-----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, D05f9OW6WjPD48nVp9nc20Q90oB0iHtDXeJfUW4nKtf+CdjMYFsTcyzhXyqf4Pvx 7OqqDpgsPp4vxCBBlP06PA== 0000928385-00-001624.txt : 20000523 0000928385-00-001624.hdr.sgml : 20000523 ACCESSION NUMBER: 0000928385-00-001624 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAISER GROUP INTERNATIONAL INC CENTRAL INDEX KEY: 0000856200 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 541437073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12248 FILM NUMBER: 641625 BUSINESS ADDRESS: STREET 1: 9300 LEE HWY CITY: FAIRFAX STATE: VA ZIP: 22031 BUSINESS PHONE: 7039343600 MAIL ADDRESS: STREET 1: 9300 LEE HWY CITY: FAIRFAX STATE: VA ZIP: 22031 FORMER COMPANY: FORMER CONFORMED NAME: ICF KAISER INTERNATIONAL INC DATE OF NAME CHANGE: 19930811 FORMER COMPANY: FORMER CONFORMED NAME: ICF INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL & RESEARCH CORP /DE/ DATE OF NAME CHANGE: 19910314 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 Commission File No. 1-12248 KAISER GROUP INTERNATIONAL, INC. (formerly ICF Kaiser International, Inc.) (Exact name of registrant as specified in its charter) Delaware 54-1437073 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9300 Lee Highway, Fairfax, Virginia 22031-1207 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (703) 934-3300 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No On May 15, 2000, there were 23,419,828 shares of Kaiser Group International, Inc. Common Stock, par value $0.01 per share, outstanding. KAISER GROUP INTERNATIONAL, INC. INDEX TO FORM 10-Q Page Part I - Financial Information Item 1. Financial Statements: Consolidated Balance Sheets - March 31, 2000 and December 31, 1999........................... 3 Consolidated Statements of Operations and Comprehensive (Loss) Three Months Ended March 31, 2000 and 1999..................... 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999..................... 5 Notes to Consolidated Financial Statements..................... 6-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 15-22 Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 23 Part II - Other Information Item 1. Legal Proceedings Item......................................... 23 Item 2. Changes in Securities and Use of Proceeds...................... 23 Item 3. Defaults Upon Senior Securities................................ 23 Item 4. Submission of Matters to a Vote of Security Holders............ 23 Item 5. Other Information.............................................. 23 Item 6. Exhibits and Reports on Form 8K................................ 24 2 KAISER GROUP INTERNATIONAL, INC. Consolidated Balance Sheets (In thousands, except shares)
March 31, December 31, 2000 1999 ------------ ------------ (Uaudited) Assets Current Assets Cash and cash equivalents $ 19,969 $ 26,391 Restricted cash 16,425 16,386 Contract receivables, net 184,232 158,319 Prepaid expenses and other current assets 5,856 5,350 --------- --------- Total Current Assets 226,482 206,446 --------- --------- Fixed Assets Furniture, equipment, and leaseholds 14,089 14,224 Less depreciation and amortization (11,320) (11,403) --------- --------- 2,769 2,821 --------- --------- Other Assets Goodwill, net 17,323 17,581 Investments in and advances to affiliates 8,264 10,040 Notes receivable 6,550 6,550 Capitalized software development costs 1,507 1,601 Other 8,580 8,524 --------- --------- 42,224 44,296 --------- --------- Total Assets $ 271,475 $ 253,563 ========= ========= Liabilities and Shareholders' Equity (Deficit) Current Liabilities Accounts payable $ 142,227 $ 119,556 Accrued salaries and benefits 27,984 27,249 Other accrued expenses 23,857 26,921 Deferred revenue 6,363 9,015 Accrued interest 4,095 -- Income taxes payable 4,041 6,597 --------- --------- Total Current Liabilities 208,567 189,338 Long-term Liabilities Long-term debt 124,329 124,218 Other 7,489 7,577 --------- --------- Total Liabilities 340,385 321,133 Commitments and Contingencies Minority Interest 1,950 2,333 Shareholders' Equity (Deficit) Preferred stock - - Common stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 23,474,828 and 23,655,500 shares 234 237 Additional paid-in capital 73,594 73,643 Accumulated deficit (143,007) (140,681) Accumulated other comprehensive income (loss) (1,681) (3,102) --------- --------- Total Shareholders' Equity (Deficit) (70,860) (69,903) --------- --------- Total Liabilities and Shareholders' Equity (Deficit) $ 271,475 $ 253,563 ========= =========
See notes to consolidated financial statements. 3 KAISER INTERNATIONAL, INC. Consolidated Statements of Operations and Comprehensive (Loss) (In thousands, except per share amounts)
Three Months Ended March 31, ---------------------------- 2000 1999 --------- --------- (Unaudited) Gross Revenue $ 218,574 $ 225,497 Subcontract and direct material costs (146,902) (162,858) Equity in income of joint ventures and affiliated companies 280 1,520 --------- --------- Service Revenue 71,952 64,159 Operating Expenses Direct labor and fringe benefits 52,986 48,459 Selling, general and administrative 11,246 14,741 Depreciation and amortization 958 1,481 Restructuring charges 667 895 --------- --------- Operating Income (Loss) 6,095 (1,417) Other Income (Expense) Interest income 676 268 Interest expense (4,222) (5,852) --------- --------- Income (Loss) From Continuing Operations Before Income Taxes and Minority Interest 2,549 (7,001) Income tax (provision) benefit (75) 1,020 --------- --------- Income (Loss) From Continuing Operations 2,474 (5,981) Before Minority Interest Minority interest in net income of subsidiaries (4,800) (2,082) --------- --------- (Loss) From Continuing Operations (2,326) (8,063) Income from discontinued operations (net of tax in 1999 of $1,521) - 2,344 --------- --------- Net (Loss) $ (2,326) $ (5,719) ========= ========= Basic and Fully Diluted Earnings (Loss) Per Share: Continuing operations $(0.10) $(0.34) Discontinued operations 0.00 0.10 --------- --------- $(0.10) $(0.24) ========= ========= Weighted average shares for basic earnings per share 23,562 24,068 Effect of dilutive stock options - - ========= ========= Weighted average shares for diluted earnings per share 23,562 24,068 ========= ========= Comprehensive (Loss) Net (Loss) $(2,326) $(5,719) Other Comprehensive Income (Loss): Foreign currency translation adjustments 1,421 467 --------- --------- Total Comprehensive (Loss) $ (905) $ (5,252) ========= =========
See notes to consolidated financial statements. 4 KAISER GROUP INTERNATIONAL, INC. Consolidated Statements of Cash Flows (In thousands)
Three Months Ended March 31, ---------------------------- 2000 1999 --------- --------- (Unaudited) Operating Activities Net income (loss) $ (2,326) $ (5,719) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Income from discontinued operations - (2,344) Depreciation and amortization 958 1,481 Provision (credit) for losses - (2,555) Provision for deferred income taxes - 468 Note receivable write-off - 638 Earnings in excess of cash distributions from joint ventures and affiliated companies - (137) Minority interest in net income of subsidiaries 4,800 2,082 Changes in operating assets and liabilities, net of acquisitions and dispositions: Contract receivables, net (25,913) 19,880 Prepaid expenses and other current assets (506) (1,653) Accounts payable and accrued expenses 20,306 11,550 Deferred revenue (2,652) (23,810) Income tax payable (2,556) 275 Other operating activities 1,663 - -------- -------- Net Cash (Used in) Provided by Operating Activities (6,226) 156 -------- -------- Investing Activities Proceeds from sale of investment 977 -- Investments in net assets of discontinued operations - (596) Purchases of fixed assets (135) (557) -------- -------- Net Cash Provided by (Used in) Investing Activities 842 (1,153) -------- -------- Financing Activities Borrowings under revolving credit facility - 57,064 Principal payments on revolving credit facility - (50,942) Change in book overdraft 4,072 (6,117) Distribution of income to minority interest (5,183) 51 Proceeds from issuances of common stock - 38 -------- -------- Net Cash (Used in) Provided by Financing Activities (1,111) 94 -------- -------- Effect of Exchange Rate Changes on Cash 73 (63) -------- -------- (Decrease) in Cash and Cash Equivalents (6,422) (966) Cash and Cash Equivalents at Beginning of Period 26,391 15,248 -------- -------- Cash and Cash Equivalents at End of Period $ 19,969 $ 14,282 ======== ======== Supplemental cash flow information is as follows: Cash payments for interest $ - $ - Cash payments for income taxes 2,556 28 Non-cash transactions: Reacquisition of common stock - (247)
See notes to consolidated financial statements. 5 KAISER GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying consolidated financial statements of Kaiser Group International, Inc. and subsidiaries (the Company), except for the December 31, 1999 balance sheet (derived from audited financial statements), are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's audited consolidated financial statements and footnotes thereto for the year ended December 31, 1999 and the information included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Certain reclassifications have been made to the prior period financial statements to conform them to the presentation used in the March 31, 2000 financial statements. 2. Liquidity and Capital Resource Outlook The accompanying financial statements have been prepared assuming that Kaiser Group International, Inc. and Subsidiaries ("Kaiser" or "the Company") will continue as a going concern. Significant losses on four large fixed price projects to construct plants to produce nitric acid incurred primarily during 1998 within the Engineering Operations caused the Company to respond to the resulting negative cash flows and to other operating losses experienced within that Group, by implementing a corporate reorganization plan designed to significantly restructure operations and restore profitability. In summary, the components of the corporate reorganization plan developed by management and the Board of Directors included: . Divesting non-engineering operating units and reinvesting the proceeds in the Company to provide working capital necessary to stabilize the retained business activities - completed primarily in 1999; . Reducing the Company's overhead cost structure that would remain after the divestitures of the operating units referenced above - completed primarily in 1999; and; . Revising the Company's capital structure, including substantial modification of its outstanding debt, in order to eliminate barriers to securing new business and improve accessibility to new sources of working capital. Cash proceeds from the divestitures were subsequently used, in part, to complete the nitric acid projects and to repay cash borrowings from a revolving line of credit that had been used primarily to fund the project losses, as well as for working capital needs accumulated by the Company's other growing operating units prior to their 1999 divestitures. Also, in 1999, the Company used some of the proceeds from the divestitures to repurchase $14.0 million of $15.0 million in outstanding Senior Notes. The Company currently has no working capital facility and is financing its Engineering Operations' working capital needs through the use of cash from operations, from the residual cash proceeds from the sale of its Consulting Group completed in June 1999, and from distributions by its Kaiser-Hill subsidiary. Based on (i) current expectations for near-term operating results, (ii) its current available cash position and (iii) recent trends and projections in liquidity and capital needs, management believes the Company has sufficient short-term liquidity to bridge current operating needs until the implementation of a modified debt restructuring, assuming that such a restructuring can be accomplished within the reasonably near term. There is no assurance that a successful restructuring can be accomplished. Actions remaining critical to the Company's long-term liquidity include completing a restructuring of its $125.0 million Senior Subordinated Notes prior to the next interest payment due date of June 30, 2000, securing a sufficient working capital facility with acceptable terms, obtaining successful outcomes regarding significant contingent liabilities (see Note 5), and improving operating results. Management believes that, if these steps can be achieved, the Company will have sufficient liquidity generated by improved operating results, substantially decreased interest expense and borrowings on a possible new credit facility to meet its longer-term working capital requirements. The inability of the Company to accomplish a combination of actions described above would have a material adverse impact on the financial condition, operating results, and the business. The Company has continued negotiations with representatives of its Senior Subordinated Notes and, while it has no assurance, believes it may be able to implement a modified restructuring of those notes. Such a transaction could involve an exchange of Senior Subordinated Notes for a combination of new common stock and newly issued preferred stock. The Company believes that such a restructuring would substantially improve its financial condition and provide a basis for ongoing operations and continuation of the Company's turnaround. However, such a restructuring would result in substantially more dilution of the equity of existing common stockholders than the restructuring terms proposed during the fall of 1999. 6 While continuing negotiations with representatives of its Senior Subordinated Noteholders, the Company has been exploring strategic alternatives, including the possible sale of certain of its assets or businesses. The Company is currently engaged in discussions with several potential purchasers concerning the sale of its Engineering Operations in two separate transactions. The Company has reached general understandings as to the scope and price range of such transactions. However, the transactions remain subject to, among other things, completion of diligence and successful negotiation of definitive agreements. The Company also continues to explore strategic alternatives for its interest in Kaiser-Hill Company, LLC. The Company presently believes that one or more of the transactions under discussion will take place, but there can be no assurance that any transaction concerning any of the Company's business units will be completed. The Company expects to be able to reach a conclusion with respect to its strategic direction and begin to implement its reorganization, either with or without business unit sale transactions, prior to the end of the second quarter of calendar year 2000. The Company expects its financial condition to be materially affected by the implementation of any debt restructuring or strategic alternatives. The consummation of any debt restructuring, any transactions for the sale of business units, or any combination of debt restructuring and business unit sale transactions will likely be completed through a "prepackaged" plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan were selected as the mechanism for completing the Company's restructuring, the Company expects that it would have the support of the largest holders of its Senior Subordinated Notes and, therefore, be able to implement the plan relatively promptly. If the Company commences such a proceeding, the goals of any such plan would be to (i) minimize adverse effects on Kaiser's ongoing operations, trade creditors and employees, (ii) facilitate possible business unit sale transactions, and (iii) result in a financially strengthened and stable organization for purposes of ongoing operations. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the classification of liabilities that might result should the Company not be successful in attempts to enact the critical actions summarized above. 3. Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding for the period. The assumed proceeds from the exercise of dilutive securities are used to purchase common stock at the average market price during the period. The difference between the number of shares assumed issued and the number of shares assumed purchased is added to the basic EPS denominator in order to derive the diluted EPS denominator. The Company's common stock equivalents that would be antidilutive have been excluded from the fully diluted EPS calculation. 4. Segment Information The Company uses several segments for internal management reporting purposes. The segments are compiled based on the similarities in each of their underlying services, customers, and regulatory environments. The segment operating results represent all activities that were controllable by the respective segment business leaders and that had sole direct benefit to the respective segment. The accounting policies of the operating segments are the same as those described in the Company's summary of significant accounting policies. Historical segment information has not been presented in the accompanying financial statements for any of the business units that were divested in 1999 (Note 2). The Company's continuing business segments are: . the Engineers and Constructors Group (E&C), which provides engineering, construction management and project and program management services to commercial and federal, state, and local entities in the areas of transit and transportation, alumina and aluminum, facilities engineering and management, iron and steel and microelectronics and clean technology; . Kaiser-Hill Company, LLC (Kaiser-Hill), a 50% owned subsidiary, which serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. The Company, through a designated majority representation on Kaiser-Hill's board of managers, has a controlling interest in Kaiser-Hill and therefore consolidates Kaiser-Hill's results of operations with those of its only other remaining business segment, E&C. On January 24, 2000, Kaiser-Hill was awarded the follow-on Rocky Flats Contract (the Closure Contract). The Closure Contract became effective February 1, 2000, essentially terminating the predecessor contract that would otherwise have been executed through to its original ending date of September 30, 2000. Correspondingly, certain performance elements of the predecessor contract were shifted into the new Closure Contract. Under the predecessor contract, Kaiser-Hill was awarded and paid approximately $7.0 million of performance fee during the first quarter of 2000. The Company recognized the entire $7.0 million award in January 2000. As of January 31, 2000, the Company had recognized the entire value of the predecessor contract. 7 Financial data for the continuing business segments are as follows (in thousands):
Statements of Operations For the three months ended March 31, - ------------------------------------------------------------- 2000 (unaudited) Kaiser-Hill E&C Total - --------------- ----------- -------- --------- Gross revenue......................................... $ 171,790 $ 46,784 $ 218,574 Subcontracts and materials.......................... (125,523) (21,379) (146,902) Equity in unconsolidated subsidiaries............... -- 280 280 --------- -------- --------- Service revenue....................................... 46,267 25,685 71,952 Operating expenses: Direct labor and fringe............................. 36,772 16,214 52,986 Selling, general and administrative................. -- 11,246 11,246 Depreciation and amortization....................... -- 958 958 Restructuring charges............................... -- 667 667 --------- -------- --------- Segment operating income (loss)....................... $ 9,495 $ (3,400) $ 6,095 ========= ======== ========= 1999 (unaudited) - ---------------- Gross revenue......................................... $ 145,103 $ 80,394 $ 225,497 Subcontracts and materials.......................... (110,341) (52,517) (162,858) Equity in unconsolidated subsidiaries............... -- 1,520 1,520 --------- -------- --------- Service revenue....................................... 34,762 29,397 64,159 Operating expenses: Direct labor and fringe............................. 30,622 17,837 48,459 Selling, general and administrative................. -- 14,741 14,741 Depreciation and amortization....................... -- 1,481 1,481 Restructuring charges............................... -- 895 895 --------- -------- --------- Segment operating income (loss) $ 4,140 $ (5,557) $ (1,417) ========= ======== =========
Kaiser-Hill E&C ------------------------------ ----------------------------- March 31, December 31 March 31, December 31 Balance Sheets 2000 1999 2000 1999 - -------------- --------- ---------------- --------- ----------------- Assets (Unaudited) (Unaudited) Cash and cash equivalents......................... $ 6,338 $ 5,243 $ 13,631 $ 21,148 Restricted cash................................... -- -- 16,425 16,386 Contract receivables, net......................... 127,715 104,740 56,517 53,579 Other current assets.............................. 91 126 5,765 5,224 Other long-term assets............................ 496 587 44,497 46,530 --------- -------- --------- -------- Total Assets $ 134,640 $110,696 $ 136,835 $142,867 Liabilities Accounts payable.................................. 115,845 91,313 26,382 28,743 Accrued salaries and benefits..................... 14,896 14,717 13,088 12,532 Other current liabilities......................... -- -- 38,356 42,533 Other long-term liabilities....................... -- -- 131,818 131,795 --------- -------- --------- -------- Total Liabilities 130,741 106,030 209,644 215,603 Commitments and contingencies......................... Minority Interest..................................... 1,950 2,333 -- -- --------- -------- --------- -------- Net Assets/(Liabilities).............................. $ 1,949 $ 2,333 $ (72,809) $(72,736) ========= ======== ========= ========
Condensed Statements of Cash Flows Kaiser-Hill E&C - ---------------------------------- ------------------------------ ----------------------------- For the three months ended March 31: 2000 1999 2000 1999 --------- -------- --------- --------- Net cash provided by (used in) operating activities..... $ 6,278 $ 2,102 $ (12,504) $ (1,946) Net cash provided by (used in) investing activities..... -- -- 842 (1,153) Net cash (used in) provided by financing activities..... (5,183) -- 4,072 94 Effect of exchange rate changes on cash................. -- -- 73 (63) --------- -------- --------- -------- Increase (decrease) in cash and cash equivalents........... 1,095 2,102 (7,517) (3,068) Cash and cash equivalents at beginning of period........... 5,243 3,644 21,148 11,604 --------- -------- --------- -------- Cash and cash equivalents at end of period................. $ 6,338 $ 5,746 $ 13,631 $ 8,536 ========= ======== ========= ========
8 5. Contingencies Bath Contingency: In March 1998, the Company entered into a $187 million maximum price contract with Bath Iron Works to construct a ship building facility. In May 1998, the Company subsequently learned that estimated costs to perform the contract as reflected in actual proposed subcontracts were approximately $30 million higher than the cost estimates originally used as the basis for contract negotiation between the Company and the customer. After learning this, the Company advised the customer that it was not required to perform the contract in accordance with its terms as a result of a mutual mistake among them in negotiating that contract. In October 1998, the customer presented an initial draft of a claim against the Company requesting payment for estimated damages and entitlements pursuant to the terminated contract. The customer has also subsequently asserted a claim based on alleged differing site conditions that allegedly should have been identified by the Company. In March 2000, Bath filed a combined claim against the Company in U.S. District Court in the District of Maine requesting payment for $38 million. The Company continues to object to Bath's allegations and is vigorously defending its position. Although no resolution has been reached, management has recorded a provision in the financial statements for the Company's proposed settlement of the non- insured portion of the loss. Acquisition Contingency: The Kaiser common shares exchanged for the stock of ICT Spectrum in the March, 1998 acquisition carry the guarantee that the fair market value of each share of stock will reach $5.36 by March 1, 2001. In the event that the fair market value does not attain the guaranteed level, the Company is obligated to make up the shortfall either through the payment of cash or by issuing additional shares of common stock with a total value equal to the shortfall, depending upon the Company's preference. Pursuant to the terms of the Agreement, however, the total number of contingently issuable shares of common stock cannot exceed an additional 1.5 million. In December, 1999, the Company and certain former Company employees and shareholders of ICT Spectrum agreed to amend the applicable agreements in a manner that had the result of reducing the amount of the taxable gain created by former shareholder-employees' involuntary departures from the Company. As permitted per the agreement, the shareholders agreed to allow the Company to retain some of the vested shares as payment of the income tax withholding in lieu of cash. In total, the Company retained 255,669 shares and recorded the transaction as a $1.37 million reduction to goodwill and paid-in-capital. Given that the quoted fair market value of the Company's common stock at May 19, 2000 was $0.19 per share, and that the Company's current debt instruments restrict the amount of cash that can be used for acquisitions, the assumed issuance of an additional 1.5 million shares (now adjusted downward by the 255,669 retained shares to 1,244,331), would not completely extinguish the remaining purchase price contingency. In this event, the Company will need to fund the contingency in cash and would need to obtain an amendment to current debt instruments or replace them in order to complete a cash fill-up. Any future distribution of cash or common stock would be recorded as a charge to the Company's paid-in-capital. Until the earlier of the contingent purchase price resolution or March 1, 2001, any additional shares assumed to be issued because of shortfalls in fair market value will be included in the Company's diluted earnings per share calculations, unless they are antidilutive. The exchanged shares also contain restrictions preventing their sale prior to March 1, 2001. On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf of all others similarly situated, filed a class action lawsuit in the U.S. District Court for the District of Idaho alleging false and misleading statements made in a private offering memorandum, and otherwise, in connection with the Company's acquisition of ICT Spectrum in 1998. The Company subsequently filed a motion to dismiss the case. On March 14, 2000, the court ordered the plaintiff to address certain claim deficiencies. The plaintiff filed an amended complaint on May 15, 2000. The court is expected to consider the amended complaint in light of the Company's motion to dismiss and complete its ruling relative to the Company's motion. Litigation, Claims and Assessments Contingencies: In the course of the Company's normal business activities, various claims or charges have been asserted and litigation commenced against the Company arising from or related to properties, injuries to persons, and breaches of contract, as well as claims related to acquisitions and dispositions. Claimed amounts may not bear any reasonable relationship to the merits of the claim or to a final court award. In the opinion of management, adequate reserves have been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against the Company in such litigation. The continued adequacy of reserves is reviewed periodically as progress on such matters ensues. The Company may from time to time, either individually or in conjunction with other government contractors operating in similar types of businesses, be involved in U.S. government investigations for alleged violations of procurement or other federal laws and regulations. The Company currently is the subject of a number of U.S. government investigations and is cooperating with the responsible government agencies involved. No charges presently are known to have been filed against the Company by these agencies. The Company has provided for its estimate of the potential effect of these investigations, and the continued adequacy of reserves is reviewed periodically as progress on such matters ensues. 9 Prior to the divestitures of its EFM and Consulting Groups, the Company had a substantial number of cost-reimbursement contracts with the U.S. government, the costs of which are subject to audit by the U.S. government. As a result of pending audits related to fiscal years 1986 forward, the government has asserted, among other things, that certain costs claimed as reimbursable under government contracts either were not allowable or not allocated in accordance with federal procurement regulations. The Company is actively working with the government to resolve these issues. The Company has provided for its estimate of the potential effect of issues that have been quantified, including its estimate of disallowed costs for the periods currently under audit and for periods not yet audited. Neither the government nor the Company, however, has quantified many of the issues, and others are qualitative in nature, and their potential financial impact is not quantifiable by the government or the Company at this time. The adequacy of provisions for reserves is reviewed periodically as progress with the government on such matters ensues. Contract warranties and performance guaranty contingencies: In the course of the Company's normal business activities, many of its contracts contain provisions for warranties and performance guarantees. As progress on contracts ensues, the Company regularly updates the estimates of the costs to perform such contingencies and reserves a proportionate amount of the total related contract value until such time as the contingency is resolved. 6. Guarantor Subsidiaries Pursuant to SEC rules regarding publicly held debt, the Company is required to provide financial information for wholly owned subsidiaries of Kaiser Group International, Inc. (Subsidiary Guarantors) which unconditionally guarantee the payment of the principal, premium, if any, and interest on the Company's Senior Subordinated Notes and Series B Senior Notes. The Subsidiary Guarantors are Cygna Consulting Engineers and Project Management, Inc; Kaiser Government Programs, Inc; Global Trade & Investment, Inc; Kaiser Europe, Inc; Kaiser/Georgia Wilson, Inc; Kaiser Overseas Engineering, Inc; EDA Incorporated, Inc.; Kaiser Engineers Pacific, Inc; and Kaiser Advanced Technology, Inc. Kaiser Remediation Company, a former Guarantor, was included in the sale of the EFM Group to IT on April 9, 1999, Systems Applications International, Inc., also a former Guarantor, was included in the sale of the Consulting Group on June 30, 1999 and the majority of the assets of EDA Incorporated, Inc. were sold in an unrelated transaction on August 13, 1999. The guarantor information has been updated to reflect these transactions. Condensed consolidating financial information for Kaiser Group International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non- Guarantor Subsidiaries follow on pages 11-14. The information, except for the December 31, 1999 condensed consolidating balance sheet, is unaudited. Investments in subsidiaries have been presented using the equity method of accounting. The Company does not have a formal tax-sharing arrangement with its subsidiaries and has allocated taxes to its subsidiaries based on the Company's overall effective tax rate. 10 Kaiser Group International, Inc. Condensed Consolidating Balance Sheet March 31, 2000 (In thousands)
Parent Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ---------- ----------- -------------- ------------- ------------- Assets Current Assets Cash and cash equivalents $ 2,998 $ 9,528 $ 7,443 $ - $ 19,969 Restricted cash 13,822 - 2,603 - 16,425 Contract receivables, net (4,271) 129,293 59,210 - 184,232 Intercompany receivables, net 195,309 21,694 (217,003) - Prepaid expenses and other current assets 436 612 4,808 - 5,856 --------- -------- --------- --------- Total Current Assets 208,294 161,127 (142,939) - 226,482 --------- -------- --------- -------- --------- Fixed Assets Furniture, equipment, and leaseholds 3,608 1,115 9,366 - 14,089 Less depreciation and amortization (3,078) (1,029) (7,213) - (11,320) --------- -------- --------- -------- --------- 530 86 2,153 - 2,769 --------- -------- --------- -------- --------- Other Assets Goodwill, net - 2,950 14,373 - 17,323 Investment in and advances to affiliates (139,262) 1 8,113 139,412 8,264 Notes receivable 6,550 - - - 6,550 Capitalized software development costs 1,507 - - 1,507 Other 2,889 583 5,108 - 8,580 --------- -------- --------- -------- --------- (128,316) 3,534 27,594 139,412 42,224 --------- -------- --------- -------- --------- Total Assets $ 80,508 $164,747 $(113,192) $139,412 $ 271,475 ========= ======== ========= ======== ========= Liabilities and Shareholders' Equity Current Liabilities Accounts payable and other accrued expenses $ 20,190 $118,411 $ 27,483 - $ 166,084 Accrued salaries and employee benefits (12,582) 17,134 23,432 - 27,984 Interest payable 4,095 - - - 4,095 Other 8,572 (3,160) 4,992 - 10,404 --------- -------- --------- -------- --------- Total Current Liabilities 20,275 132,385 55,907 - 208,567 Long-term Liabilities Long-term debt, less current portion 124,328 - 1 - 124,329 Other 5,250 - 2,239 - 7,489 --------- -------- --------- -------- --------- Total Liabilities 149,853 132,385 58,147 - 340,385 --------- -------- --------- -------- --------- Minority Interests in Subsidiaries - 1,950 - - 1,950 Shareholders' Equity Common Stock 224 6,809 114 (6,913) 234 Additional Paid-in Capital 73,595 2,372 48,266 (50,639) 73,594 Accumulated Earnings (Deficit) (143,164) 21,591 (218,398) 196,964 (143,007) Other Equity - (360) (1,321) - (1,681) --------- -------- --------- -------- --------- Total Shareholders' Equity (69,345) 30,412 (171,339) 139,412 (70,860) --------- -------- --------- -------- --------- Total Liabilities and Shareholders' Equity $ 80,508 $164,747 $(113,192) $139,412 $ 271,475 ========= ======== ========= ======== =========
11 Kaiser Group International, Inc.
Kaiser Group International Parent Subsidiary Non-Guarantor Inc. Condensed Consolidating Statement of Operations Company Guarantors Subsidiaries Eliminations Consolidated Three Months Ended March 31, 2000 --------- ---------- ------------ ------------- ------------ (In thousands) (Unaudited) Gross Revenue $ 1,762 $ 175,743 $ 41,069 $ - $ 218,574 Subcontract and direct material costs (1,754) (128,214) (16,934) - (146,902) Equity in net income of unconsolidated subsidiaries 5,799 - 307 (5,826) 280 ------- --------- -------- ------------ --------- Service Revenue 5,807 47,529 24,442 (5,826) 71,952 Operating Expenses Operating expenses 3,367 37,697 23,168 - 64,232 Depreciation and amortization 242 89 627 - 958 Restructuring charges 667 - - - 667 ------- --------- -------- ------------ --------- Operating Income (Loss) 1,531 9,743 647 (5,826) 6,095 Other Income (Expense) Interest income 350 116 210 - 676 Interest expense (4,207) (12) (3) - (4,222) ------- --------- -------- ------------ --------- Income (Loss) Before Income Taxes and Minority Interest (2,326) 9,847 854 (5,826) 2,549 Income tax (expense) benefit - - (75) - (75) ------- --------- -------- ------------ --------- Income (Loss) Before Minority Interest (2,326) 9,847 779 (5,826) 2,474 Minority interests in net income of subsidiaries - (4,800) - - (4,800) ------- --------- -------- ------------ --------- Income (Loss) $(2,326) $ 5,047 $ 779 $(5,826) $ (2,326) ======= ========= ======== ============ =========
Kaiser Group Condensed Consolidating Statement of Cash Flows International Three Months Ended March 31, 2000 Parent Subsidiary Non-Guarantor Inc. (In thousands) Company Guarantors Subsidiaries Eliminations Consolidated --------- ---------- ------------ ------------- ------------ (Unaudited) Net Cash Provided by (Used in) Operating Activities $(12,456) $ 6,703 $ (473) $ - $(6,226) -------- ------- ------ -------- ------- Investing Activities Sales of subsidiaries and/or investments - - 977 - 977 Purchases of fixed assets (90) - (45) - (135) -------- ------- ------ -------- ------- Net Cash Provided by (Used in) Investing Activities (90) - 932 - 842 -------- ------- ------ -------- ------- Financing Activities Change in book overdraft 4,072 - - - 4,072 Distribution of income to minority interest - (5,183) - - (5,183) -------- ------- ------ -------- ------- Net Cash Provided by (Used in) Financing Activities 4,072 (5,183) - - (1,111) -------- ------- ------ -------- ------- Effect of Exchange Rate Changes on Cash - - 73 - 73 -------- ------- ------ -------- ------- Increase in Cash and Cash Equivalents (8,474) 1,520 532 - (6,422) Cash and Cash Equivalents at Beginning of Period 11,472 8,008 6,911 - 26,391 -------- ------- ------ -------- ------- Cash and Cash Equivalents at End of Period $ 2,998 $ 9,528 $7,443 $ - $19,969 ======== ======= ====== ======== =======
12 KAISER GROUP INTERNATIONAL, INC.
Condensed Consolidating Balance Sheet As of December 31, 1999 Values in this worksheet are in thousands, except where noted. Kaiser Group International, Parent Subsidiary Non-Guarantor Inc. Company Guarantors Subsidiaries Eliminations Consolidated --------- ---------- ------------- ------------ -------------- ASSETS Current Assets Cash and cash equivalents $ 11,472 $ 8,008 $ 6,911 $ -- $ 26,391 Restricted cash 13,816 -- 2,570 -- 16,386 Contract receivables, net (3,698) 106,841 55,176 -- 158,319 Intercompany receivables, net 194,308 17,466 (211,774) -- -- Prepaid expenses and other current assets 554 949 3,847 -- 5,350 --------- -------- --------- -------- --------- Total Current Assets 216,452 133,264 (143,270) -- 206,446 Fixed Assets Furniture, equipment, and leasehold improvements 3,520 1,115 9,589 -- 14,224 Less depreciation and amortization (3,057) (1,013) (7,333) -- (11,403) --------- -------- --------- -------- --------- 463 102 2,256 -- 2,821 Other Assets Goodwill, net -- 3,029 14,552 -- 17,581 Investment in and advances to affiliates (144,683) 1 8,844 145,878 10,040 Notes receivable 6,550 -- -- -- 6,550 Capitalized software development costs 1,601 -- -- -- 1,601 Other 3,403 587 4,534 -- 8,524 --------- -------- --------- -------- --------- (133,129) 3,617 27,930 145,878 44,296 --------- -------- --------- -------- --------- Total Assets $ 83,786 $136,983 $(113,084) $145,878 $ 253,563 ========= ======== ========= ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and other accrued expenses $ 21,587 $ 94,542 $ 30,348 $ -- $ 146,477 Accrued salaries and employee benefits (11,788) 17,126 21,911 -- 27,249 Other 11,956 (2,382) 6,038 -- 15,612 --------- -------- --------- -------- --------- Total Current Liabilities 21,755 109,286 58,297 -- 189,338 Long-term Liabilities Long-term debt, less current portion 124,217 -- 1 -- 124,218 Other 4,781 -- 2,796 -- 7,577 --------- -------- --------- -------- --------- Total Liabilities 150,753 109,286 61,094 -- 321,133 --------- -------- --------- -------- --------- Minority interests in subsidiaries -- 2,333 -- -- 2,333 Shareholders' equity Common stock 227 6,809 114 (6,913) 237 Additional paid-in capital 73,644 2,372 48,266 (50,639) 73,643 Accumulated earnings (deficit) (140,838) 16,545 (219,818) 203,430 (140,681) Accumulated other comprehensive (loss) -- (362) (2,740) -- (3,102) --------- -------- --------- -------- --------- Total Shareholders' Equity (Deficit) (66,967) 25,364 (174,178) 145,878 (69,903) --------- -------- --------- -------- --------- Total Liabilities and Shareholders' Equity (Deficit) $ 83,786 $136,983 $(113,084) $145,878 $ 253,563 ========= ======== ========= ======== =========
13 Kaiser Group International, Inc. and Subsidiaries
Kaiser Group Condensed Consolidating Statement of Operations International, Three Months Ended March 31, 1999 Parent Subsidiary Non-Guarantor Discontinued Inc. (In thousands) Company Guarantors Subsidiaries Operations Eliminations Consolidated ------- ---------- ------------- ------------ ------------ -------------- (Unaudited) Gross Revenue $ 21 $ 156,509 $125,368 $(56,401) $ - $ 225,497 Subcontract and direct material costs (71) (116,301) (67,942) 21,456 - (162,858) Equity in net income of unconsolidated subsidiaries 4,109 - 2,608 - (5,197) 1,520 ------- --------- -------- -------- --------- --------- Service Revenue 4,059 40,208 60,034 (34,945) (5,197) 64,159 Operating Expenses Operating expenses 2,362 33,406 57,718 (30,286) - 63,200 Depreciation and amortization 780 245 1,251 (795) - 1,481 Other unusual charges 895 - - - - 895 ------- --------- -------- -------- --------- --------- Operating Income (Loss) 22 6,557 1,065 (3,864) (5,197) (1,417) Other Income (Expense) Interest income 57 77 134 - - 268 Interest expense (5,798) (46) (8) - - (5,852) ------- --------- -------- -------- --------- --------- Income (Loss) From Continuing Operations Before Income Taxes and Minority Interest (5,719) 6,588 1,191 (3,864) (5,197) (7,001) Income tax expense (benefit) 0 13 487 (1,520) - (1,020) ------- --------- -------- -------- --------- --------- Income (Loss) From Continuing Operations Before Minority Interest (5,719) 6,575 704 (2,344) (5,197) (5,981) Minority interests in net income of subsidiaries - 2,082 - - - 2,082 ------- --------- -------- -------- --------- --------- Income (Loss) Before Discontinued Operations (5,719) 4,493 704 (2,344) (5,197) (8,063) Income from discontinued operations (net of tax) - - - 2,344 - 2,344 ------- --------- -------- -------- --------- --------- Net Income (Loss) $(5,719) $ 4,493 $ 704 $ - $ (5,197) $ (5,719) ======= ========= ======== ======== ========= =========
Condensed Consolidating Statement of Cash Flows Kaiser Group Three Months Ended March 31, 1999 International (In thousands) Parent Subsidiary Non-Guarantor Discontinued Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated ------- ---------- ------------ ----------- ------------ ------------ (Unaudited) Net Cash Provided by (Used in) Operating Activities $ (2,017) $ 1,704 $ 4,697 $ (4,228) $ - $ 156 -------- ------- -------- -------- --------- -------- Investing Activities: Investments in subsidiaries and affiliates, net of cash acquired - - (4,374) 4,374 - - Sales of subsidiaries and/or investments - - - - - - Investments in net assets of discontinued operations - - - (596) - (596) Purchases of fixed assets - - (1,007) 450 - (557) ------- --------- -------- -------- --------- -------- Net Cash Provided by (Used in) Investing Activities - - (5,381) 4,228 - (1,153) ------- --------- -------- -------- --------- -------- Financing Activities: Borrowings under credit facility 57,064 - - - - 57,064 Principal payments on credit facility (50,942) - - - - (50,942) Change in book overdraft (6,117) - - - - (6,117) Distribution of income to minority interest - 51 - - - 51 Proceeds from issuances of common stock 38 - - - - 38 ------- --------- -------- -------- -------- --------- Net Cash Provided by (Used in) Financing Activities 43 51 - - - 94 ------- --------- -------- -------- -------- --------- Effect of Exchange Rate Changes on Cash - - (63) - - (63) ------- --------- -------- -------- -------- --------- Increase (Decrease) in Cash and Cash Equivalents (1,974) 1,755 (747) - - (966) ------- --------- -------- -------- -------- --------- Cash and Cash Equivalents at Beginning of Period 2,414 3,814 9,039 (19) - 15,248 ------- --------- -------- -------- -------- --------- Cash and Cash Equivalents at End of Period $ 440 $ 5,569 $ 8,292 $ (19) $ - $ 14,282 ======= ========= ======== ======== ========= =========
14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Status of Corporate Reorganization The Company has continued negotiations with representatives of its Senior Subordinated Notes and, while it has no assurance, believes it may be able to implement a modified restructuring of those notes. Such a transaction could involve an exchange of Senior Subordinated Notes for a combination of new common stock and newly issued preferred stock. The Company believes that such a restructuring would substantially improve its financial condition and provide a basis for ongoing operations and continuation of the Company's turnaround. However, such a restructuring would result in substantially more dilution of the equity of existing common stockholders than the restructuring terms proposed during the fall of 1999. While continuing negotiations with representatives of its Senior Subordinated Noteholders, the Company has been exploring strategic alternatives, including the possible sale of certain of its assets or businesses. The Company is currently engaged in discussions with several potential purchasers concerning the sale of its Engineering Operations in two separate transactions. The Company has reached general understandings as to the scope and price range of such transactions. However, the transactions remain subject to, among other things, completion of diligence and successful negotiation of definitive agreements. The Company also continues to explore strategic alternatives for its interest in Kaiser-Hill Company, LLC. The Company presently believes that one or more of the transactions under discussion will take place, but there can be no assurance that any transaction concerning any of the Company's business units will be completed. The Company expects to be able to reach a conclusion with respect to its strategic direction and begin to implement its reorganization, either with or without business unit sale transactions, prior to the end of the second quarter of calendar year 2000. The Company expects its financial condition to be materially affected by the implementation of any debt restructuring or strategic alternatives. The consummation of any debt restructuring, any transactions for the sale of business units, or any combination of debt restructuring and business unit sale transactions will likely be completed through a "prepackaged" plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan were selected as the mechanism for completing the Company's restructuring, the Company expects that it would have the support of the largest holders of its Senior Subordinated Notes and, therefore, be able to implement the plan relatively promptly. If the Company commences such a proceeding, the goals of any such plan would be to (i) minimize adverse effects on Kaiser's ongoing operations, trade creditors and employees, (ii) facilitate possible business unit sale transactions, and (iii) result in a financially strengthened and stable organization for purposes of ongoing operations. Results of Operations The Company's business is currently comprised of its Engineering Operations and its 50% interest in the Kaiser-Hill subsidiary. The following discussions separately address the operating results of the two different operations. In all cases, if necessary, conforming changes to current period presentation formats have been made to the historical results presented. Kaiser-Hill Kaiser-Hill is a 50% owned joint venture between Kaiser Group International, Inc. and CH2M Hill, formed solely to perform the U.S. Department of Energy's Rocky Flats Closure Project (the Rocky Flats Contract) initially awarded in late 1995. The Kaiser-Hill operating results for each of the three months ended March 31 were as follows (in thousands):
Kaiser-Hill 2000 1999 --------- --------- Gross Revenue.................. $ 171,790 $ 145,103 Subcontracts and materials... (125,523) (110,341) --------- --------- Service Revenue.............. 46,267 34,762 Operating Expenses: Direct labor and fringe...... 36,772 30,622 --------- --------- Operating Income............... $ 9,495 $ 4,140 ========= =========
The Rocky Flats Contract is primarily cost-reimbursable in nature, but it also contains certain minimum and incentive fee elements based on qualitative and quantitative factors of actual performance levels compared to annually negotiated and established benchmarks or milestones. Accordingly, apart from a shift of some performance milestones from the fourth quarter of 1999 into the first quarter of 2000, fluctuations in gross and service revenue earned by Kaiser-Hill during the comparable periods above were largely reflective of increased levels of reimbursable subcontractor costs, i.e., pass-throughs, being incurred 15 as the contract progress continued and as the term of the contract neared its original completion date of June 30, 2000. Although annual operating results are not directly comparable because of changes in the underlying performance milestones that are established annually by the DOE, the service revenue and operating income increases from 1999 to 2000 are largely the result of the January 24, 2000 award of the new Rocky Flats Closure Contract, effective February 1, 2000. The new Closure Contract essentially terminated the predecessor contract that would otherwise have been executed through to its original ending date of September 30, 2000. Correspondingly, certain performance elements of the predecessor contract were shifted into the new Closure Contract. Under the predecessor contract, Kaiser-Hill was awarded and paid approximately $7.0 million of performance fee during the first quarter of 2000. The Company recognized the entire $7.0 million award in January 2000. As of January 31, 2000, the Company had recognized the entire value of the predecessor contract. On January 24, 2000, Kaiser-Hill was awarded the follow-on Rocky Flats Contract pursuant to which Kaiser-Hill will provide services through to closure of the Rocky Flats site (the Closure Contract). The Closure Contract became effective February 1, 2000, essentially terminating the remaining period of the original contract. The economic terms of the Closure Contract are significantly different from the original contract in that Kaiser-Hill will earn revenue based on the actual cost of physical completion and will earn a performance fee based on a combination of the actual cost of completion and the actual date of physical completion, both as compared to contracted targets. The Closure Contract fee may range from $150.0 million to $460.0 million based on Kaiser- Hill's costs falling within the range of targeted completion cost of $3.6 billion to $4.8 billion, respectively, if completed within various dates between March 31, 2006 - March 31, 2007. Physical completion above the target cost would result in a reduction to the fee whereby Kaiser-Hill will share 30% in all costs incurred after such date, subject to a maximum Kaiser-Hill liability of $20.0 million. Until such time as Kaiser-Hill can reasonably predict the likely outcome of the total fee to be earned by contract completion, the fee will be accrued at the minimum on a straight-line basis from February 1, 2000 through December 31, 2007. Estimated changes in the earned fee will be recognized as contract to date adjustments at such time as the estimate is revised. The Closure Contract currently provides for Kaiser-Hill to invoice DOE quarterly based on a $340.0 million target fee pool, less a 50% retainage for 2000. Thereafter, the quarterly invoicing will revert to a formula such that cumulative contract billings would not exceed the minimum fee of $150.0 million spread over a 7 year timeframe, with retainages. All invoice payments made by DOE to Kaiser-Hill will be distributed to the joint venture owners immediately upon receipt, less certain Kaiser-Hill reimbursements. Engineering Operations The Engineering Operations provide design, engineering, procurement, and construction and project management services to domestic and international clients in the infrastructure, facilities, metals, mining and industrial markets. The operating results for each of the three months ended March 31 was as follows (in thousands):
2000 1999 --------- -------- Gross Revenue.......................... $ 46,784 $ 80,394 Subcontracts and materials........... (21,379) (52,517) Equity income of affiliates.......... 280 1,520 --------- -------- Service Revenue........................ 25,685 29,397 Operating Expenses: Direct labor and fringe.............. 16,214 17,837 Selling, general and administrative.. 11,246 14,741 Depreciation/amortization............ 958 1,481 Restructuring charges................ 667 895 --------- -------- Operating (Loss)....................... $ (3,400) $ (5,557) ========= ========
Gross Revenue: Gross revenue represents the amount of goods and services provided to the customer through primary contract relationships. Often included as a component of gross revenue, and reimbursed by the customers, are costs of certain services which the Company subcontracts to and procures from third parties, including direct project costs and materials. These costs are excluded from gross revenue to derive the Company's service revenue. Engineering Operations derive the majority of their economic benefit, however, in the form of engineering, procurement and construction management services performed directly - this element is referred to as service revenue and is used as the basis for managing the Engineering Operations. The majority of the gross revenue fluctuations noted above are attributable to the completion or near completion, between the time span of the two periods, of several large fixed price projects that also contained large amounts of construction materials and passed-through subcontractor costs. Although included in the Company's gross revenues, the quantities of such pass-through costs typically have nominal effect on overall project profitability. The largest reductions in gross revenue were due to: 16 . the large fixed-price Nitric Acid projects, completed in the first quarter of 1999, resulting in gross revenue of $13.8 million in the first quarter of 1999 compared to $0 during the first quarter of 2000; . the large fixed-price project to construct the Nova Hut steel mini-mill in the Czech Republic generated gross revenue of $12.3 million in the first quarter of 1999 versus $1.0 million during the first quarter of 2000; and . a $5.3 million reduction in gross revenue generated by the Microelectronics business unit during the first quarter of 2000 as compared to 1999. The Engineering Operations had approximately $187 million in signed contract backlog at March 31, 2000. Service Revenue: Service revenue of the Company's engineering operations declined during the first three months of 2000 by 12.6% compared to the same period in 1999 as it continued to experience strains in new business development activities, primarily in all business lines in the Asia-Pacific region and within the iron and steel and microelectronics business lines in North America, stemming in part from the Company's financial condition and, in part, from overall continued softness in those markets. Operating gross margins - defined as service revenue less direct labor and fringe costs - as a percent of service revenue remained relatively constant during the first quarters of 2000 and 1999. Excluding the equity income in affiliates, the gross margins as a percent of service revenue were 36.2.% and 36.0%, respectively, during the three months ended March 31, 2000 and 1999. The decrease in equity in income from affiliates from 1999 to 2000 reflects the culmination of an alumina refinery project in Australia during 1999 being performed by one of the Company's joint ventures. Operating Expenses: The restructuring plan implemented in 1999 and late 1998 included actions to realign and reduce the Company's post-divestiture overhead cost structure such that the remaining levels more appropriately fit the needs and size of its continuing operations. Elements of the overhead reduction plan included an approximate 25% personnel reduction in the Company's wholly-owned North American operations with lesser percentage reductions in International operations, eliminating regional overhead layers, downsizing facilities, closing of marginally profitable office locations, discontinuing certain business offerings, improving direct labor utilization on projects and enhancing project controls to minimize risks of future contract losses. Because of certain centralized aspects of the Company's organizational structure that existed prior to completing the divestitures discussed above, the cost reduction elements of this phase of the plan could not begin until after the divestitures were completed. To date, the results from the cost reduction plan have been positive - - administrative expenses have been reduced by more than $14.6 million on an annualized basis when comparing the first quarter of 2000 to that of 1999 and an absolute reduction of $3.5 million from the three months ended March 31, 1999 to 2000. Although the majority of the reduction initiatives have been enacted, the Company remains focused on controlling overhead spending. In connection with its plan of reorganization discussed in the Overview, the Company recorded charges for restructuring costs of $0.7 million and $0.9 million during the first quarters of 2000 and 1999, respectively. Components of this quarter's charge consisted of professional fees incurred in connection with the Company's debt restructuring activities. Components of the 1999 charge, among others recorded later in 1999, included amounts for severance and related matters, and for business unit divestiture costs. These restructuring charges have been presented individually on the Consolidated Statements of Operations. Interest: The Company's average annual outstanding debt and the related average effective interest rates for the three months ended March 31, 2000 and 1999, respectively, were $126.0 million and 13.0%, and $175.8 million and 13.3%. The rate of interest expense was higher in 1999 than in 2000 due to the incurrence of rollover, loan origination fees and points charged in connection with noncompliance with the terms of the revolving credit facility in early 1999. The reduction in the average outstanding debt balance was from 1999 to 2000 was as a result of the pay off of the average revolver balance of $325.8 million in April of 1999 and of the repurchase of $14.0 million of outstanding Senior Notes in October of 1999. Interest income is earned on available cash balances that were generated primarily from the unused proceeds from the divestitures in 1999 and prior to those sales, largely only by Kaiser-Hill and foreign operations. All other cash not required for operations was historically used to pay down outstanding cash borrowings. Income Tax Expense: The income tax provision for all periods presented excludes the minority's interest in Kaiser-Hill's operating income because it is owned partially by another company and is a flow-through entity for income tax purposes. The Company recorded income tax expense of $0.1 million on income from continuing operations of $3.3 million during the three months ended March 31, 2000 - as it continued with the established practice of not recognizing current 17 financial statement benefits of net operating losses since the likelihood of being able to utilize such deductions in the future is uncertain at this time. Rather, the Company only provided for income taxes that will be due as a result of current period foreign earnings. The Company will not recognize an income statement benefit for any previously unbenefitted or future operating losses or future tax deductions until such time as management believes it is more likely than not that the Company's future operations will generate sufficient taxable income to be able to realize such benefits. As of March 31, 2000, the Company had provided a valuation allowance against the entire remaining deferred tax asset of $40.9 million. Similarly, during the three months ended March 31, 1999, the Company recorded an income tax benefit of $1.0 million on a loss from continuing operations of $7.0 million - largely to offset the effect of the income tax expense of $1.6 million recorded on the $3.9 million of income generated from discontinued operations, as well as to provide for its estimate of tax due on foreign earnings. Results of Discontinued Operations Divested Operating Units . Sale of the Environment and Facilities Management Group (EFM): On April 9, 1999, the Company sold the majority of the active contracts and investments, and transferred a substantial number of employees, of EFM to The IT Group, Inc. (IT) for a cash purchase price of $82.0 million, less $8.0 million which was retained by IT for EFM's working capital requirements. The Company then completed EFM contracts that were not sold to IT. Net of income tax expense of $24.5 million, the Company recognized a gain of $12.0 million from the sale. . Sale of the Consulting Group: On June 30, 1999, the Company sold 90% of its Consulting Group to CM Equity Partners, L.P. and the Group's management for $64.0 million in cash and $6.6 million of interest-bearing notes. The Company retained a 10% ownership interest in the new and independent consulting company, now known as ICF Consulting Group, Inc. Net of income tax expense of $11.2 million, the Company recognized a gain of $30.3 million from the sale. The combined net financial position, operating results and cash flows of the EFM and Consulting Groups have been presented in the accompanying consolidated financial statements as discontinued operations. The operating results of the two discontinued segments has been included in the accompanying financial statements, in accordance with generally accepted accounting principles, in the form of their net results only. Summarized results for the discontinued segments for the three months ended March 31, 1999 is as follows (as these operations were disposed on in April and June of 1999, respectively, there were no comparable earnings for the quarter ended March 31, 2000) (in thousands):
EFM CONSULTING --- ---------- THREE MONTHS ENDED MARCH 31, 1999 Gross revenue..................... $ 29,939 $26,462 Subcontracts and materials....... (16,377) (5,079) -------- ------- Service revenue................... 13,562 21,383 Operating expenses: Direct labor and fringe.......... 6,975 9,973 Group overhead................... 4,722 8,615 Depreciation and amortization.... 455 340 --- --- Segment income before income tax.. $ 1,410 $ 2,455 ======== =======
Total segment income from the discontinued operations of $3.9 million for the three months ended March 31, 1999 is presented in the accompanying income statement net of an applicable 40% income tax of $1.6 million. 18 LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources Operating activities: Kaiser-Hill generated operating cash flows of $7.5 million and $2.1 million during the three months ended March 31, 2000 and 1999, respectively. Kaiser-Hill's cash flows become available to the Company only upon actual periodic distributions of earnings to the Company and to the other 50% owner. The Company's continuing E&C operations used $12.4 million and $1.9 million in cash during the first quarters of 2000 and 1999, respectively. The cash used for E&C operating activities in the first quarter of 2000 included approximately $0.7 million for the payment of professional fees associated with debt restructuring and corporate reorganization activities, $2.6 million for the payment of income taxes generated primarily from the gains on the sales of the EFM and Consulting Groups in 1999 and approximately $9.1 million resulting from the cash flow timing of other working capital components. Investing activities: Fixed asset purchases in the first quarter of 2000 were minimal following the Company's Year 2000 readiness activities completed in 1999. Fixed asset purchases in the first quarter of 1999 consisted largely of the capitalized costs of either purchased or internally developed software necessitated by the Company's software replacement efforts for Year 2000 issues. During the first quarter of 2000, the Company sold its 35% interest in an environmental holding company based in France generating approximately $1.0 million in cash from investing activities. Financing activities: During the first quarter of 2000, Kaiser-Hill distributed $6.5 million to CH2M Hill. As of March 31, 2000, the Company reported a temporary $4.1 million book overdraft as a financing cash proceed. As of March 31, 2000 the Company had $12.6 million in letters of credit outstanding collateralized by restricted cash balances. Liquidity and Capital Resource Outlook The Company currently has no working capital facility and is financing its Engineering Operations' working capital needs through the use of cash from operations, from the residual cash proceeds from the sale of its Consulting Group completed in June 1999, and from distributions by its Kaiser-Hill subsidiary. Based on (i) current expectations for near-term operating results, (ii) its current available cash position and (iii) recent trends and projections in liquidity and capital needs, management believes the Company has sufficient short-term liquidity to bridge current operating needs until the implementation of a modified debt restructuring, assuming that such a restructuring can be accomplished within the reasonably near term. There is no assurance that a successful restructuring can be accomplished. Actions remaining critical to the Company's long-term liquidity include completing a restructuring of its $125.0 million Senior Subordinated Notes prior to the next interest payment due date of June 30, 2000, securing a sufficient working capital facility with acceptable terms, obtaining successful outcomes regarding significant contingent liabilities (see Other Matters below), and improving operating results. Management believes that, if these steps can be achieved, the Company will have sufficient liquidity generated by improved operating results, substantially decreased interest expense and borrowings on a possible new credit facility to meet its longer-term working capital requirements. The inability of the Company to accomplish a combination of actions described above would have a material adverse impact on the financial condition, operating results, and the business. The Company has continued negotiations with representatives of its Senior Subordinated Notes and, while it has no assurance, believes it may be able to implement a modified restructuring of those notes. Such a transaction could involve an exchange of Senior Subordinated Notes for a combination of new common stock and newly issued preferred stock. The Company believes that such a restructuring would substantially improve its financial condition and provide a basis for ongoing operations and continuation of the Company's turnaround. However, such a restructuring would result in substantially more dilution of the equity of existing common stockholders than the restructuring terms proposed during the fall of 1999. While continuing negotiations with representatives of its Senior Subordinated Noteholders, the Company has been exploring strategic alternatives, including the possible sale of certain of its assets or businesses. The Company is currently engaged in discussions with several potential purchasers concerning the sale of its Engineering Operations in two separate transactions. The Company has reached general understandings as to the scope and price range of such transactions. However, the transactions remain subject to, among other things, completion of diligence and successful negotiation of definitive agreements. The Company also continues to explore strategic alternatives for its interest in Kaiser-Hill Company, LLC. The Company presently believes that one or more of the transactions under discussion will take place, but there can be no assurance that any transaction concerning any of the Company's business units will be completed. The Company expects to be able to reach a conclusion with respect to its strategic direction and begin to implement its reorganization, either with or without business unit sale transactions, prior to the end of the second quarter of calendar year 2000. 19 The Company expects its financial condition to be materially affected by the implementation of any debt restructuring or strategic alternatives. The consummation of any debt restructuring, any transactions for the sale of business units, or any combination of debt restructuring and business unit sale transactions will likely be completed through a "prepackaged" plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan were selected as the mechanism for completing the Company's restructuring, the Company expects that it would have the support of the largest holders of its Senior Subordinated Notes and, therefore, be able to implement the plan relatively promptly. If the Company commences such a proceeding, the goals of any such plan would be to (i) minimize adverse effects on Kaiser's ongoing operations, trade creditors and employees, (ii) facilitate possible business unit sale transactions, and (iii) result in a financially strengthened and stable organization for purposes of ongoing operations. Other Matters Bath Contingency: In March 1998, the Company entered into a $187 million maximum price contract with Bath Iron Works to construct a ship building facility. In May 1998, the Company subsequently learned that estimated costs to perform the contract as reflected in actual proposed subcontracts were approximately $30 million higher than the cost estimates originally used as the basis for contract negotiation between the Company and the customer. After learning this, the Company advised the customer that it was not required to perform the contract in accordance with its terms as a result of a mutual mistake among them in negotiating that contract. In October 1998, the customer presented an initial draft of a claim against the Company requesting payment for estimated damages and entitlements pursuant to the terminated contract. The customer has also subsequently asserted a claim based on alleged differing site conditions that allegedly should have been identified by the Company. In March 2000, Bath filed a combined claim against the Company in U.S. District Court in the District of Maine requesting payment for $38 million. The Company continues to object to Bath's allegations and is vigorously defending its position. Although no resolution has been reached, financial statements contain a provision for the amount of the Company's proposed settlement of the non-insured portion of the loss. Acquisition Contingency: The Kaiser common shares exchanged for the stock of ICT Spectrum in the March, 1998 acquisition carry the guarantee that the fair market value of each share of stock will reach $5.36 by March 1, 2001. In the event that the fair market value does not attain the guaranteed level, the Company is obligated to make up the shortfall either through the payment of cash or by issuing additional shares of common stock with a total value equal to the shortfall, depending upon the Company's preference. Pursuant to the terms of the Agreement, however, the total number of contingently issuable shares of common stock cannot exceed an additional 1.5 million. In December, 1999, the Company and certain former Company employees and shareholders of ICT Spectrum agreed to amend the applicable agreements in a manner that had the result of reducing the amount of the taxable gain created by former shareholder-employees' involuntary departures from the Company. As permitted per the agreement, the shareholders agreed to allow the Company to retain some of the vested shares as payment of the income tax withholding in lieu of cash. In total, the Company retained 255,669 shares and recorded the transaction as a $1.37 million reduction to goodwill and paid-in-capital. Given that the quoted fair market value of the Company's common stock at May 19, 2000 was $0.19 per share, and that the Company's current debt instruments restrict the amount of cash that can be used for acquisitions, the assumed issuance of an additional 1.5 million shares (now adjusted downward by the 255,669 retained shares to 1,244,331), would not completely extinguish the remaining purchase price contingency. In this event, the Company will need to fund the contingency in cash and would need to obtain an amendment to current debt instruments or replace them in order to complete a cash fill-up. Any future distribution of cash or common stock would be recorded as a charge to the Company's paid-in-capital. Until the earlier of the contingent purchase price resolution or March 1, 2001, any additional shares assumed to be issued because of shortfalls in fair market value will be included in the Company's diluted earnings per share calculations, unless they are antidilutive. The exchanged shares also contain restrictions preventing their sale prior to March 1, 2001. On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf of all others similarly situated, filed a class action lawsuit in the U.S. District Court for the District of Idaho alleging false and misleading statements made in a private offering memorandum, and otherwise, in connection with the Company's acquisition of ICT Spectrum in 1998. The Company subsequently filed a motion to dismiss the case. On March 14, 2000, the court ordered the plaintiff to address certain claim deficiencies. The plaintiff filed an amended complaint on May 15, 2000. The court is expected to consider the amended complaint in light of the Company's motion to dismiss and complete its ruling relative to the Company's motion. Litigation, Claims and Assessments Contingencies: In the course of the Company's normal business activities, various claims or charges have been asserted and litigation commenced against the Company arising from or related to properties, injuries to persons, and breaches of contract, as well as claims related to acquisitions and dispositions. Claimed amounts may 20 not bear any reasonable relationship to the merits of the claim or to a final court award. In the opinion of management, adequate reserves have been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against the Company in such litigation. The continued adequacy of reserves is reviewed periodically as progress on such matters ensues. The Company may from time to time, either individually or in conjunction with other government contractors operating in similar types of businesses, be involved in U.S. government investigations for alleged violations of procurement or other federal laws and regulations. The Company currently is the subject of a number of U.S. government investigations and is cooperating with the responsible government agencies involved. No charges presently are known to have been filed against the Company by these agencies. The Company has provided for its estimate of the potential effect of these investigations, and the continued adequacy of reserves is reviewed periodically as progress on such matters ensues. Prior to the divestitures of its EFM and Consulting Groups, the Company had a substantial number of cost-reimbursement contracts with the U.S. government, the costs of which are subject to audit by the U.S. government. As a result of pending audits related to fiscal years 1986 forward, the government has asserted, among other things, that certain costs claimed as reimbursable under government contracts either were not allowable or not allocated in accordance with federal procurement regulations. The Company is actively working with the government to resolve these issues. The Company has provided for its estimate of the potential effect of issues that have been quantified, including its estimate of disallowed costs for the periods currently under audit and for periods not yet audited. Neither the government nor the Company, however, has quantified many of the issues, and others are qualitative in nature, and their potential financial impact is not quantifiable by the government or the Company at this time. The adequacy of provisions for reserves is reviewed periodically as progress with the government on such matters ensues. Contract warranties and performance guaranty contingencies: In the course of the Company's normal business activities, many of its contracts contain provisions for warranties and performance guarantees. As progress on contracts ensues, the Company regularly updates the estimates of the costs to perform such contingencies and reserves a proportionate amount of the total related contract value until such time as the contingency is resolved. Year-2000 Readiness: The Company, to date, has not experienced any material systems failures related to the Year 2000 (Y2K) rollover. Our remediation plan for the Y2K issue is discussed in detail in the Company's 1999 Annual Report to Shareholders and in 1999 Forms 10-Q. The Company will continue to monitor and address any issues that may arise from internal systems or those of third parties. These costs were largely comprised of the costs to replace financial accounting and other software applications. Apart from the system replacement costs, other costs related to Y2K have not had a material adverse effect on the Company's results of operation or financial condition. Forward-Looking Statements From time to time, certain disclosures in reports and statements released by the Company, or statements made by its officers or directors, will be forward-looking in nature. These forward-looking statements may contain information related to the Company's intent, belief, or expectation with respect to contract awards and performance, potential acquisitions and joint ventures, and cost-cutting measures. In addition, these forward-looking statements contain a number of factual assumptions made by the Company regarding, among other things, future economic, competitive, and market conditions. Because the accurate prediction of any future facts or conditions may be difficult and involve the assessment of events beyond the Company's control, actual results may differ materially from those expressed or implied in such forward-looking statements. The Company is availing itself of the safe harbor provisions provided in the Private Securities Litigation Reform Act of 1995 by cautioning readers that forward-looking statements, including those that use words such as the Company "anticipates," "expects," "estimates," and "believes", are subject to certain risks and uncertainties which could cause actual results of operations to differ materially from expectations. These forward-looking statements will be contained in the Company's federal securities laws filings or in written or oral statements made by the Company's officers and directors to press, potential investors, securities analysts, and others. Any such written or oral forward- looking statements should be considered in context with the risk factors discussed below: . The Company must significantly revise its capital structure, in the form of a debt to equity conversion or a combination of other equity investments, joint ventures or asset sales. The inability of the Company to accomplish one or a combination of transactions described above would have a material adverse effect on the business. . The Company requires access to a revolving credit line to fund short-term borrowing needs and provide letter of credit capacity required in connection with certain projects. Kaiser may not be able to generate collateral to support a borrowing 21 base of sufficient size to obtain such credit or may not be able to improve operating results enough to be able to obtain such credit. . The Company may not be able to obtain satisfactory contract performance guarantee mechanisms, such as performance bonds. . The Company's financial performance is significantly tied to Kaiser-Hill Company, LLC, which is subject to uncertainties that may adversely affect its and the Company's operating results. . The Company may not be able to maintain the existing volume or size of contracts and may not be able to realize increased contract performance levels. . The Company is involved in a number of fixed-price contracts under which the Company can benefit from cost savings or performance efficiencies. The Company's revenue and profit recognition policies are based on making a series of assumptions including aspects relative to contract pricing and performance capabilities. The Company's contract to construct the Nova Hut steel mini-mill in the Czech Republic includes such aspects. In the event that such assumptions cannot be met or change as contract progress ensues, the Company may have to make downward adjustments to revenue and profit already recognized in the financial statements. Possible results of changes in such assumptions could include the inability to realize all contract performance fees or other incentives already recognized as revenue in the financial statements, and may result in other unrecoverable cost overruns. . The Company may not be awarded new contracts for which it is competing in its established markets or these awards may be delayed. In addition, the Company may not be able to win contracts in new markets it chooses to target. General economic conditions in the international arena, especially Asia and Latin America, could negatively impact the Company's current international business and its ability to expand in international markets. . The Company may not be able to make acquisitions and/or enter into joint ventures, and if made, acquisitions and joint ventures may take more time to contribute favorably to the Company's financial results than was formerly assumed. The Company is highly leveraged and is subject to restrictive covenants that limit its ability to fund potential acquisitions and joint ventures beyond certain levels established in its debt agreements. . A portion of the Company's business is generated either directly or indirectly as a result of federal and state laws, regulations, and programs; a reduction in the number or scope of these laws, regulations or programs could materially affect the Company's business. . The Company's ability to attract and retain business is closely related to its ability to attract and retain key management and operating personnel. The market for professionals of the types employed by the Company is quite competitive. The Company may not be able to attract and retain personnel necessary for successful operations. . The Company has several significant contingent liabilities arising out of prior operations and contracts, its 1998 acquisition of ICT Spectrum Constructors, Inc. and the dispositions of its Environment and Facilities Management and Consulting Groups. Adverse resolution of one or more of those contingencies could adversely affect the Company's financial performance and condition. . Certain of the Company's environmental work poses risks of large civil and criminal liabilities for violations of environmental laws and regulations, and liabilities to customers and to third parties for damages arising from the Company's performing environmental services to its clients. A large fine or penalty imposed on the Company could negatively impact contract performance fees under certain existing contracts or otherwise negatively affect the Company's financial results. . The Company generally grants uncollateralized credit to its customers and is therefore subject to risks of financial instability on the part of its customers. In certain cases, the Company secures project specific insurance policies related to various insurable risks such as certain non-payment due to insolvency of the customer. Negative changes in the financial condition of its customers could expose the Company to adverse financial consequences. 22 Item 3. Quantitative and Qualitative Information about Market Risk Market Risk The Company does not believe that it has significant exposures to market risk. The majority of its foreign contracts are denominated and executed in the applicable local currency. The interest rate risk associated with the majority of the Company's borrowing activities is fixed. Part II - Other Information Item 1. Legal Proceedings As previously reported in the Annual Report on Form 10-K for the year ended December 31, 1999. See also Note 5 to the financial statements contained herein. Item 2. Changes in Securities (a) None (b) None (c) None (d) Not applicable Item 3. Defaults Upon Senior Securities (a) None (b) None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) The exhibits filed as part of this report are listed below: No. 21 Consolidated Subsidiaries of the Registrant as of May 1, 2000. No. 27 Financial Data Schedule (b) Reports on Form 8-K On May 2, 2000, Kaiser Group International, Inc. filed a Form 8-K referencing the April 13, 2000 amendments of its Section 401(k) Plan dated March 1, 1989 and its Retirement Plan dated August 1, 1971. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. KAISER GROUP INTERNATIONAL, INC. (Registrant) Date: May 22, 2000 /s/ Timothy P. O'Connor ----------------------- Timothy P. O'Connor Executive Vice President, Chief Financial Officer and Chief Administrative Officer (Duly authorized officer and principal financial officer) 24 EX-21 2 EXHIBIT 21 Exhibit 21 KAISER GROUP INTERNATIONAL, INC. 9300 Lee Highway, Fairfax, Virginia 22031 (703) 934-3300 Kaiser Group International, Inc.'s consolidated subsidiaries are listed below. Consolidated subsidiaries which are less than wholly owned are indicated by the ownership percentage figure in parentheses following the name of the consolidated subsidiary.
Jurisdiction Consolidated Subsidiary of Formation - ------------------------- -------------- I. Cygna Group, Inc. Delaware II. Liability Risk Management, Inc. California I. EDA, Incorporated Maryland I. HBG Hawaii, Inc. Delaware I. HBG International, Inc. Delaware I. Henry J. Kaiser Development Corporation, Inc. Delaware II. Global Trade & Investment, Inc. Delaware I. Kaiser Engineers Group, Inc. Delaware II. Henry J. Kaiser Company Nevada II. Kaiser Engineers, Inc. Ohio III. Henry J. Kaiser Company (Canada) Ltd. Canada III. Kaiser Engineers & Builders, Inc. Delaware III. Kaiser Engineers (California) Corporation Delaware III. Kaiser Engineers Corporation New York III. Kaiser Engineers of Michigan, Inc. Michigan III. ICF Kaiser International Planning & Design, Inc. (33 1/3%) Pennsylvania III. Kaiser Overseas Engineering, Inc. Delaware III. Kaiser Engineers Limited United Kingdom IV. Kaiser Engineers Technical Services Limited (80%) Cyprus III. Kaiser Engineers and Constructors, Inc. Nevada IV. ICF Kaiser Engenharia e Participacoes Ltda. (99.9%) Brazil V. ICF Kaiser Construcoes e Engenharia Ltda (99.989%) Brazil IV. ICF Pty. Ltd. (50%) Australia IV. Kaiser Engineers Limited (0.02%) U.K. IV. Kaiser Engenharia S.A. (50%) Portugal V. ICF Kaiser Construcoes e Engenharia Ltda (0.01%) Brazil IV. Kaiser Engineers (NZ) Ltd (1%) New Zealand IV. Kaiser Engineers Pty. Ltd. (50%) Australia V. KWA Kenwalt (50%) Australia V. ICF Kaiser Aluterv KFT Hungary V. ICF Kaiser Engineers Asia Pacific Pty Ltd Australia V. ICF Kaiser Engineers (Hong Kong) Ltd Hong Kong V. ICF Kaiser Engineers (Singapore) Pte Ltd Singapore V. Kaiser Engineers (NZ) Limited (99%) New Zealand III. Kaiser Engineers International, Inc. Nevada IV. ICF Pty. Ltd. (50%) Australia IV. ICF Kaiser Engenharia e Participacoes Ltda.(0.1%) Brazil
IV. Kaiser Panama S.A. Panama IV. Kaiser Engenharia S.A. (50%) Portugal IV. Kaiser Engineers Pty. Ltd. (50%) Australia III. Kaiser Engineers Limited (99.98%) U.K. IV. Kaiser Engineers Technical Services Limited (80%) Cyprus IV. Kaiser Engineers (UK) Limited (50%) U.K. III. Kaiser Engineers (UK) Limited (50%) U.K. IV. Kaiser Engineers Technical Services Limited (20%) Cyprus III. KE Services Corporation Delaware III. Kaiser Engenharia e Constructoes Limitada Brazil II. International Waste Energy Systems, Inc. Delaware II. KE Livermore, Inc. Delaware I. Kaiser Engineers Massachusetts, Inc. Delaware I. Kaiser Engineers Pacific, Inc. Nevada I. Kaiser Europe, Inc. Delaware I. Kaiser/Georgia Wilson, Inc. Delaware I. Kaiser Government Programs, Inc. Delaware II. Kaiser K-H Holdings, Inc. Delaware III. Kaiser-Hill Company, LLC (50%) Colorado IV. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware III. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware I. Kaiser Hanford Company Delaware I. Kaiser Holdings Unlimited, Inc. Delaware II. American Venture Investments Incorporated Delaware III. American Venture Holdings, Inc. Delaware II. Cygna Consulting Engineers and Project Management, Inc. California II. Excell Development Construction, Inc. Delaware II. Kaiser DPI Holding Co., Inc. Delaware II. Kaiser Engineers Eastern Europe, Inc. Delaware III. Kaiser Netherlands B.V. (10%) Netherlands II. Kaiser Hunters Branch Leasing, Inc. Delaware II. Kaiser K-T Holdings, Inc. Delaware II. Kaiser K-A Louisiana, Inc. Louisiana II. Kaiser K-A Services, Inc. Delaware II. Kaiser Netherlands B.V. (90%) Netherlands II. Kaiser Leasing Corporation, Inc. Delaware I. ICF Kaiser Servicios Ambientales, S.A. de C.V. (66 2/3%) Mexico I. Kaiser Technology Holdings, Inc. Delaware II. Kaiser Advanced Technology, Inc. Idaho III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico I. Kaiser R G.P. No. 1, Inc. Delaware I. Monument Select Insurance Company Vermont I. Phase Linear Systems Incorporated Delaware I. Tudor Engineering Company Delaware
EX-27 3 FINANCIAL DATA SCHEDULE
5 Represents gross revenue which includes costs of certain services subcontracted to third parties and other reimbursable direct project costs, such as materials procured by the company on behalf of its customers. Gross revenue also includes equity in net income of unconsolidated subsidiaries for purpose of this schedule. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 19,969,000 0 193,951,000 (9,719,000) 0 226,482,000 14,089,000 (11,320,000) 271,475,000 208,567,000 124,329,000 0 0 234,000 (70,860,000) 271,475,000 0 218,854,000 0 199,888,000 12,871,000 0 (3,546,000) 2,549,000 (75,000) (2,326,000) 0 0 0 (2,326,000) (.10) (.10)
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