<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
================================================================================
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1995 Commission File No. 1-12248
ICF KAISER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1437073
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9300 Lee Highway, Fairfax, Virginia 22031-1207
----------------------------------- ----------
(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 _________
---------
On June 30, 1995, there were 21,010,884 shares of ICF Kaiser International,
Inc. Common Stock, par value $0.01 per share, outstanding.
================================================================================
<PAGE>
ICF KAISER INTERNATIONAL, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
May 31, 1995 and February 28, 1995............................. 3
Consolidated Statements of Operations -
Three Months Ended May 31, 1995 and 1994....................... 4
Consolidated Statements of Cash Flows -
Three Months Ended May 31, 1995 and 1994....................... 5
Notes to Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7-9
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,
1995 1995
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 20,906 $ 28,233
Contract receivables, net 139,763 139,860
Prepaid expenses and other current assets 9,447 10,872
Deferred income taxes 13,420 13,553
----------- ----------
Total Current Assets 183,536 192,518
----------- ----------
Fixed Assets
Furniture, equipment, and leasehold improvements 42,173 42,557
Less depreciation and amortization (30,461) (29,648)
----------- ----------
11,712 12,909
----------- ----------
Other Assets
Goodwill, net 47,453 47,945
Investments in and advances to affiliates 9,021 8,022
Due from officers and employees 656 1,826
Other 21,394 18,202
----------- ----------
78,524 75,995
----------- ----------
$ 273,772 $ 281,422
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 46,173 $ 46,811
Accrued salaries and employee benefits 29,107 30,549
Accrued interest 6,275 2,528
Current portion of long-term debt 321 578
Income taxes payable 307 644
Deferred revenue 8,846 11,013
Other 8,299 8,755
----------- ----------
Total Current Liabilities 99,328 100,878
----------- ----------
Long-term Liabilities
Long-term debt, less current portion 121,243 126,733
Other 6,478 6,570
----------- ----------
127,721 133,303
----------- ----------
Commitments and Contingencies
Redeemable Preferred Stock 19,668 19,617
Common Stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 21,010,864 and 21,011,369 shares 210 210
Additional Paid-in Capital 63,709 63,786
Notes Receivable Related to Common Stock (1,732) (1,732)
Retained Earnings (Deficit) (33,719) (33,343)
Cumulative Translation Adjustment (1,413) (1,297)
----------- ----------
$ 273,772 $ 281,422
=========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended May 31,
1995 1994
==============================
(Unaudited)
<S> <C> <C>
GROSS REVENUE $ 192,983 $ 210,491
Subcontract and direct material costs (88,406) (98,292)
Equity in income of joint ventures
and affiliated companies 921 951
----------- -----------
SERVICE REVENUE 105,498 113,150
OPERATING EXPENSES
Direct cost of services and overhead 87,355 95,545
Administrative and general 11,998 11,127
Depreciation and amortization 2,383 2,259
----------- -----------
OPERATING INCOME 3,762 4,219
OTHER INCOME (EXPENSE)
Interest income 561 305
Interest expense (4,027) (3,949)
----------- -----------
INCOME BEFORE INCOME TAXES 296 575
Income tax provision 133 357
----------- -----------
NET INCOME 163 218
Preferred stock dividends and accretion 539 539
----------- -----------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (376) $ (321)
=========== ===========
Primary and Fully Diluted
Net Loss Per Common Share $ (0.02) $ (0.02)
=========== ===========
Primary and Fully Diluted
Weighted Average Common and
Common Equivalent Shares Outstanding 21,004 20,943
=========== ===========
</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,
1995 1994
================================
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 163 $ 218
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,383 2,259
Provision for losses on contract receivables 480 237
Provision for deferred income taxes 133 357
Earnings in excess of cash distributions from joint
ventures and affiliated companies (465) (666)
Changes in operating assets and liabilities related to
operating activities:
Contract receivables, net (383) (2,346)
Prepaid expenses and other current assets 644 4,231
Other assets (2,247) (1,336)
Accounts payable and accrued expenses 1,667 (9,747)
Income taxes payable (337) 434
Deferred revenue (2,167) (828)
Other liabilities (438) (1,570)
---------- ----------
Net Cash Used in Operating Activities (567) (8,757)
---------- ----------
INVESTING ACTIVITIES
Sale of subsidiaries and subsidiary assets 735 2,600
Investments in subsidiaries and affiliates (847) (88)
Purchases of fixed assets, net (110) (357)
---------- ----------
Net Cash Provided by (Used in) Investing Activities (222) 2,155
---------- ----------
FINANCING ACTIVITIES
Principal payments on credit facility (5,000) -
Principal payments on other borrowings (857) (414)
Proceeds from issuances of common stock 169 106
Repurchases of common stock (246) -
Preferred stock dividends (488) (488)
---------- ----------
Net Cash Used in Financing Activities (6,422) (796)
---------- ----------
Effect of Exchange Rate Changes on Cash (116) 156
---------- ----------
Decrease in Cash and Cash Equivalents (7,327) (7,242)
Cash and Cash Equivalents at Beginning of Period 28,233 25,509
---------- ----------
Cash and Cash Equivalents at End of Period $ 20,906 $ 18,267
========== ==========
SUPPLEMENTAL INFORMATION:
Cash payments for interest $ 178 $ 109
Cash payments (refunds) for income taxes $ 326 $ (408)
</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,
1995 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, 1995 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, 1995. Certain reclassifications have
been made to the prior period financial statements to conform to the
presentation used in the May 31, 1995 financial statements.
NOTE B - NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using net income (loss)
attributable 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. The adjustments required
by the modified treasury stock method to net income (loss) attributable to
common shareholders and the impact of common stock equivalents on the weighted
average number of shares were anti-dilutive for all periods presented and,
therefore, are excluded from earnings per share computations.
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, that might be rendered
against the Company in such litigation.
The Company may from time to time, either individually or in conjunction with
other government contractors operating in similar types of businesses, be
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 presently are known to
have been filed against the Company by these agencies. Management does not
believe that there will be any material adverse effect on the Company's
financial position, operations, or cash flows as a result of these
investigations.
The Company has a substantial number of cost-reimbursement 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
provided for adequately and will not have a material adverse effect on the
Company's financial position, operations, or cash flows.
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 income of $3.8 million for the quarter ended May 31, 1995
was a $0.4 million decrease from the $4.2 million of operating income reported
for the quarter ended May 31, 1994. The lower operating income reflects a
decline in revenue from environmental operations primarily resulting from a
decline in private-sector environmental work, combined with slower funding under
certain public-sector contracts. The Company believes that the federal
environmental projects have been slowed temporarily by federal government
budgetary uncertainties; however, the Company believes that continued investment
in its business development activities should result in higher backlog.
Operating income was further impacted by a significant increase in marketing
efforts in the quarter ended May 31, 1995 versus the quarter ended May 31, 1994
and by continued low staff utilization. Offsetting these negative income
impacts was an improvement in engineering and construction operations due to
operating revenues which had been previously deferred pending commencement of a
major transit project in the Philippines (costs related to the development of
this project had been expensed in prior periods).
The Company's contract backlog increased significantly to $4.3 billion at May
31, 1995 compared to $1.4 billion at February 28, 1995. In April 1995, Kaiser-
Hill Company, LLC (Kaiser-Hill), a limited liability company owned equally by
ICF Kaiser and CH2M Hill Companies, Ltd., was awarded the Performance Based
Integrating Management contract at the U.S. Department of Energy's (DOE) Rocky
Flats Environmental Technology Site in Colorado (Rocky Flats). The five-year
contract increased contract backlog by $3.0 billion and is expected to generate
between $1.5 million and $9 million in annual pretax profit to ICF Kaiser. The
fee structure for this contract will provide for a mixture of base and incentive
fees earned through the achievement of cost reductions, attainment of certain
milestones, and accomplishment of other goals.
With the recent award of the Rocky Flats contract and the Company's continued
work at DOE's Hanford, Washington site (Hanford), ICF Kaiser is now actively
participating in two of DOE's major environmental cleanup efforts, as well as
working at eight of the other 18 DOE major weapons facilities. The Company
expects these operations to provide a stable operating income base upon which
the Company can build. Management intends to continue its pursuit of major
federal environmental cleanup contracts similar to Rocky Flats and Hanford. The
Company also intends to develop new business opportunities such as international
and private-sector expansion of consulting services and expansion of remediation
capabilities. The Company strongly believes that these endeavors, combined with
the Company's ongoing efforts to enhance financial and system controls and
increase market development activities, should progressively move the Company
forward.
7
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes key elements in the Consolidated Statements of
Operations for the three months ended May 31, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
May 31, 1995 May 31, 1994
---------------------------------------
(Dollars in millions)
<S> <C> <C>
GROSS REVENUE $193.0 $210.5
SERVICE REVENUE $105.5 $113.2
SERVICE REVENUE AS A
PERCENTAGE OF GROSS REVENUE 54.7% 53.8%
OPERATING EXPENSES AS A
PERCENTAGE OF SERVICE REVENUE:
Direct cost of services
and overhead 82.8% 84.4%
Administrative and general 11.4% 9.8%
Depreciation and amortization 2.3% 2.0%
OPERATING INCOME 3.6% 3.7%
</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.
Operating profits generated by the Hanford contract are based on performance and
not revenue. A change in revenue between periods is likely to be
disproportionate to the change in operating income. Consequently, changes in
revenue may have an exaggerated impact on the Company's margins as measured on a
percentage basis.
Revenue
Gross revenue for the quarter ended May 31, 1995 decreased $17.5 million, or
8.3%, to $193.0 million, while service revenue decreased $7.7 million, or 6.8%,
to $105.5 million, from the comparable period in the prior year. These
decreases were attributable to a decline in work performed at Hanford ($29.1
million reduction in gross revenue and $10.2 million reduction in service
revenue) due to federal budget reductions which caused a decrease in services
provided by the Company at the Hanford site. This reduced level of Hanford
activity is expected to continue and may be reduced further in future periods;
however, a reduction in the Hanford budget is not expected to have a significant
impact on operating income due to the nature of the fee structure. The Hanford
decrease was offset partially by an increase in the Company's engineering and
construction revenue ($6.3 million increase in gross revenue and $4.2 million
increase in service revenue) primarily due to the recognition of revenues on the
Philippines project and an increase in revenues on projects in the basic
industries sector.
8
<PAGE>
Operating Expenses
Direct cost of services and overhead decreased $8.1 million for the quarter
ended May 31, 1995 to $87.4 million from $95.5 million for the comparable period
in the prior year. This decrease was primarily due to a reduction in direct
labor at Hanford attributable to the federal budget reductions discussed above.
The Company's direct cost of services and overhead as a percentage of service
revenue for the quarter ended May 31, 1995 was substantially the same as for the
comparable period in the prior year. Administrative and general expense
increased $0.9 million between years and increased from 9.8% to 11.4% as a
percentage of service revenue. The increase in these costs is primarily
attributable to the Company's increased commitment to the development of
marketing activities, including filling several key marketing positions within
the Company and the relatively high level of marketing expense associated with
proposing and bidding large scale U.S. Department of Defense and DOE contracts.
Income Tax Expense
ICF Kaiser's effective tax rate was 45% for the quarter ended May 31, 1995, a
decrease from 62% for the quarter ended May 31, 1994. The decrease in the
effective tax rate is primarily due to a reduction in losses of controlled
foreign corporations and an increase in recognition of tax credits.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of the current fiscal year, cash and cash
equivalents decreased $7.3 million to $20.9 million at May 31, 1995. The
repayment of the outstanding balance on the Company's credit facility used $5.0
million of cash; payment of other outstanding debt used $0.9 million;
investments in joint ventures and affiliates used $0.8 million; and increases in
other assets used $2.2 million, primarily due to a settlement with former
employees and the award of the Rocky Flats contract. The cash position was
improved by $0.7 million from proceeds received during the quarter ended May 31,
1995 from the previously recognized sale of a 20% interest in a French
subsidiary which occurred in the prior year.
During the year ended February 28, 1995, the U.S. Environmental Protection
Agency approved the Company's revised provisional billing rates for fiscal years
1991 through 1994, thus authorizing the Company to submit invoices on cost-plus
contracts with U.S. government agencies for work performed during these approved
years. The Company collected $1.1 million during the three months ended May 31,
1995 on these contracts and expects to collect up to an additional $3.0 million
through December 1995.
Management believes that current projected levels of cash flows and the
availability of financing, including borrowings under the Company's credit
facility, will be adequate to fund operations throughout the next twelve months.
As of May 31, 1995, there were no outstanding borrowings under the credit
facility, except for letters of credit; however, the Company borrowed $5.0
million under its credit facility on June 30, 1995. A $7.5 million interest
payment on the Company's 12% Senior Subordinated Notes due 2003 was made in June
1995.
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, 1995.
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:
-----------------------------------------------------------
No. 27 Financial Data Schedule
(b) Report on Form 8-K
------------------
Report on Form 8-K (Date of Event: June 23, 1995) reporting a decision
to change the Company's fiscal year end from February 28 to December
31, effective December 31, 1995 (filed with the Commission on July 7,
1995).
10
<PAGE>
SIGNATURES
----------
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: July 11, 1995 /s/ Richard K. Nason
-----------------------------
Richard K. Nason
Executive Vice President and
Chief Financial Officer
(Duly authorized officer and
principal financial officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<EXCHANGE-RATE> 1
<CASH> 20,906,000
<SECURITIES> 0
<RECEIVABLES> 149,782,000
<ALLOWANCES> 10,019,000
<INVENTORY> 0
<CURRENT-ASSETS> 183,536,000
<PP&E> 42,173,000
<DEPRECIATION> 30,461,000
<TOTAL-ASSETS> 273,772,000
<CURRENT-LIABILITIES> 99,328,000
<BONDS> 121,243,000<F1>
<COMMON> 210,000
19,668,000
0
<OTHER-SE> 26,845,000
<TOTAL-LIABILITY-AND-EQUITY> 273,772,000
<SALES> 0
<TOTAL-REVENUES> 192,983,000<F2>
<CGS> 0
<TOTAL-COSTS> 87,355,000<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 480,000
<INTEREST-EXPENSE> 4,027,000
<INCOME-PRETAX> 296,000
<INCOME-TAX> 133,000
<INCOME-CONTINUING> 163,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,000
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>Excludes current portion of bonds, mortgages, and similar debt.
<F2>Represents gross revenue which includes 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.
<F3>Excludes subcontract and direct material costs of $88,406,000.
</FN>
</TABLE>
