<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter Ended June 30, 1995
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------- ----------------
Commission File Number 0-14292
GTS DURATEK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-2476180
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8955 Guilford Road, Suite 200, Columbia, Maryland 21046
------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 312-5100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common stock as
of August 1, 1995:
Common Stock, par value $0.01 per share 8,773,317 shares
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
as of June 30, 1995 and December 31, 1994..................... 1
Consolidated Condensed Statements of Operations for the Three
and Six Months Ended June 30, 1995 and 1994................... 2
Consolidated Condensed Statement of Changes in Stockholders
Equity for the Six Months Ended June 30, 1995................. 3
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994............... 4
Notes to Consolidated Financial Statements...................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 6
Qualification Relating to Financial Information................. 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................ 9
Signatures...................................................... 10
</TABLE>
<PAGE>
Part I Financial Information
Item 1. Financial Statements
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
(unaudited) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 5,237,514 $
Receivables, net................................................. 8,109,410 8,090,614
Costs and estimated earnings in excess of billings on
uncompleted contracts.......................................... 4,588,289 3,119,443
Inventories...................................................... 297,997 334,998
Prepaid expenses and other current assets........................ 220,786 141,510
----------- -----------
Total current assets......................................... 18,453,996 11,686,565
----------- -----------
Costs and estimated earnings in excess of billings,
noncurrent........................................................ 1,307,728
Property, plant and equipment, net.................................. 2,110,387 2,137,247
Intangibles, net.................................................... 592,898 637,553
Investments in and advances to joint venture, net................... 3,243,416 2,417,771
Deferred charges and other assets................................... 979,181 1,013,220
----------- -----------
$25,379,878 $19,200,084
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings........................................... $ $ 7,630,512
Current maturities of long-term debt............................ 707,094 707,094
Accounts payable and accrued expenses........................... 2,648,784 3,427,236
----------- -----------
Total current liabilities................................... 3,355,878 11,764,842
----------- -----------
Long-term debt..................................................... 151,731 502,417
----------- -----------
Redeemable convertible preferred stock
(Liquidation value $16,320,000).................................. 14,500,083
----------- -----------
Stockholders' equity:
Common stock.................................................... 88,200 87,598
Capital in excess of par value.................................. 17,059,647 16,656,009
Deficit......................................................... (9,603,884) (9,639,005)
Treasury stock, at cost......................................... (171,777) (171,777)
----------- -----------
Total stockholders' equity.................................. 7,372,186 6,932,825
----------- -----------
$25,379,878 $19,200,084
----------- -----------
----------- -----------
<FN>
*The Consolidated Condensed Balance Sheet as of December 31, 1994 has been
derived from the Company's audited Consolidated Balance Sheet as of that date.
</TABLE>
1
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -----------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues.................................................... $9,985,641 $8,989,871 $19,521,393 $16,971,965
Cost of revenues............................................ 8,139,966 7,030,239 15,918,977 13,189,539
---------- ---------- ----------- -----------
Gross profit................................................ 1,845,675 1,959,632 3,602,416 3,782,426
---------- ---------- ----------- -----------
Expenses:
Selling, general and administrative...................... 1,372,890 1,605,722 2,675,429 3,147,082
Royalties paid to related parties........................ 25,000 25,000 50,000 50,000
---------- ---------- ----------- -----------
1,397,890 1,630,722 2,725,429 3,197,082
---------- ---------- ----------- -----------
Income from operations...................................... 447,785 328,910 876,987 585,344
Interest (income) expense, net.............................. (42,630) 102,521 (25,915) 203,737
---------- ---------- ----------- -----------
Income before income taxes and proportionate share of loss
of joint venture.......................................... 490,415 226,389 902,902 381,607
Income taxes................................................ 48,966 90,215 1,395
---------- ---------- ----------- -----------
Income before proportionate share of loss of joint
venture................................................... 441,449 226,389 812,687 380,212
Proportionate share of loss of joint venture................ (53,378) (137,229) (132,310) (209,000)
---------- ---------- ----------- -----------
Net income.................................................. $ 388,071 $ 89,160 $ 680,377 $ 171,212
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net income per share........................................ $ .00 $ .01 $ .00 $ .02
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Weighted average number of shares outstanding............... 8,720,797 8,686,433 8,705,144 8,682,986
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
2
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in Total
------------------- Excess of Treasury Stockholders'
Shares Amount Par Value Deficit Stock Equity
------ ------- ----------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ..... 8,759,775 $87,598 $16,656,009 $(9,639,005) $(171,777) $6,932,825
Net Income 680,377 680,377
Preferred dividends ............ (555,200) (555,200)
Issuance of stock options ...... 280,000 280,000
Exercise of stock options ...... 60,200 602 123,638 124,240
Accretion of redeemable
preferred stock .............. (90,056) (90,056)
---------- ------- ----------- ----------- --------- ----------
Balance, June 30, 1995 ......... 8,819,975 $88,200 $17,059,647 $(9,603,884) $(171,777) $7,372,186
--------- ------- ----------- ----------- --------- ----------
--------- ------- ----------- ----------- --------- ----------
</TABLE>
3
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
---------- ---------
<S> <C> <C>
Cash flows from operations:
Net income.................................................. $ 680,377 $ 171,212
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization............................. 302,692 265,638
Proportionate share of loss of joint venture.............. 132,310 209,000
Changes in operating items:
Receivables............................................. (18,796) (810,066)
Cost in excess of billings.............................. (161,118) (1,450,778)
Inventories............................................. 37,001 (32,288)
Accounts payables and accrued expenses.................. (1,098,452) (397,632)
Other operating items................................... (79,276) (234,385)
----------- -----------
Net cash used by operations.......................... (205,262) (2,279,299)
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment, net........... (179,361) (440,306)
Advances to joint venture................................. (957,955) (434,958)
Other..................................................... (17,777) 24,097
----------- -----------
Net cash used by investing activities................ (1,155,093) (851,167)
----------- -----------
Cash flows from financing activities:
Net proceeds from (repayment of) short-term borrowings.... (7,630,512) 1,761,756
Proceeds from issuance of long-term debt.................. 957,150
Reduction of long-term debt............................... (350,686) (102,839)
Proceeds from issuance of common stock.................... 124,240 500,000
Proceeds from issuance of redeemable preferred stock...... 14,410,027
Payment of preferred stock dividends...................... (235,200)
Proceeds from issuance of stock option.................... 280,000 14,399
----------- -----------
Net cash provided by financing activities............ 6,597,869 3,130,466
----------- -----------
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period..........
----------- -----------
Cash and cash equivalents at end of period................ $ 5,237,514 $
----------- -----------
Cash paid for:
Interest.................................................. $ 136,129 $ 203,737
----------- -----------
----------- -----------
Income taxes.............................................. $ 9,741 $ 1,395
----------- -----------
----------- -----------
</TABLE>
4
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
On January 24, 1995, the Company consummated a financing transaction (the
"Financing Transaction") whereby it issued for $16 million 160,000 shares of 8%
Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share
(the "Convertible Preferred Stock") and an option (the "Company Option") to
purchase up to an additional 1.25 million shares of the Company's newly issued
common stock, par value at $.01 per share (the "Common Stock") at any time
prior to January 24, 1999 for $3.75 per share to investment partnerships
sponsored and controlled by the Carlyle Group, a Washington, D.C. based
private merchant bank ("Carlyle"). The Convertible Preferred Stock is initially
convertible into the Company's Common Stock at a conversion price of $3 per
share and, if not previously converted, the Company is required to redeem the
outstanding Convertible Preferred Stock on December 31, 2001 for $100 per share
plus accrued and unpaid dividends. The Company is required to pay quarterly
dividends on the Convertible Preferred Stock of $320,000. In addition, as part
of the Financing Transaction, Carlyle acquired 1,666,667 shares of Common Stock
of the Company owned by National Patent for $3 per share and has the option (the
"NPD Option") to purchase up to an additional 500,000 shares of the Company's
Common Stock from National Patent at any time prior to January 24, 1996 at an
exercise price of $3.75 per share. The Company intends to use proceeds from
the Financing Transaction to (i) finance the Company s obligations under the
DuraChem joint venture with Chem-Nuclear Systems, Inc., estimated at $5 million,
(ii) provide $5 million of working capital required in connection with the
contract with Westinghouse Savannah River Company to construct a DuraMelter-TM-
vitrification melter to remediate and stabilize low-level radioactive waste at
the Department of Energy's Savannah River Site in South Carolina, and
(iii) provide working capital for the Company's Technology Group.
Assuming the conversion of all of the Convertible Preferred Stock into
Common Stock, Carlyle would own 49.9% of the Common Stock of the Company,
excluding the effects of the exercise of the Company and the NPD Options and
all other outstanding warrants and employee stock options. Assuming the
conversion of all of the Convertible Preferred Stock into Common Stock and
assuming Carlyle's exercise in full of the Company and NPD Options (but not the
exercise of outstanding warrants and employee stock options), Carlyle would
own 57.3% of the Company's Common Stock.
2. INVENTORIES
Inventories, consisting of material, labor and overhead, are classified
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
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<S> <C> <C>
Raw materials.......................... $ 52,079 $ 55,452
Finished goods......................... 245,918 279,546
-------- --------
$297,997 $334,998
-------- --------
-------- --------
</TABLE>
3. NET INCOME PER SHARE
The net income per share for 1995 and 1994 was computed by dividing the
net income applicable to common stock, which reflects the preferred stock
dividend requirement and accretion, by the weighted average number of shares
of common stock outstanding and common stock equivalents to the extent they
result in additional dilution. As the Company has issued options and warrants
which exceed 20% of the common stock outstanding, the Company determines the
dilutive effect of such common stock equivalents using the modified treasury
stock method. For the three and six months ended June 30, 1995, the common
stock equivalents were deemed to be anti-dilutive and, accordingly, are not
included in the weighted average number of shares used in determining net
income per share.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GTS DURATEK, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
OVERVIEW
The Company had net income of $388,000 and $680,000 for the quarter
and six months ended June 30, 1995 as compared to $89,000 and $171,000 for
the same periods in 1994. The increase in net income was due to increased
revenues in the Services Group combined with lower selling, general and
administrative expenses and a reduction in net interest expense.
The Company's results of operations are significantly affected by the
timing of the award of contracts and the timing and performance on contracts.
These factors directly affect the Company's pre-tax income and net income. The
quarter-to-quarter results continue to be affected by the Company's electric
utility customers scheduling of nuclear power plant outages causing the demand
for these services to often shift between quarters. Accordingly, results of
operations for the quarter and quarter-to-quarter comparisons may not be as
meaningful as comparisons over longer periods.
REVENUES
Revenues were $9,986,000 and $19,521,000 during the quarter and six
months ended June 30, 1995 as compared to $8,990,000 and $16,972,000 for
the same periods in 1994. The increase in consolidated revenues of $996,000
or 11.1% for the quarter is attributable to increases in the Technology Group
and Services Group revenues of $835,000 and $161,000, respectively. The
increase in consolidated revenues of $2,549,000 or 15.0% for the six month
period is attributable to increases in the Technology Group and Services Group
revenues of $415,000 and $2,134,000, respectively. The increases in Technology
Group revenues for the quarter and six month period was primarily due to work
performed on the Department of Energy's Savannah River M-Area low-level
radioactive waste vitrification project. The increases in Services Group
revenues for the quarter and six month period was primarily due to increased
demand for commercial nuclear power plant outage services.
GROSS PROFIT
Gross profit was $1,846,000 or 18.5% and $3,602,000 or 18.5% for the
quarter and six months ended June 30, 1995 as compared to $1,960,000 or 21.8%
and $3,782,000 or 22.3% for the same periods in 1994. The decrease in gross
profit for the quarter and six month period was due to changes in the mix of
revenues with a higher proportion of the total from the Services Group which
generates a lower gross profit than the Technology Group.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $1,398,000 and $2,725,000
for the quarter and six months ended June 30, 1995 as compared to $1,631,000
and $3,197,000 for the same periods in 1994. The decrease of $233,000 and
$472,000 for the quarter and six month period was due to cost saving measures
taken in the second half of 1994 in the Services Group from personnel
reductions, consolidation of offices and continued efforts to control costs.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
GTS DURATEK, INC. AND SUBSIDIARIES
INTEREST EXPENSE
The decrease in interest expense, net for the quarter and six months
ended June 30, 1995 as compared to the same periods in 1994 reflects the
repayment of short-term borrowings and investment income with the proceeds
of the Financing Transaction (see Note 1).
OTHER INCOME AND EXPENSE
The Company's proportionate share of loss of the joint venture of $53,000
and $132,000 for the quarter and six months ended June 30, 1995 relates to the
start-up expenses and operation of a 50% joint venture formed to pursue
vitrification of non-radioactive waste materials.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with short-term
borrowings and has a revolving line of credit with a commercial bank. As a
result of the Financing Transaction, the Company has available borrowings of
$7,000,000 as of June 30, 1995 under the line of credit arrangement.
The Company believes that cash flow from operations, proceeds from the
Financing Transaction and borrowings availability under the line of credit will
be sufficient to meet its operating needs and preferred dividend requirements.
OTHER ITEMS
Investments in and advances to joint venture, net, were $3,243,000 and
$2,418,000 at June 30, 1995 and December 31, 1994, respectively. The increase
of $825,000 for the six month period is primarily attributable to expenditures
on the DuraChem joint venture to design and construct a vitrification system
at an existing Chem-Nuclear waste management facility.
Costs and estimated earnings in excess of billings on uncompleted contracts
were $4,588,000 and $3,119,000 at June 30, 1995 and December 31, 1994,
respectively. The increase of $1,469,000 for the six month period is primarily
attributable to the work performed on the Department of Energy's Savannah River
M-Area low-level radioactive waste vitrification project mentioned above and a
contract with Fernald Environmental Restoration Management Corporation to
provide a joule-heated vitrification system. Such amounts are expected to be
billed and collected over the next twelve month period.
7
<PAGE>
Item 2. Qualification Relating to Financial Information
GTS DURATEK, INC. AND SUBSIDIARIES
The consolidated financial information included herein is unaudited, and
does not include all disclosures required under generally accepted accounting
principles because certain note information included in the Company's Annual
Report, filed on Form 10-K, has been omitted; however, such information reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods presented. The results of the 1995 interim period are not necessarily
indicative of results to be expected for the entire year.
8
<PAGE>
Part II Other Information
GTS DURATEK, INC. AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 24, 1995 the following
matters were voted upon.
a. Daniel A. D'Aniello, William E. Conway, Jr., Earle C. Williams and
Steven J. Gilbert were elected to serve as directors of the Registrant for
one-year term by the Preferred Stockholders. Jerome I. Feldman, Martin M.
Pollak, and Robert E. Prince were elected to serve as directors of the
Registrant for a one-year term by the Common Stockholders.
b. The proposal to approve the amendments to the Company's Stock Option
Plan was adopted by a vote of 6,427,805 for, and 117,232 against this proposal.
c. The proposal to reappoint KPMG Peat Marwick LLP as auditors was
adopted by a vote of 7,602,032 for, and 7,913 against this proposal.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11.1 GTS Duratek, Inc., and Subsidiaries, Computation of
Earnings Per Share for the three and six months ended
June 30, 1995 and 1994.
27 Financial Data Schedule
b. Reports
There were no reports on Form 8-K filed for the period ended
June 30, 1995.
9
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
JUNE 30, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GTS DURATEK, INC.
Dated: August 11, 1995 BY: /s/ Robert F. Shawver
------------------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: August 11, 1995 BY: /s/ Craig T. Bartlett
------------------------------------
Craig T. Bartlett
Controller and Principal
Accounting Officer
10
<PAGE>
Exhibit 11.1
GTS DURATEK, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- ----------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary:
Net earnings..................................... $ 388,071 $ 89,160 $ 680,377 $ 171,212
Accrued dividend on preferred stock.............. (320,000) 0 (555,200) 0
Accretion of redeemable preferred stock.......... (54,432) 0 (90,055) 0
---------- ---------- ---------- ----------
Net earnings applicable to common stock.......... $ 13,639 $ 89,160 $ 35,122 $ 171,212
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares outstanding....... 8,720,797 8,686,433 8,705,144 8,682,986
Earnings per common share........................ $ 0.00 $ 0.01 $ 0.00 $ 0.02
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF JUNE 30, 1995 (UNAUDITED) AND THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1995 (UNAUDITED), OF GTS DURATEK, INC. AND SUBSIDARIES, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,237,514
<SECURITIES> 0
<RECEIVABLES> 12,809,431
<ALLOWANCES> (111,732)
<INVENTORY> 297,997
<CURRENT-ASSETS> 18,453,996
<PP&E> 6,054,076
<DEPRECIATION> (3,943,689)
<TOTAL-ASSETS> 25,379,878
<CURRENT-LIABILITIES> 3,355,878
<BONDS> 151,731
<COMMON> 88,200
14,500,083
0
<OTHER-SE> 7,283,986
<TOTAL-LIABILITY-AND-EQUITY> 25,379,878
<SALES> 0
<TOTAL-REVENUES> 19,521,393
<CGS> 0
<TOTAL-COSTS> 15,918,977
<OTHER-EXPENSES> 2,670,429
<LOSS-PROVISION> 55,000
<INTEREST-EXPENSE> (25,915)
<INCOME-PRETAX> 902,902
<INCOME-TAX> 90,215
<INCOME-CONTINUING> 680,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 680,377
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
