<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, 1997
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 Identification No.)
incorporation or organization)
10100 Old Columbia Road, Columbia, Maryland 21046 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 June 30, 1997
Common Stock, par value $0.01 per share 12,599,965 shares
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GTS DURATEK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Condensed Balance Sheets
as of June 30, 1997 and December 31, 1996.................... 1
Consolidated Condensed Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996.................. 2
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the Six Months Ended June 30, 1997................ 3
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996.............. 4
Notes to Consolidated Financial Statements................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
Qualification Relating to Financial Information.............. 12
Part II OTHER INFORMATION
- -------
Item 2. Changes in Securities........................................ 12
Item 4. Submission of Matters to a Vote of Security Holders.......... 12
item 5. Other Information............................................ 13
Item 6. Exhibits and Reports on Form 8-K............................. 14
Signatures................................................... 15
</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,
1997 1996
------------ -----------
ASSETS (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 15,822,668 $46,336,126
Receivables, net.................................. 27,863,764 7,462,688
Other accounts receivable......................... 5,261,069 1,547,755
Costs and estimated earnings in excess of
billings on uncompleted contracts............... 10,660,808 8,956,200
Inventories....................................... 726,272 467,775
Prepaid expenses and other current assets......... 3,808,445 1,425,476
------------ -----------
Total current assets........................... 64,143,026 66,196,020
Property, plant and equipment, net.................. 54,640,596 10,780,748
Investments in and advances to joint ventures, net.. 6,790,383 5,960,984
Intangibles, net.................................... 14,881,850 464,344
Deferred charges and other assets................... 2,238,513 1,797,290
------------ -----------
$142,694,368 $85,199,386
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and obligations under capital leases.............. $ 52,881 $ 49,403
Accounts payable................................... 21,021,177 1,496,738
Other current liabilities.......................... 36,107,902 2,488,419
------------ -----------
Total current liabilities...................... 57,181,960 4,034,560
Long-term debt and obligations under capital lease.. 180,000 206,794
Convertible debenture............................... 11,010,569 10,682,897
Deferred tax liability.............................. 302,302 299,302
Decontamination and decommissioning accrual......... 6,170,000 -
Other liabilities................................... 684,000 -
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Total liabilities.............................. 75,528,831 15,223,553
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Redeemable preferred stock
(Liquidation value $16,320,000)................... 14,940,243 14,828,965
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Stockholders' equity:
Common stock...................................... 126,635 124,191
Capital in excess of par value.................... 65,709,995 64,216,440
Deficit........................................... (13,439,559) (9,021,986)
Treasury stock, at cost........................... (171,777) (171,777)
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Total stockholders' equity...................... 52,225,294 55,146,868
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$142,694,368 $85,199,386
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</TABLE>
* The Consolidated Condensed Balance Sheet as of December 31, 1996 has been
derived from the Company's audited Consolidated Balance Sheet as of that date.
1
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GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................... $38,010,417 $11,645,105 $49,961,062 $21,981,340
Cost of revenues....................... 32,812,026 9,176,745 48,771,847 16,781,929
----------- ----------- ----------- -----------
Gross profit........................... 5,198,391 2,468,360 1,189,215 5,199,411
Selling, general and
administrative expenses.............. 4,230,557 2,064,712 6,050,597 3,995,392
----------- ----------- ----------- -----------
Income (loss) from operations.......... 967,834 403,648 (4,861,382) 1,204,019
Interest income, net................... 113,054 308,834 535,090 265,007
----------- ----------- ----------- -----------
Income (loss) before income taxes and
proportionate share of loss of
joint venture........................ 1,080,888 712,482 (4,326,292) 1,469,026
Income taxes (benefit)................. - 156,527 (750,000) 366,788
----------- ----------- ----------- -----------
Income (loss) before proportionate
share of loss of joint venture....... 1,080,888 555,955 (3,576,292) 1,102,238
Proportionate share of loss of joint
venture.............................. (45,000) (39,564) (90,000) (85,398)
----------- ----------- ----------- -----------
Net income (loss)...................... 1,035,888 516,391 (3,666,292) 1,016,840
Preferred stock dividends and
charges for accretion................. 375,746 374,915 751,281 749,627
----------- ----------- ----------- -----------
Net income (loss) attributable to
common shareholders................... $ 660,142 $ 141,476 $(4,417,573) $ 267,213
=========== =========== =========== ===========
Net income (loss) per share............ $ .05 $ .01 $ ( .33) $ .02
=========== =========== =========== ===========
Weighted number of common shares
outstanding and common stock
equivalents.......................... 14,264,760 14,183,281 13,283,634 13,116,116
=========== =========== =========== ===========
</TABLE>
2
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GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Total
------------------------- Capital in Excess Treasury Stockholders'
Shares Amount of Par Value Deficit Stock Equity
---------- ----------- ----------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 12,419,231 $124,191 $64,216,440 $ (9,021,986) $(171,777) $55,146,868
Net income (3,666,292) (3,666,292)
Preferred dividends (640,000) (640,000)
Exercise of options and
warrants 87,350 874 302,502 303,376
Accretion of redeemable
preferred stock (111,281) (111,281)
Issuance of common stock in
acquisition of The
Scientific Ecology Group 156,986 1,570 1,191,053 1,192,623
---------- -------- ----------- ------------ --------- -----------
Balance, June 30, 1997 12,663,567 $126,635 $65,709,995 $(13,439,559) $(171,777) $52,225,294
========== ======== =========== ============ ========= ===========
</TABLE>
3
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GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operations:
Net income (loss)....................................... $ (3,666,292) $ 1,016,840
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization....................... 1,581,806 235,373
Accrued interest on convertible debenture........... 327,672 285,250
SEG site remediation accrual........................ 267,000 -
Proportionate share of loss of joint venture........ 90,000 85,398
Changes in operating items, net of effects
of businesses acquired:
Receivables....................................... (7,736,076) 655,666
Cost in excess of billings........................ (343,608) (2,014,271)
Inventories....................................... (258,497) (4,306)
Accounts payables and accrued expenses............ 7,992,919 (574,392)
Other operating items............................. (537,969) (440,903)
------------ -----------
Net cash used in operating activities................... (2,283,045) (755,345)
------------ -----------
Cash flows from investing activities:
Additions to property, plant and equipment ........... (3,241,288) (3,113,317)
Advances to joint ventures............................ (919,399) (1,174,676)
Acquisition of Analytical Resources Inc.,
net of cash acquired................................ - (278,446)
Acquisition of The Scientific Ecology Group, Inc.,
net of cash acquired................................ (23,042,377) -
Other.................................................. (667,409) 475,889
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Net cash used in investing activities................... (27,870,473) (4,090,550)
------------ -----------
Cash flows from financing activities:
Reduction of long-term debt and
capital lease obligations........................... (23,316) (505,053)
Proceeds from issuance of common stock................ 303,376 44,090,128
Payment of preferred stock dividends.................. (640,000) (640,000)
------------ -----------
Net cash provided by (used in) financing activities..... (359,940) 42,945,075
------------ -----------
Net change in cash and cash equivalents................. (30,513,458) 38,099,180
Cash and cash equivalents at beginning of period........ 46,336,126 11,396,008
------------ -----------
Cash and cash equivalents at end of period.............. $ 15,822,668 $49,495,188
============ ===========
</TABLE>
4
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GTS DURATEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the GTS Duratek,
Inc. (the "Company") and its subsidiaries, all of which are wholly-owned except
for DuraTherm, Inc. which is 80% owned. All significant intercompany balances
and transactions have been eliminated in consolidation. Investments in
subsidiaries and joint ventures in which the Company does not have control or
majority ownership are accounted for under the equity method.
2. INVENTORIES
Inventories, consisting of material, labor and overhead, are classified as
follows:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials... $418,002 $187,787
Finished goods.. 308,270 279,988
-------- --------
$726,272 $467,775
======== ========
</TABLE>
3. ACQUISITION OF THE SCIENTIFIC ECOLOGY GROUP, INC.
On April 18, 1997, the Company acquired 100% of the outstanding capital stock
of The Scientific Ecology Group, Inc. ("SEG") from Westinghouse Electric
Corporation for $28.0 million in cash, subject to certain post-closing
adjustments, and 156,986 shares of the Company's Common Stock. The Company paid
the cash portion of the purchase price out of available cash. The acquisition
of SEG was effective as of April 1, 1997 for financial reporting purposes and,
accordingly, the Company's results of operations for the three months ended June
30, 1997 reflect the operating results of SEG. The Company has accounted for
the transaction under the purchase method of accounting. The aggregate purchase
price of $73.6 million, which includes liabilities assumed and transaction
costs, exceeded the estimated fair value of SEG's tangible assets by
$14,895,000. Such amount has been allocated to intangible assets, principally
goodwill, and is being amortized over 30 years.
SEG, which is based in Oak Ridge, Tennessee, is the largest commercial
radioactive waste processing Company in the United States, offering an extensive
range of waste processing services and technologies including incineration,
compaction and metal processing to commercial generators of radioactive and
mixed waste. SEG also provides transportation services for radioactive wastes,
maintaining a fleet of tractors, trailers and shipping containers for
transporting the wastes, and provides radiological decommissioning and field
waste processing services to nuclear clients including government facilities,
commercial facilities and university/research/test facilities.
5
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The aggregate purchase price for SEG was as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash purchase price $23,802,000
Fair value of 156,986 shares of common stock
at an estimated value of $7.60 per share 1,193,000
Liabilities assumed, including restructuring
costs of $2.0 million 46,305,000
Transaction costs 2,300,000
-----------
Aggregate purchase price $73,600,000
===========
</TABLE>
The aggregate purchase price was allocated to acquired assets based upon their
estimated fair values as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 60,000
Accounts receivable 12,665,000
Cost and estimated earnings in excess of
billings on uncompleted contracts 1,928,000
Prepaid expenses and other assets 1,842,000
Property, plan and equipment 41,907,000
Goodwill and other intangible assets 14,895,000
Other assets 303,000
-----------
$73,600,000
===========
</TABLE>
The following unaudited pro forma information for the three and six months
periods ended June 30, 1996 and the six months period ended June 30, 1997
presents a summary of consolidated results of operations of the Company and SEG
as if the acquisition of SEG had occurred on January 1, 1996:
<TABLE>
<CAPTION>
Three Months
Ended Six Months Ended
June 30, 1996 June 30, 1996 June 30, 1997
-------------- ----------------- --------------
<S> <C> <C> <C>
Revenues $ 43,287,000 $ 84,144,000 $ 76,129,000
Net income (loss) $(16,452,000) $(20,875,000) $(15,197,000)
Net income (loss) per share $ (1.19) $ (1.65) $ (0.61)
</TABLE>
These unaudited pro forma results have been prepared for comparative purposes
only. Management of the Company does not believe them to be reflective of the
consolidated results of operations after the acquisition. In order to achieve
profitability, the Company and SEG have taken a number of steps to, among
others, narrow the range of waste they will accept and process, limit the
maximum holding period for waste on site to 90 days, increase processing
pricing, adjust processing schedules to increase throughput and reduce overhead
costs. The Company believes these factors should enable SEG to significantly
reduce processing losses in the future. However, there can be no assurance that
such steps will be sufficient to make SEG profitable.
4. DOE SAVANNAH RIVER M-AREA PROJECT
On March 27, 1997, the Company decided to temporarily suspend processing of
radioactive waste and initiate an unscheduled controlled cool down of its glass
melter at its M-Area processing plant located at the The Department of Energy's
(DOE) Savannah River site. This decision was the result of observations, by
operations personnel, indicating that excessive wear could be occurring on
certain internal components of the melter. On April 16, 1997, after an
extensive inspection of the condition of the melter at the Savannah River
6
<PAGE>
site, the Company's management made the decision to undertake more extensive
repairs and modification of the facility, including melter box replacement,
before resumption of radioactive waste processing. The Company's management
estimated that the M-Area facility will resume radioactive waste processing
operations by the end of the fourth quarter of 1997. As a result of the
necessary repairs and the delay in completing the waste processing required by
the contract, the Company recorded a loss of $5.9 million on the M-Area contract
in the first quarter of 1997 which includes the estimated costs of repairs to
the melter and for estimated losses to complete the fixed price contract. The
Company is seeking to extend the date by which it is required to complete the
waste processing under the contract from the current completion date of October
1997.
5. NEW CREDIT FACILITY
In connection with the acquisition of SEG, the Company entered into a new
credit facility with its bank. Under this new facility, the Company has a
revolving line of credit providing for borrowings up to $8.8 million based upon
eligible amounts of accounts receivable, as defined in the credit agreement.
Borrowings outstanding under the revolving line of credit are due on demand and
bear interest at the London Interbank Offered Rate "LIBOR" rate plus 2% (7.70%
as of June 30, 1997). Under this credit facility, the Company's bank has also
issued letters of credit in the aggregate amount of $15.3 million to the State
of Tennessee to provide security for SEG's obligation to clean and remediate
SEG's facility upon its closure. At June 30, 1997, no borrowings were
outstanding and the Company had available borrowings of $8.8 million.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GTS DURATEK, INC. AND SUBSIDIARIES
OVERVIEW
GTS Duratek, Inc. (the "Company") has historically derived substantially all
of its revenues from technical support services to government agencies, electric
utilities, industrial facilities and commercial businesses. Technical support
services are generally provided pursuant to multi-year time-and-materials
contracts. Revenues are recognized as costs are incurred according to
predetermined rates. The contract costs primarily include direct labor,
materials and the indirect costs related to contract performance.
The Company's waste treatment revenues historically have been generated from
projects in which the Company acts as subcontractor for the United States
Department of Energy ("DOE") pursuant to fixed-price and cost-plus-fixed-fee
contracts. Substantially all of the Company's waste treatment revenues during
the first six months of 1996 were derived from the DOE's Savannah River M-Area
project which is a $14 million fixed price contract. Waste treatment revenues
from the DOE were not significant in the first six months of 1997.
On April 18, 1997, the Company acquired 100% of the outstanding capital stock
of The Scientific Ecology Group, Inc. ("SEG") from Westinghouse Electric
Corporation for $28.0 million in cash, subject to certain post-closing
adjustments, and 156,986 shares of the Company's Common Stock. The Company paid
the cash portion of the purchase price out of available cash. The acquisition
of SEG was effective as of April 1, 1997 for financial reporting purposes and,
accordingly, the Company's results of operations for the three months ended June
30, 1997 reflect the operating results of SEG. The acquisition of SEG has a
significant impact on the comparison of 1996 and 1997 results of operations.
The Company has accounted for the transaction under the purchase method of
accounting. The aggregate purchase price of $73.6 million, which includes
liabilities assumed and transaction costs, exceeded the estimated fair value of
SEG's tangible assets by $14,895,000. Such amount has been allocated to
intangible assets, principally goodwill, and is being amortized over 30 years.
SEG, which is based in Oak Ridge, Tennessee, is the largest commercial
radioactive waste processing Company in the United States, offering an extensive
range of waste processing services and technologies including incineration,
compaction and metal processing to commercial generators of radioactive and
mixed waste. SEG also provides transportation services for radioactive wastes,
maintaining a fleet of tractors, trailers and shipping containers for
transporting the wastes, and provides radiological decommissioning and field
waste processing services to nuclear clients including government facilities,
commercial facilities and university/research/test facilities. The Company
anticipates that SEG will provide over 50% of the Company's revenue for 1997.
Waste processing and technological services are generally provided pursuant to
fixed unit rate contracts and revenues are recognized as the waste is processed.
Radiological decommissioning and field services are generally provided pursuant
to time and material contracts and revenues are recognized as costs are incurred
according to predetermined rates.
8
<PAGE>
On March 27, 1997, the Company decided to temporarily suspend processing of
radioactive waste and initiate an unscheduled controlled cool down of its glass
melter at its M-Area processing plant located at the DOE's Savannah River site.
This decision was the result of observations, by operations personnel,
indicating that excessive wear could be occurring on certain internal components
of the melter. On April 16, 1997, after an extensive inspection of the
condition of the melter at the Savannah River site, the Company's management
made the decision to undertake more extensive repairs and modification of the
facility, including melter box replacement, before resumption of radioactive
waste processing. The Company's management estimated that the M-Area facility
will resume radioactive waste processing operations by the end of the fourth
quarter of 1997. As a result of the necessary repairs and the delay in
completing the waste processing required by the contract, the Company recorded a
loss of $5.9 million on the M-Area contract in the first quarter of 1997 which
includes the estimated costs of repairs to the melter and for estimated losses
to complete the fixed price contract. The Company is seeking to extend the date
by which it is required to complete the waste processing under the contract from
the current completion date of October 1997.
Prior to the acquisition of SEG, the Company had generated insignificant
revenues from waste treatment projects for commercial customers. The Company's
current commercial waste treatment projects are DuraTherm, Inc. ("DuraTherm"),
which owns the San Leon, Texas thermal desorption facility, and the DuraChem
joint venture with Chem-Nuclear, Inc. DuraTherm commenced commercial operations
in the second quarter of 1996 and the Company consolidates the results of
DuraTherm adjusting for the 20% minority interest in consolidation. Income or
loss from the Company's 45% share in DuraChem will be recorded by the Company on
the equity method.
As a result of the Company focusing its management and capital resources on
(i) restarting the M-Area melter, (ii) successfully and rapidly incorporating
SEG's business following the acquisition and (iii) meeting commitments to the
DOE privatization cleanups in Hanford, Washington and Idaho, the Company
announced on April 16, 1997 that it will reduce the priority of, and capital
commitments to, other projects which have higher levels of marketplace
uncertainty or have longer-term financial prospects. Accordingly, the Company
announced that the DuraChem facility will not commence commercial operations in
1997 as previously reported.
In November 1995, the Company formed a strategic alliance with BNFL Inc.
("BNFL") to jointly pursue up to five major DOE waste treatment projects.
Pursuant to the terms of the strategic alliance, the Company will receive a $1.0
million teaming fee for each time that BNFL and the Company agree to jointly
pursue a major DOE waste treatment project. The Company reached agreements to
pursue the first three projects in November 1995, February 1996 and September
1996 and recognized as revenue the $1.0 million fees in the fourth quarter of
1995 and the first and third quarters of 1996, respectively. The Company is
unable to predict the timing of recognition of future teaming fees, if any. In
addition, BNFL will provide the Company with research and development funding of
$500,000 annually for five years which will be used to offset certain of the
Company's research and development expenses.
The Company's future operating results and period-to-period comparisons of
such operating results will be affected by, among other things, the timing of
9
<PAGE>
new commercial waste processing contracts through SEG, the duration of and
amount of waste to be processed pursuant to these contracts, the timing of new
DOE waste treatment projects, including those pursued jointly with BNFL, the
duration of such projects, and the form in which such projects are to be owned
and operated.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1997.
Revenues increased by $26.4 million or 226.4% from $11.6 million in 1996 to
$38.0 million in 1997. The increase was primarily attributable to $24.3 million
in revenues from the operations of SEG which was acquired by the Company
effective as of April 1, 1997, an increase in technical support services of $1.8
million and an increase in waste processing revenue of $821,000 at the Company's
DuraTherm commercial waste treatment facility located in San Leon Texas,
partially offset by a decrease in waste treatment projects revenue of $610,000.
The increase in revenues in technical support services was the result of more
power plant outages being scheduled in the second quarter of 1997 as compared to
the same period in 1996. Revenues at the Company's DuraTherm facility which
commenced operations on May 1, 1996 were $1.9 million for the second quarter of
1997 as compared to $1.1 million for the same period in 1996. The decline in
revenues from waste treatment projects was the result of the Company's decision
to suspend operations at the Company's M-Area processing plant located at the
DOE's Savannah River site partially offset by revenue generated by new contracts
awarded by DOE for waste treatment projects at Hanford, Washington and Idaho.
Gross profit increased by $2.7 million or 110.6% from $2.5 million in 1996 to
$5.2 million in 1997. SEG and DuraTherm operations accounted for increases in
gross profit by $3.5 million and $126,000 respectively. These increases were
offset by a decrease in gross profit of $850,000 in DOE waste treatment projects
and a reduction of $90,000 in the gross profit on technical support services.
As a percentage of revenues, gross profit decreased from 21.2% in 1996 to 13.7%
in 1997 for the reasons previously mentioned.
Selling, general and administrative expenses increased by $2.2 million or
104.9% from $2.1 million in 1996 to $4.2 million in 1997. SEG accounted for
$2.7 million of the increase. As a percentage of revenues, selling general and
administrative expenses decreased from 17.7% in 1996 to 11.1% in 1997. The
decrease is principally related to the acquisition of SEG which has
significantly lower selling, general and administrative expenses as percentage
of revenues as compared with the Company's other businesses.
Interest income, net decreased by approximately $196,000 from 1996 to 1997.
The decrease was the result of a major portion of excess cash reserves being
used to acquire SEG.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1997.
Revenues increased by $28.0 million or 127.3% from $22.0 million in 1996 to
$50.0 million in 1997. The increase was primarily attributable to $24.3 million
in revenues from the operations of SEG which was acquired by the Company
effective as of April 1, 1997, an increase in technical support services of $4.5
million and an increase in waste processing revenue of $2.5 million at the
Company's DuraTherm commercial waste treatment facility, partially offset by a
decrease in waste treatment projects revenue of $3.4 million. The increase in
10
<PAGE>
revenues in technical support services was the result of higher revenues on
service contracts primarily with Duke Power, Georgia Power and the New York
Power Authority in 1997 as compared to the same period in 1996. Revenues at the
Company's DuraTherm facility which commenced operations on May 1, 1996 were $2.5
million for the first six months of 1997 as compared to $1.1 million for the
same period in 1996. The decline in revenues from waste treatment projects was
the result of the Company's decision to suspend operations at the Company's M-
Area processing plant located at the DOE's Savannah River, the absence of $1.0
million in teaming fees from BNFL in 1997, a reduction in revenues from other
DOE projects, partially offset by revenue generated by new contracts awarded by
DOE for waste treatment projects at Hanford, Washington and Idaho.
Gross profit decreased by $4.0 million or 77.1% from $5.2 million in 1996 to
$1.2 million in 1997. SEG, DuraTherm and technical support service operations
accounted for increases in gross profit by $3.5 million, $389,000 and $102,000
respectively. These increases were offset by a decrease of $8.0 million in DOE
waste treatment projects principally related to the $5.9 million loss recorded
on the M-Area project in the first quarter of 1997 and the absence of a teaming
fee from BNFL. During the first quarter of 1996, the Company received a $1.0
million teaming fee from BNFL. As a percentage of revenues, gross profit
decreased from 23.7% in 1996 to 2.4% in 1997 for the reasons previously
mentioned.
Selling, general and administrative expenses increased by $2.1 million or
51.4% from $4.0 million in 1996 to $6.1 million in 1997. SEG accounted for $2.7
million of the increase. As a percentage of revenues, selling, general and
administrative expenses decreased from 18.2% in 1996 to 12.1% in 1997. The
decrease is principally related to the acquisition of SEG which has
significantly lower selling, general and administrative expenses as percentage
of revenues as compared with the Company's other businesses.
Interest income, net increased by approximately $270,000 from 1996 to 1997.
The increase was principally the result of the higher average availability of
excess cash to invest in 1997 as compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, The Company used $27.9 million of
cash in investing activities principally related to the acquisition of SEG,
equipment acquired for improvements to the DuraTherm facility and additional
investment in DuraChem.
In connection with the acquisition of SEG, the Company entered into a new
credit facility with its bank. Under this new facility, the Company has a
revolving line of credit providing for borrowings up to $8.8 million based upon
eligible amounts of accounts receivable, as defined in the credit agreement.
Borrowings under the revolving line of credit bear interest at the LIBOR rate
plus 2%. Under this credit facility, the Company's bank has also issued letters
of credit in the aggregate amount of $15.3 million to the State of Tennessee to
provide security for SEG's obligation to clean and remediate SEG's facility upon
its closure. At June 30, 1997, no borrowings were outstanding and the Company
had available borrowings of $8.8 million.
11
<PAGE>
The Company believes cash flows from operations, cash resources at June 30,
1997 and, if necessary, borrowings under the bank line of credit will be
sufficient to meet its operating needs, including the quarterly preferred
dividend requirement of $320,000.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998 the Company will adopt the provisions of Statements of
Financial Accounting Standards No. 128 "Earnings Per Share, No. 129 "Disclosure
of Information about Capital Structure", No. 130 "Reporting Comprehensive
Income", and No. 131 "Disclosures about Segments of an Enterprise and Related
Information". The Company does not expect that any of the new pronouncements
will have a material effect on the Company's financial condition or results of
operations.
QUALIFICATION RELATING TO FINANCIAL INFORMATION
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 1997 interim period are not necessarily
indicative of results to be expected for the entire year.
PART II OTHER INFORMATION
- -------
Item 2. Changes in Securities
On April 18, 1997, the Company acquired 100% of the outstanding stock of
SEG from Westinghouse Electric Corporation for $28.0 million in cash, subject to
certain post-closing adjustments, and 156,986 shares of the Company's Common
Stock. The 156,986 shares of the Company's Common Stock were not registered
under the Securities Act of 1933, as amended (the "Securities Act"), but were
issued to Westinghouse Electric Corporation pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. Subsequent to the
issuance of those shares and pursuant to the terms of the acquisition
transaction, the Company filed a registration statement on Form S-3 to register
such shares under the Securities Act. The registration statement on Form S-3
was declared effective by the Securities and Exchange Commission on July 9,
1997.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 14, 1997 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 Company by the
convertible preferred stockholders for a one-year term. Admiral James D.
Watkins, George V. McGowan and Robert E. Prince were elected to serve as
12
<PAGE>
directors of the Company for a one-year term by the common stockholders and
convertible preferred stockholders, voting together as a single class.
b. The proposal to reappoint KPMG Peat Marwick LLP as the Company's
independent auditors was adopted by a vote of 11,038,847 for, and 22,938 against
this proposal.
Item 5. Other Information.
In response to the "safe harbor" provisions contained in the Private
Securities Litigation Reform Act of 1995, the Company is including in this
Quarterly Report on Form 10-Q the following cautionary statements which are
intended to identify certain important factors that could cause the Company's
actual results to differ materially from those projected in forward-looking
statements of the Company made by or on behalf of the Company. Many of these
factors have been discussed in prior filings with the Securities and Exchange
Commission, including the discussion of "Risk Factors" contained in the
Company's Registration Statement on Form S-3 (File No. 333-26623) which was
filed by the Company with the Securities and Exchange Commission on May 7, 1997,
to which reference is hereby made.
The Company experienced significant growth in revenues during 1996 and
through the first six months of 1997. Net income in the three months ended June
30, 1997 was also significantly greater than the three months ended March 31,
1997 and the comparable period of the prior year. However, there can be no
assurance that the Company will be able to sustain these favorable operating
trends in future periods. The Company's future operating results are largely
dependent upon the Company's ability to complete the necessary repairs at its M-
Area processing plant located at the DOE's Savannah River Site, resume
operations in a timely manner, extend the existing contract with the DOE,
complete the waste processing required by the contract without further delay and
secure contracts to handle additional waste streams at that facility or deploy
the equipment on future waste treatment projects. The Company's future
operating results are also largely dependent upon its ability to integrate the
SEG acquisition and effectively manage SEG's operations. The acquisition of SEG
also involves a number of additional specific risks including: adverse short-
term effects on the Company's operating results, environmental risks and
potential liabilities associated with operating a radioactive waste processing
facility and radioactive waste transportation business, risks associated with
operating SEG's business in a highly regulated environment, risks associated
with maintaining compliance with operating licenses and permits, dependence on
retaining key customers, dependence on retaining key personnel and risks
associated with unanticipated problems, liabilities or contingencies following
the acquisition of a business. In addition, the Company's future operating
results are largely dependent upon the timing and awarding of contracts by the
DOE for the cleanup of the waste sites administered by it. The timing and award
of such contracts by the DOE is directly related to the response of governmental
authorities to public concerns over the treatment and disposal of radioactive,
hazardous, mixed and other wastes. The lessening of public concern in this area
or other changes in the political environment could adversely affect the
availability and timing of government funding for the cleanup of DOE and other
sites containing radioactive and mixed wastes. Additionally, revenues from
technical support services have in the past and continue to account for a
substantial portion of the Company's revenues and the loss of one or more
technical support service contracts could adversely affect the Company's future
operating results.
13
<PAGE>
The Company's future operating results may fluctuate due to factors such as:
the acceptance and implementation of its waste treatment technologies in the
government and commercial sectors, the evaluation by the DOE and other customers
of the Company's technologies versus other competing technologies as well as
conventional storage and disposal alternatives; the timing of new waste
treatment projects, including those pursued jointly with BNFL, the Company's
ability to maintain existing collaborative relationships or enter into new
collaborative arrangements in order to commercialize its waste treatment
technologies, the timing of new commercial waste processing contracts through
SEG and the duration of and amount of waste to be processed pursuant to those
contracts.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
--------
See accompanying Index to Exhibits
b. Reports
-------
None.
14
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
JUNE 30, 1997
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 12, 1997 BY: /s/ Robert F. Shawver
----------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: August 12, 1997 BY: /s/ Craig T. Bartlett
-----------------------------
Craig T. Bartlett
Treasurer
15
<PAGE>
Exhibits Index
3.1 Amended and Restated Certificate of Incorporation of the Registrant.
Incorporated herein by reference to Exhibit 3.1 of the Registrant's
Quarterly Report on From 10-Q for the quarter ended March 31, 1996. (File
No. 0-14292)
3.2 By-Laws of the Registrant. Incorporated herein by reference to Exhibit 3.3
of the Registrant's Form S-1 Registration Statement No. 33-2062.
4.1 Certificate of Designations of the 8% Cumulative Convertible Redeemable
Preferred Stock dated January 23, 1995. Incorporated herein by reference
to Exhibit 4.1 of the Registrants Form 8-K filed on February 1, 1995.
(File No. 0-14292)
4.2 Stock Purchase Agreement among Carlyle Partners II, L.P., Carlyle
International Partners II, L.P., Carlyle International Partners III, L.P.,
C/S International Partners, Carlyle-GTSD Partners, L.P., Carlyle-GTSD
Partners II, L.P. and GTS Duratek, Inc. and National Patent Development
Corporation dated as of January 24, 1995. Incorporated herein by
reference to Exhibit 4.2 of the Registrants Form 8-K filed on February 1,
1995. (File No. 0-14292)
4.3 Stockholders Agreement by and among GTS Duratek, Inc., Carlyle Partners
II, L.P., Carlyle International Partners II, L.P., Carlyle International
Partners III, L.P., C/S International Partners, Carlyle-GTSD Partners,
L.P., Carlyle-GTSD Partners II, L.P. and GTS Duratek, Inc. and National
Patent Development Corporation dated as of January 24, 1995. Incorporated
herein by reference to Exhibit 4.3 of the Registrants Form 8-K filed on
February 1, 1995. (File No. 0-14292)
4.4 Registration Rights Agreement by and among GTS Duratek, Inc., Carlyle
Partners II, L.P., Carlyle International Partners II, L.P., Carlyle
International Partners III, L.P., C/S International Partners, Carlyle-GTSD
Partners, L.P., Carlyle-GTSD Partners II, L.P.and GTS Duratek, Inc. and
National Patent Development Corporation dated as of January 24, 1995.
Incorporated herein by reference to Exhibit 4.4 of the Registrants Form 8-
K filed on February 1, 1995. (File No. 0-14292.
4.5 Convertible Debenture issued by GTS Duratek, Inc., General Technical
Services, Inc. and GTS Instrument Services Incorporated to BNFL Inc. dated
November 7, 1995. Incorporated herein by reference to Exhibit 10.20 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995 (File No. 0-14292).
10.1 1984 Duratek Corporation Stock Option Plan, as Amended. Incorporated
herein by reference to Exhibit 10.9 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.
10.2 Asset Purchase Agreement dated August 20. 1990 between Chem-Nuclear
Systems, Inc. and Duratek Corporation. Incorporated herein by reference
to Exhibit 1 to the Registrant's Form 8-K filed on August 20, 1990. (File
No. 0-14292)
E-1
<PAGE>
10.3 Credit and Security Agreements dated April 18, 1997 between First Union
National Bank of Maryland and First Union National Bank of North Carolina
and GTS Duratek, Inc., The Scientific Ecology Group, Inc., SEG Colorado,
Inc., Hittman Transport Services, Inc., General Technical Service, Inc.,
GTS Instrument Services, Inc. and Analytical Resources, Inc. Incorporated
herein by reference to Exhibits (C)(3), (C)(4), and (C)(5) of the
Registrant's Current Report on Form 8-K filed on April 18, 1997. (File No.
0-14292)
10.4 License Agreement dated as of August 17, 1992 between GTS Duratek, Inc.
and Dr. Theodore Aaron Litovitz and Dr. Pedro Buarque de Macedo.
Incorporated herein by reference to Exhibit 10.9 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992. (File No.
0-14292)
10.5 Purchase Agreement dated October 15, 1993 between GTS Duratek, Inc. and
Environmental Corporation of America. Incorporated herein by reference to
Exhibit 2 of the Registrant's Form 8-K Current Report dated October 15,
1993. (File No. 0-14292)
10.6 Warrant Agreement dated October 15, 1993 between GTS Duratek, Inc. and
Environmental Corporation of America. Incorporated herein by reference to
Exhibit 2 of the Registrant's Form 8-K Current Report dated October 15,
1993. (File No. 0-14292)
10.7 Stock Purchase Agreement dated December 22, 1993 between GTS Duratek, Inc.
and Jack J. Spitzer. Incorporated herein by reference to Exhibit 1 of the
Registrant's Form 8-K Current Report dated December 22, 1993. (File No. 0-
14292)
10.8 Stock Purchase Agreement dated December 22, 1993 between GTS Duratek, Inc.
and Joseph H. Domberger. Incorporated by reference to Exhibit 2 of the
Registrant's Form 8-K Current Report dated December 22, 1993. (File No.
0-14292)
10.9 Stockholders' Agreement dated December 28, 1993 between GTS Duratek, Inc.
and Vitritek Holdings, L.L.C. Incorporated by reference to Exhibit 3 of
the Registrant's Form 8-K Current Report dated December 22, 1993. (File
No. 0-14292)
10.10 Agreement dated January 14, 1994 between GTS Duratek, Inc. and
Westinghouse Savannah River Company. Incorporated by reference to Exhibit
10.17 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993. (File No. 0-14292)
10.11 Agreement dated February 24, 1994 between GTS Duratek, Inc. and the
University of Chicago (Operator of Argonne National Laboratory).
Incorporated by reference to Exhibit 10.18 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993. (File No. 0-
14292)
10.12 Agreement dated September 15, 1994 between DuraChem Limited Partnership a
Maryland Limited Partnership, by and among CNSI Sub, Inc. and GTSD Sub,
Inc. as the General Partners, and Chemical Waste Management, Inc. and GTS
Duratek, Inc. as the Limited Partners. Incorporated herein by reference
E-2
<PAGE>
to Exhibit 10-19 of the Registrants Annual Report on 10-K for the year
ended December 31, 1994 (File No. 0-14292)
10.13 Teaming Agreement by and between GTS Duratek, Inc. and BNFL Inc. dated
November 7, 1995. Incorporated herein by reference to Exhibit 10.20 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995 (File No. 0-14292).
10.14 Sublicense Agreement by and between GTS Duratek, Inc. and BNFL Inc. dated
November 7, 1995. Incorporated herein by reference to Exhibit 10.20 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995 (File No. 0-14292).
10.15 Stock Purchase Agreement by and among Bird Environmental Gulf Coast,
Inc., Bird Environmental Technologies, Inc., Bird Corporation, GTS
Duratek, Inc. and GTSD Sub II, Inc. dated as of November 29, 1995.
Incorporated herein by reference to Exhibit (c)(2) of Registrant's Current
Report on Form 8-K filed on December 11, 1995 (File No. 0-14292).
10.16 Stockholders' Agreement by and among Bird Environmental Gulf Coast, Inc.
GTS Duratek, Inc., GTSD Sub II, Inc., Jim S. Hogan, Mark B. Hogan, Barry
K. Hogan and Sam J. Lucas III dated November 29, 1995. Incorporated
herein by reference to Exhibit (c)(3) of the Registrant's Current Report
on Form 8-K filed on December 11, 1995 (File No. 0-14292).
10.17 Technology License Agreement by and among GTS Duratek, Inc., Bird
Environmental Gulf Coast, Inc. and Jim S. Hogan dated November 29, 1995.
Incorporated herein by reference to Exhibit (c)(4) of the Registrant's
Current Report on Form 8-K filed on December 11, 1995. (File No. 0-14292).
10.18 Stock Purchase Agreement by and between Westinghouse Electric Corporation
and GTS Duratek, Inc. dated as of April 8, 1997. Incorporated herein by
reference to Exhibit (c)(2) of Registrant's Current Report on Form 8-K
filed on April 18, 1997. (File No. 0-14292).
11.1 GTS Duratek Inc., and Subsidiaries, Computation of Earnings Per Share for
the three months ended March 31, 1997. (filed herewith)
27 Financial Data Schedule. (filed herewith)
E-3
<PAGE>
GTS Duratek, Inc. Executive Compensation Plan ("The Plan")
PLAN PURPOSE
To attract, retain, and motivate key management and to align the financial
interests of the executive officers of GTS Duratek, Inc. ("GTS Duratek" or the
"Company") with those of the Company's shareholders.
PLAN COMPONENTS
The components of the executive officers' compensation under the Plan are:
(i) Base Salary
(ii) Annual Cash Performance Bonus
(iii) Long-term Incentive Stock Option Grant
A meaningful portion of an executive officer's compensation is "at risk" with
annual and long-term incentives, at target levels, intended to provide between
20% to 40% of total compensation.
PLAN ELIGIBILITY
All Senior Vice Presidents and above of the Company will be eligible to
participate in the Plan. As of July 1, 1997 the employees eligible are:
Robert E. Prince Chief Executive Officer and President
Robert Shawver Chief Financial Officer and Exec. Vice President
C. Paul Deltete Senior Vice President
Donald Neely Senior Vice President
Leslie Hill Senior Vice President
In order to receive the Annual Cash Performance Bonus, an eligible employee must
be employed at year end of the Plan year. In order to receive a Long-term
Incentive Stock Option Grant, an eligible employee must meet the requirements of
the Company's Stock Option Plan. Any newly hired or promoted executive officers
eligible for the Plan during the Plan year will receive a prorated Annual Cash
Performance Bonus.
PLAN ADMINISTRATION
The Compensation Committee of the Board of Directors will administer the Plan.
All raises, bonuses, and stock grants are subject to the Compensation
Committee's approval and adjustment based on the sole discretion of the
Compensation Committee members. The Compensation Committee shall have full
power and authority, in its sole and
<PAGE>
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, guidelines, instruments and agreements for
the administration of the Plan and for the conduct of its business as it deems
necessary or advisable.
TIMING OF TARGET SETTING AND AWARDS
The Company's management will prepare, and the Board of Directors will approve,
the Company's annual budget each December for the following fiscal year. This
budget will provide the basis for the Company executives' performance targets.
Annual Base Salary Adjustments, Annual Cash Performance Bonus Awards, and Long-
term Incentive Stock Option Grants will be approved by the Compensation
Committee in March of each year based on the Company's performance for the most
recently completed fiscal year versus that year's targets as reported in the
final audited financial reporting package.
BASE SALARIES
Base salaries and any annual raises will be established for all executive
officers, except the Chief Executive Officer, by the Chief Executive Officer.
The Chief Executive Officer's base salary and any annual raise will be
established by the Compensation Committee.
Annual adjustments to Base Salaries are intended (i) to represent cost-of-living
increases and (ii) to address any base salary discrepancies as identified by the
Chief Executive Officer or the Compensation Committee.
Schedule A presents the 1996 Base Salaries, the most recent annual raises, and
the resulting 1997 Base Salaries.
ANNUAL CASH PERFORMANCE BONUS
The Annual Cash Performance Bonus is designed to reward executives on an annual
basis for their contributions to corporate and business unit/division
objectives, and for individual performance. Each eligible employee's award is
expressed as a percentage of the individual's base salary for such fiscal year.
This compensation structure is based on the Compensation Committee's policy that
increasing amounts of compensation should be "at risk" for those employees with
greater influence on shareholder value.
<PAGE>
The incentive bonus targets equate to the Company's Annual Budget objectives as
approved by the Board of Directors. If the Company's performance exceeds
budget, the maximum bonus payable to participants would be 150% of the target.
All Annual Cash Performance Bonuses are subject to the approval of, and
potential adjustment up or down at the sole discretion of, the Compensation
Committee.
Schedule B presents targeted bonus amounts for each eligible employee and
Company performance targets.
LONG-TERM INCENTIVE STOCK OPTION GRANTS
Under the Company's Stock Option Plan options to purchase shares of GTS
Duratek's common stock can be awarded on an annual basis at the Compensation
Committee's sole discretion.
While the annual grant of options will be at the full discretion of the
Compensation Committee, the Plan objective is to align the executive officers'
long-term compensation with the long-term creation of shareholder value. As a
result, general guidelines for annual stock option grants are presented in
Schedule C.
<PAGE>
SCHEDULE A
Base Salary
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Eligible Executive 1996 Base Salary 1996 Year-End Raise 1997 Base Salary
- ------------------ ---------------- ------------------- ----------------
<S> <C> <C> <C>
R. Prince $202,000.00 3.6% ($7,300) $209,300.00
- ------------------------------------------------------------------------------
R. Shawver $145,600.00 3.6% ($5,250) $150,850.00
- ------------------------------------------------------------------------------
P. Deltete $130,000.00 3.6% ($4,700) $134,700.00
- ------------------------------------------------------------------------------
D. Neely
- ------------------------------------------------------------------------------
L. Hill
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
Annual Cash Performance Bonus
Targeted Bonuses
- ----------------
Participants are eligible to earn a cash performance bonus based upon a
percentage of salary as follows:
Participant Bonus Amount
----------- ------------
R. Prince 20% of base salary
R. Shawver 15% of base salary
P. Deltete 15% of base salary
D. Neeley 15% of base salary
L. Hill 15% of base salary
Any bonus earned under the basic plan will be weighted as follows:
A - Operating Profit 30%
B - Free Cash Flow 30%
C - Earnings Per Share 30%
D - Personal Objective 10%
Operating Profit (EBIT) = Earnings Before Interest and Taxes including
proportionate share of joint venture earnings,
excluding any non-recurring special items.
Free Cash Flow = EBIT plus Depreciation and Amortization less
----
(i) changes in Net Working Capital (Working
Capital - Cash)
(ii) capital expenditures, and
(iii) advances to joint ventures, and
(iv) any other meaningful cash usage.
Earnings Per Share = EPS as reported, excluding any special items.
<PAGE>
Financial Objectives
- --------------------
The range of performance for objectives A, B & C above will be:
less than 90% of budget = zero bonus
90% of budget = 60% payout
100% of budget = 100% payout
125% (or more) of budget = 150% payout
To receive any award, a minimum of 90% achievement of budget targets must be
realized for the average of objectives A, B and C.
Payouts will be linear between 90-100% and 100-125% of performance.
Personal Objective
- ------------------
Objectives will be assigned and graded by the Chief Executive Officer. There
will be no upside performance on Personal Objectives and the award/payment in
contingent on the achievement of a minimum of 90% of objectives A, B & C
(i.e., the average of the three objectives).
Participants must be employed at the Plan year-end (i.e., December 31, 1997) in
order to be eligible for payment under this plan. Any final award is subject to
the review and approval of the Compensation Committee.
<PAGE>
SCHEDULE C
Long-term Incentive Stock Option Grant
The Compensation Committee has a guideline to award 100,000 options per year at
---------
the March Board Meeting (exercisable at the then prevailing market price at the
time the options are granted).
The Compensation Committee will award options based on the following:
. Executive Management awards would be recommended and approved by the
Compensation Committee (which would approximate 30,000 to 40,000 per year
for the 5 executives covered by the Plan)
. Non-executive awards would be recommended by the Chief Executive Officer
and approved by the Compensation Committee.
The Compensation Committee, in its sole discretion and within the guidelines of
the Plan, could award more or fewer options.
<PAGE>
Exhibit 11.1
GTS DUARTEK, INC. AND SUBSIDARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary:
Earnings (loss) applicable
to common stock $ 1,035,888 $ 516,391 $(3,666,292) $ 1,016,840
Accrued dividend on
preferred stock (320,000) (320,000) (640,000) (640,000)
Accretion of redeemable
preferred stock (55,746) (54,506) (111,281) (109,627)
----------- ----------- ----------- -----------
Net earnings (loss)
applicable to common stock $ 660,142 $ 141,885 $(4,417,573) $ 267,213
=========== =========== =========== ===========
Average common shares
outstanding 12,563,782 11,630,115 12,473,884 10,575,963
Dilutive effect of stock
options and warrants 1,570,843 2,553,166 785,422 2,524,066
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 14,134,625 14,183,281 13,259,306 13,100,029
Earnings (loss) per common
share $ 0.05 $ 0.01 $ (0.33) $ 0.02
=========== =========== =========== ===========
Fully Diluted:
Earnings (loss) applicable
to common stock 1,035,888 516,391 (3,666,292) 1,016,840
Accrued dividend on
preferred stock (320,000) (320,000) (640,000) (640,000)
Accretion of redeemable
preferred stock (55,746) (54,506) (111,281) (109,627)
----------- ----------- ----------- -----------
Net earnings (loss)
applicable to common stock $ 660,142 $ 141,885 $(4,417,573) $ 267,213
=========== =========== =========== ===========
Average common shares
outstanding 12,563,782 11,630,115 12,563,782 10,575,963
Dilutive effect of stock
options and warrants 1,700,978 2,553,166 719,852 2,540,153
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 14,264,760 14,183,281 13,283,634 13,116,116
----------- ----------- ----------- -----------
Earnings (loss) per common
share $ 0.05 $ 0.01 $ (0.33) $ 0.02
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED) AND THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1997 (UNAUDITED) OF GTS DURATEK, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,822,668
<SECURITIES> 0
<RECEIVABLES> 43,937,156
<ALLOWANCES> (151,515)
<INVENTORY> 726,272
<CURRENT-ASSETS> 64,143,026
<PP&E> 79,388,300
<DEPRECIATION> (24,747,704)
<TOTAL-ASSETS> 142,694,368
<CURRENT-LIABILITIES> 57,181,960
<BONDS> 0
14,940,243
0
<COMMON> 126,635
<OTHER-SE> 52,098,659
<TOTAL-LIABILITY-AND-EQUITY> 142,694,368
<SALES> 0
<TOTAL-REVENUES> 49,961,062
<CGS> 0
<TOTAL-COSTS> 48,771,847
<OTHER-EXPENSES> 6,019,046
<LOSS-PROVISION> 31,551
<INTEREST-EXPENSE> (535,090)
<INCOME-PRETAX> (4,326,292)
<INCOME-TAX> (750,000)
<INCOME-CONTINUING> (3,576,292)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,666,292)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
