-----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, G4cKpIi+jZ4NIGwZlxo5xJPBXQ1j8gOwqwvaxDKGYNIHGgCWMUmCAQKznenvXTSD p/bt/5dN4aV4dBr8g0EfCg== 0000950109-96-000233.txt : 19960117 0000950109-96-000233.hdr.sgml : 19960117 ACCESSION NUMBER: 0000950109-96-000233 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960116 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICF KAISER INTERNATIONAL INC CENTRAL INDEX KEY: 0000856200 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 541437073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12248 FILM NUMBER: 96503822 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 November 30, 1995 Commission File No. 1-12248 ICF KAISER INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 54-1437073 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9300 Lee Highway, Fairfax, Virginia 22031-1207 ----------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (703) 934-3600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No _________ --------- On December 31, 1995, there were 21,263,828 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 - November 30, 1995 and February 28, 1995........................3 Consolidated Statements of Operations - Nine Months Ended November 30, 1995 and 1994...................4 Consolidated Statements of Operations - Three Months Ended November 30, 1995 and 1994..................5 Consolidated Statements of Cash Flows - Nine Months Ended November 30, 1995 and 1994...................6 Notes to Consolidated Financial Statements...................7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............8-12 PART II - OTHER INFORMATION Item 1. Legal Proceedings.............................................12 Item 2. Changes in Securities.........................................12 Item 3. Defaults Upon Senior Securities...............................12 Item 4. Submission of Matters to a Vote of Security Holders...........12 Item 5. Other Information.............................................12 Item 6. Exhibits and Reports on Form 8-K..............................12
2 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
November 30, February 28, 1995 1995 (Unaudited) - ----------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 23,105 $ 28,233 Contract receivables, net 205,583 139,860 Prepaid expenses and other current assets 14,970 10,872 Deferred income taxes 11,420 13,553 ----------- ---------- Total Current Assets 255,078 192,518 ----------- ---------- Fixed Assets Furniture, equipment, and leasehold improvements 43,254 42,557 Less depreciation and amortization (33,392) (29,648) ----------- ---------- 9,862 12,909 ----------- ---------- Other Assets Goodwill, net 48,489 47,945 Investments in and advances to affiliates 9,859 8,022 Due from officers and employees 1,024 1,826 Other 21,535 18,202 ----------- ---------- 80,907 75,995 ----------- ---------- $ 345,847 $ 281,422 LIABILITIES AND SHAREHOLDERS' EQUITY =========== ========== Current Liabilities Accounts payable and accrued expenses $ 86,533 $ 46,811 Accrued salaries and employee benefits 57,760 30,549 Accrued interest 6,180 2,528 Current portion of long-term debt 44 578 Income taxes payable 231 644 Deferred revenue 12,734 11,013 Other 8,535 8,755 ----------- ---------- Total Current Liabilities 172,017 100,878 ----------- ---------- Long-term Liabilities Long-term debt, less current portion 120,096 126,733 Other 4,523 6,397 ----------- ---------- 124,619 133,130 ----------- ---------- Commitments and Contingencies Minority Interests in Subsidiaries 1,797 173 Redeemable Preferred Stock 19,770 19,617 Common Stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 21,260,430 and 21,011,369 shares 213 210 Additional Paid-in Capital 64,666 63,786 Notes Receivable Related to Common Stock (1,732) (1,732) Retained Earnings (Deficit) (33,332) (33,343) Cumulative Translation Adjustment (2,171) (1,297) ----------- ---------- $ 345,847 $ 281,422 =========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
NINE MONTHS ENDED NOVEMBER 30, 1995 1994 ============================== (Unaudited) GROSS REVENUE $ 781,127 $ 655,364 Subcontract and direct material costs (413,257) (309,643) Equity in income of joint ventures and affiliated companies 2,664 2,693 ---------- ---------- SERVICE REVENUE 370,534 348,414 OPERATING EXPENSES Direct cost of services and overhead 312,704 299,877 Administrative and general 35,249 31,142 Depreciation and amortization 7,507 6,941 ---------- ---------- OPERATING INCOME 15,074 10,454 OTHER INCOME (EXPENSE) Gain on sale of investment - 551 Interest income 1,884 1,381 Interest expense (11,943) (10,857) ---------- ---------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 5,015 1,529 Income tax provision 2,257 2,247 ---------- ---------- INCOME (LOSS) BEFORE MINORITY INTERESTS 2,758 (718) Minority interests in net income of subsidiaries 1,124 - ---------- ---------- NET INCOME (LOSS) 1,634 (718) Preferred stock dividends and accretion 1,623 1,616 ---------- ---------- NET INCOME (LOSS) AVAILABLE FOR COMMON SHAREHOLDERS $ 11 $ (2,334) ========== ========== Primary and Fully Diluted Net Income (Loss) Per Common Share $ 0.00 $ (0.11) ========== ========== Primary and Fully Diluted Weighted Average Common and Common Equivalent Shares Outstanding 21,503 20,945 ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Three Months Ended November 30, 1995 1994 =============================== (Unaudited) GROSS REVENUE $ 319,870 $ 235,912 Subcontract and direct material costs (173,430) (111,240) Equity in income of joint ventures and affiliated companies 951 673 ---------- ---------- SERVICE REVENUE 147,391 125,345 OPERATING EXPENSES Direct cost of services and overhead 126,359 110,445 Administrative and general 12,632 9,581 Depreciation and amortization 2,585 2,357 ---------- ---------- OPERATING INCOME 5,815 2,962 OTHER INCOME (EXPENSE) Interest income 852 624 Interest expense (3,866) (2,993) ---------- ---------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 2,801 593 Income tax provision 1,261 916 ---------- ---------- INCOME (LOSS) BEFORE MINORITY INTERESTS 1,540 (323) Minority interests in net income of subsidiaries 644 - ---------- ---------- NET INCOME (LOSS) 896 (323) Preferred stock dividends and accretion 546 539 ---------- ---------- NET INCOME (LOSS) AVAILABLE FOR COMMON SHAREHOLDERS $ 350 $ (862) ========== ========== Primary and Fully Diluted Net Income (Loss) Per Common Share $ 0.02 $ (0.04) ========== ========== Primary and Fully Diluted Weighted Average Common and Common Equivalent Shares Outstanding 21,636 20,948 ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended November 30, 1995 1994 ================================= (Unaudited) OPERATING ACTIVITIES Net income (loss) $ 1,634 $ (718) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 7,507 6,941 Provision for losses on contract receivables 1,440 908 Provision for deferred income taxes 2,257 2,247 Earnings less than (in excess of) cash distributions from joint ventures and affiliated companies (1,055) 1,712 Gain on sale of investment - (551) Minority interests in net income of subsidiaries 1,124 - Changes in operating assets and liabilities related to operating activities, net of acquisitions: Contract receivables, net (66,981) (18,014) Prepaid expenses and other current assets (5,298) 4,294 Other assets (3,854) (1,442) Accounts payable and accrued expenses 69,744 5,278 Income taxes payable (413) 31 Deferred revenue 1,721 513 Other liabilities (1,825) (5,077) -------------- -------------- Net Cash Provided by (Used in) Operating Activities 6,001 (3,878) -------------- -------------- INVESTING ACTIVITIES Investments in subsidiaries and affiliates, net of cash acquired (2,060) (400) Sale of subsidiaries and subsidiary assets 735 2,600 Purchases of fixed assets, net (638) (1,731) -------------- -------------- Net Cash Provided by (Used in) Investing Activities (1,963) 469 -------------- -------------- FINANCING ACTIVITIES Principal payments on credit facility (16,000) - Principal payments on other borrowings (1,149) (914) Proceeds from borrowings on credit facility 11,000 - Proceeds from other borrowings 55 - Reacquisition of senior subordinated notes and related warrants (1,363) - Subsidiary capital contribution from minority interest 500 - Proceeds from issuances of common stock 392 298 Repurchases of common stock (256) (180) Redemptions of redeemable preferred stock - (799) Preferred stock dividends (1,471) (1,463) -------------- -------------- Net Cash Used in Financing Activities (8,292) (3,058) -------------- -------------- Effect of Exchange Rate Changes on Cash (874) 419 -------------- -------------- Decrease in Cash and Cash Equivalents (5,128) (6,048) Cash and Cash Equivalents at Beginning of Period 28,233 25,509 -------------- -------------- Cash and Cash Equivalents at End of Period $ 23,105 $ 19,461 -------------- -------------- SUPPLEMENTAL INFORMATION: Cash payments for interest $ 7,839 $ 7,385 Cash payments (refunds) for income taxes $ 401 $ (152) NON-CASH TRANSACTION: Sale of investment $ - $ 735
See notes to consolidated financial statements. 6 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying consolidated financial statements of ICF Kaiser International, Inc. (ICF Kaiser or the Company) and subsidiaries (including Kaiser-Hill Company, LLC, effective July 1, 1995), except for the February 28, 1995 balance sheet, are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's audited consolidated financial statements and footnotes thereto for the year ended February 28, 1995 and the information included in the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended February 28, 1995. Certain reclassifications have been made to the prior period financial statements to conform to the presentation used in the November 30, 1995 financial statements. NOTE B - MINORITY INTERESTS Certain of ICF Kaiser's subsidiaries are partially owned by outside parties. For financial reporting purposes, the assets, liabilities, results of operations and cash flows of these subsidiaries are included in ICF Kaiser's consolidated financial statements and the outside parties' interests are reflected as minority interests. NOTE C - NET INCOME (LOSS) PER COMMON SHARE Net income (loss) per common share is computed using net income (loss) available for common shareholders, as adjusted under the modified treasury stock method, and the weighted average number of common stock and common stock equivalents outstanding during the periods presented. Common stock equivalents include stock options and warrants and additional shares which will be or may be issued in connection with acquisitions. The adjustments required by the modified treasury stock method and for acquisition-related contingencies were anti- dilutive for all loss periods presented and immaterial to the income periods presented. Therefore, the adjustments were excluded from earnings per share computations. NOTE D - CONTINGENCIES Normally in the Company's business, various claims or charges are asserted and litigation commenced against the Company arising from or related to properties, injuries to persons, and breaches of contract, as well as claims related to acquisitions and dispositions. Claimed amounts may not bear any reasonable relationship to the merits of the claim or to a final court award. In the opinion of management, an adequate reserve has been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against the Company in such litigation. The 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. Management does not believe that there will be any material adverse effect on the Company's financial position, operations, or cash flows as a result of these investigations. 7 The Company has a substantial number of cost-reimbursement contracts with the U.S. government, the costs of which are subject to audit by the U.S. government. As a result of such audits, the government asserts, from time to time, that certain costs claimed as reimbursable under government contracts either were not allowable or not allocated in accordance with federal procurement regulations. Management believes that the potential effect of disallowed costs, if any, for the periods currently under audit and for periods not yet audited, has been provided for adequately and will not have a material adverse effect on the Company's financial position, operations, or cash flows. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW ICF Kaiser is one of the nation's largest engineering, construction, and consulting services companies, providing fully integrated capabilities to clients in four related market areas: environment, infrastructure, industry, and energy. The Company provides services to domestic and foreign clients in both the private and public sectors. Results for Nine Months ICF Kaiser's operating income of $15.1 million for the nine months ended November 30, 1995 was a $4.6 million increase from the $10.5 million of operating income reported for the nine months ended November 30, 1994. The increase in operating income primarily resulted from a $6.2 million improvement in engineering and construction operations. This operating income improvement was partially due to a major transit project to be constructed in the Philippines, operating revenues of which had been previously deferred. Costs related to the development of this transit project had been expensed in prior periods. Further improvements in engineering and construction operations were due to substantial growth in the group's industrial sector and a reduction in the group's overhead. An additional reason for the improvement in operating income (before minority interests) for the nine months ended November 30, 1995 was $4.1 million in earnings from the Performance Based Integrating Management Contract at the U.S. Department of Energy's (DOE) Rocky Flats Environmental Technology Site in Colorado. This DOE contract was awarded in April 1995 to Kaiser-Hill Company, LLC (Kaiser-Hill), a limited liability company owned equally by ICF Kaiser and CH2M Hill Companies, Ltd. (CH2M Hill). A further $1.8 million increase in ICF Kaiser's operating income was realized from the Company's operations at the U.S. Department of Energy's (DOE) Hanford, Washington site (Hanford). During the quarter ended November 30, 1994, income from Hanford had been reduced by an adjustment in estimated fees earned. The improvements in operating income in 1995 as compared to 1994 were partially offset by a $4.2 million decline in operating income from private-sector environmental work, increases in bidding and proposal efforts required by large scale U.S. Department of Defense (DOD) and DOE contracts; and temporary delays in federal environmental projects due to federal government budgetary uncertainties. The Company's consulting operations experienced a $2.7 million decrease in operating income between the nine-month periods ended November 30, 1995 and 1994, caused by a delay in task order assignments under new contract awards and a significant increase in levels of business development activity. The federal government's fiscal 1996 budget was not finalized during the period ended November 30, 1995, which led to the federal government's operating under an existing continuing resolution (including one no-work furlough period) since October 1, 1995. While under this resolution, the assignment of work under task order contracts has been delayed. 8 A significant company-wide increase in marketing efforts further negatively impacted operating results in 1995 as compared to 1994 in addition to the activities discussed above within the environmental and consulting operations. Management believes that ICF Kaiser's increasing investment in its business development activities should result in additional contract awards in both the public and private sectors of its business. Results for Third Quarter Operating income for the quarter ended November 30, 1995 increased $2.8 million to $5.8 million, compared to $3.0 million of operating income reported for the quarter ended November 30, 1994. The increase in operating income between the three-month periods was primarily due to the factors discussed above. The engineering and construction group's operating income increased by $0.7 million, operating income from Hanford increased by $1.8 million, and Kaiser-Hill produced $2.3 million of operating results for the quarter ended November 30, 1995. These increases were partially offset by lower operating results from other environmental operations ($0.5 million) and consulting services ($1.5 million). The decrease in consulting services for the quarter ended November 30, 1995 as compared to the quarter ended November 30, 1994 was due to the temporary shutdown of the federal government in November 1995 and increases in business development efforts as discussed above. Business Conditions and Backlog The Company's contract backlog increased significantly to $4.3 billion at November 30, 1995 compared to $1.4 billion at February 28, 1995. The increase in backlog primarily resulted from the April 1995 award of the five-year Kaiser- Hill contract which increased contract backlog by approximately $3.0 billion. In August 1995, ICF Kaiser signed a contract estimated at $330 million to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers (USACE), Baltimore District. This Total Environmental Restoration Contract (TERC) is for four years with two, three-year options. The contract is a cost reimbursement delivery order contract, and the fee structure includes a combination of cost plus fixed fee, award fee, and incentive fees. Also, In August 1995, ICF Kaiser signed a five-year contract estimated at $50 million to provide environmental services to USACE, Savannah District. With the award of the Kaiser-Hill contract and the Company's continued work at DOE's Hanford, ICF Kaiser is now actively participating in two of DOE's major environmental cleanup efforts and at eight of DOE's other 18 major weapons facilities. ICF Kaiser recently expanded its environmental cleanup contract base with DOD with the award of the USACE Baltimore TERC and USACE Savannah contracts discussed above. The Company expects that the experience and reputation it earns under these contracts will continue to enhance its position as a major participant in the field of environmental cleanup and large program management. The Company also expects to continue its increased level of business development activity in the consulting group and expects that such activity will result in expanded public and private sector consulting services. In October 1995, the Company's consulting group was awarded a contract worth up to $111 million to support the marketing and communication efforts of the U.S. Environmental Protection Agency's Energy Star programs. The contract is for one year, with four additional one-year options. Other major current business initiatives include a significant effort to enhance the Company's internal management information systems. ICF Kaiser believes these endeavors, combined with other ongoing efforts described above, should positively impact the Company's future performance. 9 RESULTS OF OPERATIONS The following table summarizes key elements in the Consolidated Statements of Operations for the nine months ended November 30, 1995 and 1994.
Nine Months Nine Months Ended Ended November 30, 1995 November 30, 1994 ----------------------------------------- (Dollars in millions) GROSS REVENUE $781.1 $655.4 SERVICE REVENUE $370.5 $348.4 SERVICE REVENUE AS A PERCENTAGE OF GROSS REVENUE 47.4% 53.2% OPERATING EXPENSES AS A PERCENTAGE OF SERVICE REVENUE: Direct cost of services and overhead 84.4% 86.1% Administrative and general 9.5% 8.9% Depreciation and amortization 2.0% 2.0% OPERATING INCOME 4.1% 3.0%
Gross revenue represents services provided to customers with whom the Company has a primary contractual relationship. Included in gross revenue are costs of certain services subcontracted to third parties and other reimbursable direct project costs, such as materials procured by the Company on behalf of its customers. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of the equity in income of unconsolidated joint ventures and affiliated companies. ICF Kaiser believes that it is appropriate to analyze operating margins and other ratios in relation to service revenue because such revenue and ratios reflect the work performed directly by the Company. Operating profits (fees) generated by the Hanford and Kaiser-Hill contracts are based on performance and not revenue. A change in revenue between periods is likely to be disproportionate to the change in the fees. Consequently, changes in revenue may have an exaggerated impact on the Company's margins as measured on a percentage basis. In addition, because Kaiser-Hill is a consolidated subsidiary of ICF Kaiser, the operating income includes the portion of income generated under the Kaiser-Hill contract attributable to CH2M Hill. CH2M Hill's interest in Kaiser-Hill is reflected as a minority interest in ICF Kaiser's financial statements (see Note B). Revenue Gross revenue for the nine months ended November 30, 1995 increased $125.7 million, or 19.2%, to $781.1 million. The increase in gross revenue was attributable to the commencement of work under the Kaiser-Hill contract which generated $216.5 million in gross revenue during the current fiscal year ($133.7 million in the quarter ended November 30, 1995). The increase was partially offset by a $90.4 million reduction in gross revenue under the Hanford contract due to federal budget reductions at the Hanford site. This reduced level of Hanford activity is expected to continue and may be reduced further in future periods; however, a reduction in the Hanford budget is not currently expected to have a significant impact on operating income due to the nature of the fee structure under this particular the DOE contract. In October 1995, the Company announced that its subsidiary ICF Kaiser Hanford Company was teaming with five other nationally known firms in bidding on the DOE's new management and integration contract at Hanford. The response to the DOE's request for proposals is due in March 1996. 10 Service revenue increased by $22.1 million for the nine-month period ended November 30, 1995 as compared to the nine months ended November 30, 1994. The $22.1 million increase in service revenue was due primarily to $71.4 million generated under the Kaiser-Hill contract, offset by a $49.3 million decrease in service revenue under the Hanford contract. Service revenue as a percentage of gross revenue decreased to 47.4% for the nine months ended November 30, 1995 from 53.2% for the nine months ended November 30, 1994 as a result of the nature of the Kaiser-Hill contract. A significant portion of the gross revenue derived from the Kaiser-Hill contract includes the costs of services subcontracted to third parties. Operating Expenses Direct cost of services and overhead increased $12.8 million between the nine- month periods ended November 30, 1995 and 1994. Costs on the new Kaiser-Hill contract ($66.9 million) were offset by a $51.3 million reduction in the Hanford contract costs (attributable to the federal budget reductions discussed above). The remainder of the Company's direct cost of services and overhead as a percentage of service revenue for the nine months ended November 30, 1995 was comparable to the same period in the prior year. Administrative and general expense increased $4.1 million, or 13.2%, between the nine-month periods ended November 30, 1995 and 1994 and increased from 8.9% to 9.5% as a percentage of service revenue. The increase in these costs is primarily attributable to the Company's increased commitment to its marketing activities, including filling several key marketing positions within the Company and the relatively high level of marketing expense associated with proposing and bidding large scale DOD and DOE contracts. Income Tax Expense ICF Kaiser's income tax provision was $2.3 million and $2.2 million for the nine months ended November 30, 1995 and 1994, respectively. Although pretax income for the nine months ended November 30, 1995 was $3.5 million greater than pretax income for the comparable period ended November 30, 1994, the Company's effective tax rate decreased due to a reduction in permanent differences (such as the nondeductibility of goodwill) as a percentage of pretax income and a reduction in controlled foreign corporation losses. The nine months ended November 30, 1994 also included a repatriation of overseas funds to the U.S., which could not then be currently offset by foreign tax credits, resulting in additional income taxes for that period. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended November 30, 1995, cash and cash equivalents decreased $5.1 million to $23.1 million. Cash was primarily used for net repayments on the Company's Credit Facility ($5.0 million); acquisitions and investments in joint ventures and affiliates ($2.1 million); payment or accrual of dividends ($1.5 million); repurchases by the Company's insurance subsidiary of a portion of the Company's outstanding 12% Senior Subordinated Notes and related warrants ($1.4 million); and payments of other outstanding debt ($1.1 million). These uses were offset by $6.0 million resulting from operating activities, including receipt of $13.4 million from DOE for payment of accrued employee benefits acquired pursuant to the Kaiser-Hill contract, offset by cash used in other operating activities at Kaiser-Hill and an interest payment of $7.5 million on the Company's 12% Senior Subordinated Notes. The next $7.5 million interest payment on the Notes was due and paid on January 2, 1996. For the past several years, the Company has had ongoing negotiations, filings, and litigation with the Internal Revenue Service (IRS) related to settlement of its tax liabilities and the liabilities associated with acquired predecessor companies. The cash and income impact have generally been favorable to the Company. Further , the Company's previous tax losses and its resultant net operating loss carryforward position, will limit federal income tax payments required in the near future. In one recent tax case, the Company prevailed at the trial court level in a tax refund litigation matter against the IRS. The Company is currently engaged in discussions with the Department of Justice concerning the possible settlement of this litigation in order to avoid a further appeal. It cannot be predicted whether or when this matter will be resolved; however, the resolution of this matter could have a material favorable impact on the Company's liquidity and financial results. 11 Management believes that current projected level of cash flows and the availability of financing, including borrowings under the Company's Credit Facility, will be adequate to fund operations throughout the next twelve months. As of November 30, 1995, there were no outstanding borrowings under the Credit Facility, except for letters of credit. As of the date of this filing, the Company had $7 million of borrowings, excluding letters of credit, outstanding under its Credit Facility. ICF Kaiser is currently considering alternative financing sources to achieve cost savings and provide greater flexibility in growing and managing the Company's businesses. This process includes an active search for a replacement for or extension of the current Credit Facility which expires on October 31, 1996. Management expects to have a firm commitment for a replacement for or extension of the Company's existing Credit Facility by March 31, 1996. PART II - OTHER INFORMATION Item 1. Legal Proceedings As previously reported in the Report on Form 10-K for the year ended February 28, 1995. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities Because of technical limitations on the payment of dividends contained in the agreement governing the Company's 12% Senior Subordinated Notes due 2003 (12% Notes), the Company did not pay the November 30, 1995 accrued dividend on its outstanding Series 2D Senior Preferred Stock, in the aggregate amount of $487,500. In this regard, the Company has internally reserved cash in the amount of this dividend arrearage for future payment. If the dividend arrearage is not cured by March 10, 1996, the holder of the Series 2D Senior Preferred Stock will have certain additional rights, including the right to prohibit the Company from engaging in various corporate actions without the prior consent of such holder and to elect two directors. The Company is continuing in its attempts to satisfactorily resolve this matter. 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. 27 Financial Data Schedule (b) Report on Form 8-K ------------------ None. 12 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report of Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. ICF KAISER INTERNATIONAL, INC. (Registrant) Date: January 16, 1996 /s/ Richard K. Nason ----------------------------- Richard K. Nason Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial officer) 13 EX-27 2 FINANCIAL DATA SERVICES - ARTICLE 5
5 9-MOS DEC-31-1995 MAR-01-1995 NOV-30-1995 23,105,000 0 216,613,000 11,030,000 0 255,078,000 43,254,000 33,392,000 345,847,000 172,017,000 120,096,000 213,000 19,770,000 0 27,431,000 345,847,000 0 781,127,000 0 312,704,000 0 1,440,000 11,943,000 5,015,000 2,257,000 1,634,000 0 0 0 1,634,000 0.00 0.00 Excludes current portion of bonds, mortgages, and similar debt. Represents gross revenue which includes costs of certain services subcontracted to third parties and other reimbursable direct project costs, such as materials procured by the Company on behalf of its customers. Excludes subcontract and direct material costs of $413,257,000.
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