<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 March 31, 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 22-2427618
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 May 8, 1995:
Common Stock, par value $0.01 per share 8,718,417 shares
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
----
Part I FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994 . . . . . . . . . . 1
Consolidated Condensed Statements of Operations
Three Months Ended March 31, 1995 and 1994 . . . . . . . 2
Consolidated Condensed Statement of Changes in
Stockholders' Equity Three Months Ended March 31, 1995 . 3
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 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
<PAGE>
Part I Financial Information
- ------
Item 1. Financial Statements
<TABLE>
<CAPTION>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31,
1995 1994
---------- ----------
ASSETS (unaudited) *
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,443,423 $
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,190,414 8,090,614
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,731,926 3,119,443
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,777 334,998
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . 269,922 141,510
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,978,462 11,686,565
----------- -----------
Costs and estimated earnings in excess of billings,
noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307,728
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,125,108 2,137,247
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609,716 637,553
Investments in and advances to joint venture, net . . . . . . . . . . . . . . . . . . . . . 2,788,376 2,417,771
Deferred charges and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993,797 1,013,220
----------- -----------
$ 24,495,459 $ 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,834 3,427,236
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,472,928 11,764,842
----------- -----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,074 502,417
----------- -----------
Redeemable preferred stock
(Liquidation value $16,235,200) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,461,149
----------- -----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,598 87,598
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,936,009 16,656,009
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,617,522) (9,639,005)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (171,777) (171,777)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,234,308 6,932,825
----------- -----------
$ 24,495,459 $ 19,200,084
----------- -----------
----------- -----------
<FN>
* The Consolidated Condensed Balance Sheet as of December 31, 1994 has been derived from the Company's audited Balance Sheet as of
that date.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
----------- ------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,535,752 $ 7,982,094
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,779,011 6,159,300
---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,756,741 1,822,794
---------- ----------
Expenses:
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,302,539 1,541,360
Royalties paid to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
---------- ----------
1,327,539 1,566,360
---------- ----------
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429,202 256,434
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,715 101,216
---------- ----------
Income before income taxes and
proportionate share of loss of joint venture . . . . . . . . . . . . . . . . . . . . . . 412,487 155,218
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,249 1,395
---------- ----------
Income before proportionate share of
loss of joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,238 153,823
Proportionate share of loss of joint venture . . . . . . . . . . . . . . . . . . . . . . . (78,932) (71,771)
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292,306 $ 82,052
---------- ----------
---------- ----------
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .00 $ .01
---------- ----------
---------- ----------
Weighted average number of shares outstanding . . . . . . . . . . . . . . . . . . . . . . . 9,308,747 9,102,857
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
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 8,759,755 $ 87,598 $16,656,009 $ (9,639,005) $(171,777) $ 6,932,825
Net Income 292,306 292,306
Preferred dividends (235,200) (235,200)
Issuance of stock options 280,000 280,000
Accretion of redeemable
preferred stock (35,623) (35,623)
------------- ---------- ----------- ------------ ---------- -------------
Balance, March 31, 1995 8,759,775 $ 87,598 $16,936,009 $ (9,617,522) $(171,777) $ 7,234,308
------------- ---------- ----------- ------------ ---------- -------------
------------- ---------- ----------- ------------ ---------- -------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operations:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292,306 $ 82,052
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,751 153,762
Proportionate share of loss of joint venture . . . . . . . . . . . . . . . . . . . . . . 78,932 71,771
Changes in operating items:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,800) (1,153,017)
Cost in excess of billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,695,245 (723,808)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,779) (30,706)
Accounts payables and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . (1,896,602) (399,146)
Other operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (128,412) (206,043)
----------- -----------
Net cash provided (used) by operations . . . . . . . . . . . . . . . . . . . . . . . 87,641 (2,205,135)
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . (90,973) (177,928)
Advances to joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (449,537) (143,542)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,379) 1,457
----------- -----------
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . (543,889) (320,013)
----------- -----------
Cash flows from financing activities:
Net proceeds from (repayment of) short-term borrowings . . . . . . . . . . . . . . . . . (7,630,512) 2,566,068
Reduction of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175,343) (51,419)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 10,499
Proceeds from issuance of redeemable preferred stock . . . . . . . . . . . . . . . . . . 14,425,526
Proceeds from issuance of stock option . . . . . . . . . . . . . . . . . . . . . . . . . 280,000
----------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . 6,899,671 2,525,148
----------- -----------
Net change in cash
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------- -----------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,443,423 $
----------- -----------
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,923 $ 101,216
----------- -----------
----------- -----------
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 1,395
----------- -----------
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</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>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . $ 55,452 $ 55,452
Finished goods . . . . . . . . . . . . . 287,325 279,546
------- -------
$342,777 $334,998
------- -------
------- -------
</TABLE>
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 $292,000 for the quarter ended March 31, 1995
as compared to $82,000 for the three months ended March 31, 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 $9,536,000 during the first quarter of 1995 as compared to
$7,982,000 for the first quarter of 1994. The increase in consolidated revenues
of $1,554,000 or 19.5% is attributable to an increase in the Services Group
revenues of $1,973,000 and a decrease in the Technology Group revenues of
$419,000. The increase in Services Group revenues was primarily due to work
performed on power plant outage contracts with Duke Power Company and Vermont
Yankee Nuclear Power Corporation. The decrease in Technology Group revenues was
primarily due to the completion of contracts the Department of Energy (DOE)
funded MINIMUM ADDITIVE WASTE STABILIZATION (MAWS) demonstration project in
which the Company successfully vitrified 7,000 gallons of low-level radioactive
waste using its DuraMelter-TM- 300 located on the DOE's Fernald site.
GROSS PROFIT
Gross profit was $1,757,000 or 18% during the first quarter of 1995 as
compared to $1,823,000 or 23% for the same period in 1994. The decrease in
gross profit 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 $1,328,000 for the first
quarter of 1995 as compared to $1,566,000 for the first quarter of 1994. The
decrease of 238,000 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 first quarter of 1995 as
compared to the same period 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 $79,000
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 March 31, 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.
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
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GTS DURATEK, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
--------
GTS Duratek, Inc., and Subsidiaries, Computation of Earnings Per
Share for the three months ended March 31, 1995 and 1994.
b. Reports
-------
A report on Form 8-K was filed on February 1, 1995, which
disclosed the Financing Transaction with The Carlyle Group.
9
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
MARCH 31, 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: May 9, 1995 BY: /s/ Robert F. Shawver
----------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: May 9, 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
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Primary:
Net earnings $ 292,306 $ 82,052
Accrued dividend on preferred stock (235,200) 0
Accretion of redeemable preferred stock (35,623) 0
--------- ---------
Net earnings applicable to common stock $ 21,483 $ 82,052
--------- ---------
--------- ---------
Average common shares outstanding 8,689,317 8,560,250
Dilutive effect of stock options
and warrants 619,430 542,607
--------- ---------
Weighted average common shares
outstanding 9,308,747 9,102,857
Earnings per common share $ 0.00 $ 0.01
--------- ---------
--------- ---------
Fully Diluted:
Net earnings applicable to common stock $ 21,483 $ 82,052
--------- ---------
--------- ---------
Average common shares outstanding 8,689,317 8,560,250
Dilutive effect of stock
options and warrants 817,592 542,607
--------- ---------
Weighted average common shares
outstanding 9,506,909 9,102,857
Earnings per common share assuming
full dilution $ 0.00 $ 0.01
--------- ---------
--------- ---------
</TABLE>
