<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 25, 1998
INTERNATIONAL TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-9037 33-0001212
(STATE OR OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 372-7701
None
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
This Amendment No. 1 amends and supplements the Current Report on Form 8-K
filed by International Technology Corporation with the Securities and Exchange
Commission on March 5, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The response to Item 7(b) is hereby amended and supplemented by the
information set forth below:
(b) Pro Forma Financial Information.
Index to Unaudited Pro Forma Consolidated Financial Statements
attached hereto.
(c) Exhibits.
23.1 Consent of Ernst & Young LLP, independent auditors for OHM
Corporation.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INTERNATIONAL TECHNOLOGY
CORPORATION
Date: May 11, 1998 By: /s/ James M. Redwine
---------------------
James M. Redwine
Senior Corporate Counsel
3
<PAGE>
Index to
Unaudited Pro Forma Consolidated Financial Statements
The following pro forma financial information is filed as a part of this Form
8-K:
<TABLE>
<CAPTION>
<S> <C>
Unaudited Pro Forma Consolidated Financial Statements.................................................. 5
Unaudited Pro Forma Consolidated Balance Sheet as of December 26, 1997................................. 8
Notes to Unaudited Pro Forma Consolidated Balance Sheet................................................ 9
Unaudited Pro Forma Consolidated Statement of Operations for the Nine-Months ended December 26, 1997... 13
Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year ended March 28, 1997...... 14
Notes to Unaudited Pro Forma Consolidated Statements of Operations..................................... 15
</TABLE>
4
<PAGE>
Unaudited Pro Forma Consolidated Financial Statements
The Unaudited Pro Forma Consolidated Statements of Operations of International
Technology Corporation (ITC) for the fiscal year ended March 28, 1997 and the
nine-months ended December 26, 1997 (the "Pro Forma Statements of Operations"),
and the Unaudited Pro Forma Consolidated Balance Sheet of ITC as of December 26,
1997 (the "Pro Forma Balance Sheet" and together with the Pro Forma Statements
of Operations, the "Pro Forma Financial Statements"), have been prepared to
illustrate the effect of the first step of the Merger Agreement between ITC and
OHM dated January 15, 1998 (Merger Agreement). Pursuant to the first step of the
Merger Agreement, ITC acquired 13,933,000 shares of OHM Common Stock for $11.50
per share (the "Offer"), which was consummated on February 25, 1998. In
connection with the payment for shares of OHM Common Stock in the Offer, OHM
repurchased 2,557,231 shares of OHM Common Stock from Rust Services for $11.50
per share ("Repurchase") and made a pro rata distribution of shares of NSC held
by OHM to holders of record of shares of OHM Common Stock on the business day
immediately preceding the day on which the shares of OHM Common Stock were
accepted for payment in the Offer (NSC Distribution). In the second step of the
Merger Agreement the remaining issued and outstanding shares of OHM Common Stock
will be converted into ITC shares at an exchange ratio (initially 1.394 but
adjusted based on certain factors). The effects of the second step of the Merger
have not been included in these pro-forma financial statements because the
issuance of additional ITC shares is subject to shareholder approval.
Because ITC has acquired less than 100% of OHM outstanding stock in the first
step of the Merger, the valuation of assets acquired and liabilities assumed are
based on a prorata allocation of the fair values of the assets acquired and
liabilities assumed (54%) and the historical financial statement carrying
amounts of the assets and liabilities of OHM (46%). Transaction costs for the
first step of the Merger is estimated to be approximately $16 million and have
been included or disclosed where appropriate within the Pro Forma Financial
Statements or notes thereto. The first step of the Merger is being financed by
credit facilities of up to $240 million which will be refinanced in connection
with the consummation of the second step of the Merger. The Pro Forma Financial
Statements do not reflect anticipated cost savings from the OHM acquisition, or
any synergies that are anticipated to result from the OHM acquisition, and there
can be no assurance that any such cost savings or synergies will occur. The Pro
Forma Statements of Operations give pro forma effect to the Offer, Repurchase,
and NSC Distribution as if they had occurred on March 30, 1996. The Pro Forma
Balance Sheet gives pro forma effect to the Offer, Repurchase, and NSC
Distribution as if they occurred on December 26, 1997. The Pro Forma Financial
Statements do not purport to be indicative of the results of operations of
financial position of ITC that would have actually been obtained had such
transactions been completed as of the assumed dates and for the period
presented, or which may be obtained in the future. The pro forma adjustments as
described in the accompanying notes and are based upon available information and
certain assumptions that ITC believes are reasonable.
The Pro Forma Financial Statements should be read in conjunction with the
separate historical consolidated financial statements of ITC and OHM and the
related notes thereto, as well as, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of
5
<PAGE>
ITC and OHM all of which are included or incorporated by reference into the
respective Forms 10-K and on an interim basis the Forms 10-Q of ITC and OHM
filed with the Securities and Exchange Commission.
A preliminary allocation of the purchase price has been made to major categories
of assets and liabilities in the accompanying Pro Forma Financial Statements
based on available information. The actual allocation of purchase price and the
resulting effect on income from operations may differ significantly from the pro
forma amounts included herein. Areas where management believes the allocations
are preliminary and could substantially change as more information, which
management has not yet received, becomes available through changes to the
indicated financial statement line item and goodwill are as follows:
<TABLE>
<CAPTION>
ANTICIPATED METHODS/TIMING TO DETERMINE ESTIMATED RANGE OF POTENTIAL
AREA FINAL ALLOCATION ADJUSTMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Inventory OHM had approximately $13.2 million of A determination of the effect of
materials and supplies at December 31, excess quantities cannot be finalized
1997. As a result of the Merger, excess until a detailed review of materials
quantities of certain types of and supplies by operational
inventories may exist. Management is management is completed. A
currently comparing combined quantities preliminary estimate indicates that
with anticipated requirements which may up to an additional $3.0 million
result in additional fair market value potential fair market value decrease
adjustments may be recorded. Fifty-four percent
of this potential decrease would
impact the ITC balance sheet.
Litigation Accruals Management is currently evaluating OHM Management cannot finalize the
litigation to determine the potential adjustment until all and open
financial impact of various alternatives litigation has been analyzed.
to preserve ongoing relationships with However, a preliminary estimate
customers. indicates that up to an additional
$1.5 million potential liability
may be required. Fifty-four percent of
this potential decrease would impact
the ITC balance sheet.
Property, Plant and Equipment A valuation firm has been engaged to A preliminary estimate indicates that
appraise the fair value of property, up to an additional $5.0 million
plant and equipment of OHM. decrease in fair value may be
required. Fifty-four percent of this
potential decrease would impact the
ITC balance sheet.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED METHODS/TIMING TO DETERMINE ESTIMATED RANGE OF POTENTIAL
AREA FINAL ALLOCATION ADJUSTMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transition Accrual including Management has begun to assess and A preliminary estimate indicates that
Lease Termination Costs and formulate a plan to close certain up to an additional $6.0 million
Severance duplicate OHM properties located in the accrual for property lease
same geographic areas as certain ITC termination, relocation, and
properties and to identify duplicate severance (all costs related to OHM)
leased equipment and select employees may be required. Management cannot
from a total labor pool of OHM and ITC reasonably estimate the impact of
combined. This plan will be finalized, equipment termination costs until a
approved and communicated prior to detailed review of equipment leases
twelve months from the Effective Time. is completed. Fifty-four percent of
this potential decrease would impact
the ITC balance sheet.
Change of Control, Stock Options The final change of control and The adjustment related to finalizing
and Employment Agreements employment agreement accruals will be the stock option payouts would
available subsequent to completion of primarily be a reclassification from
the evaluation of the agreements and the liabilities to equity. The additional
actual separation dates of the employees cost related to employment and change
is known. The impact of the stock of control agreements is estimated to
options will change based upon whether be less than $1.0 million.
option holders choose to exercise their
options or convert them into ITC options
with equivalent features. The actual
impact of the options will be finalized
prior to the filing of ITC's fiscal 1998
Form 10-K.
</TABLE>
These pro forma adjustments represent ITC's preliminary determination of
purchase accounting adjustments and are based upon available information and
certain assumptions that ITC believes to be reasonable. Consequently, the
amounts reflected in the Pro Forma Financial Statements are subject to change,
and the final amounts may differ substantially.
7
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet
December 26, 1997
<TABLE>
<CAPTION>
ITC OHM PRO FORMA
DECEMBER 26, 1997 DECEMBER 31, PRO FORMA CONSOLIDATED
1997 ADJUSTMENTS COMPANY
--------------------------------------------------------------------------
(In Thousands)
ASSETS
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 54,128 $ 31,784 $(55,912) (b) $ 30,000
Receivables, net 115,518 118,401 - 233,919
Materials and supply inventory at cost 13,285 (864) (a) 12,421
Prepaid expenses and other current assets 5,588 15,370 (4,362) (a) 16,596
Deferred income taxes 10,370 11,166 - 21,536
--------------------------------------------------------------------------
Total current assets 185,604 190,006 - 314,472
Net property, plant, and equipment 39,135 56,610 (14,304) (a) 81,441
Investment in affiliated company 16,300 5,637 (5,637) (a) 16,300
Intangible assets, net 12,029 46,364 138,318 (a) 196,711
Debt issuance and financing costs 3,600 1,114 150 (c) 4,864
Deferred income taxes 16,751 15,725 32,476
Other assets 11,030 1,587 12,617
Long-term assets of discontinued operations 40,048 - 40,048
--------------------------------------------------------------------------
Total assets $324,497 $317,043 $698,929
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,735 $ 72,692 $111,427
Accrued liabilities 29,699 26,501 56,200
Billings in excess of revenues 1,978 1,530 3,508
Short-term debt, including current portion of
long-term debt 4,134 8,064 12,198
Transition accrual - - 6,912 (a) 6,912
Shareholder option repurchase - - 19,600 (d) 19,600
Employee obligations - - 1,500 (d) 1,500
Net current liabilities of discontinued operations 11,168 - 11,168
--------------------------------------------------------------------------
Total current liabilities 85,714 108,787 222,513
Long-term debt 65,650 50,041 (65,000) (b) 50,691
Tender offer debt facility - - 80,000 (b) 80,000
Tender offer revolver - - 134,850 (b) 134,850
Long-term accrued liabilities of discontinued
operations, net 2,349 - 2,349
Other long-term accrued liabilities 7,321 4,055 11,376
Commitments and contingencies - -
Minority interest - - 45,087 (a) 45,087
Stockholders' equity:
Preferred stock 6,438 - 6,438
Common stock 97 2,742 (2,742) (c) 97
Treasury stock at cost (74) - (74)
Additional paid-in capital 246,074 142,453 (142,453) (c) 246,074
Retained earnings (deficit) (89,072) 8,965 (20,365) (c) (100,472)
--------------------------------------------------------------------------
Total stockholders' equity 163,463 154,160 152,063
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $324,497 $317,043 $698,929
==========================================================================
</TABLE>
See accompanying notes.
8
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
December 26, 1997
(a) The estimated purchase price and preliminary adjustments to historical book
value of OHM as a result of the Offer, the Repurchase and the NSC
Distribution together with the related financing are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Purchase Price:
Estimated cash cost of acquired shares $160,230
Asset acquisition costs 4,574
Book value of net assets acquired (52,928)
------------------------
Purchase price in excess of net assets acquired $111,876
========================
The book value of net assets acquired consists of:
Book value of OHM at December 31, 1997 154,160
OHM repurchase of shares from WMX in 1998 (29,408) *
OHM employee benefit accruals which will be charged to expense (19,600) *
Shareholder option repurchase in 1998 (1,500) *
NSC Distribution (5,637) *
------------------------
Adjusted book value 98,015
Percentage acquired 54%
------------------------
ITC book value acquired $52,928
========================
The minority interest is equal to 46% or $45,087 of the adjusted book
value
Preliminary allocation of purchase price in excess of net assets
acquired:
Write down to 54% of fair value duplicate management information
system and property, plant and equipment amounts $(14,304)
Write down of excess inventory to fair value (864)
Transition accrual, including severance ($6.5 million), and lease
termination costs ($6.3 million) recognized in accordance with EITF
95-3 at 54% (6,912)
Reduction of other assets to 54% fair value (deferred proposal costs)
(4,362)
Estimated goodwill 138,318
------------------------
$111,876
========================
</TABLE>
* Amount to be recognized in OHM's historical income statement prior to the
Merger.
Management has begun to assess and formulate a plan to close certain OHM and ITC
properties located in the same geographic areas and to terminate select
employees from the total labor pool of OHM and ITC combined. To the extent that
OHM employees and/or facilities are not retained, the impact of any severance
obligations and lease termination costs and leasehold improvements
9
<PAGE>
Notes to Uaudited Pro Forma Consolidated Balance Sheet (continued)
will affect the purchase price allocation. The pro forma balance sheet includes
an estimated accrual of approximately $6.9 million for 54% of the estimated
severance and lease termination costs. This plan will be finalized, approved and
communicated prior to twelve months from the Effective Time.
Primarily as a result of OHM and ITC operating within the same industry for many
of the same customers, management does not believe that identifiable
intangibles, other than residual goodwill, was acquired in the transaction.
(b) Reflects the financing for the Offer and Merger as follows (dollars in
thousands):
<TABLE>
<S> <C>
Sources of Financing:
Tender offer term loan facility $ 80,000
Tender offer revolver 134,850
Consolidated cash of ITC and OHM 85,912
-----------
Total sources of financing $300,762
===========
Uses of Financing Amounts:
Cash consideration for Offer (13,933,000 shares @ $11.50) $160,233
Repayment of existing ITC debt (current and long-term) 65,000
OHM repurchase of shares from WMX (2,557,231 shares @ $11.50 per share)
29,408
Working capital purposes 30,000
Fees and expenses 16,121
----------
Total uses of financing amounts $300,762
==========
</TABLE>
The tender revolver and the term loan provide an aggregate principal amount up
to $160 million and $80 million, respectively payable 270 days of the execution
of the Tender Offer.
Fees and expenses of approximately $16.1 million consist of bridge loan costs of
approximately $3.7 million, breakage costs (early debt payment premium) of
approximately $7.8 million and asset acquisition costs of approximately $4.6
million. The asset acquisition costs consist primarily of investment banking,
legal and accounting fees.
The adjustment to long-term debt of $65,000 represents repayment of certain
existing ITC debt as detailed above. The repayment of this debt amount is
nondiscretionary and an integral part of the acquisition of OHM. The
consolidated cash of ITC and OHM of $85,912 net of amount to be retained for
working capital purposes of $30,000 represents the estimate of existing cash to
be used to finance the transaction of $55,912.
10
<PAGE>
Notes to Uaudited Pro Forma Consolidated Balance Sheet (continued)
(c) The adjustments to common stock, paid-in capital and retained earnings as a
result of the Offer and Merger are as follows (dollars in thousands):
<TABLE>
<S> <C>
Common Stock:
OHM repurchase of WMX stock $ (256)
Elimination of OHM common stock (2,486)
-------------
$ (2,742)
=============
Paid-in Capital:
OHM repurchase of WMX stock (net of par) $ (29,152)
Elimination of OHM paid-in capital (113,301)
-------------
$(142,453)
=============
Retained Earnings:
Record OHM employee benefit costs $ (19,600)
Shareholder option repurchase (1,500)
NSC Distribution (5,637)
Elimination of OHM retained deficit (retained earnings as reported
reduced by NSC Distribution, Shareholder Option Repurchase and OHM
benefit costs) 17,772
Refinancing costs (early payment premiums and related costs) (7,800)
Write-off of ITC debt issuance related to refinanced debt (3,600)
-------------
$ (20,365)
=============
The pro forma increase in debt issue costs of $150 consists of:
Write-off of ITC debt issue costs related to refinanced debt $ (3,600)
Capitalized debt issue costs related to Merger Debt Facilities 3,750
-------------
$ 150
=============
</TABLE>
(d) To record the following employee benefit costs and option repurchase in
OHM's historical income statement prior to closing related to the following
(dollars in thousands):
<TABLE>
<S> <C>
Change of control agreements $ 9,700
Stock options 8,400
Employment agreements 1,500
-------------
Total employee obligations $19,600*
=============
Shareholder option repurchase $ 1,500
=============
</TABLE>
The estimated pro forma adjustment for change of control agreement of $9.7
million was calculated in accordance with the change of control provisions
within each eligible individual's employment agreement. Such accrual was based
upon a multiple of historical compensation and benefits and limited by Section
280G of the Code. The estimated adjustment for employment agreements of $1.5
million was calculated in accordance with three individuals' employment
agreements which contain change of control provisions. The $732,000 paid to
Joseph R. Kirk in
11
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet (continued)
accordance with his employment agreement on February 12, 1998 is included in the
total accrual of $1.5 million.
The estimated pro forma adjustment for stock options of $8.4 million assumes
that all option holders will elect to receive cash for the difference between
their exercise price and $11.50 per share. The purchase price of OHM will be
impacted to the extent the option holders exercise their options prior to the
Merger or convert their options to equivalent ITC options by the difference
between $11.50 per share and the equivalent fair value of the ITC shares or
options received at the Effective Time. As of December 31, 1997 there were
approximately 2.7 million OHM Options outstanding. Se footnote 13 to the 1997
OHM Form 10-K for additional information regarding exercise prices of the OHM
Options.
Pursuant to the Option Termination Agreement dated January 15, 1998, H. Wayne
Huizuenga agreed to terminate options held by him to purchase 1,000,000 shares
of OHM Common Stock for a cash payment by OHM of $1.5 million.
(e) ITC's common shares issued and outstanding at December 26, 1997 were
9,733,288.
12
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
Nine Months ended December 26, 1997
<TABLE>
<CAPTION>
ITC OHM BENECO
NINE-MONTH NINE-MONTH PRO FORMA PRO FORMA
PERIOD ENDED PERIOD ENDED FIVE-MONTHS ENDED PRO FORMA COMBINED
DECEMBER 26, 1997 SEPTEMBER 30, MAY 31, 1997 ADJUSTMENTS COMPANY (a)
1997
---------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenues $306,178 $381,467 $28,580 $716,225
Cost and expenses:
Cost of revenues 271,572 328,833 28,136 628,541
Selling, general and
administrative expenses 21,182 33,872 1,653 2,055 (b) 58,762
Special charges 8,554 37,877 - 46,431
--------------------------------------------------------------------- -----------------
Operating income (loss) 4,870 (19,115) (1,209) (17,509)
Interest, net (3,386) (3,625) 156 (14,468) (c) (21,323)
Equity in net earnings of
affiliate - (667) - 667 (d) -
Other, net - (232) 5 (227)
Write-down of investment
in NSC - (14,949) - 14,949 (d) -
--------------------------------------------------------------------- -----------------
Income (loss) before
minority interest and
income taxes 1,484 (38,588) (1,048) (39,059)
Minority interest - - - 7,458 (h) 7,458
--------------------------------------------------------------------- -----------------
Income (loss) before
income taxes 1,484 (33,836) (1,048) (31,601)
(Provision) benefit for
income taxes (4,316) 12,479 - 5,397 (e) 13,560
-------------------------------------------------------------------- -----------------
Net income (loss) (2,832) (26,109) (1,048) (18,041)
Less preferred stock
dividends (4,609) - - (4,609)
Net loss applicable to ---------------------------------------------- -----------------
common stock $ (7,441) $(26,109) $(22,650)
============================================== ================
Basic and diluted loss per
share $(2.33) (f)
=================
Weighted average shares
outstanding (000s) $ 9,739 $ 9,739
================ =================
</TABLE>
See accompanying notes.
13
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
Year ended March 28, 1997
<TABLE>
<CAPTION>
ITC OHM BENECO
NINE-MONTH NINE-MONTH PRO FORMA PRO FORMA
PERIOD ENDED PERIOD ENDED FIVE-MONTHS ENDED PRO FORMA COMBINED
DECEMBER 26, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1996 ADJUSTMENTS COMPANY (A)
---------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenues $362,131 $550,984 $71,830 $984,945
Cost and expenses:
Cost of revenues 323,993 478,924 66,055 868,972
Selling, general and
administrative
expenses 33,431 49,250 2,157 3,028 (b) 87,866
Restructuring charge 8,403 8,403
---------------------------------------------------------------------- ---------------
Operating income (loss) (3,696) 22,810 3,618 19,704
Equity in net earnings
of affiliate 748 (748) (d) --
Other income (expense) 296 12 308
Interest, net (5,260) (6,963) 258 (16,735) (c) (28,700)
---------------------------------------------------------------------- ---------------
Income (loss) from
continuing operations
before minority
interest and income
taxes (8,956) 16,891 3,888 (8,688)
Minority interest (5,764) (h) (5,764)
---------------------------------------------------------------------- ---------------
Income (less) before
income taxes (8,956) 16,891 3,888 (14,452)
Benefit (provision) for
income taxes 179 (5,376) 7,376 (e) 2,179
---------------------------------------------------------------------- ---------------
Net loss (8,777) 11,515 3,888 (12,273)
Less preferred stock
dividends (4,916) (4,916)
---------------------------------------------------------------------- ---------------
Net loss applicable to
common stock $(13,693) $ 11,515 $(17,189)
====================================================================== ===============
Basic and diluted loss
per share $(1.86) (f)
===============
Weighted average shares
outstanding (000s)
$ 9,227 $ 9,227
==================== ===============
</TABLE>
See accompanying notes.
14
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Operations
December 26, 1997
(a) The Pro Forma Statements of Operations assume that the first step of the
Merger including the offer, the repurchase and the NSC distribution
occurred on March 30, 1996. For purposes of the Pro Forma Statement of
Operations for the fiscal year ended March 28, 1997, OHM's historical
statement of operations for the year ended December 31, 1996 was
consolidated with ITC's historical statement of operations for the fiscal
year ended March 28, 1997. For purposes of the Pro Forma Statement of
Operations for the nine-month period ended December 26, 1997, OHM's
historical statement of operations for the nine-month period ended
September 30, 1997 was consolidated with ITC's historical statement of
operations for the nine-month period ended December 26, 1997.
Effective June 1, 1997, OHM acquired all of the outstanding stock of Beneco
Enterprises, Inc., a Utah corporation ("Benco") for an aggregate purchase
price of $14,700,000. The pro forma results of Beneco for the period
January 1, 1997 through May 31, 1997 and the year ended December 31, 1996
have been included in the unaudited pro forma consolidated statements of
operations for the nine-months ended December 26, 1997 and the fiscal year
ended March 28, 1997, respectively.
(b) The acquisition of 54% of OHM will be accounted for by the purchase method
of accounting. Under purchase accounting, the total purchase price will be
allocated to the tangible and intangible assets and liabilities of OHM
based upon 54% of their estimated fair values. For purposes of this
presentation, these estimated fair values are based upon preliminary
valuations which are not yet finalized. The estimated maximum impact of
potential changes discussed on pages 1-3 on pro forma results of operations
for the nine-months ended December 26, 1997 and the year ended March 28,
1997 may be an increase to net loss of approximately $175,500 and $234,000,
respectively, or $.02 and $.03 per share, respectively. The estimated
maximum adverse impact on the pro forma balance sheet would be an increase
in assumed liabilities (accrued liabilities), decrease in current assets
(receivables) and a corresponding increase in goodwill totaling
approximately $9.4 million. In addition to these exposure items there are
other issues that cannot be quantified at this time and could impact
purchase price and pro forma results of operations as discussed on pages
1-3. The actual allocation of purchase price and the resulting effect on
income from operations may differ significantly
15
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Operations (continued)
from the pro forma amounts included herein. The following represents ITC's
preliminary estimate of the effect of the purchase adjustments and the
utilization of consistent ITC accounting policies on the Pro Forma
Statements Operations:
<TABLE>
<CAPTION>
Year ended NINE-MONTHS ENDED
MARCH 28, 1997 DECEMBER 26, 1997
SG&A SG&A
-------------------------------------------------------
<S> <C> <C>
Depreciation $ (280) $ (425)
Amortization of intangibles and goodwill 3,697 2,656
Net capitalization (amortization) of
deferred proposal costs (550) (244)
OHM amortization of Beneco intangibles
at 46% 161 68
-------------------------------------------------------
Total increase (decrease) $3,028 $2,055
=======================================================
</TABLE>
The adjustments for estimated pro forma depreciation relate to the
reduction in depreciation as a result of the write-down to fair value of
duplicate management information systems and equipment. The adjustments
related to duplicate management information systems and equipment represent
the elimination of 54% of the actual historical depreciation expense
recorded by OHM during the respective periods as the fair value of these
costs is estimated to be zero. The depreciation adjustment related to
facilities is the difference between what was actually recorded in the
historical financial statements and the amount estimated to be recorded
based upon the 54% fair value over 30 years. The adjustments to estimated
pro forma amortization relate to the increase in amortization for ITC
resulting from the increase of goodwill and the annualization of
amortization for the Beneco acquisition of $239,000 and $63,000 for the
year ended March 28, 1997 and the nine-months ended December 26, 1997,
respectively. Goodwill is being amortized over 40 years. The OHM
amortization adjustment relates to 46% of the pro forma Beneco intangible
amortization recorded on OHM.
OHM has historically capitalized the cost associated with preparing large
proposals when the recoverability was evaluated as probable. The costs
associated with successful awards are then amortized over the life of the
related contract. ITC has not assigned any fair value to these deferred
amounts in the allocation of the purchase price. This adjustment eliminates
the effect of assigning no fair value to these costs.
16
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Operations (continued)
(c) Reflects adjustments for additional interest expense assuming the Tender
Offer Credit Facilities were drawn upon on March 30, 1996. The change in
interest expense, in addition to amortization of deferred financing costs,
reflects the change in term loans and revolving loans at their rates based
on LIBOR plus 1.5% per annum (dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED MARCH NINE MONTHS ENDED
RATE AMOUNT 28, 1997 DECEMBER 26, 1997
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tender Offer Credit Facilities:
Term loan (LIBOR + 1.5%) 8.2% $ 80,000 $ 6,560 $ 4,920
Revolving credit facility (LIBOR +
1.5%) 8.2% 134,850 11,058 8,294
OHM debt not refinanced Various 58,105 6,164 4,297
ITC's debt not refinanced 8% 4,784 383 287
Amortization of capitalized
financing fees - 3,750 3,750 3,750
------------------------------------------------------------------------------------
Total pro forma interest expense 27,915 21,548
Less: Historical interest expense 14,255 9,386
------------------------------------------------
Total pro forma interest expense 13,660 12,162
Foregone interest income 3,075 2,306
------------------------------------------------
Total adjustment $16,735 $14,468
================================================
</TABLE>
The OHM interest expense on debt not refinanced includes additional interest
expense of $956,000 and $398,000 for the year ended March 28, 1997 and the
nine-months ended December 26, 1997, respectively, as a result of the
issuance of the $5.0 million in face value of 7.25% notes under the terms of
the Beneco agreement and borrowings made under OHM's revolving credit
agreement for cash payments of $9.7 million under the terms of such
agreement. The interest rate used for the revolver was 6.3467% based on the
variable rate borrowings of OHM at the date of acquisition.
As a result of the utilization of $55,912 in cash to fund the acquisition
lost investment earnings was estimated using the average rate of interest
earned in 1997 of 5.5%.
Before interest income, the estimated pro forma effect of a 1/8% change in
the assumed variable interest rate on pro forma results of operations is
approximately $280,687 and $210,516 for the year ended March 28, 1997 and
the nine-months ended December 26, 1997, respectively.
(d) Remove NSC Corporation equity earnings and other amounts because its shares
are distributed concurrent with the Offer.
17
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Operations (continued)
(e) Adjustment to reflect income taxes at an amount which would have been
recognized on a consolidated basis assuming the merged entity would
generate future taxable income sufficient to realize the deferred tax
benefit recognized. The difference between the statutory rate and the
effective rates are primarily related to nontax-deductible goodwill
amortization as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE-MONTHS ENDED
MARCH 28, 1997 DECEMBER 26, 1997
-----------------------------------------------
<S> <C> <C>
Pro forma loss before taxes $(14,452) $(31,601)
Permanent difference related to goodwill
amortization 4,617 3,463
Minority interest taxes (2,925) 3,841
-----------------------------------------------
Estimated pro forma taxable loss (12,760) (24,297)
Estimated statutory tax rate x40% 40%
-----------------------------------------------
Pro forma tax benefit 5,104 9,719
Reverse minority interest taxes (2,925) 3,841
-----------------------------------------------
$ 2,179 $ 13,560
===============================================
</TABLE>
(f) Basic and diluted loss per share has been calculated utilizing the weighted
average of ITC shares outstanding during the periods.
(g) Material nonrecurring charges (pretax) that result directly from the
transaction and will be included within twelve months after the transaction
that have not been considered in the Pro Forma Consolidated Statement of
Operation are as follows:
<TABLE>
<S> <C>
Refinancing costs $ 7,800
Write-off of ITC debt issue costs related to refinanced debt 3,600
-------------------
$11,400
===================
</TABLE>
The refinancing costs and write-off of ITC debt issue costs related to
refinanced debt will be recorded as an extraordinary item in the statement
of operations of ITC. Management of ITC estimates that a charge, estimated
to range from $5.0 million to $7.0 million, will also be included in its
operations within twelve months after the transaction related to closure of
certain ITC facilities duplicated by OHM facilities in the same area and
severance for certain ITC employees.
(h) Record minority interest expense equal to 46% of the pro forma income
statement of OHM.
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
23.1 Consent of Ernst & Young LLP, independent auditors of OHM
Corporation.
</TABLE>
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Form 8-K, as amended, of
International Technology Corporation of our report dated February 12, 1998,
except for Note 1, as to which the date is May 4, 1998, with respect to the
consolidated financial statements and schedule of OHM Corporation and
subsidiaries included in its Annual Report (Form 10-K), as amended, for the year
ended December 31, 1997.
/s/ Ernst & Young LLP
May 7, 1998
Columbus, Ohio
