-----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, ETwKekMckn1PjiKWS2eb2eyLZEAIumz+Cag012CHzDQ5L3SN86/cJ3yCVK90Epvz SncXCKEDVzoIJhRPxCulRw== 0000928385-98-001668.txt : 19980814 0000928385-98-001668.hdr.sgml : 19980814 ACCESSION NUMBER: 0000928385-98-001668 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98685420 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 FOR 6/30/98 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 June 30, 1998 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 July 31, 1998, there were 24,138,870 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 - June 30, 1998 and December 31, 1997........................ 3 Consolidated Statements of Operations - Three and Six Months Ended June 30, 1998 and 1997.......... 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997.................... 5 Notes to Consolidated Financial Statements................. 6-16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 17-24 Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................................... 24 Part II - Other Information Item 1. Legal Proceedings........................................ 24 Item 2. Changes in Securities and Use of Proceeds................ 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)
- ---------------------------------------------------------------------------------------------------------------------------------- JUNE 30, DECEMBER 31, 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 7,627 $ 19,198 Contract receivables, net 294,933 264,030 Prepaid expenses and other current assets 13,002 14,490 Deferred income taxes 33,387 15,281 -------- -------- Total Current Assets 348,949 312,999 -------- -------- Fixed Assets Furniture, equipment, and leasehold improvements 49,172 51,446 Less depreciation and amortization (38,099) (39,648) -------- -------- 11,073 11,798 -------- -------- Other Assets Goodwill, net 50,746 47,323 Investments in and advances to affiliates 7,058 7,038 Other 15,649 19,308 -------- -------- 73,453 73,669 -------- -------- Total Assets $433,475 $398,466 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Debt currently payable $ - $ 15 Accounts payable 142,648 120,368 Accrued salaries and benefits 37,207 37,654 Other accrued expenses 56,418 26,902 Deferred revenue 36,357 36,527 Income taxes payable 1,362 1,012 -------- -------- Total Current Liabilities 273,992 222,478 Long-term Liabilities Long-term debt 151,745 141,004 Other 4,428 4,586 -------- -------- Total Liabilities 430,165 368,068 -------- -------- Commitments and Contingencies Minority Interest 4,133 3,071 Shareholders' Equity (Deficit) Preferred Stock - - Common Stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 24,184,581 and 22,475,904 shares 241 225 Additional Paid-in Capital 75,142 67,116 Notes Receivable Collateralized by Common Stock (2,504) (2,422) Accumulated Deficit (69,448) (34,225) Cumulative Translation Adjustment (4,254) (3,367) -------- -------- Total Shareholders' Equity (Deficit) (823) 27,327 -------- -------- Total Liabilities and Shareholders' Equity (Deficit) $433,475 $398,466 ======== ======== - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 3 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In thousands, except per share amounts)
- --------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ------------------ -------------------- 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) GROSS REVENUE $ 312,012 $ 241,586 $ 617,268 $ 507,543 Subcontract and direct material costs (207,457) (132,552) (406,477) (294,818) Provision for contract losses (40,000) - (40,000) - Equity in income of joint ventures and affiliated companies 1,407 547 2,434 834 --------- --------- --------- --------- SERVICE REVENUE 65,962 109,581 173,225 213,559 OPERATING EXPENSES Direct labor and fringe benefits 70,781 72,600 140,216 142,600 Group overhead 22,448 21,333 44,537 41,160 Corporate general and administrative 5,157 5,886 10,101 11,070 Restructuring charge 1,500 - 1,500 - Depreciation and amortization 2,096 2,373 4,431 4,742 --------- --------- --------- --------- OPERATING INCOME (LOSS) (36,020) 7,389 (27,560) 13,987 OTHER INCOME (EXPENSE) Interest income 435 677 901 1,016 Interest expense (4,939) (4,804) (9,760) (9,157) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST, AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (40,524) 3,262 (36,419) 5,846 Income tax (provision) benefit 12,896 (566) 11,747 (1,134) --------- --------- --------- --------- INCOME BEFORE MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (27,628) 2,696 (24,672) 4,712 Minority interest in net income of subsidiaries (2,040) (2,693) (4,551) (4,662) --------- --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (29,668) 3 (29,223) 50 Cumulative effect of accounting change, net of tax (6,000) - (6,000) - --------- --------- --------- --------- NET INCOME (LOSS) $ (35,668) $ 3 $ (35,223) $ 50 ========= ========= ========= ========= OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment (1,441) 1,031 (887) (438) --------- --------- --------- --------- TOTAL COMPREHENSIVE INCOME (LOSS) $ (37,109) $ 1,034 $ (36,110) $ (388) ========= ========= ========= ========= BASIC AND DILUTED EARNINGS (LOSS) PER SHARE Income (loss) before cumulative effect of accounting change $ (1.23) $0.00 $ (1.22) $0.00 Cumulative effect of accounting change, net of tax (0.25) - (0.25) - --------- --------- --------- --------- Net Income (Loss) $ (1.48) $0.00 $ (1.47) $0.00 ========= ========= ========= ========= WEIGHTED AVERAGE SHARES FOR BASIC EARNINGS PER SHARE 24,103 22,441 24,017 22,370 Effect of dilutive stock options - 115 - 98 --------- --------- --------- --------- WEIGHTED AVERAGE SHARES FOR DILUTED EARNINGS PER SHARE 24,103 22,556 24,017 22,468 ========= ========= ========= ========= - ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 4 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
- --------------------------------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- (Unaudited) OPERATING ACTIVITIES Net income (loss) $(35,223) $ 50 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,431 4,742 Provision for losses, restructuring and contingencies 41,516 871 Provision for deferred income taxes (18,106) (3,025) Cash distributions in excess of earnings from joint ventures and affiliated companies 237 87 Minority interest in net income of subsidiaries 4,551 4,662 Changes in operating assets and liabilities: Contract receivables, net (23,460) (24,392) Prepaid expenses and other current assets 1,568 1,140 Accounts payable and accrued expenses 4,198 12,583 Deferred revenue (43) 4,948 Other operating activities (1,063) 433 -------- -------- Net Cash Provided by (Used in) Operating Activities (21,394) 2,099 -------- -------- INVESTING ACTIVITIES Cash acquired from (or invested in) subsidiary acquisitions 3,759 (345) Sales of subsidiaries and/or investments 2,400 16,540 Purchases of fixed assets (2,546) (2,683) -------- -------- Net Cash Provided by Investing Activities 3,613 13,512 -------- -------- FINANCING ACTIVITIES Borrowings under revolving credit facility 76,500 38,000 Principal payments on revolving credit facility (66,000) (53,000) Distribution of income to minority interest (3,489) (3,950) Proceeds from issuances of common stock 86 109 Repurchases of common stock - (252) Debt issuance costs - (486) -------- -------- Net Cash Provided by (Used in) Financing Activities 7,097 (19,579) -------- -------- Effect of Exchange Rate Changes on Cash (887) (438) -------- -------- Decrease in Cash and Cash Equivalents (11,571) (4,406) Cash and Cash Equivalents at Beginning of Period 19,198 16,761 -------- -------- Cash and Cash Equivalents at End of Period $ 7,627 $ 12,355 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION IS AS FOLLOWS: Cash payments for interest $ 9,384 $ 9,381 Cash payments for income taxes - 9 Non-cash transactions: Issuance of common stock for acquisition 8,455 - (Cancellation) reacquisition of common stock (513) 287 - ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 5 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, 1997 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, 1997 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, 1997. Certain reclassifications have been made to the prior period financial statements to conform to the presentation used in the June 30, 1998 financial statements. 2. Adoption of New Pronouncements In June 1997, the Financial Accounting Standards Board issued FASB Statement No. 130 - Reporting Comprehensive Income. The Statement requires that companies begin reporting comprehensive income during the fiscal year beginning after December 15, 1997. Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non- owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company adopted the Statement effective the first quarter of 1998. In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued a Statement of Position 98-5 - Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires costs of organization and start-up activities to be expensed as incurred. Initial application of the SOP should be reported as the cumulative effect of a change in accounting principle, as described in Accounting Principles Board Opinion No. 20, Accounting Changes. The Company adopted the Statement effective April 1, 1998. 3. Net Income Per Common Share In 1997, the Company adopted the Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128). All EPS computation periods presented in these financial statements have been restated to conform to SFAS No. 128. Basic 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 repurchase 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. 4. Long-term Debt As a result of the significant charges recognized during the second quarter, the Company was not in compliance as of June 30, 1998 with certain financial covenants set forth in its revolving credit facility. The Company has requested an amendment to allow the Company to be in compliance with reestablished covenants. The Banks have informed the Company that they will continue to permit the Company to borrow and obtain letters of credit pursuant to the revolving credit facility while the Company's request is being considered. As of August 13, 1998, the Banks had not declared any Events of Default pursuant to the terms of the facility. Accordingly, the total amount of outstanding cash borrowings from the revolver as of June 30, 1998 of $14.5 million is classified as long-term debt on the balance 6 sheet. Other than the covenant noncompliance, the Company is not aware of any violations of any other obligations under the facility. 5. Income Taxes During the three months ended June 30, 1998, the Company recognized an additional deferred tax asset of $18.1 million, primarily as a result of recording reserves for losses which may be incurred on certain fixed-price contract overruns. The Company did not record any additional valuation allowance for any of the net deferred tax assets carried on the balance sheet now totaling $33.4 million. Management believes that, through the combination of expected future levels of pretax operating earnings and, more significantly, a tax-planning strategy, that would, if necessary, be implemented to accelerate taxable amounts, it will be able to utilize all deferred tax assets generated from net operating losses. As permitted by Statement of Financial Accounting Standard No. 109 - Accounting for Income Taxes, tax-planning strategies are alternatives that can be used to provide evidence of the likelihood of future taxable income for purposes of evaluating the necessity of establishing valuation reserves against balances of deferred tax assets. The Company's tax- planning strategy involves the disposition of its Consulting Group operations for consideration that could result in taxable income sufficient enough to utilize the deferred tax assets. In the event that this tax-planning strategy is abandoned, the Company's ability to fully utilize the deferred tax assets could be reduced significantly and a valuation allowance against the asset would have to be recognized in the financial statements as a charge to income. 6. Contingencies In connection with significant cost overruns incurred on several fixed- price contracts, the Company is vigorously pursuing claims which it believes are justified against various parties. Through June 30, 1998, the Company had recognized revenue from certain claims recoveries totaling $3.1 million and deferred recognition of further claims recoveries in the financial statements. No amounts have yet been collected from the recognized claims recoveries. In March 1998, the Company entered into a $187 million maximum price contract for the construction of a ship construction facility. The Company subsequently learned that the costs used by the Company and the customer as the basis for negotiation of the contract were approximately $30 million lower than the actual costs to perform the contract as reflected in proposed actual subcontracts. After learning of this mutual mistake, the Company advised the customer that it is not required to perform the contract in accordance with its terms. Negotiations with the customer resulted in an interim agreement under which both parties reserved their rights, and on a day-to-day basis, the Company is overseeing activities at the site but is not entering into subcontracts in its name. Management believes that it does not have sufficient information to reasonably estimate the outcome at this time. The Company did, however, recognize $1.8 million in revenue and cost during the three months ended June 30, 1998 for services performed pursuant to the terms of the interim agreement. As a result of these project uncertainties, the Company recorded a $40 million charge during the second quarter to establish a reserve primarily intended to cover its estimate of the total contract cost overruns it expects to incur prior to completing the above referenced contracts. Although management believes that, based on information currently available, an adequate provision for loss reserves for these fixed-price contracts has been reflected in the financial statements, no assurance can be given that the full amount of any claims will be realized or that the loss provision is entirely adequate. 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. 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 7 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. 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 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. 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 adequacy of provisions for reserves is reviewed periodically as progress with the government ensues. 7. Guarantor Subsidiaries Pursuant to SEC rules regarding publicly held debt, the Company is required to provide financial information for wholly owned subsidiaries of ICF Kaiser International, Inc. (Subsidiary Guarantors) that unconditionally guarantee the payment of the principal, premium, if any, and interest on the Company's Subordinated Notes, and its Series B Senior Notes. The Subsidiary Guarantors are Cygna Consulting Engineers and Project Management, Inc; ICF Kaiser Government Programs, Inc; Systems Applications International, Inc; EDA, Incorporated; Global Trade & Investment, Inc; ICF Kaiser Europe, Inc; ICF Kaiser/Georgia Wilson, Inc; ICF Kaiser Overseas Engineering, Inc; ICF Kaiser Engineers Pacific, Inc; and ICF Kaiser Remediation Company. Presented below is condensed consolidating financial information for ICF Kaiser International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non- Guarantor Subsidiaries. The information, except for the December 31, 1997 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. In the Company's opinion, presentation of separate financial statements for each individual Subsidiary Guarantor would not provide additional information that is material to investors. Therefore, the Subsidiary Guarantors are combined in the presentation below. 8 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING BALANCE SHEET June 30, 1998 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ (509) $ 1,023 $ 7,113 $ - $ 7,627 Contract receivables, net (3,793) 122,636 176,090 - 294,933 Intercompany receivables, net 120,729 4,709 (125,438) - - Prepaid expenses and other current assets 4,344 540 8,118 - 13,002 Deferred income taxes 26,475 - 6,912 - 33,387 -------- --------- --------- ------------ --------- Total Current Assets 147,246 128,908 72,795 - 348,949 -------- --------- --------- ------------ --------- Fixed Assets Furniture,equipment, and leasehold improvements 10,541 2,499 36,132 - 49,172 Less depreciation and amortization (6,091) (2,298) (29,710) - (38,099) -------- --------- --------- ------------ --------- 4,450 201 6,422 - 11,073 -------- --------- --------- ------------ --------- Other Assets Goodwill, net 250 4,397 46,099 - 50,746 Other 30,265 816 16,747 (25,121) 22,707 -------- --------- --------- ------------ --------- 30,515 5,213 62,846 (25,121) 73,453 -------- --------- --------- ------------ --------- Total Assets $182,211 $ 134,322 $ 142,063 $(25,121) $ 433,475 ======== ========= ========= ============ ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ - $ - $ - $ - $ - Accounts payable and other accrued expenses 19,985 98,604 37,997 - 156,586 Accrued salaries and employee benefits 2,429 13,727 21,051 - 37,207 Other 2,711 1,716 75,772 - 80,199 -------- --------- --------- ------------ --------- Total Current Liabilities 25,125 114,047 134,820 - 273,992 Long-term Liabilities Long-term debt, less current portion 151,745 - - - 151,745 Other 2,307 26 2,095 - 4,428 -------- --------- --------- ------------ --------- Total Liabilities 179,177 114,073 136,915 - 430,165 -------- --------- --------- ------------ --------- Minority Interests in Subsidiaries - 4,551 (418) - 4,133 Shareholders' Equity Common Stock 230 148 8,170 (8,307) 241 Additional Paid-in Capital 74,914 2,596 58,548 (60,916) 75,142 Accumulated Earnings (Deficit) (69,606) 13,103 (57,047) 44,102 (69,448) Other Equity (2,504) (149) (4,105) - (6,758) -------- --------- --------- ------------ --------- Total Shareholders' Equity 3,034 15,698 5,566 (25,121) (823) -------- --------- --------- ------------ --------- Total Liabilities and Shareholders' Equity $182,211 $ 134,322 $ 142,063 $(25,121) $ 433,475 ======== ========= ========= ============ ========= - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 9
ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING BALANCE SHEET December 31, 1997 (In thousands) - ------------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents $ (5,665) $ 10,258 $ 14,605 $ - $ 19,198 Contract receivables, net 3,210 96,921 163,899 - 264,030 Intercompany receivables, net 136,629 (2,529) (134,100) - - Prepaid expenses and other current assets 4,181 475 9,834 - 14,490 Deferred income taxes 14,749 - 532 - 15,281 -------- -------- --------- ------------ -------- Total Current Assets 153,104 105,125 54,770 - 312,999 -------- -------- --------- ------------ -------- Fixed Assets Furniture, equipment, and leasehold improvements 9,728 2,505 39,213 - 51,446 Less depreciation and amortization (5,361) (2,275) (32,012) - (39,648) -------- -------- --------- ------------ -------- 4,367 230 7,201 - 11,798 -------- -------- --------- ------------ -------- Other Assets Goodwill, net - 4,793 42,530 - 47,323 Other 50,528 1,849 17,552 (43,583) 26,346 -------- -------- --------- ------------ -------- 50,528 6,642 60,082 (43,583) 73,669 -------- -------- --------- ------------ -------- Total Assets $207,999 $111,997 $ 122,053 $(43,583) $398,466 ======== ======== ========= ============ ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ - $ - $ 15 $ - $ 15 Accounts payable and other accrued expenses 23,186 79,893 35,254 - 138,333 Accrued salaries and employee benefits 6,938 16,722 13,994 - 37,654 Other 4,138 848 41,490 - 46,476 -------- -------- --------- ------------ -------- Total Current Liabilities 34,262 97,463 90,753 - 222,478 Long-term Liabilities Long-term debt, less current portion 141,004 - - - 141,004 Other 2,437 26 2,123 - 4,586 -------- -------- --------- ------------ -------- Total Liabilities 177,703 97,489 92,876 - 368,068 -------- -------- --------- ------------ -------- Minority Interests in Subsidiaries - 3,071 - - 3,071 Shareholders' Equity Common Stock 214 148 129 (266) 225 Additional Paid-in Capital 66,888 2,796 58,548 (61,116) 67,116 Accumulated Earnings (Deficit) (34,384) 8,757 (26,397) 17,799 (34,225) Other Equity (2,422) (264) (3,103) - (5,789) -------- -------- --------- ------------ -------- Total Shareholders' Equity 30,296 11,437 29,177 (43,583) 27,327 -------- -------- --------- ------------ -------- Total Liabilities and Shareholders' Equity $207,999 $111,997 $ 122,053 $(43,583) $398,466 ======== ======== ========= ============ ======== - ------------------------------------------------------------------------------------------------------------------------------------ See notes to consolidated financial statements.
10 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME Six Months Ended June 30, 1998 (In thousands)
- ----------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- GROSS REVENUE $ 608 $ 302,158 $ 314,502 $ - $ 617,268 Subcontract and direct material costs (280) (225,101) (181,096) - (406,477) Provision for contract loss - - (40,000) - (40,000) Equity in income of joint ventures and affiliated companies and subsidiaries (32,111) - 3,973 30,572 2,434 -------- --------- --------- ------------ --------- SERVICE REVENUE (31,783) 77,057 97,379 30,572 173,225 OPERATING EXPENSES Operating expenses 9,487 66,206 120,661 - 196,354 Depreciation and amortization 1,258 404 2,769 - 4,431 -------- --------- --------- ------------ --------- OPERATING INCOME (42,528) 10,447 (26,051) 30,572 (27,560) OTHER INCOME (EXPENSE) Interest and investment income 181 199 521 - 901 Interest expense (9,646) (96) (18) - (9,760) -------- --------- --------- ------------ --------- INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS, AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (51,993) 10,550 (25,548) 30,572 (36,419) Income tax provision (benefit) (16,770) 3,403 (8,241) 9,861 (11,747) -------- --------- --------- ------------ --------- INCOME BEFORE MINORITY INTERESTS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (35,223) 7,147 (17,307) 20,711 (24,672) Minority interests in net income of subsidiaries - 4,551 - - 4,551 -------- --------- --------- ------------ --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (35,223) 2,596 (17,307) 20,711 (29,223) Cumulative effect of accounting change, net of tax - - 6,000 - 6,000 -------- --------- --------- ------------ --------- NET INCOME (LOSS) $(35,223) $ 2,596 $ (23,307) $ 20,711 $ (35,223) ======== ========= ========= ============ ========= Foreign currency translation adjustment (887) - - - (887) -------- --------- --------- ------------ --------- COMPREHENSIVE INCOME (LOSS) $(36,110) $ 2,596 $ (23,307) $ 20,711 $ (36,110) ======== ========= ========= ============ ========= - ----------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
11 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME Six Months Ended June 30, 1997 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- (Unaudited) GROSS REVENUE $ 223 $ 278,511 $ 228,809 $ - $ 507,543 Subcontract and direct material costs (301) (192,273) (102,244) - (294,818) Equity in income of joint ventures and affiliated companies and subsidiaries 21,209 - 1,092 (21,467) 834 ------- --------- --------- -------- --------- SERVICE REVENUE 21,131 86,238 127,657 (21,467) 213,559 OPERATING EXPENSES Operating expenses 11,182 75,310 108,338 - 194,830 Depreciation and amortization 1,143 583 3,016 - 4,742 ------- --------- --------- -------- --------- OPERATING INCOME 8,806 10,345 16,303 (21,467) 13,987 OTHER INCOME (EXPENSE) Interest income 399 354 309 (46) 1,016 Interest expense (9,143) (25) (30) 41 (9,157) ------- --------- --------- -------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 62 10,674 16,582 (21,472) 5,846 Income tax provision (benefit) 12 2,071 3,217 (4,166) 1,134 ------- --------- --------- -------- --------- INCOME BEFORE MINORITY INTERESTS 50 8,603 13,365 (17,306) 4,712 Minority interests in net income of subsidiaries - 4,662 - - 4,662 ------- --------- --------- -------- --------- NET INCOME $ 50 $ 3,941 $ 13,365 $(17,306) $ 50 ======= ========= ========= ======== ========= Foreign currency translation adjustment (438) - - - (438) ------- --------- --------- -------- --------- Comprehensive Income (Loss) $ (388) $ 3,941 $ 13,365 $(17,306) $ (388) ======= ========= ========= ======== ========= - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 12 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME Three Months Ended June 30, 1998 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- (Unaudited) GROSS REVENUE $ 772 $ 155,727 $155,513 $ - $ 312,012 Subcontract and direct material costs (105) (117,629) (89,723) - (207,457) Provision for contract loss - - (40,000) - (40,000) Equity in income of joint ventures and affiliated companies and subsidiaries (42,704) - 1,882 42,229 1,407 -------- --------- -------- ------------ --------- SERVICE REVENUE (42,037) 38,098 27,672 42,229 65,962 OPERATING EXPENSES Operating expenses 5,199 33,598 61,089 - 99,886 Depreciation and amortization 595 112 1,389 - 2,096 -------- --------- -------- ------------ --------- OPERATING INCOME (47,831) 4,388 (34,806) 42,229 (36,020) OTHER INCOME (EXPENSE) Interest and investment income 50 76 251 58 435 Interest expense (4,830) (50) (6) (53) (4,939) -------- --------- -------- ------------ --------- INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS, AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (52,611) 4,414 (34,561) 42,234 (40,524) Income tax provision (benefit) (16,943) 1,685 (10,765) 13,127 (12,896) -------- --------- -------- ------------ --------- INCOME BEFORE MINORITY INTERESTS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (35,668) 2,729 (23,796) 29,107 (27,628) Minority interests in net income of subsidiaries - 2,013 27 - 2,040 -------- --------- -------- ------------ --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (35,668) 716 (23,823) 29,107 (29,668) Cumulative effect of accounting change, net of tax - - 6,000 - 6,000 -------- --------- -------- ------------ --------- NET INCOME (LOSS) $(35,668) $ 716 $(29,823) $ 29,107 $ (35,668) ======== ========= ======== ============ ========= Foreign currency translation adjustment (1,441) - - - (1,441) -------- --------- -------- ------------ --------- COMPREHENSIVE INCOME (LOSS) $(37,109) $ 716 $(29,823) $ 29,107 $ (37,109) ======== ========= ======== ============ ========= - ---------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
13 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME Three Months Ended June 30, 1997 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------- -------------------- (Unaudited) GROSS REVENUE $ (234) $118,126 $123,694 $ - $ 241,586 Subcontract and direct material costs (127) (72,621) (59,804) - (132,552) Equity in income of joint ventures and affiliated companies and subsidiaries 11,884 - 1,032 (12,369) 547 ------- -------- -------- -------- --------- SERVICE REVENUE 11,523 45,505 64,922 (12,369) 109,581 OPERATING EXPENSES Operating expenses 6,373 39,099 54,347 - 99,819 Depreciation and amortization 602 290 1,481 - 2,373 ------- -------- -------- -------- --------- OPERATING INCOME 4,548 6,116 9,094 (12,369) 7,389 OTHER INCOME (EXPENSE) Interest income 309 228 158 (18) 677 Interest expense (4,855) 54 (21) 18 (4,804) ------- -------- -------- -------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 2 6,398 9,231 (12,369) 3,262 Income tax provision (benefit) (1) 1,130 1,600 (2,163) 566 ------- -------- -------- -------- --------- INCOME BEFORE MINORITY INTERESTS 3 5,268 7,631 (10,206) 2,696 Minority interests in net income of subsidiaries - 2,693 - - 2,693 ------- -------- -------- -------- --------- NET INCOME $ 3 $ 2,575 $ 7,631 $(10,206) $ 3 ======= ======== ======== ======== ========= Foreign currency translation adjustment 1,031 - - - 1,031 ------- -------- -------- -------- --------- COMPREHENSIVE INCOME (LOSS) $ 1,034 $ 2,575 $ 7,631 $(10,206) $ 1,034 ======= ======== ======== ======== ========= - ---------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
14 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended June 30, 1998 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor International, Inc. Company Guarantors Subsidiaries Eliminations Consolidated ----------- ----------- -------------- ------------ -------------------- (Unaudited) Net Cash Provided by (Used in) Operating Activities $ (4,616) $(5,740) $(11,038) $ - $(21,394) -------- ---------- ------------- ------------ -------- INVESTING ACTIVITIES Purchases of fixed assets (814) (6) (1,726) - (2,546) Cash acquired from (invested in) subsidiary acquisitions - - 3,759 - 3,759 Sale of subsidiaries and/or investments - - 2,400 - 2,400 -------- ---------- ------------- ------------ -------- Net Cash Used in Investing Activities (814) (6) 4,433 - 3,613 -------- ---------- ------------- ------------ -------- FINANCING ACTIVITIES Borrowings under credit facility 76,500 - - - 76,500 Principal payments on credit facility (66,000) - - - (66,000) Distribution of income to minority interest - (3,489) - - (3,489) Proceeds from issuances of common stock 86 - - - 86 -------- ---------- ------------- ------------ -------- Net Cash Used in Financing Activities 10,586 (3,489) - - 7,097 -------- ---------- ------------- ------------ -------- Effect of Exchange Rate Changes on Cash - - (887) - (887) -------- ---------- ------------- ------------ -------- Increase (Decrease) in Cash and Cash Equivalents 5,156 (9,235) (7,492) - (11,571) Cash and Cash Equivalents at Beginning of Period (5,665) 10,258 14,605 - 19,198 -------- ---------- ------------- ------------ -------- Cash and Cash Equivalents at End of Period $ (509) $ 1,023 $ 7,113 $ - $ 7,627 ======== ========== ============= ============ ======== - ---------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
15 ICF Kaiser International, Inc. and Subsidiaries CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended June 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 $ 23,531 $(5,454) $(15,972) $ (6) $ 2,099 -------- ---------- ------------- ------------ -------- INVESTING ACTIVITIES Purchases of fixed assets (1,382) (17) (1,284) - (2,683) Cash acquired from (invested in) subsidiary acquisitions - (13) (332) - (345) Sale of subsidiaries and subsidiary assets - - 16,540 - 16,540 -------- ---------- ------------- ------------ -------- Net Cash Used in Investing Activities (1,382) (30) 14,924 - 13,512 -------- ---------- ------------- ------------ -------- FINANCING ACTIVITIES Borrowings under credit facility 38,000 - - - 38,000 Principal payments on credit facility (53,000) - - - (53,000) Distribution of income to minority interest - (3,950) - - (3,950) Proceeds from issuances of common stock 109 - - - 109 Repurchases of common stock (252) - - - (252) Debt issuance costs (277) - (209) - (486) -------- ---------- ------------- ------------ -------- Net Cash Used in Financing Activities (15,420) (3,950) (209) - (19,579) -------- ---------- ------------- ------------ -------- Effect of Exchange Rate Changes on Cash (142) - (296) - (438) -------- ---------- ------------- ------------ -------- Increase (Decrease) in Cash and Cash Equivalents 6,587 (9,434) (1,553) (6) (4,406) Cash and Cash Equivalents at Beginning of Period (7,720) 12,210 12,765 (494) 16,761 -------- ---------- ------------- ------------ -------- Cash and Cash Equivalents at End of Period $ (1,133) $ 2,776 $ 11,212 $(500) $ 12,355 ======== ========== ============= ============ ======== - ---------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements.
16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW As first discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, the Company continues to have difficulty performing several fixed-price contracts involving the construction of plants to produce nitric acid (the Nitric Acid Projects). Initially, management believed that the cost overruns would be limited to only one of the several contracts and recorded a charge in December 1997 to record an estimated $2 million loss at completion and to reverse all profit recognized theretofore on this one project. During the second quarter of 1998, however, it became apparent that several other contracts faced similar cost overruns and that significant liabilities for liquidated damages could be imposed by the contracts if scheduled completion dates were missed. After careful review of all of the contracts and the potential liabilities, the Company recorded a charge of $40 million during the three months ended June 30, 1998 to establish a reserve that is primarily intended to cover its estimate of the total contract cost overruns it expects to incur prior to completing these projects. The Company is now using the resources of its wholly owned, recently acquired, construction subsidiary to manage the completion of the Nitric Acid Projects, and these projects will receive the internal resources necessary to reduce additional risks. Apart from the reserve, these loss projects also had a negative impact on the remainder of the Company's results of operations. Collectively during the six months ended June 30, 1998, these projects generated over $47.2 million in gross revenue without any contribution to operating margins. Subsequent to the end of the second quarter, the Board of Directors established a special committee to review alternatives for its Consulting Group in order to realize the significant value perceived therein which may not be fully recognized and reflected in the Company's total valuation and to consider strategic alternatives for the Company as a whole. Contributing favorably to the Company's performance during 1998 has been the acquisition, effective on January 1, 1998, of the former ICT Spectrum Constructors, Inc. (now ICF Kaiser Advanced Technology, Inc.), a contractor based in Boise, Idaho, specializing in construction management of fabrication plants and other facilities for semiconductor and microelectronics customers. The transaction was completed on March 17, 1998. Due to the magnitude of the effect of the adjustments recorded during the three months ended June 30, 1998 for the above referenced overruns, many of the analyses contained in the following sections have been adjusted to focus on the results of the Company's other operations. RESULTS OF OPERATIONS Gross Revenue (1) - ------------- The Company's gross revenue by operating group for the three and six months ended June 30, 1998 and 1997 is as follows (in millions):
Three Months Ended June 30 Six Months Ended June 30 ------------------------------------------------------------------ 1998 1997 Change 1998 1997 Change ------ ------ ------ ------ ------ ------ Environment and Facilities Management (EFM) $174.6 $134.1 30% $338.6 $312.7 8% Engineering and Construction (E&C) 110.8 86.3 28% 228.3 152.4 50% Consulting 27.0 23.8 13% 52.4 46.0 14% Other, net (0.4) (2.7) - (2.0) (3.6) - ------ ------ -- ------ ------ -- Total $312.0 $241.5 29% $617.3 $507.5 22% ====== ====== == ====== ====== ==
(1) 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. 17 Gross revenue for the three and six months ended June 30, 1998 increased by $70.5 million and $109.8 million, respectively, compared to the same periods in 1997. The Company's new construction subsidiary, ICF Kaiser Advanced Technology, Inc. (formerly ICT Spectrum), acquired effective January 1, 1998 (within E&C) generated $26.7 million and $64.5 million in gross revenue for the three and six months respectively. The Rocky Flats contract performed by Kaiser-Hill (within EFM), comprised the majority of the remaining increase with growth of $38.8 million and $24.8 million, for the three and six months respectively. The remaining increase in gross revenue for the six months ended June 30, 1998 of $20.5 million versus the same period in 1997 was primarily a composite of the following results: . $47.2 million in 1998 gross revenue was recognized on the Nitric Acid Projects versus $15.0 million in 1997 . a decrease of $10.3 million in gross revenue generated from the Nova Hut project in 1998 versus 1997 . an increase of $5.2 million in revenue from all other international business in 1998 versus 1997 . a $6.4 million increase in gross revenue generated from the Consulting Group operations in 1998 over 1997 (excluding the impact, if any, of any adjustments that may be recognized within the year for changes in rates used to recover indirect expenses from government customers) . a combination of other decreases of $13.0 million from 1997 to 1998 due to the completion of underlying projects The Company's total contract backlog at June 30, 1998 was essentially unchanged from that as of December 31, 1997 and March 31, 1998. Service Revenue (1) - --------------- The Company's service revenue by operating group for the three and six months ended June 30, 1998 and 1997 is as follows (in millions):
Three Months Ended Six Months Ended June 30 June 30 --------------------------------------- ------------------------------------ 1998 (2) 1997 (2) Change 1998 (2) 1997 (2) Change ------ -- ------ -- ------ ------ -- ------ -- ------ Environment and Facilities Management (EFM) $ 48.2 28% $ 55.8 42% -14% $ 96.7 29% $108.3 35% -11% Engineering and Construction (E&C) (4.7) -4% 35.4 41% -113% 33.2 15% 67.9 45% -51% Consulting 20.9 77% 18.2 76% 15% 40.8 78% 35.9 78% 14% Equity in income of joint ventures and affiliated companies 1.4 - 0.5 - 180% 2.4 - 0.8 - 200% Other, net 0.1 - (0.3) - - 0.1 - 0.7 - - ------ -- ------ -- ---- ------ -- ------ -- ---- $ 65.9 21% $109.6 45% -40% $173.2 28% $213.6 42% -19% ====== == ====== == ==== ====== == ====== == ==== Adjusted for all effects of the Nitric Acid Projects $103.9 37% $108.0 46% -4% $208.0 36% $210.5 43% -1% ====== == ====== == ==== ====== == ====== == ==== Adjusted for the effects of acquisitions and the Nitric Acid projects $101.6 39% $108.0 46% -6% $203.0 40% $210.5 43% -4% ====== == ====== == ==== ====== == ====== == ====
(1) Service revenue is derived by deducting the costs of subcontracted services and materials from gross revenue and adding the Company's share of the equity in income of unconsolidated joint ventures and affiliated companies. (2) This column reflects each operating group's service revenue as a percentage of its gross revenue. Service revenue decreased by $43.7 million and $40.4 million for the three and six months ended June 30, 1998, respectively, as compared to the same periods in 1997. The majority of the decrease was due to the $40 million loss reserve established primarily to cover estimated cost overruns on the Nitric Acid Projects. The Company is 18 vigorously pursuing claims it believes are justified against various parties. Through June 30, 1998, the Company had recognized revenue from certain claims totaling $3.1 million and deferred recognition of further claims in the financial statements. No amounts have yet been collected from the recognized claims. Although management believes that adequate provision for loss reserves for these fixed-price contracts has been reflected in the financial statements, no assurance can be given that the full amount of the claims will be realized or that the loss provision is entirely adequate. Service revenue from the Rocky Flats contract decreased by $7.6 million and $8.5 million for the three and six months respectively, as compared to 1997. This decrease is attributable to increased spending for subcontracted services in addition to anticipated lower profits to be recognized in 1998 versus 1997. These decreases were somewhat offset by $2.3 million and $5.0 million increases for the three and six months, respectively, in service revenue generated by the 1998 acquisition of ICF Kaiser Advanced Technology. Increases for both the three- and six-month periods in service revenue from the Consulting Group paralleled the increases in the related gross revenue. Equity in income from joint ventures and affiliated companies increased by $0.9 million and $1.6 million, for the three and six months respectively, due primarily to a joint venture contract awarded in late 1997 for an alumina refinery expansion project in Australia. Service revenue as a percentage of gross revenue decreased to 21% and 28% for the three and six months ended June 30, 1998, respectively, compared to 45% and 42% for the same periods in 1997. The decrease is largely attributable to the results of the Nitric Acid Projects as well as the reserve for related contract overruns. In addition to the $40 million reserve for project overruns, the Projects generated gross revenue of $27.4 million and $47.2 million in the three- and six-month 1998 periods, respectively, without generating any service revenue as a result of the projected losses at completion. Additionally, ICF Kaiser Advanced Technology's 8% service revenue margins are significantly lower than the percentage for the remainder of the Company. The general construction contractor nature of ICF Kaiser Advanced Technology's business involves the subcontracting of major portions of most prime contracts. As a result, service revenue as a percentage of gross revenue for the Company as a whole will likely decrease in the future as this business grows. In March 1998, the Company entered into a $187 million maximum price contract for the construction of a ship construction facility. The Company subsequently learned that the costs used by the Company and the customer as the basis for negotiation of the contract were approximately $30 million lower than the actual costs to perform the contract as reflected in proposed actual subcontracts. After learning of this mutual mistake, the Company advised the customer that it is not required to perform the contract in accordance with its terms. Negotiations with the customer resulted in an interim agreement under which both parties reserved their rights and, on a day-to-day basis, the Company is overseeing activities at the site but is not entering into subcontracts in its name. No separate provision for any losses on this contract, apart from the $40 million charge explained above, had been included in the Company's financial results to date as management believes that it does not have sufficient information to reasonably estimate the settlement outcome at this time. The Company did, however, recognize $1.8 million in revenue and cost during the three months ended June 30, 1998 for services performed pursuant to the terms of the interim agreement. Operating Expenses - ------------------ To analyze operating expenses as a percentage of service revenue, shown below, service revenue has been adjusted to exclude the effects of the Nitric Acid Projects for all periods presented. 19
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1998 1997 1998 1997 ----- ----- ----- ----- Service Revenue (1) 100% 100% 100% 100% Operating Expenses Direct labor and fringe benefits 66% 66% 65% 67% Group overhead (2) 22% 20% 21% 20% Corporate general and administrative (3) 5% 5% 5% 5% Restructuring charge 1% 0% 1% 0% Depreciation and amortization 2% 2% 2% 2% --- --- --- --- Operating Income 4% 7% 6% 6% === === === ===
(1) Service revenue has been adjusted to exclude the 1998 and 1997 effects of the Nitric Acid Projects. (2) Group overhead represents those general and administrative costs incurred by the Company's operating groups for which an indirect benefit is generally not derived by any other operating group. (3) Corporate general and administrative expenses consists of costs incurred by the Company which provide some indirect benefit to all operating groups. The acquisitions of ICF Kaiser Advanced Technology added direct labor and fringe benefits expense of $1.6 million and $3.1 million during the three and six months ended June 30, 1998, respectively. Apart from acquired direct labor growth, all other direct labor spending remained at levels in 1998 that were similar to levels in both the three- and six-months periods in 1997. Group overhead increased by $1.1 million, or 5%, and $3.4 million, or 8%, during the three and six months ended June 30, 1998, respectively, compared to the same periods in 1997 (the information presented herein includes a correction of a reclassification of certain 1997 group overhead amounts; the information presented in the Company's July 24, 1998 press release on this issue has been superseded). The 1998 group overhead increase reflects the inclusion of $0.5 million and $1.0 million in general and administrative costs incurred by ICF Kaiser Advanced Technology during the three and six month periods, respectively; a $0.7 million charge in the first quarter of 1998 to establish reserves for contingencies; and lastly, a combination of other increases in marketing and administrative expenses which were not incurred at similar levels during the first three and six months in 1997. Group overhead is likely to continue to increase in the near term as the Company invests in areas designed to improve existing project controls and contracting processes as discussed above. Corporate general and administrative expense decreased by $0.7 million, or 12%, and $1.0 million, or 9%, during the three and six months ended June 30, 1998, respectively compared to the same periods in 1997. These decreases contributed to corporate general and administrative expense maintaining a consistent 5% of total service revenue (service revenue as adjusted for the effects of the Nitric Acid Projects) for all financial statement periods presented. The Company recorded a $1.5 million charge for the costs of legal and organizational changes necessary for the disposition of the Consulting Group. Interest Expense - ---------------- Interest expense increased $0.1 million, or 3%, and $0.6 million, or 7%, during the three and six months ended June 30, 1998 compared to the same periods in 1997. Included in interest expense during the first quarter of 1997 was a reduction of expense of $0.4 million reflecting the favorable resolution of a foreign income tax matter. Apart from this non-recurring interest credit, interest expense has increased due to net increases in outstanding cash borrowings from the Company's revolving credit facility. Income Tax Expense - ------------------ During the three months ended June 30, 1998, the Company recognized an additional deferred tax asset of $18.1 million, primarily as a result of recording reserves for losses which may be incurred on certain fixed-price contract overruns. The Company did not record any additional valuation allowance for any of the net deferred tax assets 20 carried on the balance sheet now totaling $33.4 million. Management believes that through the combination of expected levels of pretax operating earnings and, more significantly, a tax-planning strategy, that would, if necessary, be implemented to accelerate taxable amounts, it will be able to utilize all deferred tax assets generated from net operating losses. As permitted by Statement of Financial Accounting Standard No. 109 - Accounting for Income Taxes, tax-planning strategies are alternatives that can be used to provide evidence of the likelihood of future taxable income for purposes of evaluating the necessity of establishing valuation reserves against balances of deferred tax assets. The Company's tax-planning strategy involves the disposition of the Consulting Group operations for consideration that could result in taxable income sufficient enough to utilize the deferred tax assets. In the event that this tax-planning strategy is abandoned, the Company's ability to fully utilize the deferred tax assets could be reduced significantly and a valuation allowance against the asset would have to be recognized in the financial statements as a charge to income. Cumulative Effect of Accounting Change - -------------------------------------- In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued a Statement of Position 98-5 - Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires costs of organization and start-up activities to be expensed as incurred. Initial application of the SOP should be reported as the cumulative effect of a change in accounting principle, as described in Accounting Principles Board Opinion No. 20, Accounting Changes. The Company adopted the Statement effective April 1, 1998 and recognized a charge of $6 million, net of tax, as the cumulative effect of the adoption. The Company's quarterly amortization expense will likely be reduced by approximately $350,000 for each of the next several quarters because the cumulative charge includes items that were being amortized. Operating Outlook - ----------------- Adjusting the second quarter financial results to exclude the effects of the significant charges discussed above, the net income results for the quarter would have approximated a loss of $.05 per share. As a result of the second quarter developments, the Company expects to record significant expenses for severance costs and costs related to amending its revolving credit facility during the remainder of 1998. In addition, preliminary operating projections for the remainder of 1998 show no improvement in operating results when compared to the first six months of the year, excluding the significant charges discussed above. Furthermore, the Company does not believe that it will be able to recognize tax benefits on any net operating losses it may incur during the remainder of 1998. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1998, cash and cash equivalents decreased $11.6 million to $7.6 million. Operating activities used $21.4 million in cash (including $9.1 million in a semiannual interest payment made on June 30), investing activities provided $3.6 million in cash, and financing activities provided $7.1 million in cash. The effect of foreign currency exchange rate fluctuations also decreased the June 30 cash balance by $0.9 million. Operating Activities - --------------------- The Company's cash flow from operations decreased by $23.5 million during the six months ended June 30, 1998 compared to the same period in 1997. The decrease was due primarily to certain large commercial projects with provisions in the contract terms for milestone-based payments that had been received in prior periods, government contracts that require the Company to pay subcontractors prior to billing the federal government customer, and the Company subsequently experiencing slow payments on several of these growing federal contracts. 21 Investing Activities - -------------------- The acquisition of ICF Kaiser Advanced Technology, via an exchange of shares of common stock, brought $3.8 million in cash to the Company during 1998. Additionally, during the period ended June 30, 1998, the Company collected $2.4 million for the 1997 sale of its remaining minority investment in entities that own and operate a pulverized coal injection facility. The Company sold the majority of this investment in 1996 and collected $16.5 million of the sale price in the first quarter of 1997. Other uses of cash for investing purposes continue to consist of outlays for fixed assets, primarily software, computers and consulting expenditures necessary to complete the Company's implementation of a new financial system by the end of 1999. Financing Activities - -------------------- Net activity in revolving credit facility borrowings added $10.5 million in cash while payments for distributions of income to minority interests made in the six months ended June 30, 1998 used $3.5 million in cash. As of June 30, 1998, the Company had $14.5 million in cash borrowings, $23.5 million of performance letters of credit outstanding, and $17.8 million of additional credit available under the credit facility based on the amount of eligible receivables. The revolving credit facility contains a $25 million limit on cash borrowings. During the third quarter of 1998, the Company plans to add ICF Kaiser Advanced Technology as a Subsidiary Guarantor on its revolving credit facility. This addition is expected to increase the amount of eligible receivables and if completed on June 30 would have increased the then-available credit under the facility to $22 million. The Company is currently contractually obligated to issue an additional $8.5 million in letters of credit for its Nova Hut project during the third quarter of 1998. Lastly, on June 29, 1998 the receivables facility used by Kaiser-Hill, which was scheduled to expire on June 30, 1998, was renewed for another twelve months. Liquidity and Capital Resources Outlook - --------------------------------------- As a result of the significant charges recognized during the second quarter, the Company was not in compliance as of June 30, 1998 with certain financial covenants set forth in its revolving credit facility. The Company has requested an amendment to allow the Company to be in compliance with reestablished covenants. The Banks have informed the Company that they will continue to permit the Company to borrow and obtain letters of credit pursuant to the revolving credit facility while the Company's request is being considered. As of August 13, 1998, the Banks had not declared any Events of Default pursuant to the terms of the facility. Accordingly, the total amount of outstanding borrowings from the revolver as of June 30, 1998 of $14.5 million is classified as long-term debt on the balance sheet. Other than the covenant noncompliance, the Company is not aware of any violations of any other obligations under the facility. A copy of the letter agreement dated July 30, 1998 for the revolving credit facility is filed as an exhibit to this Form 10-Q. Management expects that the cost overruns as discussed above for the Nitric Acid Projects will require significant cash outlays over the next six to eight months. Management believes that projected levels of cash flows (including claims recoveries) and the availability of financing, including borrowings under the Company's revolving credit facility, will be adequate to fund the losses as well as projected levels of ongoing operations, including interest and retirement plan obligations. The additional borrowings and uses of cash from previously unutilized sources, including foreign sources, will increase the Company's cost of capital. In addition to the cash requirements of the Company's daily operations, the 1997 retirement plan contribution of $4.7 million is due on September 15, 1998 and a semiannual interest payment of $9.1 million is due on December 31, 1998 for the Series B Senior Notes and Senior Subordinated Notes. The Company expects to meet the retirement plan contribution and the interest obligation with either operating cash flows or borrowings under its revolving credit facility. If and when circumstances permit, the Company would consider redeeming the Series B Senior Notes and the Senior Subordinated Notes, both due in 2003, which, at the earliest, can be called on December 31, 1998. 22 The revolving credit facility limits the Company's ability to make acquisitions and other investments, and 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. Limitations imposed by the revolving credit facility and the Indentures mean that it will be necessary for the Company to obtain permission from its lenders in order to issue additional equity securities for the funding of any significant acquisitions and/or joint ventures. The amendment required to bring the Company into compliance with the revolving credit facility financial covenants may impose further restrictions on the Company. IMPACT OF NEW ACCOUNTING STANDARD In June 1997, the Financial Accounting Standards Board issued FASB Statement No. 131 - Disclosures about Segments of an Enterprise and Related Information. The Statement establishes standards for the way that public business enterprises report information about operating segments and requires that those enterprises report selected information about operating segments in interim financial reports. The Statement is effective for fiscal years beginning after December 15, 1997 and does not require application in interim financial statements in the initial year of adoption. Accordingly, the Company will adopt the Statement as part of its financial statements for the year ended December 31, 1998 and will not include disclosures in its 1998 interim financial statements. In February 1998, the Financial Accounting Standards Board issued FASB Statement No. 132 - Employers' Disclosures about Pensions and Other Postretirement Benefits. The Statement revised employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. The Statement is effective for fiscal years beginning after December 15, 1997. The Company will adopt the disclosure requirements in its financial statements for the year ended December 31, 1998. In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued a Statement of Position 98-5 - Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires costs of organization and start-up activities to be expensed as incurred. Initial application of the SOP should be reported as the cumulative effect of a change in accounting principle, as described in Accounting Principles Board Opinion No. 20, Accounting Changes. The Company adopted the Statement effective April 1, 1998. FORWARD-LOOKING STATEMENTS AND CERTAIN FACTORS AFFECTING ICF KAISER AND ITS BUSINESSES 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 to 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 the forward-looking statements which 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 may 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 may not be able to maintain existing contracts at their current levels and may not be able to realize the increased contract performance levels that it is assuming it will achieve under certain of these existing contracts. The Company is involved in a number of fixed price contracts under which the Company may benefit from cost savings, but if certain pricing and performance assumptions prove inaccurate, unrecoverable cost overruns can occur. 23 -- 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 the new markets it is targeting. General economic conditions in the international arena, especially Asia, could negatively impact the Company's current international business and its ability to expand into new international markets. -- the Company is very dependent on federal government contracts which are subject to annual funding approvals, which may be subject to cost audits, and which may be terminated at any time, with or without cause; a large number of federal government contracts are included in the Company's backlog number which means that the backlog number is not necessarily indicative of the future revenue of the Company; -- the Company may not be able to complete certain anticipated acquisitions and joint ventures, or if completed, these acquisitions and joint ventures may take more time to contribute to the Company's financial results than is currently assumed. The Company is highly leveraged and subject to restrictive covenants that limit its ability to fund potential acquisitions and joint ventures beyond certain levels established in its debt agreements. -- a large portion of the Company's business has been and is generated either directly or indirectly as a result of federal and state environmental laws, regulations, and programs; a reduction in the number or scope of these laws, regulations, or programs could materially affect the Company's business. In addition 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 may not be able to recognize the level of savings expected from its on-going cost cutting measures and cost control improvements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Applicable to the Company's filings of financial statements for fiscal years ending after June 15, 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, 1997. Item 2. Changes in Securities (a) None (b) None (c) None (d) Not applicable Item 3. Defaults Upon Senior Securities (a) See Management's Discussion and Analysis of Financial Condition and Results of Operations. (b) None 24 Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of the Company was held on Friday, May 1, 1998, at the headquarters of the Company, 9300 Lee Highway, Fairfax, VA 22031. The only matters voted on were (a) the election of four management- nominee directors, each to a three-year term expiring at the 2001 Annual Meeting of Shareholders and (b) the approval of the appointment of Coopers & Lybrand (now PriceWaterhouse Coopers) as the Company's independent public accountants for the fiscal year ended December 31, 1998. The number of votes cast for, against, or withheld, as well as the number of abstention and broker nonvotes for each of the above-described matters are set forth below:
Total Votes Total Votes Total Broker Total Votes For For (%) Withheld (*) Non-Votes --------------- ----------- ------------- ------------- 1. Election of Directors James O. Edwards 18,895,961 95.425% 905,887 0 Maynard H. Jackson, Jr. 19,280,312 97.366% 521,536 0 Keith M. Price 19,318,302 97.558% 483,546 0 Michael E. Tennenbaum 19,489,733 98.424% 312,115 0
Total Total Total Total Total Votes Votes Broker Votes Votes For For (%) Withheld(*) Non-Votes Abstain ----------- ------- ----------- --------- ------- 2. Approval of Independent Public Accountants 19,519,550 98.574% 174,018 0 108,280
(*) "Votes Withheld" means that the shareholder marked the box on his/her proxy card or ballot labeled "withheld." This vote total includes situations in which the shareholder wrote in the name of the individual director for whom he/she did not want to vote and situations in which the shareholder withheld his/her vote against all four management-nominees. 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. 10 Letter agreement dated July 30, 1998 for the revolving credit facility No. 21 Subsidiaries of the Registrant as of July 15, 1998 No. 27 Financial Data Schedule (b) Reports on Form 8-K None 25 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. ICF KAISER INTERNATIONAL, INC. (Registrant) Date: August 13, 1998 /s/ Timothy P. O'Connor ----------------------- Timothy P. O'Connor Senior Vice President, Acting Chief Financial Officer, and Treasurer (Duly authorized officer and principal financial officer) 26 EX-10 2 EXHIBIT 10 [FIRST UNION LETTERHEAD] Exhibit No. 10 July 30, 1998 ICF Kaiser International, Inc. and The Parties Listed on Schedule A hereto c/o ICF Kaiser International, Inc. 9300 Lee Highway Fairfax, VA 22031 Re: Amended and Restated Credit Agreement dated December 3, 1997 (the "Credit Agreement"), by and among (i) ICF Kaiser International, Inc. (the "Borrower"); (ii) certain Subsidiaries of the Borrower listed on Schedule A hereto (the "Subsidiary Guarantors"); (iii) First Union Commercial Corporation (the successor in interest to CoreStates Bank, N.A. and Signet Bank), National Bank of Canada and BankBoston, N.A. (collectively the "Banks"); and (iv) First Union Capital Markets, a division of Wheat First Securities, Inc., as agent (acting in such capacity as successor in interest to CoreStates Bank, N.A., and in such capacity herein referred to --------------------------- as the "Agent") --------------- To the Parties Addressed: The Agent and Banks have recently been advised that the Borrower and/or certain of the Guarantor Subsidiaries are experiencing significant cost overruns on certain projects (the "Overrun Projects"), and that as a consequence of such overruns, the Borrower is not in compliance with certain financial covenants set forth in the Credit Agreement. A condition precedent to additional advances pursuant to the Credit Agreement is that the Borrower is in compliance with all terms and provisions thereof, and the Borrower has requested the Agent and Banks to amend and/or waive certain provisions of the Credit Agreement so that the Borrower will be in compliance therewith. The Banks are considering such request, and in connection therewith the Agent has requested the Borrower to provide to the Banks certain financial and other information regarding the cost overruns and other business operations of the Borrower and its Subsidiaries. The Banks are willing to continue to advance funds pursuant to the Credit Agreement while they are considering the Borrower's request, provided that the Borrower and Subsidiary Guarantors execute this letter to acknowledge, agree, represent and warrant that (a) the Banks' further disbursement of Loan proceeds shall be in the sole discretion of the Banks, and any such disbursement shall not constitute a waiver of any rights and remedies available to the Banks or Agent pursuant to the Loan Documents or applicable law (including, without imitation, the right to (i) declare an Event of Default in accordance with the terms of the Loan Documents and/or (ii) withhold further disbursements of Loan proceeds); (b) the Borrower and Guarantors shall pay to the Agent on demand, and shall be jointly and severally liable for the payment of, any and all costs and expenses incurred by the Agent or any Bank in reviewing and/or evaluating the Borrower's request, the current and projected financial position and operations of the Borrower and/or any of the Subsidiaries, and/or the legal rights and remedies available to the Agent and Banks, including, without limitation, all costs, fees and expenses of (i) any and all environmental or other third party consultants engaged to review the Overrun Projects or any other aspect of the Borrower's or any Subsidiary's business or operations; (ii) the Agent's or any Bank's internal auditors; and (iii) the Agent's or any Bank's counsel; (c) there are no set-offs or defenses against any of the notes evidencing any Loan or any other Loan Document; (d) all of the Loan documents remain unmodified and in full force and effect, and are hereby expressly approved, ratified and confirmed; and (e) the execution and delivery of this letter agreement by the Borrower and Subsidiary Guarantors, and the performance by the Borrower and Subsidiary Guarantors of their respective obligations set forth herein are within their respective corporate powers, have been duly authorized by all necessary corporate action, and do not require the consent or approval of any other person or entity. All capitalized terms which are used but not defined herein shall have the meaning attributed to such terms in the Credit Agreement. If the foregoing correctly sets forth our understanding, please below execute and return a copy of this letter. Very truly yours,
First Union Capital Markets, a division of Wheat First Securities Inc., Agent By: /s/ Chris R. Hetterly Accepted and Agreed to: BORROWER: ICF KAISER INTERNATIONAL, INC. BY: /s/ James O. Edwards TITLE: Chairman and Chief Executive Officer ACCEPTED AND AGREED TO: SUBSIDIARY GUARANTORS: CLEMENT INTERNATIONAL CORPORATION EXCELL DEVELOPMENT CONSTRUCTION, INC. By: /s/ Timothy P. O'Connor BY: /s/ Timothy P. O'Connor Title: Assistant Treasurer TITLE: Assistant Treasurer HENRY J. KAISER COMPANY ICF INCORPORATED By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer ICF INFORMATION TECHNOLOGY, INC. ICF KAISER ENGINEERS (CALIFORNIA) CORPORATION BY: /s/ Timothy P. O'Connor BY: /s/ Timothy P. O'Connor TITLE: Assistant Treasurer TITLE: Assistant Treasurer ICF KAISER ENGINEERS CORPORATION ICF KAISER ENGINEERS GROUP, INC. By: /s/ Timothy P. O'Connor BY: /s/ Timothy P. O'Connor Title: Assistant Treasurer TITLE: Assistant Treasurer ICF KAISER ENGINEERS MASSACHUSETTS, INC. ICF KAISER ENGINEERS, INC. BY: /s/ Timothy P. O'Connor BY: /s/ Timothy P. O'Connor TITLE: Assistant Treasurer TITLE: Assistant Treasurer
ICF KAISER GOVERNMENT PROGRAMS, INC. ICF KAISER HOLDINGS UNLIMITED, INC. BY: /s/ Timothy P. O'Connor BY: /s/ Timothy P. O'Connor TITLE: Assistant Treasurer TITLE: Assistant Treasurer ICF RESOURCES INCORPORATED ICF KAISER HANFORD COMPANY By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer CYGNA GROUP, INC ICF LEASING CORPORATION, INC. By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer KE SERVICES CORPORATION KE LIVERMORE, INC. By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer KAISER ENGINEERS AND CONSTRUCTORS, INC. KAISER ENGINEERS INTERNATIONAL, INC. By: /s/ Timothy P. O'Connor Title: Assistant Treasurer By: /s/ Timothy P. O'Connor Title: Assistant Treasurer SYSTEMS APPLICATIONS INTERNATIONAL, INC. TUDOR ENGINEERING COMPANY By: /s/ Timothy P. O'Connor Title: Assistant Treasurer By: /s/ Timothy P. O'Connor Title: Assistant Treasurer ICF KAISER NETHERLANDS B.V. CYGNA CONSULTING ENGINEERS AND PROJECT MANAGEMENT, INC. By its Managing Directors: ICF Kaiser Holdings Unlimited, Inc. By: /s/ Timothy P. O'Connor Represented by: Michael K. Goldman Title: Assistant Treasurer President Signature: /s/ Michael K. Goldman ICF Kaiser Engineers Eastern Europe, Inc. ICF KAISER/ GEORGIA WILSON, INC. Represented by: Paul Weeks, II Director & Secretary By: /s/ Timothy P. O'Connor Signature: /s/ Paul Weeks, II Title: Assistant Treasurer GLOBAL TRADE & INVESTMENT, INC. ICF KAISER ENGINEERS PACIFIC, INC. By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer
EDA, INCORPORATED ICF KAISER REMEDIATION COMPANY By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer ICF KAISER OVERSEAS ENGINEERING, INC. ICF KAISER EUROPE, INC. By: /s/ Timothy P. O'Connor By: /s/ Timothy P. O'Connor Title: Assistant Treasurer Title: Assistant Treasurer
EX-21 3 EXHIBIT 21 Exhibit No. 21 ICF KAISER INTERNATIONAL, INC. 9300 Lee Highway, Fairfax, Virginia 22031 (703) 934-3600 ICF Kaiser 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. CLEMENT INTERNATIONAL CORPORATION DELAWARE I. CYGNA GROUP, INC. DELAWARE II. Liability Risk Management, Inc. California I. EDA, INCORPORATED MARYLAND I. HBG HAWAII, INC. DELAWARE II. Silversword, Inc. (50%) Delaware III. Silversword Ltd. L.P. Delaware I. HBG INTERNATIONAL, INC. DELAWARE II. PyroCarbons, Ltd. (50%) Virginia I. ICF INCORPORATED DELAWARE II. ICF/EKO (63.0%) Russia I. ICF INFORMATION TECHNOLOGY, INC. DELAWARE II. Phase Linear Systems Incorporated Delaware I. ICF KAISER DEFENSE PROGRAMS, INC. DELAWARE II. Kaiser-Hill TERC Company, LLC (65%) Delaware I. ICF KAISER DEVELOPMENT CORPORATION, INC. DELAWARE II. Global Trade & Investment, Inc. Delaware I. ICF KAISER ENGINEERS GROUP, INC. DELAWARE II. Henry J. Kaiser Company Nevada II. ICF Kaiser Engineers, Inc. Ohio III. Henry J. Kaiser Company (Canada) Ltd. Canada III. ICF Kaiser Engineers & Builders, Inc. Delaware III. ICF Kaiser Engineers (California) Corporation Delaware III. ICF Kaiser Engineers Corporation New York III. ICF Kaiser Engineers of Michigan, Inc. Michigan III. ICF Kaiser International Planning & Design, Inc. Pennsylvania III. ICF Kaiser Overseas Engineering, Inc. Delaware III. ICF Kaiser Remediation Company Delaware III. Kaiser Engineers and Constructors, Inc. Nevada IV. ICF Kaiser Engenharia e Participagues Ltda. (99%) Brazil V. ICF Kaiser Construgues e Engenharia Ltda (99%) 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 Construgues e Engenharia Ltda (1%) Brazil
Current as of July 15, 1998 Page 1 of 3 IV. Kaiser Engineers (NZ) Ltd (1%) New Zealand IV. Kaiser Engineers Pty. Ltd. (50%) Australia V. ICF Kaiser Aluterv KFT Hungary V. ICF Kaiser Engineers Asia Pacific Pty Ltd India V. ICF Kaiser Engineers (Hong Kong) Pty Ltd Hong Kong V. ICF Kaiser Engineers (Singapore) Pte Singapore V. Kaiser Engineers (NZ) Limited (99%) New Zealand V. KWA Kenwalt Australia Pty Ltd (50%) Australia IV. Kaiser Ingenieria de Chile Limitada (51%) Chile III. Kaiser Engineers International, Inc. Nevada IV. ICF Pty. Ltd. (50%) Australia IV. ICF Kaiser Engenharia e Participagues Ltda.(1%) Brazil IV. ICF Kaiser Panama S.A. Panama IV. Kaiser Engenharia S.A. (50%) Portugal IV. Kaiser Engineers Pty. Ltd. (50%) Australia IV. Kaiser Ingenieria de Chile Limitada (49%) Chile 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. Kaiser Engenharia e Constructoes Limitada Brazil III. KE, Inc. Philippines III. KE Services Corporation Delaware II. International Waste Energy Systems, Inc. Delaware II. KE Livermore, Inc. Delaware II. LIFAC-North America Partnership (50%) Delaware I. ICF KAISER ENGINEERS MASSACHUSETTS, INC. DELAWARE I. ICF KAISER ENGINEERS PACIFIC, INC. NEVADA I. ICF KAISER EUROPE, INC. DELAWARE I. ICF KAISER / GEORGIA WILSON, INC. DELAWARE I. ICF KAISER GOVERNMENT PROGRAMS, INC. DELAWARE II. Kaiser-Hill Company, LLC (50%) Colorado III. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware II. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware I. ICF KAISER HANFORD COMPANY DELAWARE I. ICF 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. ICF Kaiser Engineers Eastern Europe, Inc. Delaware III. ICF Kaiser Netherlands B.V. (10%) Netherlands II. ICF Kaiser Hunters Branch Leasing, Inc. Delaware II. ICF Kaiser Netherlands B.V. (90%) Netherlands
Current as of July 15, 1998 Page 2 of 3 II. ICF Leasing Corporation, Inc. Delaware I. ICF KAISER SERVICIOS AMBIENTALES, S.A. DE C.V. (66 2/3%) MEXICO I. ICF KAISER TECHNOLOGY HOLDINGS, INC. DELAWARE II. ICF Kaiser Advanced Technology, Inc. Idaho III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico I. ICF RESOURCES INCORPORATED DELAWARE II. ICF R G.P. No. 1, Inc. Delaware II. Public/Private Policy Analysis, Inc. Delaware I. MONUMENT SELECT INSURANCE COMPANY VERMONT I. SYSTEMS APPLICATIONS INTERNATIONAL, INC. DELAWARE I. THE K.S. CRUMP GROUP, INC. DELAWARE I. TUDOR ENGINEERING COMPANY DELAWARE
Current as of July 15, 1998 Page 3 of 3 EX-27 4 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 7,627,000 0 303,265,000 8,332,000 0 348,949,000 49,172,000 38,099,000 433,475,000 273,992,000 151,745,000 0 0 241,000 (1,064,000) 433,475,000 0 617,268,000 0 586,693,000 0 41,516,000 9,760,000 (36,419,000) (11,747,000) (24,672,000) 0 0 6,000,000 (35,223,000) (1.47) (1.47) Excludes current portion of bonds, mortgages, 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.
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