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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
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Amendment No. 1
(Mark One)
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from March 28, 1998 to December 25, 1998
Commission file number 1-9037
The IT Group, Inc.
(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.)
2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (412) 372-7701
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, $.01 Par Value New York Stock Exchange; Pacific Exchange
Preferred Stock Depositary Shares New York Stock Exchange; Pacific Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K for the transition period from March 28, 1998 to December
25, 1998 as set forth in the pages attached hereto.
PART III
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual, long-term compensation and other
compensation for services in all capacities to the Company for calendar year
("CY") 1998 and fiscal years ended March 27, 1998 (FY 1998) and ended March 28,
1997 (FY 1997) with respect to the Chief Executive Officer and the four most
highly compensated executive officers, other than the Chief Executive Officer,
as of December 25, 1998 (the "Named Officers").
<TABLE>
<CAPTION>
Long Term
Compensation
---------------------
Annual Compensation Securities
---------------------------- Restricted Underlying All Other
Name & Principal Year Other Annual Stock Options Compensations
Position (1) Salary ($) Bonus (2) Compensation (3) Awards ($) (#)(4) ($)(5)
- ---------------- ------- ---------- --------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. DeLuca....... CY 1998 $378,462 $300,000 -- $ 0 43,782 $ 95,481
Chief Executive Officer FY 1998 $320,000 $170,000 -- 0 0 248,250
and President FY 1997 $307,981 $ 50,000 -- 0 26,333 37,614
Raymond J. Pompe........ CY 1998 $275,960 $110,000 -- $ 0 18,286 $ 31,474
Senior Vice President, FY 1998 $265,000 $106,000 -- 0 0 29,473
Engineering &
Construction FY 1997 $248,075 $ 26,500 -- 0 16,417 18,270
James R. Mahoney........ CY 1998 $260,000 $ 66,812 $55,814 $ 0 8,052 $ 221,078
Senior Vice President, FY 1998 $260,000 $ 47,383 $40,681 0 0 143,687
Consulting & Ventures FY 1997 $260,000 $ 26,000 -- 0 16,333 27,060
James G. Kirk........... CY 1998 $164,385 $ 55,000 -- $ 0 5,000 $ 12,111
Vice President, FY 1998 $160,000 $ 36,074 -- 0 0 10,863
General Counsel &
Secretary FY 1997 $150,625 $ 10,000 -- 0 4,667 8,352
Philip O. Strawbridge
(6).................... CY 1998 $263,567 $110,000 -- $ 0 23,166 $1,612,191
Sr. Vice President and FY 1997 $262,376 $144,600 -- $ 0 75,000 109,817
Chief Administrative
Officer FY 1996 $187,321 $ 0 -- $108,875 22,967 47,305
</TABLE>
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(1) On June 9, 1998, the Company elected to convert from a fiscal year ending
on the last Friday in March to a fiscal year ending on the last Friday in
December. The compensation reported for the Named Officers for CY 1998
represents remuneration paid during the twelve month period commencing
January 1, 1998 and ending December 31, 1998. The compensation reported for
FY 1998 for Messrs. DeLuca, Pompe, Mahoney and Kirk represents remuneration
paid during the period commencing March 29, 1997 and ending March 27, 1998.
The compensation reported for FY 1997 for Mr. Strawbridge represents
remuneration paid during the period commencing January 1, 1997 and ending
December 31, 1997, which corresponds to the OHM Corporation 1997 fiscal
year. The compensation reported for FY 1997 for Messrs. DeLuca, Pompe,
Mahoney and Kirk represents remuneration paid during the period commencing
March 29, 1996 and ending March 28, 1997. The compensation reported for FY
1996 for Mr. Strawbridge represents remuneration for the period January 1,
1996 and ending December 31, 1996, which corresponds to the OHM Corporation
1996 fiscal year.
(2) Bonus amounts are reported in the fiscal year they are earned or accrued,
even though some or all of the actual cash payment may be made in the next
fiscal year. For FY 1997, each Named Officer, with the exception of
Mr. Strawbridge who was not employed by the Company and therefore did not
participate in the Company's FY 1997 management incentive plan, who
received a "Bonus" also received a grant of stock options in FY 1998 for
achieving the performance objectives set forth in the 1997 Management
Incentive Plan. Such stock options are reported in this table under
Securities Underlying Options in 1997.
(3) The dollar value of perquisites and other personal benefits, if any, for
each of the Named Officers except Mr. Mahoney was less than reporting
thresholds established by the SEC. Mr. Mahoney received tax reimbursement
for relocation expenses reported under "Other Annual Compensation" of
$33,183 in CY 1998 and $17,022 in FY 1998.
(4) During 1998, stock options were awarded which vest in 25% increments over
four years beginning one year from the date of grant, expire ten years
after the date of grant, and were issued at an exercise price equal to fair
market value of the Common Stock on date of grant. The number of option
shares so issued to the Named Officers in 1998 are as follows: Mr. DeLuca
25,000; Mr. Mahoney 5,000; Mr. Pompe 15,000; Mr. Strawbridge 18,500; and
Mr. Kirk 5,000. Also during 1998, stock options were awarded which vest at
100% four years after
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date of grant, expire five years after date of grant and were issued at an
exercise price equal to fair market value of the Common Stock on date of
grant. These options will vest on an accelerated basis as follows: 50% will
vest if the Common Stock price averages $13.50 for a period of 90
consecutive days, and 50% will vest if the common stock price averages
$16.50 for a period of 90 consecutive days. The number of option shares so
issued to the Named Officers in 1998 are as follows: Mr. DeLuca 18,782; Mr.
Mahoney 3,052; Mr. Pompe 3,286; and Mr. Strawbridge 4,666. For FY 1997, each
Named Officer, with the exception of Mr. Strawbridge who was not employed by
the Company and therefore did not participate in the Company's FY 1997
Management Incentive Plan, who received a "Bonus" also received a grant of
non-qualified stock options in fiscal year 1998 for achieving the
performance objectives set forth in the 1997 Management Incentive Plan. The
options vest in 25% increments over four years beginning one year from the
date of grant, expire ten years after the date of grant and were issued at
an exercise price equal to the fair market value of the Common Stock on the
date of grant. The number of option shares so granted to the Named Officers
in FY 1998 was as follows: Mr. DeLuca, 8,333 shares; Mr. Mahoney, 4,333
shares; Mr. Pompe, 4,417 shares; and Mr. Kirk, 1,667 shares.
(5) For CY 1998, the amounts shown for Messrs. DeLuca, Pompe, Mahoney,
Strawbridge (IT and OHM combined) and Kirk represent $9,008; $13,719;
$8,331; $1,017 and $908 respectively of life insurance premiums in excess
of $50,000. Although required to be reported as income, the Named Officers,
as do all salaried employees, pay the cost of all life insurance premiums
for life insurance coverage in excess of one times their salary. In
addition, the amounts shown include: the Company's contribution to the
Company's Retirement Plan, a defined contribution plan, for the Company's
fixed and 401(k) Company matching contributions for Messrs. DeLuca, Pompe,
Mahoney, Strawbridge (IT and OHM combined) and Kirk in the amounts of
$6,877; $8,000; $7,485; $8,793; and $7,946 respectively; the Company's
contribution to the Company's Restoration Plan, a non-qualified
supplemental retirement plan, to Messrs. DeLuca, Pompe, Mahoney,
Strawbridge and Kirk in the amounts of $16,059; $9,755; $7,000; $874 and
$2,902 respectively; partial forgiveness of the principal on a relocation
loan to purchase a residence of $5,000 and $10,000 for Messrs. DeLuca and
Mahoney respectively; accrued but unused paid time off of $26,346 for Mr.
DeLuca; reimbursed relocation expenses of $26,554, $178,204 and $2,666 for
Messrs. DeLuca, Mahoney and Strawbridge respectively; imputed interest on
relocation loans of $5,637 and $7,099 for Messrs. DeLuca and Mahoney
respectively; earnings on voluntary deferred compensation of $2,959 for
Mr. Mahoney; and severance and other entitled payments paid by OHM under
the OHM merger agreement of $1,598,842 to Mr. Strawbridge. For FY 1998, the
amounts shown for Messrs. DeLuca, Mahoney, Pompe and Kirk represent $7,507,
$6,943, $11,433 and $165 respectively, of life insurance premiums in excess
of $50,000. Although required to be reported as income, the Named Officers,
as do all salaried employees, pay the cost for all life insurance premiums
for coverage in excess of one times their salary in calendar years 1998 and
1997 and one and one-half times their salary in calendar year 1996. In
addition, the amounts shown include: the Company's contribution to the
Company's Retirement Plan, a defined contribution plan, for the Company's
fixed and 401(k) Company matching contributions for Messrs. DeLuca,
Mahoney, Pompe and Kirk in the amounts of $4,800, $7,908, $8,000 and $7,975
respectively; the Company's contribution to the Company's Restoration Plan,
a non-qualified supplemental retirement plan, to Messrs. DeLuca, Mahoney,
Pompe and Kirk as follows: $14,800, $5,680, $10,040 and $2,723
respectively; $3,500 and $10,000 for partial principal forgiveness on a
relocation loan to purchase a residence for Messrs. DeLuca and Mahoney;
$27,692 in accrued but unused paid time off for Mr. DeLuca; $93,951 and
$35,157 in reimbursed relocation expenses for Messrs. DeLuca and Mahoney
respectively; and $96,000 and $78,000 in relocation mobility allowances for
Messrs. DeLuca and Mahoney respectively. For FY 1997, the amounts shown for
Messrs. DeLuca, Mahoney, Pompe and Kirk represent $5,255, $4,860, $5,897
and $991 respectively, of life insurance premiums in excess of $50,000. In
addition, the amounts shown include: the Company's contribution to the
Company's Retirement Plan, a defined contribution plan, for the Company's
fixed and 401(k) Company matching contributions for Messrs. DeLuca,
Mahoney, Pompe and Kirk in the amounts of $4,500, $7,500, $7,500 and $7,361
respectively; the Company's contribution to the Company's Restoration Plan,
a non-qualified supplemental retirement plan, to Messrs. DeLuca, Mahoney
and Pompe as follows: $7,300, $4,700 and $4,873, respectively; $10,000 for
partial principal forgiveness on a relocation loan to purchase a residence
for Mr. Mahoney; $17,508 in accrued but unused paid time off for Mr.
DeLuca; and $3,052 in reimbursed relocation expenses for Mr. DeLuca.
(6) Remuneration shown for Mr. Strawbridge for CY 1998 reflects "salary" and
"bonus" for IT and OHM combined, and "All Other Compensation" for IT and
OHM as set forth in footnote #4. Remuneration shown for Mr. Strawbridge for
FY 1997 and 1996 reflects information published in OHM Corporation's
shareholder
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meeting proxy materials for each of OHM's fiscal years 1997 and 1996, with
the exception that $144,600 FY 1997 bonus is comprised of $119,000 reported
in the OHM proxy as paid in 1997 plus a bonus of $25,600 earned in 1997 but
paid by OHM in 1998, of which $25,000 was earned in 1996 but paid by OHM in
1997 and $94,000 which was earned and paid in 1997.
Stock Option Grants in the Last Fiscal Year
The following table provides information related to grants of stock options
to the Named Officers pursuant to the Company's Stock Incentive Plans during
the nine month transition period commencing on March 28, 1998 and ended
December 25, 1998. No stock appreciation rights ("SARs") were granted during
the last fiscal year.
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Securities Granted to
Grant Underlying Employees Exercise Price Expiration Grant Date
Date Option (1) in Fiscal Year Per Share (2) Date Present Value(3)
-------- ---------- -------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 5/26/98 25,000 7.5% $10.1250 5/26/08 $152,000
11/17/98 18,782 5.7% $ 9.4375 11/17/03 79,448
------ --------
43,782 13.2% $231,448
Pompe................... 5/26/98 15,000 4.5% $10.1250 5/26/08 $ 91,200
11/17/98 3,286 1.0% $ 9.4375 11/17/03 13,900
------ --------
18,286 5.5% $105,100
Mahoney................. 5/26/98 5,000 1.5% $10.1250 5/26/08 $ 30,400
11/17/98 3,052 0.9% $ 9.4375 11/17/03 12,910
------ --------
8,052 2.4% $ 43,310
Strawbridge............. 5/26/98 18,500 5.6% $10.1250 5/26/08 $112,480
11/17/98 4,666 1.4% $ 9.4375 11/17/03 19,737
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23,166 7.0% $132,217
Kirk.................... 5/26/98 5,000 1.5% $10.1250 5/26/08 $ 30,400
</TABLE>
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(1) Options granted May 26, 1998 vest in 25% increments over four years
beginning one year from the date of grant. Full vesting occurs on the
fourth anniversary date and expires ten years after grant. Options become
100% vested and are exercisable for two years after retirement from the
Company. Options granted November 17, 1998 vest 100% after four years and
expire five years after grant. Vesting is accelerated if the Company's
Common Stock price increases to certain predetermined levels. Options
vested at retirement expire two years after retirement; options unvested
at retirement are eligible to become vested for six months following
retirement.
(2) The exercise price on options granted is the fair market value of the
Common Stock on the date of grant.
(3) When calculating the present value of options granted in 1998, the Company
used the Black-Sholes option pricing model to obtain a calculated present
value with certain assumptions regarding volatility, risk free interest
rate and when the shares would be exercised throughout the vesting period.
In addition, the Company took a 3% discount for each year in the vesting
period to account for the risk of forfeiture in the event that the
executive terminates employment with the Company. The Black-Sholes present
value for options granted May 26, 1998 is $6.08 with assumptions as
follows: volatility of .445; risk free interest rate of 5.78%; and an
assumption that shares would be exercised evenly throughout the four year
vesting period. The Black-Sholes present value for options granted
November 17, 1998 is $4.23 with assumptions as follows: volatility of
.524; risk free interest rate of 4.76% and an assumption that options
would be exercised four years after grant, since accelerated vesting is
subject to the price of company Common Stock achieving certain price
thresholds. The valuation is not intended to forecast possible future
appreciation, if any, of the Common Stock. The real value of the option
depends on the actual performance of the Company's Common Stock during the
applicable period.
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Aggregated Option Exercises During Last Fiscal Year and Option Values at End
of Last Fiscal Year
The following table provides information with respect to the exercise of
stock options during the nine month transition period commencing on March 28,
1998 and ended December 25, 1998 by the Named Officers, and with respect to
unexercised "in-the-money" stock options outstanding as of December 25, 1998.
In-the-money stock options are options for which the exercise price is less
than the market price of the underlying stock at the end of the fiscal year. No
executive officer or any other employee of the Company held or exercised any
SARs at any time during the nine months ended December 25, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options at Fiscal Year Options at Fiscal Year
Shares End (In shares) End ($)(1)
Acquired Value ----------------------------- -----------------------------
on Exercise Realized($) Exercisable Unexercisable (2) Exercisable Unexercisable (2)
----------- ----------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 0 $0.00 31,334 66,031 $ 20,258 $120,192
Pompe................... 0 $0.00 17,355 32,598 $ 12,315 $ 58,620
Mahoney................. 0 $0.00 28,834 22,301 $ 12,227 $ 47,321
Strawbridge............. 0 $0.00 143,536 23,166 $734,107 $ 27,822
Kirk.................... 0 $0.00 1,874 8,500 $ 3,668 $ 16,313
</TABLE>
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(1) Represents the difference between the $11.1875 closing market price of the
Company's Common Stock at December 25, 1998, minus the exercise price of
the options.
(2) Messrs. DeLuca, Mahoney and Pompe's options with respect to 2,500 shares,
2,000 shares and 2,000 shares, respectively, have vested as a result of the
passage of time but may not be exercised unless the Company's stock price
increases to certain predetermined levels. Because the condition has not
been satisfied and the options therefore are not vested, such options are
not included in this table or the "Beneficial Ownership of Shares" table in
Item 12.
(3) Mr. Strawbridge's exercisable shares were originally issued by OHM and were
converted to the Company's options equivalent in number of shares and
exercise price. Mr. Strawbridge, as were all employees of OHM who held
outstanding OHM stock options, was permitted to cash out the OHM options or
convert the OHM options to the Company's options equivalent in number of
shares and exercise price.
Compensation of Directors
Retainer Fees. Non-employee directors each receive annual compensation of
approximately $35,000, consisting of a retainer fee of $6,000 per quarter and a
board meeting fee of $2,750 for each board meeting attended (no additional
compensation is given for attendance at committee meetings). Directors'
compensation may be paid in cash and/or stock as determined by the Executive
Committee. Payments on account of directors fees earned by Messrs. D'Aniello
and Dolan are paid directly to Carlyle.
Chairman of the Board. The Chairman of the Board of Directors serves as a
member or ex-officio member of all committees of the Board and is required to
spend significant time on Company matters. The chairmanship is a non-officer,
non-employee position. Upon completion of the Investment, Carlyle named one of
the Preferred Stock Directors, Mr. Daniel A. D'Aniello, Chairman of the Board.
Mr. D'Aniello is compensated for his services at the rate of $120,000 per year,
in lieu of the non-employee director fees described above. Mr. D'Aniello
receives the same compensation the previous chairman, Mr. E. Martin Gibson,
received.
Stock Options. At the 1996 Annual Meeting, Stockholders approved the 1996
Stock Inventive Plan (the "1996 Plan"). The purpose of the 1996 Plan is to
enable the Company and its subsidiaries to attract, retain and motivate
employees by providing for or increasing their proprietary interests in the
Company, and to attract non-employee directors and further align their
interests with those of the stockholders by providing for or increasing their
proprietary interests in the Company. Every employee of the Company or any of
its subsidiaries is eligible to be considered for the grant of awards under the
1996 Plan.
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Prior to the Special Meeting, the maximum number of shares of Common Stock
that could be issued pursuant to awards granted under the 1996 Plan was
639,357; and on April 1 of each of the years 1999, 2000 and 2001, such maximum
number was to be increased by a number equal to 2% of the number of shares of
Common Stock issued and outstanding on each of such dates. At the Special
Meeting, stockholders approved amendments to the plan to provide for a one-time
increase equal to 2% of the shares of Common Stock issued in the Merger, and to
change the date of occurrence of the remaining scheduled annual increases from
April 1 of each such year to the first business day of each fiscal year of the
Company through 2001, in accordance with the previously announced change to the
last Friday in December as the end of the Company's fiscal year. With this 2%
one-time increase, the maximum number of shares authorized for issuance under
the 1996 Plan is 878,240.
The 1996 Plan is administered by the Compensation Committee of the Board
(the "Committee"). Subject to the provisions of the 1996 Plan, the Committee
has full and final authority to adopt, amend and rescind rules and regulations
relating to the 1996 Plan, select the employees to whom awards will be granted
thereunder, to grant such awards, and to determine the terms and conditions of
such awards and the number of shares to be issued pursuant thereto.
Pursuant to the terms of the 1996 Plan, grants of stock options to non-
employee directors are within the discretion of the Compensation Committee, and
since the approval of the 1996 Plan at the 1996 Annual Meeting of Stockholders,
no grants have been made to non-employee directors.
Pursuant to the OHM merger agreement, each holder of an option to purchase a
share of OHM Common Stock (each an "OHM Option") granted under OHM's 1986 Stock
Option Plan, the Directors Deferred Fee Plan, the Incentive Stock Plan and the
Nonqualified Stock Option Plan for Directors (collectively, the "OHM Stock
Plans") was required to elect the treatment of their OHM Options under the
provisions of the OHM merger agreement. OHM Option holders were permitted to
elect that each OHM Option, be converted into the right to receive cash
consideration equal to the product of (x) (1) the excess of $11.50 over (2) the
exercise price per share subject to such OHM Option and (y) the number of
shares subject to such OHM Option, or that, at the effective time of the
merger, each OHM Option would be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such OHM Option, a
number of shares of Common Stock equivalent to the number of shares of OHM
Common Stock that could have been purchased immediately prior to the effective
time under such OHM Option multiplied by 1.394 shares of OHM Common Stock for
each share of Common Stock (the "Exchange Ratio") rounded up to the nearest
whole number of shares of Common Stock), at a price per share of Common Stock
(rounded up to the nearest whole cent) equal to (y) the aggregate exercise
price for the Shares otherwise purchasable pursuant to such OHM Option divided
by (z) the Exchange Ratio; provided, however, that in the case of any OHM
Option to which Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") applied, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
would be determined in accordance with the foregoing, subject to such
adjustments necessary in order to satisfy the requirements of Section 424(a) of
the Code. Pursuant to the OHM merger agreement, the Company assumed each OHM
Option to which this second election applied in accordance with the terms of
the OHM Stock Plans under which such OHM Option was issued and the stock option
agreement by which it was evidenced. Holders of OHM Options with respect to
188,038 shares of OHM Common Stock (convertible into 262,126 shares of Company
Common Stock) chose the second election.
Retirement Plan. Prior to the consummation of the Investment, the Company
maintained a retirement plan for non-employee directors and under certain
circumstances directors who met the plan's length of service requirements were
entitled to an accelerated lump sum payment upon a change of control such as
the change of control resulting from the Investment. In connection with the
Investment, however, each of the then non-employee directors of the Company
acknowledged and agreed to a modification of the right to receive the
accelerated lump sum payment. The payments to be received by non-employee
directors pursuant to the
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amended plan are significantly less than the lump sum payments that were
waived. Pursuant to the plan, as amended, Mr. Gibson is to receive $16,000 in
annual benefits, for a total of $80,000, and Mr. McGill is to receive $40,000
in annual benefits, for a total of $200,000, payable in monthly installments
over five years, on account of their service as directors prior to the
Investment.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board of Directors is a
former or current officer or associate of the Company or its subsidiaries and
there are no Compensation Committee interlocks.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 on
Form 10-K/A to its Form 10-K for the transition period from March 28, 1998 to
December 25, 1998 to be signed on its behalf by the undersigned, thereunto duly
authorized in Monroeville, Pennsylvania on the 26th day of April, 1999.
THE IT GROUP, INC.
By: /s/ Anthony J. DeLuca
-----------------------
Anthony J. DeLuca
President and Chief Executive Officer
