SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from May 1, 1996 to
October 31, 1996
COMMISSION FILE NUMBER 0-15067
--------------------
FLUOR DANIEL GTI, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 02-0324047
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 RIVER RIDGE DRIVE, NORWOOD, MASSACHUSETTS 02062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 769-7600
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $.001 par value None
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
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
registrant on January 6, 1997, was $29,762,515 computed on the basis of the
closing price per share of such stock on the Nasdaq National Market System. The
number of shares of Common Stock outstanding on January 6, 1997, was 8,212,791
shares.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement for the 1997
Annual Meeting of Stockholders to be held on March 19, 1997 pursuant to
Regulation 14A within 120 days of the end of the transition period ended October
31, 1996. Portions of the proxy statement are incorporated by reference in Part
III hereof.
FLUOR DANIEL GTI, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
PART I
<S> <C> <C>
Item 1. Business..............................................................................................1
General............................................................................................1
Services...........................................................................................2
Remediation and Containment Technologies...........................................................3
Business Strategies................................................................................4
Governmental Regulation and Market.................................................................5
Customers and Marketing............................................................................6
Personnel..........................................................................................7
Competition and Seasonal Factors...................................................................7
Potential Liability and Insurance..................................................................7
Patents and Technology.............................................................................8
Factors Affecting Future Performance...............................................................8
Item 2. Properties............................................................................................9
Item 3. Legal Proceedings.....................................................................................9
Item 4. Submission of Matters to a Vote of Security Holders...................................................9
Executive Officers of the Company................................................................................11
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................13
Item 6. Selected Financial Data..............................................................................13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................................14
Item 8. Consolidated Financial Statements and Supplementary Data.............................................17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................................................18
PART III
Item 10. Directors and Executive Officers of the Registrant...................................................18
Item 11. Executive Compensation...............................................................................18
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................18
Item 13. Certain Relationships and Related Transactions.......................................................19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................19
Signatures ................................................................................................22
</TABLE>
This Report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Reference is made in
particular to the description of the Company's plans included in the Letter to
Stockholders that accompanies the Annual Report to Stockholders, and the
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections in this Report. Certain factors that may affect
these forward- looking statements are discussed on page 8.
PART I
ITEM 1. BUSINESS
GENERAL
Fluor Daniel GTI, Inc. (formerly Groundwater Technology, Inc.) and its
subsidiaries (collectively, "Fluor Daniel GTI" or the "Company") provide a broad
range of environmental, consulting, engineering and remediation services to a
variety of commercial and industrial customers and federal, state and local
government agencies. The Company was incorporated in Delaware in October 1975
and currently operates from 62 consulting offices throughout the United States
and in five foreign countries including Australia, the United Kingdom, Canada,
Italy and The Netherlands. Also, the Company's joint venture with a German
company has offices in six additional locations in Germany, Austria and Hungary.
The principal services provided by the Company are detailed, scientific
environmental assessment and remediation programs, which combine elements of
hydrogeology, geochemistry, chemistry, biochemistry and engineering. The Company
also provides compliance, permitting and other environmental support services. A
typical program generally includes interaction with appropriate governmental
regulatory agencies, detailed site assessments, design and implementation of a
cost-effective remediation system, construction management services and ongoing
monitoring and maintenance of the system for the duration of the program. These
assessments and remediation programs are generally in response to regulatory
programs adopted by state agencies as well as U.S. Environmental Protection
Agency ("EPA") programs, such as the Resource Conservation and Recovery Act of
1976 ("RCRA") and the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund Act"). The Company does not own or operate
a hazardous waste landfill or any other hazardous waste treatment, storage or
disposal facility.
On May 10, 1996, the Company closed a series of transactions (the "Change
of Control Transactions") pursuant to which it became a majority-owned
subsidiary of Fluor Daniel, Inc. ("Fluor Daniel"), a global construction,
engineering, maintenance and services company. The Change of Control
Transactions included a recapitalization of the Company's common stock, and the
merger of one of the Company's subsidiaries and Fluor Daniel Environmental
Services, Inc. ("FDESI"), a wholly-owned subsidiary of Fluor Daniel that
provides environmental services primarily to agencies of the federal government.
In exchange for FDESI and $35 million in cash, Fluor Daniel received 4,400,000
shares of the Company's "new" common stock and an option to purchase 1,768,970
additional shares at $13.1274 per share that expires on December 11, 1998. In
the recapitalization, each holder of "old" common stock received $8.62 in cash
and .5274 of a share of "new" common stock of the Company. In addition, the
Company entered into a Marketing Agreement with Fluor Daniel, and the Company
changed its name from "Groundwater Technology, Inc." to "Fluor Daniel GTI, Inc."
to emphasize the new relationship.
The Company has changed its year end from April 30 to October 31.
Accordingly, the Company began a new 12-month fiscal year on November 1, 1996.
The six month period resulting from this change, May 1, 1996 through October 31,
1996, is referred to as the "Transition Period."
Financial results for the Transition Period ended October 31, 1996 include
the operations of GTI as if the merger had occurred on May 1, 1996. Financial
activity for the period May 1, 1996 through May 9, 1996 was not significant.
1
SERVICES
Fluor Daniel GTI provides a broad range of environmental consulting,
engineering and construction management services, which currently focus on the
assessment, remediation and monitoring of soil and groundwater using a broad
range of techniques and technologies. These services are provided separately or
in combination.
Remedial Investigation and Assessment. Fluor Daniel GTI prepares
environmental profiles of sites, including hydrogeological and chemical
evaluations. A team of the Company's hydrogeologists, geologists, engineers,
chemists and technicians may use a variety of techniques, such as soil gas
mapping or the installation of a diagnostic monitoring well system. These
techniques provide the data necessary to determine the extent of the
contamination, as well as soil characteristics and groundwater chemistry, flow
and direction, and form the basis for the selection of a remediation program.
Fluor Daniel GTI also offers health and environmental risk assessment
services. Working in multi- disciplinary teams of toxicologists, environmental
scientists and industrial hygienists, the staff ascertains the health hazards
and risks produced by chemicals in the environment and the workplace. The risk
assessment services include site-specific exposure modeling and quantitative
risk assessment, hazard and risk communication programs, human health monitoring
and regulatory compliance, education, training and industrial hygiene services.
Design and Remediation. The Company has particular experience in the design
and installation of remedial systems for the removal of contaminants from soil
and groundwater. Using information obtained in a site investigation and
assessment, and an evaluation of risks to human health, the Company designs a
remedial solution appropriate to the particular conditions present at the site.
These analyses help to define the appropriate level of remedial response and are
used as the basis for negotiating remediation goals with regulatory authorities.
The Company evaluates alternatives, often conducting feasibility studies,
and the most appropriate response is selected. If action is required, a
cost-effective remediation system is engineered for the specific site. In some
instances, systems designed to contain existing contamination are appropriate.
Where remediation is required, the Company uses a wide range of physical,
chemical, biological and thermal treatment technologies in performing its
services, which are usually applied either on site or in situ. With on-site
restoration, the contaminated media, soil or groundwater is removed and treated.
With in situ restoration, the contaminants themselves are directly removed or
treated in place, without removing the soil or groundwater.
Monitoring. The Company performs ongoing sampling and analysis of
groundwater, soils and air to regulate and adjust the remediation system. The
analysis also provides the data necessary to respond in a timely fashion to
changes in the levels of contaminants and other variables, and forms the basis
for ongoing reports to the appropriate governmental regulatory agencies.
The Company generally charges its customers for its services on a time and
materials basis, typically with strict adherence to "not to exceed" limitations
contained in contracts for projects billed on this basis. Moreover, services are
subject to competitive bidding and are increasingly being performed on a fixed
contract or unit price basis. The Company is also increasing the marketing of
its services on a "pay for performance" incentive basis, and anticipates that
this will become a larger portion of its business in the future. Revenues are
also realized when the Company subcontracts for drilling, well materials,
electrical installation, laboratory analysis and other outside services. The fee
for a typical restoration program (including equipment) ranges from $100,000 to
$750,000, but for complex and lengthy programs the Company has billed as much as
several million dollars. Typical restoration programs generally require one to
five years to complete, and certain programs may take as long as ten or more
years.
2
REMEDIATION AND CONTAINMENT TECHNOLOGIES
Fluor Daniel GTI has substantial experience in the commercialization and
practical field application of new and existing technologies for the treatment
or containment of hazardous wastes and uses many technologies to restore
contaminated groundwater, soils and air to acceptable standards. The primary
approaches used by the Company -- physical, chemical, biological and thermal --
are usually used for on-site and in situ treatment. These techniques are often
used in combination to achieve desired results.
Physical treatments include those technologies that physically impact the
contaminants and the media, and include air stripping, vapor extraction and air
sparging. Air stripping involves pumping contaminated groundwater through either
a stripping tower or an air stripper system, which increases the evaporation
rate of hydrocarbon contaminants. Air flows through the unit countercurrent to
the water flow, "stripping" off the dissolved hydrocarbons at an increased rate.
Soil vapor extraction is the removal of volatile organic compounds by
induced air flow. The air flow is induced by the application of a vacuum to
subsurface soils and may be enhanced by the simultaneous injection of air. An
important part of vapor extraction is treating the extracted contaminants.
Air sparging is a process for treating soils and groundwater below the
water table by injecting air into the formation under pressure. The air
displaces the water in the soil and volatilizes the organic compounds present.
These compounds are then carried by the air stream out of the water table into
the soil above the water table, where they are captured by a vapor extraction
system. The Company has pioneered the use of ozone to enhance air sparging by
direct oxidation of contaminants.
In situ bioremediation involves treating contaminated soil and groundwater
by adding an oxygen source and nutrients into the aquifer, where naturally
occurring bacteria biochemically break down the contaminants into non-toxic
materials. The added oxygen and nutrients enhance the population of natural
bacteria which normally feed on contaminants. By stimulating the growth of
selected bacteria, soil and groundwater quality is restored to acceptable
levels.
Thermal treatment technologies take a number of forms. The principal form
of this technology used by the Company has been thermal desorption, which uses
heat to remove volatile compounds from a waste without oxidation of the
compounds. The Company has used steam injection and hot air injection to enhance
soil vapor extraction techniques on selected sites. Fluor Daniel GTI is also
exploring the use of co-burning of coal tar impacted soils.
For certain wastes that are not amenable to biological or chemical
degradation, such as metals, the Company uses several in situ technologies that
can be used to reduce or prevent further leaching of contamination from soil to
groundwater or surface water, or to reduce or prevent further migration of the
contamination horizontally. These technologies can be used in combination with
control measures such as capping, which involves placing a physical barrier
above the contaminated area, and slurry walls, which involves placing a physical
barrier adjacent to the contaminated area.
In situ fixation is a process that involves mixing chemical reagents with a
smaller volume of pumped groundwater, and then reinjecting the treated water
around the perimeter of a contaminated area. As the treated water moves through
the contaminated area, it promotes subsurface reactions that cause metals to fix
onto soil particles, thus rendering them immobile. The Company has used as
reagents lime and ferrous sulfate, and has also developed proprietary reagents
for in situ metals fixation.
3
BUSINESS STRATEGIES
Between 1992 and 1995, the Company diversified its core environmental
consulting and engineering services away from a dependence on retail petroleum
customers and into government and industrial markets with the intention to have
its customer base roughly equate with the proportions of the total market for
soil and groundwater remediation services being purchased by those customers.
During this period, the Company perceived an evolving shift from governmental
enforcement of environmental laws and regulations to commercial considerations
as the primary source of demand for the Company's services, and the Company
increasingly faced strong price competition as a result of this shift. The
Company also divested non-core businesses -- its drilling operations and
equipment manufacturing business in 1993 and 1994, respectively, and its
analytical laboratories in December 1995. During this period the Company changed
its business mix through a combination of internal focus and two acquisitions,
and pursued teaming arrangements with larger engineering and construction firms
for specific projects in the government market.
In connection with the Change of Control Transactions, the Company entered
into a Marketing Agreement with Fluor Daniel, pursuant to which the Company has
access to Fluor Daniel's worldwide marketing, engineering and construction, and
program management resources, which is intended to better enable the Company to
penetrate potential markets and, more generally, to respond to the competitive
challenges posed by current and anticipated developments in the environmental
services market. Fluor Daniel GTI serves as the preferred supplier for
environmental assessment, permitting and remediation services to Fluor Daniel
and its affiliates. However, there are no assurances provided in the Marketing
Agreement. Fluor Daniel will continue to provide its customers with engineering
and construction services, as well as certain environmental services, such as
Department of Energy Management and Operations, Operating and Management,
Management and Integration services and so-called "Total Business Solutions"
services. Total Business Solutions services are differentiated from the
environmental services that will continue to be provided by the Company in that
they involve an integration of such services with substantial non-environmental
services or involve a substantial increase in the scale and scope of services
beyond those currently provided by the Company.
The term of the Marketing Agreement expires in May 2006 unless further
extended by the parties. In the event Fluor Daniel ceases to own at least 20% of
the issued and outstanding equity of the Company, (a) Fluor Daniel, provided it
is not in breach of its obligations pursuant to Section 6.3(d) of the Investment
Agreement (described below), or the Company may terminate the Marketing
Agreement prior to expiration of the term; and (b) Fluor Daniel may revoke the
license of the Company and its subsidiaries to use the name "Fluor Daniel" in
the Company's corporate name. Section 6.3(d) of the Investment Agreement
provides that, until April 30, 1999, and with very limited exception, Fluor
Daniel is not permitted to dispose of any of its shares of the Company's common
stock without the prior approval of a majority of the independent directors
serving on the Company's Board of Directors.
In addition to developing its new relationship with Fluor Daniel, the
Company will continue to hire and train geologists, engineers, chemists and
hydrogeologists in the specialized fields of environmental services and cleanup
of soil and groundwater in order to staff local offices. It is the Company's
belief that a local presence increases understanding of local environmental
statutes, regulations and regulatory agencies and fosters a constructive working
relationship with local agency personnel. The Company spends significant time
and resources on in-house educational programs at all levels to maintain and
improve the quality of its operations; and it has invested in information
systems to connect all of its U.S. offices by a computer network that allows
employees to share resources.
4
GOVERNMENTAL REGULATION AND MARKET
Public concern over health, safety and preservation of the environment has
resulted in the enactment of Federal, state and local environmental laws and the
implementing regulations that affect nearly every industry. The enforcement of
these laws and regulations is responsible for creating much of the demand for
the services offered by the Company, and the renewal, modification or
elimination of these laws and regulations could significantly affect the
Company's business. Recently, the level of enforcement has waned due to
governmental budgeting constraints, and a number of laws set for reauthorization
for some time have not been reauthorized. The Company believes that, even apart
from cleanup activity attributable directly to funding authorized by these laws,
industry and governmental entities will continue to attempt to resolve hazardous
waste problems in order to comply with other statutory requirements and to avoid
liabilities to private parties.
The principal legislation that affect the Company's business are as
follows:
RCRA The Resource Conservation and Recovery Act of 1976 established a
framework for federal and state regulation of hazardous wastes. In 1988, the EPA
issued regulations under RCRA that govern underground storage tanks containing
certain hazardous substances or petroleum. These regulations require the owners
of underground storage tanks to upgrade or close existing deficient tanks and to
install release detection equipment on existing tanks. In addition, these
regulations prescribe the procedures by which tank owners and operators should
investigate and report confirmed or suspected releases from tanks, and if
applicable, proceed with corrective actions.
Superfund Act (CERCLA) The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 generally addresses cleanup of inactive
sites at which hazardous treatment, storage or disposal occurred in the past.
The Superfund Act authorizes the federal government to cleanup or order cleanup
of these sites. As of January 1996, there were approximately 1,200 sites on the
National Priority List ("NPL") subject to extensive monitoring and cleanup work.
In 1986, the Superfund Amendment and Reauthorization Act ("SARA") was
enacted and increased environmental remediation activities significantly. SARA,
among other things, authorized additional federal expenditures and expanded the
EPA's enforcement powers, which encouraged and facilitated settlements with
potentially responsible parties. Superfund was reauthorized as part of the 1991
federal budget, which appropriated $5.1 billion through 1994, and is currently
set for reauthorization. There has been considerable debate about several
provisions of SARA, and the Company is unable to ascertain the effect of the
proposed reauthorization at this time.
Other Federal Legislation The Company believes that in addition to RCRA and
CERCLA, other federal laws will affect demand for its services. These laws
include the Toxic Substances Control Act, the Clean Water Act, the Clean Air Act
and the Safe Drinking Water Act.
State Legislation The federal statutes summarized above presuppose
significant state involvement in their administration and enforcement. Many
states have enacted their own statutes designed to protect and restore
environmental quality and to deal directly with the problem of soil and
groundwater contamination; and in some cases these statutes are different or
more stringent than the federal statutes. In addition, states have adopted
reimbursement programs to assist customers who are required to use the Company's
services. Some examples of these state reimbursement programs include the
Florida Inland Protection Trust Fund, the Massachusetts Underground Storage Tank
Petroleum Product Cleanup Fund, the Texas Petroleum Storage Tank Remediation
Fund and the California Underground Storage Tank Cleanup Fund.
5
Permits, Licenses and Regulatory Approvals The installation and operation
of remediation systems are subject to various licensing, permitting, approval
and reporting requirements imposed by federal, state and local laws. For
example, National Pollutant Discharge Elimination System ("NPDES") permits and
other regulatory program permits are typically required in connection with the
installation of the recovery system, and the terms of these permits often
require ongoing reporting to governmental agencies concerning the operation of
the recovery system. Approvals of corrective action plans by the appropriate
regulatory agency is increasingly being required before a recovery system can be
installed to address contaminated soil or groundwater due to a release from an
underground storage tank.
Various state and local laws require the monitoring wells and wells used in
the recovery process to be installed by licensed well drillers, and installation
of the recovery system may also require compliance with applicable provisions of
construction and zoning laws. Some states have also adopted testing and
licensing programs to regulate professionals who typically conduct subsurface
investigations and propose remedial action work plans.
Fluor Daniel GTI employs individuals who specialize in obtaining the
required federal, state and local environmental and operational permits
necessary for the Company and its customers to install and operate remediation
systems. The Company also provides the documentation of the recovery process
necessary to assist its customers in satisfying applicable reporting
requirements.
CUSTOMERS AND MARKETING
The Company provides services to a broad range of customers, including
petroleum companies, industrial companies, government agencies and international
customers. The Company has also worked with a number of engineering and
consulting firms in both the private and public sectors that manage projects
requiring the Company's services; however, given the new affiliation with Fluor
Daniel, the Company anticipates that it will have fewer opportunities to work as
a subcontractor with other engineering and construction firms.
Industrial customers principally include large companies in the chemicals,
manufacturing, utility, electronics, real estate and transportation industries.
In the public sector, the Company's principal customers are federal government
agencies, including the Department of Defense and the U.S. Army Corps of
Engineers, and other federal and state agencies. FDESI's primary clients include
the Department of Defense and the EPA.
The Company anticipates that the affiliation with Fluor Daniel will create
new opportunities for the Company to market its services. The government market
has recently begun to indicate a preference for awarding substantial work to
single source providers. In addition, customers in the industrial markets are
moving from the assessment phase of their environmental projects into the
remediation phase. In this next phase of the environmental projects, substantial
resources in engineering and construction capabilities will be required. Under
the Marketing Agreement, the Company has access to the program management and
engineering and construction capabilities of Fluor Daniel necessary to compete
for this work.
Within the North American operations, the Company focuses its marketing and
operational staff on three major markets - petroleum, industrial/commercial and
government. Fluor Daniel GTI believes this market- centered focus, along with
its geographic diversification, allows it to provide responsive services to its
customers. Currently, most of the Company's jobs are performed for repeat
customers, and in the case of large petroleum and certain industrial customers,
pursuant to year-to-year, non-exclusive national buying contracts. There are no
minimum purchase requirements associated with these contracts.
In the Transition Period, no single customer accounted for more than 10% of
the Company's revenues; and approximately 32% of revenues were derived from
petroleum customers, 39% from industrial/commercial
6
customers and 22% from federal, state and local government agencies. In
addition, approximately 7% of revenues in the Transition Period were derived
from international customers. In the three years ended April 30, 1996, 1995 and
1994 the percent of FDESI revenues derived from the Department of Defense were
29.2%, 28.9% and 4.1% and from the EPA were 20.4%, 10.5% and 8.6%, respectively.
Although Fluor Daniel GTI relies on repeat customers and work generated
through referrals and seminar appearances for a significant portion of its new
business, the Company maintains a dedicated sales force. At the end of the
transition period, the Company had 36 professionals dedicated to sales, and it
has a National Accounts Program to develop and maintain long-term relationships
with customers.
In the last several years, an increasing amount of work has been done on a
competitive basis in response to customer requests for proposals. This has
required the dedication of significantly greater resources to proposal writing
and general business development. In addition, the Company has instituted an
extensive training and marketing program featuring internal and external
seminars and a comprehensive sales incentive plan. The Company is focusing its
direct sales and marketing efforts towards retaining its position in the retail
petroleum market and achieving continued growth in the upstream petroleum,
industrial and government markets.
PERSONNEL
As of October 31, 1996, the Company had 1,394 employees. Of these 1,079 are
skilled professionals (geologists, hydrogeologists, engineers, chemists and
environmental scientists) who perform services in the field, 36 in sales and 279
in administrative support, financial, legal and accounting functions.
The soil and groundwater remediation services market is very competitive
and requires highly skilled, experienced technical and management personnel. The
Company's ability to remain competitive is partially dependent on its ability to
attract and retain qualified personnel. None of the Company's employees are
represented by a labor organization. The Company considers its relations with
its employees to be satisfactory.
COMPETITION AND SEASONAL FACTORS
The markets in which the Company competes are very competitive. In each
specific service area of its business the Company competes with many engineering
and consulting firms that are both larger and smaller than the Company, although
no firm currently dominates any significant portion of those services. The
Company competes primarily on the basis of differentiated service quality,
reputation, expertise, geographic location and, to a lessor extent, price.
The Company's quarterly results may fluctuate. Factors influencing such
variations include: spending decisions by major customers; delays in the release
of committed projects; weather; holidays and vacation time, which limit the
amount of time Company professional and technical personnel have in the field;
and the level of subcontracted services.
POTENTIAL LIABILITY AND INSURANCE
A majority of the Company's revenues are derived from work involving
hazardous materials, toxic wastes and other pollutants that present significant
risks of liability for environmental damage, personal injury, fines and costs
imposed by regulatory agencies. Although liabilities arising from environmental
regulations are more directly applicable to the Company's customers, these
regulations, under certain circumstances, could impose liability on the Company,
and these liabilities can be joint and several where other parties are involved.
Although the Company does not believe its services generally fall within any of
these categories, when the Company's remedial activities at any site involve the
treatment, storage or disposal of hazardous waste, it must
7
adhere to the permitting and substantive requirements of these regulations.
Fluor Daniel GTI, through its in situ and on-site capabilities, attempts to
minimize for its customers the need to transport hazardous substances. When
transportation is required, the customers themselves generally arrange for the
disposal of hazardous substances. In certain circumstances, however, the Company
may subcontract for the transportation and disposal of hazardous substances to
treatment, storage or disposal facilities for certain customers.
The non-environmental liabilities associated with the Company's services
also involve a significant degree of risk. In addition, a substantial number of
the Company's contracts with its customers require the Company to indemnify the
customer for claims, damages or losses for personal injury or property damage
relating to the Company's performance of the contracts, unless such injury or
damage is the result of the customer's negligent or willful acts or omissions.
Fluor Daniel GTI maintains health and safety and quality assurance/quality
control programs to reduce the risk of potential damage to persons and property,
as well as other losses. During the Transition Period, the Company maintained
its environmental impairment liability coverage with its professional liability
coverage under one policy. While the Company believes it operates safely and
prudently, there are various exclusions under its insurance policies and there
can be no assurance that all possible liabilities that may be incurred by the
Company are covered by its insurance or that the dollar amount of such
liabilities will not exceed the Company's policy limits. Further, the cost and
limited availability of insurance has resulted in the Company's use of
self-insurance under certain policies. Management believes an adequate level of
insurance coverage has been provided. Prior to the Change in Control
Transactions, FDESI's insurance was provided by Fluor Daniel. This coverage
ceased to be provided by Fluor Daniel at completion of the merger.
PATENTS AND TECHNOLOGY
Fluor Daniel GTI believes that its intellectual property and know-how are
important to its business and have been established by the Company through its
technical expertise, understanding of regulations, skill in the design and
implementation of treatment processes, and investment in technology development.
The Company has filed several patent applications covering remediation processes
and claims copyright and trade secret protection on certain computer software,
publications and technical standard operating procedures. The Company does not
believe that such patent applications and copyrights are a material factor in
its business.
FACTORS AFFECTING FUTURE PERFORMANCE
This Report contains a discussion of a number of factors that may affect
future performance of the Company. In addition to those factors, the following
discussion highlights other risks.
Uncertainty of Government Market for Environmental Services. The Company's
affiliation with Fluor Daniel is intended to increase the ability of the Company
to further penetrate the market for environmental services, particularly
services for the federal government. The size of the government market and the
extent of that market's demand for environmental services, however, is subject
to change based on, among other factors, legislative and regulatory developments
and budget and spending decisions of governmental bodies. There can be no
assurance that the demand for environmental services in the government market
will achieve or remain at levels that will permit the Company to grow by
penetration of such market, and any reduction in the size of the government
market could have an adverse effect on the Company's financial condition and
operating results.
Difficulty of Implementing Marketing Strategy. Growth of the Company
through further penetration of the environmental services market, particularly
services for the federal government, is dependent upon the Company's ability to
realize the benefits of the relationship with Fluor Daniel contemplated by the
Marketing
8
Agreement and the integration of FDESI with the Company. Substantial attention
and a high level of coordination from management of both the Company and Fluor
Daniel will be required to realize the anticipated benefits of the relationship.
Further, the attention and resources devoted by Fluor Daniel to the
implementation and realization of the potential benefits of the relationship are
not within the control of the Company, and there can be no assurance that Fluor
Daniel will either devote the necessary attention and resources to successfully
implement the Marketing Agreement or that it will perform its obligations under
the Marketing Agreement. The diversion of the attention of the Company's
management from other aspects of the Company's business, and any difficulties
encountered in the implementation process, could have an adverse impact on the
revenues and operating results of the Company. There can be no assurance that
the anticipated benefits of the relationship will be realized.
Deterrence of Potential Customers. The Company anticipates that its close
affiliation with Fluor Daniel could deter other large engineering and
construction firms that compete with Fluor Daniel from retaining the Company as
a subcontractor or teaming partner for projects requiring environmental
services.
ITEM 2. PROPERTIES
The Company's executive offices are located in a 40,340 square foot office
leased in Norwood, Massachusetts, a suburb of Boston. The term of the Company's
lease for this office space expires July 31, 2002.
The Company owns two buildings - a 15,540 square foot, one-story brick and
concrete building in Wichita, Kansas, which is leased to a third party, and a
6,050 square foot, two-story building in Kingsgrove, Australia, which houses
consulting and administrative staff. The Company leases space for offices and
warehouses in 62 cities in the United States, as well as Canada, the United
Kingdom, Australia, The Netherlands and Italy. Sizes of leased space range from
150 square feet to 42,000 square feet. Lease terms for offices typically range
from one to seven years.
The Company believes that its existing facilities are adequate to meet
current requirements and that suitable additional or substitute space will be
available as needed to accommodate any expansion of operations and for
additional offices.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of claims and lawsuits incidental to the
ordinary conduct of its business. Based upon analyses of the facts underlying
these matters and upon discussions with counsel, management does not believe
that the outcome of any or all of these matters will have a material adverse
effect upon its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. An Annual Meeting of the Company was held on September 18,
1996.
b. The number of Directors of the Company was set at seven, and
the following individuals were elected directors to serve
until the next annual meeting of stockholders and until
their successors are duly elected and qualified: Allan S.
Bufferd, Robert P. Schechter, Ernie Green, David L. Myers,
J. Michal Conaway, James C. Stein and Walter C. Barber.
9
<TABLE>
<CAPTION>
c. Proposal I For Withheld No-Vote
---------- --- -------- -------
<S> <C> <C> <C>
Election of Directors
Allan S. Bufferd 7,647,778 98,776 --
Robert P. Schechter 7,647,238 99,316 --
Ernie Green 7,647,254 99,300 --
David L. Myers 7,647,358 99,196 --
J. Michal Conaway 7,647,492 99,062 --
James C. Stein 7,646,463 100,091 --
Walter C. Barber 7,645,005 101,549 --
Proposal II For Against Abstain No-Vote
----------- --- ------- ------- -------
Selection of Auditors
Coopers & Lybrand 7,738,292 2,519 5,743 ---
</TABLE>
d. Effective December 31, 1996, Mr. Schechter resigned as a
director of the Company.
10
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are listed below:
<TABLE>
<S> <C> <C>
Walter C. Barber...................55 President and Chief Executive Officer
Wendell W. Lattz...................44 Senior Vice President and General Manager, South
Region
J. Steven Paquette.................42 Vice President and General Manager, North Region
David L. Backus....................55 Vice President and General Manager, West Region
Rhonnie L. Smith...................54 Vice President and General Manager, Government
Services Division
Robert E. Sliney, Jr...............46 Vice President, Treasurer and Chief Financial
Officer
Glenn V. Batchelder ...............35 Vice President of Sales and Marketing
Anne Nolan.........................48 Vice President of Human Resources
Catherine L. Farrell...............52 Vice President, General Counsel and Secretary
</TABLE>
Walter C. Barber has served as President and Chief Executive Officer since
joining the Company in 1989. From 1983 to 1989, Mr. Barber was Vice President of
Environmental Management and Administration of Chemical Waste Management Inc., a
hazardous waste management services company. Previously, Mr. Barber was Director
of Research and Technology Development for the Uranium Mill Tailings Project of
Jacobs Engineering Group, Inc., an engineering and construction firm. Mr. Barber
was also an executive with the U.S. Environmental Protection Agency, holding
positions as its Director of the Office of Air Quality Planning and Standards
and as Director of the Standards and Regulations Division.
Wendell W. Lattz joined the Company in 1991 and currently serves as Senior
Vice President and General Manager, South Region. Prior to joining the Company,
from 1985 to 1991, Mr. Lattz was General Manager of Chemical Waste Management of
Indiana, Inc., a hazardous waste treatment and disposal company.
J. Steven Paquette is Vice President and General Manager, East Region for
the Company. Between 1993 and May 1996, he served as President of Groundwater
Technology Government Services, Inc., a subsidiary of the Company. Prior to
joining the Company, from 1990 to 1992, he served as Senior Vice President and
Northeast Division Manager, and from 1987 to 1990, he served as Vice President
of Eastern Operations, for CDM Federal Programs Corporation, a wholly-owned
subsidiary of Camp Dresser & McKee, Inc., a provider of environmental
engineering and consulting services to agencies and departments of the Federal
government.
11
David L. Backus joined the Company in June 1996 as Vice President and
General Manager, West Region. Since June 1994, Mr. Backus has served as Vice
President of Environmental Strategies for Fluor Daniel, Inc., a global
construction, engineering, maintenance and services company. From 1991 to 1994,
he served as Vice President of Operations in charge of environmental operations
in the western United States for Dow Chemical Corporation; and from 1972 to
1991, he served as Senior Vice President and then President of Morrison Knudsen
Environmental Services, a unit of Morrison Knudsen Corporation, an engineering
and construction firm. Mr. Backus continues to be employed by Fluor Daniel while
serving the Company on a part time basis.
Rhonnie L. Smith joined the Company on May 10, 1996 as part of the merger
of the Company with Fluor Daniel Environmental Services, Inc., a subsidiary of
Fluor Daniel, Inc.; and he was formally elected Vice President and General
Manager, Government Services Division in June 1996. Prior to joining the
Company, from September 1994 to May 1996, Mr. Smith served as Vice President,
and General Manager, Federal Programs of Environmental Strategies for Fluor
Daniel. From 1989 to 1994, he served as Vice President of Eastern Operations for
Enserch Environmental Corporation, a provider of environmental engineering and
consulting services to agencies and departments of the federal government.
Robert E. Sliney, Jr. has served as Vice President, Treasurer and Chief
Financial Officer since joining the Company in 1992. From 1985 to 1992, Mr.
Sliney served as Controller and then Vice President and Chief Financial Officer
of Signal Technology Company, a component manufacturer in defense electronics.
From 1975 to 1985, Mr. Sliney was employed by the public accounting firm of
Coopers & Lybrand.
Glenn V. Batchelder has served as Vice President of Sales and Marketing
since 1995. Between 1986 and 1995, he served the Company in several capacities,
including Manager of the Company's former ORS Environmental Equipment Division
from 1992 until its sale in 1994, Vice President of Engineering from 1989 to
1992, and District Manager from 1986 to 1989.
Anne Nolan joined the Company in October 1994 as Director of Human
Resources and was elected Vice President of Human Resources in 1995. Prior to
joining the Company, from August 1989 to April 1994, Ms. Nolan served as Senior
Vice President and Director of Training and Organizational Development for Fleet
Financial Group, Inc., and from June 1987 to August 1989, she served as Human
Resources Manager for Digital Equipment Corporation.
Catherine L. Farrell has served as Vice President, General Counsel and
Secretary since joining the Company in 1992. From 1988 to 1992, Ms. Farrell
served as General Counsel to the Massachusetts Water Resources Authority, a
state agency providing sewer and water services. From 1984 to 1988, she served
as corporate counsel for the New England Division of Federated Department
Stores, Inc., a holding company for several retail clothing chains. Previously,
Ms. Farrell served as an attorney with the U.S. Environmental Protection Agency
and the Massachusetts Attorney General's office.
12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded under the symbol "FDGT" on the Nasdaq
National Market System. The following table sets forth, by quarter, the high and
low bid prices of the Company's common stock as reported by the Nasdaq National
Market System.
Transition Period ended
October 31, 1996
-------------------------
High Low
- --------------------------------------------------------------------------------
Quarter ended July 31, 1996 $14 $9
Quarter ended October 31, 1996 10 3/4 7
Share price information for the periods prior to the merger has been
omitted since Fluor Daniel Environmental Services, Inc. (FDESI), the predecessor
entity for accounting purposes, had no publicly traded equity securities.
As of January 6, 1997, the Company's common stock was held by 986 holders
of record. The Company has never paid cash dividends on its common stock and
currently has no intention to pay cash dividends in the foreseeable future. The
Company currently intends to retain any future earnings to finance the growth of
the Company.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Transition
Period ended
October 31, Fiscal years ended April 30,(1)
---------------------------------------------------------------
1996 1996 1995 1994 1993(3) 1992(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $89,063 $34,497 $35,425 $52,755 $41,253 $33,951
Income (loss) before provision for
income taxes 215 1,728 1,076 1,118 513 (1,581)
Net income (loss) 91 1,054 656 682 316 (980)
Earnings per share of common stock(2) .01 N/A N/A N/A N/A N/A
Working capital 56,955 4,536 2,661 1,155 1,515 2,267
Total assets $100,393 $5,365 $3,022 $1,475 $1,658 $2,267
Weighted average shares outstanding(2) 8,141 N/A N/A N/A N/A N/A
</TABLE>
The Company has never paid cash dividends on its common stock and has no
present intention to pay cash dividends in the foreseeable future.
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. (FDESI), the predecessor entity for accounting purposes.
(2) Share price information for the periods prior to the merger has been omitted
since Fluor Daniel Environmental Services, Inc. (FDESI), the predecessor entity
for accounting purposes, had no publicly traded equity securities.
(3) Unaudited.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
A. GENERAL - FLUOR DANIEL GTI, INC.
On May 10, 1996, the Company closed a series of transactions (the "Change
of Control Transactions") pursuant to which it became a majority-owned
subsidiary of Fluor Daniel, Inc. ("Fluor Daniel"), a global construction,
engineering, maintenance and services company. The Change of Control
Transactions included a recapitalization of the Company's common stock, and the
merger of one of the Company's subsidiaries and Fluor Daniel Environmental
Services, Inc. ("FDESI"), a wholly-owned subsidiary of Fluor Daniel that
provides environmental services primarily to agencies of the federal government.
In exchange for FDESI and $35 million in cash, Fluor Daniel received 4,400,000
shares of the Company's "new" common stock and an option to purchase 1,768,970
additional shares at $13.1274 per share that expires on December 11, 1998. In
the recapitalization, each holder of "old" common stock received $8.62 in cash
and .5274 of a share of "new" common stock of the Company. In addition, the
Company entered into a Marketing Agreement with Fluor Daniel, and the Company
changed its name from "Groundwater Technology, Inc." to "Fluor Daniel GTI, Inc."
to emphasize the new relationship.
The merger of GTI and FDESI was treated as a reverse acquisition for
accounting purposes, and therefore, the balance sheets as of April 30, 1996 and
1995 and the related statements of operations, cash flows and parent company
investment for each of the three years in the period ended April 30, 1996
represent the historical results of FDESI, which is the predecessor entity.
The Company has changed its year end from April 30 to October 31.
Accordingly, the Company began a new 12-month fiscal year on November 1, 1996.
The six month period resulting from this change, May 1, 1996 through October 31,
1996, is referred to as the "Transition Period."
Financial results for the Transition Period ended October 31, 1996 include
the operations of GTI as if the merger had occurred on May 1, 1996. Financial
activity for the period May 1, 1996 through May 9, 1996 was not significant.
The Company's services are primarily related to the assessment and
remediation of contaminated soil and groundwater for customers in a variety of
industries and for federal and state governments. The demand for the Company's
services is a result of governmental regulation and enforcement related to
hazardous contaminants in the environment.
Revenue includes fees billed for services provided directly by the Company
and fees charged by the Company for arranging and managing subcontractor
services. Cost of sales includes professional salaries incurred in rendering
services to customers, other direct labor, purchases of equipment and materials
and certain direct and indirect overhead costs. Selling, general and
administrative expenses includes management salaries, facility costs, and
clerical and administrative overhead. License and other income includes license
and royalty income earned on the Company's intellectual property and income from
direct equity investments in the environmental industry.
As of October 31, 1996, the Company had 62 consulting offices in 31 states
and 5 foreign countries, including Australia, the United Kingdom, Canada, Italy
and the Netherlands. Additionally, the Company's joint venture with a German
company had offices in Germany, Austria and Hungary. Total employees as of
October 31, 1996 was 1,394.
14
TRANSITION PERIOD ENDED OCTOBER 31, 1996 COMPARED WITH SIX MONTHS ENDED OCTOBER
31, 1995
Revenue for the Transition Period were $89.1 million. The Company continued
to experience a decrease in work from petroleum customers and the federal
government as well as continued competition within almost all assessment and
remediation markets.
Gross profit for the Transition Period was $19.1 million. As a percentage
of revenues, gross profit for the Transition Period was 21.5%. The gross profit
for the Transition Period has been impacted by continued pricing pressures for
services performed and it is not expected that the Company's performance will
significantly improve in the near term.
Selling, general and administrative for the Transition Period was $20.4
million. There were no unusual expenses in selling, general and administrative
during this period.
License and other income for the Transition Period was $1.1 million.
License and other income was impacted by the receipt of $889,000 from the sale
of an investment.
The tax rate at 57.7% for the Transition Period was unusually high, mainly
due to the impact of state taxes. State taxes were not reduced significantly
relative to the low income for the period because their computation is based on
a number of components such as equity and revenue. The tax rate was also
adversely affected by expense items which are not tax deductible, such as meals
and entertainment and certain portions of goodwill.
Pro forma results for the six months ended October 31, 1995, presented as
though the merger of FDESI and GTI had occurred on May 1, 1995, were net income
of approximately $1.0 million on revenues of approximately $105.0 million.
Inflation/Foreign Currency Transactions
- ---------------------------------------
The Company's operations have not been, and in the foreseeable future are
not expected to be, materially affected by inflation, changing prices or
fluctuations in the exchange rates for foreign currency transactions.
B. GENERAL - FLUOR DANIEL ENVIRONMENTAL SERVICES, INC. (PREDECESSOR ENTITY)
The financial data presented herein reflects the financial position and
results of operations as if the contracts and personnel which constitute the
environmental remediation business of Fluor Daniel had been operating entirely
through FDESI for all periods presented. Operations reflect environmental
remediation contract work performed by Fluor Daniel personnel for federally
funded non-Department of Energy contracts, remediation projects for other
government agencies and environmental risk assessment, permitting and
remediation for commercial clients, for the periods presented. Additionally,
FDESI provides certain environmental consulting services to Fluor Daniel and
other affiliated entities.
Indirect expenses include non-project costs of environmental services
personnel assigned to the environmental operations of Fluor Daniel who are
available to provide services to FDESI's clients and other Fluor Daniel clients.
Additionally, other indirect expenses primarily include charges from Fluor
Daniel for the fair value of rent for occupied space, computer usage and other
costs. There has been no allocation of corporate general and administrative
expenses by Fluor Daniel as management believes that no significant general and
administrative expenses were incurred with respect to FDESI's operations beyond
those reflected in the financial statements.
15
FDESI's operations include projects in both the commercial and government
sectors. Although the mix of projects fluctuates from year to year, government
projects represent a significant portion of total revenues. The uncertain timing
of project awards can create variability in FDESI's operations, consequently,
trends are difficult to predict with certainty.
The effective tax rate on earnings is essentially unchanged for all periods
presented. Under a tax allocation practice, FDESI is charged or credited by
Fluor Daniel for federal income taxes, if any, generally at the U.S. statutory
rate. FDESI is also charged or credited for state income taxes.
FISCAL 1996 COMPARED WITH FISCAL 1995
- -------------------------------------
Revenues and net income for the year ended April 30, 1996 were $34,497,000
and $1,054,000, respectively, compared with $35,425,000 and $656,000 for the
year ended April 30, 1995. The decrease in revenues is primarily attributable to
lower revenues on Department of Defense ("DOD") contracts in 1996 compared with
1995. This decrease was partially offset by higher revenues on commercial
projects in 1996 compared with 1995. Government projects contributed 50% of
total revenues for the year ended April 30, 1996 compared with 39% for the same
period of 1995.
Total indirect expenses increased to $6,935,000 for the year ended April
30, 1996 from $5,939,000 for the same period of 1995, due primarily to increased
proposal costs for environmental remediation on DOD prospects.
FISCAL 1995 COMPARED WITH FISCAL 1994
- -------------------------------------
Revenues and net income for the year ended April 30, 1995 were $35,425,000
and $656,000, respectively, compared with $52,755,000 and $682,000 for the year
ended April 30, 1994. The decrease in revenues is primarily attributable to the
completion of two large commercial projects in early 1995. These projects
contributed $10,174,000 to total revenues in 1995 compared with $39,408,000 in
1994. This decrease was partially offset by higher revenues on DOD contracts in
1995 compared with 1994. Government projects contributed 39% of total revenues
for the year ended April 30, 1995 compared with 13% for the year ended April 30,
1994.
Total indirect expenses increased to $5,939,000 for the year ended April
30, 1995 from $4,229,000 for the same period of 1994 due primarily to increased
proposal costs for environmental remediation on DOD prospects. These increased
costs contributed to a net loss of approximately $200,000 experienced in the
last half of fiscal 1995.
C. FINANCIAL POSITION AND LIQUIDITY
At October 31, 1996, the Company's primary source of liquidity was $6.7
million in cash, cash equivalents and marketable securities. The Company has no
long-term borrowings. At October 31, 1996, the Company had a line of credit with
a bank providing for borrowings up to $10.0 million through April 30, 1999.
There have been no borrowings under the line of credit.
The Company used $3.1 million in net cash to fund operating activities
during the Transition Period ended October 31, 1996. At October 31, 1996, the
Company's working capital was $57.0 million. Total assets were $100.4 million at
the end of the same period.
16
Cash flows from investing activities were impacted by approximately $2.1
million of expenditures in property, plant and equipment that were made to
upgrade the Company's computer and rental equipment. The Company had no material
commitments for capital expenditures as of October 31, 1996 and estimates
spending for the next twelve months to be approximately $3.6 million,
principally for the general expansion of operations and replacement of
depreciated assets.
Prior to the Change of Control Transactions, FDESI, the predecessor
company, was dependent upon Fluor Daniel for continued financing, including
funding required, if any, for settlement of claims, working capital requirements
and third party bid and performance guarantees made in the ordinary course of
business; and FDESI advanced to and received non-interest bearing funds from
Fluor Daniel. The funding mechanism ceased to exist at completion of the Change
of Control Transactions.
Funding requirements for operations are expected to be met from existing
cash, cash equivalents, marketable securities and cash generated from
operations. The Company believes that cash provided from these sources will be
sufficient to meet its operating requirements for the near term.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is set forth in the Company's
Consolidated Financial Statements and supplementary data contained in this
report and is incorporated herein by this reference. Specific financial
statements and supplementary data can be found at the pages listed in the
following index.
<TABLE>
<CAPTION>
Index Page
----- ----
<S> <C>
Reports of Independent Accountants...............................................................................F-2
Consolidated Statements of Operations for the Transition Period ended October 31, 1996
and for each of the three years ended April 30, 1996, 1995, and 1994.............................................F-4
Consolidated Balance Sheets at October 31, 1996, April 30, 1996 and 1995.........................................F-5
Consolidated Statements of Cash Flows for the Transition Period ended October 31, 1996
and for each of the three years ended April 30, 1996, 1995, and 1994.............................................F-6
Consolidated Statements of Stockholders' Equity and Parent Company Investment
for the Transition Period ended October 31, 1996 and for each of the three
years ended
April 30, 1996, 1995 and 1994....................................................................................F-7
Notes to Consolidated Financial Statements.......................................................................F-8
Selected Quarterly Financial Data (unaudited)...................................................................F-17
Schedule II - Valuation and Qualifying Accounts. . . ...........................................................F-18
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and, therefore, have been omitted.
17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 12, 1996, the Company dismissed the accounting firm of Coopers
& Lybrand L.L.P ("C&L") and engaged the accounting firm of Ernst & Young LLP
("E&Y") to be the Company's independent accountants for the fiscal year ending
October 31, 1997. The Company's Board of Directors approved the decision to
change accountants upon the recommendation of the Company's Audit Committee.
E&Y serves as independent accountants for the Company's parent company,
Fluor Daniel, Inc. and Fluor Daniel, Inc.'s former subsidiary, Fluor Daniel
Environmental Services, Inc. ("FDESI"), which was merged with and became a
subsidiary of the Company on May 10, 1996.
On July 26, 1995, the Company had dismissed E&Y and engaged C&L to be the
Company's independent accountants for the fiscal year ended April 27, 1996. C&L
also was engaged to be the independent accountants for the Transition Period May
1, 1996 through October 31, 1996, which resulted from the Company changing its
fiscal year end to October 31, the fiscal year-end of Fluor Daniel, Inc.
During the period of engagement of C&L there have been no "disagreements"
between the Company and C&L on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, or any
"reportable events", as those terms are defined in Item 304 of Regulation S-K.
C&L's reports on the consolidated financial statements for the fiscal year
ended April 27, 1996 and the Transition Period ended October 31, 1996 contained
no adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principles.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item, other than the information appearing
in Part I hereof in "Executive Officers", may be found in the section captioned,
"Election of Directors" in the Company's definitive Proxy Statement in
connection with the 1997 Annual Meeting of Stockholders to be held on March 19,
1997. Such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item may be found in the section
captioned, "Executive Compensation" in the Company's definitive Proxy Statement
in connection with the 1997 Annual Meeting of Stockholders to be held on March
19, 1997. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item may be found in the sections
captioned, "Share Ownership of Principal Holders and Management" and "Election
of Directors" in the definitive Proxy Statement in connection with the 1997
Annual Meeting of Stockholders to be held on March 19, 1997. Such information is
incorporated herein by reference.
18
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item may be found in the section
captioned, "Executive Compensation" in the definitive Proxy Statement in
connection with the 1997 Annual Meeting of Stockholders to be held on March 19,
1997. Such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS:
The list of financial statements required by this item is set forth in Item
8 "Consolidated Financial Statements and Supplementary Data" and is incorporated
herein by reference.
(2) FINANCIAL STATEMENT SCHEDULE:
<TABLE>
<CAPTION>
Location in
this Report
-----------
<S> <C>
Schedule II - Valuation and Qualifying Accounts....................................................................F-18
</TABLE>
All other schedules are omitted because they are inapplicable, not
required, or the information is included elsewhere in the Consolidated Financial
Statements or the notes thereto.
(3) EXHIBITS:
The following exhibits are filed herewith or incorporated by reference as
indicated below.
Number Description of Exhibit
------ ----------------------
3.01 Amended and Restated Certificate of Incorporation
(filed as Exhibit 3.1 to Current Report on Form 8-K for
May 10, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
3.02 By-Laws, as amended (filed as Exhibit 3.2 to Current
Report on Form 8-K for May 10, 1996 with the Securities
and Exchange Commission and incorporated herein by
reference.)
10.01* Amended and Restated 1986 Employee Stock Purchase Plan,
as amended (filed as Exhibit 10.01 to Annual Report on
Form 10-K for the year ended April 27, 1996 with the
Securities and Exchange Commission and incorporated
herein by reference.)
10.02* Amended and Restated 1986 Employee Stock Purchase Plan
Enrollment Form (filed as Exhibit 10.02 to Annual
Report on Form 10-K for the year ended April 27, 1996
with the Securities and Exchange Commission and
incorporated herein by reference.)
10.03* Amended and Restated 1987 Stock Plan, as amended (filed
as Exhibit 10.03 to Annual Report on Form 10-K for the
year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by
reference.)
19
10.04* Form of Non-qualified Stock Option Agreement under the
Company's Amended and Restated 1987 Stock Plan (filed
as Exhibit 10.04 to Annual Report on Form 10-K for the
year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by
reference.)
10.05* Amended and Restated 1995 Director Stock Option Plan,
as amended (filed as Exhibit 10.05 to Annual Report on
Form 10-K for the year ended April 27, 1996 with the
Securities and Exchange Commission and incorporated
herein by reference.)
10.06* Form of Option Agreement under the Company's Amended
and Restated 1995 Director Stock Option Plan (filed as
Exhibit 10.06 to Annual Report on Form 10-K for the
year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by
reference.)
10.07* Retirement Savings Plan of the Company, as amended
(filed as Exhibit 10.10 to Annual Report on Form 10-K
for the year ended May 2, 1993 with the Securities and
Exchange Commission and incorporated herein by
reference.)
10.08* Amendment to Retirement Savings Plan of the Company
(filed as Exhibit 10.11 to Annual Report on Form 10-K
for the year ended April 29, 1995 with the Securities
and Exchange Commission and incorporated herein by
reference.)
10.09* Employment Agreement between the Company and Walter C.
Barber (filed as Exhibit 10.09 to Annual Report on Form
10-K for the year ended April 27, 1996 with the
Securities and Exchange Commission and incorporated
herein by reference.)
10.10* Form of Employment Agreement between the Company and
each of its Executive Officers (filed as Exhibit 10.10
to Annual Report on Form 10-K for the year ended April
27, 1996 with the Securities and Exchange Commission
and incorporated herein by reference.)
10.11* Restricted Stock Award Agreement under the Company's
Amended and Restated 1987 Stock Plan between the
Company and Walter C. Barber (filed as Exhibit 10.11 to
Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.12* Non-Qualified Option Agreement under the Company's
Amended and Restated 1987 Stock Plan between the
Company and Walter C. Barber (filed as Exhibit 10.12 to
Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.13* Profit Sharing Plan (filed as Exhibit 10.14 to Annual
Report on Form 10-K for the year ended April 29, 1995
with the Securities and Exchange Commission and
incorporated herein by reference.)
10.14 Lease for 100 River Ridge Drive, Norwood, Massachusetts
(filed as Exhibit 10.15 to Annual Report on Form 10-K
for the year ended May 2, 1992 with the Securities and
Exchange Commission and incorporated herein by
reference.)
10.15 Third Amendment to Lease for 100 River Ridge Drive,
Norwood, Massachusetts (filed as Exhibit 10.13 to
Annual Report on Form 10-K for the year ended April 29,
1995 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.16 Fourth Amendment to Lease for 100 River Ridge Drive,
Norwood, Massachusetts (filed as Exhibit 10.16 to
Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
20
10.17 Revolving Credit Agreement and Revolving Time Note,
each dated April 4, 1996 between the Company and Fleet
National Bank (filed as Exhibit 10.17 to Annual Report
on Form 10-K for the year ended April 27, 1996 with the
Securities and Exchange Commission and incorporated
herein by reference.)
10.18 Investment Agreement dated as of December 11, 1995
between the Company and Fluor Daniel, Inc. (with
respect to Section 6.3 thereof) (filed as Exhibit 2.1
to Quarterly Report on Form 10-Q for the period ended
January 27, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
10.19 Option Agreement dated as of December 11, 1995 between
the Company and Fluor Daniel, Inc. (filed as Exhibit
10.1 to Quarterly Report on Form 10-Q for the period
ended January 27, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
10.20 First Amendment to Option Agreement dated as of May 30,
1996 between the Company and Fluor Daniel, Inc. (filed
as Exhibit 10.20 to Annual Report on Form 10-K for the
year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by
reference.)
10.21 Marketing Agreement dated as of May 10, 1996 between
the Company and Fluor Daniel, Inc. (filed as Exhibit
10.2 to Current Report on Form 8-K for May 10, 1996
with the Securities and Exchange Commission and
incorporated herein by reference.)
10.22* 1997 Stock Plan.
10.23* Form of Non-Qualified Stock Options Agreement under the
Company's 1997 Stock Plan.
21.1 Subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand L.L.P
23.2 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
- --------
* Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form pursuant to Item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K. None for the quarter ended October 31, 1996.
(C) EXHIBITS. The Company hereby files as exhibits to this Annual Report on
Form 10-K those exhibits listed in Item 14(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES. The response to this portion of Item 14
is submitted as a separate section of this report.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FLUOR DANIEL GTI, INC.
by /s/ Walter C. Barber
-------------------------
WALTER C. BARBER
President and Chief
Executive Officer
January 28, 1997
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
President,
Chief Executive Officer
/s/ Walter C. Barber and Director
- ---------------------------------------- (Principal Executive Officer) January 28, 1997
WALTER C. BARBER
Vice President,
Chief Financial Officer, and
/s/ Robert E. Sliney, Jr. Treasurer (Principal Financial Officer
- ---------------------------------------- and Principal Accounting Officer) January 28, 1997
ROBERT E. SLINEY, JR.
/s/ D.L. Myers Chairman of the Board January 28, 1997
- ----------------------------------------
DAVID L. MYERS
/s/ Ernie Green Director January 28, 1997
- ----------------------------------------
ERNIE GREEN
22
/s/ Allan S. Bufferd Director January 28, 1997
- --------------------------------------
ALLAN S. BUFFERD
/s/ James C. Stein Director January 28, 1997
- ---------------------------------------
JAMES C. STEIN
/s/ J. Michal Conaway Director January 28, 1997
- -----------------------------------
J. MICHAL CONAWAY
</TABLE>
23
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(ITEM 14(A)(1) AND (2))
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Accountants.......................................................................F-2
Consolidated Statements of Operations for the Transition Period ended October 31,
1996 and for each of the three years ended April 30, 1996, 1995, and 1994................................F-4
Consolidated Balance Sheets at October 31, 1996, April 30, 1996 and 1995.................................F-5
Consolidated Statements of Cash Flows for the Transition Period ended October 31,
1996 and for each of the three years ended April 30, 1996, 1995 and 1994.................................F-6
Consolidated Statements of Stockholders' Equity and Parent Company Investment
for the Transition Period ended October 31, 1996 and for each of the three years
ended April 30, 1996, 1995, and 1994.....................................................................F-7
Notes to Consolidated Financial Statements...............................................................F-8
Selected Quarterly Financial Data (unaudited)............................................................F-17
Schedule II - Valuation and Qualifying Accounts..........................................................F-18
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and, therefore, have been omitted.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Fluor Daniel GTI, Inc.
We have audited the accompanying consolidated balance sheet of Fluor Daniel GTI,
Inc. as of October 31, 1996 and the related consolidated statement of
operations, stockholders' equity, and cash flow and the financial statement
schedule listed in Item 14(a) of the Report on Form 10-K for the Transition
Period then ended. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Fluor Daniel GTI,
Inc. at October 31, 1996, and the consolidated results of its operations and its
cash flows for the Transition Period then ended in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
------------------------
Boston, Massachusetts
December 11, 1996
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Fluor Daniel Environmental Services, Inc.
We have audited the accompanying balance sheets of Fluor Daniel Environmental
Services, Inc. as of April 30, 1996 and 1995, and the related statements of
operations, cash flows and parent company investment for each of the three years
in the period ended April 30, 1996. 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.
As more fully described in Notes 1 and 7, the Company was a wholly owned
subsidiary of Fluor Daniel, Inc. and has material transactions with Fluor
Daniel, Inc. and its affiliates.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Fluor Daniel Environmental
Services, Inc. at April 30, 1996 and 1995 and results of its operations and its
cash flows for each of the three years in the period ended April 30, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Orange County, California
December 10, 1996
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Transition Period ended Fiscal years ended April 30,(1)
October 31, 1996 1996 1995 1994
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $89,063 $34,497 $35,425 $52,755
Cost of revenues 69,951 25,834 28,410 47,408
--------- -------- -------- --------
Gross profit 19,112 8,663 7,015 5,347
Selling, general and administrative expenses 20,382 -- -- --
Indirect expenses -- 6,935 5,939 4,229
License and other income 1,132 -- -- --
---------- ------------ ------------ ------------
Income (loss) before investment and interest income (138) 1,728 1,076 1,118
Investment and interest income, net 353 -- -- --
----------- ------------ ------------ ------------
Income before provision for income taxes 215 1,728 1,076 1,118
Provision for income taxes 124 674 420 436
----------- ---------- ---------- ----------
Net income $ 91 $ 1,054 $ 656 $ 682
=========== ======== ========= =========
Earnings per common share $ 0.01 N/A N/A N/A
Shares used to compute earnings per common share 8,141 N/A N/A N/A
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. (FDESI), the predecessor entity for accounting purposes.
F-4
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
October 31, April 30, April 30,
Assets 1996 1996(1) 1995(1)
- ------ ---- ------- -------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,552 $ -- $ --
Marketable securities 4,101 -- --
Accounts receivable, less allowance of
$1,740 at October 31, 1996 and $0 at April 30, 1996 and 1995 46,438 2,644 2,617
Unbilled revenues 18,917 2,721 405
Deferred income taxes 937 -- --
Other current assets 2,525 -- --
----------- ---------- ----------
Total current assets 75,470 5,365 3,022
Deferred income taxes 2,967 -- --
Property, plant and equipment, net 7,776 -- --
Goodwill, net of accumulated amortization of $860 10,218 -- --
Other assets 3,962 -- --
----------- ----------- -----------
Total assets $100,393 $5,365 $3,022
=========== =========== ===========
Liabilities and Stockholders' Equity and Parent Company Investment
Current liabilities:
Accounts payable $ 8,034 $ -- $ --
Accrued salaries and benefits 4,023 -- --
Advance billings on contracts 452 737 361
Other accrued liabilities 5,905 92 --
Income taxes payable 101 -- --
------------ ---------- ----------
Total current liabilities 18,515 829 361
Commitments and contingencies (note 8)
Stockholders' equity and parent company investment:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none
issued; and no preferred stock authorized at April 30, 1996 or 1995 -- -- --
Common stock, $.001 par value, 25,000,000 shares
authorized, 8,155,832 issued and outstanding at October 31, 1996;
and $1.00 par value, 1,000 shares authorized, issued, and
outstanding at April 30, 1996 and 1995 8 1 1
Capital in excess of par value 81,003 335 335
Advances from parent -- 3,466 2,645
Retained earnings (deficit) 825 734 (320)
Cumulative currency translation adjustment 42 -- --
------------- ------------ -----------
Total stockholders' equity and parent company investment 81,878 4,536 2,661
------------- ------------ -----------
Total liabilities, stockholder's equity and parent company investment $100,393 $5,365 $3,022
============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Represents the financial position of Fluor Daniel Environmental Services,
Inc. (FDESI), the predecessor entity for accounting purposes.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Transition Period ended
October 31, Fiscal years ended April 30,(1)
1996 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 91 $1,054 $ 656 $ 682
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 2,354 -- -- --
Deferred income taxes (111) -- -- --
Loss on fixed assets 45 -- -- --
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable and unbilled revenues (6,532) (2,343) (1,547) 183
Other current assets 3,070 -- -- --
Other assets 102 -- -- --
Accounts payable (1,720) -- -- --
Accrued salaries and benefits 1,233 -- -- --
Advance billings on contract (285) 376 41 177
Other accrued liabilities (1,101) 92 -- --
Income taxes payable (273) -- -- --
Advances from (to) parent -- 821 850 (1,042)
------------- --------- -------- -------
Net cash used in operating activities (3,127) -- -- --
Cash flows from investing activities:
Expenditures for property, plant and equipment (2,065) -- -- --
Sale of fixed assets 815 -- -- --
Purchase of marketable securities (5,451) -- -- --
Sale of marketable securities 1,350 -- -- --
Investment in joint ventures 102 -- -- --
Other 263 -- -- --
Cash acquired in merger with Groundwater Technology, Inc. 36,729 -- -- --
Cash paid to shareholders (60,102) -- -- --
-------- ----------- ----------- ----------
Net cash used in investing activities (28,359) -- -- --
Cash flows from financing activities:
Proceeds from sale of stock under employee
stock plans and payments on employee notes 646 -- -- --
Cash received from Fluor Daniel, Inc. 33,350 -- -- --
--------- ----------- ----------- ----------
Net cash provided by financing activities 33,996 -- -- --
Effect of exchange rate changes on cash and cash equivalents 42 -- -- --
------------ ----------- ---------- -----------
Net increase in cash and cash equivalents 2,552 -- -- --
Cash and cash equivalents at beginning of year -- -- -- --
----------- ----------- ----------- ----------
Cash and cash equivalents at end of year $ 2,552 $ -- $ -- $ --
=========== =========== ========== ==========
Supplemental disclosures of cash flow information:
Received net assets from merger with Groundwater Technology, Inc. $70,858 -- -- --
Income taxes paid $ 513 -- -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. (FDESI), the predecessor entity for accounting purposes.
F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARENT COMPANY INVESTMENT
TRANSITION PERIOD ENDED OCTOBER 31, 1996 AND YEARS ENDED APRIL 30, 1996, 1995
AND 1994 (In thousands, except share amounts)
<TABLE>
<CAPTION>
Retained Currency
Common Stock Additional Earnings Advances (To) Translation
Shares Amount Paid in Capital (Deficit) From Parent Adjustment Total
------ ------ -------------- --------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 30, 1993 (1) 1,000 $1 $ 335 $(1,658) $2,837 $ -- $ 1,515
Advances to parent (1,042) (1,042)
Net income 682 682
BALANCE, APRIL 30, 1994 (1) 1,000 1 335 (976) 1,795 -- 1,155
Advances from parent 850 850
Net income 656 656
BALANCE, APRIL 30, 1995 (1) 1,000 1 335 (320) 2,645 -- 2,661
Advances from parent 821 821
Net income 1,054 1,054
BALANCE, APRIL 30, 1996 (1) 1,000 1 335 734 3,466 -- 4,536
Contribution of advances to capital 2,359 (2,359) --
Advances to parent (1,107) (1,107)
Return of capital (1,000) (1) (2,694) (2,695)
Transaction related costs (1,569) (1,569)
Issuance of new common stock (2) 8,076,466 8 81,565 81,573
Issuance of common stock to employees 79,366 988 988
Restricted stock repayment 19 19
Cumulative translation adjustment 42 42
Net income 91 91
BALANCE, OCTOBER 31, 1996 8,155,832 $8 $81,003 $ 825 $ -- $42 $81,878
========== === ======== ========== ========== === =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. (FDESI), the predecessor entity for accounting purposes.
(2) In the recapitalization, the former Groundwater Technology stockholders
received an aggregate of $60,102,000 in cash in addition to 3,676,000 shares
of "new" common stock of the Company.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS Fluor Daniel GTI, Inc. provides a broad range of
environmental consulting, engineering, and construction management services.
These services currently focus on the assessment and remediation of contaminated
soil and groundwater using a broad range of techniques an technologies. These
services are provided separately or in combination for customers in a variety of
industries and for federal and state governments.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Fluor Daniel GTI, Inc. and its wholly owned subsidiaries (the
"Company"). All material intercompany transactions and accounts have been
eliminated. Certain prior period amounts have been reclassified to conform with
current period presentation. The Company accounts for its investments in
unconsolidated affiliated companies under the equity method.
BASIS OF PRESENTATION On May 10, 1996, the Company closed a series of
transactions (the "Change of Control Transactions") pursuant to which it became
a majority-owned subsidiary of Fluor Daniel, Inc. ("Fluor Daniel"), a global
construction, engineering, maintenance and services company. The Change of
Control Transactions included a recapitalization of the Company's common stock,
and the merger of one of the Company's subsidiaries and Fluor Daniel
Environmental Services, Inc. ("FDESI"), a wholly-owned subsidiary of Fluor
Daniel that provides environmental services primarily to agencies of the federal
government. In exchange for FDESI and $35 million in cash, Fluor Daniel received
4,400,000 shares of the Company's "new" common stock and an option to purchase
1,768,970 additional shares at $13.1274 per share that expires on December 11,
1998. In the recapitalization, each holder of "old" common stock received $8.62
in cash and .5274 of a share of "new" common stock of the Company. In addition,
the Company entered into a Marketing Agreement with Fluor Daniel, and the
Company changed its name from "Groundwater Technology, Inc." to "Fluor Daniel
GTI, Inc." to emphasize the new relationship.
The merger was treated as a reverse acquisition for accounting purposes, and
therefore, the balance sheets as of April 30, 1996 and 1995 and the related
statements of operations, cash flows and parent company investment for each of
the three years in the period ended April 30, 1996, represent the historical
results of FDESI, which is the predecessor entity.
The historical financial statements of FDESI have been adjusted to reflect the
"carved out" financial position, results of operations and cash flows of FDESI
as if the contracts and personnel that constitute the environmental remediation
business of Fluor Daniel had been operating as a separate entity. Operations
reflect the environmental remediation contract work performed by Fluor Daniel
personnel for federally funded non- Department of Energy contracts, remediation
projects for other government agencies and environmental risk assessment,
permitting and remediation for commercial clients. Additionally, the Company
provides certain environmental consulting services to Fluor Daniel and other
affiliated entities. The historical financial statements do not include an
allocation of corporate general and administrative expenses by Fluor Daniel as
management believes that no significant general and administrative expenses were
incurred with respect to FDESI's operations beyond those reflected in the
accompanying financial statements.
The Company has changed its year end from April 30 to October 31. Accordingly,
the Company began a new 12-month fiscal year on November 1, 1996. The six month
period resulting from this change, May 1, 1996 through October 31, 1996, is
referred to as the "Transition Period."
F-8
Financial results for the Transition Period ended October 31, 1996 include the
operations of GTI as if the merger had occurred on May 1, 1996. Financial
activity for the period May 1, 1996 through May 9, 1996 was not significant.
CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand,
demand deposit accounts and investments in tax-exempt money market funds and
tax-exempt municipal bonds having original maturities of three months or less or
which contain a put option which can be exercised at par within three months of
the date of acquisition. These investments are highly liquid and are considered
cash equivalents. Cash equivalents are stated at cost which approximates market.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION Property, plant and equipment are
stated at cost. Repairs and maintenance costs are charged to operations when
incurred, while betterments are capitalized. Depreciation and amortization are
computed on the straight-line method over the estimated useful lives of the
assets. The estimated useful life of each class of asset is as follows:
Buildings and equipment 25 years
Leasehold improvements 1-7 years
Machinery and equipment 3 years
Laboratory equipment 7 years
Furniture, fixtures and computer equipment 3-5 years
Rental equipment 2 years
Upon retirement or disposal, the cost of the asset disposed of and the related
accumulated depreciation are removed from the accounts and any gain or loss is
reflected in income.
INTANGIBLES Intangibles consist principally of goodwill and other intangible
assets resulting from acquisitions. Amortization is computed on a straight-line
basis not to exceed forty years. The carrying value of intangible assets is
periodically reviewed by the Company and impairments are recognized when the
expected future operating cash flows derived from such intangible assets is less
than their carrying value.
INDIRECT EXPENSES Indirect expenses include indirect non-project costs of
environmental services personnel assigned to the environmental operations of
FDESI, who were available to provide services to FDESI's clients while it was a
subsidiary of Fluor Daniel. Additionally, FDESI was charged by Fluor Daniel for
the fair value of rent for occupied space, computer usage and rental and
reproduction costs.
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE TRANSACTIONS For non-U.S.
operations, the functional currency is the applicable local currency. The
translation of the functional currencies into U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using average rates of exchange
prevailing during the reporting period. Adjustments resulting from the
translation of foreign currency financial statements are accumulated in a
separate component of stockholders' equity until the entity is sold or
substantially liquidated. Gains or losses resulting from foreign currency
transactions are included in the results of operations.
EARNINGS PER COMMON SHARE The calculation of earnings per common share is based
on the weighted average number of shares outstanding, including all common stock
and stock options outstanding considered to be common stock equivalents. In
periods in which a loss is incurred, common stock equivalents are excluded as
the effect would be anti-dilutive. Primary and fully diluted net income per
share data are the same for each period presented.
F-9
Earnings per share information for periods prior to the merger between FDESI and
GTI has been omitted since FDESI, the predecessor entity for accounting
purposes, had no publicly traded equity securities.
REVENUE RECOGNITION Revenue is recognized when services are performed. Certain
government projects are accounted for on the percentage-of-completion method,
primarily based on contract costs incurred to date compared with total estimated
contract costs. Changes to total estimated contract costs and losses, if any,
are recognized in the period in which they are determined. Revenues recognized
in excess of amounts billed are classified as current assets under unbilled
revenues. Amounts billed to clients in excess of revenues recognized to date are
classified as advance billings on contracts.
LICENSE AND OTHER INCOME License and other income includes license and royalty
income earned on the Company's intellectual property and income from equity
investments in the environmental industry.
RISK AND UNCERTAINTIES Credit is extended based on an evaluation of the
customer's financial condition, with terms consistent in the industry and
normally collateral is not required. Losses from credit sales are provided for
in the financial statements and have been consistently within the allowance
provided. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to provide 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 and would
impact future results of operations and cash flows.
NOTE 2
MARKETABLE SECURITIES The Company accounts for its investments under the
provision of Statement of Financial Accounting Standard (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
Company's investments are classified as available-for-sale securities and
recorded at current market value with an offsetting adjustment included in
stockholders' equity. All securities mature in less than six months.
Marketable securities consisted principally of municipal obligations which
contain a put option that can be exercised at par with various maturity dates.
The Company considers these investments, which represent funds available for
current operations, an integral component of its cash management activities. The
investments in municipal obligations represent principally "A" rated or better
investment grade securities with no significant concentrations in any one issue.
At the end of October 31, 1996, proceeds from sales of securities available for
sale were approximately $1,350,000. No gains or losses were realized.
At October 31, 1996, investments in debt and equity securities were stated at
their fair value of $4,100,876. In addition, included in cash and cash
equivalents are short term debt securities with a carrying value which
approximates their fair value of $589,660.
NOTE 3
UNBILLED REVENUES Unbilled revenues represent amounts earned under the Company's
contracts but not billed or not yet billable to customers according to contract
terms, which usually consider passage of time, achievement of certain project
milestones or completion of the project. The unbilled revenues at October 31,
1996 are expected to be billed and collected within one year.
F-10
NOTE 4
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the
following:
(In thousands)
- -------------------------------------------------------------------------------
Land, buildings and improvements $ 1,932
Leasehold improvements 1,773
Machinery and equipment 2,872
Laboratory equipment 610
Furniture, fixtures and computer equipment 23,417
Rental equipment 8,802
--------
39,406
Less accumulated depreciation (31,630)
--------
$ 7,776
========
Depreciation expense was $2,182,000, for the Transition Period.
NOTE 5
LINE OF CREDIT At October 31, 1996, the Company had a line of credit with a bank
providing for borrowings up to $10,000,000 through April 30, 1999. Borrowings
under the line bear interest at the prime rate (8.25% at October 31, 1996).
There have been no borrowings under the line of credit. The full amount of the
line of credit was available to the Company at October 31, 1996. The line of
credit is unsecured; however, the Company is required to maintain certain
financial ratios and minimum level of net worth, and the Company's ability to
pay dividends to shareholders is restricted.
NOTE 6
INCOME TAXES
The provision for income taxes consisted of the following:
(In thousands)
<TABLE>
<CAPTION>
Transition Period
ended October 31, Fiscal years ended April 30,
---------------------------------------
1996 1996 1995 1994
---- ---------------------------------------
<S> <C> <C> <C> <C>
Current:
Federal $ 58 $605 $366 $380
State 177 69 54 56
------- ------- ------- -------
235 674 420 436
Deferred (prepaid):
Federal 105 -- -- --
State 52 -- -- --
Foreign (268) -- -- --
------- ------- ------- -------
(111) -- -- --
------- ------- ------- -------
$124 $674 $420 $436
======= ======= ======= =======
</TABLE>
F-11
The provisions for income taxes were at rates other than the U.S. federal
statutory income tax rate for the following reasons:
<TABLE>
<CAPTION>
Transition Period
ended October 31, Fiscal years ended April 30,
-------------------------------------------
1996 1996 1995 1994
---- -------------------------------------------
<S> <C> <C> <C> <C>
U.S. federal statutory income tax rate % 34.0% 34.0% 34.0% 34.0%
State income taxes
net of federal income tax benefit 70.4 5.0 5.0 5.0
Foreign income taxes (87.0) -- -- --
Meals & entertainment 25.5 -- -- --
Goodwill 25.8 -- -- --
Interest income exempt from federal tax (6.1) -- -- --
Other, net (4.9) -- -- --
------- --------- ---------- ----------
57.7% 39.0% 39.0% 39.0%
===== ===== ===== =====
</TABLE>
Deferred assets reflect the net tax effect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets as of October 31, 1996 are as follows:
(In thousands)
Deferred tax assets
Depreciation $1,440
Allowance for doubtful accounts 612
Other accrued liabilities 1,334
Net operating loss carryforwards
of international subsidiaries 894
---
Total deferred tax assets 4,280
Valuation allowance attributable to
net operating loss carryforwards
of international subsidiaries (376)
----
Net deferred tax assets $3,904
======
The foreign loss before income taxes was $238,000 net, for the Transition
Period. The valuation allowance is attributable to foreign net operating losses
which are likely to expire before being utilized.
The operations of FDESI were included in the consolidated federal income tax
return of Fluor Corp., the ultimate parent company of Fluor Daniel, Inc. Under a
tax allocation practice, FDESI was charged by Fluor Daniel for federal and state
income taxes, if any, generally at statutory rates.
As a result of the tax allocation practice, tax benefits associated with
pre-1993 losses were recognized in the year the loss occurred. If FDESI had
filed a separate return, these tax benefits would have been recognized in later
years, resulting in the elimination of substantially all of the income tax
expense for the years 1993 through 1995.
F-12
NOTE 7
RELATED PARTIES The Company provides certain environmental consulting services
to Fluor Daniel and other affiliated entities. Revenues from these consulting
services have been reflected in the accompanying statements in accordance with a
Marketing Agreement ("the Agreement") signed in conjunction with the Investment
Agreement between the Company and Fluor Daniel. Under the terms of the
Agreement, affiliates are charged for labor cost plus established multipliers on
base compensation. Due to the variable and often unpredictable nature of the
Company's work load, consulting services are provided to Fluor Daniel as
conditions allow. Revenues from Fluor Daniel and other affiliated entities were
$1,058,000 for the Transition Period ended October 31, 1996 and $4,507,000,
$4,941,000 and $4,613,000 for the periods ended April 30, 1996, 1995 and 1994,
respectively.
Prior to the change of control transactions, FDESI, the predecessor company, was
dependent upon Fluor Daniel for continued financing, including funding required,
if any, for settlement of claims, working capital requirements and third party
bid and performance guarantees made in the ordinary course of business; and
FDESI advanced and received non-interest bearing funds from Fluor Daniel. The
funding mechanism ceased to exist upon completion of the merger.
NOTE 8
COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS The Company leases virtually all of its facilities under
operating leases. Most of these leases have renewal options, and certain of them
require increasing rent payments over the term of the lease and payments for
additional expenses such as taxes and maintenance. One of the leases also
contains a purchase option. Additionally, the Company leases equipment and
vehicles under operating leases.
Future minimum payments under all noncancelable leases are as follows:
(In thousands)
- ------------------------------------------------------
1997 $ 4,038
1998 3,091
1999 2,141
2000 1,398
2001 and thereafter 1,302
---------
$11,970
=========
Rent expense charged to operations was $2,530,000 for the Transition Period.
OTHER COMMITMENTS A substantial number of the Company's contracts with its
customers require the Company to indemnify the customer for claims, damages, or
losses for personal injury or property damage relating to the Company's
performance of the contracts unless such injury or damage is solely the result
of the customer's negligent or willful acts or omissions. A number of the
insurance policies maintained by the Company for this purpose are provided
through arrangements which require the Company to indemnify the insurance
carrier for all losses and expenses under the policies and to support its
indemnity commitments with letters of credit. At October 31, 1996, such letters
of credit aggregated $7,300,655. In addition, provisions for losses expected
under these policies of $1,741,000 are included in other accrued liabilities at
October 31, 1996. Management believes an adequate level of insurance coverage
has been provided.
F-13
CONTINGENCIES In the ordinary course of conducting its business, the Company
becomes involved in a number of lawsuits and administrative proceedings,
including environmentally related matters. Some of these proceedings may result
in fines, penalties or judgments being assessed against the Company which, from
time to time, may have an impact on earnings for a particular quarter. The
Company does not believe that these matters, individually or in the aggregate,
will have a material adverse effect on its operations, cash flows or financial
condition.
NOTE 9
CAPITAL STOCK AND STOCK PLANS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB25) and related Interpretations
in accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The Company has determined that had compensation costs related to awards of
employee stock options been calculated based on fair value at the grant date
consistent with FASB Statement 123, "Accounting for Stock Based Compensation",
there would be no material impact on the net income or earnings per share of the
Company for the Transition Period.
AMENDED AND RESTATED 1987 STOCK PLAN Pursuant to the plan, as amended, 1,917,089
shares of common stock have been reserved for issuance upon the exercise of
options or in connection with awards or authorizations to make direct purchases
of stock. The plan provides for the granting of both nonstatutory stock options
and incentive stock options. The recipients, terms, and option prices are to be
determined by the Compensation Committee of the Board of Directors and, in the
case of incentive stock options, may not be less than the fair market value of
the common stock at the date of grant. The exercise of incentive stock options
is limited by the provisions of the plan, but in no case may the exercise period
extend beyond ten years from the date of grant. All options outstanding under
the plan on May 10, 1996 have been adjusted pursuant to the Change of Control
Transactions.
Information related to the Amended and Restated 1987 Stock Plan is summarized as
follows:
Options Outstanding
Shares Price
------ -----
Adjusted Options as of May 1, 1996 1,410,550 $8.59-12.625
Exercises 4,341 8.59-10.23
Grants 0 --
Cancellations 34,291 8.59-10.23
----------- -------------
Balance at October 31, 1996 1,371,918 $8.59-12.625
At October 31, 1996, 389,452 shares were available for grant and 621,237 shares
were exercisable under the Amended and Restated 1987 Stock Plan.
AMENDED AND RESTATED 1986 EMPLOYEE STOCK PURCHASE PLAN Under the Company's
Amended and Restated 1986 Employee Stock Purchase Plan, up to 600,000 shares of
common stock may be sold to eligible employees. Those individuals employed a
minimum of 20 hours per week are eligible to participate in the plan. Shares are
issuable at the lesser of 85% of the average market price of the Company's
common stock on the first day or last day of semi-annual payment periods. At
October 31, 1996, 254,899 shares were available for issuance under the plan.
F-14
AMENDED AND RESTATED 1995 DIRECTOR STOCK OPTION PLAN Pursuant to the plan, as
amended, 108,114 shares of common stock are reserved for issuance upon the
exercise of options. Each non-employee director who satisfies certain other
requirements is granted an initial option to purchase 5,000 shares of the
Company's common stock. Once per year each non-employee director will receive an
option to purchase an additional 2,500 shares of common stock. To be eligible, a
director cannot be an employee of the Company or any affiliate of the Company.
The purchase price of the option granted is the fair market value of the shares
on the day the option is granted. Each option becomes exercisable with respect
to one third of the shares subject to such option on each anniversary of the
date of the grant. Options expire seven years after the date of grant and are
nonassignable and nontransferable. All options outstanding under the plan on May
10, 1996 have been adjusted pursuant to the Change of Control Transactions.
Options to purchase 19,425 common shares at the price of $10.33, and 7,500
common shares at the price of $11.50 were outstanding as of October 31, 1996. At
October 31, 1996, 81,189 shares were available for grant.
PREFERRED STOCK Terms of the preferred stock will be established at time of
issuance.
NOTE 10
EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN AND BONUS PERFORMANCE PLAN During the Transition Period, the
Company had a profit sharing plan for the benefit of all employees meeting
certain minimum service requirements. The plan provided for a 10% of pre-tax
operating income to be distributed to employees at the end of the second and
fourth quarters of each fiscal year. The plan was designed to encourage
employees to reduce overall operating costs as a percentage of net revenue.
There was no profit sharing expense for the Transition Period.
The Company has a bonus performance program covering eligible employees under
which awards are made at the discretion of the Compensation Committee of the
Board of Directors. Bonus expense was approximately $415,000, for the Transition
Period.
RETIREMENT SAVINGS PLAN The Company has a Retirement Savings Plan under Section
401(k) of the Internal Revenue Code for the benefit of all U. S. employees
meeting certain minimum service requirements. Eligible employees may elect to
contribute to the plan up to 12% of their cash compensation, subject to
limitations established by the Internal Revenue Code. The trustees of the plan
select investment opportunities from which participants may choose to
contribute.
The plan requires a matching contribution by the Company of 100% on the first
1%, and 25% on the next 4% of each participant's contribution, but not greater
than the maximum allowable under the Internal Revenue Code. The Company may also
contribute a discretionary amount to the plan which may be allocated to
employees based upon employees' contributions to the plan. The Company's
matching contributions currently vest at a rate of 25% per year based upon years
of service. The Company's contributions to this plan were $464,000, for the
Transition Period.
The Company has various defined contribution plans covering substantially all
non-U. S. employees. The Company's contributions to these plans were $115,000
for the Transition Period.
Prior to the merger, employees of FDESI who met certain eligibility requirements
participated in a non-contributory defined contribution retirement plan of Fluor
Daniel. Contributions to this plan were based on a percentage of the
participants' gross salaries. In addition, eligible employees were allowed to
contribute up to
F-15
10 percent of their salaries to a savings investment plan with Fluor Daniel
providing a matching contribution up to 4 percent of their salaries. The cost of
these plans was included in the payroll burden rate charged to FDESI by Fluor
Daniel.
NOTE 11
INDUSTRY SEGMENT INFORMATION
The Company provides a wide range of environmental services to both the private
and government sectors including scientific and engineering applications from
environmental assessment, permitting and remediation through design and
construction to operations and maintenance services. These services are provided
to a variety of different industries including petroleum, chemical, power,
pharmaceutical and others.
Revenues from U.S. Federal agencies were as follows ($ in thousands):
Year Ended April 30
---------------------------------------
1996 1995 1994
---- ---- ----
Department of Defense $10,075 $10,255 $2,184
Percent of total revenues 29.2% 28.9% 4.1%
Environmental Protection Agency $ 7,045 $ 3,712 $4,518
Percent of total revenues 20.4% 10.5% 8.6%
In the Transition Period, no single customer accounted for more than 10% of the
Company's revenues.
F-16
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
In thousands, except per share amounts
<TABLE>
<CAPTION>
Income (Loss) Net Weighted(2)
Gross From Income Income Earnings(2) Average
Revenues Profit Operations Taxes (Loss) Per Share Shares
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Transition Period ended
October 31, 1996
First quarter $42,056 $9,388 $ 23 $ 0 $ 23 $.00 8,229
Second quarter 47,007 9,724 192 124 68 .01 8,156
Six months ended
October 31, 1995(1)
First quarter 8,397 2,112 430 168 262 N/A N/A
Second quarter 9,614 2,363 601 234 367 N/A N/A
Twelve months ended
April 30, 1996(1)
First quarter 8,397 2,112 430 168 262 N/A N/A
Second quarter 9,614 2,363 601 234 367 N/A N/A
Third quarter 8,308 1,290 (229) (89) (140) N/A N/A
Fourth quarter 8,178 2,898 926 361 565 N/A N/A
Twelve months ended
April 30, 1995(1)
First quarter 9,597 1,755 901 351 550 N/A N/A
Second quarter 11,208 1,637 517 202 315 N/A N/A
Third quarter 4,084 1,547 (188) (73) (115) N/A N/A
Fourth quarter 10,536 2,076 (154) (60) (94) N/A N/A
</TABLE>
The Company's quarterly results may fluctuate. Factors influencing such
variations include: spending decisions by major customers; delays in the release
of committed projects; weather; holidays and vacation time, which limit the
amount of time Company professional and technical personnel have in the field;
and the level of subcontracted services.
(1) Represents the historical results of Fluor Daniel Environmental Services,
Inc. (FDESI).
(2) Share price information for the periods prior to the merger has been omitted
since Fluor Daniel Environmental Services, Inc. (FDESI), the predecessor entity
for accounting purposes, had no publicly traded equity securities.
F-17
FLUOR DANIEL GTI, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Transition Period ended October 31, 1996
(In thousands)
Allowance for
Doubtful Accounts
and Credit Memos
- ----------------
Balance at 5/1/96 $ 0
Additions (A) 2,063
Deductions (B) (323)
----
Balance at 10/31/96 $1,740
======
(A) Amount historically recorded by Groundwater Technology, Inc.
(B) Amounts written off
F-18
INDEX TO EXHIBITS
(Item 14(a)(3))
<TABLE>
<CAPTION>
Number Description of Exhibit
- ------ ----------------------
<C> <C>
3.01 Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to Current Report on Form
8-K for May 10, 1996 with the Securities and Exchange Commission and incorporated herein by
reference.)
3.02 By-Laws, as amended (filed as Exhibit 3.2 to Current Report on Form 8-K for May 10, 1996 with
the Securities and Exchange Commission and incorporated herein by reference.)
10.01* Amended and Restated 1986 Employee Stock Purchase Plan, as amended (filed as Exhibit 10.01 to
Annual Report on Form 10-K for the year ended April 27, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
10.02* Amended and Restated 1986 Employee Stock Purchase Plan Enrollment Form (filed as Exhibit
10.02 to Annual Report on Form 10-K for the year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by reference.)
10.03* Amended and Restated 1987 Stock Plan, as amended (filed as Exhibit 10.03 to Annual Report on
Form 10-K for the year ended April 27, 1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.04* Form of Non-qualified Stock Option Agreement under the Company's Amended and Restated 1987
Stock Plan (filed as Exhibit 10.04 to Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and incorporated herein by reference.)
10.05* Amended and Restated 1995 Director Stock Option Plan, as amended (filed as Exhibit 10.05 to
Annual Report on Form 10-K for the year ended April 27, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
10.06* Form of Option Agreement under the Company's Amended and Restated 1995 Director Stock
Option Plan (filed as Exhibit 10.06 to Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and incorporated herein by reference.)
10.07* Retirement Savings Plan of the Company, as amended (filed as Exhibit 10.10 to Annual Report on
Form 10-K for the year ended May 2, 1993 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.08* Amendment to Retirement Savings Plan of the Company (filed as Exhibit 10.11 to Annual Report
on Form 10-K for the year ended April 29, 1995 with the Securities and Exchange Commission
and incorporated herein by reference.)
10.09* Employment Agreement between the Company and Walter C. Barber (filed as Exhibit 10.09 to
Annual Report on Form 10-K for the year ended April 27, 1996 with the Securities and Exchange
Commission and incorporated herein by reference.)
1
10.10* Form of Employment Agreement between the Company and each of its Executive Officers (filed as
Exhibit 10.10 to Annual Report on Form 10-K for the year ended April 27, 1996 with the
Securities and Exchange Commission and incorporated herein by reference.)
10.11* Restricted Stock Award Agreement under the Company's Amended and Restated 1987 Stock Plan
between the Company and Walter C. Barber (filed as Exhibit 10.11 to Annual Report on Form 10-
K for the year ended April 27, 1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.12* Non-Qualified Option Agreement under the Company's Amended and Restated 1987 Stock Plan
between the Company and Walter C. Barber (filed as Exhibit 10.12 to Annual Report on Form 10-
K for the year ended April 27, 1996 with the Securities and Exchange Commission and
incorporated herein by reference.)
10.13* Profit Sharing Plan (filed as Exhibit 10.14 to Annual Report on Form 10-K for the year ended
April 29, 1995 with the Securities and Exchange Commission and incorporated herein by
reference.)
10.14 Lease for 100 River Ridge Drive, Norwood, Massachusetts (filed as Exhibit 10.15 to Annual
Report on Form 10-K for the year ended May 2, 1992 with the Securities and Exchange
Commission and incorporated herein by reference.)
10.15 Third Amendment to Lease for 100 River Ridge Drive, Norwood, Massachusetts (filed as Exhibit
10.13 to Annual Report on Form 10-K for the year ended April 29, 1995 with the Securities and
Exchange Commission and incorporated herein by reference.)
10.16 Fourth Amendment to Lease for 100 River Ridge Drive, Norwood, Massachusetts (filed as Exhibit
10.16 to Annual Report on Form 10-K for the year ended April 27, 1996 with the Securities and
Exchange Commission and incorporated herein by reference.)
10.17 Revolving Credit Agreement and Revolving Time Note, each dated April 4, 1996 between the
Company and Fleet National Bank (filed as Exhibit 10.17 to Annual Report on Form 10-K for the year
ended April 27, 1996 with the Securities and Exchange Commission and incorporated herein
by reference.)
10.18 Investment Agreement dated as of December 11, 1995 between the Company and Fluor Daniel,
Inc. (with respect to Section 6.3 thereof) (filed as Exhibit 2.1 to Quarterly Report on Form 10-Q for
the period ended January 27, 1996 with the Securities and Exchange Commission and incorporated
herein by reference.)
10.19 Option Agreement dated as of December 11, 1995 between the Company and Fluor Daniel, Inc.
(filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended January 27, 1996
with the Securities and Exchange Commission and incorporated herein by reference.)
10.20 First Amendment to Option Agreement dated as of May 30, 1996 between the Company and Fluor
Daniel, Inc. (filed as Exhibit 10.20 to Annual Report on Form 10-K for the year ended April 27,
1996 with the Securities and Exchange Commission and incorporated herein by reference.)
</TABLE>
2
<TABLE>
<CAPTION>
<C> <C>
10.21 Marketing Agreement dated as of May 10, 1996 between the Company and Fluor Daniel, Inc.
(filed as Exhibit 10.2 to Current Report on Form 8-K for May 10, 1996 with the Securities and
Exchange Commission and incorporated herein by reference.)
10.22* 1997 Stock Plan.
10.23* Form of Non-Qualified Stock Options Agreement under the Company's 1997 Stock Plan.
21.1 Subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand LLP.
23.2 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
- --------
</TABLE>
* Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form pursuant to Item 14 (C) of Form 10-K.
3
EX 10.22
FLUOR DANIEL GTI, INC.
1997 STOCK PLAN
1. PURPOSE. This 1997 Stock Plan (the "Plan") is intended to provide
incentives (a) to the employees of Fluor Daniel GTI, Inc. (the "Company"), its
parent (if any) and any present or future subsidiaries of the Company
(collectively, "Related Corporations") by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISO" or "ISOs") under Section 422(b) of
the Internal Revenue Code of 1986 (the "Code"); (b) to employees and consultants
of the Company and Related Corporations by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
quality as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to
employees and consultants of the Company and Related Corporations by providing
them with awards of stock in the Company ("Awards"); and (d) to employees and
consultants of the Company and Related Corporations by providing them with
opportunities to make direct purchases of stock of the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options." Options, Awards and Purchases are
referred to hereafter collectively as "Stock Rights." As used herein, the terms
"parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively as those terms are defined in Section 424 of the
Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board of no less than two members (the "Committee");
provided, that, to the extent required by Rule 16b-3 or any successor provision
("Rule 16b-3") of the Securities Exchange Act of 1934, with respect to specific
grants of Stock Rights, the Plan shall be administered by non-employee directors
within the meaning of Rule 16b-3. Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee, if so
appointed, shall have the authority to (i) determine the employees of the
Company and Related Corporations (from among the class of employees eligible
under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options or Awards may be
granted or Purchases made; (iii) determine the option price of shares subject to
each Option, which price shall not be less than the minimum price specified in
paragraph 6, and the purchase price of shares subject to each Purchase; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions, if
any; and (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Option, Award or authorization for
Purchase granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and places as it
may determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee (if consistent
with applicable state law), shall be the valid acts of the Committee. All
references in this Plan to the Committee shall mean the Board if no Committee
has been appointed. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefore, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. No Stock Right
shall be granted to any person who is, at the time of the proposed grant, a
member of the Board, unless such member of the Board is also an employee of the
Company and such grant is awarded consistent with the provisions of the first
sentence of paragraph 2(A) above, if applicable. All grants of Stock Rights to
members of the Board in all other respects shall be made in accordance with the
provisions of this Plan applicable to other eligible persons. Subject to the
first sentence of paragraph 2(A), members of the Board who are either (i)
eligible for Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the Plan or the
grant of any Stock Rights pursuant to the Plan, except that no such member shall
act upon the granting to himself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to him of Stock
Rights.
3. ELIGIBLE EMPLOYEE AND OTHERS. ISOs may be granted to any employee of
the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee or consultant of
the Company or any Related Corporation. Directors who are not employees of the
Company or any Related Corporation shall not be eligible to receive ISOs,
Non-Qualified Options, Awards or authorizations to make Purchases. The Committee
may take into consideration a recipient's individual circumstances in
determining whether to grant an ISO, a Non-Qualified Option or an authorization
to make a Purchase. Granting of any Stock Right to any individual or entity
shall neither entitle that individual or entity to, nor disqualify him from,
participation in any other grant of Stock Rights.
-2-
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.001
per share ("Common Stock"), or shares of Common Stock reacquired by the Company
in any manner. The aggregate number of shares which may be issued pursuant to
the Plan is 290,000, subject to adjustment as provided in paragraph 13. Any such
shares may be issued pursuant to ISOs, Non-Qualified Options or Awards, or to
persons or entities making Purchases, so long as the number of shares so issued
does not exceed such number, as adjusted. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part, or if the
Company shall reacquire any unvested shares issued pursuant to Awards or
Purchases, the unpurchased shares subject to such Options and any unvested
shares so reacquired by the Company shall again be available for grants of Stock
Rights under the Plan.
5. GRANTING OF OPTIONS, AWARDS AND AUTHORIZATIONS TO MAKE PURCHASES.
Stock Rights may be granted under the Plan at any time after January 8, 1997 and
prior to January 8, 2007. The date of grant of a Stock Right under the Plan will
be the date specified by the Committee at the time it grants the Stock Rights;
provided, however, that such date shall not be prior to the date on which the
Committee acts to approve the grant. The Committee shall have the right, with
the consent of the optionee, to convert an ISO granted under the Plan to a
Non-Qualified Option pursuant to paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per
share specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal consideration
required therefor under the laws of the State of Delaware or the laws of the
jurisdiction in which the Company or its successors in interest may be
organized.
B. PRICE FOR ISOS. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than 110 percent of the fair
market value of Common Stock on the date of grant.
C. $100,000 ANNUAL LIMITATION ON ISO'S. Each eligible employee
may be granted ISOs only to the extent that, in the aggregate under this Plan
and all incentive stock option plans of the Company and any Related Corporation,
such ISOs do not become exercisable for the first time by such employee during
any calendar year in a manner which would entitle the
-3-
employee to purchase more than $100,000 in fair market value (determined at the
time the ISOs were granted) of Common Stock in that year. Any options granted to
an employee in excess of such amount will be granted as Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at any time an
Option is granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for which
the prices or quotes discussed in this sentence are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the high
and low prices of the Common Stock on the principal national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the NASDAQ National Market List, if the Common Stock is not then traded
on a national securities exchange; or (iii) the closing bid price (or average of
bid prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market List; or (iv) if the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or any
Related Corporation. Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The option shall either be fully exercisable on
the date of grant or shall become exercisable thereafter in such installments as
the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once and installment becomes
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
-4-
D. ACCELERATION OF VESTING. The Committee shall have the right
to accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any installment of
any Option granted to any employee as an ISO (and not previously converted into
a Non-Qualified Option pursuant to paragraph 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the Code,
as described in paragraph 6(c).
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be employed
by the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate on the date he ceases to be
employed, but in no event later than on their specified expiration dates, except
to the extent that such ISOs (or unexercised installment thereof) have been
converted into Non-Qualified Options pursuant to paragraph 16. A bona fide leave
of absence with the written approval of the Committee shall not be considered an
interruption of employment under the Plan, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the employee after the approved period of absence. Employment
shall also be considered as continuing uninterrupted during any other bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY; DISSOLUTION.
A. DEATH. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his death, any ISO of his may
be exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws of
descent and distribution, at any time prior to the earlier of the ISO's
specified expiration date or 180 days from the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, he shall have
the right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he could
have exercised it on that date, at any time prior to the earlier of the ISO's
specified expiration date or 180 days from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term "disability" shall
mean "permanent and total disability" as defined in Section 22(e)(3) of the Code
or successor statute.
-5-
C. DISSOLUTION. If the grantee of a Stock Right is a
corporation, partnership, trust or other entity that is dissolved, liquidated,
becomes insolvent or enters into a merger or acquisition with respect to which
such grantee is not the surviving entity, any Stock Right granted to such entity
under this Plan shall immediately terminate as of the date of such event, and
the only rights hereunder shall be those as to which the Stock Right was
properly exercised before such dissolution or other event.
11. ASSIGNABILITY. Except as provided in this paragraph 11, no Stock
Right shall be assignable or transferable by the grantee except by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. During the lifetime of the grantee
each Stock Right shall be exercisable only by him. The Committee may, in its
discretion, authorize all or a portion of the options granted to an optionee to
be on terms which permit transfer by such optionee to (a) the spouse, children
or grandchildren of the optionee ("Immediate Family Members"), (b) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (c) a
partnership in which such Immediate Family Members are the only partners;
provided that (x) there may be no consideration for any such transfer, (y) the
stock option agreement pursuant to which such options are granted must be
approved by the Committee, and must expressly provide for transferability in a
manner consistent with this paragraph 11, and (z) subsequent transfers of
transferred options shall be prohibited except those in accordance with this
paragraph 11. Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer. The events of termination of employment of paragraphs 9 and 10 shall
continue to be applied with respect to the original optionee, following which
the options shall be exercisable by the transferee only to the extent, and for
the periods specified, in paragraphs 9 and 10.
12. TERMS AND CONDITIONS OF OPTIONS. Stock Rights shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the happening of any of the following
described events, an optionee's rights with respect to Options granted to him
hereunder, and the recipient's rights with respect to Common Stock acquired
pursuant to a Purchase or Award hereunder, shall be adjusted
-6-
as hereinafter provided, unless otherwise specifically provided in the written
agreement between the recipient and the Company relating to such Stock Right.
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the exercise price
per share to reflect such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise ("Acquisition"), the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder (the "Successor Board"), shall, as to outstanding Options,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
the consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; or (ii) upon written notice to the
optionees, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; or (iii) terminate all
Options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such Options (to the extent then exercisable)
over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he would have
received if he had exercised his Option prior to such recapitalization or
reorganization.
D. MODIFICATIONS OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs shall
be made only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
-7-
F. ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to Options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan, and the grantee shall receive from the Company cash in lieu of
such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the foregoing
events described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to Stock
Rights which previously have been or subsequently may be granted under the Plan
shall also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the specific
adjustments to be made under this paragraph 13 and, subject to paragraph 2, its
determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of a Stock Right made hereunder receives shares or securities or cash
in connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price share for
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having
fair market value equal as of the date of the exercise to the cash exercise
price of the Option, or (c) at the discretion of the Committee, by delivery of
the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee and
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Stock Right and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the
-8-
rights of a shareholder with respect to the shares covered by his Stock Right
until the date of issuance of a stock certificate to him for such shares. Except
as expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as
of January 8, 1997, subject to approval of the Plan by the holders of a majority
of the outstanding shares of Common Stock of the Company at the next Meeting of
Stockholders. The Plan shall expire on January 8, 2007 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5, Stock
Rights may be granted under the Plan prior to the date of stockholder approval
of the Plan. If the approval of stockholders is not obtained by January 8, 1998,
any grants of Stock Rights under the Plan made prior to that date will be
rescinded. The Board may terminate or amend the Plan in any respect at any time,
except that, as may be required by the Code or the rules of any national
securities exchange, Nasdaq or other over-the-counter quotation service on which
the Company's Common Stock is then listed or quoted, without the approval of the
stockholders obtained within 12 months before or after the Board adopts
resolutions authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without his consent, under
any Stock Right previously granted to him.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercises of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
-9-
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includable in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right on the grantee's payment of such additional
withholding taxes.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives ISOs shall agree to notify the Company in writing immediately after the
employee makes a Disqualifying Disposition of any Common Stock received pursuant
to the exercise of an ISO. A Disqualifying Disposition is any disposition
(including any sale) of such stock before the later of (a) two years after the
employee was granted the ISO under which he acquired such stock, or (b) one year
after the employee acquired such stock by exercising such ISO. If the employee
has died before such stock is sold, these holding period requirements do not
apply and no Disqualifying Disposition can occur thereafter.
21. GOVERNING LAW; Construction. The validity and construction of the
Plan and the instruments evidencing Options, Awards and Purchases shall be
governed by the laws of the State of Delaware. In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
-10-
EX 10.23
FLUOR DANIEL GTI, INC.
Non-Qualified Stock Option Agreement
Under 1997 Stock Plan
Fluor Daniel GTI, Inc., a Delaware corporation (the "Company"), hereby
grants this ____ day of __________, 1997 to _______________________ (the
"Optionee"), an option to purchase a maximum of _________ shares of its Common
Stock, $.001 par value, at the price of $______ per share, on the following
terms and conditions:
1. Grant Under 1997 Stock Plan. This option is granted pursuant to and
is governed by the Company's 1997 Stock Plan (the "Plan") and, unless the
context otherwise requires, terms used herein shall have the same meaning as in
the Plan. Determinations made in connection with this option pursuant to the
Plan shall be governed by the Plan as it exists on this date.
2. Grant as Non-Qualified Option; Other Options. This option is
intended to be a non- qualified option (rather than an incentive stock option),
and the Company intends to take appropriate action, if necessary, to achieve
this result. This option is in addition to any other option heretofore or
hereafter granted to the Optionee by the Company.
3. Extent of Option if Business Relationship Continues. If the Optionee
has continued to serve the Company or any Related Corporation in the capacity of
an employee, officer or director (such service is described herein as
maintaining or being involved in a "Business Relationship" with the Company) on
the following dates, the Optionee may, subject to Article 2, exercise this
option for the number of shares set opposite the applicable date.
Date Option Becomes Number of Shares Expiration
Exercisable Available for Exercise Date
- ------------------- ---------------------- ----------
The foregoing rights are cumulative and, while the Optionee continues
to maintain a Business Relationship with the Company, may be exercised up to and
including the scheduled expiration date. All of the foregoing rights are subject
to Articles 4 and 5, as appropriate, if the Optionee ceases to maintain a
Business Relationship with the Company, or dies or becomes disabled while
involved in a Business Relationship with the Company.
4. Termination of Business Relationship. If the Optionee ceases to
maintain a Business Relationship with the Company, other than by reason of death
or disability as defined in Article
5, no further installments of this option shall become exercisable and this
option shall terminate on the date the Optionee's Business Relationship ceases,
but in no event later than the scheduled expiration date.
5. Death; Disability; Dissolution. If the Optionee dies while involved
in a Business Relationship with the Company, this option may be exercised, to
the extent of the number of shares with respect to which the Optionee could have
exercised it on the date of his death, by his estate, personal representative or
beneficiary to whom this option has been assigned pursuant to Article 9, at any
time within 180 days after the date of death, but not later than the scheduled
expiration date. If the Optionee's Business Relationship with the Company is
terminated by reason of his disability (as defined in the Plan), this option may
be exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date the Business Relationship was
terminated, at any time within 180 days after the date of such termination, but
not later than the scheduled expiration date. At the expiration of such 180 day
period or the scheduled expiration date, whichever is the earlier, this option
shall terminate and the only rights hereunder shall be those as to which the
option was properly exercised before such termination.
6. Partial Exercise. Exercise of this option up to the extent above
stated may be made in part at any time and from time to time within the above
limits, except that this option may not be exercised for a fraction of a share
unless such exercise is with respect to the final installment of stock subject
to this option and a fractional share (or cash in lieu thereof) must be issued
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
7. Payment of Price. The option price is payable in United States
dollars and may be paid: (a) in cash or by check, or any combination of the
foregoing, equal in amount to the option price; or (b) at the discretion of the
Committee, in cash, by check or by delivery of shares of the Company's Common
Stock having a fair market value (as determined by the Committee) equal as of
the date of exercise to the option price, or by any combination of the foregoing
equal in amount to the option price.
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company,
at its principal executive office. Such notice shall state the election to
exercise this option and the number of shares with respect to which it is being
exercised and shall be signed by the person or persons so exercising this
option. Such notice shall be accompanied by payment of the full purchase price
of such shares, and the Company shall deliver a certificate or certificates
representing such shares as soon as practicable after the notice shall be
received. The certificate or certificates for the shares as to which this option
shall have been so exercised shall be registered in the name of the person or
persons so exercising this option (or, if this option shall be exercised by the
Optionee and if the Optionee shall so request in the notice exercising this
option, shall be registered in the name of the Optionee and another person
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising this option. In
-2-
the event this option shall be exercised, pursuant to Article 5 hereof, by any
person or persons other than the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise this
option. Before certificates for the shares purchased, pursuant to this option
are delivered, the Optionee shall pay the purchase price for the shares
purchased and provide for the withholding or reimbursement for taxes pursuant to
Article 14. All shares that shall be purchased upon the exercise of this option
as provided herein shall be fully paid and non-assessable.
9. Option Not Transferable. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Optionee's lifetime only the Optionee can exercise this option.
10. No Obligation to Exercise Option. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.
11. No Obligation to Continue Business Relationship. The Company and
any Related Corporation are not by the Plan or this option obligated to continue
to maintain a Business Relationship with the Optionee.
12. No Rights as Stockholder until Exercise. The Optionee shall have no
rights as a stockholder with respect to shares subject to this Agreement until a
stock certificate therefor has been issued to the Optionee and is fully paid
for. Except as is expressly provided in the Plan with respect to certain changes
in the capitalization of the Company, no adjustment shall be made for dividends
or similar rights for which the record date is prior to the date such stock
certificate is issued.
13. Capital Changes and Business Successions. It is the purpose of this
option to encourage the Optionee to work for the best interests of the Company
and its stockholders. Since, for example, that might require the issuance of a
stock dividend or a merger with another corporation, the purpose of this option
would not be served if such a stock dividend, merger or similar occurrence would
cause the Optionee's rights hereunder to be diluted or terminated and thus be
contrary to the Optionee's interest. The Plan contains extensive provisions
designed to preserve options at full value in a number of contingencies.
Therefore, provisions in the Plan for adjustment with respect to stock subject
to options and the related provisions with respect to successors to the business
of the Company are hereby made applicable hereunder and are incorporated herein
by reference. In particular, without affecting the generality of the foregoing,
it is understood that for the purposes of Articles 3 and 5 hereof, maintaining
or being involved in a Business Relationship with the Company includes
maintaining or being involved in a Business Relationship with a Related
Corporation as defined in the Plan.
14. Withholding Taxes. The Optionee hereby agrees that the Company may
withhold from the Optionee's wages or other remuneration the appropriate amount
of federal, state and local taxes attributable to Optionee's exercise of any
installment of this option. At the Company's discretion, the amount required to
be withheld may be withheld in cash from such wages or other remuneration, or in
kind from the Common Stock otherwise deliverable to Optionee on exercise of this
option. The Optionee further agrees that, if the Company does not withhold an
amount
-3-
from the Optionee's wages or other remuneration sufficient to satisfy the
Company's withholding obligation, the Optionee will reimburse the Company on
demand, in cash, for the amount under-withheld. Certificates for shares
purchased pursuant to this option will not be delivered unless the Optionee
provides for federal, state and local taxes as set forth in this Article.
15. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF the Company and the Optionee have caused this
Agreement to be executed, and the Optionee whose signature appears below
acknowledges receipt of a copy of the Plan and acceptance of a copy of this
Agreement.
FLUOR DANIEL GTI, INC.
By:
----------------------- --------------------------
Optionee
-4-
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the Subsidiaries of the Company:
Subsidiary Place of Incorporation
- ---------- ----------------------
Groundwater Technology Government Services, Inc. Delaware
GTI Investment Company, Inc. Delaware
Fluor Daniel GTI International, Inc. Delaware
Fluor Daniel GTI Canada, Inc.* Province of Ontario,
Canada
Fluor Daniel GTI International Limited* United Kingdom
Groundwater Technology B.V.* The Netherlands
Fluor Daniel GTI Australia PTY, Limited* Australia
Groundwater Technology Italia S.r.1.* Italy
Fluor Daniel Environmental Services, Inc. California
* Fluor Daniel GTI Canada, Inc. ("Canada"), Fluor Daniel GTI International
Limited ("UK"), Groundwater Technology B.V. ("Netherlands"), Fluor Daniel GTI
Australia PTY, Limited ("Australia") and Fluor Daniel GTI Italia S.r.1.
("Italy") are indirect or "second-tier" subsidiaries of the Company. Canada,
UK, Netherlands, Australia and Italy are subsidiaries of Fluor Daniel GTI
International, Inc., which, in turn, is a wholly-owned subsidiary of the
Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Fluor Daniel GTI, Inc. on Form S-8 (File Nos. 33-9756, 33-19289, 33-28059,
33-43156 and 33-65363) of our report dated December 11, 1996, on our audit of
the consolidated financial statements and financial statement schedule of Fluor
Daniel GTI, Inc. as of and for the Transition Period ended October 31, 1996,
which report is incorporated by reference or included in this Annual Report on
Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 27, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-9756, 33-19289, 33-28059, 33-43156 and 33-65363) pertaining to
the 1986 Employee Stock Purchase Plan, the 1987 Stock Plan, the 1987 Stock Plan,
as amended, the 1986 Employee Stock Purchase Plan as amended, and the Amended
and Restated 1986 Employee Stock Purchase Plan and 1995 Director Stock Option
Plan, respectively, of Fluor Daniel GTI, Inc., formerly Groundwater Technology,
Inc., of our report dated December 10, 1996, with respect to the financial
statements of Fluor Daniel Environmental Services, Inc. included in the Annual
Report (Form 10-K) of Fluor Daniel GTI, Inc. for the Transition Period ended
October 31, 1996.
/s/ ERNST & YOUNG LLP
Orange County, California
January 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM * FORM 10-K
FOR PERIOD ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
*IDENTIFY THE FINANCIAL STATEMENT(S) TO BE REFERENCED IN THE LEGEND: THIS IS FOR
A 6 MONTH TRANSITION PERIOD.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 2,552
<SECURITIES> 4,101
<RECEIVABLES> 48,178
<ALLOWANCES> 1,740
<INVENTORY> 0
<CURRENT-ASSETS> 75,470
<PP&E> 7,776
<DEPRECIATION> 0
<TOTAL-ASSETS> 100,393
<CURRENT-LIABILITIES> 18,515
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 81,870
<TOTAL-LIABILITY-AND-EQUITY> 100,393
<SALES> 89,063
<TOTAL-REVENUES> 89,063
<CGS> 69,951
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 20,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 215
<INCOME-TAX> 124
<INCOME-CONTINUING> 91
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91
<EPS-PRIMARY> 8141
<EPS-DILUTED> 0
</TABLE>
