -- -- (420,000) ----------------- --------------- --------------- ---------------- Net loss and comprehensive loss (2,429,352) (261,091) (797,000) (3,487,443) Preferred stock dividends and charges for accretion (1,506,754) -- -- (1,506,754) ----------------- --------------- --------------- ---------------- Net loss attributable to common stockholders $ (3,936,106) (261,091) (797,000) (4,994,197) ================= =============== =============== ================ Weighted average shares outstanding: Basic $ 13,137,000 13,137,000 ================= ================ Diluted $ 13,137,000 13,137,000 ================= ================ Net loss per share before cumulative effect of change in accounting principle: Basic $ (0.27) (0.35) ================= ================ Diluted $ (0.27) (0.35) ================= ================ Net loss per share: Basic $ (0.30) (0.38) ================= ================ Diluted $ (0.30) (0.38) ================= ================
22 GTS DURATEK, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations (Unaudited) Year ended December 31, 1998 (1) To adjust depreciation expense to reflect purchase accounting adjustments. (2) To adjust goodwill amortization expense to reflect purchase accounting adjustments. (3) To eliminate management fee charge to Hake by its parent company. (4) To adjust interest expense to reflect effects of the acquisition on cash resources. (5) To adjust income taxes to reflect the effect of the income tax benefit from the Hake tax losses. 23 GTS DURATEK, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations (Unaudited) Six months ended June 30, 1999
Pro forma Pro forma GTS Hake adjustments combined --------------- ------------- ------------- --------------- Revenues $ 80,577,671 8,400,000 -- 88,977,671 Cost of revenues 59,145,744 5,950,000 -- 65,095,744 --------------- ------------- ------------- --------------- Gross profit 21,431,927 2,450,000 -- 23,881,927 (55,000) (1) 175,000 (2) Selling, general and administrative expenses 13,243,570 2,705,000 (36,000) (3) 16,032,570 --------------- ------------- ------------- --------------- Income from operations 8,188,357 (255,000) (84,000) 7,849,357 Interest expense, net (583,612) (190,000) (521,000) (4) (1,294,612) --------------- ------------- ------------- --------------- Income (loss) before income taxes and proportionate share of loss of joint venture 7,604,745 (445,000) (605,000) 6,554,745 Income taxes (benefit) 2,996,682 -- (285,000) 2,711,682 --------------- ------------- ------------- --------------- Income (loss) before proportionate share of loss of joint venture 4,608,063 (445,000) (320,000) 3,843,063 Proportionate share of loss of joint venture (100,000) -- -- (100,000) --------------- ------------- ------------- --------------- Net income (loss) and comprehensive income (loss) 4,508,063 (445,000) (320,000) 3,743,063 Preferred stock dividends and charges for accretion (754,655) -- -- (754,655) --------------- ------------- ------------- --------------- Net income (loss) attributable to common stockholders $ 3,753,408 (445,000) (320,000) 2,988,408 =============== ============= ============= =============== Weighted average shares outstanding: Basic 13,582,581 13,582,581 =============== =============== Diluted 20,636,387 20,636,387 =============== =============== Net income per share: Basic $ 0.28 0.22 =============== =============== Diluted $ 0.23 0.19 =============== ===============
24 GTS DURATEK, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations (Unaudited) Six months ended June 30, 1999 (1) To adjust depreciation expense to reflect purchase accounting adjustments. (2) To adjust goodwill amortization expense to reflect purchase accounting adjustments. (3) To eliminate management fee charge to Hake by its parent company. (4) To adjust interest expense to reflect effects of the acquisition on cash resources. (5) To adjust income taxes to reflect the effect of the income tax benefit from the Hake tax losses. 25 Exhibit Index Exhibit Description (c)(1) GTS Duratek, Inc. Press Release dated June 30, 1999* (c)(2) Purchase and Sale Agreement between HakeTenn, Inc., George T. Hamilton and Richard Wilson and GTS Duratek, Inc. dated as of June 30, 1999* *Previously filed 26 -----END PRIVACY-ENHANCED MESSAGE-----