<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 23, 1998
THE IT GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-9037 33-0001212
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
2790 Mosside Boulevard 15146-2792
Monroeville, PA (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (412) 372-7701
INTERNATIONAL TECHNOLOGY CORPORATION
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
On December 28, 1998, The IT Group, Inc., a Delaware corporation, announced
that it had completed all steps necessary to change its name from International
Technology Corporation to The IT Group, Inc.
A copy of The ITC Group, Inc.'s press release dated December 28, 1998, is
filed as an exhibit to this Current Report on Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
1. Consolidated Statement of Operations for the year ended October 31,
1997.
2. Consolidated Balance Sheet at October 31, 1997.
3. Consolidated Statement of Cash Flows for the year ended October 31,
1997.
*4. Notes to Consolidated Financial Statements.
**5. Condensed Consolidated Balance Sheets at July 31, 1998 (Unaudited)
and October 31, 1997.
**6. Condensed Consolidated Statements of Operations for the Quarters
ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited).
**7. Condensed Consolidated Statements of Operations for the Nine months
ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited).
**8. Condensed Consolidated Statements of Cash Flows for the Nine months
ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited).
**9. Notes to Condensed Consolidated Financial Statements (Unaudited).
____________________________
* The portions of the Notes to Consolidated Financial Statements related to the
periods covered by the financial statements identified in numbers 1 through 3
above are incorporated herein by reference from the Annual Report on Form 10-K
for the fiscal year ended October 31, 1997 filed by Fluor Daniel GTI, Inc.
Portions of the Notes to Consolidated Financial Statements relating to periods
not covered by numbers 1 through 3 above are not incorporated herein by
reference.
** Incorporated herein by reference from the Quarterly Report on Form 10-Q for
the quarterly period ended July 31, 1998 filed by Fluor Daniel GTI, Inc.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
October 31, 1997
-------------------------------------
(In thousands, except
per share information)
<S> <C>
Revenues................................................................... $190,536
Cost of revenues........................................................... 150,826
--------
Gross profit............................................................... 39,710
Selling, general and administrative expenses............................... 39,766
Indirect expenses.......................................................... --
License and other income................................................... 576
--------
Income (loss) before investment and interest income........................ 520
Investment and interest income, net........................................ 770
--------
Income before provision for income taxes................................... 1,290
Provision for income taxes................................................. 535
--------
Net income................................................................. $ 755
========
Earnings per common shares(2).............................................. $0.09
Shares used to compute earnings per common share........................... 8,267
</TABLE>
________________
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. ("FDESI"), the predecessor entity of Fluor Daniel GTI, Inc. ("Fluor
Daniel GTI") for accounting purposes.
(2) Share price information for the periods prior to the merger has been omitted
since FDESI, the predecessor entity of Fluor Daniel GTI for accounting
purposes, had no publicly traded equity securities
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, 1997
--------------------------------------
(In thousands, except
share amounts)
<S> <C>
Assets
Current assets:
Cash and cash equivalents................................................. $ 3,588
Marketable securities..................................................... 7,396
Accounts receivable, less allowance of $2,049 at October 31, 1997.........
38,548
Unbilled revenues......................................................... 25,567
Deferred income taxes..................................................... 1,328
Other current assets and prepaid expenses................................. 3,125
--------
Total current assets.................................................... 79,552
Deferred income taxes..................................................... 3,508
Property, plant and equipment, net........................................ 6,624
Goodwill, net of accumulated amortization of $1,456 at October 31, 1997... 11,654
Other assets.............................................................. 1,798
--------
Total assets.............................................................. $103,136
========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.......................................................... $ 8,266
Accrued salaries and benefits............................................. 5,553
Advance billings on contracts............................................. 380
Other accrued liabilities................................................. 5,465
Income taxes payable...................................................... 109
--------
Total current liabilities............................................... 19,773
Commitments and contingencies:
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued
at October 31, 1997...................................................... --
Common Stock, $.001 par value, 25,000,000 shares authorized, 8,323,790
issued and outstanding at October 31, 1997............................... 8
Capital in excess of par value............................................ 82,163
Retained earnings......................................................... 1,580
Cumulative currency translation adjustment................................ (388)
--------
Total stockholders' equity.............................................. 83,363
--------
Total liabilities and stockholders' equity.............................. $103,136
========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
October 31, 1997
--------------------------------------
(In thousands)
<S> <C>
Cash flows from operating activities:
Net income................................................................ $ 755
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization........................................... 3,915
Deferred income taxes................................................... (932)
Loss on fixed assets.................................................... --
Allowance for doubtful accounts, net.................................... 309
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable and unbilled revenues............................ 931
Other current assets and prepaid expenses............................ (600)
Other assets......................................................... 1,615
Accounts payable..................................................... 232
Accrued salaries and benefits........................................ 1,530
Advance billings on contract......................................... (72)
Other accrued liabilities............................................ (440)
Income taxes payable................................................. 8
Advances from (to) parent............................................... --
-------
Net cash provided (used) for operating activities.......................... 7,251
Cash flows from investing activities:
Expenditures for property, plant and equipment............................ (2,493)
Sale of fixed assets...................................................... 335
Purchase of marketable securities......................................... (9,950)
Sale of marketable securities............................................. 6,655
Investments in and advances to joint ventures............................. 558
Other..................................................................... (1,687)
Cash acquired in merger with Groundwater Technology, Inc.................. --
Cash paid to shareholders................................................. --
-------
Net cash used in investing activities...................................... (6,582)
Cash flows from financing activities:
Proceeds from sale of stock under employee stock plans.................. 799
Cash received from Fluor Daniel, Inc.................................... --
-------
Net cash provided by financing activities................................. 799
Effect of exchange rate changes on cash and cash equivalents.............. (432)
Net increase in cash and cash equivalents................................. 1,036
Cash and cash equivalents at beginning of year............................ 2,552
-------
Cash and cash equivalents at end of year.................................. $ 3,588
=======
Supplemental disclosures of cash flow information:
Received net assets from merger with Groundwater Technology, Inc........ --
Income taxes paid....................................................... $ 1,085
Issuance of common stock in connection with previous business
combinations........................................................... $ 361
</TABLE>
________________
(1) Represents the historical results of FDESI, the predecessor entity of Fluor
Daniel GTI for accounting purposes.
<PAGE>
(b) Pro Forma Financial Information.
1. Unaudited Pro Forma Consolidated Financial Statements.
2. Unaudited Pro Forma Consolidated Balance Sheet as of
September 25, 1998.
3. Notes to Unaudited Pro Forma Consolidated Balance Sheet.
4. Unaudited Pro Forma Consolidated Statement of Operations for the
(a) Six Months ended September 25, 1998; and
(b) Year ended March 27, 1998.
5. Notes to Unaudited Pro Forma Consolidated Statements of Operations.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Statements of Operations of The IT
Group, Inc. (ITC) for the year ended March 27, 1998 and the six months ended
September 25, 1998 (the "Pro Forma Statements of Operations"), and the Unaudited
Pro Forma Consolidated Balance Sheet of ITC as of September 25, 1998 (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 Merger Agreement. Pursuant to the Merger Agreement, ITC made the
Offer to acquire 8,411,766 shares of Fluor Daniel GTI, Inc. (FDGTI) Common Stock
for $8.25 per share, which was consummated on December 2, 1998. ITC's
transaction costs estimated to approximate $2 million have been included or
disclosed where appropriate within the Pro Forma Financial Statements or notes
thereto. The transaction is being financed through ITC existing credit
facilities. The Pro Forma Financial Statements do not reflect anticipated cost
savings from the FDGTI acquisition, or any synergies that are anticipated to
result from the FDGTI 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 Merger as if it had occurred on March 28, 1997. The
Pro Forma Balance Sheet gives pro forma effect to the Merger as if it occurred
on September 25, 1998. The Pro Forma Financial Statements do not purport to be
indicative of the results of operations or 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 are 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 FDGTI and
the related notes thereto, as well as "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of ITC and FDGTI, all of which
are incorporated by reference from their respective Forms 10-K and on an interim
basis from the Forms 10-Q of ITC and FDGTI 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 from the pro
forma amounts included herein. The difference if any is not anticipated to be
material.
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.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 25, 1998
<TABLE>
<CAPTION>
ITC FDGTI FDGTI
September 25, July 31, Pro Forma Pro Forma
1998 1998 Adjustments Consolidated
----------------- ---------------- ---------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents............ $ 31,350 $ 3,845 $ (8,102) (b) $ 27,093
Marketable securities................ -- 13,295 (13,295) (b) --
Receivables, net..................... 280,998 63,213 -- 344,211
Prepaid and other current assets..... 18,748 3,508 -- 22,256
Deferred income taxes................ 12,144 1,283 -- 13,427
----------------- ---------------- ---------------- ---------------
Total current assets.................... 343,240 85,144 (21,397) 406,987
Net property, plant, and equipment...... 45,814 5,225 (2,441) (a) 48,598
Intangible assets, net.................. 331,283 11,164 5,392 (a) 347,839
Deferred income taxes................... 86,716 3,508 5,724 (a) 95,948
Other assets............................ 16,708 1,544 -- 18,252
Long-term assets of discontinued
operations............................. 40,048 -- -- 40,048
----------------- ---------------- ---------------- ---------------
Total assets............................ $863,809 $106,585 $(12,722) $957,672
================= ================ ================ ===============
Liabilities and
Stockholders' Equity
--------------------
Current liabilities:
Accounts payable..................... $126,007 $ 9,456 $ -- $135,463
Accrued liabilities.................. 72,406 12,474 10,681 (a) 95,561
Billings in excess of revenues....... 5,415 361 -- 5,776
Short-term debt, including current
portion of long-term debt.......... 13,416 -- -- 13,416
Transition accrual................... -- -- 7,900 (a) 7,900
Accrued transaction liability........ -- -- 1,457 (a) 1,457
Employee obligations................. -- -- 1,534 (a) 1,534
Net current liabilities of discontinued
operations......................... 9,706 -- -- 9,706
----------------- ---------------- ---------------- ---------------
Total current liabilities............... 226,950 22,291 21,572 270,813
Long-term debt.......................... 326,423 -- 50,000 (b) 376,423
8% convertible subordinated debentures.. 44,548 -- -- 44,548
Long-term accrued liabilities of
discontinued operations, net......... 500 -- -- 500
Other long-term accrued liabilities..... 31,601 -- -- 31,601
Minority interest....................... 557 -- -- 557
Commitments and contingencies........... -- -- -- --
Stockholders' equity:
Preferred stock...................... 6,628 -- -- 6,628
Common stock......................... 226 8 (8) (c) 226
Treasury stock at cost............... (74) -- -- (74)
Additional paid-in capital........... 348,447 82,716 (82,716) (c) 348,447
Retained earnings (deficit).......... (121,997) 1,570 (1,570) (c) (121,997)
----------------- ---------------- ---------------- ---------------
Total stockholders' equity.............. 233,230 84,294 (84,294) 233,230
----------------- ---------------- ---------------- ---------------
Total liabilities and stockholders' equity $863,809 $106,585 $(12,722) $957,672
================= ================ ================ ===============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 25, 1998
(a)--The estimated purchase price and preliminary adjustments to
historical book value of FDGTI as a result of the Offer together with the
related financing are as follows (dollars in thousands):
<TABLE>
<S> <C>
Purchase price:
Estimated cash consideration (see (b) below)......................................... $ 69,397
Asset acquisition costs.............................................................. 2,000
Book value of net assets acquired FDGTI.............................................. (84,294)
----------------
$(12,897)
================
Preliminary allocation of purchase price in excess of net assets acquired:
Write down to fair value duplicate information technology systems and equipment...... $ (2,441)
Increase in deferred tax assets related to acquired assets and liabilities having
a new basis....................................................................... 5,724
Accrued liabilities, including legal costs........................................... (10,681)
Accrued transaction liability........................................................ (1,457)
FDGTI employee benefit accruals which will be charged to expense prior to
acquisition....................................................................... (1,534) *
Transition accrual, including severance ($3.5 million) and lease termination costs
($4.4 million) recognized in accordance with EITF 95-3............................ (7,900)
Estimated goodwill adjustment........................................................ 5,392
----------------
$(12,897)
================
</TABLE>
The Pro Forma Balance Sheet includes an estimated transition accrual of
$7.9 million for severance and lease termination. The transition plan will be
finalized, approved, and communicated as soon as practical. There are no known
significant unresolved liabilities anticipated by management in the transition
plan.
Primarily as a result of FDGTI and ITC operating within the same
industry for many of the same customers, management does not believe that
identifiable intangibles, other than residual goodwill, were acquired in the
transaction.
*Amount to be recognized in FDGTI's historic income statement prior to Merger.
(b)--Reflects the financing for the Offer on December 3, 1998 as
follows (dollars in thousands):
<TABLE>
<S> <C>
Sources of financing:
Revolving credit facility............................................................ $50,000
Consolidated cash of ITC and FDGTI................................................... 8,102
Marketable securities of FDGTI....................................................... 13,295
----------------
Total sources of financing............................................................. $71,397
================
Uses of financing amounts:
Cash consideration for Offer (8,411,766 @ $8.25)..................................... $69,397
Estimated fees and expenses.......................................................... 2,000
----------------
Total uses of financing amounts........................................................ $71,397
================
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)
For purposes of the Pro Forma Financial Statements, 8,411,766 shares of
FDGTI Common Stock was acquired by ITC. The 8,411,766 shares represent all the
outstanding Common Stock of FDGTI on December 3, 1998.
Fees and expenses represent asset acquisition costs of approximately
$2.0 million consisting primarily of investment banking, legal and accounting
fees.
(c)--The elimination of FDGTI's equity amounts consists of the
following (dollars in thousands):
<TABLE>
<S> <C>
Common Stock:
Common stock......................................................................... $ 8
Paid-in capital:
Paid-in capital...................................................................... $82,716
Retained earnings:
Retained earnings.................................................................... $ 1,570
</TABLE>
(d)--To recognize the following employee benefit costs and stock option
repurchase transactions reflected in FDGTI's historical income statement prior
to closing (dollars in thousands):
<TABLE>
<S> <C>
Stock options--cash paid for outstanding stock options.................................. $ 429
Bonuses and severance.................................................................. 1,105
----------------
$1,534 *
================
</TABLE>
* Amount to be recognized in the FDGTI's historical income statement prior to
the Merger.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)
As of October 31, 1998 and December 3, 1998, there were 1,286,883 FDGTI
Options outstanding. See footnote 9 to the financial statements at October 31,
1997 included in FDGTI's Form 10-K for additional information regarding FDGTI
Options. The pro forma adjustment for stock options of $429,000 was paid for all
1,286,883 FDGTI Options outstanding.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Six Months ended September 25, 1998
<TABLE>
<CAPTION>
ITC FDGTI FDGTI
Six-Month Six-Month and
Period ended Period ended Consolidated
September 25, July 31, Pro Forma Pro Forma
1998 (a) 1998 (a) Adjustments Consolidated
------------- ------------ ------------- ------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Revenues................................ $485,375 $101,362 $-- $586,737
Cost and expenses:
Cost of revenues..................... 427,764 83,555 -- 511,319
Selling, general, and administrative
expenses........................... 27,228 16,376 (177) (e) 43,427
Special charges...................... 24,971 -- -- 24,971
------------- ------------ ------------- ------------
Operating income (loss)................. 5,412 1,431 7,020
Interest income (expense), net.......... (16,871) 381 (2,588) (f) (19,078)
Other, net.............................. 67 (279) -- (212)
------------- ------------ ------------- ------------
Income (loss) from continuing operations
before income taxes.................. (11,392) 1,533 (12,270)
Provision for income taxes.............. (2,431) (1,017) 453 (g) (3,901)
------------- ------------ ------------- ------------
Net income (loss)....................... (13,823) 516 (16,171)
Less preferred dividends................ (3,138) -- (3,138)
------------- ------------ ------------- ------------
Net income (loss) applicable to common
stock................................ $ (16,961) $ 516 $ (19,309)
============= ============ ============
Basic and diluted loss per share........ $ (.85) (h)
============
Weighted average shares outstanding
(000s) basic and diluted............. 17,256 22,636
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year ended March 27, 1998
<TABLE>
<CAPTION>
OHM Beneco FDGTI
ITC FDGTI Eleven Months Two Months OHM and and
Year ended Year ended ended ended Beneco Consolidated Pro Forma
March 27, January 31, February 25, May 31, Pro Forma Pro Forma Consoli-
1998 (a) 1998 (a) 1998 (a) 1997 (a) Adjustments Adjustments dated
---------- ----------- ------------- ---------- ----------- ------------ ----------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $442,216 $189,889 $477,642 $9,368 $-- $-- $1,119,115
Cost and expenses:
Cost of revenues...... 391,126 151,293 416,597 9,228 -- -- 968,244
Selling, general, and
administrative
expenses............ 31,774 37,779 42,745 763 4,404 (b) (354) (e) 117,111
Special charges....... 14,248 -- 40,777 -- -- -- 55,025
---------- ----------- ------------- ---------- ----------
Operating income (loss).. 5,068 817 (22,477) (623) (21,265)
Interest income
(expense), net........ (7,969) 825 (4,256) 55 (15,645)(c) (5,177) (f) (32,167)
Equity in net earnings
of affiliate.......... -- -- (2,182) -- 2,182 (d) -- --
Write-down of investment
in NSC................ -- -- (14,949) -- 14,949 (d) -- --
Other income (expense),
net................... 716 83 (441) -- -- -- 358
---------- ----------- ------------- ---------- ----------
Income (loss) from
continuing operations
before income taxes... (2,185) 1,725 (44,305) (568) (53,074)
(Provision) benefit
for income taxes...... (4,175) (715) 14,323 -- -- 5,705 (g) 15,138
------------- ------------ --------------- ------------- -----------
Income (loss) from
continuing operations. (6,360) 1,010 (29,982) (568) (37,936)
Less preferred dividends. (6,167) -- -- -- (6,167)
------------- ------------ --------------- ------------- -----------
Income (loss) from
continuing operations
applicable to
common stock $ (12,527) $ 1,010 $ (29,982) $ (568) $ (44,103)
============= ============ =============== ============= ===========
Basic and diluted
loss per share........ $(1.95)(h)
Weighted average shares
outstanding (000s).... 9,737 22,649
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
September 25, 1998
General
- -------
(a)--The Pro Forma Statements of Operations assume that the Merger
occurred on March 28, 1997, the first day of ITC's fiscal 1998. FDGTI has a
fiscal year end of October 31st. Therefore, for purposes of the Pro Forma
Statement of Operations for the year ended March 27, 1998, FDGTI's historical
statement of operations for the twelve months ended January 31, 1998 (within 93
days of ITC fiscal year end) was consolidated with ITC's historical statement of
operations for the fiscal year ended March 27, 1998. For purposes of the Pro
Forma Statement of Operations for the six-month period ended September 25, 1998,
FDGTI's historical statement of operations for the six-month period ended July
31, 1998 was consolidated with ITC's historical statement of operations for the
six-month period ended September 25, 1998.
In January 1998, the Company entered into a merger agreement to acquire
OHM Corporation (OHM). The transaction was effected through a two-step process
consisting of (a) the acquisition of 54% of the total outstanding shares through
a cash tender offer, which was consummated on February 25, 1998, at $11.50 per
share for 13,933,000 shares of OHM common stock, for a total consideration of
approximately $160,200,000 plus, approximately $4,600,000 in asset acquisition
costs and (b) the acquisition on June 11, 1998 of the remaining 46% of the total
outstanding shares through the exchange of 12,900,000 shares of Company common
stock and cash payment of approximately $30,800,000. This transaction was
accounted for as a step acquisition. The effects of the first step was to
include 100% of OHM revenues and expenses in the historic statement of
operations of ITC from February 25, 1998 to March 27, 1998 with a minority
interest of 46%. The effects of the second step of the merger were not included
in the March 27, 1998 historic financial statements because the issuance of the
additional ITC shares was subject to shareholder approval which was not received
until June 11, 1998. The pro forma results of OHM for the year ended March 27,
1998 have been included in the Unaudited Pro Forma Consolidated Statements of
Operations for the year ended March 27, 1998, assuming both steps of the
transaction occurred on March 28, 1997.
Effective June 1, 1997, OHM acquired all of the outstanding stock of
Beneco Enterprises, Inc. (Beneco), for an aggregate purchase price of
$14,700,000. The pro forma results of Beneco for the period April 1, 1997
through May 31, 1997 have been included in the Unaudited Pro Forma Consolidated
Statements of Operations for the year ended March 27, 1998, respectively.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
OHM and Beneco Pro Forma
- ------------------------
(b)--The acquisition of OHM was accounted for as a purchase. Under
purchase accounting, the total purchase price was allocated to the tangible and
intangible assets and liabilities of OHM based upon their estimated fair values.
The following represents ITC's purchase adjustments on the Pro Forma Statements
of Operations (dollars in thousands):
<TABLE>
<CAPTION>
Year ended
March 27,
1998
----------------
SG&A
----------------
<S> <C>
Depreciation.................................................................................... $ (828)
Amortization of intangibles and goodwill........................................................ 6,283
Net capitalization (amortization) of deferred proposal costs.................................... (1,051)
----------------
Total increase (decrease)....................................................................... $ 4,404
================
</TABLE>
The adjustments for pro forma depreciation relate to the reduction in
depreciation as a result of the write-down to fair value of facilities,
duplicate management information systems and equipment. The adjustments related
to duplicate management information systems and equipment represent the
elimination 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 adjustments to estimated pro forma amortization relate to the increase in
amortization expense resulting from the increase of goodwill. Goodwill is being
amortized over 40 years.
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 value to these proposal costs.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
OHM and Beneco Pro Forma (continued)
- ------------------------------------
(c)--Reflects adjustments for additional interest expense assuming the
OHM Merger Credit Facilities were drawn upon on March 28, 1997. The increase in
interest expense and the addition to amortization of deferred financing costs
reflect the change in term loans and their related rates based on LIBOR plus
2.5% per annum (dollars in thousands):
<TABLE>
<CAPTION>
Additional Year ended
Drawn March 27,
Rate Amount 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Merger Credit Facilities:
Term loan (LIBOR + 2.5%)................................. 8.5% $191,000 $15,100
Amortization of capitalized financing fees............... 545
----------------
Total adjustment............................................ $15,645
================
</TABLE>
Financing fees capitalized are being amortized over the period of the credit
facility.
(d)--Removes NSC equity earnings and other amounts because its shares
were distributed to the stockholders of OHM concurrent with the OHM offer.
FDGTI Pro Forma
- ---------------
(e)--The acquisition of FDGTI will also be accounted for by the
purchase method of accounting. For purposes of presentation, estimated fair
values are based upon preliminary valuations which are not yet finalized. The
actual allocation of purchase price and the resulting effect on income from
operations may differ from the pro forma amounts included herein. Such
difference is not anticipated to be material. The following represents ITC's
preliminary estimate of the effect of the FDGTI purchase adjustments on the Pro
Forma Statements of Operations (dollars in thousands):
<TABLE>
<CAPTION>
Six Months
Year ended ended
March 27, September 25,
1998 1998
---------------- ------------------
SG&A SG&A
---------------- ------------------
<S> <C> <C>
Depreciation................................................................ $(488) $ (244)
Amortization of intangibles and goodwill.................................... 134 67
---------------- ------------------
Total increase (decrease)................................................... $ (354) $ (177)
================ ==================
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
FDGTI Pro Forma (continued)
- ---------------------------
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 the actual historical depreciation expense recorded by FDGTI
during the respective periods as the fair value of these costs is estimated to
be zero. The adjustments to estimated pro forma amortization relate to the
increase in amortization expense resulting from the increase in goodwill of
$5,392 which is being amortized over 40 years.
(f)--Reflect adjustments for additional interest expense and a decrease
interest income assuming the Revolving Credit Facility and cash and marketable
securities were used for the acquisition as of March 28, 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
Six Months
Additional Year ended ended
Drawn March 27, September 25,
Rate Amount 1998 1998
-------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revolver credit facility (LIBOR + 2%)............. 8% $50,000 $4,000 $ 2,000
Foregone interest income.......................... 1,177 588
-------------- -----------------
$5,177 $2,588
=============== =================
</TABLE>
As a result of the utilization of $8,102 and $13,295 in cash and
marketable securities to fund the acquisition, lost investment earnings are
estimated using the average rate of interest earned in 1998 of 5.5%.
Consolidated Pro Forma
- ----------------------
(g)--Adjustment to reflect income taxes as the 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 is
primarily related to nontax-deductible goodwill amortization and increases to
the deferred tax valuation allowance as follows (dollars in thousands):
<TABLE>
<CAPTION>
Six Months
Year ended ended
March 27, September 25,
1998 1998
--------------------------------------
<S> <C> <C>
Pro forma loss before taxes.................................................. $(53,074) $(12,270)
Permanent difference related to goodwill amortization........................ 9,598 4,799
---------------- ------------------
Estimated pro forma taxable loss............................................. (43,476) (7,471)
Estimated statutory tax rate................................................. 40% 40%
---------------- ------------------
(17,390) (2,988)
Deferred tax asset valuation allowance adjustment ........................... 2,252 6,889
---------------- ------------------
Pro forma tax (benefit) expense ............................................. $(15,138) $ 3,901
================ ==================
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
Consolidated Pro Forma (continued)
- ----------------------------------
The increase in the deferred tax asset valuation allowance is mainly
the result of capital losses incurred for financial statement purpose in the
historical financial statements. These losses are not recoverable until capital
gains of equivalent amounts are realized. See ITC's March 27, 1998 and September
25, 1998 Forms 10-K and 10-Q for additional information regarding the adjustment
to the deferred tax asset valuation.
(h)--Basic and diluted loss per share has been calculated utilizing the
basic and diluted weighted average of ITC shares outstanding during the periods
adjusted for approximately 12,900,000 shares of Company common stock issued June
11, 1998 for the OHM acquisition assuming the 12,900,000 shares were outstanding
as of the beginning of the periods presented.
(i)--Before interest income, the estimated pro forma effect, on the
consolidated debt, with a variable interest rate ($389,839,000 principal amount
at September 25, 1998) of a 1/8% change in the assumed interest rates on pro
forma results of operations is approximately $485,000 and $242,500 for the year
ended March 27, 1998 and the six-month period ended September 25, 1998,
respectively.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
3(i).1 Certificate of Amendment of Certificate of Incorporation of
International Technology Corporation, dated as of December
21, 1998, as filed with the Delaware Secretary of State on
December 23, 1998.
99.1 Press Release, dated December 28, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly changed this report to be signed on its behalf
by the undersigned hereunto duly authorized.
THE IT GROUP, INC.
Date: January 22, 1999 By: /s/ James G. Kirk
-----------------------------------------
James G. Kirk
Vice President, General Counsel and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Tab No.
- --- ----------- -------
3(i).1 Certificate of Amendment of Certificate of Incorporation 1
of International Technology Corporation, dated as of
December 21, 1998, as filed with the Delaware Secretary
of State on December 23, 1998.
99.1 Press Release, dated December 28, 1998. 2
<PAGE>
Exhibit 3(i).1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL TECHNOLOGY CORPORATION
International Technology Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
1. Article FIRST of the Corporation's Certificate of Incorporation is
hereby amended pursuant to Section 242 of the Delaware General Corporation
Law to read as follows:
FIRST: The name of the corporation is:
THE IT GROUP, INC.
2. The foregoing amendment of the Corporation's Certificate of
Incorporation has been duly approved by the Board of Directors of the
Corporation.
3. The foregoing amendment has been duly approved by written consent of
the required majority of shareholders, in lieu of a meeting of
shareholders, in accordance with Section 228(d) of the Delaware General
Corporation Law. Holders of the Corporation's Common Stock, $0.01 par
value, and the Corporation's 6% Convertible Preferred Stock (the "Preferred
Stock") were entitled to notice of and to consent with respect to the
action. As of October 22, 1998, the record date established by the Board
of Directors of the Corporation, the number of outstanding shares of Common
Stock was 22,628,433, and the number of outstanding shares of Preferred
Stock was 45,819. The affirmative vote of a majority of shares of the
Common Stock and Preferred Stock voting (on an as-converted basis) as a
single class, and the affirmative vote of at least a majority of the shares
of the Preferred Stock, was required to approve the amendment. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50% of each such
class.
4. IN WITNESS WHEREOF, this corporation has caused this certificate to be
signed by Richard R. Conte, its Vice President, and James M. Redwine, its
Assistant Secretary, this 2_day of December, 1998.
/s/ Richard R. Conte
--------------------------------
Richard R. Conte,
Vice President
/s/ James M. Redwine
-------------------------------
James M. Redwine,
Assistant Secretary
<PAGE>
Exhibit 99.1
[Letterhead of
The IT Group, Inc.
2790 Mosside Boulvard
Monroeville, PA 15146-2792
Tel. 412.372.7701
Fax. 412.373.7135]
[LOGO OF THE IT GROUP]
N E W S R E L E A S E
Release Date: FOR IMMEDIATE RELEASE
Investor Contact: Richard R. Conte (412) 372-7701
Media Contact: William L. Mulvey (202) 682-1147
THE IT GROUP STOCK LISTINGS NOW UNDER "IT Gp"
Pittsburgh, Pennsylvania -- December 28, 1998 -- The IT Group, Inc. (NYSE: ITX)
announced today that future communications and reports will reflect its new name
and that stock quotations in newspapers should now be listed under IT Gp, rather
than IT Corp as in the past. The IT Group's common stock and depositary shares
will continue to trade under the symbols ITX and ITXpr, respectively. The name
change from International Technology Corporation to The IT Group, Inc. became
official on December 24, 1998. The IT Group is a leading diversified services
company offering a full range of consulting, facilities management, engineering
& construction and remedial services.
The new name properly identifies a group of diverse, yet complementary companies
that have expanded capabilities and are well positioned to serve the needs of
clients. More information on The IT Group can be found on the Internet at
www.theitgroup.com.
###
