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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, 1998
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)
<TABLE>
<CAPTION>
<S> <C>
Delaware 22-2476180
- ------------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10100 Old Columbia Road, Columbia, Maryland 21046 21046
- ------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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, 1998
Common Stock, par value $0.01 per share 13,029,362 shares
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GTS DURATEK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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<TABLE>
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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, 1998 and December 31, 1997..................... 1
Consolidated Condensed Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997................... 2
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the Six Months Ended June 30, 1998................. 3
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 1998 and 1997............... 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................. 9
Part II OTHER INFORMATION
- -------
Item 1. Legal Proceedings............................................... 10
Item 4. Submission of Matters to a Vote of Security Holders............. 10
Item 5. Other Information............................................... 10
Item 6. Exhibits and Reports on Form 8-K................................ 11
Signatures...................................................... 12
</TABLE>
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Part I Financial Information
- ------
Item 1. Financial Statements
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(unaudited) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 5,882,512 $ 7,026,249
Receivables, net.................................. 34,511,719 28,912,271
Other accounts receivable......................... 1,034,375 1,373,704
Costs and estimated earnings in excess of
billings on uncompleted contracts............... 4,758,610 9,072,828
Prepaid expenses and other current assets......... 3,319,764 3,193,224
------------ ------------
Total current assets........................... 49,506,980 49,578,276
Property, plant and equipment, net.................. 62,031,618 60,356,784
Investments in and advances to joint ventures, net.. 6,279,378 6,362,526
Intangibles, net.................................... 13,736,344 13,877,802
Deferred charges and other assets................... 2,187,742 2,122,793
------------ ------------
$133,742,062 $132,298,181
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 14,400,904 $ 12,235,006
Short term borrowings............................. 6,780,622 -
Accrued expenses and other current liabilities.... 9,619,188 12,042,413
Unearned revenues................................. 3,408,387 8,256,541
Waste processing and disposal liabilities......... 7,248,259 8,681,102
------------ ------------
Total current liabilities...................... 41,457,360 41,215,062
Convertible debenture............................... 11,674,229 11,348,925
Facility and equipment decontamination
and decommissioning liabilities.................... 7,730,285 7,270,681
Other non current liabilities....................... 871,328 981,824
------------ ------------
Total liabilities.............................. 61,733,202 60,816,492
------------ ------------
Redeemable preferred stock
(Liquidation value $16,320,000)................... 15,165,308 15,052,355
------------ ------------
Stockholders' equity:
Common stock...................................... 129,482 128,790
Capital in excess of par value.................... 67,521,474 67,278,739
Deficit........................................... (10,635,627) (10,806,418)
Treasury stock, at cost........................... (171,777) (171,777)
------------ ------------
Total stockholders' equity...................... 56,843,552 56,429,334
------------ ------------
$133,742,062 $132,298,181
============ ============
</TABLE>
* The Consolidated Condensed Balance Sheet as of December 31, 1997 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,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues.............................. $38,810,201 $38,010,417 $76,041,153 $49,961,062
Cost of revenues...................... 32,103,828 32,812,026 61,498,441 48,771,847
----------- ----------- ----------- -----------
Gross profit.......................... 6,706,373 5,198,391 14,542,712 1,189,215
Selling, general and
administrative expenses............. 7,119,611 4,230,557 12,636,112 6,050,597
----------- ----------- ----------- -----------
Income (loss) from operations......... (413,238) 967,834 1,906,600 (4,861,382)
Interest income (expense), net........ (181,619) 113,054 (255,400) 535,090
----------- ----------- ----------- -----------
Income (loss) before income taxes
(benefit) and proportionate share
of loss of joint venture............ (594,857) 1,080,888 1,651,200 (4,326,292)
Income taxes (benefit)................ (226,147) - 627,456 (750,000)
----------- ----------- ----------- -----------
Income (loss) before proportionate
share of loss of joint venture...... (368,710) 1,080,888 1,023,744 (3,576,292)
Proportionate share of loss of joint
venture............................. (50,000) (45,000) (100,000) (90,000)
----------- ----------- ----------- -----------
Net income (loss)..................... (418,710) 1,035,888 923,744 (3,666,292)
Preferred stock dividends and
charges for accretion................ 376,582 375,746 752,953 751,281
----------- ----------- ----------- -----------
Net income (loss) attributable to
common shareholders.................. $ (795,292) $ 660,142 $ 170,791 $(4,417,573)
=========== =========== =========== ===========
Basic net income (loss) per share..... $(0.06) $.05 $.01 $(0.35)
=========== =========== =========== ===========
Diluted net income (loss) per share... $(0.06) $.05 $.01 $(0.35)
=========== =========== =========== ===========
Weighted average
common stock outstanding............. 12,830,071 12,562,057 12,820,783 12,499,090
=========== =========== =========== ===========
Weighted average common stock and
dilutive securities outstanding...... 12,830,071 14,016,623 14,300,419 12,499,090
=========== =========== =========== ===========
</TABLE>
2
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GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
(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, 1997 12,879,057 $128,790 $67,278,739 $(10,806,418) $(171,777) $56,429,334
Net income 923,744 923,744
Exercise of options and
warrants 69,184 692 242,735 243,427
Preferred dividends (640,000) (640,000)
Accretion of redeemable
preferred stock (112,953) (112,953)
---------- -------- ----------- ------------ --------- -----------
Balance, June 30, 1998 12,948,241 $129,482 $67,521,474 $(10,635,627) $(171,777) $56,843,552
========== ======== =========== ============ ========= ===========
</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,
---------------------------
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operations:
Net income (loss)..................................... $ 923,744 $ (3,666,292)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization..................... 2,710,618 1,581,806
Accrued interest on convertible debenture......... 325,304 327,672
Proportionate share of loss of joint venture...... 100,000 90,000
Changes in operating items:
Receivables..................................... (5,260,119) (7,736,076)
Cost in excess of billings...................... 4,314,218 (343,608)
Prepaid expenses and other current assets....... (126,540) (258,497)
Accounts payables, accrued expenses and
other current liabilities.................... (642,632) 7,454,950
Unearned revenues............................... (4,848,154) -
Waste processing and disposal liabilities....... (1,432,843) -
Facility and equipment decontamination and
decommissioning liabilities.................. 459,604 267,000
----------- ------------
Net cash used in operating activities................. (3,476,800) (2,283,045)
----------- ------------
Cash flows from investing activities:
Additions to property, plant and equipment ......... (4,049,180) (3,241,288)
Advances to joint ventures.......................... (16,853) (919,399)
Acquisition of The Scientific Ecology Group, Inc.,
net of cash acquired.............................. - (23,042,377)
Other............................................... 40,851 (667,409)
----------- ------------
Net cash used in investing activities................. (4,025,182) (27,870,473)
----------- ------------
Cash flows from financing activities:
Short term borrowings............................... 6,780,622 -
Reduction of long term debt and
capital lease obligations......................... (25,804) (23,316)
Proceeds from issuance of common stock.............. 243,427 303,376
Payment of preferred stock dividends................ (640,000) (640,000)
----------- ------------
Net cash provided by (used in) financing activities... 6,358,245 (359,940)
----------- ------------
Net change in cash and cash equivalents............... (1,143,737) (30,513,458)
Cash and cash equivalents at beginning of period...... 7,026,249 46,336,126
----------- ------------
Cash and cash equivalents at end of period............ $ 5,882,512 $ 15,822,668
=========== ============
</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 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,
1998 1997
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<S> <C> <C>
Raw materials...... $265,987 $324,843
Finished goods..... 662,368 307,214
-------- --------
$928,355 $632,057
======== ========
</TABLE>
Such amounts are included in other current assets.
3. NET INCOME PER SHARE
Basic earnings per share (EPS) excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Weighted average shares used in
computing basic EPS were 12,830,071 and 12,562,057 for the three months ended
June 30, 1998 and 1997, respectively, and 12,830,071 and 12,499,090 for the six
months ended June 30, 1998 and 1997, respectively. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Weighted average shares used in computing diluted EPS were 12,830,071 and
14,016,623 for the three months ended June 30, 1998 and 1997, respectively, and
14,300,419 and 12,499,090 for the six months ended June 30, 1998 and 1997,
respectively. The difference between basic and diluted weighted average shares
relates to the dilutive effect of stock options and warrants where the exercise
price is less than the average market value of the Company's common stock for
the period of calculation. Conversion of the Company's convertible debentures
and preferred stock is not included in the calculation of diluted EPS as the
conversion is anti-dilutive.
5
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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.
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 approximately $22.4 million in cash including transaction costs
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 April 1, 1997 and, accordingly, the Company's results of operations
for the year ended December 31, 1997 reflect the operating results of SEG from
April 1, 1997. The Company has accounted for the transaction under the purchase
method of accounting. The aggregate purchase price of $72.5 million, which
includes liabilities assumed and transaction costs, exceeded the estimated fair
value of SEG's tangible assets by approximately $13.8 million. Such amount has
been allocated to intangible assets, principally goodwill, and is being
amortized over 30 years. SEG provided over 50% of the Company's revenue for the
three and six month periods ended June 30, 1998 and had a significant impact on
the results of operations in the period to period comparison.
Prior to the acquisition of SEG, the Company's waste treatment revenues
historically had been generated from government waste processing operations
pursuant to fixed-price and cost-plus-fixed-fee contracts with the United States
Department of Energy ("DOE"). Waste treatment revenues from the DOE were not
significant in 1997.
In March 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
as a result of observations, by operations personnel, indicating that excessive
wear could be occurring on certain internal components of the melter. 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. 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 included the estimated costs of repairs to the melter and
for estimated losses to complete the fixed price contract. In December 1997,
the Company recommenced radioactive operations and recorded an additional charge
of $1.3 million on the M-Area contract in the fourth quarter of 1997 for the
estimated increased costs to complete the contract as a result of it taking
longer than original estimates to bring the system to full processing throughput
levels. The Company is currently negotiating an extension of the contract.
However, in the event the Company is not able to obtain a contract extension,
the Company could incur additional losses which could be material.
The Company's net earnings for the second quarter of 1998 were adversely
affected by the following events: (i) one-time non-reimbursable costs incurred
on the recently completed Maine Yankee Nuclear Power Plant waste
characterization contract; (ii) higher than expected costs incurred on recent
proposals for two major commercial
6
<PAGE>
nuclear power plant decommissioning projects; (iii) the Company's decision to
reschedule a radioactive metal melt campaign planned for the end of the second
quarter to the third quarter at its Bear Creek radioactive waste processing and
recycling facility in Oak Ridge, Tennessee; and (iv) one-time charges associated
with restructuring its Oak Ridge low-level radioactive waste processing
operations.
The Company's future operating results will be affected by, among other
things, the duration of commercial waste processing contracts and amount of
waste to be processed by the Company's commercial waste processing operations
pursuant to these contracts; the timing of new DOE waste treatment projects,
including those pursued jointly with BNFL, Inc.; the duration of the Hanford and
Idaho Falls DOE projects; and the amount of new waste streams, if any, awarded
to the Company for processing at the M-Area facility in Savannah River.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1998.
Revenues increased by $800,000 or 2.1% from $38.0 million in 1997 to $38.8
million in 1998. The increase was primarily attributable to a $3.5 million
increase in government waste processing services and an increase in waste
processing revenues of $300,000 at the Company's DuraTherm hazardous waste
treatment facility located in San Leon, Texas. The increase was partially
offset by a $3.0 million decrease in waste processing services at the Company's
Bear Creek low-level radioactive waste processing facility located in Oak Ridge,
Tennessee. The increase in revenues in government waste processing services was
the result of work performed on a contract awarded by BNFL to build and operate
a pilot melter at the Company's Columbia, Maryland headquarters and continued
performance on the Idaho Falls, Idaho waste treatment project. Revenues at the
DuraTherm facility were $2.2 million for the three months ended June 30, 1998 as
compared to $1.9 million for the same period in 1997. The decline in revenues
at the Bear Creek facility was due to the rescheduling of a radioactive metal
melt campaign from the second quarter to the third quarter of 1998.
Gross profit increased by $1.5 million from $5.2 million in 1997 to $6.7
million in 1998. Technical support services and government waste processing
services accounted for increases in gross profit of $1.2 million and $600,000,
respectively. These increases were partially offset by a decrease in gross
profit of $300,000 at the Bear Creek facility. The increase in gross profit in
technical support services was the result of performance on higher margin
consulting contracts as compared to the same period in 1997, which were
partially offset by higher than expected non-reimbursable costs incurred on the
recently completed Maine Yankee Nuclear Power Plant waste characterization
contract. As a percentage of revenues, gross profit increased from 13.7% in
1997 to 17.3% in 1998 for the reasons previously mentioned.
Selling, general and administrative expenses increased by $2.9 million or
68.3% from $4.2 million in 1997 to $7.1 million in 1998. As a percentage of
revenues, selling general and administrative expenses increased from 11.1% in
1997 to 18.3% in 1998. The increase was primarily attributable to higher than
expected costs incurred on proposals for two major commercial nuclear power
plant decommissioning projects of $600,000 and one-time charges associated with
the restructuring of the operations at the Bear Creek facility of $800,000.
Interest income (expense), net changed from income of $113,000 in 1997 to
expense of $182,000 in 1998. The change was the result of the decrease in cash
due to the purchase of SEG in April of 1997 and interest on short term
borrowings required to fund working capital needs.
7
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Income taxes was a benefit of $226,000 in 1998. As of December 31, 1997
the Company has recognized the benefit of its available net operating loss
carryforward. Accordingly, for 1998 the Company is accruing income taxes
(benefit) at full statutory rates.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1998.
Revenues increased by $26.0 million or 52.0% from $50.0 million in 1997 to
$76.0 million in 1998. The increase was primarily attributable to $23.3 million
in revenues from the operations of SEG which was acquired by the Company
effective April 1, 1997, and to a lesser extent, an increase in government waste
processing revenues of $4.4 million, and an increase of $900,000 at the
Company's DuraTherm commercial waste treatment facility. The increase in
revenues was partially offset by a decrease in technical support services
revenues of $2.6 million. The increase in revenues from government waste
processing was primarily the result of performance on a contract awarded by BNFL
to build and operate a pilot melter at the Company's Columbia, Maryland
headquarters and performance on a project at Idaho Falls, Idaho. Revenues at
the DuraTherm facility were $4.5 million for the six months ended June 30, 1998
as compared to $3.6 million for the same period in 1997. The decline in
revenues from technical support services was the result of less power plant
outages being scheduled in first six months of 1998 as compared to the same
period in 1997.
Gross profit increased by $13.3 million from $1.2 million in 1997 to $14.5
million in 1998. SEG, government waste processing and DuraTherm accounted for
increases in gross profit of $7.2 million, $6.2 million and $200,000,
respectively. The increase in gross profit was partially offset by a decrease in
gross profit from technical support services of $300,000. The increase in gross
profit from government waste processing principally relates to a $5.9 million
dollar loss recorded on the M-Area project in the first quarter of 1997. The
gross profit percentage from technical support services was relatively unchanged
for the six months ended June 30, 1998 as compared to the same period in 1997.
Selling, general and administrative expenses increased by $6.5 million or
108.8% from $6.1 million in 1997 to $12.6 million in 1998. As a percentage of
revenues, selling, general and administrative expenses increased from 12.1% in
1997 to 16.6% in 1998. The increase in selling general and administrative
expenses was primarily attributable to the operations of SEG which was acquired
by the Company effective April 1, 1997 and to higher than expected costs
incurred on proposals for two major commercial nuclear power plant
decommissioning projects of $600,000 and one-time charges associated with the
restructuring of the operations at the Bear Creek facility of $800,000.
Interest income (expense), net decreased by $790,000 from 1997 to 1998.
The decrease was the result of the decrease in cash due to the purchase of SEG
in April of 1997.
Income taxes (benefit) increased from a benefit of $750,000 in 1997 to
expenses of $627,000 in 1998. As of December 31, 1997 the Company has
recognized the benefit of its available net operating loss carryforward.
Accordingly, for 1998 the Company is accruing income taxes (benefit) at full
statutory rates.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving line of credit agreement with a bank providing
for borrowings up to $12.0 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%. At June 30, 1998, the
Company had $6.8 million outstanding under the line of credit. 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 the Company's Bear Creek facility upon its
closure.
The Company believes cash flows from operations and, if necessary,
borrowings available under the bank line of credit will be sufficient to meet
its operating needs, including the quarterly preferred dividend requirement of
$320,000 for at least the next twelve months.
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 1998 interim periods are not necessarily
indicative of results to be expected for the entire year.
9
<PAGE>
PART II OTHER INFORMATION
- -------
Item 1. Legal Proceedings
See the Company's Annual Report on Form 10-Q for the year ended
December 31, 1997 for a discussion of legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 19, 1998
the following matters were voted upon.
a. Daniel A. D'Aniello, William E. Conway, Jr., Earle C. Williams,
and J.A. Fred Brothers 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
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 11,437,376 for, and 12,680 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.
The Company experienced significant growth in revenues during 1997 and
the first six months of 1998, primarily as a result of the acquisition of SEG in
April 1997. The Company's future operating results are largely dependent upon
the Company's ability to manage its commercial waste processing operations,
which are formerly the operations of SEG, including obtaining commercial waste
processing contracts and processing waste under such contracts in a timely and
cost effective manner. The Company's future operating results are also largely
dependent upon the Company's ability to extend the existing contract with the
DOE for the Savannah River M-Area Site, 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. 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
10
<PAGE>
revenues and the loss of one or more technical support service contracts could
adversely affect the Company's future operating results.
The Company's future operating results may fluctuate due to factors such
as: the timing of new commercial waste processing contracts and duration of and
amount of waste to be processed pursuant to those contracts: 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 duration of
such projects; and the timing of outage support projects and other large
technical support services projects at its customers' facilities.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
--------
See accompanying Index to Exhibits
b. Reports
-------
None.
11
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GTS DURATEK, INC. AND SUBSIDIARIES
JUNE 30, 1998
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 14, 1998 BY: /s/ Robert F. Shawver
----------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: August 14, 1998 BY: /s/ Craig T. Bartlett
-----------------------------
Craig T. Bartlett
Treasurer and Controller
12
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Exhibits Index
<TABLE>
<S> <C>
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)
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)
</TABLE>
E-1
<PAGE>
<TABLE>
<S> <C>
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
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).
</TABLE>
E-2
<PAGE>
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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).
10.19 GTS Duratek, Inc. Executive Compensation Plan. Incorporated herein by
reference to Exhibit 10.19 of Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 (File No. 0-14292).
27 Financial Data Schedule. (filed herewith)
</TABLE>
E-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF JUNE 30, 1998 (UNAUDITED) AND THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1998 (UNAUDITED), OF GTS DURATEK, INC. AND SUBSIDIARIES, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,882,512
<SECURITIES> 0
<RECEIVABLES> 34,994,898
<ALLOWANCES> (483,179)
<INVENTORY> 928,355
<CURRENT-ASSETS> 49,506,980
<PP&E> 71,910,860
<DEPRECIATION> (9,879,242)
<TOTAL-ASSETS> 133,742,062
<CURRENT-LIABILITIES> 41,457,360
<BONDS> 0
15,165,308
0
<COMMON> 129,482
<OTHER-SE> 56,714,070
<TOTAL-LIABILITY-AND-EQUITY> 133,742,062
<SALES> 0
<TOTAL-REVENUES> 76,041,153
<CGS> 0
<TOTAL-COSTS> 61,498,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 44,500
<INTEREST-EXPENSE> 255,400
<INCOME-PRETAX> 1,651,200
<INCOME-TAX> 627,456
<INCOME-CONTINUING> 923,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 923,744
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</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, 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 STATEMENTS.
</LEGEND>
<RESTATED>
<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> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
