<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 30, 1999
GTS DURATEK, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-14292 22-2476180
(State or Other (Commission file number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
10100 Old Columbia Road, Columbia, Maryland 21046
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: (410) 312-5100
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 30, 1999, GTS Duratek, Inc. (the "Company") acquired 100% of
the outstanding capital stock of Frank W. Hake Associates, LLC ("Hake")
from HakeTenn, Inc., a Delaware corporation and an affiliate of the
Hake Group of Philadelphia, Pennsylvania, George T. Hamilton and
Richard Wilson ("Sellers") for $12.9 million in cash and the assumption
of certain liabilities. Hake is a specialist in the storage,
transportation handling and processing of radioactive waste emanating
from nuclear power generation plants throughout the United States. Hake
also stores and services power generation equipment at its licensed
facility in Memphis, Tennessee. The Company generally intends to
continue the business of Hake and to use its assets and facilities for
essentially the same purposes as they were used prior to the
acquisition.
The Company paid the cash portion of the purchase price out of
available cash, principally from its credit facility with its bank.
Under this facility, the Company has an acquisition line of credit to
finance acquisitions or stock repurchases providing for borrowings up
to $20 million. Borrowings under the line of credit bear interest at
the LIBOR rate plus 2.25%.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired:
Balance sheets of Frank W. Hake Associates, LLC as of December 31,
1998 and 1997 and the related statements of operations, members'
equity and cash flows for the years then ended.
Balance sheet of Frank W. Hake Associates, LLC as of June 30, 1999
(unaudited) and the related statements of operations and cash
flows for the six months then ended (unaudited).
(b) Pro Forma Financial Information:
(i) Pro Forma Consolidated Balance Sheet at June 30, 1999.
(ii) Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998 and related notes.
(iii) Pro Forma Consolidated Statement of Operations for the six
months ended June 30, 1999 and related notes.
(c) Exhibits. The following exhibits are filed with this report, and
the foregoing description is modified by reference to such
exhibits:
(1) GTS Duratek, Inc. Press Release dated June 30, 1999,
previously filed with the Company's Current Report on Form 8-K
which was filed with the Securities and Exchange Commission on
July 13, 1999.
(2) Purchase and Sale Agreement between HakeTenn, Inc., George T.
Hamilton and Richard Wilson and GTS Duratek, Inc. dated as of
June 30, 1999, previously filed with the Company's Current
Report on Form 8-K which was filed with the Securities and
Exchange Commission on July 13, 1999.
2
<PAGE>
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 hereunto duly authorized.
GTS Duratek, Inc.
/s/ Robert F. Shawver
---------------------
Robert F. Shawver
Executive Vice President
and Chief Financial Officer
Date: September 10, 1999
<PAGE>
Frank W. Hake Associates, LLC
Financial Statements
For the Years Ended December 31, 1998 and 1997
Contents
Page
Independent Auditors' Report 5
Financial Statements
Balance Sheets 6
Statements of Operations 7
Statements of Members' Equity 8
Statements of Cash Flows 9
Summary of Accounting Policies 10
Notes to Financial Statements 12
4
<PAGE>
Independent Auditors' Report
Board of Directors
Frank W. Hake Associates, LLC
Memphis, Tennessee
We have audited the accompanying balance sheets of Frank W. Hake Associates, LLC
as of December 31, 1998 and 1997, and the related statements of operations,
members' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frank W. Hake Associates, LLC
at December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 9, the members (owners) of the Company sold their ownership
in Frank W. Hake Associates, LLC to GTS Duratek, Inc., an unrelated company, on
June 30, 1999.
BDO Seidman, LLP
May 21, 1999
Memphis, Tennessee
5
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 67,510 83,911
Accounts receivable (note 6) 2,901,420 3,628,630
Prepaid expenses 200,023 60,623
Employee advances 9,955 8,441
--------------- --------------
Total current assets 3,178,908 3,781,605
Property, plant and equipment (notes 1 and 7):
Buildings and improvements 4,243,840 3,892,839
Furniture and equipment 2,451,692 2,171,032
--------------- --------------
6,695,532 6,063,871
Less accumulated depreciation (3,668,914) (3,502,227)
--------------- --------------
Property, plant and equipment, net 3,026,618 2,561,644
--------------- --------------
Other assets 107,957 89,214
--------------- --------------
Total assets $ 6,313,483 6,432,463
=============== ==============
Liabilities and Members' Equity
Current liabilities
Accounts payable -- trade $ 1,529,809 1,185,804
Advances from affiliates (note 1) 813,415 193,170
Billings in excess of costs and estimated earnings
on uncompleted contracts (note 2) 607,690 701,905
Accrued waste disposal 1,154,633 1,449,095
Other accrued expenses 209,919 312,136
Current maturities of long-term debt (note 4) 210,446 333,594
--------------- --------------
Total current liabilities 4,525,912 4,175,704
Long-term debt, noncurrent portion (note 4) 360,223 548,421
--------------- --------------
Total liabilities 4,886,135 4,724,125
Commitments and contingencies (notes 5, 6, 8 and 9)
Members' equity (note 9) 1,427,348 1,708,338
--------------- --------------
$ 6,313,483 6,432,463
=============== ==============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
6
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Statements of Operations
Years ended December 31, 1998 and 1997
1998 1997
--------------- ----------------
Net revenue (notes 2 and 6) $ 15,167,899 13,117,619
Direct costs 10,603,523 8,511,246
--------------- ----------------
Gross profit on sales 4,564,376 4,606,373
Selling, general and administrative expenses 4,654,089 3,809,493
--------------- ----------------
Operating income (loss) (89,713) 796,880
Interest expense, net (148,539) (176,768)
Other income (loss), net (note 3) (22,839) 356
--------------- ----------------
Net income (loss) $ (261,091) 620,468
=============== ================
See accompanying summary of accounting policies and notes to financial
statements.
7
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Statements of Members' Equity
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Retained
earnings Total
Paid-in (accumulated members'
capital deficit) equity
-------------- ------------- --------------
<S> <C> <C> <C>
Balances, January 1, 1997 $ 503,548 (415,678) 87,870
Net income -- 620,468 620,468
Conversion of debt to equity (note 1) 1,000,000 -- 1,000,000
-------------- ------------- --------------
Balances, December 31, 1997 1,503,548 204,790 1,708,338
Net loss -- (261,091) (261,091)
Distributions to members -- (19,899) (19,899)
-------------- ------------- --------------
Balances, December 31, 1998 $ 1,503,548 (76,200) 1,427,348
============== ============= ==============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
8
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Statements of Cash Flows
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
Cash flows from operations:
<S> <C> <C>
Net income (loss) $ (261,091) 620,468
Depreciation and amortization 323,199 378,598
Loss on disposal of equipment 29,082 --
Change in operating assets and liabilities:
Accounts receivable 727,210 (804,717)
Prepaid expenses and other assets (160,465) 35,952
Employee advances (1,514) 17,524
Accounts payable -- trade 344,004 (873,089)
Billings in excess of costs and estimated earnings
on uncompleted contracts (94,215) (3,699)
Other accrued expenses (396,679) 1,144,066
---------- ----------
Cash provided by operating activities 509,531 515,103
---------- ----------
Cash flows from investing activities -- purchase of
property and equipment (814,932) (406,455)
---------- ----------
Cash flows from financing activities:
Advances from affiliates 620,245 72,815
Principal payments on long-term borrowings (311,346) (259,387)
Distributions to members (19,899) --
---------- ----------
Cash provided (used) by financing activities 289,000 (186,572)
---------- ----------
Net decrease in cash and cash equivalents (note 7) (16,401) (77,924)
Cash and cash equivalents, beginning of year 83,911 161,835
---------- ----------
Cash and cash equivalents, end of year $ 67,510 83,911
========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
9
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Summary of Accounting Policies
Years ended December 31, 1998 and 1997
Summary of Accounting Policies
(a) Business
Frank W. Hake Associates, LLC (the "Company") is a Delaware
corporation operating in Memphis, Tennessee, that treats and disposes
of low-level radioactive-contaminated power plant equipment, and also
stores new power plant equipment for its customers. The members'
agreement establishing the Company as a limited liability company
provides for the dissolution of the Company in March 2025, or sooner,
as provided for in the agreement.
The Company's majority member (owner) is Hake Partners, Inc. ("Hake
Partners"). Hake Partners is owned by the shareholders of Frank W.
Hake, Inc.
As discussed in Note 9, the members (owners) sold their ownership in
the Company to GTS Duratek, Inc., an unrelated company, effective
June 30, 1999.
(b) Use of Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(c) Property, Plant, Equipment and Depreciation
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed using accelerated methods over
the following estimated useful lives:
Buildings and improvements 10 - 39 years
Furniture and equipment 5 - 7 years
(d) Cash and Cash Equivalents
For statements of cash flows purposes , the Company considers cash on
hand and in savings and checking accounts, and certificates of
deposit purchased with maturities of 90 days or less, to be cash
equivalents.
10
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Summary of Accounting Policies
Years ended December 31, 1998 and 1997
(e) Radio-Active Material Handling Revenue
Revenues from the treatment and disposal of low-level radioactive-
contaminated power plant equipment are recognized using the
percentage-of-completion method. Contract costs include all direct
labor costs, waste disposal costs, subcontracted labor and trucking
costs, and supplies. Changes in total contract costs are recognized
in the period they are determined. No contract losses are
anticipated.
(f) Taxes on Income
The Company is treated as a "pass through" for income tax purposes.
Accordingly, the Company pays no taxes on income and each member
includes their portion of income in their respective tax returns.
11
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Notes to Financial Statements
December 31, 1998 and 1997
(1) Related Party Transactions
During 1998 and 1997, all of the Company's employees were leased from Frank
W. Hake, Inc. at cost (including compensation, benefits, payroll related
taxes and workers compensation insurance). Subsequent to December 31, 1998,
they have been employees of the Company.
Advances from affiliates consist of amounts payable to Hake Partners, Inc.,
are non-interest bearing, and are due upon demand.
Effective December 31, 1997, Hake Partners, Inc. converted $1,000,000 of
advances to the Company to an equity interest.
(2) Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
Billings in excess of costs and estimated earnings on uncompleted contracts
consist of the following:
December 31,
--------------------------------
1998 1997
------------- ------------
Costs incurred on uncompleted contracts $ 3,124,726 8,879,668
Estimated earnings on uncompleted contracts 1,332,488 7,918,817
------------- ------------
4,457,214 16,798,485
Less billings to date 5,064,904 17,500,390
------------- ------------
Billings in excess of costs
and estimated earnings $ (607,690) (701,905)
============= ============
(3) Other Income (Loss), Net
Other income (loss) consists of the following:
December 31,
--------------------------------
1998 1997
------------- ------------
$ (29,082) --
Net loss on disposal of equipment 6,243 356
Other ------------- ------------
$ (22,839) 356
============= ============
12
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Notes to Financial Statements
December 31, 1998 and 1997
(4) Long-term Debt
Long-term debt at December 31, 1998 and 1997 consisted of the following:
1998 1997
-------- --------
Note payable to insurance company, bearing
interest at 10% per annum, payable in
monthly principal and interest installments
of $21,500 through July 1, 2001, secured by
four warehouses $ 570,669 746,145
Note payable to bank, repaid March 1998 -- 135,870
---------- ----------
570,669 882,015
Less current maturities (210,446) (333,594)
---------- ----------
Noncurrent portion $ 360,223 548,421
========== ==========
Future maturities of long-term debt at December 31, 1998 were as follows:
1999 $ 210,446
2000 232,461
2001 127,762
----------
$ 570,669
==========
(5) Leases
The Company leases certain equipment under noncancellable operating leases
which expire at various dates through 2002. In most cases, management
expects that in the normal course of business, leases that expire will be
renewed or replaced by other leases.
Future minimum lease payments required under operating leases that have
initial or remaining terms in excess of one year were as follows at
December 31, 1998:
1999 $ 67,812
2000 55,297
2001 27,019
2002 4,344
----------
$ 154,472
==========
13 (Continued)
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Notes to Financial Statements
December 31, 1998 and 1997
(6) Major Customers and Other Risks
Sales to three customers comprised approximately 53% and 52% of the
Company's net revenue for the years ended December 31, 1998 and 1997.
Accounts receivable from these customers were approximately $1,269,131 and
$2,038,000 at December 31, 1998 and 1997, respectively. The Company's
principal customers are large corporations located throughout the United
States.
The industry in which the Company operates is highly regulated and subject
to a broad range of federal, state and local environmental requirements,
including those governing discharges to the air and water, the handling of
radioactive wastes and the remediation of contamination associated with
releases of radioactive substances.
The Company is unable to predict what regulatory changes may occur or the
impact on the Company of any particular change. However, the Company's
operations and financial results could be adversely affected. The Company
believes that it is currently in substantial compliance with applicable
environmental requirements and does not anticipate the need to make
substantial expenditures for environmental control measures. However, if a
release of radioactive substances located on the Company's premises occurs,
the Company may be held liable and may be required to pay the cost of
remedying the condition. The amount of any such liability and removal cost
could be material.
(7) Supplemental Cash Flow Disclosure
Interest paid by the Company for the years ended December 31, 1998 and 1997
was approximately $88,517 and $113,887, respectively.
Effective December 31, 1997, Hake Partners, Inc. converted $1,000,000 of
advances to the Company to an equity interest, creating a noncash decrease
in advances from affiliates.
(8) Waste Commitment
The Company has committed to deliver a minimum volume of 200,000 cubic feet
of non-mixed, low level radioactive waste material to an outside waste
disposal site for burial. The Company has also committed to deliver a
minimum of 13,000 pounds of mixed waste lead material for treatment and
disposal. Management does not expect these commitments to have a material
adverse impact on the Company's results of operations.
(9) Subsequent Event
Effective June 30, 1999, the members (owners) sold their ownership in the
Company to GTS Duratek, Inc., an unrelated company.
14
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Balance Sheet
June 30, 1999
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 90,000
Accounts receivable 1,887,000
Prepaid expenses 275,000
Employee advances 9,000
------------
Total current assets 2,261,000
------------
Property, plant and equipment:
Buildings and improvements 4,550,000
Furniture and equipment 2,880,000
------------
7,430,000
Less accumulated depreciation (3,848,371)
------------
Property, plant and equipment, net 3,581,629
------------
Other assets 100,000
------------
Total assets $ 5,942,629
============
Liabilities and Members' Equity
Current liabilities
Accounts payable -- trade $ 1,506,216
Advances from affiliates 865,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 314,000
Accrued waste disposal 1,579,000
Other accrued expenses 230,842
Current maturities of long-term debt 225,000
------------
Total current liabilities 4,720,058
Long-term debt, noncurrent portion 240,223
------------
Total liabilities 4,960,281
Commitments and contingencies
Members' equity 982,348
------------
$ 5,942,629
============
See accompanying notes to financial statements.
15
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Statement of Operations
Six Months Ended June 30, 1999
(Unaudited)
Revenues $ 8,400,000
Cost of revenues 5,950,000
---------------
Gross profit 2,450,000
Selling, general and administrative expenses 2,705,000
---------------
Income (loss) from operations (255,000)
Interest expense, net (190,000)
---------------
Net loss $ (445,000)
===============
See accompanying notes to financial statements.
16
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Statement of Cash Flows
Six Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Cash flows from operations:
<S> <C>
Net loss $ (445,000)
Depreciation 179,457
Change in operating assets and liabilities:
Accounts receivable 1,014,420
Other assets 8,912
Prepaid expenses (74,977)
Accounts payable -- trade (23,593)
Billings in excess of costs and estimated earnings of uncompleted contracts (293,690)
Accrued waste disposal 424,367
Other accrued expenses 20,923
--------------
Cash provided by operating activities 810,819
--------------
Cash flows from investing activities -- purchase of property and equipment (734,468)
--------------
Cash flows from financing activities:
Advances from affiliates 51,585
Principal payments of long-term borrowings (105,446)
--------------
Cash used in financing activities (53,861)
--------------
Net change in cash and cash equivalents 22,490
Cash and cash equivalents, beginning of period 67,510
--------------
Cash and cash equivalents, end of period $ 90,000
==============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
FRANK W. HAKE ASSOCIATES, LLC
Notes to Financial Statements
June 30, 1999
(Unaudited)
(1) Basis of Presentation
Frank W. Hake Associates, LLC (the Company) is a Delaware corporation
operating in Memphis, Tennessee, that treats and disposes of low-level
radioactive-contaminated power plant equipment, and also stores new power
plant equipment for its customers.
Effective June 30, 1999, the owners of the Company sold their ownership in
the Company to GTS Duratek, Inc.
Prior to the acquisition, the Company's majority owner was Hake Partners,
Inc. Hake Partners, Inc. is owned by the shareholders of Frank W. Hake,
Inc.
The Company's financial statements as of and for the six months ended
June 30, 1999 are unaudited and do not include all disclosures required
under generally accepted accounting principles. Such financial statements
reflect 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 1999 interim period are not
necessarily indicative of results to be expected for the entire year.
18
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information should be read in conjunction with the
consolidated financial statements and related notes of GTS Duratek, Inc. and
subsidiaries (the "Company"), not included herein, and the financial statements
of Frank W. Hake Associates, LLC ("Hake"), included elsewhere herein.
On June 30, 1999, the Company acquired 100% of the outstanding capital stock of
Hake from HakeTenn, Inc., a Delaware corporation and an affiliate of the Hake
Group of Philadelphia, Pennsylvania, George T. Hamilton and Richard Wilson for
$12.9 million in cash and the assumption of certain liabilities, subject to a
post-closing adjustment. The Company paid the cash portion of the purchase price
out of available cash, principally from its credit facility with its bank. Hake
is a specialist in the storage, transportation handling and processing of
radioactive waste emanating from nuclear power generation plants throughout the
United States. Hake also stores and services power generation equipment at its
licensed facility in Memphis, Tennessee.
As the acquisition was effective as of June 30, 1999, the Company's results of
operations for the six months ended June 30, 1999 do not include the results of
Hake. The Company has accounted for the transaction under the purchase method of
accounting. The aggregate purchase price of approximately $17.8 million, which
includes liabilities assumed and transaction costs, exceeded the fair value of
Hake's tangible assets by approximately $11 million. Such amount has been
allocated to intangible assets, principally goodwill, and is being amortized
over 30 years.
For purposes of the pro forma consolidated financial statements, the aggregate
purchase price for Hake was as follows:
Cash paid $12,957,682
Liabilities assumed 4,638,281
Transaction costs 199,016
-----------
$17,794,979
===========
The aggregate purchase price was allocated to acquired assets based upon their
estimated fair values as follows:
Current Assets $ 2,261,682
Due from Hake -- estimated post closing adjustment 900,000
Property, plant and equipment 3,500,000
Goodwill and other intangible assets 11,033,297
Other assets 100,000
-----------
$17,794,979
===========
Revenues from Hake, on an annualized basis, are expected to be approximately $15
million.
The Company is still in the process of evaluating the fair value of the tangible
and identifiable intangible assets acquired and liabilities assumed. The final
purchase price allocation will be affected by this and the actual amount of
transaction costs. Such amounts could differ materially from the pro forma
presentation.
19
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Consolidated Balance Sheet
The pro forma consolidated balance sheet as of June 30, 1999 is not presented
herein as the acquisition of Hake was included as part of the consolidated
balance sheet of GTS Duratek, Inc. and subsidiaries (GTS Duratek) as of June 30,
1999 found in the June 30, 1999 Form 10-Q filed with the Securities and Exchange
Commission on August 13, 1999.
Pro Forma Consolidated Statements of Operations
The pro forma consolidated statements of operations for the year ended December
31, 1998 and the six months ended June 30, 1999 give effect to the Company's
acquisition of Hake as if the transaction had occurred on January 1, 1998 and
January 1, 1999, respectively. The pro forma consolidated statements of
operations may not be indicative of the actual results that would have occurred
with Hake under management and control of the Company's personnel.
The pro forma adjustments include the following:
(1) Depreciation and Amortization -- GTS Duratek estimates approximately $2.0
million of the purchase price will be allocated to buildings with a 20 year
useful life and $1.5 million will be allocated to equipment with an average
useful life of ten years. Depreciation and amortization included in the Hake
statement of operations for the year ended December 31,1998 and the six
months ended June 30, 1999 was approximately $323,000 and $180,000,
respectively. Accordingly, the pro forma consolidated statements of
operations reflect an adjustment to depreciation and amortization of $73,000
and $55,000 for the year ended December 31, 1998 and the six months ended
June 30, 1999, respectively.
(2) Goodwill amortization -- Assuming the acquisition had taken place on January
1, 1998, amortization of the goodwill resulting for purchase accounting over
a 30 year period would have been reflected in the pro forma consolidated
statements of operations. Such amounts are estimated to be $350,000 and
$175,000 for the year ended December 31, 1998 and the six months ended June
30, 1999, respectively.
(3) Management Fees -- Hake was charged a management fee by its parent of
$72,000 and $36,000 for the year ended December 31, 1998 and the six months
ended June 30, 1999, respectively. Such fee will be eliminated following the
acquisition and accordingly has been eliminated in the pro forma
consolidated statements of operations. In addition, GTS Duratek believes
that it can eliminate at least $1 million of costs on an annual basis as the
result of synergies created by its Tennessee operations. These savings are
not reflected in pro forma consolidated statements of operations.
20
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
(4) Interest expense -- Assuming the acquisition had taken place on January 1,
1998, interest expense would have increased as a result of additional line
of credit borrowings for (i) the working capital needs of Hake during the
year ended December 31, 1998 and the six months ended June 30, 1999, (ii)
the net purchase price of $12,057,682 and (iii) transaction costs of
$199,016. Accordingly, the pro forma consolidated statements of operations
reflect a charge for additional interest expense of $1,042,000 and $521,000
for the year ended December 31, 1998 and the six months ended June 30, 1999,
respectively, assuming borrowing under the Company's line of credit at a
rate of 8.5%.
(5) Income taxes -- Hake was treated as a "pass through" entity for income tax
purposes prior to the acquisition. Accordingly, Hake paid no federal or
state income taxes. Following the acquisition, results of Hake will be
included in the determination of taxable income for GTS Duratek. Hake
incurred net losses of $261,000 and $445,000 for the year ended December 31,
1998 and the six months ended June 30, 1999, respectively. Accordingly, the
income tax benefit of those losses, appropriately adjusted for permanent
differences such as non-deductible goodwill, are reflected in the pro forma
consolidated statements of operations. Such amounts were estimated to be
$450,000 and $285,000 for the year ended December 31, 1998 and the six
months ended June 30, 1999, respectively.
21
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations (Unaudited)
Year ended December 31, 1998
<TABLE>
<CAPTION>
Pro forma Pro forma
GTS Hake adjustments combined
----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 160,313,077 15,167,899 -- 175,480,976
Cost of revenues 123,839,031 10,603,523 -- 134,442,554
----------------- --------------- --------------- ----------------
Gross profit 36,474,046 4,564,376 -- 41,038,422
(73,000) (1)
350,000 (2)
Selling, general and administrative expenses 26,613,548 4,676,928 (72,000) (3) 31,495,476
Change for asset impairment 9,223,948 -- -- 9,223,948
----------------- --------------- --------------- ----------------
Income (loss) from operations 636,550 (112,552) (205,000) 318,998
Interest expense, net (544,902) (148,539) (1,042,000) (4) (1,735,441)
----------------- --------------- --------------- ----------------
Income (loss) before income taxes (benefit)
and proportionate share of loss of joint
venture 91,648 (261,091) (1,247,000) (1,416,443)
Income taxes (benefit) 627,000 -- (450,000) (5) 177,000
----------------- --------------- --------------- ----------------
Income (loss) before proportionate share of
loss of joint ventures (535,352) (261,091) (797,000) (1,593,443)
Proportionate share of loss of joint ventures (1,474,000) -- (1,474,000)
----------------- --------------- --------------- ----------------
Net loss before cumulative effect
of change in accounting principle (2,009,352) (261,091) (797,000) (3,067,443)
Cumulative effect of change in accounting
principle (420,000) -- -- (420,000)
----------------- --------------- --------------- ----------------
Net loss and comprehensive loss (2,429,352) (261,091) (797,000) (3,487,443)
Preferred stock dividends and charges for
accretion (1,506,754) -- -- (1,506,754)
----------------- --------------- --------------- ----------------
Net loss attributable to common
stockholders $ (3,936,106) (261,091) (797,000) (4,994,197)
================= =============== =============== ================
Weighted average shares outstanding:
Basic $ 13,137,000 13,137,000
================= ================
Diluted $ 13,137,000 13,137,000
================= ================
Net loss per share before cumulative effect of change in accounting
principle:
Basic $ (0.27) (0.35)
================= ================
Diluted $ (0.27) (0.35)
================= ================
Net loss per share:
Basic $ (0.30) (0.38)
================= ================
Diluted $ (0.30) (0.38)
================= ================
</TABLE>
22
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations (Unaudited)
Year ended December 31, 1998
(1) To adjust depreciation expense to reflect purchase accounting adjustments.
(2) To adjust goodwill amortization expense to reflect purchase accounting
adjustments.
(3) To eliminate management fee charge to Hake by its parent company.
(4) To adjust interest expense to reflect effects of the acquisition on cash
resources.
(5) To adjust income taxes to reflect the effect of the income tax benefit from
the Hake tax losses.
23
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations (Unaudited)
Six months ended June 30, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
GTS Hake adjustments combined
--------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 80,577,671 8,400,000 -- 88,977,671
Cost of revenues 59,145,744 5,950,000 -- 65,095,744
--------------- ------------- ------------- ---------------
Gross profit 21,431,927 2,450,000 -- 23,881,927
(55,000) (1)
175,000 (2)
Selling, general and administrative expenses 13,243,570 2,705,000 (36,000) (3) 16,032,570
--------------- ------------- ------------- ---------------
Income from operations 8,188,357 (255,000) (84,000) 7,849,357
Interest expense, net (583,612) (190,000) (521,000) (4) (1,294,612)
--------------- ------------- ------------- ---------------
Income (loss) before income taxes and
proportionate share of loss of joint
venture 7,604,745 (445,000) (605,000) 6,554,745
Income taxes (benefit) 2,996,682 -- (285,000) 2,711,682
--------------- ------------- ------------- ---------------
Income (loss) before proportionate
share of loss of joint venture 4,608,063 (445,000) (320,000) 3,843,063
Proportionate share of loss of joint venture (100,000) -- -- (100,000)
--------------- ------------- ------------- ---------------
Net income (loss) and comprehensive
income (loss) 4,508,063 (445,000) (320,000) 3,743,063
Preferred stock dividends and charges for
accretion (754,655) -- -- (754,655)
--------------- ------------- ------------- ---------------
Net income (loss) attributable to common
stockholders $ 3,753,408 (445,000) (320,000) 2,988,408
=============== ============= ============= ===============
Weighted average shares outstanding:
Basic 13,582,581 13,582,581
=============== ===============
Diluted 20,636,387 20,636,387
=============== ===============
Net income per share:
Basic $ 0.28 0.22
=============== ===============
Diluted $ 0.23 0.19
=============== ===============
</TABLE>
24
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations (Unaudited)
Six months ended June 30, 1999
(1) To adjust depreciation expense to reflect purchase accounting adjustments.
(2) To adjust goodwill amortization expense to reflect purchase accounting
adjustments.
(3) To eliminate management fee charge to Hake by its parent company.
(4) To adjust interest expense to reflect effects of the acquisition on cash
resources.
(5) To adjust income taxes to reflect the effect of the income tax benefit from
the Hake tax losses.
25
<PAGE>
Exhibit Index
Exhibit Description
(c)(1) GTS Duratek, Inc. Press Release dated June 30, 1999*
(c)(2) Purchase and Sale Agreement between HakeTenn, Inc.,
George T. Hamilton and Richard Wilson and GTS Duratek, Inc.
dated as of June 30, 1999*
*Previously filed
26
