-----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, TaqUWaEAV9UnUUQKZYyRO0jz6JDaWcihK6Rj+ABL5MqHGp5i9bAuAw1fgF7AQQ+E YIc5ZHK/o95bzwYOD6gzew== 0000928385-97-001877.txt : 19971117 0000928385-97-001877.hdr.sgml : 19971117 ACCESSION NUMBER: 0000928385-97-001877 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICF KAISER 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: 97717652 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 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 F0R 9/30/1997 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 September 30, 1997 Commission File No. 1-12248 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) 934-3600 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 October 31, 1997, there were 22,475,904 shares of ICF Kaiser International, Inc. Common Stock, par value $0.01 per share, outstanding. ICF KAISER INTERNATIONAL, INC. INDEX TO FORM 10-Q
Page Part I - Financial Information Item 1. Financial Statements: Consolidated Balance Sheets - September 30, 1997 and December 31, 1996............... 3 Consolidated Statements of Operations - Nine Months Ended September 30, 1997 and 1996.......... 4 Consolidated Statements of Operations - Three Months Ended September 30, 1997 and 1996......... 5 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996.......... 6 Notes to Consolidated Financial Statements............. 7-17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 18-24 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ 24 Part II - Other Information Item 1. Legal Proceedings...................................... 24 Item 2. Changes in Securities.................................. 24 Item 3. Defaults Upon Senior Securities........................ 24 Item 4. Submission of Matters to a Vote of Security Holders.... 25 Item 5. Other Information...................................... 25 Item 6. Exhibits and Reports on Form 8-K....................... 25
2 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares)
- ------------------------------------------------------------------------------------- SEPTEMBER 30, DECEMBER 31, 1997 1996 - ------------------------------------------------------------------------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 13,929 $ 16,761 Contract receivables, net 299,351 223,278 Prepaid expenses and other current assets 8,521 27,096 Deferred income taxes 11,691 9,739 -------- -------- Total Current Assets 333,492 276,874 -------- -------- Fixed Assets Furniture, equipment, and leasehold improvements 51,063 48,410 Less depreciation and amortization (39,010) (37,208) -------- -------- 12,053 11,202 -------- -------- Other Assets Goodwill, net 47,916 49,699 Investments in and advances to affiliates 6,963 6,443 Due from officers and employees 653 716 Other 20,680 21,039 -------- -------- 76,212 77,897 -------- -------- $421,757 $365,973 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ 19 $ 43 Accounts payable and subcontractors payable 155,964 73,320 Accrued salaries and employee benefits 43,240 45,779 Accrued interest 4,587 47 Other accrued expenses - 15,838 Income taxes payable 409 852 Deferred revenue 29,025 21,829 Other 7,238 5,268 -------- -------- Total Current Liabilities 240,482 162,976 -------- -------- Long-term Liabilities Long-term debt, less current portion 138,880 156,519 Other 4,905 5,432 -------- -------- 143,785 161,951 -------- -------- Commitments and Contingencies Minority Interests in Subsidiaries 3,516 6,154 Common Stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 22,466,572 and 22,311,842 shares 225 223 Additional Paid-in Capital 67,108 66,983 Notes Receivable Related to Common Stock (1,732) (1,732) Retained Earnings (Deficit) (29,068) (29,238) Cumulative Translation Adjustment (2,559) (1,344) -------- -------- $421,757 $365,973 ======== ======== - -------------------------------------------------------------------------------------
See notes to consolidated financial statements. 3 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------ Nine Months Ended September 30, ------------------------------- 1997 1996 - ------------------------------------------------------------------------------------ (Unaudited) GROSS REVENUE $ 839,716 $1,023,410 Subcontract and direct material costs (511,606) (592,295) Equity in income of joint ventures and affiliated companies 1,552 2,532 --------- ---------- SERVICE REVENUE 329,662 433,647 OPERATING EXPENSES Direct cost of services and overhead 258,108 354,658 Administrative and general 43,176 49,979 Depreciation and amortization 7,197 7,840 --------- ---------- OPERATING INCOME 21,181 21,170 OTHER INCOME (EXPENSE) Interest and investment income 1,340 944 Interest expense (13,397) (12,829) --------- ---------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 9,124 9,285 Income tax provision 1,642 840 --------- ---------- INCOME BEFORE MINORITY INTERESTS 7,482 8,445 Minority interests in net income of subsidiaries 7,312 4,725 --------- ---------- NET INCOME 170 3,720 Preferred stock dividends and accretion - 1,631 --------- ---------- NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 170 $ 2,089 ========= ========== NET INCOME PER COMMON SHARE: PRIMARY $ 0.01 $ 0.10 ========= ========== FULLY DILUTED $ 0.01 $ 0.10 ========= ========== COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: PRIMARY 22,431 21,955 ========= ========== FULLY DILUTED 22,511 21,955 ========= ========== - ----------------------------------------------------- --------------- -------------
See notes to consolidated financial statements. 4 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
- ----------------------------------------------------------------------------------------------- Three Months Ended September 30, -------------------------------- 1997 1996 - ----------------------------------------------------------------------------------------------- (Unaudited) GROSS REVENUE $ 332,173 $ 379,971 Subcontract and direct material costs (216,788) (241,579) Equity in income of joint ventures and affiliated companies 718 388 -------- --------- SERVICE REVENUE 116,103 138,780 OPERATING EXPENSES Direct cost of services and overhead 91,131 113,695 Administrative and general 15,323 17,464 Depreciation and amortization 2,455 2,534 -------- --------- OPERATING INCOME 7,194 5,087 OTHER INCOME (EXPENSE) Interest and investment income 324 521 Interest expense (4,240) (4,518) -------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 3,278 1,090 Income tax provision 508 (1,455) -------- --------- INCOME BEFORE MINORITY INTERESTS 2,770 2,545 Minority interests in net income of subsidiaries 2,650 1,782 -------- --------- NET INCOME 120 763 Preferred stock dividends and accretion - 539 -------- --------- NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 120 $ 224 ======== ========= NET INCOME PER COMMON SHARE: PRIMARY $ 0.01 $ 0.01 ======== ========= FULLY DILUTED $ 0.01 $ 0.01 ======== ========= COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: PRIMARY 22,502 22,227 ======== ========= FULLY DILUTED 22,594 22,227 ======== ========= - -----------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 5 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
- ------------------------------------------------------------------------------------------------- Nine Months Ended September 30, ------------------------------- 1997 1996 - ------------------------------------------------------------------------------------------------- (Unaudited) OPERATING ACTIVITIES Net income $ 170 $ 3,720 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 7,197 7,840 Provision for losses on contract receivables 1,345 1,255 Provision for deferred income taxes (1,952) (386) Earnings less than (in excess of) cash distributions from joint ventures and affiliated companies (135) (282) Minority interests in net income of subsidiaries 7,312 4,725 Unusual items, net - 1,498 Changes in operating assets and liabilities, net of acquisitions and dispositions: Contract receivables, net (77,418) (7,379) Prepaid expenses and other current assets 2,035 2,139 Other assets (2,312) (1,293) Accounts payable and accrued expenses 69,306 (4,698) Income taxes payable (443) (402) Deferred revenue 7,196 546 Other liabilities 2,280 (1,510) Other operating activities (93) 156 -------- -------- Net Cash Provided by Operating Activities 14,488 5,929 -------- -------- INVESTING ACTIVITIES Sales of subsidiary and subsidiary assets 16,540 - Sale of fixed assets - 22 Purchases of fixed assets (3,118) (4,905) Investments in subsidiaries and affiliates, net of cash acquired (441) (1,241) -------- -------- Net Cash Provided by (Used in) Investing Activities 12,981 (6,124) -------- -------- FINANCING ACTIVITIES Borrowings under credit facility 69,000 65,000 Principal payments on credit facility and other borrowings (87,500) (57,000) Distribution of income to minority interest (9,950) (823) Proceeds from issuances of common stock 165 313 Repurchases of common stock (252) - Preferred stock dividends - (1,965) Debt issuance costs (549) (449) Other financing activities - (293) -------- -------- Net Cash Provided by (Used in) Financing Activities (29,086) 4,783 -------- -------- Effect of Exchange Rate Changes on Cash (1,215) 77 -------- -------- Increase (Decrease) in Cash and Cash Equivalents (2,832) 4,665 Cash and Cash Equivalents at Beginning of Period 16,761 16,357 -------- -------- Cash and Cash Equivalents at End of Period $ 13,929 $ 21,022 ======== ======== SUPPLEMENTAL INFORMATION Cash payments for interest $ 9,791 $ 16,182 Cash payments for income taxes $ 445 $ 945 NON-CASH TRANSACTIONS: Issuance of common stock pursuant to agreements with employees $ 287 $ 500 Reacquisition of common stock $ 227 $ - Issuance of common stock in connection with an acquisition $ - $ 1,600 - -------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 6 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying consolidated financial statements of ICF Kaiser International, Inc. and subsidiaries (the Company), except for the December 31, 1996 balance sheet, 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, 1996 and the information included in the Company's Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K for the year ended December 31, 1996. Certain reclassifications have been made to the prior period financial statements to conform to the presentation used in the September 30, 1997 financial statements. 2. Net Income Per Common Share Net income per common share was computed under the treasury stock method for the nine and three months ended September 30, 1997 and the modified treasury stock method for the nine and three months ended September 30, 1996, using net income available for common shareholders and the weighted average number of common stock and common stock equivalents outstanding during the periods. Common stock equivalents include stock options and warrants and additional shares which will be or may be issued in connection with acquisitions. 3. 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, an adequate reserve has been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against the Company in such litigation. 7 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 acquisition 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. Management does not believe that there will be any material adverse effect on the Company's financial position, results of operations, or cash flows as a result of these investigations. The Company has 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 acquisition 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. Many of the issues, however, have not been quantified by the government or the Company, and others are qualitative in nature, and their potential financial impact, if any, is not quantifiable by the government or the Company at this time. The Company's provision will be reviewed periodically as discussions with the government progress. 4. Long-term Debt The Company's $40 million revolving credit facility is provided by a group of three banks and expires on December 31, 1998. The credit facility was amended during the first six months of 1997 to modify certain financial ratios, to extend the termination date of the credit facility from June 30, 1998, to December 31, 1998, and to permit certain investments and acquisitions. The Company currently is negotiating to amend and restate the credit facility [New Credit Facility] to increase the capacity from $40 million to $60 million, to add two new participating banks, to extend the termination date from December 31, 1998 to the year 2000, and to modify certain financial ratios required to be maintained. The credit facility and the New Credit Facility will continue to be guaranteed by certain subsidiaries (Guarantors), and the banks will continue to have a security interest in substantially all accounts receivable and certain other assets and a pledge of the stock of certain subsidiaries. The New Credit Facility will continue the limitations on the payments of cash dividends on common stock, the prohibitions on the issuance of certain types of indebtedness, and the limitations on certain investments and acquisitions. The Company expects to close on the New Credit Facility in the fourth quarter. 8 5. Guarantor Subsidiaries Four wholly owned subsidiaries of ICF Kaiser International, Inc. (Subsidiary Guarantors) unconditionally guarantee the payment of the principal, premium, if any, and interest on the Company's Subordinated Notes and the Series B Senior Notes. The Subsidiary Guarantors are Cygna Consulting Engineers and Project Management, Inc.; ICF Kaiser Government Programs, Inc.; PCI Operating Company, Inc.; and Systems Applications International, Inc. New Guarantors of the New Credit Facility will be added as New Subsidiary Guarantors effective in the fourth quarter, and the condensed consolidating financial information for the existing Subsidiary Guarantors and the New Subsidiary Guarantors will be presented in the Company's Annual Report to the SEC on Form 10-K for the year ending December 31, 1997. Presented below is condensed consolidating financial information for ICF Kaiser International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non- Guarantor Subsidiaries, some of whom will become New Subsidiary Guarantors once the Company closes on the New Credit Facility. The information, except for the December 31, 1996 condensed consolidating balance sheet, is unaudited. Investments in subsidiaries have been presented using the equity method of accounting. In the Company's opinion, separate financial statements for the Subsidiary Guarantors would not provide additional information that is material to investors. Therefore, the Subsidiary Guarantors are combined in the presentation below. 9 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET September 30, 1997 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated --------- ---------- ------------- ------------ ------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ (4,278) $ 4,741 $ 13,466 $ - $ 13,929 Contract receivables, net (1,585) 139,737 161,199 - 299,351 Intercompany receivables, net 92,354 9,276 (101,630) - - Prepaid expenses and other current assets 6,970 22 1,529 - 8,521 Deferred income taxes 11,553 - 138 - 11,691 -------- -------- --------- --------- -------- Total Current Assets 105,014 153,776 74,702 - 333,492 -------- -------- --------- --------- -------- Fixed Assets Furniture, equipment, and leasehold improvements 9,618 2,204 39,241 - 51,063 Less depreciation and amortization (5,050) (2,107) (31,853) - (39,010) -------- -------- --------- --------- -------- 4,568 97 7,388 - 12,053 -------- -------- --------- --------- -------- Other Assets Goodwill, net - - 47,916 - 47,916 Other 91,717 2,009 22,662 (88,092) 28,296 -------- -------- --------- --------- -------- 91,717 2,009 70,578 (88,092) 76,212 -------- -------- --------- --------- -------- $201,299 $155,882 $ 152,668 $ (88,092) $421,757 ======== ======== ========= ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ - $ - $ 19 $ - $ 19 Accounts payable and subcontractors payable 16,154 112,718 27,092 - 155,964 Accrued salaries and employee benefits (4,071) 22,330 24,981 - 43,240 Other 11,538 452 29,269 - 41,259 -------- -------- --------- --------- -------- Total Current Liabilities 23,621 135,500 81,361 - 240,482 -------- -------- --------- --------- -------- Long-term Liabilities Long-term debt, less current portion 138,880 - - - 138,880 Other 2,659 34 2,212 - 4,905 -------- -------- --------- --------- -------- 141,539 34 2,212 - 143,785 -------- -------- --------- --------- -------- Minority Interests in Subsidiaries - 3,516 - - 3,516 Common Stock 217 108 166 (266) 225 Additional Paid-in Capital 66,881 224 61,119 (61,116) 67,108 Retained Earnings (Deficit) (29,227) 16,500 10,369 (26,710) (29,068) Other Equity (1,732) - (2,559) - (4,291) -------- -------- --------- --------- -------- $201,299 $155,882 $ 152,668 $ (88,092) $421,757 ======== ======== ========= ========= ========
10 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET December 31, 1996 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated -------- ---------- ------------- ------------ ------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ (7,720) $11,974 $ 13,001 $ (494) $ 16,761 Contract receivables, net 183 78,585 144,510 - 223,278 Intercompany receivables, net 155,653 (2,543) (153,110) - - Prepaid expenses and other current assets 4,509 187 22,731 (331) 27,096 Deferred income taxes 12,504 - (2,765) - 9,739 -------- ------- -------- -------- -------- Total Current Assets 165,129 88,203 24,367 (825) 276,874 -------- ------- -------- -------- -------- Fixed Assets Furniture, equipment, and leasehold improvements 7,243 2,198 38,969 - 48,410 Less depreciation and amortization (3,430) (2,079) (31,699) - (37,208) -------- ------- -------- -------- -------- 3,813 119 7,270 - 11,202 -------- ------- -------- -------- -------- Other Assets Goodwill, net - - 49,699 - 49,699 Other 58,494 2,602 21,774 (54,672) 28,198 -------- ------- -------- -------- -------- 58,494 2,602 71,473 (54,672) 77,897 -------- ------- -------- -------- -------- $227,436 $90,924 $103,110 $(55,497) $365,973 ======== ======= ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ - $ - $ 43 $ - $ 43 Accounts payable and subcontractors payable 16,467 $53,612 19,079 - 89,158 Accrued salaries and employee benefits 10,242 22,498 13,039 - 45,779 Other 4,454 447 23,126 (31) 27,996 -------- ------- -------- -------- -------- Total Current Liabilities 31,163 76,557 55,287 (31) 162,976 -------- ------- -------- -------- -------- Long-term Liabilities Long-term debt, less current portion 157,306 - - (787) 156,519 Other 2,731 - 2,701 - 5,432 -------- ------- -------- -------- -------- 160,037 - 2,701 (787) 161,951 -------- ------- -------- -------- -------- Minority Interests in Subsidiaries - 6,154 - - 6,154 Common Stock 223 108 167 (275) 223 Additional Paid-in Capital 66,983 224 44,619 (44,843) 66,983 Retained Earnings (Deficit) (29,238) 7,881 1,680 (9,561) (29,238) Other Equity (1,732) - (1,344) - (3,076) -------- ------- -------- -------- -------- $227,436 $90,924 $103,110 $(55,497) $365,973 ======== ======= ======== ======== ========
11 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Nine Months Ended September 30, 1997 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ -------------------- (Unaudited) GROSS REVENUE $ 475 $ 467,034 $ 372,207 $ - $ 839,716 Subcontract and direct material costs (441) (336,125) (175,040) - (511,606) Equity in income of joint ventures and affiliated companies and subsidiaries 20,759 - 1,715 (20,922) 1,552 ------- --------- ----------- --------- --------- SERVICE REVENUE 20,793 130,909 198,882 (20,922) 329,662 OPERATING EXPENSES Operating expenses 17,404 114,926 168,954 - 301,284 Depreciation and amortization 1,738 475 4,984 - 7,197 ------- --------- ----------- --------- --------- OPERATING INCOME 1,651 15,508 24,944 (20,922) 21,181 OTHER INCOME (EXPENSE) Interest and investment income 459 489 449 (57) 1,340 Interest expense (13,340) (65) (44) 52 (13,397) ------- --------- ----------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (11,230) 15,932 25,349 (20,927) 9,124 Income tax provision (benefit) (11,400) 3,362 9,680 - 1,642 ------- --------- ----------- --------- --------- INCOME BEFORE MINORITY INTERESTS 170 12,570 15,669 (20,927) 7,482 Minority interests in net income of subsidiaries - 7,312 - - 7,312 ------- --------- ----------- --------- --------- NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 170 $ 5,258 $ 15,669 $ (20,927) $ 170 ======= ========= =========== ========= =========
12 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Nine Months Ended September 30, 1997 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------- ------------ -------------------- (Unaudited) GROSS REVENUE $1,165 $ 442,478 $ 579,767 $ - $ 1,023,410 Subcontract and direct material costs (524) (302,444) (289,327) - (592,295) Equity in income of joint ventures and affiliated companies and subsidiaries 8,959 - 2,895 (9,322) 2,532 ------ --------- ---------- ---------- ----------- SERVICE REVENUE 9,600 140,034 293,335 (9,322) 433,647 OPERATING EXPENSES Operating expenses (4,771) 130,515 278,896 (3) 404,637 Depreciation and amortization 1,638 904 5,298 - 7,840 ------ --------- ---------- ---------- ----------- OPERATING INCOME 12,733 8,615 9,141 (9,319) 21,170 OTHER INCOME (EXPENSE) Interest and investment income 223 286 675 (240) 944 Interest expense (12,832) (129) (54) 186 (12,829) ------ --------- ---------- ---------- ----------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 124 8,772 9,762 (9,373) 9,285 Income tax provision (benefit) (3,596) 1,578 2,858 - 840 ------ --------- ---------- ---------- ----------- INCOME BEFORE MINORITY INTERESTS 3,720 7,194 6,904 (9,373) 8,445 Minority interests in net income of subsidiaries - 4,725 - - 4,725 ------ --------- ---------- ---------- ----------- NET INCOME 3,720 2,469 6,904 (9,373) 3,720 Preferred stock dividends and accretion 1,631 - - - 1,631 ------ --------- ---------- ---------- ----------- NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $2,089 $ 2,469 $ 6,904 $ (9,373) $ 2,089 ====== ========= ========== ========== ===========
13 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Three Months Ended September 30, 1997 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------------- (Unaudited) GROSS REVENUE $ 252 $ 195,190 $136,731 $ - $ 332,173 Subcontract and direct material costs (140) (147,277) (69,371) - (216,788) Equity in income of joint ventures and affiliated companies and subsidiaries 7,781 - 954 (8,017) 718 ------- --------- --------- ---------- ------------ SERVICE REVENUE 7,893 47,913 68,314 (8,017) 116,103 OPERATING EXPENSES Operating expenses 6,222 41,967 58,265 - 106,454 Depreciation and amortization 595 105 1,755 - 2,455 ------- --------- --------- ---------- ------------ OPERATING INCOME (LOSS) 1,076 5,841 8,294 (8,017) 7,194 OTHER INCOME (EXPENSE) Interest income 60 142 133 (11) 324 Interest expense (4,197) (41) (13) 11 (4,240) ------- --------- --------- ---------- ------------ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (3,061) 5,942 8,414 (8,017) 3,278 Income tax provision (benefit) (3,181) 1,284 2,405 - 508 ------- --------- --------- ---------- ------------ INCOME BEFORE MINORITY INTERESTS 120 4,658 6,009 (8,017) 2,770 Minority interests in net income of subsidiaries - 2,650 - - 2,650 ------- --------- --------- ---------- ------------ NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 120 $ 2,008 $ 6,009 $ ( 8,017) $ 120 ======= ========= ========= ========== ============
14 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Three Months Ended September 30, 1996 (In thousands)
- -------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------- ------------ ------------------- (Unaudited) GROSS REVENUE $ (27) $ 176,079 $ 203,919 $ - $ 379,971 Subcontract and direct material costs (161) (134,234) (107,184) - (241,579) Equity in income of joint ventures and affiliated companies and subsidiaries 3,446 - 490 (3,548) 388 ------- ---------- ------------- ------------ ---------- SERVICE REVENUE 3,258 41,845 97,225 (3,548) 138,780 OPERATING EXPENSES Operating expenses (726) 38,652 93,233 - 131,159 Depreciation and amortization 523 319 1,692 - 2,534 ------- ---------- ------------- ------------ ---------- OPERATING INCOME 3,461 2,874 2,300 (3,548) 5,087 OTHER INCOME (EXPENSE) Interest income 78 146 402 (105) 521 Interest expense (4,564) (28) (16) 90 (4,518) ------- ---------- ------------- ------------ ---------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS (1,025) 2,992 2,686 (3,563) 1,090 Income tax provision (benefit) (1,788) 509 (176) - (1,455) ------- ---------- ------------- ------------ ---------- INCOME BEFORE MINORITY INTERESTS 763 2,483 2,862 (3,563) 2,545 Minority interests in net income of subsidiaries - 1,687 95 - 1,782 ------- ---------- ------------- ------------ ---------- NET INCOME 763 796 2,767 (3,563) 763 Preferred stock dividends and accretion 539 - - - 539 ------- ---------- ------------- ------------ ---------- NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 224 $ 796 $ 2,767 $ (3,563) $ 224 ======= ========== ============= ============ ==========
15 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Nine Months Ended September 30, 1997 (In thousands)
- ----------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated -------- ---------- ------------- ------------ ------------------- (Unaudited) Net Cash Provided by (Used in) Operating Activities $ 23,539 $ (40) $ (9,505) $ 494 $ 14,488 -------- ---------- ------------- ------------ ------------ INVESTING ACTIVITIES Sales of subsidiaries and subsidiary assets - 2,763 13,777 - 16,540 Purchases of fixed assets (961) (6) (2,151) - (3,118) Investments in subsidiaries and affiliates, net of cash acquired - - (441) - (441) Sale of fixed assets - - - - - -------- ---------- ------------- ------------ ------------ Net Cash Used in Investing Activities (961) 2,757 11,185 - 12,981 -------- ---------- ------------- ------------ ------------ FINANCING ACTIVITIES Borrowings under credit facility 69,000 - - - 69,000 Principal payments on credit facility (87,500) - - - (87,500) Distribution of income to minority interest - (9,950) - - (9,950) Proceeds from issuances of common stock 165 - - - 165 Repurchases of common stock (252) - - - (252) Preferred stock dividends - - - - - Debt issuance costs (549) - - - (549) -------- ---------- ------------- ------------ ------------ Net Cash Used in Financing Activities (19,136) (9,950) - - (29,086) -------- ---------- ------------- ------------ ------------ Effect of Exchange Rate Changes on Cash - - (1,215) - (1,215) -------- ---------- ------------- ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents 3,442 (7,233) 465 494 (2,832) Cash and Cash Equivalents at Beginning of Period (7,720) 11,974 13,001 (494) 16,761 -------- ---------- ------------- ------------ ------------ Cash and Cash Equivalents at End of Period $ (4,278) $ 4,741 $ 13,466 $ - $ 13,929 ======== ========== ============= ============= ============
16 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Nine Months Ended September 30, 1996 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated -------- ---------- ------------- ------------ ------------------- (Unaudited) Net Cash Provided by (Used in) Operating Activities $(7,858) $8,217 $ 5,675 $ (105) $ 5,929 ------- ------ ------- ------- ------- INVESTING ACTIVITIES Purchases of fixed assets (2,496) (137) (2,272) - (4,905) Investments in subsidiaries and affiliates, net of cash acquired - - (1,241) - (1,241) Sale of fixed assets - - 22 - 22 ------- ------ ------- ------- ------- Net Cash Used in Investing Activities (2,496) (137) (3,491) - (6,124) ------- ------ ------- ------- ------- FINANCING ACTIVITIES Borrowings under credit facility 65,000 - - - 65,000 Principal payments on credit facility (57,000) - - - (57,000) Distribution of income to minority interest - (823) - - (823) Proceeds from issuances of common stock 313 - - - 313 Preferred stock dividends (1,965) - - - (1,965) Debt issuance costs (449) - - (449) Other financing activities - - (293) - (293) ------- ------ ------- ------- ------- Net Cash Used in Financing Activities 5,899 (823) (293) - 4,783 ------- ------ ------- ------- ------- Effect of Exchange Rate Changes on Cash - - 77 - 77 ------- ------ ------- ------- ------- Increase (Decrease) in Cash and Cash Equivalents (4,455) 7,257 1,968 (105) 4,665 Cash and Cash Equivalents at Beginning of Period 4,128 1,015 12,578 (1,364) 16,357 ------- ------ ------- ------- ------- Cash and Cash Equivalents at End of Period $ (327) $8,272 $14,546 $(1,469) $21,022 ======= ====== ======= ======= =======
17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW ICF Kaiser International, Inc. and subsidiaries (the Company) provides engineering, construction, program management, and consulting services primarily to the public and private environmental, infrastructure, industrial, and energy markets domestically and internationally. Financial Review - ---------------- The Company's operating results by operating group for the nine and three months ended September 30, 1997 and 1996 are as follows (in millions):
Nine Months Ended Three Months Ended September 30, September 30, ------- -------- -------- -------- 1997 1996 1997 1996 ------- -------- -------- -------- Federal programs $ 17.6 $ 24.5 $ 6.7 $ 6.7 Engineering and construction 15.2 10.9 5.0 3.2 Consulting 10.7 9.7 3.7 4.5 ------- -------- -------- -------- 43.5 45.1 15.4 14.4 Corporate costs (22.3) (23.9) (8.2) (9.3) ------- -------- -------- -------- Total operating income $ 21.2 $ 21.2 $ 7.2 $ 5.1 ======= ======== ======== ========
Nine Months Ended September 30, 1997 Versus Nine Months Ended September 30, 1996 The decrease in income from federal programs primarily resulted from the effective termination of the Company's contract to perform services at the U.S. Department of Energy's (DOE) Hanford, Washington, Site (Hanford) in 1996 (see below). The Hanford contract had a $12.1 million decrease in income between the nine-month periods. The only income under the Hanford contract during the nine months ended September 30, 1997 was $1.2 million related to activities associated with the final phase of the Company's work at Hanford. The Hanford decrease was offset partially by a $4.8 million increase in income from the Performance Based Integrating Management Contract at DOE's Rocky Flats Environmental Technology Site in Colorado (Rocky Flats) due to an increase in fees earned. The Rocky Flats contract was awarded in 1995 to Kaiser-Hill Company, LLC (Kaiser-Hill), a limited liability company owned equally by the Company and CH2M Hill Companies, Ltd. (CH2M Hill). Because Kaiser-Hill is a consolidated subsidiary of the Company, operating income includes the portion of income generated under the Rocky Flats contract attributable to CH2M Hill. CH2M Hill's interest in Kaiser-Hill is reflected as a minority interest in subsidiaries in the Company's financial statements. 18 Engineering and construction operations experienced a $4.3 million improvement in income between the nine-month periods primarily due to an increase in the volume of work, including a substantial increase in revenue from a mini-mill project for Nova Hut, a.s., an integrated steel maker based in the Ostrava region of the Czech Republic (see Business Outlook). Excluding the Nova Hut project, the increase in volume was offset by slightly lower margins in 1997. Income from consulting operations increased by $1.0 million for the nine months ended September 30, 1997 mainly due to an increase in the utilization of labor which resulted in a reduction of indirect labor expenses and increased billable hours. The increase in utilization in early 1997 was a direct result of an increase in the availability of work under both existing and new projects and a reduction in the total labor assigned to consulting operations. During the first two quarters of the nine months ended September 30, 1996, consulting operations were still experiencing some delays in both task-order assignments and funding of some of the Company's consulting contracts due to the federal government's operating under a continuing resolution from October 1995 through April 1996. As discussed below, the three months ended September 30, 1996, included $2.3 million of additional revenue due to an acceleration in the federal government cost approval process for 1996. Three Months Ended September 30, 1997 Versus Three Months Ended September 30, 1996 Income from federal programs remained unchanged for the three months ended September 30, 1997 as compared to the same period in 1996. The $3.6 million decrease in income from the Hanford contract, was offset, in part, by a $2.0 million increase in income from the Rocky Flats contract and a $1.6 million increase in other projects. Income from engineering and construction operations increased by $1.8 million primarily due to an increase in income from the Nova Hut project, offset by a decline in overall gross margin on other work. Income from consulting operations decreased by $0.8 million for the three months ended September 30, 1997 as compared to the same period in 1996. This decrease was primarily due to the recognition of revenue resulting from the acceleration in the cost approval process during the three months ended September 30, 1996. In 1996, the Company accelerated the procedures for obtaining approval from the U.S. government for the Company's actual costs incurred in the current period. As a result, in the third quarter of 1996, the Company's consulting group was able to accelerate its process of revenue recognition on certain cost-reimbursement contracts. Business Outlook - ---------------- The Company was awarded a number of new contracts including a five-year contract valued at up to $40 million to conduct environmental restoration and cleanup projects at Los Alamos National Laboratory (LANL) in New Mexico and a five-year contract valued at up to $25 million to provide general support services to the U.S. Department of Energy's Hanford Site in Richland, Washington. The Company was also given notice to proceed on the expansion of an alumina facility in Perth, Australia. This twenty-eight month contract is expected to generate service revenue of approximately $22.0 million. 19 In March 1996, the Company signed a two-year, $102 million contract to provide engineering and construction services for the initial phase of a mini-mill project for Nova Hut, a.s., an integrated steel maker based in the Ostrava region of the Czech Republic. In late June 1997, the Company signed a $160 million contract with Nova Hut for the next phase of the mini-mill project. Earnings associated with this contract for the additional work have been material to the Company's engineering and construction operations and are expected to be material in future periods. Engineering and construction group's profitability has increased significantly over the prior year. Income has increased $4.3 million from the similar period last year and operating margins have also increased from 10% to 13% of service revenue, despite declining project margins on certain projects. Excluding the profit that was generated by the pulverized coal injection facility which was sold at the end of 1996, the engineering and construction group's profitability increased by $6.4 million and margins increased 4% points for the nine months ended September 30, 1997. This improvement in profitability is the result of profits on the Nova Hut mini-mill project, increased labor productivity and lower overhead costs. Management believes it can continue to improve the profitability of the engineering and construction business through further reductions in overhead and improving the effectiveness of its marketing efforts. RESULTS OF OPERATIONS Revenue - ------- The Company's revenue by operating group for the nine months ended September 30, 1997 and 1996 is as follows (in millions):
Nine Months Ended September 30, ------------------------------------ 1997 1996 ----------------- ----------------- Gross Service Gross Service -------- ------- -------- ------- Federal programs $ 507.2 $ 156.3 $ 769.1 $ 278.3 Engineering and construction 264.7 120.5 190.6 104.6 Consulting 67.8 52.9 63.7 50.7 -------- ------- -------- ------- Total $ 839.7 $ 329.7 $1,023.4 $ 433.6 ======== ======= ======== =======
Gross revenue represents services provided to customers with whom the Company has a primary contractual relationship. Included in gross revenue are 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. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of the equity in income of unconsolidated joint ventures and affiliated companies. 20 Operating profits (fees) generated by certain large government contracts, including the Rocky Flats and Hanford contracts, are or were based on performance and not revenue. A change in revenue between periods is not proportionate to the change in the fees earned. Gross revenue for 1997 decreased $183.7 million, or 17.9%, to $839.7 million for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. The decrease in gross revenue was primarily due to a $261.9 million decrease in gross revenue from federal programs because of the Hanford contract termination on October 1, 1996. The Hanford contract experienced a $290.1 million decrease in gross revenue from the comparable period in 1996. The decrease in federal programs was offset partially by a $74.1 million increase in gross revenue from engineering and construction operations primarily due to a $35.0 million increase in gross revenue from the Nova Hut project and a $32.6 million increase in gross revenue from the Company's work on nitric acid plants in 1997. Consulting operations reported a $4.1 million increase in gross revenue. Excluding revenue recognized in the 1996 period after an acceleration in the cost approval process, consulting operations realized a $6.4 million increase in gross revenue as compared to the nine month period ended September 30, 1996. Service revenue decreased by $103.9 million for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. The $122.0 million decrease in federal programs was due to decreases in service revenue of $117.0 million and $7.0 million from the Hanford contract and the Rocky Flats contract, respectively. The decrease for the Rocky Flats contract was primarily due to an increase in subcontractors costs, offset, in part, by a decrease in direct material costs. The decrease in service revenue from federal programs was offset partially by increases in service revenue from consulting and engineering and construction operations due to increases in volume of work described above. Service revenue as a percentage of gross revenue decreased to 39.3% for the nine months ended September 30, 1997 from 42.4% for the nine months ended September 30, 1996 due to an increase in the use of subcontractors on the Rocky Flats contract. A significant portion of the gross revenue derived from the Rocky Flats contract includes the costs of services subcontracted to third parties. Operating Expenses - ------------------ Direct cost of services and overhead decreased to $258.1 million for the period ended September 30, 1997 as compared to $354.7 million for the nine months ended September 30, 1996. The $96.6 million decrease is primarily due to a decrease of $103.5 million related to the Hanford contract, offset, in part, by a $6.9 million increase on core business contracts, especially the Nova Hut and nitric acid contracts. 21 Administrative and general expense decreased $6.8 million, or 13.6%, between the nine months ended September 30, 1997 and 1996. The decrease is primarily due to reductions in labor costs, costs associated with large scale proposal efforts, and the use of consultants. Interest Expense, Preferred Stock Dividends and Accretion - --------------------------------------------------------- Interest expense increased $0.6 million between the nine months ended September 30, 1997 and 1996 primarily due to the issuance of the Company's Series B Senior Notes. The increase in interest expense was offset by a $1.6 million decrease in preferred stock dividends and accretion resulting from the Company's repurchase of its redeemable preferred stock in December 1996. Income Tax Expense - ------------------ The Company's effective income tax rate increased to 18.0% for the nine months ended September 30, 1997, compared with 9.1% for the nine months ended September 30, 1996. The increase is primarily attributed to a $2.0 million reversal of the valuation allowance for certain deferred tax assets in 1996. This increase was partially offset by a higher tax exclusion for the Kaiser Hill minority interest in 1997 as compared to 1996. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1997, cash and cash equivalents decreased $2.8 million to $13.9 million. Operating activities generated $14.5 million in cash, investing activities provided $13.0 million in cash, and financing activities used $29.1 million in cash. Working Capital - ---------------- The decrease in prepaid expenses and other current assets between September 30, 1997 and December 31, 1996 was due to the receipt in January 1997 of $16.5 million of cash proceeds from the December 1996 sale of an investment in entities that own and operate a pulverized coal injection facility (see below). The increase in contract receivables, net was due primarily to the timing of cash receipts from DOE on the Rocky Flats contract. The increase in accounts payable and subcontractors payable was due primarily to an increase in accounts payable on the Nova Hut contract offset, in part by, payments made to subcontractors on the Rocky Flats contract. The increase in deferred revenue was due primarily to advance billings and collections on the Nova Hut contract and nitric acid projects. In January 1997, the U.S. Environmental Protection Agency approved the Company's provisional billing rates for the year ended December 31, 1996, for the rate variances on cost-plus contracts with U.S. government agencies for costs incurred during that year. The Company received approximately $2.2 million on these billings during the nine months ended September 30, 1997, and expects to collect in excess of $1.0 million in future periods. The Company also collected approximately $2.3 million in 1997 on billings for billing rate variances for previous periods. 22 Credit Facility - --------------- The Company's $40 million revolving credit facility is provided by a group of three banks and expires on December 31, 1998. In 1997, net payments on the credit facility were $18.5 million. As of September 30, 1997, the Company had $2.0 million in cash borrowings, $24.0 million of performance letters of credit outstanding, and $14.0 million of additional credit available under the credit facility. As of November 14, 1997, the Company had $10 million in cash borrowings, $24 million of performance letters of credit outstanding, and $6 million of additional credit available under the credit facility. The Company currently is negotiating to amend and restate the credit facility (the New Credit Facility) to increase the capacity, to extend the termination date, and to modify certain financial ratios required to be maintained. The credit facility and the New Credit Facility will continue to be guaranteed by certain subsidiaries (Guarantors), and the banks will continue to have a security interest in substantially all accounts receivable and certain other assets and a pledge of the stock of certain subsidiaries. The New Credit Facility is expected to continue the limitations on the payments of cash dividends on common stock, the prohibitions on the issuance of certain types of indebtedness, and the limitations on certain investments and acquisitions. The Company expects to close on the New Credit Facility in the fourth quarter. Other Investing and Financing Activities - ---------------------------------------- In December 1996, the Company sold the majority portion of its equity interest in entities that own and operate a pulverized coal injection facility, and certain related contractual rights, for $16.6 million. The buyer also has an option to purchase the remaining equity investment for $2.4 million in January 1998. The proceeds from the sale, net of $0.1 million held in escrow, were received in January 1997 and were reinvested in the Company's business. The $0.1 million initially held in escrow was received in July 1997. These entities' earnings and cash flows were material to the Company in 1996, and the absence of these entities' earnings and cash flows will continue to have a material impact on earnings and cash flows. Other significant uses of cash in investing and financing activities included distribution of income by Kaiser-Hill to a minority interest ($10.0 million) and purchases of fixed assets ($3.1 million). Liquidity and Capital Resources Outlook - --------------------------------------- The Company believes that current projected levels of cash flows and the availability of financing, including borrowings under the Company's credit facility and the New Credit Facility, if closed in the fourth quarter, will be adequate to fund its operations, including interest obligations, throughout the next 12 months. 23 The credit facility limits the Company's ability to make acquisitions and other investments (similar conditions are expected under the New Credit Facility); the Indentures governing the Company's Series B Senior Notes and Senior Subordinated Notes limit the Company's ability to make restricted payments, including certain payments in connection with investments and acquisitions. This means that during the next several years, unless these limitations are amended or replaced, the Company would be required to obtain permission from lenders or would need to issue additional equity securities to fund any significant acquisitions or to invest significant amounts in joint ventures. In addition to the cash requirements of the Company's daily operations, the Company has semiannual interest payments of $9.1 million due in December 1997 and June 1998 for the Series B Senior Notes and Subordinated Notes. If the Company achieves and maintains a specified level of earnings, the semiannual interest requirement will be reduced to $8.4 million. The Company expects to meet this interest obligation with either operating cash flows or borrowings under its credit facility or its New Credit Facility (once it is closed). IMPACT OF NEW ACCOUNTING STANDARD The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128), effective for financial statements for both interim and annual periods ending after December 15, 1997. SFAS No. 128 requires the presentation of basic and diluted earnings per share instead of primary and fully diluted earnings per share. Under the Company's existing equity structure as of September 30, 1997, the computation of basic and diluted earnings per share, as defined under SFAS No. 128, results in earnings per share that is substantially the same as primary and fully diluted earnings per share as presented in the accompanying financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable to Registrant until 1998. 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, 1996. Item 2. Changes in Securities (a) None (b) None (c) None 24 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. 11 Computation of Primary and Fully Diluted Earnings Per Share No. 27 Financial Data Schedule (b) Reports on Form 8-K None Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report of Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. ICF KAISER INTERNATIONAL, INC. (Registrant) Date: November 14, 1997 /s/ Kenneth L. Campbell ----------------------- Kenneth L. Campbell Executive Vice President, and Chief Financial Officer (Duly authorized officer and principal financial officer) 25 EX-11 2 EXHIBIT 11 EXHIBIT 11 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
Nine Months Ended September 30, ------------------------------- 1997 1996 ------------- ----------- (Unaudited) Primary: Net income available for common shareholders $ 170,000 $ 2,089,000 =========== =========== Weighted average of common shares outstanding not included in amounts below 22,381,538 21,954,783 Weighted average of common shares issuable on exercise of outstanding stock options and warrants 49,698 - ----------- ----------- Weighted average of common and common equivalent shares outstanding, as adjusted 22,431,236 21,954,783 or or 22,431,000 21,955,000 =========== =========== Net income per common share $ 0.01 $ 0.10 =========== =========== Fully Diluted: Net income available for common shareholders $ 170,000 $ 2,089,000 =========== =========== Weighted average of common shares outstanding as adjusted for primary computation 22,431,236 21,954,783 Weighted average of additional common shares issuable on exercise of outstanding stock options and warrants 79,523 - ----------- ----------- Weighted average of common and common equivalent shares outstanding, as adjusted 22,510,759 21,954,783 or or 22,511,000 21,955,000 =========== =========== Net income per common share $ 0.01 $ 0.10 =========== ===========
EXHIBIT 11 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
Three Months Ended September 30, -------------------------------- 1997 1996 ------------- -------------- (Unaudited) Primary: Net income available for common shareholders $ 120,000 $ 224,000 =========== =========== Weighted average of common shares outstanding not included in amounts below 22,501,784 22,226,844 Weighted average of common shares issuable on exercise of outstanding stock options and warrants - - ----------- ----------- Weighted average of common and common equivalent shares outstanding, as adjusted 22,501,784 22,226,844 or or 22,502,000 22,227,000 =========== =========== Net income per common share $ 0.01 $ 0.01 =========== =========== Fully Diluted: Net income available for common shareholders $ 120,000 $ 224,000 =========== =========== Weighted average of common shares outstanding as adjusted for primary computation 22,501,784 22,226,844 Weighted average of additional common shares issuable on exercise of outstanding stock options and warrants 92,240 - ----------- ----------- Weighted average of common and common equivalent shares outstanding, as adjusted 22,594,024 22,226,844 or or 22,594,000 22,227,000 =========== =========== Net income per common share $ 0.01 $ 0.01 =========== ===========
EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 13,929,000 0 309,785,000 10,434,000 0 333,492,000 51,063,000 39,010,000 421,757,000 240,482,000 138,880,000 0 0 225,000 33,749,000 421,757,000 0 839,716,000 0 258,108,000 0 1,345,000 13,397,000 9,124,000 1,642,000 170,000 0 0 0 170,000 0.01 0.01 Excludes current portion of bonds, mortgage, and similar debt. 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. Excludes subcontract and direct material cost of $511,606,000
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