<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 September 30, 1997 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 October 31, 1997, there were 22,475,904 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 -
September 30, 1997 and December 31, 1996............... 3
Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 and 1996.......... 4
Consolidated Statements of Operations -
Three Months Ended September 30, 1997 and 1996......... 5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996.......... 6
Notes to Consolidated Financial Statements............. 7-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 18-24
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 24
Part II - Other Information
Item 1. Legal Proceedings...................................... 24
Item 2. Changes in Securities.................................. 24
Item 3. Defaults Upon Senior Securities........................ 24
Item 4. Submission of Matters to a Vote of Security Holders.... 25
Item 5. Other Information...................................... 25
Item 6. Exhibits and Reports on Form 8-K....................... 25
</TABLE>
2
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
- -------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 13,929 $ 16,761
Contract receivables, net 299,351 223,278
Prepaid expenses and other current assets 8,521 27,096
Deferred income taxes 11,691 9,739
-------- --------
Total Current Assets 333,492 276,874
-------- --------
Fixed Assets
Furniture, equipment, and leasehold improvements 51,063 48,410
Less depreciation and amortization (39,010) (37,208)
-------- --------
12,053 11,202
-------- --------
Other Assets
Goodwill, net 47,916 49,699
Investments in and advances to affiliates 6,963 6,443
Due from officers and employees 653 716
Other 20,680 21,039
-------- --------
76,212 77,897
-------- --------
$421,757 $365,973
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 19 $ 43
Accounts payable and subcontractors payable 155,964 73,320
Accrued salaries and employee benefits 43,240 45,779
Accrued interest 4,587 47
Other accrued expenses - 15,838
Income taxes payable 409 852
Deferred revenue 29,025 21,829
Other 7,238 5,268
-------- --------
Total Current Liabilities 240,482 162,976
-------- --------
Long-term Liabilities
Long-term debt, less current portion 138,880 156,519
Other 4,905 5,432
-------- --------
143,785 161,951
-------- --------
Commitments and Contingencies
Minority Interests in Subsidiaries 3,516 6,154
Common Stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 22,466,572 and 22,311,842 shares 225 223
Additional Paid-in Capital 67,108 66,983
Notes Receivable Related to Common Stock (1,732) (1,732)
Retained Earnings (Deficit) (29,068) (29,238)
Cumulative Translation Adjustment (2,559) (1,344)
-------- --------
$421,757 $365,973
======== ========
- -------------------------------------------------------------------------------------
</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>
- ------------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
1997 1996
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
GROSS REVENUE $ 839,716 $1,023,410
Subcontract and direct material costs (511,606) (592,295)
Equity in income of joint ventures
and affiliated companies 1,552 2,532
--------- ----------
SERVICE REVENUE 329,662 433,647
OPERATING EXPENSES
Direct cost of services and overhead 258,108 354,658
Administrative and general 43,176 49,979
Depreciation and amortization 7,197 7,840
--------- ----------
OPERATING INCOME 21,181 21,170
OTHER INCOME (EXPENSE)
Interest and investment income 1,340 944
Interest expense (13,397) (12,829)
--------- ----------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 9,124 9,285
Income tax provision 1,642 840
--------- ----------
INCOME BEFORE MINORITY INTERESTS 7,482 8,445
Minority interests in net income of subsidiaries 7,312 4,725
--------- ----------
NET INCOME 170 3,720
Preferred stock dividends and accretion - 1,631
--------- ----------
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 170 $ 2,089
========= ==========
NET INCOME PER COMMON SHARE:
PRIMARY $ 0.01 $ 0.10
========= ==========
FULLY DILUTED $ 0.01 $ 0.10
========= ==========
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
PRIMARY 22,431 21,955
========= ==========
FULLY DILUTED 22,511 21,955
========= ==========
- ----------------------------------------------------- --------------- -------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Three Months Ended September 30,
--------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
GROSS REVENUE $ 332,173 $ 379,971
Subcontract and direct material costs (216,788) (241,579)
Equity in income of joint ventures
and affiliated companies 718 388
-------- ---------
SERVICE REVENUE 116,103 138,780
OPERATING EXPENSES
Direct cost of services and overhead 91,131 113,695
Administrative and general 15,323 17,464
Depreciation and amortization 2,455 2,534
-------- ---------
OPERATING INCOME 7,194 5,087
OTHER INCOME (EXPENSE)
Interest and investment income 324 521
Interest expense (4,240) (4,518)
-------- ---------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 3,278 1,090
Income tax provision 508 (1,455)
-------- ---------
INCOME BEFORE MINORITY INTERESTS 2,770 2,545
Minority interests in net income of subsidiaries 2,650 1,782
-------- ---------
NET INCOME 120 763
Preferred stock dividends and accretion - 539
-------- ---------
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS $ 120 $ 224
======== =========
NET INCOME PER COMMON SHARE:
PRIMARY $ 0.01 $ 0.01
======== =========
FULLY DILUTED $ 0.01 $ 0.01
======== =========
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
PRIMARY 22,502 22,227
======== =========
FULLY DILUTED 22,594 22,227
======== =========
- -----------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 170 $ 3,720
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,197 7,840
Provision for losses on contract receivables 1,345 1,255
Provision for deferred income taxes (1,952) (386)
Earnings less than (in excess of) cash distributions from
joint ventures and affiliated companies (135) (282)
Minority interests in net income of subsidiaries 7,312 4,725
Unusual items, net - 1,498
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Contract receivables, net (77,418) (7,379)
Prepaid expenses and other current assets 2,035 2,139
Other assets (2,312) (1,293)
Accounts payable and accrued expenses 69,306 (4,698)
Income taxes payable (443) (402)
Deferred revenue 7,196 546
Other liabilities 2,280 (1,510)
Other operating activities (93) 156
-------- --------
Net Cash Provided by Operating Activities 14,488 5,929
-------- --------
INVESTING ACTIVITIES
Sales of subsidiary and subsidiary assets 16,540 -
Sale of fixed assets - 22
Purchases of fixed assets (3,118) (4,905)
Investments in subsidiaries and affiliates, net of cash acquired (441) (1,241)
-------- --------
Net Cash Provided by (Used in) Investing Activities 12,981 (6,124)
-------- --------
FINANCING ACTIVITIES
Borrowings under credit facility 69,000 65,000
Principal payments on credit facility and other borrowings (87,500) (57,000)
Distribution of income to minority interest (9,950) (823)
Proceeds from issuances of common stock 165 313
Repurchases of common stock (252) -
Preferred stock dividends - (1,965)
Debt issuance costs (549) (449)
Other financing activities - (293)
-------- --------
Net Cash Provided by (Used in) Financing Activities (29,086) 4,783
-------- --------
Effect of Exchange Rate Changes on Cash (1,215) 77
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (2,832) 4,665
Cash and Cash Equivalents at Beginning of Period 16,761 16,357
-------- --------
Cash and Cash Equivalents at End of Period $ 13,929 $ 21,022
======== ========
SUPPLEMENTAL INFORMATION
Cash payments for interest $ 9,791 $ 16,182
Cash payments for income taxes $ 445 $ 945
NON-CASH TRANSACTIONS:
Issuance of common stock pursuant to agreements with employees $ 287 $ 500
Reacquisition of common stock $ 227 $ -
Issuance of common stock in connection with an acquisition $ - $ 1,600
- -------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements of ICF Kaiser International,
Inc. and subsidiaries (the Company), except for the December 31, 1996 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 December 31, 1996 and the information included in the
Company's Annual Report to the Securities and Exchange Commission (SEC) on Form
10-K for the year ended December 31, 1996. Certain reclassifications have been
made to the prior period financial statements to conform to the presentation
used in the September 30, 1997 financial statements.
2. Net Income Per Common Share
Net income per common share was computed under the treasury stock method for the
nine and three months ended September 30, 1997 and the modified treasury stock
method for the nine and three months ended September 30, 1996, using net income
available for common shareholders and the weighted average number of common
stock and common stock equivalents outstanding during the periods. Common stock
equivalents include stock options and warrants and additional shares which will
be or may be issued in connection with acquisitions.
3. Contingencies
In the course of the Company's normal business activities, various claims or
charges have been 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.
7
<PAGE>
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 acquisition 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, results of 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 pending audits related to fiscal years 1986 forward, the
government has asserted, among other things, that certain costs claimed as
reimbursable under government contracts either were not allowable or not
allocated in accordance with federal acquisition regulations. The Company is
actively working with the government to resolve these issues. The Company has
provided for its estimate of the potential effect of issues that have been
quantified, including its estimate of disallowed costs for the periods currently
under audit and for periods not yet audited. Many of the issues, however, have
not been quantified by the government or the Company, and others are qualitative
in nature, and their potential financial impact, if any, is not quantifiable by
the government or the Company at this time. The Company's provision will be
reviewed periodically as discussions with the government progress.
4. Long-term Debt
The Company's $40 million revolving credit facility is provided by a group of
three banks and expires on December 31, 1998. The credit facility was amended
during the first six months of 1997 to modify certain financial ratios, to
extend the termination date of the credit facility from June 30, 1998, to
December 31, 1998, and to permit certain investments and acquisitions. The
Company currently is negotiating to amend and restate the credit facility [New
Credit Facility] to increase the capacity from $40 million to $60 million, to
add two new participating banks, to extend the termination date from December
31, 1998 to the year 2000, and to modify certain financial ratios required to be
maintained. The credit facility and the New Credit Facility will continue to be
guaranteed by certain subsidiaries (Guarantors), and the banks will continue to
have a security interest in substantially all accounts receivable and certain
other assets and a pledge of the stock of certain subsidiaries. The New Credit
Facility will continue the limitations on the payments of cash dividends on
common stock, the prohibitions on the issuance of certain types of indebtedness,
and the limitations on certain investments and acquisitions. The Company
expects to close on the New Credit Facility in the fourth quarter.
8
<PAGE>
5. Guarantor Subsidiaries
Four wholly owned subsidiaries of ICF Kaiser International, Inc. (Subsidiary
Guarantors) unconditionally guarantee the payment of the principal, premium, if
any, and interest on the Company's Subordinated Notes and the Series B Senior
Notes. The Subsidiary Guarantors are Cygna Consulting Engineers and Project
Management, Inc.; ICF Kaiser Government Programs, Inc.; PCI Operating Company,
Inc.; and Systems Applications International, Inc. New Guarantors of the New
Credit Facility will be added as New Subsidiary Guarantors effective in the
fourth quarter, and the condensed consolidating financial information for the
existing Subsidiary Guarantors and the New Subsidiary Guarantors will be
presented in the Company's Annual Report to the SEC on Form 10-K for the year
ending December 31, 1997.
Presented below is condensed consolidating financial information for ICF Kaiser
International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non-
Guarantor Subsidiaries, some of whom will become New Subsidiary Guarantors once
the Company closes on the New Credit Facility. The information, except for the
December 31, 1996 condensed consolidating balance sheet, is unaudited.
Investments in subsidiaries have been presented using the equity method of
accounting. In the Company's opinion, separate financial statements for the
Subsidiary Guarantors would not provide additional information that is material
to investors. Therefore, the Subsidiary Guarantors are combined in the
presentation below.
9
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ (4,278) $ 4,741 $ 13,466 $ - $ 13,929
Contract receivables, net (1,585) 139,737 161,199 - 299,351
Intercompany receivables, net 92,354 9,276 (101,630) - -
Prepaid expenses and other current assets 6,970 22 1,529 - 8,521
Deferred income taxes 11,553 - 138 - 11,691
-------- -------- --------- --------- --------
Total Current Assets 105,014 153,776 74,702 - 333,492
-------- -------- --------- --------- --------
Fixed Assets
Furniture, equipment, and leasehold improvements 9,618 2,204 39,241 - 51,063
Less depreciation and amortization (5,050) (2,107) (31,853) - (39,010)
-------- -------- --------- --------- --------
4,568 97 7,388 - 12,053
-------- -------- --------- --------- --------
Other Assets
Goodwill, net - - 47,916 - 47,916
Other 91,717 2,009 22,662 (88,092) 28,296
-------- -------- --------- --------- --------
91,717 2,009 70,578 (88,092) 76,212
-------- -------- --------- --------- --------
$201,299 $155,882 $ 152,668 $ (88,092) $421,757
======== ======== ========= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ - $ - $ 19 $ - $ 19
Accounts payable and subcontractors payable 16,154 112,718 27,092 - 155,964
Accrued salaries and employee benefits (4,071) 22,330 24,981 - 43,240
Other 11,538 452 29,269 - 41,259
-------- -------- --------- --------- --------
Total Current Liabilities 23,621 135,500 81,361 - 240,482
-------- -------- --------- --------- --------
Long-term Liabilities
Long-term debt, less current portion 138,880 - - - 138,880
Other 2,659 34 2,212 - 4,905
-------- -------- --------- --------- --------
141,539 34 2,212 - 143,785
-------- -------- --------- --------- --------
Minority Interests in Subsidiaries - 3,516 - - 3,516
Common Stock 217 108 166 (266) 225
Additional Paid-in Capital 66,881 224 61,119 (61,116) 67,108
Retained Earnings (Deficit) (29,227) 16,500 10,369 (26,710) (29,068)
Other Equity (1,732) - (2,559) - (4,291)
-------- -------- --------- --------- --------
$201,299 $155,882 $ 152,668 $ (88,092) $421,757
======== ======== ========= ========= ========
</TABLE>
10
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ (7,720) $11,974 $ 13,001 $ (494) $ 16,761
Contract receivables, net 183 78,585 144,510 - 223,278
Intercompany receivables, net 155,653 (2,543) (153,110) - -
Prepaid expenses and other current assets 4,509 187 22,731 (331) 27,096
Deferred income taxes 12,504 - (2,765) - 9,739
-------- ------- -------- -------- --------
Total Current Assets 165,129 88,203 24,367 (825) 276,874
-------- ------- -------- -------- --------
Fixed Assets
Furniture, equipment, and leasehold improvements 7,243 2,198 38,969 - 48,410
Less depreciation and amortization (3,430) (2,079) (31,699) - (37,208)
-------- ------- -------- -------- --------
3,813 119 7,270 - 11,202
-------- ------- -------- -------- --------
Other Assets
Goodwill, net - - 49,699 - 49,699
Other 58,494 2,602 21,774 (54,672) 28,198
-------- ------- -------- -------- --------
58,494 2,602 71,473 (54,672) 77,897
-------- ------- -------- -------- --------
$227,436 $90,924 $103,110 $(55,497) $365,973
======== ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ - $ - $ 43 $ - $ 43
Accounts payable and subcontractors payable 16,467 $53,612 19,079 - 89,158
Accrued salaries and employee benefits 10,242 22,498 13,039 - 45,779
Other 4,454 447 23,126 (31) 27,996
-------- ------- -------- -------- --------
Total Current Liabilities 31,163 76,557 55,287 (31) 162,976
-------- ------- -------- -------- --------
Long-term Liabilities
Long-term debt, less current portion 157,306 - - (787) 156,519
Other 2,731 - 2,701 - 5,432
-------- ------- -------- -------- --------
160,037 - 2,701 (787) 161,951
-------- ------- -------- -------- --------
Minority Interests in Subsidiaries - 6,154 - - 6,154
Common Stock 223 108 167 (275) 223
Additional Paid-in Capital 66,983 224 44,619 (44,843) 66,983
Retained Earnings (Deficit) (29,238) 7,881 1,680 (9,561) (29,238)
Other Equity (1,732) - (1,344) - (3,076)
-------- ------- -------- -------- --------
$227,436 $90,924 $103,110 $(55,497) $365,973
======== ======= ======== ======== ========
</TABLE>
11
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ --------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
GROSS REVENUE $ 475 $ 467,034 $ 372,207 $ - $ 839,716
Subcontract and direct material costs (441) (336,125) (175,040) - (511,606)
Equity in income of joint ventures and
affiliated companies and subsidiaries 20,759 - 1,715 (20,922) 1,552
------- --------- ----------- --------- ---------
SERVICE REVENUE 20,793 130,909 198,882 (20,922) 329,662
OPERATING EXPENSES
Operating expenses 17,404 114,926 168,954 - 301,284
Depreciation and amortization 1,738 475 4,984 - 7,197
------- --------- ----------- --------- ---------
OPERATING INCOME 1,651 15,508 24,944 (20,922) 21,181
OTHER INCOME (EXPENSE)
Interest and investment income 459 489 449 (57) 1,340
Interest expense (13,340) (65) (44) 52 (13,397)
------- --------- ----------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS (11,230) 15,932 25,349 (20,927) 9,124
Income tax provision (benefit) (11,400) 3,362 9,680 - 1,642
------- --------- ----------- --------- ---------
INCOME BEFORE MINORITY INTERESTS 170 12,570 15,669 (20,927) 7,482
Minority interests in net income of subsidiaries - 7,312 - - 7,312
------- --------- ----------- --------- ---------
NET INCOME AVAILABLE FOR
COMMON SHAREHOLDERS $ 170 $ 5,258 $ 15,669 $ (20,927) $ 170
======= ========= =========== ========= =========
</TABLE>
12
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ --------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
GROSS REVENUE $1,165 $ 442,478 $ 579,767 $ - $ 1,023,410
Subcontract and direct material costs (524) (302,444) (289,327) - (592,295)
Equity in income of joint ventures and
affiliated companies and subsidiaries 8,959 - 2,895 (9,322) 2,532
------ --------- ---------- ---------- -----------
SERVICE REVENUE 9,600 140,034 293,335 (9,322) 433,647
OPERATING EXPENSES
Operating expenses (4,771) 130,515 278,896 (3) 404,637
Depreciation and amortization 1,638 904 5,298 - 7,840
------ --------- ---------- ---------- -----------
OPERATING INCOME 12,733 8,615 9,141 (9,319) 21,170
OTHER INCOME (EXPENSE)
Interest and investment income 223 286 675 (240) 944
Interest expense (12,832) (129) (54) 186 (12,829)
------ --------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS 124 8,772 9,762 (9,373) 9,285
Income tax provision (benefit) (3,596) 1,578 2,858 - 840
------ --------- ---------- ---------- -----------
INCOME BEFORE MINORITY INTERESTS 3,720 7,194 6,904 (9,373) 8,445
Minority interests in net income of subsidiaries - 4,725 - - 4,725
------ --------- ---------- ---------- -----------
NET INCOME 3,720 2,469 6,904 (9,373) 3,720
Preferred stock dividends and accretion 1,631 - - - 1,631
------ --------- ---------- ---------- -----------
NET INCOME AVAILABLE FOR
COMMON SHAREHOLDERS $2,089 $ 2,469 $ 6,904 $ (9,373) $ 2,089
====== ========= ========== ========== ===========
</TABLE>
13
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
GROSS REVENUE $ 252 $ 195,190 $136,731 $ - $ 332,173
Subcontract and direct material costs (140) (147,277) (69,371) - (216,788)
Equity in income of joint ventures and
affiliated companies and subsidiaries 7,781 - 954 (8,017) 718
------- --------- --------- ---------- ------------
SERVICE REVENUE 7,893 47,913 68,314 (8,017) 116,103
OPERATING EXPENSES
Operating expenses 6,222 41,967 58,265 - 106,454
Depreciation and amortization 595 105 1,755 - 2,455
------- --------- --------- ---------- ------------
OPERATING INCOME (LOSS) 1,076 5,841 8,294 (8,017) 7,194
OTHER INCOME (EXPENSE)
Interest income 60 142 133 (11) 324
Interest expense (4,197) (41) (13) 11 (4,240)
------- --------- --------- ---------- ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS (3,061) 5,942 8,414 (8,017) 3,278
Income tax provision (benefit) (3,181) 1,284 2,405 - 508
------- --------- --------- ---------- ------------
INCOME BEFORE MINORITY INTERESTS 120 4,658 6,009 (8,017) 2,770
Minority interests in net income of subsidiaries - 2,650 - - 2,650
------- --------- --------- ---------- ------------
NET INCOME AVAILABLE FOR
COMMON SHAREHOLDERS $ 120 $ 2,008 $ 6,009 $ ( 8,017) $ 120
======= ========= ========= ========== ============
</TABLE>
14
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 1996
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
GROSS REVENUE $ (27) $ 176,079 $ 203,919 $ - $ 379,971
Subcontract and direct material costs (161) (134,234) (107,184) - (241,579)
Equity in income of joint ventures and
affiliated companies and subsidiaries 3,446 - 490 (3,548) 388
------- ---------- ------------- ------------ ----------
SERVICE REVENUE 3,258 41,845 97,225 (3,548) 138,780
OPERATING EXPENSES
Operating expenses (726) 38,652 93,233 - 131,159
Depreciation and amortization 523 319 1,692 - 2,534
------- ---------- ------------- ------------ ----------
OPERATING INCOME 3,461 2,874 2,300 (3,548) 5,087
OTHER INCOME (EXPENSE)
Interest income 78 146 402 (105) 521
Interest expense (4,564) (28) (16) 90 (4,518)
------- ---------- ------------- ------------ ----------
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS (1,025) 2,992 2,686 (3,563) 1,090
Income tax provision (benefit) (1,788) 509 (176) - (1,455)
------- ---------- ------------- ------------ ----------
INCOME BEFORE MINORITY INTERESTS 763 2,483 2,862 (3,563) 2,545
Minority interests in net income of subsidiaries - 1,687 95 - 1,782
------- ---------- ------------- ------------ ----------
NET INCOME 763 796 2,767 (3,563) 763
Preferred stock dividends and accretion 539 - - - 539
------- ---------- ------------- ------------ ----------
NET INCOME AVAILABLE FOR
COMMON SHAREHOLDERS $ 224 $ 796 $ 2,767 $ (3,563) $ 224
======= ========== ============= ============ ==========
</TABLE>
15
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Cash Provided by (Used in) Operating Activities $ 23,539 $ (40) $ (9,505) $ 494 $ 14,488
-------- ---------- ------------- ------------ ------------
INVESTING ACTIVITIES
Sales of subsidiaries and subsidiary assets - 2,763 13,777 - 16,540
Purchases of fixed assets (961) (6) (2,151) - (3,118)
Investments in subsidiaries and affiliates,
net of cash acquired - - (441) - (441)
Sale of fixed assets - - - - -
-------- ---------- ------------- ------------ ------------
Net Cash Used in Investing Activities (961) 2,757 11,185 - 12,981
-------- ---------- ------------- ------------ ------------
FINANCING ACTIVITIES
Borrowings under credit facility 69,000 - - - 69,000
Principal payments on credit facility (87,500) - - - (87,500)
Distribution of income to minority interest - (9,950) - - (9,950)
Proceeds from issuances of common stock 165 - - - 165
Repurchases of common stock (252) - - - (252)
Preferred stock dividends - - - - -
Debt issuance costs (549) - - - (549)
-------- ---------- ------------- ------------ ------------
Net Cash Used in Financing Activities (19,136) (9,950) - - (29,086)
-------- ---------- ------------- ------------ ------------
Effect of Exchange Rate Changes on Cash - - (1,215) - (1,215)
-------- ---------- ------------- ------------ ------------
Increase (Decrease) in Cash and Cash Equivalents 3,442 (7,233) 465 494 (2,832)
Cash and Cash Equivalents at Beginning of Period (7,720) 11,974 13,001 (494) 16,761
-------- ---------- ------------- ------------ ------------
Cash and Cash Equivalents at End of Period $ (4,278) $ 4,741 $ 13,466 $ - $ 13,929
======== ========== ============= ============= ============
</TABLE>
16
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1996
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Cash Provided by (Used in) Operating Activities $(7,858) $8,217 $ 5,675 $ (105) $ 5,929
------- ------ ------- ------- -------
INVESTING ACTIVITIES
Purchases of fixed assets (2,496) (137) (2,272) - (4,905)
Investments in subsidiaries and affiliates,
net of cash acquired - - (1,241) - (1,241)
Sale of fixed assets - - 22 - 22
------- ------ ------- ------- -------
Net Cash Used in Investing Activities (2,496) (137) (3,491) - (6,124)
------- ------ ------- ------- -------
FINANCING ACTIVITIES
Borrowings under credit facility 65,000 - - - 65,000
Principal payments on credit facility (57,000) - - - (57,000)
Distribution of income to minority interest - (823) - - (823)
Proceeds from issuances of common stock 313 - - - 313
Preferred stock dividends (1,965) - - - (1,965)
Debt issuance costs (449) - - (449)
Other financing activities - - (293) - (293)
------- ------ ------- ------- -------
Net Cash Used in Financing Activities 5,899 (823) (293) - 4,783
------- ------ ------- ------- -------
Effect of Exchange Rate Changes on Cash - - 77 - 77
------- ------ ------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents (4,455) 7,257 1,968 (105) 4,665
Cash and Cash Equivalents at Beginning of Period 4,128 1,015 12,578 (1,364) 16,357
------- ------ ------- ------- -------
Cash and Cash Equivalents at End of Period $ (327) $8,272 $14,546 $(1,469) $21,022
======= ====== ======= ======= =======
</TABLE>
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
ICF Kaiser International, Inc. and subsidiaries (the Company) provides
engineering, construction, program management, and consulting services primarily
to the public and private environmental, infrastructure, industrial, and energy
markets domestically and internationally.
Financial Review
- ----------------
The Company's operating results by operating group for the nine and three months
ended September 30, 1997 and 1996 are as follows (in millions):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------- -------- -------- --------
1997 1996 1997 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
Federal programs $ 17.6 $ 24.5 $ 6.7 $ 6.7
Engineering and construction 15.2 10.9 5.0 3.2
Consulting 10.7 9.7 3.7 4.5
------- -------- -------- --------
43.5 45.1 15.4 14.4
Corporate costs (22.3) (23.9) (8.2) (9.3)
------- -------- -------- --------
Total operating income $ 21.2 $ 21.2 $ 7.2 $ 5.1
======= ======== ======== ========
</TABLE>
Nine Months Ended September 30, 1997 Versus Nine Months Ended September 30, 1996
The decrease in income from federal programs primarily resulted from the
effective termination of the Company's contract to perform services at the U.S.
Department of Energy's (DOE) Hanford, Washington, Site (Hanford) in 1996 (see
below). The Hanford contract had a $12.1 million decrease in income between the
nine-month periods. The only income under the Hanford contract during the nine
months ended September 30, 1997 was $1.2 million related to activities
associated with the final phase of the Company's work at Hanford.
The Hanford decrease was offset partially by a $4.8 million increase in income
from the Performance Based Integrating Management Contract at DOE's Rocky Flats
Environmental Technology Site in Colorado (Rocky Flats) due to an increase in
fees earned. The Rocky Flats contract was awarded in 1995 to Kaiser-Hill
Company, LLC (Kaiser-Hill), a limited liability company owned equally by the
Company and CH2M Hill Companies, Ltd. (CH2M Hill). Because Kaiser-Hill is a
consolidated subsidiary of the Company, operating income includes the portion of
income generated under the Rocky Flats contract attributable to CH2M Hill. CH2M
Hill's interest in Kaiser-Hill is reflected as a minority interest in
subsidiaries in the Company's financial statements.
18
<PAGE>
Engineering and construction operations experienced a $4.3 million improvement
in income between the nine-month periods primarily due to an increase in the
volume of work, including a substantial increase in revenue from a mini-mill
project for Nova Hut, a.s., an integrated steel maker based in the Ostrava
region of the Czech Republic (see Business Outlook). Excluding the Nova Hut
project, the increase in volume was offset by slightly lower margins in 1997.
Income from consulting operations increased by $1.0 million for the nine months
ended September 30, 1997 mainly due to an increase in the utilization of labor
which resulted in a reduction of indirect labor expenses and increased billable
hours. The increase in utilization in early 1997 was a direct result of an
increase in the availability of work under both existing and new projects and a
reduction in the total labor assigned to consulting operations. During the
first two quarters of the nine months ended September 30, 1996, consulting
operations were still experiencing some delays in both task-order assignments
and funding of some of the Company's consulting contracts due to the federal
government's operating under a continuing resolution from October 1995 through
April 1996. As discussed below, the three months ended September 30, 1996,
included $2.3 million of additional revenue due to an acceleration in the
federal government cost approval process for 1996.
Three Months Ended September 30, 1997 Versus Three Months Ended September 30,
1996
Income from federal programs remained unchanged for the three months ended
September 30, 1997 as compared to the same period in 1996. The $3.6 million
decrease in income from the Hanford contract, was offset, in part, by a $2.0
million increase in income from the Rocky Flats contract and a $1.6 million
increase in other projects. Income from engineering and construction operations
increased by $1.8 million primarily due to an increase in income from the Nova
Hut project, offset by a decline in overall gross margin on other work.
Income from consulting operations decreased by $0.8 million for the three months
ended September 30, 1997 as compared to the same period in 1996. This decrease
was primarily due to the recognition of revenue resulting from the acceleration
in the cost approval process during the three months ended September 30, 1996.
In 1996, the Company accelerated the procedures for obtaining approval from
the U.S. government for the Company's actual costs incurred in the current
period. As a result, in the third quarter of 1996, the Company's consulting
group was able to accelerate its process of revenue recognition on certain
cost-reimbursement contracts.
Business Outlook
- ----------------
The Company was awarded a number of new contracts including a five-year contract
valued at up to $40 million to conduct environmental restoration and cleanup
projects at Los Alamos National Laboratory (LANL) in New Mexico and a five-year
contract valued at up to $25 million to provide general support services to the
U.S. Department of Energy's Hanford Site in Richland, Washington. The Company
was also given notice to proceed on the expansion of an alumina facility in
Perth, Australia. This twenty-eight month contract is expected to generate
service revenue of approximately $22.0 million.
19
<PAGE>
In March 1996, the Company signed a two-year, $102 million contract to provide
engineering and construction services for the initial phase of a mini-mill
project for Nova Hut, a.s., an integrated steel maker based in the Ostrava
region of the Czech Republic. In late June 1997, the Company signed a $160
million contract with Nova Hut for the next phase of the mini-mill project.
Earnings associated with this contract for the additional work have been
material to the Company's engineering and construction operations and are
expected to be material in future periods.
Engineering and construction group's profitability has increased significantly
over the prior year. Income has increased $4.3 million from the similar period
last year and operating margins have also increased from 10% to 13% of service
revenue, despite declining project margins on certain projects. Excluding the
profit that was generated by the pulverized coal injection facility which was
sold at the end of 1996, the engineering and construction group's profitability
increased by $6.4 million and margins increased 4% points for the nine months
ended September 30, 1997. This improvement in profitability is the result of
profits on the Nova Hut mini-mill project, increased labor productivity and
lower overhead costs. Management believes it can continue to improve the
profitability of the engineering and construction business through further
reductions in overhead and improving the effectiveness of its marketing efforts.
RESULTS OF OPERATIONS
Revenue
- -------
The Company's revenue by operating group for the nine months ended September 30,
1997 and 1996 is as follows (in millions):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
1997 1996
----------------- -----------------
Gross Service Gross Service
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Federal programs $ 507.2 $ 156.3 $ 769.1 $ 278.3
Engineering and construction 264.7 120.5 190.6 104.6
Consulting 67.8 52.9 63.7 50.7
-------- ------- -------- -------
Total $ 839.7 $ 329.7 $1,023.4 $ 433.6
======== ======= ======== =======
</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 equity in income of unconsolidated joint ventures and affiliated
companies.
20
<PAGE>
Operating profits (fees) generated by certain large government contracts,
including the Rocky Flats and Hanford contracts, are or were based on
performance and not revenue. A change in revenue between periods is not
proportionate to the change in the fees earned.
Gross revenue for 1997 decreased $183.7 million, or 17.9%, to $839.7 million for
the nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. The decrease in gross revenue was primarily due to a $261.9
million decrease in gross revenue from federal programs because of the Hanford
contract termination on October 1, 1996. The Hanford contract experienced a
$290.1 million decrease in gross revenue from the comparable period in 1996.
The decrease in federal programs was offset partially by a $74.1 million
increase in gross revenue from engineering and construction operations primarily
due to a $35.0 million increase in gross revenue from the Nova Hut project and a
$32.6 million increase in gross revenue from the Company's work on nitric acid
plants in 1997.
Consulting operations reported a $4.1 million increase in gross revenue.
Excluding revenue recognized in the 1996 period after an acceleration in the
cost approval process, consulting operations realized a $6.4 million increase in
gross revenue as compared to the nine month period ended September 30, 1996.
Service revenue decreased by $103.9 million for the nine months ended September
30, 1997 as compared to the nine months ended September 30, 1996. The $122.0
million decrease in federal programs was due to decreases in service revenue of
$117.0 million and $7.0 million from the Hanford contract and the Rocky Flats
contract, respectively. The decrease for the Rocky Flats contract was primarily
due to an increase in subcontractors costs, offset, in part, by a decrease in
direct material costs. The decrease in service revenue from federal programs
was offset partially by increases in service revenue from consulting and
engineering and construction operations due to increases in volume of work
described above.
Service revenue as a percentage of gross revenue decreased to 39.3% for the nine
months ended September 30, 1997 from 42.4% for the nine months ended September
30, 1996 due to an increase in the use of subcontractors on the Rocky Flats
contract. A significant portion of the gross revenue derived from the Rocky
Flats contract includes the costs of services subcontracted to third parties.
Operating Expenses
- ------------------
Direct cost of services and overhead decreased to $258.1 million for the period
ended September 30, 1997 as compared to $354.7 million for the nine months ended
September 30, 1996. The $96.6 million decrease is primarily due to a decrease
of $103.5 million related to the Hanford contract, offset, in part, by a $6.9
million increase on core business contracts, especially the Nova Hut and nitric
acid contracts.
21
<PAGE>
Administrative and general expense decreased $6.8 million, or 13.6%, between the
nine months ended September 30, 1997 and 1996. The decrease is primarily due to
reductions in labor costs, costs associated with large scale proposal efforts,
and the use of consultants.
Interest Expense, Preferred Stock Dividends and Accretion
- ---------------------------------------------------------
Interest expense increased $0.6 million between the nine months ended September
30, 1997 and 1996 primarily due to the issuance of the Company's Series B Senior
Notes. The increase in interest expense was offset by a $1.6 million decrease
in preferred stock dividends and accretion resulting from the Company's
repurchase of its redeemable preferred stock in December 1996.
Income Tax Expense
- ------------------
The Company's effective income tax rate increased to 18.0% for the nine months
ended September 30, 1997, compared with 9.1% for the nine months ended September
30, 1996. The increase is primarily attributed to a $2.0 million reversal of
the valuation allowance for certain deferred tax assets in 1996. This increase
was partially offset by a higher tax exclusion for the Kaiser Hill minority
interest in 1997 as compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, cash and cash equivalents
decreased $2.8 million to $13.9 million. Operating activities generated $14.5
million in cash, investing activities provided $13.0 million in cash, and
financing activities used $29.1 million in cash.
Working Capital
- ----------------
The decrease in prepaid expenses and other current assets between September 30,
1997 and December 31, 1996 was due to the receipt in January 1997 of $16.5
million of cash proceeds from the December 1996 sale of an investment in
entities that own and operate a pulverized coal injection facility (see below).
The increase in contract receivables, net was due primarily to the timing of
cash receipts from DOE on the Rocky Flats contract. The increase in accounts
payable and subcontractors payable was due primarily to an increase in accounts
payable on the Nova Hut contract offset, in part by, payments made to
subcontractors on the Rocky Flats contract. The increase in deferred revenue
was due primarily to advance billings and collections on the Nova Hut contract
and nitric acid projects.
In January 1997, the U.S. Environmental Protection Agency approved the Company's
provisional billing rates for the year ended December 31, 1996, for the rate
variances on cost-plus contracts with U.S. government agencies for costs
incurred during that year. The Company received approximately $2.2 million on
these billings during the nine months ended September 30, 1997, and expects to
collect in excess of $1.0 million in future periods. The Company also collected
approximately $2.3 million in 1997 on billings for billing rate variances for
previous periods.
22
<PAGE>
Credit Facility
- ---------------
The Company's $40 million revolving credit facility is provided by a group of
three banks and expires on December 31, 1998. In 1997, net payments on the
credit facility were $18.5 million. As of September 30, 1997, the Company had
$2.0 million in cash borrowings, $24.0 million of performance letters of credit
outstanding, and $14.0 million of additional credit available under the credit
facility. As of November 14, 1997, the Company had $10 million in cash
borrowings, $24 million of performance letters of credit outstanding, and $6
million of additional credit available under the credit facility.
The Company currently is negotiating to amend and restate the credit facility
(the New Credit Facility) to increase the capacity, to extend the termination
date, and to modify certain financial ratios required to be maintained. The
credit facility and the New Credit Facility will continue to be guaranteed by
certain subsidiaries (Guarantors), and the banks will continue to have a
security interest in substantially all accounts receivable and certain other
assets and a pledge of the stock of certain subsidiaries. The New Credit
Facility is expected to continue the limitations on the payments of cash
dividends on common stock, the prohibitions on the issuance of certain types of
indebtedness, and the limitations on certain investments and acquisitions. The
Company expects to close on the New Credit Facility in the fourth quarter.
Other Investing and Financing Activities
- ----------------------------------------
In December 1996, the Company sold the majority portion of its equity interest
in entities that own and operate a pulverized coal injection facility, and
certain related contractual rights, for $16.6 million. The buyer also has an
option to purchase the remaining equity investment for $2.4 million in January
1998. The proceeds from the sale, net of $0.1 million held in escrow, were
received in January 1997 and were reinvested in the Company's business. The
$0.1 million initially held in escrow was received in July 1997. These
entities' earnings and cash flows were material to the Company in 1996, and the
absence of these entities' earnings and cash flows will continue to have a
material impact on earnings and cash flows.
Other significant uses of cash in investing and financing activities included
distribution of income by Kaiser-Hill to a minority interest ($10.0 million) and
purchases of fixed assets ($3.1 million).
Liquidity and Capital Resources Outlook
- ---------------------------------------
The Company believes that current projected levels of cash flows and the
availability of financing, including borrowings under the Company's credit
facility and the New Credit Facility, if closed in the fourth quarter, will be
adequate to fund its operations, including interest obligations, throughout the
next 12 months.
23
<PAGE>
The credit facility limits the Company's ability to make acquisitions and other
investments (similar conditions are expected under the New Credit Facility); the
Indentures governing the Company's Series B Senior Notes and Senior Subordinated
Notes limit the Company's ability to make restricted payments, including certain
payments in connection with investments and acquisitions. This means that
during the next several years, unless these limitations are amended or replaced,
the Company would be required to obtain permission from lenders or would need to
issue additional equity securities to fund any significant acquisitions or to
invest significant amounts in joint ventures.
In addition to the cash requirements of the Company's daily operations, the
Company has semiannual interest payments of $9.1 million due in December 1997
and June 1998 for the Series B Senior Notes and Subordinated Notes. If the
Company achieves and maintains a specified level of earnings, the semiannual
interest requirement will be reduced to $8.4 million. The Company expects to
meet this interest obligation with either operating cash flows or borrowings
under its credit facility or its New Credit Facility (once it is closed).
IMPACT OF NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 128, Earnings per Share (SFAS No. 128), effective for
financial statements for both interim and annual periods ending after December
15, 1997. SFAS No. 128 requires the presentation of basic and diluted earnings
per share instead of primary and fully diluted earnings per share. Under the
Company's existing equity structure as of September 30, 1997, the computation of
basic and diluted earnings per share, as defined under SFAS No. 128, results in
earnings per share that is substantially the same as primary and fully diluted
earnings per share as presented in the accompanying financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to Registrant until 1998.
Part II - Other Information
Item 1. Legal Proceedings
As previously reported in the Annual Report on Form 10-K for the year ended
December 31, 1996.
Item 2. Changes in Securities
(a) None
(b) None
(c) None
24
<PAGE>
Item 3. Defaults Upon Senior Securities
(a) None
(b) 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. 11 Computation of Primary and Fully Diluted Earnings Per Share
No. 27 Financial Data Schedule
(b) Reports on Form 8-K
None
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: November 14, 1997 /s/ Kenneth L. Campbell
-----------------------
Kenneth L. Campbell
Executive Vice President,
and Chief Financial Officer
(Duly authorized officer and
principal financial officer)
25
<PAGE>
EXHIBIT 11
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------- -----------
(Unaudited)
<S> <C> <C>
Primary:
Net income available for common shareholders $ 170,000 $ 2,089,000
=========== ===========
Weighted average of common shares
outstanding not included in
amounts below 22,381,538 21,954,783
Weighted average of common shares
issuable on exercise of outstanding
stock options and warrants 49,698 -
----------- -----------
Weighted average of common and
common equivalent shares
outstanding, as adjusted 22,431,236 21,954,783
or or
22,431,000 21,955,000
=========== ===========
Net income per common share $ 0.01 $ 0.10
=========== ===========
Fully Diluted:
Net income available for common shareholders $ 170,000 $ 2,089,000
=========== ===========
Weighted average of common shares
outstanding as adjusted for primary
computation 22,431,236 21,954,783
Weighted average of additional common
shares issuable on exercise of
outstanding stock options and warrants 79,523 -
----------- -----------
Weighted average of common and
common equivalent shares
outstanding, as adjusted 22,510,759 21,954,783
or or
22,511,000 21,955,000
=========== ===========
Net income per common share $ 0.01 $ 0.10
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 11
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1997 1996
------------- --------------
(Unaudited)
<S> <C> <C>
Primary:
Net income available for common shareholders $ 120,000 $ 224,000
=========== ===========
Weighted average of common shares
outstanding not included in
amounts below 22,501,784 22,226,844
Weighted average of common shares
issuable on exercise of outstanding
stock options and warrants - -
----------- -----------
Weighted average of common and
common equivalent shares
outstanding, as adjusted 22,501,784 22,226,844
or or
22,502,000 22,227,000
=========== ===========
Net income per common share $ 0.01 $ 0.01
=========== ===========
Fully Diluted:
Net income available for common shareholders $ 120,000 $ 224,000
=========== ===========
Weighted average of common shares
outstanding as adjusted for primary
computation 22,501,784 22,226,844
Weighted average of additional common
shares issuable on exercise of
outstanding stock options and warrants 92,240 -
----------- -----------
Weighted average of common and
common equivalent shares
outstanding, as adjusted 22,594,024 22,226,844
or or
22,594,000 22,227,000
=========== ===========
Net income per common share $ 0.01 $ 0.01
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,929,000
<SECURITIES> 0
<RECEIVABLES> 309,785,000
<ALLOWANCES> 10,434,000
<INVENTORY> 0
<CURRENT-ASSETS> 333,492,000
<PP&E> 51,063,000
<DEPRECIATION> 39,010,000
<TOTAL-ASSETS> 421,757,000
<CURRENT-LIABILITIES> 240,482,000
<BONDS> 138,880,000<F1>
0
0
<COMMON> 225,000
<OTHER-SE> 33,749,000
<TOTAL-LIABILITY-AND-EQUITY> 421,757,000
<SALES> 0
<TOTAL-REVENUES> 839,716,000<F2>
<CGS> 0
<TOTAL-COSTS> 258,108,000<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,345,000
<INTEREST-EXPENSE> 13,397,000
<INCOME-PRETAX> 9,124,000
<INCOME-TAX> 1,642,000
<INCOME-CONTINUING> 170,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>Excludes current portion of bonds, mortgage, 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 cost of $511,606,000
</FN>
</TABLE>
