SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarter ended December 31, 1993
OR
__ TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
Commission file number 1-9037
International Technology Corporation
(Exact name of registrant as specified in its charter)
Delaware 33-0001212
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23456 Hawthorne Boulevard, Torrance, California 90505
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 378-9933
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 ........
At January 31, 1994 the registrant had issued and outstanding an aggregate of
33,570,231 shares of its common stock.
1
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED DECEMBER 31, 1993
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
as of December 31, 1993 (unaudited) and
March 31, 1993. 3
Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended
December 31, 1993 and 1992 (unaudited). 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 1993
and 1992 (unaudited). 5
Notes to Condensed Consolidated Financial
Statements (unaudited). 6-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition. 10-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 18
Item 6. Exhibits and Reports on Form 8-K. 19
Signature. 20
2
<PAGE>
PART I
Item 1. Financial Statements.
INTERNATIONAL TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1993 1993
------------ ---------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 9,738 $ 8,659
Receivables, net 121,223 129,824
Prepaid expenses and other current assets 7,543 5,879
Deferred income taxes 8,361 10,638
------- -------
Total current assets 146,865 155,000
------- -------
Property, plant and equipment, at cost:
Land and land improvements 2,136 2,136
Buildings and leasehold improvements 26,010 25,906
Machinery and equipment 155,007 149,250
------- -------
183,153 177,292
Less accumulated depreciation and
amortization 87,310 73,261
------- -------
Net property, plant and equipment 95,843 104,031
------- -------
Construction-in-progress 19,361 17,145
Other assets 50,944 51,297
Long-term assets of discontinued operations 41,705 41,705
------- -------
Total assets $354,718 $369,178
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,451 $ 38,046
Accrued liabilities 33,281 40,715
Billings in excess of revenues 9,164 2,529
Short-term debt, including current portion
of long-term debt 16,223 4,695
Net current liabilities of discontinued operations 10,907 11,912
------- -------
Total current liabilities 96,026 97,897
------- -------
Long-term debt 50,859 115,811
Long-term accrued liabilities of
discontinued operations 40,961 49,292
Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 180,000 shares
authorized; 24,000 shares issued and outstanding
at December 31, 1993 2,400 -
Common stock, $1 par value; 100,000,000 shares
authorized; 33,571,422 and 33,239,543 shares
issued and outstanding, respectively 33,571 33,240
Additional paid-in capital 164,735 109,217
Common stock to be issued 5,500 6,350
Deficit (39,334) (42,629)
------- -------
Total stockholders' equity 166,872 106,178
------- -------
Total liabilities and stockholders' equity $354,718 $369,178
------- -------
See accompanying notes.
3
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INTERNATIONAL TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three months ended Nine months ended
December 31, December 31,
------------------ -----------------
1993 1992 1993 1992
-------- -------- ------- --------
(Unaudited)
Revenues $ 92,524 $101,673 $295,738 $307,042
Cost and expenses:
Cost of revenues 79,144 83,654 248,790 250,946
Selling, general and
administrative expenses 10,519 12,068 33,159 37,074
------- ------- ------- -------
Operating income 2,861 5,951 13,789 19,022
Interest, net 1,691 2,746 6,725 8,493
Other expense, net - 8,281 - 4,798
------- ------- ------- -------
Income (loss) before income taxes 1,170 (5,076) 7,064 5,731
(Provision) benefit for income taxes (444) 730 (2,684) (3,160)
------- ------- ------- ------
Income (loss) from continuing
operations 726 (4,346) 4,380 2,571
Discontinued operations
(net of income taxes):
Pollution control manufacturing -
Adjustment of gain from disposition - (3,809) - (3,809)
------- ------- ------- -------
Income (loss) before cumulative
effect of change in accounting
for income taxes 726 (8,155) 4,380 (1,238)
Cumulative effect of change in
accounting for income taxes - - - 13,000
------- ------- ------- -------
Net income (loss) 726 (8,155) 4,380 11,762
Less preferred stock dividends 1,050 - 1,085 -
------- ------- ------- -------
Net income (loss) applicable
to common stock $ (324) $ (8,155) $ 3,295 $ 11,762
------- ------- ------- -------
Net income (loss) per common share:
Continuing operations (net of
preferred stock dividends) $ (.01) $ (.13) $ .10 $ .08
Discontinued operations - (.11) - (.12)
------- ------- ------- -------
(.01) (.24) .10 (.04)
Cumulative effect of change in
accounting for income taxes - - - .39
------- ------- ------- -------
$ (.01) $ (.24) $ .10 $ .35
------- ------- ------- -------
See accompanying notes.
4
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INTERNATIONAL TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended
December 31,
----------------------
1993 1992
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income $ 4,380 $ 11,762
Adjustments to reconcile net income to net cash
provided by operating activities:
Adjustment of gain from disposition of
discontinued operations - 3,809
Depreciation and amortization 16,576 15,095
Deferred income taxes 2,277 3,515
Gain on sale of investment in EXEL Limited - (3,483)
Writeoff of costs incurred in U.K.
joint venture - 1,981
Provision for settlement of
stockholders' lawsuit - 6,300
Cumulative effect of change in accounting
for income taxes - (13,000)
Changes in assets and liabilities, net of effects
from acquisitions and dispositions of businesses:
Decrease (increase) in receivables, net 8,601 (3,763)
Increase in prepaid expenses and
other current assets (2,344) (206)
Decrease in accounts payable (11,595) (5,469)
Decrease in accrued liabilities (7,434) (1,747)
Increase (decrease) in billings
in excess of revenues 6,635 (1,754)
------- -------
Net cash provided by operating activities 17,096 13,040
------- -------
Cash flows from investing activities:
Capital expenditures (10,314) (10,842)
Proceeds from sale of pollution control
manufacturing business - 22,677
Proceeds from sale of investment in EXEL Limited - 3,733
Other 742 (3,887)
Investment activities of transportation,
treatment and disposal discontinued operations (9,336) (8,252)
------- -------
Net cash (used for) provided by investing
activities (18,908) 3,429
------- -------
Cash flows from financing activities:
Repayments of long-term borrowings (80,434) (38,402)
Long-term borrowings 27,010 21,440
Net proceeds from public offering of
depositary shares 57,130 -
Dividends paid on preferred stock (1,085) -
Issuances of common stock 270 504
------- -------
Net cash provided by (used for)
financing activities 2,891 (16,458)
------- -------
Net increase in cash and cash equivalents 1,079 11
Cash and cash equivalents at beginning of period 8,659 9,444
------- -------
Cash and cash equivalents at end of period $ 9,738 $ 9,455
------- -------
See accompanying notes.
5
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INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included herein
have been prepared by International Technology Corporation
(Company or IT), without audit, and include all adjustments of a
normal, recurring nature which are, in the opinion of management,
necessary for a fair presentation of the results of operations
for the three-month and nine-month periods ended December 31,
1993 and 1992, pursuant to the rules of the Securities and
Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations
although the Company believes that the disclosures in such
financial statements are adequate to make the information
presented not misleading.
These condensed consolidated financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1993. The results of operations
for the nine-month period ended December 31, 1993 are not
necessarily indicative of the results for the full fiscal year.
2. In a September 27, 1993 public offering, the Company sold
2,400,000 depositary shares, each representing a 1/100th
interest in a share of the Company's 7% Cumulative Convertible
Exchangeable Preferred Stock. The net proceeds to the Company
were $57,130,000, some of which were utilized at that time to
repay the aggregate $30,000,000 of outstanding cash advances under
the Company's revolving credit line. On November 15, 1993, the
Company prepaid at par value $25,000,000 of the $75,000,000 of
outstanding 9 3/8% Senior Notes due July 1, 1996 (the Notes),
utilizing proceeds from the offering of depositary shares.
The depositary shares entitle the holder to all proportional
rights and preferences of the 7% Cumulative Convertible
Exchangeable Preferred Stock, including dividend, voting,
redemption, conversion and liquidation rights and preferences.
The depositary shares have a cumulative annual per share dividend
of $1.75, payable quarterly. The depositary shares will rank as
to dividends and liquidation, prior to the Company's common
stock and to the Company's Series A preferred stock, if
issued. The liquidation preference of each depositary share
is equivalent to $25 plus accrued and unpaid dividends.
The depositary shares are convertible into common stock of
the Company at the option of the holder at any time at
$5.84 per common share or approximately 4.28 common shares
for each depositary share. The depositary shares are
redeemable for cash at the option of the Company on or
after September 30, 1996, initially at a price of $26.225
per depositary share and thereafter at prices declining to
$25 per depositary share on or after September 30, 2003.
On any dividend payment date on or after September 30,
1996, the depositary shares are exchangeable at the option
of the Company for 7% Convertible Subordinated Debentures
Due 2008 in a principal amount equal to $25 per depositary
share.
3. Effective April 1, 1992, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," (SFAS 109). As permitted under SFAS
109, the Company reported the effect of its adoption as
a cumulative effect of a change in accounting for income
taxes of $13,000,000 of income in the fiscal quarter
ended June 30, 1992.
It is the Company's policy at the end of each interim reporting
period to make an estimate of the annual effective income tax rate.
The annual effective income tax rate so determined is used to
provide for income taxes on a current year-to-date basis.
6
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INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The effective income tax rate of 38% for the nine-month period
ending December 31, 1993 compares to a 55% effective rate for the
corresponding period of the prior fiscal year. The effective
income tax rates exceed the 34% federal statutory rate primarily
due to nondeductible expenses and state income taxes.
4. Net income per common share is computed by dividing net income
applicable to common stock by the weighted average number of
outstanding common shares and common share equivalents during
each period as follows:
Three months ended Average common and common
December 31, equivalent shares outstanding
------------------ -----------------------------
1993 34,994,557
1992 33,328,834
Nine months ended Average common and common
December 31, equivalent shares outstanding
----------------- -----------------------------
1993 34,617,879
1992 33,220,777
Common share equivalents relate to dilutive stock options
computed using the treasury stock method and common shares
to be issued to discharge the Company's obligation in
connection with a recently approved settlement of a
stockholders' lawsuit. (See Part II of this filing for
current developments related to this stockholders' lawsuit.)
In fiscal year 1994, the computation of net income per
share, assuming the conversion into common shares of the
Company's 7% Cumulative Convertible Exchangeable Preferred
Stock, is antidilutive.
5. On February 24, 1992, the Company entered into an agreement
for the sale of the manufacturing operations of the Company's
Pollution Control Systems (PCS) division located in Tulsa,
Oklahoma and Hull, England. This business designed and
manufactured combustion, hydrocarbon vapor recovery, waste
treatment and other environmental control systems for domestic
and international clients. The sale closed on May 14, 1992
when the Company received $20,888,000 for certain assets and
liabilities of the business. Additionally, the Company received
payments totaling $1,789,000 during the second quarter of fiscal
year 1993 in settlement of certain post-closing adjustments.
In the third quarter of fiscal year 1993, the Company
recorded a charge of $3,809,000 (net of income tax benefit
of $2,176,000) to reduce the net gain of $13,088,000 (net
of provision for income taxes of $575,000) which had been recorded
in fiscal year 1992 from the sale of the PCS manufacturing
business. This charge resulted from unexpected cost overruns
in connection with the completion and closeout of certain
projects retained by the Company as well as from difficulties
the Company has experienced in collecting receivables and
limiting its warranty obligations on certain projects for
which the Company retained financial responsibility.
6. In December 1987, the Company's Board of Directors adopted
a strategic restructuring program which included a formal plan
to divest the transportation, treatment and disposal operations
through sale of some facilities and closure of certain other
facilities. As of December 31, 1993, two of the Company's
inactive disposal sites have been formally closed and the other
two are in the process of closure. In connection with the
7
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INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
plan of divestiture at December 31, 1987, the Company recorded
a provision for loss on disposition of transportation,
treatment and disposal discontinued operations in the amount
of $110,069,000, net of income tax benefit of $24,202,000, which
included the estimated net loss on sale or closure and the results
of operations of the active disposal sites and the transportation
business through the then estimated sale date. At March 31, 1992,
the Company increased the provision for loss on disposition by the
amount of $32,720,000, net of income tax benefit of $2,280,000,
principally due to the write off of the $30,400,000 contingent
purchase price from the earlier sale of certain assets. At
March 31, 1993, the Company increased the provision for loss on
disposition by $6,800,000, with no offsetting income tax benefit,
related to estimated additional costs resulting from delays in the
regulatory approval process and associated closure plan revisions.
At December 31, 1993, the Company's condensed consolidated
balance sheet included accrued liabilities of approximately
$51,868,000 to complete the closure and related post-closure of
its inactive disposal sites and related matters.
The provision for loss on disposition of transportation,
treatment and disposal discontinued operations is based on
various assumptions and estimates. The adequacy of the
provision for loss has been recently reevaluated in light
of the developments since the adoption of the divestiture
plan, and management believes the provision, as adjusted,
is reasonable; however, the ultimate effect of the
divestiture on the consolidated financial condition of the
Company is dependent upon future events, the outcome of
which cannot be determined at this time. Outcomes
significantly different from those used to estimate the
provision for loss could result in a material adverse
effect on the consolidated financial condition of the
Company.
7. Litigation to which IT is a party is discussed in Item 3,
Legal Proceedings, in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1993 and in
the Company's Quarterly Reports on Form 10-Q for the quarters
ended September 30 and June 30, 1993. Current developments
are discussed in Part II of this filing.
8. Unbilled receivables of $16,027,000 at December 31, 1993
($14,751,000 at March 31, 1993) are included in accounts
receivable. Unbilled receivables typically represent
amounts earned under the Company's contracts but not yet
billable according to the contract terms, which usually
consider the passage of time, achievement of certain milestones,
negotiation of change orders or completion of the project.
Included in unbilled receivables at December 31 and March 31, 1993
are approximately $6,750,000 and $6,000,000, respectively, of
claims related to a project which is subject to an audit by
the Defense Contract Audit Agency and a federal civil and
criminal investigation into the claims.
9. Noncurrent other assets at December 31 and March 31, 1993
include a claim amount of approximately $31,000,000
representing direct costs incurred in excess of those
recovered under the Motco Site Trust Fund contract, a
major fixed-price remediation contract. On December 4, 1991,
the Company announced the suspension of work on the Motco
project and the filing of a $56,000,000 breach of contract
lawsuit to recover direct costs, overhead and profit from
Motco Trust, the potentially responsible party (PRP) group
that agreed to finance remediation of the site, and Monsanto
Company, the leader of the PRP group.
On December 26, 1991, the Motco Trust and Monsanto filed
an answer to IT's lawsuit and asserted a counterclaim
against IT. In addition to denying liability on various
grounds, the Motco Trust, in an amended counterclaim
accepted for filing on October 1, 1993, asserts that it
has sustained actual and consequential damages, which it
claims will exceed $27,500,000, exclusive of interest,
attorneys fees and costs. These categories of damages are
claimed to include actual and projected future costs to
complete source control remediation at the site and
8
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INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
amounts of U.S. Environmental Protection Agency (USEPA)
reimbursement funding which the Motco Trust claims to have
lost. Monsanto also denies any separate liability from
that of the Motco Trust.
The Company is vigorously pursuing its lawsuit and defense
of the counterclaim by the Motco Trust. The Motco Trust's
recently filed motions for summary judgment have been
recommended for denial by the court magistrate and the
judge will consider this recommendation prior to trial.
The court has set a trial date of March 7, 1994. After
consideration of the merits of the Company's position in
the lawsuit and after consultations with its outside
counsel, management believes that, subject to the inherent
uncertainties of litigation, the Company more likely than
not will recover the contract claim receivable recorded to
date and prevail on Motco Trust's counterclaim. However,
if this matter is resolved in an amount significantly
lower than the contract claim receivable recorded by IT or
if the Motco Trust prevails in its counterclaim and
recovers any significant amount of damages, a material adverse
effect to the consolidated financial condition and results of
operations of the Company would result.
9
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Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.
INTERNATIONAL TECHNOLOGY CORPORATION
FOR QUARTER ENDED DECEMBER 31, 1993
RESULTS OF OPERATIONS
Overview
Effective April 1, 1993, the Company realigned its organizational
structure by combining the operations of its environmental engineering
and remediation services businesses to form an integrated environmental
services business area. Revenues and gross margin percentages for the
three-month and nine-month periods ended December 31, 1992 have been
restated in the realigned business areas.
The Company's financial performance in fiscal year 1993 and through
the first three quarters of fiscal year 1994 continued to be impacted
by weak market demand, particularly in the commercial sector, due to
the sluggish economy. Operating margins were negatively impacted by
costs associated with excess capacity, aggressive pricing pressures
and increased competition by new entrants in the market. The Company
expects the current business climate and market conditions to persist
at least through the end of the current fiscal year with a continuing
negative effect on revenue levels and operating margins.
<TABLE>
Comparison of the Three Months and Nine Months Ended December 31, 1993
to the Three Months and Nine Months Ended December 31, 1992
<CAPTION>
Three months ended December 31,
----------------------------------------------------------------
1993 1992
--------------------- ---------------------
(Dollars in thousands)
Gross Percentage revenue Gross
Margin increase (decrease) Margin
Revenues Percentage 1992 to 1993 Revenues Percentage
-------- ---------- ------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Environmental
Services $ 57,832 15.5% (20.2)% $ 72,466 18.4%
Analytical
Services 13,393 8.4 (7.4) 14,471 14.6
Construction and
Remediation 21,299 15.6 44.5 14,736 17.5
------- -------
Total $ 92,524 14.5 (9.0) $101,673 17.7
------- -------
</TABLE>
<TABLE>
<CAPTION>
Nine months ended December 31,
----------------------------------------------------------------
1993 1992
---------------------- ---------------------
(Dollars in thousands)
Gross Percentage revenue Gross
Margin increase (decrease) Margin
Revenues Percentage 1992 to 1993 Revenues Percentage
-------- ---------- ------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Environmental
Services $187,482 17.5% (12.9)% $215,247 19.4%
Analytical
Services 42,708 11.7 (.8) 43,036 16.1
Construction and
Remediation 65,548 14.0 34.4 48,759 15.1
------- -------
Total $295,738 15.9 (3.7) $307,042 18.3
------- -------
</TABLE>
10
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INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Revenues
Revenues for the third quarter of fiscal year 1994 decreased $9,149,000
or 9.0% from the level of the related quarter of the prior fiscal year.
For the first nine months of fiscal year 1994, revenues declined
$11,304,000 or 3.7% from the amount reported in the corresponding
period of fiscal year 1993.
For the three and nine months ended December 31, 1993, the Environmental
Services area experienced declines of $14,634,000 and $27,765,000, or
20.2% and 12.9%, respectively, from the related revenue levels of the
prior fiscal year. The Environmental Services area has reported
successively lower revenues in each of the last four fiscal quarters
primarily due to a continuing decline in client demand, principally
by commercial clients, for environmental engineering consulting services
as well as small remediation and groundwater services projects which
has led to reduced pricing. The Company has addressed this situation
through office consolidations and ongoing efforts to streamline the
organization, reduce costs and increase marketing efficiencies.
During the third quarter of fiscal year 1994, revenues for Analytical
Services declined $1,078,000 or 7.4% from the level reported in the
same period of the prior fiscal year, principally as a result of lower
pricing related to reduced market demand for chemical analyses and by
operating inefficiencies at certain of the Company's laboratories.
For the current nine-month period, Analytical Services experienced
a $328,000 or 0.8% decrease in revenues from the first nine months
of fiscal year 1993.
Due to increased activities on a major incineration project and on
certain governmental civil remediation programs, Construction
and Remediation reported revenue increases for the current three-month
and nine-month periods of $6,563,000 and $16,789,000, or 44.5% and
34.4%, respectively, in comparison to the corresponding periods of
the prior fiscal year.
The Company's total contract backlog increased from approximately
$391,000,000 at March 31, 1993 to approximately $411,000,000 at
December 31, 1993. The Company was a participant on a team which
was awarded the five-year Environmental Restoration Management Contract
(ERMC) in January 1993 for the U.S. Department of Energy's (DOE)
Hanford, Washington site. Although the scope and value of
the work under the contract will be more accurately defined in the
initial phases of the project, it is estimated that the minimum value
of the contract is approximately $800,000,000 of which the Company's
estimated current portion is approximately 30% of the contract value.
This contract is not included in backlog because the DOE is presently
reevaluating certain cost proposals made by IT's team and those of
a losing competitor. The reevaluation was recommended by the
General Accounting Office (GAO) based upon its decision with respect
to protests filed by two losing competitors for the contract. On
August 2, 1993, the Company announced the award of an eight-year
contract by the Westinghouse Hanford Company (WHC) to provide
analytical services at the DOE Hanford site. The Company was
advised on August 18, 1993 that protests have been filed by a losing
bidder regarding the award of the contract. On January 18, 1994,
the GAO dismissed and denied the protests filed by the losing bidder.
The Company estimates that the first-year analytical samples under
the contract will approximate $3,000,000 to $5,000,000 with a
corresponding amount included in backlog. The volume and complexity
of the sample analysis program is heavily dependent on the progress and
scope of remediation activities at the DOE Hanford site. Such
activities have been subject to various uncertainties and to
delays associated with the protest of the Hanford ERMC award
which has been pending approximately one year. Consequently,
the ultimate value of the contract cannot be estimated at
this time and could be lower than the original value
estimated by WHC.
11
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Gross Margin
Gross margin percentage for the third quarter of fiscal year
1994 declined to 14.5% of revenues from 17.7% of revenues for
the corresponding period of the prior fiscal year. For the
first nine months of fiscal year 1994, gross margin represented
15.9% of revenues as compared to 18.3% of revenues reported for
the corresponding nine-month period of the prior fiscal year.
In the current three-month and nine-month periods, Environmental
Services' gross margin percentage declined from the prior year level
due to overall pricing pressure resulting from generally lower
commercial client demand which has caused lower hourly billing rates
on time-and-material contracts as well as lower bidding margins
required to win small remediation and groundwater projects.
Analytical Services experienced downturns in gross margin percentages
for the current three-month and nine-month periods because of
increased pricing pressure in the chemical analysis area due to
weak customer demand, and decreased utilization of laboratory
capacity resulting from start-up delays on certain governmental
projects in the radiochemical analysis area.
Construction and Remediation gross margin percentages for the
third quarter of fiscal year 1994 have declined from prior
year levels principally because prior year operations
included favorable performance on a major thermal project
which did not recur in the current period. In the first nine
months of the current fiscal year, the overall mix of the
Company's remediation work continued to shift slightly toward
lower margin projects compared to the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the third
quarter of fiscal year 1994 represented 11.4% of revenues,
which compared favorably with the related 11.9% of revenues
reported for the corresponding period of the prior year. For
the first nine months of the current fiscal year, selling,
general and administrative expenses declined to 11.2% of
revenues from the 12.1% of revenues for the related nine-
month period of fiscal year 1993. The Company experienced
lower administrative costs in the current fiscal year due to
the elimination of management layers in the Environmental
Services area as a result of actions taken late in fiscal
year 1993 involving organizational realignment, the elimination
of administrative costs in Europe, and ongoing reductions in
certain corporate office administrative costs.
Other Expense, Net
In the third quarter of fiscal year 1993, the Company provided
for two nonoperating charges included in other expense: the
$6,300,000 anticipated settlement of a stockholders' lawsuit and
the $1,981,000 writeoff of nonrecoverable costs incurred in a U.K.
joint venture.
On April 9, 1992, the Company sold its investment in stock options of
EXEL Limited, an off-shore casualty insurance company, for $3,733,000
in cash. The Company reported a pre-tax gain on this transaction of
$3,483,000 as other income for the fiscal quarter ended June 30, 1992.
Interest, Net
For the third quarter of fiscal year 1994, net interest expense
declined to 1.8% of revenues from the 2.7% of revenues reported for
12
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INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
the corresponding period of the prior fiscal year. Net interest
expense for the current nine-month period represented 2.3% of revenues
as compared to 2.8% of revenues for the first nine months of fiscal
year 1993.
The net proceeds of $57,130,000 received by the Company from the
public offering of 2,400,000 depositary shares (see Note 2 to
Condensed Consolidated Financial Statements) were utilized to repay
outstanding cash advances under the Company's credit facility and
to prepay $25,000,000 of the Notes. These actions significantly
reduced interest incurred for the third quarter of fiscal year 1994.
During the first six months of fiscal year 1994, which were prior to
the public offering, net interest expense declined slightly from
the level of the prior year primarily because of lower average
borrowings under the Company's revolving credit line resulting from
improved cash flows from the Company's operating activities.
Income Taxes
The effective income tax rate of 38% for the nine-month period ended
December 31, 1993 compares to a 55% effective rate for the
corresponding period of fiscal year 1993. The effective income
tax rates exceed the 34% federal statutory rate primarily due to
nondeductible expenses and state income taxes. In fiscal year 1993,
the level of nondeductible expenses was unusually high as a result
of the impact of certain charges to other expense which were recorded
in the quarter ended December 31, 1992.
13
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
FINANCIAL CONDITION
Working capital of $50,839,000 at December 31, 1993 decreased
by $6,264,000 or 11.0% from $57,103,000 at March 31, 1993. The
current ratio at December 31, 1993 declined to 1.53:1 from 1.58:1
at March 31, 1993.
On September 27, 1993, the Company completed a public offering at
$25 per share of 2,400,000 depositary shares, each representing
1/100th of a share of 7% Cumulative Convertible Exchangeable Preferred
Stock (see Note 2 to Condensed Consolidated Financial Statements).
The net proceeds of $57,130,000 received by the Company were utilized
to repay the aggregate $30,000,000 of outstanding cash advances under
its revolving credit facility and, on November 15, 1993, to prepay at
par value $25,000,000 of the Notes.
Cash provided by operating activities for the first nine months of
fiscal year 1994 totaled $17,096,000, a $4,056,000 increase from the
$13,040,000 cash provided by operating activities in the corresponding
nine-month period of the prior fiscal year. This increase in cash
provided by operating activities resulted principally from a reduction
in trade receivables in the current period generally corresponding to
the decline in the Company's revenues. Capital expenditures of
$10,314,000 for the current nine-month period were slightly lower than
the $10,842,000 amount reported for the corresponding period of the
prior fiscal year.
During fiscal year 1993, the Company received cash proceeds of
$22,677,000 from the sale of its pollution control manufacturing
business, a significant portion of which was used to repay long-term
borrowings. On April 9, 1992, the Company sold its investment in
stock options of EXEL Limited for $3,733,000 in cash.
With regard to the Company's transportation, treatment and disposal
discontinued operations, the Company has closed two of the inactive
disposal sites and is pursuing formal permanent closure of its Panoche
and Vine Hill disposal sites, for which there will be significant
closure and post-closure costs over the next several years. During
the first nine months of the current fiscal year, the Company spent
$9,336,000 relating to closure plans and construction costs for the
sites compared to $8,252,000 in the corresponding period of the prior
fiscal year. At December 31, 1993, the Company's condensed
consolidated balance sheet included accrued liabilities of
approximately $51,868,000 to complete the closure and post-closure of
its inactive disposal sites and related matters.
Closure and post-closure plans for the Panoche facility were revised
to incorporate regulatory agency comments in March 1991 and an
Environmental Impact Report (EIR), required by California law prior
to plan approval, was begun by the California Department of Health
Services, now the California EPA Department of Toxic Substances
Control (DTSC), in February 1991. The California Supreme Court in
December 1991 reversed a lower court decision regarding an aspect of
the closure plan at Panoche relating to the county of Solano's authority
in the closure process and the method of closure of peripheral waste
areas at the facility (the Buffer Zone Areas). The Company has been
required to submit additional information and closure designs for the
Buffer Zone Areas, including designs for excavation and relocation
on-site of significant quantities of wastes and soils. Clean closure
by excavation and relocation on-site of materials in the Buffer
Zone Areas will be evaluated in the EIR. The additional study
of Buffer Zone alternatives has delayed the closure plan approval.
The Company is now seeking final determination on closure plans
in time for implementation of closure construction in fiscal year 1996
through fiscal year 1998. A determination to excavate and relocate a
substantial amount of materials in the Buffer Zone Areas would increase
costs substantially which would have a material adverse effect on the
consolidated financial condition of the Company.
Progress on the Vine Hill Complex facility closure plan continues,
with a revised closure plan submitted to the DTSC in August 1991.
The Company has responded to comments on the plan from DTSC. An EIR
is being prepared by DTSC. The Company expects the plan to be approved
and implemented in fiscal years 1995 and 1996.
14
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
FINANCIAL CONDITION (CONTINUED)
The Company is required to perform post-closure monitoring and
maintenance of its disposal sites for at least 30 years. Operation
of the sites in the closure and post-closure periods is subject to
numerous federal, state and local regulations. The Company may be
required to perform unexpected remediation work at the sites in the
future or to pay penalties for alleged noncompliance with regulatory
permit conditions.
The California Toxic Pits Cleanup Act of 1984 (TPCA) required operators
of certain surface impoundments to cease discharging liquid hazardous
wastes into these units by a statutory deadline, unless the units were
retrofitted to meet minimum technology requirements. The Company has
taken reasonable measures and has made substantial progress toward
compliance at the Vine Hill Complex, but cannot fully meet statutory
requirements until final closure plans have been approved. The Company
has discussed its TPCA compliance activities with the applicable
Regional Water Quality Control Board. Although substantial civil
penalties are available for noncompliance with TPCA, the Company does
not expect that penalties, if imposed, would be material to the
Company's financial condition, given the circumstances and the
Company's good faith efforts to achieve compliance and conclude closure.
Closure and post-closure costs are incurred over a significant number
of years and are subject to a number of variables including, among
others, completion of negotiations regarding specific site closure
and post-closure plans with applicable regulatory agencies. The
Company has estimated the impact of closure and post-closure costs in
the provision for loss on disposition of transportation, treatment
and disposal discontinued operations; however, closure and post-closure
costs could be higher than estimated if regulatory agencies were to
require closure and/or post-closure procedures significantly different
than those in the plans developed by the Company. Certain revisions
to the closure procedures could also result in impairment of the
residual land values attributed to certain of the sites.
The carrying value of the long-term assets of transportation,
treatment and disposal discontinued operations of $41,705,000 at
December 31, 1993 is principally comprised of residual land at the
inactive disposal sites and assumes that sales will occur at current
market prices estimated by the Company based on certain assumptions
(entitlements, development agreements, etc.), taking into account
market value information provided by independent real estate appraisers.
During fiscal year 1992, the Company entered into an agreement with
a real estate developer to develop some of this property as part of
a larger development in the local area involving a group of developers.
The group decided to delay the entitlement process in late fiscal
year 1993 pending resolution of the Company's closure plan for
the adjacent disposal site and issuance of the EIR. In addition, a
referendum on the development project had been tentatively scheduled,
but was postponed as a result of the development group's decision.
If the developers' plans change or a future referendum results in
an inability to obtain entitlements as planned, the carrying value
of this property could be significantly impaired. With regard to
this property or any of the other residual land, there is no
assurance as to the timing of sales or the Company's ability to
ultimately liquidate the land for the sale prices assumed. If the
assumptions used to determine such prices are not realized, the value
of the land could be materially different from the current carrying value.
The USEPA and the DTSC are investigating certain transportation and
disposal activities conducted by numerous companies, including the
Company or its predecessors, involving certain disposal sites in
California, including the Operating Industries, Inc. (OII) Superfund
site. In connection with the OII action, the Company did not elect to
join various proposed settlements with the USEPA for the first three
interim remedial measures. The claims against the Company by the
USEPA for these costs total approximately $8,500,000 and the claims
by the PRP steering committee approximate $2,700,000. (The Company
believes there is substantial duplication between the USEPA's and
the PRP steering committee's claims.) The claims to date do not
include certain future costs for site remediation and long-term
monitoring and maintenance which are expected to be substantial.
Based on the nature of the waste streams handled by the Company's
subsidiaries and their conduct in handling the wastes, the Company
believes its proper share of responsibility for the site is less
than the share attributed to it by the USEPA and the PRP steering
15
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
FINANCIAL CONDITION (CONTINUED)
committee. Accordingly, the Company has not been able to agree to
USEPA's or the PRP steering committee's claims. IT has met with the
USEPA to propose and negotiate a release from alleged liability for
past costs in return for IT undertaking remediation work at the site.
In light of the PRP steering committee's efforts to pursue its claims
against the Company, and the ongoing remediation of the site, the
Company has recently renewed its efforts to reach an acceptable
compromise of the USEPA's claims. The PRP steering committee
has entered into a series of short-term tolling agreements extending
the statute of limitations on its potential claim against the Company.
Although the PRP steering committee recently agreed to renew the
tolling agreements, it could decline to extend them at any time.
The Company has advised its liability insurance carriers as to the
pendency of the USEPA's claim and requested indemnification and legal
representation. The carriers dispute the scope of their coverage
obligations to IT. The Company has also been named as a PRP in
several other investigations, and has either denied responsibility
and/or is participating with others named by the USEPA and/or the
DTSC in conducting investigations as to the nature and extent of
contamination at the sites.
The provision for loss on disposition of transportation, treatment
and disposal discontinued operations is based on various assumptions
and estimates, including those discussed above. The adequacy of the
provision for loss has been currently reevaluated in light of the
developments since the adoption of the divestiture plan, and management
believes that the provision, as adjusted, is reasonable; however, the
ultimate effect of the divestiture on the consolidated financial
condition of the Company is dependent upon future events, the outcome
of which cannot be determined at this time. Outcomes significantly
different from those used to estimate the provision for loss could
result in a material adverse effect on the consolidated financial
condition of the Company.
At December 31, 1993, a deferred tax asset in the amount of $11,859,000
(net of a valuation allowance of $10,119,000) is included in the
Company's condensed consolidated balance sheet. The asset represents
the tax benefit of future tax deductions and net operating loss,
alternative minimum and investment tax carryforwards. The asset will
be realized principally as closure expenditures related to the Company's
Northern California disposal sites over the next several years are
deductible in the years the expenditures are made, but only to the
extent the Company has sufficient levels of taxable income. The
Company will evaluate the adequacy of the valuation allowance and the
realizability of the deferred tax asset on an ongoing basis.
The Company is using approximately $29,000,000 of letters of credit,
as well as a trust fund and annuities to fulfill regulatory financial
assurance requirements for the closure and post-closure care of the
Company's inactive disposal facilities. In aggregate, at December 31,
1993, letters of credit totaling approximately $56,000,000 were
outstanding against the Company's $120,000,000 bank line of credit.
Additionally, the Company has outstanding $4,000,000 of cash advances
under the line, leaving approximately $60,000,000 unused at
December 31, 1993. However, the amount of the Company's current
availability is limited to the amount of collateral available in
accordance with the loan agreement, principally 80% of eligible
accounts receivable. At January 31, 1994, approximately $30,000,000
was available. The line of credit is scheduled to mature on July 31,
1994; however, the Company and the banks are currently in negotiations
to extend that maturity.
The Company has approximately $12,000,000 outstanding on an amortizing
11.63% equipment loan secured by two of the Company's Hybrid Thermal
Treatment System (HTTS) units. At December 31, 1993, the Company was
not in compliance with a debt service coverage covenant in this loan;
however, such noncompliance was waived by the lender through March 25,
1994. The Company is currently negotiating with the lender to prepay
the $5,000,000 balloon payment of this loan (currently due on June 30,
1995) in return for a partial release of collateral, and to amend the
agreement to allow the Company to maintain convenant compliance and
amortize the remaining balance over its original schedule.
16
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
FINANCIAL CONDITION (CONTINUED)
Over the past two years, the Company's liquidity has required careful
management. Although consummation of the recent public offering and
application of the net proceeds principally to reduce debt has
significantly improved the Company's liquidity position and provided
it with greater flexibility to address its cash needs, the Company
will continue to have significant cash requirements, including its
planned capital expenditure program, expenditures for the closure
of its inactive disposal sites, debt service, dividend obligations
on the depositary shares and contingent liabilities.
17
<PAGE>
PART II
INTERNATIONAL TECHNOLOGY CORPORATION
Item 1. Legal Proceedings.
The following matters are more fully discussed in Item 3,
Legal Proceedings, in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1993 and
in the Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30 and June 30, 1993. See Note 9
to Condensed Consolidated Financial Statements for a
discussion of current developments related to the Motco
litigation. See also Management's Discussion and
Analysis of Results of Operations and Financial Condition
- Financial Condition for current developments related to
the Operating Industries, Inc. Superfund site matter.
Class Action Lawsuits
With respect to the In re International Technology
Corporation class action securities litigation, the
parties reached a settlement which was approved by the
Court at a hearing on August 23, 1993. The settlement
provides for the creation of a total settlement fund of
$12,000,000 plus interest from December 14, 1992. The
Company's contribution to the settlement agreement will
be newly issued, freely tradeable common stock of the
Company, with the market value at the date of issuance
of approximately $6,350,000. During the third quarter
of fiscal year 1994, the Company issued 243,129 common
shares having a value of approximately $850,000 plus
interest. The Company expects that the balance of the
shares will be issued in March 1994 based on the average
price of the common stock during a ten-day pricing
period immediately preceding the distribution to
authorized claimants. Approximately 1,800,000 shares
would be issued utilizing a price of $3.00 per share,
the closing price of the stock on February 11, 1994.
18
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See Exhibit Index on page 21 of this filing.
(b) Reports on Form 8-K.
None.
19
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INTERNATIONAL TECHNOLOGY CORPORATION
(Registrant)
ANTHONY J. DELUCA February 14, 1994
---------------------------------------------- -------------------------
Anthony J. DeLuca
Senior Vice President, Chief Financial Officer
and Duly Authorized Officer
20
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
EXHIBIT INDEX
FOR QUARTER ENDED DECEMBER 31, 1993
Exhibits
--------
The following Exhibits are filed as part of this report:
27.1 Financial Data Schedule - Quarter ended December 31, 1993.
27.2 Financial Data Schedule - Quarter ended September 30, 1993.
27.3 Financial Data Schedule - Quarter ended June 30, 1993.
21
<PAGE>
Exhibit 27.1
------------
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
International Technology Corporation's Condensed Consolidated Balance
Sheet as of December 31, 1993 (unaudited), Condensed Consolidated
Statement of Operations for the Three Months Ended December 31, 1993
(unaudited) and related Notes to Condensed Consolidated Financial
Statements (unaudited), all of which were filed with the SEC on
February 14, 1994 on Form 10-Q for the quarter ended December 31, 1993
(commission file number 1-9037) AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
(Amounts in thousands except per share data)
Item Number Item Description Amount
----------- ---------------- ---------
5-02 (1) cash and cash items $9,738
5-02 (2) marketable securities -
5-02 (3)(a)(1) notes and accounts receivable - trade 121,223
5-02 (4) allowance for doubtful accounts -
5-02 (6) inventory -
5-02 (9) total current assets 146,865
5-02 (13) property, plant and equipment 183,153
5-02 (14) accumulated depreciation 87,310
5-02 (18) total assets 354,718
5-02 (21) total current liabilities 96,026
5-02 (22) bonds, mortgages and similar debt 50,859
5-02 (28) preferred stock - mandatory redemption -
5-02 (29) preferred stock - no mandatory redemption 2,400
5-02 (30) common stock 33,571
5-02 (31) other stockholders' equity 130,901
5-02 (32) total liabilities and stockholders' equity 354,718
5-03 (b)(1)(a) net sales of tangible products -
5-03 (b)(1) total revenues 92,524
5-03 (b)(2)(a) cost of tangible goods sold -
5-03 (b)(2) total costs and expenses applicable
to sales and revenues 89,663
5-03 (b)(3) other costs and expenses -
5-03 (b)(5) provision for doubtful accounts and notes -
5-03 (b)(8) interest and amortization of debt discount 1,691
5-03 (b)(10) income (loss) before taxes and other items 1,170
5-03 (b)(11) income tax expense 444
5-03 (b)(14) income (loss) continuing operations 726
5-03 (b)(15) discontinued operations -
5-03 (b)(17) extraordinary items -
5-03 (b)(18) cumulative effects - changes in accounting
principles -
5-03 (b)(19) net income (loss) 726
5-03 (b)(20) earnings per share - primary $(0.01)
5-03 (b)(20) earnings per share - fully diluted -
<PAGE>
Exhibit 27.2
------------
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
International Technology Corporation's Condensed Consolidated Balance
Sheet as of September 30, 1993 (unaudited), Condensed Consolidated
Statement of Operations for the Three Months Ended September 30, 1993
(unaudited) and related Notes to Condensed Consolidated Financial
Statements (unaudited), all of which were filed with the SEC on
November 12, 1993 on Form 10-Q for the quarter ended September 30, 1993
(commission file number 1-9037) AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
(Amounts in thousands except per share data)
Item Number Item Description Amount
----------- ---------------- --------
5-02 (1) cash and cash items $ 37,828
5-02 (2) marketable securities -
5-02 (3)(a)(1) notes and accounts receivable - trade 122,985
5-02 (4) allowance for doubtful accounts -
5-02 (6) inventory -
5-02 (9) total current assets 176,445
5-02 (13) property, plant and equipment 182,771
5-02 (14) accumulated depreciation 82,146
5-02 (18) total assets 386,168
5-02 (21) total current liabilities 90,284
5-02 (22) bonds, mortgages and similar debt 84,231
5-02 (28) preferred stock - mandatory redemption -
5-02 (29) preferred stock - no mandatory redemption 2,400
5-02 (30) common stock 33,328
5-02 (31) other stockholders' equity 131,453
5-02 (32) total liabilities and stockholders' equity 386,168
5-03 (b)(1)(a) net sales of tangible products -
5-03 (b)(1) total revenues 100,665
5-03 (b)(2)(a) cost of tangible goods sold -
5-03 (b)(2) total costs and expenses applicable
to sales and revenues 95,500
5-03 (b)(3) other costs and expenses -
5-03 (b)(5) provision for doubtful accounts and notes -
5-03 (b)(8) interest and amortization of debt discount 2,487
5-03 (b)(10) income (loss) before taxes and other items 2,678
5-03 (b)(11) income tax expense 986
5-03 (b)(14) income (loss) continuing operations 1,692
5-03 (b)(15) discontinued operations -
5-03 (b)(17) extraordinary items -
5-03 (b)(18) cumulative effects - changes in accounting
principles -
5-03 (b)(19) net income (loss) 1,692
5-03 (b)(20) earnings per share - primary $ 0.05
5-03 (b)(20) earnings per share - fully diluted -
<PAGE>
Exhibit 27.3
------------
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
International Technology Corporation's Condensed Consolidated Balance
Sheet as of June 30, 1993 (unaudited), Condensed Consolidated Statement
of Operations for the Three Months Ended June 30, 1993 (unaudited) and
related Notes to Condensed Consolidated Financial Statements (unaudited),
all of which were filed with the SEC on August 12, 1993 on Form 10-Q for
the quarter ended June 30, 1993 (commission file number 1-9037) AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
(Amounts in thousands except per share data)
Item Number Item Description Amount
----------- ---------------- --------
5-02 (1) cash and cash items $ 7,587
5-02 (2) marketable securities -
5-02 (3)(a)(1) notes and accounts receivable - trade 129,805
5-02 (4) allowance for doubtful accounts -
5-02 (6) inventory -
5-02 (9) total current assets 153,902
5-02 (13) property, plant and equipment 182,001
5-02 (14) accumulated depreciation 77,444
5-02 (18) total assets 366,990
5-02 (21) total current liabilities 96,789
5-02 (22) bonds, mortgages and similar debt 114,586
5-02 (28) preferred stock - mandatory redemption -
5-02 (29) preferred stock - no mandatory redemption -
5-02 (30) common stock 33,258
5-02 (31) other stockholders' equity 75,009
5-02 (32) total liabilities and stockholders' equity 366,990
5-03 (b)(1)(a) net sales of tangible products -
5-03 (b)(1) total revenues 102,549
5-03 (b)(2)(a) cost of tangible goods sold -
5-03 (b)(2) total costs and expenses applicable
to sales and revenues 96,786
5-03 (b)(3) other costs and expenses -
5-03 (b)(5) provision for doubtful accounts and notes -
5-03 (b)(8) interest and amortization of debt discount 2,547
5-03 (b)(10) income (loss) before taxes and other items 3,216
5-03 (b)(11) income tax expense 1,254
5-03 (b)(14) income (loss) continuing operations 1,962
5-03 (b)(15) discontinued operations -
5-03 (b)(17) extraordinary items -
5-03 (b)(18) cumulative effects - changes in accounting
principles -
5-03 (b)(19) net income (loss) 1,962
5-03 (b)(20) earnings per share - primary $ 0.06
5-03 (b)(20) earnings per share - fully diluted -
<PAGE>
