-----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, E/PfVN4enMy6i/Lloj+1lui8Pa404aDtJ3OmIXJrc/I5Ub5QrcooHoEk2BaXHmns Mop0Xppk7mvvgoOKC1MLGg== 0000928385-99-003407.txt : 19991117 0000928385-99-003407.hdr.sgml : 19991117 ACCESSION NUMBER: 0000928385-99-003407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99755875 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 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, 1999 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 (IRS 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 November 4, 1999, there were 23,822,657 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, 1999 and December 31, 1998 3 Consolidated Statements of Operations Three and Nine Months Ended September 30, 1999 and 1998 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 and 1998 5 Notes to Consolidated Financial Statements 6-20 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. 21-33 Item 3 Quantitative and Qualitative Disclosures About Market Risk. 33 Part 11 - Other Information Item 1. Legal Proceedings. 33 Item 2. Changes in Securities. 33 Item 3. Defaults Upon Senior Securities. 33 Item 4. Submission of Matters to a Vote of Security Holders. 33 Item 5. Other Information. 33 Item 6. Exhibits and Reports on Form 8-K 33
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except shares)
- --------------------------------------------------------------------------------------------------------- September 30, December 31, 1999 1998 ------------- ------------ (Unaudited) Assets Current Assets Cash and cash equivalents $ 34,756 $ 15,248 Restricted cash 21,000 - Contract receivables, net 229,489 234,320 Prepaid expenses and other current assets 19,510 11,918 Deferred income taxes - 34,673 Net assets of discontinued operations - 65,862 -------- -------- Total Current Assets 304,755 362,021 -------- -------- Fixed Assets Furniture, equipment, and leaseholds 13,915 17,970 Less depreciation and amortization (10,934) (13,665) -------- -------- Total Fixed Assets 2,981 4,305 -------- -------- Other Assets Goodwill, net 19,244 23,323 Investments in and advances to affiliates 9,890 7,571 Capitalized software development costs 1,474 1,618 Notes receivable 6,550 - Other 9,970 12,745 -------- -------- Total Other Assets 47,128 45,257 Total Assets $354,864 $411,583 ======== ======== Liabilities and Shareholders' Equity (Deficit) Current Liabilities Debt currently payable $ - $ 30,729 Accounts payable 170,442 179,451 Accrued salaries and benefits 33,780 31,141 Other accrued expenses 24,325 36,865 Accrued interest 4,553 - Deferred revenue 6,282 36,847 Income taxes payable 3,356 2,147 -------- -------- Total Current Liabilities 242,738 317,180 Long-term Liabilities Long-term debt 137,851 137,488 Other 13,977 19,584 -------- -------- Total Liabilities 394,566 474,252 -------- -------- Commitments and Contingencies Minority Interest 5,422 449 Shareholders' Equity (Deficit) Preferred stock - - Common stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 23,822,657 and 24,257,828 shares 238 242 Additional paid-in capital 75,097 75,422 Notes receivable collateralized by common stock - (638) Accumulated deficit (117,518) (134,757) Accumulated other comprehensive income (loss) (2,941) (3,387) -------- -------- Total Shareholders' Equity (Deficit) (45,124) (63,118) -------- -------- Total Liabilities and Shareholders' Equity (Deficit) $354,864 $411,583 ======== ======== - ----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 3 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ----------------------- 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ (Unaudited) Gross Revenue $ 254,527 $ 234,928 $ 699,904 $ 754,896 Subcontract and direct material costs (184,280) (173,174) (505,220) (547,451) Provision for contract losses - (17,210) - (57,210) Equity in net income of unconsolidated subsidiaries 838 2,632 3,834 5,066 --------- --------- --------- ---------- Service Revenue 71,085 47,176 198,518 155,301 Operating Expenses Direct labor and fringe benefits 55,876 50,968 153,186 159,384 Selling, general and administrative 11,518 14,603 39,746 44,660 Depreciation and amortization 918 2,262 4,016 5,293 Severance and restructuring - 7,907 9,359 9,407 Other unusual charges - 7,672 1,335 7,672 --------- --------- --------- ---------- Operating Income (Loss) 2,773 (36,236) (9,124) (71,115) Other Income (Expense) Interest income 858 338 1,465 1,239 Interest expense (4,592) (5,141) (16,801) (14,901) --------- --------- --------- ---------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interest, Extraordinary (961) (41,039) (24,460) (84,777) Item and Cumulative Effect of Accounting Change Income tax (expense) benefit (238) 1,199 364 15,826 --------- --------- --------- ---------- Income (Loss) From Continuing Operations (1,199) (39,840) (24,096) (68,951) Before Minority Interest, Extraordinary Item and Cumulative Effect of Accounting Change Minority interest in net income of subsidiaries (2,118) (1,326) (6,323) (5,877) --------- --------- --------- ---------- Income (Loss) Before Discontinued Operations, (3,317) (41,166) (30,419) (74,828) Extraordinary Item and Cumulative Effect of Accounting Change Income (loss) from discontinued operations, net of tax - 2,875 2,157 7,314 Gain/(loss) on sale of discontinued operations, net of tax (2,556) - 46,199 - --------- --------- --------- ---------- Income (Loss) before Extraordinary Item and Cumulative Effect of Accounting Change (5,873) (38,291) 17,937 (67,514) Extraordinary item, net of tax - - (698) - --------- --------- --------- ---------- Income (Loss) before Cumulative Effect of Accounting Change (5,873) (38,291) 17,239 (67,514) Cumulative effect of accounting change, net of tax - - - (6,000) --------- --------- --------- ---------- Net Income (Loss) $ (5,873) $ (38,291) $ 17,239 $ (73,514) ========= ========= ======== ========= Basic and Diluted Earnings (Loss) Per Share: Continuing operations, net of tax $ (0.14) $ (1.70) $ (1.27) $ (3.10) Discontinued operations, net of tax (0.11) 0.12 2.02 0.30 Extraordinary item, net of tax - - (0.03) - Cumulative effect of accounting change, net of tax - - - (0.25) --------- --------- --------- ---------- $ (0.25) $ (1.58) $ 0.72 $ (3.05) ========= ========= ======== ========= Weighted average shares for basic earnings per share 23,823 24,206 23,927 24,082 Effect of dilutive stock options - - - - --------- --------- --------- ---------- Weighted average shares for diluted earnings per share 23,823 24,206 23,927 24,082 ========= ========= ======== ========= - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 4 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands, except per share amounts)
==================================================================================================================================== Nine Months Ended September 30, -------------------------------------- 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (Unaudited) Operating Activities Net income (loss) $ 17,239 $ (73,514) Adjustments to reconcile net income (loss) to net cash used in operating activities: Income from discontinued operations (2,157) (7,314) Gain loss on sale of discontinued operations (46,199) - Depreciation and amortization 4,016 5,293 Net change in provision for losses (27,904) 58,711 Extraordinary item 698 - Cumulative effect of accounting change 6,000 Provision for deferred income taxes 34,673 (17,757) Note receivable write-off 638 - Advances to joint ventures and affiliates in excess of equity in earnings (1,688) (2,038) Minority interest in net income of subsidiaries 6,323 5,877 Changes in operating assets and liabilities, net of acquisitions and dispositions: Contract receivables, net (17,513) (73,438) Prepaid expenses and other current assets (7,592) 997 Accounts payable and accrued expenses (11,464) 67,994 Deferred revenue (8,221) (5,689) Income taxes payable 1,209 257 -------- ------- Net Cash Used in Operating Activities (57,942) (34,621) -------- ------- Investing Activities Cash proceeds from investments in subsidiaries and affiliates - 3,570 Sales of subsidiaries and/or investments - 2,400 Net proceeds from sales of discontinued operations 135,316 - Purchases of fixed assets (659) (2,710) -------- ------- Net Cash Provided by Investing Activities 134,657 3,260 -------- ------- Financing Activities Borrowings under revolving credit facility 57,064 114,000 Principal payments on revolving credit facility (92,584) (97,500) Cash collateral for performance guarantees (21,000) - Change in book overdraft 1,195 (1,496) Distribution of income to minority interest - (1,500) Payments toward debt issuance/restructuring costs (1,996) - Net issuances (repurchases) of common stock 38 347 -------- ------- Net Cash (Used in ) Provided by Financing Activities (57,283) 13,851 -------- ------- Effect of Exchange Rate Changes on Cash 76 (283) --- ------- Increase (Decrease) in Cash and Cash Equivalents 19,508 (17,793) Cash and Cash Equivalents at Beginning of Period 15,248 20,020 -------- ------- Cash and Cash Equivalents at End of Period $ 34,756 $ 2,227 ======== ======= Supplemental cash flow information is as follows: Cash payments for interest $ 12,495 $ 9,798 Cash payments for income taxes 820 936 Non-cash transactions: Issuance of common stock 8,664 Reacquisition of common stock (337) (513) ====================================================================================================================================
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, 1998 balance sheet (derived from audited financial statements), are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's audited consolidated financial statements and footnotes thereto for the year ended December 31, 1998 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, 1998. Certain reclassifications have been made to the prior period financial statements to conform them to the presentation used in the September 30, 1999 financial statements. 2. Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding for the period. The assumed proceeds from the exercise of dilutive securities are used to purchase common stock at the average market price during the period. The difference between the number of shares assumed issued and the number of shares assumed purchased is added to the basic EPS denominator in order to derive the diluted EPS denominator. All of the Company's common stock equivalents have been excluded from the fully diluted EPS calculation as they are anti-dilutive. 3. Restructuring Plan In response to severe liquidity constraints and related side effects from substantial cost overruns incurred primarily in 1998 on four fixed price projects, management, along with the Board of Directors, developed a plan intended to restructure the Company. The plan was as follows: . To divest of operating units and reinvesting the funds into the Company to facilitate the completion of the problem projects and to provide working capital necessary to grow the retained business activities; . To reduce the Company's overhead cost structure that would remain after the divestiture of the operating units referenced above; . To revise the Company's debt and capital structure in order to eliminate barriers to securing new business and improve accessibility to new sources of working capital, and lastly, . To improve the profitability of and grow the retained operations. Elements of the plan were initiated as early as the third quarter of 1998 while the nitric acid projects were entering their final phases of completion. As summarized below, however, the majority of the progress made to date has come during the second and third quarters of 1999. Achievements toward each plan element are described below: Divesting of Operating Units As of June 30, 1999, the Company had completed the sales of two business segments. . Sale of the Environment and Facilities Management Group (EFM): On April 9, 1999, the Company sold the majority of the active contracts and investments, and transferred a substantial number of employees of EFM, to The IT Group, Inc. (IT) for a cash purchase price of $82 million, less $8 million which was retained by IT for EFM's working capital requirements. 6 . Sale of the Consulting Group: On June 30, 1999, the Company sold 90% of its Consulting Group to CM Equity Partners, L.P. and the Group's management for $64.0 million in cash and $6.6 million of interest-bearing notes. The Company retained a 10% ownership balance in the new and independent consulting company, now known as ICF Consulting Group, Inc. At that time, management recorded estimates of the net resulting gains. Prior to finalizing its reported results for the year ended December 31, 1999, management will address the need for changes to those initial estimates. The combined pre- divestiture net financial position and operating results of the two segments have been presented in the accompanying financial statements as discontinued operations for the entire nine-month period. All prior period financial information has also been restated to conform to the current presentation. Reducing Overhead and Improving Profitability The restructuring plan includes actions to realign and reduce the Company's post-divestiture cost structure such that the remaining levels are appropriate for its continuing operations. Elements of the cost reduction plan include an approximate 25% personnel reduction in the Company's wholly-owned North American operations, downsizing facilities, closing of marginally profitable office locations, discontinuing certain business offerings, improving direct labor utilization on projects and enhancing project controls to minimize risks of future contract losses. Because of certain centralized aspects of the Company's organization structure that existed prior to completing the divestitures discussed above, the cost reduction elements of this phase of the plan could not begin effectively until after the divestitures were completed. The initial results of the rightsizing are reflected in the Company's operating results for the three months ended September 30, 1999, demonstrated by the reduction of selling, general and administrative expenses for the 1999 quarter by over $12.3 million on an annualized basis compared to the same quarter in 1998. Based on its attained run rate of selling, general and administrative expenses for the single month of September and also on the estimated effects of its remaining cost reduction initiatives, the Company expects to be able to demonstrate an annualized savings of over $20 million by the end of 1999 when compared to pre-restructuring levels. In connection with the actions taken to effect current and future administrative cost savings, the Company recorded a charge for severance and restructuring costs of $9.4 million during the second quarter of 1999. Components of the charge included $4.5 million for severance and related matters, $1.6 million for the write-off of goodwill associated with the discontinuance of operations from a prior acquisition, a $2.2 million write-down reflective of the carrying value impairment of certain long-term investments, and a $1.1 million charge for anticipated sublease losses incurred as a result of office downsizing. These cost reduction efforts, together with an increased focus on risk mitigation and effective resource allocation, are aimed at improving the profitability of the Company's remaining operations. The Company is committed to maintaining proper management controls and the processes necessary to deliver high-quality, profitable projects throughout its operations. Revising the Capital Structure On October 6, 1999, the Company used proceeds from its recently completed asset sales to repurchase $14.0 million of its $15.0 million in outstanding Senior Notes for 88% of their face value. The Company also paid the accrued interest on the related notes. On September 30, 1999, the Company reached a debt restructuring agreement in principle with the majority of the holders of its $125.0 million in Subordinated Notes. On or about October 1, 1999, the Company commenced an asset sale offer/exchange offer designed to restructure its $125.0 million Subordinated Notes. By November 3, 1999, the Company had received notice of participation in the asset sale/exchange offer by the holders of approximately 99% of the principal amount of the outstanding notes. On November 4, 1999, the Company obtained the necessary approval of its common shareholders to be able to effect the proposed restructuring. The plan will consist of the following elements: . The cash repurchase of at least $35.0 million principal amount of the outstanding Subordinated Notes, plus interest accrued since July 1, 1999; . An exchange offer of the following for the balance of the outstanding Subordinated Notes: . The issuance of 2,600,000 million shares of redeemable convertible preferred stock. The preferred stock will have a liquidation preference equal to $65.0 million plus the amount of accrued interest since July 1, 1999. The preferred stock will pay quarterly dividends at the rate of 3.75% of the liquidation preference through 7 December 31, 2000 and 5.75% from January 1, 2001 through December 31, 2001. Thereafter, the dividend rate will be increased to 12%. The preferred stock will be convertible into common stock at the holders' option on or after December 31, 2001. The Company may redeem the preferred stock, at its option, at any time. The Company may attain varying degrees of discounts from the liquidation preference in the event that it redeems any portion of the preferred stock prior to December 31, 2001. . The issuance of up to $25.0 million in new unsecured Senior Notes. The new Senior Notes will mature on December 31, 2002. The Notes will pay interest, semi-annually, at an initial annual rate of 15%, reducing to 13.5% when the aggregate outstanding amount of the new Senior Notes falls below $15.0 million with additional incremental reductions in the rate based on principal reductions down to a minimum of 11%. . The issuance of common shares equivalent to approximately 15% of the Company's total common stock at the time of issuance. The consummation of this total debt restructuring plan remains conditioned on the Company's ability to secure a new revolving credit facility. Although the Company does not yet have a commitment for such a facility, it is involved in serious discussions with a leading commercial lender. The Company anticipates closing the entire remaining elements of the debt restructuring before December 31, 1999. 4. Revolving Credit Facility As of September 30, 1999, the Company had no revolving credit facility and was required to maintain $21.0 million in cash collateral to support letters of credit that had been issued under its former revolver. The terms of the Company's former revolving credit facility called for the proceeds of asset sales to be used to extinguish outstanding debt and to terminate the facility. Upon the sale of the EFM Group, the Company used $35.5 million in proceeds to extinguish outstanding borrowings. The Company then obtained an amendment to the revolver extending the facility, with similar restrictive financial covenants and a substantially reduced total borrowing capacity, until the earlier of June 30, 1999 or the completion of the Company's sale of its Consulting Group. The amendment required an additional $10.0 million of the EFM proceeds to cash collateralize a portion of its outstanding letters of credit previously secured by assets of the Company. Upon the closing of the sale of the Consulting Group on June 30, 1999, an additional $12.8 million of sale proceeds was required to cash collateralize the remaining amount of outstanding letters of credit. The facility was then terminated. Amendment fees totaling $1.0 million were included in interest expense during the second quarter of 1999. Unamortized debt issuance costs of $1.1 million associated with this facility, net of an income tax benefit of $0.4 million, were also expensed during the second quarter as an extraordinary item in the accompanying Statement of Operations. The Company did not make the semi-annual interest payment due on its Notes of $9.1 million on June 30, 1999, but did pay the interest in full on July 30, 1999 prior to the expiration of a 30-day grace period contained in the Note indentures. Kaiser-Hill has received a commitment from Bank of America for a new revolving credit facility which will provide for $35.0 million of revolving credit availability. The Kaiser-Hill facility will be secured by Kaiser-Hill's receivables and substantially all of its other assets. The Company and the other 50% owner of Kaiser-Hill, CH2M Hill Companies, Ltd., have agreed to cure certain defaults of Kaiser-Hill under this facility if and when they take place. 5. Segment Information The Company uses several segments for internal management reporting purposes. The segments are compiled based on the similarities in each of their underlying services, customers, and regulatory environments. The segment operating results represent all activities that were controllable by the respective segment business leaders and that had sole direct benefit to the respective segment. Operating activities that are deemed to benefit more than one segment are not managed by segment business leaders but are instead managed by the Company's corporate overhead structure and are not allocated to the segments. The accounting policies of the operating segments are the same as those described in the Company's summary of significant accounting policies. Continuing Business Segments: For purposes of providing segment information, the Company's continuing business segments are: 8 . the Engineers and Constructors Group (E&C), which provides engineering, construction management and project and program management services to commercial and federal, state, and local entities in the areas of transit and transportation, alumina and aluminum, facilities engineering and management, iron and steel and microelectronics and clean technology; . Kaiser-Hill Company, LLC (Kaiser-Hill), a 50% owned subsidiary, which serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. The Company, through a designated majority representation on Kaiser-Hill's board of managers, has a controlling interest in Kaiser-Hill and therefore consolidates Kaiser-Hill's results of operations with those of its only other remaining business segment, E&C. Although the Company has a controlling interest in Kaiser-Hill, as defined by generally accepted accounting principles, the subsidiary's operations are primarily directed by its own dedicated management team. Neither the management of the Company nor the management of the other 50% owner has an active role in Kaiser- Hill's day-to-day operations. After the completion of the divestitures discussed above, the financial information for Kaiser-Hill represents a substantial portion of many components of the Company's financial statements. Accordingly, management believes that a separate presentation of Kaiser-Hill's financial statements is meaningful in interpreting the financial results of the remaining core E&C operations. See Note 6 for the condensed financial statements of Kaiser-Hill Company, LLC. Financial data for the three and nine months ended September 30, 1999 for the continuing business segments are as follows (in thousands):
Kaiser-Hill E&C Total -------------------------- ----------------------- ----------------------- Three Nine Three Nine Three Nine 1999 Months Months Months Months Months Months - ---- --------- --------- -------- --------- --------- --------- Gross revenue.................................. $ 206,046 $ 516,343 $ 48,481 $ 183,561 $ 254,527 $ 699,904 Subcontracts and materials................... (161,710) (401,277) (22,570) (103,943) (184,280) (505,220) Equity in unconsolidated subsidiaries........ -- -- 838 3,834 838 3,834 --------- --------- -------- --------- --------- --------- Service revenue................................ 44,336 115,066 26,749 83,452 71,085 198,518 Operating expenses: Direct labor and fringe...................... 40,299 102,620 15,577 50,566 55,876 153,186 Selling, general and administrative (1)...... -- -- 11,518 39,746 11,518 39,746 Depreciation and amortization................ -- -- 918 4,016 918 4,016 Severance and restructuring.................. -- -- -- 9,359 -- 9,359 Other unusual charges........................ -- -- -- 1,335 -- 1,335 --------- --------- -------- --------- --------- --------- Segment operating income (loss)................ $ 4,037 $ 12,446 $ (1,264) $ (21,570) $ 2,773 $ (9,124) ========= ========= ======== ========= ========= ========= 1998 - ---- Gross revenue.................................. $ 184,461 $ 476,990 $ 50,467 $ 277,906 $ 234,928 $ 754,896 Subcontracts and materials................... (147,898) (369,213) (25,276) (178,238) (173,174) (547,451) Provision for contract losses................ -- -- (17,210) (57,210) (17,210) (57,210) Equity in unconsolidated subsidiaries........ -- -- 2,632 5,066 2,632 5,066 --------- --------- -------- --------- --------- --------- Service revenue................................ 36,563 107,777 10,613 47,524 47,176 155,301 Operating expenses: Direct labor and fringe...................... 33,708 95,820 17,260 63,564 50,968 159,384 Selling, general and administrative(1)....... -- -- 14,603 44,660 14,603 44,660 Depreciation and amortization................ -- -- 2,262 5,293 2,262 5,293 Severance and restructuring.................. -- -- 7,907 9,407 7,907 9,407 Other unusual charges........................ -- -- 7,672 7,672 7,672 7,672 --------- --------- -------- --------- --------- --------- Segment operating income (loss)................ $ 2,855 $ 11,947 $(39,091) $ (83,072) $ (36,236) $ (71,115) ========= ========= ======== ========= ========= =========
(1) All of Kaiser-Hill's cost are treated as direct costs of executing its DOE contract. 9 6. Condensed Financial Information for Kaiser-Hill Company, LLC Unaudited financial information for the 50%-owned, controlled and consolidated Kaiser-Hill is as follows (see Note 5): Balance Sheets - --------------
September 30, December 31, 1999 1998 -------------- ------------- Assets Cash and cash equivalents....................................................... $ 2,344 $ 3,644 Contract receivables, net....................................................... 166,310 127,163 -------- -------- Total Assets....................................................... 168,654 130,807 Liabilities Accounts payable................................................................ 137,102 115,730 Accrued salaries and benefits................................................... 19,196 12,666 -------- -------- Total Liabilities........................................................ 156,298 128,396 -------- -------- Commitments and contingencies................................................... Net Assets...................................................................... $ 12,356 $ 2,411 ======== ========
Income Statements - -----------------
Three Months ended Nine Months ended September 30, September 30, ----------------------------------- ----------------------------------- 1999 1998 1999 1998 --------------- --------------- --------------- --------------- Gross Revenue......................................... $ 206,046 $ 184,461 $ 516,343 $ 476,990 Subcontract and direct material costs............. (161,710) (147,898) (401,277) (369,213) --------- --------- --------- --------- Service Revenue....................................... 44,336 36,563 115,066 107,777 Operating Expenses.................................... Direct labor and fringe benefits.................. 40,299 33,708 102,620 95,820 --------- --------- --------- --------- Operating Income...................................... $ 4,037 $ 2,855 $ 12,446 $ 11,645 ========= ========= ========= ========= Minority's interest in Kaiser-Hill net income......... $ 2,018 $ 1,428 $ 6,223 $ 5,823 ========= ========= ========= ========= Company's interest in Kaiser-Hill net income.......... $ 2,019 $ 1,427 $ 6,223 $ 5,822 ========= ========= ========= =========
Statements of Cash Flows - ------------------------
For the nine months ended September 30, ----------------------------------------- 1999 1998 Operating Activities ---------------- -------------- Net Income........................................................................ $ 6,323 $ 5,823 Changes in operating assets and liabilities: Accounts receivable, net.................................................. (39,198) (75,249) Accounts payable and accrued expenses..................................... 31,575 48,603 -------- --------- Net cash provided by (used in) operating activities............................ (1,300) ( 20,823) -------- --------- Financing Activities (Distributions to) receipts from shareholders.................................. 0 2,392 -------- --------- Net cash (used in) provided by financing activities............................ 0 2,392 -------- --------- Increase in cash and cash equivalents............................................. (1,300) (18,431) Cash and cash equivalents at beginning of period.................................. 3,644 10,181 -------- --------- Cash and cash equivalents at end of period........................................ $ 2,344 $ (8,250) ======== =========
10 7. Contingencies Certain Contracts: In March 1998, the Company entered into a $187 million maximum price contract to construct a shipbuilding facility. The Company subsequently learned that estimated costs to perform the contract as reflected in actual proposed subcontracts were approximately $30 million higher than the cost estimates used as the basis for contract negotiation between the Company and the customer. After learning this, the Company advised the customer that it was not required to perform the contract in accordance with its terms. 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 continued to execute certain transitional on-site activities. The customer terminated the interim agreement with the Company effective August 14, 1998. In October 1998, the customer presented an initial draft of a claim against the Company requesting payment for estimated damages and entitlements pursuant to the terminated contract. The customer has also asserted a claim based on alleged differing site conditions that allegedly should have been identified by the Company. The Company and the customer discuss from time to time the customer's claims. No provision for loss for this matter has been included in the Company's financial results to date as management does not believe that it has sufficient information at this time to reasonably estimate the outcome as there has not yet been significant activity in the negotiation process. As a result of uncertainties surrounding the costs to complete large fixed-price contracts involving the construction of plants to produce nitric acid, in 1998 the Company established $66.0 million in reserves intended to cover its estimate of the related cost overruns. 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. Acquisition and Divestiture Contingencies: The ICF Kaiser common shares exchanged for the stock of ICT Spectrum in the March, 1998 acquisition carry the guarantee that the market value of each share of stock will reach $5.36 by March 1, 2001. In the event that the market value does not attain the guaranteed level, the Company is obligated to make up the shortfall either through the payment of cash or by issuing additional shares of common stock, or both, with a total value equal to the shortfall, depending upon the Company's preference. Pursuant to the terms of the agreement, however, the total number of contingently issuable shares of common stock cannot exceed an additional 1.5 million. Given that the quoted fair market value of the stock at September 30, 1999 was approximately $0.38 per share, the assumed issuance of an additional 1.5 million shares would not completely extinguish the purchase price contingency. Any future distribution of cash or common stock would be recorded as a charge to the Company's paid-in-capital. Until the earlier of the contingent purchase price resolution or March 1, 2001, any additional shares assumed to be issued because of shortfalls in fair market value will be included in the Company's diluted earnings per share calculations, unless they are antidilutive. The exchanged shares also contain restrictions preventing their sale prior to March 1, 2001. On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf of all others similarly situated, filed a class action lawsuit alleging false and misleading statements made in a private offering memorandum, and otherwise, in connection with the Company's acquisition of ICT Spectrum in 1998. The Company has filed a motion to dismiss the plaintiffs' amended complaint. In connection with the sales of the EFM and Consulting Groups completed in the second quarter of 1999, the Company has made commitments to indemnify the buyers of those businesses on certain matters, including, but not limited to amounts incurred, if any, relating to unfavorable settlements and outcomes from government audits. The Company has provided for estimates of such contingencies. Litigation, Claims and Assessments: In the course of the Company's normal business activities, various claims or charges have been asserted and litigation commenced against the Company arising from or related to properties, injuries to persons, and breaches of contract, as well as claims related to acquisitions and dispositions. Claimed amounts may not bear any reasonable relationship to the merits of the claim or to a final court award. In the opinion of management, adequate reserves have been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against the Company in such litigation. The continued adequacy of reserves is reviewed periodically as progress on such matters ensues. The Company may from time to time, either individually or in conjunction with other government contractors operating in similar types of businesses, be involved in U.S. government investigations for alleged violations of procurement or other federal laws and regulations. The Company currently is the subject of a number of U.S. government investigations and is cooperating with the responsible government agencies involved. No charges presently are known to have been filed against the Company by these agencies. The Company has provided for its estimate of the potential effect of these investigations, and the continued adequacy of reserves is reviewed periodically as progress on such matters ensues. 11 Prior to the divestitures of its EFM and Consulting Groups, the Company had a substantial number of cost-reimbursement contracts with the U.S. government, the costs of which are subject to audit by the U.S. government. As a result of pending audits related to fiscal years 1986 forward, the government has asserted, among other things, that certain costs claimed as reimbursable under government contracts either were not allowable or not allocated in accordance with federal procurement regulations. The Company is actively working with the government to resolve these issues. The Company has provided for its estimate of the potential effect of issues that have been quantified, including its estimate of disallowed costs for the periods currently under audit and for periods not yet audited. Neither the government nor the Company, however, has quantified many of the issues, and others are qualitative in nature, and their potential financial impact, 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 on such matters ensues. Contract warranties and performance guarantees: In the course of the Company's normal business activities, many of its contracts contain provisions for warranties and performance guarantees. As progress on contracts ensues, the Company regularly updates the estimates of the costs to perform such contingencies and reserves a proportionate amount of the total related contract value until such time as the contingency is resolved. 8. 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) which unconditionally guarantee the payment of the principal, premium, if any, and interest on the Company's Senior Subordinated Notes and Series B Senior Notes. The Subsidiary Guarantors are Cygna Consulting Engineers and Project Management, Inc; ICF Kaiser Government Programs, Inc; Systems Applications International, Inc; Global Trade & Investment, Inc; Kaiser Europe, Inc; ICF Kaiser/Georgia Wilson, Inc; ICF Kaiser Overseas Engineering, Inc; EDA Incorporated, Inc.; ICF Kaiser Engineers Pacific, Inc; ICF Kaiser Remediation Company; and ICF Kaiser Advanced Technology, Inc. ICF Kaiser Remediation Company was included in the sale of the EFM Group to IT on April 9, 1999, Systems Applications International, Inc. was included in the sale of the Consulting Group on June 30 and the majority of the assets of EDA Incorporated, Inc. were sold in an unrelated transaction on August 13, 1999 . Accordingly, these subsidiaries have been eliminated as guarantors effective with the closings of the respective sales. Condensed consolidating financial information for ICF Kaiser International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non-Guarantor Subsidiaries follow on pages 13-20. The information, except for the December 31, 1998 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. 12 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Balance Sheet September 30, 1999 (In thousands)
==================================================================================================================================== ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated -------- ---------- ------------- ------------ ------------ ------------------- Assets Current Assets Cash and cash equivalents $ 20,980 $ 4,125 $ 9,651 $ - $ - $ 34,756 Restricted cash 21,000 - - - - 21,000 Contract receivables, net (1,559) 169,277 61,771 - - 229,489 Intercompany receivables, net 171,721 15,489 (187,210) - - - Prepaid expenses and other current assets 8,836 1,719 8,955 - - 19,510 Deferred income taxes - - - - - - Net assets of discontinued operations - - - - - - --------- --------- -------- ------ --------- --------- Total Current Assets 220,978 190,610 (106,833) - - 304,755 --------- --------- -------- ------ --------- --------- Fixed Assets Furniture, equipment, and leaseholds 3,327 1,111 9,477 - - 13,915 Less depreciation and amortization (3,045) (998) (6,891) - - (10,934) --------- --------- -------- ------ --------- --------- 282 113 2,586 - - 2,981 --------- --------- -------- ------ --------- --------- Other Assets Goodwill, net - 4,514 14,730 - - 19,244 Investment in and advances to affiliates (101,228) 14 8,607 - 102,497 9,890 Capitalized software development costs 1,474 - - 1,474 Note Receivable 6,550 - - - - 6,550 Other 4,049 64 5,857 - - 9,970 --------- --------- --------- ------ --------- --------- (89,155) 4,592 29,194 - 102,497 47,128 --------- --------- -------- ------ --------- --------- Total Assets $ 132,105 $ 195,315 $ (75,053) $ - $ 102,497 $ 354,864 ========= ========= ========= ====== ========= ========= Liabilities and Shareholders' Equity Current Liabilities Debt currently payable $ - $ - $ - $ - $ - $ - Accounts payable and other accrued expenses 28,030 140,826 30,464 - - 199,320 Accrued salaries and employee benefits 1,716 20,398 11,666 - - 33,780 Other 7,183 (1,827) 4,282 - - 9,638 --------- --------- -------- ----- --------- --------- Total Current Liabilities 36,929 159,397 46,412 - - 242,738 Long-term Liabilities Long-term debt, less current portion 137,850 - 1 - - 137,851 Other 967 26 12,984 - - 13,977 --------- --------- -------- ------ --------- --------- Total Liabilities 175,746 159,423 59,397 - - 394,566 --------- --------- -------- ------ --------- --------- Minority Interests in Subsidiaries - 5,422 - - - 5,422 Shareholders' Equity Common Stock 227 8,179 116 - (8,284) 238 Additional Paid-in Capital 75,097 2,372 48,267 - (50,639) 75,097 Accumulated Earnings (Deficit) (118,965) 20,269 (180,242) - 161,420 (117,518) Other Equity - (350) (2,591) - - (2,941) --------- --------- -------- ------ --------- --------- Total Shareholders' Equity (43,641) 30,470 (134,450) - 102,497 (45,124) ---------- --------- --------- ------ --------- --------- Total Liabilities and Shareholders' Equity $ 132,105 $ 195,315 $ (75,053) $ - $ 102,497 $ 354,864 ========= ========= ========== ====== ========= =========
13 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Balance Sheet December 31, 1998 (In thousands)
- ----------------------------------------------------------------------------------------------------------------------------------- ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Company Guarantors Subsidiaries Operations Eliminations Inc. Consolidated --------- ------------ ------------- -------------- ------------- ------------------ (Unaudited) Assets Current Assets Cash and cash equivalents $ 2,414 $ 3,812 $ 9,041 $ (19) $ - $ 15,248 Contract receivables, net (5,283) 132,758 156,603 (49,758) - 234,320 Intercompany receivables, net 184,700 12,311 (197,011) - - - Prepaid expenses and other current assets 2,185 422 10,234 (923) - 11,918 Deferred income taxes 30,367 3,245 1,061 - - 34,673 Net assets of discontinued operations - - - 65,862 - 65,862 --------- ------------ ---------- ------------ ------------- ------------------ Total Current Assets 214,383 152,548 (20,072) 15,162 - 362,021 --------- ------------ ---------- ------------ ------------- ------------------ Fixed Assets Furniture, equipment, and leaseholds 4,589 1,495 37,912 (26,026) - 17,970 Less depreciation and amortization (4,040) (1,258) (32,113) 23,746 - (13,665) --------- ------------ ---------- ------------ ------------- ------------------ 549 237 5,799 (2,280) - 4,305 --------- ------------ ---------- ------------ ------------- ------------------ Other Assets Goodwill, net - 8,745 40,547 (25,969) - 23,323 Investment in and advances to affiliates (64,556) 14 6,494 (157) 65,776 7,571 Capitalized software development costs 4,296 766 (3,444) 1,618 Other 4,910 523 8,094 (782) - 12,745 --------- ------------ ---------- ------------ ------------- ------------------ (55,350) 9,282 55,901 (30,352) 65,776 45,257 --------- ------------ ---------- ------------ ------------- ------------------ Total Assets 159,582 $ 162,067 $ 41,628 $ (17,470) $ 65,776 $ 411,583 ========= ============ ========== ============ ============= ================== Liabilities and Shareholders' Equity Current Liabilities Debt currently payable $ 30,729 $ - $ - $ - $ - $ 30,729 Accounts payable and other accrued expenses 29,759 121,769 72,224 (7,436) - 216,316 Accrued salaries and employee benefits 7,818 13,690 16,423 (6,790) - 31,141 Other 1,910 1,176 39,072 (3,164) - 38,994 --------- ------------ ---------- ------------ ------------- ------------------ Total Current Liabilities 70,216 136,635 127,719 (17,390) - 317,180 Long-term Liabilities Long-term debt, less current portion 137,487 - 1 - - 137,488 Other 12,000 26 7,638 (80) - 19,584 --------- ------------ ---------- ------------ ------------- ------------------ Total Liabilities 219,703 136,661 135,358 (17,470) - 474,252 --------- ------------ ---------- ------------ ------------- ------------------ Minority Interests in Subsidiaries - 449 - - - 449 Shareholders' Equity Common Stock 230 8,179 121 - (8,288) 242 Additional Paid-in Capital 75,200 2,372 58,768 - (60,918) 75,422 Accumulated Earnings (Deficit) (134,913) 14,676 (149,502) - 134,982 (134,757) Other Equity (638) (270) (3,117) - - (4,025) --------- ------------ ---------- ------------ ------------- ------------------ Total Shareholders' Equity (60,121) 24,957 (93,730) - 65,776 (63,118) --------- ------------ ---------- ------------ ------------- ------------------ Total Liabilities and Shareholders' Equity $ 159,582 $ 162,067 $ 41,628 $ (17,470) $ 65,776 $ 411,583 ========= ============ ========== ============ ============= ==================
14 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Operations Nine Months Ended September 30, 1999 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser International, Parent Subsidiary Non-Guarantor Discontinued Elimi- Inc. Company guarantors Subsidiaries Operations nations Consolidated --------- ----------- ------------ ------------- -------- --------------- (Unaudited) Gross Revenue $ 3,524 $ 539,544 $ 240,599 $ (83,763) $ - $ 699,904 Subcontract and direct material costs (3,162) (414,072) (118,976) 30,990 (505,220) Equity in income of joint ventures and affiliated companies (30,826) - 6,812 - 27,848 3,834 -------- --------- --------- --------- ------- --------- Service Revenue (30,464) 125,472 128,435 (52,773) 27,848 198,518 Operating Expenses Operating expenses 7,714 109,097 124,405 (48,284) - 192,932 Depreciation and amortization 1,434 612 2,699 (729) 4,016 Severance and restructuring 4,424 1,599 3,336 9,359 Other unusual charges 1,335 - - - - 1,335 -------- --------- --------- --------- ------- --------- Operating Income (Loss) (45,371) 14,164 (2,005) (3,760) 27,848 (9,124) Other Income (Expense) Interest income 677 427 363 (2) - 1,465 Interest expense (16,593) (194) (16) 2 - (16,801) -------- --------- --------- --------- ------- --------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interest and Extraordinary Item (61,287) 14,397 (1,658) (3,760) 27,848 (24,460) Income tax (expense) benefit 933 255 (2,427) 1,603 - 364 -------- --------- --------- --------- ------- --------- Income (Loss) From Continuing Operations Before Minority Interest and Extraordinary Item (60,354) 14,652 (4,085) (2,157) 27,848 (24,096) Minority interests in net income of subsidiaries - (6,323) - - - (6,323) -------- --------- --------- --------- ------- --------- Income (Loss) From Continuing Operations Before Extraordinary Item (60,354) 8,329 (4,085) (2,157) 27,848 (30,419) Income from discontinued operations (net of tax) - 2,157 2,157 Gain on sale of discontinued operations (net of tax) 78,291 (2,737) (29,355) - - 46,199 -------- --------- --------- --------- ------- --------- Income (Loss) Before Extraordinary Item 17,937 5,592 (33,440) - 27,848 17,937 Extraordinary item, net of tax (698) - - - - (698) -------- --------- --------- --------- ------- --------- Net Income (Loss) $ 17,239 $ 5,592 $ (33,440) $ - $27,848 $ 17,239 ======== ========= ========== ========= ======== ========
15 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Operations Nine Months Ended September 30, 1998 (In thousands)
==================================================================================================================================== ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated -------- ---------- ------------- ------------ ------------ ------------------- (Unaudited) Gross Revenue $ 949 $ 563,934 $ 344,913 $ (154,900) $ - $ 754,896 Subcontract and direct material costs (470) (444,980) (156,501) 54,500 (547,451) Provision for contact losses - (57,210) (57,210) Equity in net income of unconsolidated subsidairies (46,905) - 6,576 - 45,395 5,066 -------- --------- --------- ---------- -------- --------- Service Revenue (46,426) 118,954 137,778 (100,400) 45,395 155,301 Operating Expenses Operating expenses 12,998 105,319 172,616 (86,889) - 204,044 Depreciation and amortization 1,962 826 3,905 (1,400) 5,293 Severance and restructuring 7,907 - 1,500 9,407 Other unusual charges 2,882 - 4,790 - - 7,672 -------- --------- --------- ---------- -------- --------- Operating Income (Loss) (72,175) 12,809 (45,033) (12,111) 45,395 (71,115) Other Income (Expense) Interest income 226 448 565 - - 1,239 Interest expense (14,719) (144) (38) - - (14,901) -------- --------- --------- ---------- -------- --------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interest Extraordinary Item and Cumulative Effect of Accounting Change (86,668) 13,113 (44,506) (12,111) 45,395 (84,777) Income tax (expense) benefit 13,154 (1,990) 6,755 4,797 (6,890) 15,826 --------- --------- --------- --------- -------- -------- Income (Loss) From Continuing Operations Before Minority Interest, Extraordinary Item and Cumulative Effect of Accounting Change (73,514) 11,123 (37,751) (7,314) 38,505 (68,951) Minority interests in net income of subsidiaries - (5,877) - - - (5,877) --------- --------- --------- ---------- -------- --------- Income (Loss) From Continuing Operations Before Extraordinary Item and Cumulative Effect of Accounting Change (73,514) 5,246 (37,751) (7,314) 38,505 (74,828) Income from discontinued operations (net of tax) - - - 7,314 7,314 Gain on sale of discontinued operations (net of tax) - - - - - - ---------- --------- --------- ---------- --------- --------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting Change (73,514) 5,246 (37,751) - 38,505 (67,514) Extraordinary item, net of tax - - - - - - --------- --------- --------- ---------- --------- --------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting Change (73,514) 5,246 (37,751) - 38,505 (67,514) Cumulative effect of accounting change, net of tax - (754) (5,246) - - (6,000) --------- --------- --------- ---------- --------- --------- Net Income (Loss) $ (73,514) $ 4,492 $ (42,997) $ - $ 38,505 $ (73,514) ========= ========= ========== ========== ========= ==========
16 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Operations Three Months Ended September 30, 1999 (In thousands)
=================================================================================================================================== ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated ---------- ----------- ------------- ------------ ------------ ------------------- (Unaudited) Gross Revenue $ 2,903 $ 211,863 $ 39,761 $ - $ - $ 254,527 Subcontract and direct material costs (2,796) (164,502) (16,982) - - (184,280) Equity in income of joint ventures and affiliated companies (4,013) - 1,796 - 3,055 838 -------- --------- -------- ----- ------- --------- Service Revenue (3,906) 47,361 24,575 - 3,055 71,085 Operating Expenses Operating expenses 2,345 42,043 23,006 - - 67,394 Depreciation and amortization 225 171 522 - - 918 Severance and restructuring (1,383) - 1,383 - - - Other unusual charges - - - - - - -------- --------- -------- ----- ------- --------- Operating Income (Loss) (5,093) 5,147 (336) - 3,055 2,773 Other Income (Expense) Interest income 614 163 81 - - 858 Interest expense (4,679) 92 (5) - - (4,592) -------- --------- -------- ----- ------- --------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interes and Extraordinary Item (9,158) 5,402 (260) - 3,055 (961) Income tax (expense) benefit 2,742 565 (3,545) - - (238) -------- --------- -------- ----- ------- --------- Income (Loss) From Continuing Operations Before Minority Interest and Extraordinary Item (6,416) 5,967 (3,805) - 3,055 (1,199) Minority interests in net income of subsidiaries - (2,118) - - - (2,118) -------- --------- -------- ----- ------- --------- Income (Loss) From Continuing Operations Before Extraordinary Item (6,416) 3,849 (3,805) - 3,055 (3,317) Income from discontinued operations (net of tax) - - - - Gain on sale of discontinued operations (net of tax) 543 (2,737) (362) - - (2,556) -------- --------- -------- ----- ------- --------- Income (Loss) Before Extraordinary Item (5,873) 1,112 (4,167) - 3,055 (5,873) Extraordinary item, net of tax - - - - - - -------- --------- -------- ----- ------- --------- Net Income (Loss) $ (5,873) $ 1,112 $ (4,167) $ - $ 3,055 $ (5,873) ======== ========= ======== ===== ======= =========
17 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Operations Three Months Ended September 30, 1998 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated --------- ----------- ------------- ------------ ------------ ------------------- (Unaudited) Gross Revenue $ 341 $ 200,225 $ 91,962 $ (57,600) $ - $ 234,928 Subcontract and direct material costs (190) (160,961) (34,323) 22,300 (173,174) Provision for contact losses - (17,210) (17,210) Equity in net income of unconsolidated subsidiaries (24,818) - 3,109 - 24,341 2,632 ---------- ---------- --------- --------- ---------- ----------- Service Revenue (24,667) 39,264 43,538 (35,300) 24,341 47,176 Operating Expenses Operating expenses 5,011 36,851 54,217 (30,508) - 65,571 Depreciation and amortization 704 242 1,316 - 2,262 Severance and restructuring 6,407 - 1,500 7,907 Other unusual charges 2,882 - 4,790 - - 7,672 ---------- ---------- --------- --------- ---------- ----------- Operating Income (Loss) (39,671) 2,171 (18,285) (4,792) 24,341 (36,236) Other Income (Expense) Interest income 45 102 191 - - 338 Interest expense (5,073) (48) (20) - - (5,141) ---------- ---------- --------- --------- ---------- ----------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interest Extraordinary Item and Cumulative Effect of Accounting Change (44,699) 2,225 (18,114) (4,792) 24,341 (41,039) Income tax (expense) benefit (383) 1,522 (1,758) 1,917 (99) 1,199 ---------- ---------- --------- --------- ---------- ----------- Income (Loss) From Continuing Operations Before Minority Interest, Extraordinary Item and Cumulative Effect of Accounting Change (45,082) 3,747 (19,872) (2,875) 24,242 (39,840) Minority interests in net income of subsidiaries - (1,326) - - - (1,326) ---------- ---------- --------- --------- ---------- ----------- Income (Loss) From Continuing Operations Before Extraordinary Item and Cumulative Effect of Accounting Change (45,082) 2,421 (19,872) (2,875) 24,242 (41,166) Income from discontinued operations (net of tax) - - - 2,875 2,875 Gain on sale of discontinued operations (net of tax) - - - - - - ---------- ---------- --------- --------- ---------- ----------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting Change (45,082) 2,421 (19,872) - 24,242 (38,291) Extraordinary item, net of tax - - - - - - ---------- ---------- --------- --------- ---------- ----------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting Change (45,082) 2,421 (19,872) - 24,242 (38,291) Cumulative effect of accounting change, net of tax - (754) 754 - - - ---------- ---------- --------- --------- ---------- ----------- Net Income (Loss) $ (45,082) $ 1,667 $ (19,118) $ - $ 24,242 $ (38,291) ========== ========== ========= ========= ========== ===========
18 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 1999 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ ICF Kaiser Parent Subsidiary Non-Guarantor Discontinued International, Inc. Company Guarantors Subsidiaries Operations Eliminations Consolidated --------- ---------- ------------- ------------ ------------ ------------------- (Unaudited) Net Cash Provided by (Used in) Operating Activities $ (59,467) $ 311 $ 1,195 $ 19 $ - $ (57,942) --------- ------ -------- ---- ---- ---------- Investing Activities Cash proceeds from investments in subsidiaries and affiliates - - - - - - Sales of subsidiaries and/or investments - - - - - - Net proceeds from sale of discontinued operations 135,316 - - - - 135,316 Purchases of fixed assets - - (659) - - (659) --------- ------ -------- ---- ---- ---------- Net Cash Provided by (Used in) Investing Activities 135,316 - (659) - - 134,657 --------- ------ -------- ---- ---- ---------- Financing Activities Borrowings under revolving credit facility 57,064 - - - - 57,064 Principal payments on revolving credit facility (92,584) - - - - (92,584) Cash collateral for performance guarantees (21,000) - - - - (21,000) Change in book overdraft 1,195 - - - - 1,195 Distribution of income to minority interest - - - - - - Payments towards debt issuance/restructuring costs (1,996) - - - - (1,996) Net issuances (repurchases) of common stock 38 - - - - 38 --------- ------ -------- ---- ---- ---------- Net Cash Provided by (Used in) Financing Activities (57,283) - - - - (57,283) --------- ------ -------- ---- ---- ---------- Effect of Exchange Rate Changes on Cash - - 76 - - 76 --------- ------ -------- ---- ---- ---------- Increase (Decrease) in Cash and Cash Equivalents 18,566 311 612 19 - 19,508 Cash and Cash Equivalents at Beginning of Period 2,414 3,814 9,039 (19) - 15,248 --------- ------ -------- ---- ---- ---------- Cash and Cash Equivalents at End of Period $ 20,980 $ 4,125 $ 9,651 $ - $ - $ 34,756 ========= ======= ======= ==== ==== ==========
19 ICF Kaiser International, Inc. and Subsidiaries Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 1998 (In thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- Parent ICF Kaiser Company Subsidiary Non-Guarantor Discontinued International, Inc. (Unaudited) Guarantors Subsidiaries Operations Eliminations Consolidated ---------- ---------- ------------- ------------ ------------ ------------------- Net Cash Provided by (Used in) Operating Activities $ (14,993) $ (15,095) $ (4,533) $ - $ - $ (34,621) ---------- ---------- --------- ------------ ------------ ------------------- Investing Activities Cash proceeds from investments in subsidiaries and affiliates - - 3,570 - - 3,570 Sales of subsidiaries and/or investments - - 2,400 - - 2,400 Net proceeds from sale of discontinued operations - - - - - Purchases of fixed assets (1,159) - (1,551) - - (2,710) ---------- ---------- --------- ------------ ------------ ------------------- Net Cash Provided by (Used in) Investing Activities (1,159) - 4,419 - - 3,260 ---------- ---------- --------- ------------ ------------ ------------------- Financing Activities Borrowings under revolving credit facility 114,000 - - - - 114,000 Principal payments on revolving credit facility (97,500) - - - - (97,500) Cash collateral for performance guarantees - - - - - - Change in book overdraft (1,496) - - - - (1,496) Distribution of income to minority interest - (1,500) - - - (1,500) Payments towards debt issuance/restructuring costs - Net issuances (repurchases) of common stock 347 - - - - 347 ---------- ---------- --------- ------------ ------------ ------------------- Net Cash Provided by (Used in) Financing Activities 15,351 (1,500) - - - 13,851 ---------- ---------- --------- ------------ ------------ ------------------- Effect of Exchange Rate Changes on Cash - - (283) - - (283) ---------- ---------- --------- ------------ ------------ ------------------- Increase (Decrease) in Cash and Cash Equivalents (801) (16,595) (397) - - (17,793) Cash and Cash Equivalents at Beginning of Period (4,843) 10,258 14,605 - - 20,020 ---------- ---------- --------- ------------ ------------ ------------------- Cash and Cash Equivalents at End of Period $ (2,652) $ (6,337) $ 11,216 $ - $ - $ 2,227 ========== ========== ========= ============ ============ ===================
20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview During the third quarter of 1999, management continued to execute various elements of a plan aimed at restoring the Company to profitability following the difficulties caused primarily by problems in its execution of four large fixed price contracts to construct nitric acid plants in 1998 and early 1999. The accomplishments since the last quarter included the majority implementation of the cost reduction plan and the acceptance by the Company's noteholders and its common shareholders of a plan to significantly restructure $125.0 million in outstanding subordinated notes. Additionally, the Company reached agreement with the holders of $14.0 million of its $15.0 million in total outstanding Senior Notes to repurchase the notes for cash at 88% of face value. This repurchase was completed on October 6, 1999. Following the divestitures of two of its operating groups during the second quarter of 1999, management began the next phase of its restructuring plan during the third quarter - rightsizing its remaining cost structure to levels appropriate for its new base of ongoing operations. The results from the cost reduction plan have been positive - just in the third quarter the Company's operating results depict a reduction in administrative expenses by over $12.3 million on an annualized basis when compared to the same quarter in 1998. Although the majority of the cost reduction actions had been put in place by September 30, 1999, their full annualized impact in addition to the impact of several actions remaining to be implemented are not yet depicted in the third quarter results due to the timing within the quarter of their implementation. Management still believes, however, that by December 31, 1999, it will be able to reduce overhead costs by more than $20 million on an annual basis compared to levels prior to the restructuring. In summary, the components of the total profit restoration plan developed by management along with the Board of Directors were as follows: . To divest of operating units and reinvesting the funds into the Company to facilitate the completion of the problem projects and to provide working capital necessary to grow the retained business activities; . To reduce the Company's overhead cost structure that would remain after the divestiture of the operating units referenced above; . To revise the Company's debt and capital structure in order to eliminate barriers to securing new business and improve accessibility to new sources of working capital, and lastly, . To improve the profitability of and grow the retained operations. Elements of the plan were initiated as early as the third quarter of 1998 while the Nitric Acid projects were entering their final phases of completion. As summarized below, however, the majority of the progress made to date has come during the second and third quarters of 1999. Achievements toward each plan element are described below. Divesting of Operating Units As of June 30, 1999, the Company has completed the sales of two business segments. . Sale of the Environment and Facilities Management Group (EFM): On April 9, 1999, the Company sold the majority of the active contracts and investments, and transferred a substantial number of employees of EFM, to The IT Group, Inc. (IT) for a cash purchase price of $82 million, less $8 million which was retained by IT for EFM's working capital requirements. The Company will complete EFM contracts that were not sold to IT in the near term. 21 . Sale of the Consulting Group: On June 30, 1999, the Company sold 90% of its Consulting Group to CM Equity Partners, L.P. and the Group's management for $64.0 million in cash and $6.6 million of interest-bearing notes. The Company retained a 10% ownership balance in the new and independent consulting company, now known as ICF Consulting Group, Inc. The combined net financial position and operating results of the two segments have been presented in the accompanying financial statements as discontinued operations for the entire nine-month period. All prior period financial information has also been restated to conform to the current presentation. Reducing Overhead and Improving Profitability The restructuring plan included actions to realign and reduce the Company's post-divestiture cost structure such that the remaining levels are appropriate for its continuing operations. Elements of the overhead reduction plan included an approximate 25% personnel reduction in the Company's wholly-owned North American operations, downsizing facilities, closing of marginally profitable office locations, discontinuing certain business offerings, improving direct labor utilization on projects and enhancing project controls to minimize risks of future contract losses. Because of certain centralized aspects of the Company's organization structure that existed prior to completing the divestitures discussed above, the cost reduction elements of this phase of the plan could not begin effectively until after the divestitures were completed. The initial results of the rightsizing are evident in the Company's Statement of Operations for the three months ended September 30, 1999. Although the majority of the reduction initiatives have been enacted, the anticipated impact of several remaining actions paired with the full effects of the completed actions lead management to believe that it will attain total administrative cost savings of $20 million by December 31, 1999 when compared to previous levels. In connection with these actions, the Company recorded a charge for severance and restructuring costs of $9.4 million during the second quarter of 1999. Components of the charge included $4.5 million for severance and related matters, $1.6 million for the write-off of goodwill associated with the discontinuance of operations from a prior acquisition, a $2.2 million write-down reflective of the carrying value impairment of certain long-term investments, and a $1.1 million charge for anticipated sublease losses incurred as a result of office downsizing. These cost reduction efforts, together with an increased focus on risk mitigation and effective resource allocation, are aimed at improving the profitability of the Company's remaining operations. The Company is committed to maintaining proper management controls and the processes necessary to deliver high-quality, profitable projects throughout its operations. Revising the Capital Structure On October 6, 1999, the Company used proceeds from its recently completed asset sales to repurchase $14.0 million of its $15.0 million in outstanding Senior Notes for 88% of their face value. The Company also paid the accrued interest on the related notes. On September 30, 1999, the Company reached a debt restructuring agreement in principle with the majority of the holders of its $125.0 million in Subordinated Notes. On or about October 1, 1999, the Company commenced an asset sale offer/exchange offer designed to restructure its $125.0 million Subordinated Notes. By November 3, 1999, the Company had received notice of participation in the asset sale/exchange offer by the holders of approximately 99% of the principal amount of two outstanding notes. On November 4, 1999, the Company obtained the necessary approval of its common shareholders to be able to effect the proposed restructuring. The plan will consist of the following elements: . The cash repurchase of at least $35.0 million principal amount of the outstanding Subordinated Notes, plus interest accrued since July 1, 1999; . An exchange offer of the following for the balance of the outstanding Subordinated Notes: . The issuance of 2,600,000 million shares of redeemable convertible preferred stock. The preferred 22 stock will have a liquidation preference equal to $65.0 million plus the amount of accrued interest since July 1, 1999. The preferred stock will pay quarterly dividends at the rate of 3.75% of the liquidation preference through December 31, 2000 and 5.75% from January 1, 2001 through December 31, 2001. Thereafter, the dividend rate will be increased to 12%. The preferred stock will be convertible into common stock at the holders' option on or after December 31, 2001. The Company may redeem the preferred stock, at its option, at any time. The Company may attain varying degrees of discounts from the liquidation preference in the event that it redeems any portion of the preferred stock prior to December 31, 2001. . The issuance of up to $25.0 million in new unsecured Senior Notes. The new Senior Notes will mature on December 31, 2002. The Notes will pay interest, semi-annually, at an initial annual rate of 15%, reducing to 13.5% when the aggregate outstanding amount of the new Senior Notes falls below $15.0 million with additional incremental reductions in the rate based on principal reductions down to a minimum of 11%. . The issuance of common shares equivalent to approximately 15% of the Company's total common stock at the time of issuance. The consummation of this total debt restructuring plan remains conditioned on the Company's ability to secure a new revolving credit facility. Although the Company does not yet have a commitment for such a facility, it is involved in serious discussions with a leading commercial lender. The Company anticipates closing the entire remaining elements of the debt restructuring before December 31, 1999. Results of Continuing Operations Gross Revenue The Company's gross revenue by operating group for each of the three and nine month periods ended September 30 are as follows (in millions):
Three months Nine months ----------------------------- -------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Kaiser-Hill.................................... $206,046 $184,461 $516,343 $476,990 Engineering and Construction (E&C)............. 48,481 50,467 183,561 277,906 -------- -------- -------- -------- Total........................................ $254,527 $234,928 $699,904 $754,896 ======== ======== ======== ========
Kaiser-Hill - ------------ Kaiser-Hill Company, LLC (Kaiser-Hill), a 50% owned subsidiary, which serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. The Company, through a designated majority representation on Kaiser-Hill's board of managers, has a controlling interest in Kaiser-Hill and therefore consolidates Kaiser-Hill's results of operations with those of its only other remaining business segment, E&C. Although the Company has a controlling interest in Kaiser-Hill, as defined by generally accepted accounting principles, the subsidiary's operations are primarily directed by its own dedicated management team. Neither the management of the Company nor the management of the other 50% owner has an active role in Kaiser-Hill's day-to-day operations. The contract is cost-reimburseable plus incentive fee in nature. Kaiser-Hill's current contract expires in September 30, 2000, however Kaiser-Hill and the DOE are currently negotiating for the follow-on contract which will be aimed at attaining site closure by 2006. The changes in gross revenue earned by Kaiser- Hill during the comparable periods are largely reflective of increased levels of reimbursable subcontractor costs being incurred as the contract ensues. Gross revenue is also somewhat impacted by DOE's annual project funding which has been increasing over time as DOE progresses closer to attaining closure of this site at a pace faster than originally planned. Kaiser-Hill ended the third quarter of 1999 with approximately $600 million in contract backlog. 23 Engineers & Constructors Group (E&C) - ------------------------------------- The Engineers and Constructors Group (E&C) provides engineering, construction management and project and program management services to commercial and federal, state, and local entities in the areas of transit and transportation, alumina and aluminum, facilities engineering and management, iron and steel and microelectronics and clean technology. The decrease in gross revenue of $2.0 million and $94.3 million, respectively, during the three and nine months ended September 30, 1999 compared to the same periods in 1998 is comprised of: . a decline of $13.1 million and $63.9 million, respectively, in gross revenue generated by the Company's construction management activities specializing in fabrication plants and other facilities for semiconductor and microelectronics customers. This gross revenue contained large elements of construction costs that were directly reimbursed by the customers. The decrease therefore did not have as significant of an impact on the Company's operating results. These gross revenue declines are indicative of the softness in this overall market area since early 1998. . an increase of $8.9 million and $4.3 million, respectively, in gross revenue generated by the Nova Hut steel mini-mill contract in the Czech Republic. The increases primarily reflect the completion of project's construction phases involving the procurement of significant amounts of subcontracted labor and direct materials. This contract is entering final phases evidenced by the plant's performance recently attaining preliminary customer acceptance on November 1, 1999. The majority of the construction activities have therefore been completed. Remaining contract performance will consist of additional performance testing, warranty and turnkey activities. . a decrease of $30.9 million during the nine months, respectively, in gross revenue generated by the Nitric Acid Projects. The plants had been completed early in the second quarter of 1999. Revenue for the three months ended September 30, 1998 is reflective of a $16.2 million charge to reflect the revised estimate of completion on the projects through such date. . reductions of $3.0 million during the nine months ended September 30, 1999 in gross revenues from certain domestic and foreign operations that were discontinued at various times during 1998 and 1999. Given these isolated changes in gross revenue for the three months ended September 30, the Company's remaining volume of gross revenue has decreased by approximately 20% since the same period in 1998. This decline is attributed, in part, to the Company's difficulties in securing significant amounts of new business as a result of credit capacity limitations brought about by the problems with the Nitric Acid projects in 1998 and 1999, and, also in part, to the Company's current contract backlog mix migrating to less construction cost oriented projects. As further explained below, the operational impact of these decreases, however, have been in part offset by other Company initiatives. Contract backlog for E&C exceeded $200 million as of September 30, 1999. As the Company has completed the Nitric Acid projects as well as most of the construction on the Nova Hut steel mini-mill, the remaining current contract backlog contains more labor-intensive engineering and project management services rather than large amounts of construction materials. Although not an indicator of gross contract profit, a contract backlog of this type will result in a narrowing of the Company's spread between gross revenue and service revenue in the near term when compared to more recent historic levels. Service Revenue The Company's service revenue for the three and nine months ended September 30, as well as the related percentage of service revenue to gross revenue, is as follows (in millions):
Three Months Nine Months ---------------------------------------- ------------------------------------------ 1999 1998 % Change 1999 1998 % Change ------ ------ ---------- ------- ------- ---------- Kaiser-Hill.......................... $44.3 22% $36.6 20% 21% $115.1 22% $107.8 23% 6.8% Engineering and Construction (E&C) (1)........................... 26.8 55% 27.8 55% (3.6%) 83.4 45% 104.7 38% (20.3%) ----- ----- ------ ------ $71.1 28% $64.4 27% 10.4% $198.5 28% $212.5 28% (6.6%) ===== ===== ====== ======
24 (1) For comparative purposes, service revenue has been adjusted to exclude the $17.2 million and $40.0 million Nitric Acid Project loss provisions recorded during the three and nine months ended September 30, 1998, respectively. Kaiser-Hill - ------------ Kaiser-Hill's service revenue is generated, in part, by fees earned as a percentage of the costs incurred to execute the project and, in part, by incentive fees earned for attaining specified contract performance thresholds. The incentive fees are not based on incurred costs. The volume changes in service revenue period over period is primarily reflective of the corresponding changes in costs incurred by the project. The lower rate of service revenue as a percentage of gross revenue during the three months compared to the nine months ended September 30, 1998 reflects management's third quarter 1998 downward estimate of the project performance milestones that would be completed within the contract's 1998 fiscal funding year. The percentage of service revenue to gross revenue realized in 1999 has been consistent throughout 1999. Engineers & Constructors Group (E&C) - ------------------------------------- Adjusting for the $17.2 million and the $40.0 million provisions for the Nitric Acid contract losses recorded in the three and nine months ended September 30, 1998, service revenue decreased by $1.0 million and $21.3 million, respectively, during the three and nine months ended September 30, 1999. Apart from slight declines in service revenue period over period in the microelectronics and Asian markets and from the effects of the Company's decision to discontinue certain operations in several domestic and foreign markets during 1998 and 1999, the Company's service revenue has decreased approximately 14% from 1998 levels. This decline is attributed to the Company's difficulties in securing significant amounts of new business as a result of credit capacity limitations brought about by the problems with the Nitric Acid projects in 1998 and 1999. Despite the decreases in the volume of service revenue, direct labor deployed on projects decreased by 9% and 20%, respectively, during the comparable three and nine month periods in 1999, yielding gross profit margins as a percent of service revenue of approximately 42% and 39% during the three and nine month periods ended September 30, 1999. Operating Expenses Segment operating expenses as a percentage of service revenue for each of the three and nine months ended September 30 are as follows:
Kaiser-Hill E&C ---------------------------------- ---------------------------------------- Three Months Nine Months Three Months Nine Months ---------------- ---------------- -------------------- ------------------- 1999 1998 1999 1998 1999 1998 1999 1998 ---------------- ---------------- -------------------- ------------------- Service Revenue...................... 100% 100% 100% 100% 100% 100% (1) 100% 100% (1) Operating Expenses Direct labor and fringe benefits.... 91% 92% 89% 89% 58% 62% 61% 60% Selling, general and administrative. - - - - 43% 53% 48% 43% ---- ---- ---- ---- ---- ---- --- --- Segment operating income (loss) (2).. 9% 8% 11% 11% (1)% (15)% (9)% (3)% ==== ==== ==== ==== ==== ==== === ===
(1) For comparative purposes, service revenue has been adjusted to exclude the $40.0 million and $17.2 million in Nitric Acid Project loss provisions recorded during the three and nine months ended September 30, 1998, respectively. (2) Charges taken during the periods for severance, restructuring and other unusual matters (discussed below) have not been included in the above table. Kaiser-Hill - ------------ Kaiser-Hill's operating income as a percentage of service revenue has remained relatively constant over the comparable periods. 25 Engineering and Constructors (E&C) - ---------------------------------- Direct labor deployed on E&C projects decreased by 28% and 25%, respectively during the comparable three and nine month periods in 1999 and corresponds to similar decreases in service revenue. As evidenced, however, by the percentage increase during the nine months of 1999 in selling, general and administrative expenses as a percentage of service revenue, much of the cost of the direct labor decline was not immediately cut from the Company's operations and resulted in increasing administrative costs on a year-to-date basis. Responding to the decreasing service revenue and as a strategic element of its overall restructuring plan, the Company's cost reduction initiatives took effect primarily during the third quarter of 1999 and are evidenced by the significant improvement, compared to 1998, in the selling, general and administrative expense ratio depicted above. Apart from these comparisons to service revenue, the Company's cost reduction efforts have resulted in selling, general and administrative expenses during the third quarter of 1999 totaling $11.5 million as compared to $14.6 million during the same quarter in 1998. Based on its run rate of such expenses as of September 1999, the Company expects to be able to demonstrate an annualized savings of over $20 million when compared to levels existing prior to the restructuring. Severance and Restructuring The Company's restructuring plan included actions aimed at realigning and reducing the Company's post-divestiture overhead cost structure such that the remaining levels would be appropriate for its continuing operations. Elements of the overhead reduction plan included an approximate 25% personnel reduction in the Company's wholly-owned North American operations, downsizing facilities, closing of marginally profitable office locations, discontinuing certain business offerings, improving direct labor utilization on projects and enhancing project controls to minimize risks of future contract losses. Actions intended to obtain these results were largely executed to be effective during the second and third quarters of 1999. In connection with the actions, the Company recorded a charge for severance and restructuring costs of $9.4 million during the second quarter of 1999. Components of the charge included $4.5 million for severance and related matters, $1.6 for the write-off of goodwill associated with the discontinuance of operations from a prior acquisition, a $2.2 million write-down reflective of the carrying value impairment of certain long-term investments, and a $1.1 million charge for anticipated sublease losses incurred as a result of office downsizing. In June of 1998, the Company recorded a $1.5 million charge for the costs of legal and organizational changes necessary to begin its planned asset divestitures. Other Unusual Charges In light of the significant 1998 contract overruns and ensuing activities directed at resolving the resulting liquidity issues, the Company incurred costs that it ordinarily would not have incurred without these strains. Such costs, including certain divestiture-related expenses of professional fees as well as increased bank fees, and fines and penalties, have been presented as unusual items in the accompanying Statement of Operations. Interest Income Interest income has increased by $.5 million and by $.2 million for the three and nine months ended September 30, 1999, respectively due largely to the completion of its sale of the Consulting Group on June 30, 1999. The Company accrued interest income at the rate of 10.5% on the $6.55 million in promissory notes received as part of the sale proceeds. These new notes are due December 31, 2006 and will pay interest semiannually, beginning December 31, 2000. Additionally since receiving the proceeds from the sale of the Consulting Group, the Company has maintained average cash balances invested in overnight investments approximating $39.0 million earning an average of 5% interest. The majority of this average invested balance will be used by the Company to effect its debt restructuring discussed in the Overview. 26 Interest Expense The Company's average outstanding debt and the related average effective interest rates for three and nine months ended September 30, 1999 was as follows:
Three Months Nine Months -------------------------------- -------------------------------- 1999 1998 1999 1998 --------------- ------------- ------------ ---------------- Weighted average outstanding debt.......... $140,000 $159,571 $153,180 $151,255 Average effective interest rate............ 13.0% 13.2% 15.3% 13.1%
The change in the average outstanding balance during the three months ended September 30, 1999 compared to 1998 reflects the Company's use of proceeds from the sale of its EFM Group to pay off all amounts outstanding on its revolving line of credit in April, 1999. Upon the sale of the EFM Group, the Company agreed to a revolver amendment to extend the facility until the earlier of June 30, 1999 or the completion of the Company's sale of its Consulting Group. Amendment fees totaling $1.0 million have been included in interest expense for the nine months ended September 30, 1999. Unamortized debt issuance costs of $1.1 million associated with this facility, net of an income tax benefit of $0.4 million, were expensed on June 30, 1999 as an extraordinary item in the accompany Statement of Operations. The remaining debt at September 30, 1999 consisted of the Company's $15 million in Senior Notes, $14.0 million of which were repurchased for cash at 88% of face value on October 6, 1999, and $125 million in Subordinated Notes. The Company did not pay $9.1 million in interest that was due on these Notes as of June 30, 1999. The interest was paid, however, on July 30, 1999, prior to the expiration of a 30-day grace period. Income Tax Expense During the three months ended September 30, 1998, the Company recognized an income tax benefit and related deferred tax asset of $1.2 million, primarily as a result of reserves recorded for the estimated future Nitric Acid Project losses. That income tax benefit increased the Company's deferred tax asset to $34.7 million. The Company felt that this deferred tax asset would be fully utilized by taxable income to be generated in the near future upon the completion of planned asset sales. Essentially other than for the estimated income tax effects of the planned asset sales, since September 1998, the Company has not recognized a financial statement benefit for any other currently available or future net operating losses. To date in 1999, the Company has recognized $34.7 million in income tax expense in the three months ended June 30, 1999 resulting from its gains on the sale of two of its divisions. This amount of income tax expense was equally offset by the entire amount of this deferred tax asset. The asset was comprised of total future income tax credits from all sources of $60.0 million less a $25.3 million valuation allowance. The valuation allowance had been recorded to reflect the uncertainty over the Company's ability to use all of the net operating loss deductions in the future. The 1999 income tax expense from the gains on the sale of the two divisions included a $.7 million benefit from the release of valuation allowance offset by the alternative minimum and state income taxes due on the sales. The remaining valuation allowance totals $24.7 million as of September 30, 1999. Upon the completion of its debt restructuring plan, to result in significant reductions in interest expense, and the impacts of its cost reductions on future projections of profitability, the Company will again reconsider the possibility of recognizing the financial statement benefits of the remaining historical net operating losses. The income tax provision for all periods presented excludes the minority's interest in Kaiser-Hill's operating income because it is only 50% owned and is a flow-through entity for income tax purposes. Results of Discontinued Operations The sale of the EFM and Consulting Groups were completed on April 9, 1999 and June 30, 1999, respectively. At that time, management recorded estimates of the net resulting gains. Prior to finalizing its reported results for the year ended December 31, 1999, management will address the need for changes to those initial estimates. The pre-divestiture operating results of these two discontinued segments have been included in the accompanying financial statements, in accordance with generally accepted accounting principles, in the form of their net results only. The changes in the reported results from discontinued operations are due to the fact that the sales were 27 completed earlier in the year. In August 1999, the Company completed the sale of the majority of the assets of a small subsidiary involved in a discontinued line of business. A loss of $2.5 million was recorded on the sale consisting largely of the write off of the carrying value of goodwill associated with the Company's original acquisition of the subsidiary. 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. LIQUIDITY AND CAPITAL RESOURCES Operating activities: Apart from the net $1.3 million in operating cash flows used by Kaiser-Hill during the nine months ended September 30, 1999, the Company's remaining continuing operations has used $56.6 million in cash - primarily for the funding obligations of the Nitric Acid Project overruns, other operating losses, interest expense, pension funding commitments, and required joint venture investments, as well as the costs of its restructuring plan including employee severance and office closings. Investing activities: Fixed asset purchases during 1999 and 1998 consisted largely of the capitalized costs of either purchased or internally developed software for Year-2000 replacement efforts. During the second quarter of 1999, the Company completed the sales of its EFM and Consulting Groups and received cash proceeds of $135.3 million. During the first quarter of 1998, the Company collected $2.4 million from the 1997 sale of a remaining minority investment in a pulverized coal injection facility. Also during the first quarter of 1998, the Company acquired cash of approximately $3.6 million when it completed the acquisition of the former ICT Spectrum in exchange for common stock. Financing activities: Also upon the sale of the EFM Group, the Company used $35.5 million of the $135.3 million of net divestiture proceeds to extinguish outstanding borrowings on its revolving credit facility. The Company then obtained an amendment to the revolver extending the facility, with similar restrictive financial covenants and a substantially reduced total borrowing capacity, until the earlier of June 30, 1999 or the completion of the Company's sale of its Consulting Group. The amendment required an additional $10.0 million of the EFM proceeds to cash collateralize a portion of its outstanding letters of credit previously secured by assets of the Company. Since the closing of the sale of the Consulting Group on June 30, 1999, an additional net $11.0 million of sale proceeds has been used to cash collateralize the remaining amount of outstanding letters of credit. The facility was terminated on June 30, 1999. Amendment fees totaling $1.0 million have been included in interest expense for the nine months ended September 30, 1999 As of September 30, 1999, the Company had no outstanding cash borrowings, no immediate access to any borrowing capacity and $21.0 million in cash collateral supporting outstanding letters of credit. Liquidity and Capital Resource Outlook The consummation of the total debt restructuring plan discussed herein remains conditioned on the Company's ability to secure a new revolving credit facility. Although the Company does not yet have a commitment for such a facility, it is involved in serious discussions with a leading commercial lender. The Company anticipates 28 closing the entire remaining elements of the debt restructuring before December 31, 1999. Based on current expectations management believes that it has sufficient short term liquidity to bridge current operational needs until the closing of the debt restructuring and a revolving credit facility. Management believes that remaining factors critical to the Company's long term liquidity include securing a sufficient and affordable working capital facility and achieving improved operating results. Although management has recently taken certain steps to accomplish significant progress toward substantial cost savings, the Company must generate operating profits sufficient to fund its longer term working capital requirements. The Company also will continue to explore options that would provide additional capital for longer-term objectives and operating needs, including the possibility for additional equity infusions. Other Matters Bath Contingency: In March 1998, the Company entered into a $187 million maximum price contract to construct a shipbuilding facility. The Company subsequently learned that estimated costs to perform the contract as reflected in actual proposed subcontracts were approximately $30 million higher than the cost estimates used as the basis for contract negotiation between the Company and the customer. After learning this, the Company advised the customer that it was not required to perform the contract in accordance with its terms. 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 continued to execute certain transitional on-site activities. The customer terminated the interim agreement with the Company effective August 14, 1998. In October 1998, the customer presented an initial draft of a claim against the Company requesting payment for estimated damages and entitlements pursuant to the terminated contract. The customer has also asserted a claim based on alleged differing site conditions that allegedly should have been identified by the Company. The Company and the customer discuss from time to time the customer's claims. No provision for loss for this matter has been included in the Company's financial results to date as management does not believe that it has sufficient information at this time to reasonably estimate the outcome as there has not yet been significant activity in the negotiation process. Acquisition Contingency: The ICF Kaiser common shares exchanged for the stock of ICT Spectrum in the March, 1998 acquisition carry the guarantee that the fair market value of each share of stock will reach $5.36 by March 1, 2001. In the event that the fair market value does not attain the guaranteed level, the Company is obligated to make up the shortfall either through the payment of cash or by issuing additional shares of common stock, or both, with a total value equal to the shortfall, depending upon the Company's preference. Pursuant to the terms of the agreement, however, the total number of contingently issuable shares of common stock cannot exceed an additional 1.5 million. Given that the quoted fair market value of the stock at September 30, 1999 was approximately $0.38 per share, the assumed issuance of an additional 1.5 million shares would not completely extinguish the purchase price contingency. Any future distribution of cash or common stock would be recorded as a charge to the Company's paid-in-capital. Until the earlier of the contingent purchase price resolution or March 1, 2001, any additional shares assumed to be issued because of shortfalls in fair market value will be included in the Company's diluted earnings per share calculations, unless they are antidilutive. The exchanged shares also contain restrictions preventing their sale prior to March 1, 2001. On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf of all others similarly situated, filed a class action lawsuit alleging false and misleading statements made in a private offering memorandum, and asserting other claims, in connection with the Company's acquisition of ICT Spectrum in 1998. The Company has filed a motion to dismiss the plaintiffs' amended complaint. Year-2000 Readiness: The Company implemented a plan to achieve Year-2000 readiness. The Year-2000 readiness program, led and coordinated at the corporate level, consists of senior management from all Company disciplines, and is being executed and implemented by teams in operating groups throughout the world. The Company identified the following five areas in which Year-2000 readiness and/or risk assessment were critical operations: 29 (1) software applications used to run and monitor the business ("Internal Systems"); (2) the hardware and related software used internally to run the core business-- such as desk-top hardware and software applications, communications networks, and systems used in the operation of office facilities ("Hardware, Network, and Facilities Systems"); (3) software that the Company has either purchased, designed, developed, written, or interfaced, and sold to customers ("Customer Systems"); (4) software used by the Company's significant vendors or subcontractors that could disrupt the flow of the Company's activities in the event that the system malfunctions ("Vendor Systems"); and (5) systems critical to the operations of Kaiser-Hill ("Kaiser-Hill Systems"). Within each category, the Company identified and assigned criticality priorities to the various systems. Levels of system criticality were defined as those that might have a significant adverse effect to the Company in any of the areas of safety, environmental, legal, financial, and service-delivery capabilities. Internal Systems: Management's ongoing assessment of the major element of its Internal Systems began in 1995 and 1996 with the replacement of its main-frame based financial and project management software systems with new client-server applications which will be Year 2000 ready. The phased conversion to the new systems will be completed by December 31, 1999. The costs of the new software, external consultants, and the internal cost of implementation labor is being capitalized and will be amortized over the appropriate estimated useful lives. The total remaining costs, excluding internal labor, of this aspect of the Year- 2000 project, including nonrecurring costs associated with the historical archival of main-frame-based computer data, are estimated to be insignificant. Hardware, Network and Facilities Systems: Estimated costs of $0.2 million has been incurred to replace identified critical systems, primarily including the replacement of embedded technology in items such as telephone switches, desktop software and video conferencing equipment. Customer Systems: The Company has assessed the risk surrounding Year-2000 readiness in its customer systems, i.e. risk that may have been created through the Company's contracts for services in which the Company's professionals wrote and delivered software source code, or procured third party software for modification and/or resale to customers. Based on the service orientations of the Company's remaining business, which historically did not make wide use of computer software applications, management has not identified significant contract exposures emanating from the improper functioning of delivered source code that would still be covered under nonexpired contract warranty provisions. There can be no assurances that the Company's customers would be unable to seek compensation for actual problems, however, even if the contracts do not provide for it. Vendor Systems: The Company has corresponded with all vendors and subcontractors related to the Vendor Systems that have been identified through reasonable risk assessment techniques as critical to the Company's operations regarding their Year-2000 readiness. The Company will devise contingency plans in the event it believes significant risk to a disruption of service to the Company is not being adequately mitigated. Management is, however, devising short-lived plans intended to minimize the impacts of certain business interruptions caused by unexpected vendor non-readiness. The ability of parties to be compensated for monetary or other damages resulting from Year-2000 readiness risks is unknown. Kaiser-Hill Systems: Kaiser-Hill also has a Year-2000 readiness program, separate from that of the Company. The United States Department of Energy (DOE) owns all property and equipment at the Rocky Flats Environmental Technology Site near Denver, Colorado. While DOE bears the Year-2000 risk at Rocky Flats, Kaiser-Hill manages and uses the DOE property in its execution of the site closure contract. One work element of the Rocky Flats contract requires that Kaiser-Hill plan and execute DOE's Year-2000 readiness activities at the site. Costs incurred by Kaiser-Hill in the execution of the readiness activities are fully reimbursed by the 30 DOE. Additionally, Kaiser-Hill is eligible for performance award fees for attaining certain plan performance milestones, and is susceptible to penalties in the event certain plan milestones are not attained. As of September 30, 1999, Kaiser-Hill had completed the majority of its Year-2000 readiness activities and has attained certification as such from the DOE. Although there can be no guarantee of complete readiness by the beginning of the year 2000, the Company believes each of the business areas described above will be Year-2000 ready such that the costs of further remediation, if any, will not be significant. In the event the Company does not complete its program, or fails to properly identify and modify critical business applications, there may be an interruption to the Company's business that may have a material adverse affect on its business, future financial condition and results of operations. In addition, Year-2000-related disruptions in the general economy may also have a materially adverse effect on the Company's future financial condition and results of operations. Forward-Looking Statements From time to time, certain disclosures in reports and statements released by the Company, or statements made by its officers or directors, will be forward- looking in nature. These forward-looking statements may contain information related to the Company's intent, belief, or expectation with respect to contract awards and performance, potential acquisitions and joint ventures, and cost- cutting measures. In addition, these forward-looking statements contain a number of factual assumptions made by the Company regarding, among other things, future economic, competitive, and market conditions. Because the accurate prediction of any future facts or conditions may be difficult and involve the assessment of events beyond the Company's control, actual results may differ materially from those expressed or implied in such forward-looking statements. The Company is availing itself of the safe harbor provisions provided in the Private Securities Litigation Reform Act of 1995 by cautioning readers that the forward-looking statements that use words such as the Company "believes," "anticipates," "expects," "estimates," and "believes" are subject to certain risks and uncertainties which could cause actual results of operations to differ materially from expectations. These forward-looking statements will be contained in the Company's federal securities laws filings or in written or oral statements made by the Company's officers and directors to press, potential investors, securities analysts, and others. Any such written or oral forward- looking statements should be considered in context with the risk factors discussed below: . The Company requires access to a revolving credit line to fund short-term borrowing needs and provide letter of credit capacity required in connection with certain projects. Kaiser may not be able to generate collateral to support a borrowing base of sufficient size to obtain such credit or may not be able to improve operating results enough, by removing overhead costs or otherwise, to be able to obtain such credit. . The Company may not be able to obtain satisfactory contract performance guarantee mechanisms, such as performance bonds. . The Company's financial performance is significantly tied to Kaiser-Hill Company, LLC, which is subject to uncertainties that may adversely affect its and the Company's operating results. The contract with the Department of Energy under which Kaiser-Hill operates expires in September 2000. Although the Company believes the DOE will enter into a new contract with Kaiser-Hill, it is possible that after negotiating with Kaiser-Hill, the DOE will conduct a competition for a new contract. Kaiser-Hill may not be able to compete for or win a new contract if a competition is conducted by the DOE. If Kaiser- Hill does not successfully negotiate or win a new contract in any competition that is held, the Company will lose a significant portion of its cash flow and value. . The Company may not be able to maintain the existing volume or size of contracts and may not be able to realize increased contract performance levels. 31 . The Company is involved in a number of fixed-price contracts under which the Company can benefit from cost savings or performance efficiencies. If certain pricing and performance assumptions prove inaccurate, unrecoverable cost overruns can occur. . The Company may not be awarded new contracts for which it is competing in its established markets or these awards may be delayed. In addition, the Company may not be able to win contracts in new markets it chooses to target. General economic conditions in the international arena, especially Asia and Latin America, could negatively impact the Company's current international business and its ability to expand in international markets. . The Company may not be able to make acquisitions and/or enter into joint ventures, and if made, acquisitions and joint ventures may take more time to contribute favorably to the Company's financial results than was formerly assumed. The Company is highly leveraged and is subject to restrictive covenants that limit its ability to fund potential acquisitions and joint ventures beyond certain levels established in its debt agreements. . A portion of the Company's business is generated either directly or indirectly as a result of federal and state laws, regulations, and programs; a reduction in the number or scope of these laws, regulations or programs could materially affect the Company's business. . The Company's ability to attract and retain business is closely related to its ability to attract and retain key management and operating personnel. The market for professionals of the types employed by the Company is quite competitive. The Company may not be able to attract and retain personnel necessary for successful operations. . The Company has several significant contingent liabilities arising out of prior operations and contracts, its 1998 acquisition of ICT Spectrum Constructors, Inc. and the dispositions of its Environment and Facilities Management and Consulting Groups. Adverse resolution of one or more of those contingencies could adversely affect the Company's financial performance and condition. . Certain of the Company's environmental work poses risks of large civil and criminal liabilities for violations of environmental laws and regulations, and liabilities to customers and to third parties for damages arising from the Company's performing environmental services to its clients. A large fine or penalty imposed on the Company could negatively impact contract performance fees under certain existing contracts or otherwise negatively affect the Company's financial results. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company does not believe that it has significant exposures to market risk. The majority of its foreign contracts are denominated and executed in the applicable local currency. The interest rate risk associated with the Company's current borrowing activities is fixed. Part II - Other Information Item 1. Legal Proceedings As previously reported in the Annual Report on Form 10-K for the year ended December 31, 1998. Item 2. Changes in Securities (a) None (b) None (c) None 32 (d) Not applicable Item 3. Defaults Upon Senior Securities (a) None (b) None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) The exhibits filed as part of this report are listed below: No. 21 Consolidated Subsidiaries of the Registrant as of November 12, 1999. No. 27 Financial Data Schedule (b) Reports on Form 8-K On July 16, 1999, ICF Kaiser International, Inc. filed a Form 8-K reporting the recapitalization Agreement dated May 21, 1999 among ICF Kaiser International, Inc., ICF Consulting Group Holdings, LLC, and Clement International Corporation. On October 12, 1999, ICF Kaiser International, Inc. filed a Form 8-K reporting Amendment No. 2 to its Rights Agreement dated September 15, 1999. Also reported was the Form of Agreement of Release, Consent and Waiver, dated October 5, 1999 between the Company and T. Rowe Price, Penn Series High Yield Bond Fund, NorthStar Investment Management, and Deutsche Bank. 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: November 15, 1999 /s/ Timothy P. O'Connor ----------------------- Timothy P. O'Connor Executive Vice President, Chief Financial Officer and Chief Administrative Officer (Duly authorized officer and principal financial officer) 33 EX-21 2 EXHIBIT 21 EXHIBIT 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. Cygna Group, Inc. Delaware II. Liability Risk Management, Inc. California I. EDA, Incorporated Maryland I. HBG Hawaii, Inc. Delaware I. HBG International, Inc. Delaware I. 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. Kaiser Engineers & Builders, Inc. Delaware III. Kaiser Engineers (California) Corporation Delaware III. Kaiser Engineers Corporation New York III. Kaiser Engineers of Michigan, Inc. Michigan III. ICF Kaiser International Planning & Design, Inc. (33 1/3%) Pennsylvania III. Kaiser Overseas Engineering, Inc. Delaware III. Kaiser Engineers Limited United Kingdom IV. Kaiser Engineers Technical Services Limited (80%) Cyprus III. Kaiser Engineers and Constructors, Inc. Nevada IV. ICF Kaiser Engenharia e Participacoes Ltda. (99.9%) Brazil V. ICF Kaiser Construcoes e Engenharia Ltda (99.989%) Brazil IV. ICF Pty. Ltd. (50%) Australia IV. Kaiser Engineers Limited (0.02%) U.K. IV. Kaiser Engenharia S.A. (50%) Portugal V. ICF Kaiser Construcoes e Engenharia Ltda (0.01%) Brazil IV. Kaiser Engineers (NZ) Ltd (1%) New Zealand IV. Kaiser Engineers Pty. Ltd. (50%) Australia V. KWA Kenwalt (50%) Australia V. ICF Kaiser Aluterv KFT Hungary V. ICF Kaiser Engineers Asia Pacific Pty Ltd Australia V. ICF Kaiser Engineers (Hong Kong) Ltd Hong Kong V. ICF Kaiser Engineers (Singapore) Pte Ltd Singapore V. Kaiser Engineers (NZ) Limited (99%) New Zealand III. Kaiser Engineers International, Inc. Nevada IV. ICF Pty. Ltd. (50%) Australia IV. ICF Kaiser Engenharia e Participacoes Ltda.(0.1%) Brazil IV. ICF Kaiser Panama S.A. Panama IV. Kaiser Engenharia S.A. (50%) Portugal
IV. Kaiser Engineers Pty. Ltd. (50%) Australia III. Kaiser Engineers Limited (99.98%) U.K. IV. Kaiser Engineers Technical Services Limited (80%) Cyprus IV. Kaiser Engineers (UK) Limited (50%) U.K. III. Kaiser Engineers (UK) Limited (50%) U.K. IV. Kaiser Engineers Technical Services Limited (20%) Cyprus III. KE Services Corporation Delaware III. Kaiser Engenharia e Constructoes Limitada Brazil II. International Waste Energy Systems, Inc. Delaware II. KE Livermore, Inc. Delaware I. Kaiser Engineers Massachusetts, Inc. Delaware I. ICF Kaiser Engineers Pacific, Inc. Nevada I. Kaiser Europe, Inc. Delaware I. ICF Kaiser / Georgia Wilson, Inc. Delaware I. Kaiser Government Programs, Inc. Delaware II. Kaiser K-H Holdings, Inc. Delaware III. Kaiser-Hill Company, LLC (50%) Colorado IV. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware III. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware I. Kaiser Hanford Company Delaware I. Kaiser Holdings Unlimited, Inc. Delaware II. American Venture Investments Incorporated Delaware III. American Venture Holdings, Inc. Delaware II. Cygna Consulting Engineers and Project Management, Inc. California II. Excell Development Construction, Inc. Delaware II. Kaiser DPI Holding Co., Inc. Delaware II. Kaiser Engineers Eastern Europe, Inc. Delaware III. ICF Kaiser Netherlands B.V. (10%) Netherlands II. Kaiser Hunters Branch Leasing, Inc. Delaware II. ICF Kaiser Netherlands B.V. (90%) Netherlands II. Leasing Corporation, Inc. Delaware I. ICF Kaiser Servicios Ambientales, S.A. de C.V. (66 2/3%) Mexico I. Kaiser Technology Holdings, Inc. Delaware II. ICF Kaiser Advanced Technology, Inc. Idaho III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico I. Kaiser R G.P. No. 1, Inc. Delaware I. Monument Select Insurance Company Vermont I. Phase Linear Systems Incorporated Delaware I. Tudor Engineering Company Delaware
EX-27 3 EXHIBIT 27
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 55,756,000 0 240,729,000 (11,240,000) 0 304,755,000 13,915,000 (10,934,000) 354,864,000 242,738,000 137,851,000 0 0 238,000 (45,362,000) 354,864,000 0 699,904,000 0 654,572,000 54,456,000 0 15,336,000 (24,460,000) 364,000 (24,096,000) 48,356,000 0 0 17,239,000 0.72 0.72 Represents gross revenue, which includes costs of certain services subcontracted to third parties and other reimbursable direct project costs, such as materials procured by the company on behalf of its customers. Gross revenue also includes equity in net income of unconsolidated subsidiaries for purpose of this schedule.
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