<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1994 Commission File No. 1-12248
ICF KAISER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1437073
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9300 Lee Highway, Fairfax, Virginia 22031-1207
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (703) 934-3600
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
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On June 20, 1994, there were 20,961,850 shares of ICF Kaiser International,
Inc. Common Stock, par value $0.01 per share, outstanding.
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<PAGE>
<TABLE>
<CAPTION>
ICF KAISER INTERNATIONAL, INC.
INDEX TO FORM 10-Q
Page
----
<S> <C> <C> <C>
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets -
May 31, 1994 and February 28, 1994....................... 3
Consolidated Statements of Operations -
Three Months Ended May 31, 1994 and 1993................. 4
Consolidated Statements of Cash Flows -
Three Months Ended May 31, 1994 and 1993................. 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 7-9
<CAPTION>
<S> <C> <C> <C>
Part II - Other Information
Item 1. Legal Proceedings........................................ 10
Item 2. Changes in Securities.................................... 10
Item 3. Defaults Upon Senior Securities.......................... 10
Item 4. Submission of Matters to a Vote of Security Holders...... 10
Item 5. Other Information........................................ 10
Item 6. Exhibits and Reports on Form 8-K......................... 10
</TABLE>
2
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
May 31, February 28,
1994 1994
-------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 18,267 $ 25,509
Contract receivables, net 130,275 128,166
Prepaid expenses and other current assets 13,978 20,451
Deferred income taxes 15,697 16,053
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Total Current Assets 178,217 190,179
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Fixed Assets
Furniture, equipment and leasehold improvements 41,226 40,630
Less depreciation and amortization (26,434) (24,955)
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14,792 15,675
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Other Assets
Goodwill, net 49,423 49,916
Investments in and advances to affiliates 6,017 5,600
Due from officers and employees 2,094 1,830
Other 18,329 17,998
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75,863 75,344
--------- ---------
$ 268,872 $ 281,198
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 39,399 $ 52,073
Accrued salaries and employee benefits 22,627 23,439
Accrued interest 5,847 2,108
Current portion of long-term debt 863 1,088
Income taxes payable 1,751 1,511
Deferred revenue 7,634 8,462
Other 9,506 10,773
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Total Current Liabilities 87,627 99,454
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Long-term Liabilities
Long-term debt, less current portion 121,875 121,954
Other 8,400 8,798
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130,275 130,752
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Commitments and Contingencies
Redeemable Preferred Stock 20,263 20,212
Common Stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding-20,961,850 and 20,924,588 shares 209 209
Additional Paid-in Capital 63,678 63,572
Notes Receivable Related to Common Stock (1,732) (1,732)
Retained Earnings (Deficit) (29,863) (29,528)
Cumulative Translation Adjustment (1,585) (1,741)
--------- ---------
$ 268,872 $ 281,198
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended May 31,
1994 1993
--------------------------
(Unaudited)
<S> <C> <C>
Gross Revenue $ 210,491 $ 128,012
Subcontract and direct material costs (98,292) (39,675)
Equity in income of joint ventures
and affiliated companies 951 327
--------- ---------
Service Revenue 113,150 88,664
Operating Expenses
Direct cost of services and overhead 95,545 73,796
Administrative and general 11,127 11,879
Depreciation and amortization 2,259 2,422
Unusual item - 500
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Operating Income 4,219 67
Other Income (Expense)
Interest income 305 410
Interest expense (3,949) (1,651)
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Income (Loss) Before Income Taxes 575 (1,174)
Income tax provision (benefit) 357 (517)
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Net Income (Loss) 218 (657)
Preferred stock dividends and accretion 539 1,336
--------- ---------
Net Loss Available for Common Shareholders $ (321) $ (1,993)
========= =========
Primary and Fully Diluted
Net Loss Per Common Share $ (0.02) $ (0.09)
========= =========
Primary and Fully Diluted
Weighted Average Common and
Common Equivalent Shares Outstanding 20,943 21,023
========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended May 31,
1994 1993
--------------------------
(Unaudited)
<S> <C> <C>
Operating Activities
Net income (loss) $ 218 $ (657)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,259 2,422
Provision for losses on accounts receivable 237 509
Provision for deferred income taxes 357 (517)
Earnings less than (in excess of) cash distributions
from joint ventures and affiliated companies (666) 217
Changes in assets and liabilities related to operating
activities :
Contract receivables, net (2,346) 13,230
Prepaid expenses and other current assets 3,938 3,929
Other assets (1,043) (8)
Accounts payable and accrued expenses (9,747) (14,147)
Income taxes payable 434 217
Deferred revenue (828) 449
Other liabilities (1,570) (716)
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Net Cash Provided by (Used in) Operating Activities (8,757) 4,928
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Investing Activities
Sale of subsidiary assets 2,600 -
Purchases of fixed assets, net (357) (246)
Investments in subsidiaries and affiliates (88) (2,293)
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Net Cash Provided by (Used in) Investing Activities 2,155 (2,539)
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Financing Activities
Proceeds from borrowings from credit facility - 10,000
Principal payments on other borrowings (414) (576)
Proceeds from (uses in) common stock transactions 106 (2,675)
Preferred stock dividends (488) (1,257)
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Net Cash Provided by (Used in) Financing Activities (796) 5,492
-------- --------
Effect of Exchange Rate Changes on Cash 156 (79)
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Increase (Decrease) in Cash and Cash Equivalents (7,242) 7,802
Cash and Cash Equivalents at Beginning of Period 25,509 8,445
-------- --------
Cash and Cash Equivalents at End of Period $ 18,267 $ 16,247
======== ========
Supplemental Information:
Cash payments for interest $ 109 $ 2,622
Cash payments (refunds) for income taxes (408) (223)
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A-BASIS OF PRESENTATION
The accompanying consolidated financial statements of ICF Kaiser International,
Inc. and subsidiaries (ICF Kaiser or the Company), except for the February 28,
1994 balance sheet, are unaudited and have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. These statements should be read in conjunction
with the Company's audited consolidated financial statements and footnotes
thereto for the year ended February 28, 1994 and the information included in the
Company's Annual Report to the Securities and Exchange Commission on Form 10-K
for the fiscal year ended February 28, 1994. Certain reclassifications have
been made to the prior period financial statements to conform to the
presentation used in the May 31, 1994 financial statements.
NOTE B-NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using net income (loss) available
to common shareholders, as adjusted under the modified treasury stock method,
and the weighted average number of common stock and common stock equivalents
outstanding during the periods presented. Common stock equivalents include
stock options and warrants and the potential conversion of convertible preferred
stock. The adjustments that would be required by the modified treasury stock
method to net income (loss) available for common shareholders and to weighted
average number of shares were anti-dilutive and therefore excluded from earnings
per share computations for the periods presented.
NOTE C-CONTINGENCIES
Normally in the Company's business, various claims or charges are asserted and
litigation commenced against the Company arising from or related to properties,
injuries to persons and breaches of contract, as well as claims related to
acquisitions and dispositions. Claimed amounts may not bear any reasonable
relationship to the merits of the claim or to a final court award. In the
opinion of management, an adequate reserve has been provided for final
judgments, if any, in excess of insurance coverage, which might be rendered
against the Company in such litigation.
The Company may from time to time be, either individually or in conjunction with
other government contractors operating in similar types of businesses, involved
in U.S. government investigations for alleged violations of procurement or other
federal laws and regulations. The Company currently is the subject of a number
of U.S. government investigations and is cooperating with the responsible
government agencies involved. No charges are presently known to have been filed
against the Company by these agencies. The Company is unable to predict the
outcome of the investigations in which it is currently involved. Management
does not believe that there will be any material adverse effect on the Company's
financial position as a result of these investigations.
The Company has a substantial number of cost reimbursable contracts with the
U.S. government, the costs of which are subject to audit by the U. S.
government. As a result of such audits, the government asserts from time to
time that certain costs claimed as reimbursable under government contracts
either were not allowable or not allocated in accordance with federal
procurement regulations. Management believes that the potential effect of
disallowed costs, if any, for the periods currently under audit and for periods
not yet audited has been adequately provided for and will not have a material
adverse effect on the Company's financial position.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
ICF Kaiser is one of the nation's largest engineering, construction, and
consulting services companies, providing fully integrated services to domestic
and foreign clients in the environment, infrastructure, industry, and energy
markets, in both the private and public sectors.
ICF Kaiser's operating results for the first quarter of fiscal 1995 were
significantly better than both the comparable period in fiscal 1994 and the
previous quarter (the fourth quarter of fiscal 1994) when the Company reported a
$20.5 million net loss. The Company's $4.2 million of operating income is at
the highest level since fiscal 1993 and $17.7 million higher than the fourth
quarter of fiscal 1994. The improved financial performance from the previous
quarter was attributable to several factors including: volume and earnings
growth throughout the Company, particularly the Company's operations at the U.S.
Department of Energy's Hanford site in Washington (DOE-Hanford), reduction in
the Company's indirect cost structure to more appropriately match current
operating volume, and implementation of the restructuring plan for certain
operations initiated in the fourth quarter of fiscal 1994 in response to
weakened market conditions. Management's plan included downsizing the work
force, consolidating office space, renegotiating significant leases, and
restructuring certain international operations. Over 80% of the originally
anticipated downsizing of the work force had been completed as of May 31, 1994.
Significant actions have been taken on the other elements of the plan, which
should be completed in fiscal 1995. Management will continue its review for
additional areas to reduce costs and increase the efficiency of operations.
ICF Kaiser's primary markets (environment, infrastructure, industry, and energy)
remain extremely competitive; however, over the long-term the Company expects
market conditions to improve and its share of these markets to expand. An
improving global economy should begin to provide increased demand in the
industrial sector, including the metals, mining, and steel industries, which are
key consumers of ICF Kaiser's engineering and construction services. Improving
economic conditions should also be expected to stimulate demand in the global
infrastructure market which is dependent on government funding sources. In
addition, a reauthorization of key U.S. environmental laws, which is expected
within the next twelve months, and stricter regulatory enforcement should
increase the demand for the Company's environmental remediation services.
The Company's backlog increased to $1.7 billion as of May 31, 1994 from $1.6
billion as of February 28, 1994. The Company continues to aggressively pursue
new business across all of its markets in order to increase backlog and market
share. Currently, ICF Kaiser is pursuing and bidding on a variety of large-
scale environmental cleanup projects for the U.S. Department of Defense and DOE.
The Company's strategy is to combine large-scale projects, such as DOE-Hanford
and those environmental cleanup projects currently being pursued, with broad-
based growth in the Company's contract base, particularly in the engineering and
construction and international areas, while concurrently maintaining a tightly-
controlled cost structure.
7
<PAGE>
Results of Operations
For the quarter ended May 31, 1994, ICF Kaiser's net income was $218,000 and net
loss available for common shareholders was $321,000 or $0.02 per share, compared
to net loss of $657,000 and net loss available for common shareholders of
$1,993,000, or $0.09 per share, for the quarter ended May 31, 1993. The
$875,000 increase in net income was achieved despite significantly higher
interest expense, primarily through the expansion at DOE-Hanford and the
Company's ability to reduce and control operating costs. Each of these elements
are discussed in more detail below.
The following table summarizes key elements in the Consolidated Statements of
Operations for the quarter ended May 31, 1994 and 1993. Certain items in fiscal
1994 have been restated to conform to the fiscal 1995 presentation.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
May 31, 1994 May 31, 1993
-----------------------------------------
(Dollars in millions)
<S> <C> <C>
Gross revenue $210.5 $128.0
Service revenue $113.2 $ 88.7
Service revenue as a
percentage of gross 53.8% 69.3%
revenue
Operating expenses as a
percentage of service
revenue:
Direct cost of services
and overhead 84.4% 83.2%
Administrative
and general 9.8% 13.4%
Depreciation
and amortization 2.0% 2.7%
Unusual item - 0.6%
Operating income 3.7% 0.1%
</TABLE>
Gross revenue represents services provided to customers with whom the Company
has a primary contractual relationship. Included in gross revenue are costs of
certain services subcontracted to third parties and other reimbursable direct
project costs, such as materials procured by the Company on behalf of its
customers.
Service revenue is derived by deducting the costs of subcontracted services and
direct project costs from gross revenue and adding the Company's share of the
income of joint ventures and affiliated companies. ICF Kaiser believes that it
is appropriate to analyze operating margins and other ratios in relation to
service revenue because such revenue and ratios reflect the work performed
directly by the Company.
8
<PAGE>
Revenue
Gross revenue for the quarter increased 64.4% to $210.5 million, while service
revenue increased 27.6% to $113.2 million, versus the comparable period last
year. The increase is primarily attributable to the work performed at DOE-
Hanford ($87.5 million gross and $31.2 million service), which was significantly
expanded through an October 1993 amendment to the contract. Service revenue
increased 12.1% from the fourth quarter of fiscal 1994 due to the expansion at
DOE-Hanford and Company-wide growth. Service revenue as a percentage of gross
revenue decreased to 53.8% for the quarter ended May 31, 1994 from 69.3% for the
comparable period last year, primarily because under the amended DOE-Hanford
contract, ICF Kaiser absorbed a business segment from the prime contractor which
utilizes a much higher proportion of subcontractors than company personnel.
Expenses
The Company's direct cost of services and overhead increased $21.7 million to
84.4% of service revenue due primarily to the DOE-Hanford expansion.
Administrative and general expense decreased $0.8 million from 13.4% to 9.8% of
service revenue as the DOE-Hanford expansion had a negligible effect on
corporate administrative and general expense. The decrease in these costs is
attributable to the impact of management cost-cutting initiatives, which heavily
affected administrative staff functions.
ICF Kaiser's interest expense for the quarter ended May 31, 1994 increased $2.3
million from the comparable period last year due to the recapitalization program
completed in the fourth quarter of fiscal 1994. The increase in interest
expense was partially offset by a reduction in preferred dividends.
ICF Kaiser's effective tax rate increased to 62% in the first quarter of fiscal
1995 from 44% in the first quarter of fiscal 1994. The effective tax rate in
fiscal 1995 is higher than it has been in past income-producing years because
permanent differences, such as the nondeductibility of goodwill, comprise a much
higher percentage of pretax income than in prior years. As income increases,
the effective tax rate should decrease as these permanent differences become
less significant in relation to total pretax income.
Liquidity and Capital Resources
During the first quarter of fiscal 1995, cash and cash equivalents decreased
$7.2 million to $18.3 million at May 31, 1994; however, working capital remained
constant. Operating activities used $8.8 million of cash in the first quarter
which was partially offset by the receipt of $2.6 million of proceeds from the
sale of a subsidiary's assets in the fourth quarter of fiscal 1994. The
utilization of cash in operations was primarily due to a significant pay down of
accounts payable in the first quarter, which was compounded by an increase in
receivables. In the prior year's first quarter, both payables and receivables
decreased because of the Company's decreasing volume. The first interest
payment ($7.5 million) on the Company's 12% Senior Subordinated Notes issued in
the fourth quarter of fiscal 1994 will be made on June 30, 1994. Management
believes that current projected levels of cash flows and operating revenues and
the availability of borrowings under the Company's credit facility will be
adequate to fund operations throughout the next twelve months.
9
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
As previously reported in the Report on Form 10-K for the year ended
February 28, 1994.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed as part of this report are listed below:
-----------------------------------------------------------
None
(b) Report on Form 8-K
------------------
A Report on Form 8-K (Date of Report: April 22, 1994) was filed
with the Commission on April 25, 1994, reporting the Company's
financial results for the fiscal year ended February 28, 1994.
10
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Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report of Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
ICF KAISER INTERNATIONAL, INC.
(Registrant)
Date: June 21, 1994 /s/ Ronald R. Spoehel
------------------------------
Ronald R. Spoehel
Senior Vice President, Chief Financial
Officer (Acting), and Treasurer
(Duly authorized officer and
principal financial officer)
11
