<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, 1998 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 30, 1998, there were 24,307,828 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, 1998 and December 31, 1997..................................................................3
Consolidated Statements of Income and Comprehensive Income -
Three and Nine Months Ended September 30, 1998 and 1997...................................................4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997.............................................................5
Notes to Consolidated Financial Statements.............................................................6-17
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................................18-28
Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................................28
Part II - Other Information
Item 1. Legal Proceedings.........................................................................................28
Item 2. Changes in Securities and Use of Proceeds.................................................................28
Item 3. Defaults Upon Senior Securities...........................................................................28
Item 4. Submission of Matters to a Vote of Security Holders.......................................................28
Item 5. Other Information.........................................................................................28
Item 6. Exhibits and Reports on Form 8-K.......................................................................28-29
</TABLE>
2
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except shares)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
September 30, December 31,
1998 1997
- --------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,227 $ 19,198
Contract receivables, net 294,378 264,030
Prepaid expenses and other current assets 11,173 14,490
Deferred income taxes 33,038 15,281
--------- ---------
Total Current Assets 340,816 312,999
--------- ---------
Fixed Assets
Furniture, equipment, and leasehold improvements 50,263 51,446
Less depreciation and amortization (39,125) (39,648)
--------- ---------
11,138 11,798
--------- ---------
Other Assets
Goodwill, net 50,095 47,323
Investments in and advances to affiliates 9,483 7,038
Other 13,543 19,308
--------- ---------
73,121 73,669
--------- ---------
Total Assets $ 425,075 $ 398,466
========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Debt currently payable $ -- $ 15
Accounts payable 176,516 120,368
Accrued salaries and benefits 43,834 37,654
Other accrued expenses 38,985 26,902
Deferred revenue 30,838 36,527
Income taxes payable 1,269 1,012
--------- ---------
Total Current Liabilities 291,442 222,478
Long-term Liabilities
Long-term debt 157,866 141,004
Other 4,284 4,586
--------- ---------
Total Liabilities 453,592 368,068
--------- ---------
Commitments and Contingencies
Minority Interest 7,877 3,071
Shareholders' Equity (Deficit)
Preferred Stock -- --
Common Stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 24,282,270 and 22,475,904 shares 244 225
Additional Paid-in Capital 75,390 67,116
Notes Receivable Collateralized by Common Stock (639) (2,422)
Accumulated Deficit (107,739) (34,225)
Cumulative Translation Adjustment (3,650) (3,367)
--------- ---------
Total Shareholders' Equity (Deficit) (36,394) 27,327
--------- ---------
Total Liabilities and Shareholders' Equity (Deficit) $ 425,075 $ 398,466
========= =========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Gross Revenue $ 292,528 $ 332,173 $ 909,796 $ 839,716
Subcontract and direct material costs (195,474) (216,788) (601,951) (511,606)
Provision for contract losses (17,210) -- (57,210) --
Equity in income of joint ventures
and affiliated companies 2,632 718 5,066 1,552
--------- --------- --------- ---------
Service Revenue 82,476 116,103 255,701 329,662
Operating Expenses
Direct labor and fringe benefits 66,435 77,600 206,651 220,200
Group overhead 23,406 22,869 68,009 64,029
Corporate general and administrative 6,238 5,985 16,273 17,055
Depreciation and amortization 2,262 2,455 6,693 7,197
Severance and restructuring charges 7,907 -- 9,407 --
Other unusual charges 7,672 -- 7,672 --
--------- --------- --------- ---------
Operating Income (Loss) (31,444) 7,194 (59,004) 21,181
Other Income (Expense)
Interest income 338 324 1,239 1,340
Interest expense (5,141) (4,240) (14,901) (13,397)
--------- --------- --------- ---------
Income (Loss) Before Income Taxes, Minority Interest,
and Cumulative Effect of Accounting Change (36,247) 3,278 (72,666) 9,124
Income tax (provision) benefit (718) (508) 11,029 (1,642)
--------- --------- --------- ---------
Income (Loss) Before Minority Interest, and
Cumulative Effect of Accounting Change (36,965) 2,770 (61,637) 7,482
Minority interest in net income of subsidiaries (1,326) (2,650) (5,877) (7,312)
--------- --------- --------- ---------
Income (Loss) Before Cumulative Effect of (38,291) 120 (67,514) 170
Accounting Change
Cumulative effect of accounting change, net of tax -- -- (6,000) --
--------- --------- --------- ---------
Net Income (Loss) $ (38,291) $ 120 $ (73,514) $ 170
========= ========= ========= =========
Other Comprehensive Income (Loss)
Foreign currency translation adjustment 604 (777) (283) (1,215)
--------- --------- --------- ---------
Total Comprehensive Income (Loss) $ (37,687) $ (657) $ (73,797) $ (1,045)
========= ========= ========= =========
Basic and Diluted Earnings (Loss) Per Share
Income (loss) before cumulative effect of accounting change $ (1.58) $ 0.01 $ (2.80) $ 0.01
Cumulative effect of accounting change, net of tax -- -- (0.25) --
--------- --------- --------- ---------
Net Income (Loss) $ (1.58) $ 0.01 $ (3.05) $ 0.01
========= ========= ========= =========
Weighted average shares for basic earnings per share 24,206 22,441 24,082 22,370
Effect of dilutive stock options -- 115 -- 98
--------- --------- --------- ---------
Weighted average shares for diluted earnings per share 24,206 22,556 24,082 22,468
========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
For The
Nine Months Ended
September 30,
----------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Operating Activities
Net income (loss) $ (73,514) $ 170
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 6,693 7,197
Provision for losses, restructuring and contingencies 58,711 1,345
Provision for deferred income taxes (17,757) (1,952)
Cash distributions in excess of earnings from
joint ventures and affiliated companies (2,038) (135)
Minority interest in net income of subsidiaries 5,877 7,312
Changes in operating assets and liabilities:
Contract receivables, net (73,438) (77,418)
Prepaid expenses and other current assets 997 2,035
Accounts payable and accrued expenses 55,058 69,306
Deferred revenue (5,689) 7,196
Other liabilities 3,335 2,280
Other operating activities 6,470 (2,848)
--------- ---------
Net Cash Provided by (Used in) Operating Activities (35,295) 14,488
--------- ---------
Investing Activities
Cash acquired from (or invested in) subsidiary acquisitions 3,570 (441)
Sales of subsidiaries and/or investments 2,400 16,540
Purchases of fixed assets (2,710) (3,118)
--------- ---------
Net Cash Provided by Investing Activities 3,260 12,981
--------- ---------
Financing Activities
Borrowings under revolving credit facility 114,000 69,000
Principal payments on revolving credit facility (97,500) (87,500)
Distribution of income to minority interest (1,500) (9,950)
Proceeds from issuances of common stock 347 165
Repurchases of common stock -- (252)
Debt issuance costs -- (549)
--------- ---------
Net Cash Provided by (Used in) Financing Activities 15,347 (29,086)
--------- ---------
Effect of Exchange Rate Changes on Cash (283) (1,215)
--------- ---------
Decrease in Cash and Cash Equivalents (16,971) (2,832)
Cash and Cash Equivalents at Beginning of Period 19,198 16,761
--------- ---------
Cash and Cash Equivalents at End of Period $ 2,227 $ 13,929
========= =========
Supplemental cash flow information is as follows:
Cash payments for interest $ 9,798 $ 9,791
Cash payments for income taxes 936 445
Non-cash transactions:
Issuance of common stock 8,664 287
(Cancellation) reacquisition of common stock (513) 227
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
5
<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, 1997 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, 1997 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, 1997. Certain reclassifications have been made to the prior
period financial statements to conform to the presentation used in the September
30, 1998 financial statements.
2. Adoption of New Pronouncements
In June 1997, the Financial Accounting Standards Board issued FASB Statement No.
130 - Reporting Comprehensive Income. The Statement requires that companies
begin reporting comprehensive income during the fiscal year beginning after
December 15, 1997. Comprehensive income is defined as the change in equity
during a period from transactions and other events and circumstances from
non-owner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
Company adopted the Statement effective the first quarter of 1998.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5 -
Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires costs
of organization and start-up activities to be expensed as incurred. Initial
application of the SOP should be reported as the cumulative effect of a change
in accounting principle, as described in Accounting Principles Board Opinion No.
20, Accounting Changes. The Company adopted the Statement effective April 1,
1998.
3. Net Income Per Common Share
In 1997, the Company adopted the Statement of Financial Accounting Standards No.
128, Earnings per Share (SFAS No. 128). All EPS computation periods presented in
these financial statements have been restated to conform to SFAS No. 128. Basic
EPS is computed by dividing net income (loss) by the weighted average number of
common shares outstanding for the period. The assumed proceeds from the exercise
of dilutive securities are used to repurchase common stock at the average market
price during the period. The difference between the number of shares assumed
issued and the number of shares assumed purchased is added to the basic EPS
denominator in order to derive the diluted EPS denominator. At September 30,
1998, there were 1.6 million antidilutive shares outstanding.
4. Long-term Debt
As a result of the significant charges recognized during the second and third
quarters, the Company was not in compliance either as of June 30 or September
30, 1998 with certain financial covenants set forth in its revolving credit
facility. The Company has requested an amendment to allow the Company to be in
compliance with reestablished covenants, and the Banks have continued to permit
the Company to borrow and obtain letters of credit pursuant to the revolving
credit facility while the Company's amendment request is being considered. At
September 30, the Company had $20.5 million in cash borrowings and $25.6 million
in stand-by letters of credit outstanding. As of November 13, 1998, the Banks
had not declared any Events of Default pursuant to the terms of the facility.
Accordingly, the total amount of outstanding cash borrowings from the revolver
as of September 30, 1998 was classified as long-term debt
6
<PAGE>
on the balance sheet. On November 13, 1998, the outstanding cash balance of
$25.0 million equaled the limit of the amount of cash borrowings available.
During the third quarter, however, it became clear to management that, given the
further slippage on several of the large fixed-price project uncertainties (see
Note 6 - Contingencies), necessary charges for a realignment of the Company's
Engineers and Constructors Group including severance, office closings, and
other discontinued operations matters, the Banks might not be willing to provide
the additional working capital projected necessary to effect a turnaround.
Accordingly, management considered the need for and the possibility of securing
alternate financing.
Management has received a commitment for the replacement of its existing
senior credit facility with a new facility, similar to the Bank revolving line
of credit, that would provide for a credit line, for both cash borrowings and
letters of credit, of up to $60 million. The Company expects the new facility to
be in place by mid-December, 1998. The replacement facility would increase the
percentage of eligible accounts receivable acceptable for collateral purposes
and increase the limit on cash borrowings from $25 million to $60 million less
any outstanding letters of credit. Upon closing of a new facility, the Company
would immediately terminate the former Bank revolving credit facility and repay
any outstanding borrowings.
5. Income Taxes
The Company did not recognize any tax benefits on the operating losses generated
during the three months ended September 30, 1998. During the three months ended
June 30, 1998, the Company recognized an additional deferred tax asset of $18.1
million, primarily as a result of the losses recognized for cost overruns to be
incurred on certain fixed-price contract overruns. The Company has not recorded
any additional valuation allowance against the net deferred tax assets carried
on the balance sheet at September 30, 1998 totaling $33.0 million. Management
believes that through the combination of expected levels of pretax operating
earnings and a tax-planning strategy, that would accelerate taxable amounts, it
will be able to utilize the balance of deferred tax assets. As permitted by
Statement of Financial Accounting Standard No. 109 - Accounting for Income
Taxes, tax-planning strategies are alternatives that can be used to provide
evidence of the likelihood of future taxable income for purposes of evaluating
the necessity of establishing valuation reserves against balances of deferred
tax assets. The Company's tax-planning strategy involves the disposition of the
Consulting Group operations for consideration that could result in taxable
income sufficient to utilize a significant portion of the deferred tax assets.
Additionally, the strategy would provide for the proceeds from the sale of the
Group to be used to reduce outstanding debt and thereby lower interest costs. In
the event that this tax-planning strategy is abandoned, and in the event the
Company is not able to demonstrate a reasonable likelihood of sustaining
operating profits in the near term, the Company's ability to fully utilize the
deferred tax assets could be reduced significantly and a valuation allowance
against the asset would have to be recognized in the financial statements as a
charge to income.
6. Contingencies
In March 1998, the Company entered into a $187 million maximum price contract
for the construction of a ship construction facility. The Company subsequently
learned that the costs used by the Company and the customer as the basis for
negotiation of the contract were approximately $30 million lower than the
revised estimated costs to perform the contract as reflected in proposed actual
subcontracts. After learning this, the Company advised the customer that it was
not required to perform the contract in accordance with its terms. Negotiations
with the customer resulted in an interim agreement under which both parties
reserved their rights and, on a day-to-day basis, the Company continued to
execute certain transitional on-site activities. The customer terminated the
interim agreement with the Company effective August 14, 1998. In October 1998,
the customer presented an initial draft of a claim request to the Company
requesting payment for its perceived damages and entitlements pursuant to the
terminated contract. The Company and the customer are currently discussing the
customer's draft claim. Given the negotiation status, no provision for any
losses on this contract have been included in the Company's financial results to
date as management does not believe that it has sufficient information at this
time to reasonably estimate the outcome of the negotiations.
As a result of uncertainties surrounding the costs to complete certain large
fixed-price contracts, including four nitric acid plants, the Company recorded a
$40 million charge during the second quarter and a $17.2 million charge during
the third quarter of 1998 to establish reserves intended to cover its estimate
of the nitric acid contract cost overruns
7
<PAGE>
and charges totaling $10.2 million to reflect the adjustment of the earned
progress to date on several other fixed price projects. Although management
believes that, based on information currently available, an adequate provision
for loss reserves for these fixed-price contracts has been reflected in the
financial statements, no assurance can be given that the full amount of any
claims will be realized or that the loss provision is entirely adequate.
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. The continued adequacy of reserves is
reviewed periodically as progress on such matters ensues.
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. The Company has provided for its estimate
of the potential effect of these investigations, and the continued adequacy of
reserves is reviewed periodically as progress on such matters ensues.
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 procurement 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 adequacy of provisions for
reserves is reviewed periodically as progress with the government ensues.
Pursuant to the terms of the Company's acquisition of ICF Kaiser Advanced
Technology, Inc. on March 17, 1998, the Company issued 1.5 million shares of ICF
Kaiser common stock. The agreement guarantees that the fair market value of
each share of stock will reach $5.36 by March 1, 2001. In the event the fair
market value does not attain the guaranteed level, the Company is obligated to
make up the shortfall either through the payment of cash or by issuing
additional shares of common stock. Pursuant to the terms of the acquisition
agreement, the contingently issuable number of shares, however, cannot exceed
1.5 million. Given the fair market value of the stock at September 30, 1998, the
assumed issuance of the additional 1.5 million shares would not completely
account for the total amount of the guarantee. As of September 30, 1998, the
Company's current debt agreements restrict the amount of cash that could be used
to make up any such shortfall.
7. Guarantor Subsidiaries
Pursuant to SEC rules regarding publicly held debt, the Company is required to
provide financial information for wholly owned subsidiaries of ICF Kaiser
International, Inc. (Subsidiary Guarantors) that unconditionally guarantee the
payment of the principal, premium, if any, and interest on the Company's
Subordinated Notes and its Series B Senior Notes. The Subsidiary Guarantors are
Cygna Consulting Engineers and Project Management, Inc; ICF Kaiser Government
Programs, Inc; Systems Applications International, Inc; EDA, Incorporated;
Global Trade & Investment, Inc; ICF Kaiser Europe, Inc; ICF Kaiser/Georgia
Wilson, Inc; ICF Kaiser Overseas Engineering, Inc; ICF Kaiser Engineers Pacific,
Inc; ICF Kaiser Remediation Company; and ICF Kaiser Advanced Technology, Inc.
Presented below is condensed consolidating financial information for ICF Kaiser
International, Inc. (Parent Company), the Subsidiary Guarantors, and the
Non-Guarantor Subsidiaries. The information, except for the December 31, 1997
condensed consolidating balance sheet, is unaudited.
8
<PAGE>
Investments in subsidiaries have been presented using the equity method of
accounting. The Company does not have a formal tax-sharing arrangement with its
subsidiaries and has allocated taxes to its subsidiaries based on the Company's
overall effective tax rate. In the Company's opinion, presentation of separate
financial statements for each individual Subsidiary Guarantor 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, 1998
(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 $ (2,652) $ (6,337) $ 11,216 $ -- $ 2,227
Contract receivables, net 1,404 177,759 115,215 -- 294,378
Intercompany receivables, net 107,388 13,701 (121,089) -- --
Prepaid expenses and other current assets 3,483 680 7,010 -- 11,173
Deferred income taxes 25,802 3,245 3,991 -- 33,038
--------- --------- --------- --------- ---------
Total Current Assets 135,425 189,048 16,343 -- 340,816
--------- --------- --------- --------- ---------
Fixed Assets
Furniture, equipment, and leasehold improvements 10,886 3,420 35,957 -- 50,263
Less depreciation and amortization (6,482) (3,105) (29,538) -- (39,125)
--------- --------- --------- --------- ---------
4,404 315 6,419 -- 11,138
--------- --------- --------- --------- ---------
Other Assets
Goodwill, net -- 8,940 41,155 -- 50,095
Other 16,167 790 17,431 (11,362) 23,026
--------- --------- --------- --------- ---------
16,167 9,730 58,586 (11,362) 73,121
--------- --------- --------- --------- ---------
Total Assets $ 155,996 $ 199,093 $ 81,348 $ (11,362) $ 425,075
========= ========= ========= ========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt $ -- $ -- $ -- $ -- $ --
Accounts payable and other accrued expenses 25,646 139,446 31,283 -- 196,375
Accrued salaries and employee benefits (1,476) 19,782 25,528 -- 43,834
Other 7,171 2,219 41,843 -- 51,233
--------- --------- --------- --------- ---------
Total Current Liabilities 31,341 161,447 98,654 -- 291,442
Long-term Liabilities
Long-term debt, less current portion 157,866 -- -- -- 157,866
Other 2,319 26 1,939 -- 4,284
--------- --------- --------- --------- ---------
Total Liabilities 191,526 161,473 100,593 -- 453,592
--------- --------- --------- --------- ---------
Minority Interests in Subsidiaries -- 7,877 -- -- 7,877
Shareholders' Equity
Common Stock 231 8,189 131 (8,307) 244
Additional Paid-in Capital 72,775 2,596 60,935 (60,916) 75,390
Accumulated Earnings (Deficit) (107,897) 19,139 (76,842) 57,861 (107,739)
Other Equity (639) (181) (3,469) -- (4,289)
--------- --------- --------- --------- ---------
Total Shareholders' Equity (35,530) 29,743 (19,245) (11,362) (36,394)
--------- --------- --------- --------- ---------
Total Liabilities and Shareholders' Equity $ 155,996 $ 199,093 $ 81,348 $ (11,362) $ 425,075
========= ========= ========= ========= =========
</TABLE>
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
10
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
December 31, 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 $ (5,665) $ 10,258 $ 14,605 $ -- $ 19,198
Contract receivables, net 3,210 96,921 163,899 -- 264,030
Intercompany receivables, net 136,629 (2,529) (134,100) -- --
Prepaid expenses and other current assets 4,181 475 9,834 -- 14,490
Deferred income taxes 14,749 -- 532 -- 15,281
--------- ----------- ----------- ------------ -------------
Total Current Assets 153,104 105,125 54,770 -- 312,999
--------- ----------- ----------- ------------ -------------
Fixed Assets
Furniture, equipment, and leasehold improvements 9,728 2,505 39,213 -- 51,446
Less depreciation and amortization (5,361) (2,275) (32,012) -- (39,648)
--------- ----------- ----------- ------------ -------------
4,367 230 7,201 -- 11,798
--------- ----------- ----------- ------------ -------------
Other Assets
Goodwill, net -- 4,793 42,530 -- 47,323
Other 50,528 1,849 17,552 (43,583) 26,346
--------- ----------- ----------- ------------ -------------
50,528 6,642 60,082 (43,583) 73,669
--------- ----------- ----------- ------------ -------------
Total Assets $ 207,999 $ 111,997 $ 122,053 $ (43,583) $ 398,466
========= =========== =========== ============ =============
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt $ -- $ -- $ 15 $ -- $ 15
Accounts payable and other accrued expenses 23,186 79,893 35,254 -- 138,333
Accrued salaries and employee benefits 6,938 16,722 13,994 -- 37,654
Other 4,138 848 41,490 -- 46,476
---------- ----------- ----------- ------------ -------------
Total Current Liabilities 34,262 97,463 90,753 -- 222,478
Long-term Liabilities
Long-term debt, less current portion 141,004 -- -- -- 141,004
Other 2,437 26 2,123 -- 4,586
---------- ----------- ----------- ------------ -------------
Total Liabilities 177,703 97,489 92,876 -- 368,068
---------- ----------- ----------- ------------ -------------
Minority Interests in Subsidiaries -- 3,071 -- -- 3,071
Shareholders' Equity
Common Stock 214 148 129 (266) 225
Additional Paid-in Capital 66,888 2,796 58,548 (61,116) 67,116
Accumulated Earnings (Deficit) (34,384) 8,757 (26,397) 17,799 (34,225)
Other Equity (2,422) (264) (3,103) -- (5,789)
---------- ----------- ----------- ------------ --------------
Total Shareholders' Equity 30,296 11,437 29,177 (43,583) 27,327
---------- ----------- ----------- ------------ --------------
Total Liabilities and Shareholders' Equity $ 207,999 $ 111,997 $ 122,053 $ (43,583) $ 398,466
========== =========== =========== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
11
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Income and Comprehensive Income
Nine Months Ended September 30, 1998
(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 $ 949 $ 568,845 $ 340,002 $ -- $ 909,796
Subcontract and direct material costs (470) (446,240) (155,241) -- (601,951)
Privision for contract loss -- -- (57,210) -- (57,210)
Equity in income of joint ventures and
affiliated companies and subsidiaries (46,905) -- 6,670 45,301 5,066
--------- --------- --------- --------- ---------
Service Revenue (46,426) 122,605 134,221 45,301 255,701
Operating Expenses
Operating expenses 12,998 108,225 169,710 -- 290,933
Depreciation and amortization 1,962 840 3,891 -- 6,693
Severance and Restructuring Charge 7,907 -- 1,500 -- 9,407
Discontinued Operations 2,882 -- 4,790 -- 7,672
--------- --------- --------- --------- ---------
Operating Income (72,175) 13,540 (45,670) 45,301 (59,004)
Other Income (Expense)
Interest and investment income 226 448 565 -- 1,239
Interest expense (14,719) (144) (38) -- (14,901)
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes,
Minority Interests, and Cumulative
Effect of Accounting Change (86,668) 13,844 (45,143) 45,301 (72,666)
Income tax provision (benefit) (13,154) 2,101 (6,851) 6,875 (11,029)
--------- --------- --------- --------- ---------
Income Before Minority Interests
and Cumulative Effect of Accounting Change (73,514) 11,743 (38,292) 38,426 (61,637)
Minority interests in net income of subsidiaries -- 5,877 -- -- 5,877
--------- --------- --------- --------- ---------
Income Before Cumulative Effect of Accounting Change (73,514) 5,866 (38,292) 38,426 (67,514)
Cumulative effect of accounting change, net of tax -- 754 5,246 -- 6,000
--------- --------- --------- --------- ---------
Net Income (Loss) $ (73,514) $ 5,112 $ (43,538) $ 38,426 $ (73,514)
========= ========= ========= ========= =========
Foreign currency translation adjustment (283) -- -- -- (283)
--------- --------- --------- --------- ---------
Comprehensive Income (Loss) $ (73,797) $ 5,112 $ (43,538) $ 38,426 $ (73,797)
========= ========= ========= ========= =========
</TABLE>
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
12
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Income and Comprehensive Income
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 32,196 -- 2,667 (33,311) 1,552
--------- --------- --------- --------- ---------
Service Revenue 32,230 130,909 199,834 (33,311) 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 13,088 15,508 25,896 (33,311) 21,181
Other Income (Expense)
Interest income 459 489 449 (57) 1,340
Interest expense (13,340) (65) (44) 52 (13,397)
--------- --------- --------- --------- ---------
Income Before Income Taxes and
Minority Interests 207 15,932 26,301 (33,316) 9,124
Income tax provision (benefit) 37 2,868 4,734 (5,997) 1,642
--------- --------- --------- --------- ---------
Income Before Minority Interests 170 13,064 21,567 (27,319) 7,482
Minority interests in net income of subsidiaries -- 7,312 -- -- 7,312
--------- --------- --------- --------- ---------
Net Income $ 170 $ 5,752 $ 21,567 $ (27,319) $ 170
========= ========= ========= ========= =========
Foreign currency translation adjustment (1,215) -- -- -- (1,215)
--------- --------- --------- --------- ---------
Comprehensive Income (Loss) $ (1,045) $ 5,752 $ 21,567 $ (27,319) $ (1,045)
========= ========= ========= ========= =========
</TABLE>
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
13
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Income and Comprehensive Income
Three Months Ended September 30, 1998
(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 $ 341 $ 266,687 $ 25,500 $ - $ 292,528
Subcontract and direct material costs (190) (221,139) 25,855 - (195,474)
Privision for contract loss - - (17,210) - (17,210)
Equity in income of joint ventures and
affiliated companies and subsidiaries (14,794) - 2,697 14,729 2,632
------------ ------------ ------------ ------------ ----------------
Service Revenue (14,643) 45,548 36,842 14,729 82,476
Operating Expenses
Operating expenses 5,011 42,019 49,049 - 96,079
Depreciation and amortization 704 436 1,122 - 2,262
Severance and Restructuring Charge 6,407 - 1,500 - 7,907
Discontinued Operations 2,882 - 4,790 - 7,672
------------ ------------ ------------ ------------ ----------------
Operating Income (29,647) 3,093 (19,619) 14,729 (31,444)
Other Income (Expense)
Interest and investment income 45 249 44 - 338
Interest expense (5,073) (48) (20) - (5,141)
------------ ------------ ------------ ------------ ----------------
Income (Loss) Before Income Taxes,
Minority Interests, and Cumulative
Effect of Accounting Change (34,675) 3,294 (19,595) 14,729 (36,247)
Income tax provision (benefit) 3,616 (1,302) 1,390 (2,986) 718
------------ ------------ ------------ ------------ ----------------
Income Before Minority Interests
and Cumulative Effect of Accounting Change (38,291) 4,596 (20,985) 17,715 (36,965)
Minority interests in net income of subsidiaries - 1,326 - - 1,326
------------ ------------ ------------ ------------ ----------------
Income Before Cumulative Effect of Accounting Change (38,291) 3,270 (20,985) 17,715 (38,291)
Cumulative effect of accounting change, net of tax - 754 (754) - -
------------ ------------ ------------ ------------ ----------------
Net Income (Loss) $ (38,291) $ 2,516 $ (20,231) $ 17,715 $ (38,291)
============ ============ ============ ============ ================
Foreign currency translation adjustment 604 - - - 604
------------ ------------ ------------ ------------ ----------------
Comprehensive Income (Loss) $ (37,687) $ 2,516 $ (20,231) $ 17,715 $ (37,687)
============ ============ ============ ============ ================
</TABLE>
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
14
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Income and Comprehensive Income
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 $ 188,523 $ 143,398 $ -- $ 332,173
Subcontract and direct material costs (140) (143,852) (72,796) -- (216,788)
Equity in income of joint ventures and
affiliated companies and subsidiaries 10,987 -- 1,575 (11,844) 718
--------- --------- --------- --------- ---------
Service Revenue 11,099 44,671 72,177 (11,844) 116,103
Operating Expenses
Operating expenses 6,222 39,616 60,616 -- 106,454
Depreciation and amortization 595 (108) 1,968 -- 2,455
--------- --------- --------- --------- ---------
Operating Income 4,282 5,163 9,593 (11,844) 7,194
Other Income (Expense)
Interest income 60 135 140 (11) 324
Interest expense (4,197) (40) (14) 11 (4,240)
--------- --------- --------- --------- ---------
Income Before Income Taxes and
Minority Interests 145 5,258 9,719 (11,844) 3,278
Income tax provision (benefit) 25 797 1,517 (1,831) 508
--------- --------- --------- --------- ---------
Income Before Minority Interests 120 4,461 8,202 (10,013) 2,770
Minority interests in net income of subsidiaries -- 2,650 -- -- 2,650
--------- --------- --------- --------- ---------
Net Income $ 120 $ 1,811 $ 8,202 $ (10,013) $ 120
========= ========= ========= ========= =========
Foreign currency translation adjustment (777) -- -- -- (777)
--------- --------- --------- --------- ---------
Comprehensive Income (Loss) $ (657) $ 1,811 $ 8,202 $ (10,013) $ (657)
========= ========= ========= ========= =========
</TABLE>
- ------------------------------------------------------------------------
See notes to consolidated financial statements.
15
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 1998
(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 $ (14,993) $ (15,095) $ (5,207) $ -- $ (35,295)
--------- --------- --------- --------- ---------
Investing Activities
Purchases of fixed assets 1,159 -- (3,869) -- (2,710)
Cash acquired from (invested in) subsidiary acquisitions -- -- 3,570 -- 3,570
Sale of subsidiaries and/or investments -- -- 2,400 -- 2,400
--------- --------- --------- --------- ---------
Net Cash Used in Investing Activities 1,159 -- 2,101 -- 3,260
--------- --------- --------- --------- ---------
Financing Activities
Borrowings under credit facility 114,000 -- -- -- 114,000
Principal payments on credit facility (97,500) -- -- -- (97,500)
Distribution of income to minority interest -- (1,500) -- -- (1,500)
Proceeds from issuances of common stock 347 -- -- -- 347
--------- --------- --------- --------- ---------
Net Cash Used in Financing Activities 16,847 (1,500) -- -- 15,347
--------- --------- --------- --------- ---------
Effect of Exchange Rate Changes on Cash -- -- (283) -- (283)
--------- --------- --------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents 3,013 (16,595) (3,389) -- (16,971)
Cash and Cash Equivalents at Beginning of Period (5,665) 10,258 14,605 -- 19,198
--------- --------- --------- --------- ---------
Cash and Cash Equivalents at End of Period $ (2,652) $ (6,337) $ 11,216 $ -- $ 2,227
========= ========= ========= ========= =========
</TABLE>
- ------------------------------------------------------------------
See notes to consolidated financial statements.
16
<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 $ 24,545 $ (2,100) $ (8,451) $ 494 $ 14,488
-------- -------- -------- -------- --------
Investing Activities
Purchases of fixed assets (1,638) (6) (1,474) -- (3,118)
Cash acquired from (invested in) subsidiary acquisitions -- -- (441) -- (441)
Sale of subsidiaries and subsidiary assets -- -- 16,540 -- 16,540
-------- -------- -------- -------- --------
Net Cash Used in Investing Activities (1,638) (6) 14,625 -- 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)
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 3,771 (12,056) 4,959 494 (2,832)
Cash and Cash Equivalents at Beginning of Period (7,720) 12,210 12,765 (494) 16,761
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ (3,949) $ 154 17,724 $ -- $ 13,929
======== ======== ======== ======== ========
</TABLE>
- -------------------------------------------------------------------
See notes to consolidated financial statements.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Since the Company's last quarterly filing on Form 10-Q, senior management of the
Company has changed significantly; Keith Price is now President and Chief
Executive Officer and Richard Leupen is now President of the Engineers &
Constructors (E&C) Group. Changes have also been made in other senior management
positions within the E&C Group.
As referenced in previous filings, the Company has had difficulty performing
several fixed-price contracts involving the construction of plants to produce
nitric acid (the Nitric Acid Projects). Initially, the Company believed that the
cost overruns, and associated management and execution difficulties, would be
limited to only one of the four contracts within the Company's Engineers &
Constructors Group, and in December 1997 recorded an estimated $2.0 million loss
at completion and reversed all profit previously recognized on that specific
project. However, during the second quarter of 1998, it became apparent that
several of the other contracts faced similar cost overruns. After a review of
all of the contracts and the potential liabilities, the Company recorded
additional charges of $40 million during the three months ending June 30, 1998.
The Company has now recorded an additional charge of $7.0 million during the
three months ended September 30, 1998 to increase the second reserve. Since June
30, the Company has been using the internal resources of its new construction
subsidiary to manage the completion of the Nitric Acid Projects. These projects
have and will continue to receive the attention necessary to reduce additional
risks. The Company continues to pursue recovery of portions of the overruns from
both the customers and certain subcontractors. To date, no estimates for
recoveries have been offset against the charges recognized above. Additionally
during the third quarter of this year, the Company performed and was subjected
to extensive reviews and analyses aimed at identifying the contributors to the
Nitric Acid problems in an effort to mitigate the risk of similar problems
occurring in the future. Partly as a result of these reviews, the Company
recognized an additional charge totaling $10.2 million to reflect the adjustment
of the earned progress to date on several other large fixed-price projects as
well as to provide for reasonable estimates of reserves needed for certain risks
associated with those projects. The total of the adjustments for these unusual
charges during the third quarter of 1998 was $17.2 million. Management does not
believe it has the requisite information to form reasonable estimates of other
risks; adjustments to these financial statements may have to be, but as of yet,
have not been made.
Despite these issues, the Company continues to be awarded major contracts
demonstrated in the recent award of a five-year, $1.1 billion contract to a new
joint venture between Northrop Grumman, Wackenhut Corporation, and the Company
to jointly manage base operations for NASA and the U.S. Air Force at Kennedy
Space Center, Cape Canaveral Air Station, Patrick Air Force Base, Florida
Annexes, and the Trans Oceanic Abort Sites. The Company's total contract backlog
approximated $3.5 billion at September 30, 1998 compared to $4.1 billion at
December 31, 1997. Excluding the backlog of Kaiser-Hill, backlog increased $0.1
million during this nine month period.
Largely as a result of the project losses and adjustments within the
E&C Group, the changes in senior management discussed above were made. The new
management team members not only bring significant requisite industry knowledge
and experience to lead, grow, and improve the operations of the Company and the
E&C Group but have also demonstrated the skills necessary to effect positive
change when beginning from a troubled position. The new management team has
conducted exhaustive reviews of the most significant projects and assessed the
risks and opportunities in active business areas. The new team has identified
issues and contributors that it believes to have led to the losses to date.
Management is committed to implementing proper management controls and the
processes necessary to deliver high-quality, profitable projects throughout the
Company. Their plan provides for the discontinuance of unprofitable operations,
the realignment of staff within the Company to meet current needs, and the
improvement of risk assessment within the organization. Specifically, operating
management will focus on improving contract operating profit margins and
improving risk management.
Management believes it can reduce its current annual overhead and general and
administrative cost structures by $10 million and has begun execution of its
cost-reduction plan. The Company recognized an unusual charge for office
realignments and discontinued business areas of $7.7 million and a charge for
severance costs and other restructuring costs of $7.9 million during the three
months ended September 30, 1998.
18
<PAGE>
The Special Committee of the Board of Directors, whose creation was
announced in the second quarter Report on Form 10-Q, continues to explore
alternatives for realizing the significant value of the Company's Consulting
Group, which may not be fully reflected in the Company's total current market
valuation. significant shareholder. The Committee will also continue to consider
strategic alternatives for the Company as a whole. The sale of one or more of
its groups is such a possibility. The Special Committee has retained Raymond
James and Associates, Inc. as financial advisors to the Committee. The Company
recorded a charge of $1.5 million during the second quarter for financial and
advisory costs incurred for the disposition of one of its groups.
Anticipating the upcoming strains on the Company's cash flow stemming from the
project cost overruns and restructuring charges, management has sought
additional sources of financing. As discussed below, the Company has received a
commitment for the replacement of its existing senior credit facility with a new
facility.
The following discussion describes the Company's results of operations
for the three and nine months ended September 30, 1998 and 1997. Due to the
magnitude of the effect of many of the nonrecurring adjustments described above,
many of the analyses that follow have been adjusted to focus on the Company's
remaining core operations.
Results of Operations
Gross Revenue (1)
The Company's gross revenue by operating group for the three and nine months
ended September 30, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
--------------------------------------------------------------------------
1998 1997 Change 1998 1997 Change
----------- ------------- ------------------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Environment and Facilities Management (EFM) $ 214.7 $ 216.4 (1%) $ 553.3 $ 529.1 5%
Engineering and Construction (E&C) 54.0 92.6 (42%) 282.4 245.0 15%
Consulting 27.4 23.9 15% 79.8 69.9 14%
Other, net (3.6) (0.7) - (5.7) (4.3) -
----------- ------------- ----------- -----------
Total $ 292.5 $332.2 (12%) $ 909.8 $ 839.7 8%
=========== ============= =========== ===========
</TABLE>
(1) 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.
The reasons for the fluctuations in the Group results during the periods
presented are as follows:
Environment and Facilities Management Group (EFM)
. a decrease of $8.4 million and an increase of $16.3 million in revenue, for
the three and nine months respectively, from the Rocky Flats contract
performed by Kaiser-Hill (primarily reflecting the timing of major
subcontract work performed in 1998 versus the same periods 1997)
. an increase of $7.4 million and $8.6 million for the three and nine months,
respectively, generated on environmental restoration contracts with the
federal government
Engineers & Constructors Group (E&C)
. a reduction of $35.0 million and $6.1 million for the three and nine
months, respectively, in revenue recognized on the Nitric Acid projects
(partially reflective of the decreasing volume of activity on the projects
as they near completion and partially reflective of the reversal of
over-recognized revenue as a result of the additional losses now estimated
at completion.)
19
<PAGE>
. a reduction of $7.4 million and $2.2 million in revenue, for the three and
nine months, respectively, generated by the Company's Australia and Asian
activities. The three month decline was largely due to the winding down of
certain large projects during the third quarter of 1998. The effects of
these decreases on operating income, however, were offset as the region
secured a major new joint venture project, the results of which are only
reflected in the Company's service revenue. The decrease for the nine
months ended September 30, 1998 was largely due to negative impacts of
foreign currency translation fluctuations
. an increase of $13.4 million and $77.9 million in revenue for the three and
nine months, respectively, generated by the Company's new construction
subsidiary, ICF Kaiser Advanced Technology, Inc. (formerly ICT Spectrum),
acquired effective January 1, 1998
. a decrease of $6.5 million and $14.5 million for the three and nine months,
respectively, resulting from completing contracts for a major U.S.
industrial client
. other net decreases of $7.3 million (or 8% of the comparable 1997 gross
revenue base) and $11.6 million (or 5% of the comparable prior-year revenue
base) on the timing of other E&C contract activities
. an increase of $4.2 million in revenue generated primarily from direct
materials procured for the Nova Hut steel mini-mill contract in the Czech
Republic during the third quarter of 1998 and a decrease of $6.1 million in
revenue for the nine months ended September 30, 1998 primarily due to an
adjustment to reduce revenue by $5.7 million to more closely reflect the
actual percentage complete with the project as of September 30, 1998.
Consulting Group
. increases of $3.5 million (or 15%) and $9.9 million (or 14%) in revenue for
the three and nine months, respectively, generated by the Company's
consulting activities. Growth was experienced in all of the Groups'
business lines.
. The Group's headcount and labor base have grown by more than 16% during the
nine months ended September 30, 1998 in order to respond to growth
experienced in contract awards.
Service Revenue (1)
- ---------------
The Company's service revenue by operating group for the three and nine months
ended September 30, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------------------ ------------------------------------------
1998 (2) 1997 (2) Change 1998 (2) 1997 (2) Change
-------- ------- -------- ------- -------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Environment and Facilities Management (EFM) $ 50.1 23% $ 60.2 28% -17% $ 146.8 27% $ 168.5 32% -13%
Engineering and Construction (E&C) 11.4 21% 36.9 40% -69% 47.1 17% 105.6 43% -55%
Consulting 21.8 80% 18.6 78% 17% 62.6 78% 54.5 78% 15%
Equity in income of joint ventures
and affiliated companies 2.6 - 0.7 - 271% 5.1 - 1.6 - 219%
Other, net (3.4) - (0.3) - - (5.9) - (0.5) -
-------- -------- -------- --------
$ 82.5 28% $ 116.1 35% -29% $ 255.7 28% $ 329.7 39% -22%
======== ======== ======== ========
Adjusted for all effects of the
Nitric Acid projects $ 88.2 28% $ 115.9 37% -24% $ 296.2 34% $ 324.5 40% -9%
======== ======== ======== ========
Adjusted for the effects of acquisitions
and the Nitric Acid projects $ 86.1 29% $ 115.9 37% -26% $ 289.1 36% $ 324.5 40% -11%
======== ======== ======== ========
</TABLE>
(1) Service revenue is derived by deducting the costs of subcontracted services
and materials from gross revenue and adding the Company's share of the equity in
income of unconsolidated joint ventures and affiliated companies.
(2) This column reflects each operating group's service revenue as a percentage
of its gross revenue.
Service revenue decreased by $33.6 million and $74.0 million for the three and
nine months ended September 30, 1998, respectively, compared to the same periods
in 1997. The majority of the decreases were due to the $17.2 million and $57.2
million loss reserves, respectively, established primarily to cover estimated
cost overruns on the Nitric Acid Projects and also for revised profit margin
estimates at completion on other large fixed price projects. Although management
believes that adequate provision for loss reserves and profit estimates for
these fixed-price
20
<PAGE>
contracts has been reflected in the financial statements, no assurance can be
given that the full amount of the claims will be realized or that the loss
provision is entirely adequate.
Service revenue from the Rocky Flats contract decreased by $9.4 million and
$17.9 million for the three and nine months respectively, as compared to 1997.
This decrease is attributable to Kaiser-Hill's continuing strategy to
subcontract more of the overall contract tasks and to emphasize its primary role
as the overall services integrator on the Rocky Flats contract. Because the
contract primarily reimburses Kaiser-Hill for its actual costs incurred plus an
incentive fee on performance-based completion milestones, the shift from direct
labor to subcontracted costs has no impact to Kaiser-Hill's actual
profitability. As with all contracts involving incentive-based fee arrangements,
the Company estimates the amount of fee it believes it will earn and recognizes
revenue equal to the estimated fee percentage multiplied by the base of costs on
which the fee is incurred. During the third quarter of 1998, the Company
determined that Kaiser-Hill was not going to earn the same level of fee as in
1997, and accordingly adjusted the fee revenue down to the revised estimate.
This resulted in a decrease to Kaiser-Hill's third quarter operating income
(before exclusion of the minority interest) by approximately $2.0 million.
The service revenue decreases discussed above were somewhat offset by $2.1
million and $7.1 million increases for the three and nine months, respectively,
in service revenue generated by the 1998 acquisition of ICF Kaiser Advanced
Technology. Increases for both the three- and nine-month periods in service
revenue from the Consulting Group paralleled the increases in the related gross
revenue. Equity in income from joint ventures and affiliated companies increased
by $1.9 million and $3.5 million, for the three and nine months respectively,
due primarily to a joint venture contract awarded in late 1997 for an alumina
refinery expansion project in Australia. Additional declines in service revenue
of $7.3 million and $9.6 million for the three and nine months, respectively are
attributable to lower levels being generated by the Nova Hut contract for the
comparable 1998 periods as the contract has moved into a phase that is more
subcontractor and material intensive.
Service revenue as a percentage of gross revenue decreased to 28% for both the
three and nine months ended September 30, 1998, respectively, compared to 35%
and 39% for the same periods in 1997. The decrease is largely attributable to
the results of the Nitric Acid Projects as well as the reserve for related
contract overruns. In addition to the $17.2 million and $57.2 million reserve
for project overruns, the projects generated gross revenue of $30.9 million
during the nine months ended September 30, 1998, without generating any service
revenue as a result of the projected losses at completion. Additionally, ICF
Kaiser Advanced Technology's 9% service revenue margins are significantly lower
than the percentage for the remainder of the Company. The general construction
management nature of ICF Kaiser Advanced Technology's business involves the
subcontracting of major portions of most prime contracts. As a result, service
revenue as a percentage of gross revenue for the Company as a whole will likely
decrease in the future to the extent this business grows.
In March 1998, the Company entered into a $187 million maximum price contract
for the construction of a ship construction facility. The Company subsequently
learned that the costs used by the Company and the customer as the basis for
negotiation of the contract were approximately $30 million lower than the
estimated actual costs to perform the contract as reflected in proposed actual
subcontracts. After learning this, the Company advised the customer that it was
not required to perform the contract in accordance with its terms. Negotiations
with the customer resulted in an interim agreement under which both parties
reserved their rights and, on a day-to-day basis, the Company continued to
execute certain transitional on-site activities. The customer terminated the
interim agreement with the Company effective August 14, 1998. In October 1998,
the customer presented an initial draft of a claim request to the Company
requesting payment for its perceived damages and entitlements pursuant to the
terminated contract. The Company and the customer are currently discussing the
customer's draft claim. Given the negotiation status, no provision for any
losses on this contract have been included in the Company's financial results to
date as management does not believe that it has sufficient information at this
time to reasonably estimate the outcome of the negotiations.
21
<PAGE>
Operating Expenses
- ------------------
To analyze operating expenses as a percentage of service revenue, shown below,
service revenue has been adjusted to exclude the effects of the Nitric Acid
Projects, as well as the other contract loss provisions, for all periods
presented.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Service Revenue (1) 100% 100% 100% 100%
Operating Expenses
Direct labor and fringe benefits 67% 67% 67% 68%
Group overhead (2) 24% 20% 22% 20%
Corporate general and administrative (3) 6% 5% 5% 5%
Depreciation and amortization 2% 2% 2% 2%
-------- -------- -------- --------
Operating Income (4) 1% 6% 4% 5%
======== ======== ======== ========
</TABLE>
(1) Service revenue has been adjusted to exclude the 1998 and 1997 effects of
the Nitric Acid Projects.
(2) Group overhead represents those general and administrative costs incurred
by the Company's operating groups for which an indirect benefit is
generally not derived by any other operating group.
(3) Corporate general and administrative expenses consists of costs incurred by
the Company which provide some indirect benefit to all operating groups.
(4) Operating Income as presented here excludes the effects of the severance
and restructuring and unusual charges recorded during the third quarter of
1998.
The acquisition of ICF Kaiser Advanced Technology added direct labor and fringe
benefits expense of $1.5 million and $4.6 million during the three and nine
months ended September 30, 1998, respectively. Apart from acquired direct labor
growth, other direct labor spending decreased by $12.7 million (or 16%) and
$18.1 million (or 8%), respectively, during the three and nine months ended
September 30, 1998 compared to 1997 levels. This reduction is due primarily to
decreases incurred by Kaiser-Hill of $6.8 million (17% reduction) and $15.1
million (14% reduction), respectively. These reductions reflect Kaiser-Hill's
actions in using more subcontractors to execute work on the Rocky Flats
contract. These reductions offset the increases in subcontractor costs as
evidenced in the direct labor as a percent of service revenue in the 1998
periods remaining consistent with those levels incurred in the 1997 periods.
Group overhead increased by $0.5 million, or 2%, and $4.0 million, or 6%, during
the three and nine months ended September 30, 1998, respectively, compared to
the same periods in 1997. The 1998 group overhead increase reflects the
inclusion of $0.5 million and $1.5 million in general and administrative costs
incurred by ICF Kaiser Advanced Technology during the three and nine month
periods, respectively; a $0.7 million charge in the first quarter of 1998 to
establish reserves for contingencies; and lastly, a combination of other
increases in marketing and administrative expenses which were not incurred at
similar levels during the same three and nine month periods in 1997. Group
overhead is likely to continue to increase in the near term as the Company
invests in areas designed to improve existing project controls and contracting
processes as discussed below.
Corporate general and administrative expense increased by $0.3 million, or 5%,
and decreased $0.8 million, or 5%, during the three and nine months ended
September 30, 1998, respectively compared to the same periods in 1997. These
changes resulted in corporate general and administrative expense maintaining an
approximate 5% of total service revenue (service revenue as adjusted for the
effects of the Nitric Acid Projects and other contract loss provisions) for all
financial statement periods presented.
This new management team believes it can reduce the Company's current annual
overhead and general and administrative cost structures by $10 million and has
begun execution of its cost reduction plan. The Company recognized an unusual
charge for office realignment and discontinued business areas of $7.7 million
and a charge for severance costs and other restructuring of $7.9 million during
the three months ended September 30, 1998.
22
<PAGE>
Interest Expense
- ----------------
Interest expense increased $0.9 million, or 21%, and $1.5 million, or 11%,
during the three and nine months ended September 30, 1998 compared to the same
periods in 1997. Included in interest expense during the first and third
quarters of 1997 were reductions of $0.4 million and $0.6 million, respectively,
reflecting recoveries from the favorable resolution of a foreign income tax
matter. Apart from this non-recurring interest credit, interest expense has
increased due to net increases in outstanding cash borrowings from the Company's
revolving credit facility. Average balances outstanding on the revolving credit
facility totaled $19.5 million and $7.1 million, respectively during the three
months ended September 30, 1998 and 1997. For the nine month periods then ended,
the average revolver balances were $12.0 million and $4.5 million, respectively.
Income Tax Expense
- ------------------
The Company did not recognize any tax benefits on the operating losses generated
during the three months ended September 30, 1998. During the three months ended
June 30, 1998, the Company recognized an additional deferred tax asset of $18.1
million, primarily as a result of the losses recognized for cost overruns to be
incurred on certain fixed-price contract overruns. The Company has not recorded
any additional valuation allowance against the net deferred tax assets carried
on the balance sheet at September 30, 1998 totaling $33.0 million. Management
believes that through the combination of expected levels of pretax operating
earnings (brought about, in part, by the restructuring plan described above) and
a tax-planning strategy, that would, if necessary, accelerate taxable amounts,
it will be able to utilize the balance of deferred tax assets. As permitted by
Statement of Financial Accounting Standard No. 109 - Accounting for Income
Taxes, tax-planning strategies are alternatives that can be used to provide
evidence of the likelihood of future taxable income for purposes of evaluating
the necessity of establishing valuation reserves against balances of deferred
tax assets. The Company's tax-planning strategy involves the disposition of the
Consulting Group operations for consideration that could result in taxable
income sufficient enough to utilize a significant portion of the deferred tax
assets. Additionally, the strategy would provide for the proceeds from the sale
of the Group to be used to reduce outstanding debt and thereby lower interest
costs. In the event that this tax-planning strategy is abandoned, and in the
event the Company is not able to demonstrate a reasonable likelihood of
sustaining operating profits in the near term, the Company's ability to fully
utilize the deferred tax assets could be reduced significantly and a valuation
allowance against the asset would have to be recognized in the financial
statements as a charge to income.
Cumulative Effect of Accounting Change
- --------------------------------------
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued a Statement of Position 98-5 -
Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires costs
of organization and start-up activities to be expensed as incurred. Initial
application of the SOP should be reported as the cumulative effect of a change
in accounting principle, as described in Accounting Principles Board Opinion No.
20, Accounting Changes. The Company adopted the Statement effective April 1,
1998 and recognized a charge of $6 million, net of tax, as the cumulative effect
of the adoption. The Company's quarterly amortization expense will likely be
reduced by approximately $350,000, not including increases for new fixed asset
additions, etc., for each of the next several quarters because the cumulative
charge included balances for items that had been amortizing.
Operating Outlook
- -----------------
Given the significant amount and nature of many of the nonrecurring adjustments
included in the year-to-date financial statements, management believes that a
more indicative comparison of the nine month 1998 and 1997 results should
reflect the "pro forma" adjustments described in the notes below. The following
table presents such comparative results for the nine months ended September 30,
1998 and 1997:
23
<PAGE>
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1998 September 30, 1997
------------------------------------------- ------------------------------------------
Reported Adjustments Pro Forma Reported Adjustments Pro Forma
------------- ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenue $ 909,796 $ 3,540 1) $ 913,336 $ 839,716 $ (44,880) 3) $ 794,836
Subcontract and direct material costs (601,951) (601,951) (511,606) 38,631 3) (472,975)
Provision for contract losses (57,210) 57,210 2) - - -
Equity in income of joint ventures - -
and affiliated companies 5,066 5,066 1,552 1,552
------------- ----------- ------------ ------------ ----------- ------------
Service Revenue 255,701 60,750 316,451 329,662 (6,249) 323,413
Operating Expenses (Loss)
Direct labor and fringe benefits 206,651 206,651 220,200 (324) 4) 219,876
Group overhead 68,009 68,009 64,029 (570) 4) 63,459
Corporate general and administrative 16,273 16,273 17,055 17,055
Depreciation and amortization 6,693 6,693 7,197 7,197
Severance and restructuring 9,407 (9,407) 2) - - -
Unusual charges 7,672 (7,672) 2) - - -
------------- ----------- ------------ ------------ ----------- ------------
Operating Income (Loss) (59,004) 77,829 18,825 21,181 (5,355) 15,826
============= =========== ============ ============ =========== ============
</TABLE>
Notes to pro forma adjustments:
1) To adjust for effects of revised earnings estimates of Nova Nut steel mini-
mill contract.
2) To adjust for the effects of the unusual charges
3) To adjust for the effects of revised earnings estimates of Nova Hut steel
mini-mill contract and to exclude the unadjusted amounts recognized from
the Nitric Acid contracts.
4) To adjust for the effects of the operations deemed discontinued during
1998.
Adjusting the third quarter and nine month financial results to exclude the
effects of all of the significant and unusual charges discussed above, and
assuming that the Company could recognize future income tax deductions for
operating losses it incurs, the net income results for the quarter and the nine
months ended September 30, 1998 would have approximated a loss of $0.11 and
$0.24 per share, respectively. As a result of the losses generated this year
however, the Company does not intend to recognize income tax benefits from its
operating losses and also expects its results from recurring operations to not
be better than a loss of $0.25 per share for the last quarter of 1998. In
addition, significant uncertainties still remain on various project and contract
matters. No estimates for resolution of additional contingencies beyond those
charges discussed above have been included in this operating outlook. Lastly,
the Company also expects to recognize an extraordinary charge of approximately
$1.0 million prior to the end of 1998 to expense the unamortized fees incurred
in securing its existing revolving line of credit, and all related amendments,
that it plans to replace with a new line. Beginning in 1999, management expects
the benefits of its restructuring, profit improvement, and cost reduction plans
to be realized progressively over several quarters.
Liquidity and Capital Resources
During the three and nine months ended September 30, 1998, cash and cash
equivalents decreased $5.4 million and $16.9 million, respectively to $2.2
million. Operating activities through September 30, 1998 used $35.3 million in
cash (including $9.1 million in a semiannual interest payment made on June 30),
investing activities provided $3.3 million in cash, and financing activities
provided $15.3 million in cash. The effect of foreign currency exchange rate
fluctuations also decreased the September 30 cash balance by $0.3 million.
Operating Activities
- --------------------
The Company's cash flow from operations used $35.3 million during the nine
months ended September 30, 1998. A significant portion of the cash went to fund
the cost overruns incurred on the Nitric Acid Projects. Additional decreases
were due to the use of previously paid milestone-based payment provisions,
growth on government contracts that require the Company to pay subcontractors
prior to billing the federal government customer, and to unanticipated delays in
the timing of significant cash receipts from several large customers.
24
<PAGE>
Investing Activities
- --------------------
The acquisition of ICF Kaiser Advanced Technology, via an exchange of shares of
common stock, brought $3.8 million in cash to the Company during 1998.
Additionally, during the period ended June 30, 1998, the Company collected $2.4
million for the 1997 sale of its remaining minority investment in entities that
own and operate a pulverized coal injection facility. The Company sold the
majority of this investment in 1996 and collected $16.5 million of the sale
price in the first quarter of 1997.
Other uses of cash for investing purposes continue to consist of outlays for
fixed assets, primarily software, computers, and consulting expenditures
necessary to complete the Company's implementation of a new financial system by
the end of 1999.
Financing Activities
- --------------------
Net activity in revolving credit facility borrowings added $16.5 million in cash
while payments for distributions of income to minority interests made in the
nine months ended September 30, 1998 used $1.5 million in cash. As of September
30, 1998, the Company had $20.5 million in cash borrowings, $25.6 million of
performance letters of credit outstanding, and $4.5 million of additional credit
available under the credit facility based on the amount of eligible receivables.
The revolving credit facility contains a $25 million limit on cash borrowings.
During the third quarter of 1998, the Company added ICF Kaiser Advanced
Technology as a Subsidiary Guarantor on its revolving credit facility. This
addition increased the amount of eligible receivables against which the Company
may borrow. Lastly, the receivables purchase facility used by Kaiser-Hill, which
was scheduled to expire on June 30, 1998, was renewed for another twelve months.
Liquidity and Capital Resources Outlook
- ---------------------------------------
As a result of the significant charges recognized during the second and third
quarters, the Company was not in compliance either as of June 30 or September
30, 1998 with certain financial covenants set forth in its revolving credit
facility. The Company has requested an amendment to allow the Company to be in
compliance with reestablished covenants, and the Banks have continued to permit
the Company to borrow and obtain letters of credit pursuant to the revolving
credit facility while the Company's amendment request is being considered. At
September 30, the Company had $20.5 million in cash borrowings and $25.6 million
in stand-by letters of credit outstanding. As of November 13, 1998, the Banks
had not declared any Events of Default pursuant to the terms of the facility.
Accordingly, the total amount of outstanding cash borrowings from the revolver
as of September 30, 1998 was classified as long-term debt on the balance sheet.
On November 13, 1998, the outstanding cash balance of $25.0 million equaled the
limit of the amount of cash borrowings available.
During the third quarter, however, it became clear to management that, given the
further slippage on several of the large fixed-price project uncertainties (see
Note 6 - Contingencies), necessary charges for a realignment of the Company's
E&C Group including severance, office realignment and other discontinued
business areas, the Banks might not be willing to provide the additional working
capital projected necessary to effect a turnaround. Accordingly, management
considered the need for and the possibility of securing alternate financing.
Management has received a commitment for the replacement of its existing
senior credit facility with a new facility, similar to the Bank revolving line
of credit, that would provide for a credit line, for both cash borrowings and
letters of credit, of up to $60 million. The Company expects the new facility to
be in place by mid-December, 1998. The replacement facility would increase the
percentage of eligible accounts receivable acceptable for collateral purposes
and increase the limit on cash borrowings from $25 million to $60 million less
any outstanding letters of credit. Upon closing of a new facility, the Company
would immediately terminate the former Bank revolving credit facility and repay
any outstanding borrowings.
Management expects that the cost overruns discussed above for the Nitric Acid
Projects will require significant cash outlays over the next six to eight
months. Assuming that alternate revolving credit becomes available to the
Company, management believes that projected levels of cash flows (including the
potential for claims recoveries) and the availability of financing, including
borrowings under the more flexible
25
<PAGE>
revolving credit facility, will be adequate to fund the losses, as well as
projected levels of ongoing operations, including interest costs. The additional
borrowings and uses of cash from previously unutilized sources, including
foreign sources, will increase the Company's cost of capital.
In addition to the cash requirements of the Company's daily operations, a
semiannual interest payment of $9.1 million is due on December 31, 1998 for the
Series B Senior Notes and Senior Subordinated Notes. Assuming that more flexible
revolving credit becomes available to the Company, the Company presently intends
to be able to meet the interest obligation with either operating cash flows or
borrowings under a new revolving credit facility. The expectation to meet the
interest payment is contingent upon, among other things, the Company's ability
to close on the alternative revolving credit facility and the Company's ability
to contain the cash flows of the project losses. If and when circumstances
permit, the Company would consider redeeming the Series B Senior Notes and the
Senior Subordinated Notes, both due in 2003, which, at the earliest, can be
called on December 31, 1998.
Impact of Year 2000
Similar to many organizations that use computer programs in their operations,
the Company is addressing the impact of the Year 2000 issue on its business. The
Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the year. Any of the Company's computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, generate financial
information, or engage in similar normal business activities.
The Company has a formal plan to address the Year 2000 issue. The plan has
defined roles and responsibilities, target dates, and a detailed budget. The
plan also incorporates the use of outside consultants. The series of detailed
steps in the plan are similar to those developed by most companies to assess and
mitigate the problem. Each series of detailed steps will be performed on each of
four major risk areas the Company has identified to be areas of concern. Those
areas are 1) date-sensitive software applications used to run the core business;
2) the hardware (and software utilized in therein) used internally to run the
core business - such as desk-top applications, communications networks, and
physical plant issues; 3) software that the Company has either developed and
sold to customers or software or embedded technology that the Company has
procured from a third party and resold to a customer; and lastly 4) software
used by the Company's significant vendors or subcontractors that could disrupt
the flow of the Company's activities in the event that this software
malfunctions.
In part because of the Year 2000 issue and the inability for the Company's
mainframe computer based software applications to operate properly with a
four-digit date field, and in part because of the Company's needs for effective,
economic and efficient project management information and financial accounting
tools, the Company is replacing its main project and financial accounting
software application. The costs of the new software, external consultants, and
the internal cost of implementation labor will be capitalized and amortized over
a period of ten years. The total cost of this specific aspect of the Year 2000
project is estimated to be less than $2.0 million. Other nonrecurring costs
associated with the historical archival, as well as the need to replace embedded
technology in items such as telephone switches and certain desk-top software, as
well as the costs to execute all other aspects of the Company's Year 2000 plan,
are estimated not to exceed $1.0 million. The Company will expense the majority
of such costs.
Although a true risk assessment process will need to be continually updated and
actual results will not be known until after the beginning of the year 2000, the
Company's plan provides for all major risk-mitigation activities to be completed
at various times during the second half of 1999. At this time, the Company has
not developed a "worst case" scenario or an overall year 2000 contingency plan
but will do so when management believes such plans are warranted. Management
believes that the majority of the risks to its mission-critical business
operations are within the Company's control and ability to address. Since
sufficient time and resources remain to address the issues that are most
critical to the Company's regular operations, management believes that it will
not need to devise contingency plans for items 1), 2) and 3) above (see
"Forward-Looking Information" below). However, as it relates to item 4), our
major suppliers, the Company will continue to assess the vendors' commitment to
readiness and will devise contingency plans in the event significant risk to a
disruption of service to the Company is not being adequately mitigated. In
addition, the Company will work closely with its major customers to determine
their state of readiness in order to devise proper contingency plans to provide
for the payment of Company invoices in the event the customers' systems do not
initially function properly.
26
<PAGE>
Impact of New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued FASB Statement No.
131 - Disclosures about Segments of an Enterprise and Related Information. The
Statement establishes standards for the way that public business enterprises
report information about operating segments and requires that public enterprises
report selected information about operating segments in interim financial
reports. The Statement is effective for fiscal years beginning after December
15, 1997 and does not require application in interim financial statements in the
initial year of adoption. Accordingly, the Company will adopt the Statement as
part of its financial statements for the year ended December 31, 1998 and will
not include segment disclosures in its 1998 interim financial statements.
In February 1998, the Financial Accounting Standards Board issued FASB Statement
No. 132 - Employers' Disclosures about Pensions and Other Post-retirement
Benefits. The Statement revised employers' disclosures about pension and other
post-retirement benefit plans. It does not change the measurement or recognition
of those plans. The Statement is effective for fiscal years beginning after
December 15, 1997. The Company will adopt the disclosure requirements in its
financial statements for the year ended December 31, 1998.
The Company's adoption of Statement of Position 98-5 effective April 1, 1998 is
discussed in detail on page 23.
In October 1998, the Financial Accounting Standards Board issued FASB Statement
No. 133 - accounting for Derivative Instruments and Hedging Activities. The
Statement, applicable for fiscal quarters beginning after June 15, 1999,
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivative
instruments at fair value then account for changes in the fair value. The
Company does not currently enter into derivative instruments or hedge activity
at the current time and accordingly will continue to evaluate whether this
Statement will need to be adopted at some time in the future.
Forward-looking Statements and Certain Factors Affecting ICF Kaiser and its
Businesses
From time to time, certain disclosures in reports and statements released by the
Company, or statements made by its officers or directors, will be forward-
looking in nature. These forward-looking statements may contain information
related to the Company's intent, belief, or expectation with respect to contract
awards and performance, potential acquisitions and joint ventures, cost cutting
measures and Year 2000 readiness. In addition, these forward-looking statements
contain a number of factual assumptions made by the Company regarding, among
other things, future economic, competitive, and market conditions. Because the
accurate prediction of any future facts or conditions may be difficult and
involve the assessment of events beyond the Company's control, actual results
may differ materially from those expressed or implied in such forward-looking
statements.
The Company is availing itself of the safe harbor provisions provided in the
Private Securities Litigation Reform Act of 1995 by cautioning readers that the
forward-looking statements which use words such as the Company "anticipates,"
"expects," "estimates," and "believes" are subject to certain risks and
uncertainties which could cause actual results of operations to differ
materially from expectations. These forward-looking statements may be contained
in the Company's federal securities laws filings or in written or oral
statements made by the Company's officers and directors to press, potential
investors, securities analysts, and others. Any such written or oral forward-
looking statements should be considered in context with the risk factors
discussed below:
-- the Company may not be able to maintain existing contracts at their
current levels and may not be able to realize the increased contract performance
levels that it is assuming it will achieve under certain of these existing
contracts. The Company is involved in a number of fixed price contracts under
which the Company may benefit from cost savings, but if certain pricing and
performance assumptions prove inaccurate, unrecoverable cost overruns can occur
in addition to those already provided for.
-- the Company may not be awarded new contracts for which it is
competing in its established markets or these awards may be delayed; in
addition, the Company may not be able to win contracts in the new markets it is
targeting. General economic conditions in the international arena, especially
Asia, could negatively impact the Company's current international business and
its ability to expand into new international markets.
27
<PAGE>
-- the Company is very dependent on federal government contracts which
are subject to annual funding approvals, which may be subject to cost audits,
and which may be terminated at any time, with or without cause; a large number
of federal government contracts are included in the Company's backlog number
which means that the backlog number is not necessarily indicative of the future
revenue of the Company;
-- a large portion of the Company's business has been and is generated
either directly or indirectly as a result of federal and state environmental
laws, regulations, and programs; a reduction in the number or scope of these
laws, regulations, or programs could materially affect the Company's business.
In addition, environmental work poses risks of large civil and criminal
liabilities for violations of environmental laws and regulations, and
liabilities to customers and to third parties for damages arising from the
Company's performing environmental services to its clients. A large fine or
penalty imposed on the Company could negatively impact contract performance fees
under certain existing contracts or otherwise negatively affect the Company's
financial results.
-- the Company may not be able to recognize the level of savings
expected from its cost-cutting measures and cost control improvements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Applicable to the Company's filings of financial statements for fiscal years
ending after June 15, 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, 1997.
Item 2. Changes in Securities
(a) None (b) None (c) None (d) Not applicable
Item 3. Defaults Upon Senior Securities
(a) See Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(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. 3(aa) Amended Articles of Incorporation of ICF Kaiser Advanced
Technology, Inc.
No. 3(bb) Amended Bylaws of ICF Kaiser Advanced Technology, Inc.
(as amended through August 8, 1998)
No. 4(a)(7) Seventh Supplemental Indenture dated as of
August 13, 1998
No. 4(g)(2) Second Supplemental Indenture dated as of
August 13, 1998
No. 10(oo) Employment Agreement dated as of August 27, 1998, with
Keith M. Price, the Registrant's President and Chief
Operating Officer
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 on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized.
ICF KAISER INTERNATIONAL, INC.
(Registrant)
Date: November 16, 1998
/s/ Timothy P. O'Connor
-----------------------
Timothy P. O'Connor
Senior Vice President and Acting Chief
Financial Officer
(Duly authorized officer and principal
financial officer)
28
<PAGE>
Exhibit No.3(aa)
AMENDED ARTICLES OF INCORPORATION
OF
ICF KAISER ADVANCED TECHNOLOGY, INC.
(formerly named Micron Construction, Inc.)
THE UNDERSIGNED, a natural person of lawful age, does hereby adopt the
following Articles of Incorporation for the purpose of forming a corporation
pursuant to the Idaho Business Corporation Act.
ARTICLE I
The name of the corporation is: ICF KAISER ADVANCED TECHNOOGY, INC.
ARTICLE II
The duration of the corporation shall be perpetual.
ARTICLE III
The purpose for which the corporation is organized is the management of
construction projects and the transaction of any or all lawful business for
which corporation may be incorporated under the Idaho Business Act.
ARTICLE IV
The aggregate number of shares which the corporation shall have authority
to issue shall consist of 100,000 shares of common stock without par value.
ARTICLE V
Shareholders shall have no preemptive rights to obtain or acquire any
additional shares of the corporation.
ARTICLE VI
Each outstanding share of the stock of the corporation shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Cumulative voting shall not be allowed for any purpose, including the election
of directors.
ARTICLE VII
The address of the initial registered office of the corporation is: 2805
East Columbia Road, Boise, Idaho 83706. The name of the initial registered
agent of the corporation at such address is: David P. McAnaney.
ARTICLE VIII
The number of directors of the corporation shall be as fixed from time to
time by the Bylaws of the corporation. The initial board of directors shall be
five in number. The name and addresses of the persons who are to serve as
directors until the first annual meeting of shareholders or until their
successors be elected and qualify are:
<PAGE>
Josheph L. Parkinson Brian Mattson
2805 East Columbia Road 2805 East Columbia Road
Boise, Idaho 83706 Boise, Idaho 83706
Randal W. Chance Richard Heyer
2805 East Columbia Road 2805 East Columbia Road
Boise, Idaho 83706 Boise, Idaho 83706
Chester Edwards
2805 East Columbia Road
Boise, Idaho 83706
ARTICLE IX
The name and address of the incorporator is:
David P. McAnaney
2805 East Columbia Road
Boise, Idaho 83706
Dated: October 25, 1990
Incorporator:
/s/ David P. McAnaney
-------------------------
David P. McAnaney
<PAGE>
EXHIBIT NO.3(BB)
AMENDED BYLAWS OF ICF KAISER ADVANCED TECHNOLOGY, INC.
an Idaho Corporation
(as amended through August 8, 1998)
ARTICLE I. OFFICES
Section 1. Principal Office. The principal office of the Corporation in
the State of Idaho, shall be located in the County of Ada, Idaho.
Section 2. Other Offices. The Corporation may have such other offices,
either within or without the State of Idaho, as the board of directors may
designate or as the business of the Corporation may require from time to time.
Section 3. Registered Office. The registered office of the Corporation
required by the Idaho Business Corporation Act to be maintained in the State of
Idaho may be, but need not be, identical with the principal office in the State
of Idaho, and the address of the registered office may be changed from time to
time by the board of directors.
ARTICLE II. SHAREHOLDERS MEETINGS
Section 1. Annual Meetings. The annual meeting of the shareholders shall
be held the first day of the month of February in each year, beginning with the
year 1991, at the hour of 10:00 A.M., or at such other time on such other day
within such month as shall be fixed by the board of directors, for the purpose
of electing directors and for the transaction of such other proper business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Idaho, such meeting shall be held on the next
succeeding business day. If the election of directors is not held on the day
designated herein for the annual meeting of the shareholders, the board of
directors shall call a special meeting of the shareholders, as soon thereafter
as is convenient, for the election of the directors.
Section 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-fifth of all
outstanding shares of the corporation entitled to vote at the meeting. A
request by shareholders for a special meeting shall be in writing, specifying
the time of the meeting and the general nature of business proposed to be
transacted. The request shall be delivered personally or sent by registered
mail to the President, whom shall promptly cause notice to be given in
accordance with these Bylaws.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
any place, either within or without the State of Idaho, designated by the Board.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Idaho, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the Principal Office.
Section 4. Notice of Meeting. Written notice specifying the place, day
and time of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless otherwise prescribed by
statute, be delivered not less than ten (10) nor more than fifty (50) days
before the date of the meeting, either personally or by first class mail, by or
at the direction of the president, or the secretary, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the
<PAGE>
United States mail, addressed to the shareholder at this address as it appears
on the stock transfer books of the Corporation, or at such other last known
address of which the Corporation may have notice, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of the shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty (50) days prior to the
meeting or determination. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten (10) days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. If the stock transfer books are not closed and
no record date is fixed for the determination of shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the board of directors declaring such
dividend is adopted as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
Section 6. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If a quorum is present at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 7. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of
the Corporation before or at the time of the meeting. A valid proxy which does
not state it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to the proxy, by a
writing delivered to the Corporation, or by a subsequent proxy, or (ii) written
notice of the death or incapacity of the maker of the proxy received by the
Corporation before the vote; provided, however, no proxy shall be valid after
the expiration of eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 8. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
Section 9. Voting of Shares by Certain Holders. Shares standing in the
name of another Corporation may be voted by such officer, agent or proxy as the
Bylaws of such Corporation may prescribe, or, in the absence of such provision,
as the board of directors of such other Corporation may determine.
Shares held by an administrator, executor, guardian, or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.
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A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation nor shares
held by another corporation if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the Corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 10. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by the shareholders having not less than the minimum number of votes
which would be necessary to authorize or take the action at a meeting at which
all shares entitled to vote were present and voted.
Section 11. Cumulative Voting. Cumulative voting shall not be allowed.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the board of directors.
Section 2. Number and Qualifications. The number of directors of the
Corporation shall not be less than one (1) nor more than five (5). The number
of directors may be changed by amendment to these Bylaws approved by the
shareholders by vote at a meeting or by written consent or by the directors by
vote at a meeting or by written consent. Directors need not be residents of the
State of Idaho or shareholders of the Corporation.
Section 3. Election and Term. Directors shall be elected at each annual
meeting of the shareholders and shall hold office until the next annual meeting
of shareholders or until his successor shall have been elected and qualified.
Section 4. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of directors may
provide, by resolution, the time and place, either within or without the State
of Idaho, for the holding of additional regular meetings without notice than
such resolution. In the absence of designation, regular meetings shall be held
at the Principal Office.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any director. The person
or persons authorized to call special meetings of the board of directors may fix
any place, either within or without the State of Idaho, as the place for holding
any special meeting of the board of directors called by them.
Section 6. Notice. Notice of any special meeting shall be given at least
three (3) days previously thereto by written notice delivered personally or
mailed to each director at his or her business address, or by telegram. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
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Section 7. Quorum. A majority of the number of directors fixed by
section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Action Without a Meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken shall be signed by
all of the directors.
Section 10. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the board of directors for a term of
office continuing only until the next election of directors by the shareholders.
Section 11. Compensation. By resolution of the board of directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
board of directors, and may be paid, as director, a stated salary of a fixed sum
for attendance at each meeting of the board of directors, or both. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the Corporation shall be president,
one or more vice presidents (the number thereof to be determined by the board of
directors), a secretary, and a treasurer, each of whom shall be elected by the
board of directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the board of directors. Any two or more
offices may be held by the same person, except the offices of president and
secretary.
Section 2. Election and Term of office. The officers of the Corporation
to be elected by the board of directors shall be elected annually by the board
of directors at the first meeting of the board of directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as is
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the board of
directors whenever in its judgement, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
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<PAGE>
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. The President. The president shall be the principal executive
officer of the Corporation and, subject to the control of the board of
directors, shall in general, supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the shareholders and of the board of directors. He may sign, with the secretary
or any other proper officer of the Corporation thereunto authorized by the board
of directors, certificates for shares of the Corporation any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed, and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
Section 6. The Vice Presidents. In the absence of the president or in
the event of his death, inability or refusal to act, the vice president (or in
the event there be more than one vice president, the vice presidents in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. Any vice president may sign, with
the secretary or an assistant secretary, certificates for shares of the
Corporation; and shall perform such other duties as from time to time may be
assigned to him by the president or by the board of directors.
Section 7. The Secretary. The secretary shall: (a) keep the minutes of
the proceedings of the shareholders and the board of directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal, is duly authorized; (d) keep
a register of the post office address of each shareholder which shall be
furnished to the secretary by such shareholders; (e) sign with the president, or
a vice president, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (f)
have general charge of the stock transfer books of the Corporation; and (g) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors.
Section 8. The Treasurer. The treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(b) receive and give receipts for monies due and payable to the Corporation
from, any source whatsoever, and deposit all such monies in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and (c)
in general perform all of the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The assistant
secretaries, when authorized by the board of directors, may sign with the
president or a vice president certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the board of
directors. The assistant treasurers shall respectively, if required by the
board of directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the board of directors shall determine. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.
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Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contract. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts. Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the board of directors may
select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the president or a vice
president and by the secretary or an assistant secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent or a registrar, other than the Corporation itself or one of its
employees. Each certificate for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the Corporation as the board of directors may
prescribe.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of records thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation shall be as established by the board of
directors.
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<PAGE>
ARTICLE VIII. DIVIDENDS
The board of directors may, from time to time, declare and the Corporation
may pay dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of these Bylaws or under the provisions
of the Articles of Incorporation or under the provisions of the Idaho Business
Corporation Act, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE XI. INDEMNIFICATION
The Corporation shall, to the maximum extent permitted by the Code, have
the power to indemnify each of its agents against expenses, judgements, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that any such person is or was
an agent of the Corporation. For the purposes of this Section, an "agent" of the
Corporation includes any person who is or was a director, officer, employee or
other agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a corporation which was a predecessor corporation
of the Corporation or of another enterprise at the request of such predecessor
corporation.
ARTICLE XII. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the board of directors or by the shareholders at any regular or
special meeting.
ARTICLE XIII. EXECUTIVE COMMITTEE
Section 1. Appointment. The board of directors by resolution adopted by
a majority of the full board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee and except also
that the executive committee shall not have the authority of the board of
directors in reference to amending the Articles of Incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease or other disposition of all or substantially all of the property and
assets of the Corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof, or amending the Bylaws of the Corporation.
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<PAGE>
Section 3. Tenure and Qualifications. Each member of the executive
committee shall hold office until the next regular annual meeting of the board
of directors following his resignation and until his successor is designated as
a member of the executive committee and is elected and qualified.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice to such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one day's notice stating
the place, date and hour of the meeting, which notice may be written or oral,
and if mailed, shall be deemed to be delivered when deposited in the United
States mail addressed to the member of the executive committee at his business
address. Any member of the executive committee may waive notice of any meeting
and no notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not state the
business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting thereof
and action of the executive committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted to
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the Corporation, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings.
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Exhibit No. 4(a)(7)
THIS SEVENTH SUPPLEMENTAL INDENTURE, dated as of August 13, 1998, is
entered into by and among ICF KAISER INTERNATIONAL, INC., a Delaware corporation
(the "Company"), THE BANK OF NEW YORK, a New York banking corporation (the
"Trustee"), the following existing GUARANTORS:
Cygna Consulting Engineers and Project Management, Inc., a Delaware
corporation ("Cygna");
ICF Kaiser Government Programs, Inc., a Delaware corporation ("ICFK-GP");
Systems Applications International, Inc., a Delaware corporation "(SAI")
EDA, Incorporated, a Maryland corporation ("EDA");
Global Trade & Investment, Inc., a Delaware corporation ("Global");
ICF Kaiser Europe, Inc., a Delaware corporation ("ICFK Europe");
ICF Kaiser / Georgia Wilson, Inc., a Delaware corporation ("ICFK/GW");
ICF Kaiser Overseas Engineering, Inc., a Delaware corporation ("ICFK
Overseas");
ICF Kaiser Engineers Pacific, Inc., a Delaware corporation ("ICFK
Pacific"); and
ICF Kaiser Remediation Company, a Delaware corporation ("Remcon")
and the following new GUARANTOR:
ICF Kaiser Advanced Technology, Inc., an Idaho Corporation ("Advanced
Tech").
WITNESSETH:
WHEREAS, the new Guarantor is an indirect Wholly Owned Restricted
Subsidiary of the Company;
WHEREAS, on December 3, 1997, the Company entered into an Amended and
Restated Credit Agreement with First Union Capital Markets, a division of Wheat
First Securities, Inc. ("First Union"), as Agent, the banking institutions named
therein (the "Banks"), and certain subsidiaries of the Company named therein
(the "Subsidiary Guarantors"), as a successor Bank Credit Agreement;
WHEREAS, as a condition to the Company's being permitted to include the
Accounts Receivable of the new Guarantor in the Borrowing Base as defined in and
provided for under the Bank Credit Agreement, the new Guarantor must become a
Subsidiary Guarantor under the Bank Credit Agreement;
WHEREAS, Advance Tech has determined that it is desirable to become
Subsidiary Guarantor under the Bank Credit Agreement;
WHEREAS, the Company and the Trustee have heretofore executed and delivered
an Indenture dated as of January 11, 1994 (the "Indenture"), for the purpose of
issuing $125,000,000 of 12% Senior Subordinated Notes due 2003, (the "Notes"),
and Section 10.01 of the Indenture provides that the Company (when authorized by
a Board Resolution) and the Trustee for the Notes, at any time and from time to
time, may enter into one or more indentures supplemental thereto, in form
satisfactory to such Trustee, for any of the purposes set forth in said Section
10.01 (each a "Supplemental Indenture");
WHEREAS, Section 5.11 of the Indenture requires that, prior to or
concurrently with the new Guarantor becoming a Subsidiary Guarantor under the
Bank Credit Agreement, the Company must cause the new Guarantor to execute and
deliver to the Trustee a Supplemental Indenture and a Indenture Guarantee
(substantially in the form attached as Exhibit G to the Indenture) pursuant to
which the new Guarantor will unconditionally guarantee the payment of principal
of, premium, if any, and interest on the Notes;
<PAGE>
WHEREAS, ICFK-GP, Cygna, and SAI became Subsidiary Guarantors under the Bank
Credit Agreement in 1996;
WHEREAS, EDA, Global, ICFK Europe, ICFK/GW, ICFK Overseas, ICFK Pacific, and
Remcon, became Subsidiary Guarantors under the Bank Credit Agreement in 1997;
WHEREAS, Advanced Tech will become a Subsidiary Guarantor under the Bank
Credit Agreement on August 13, 1998, and has determined that it is desirable
simultaneously or concurrently to become a new Guarantor under the Indenture;
WHEREAS, the execution and delivery of this Seventh Supplemental Indenture has
been duly authorized by the Finance Committee of the Board of Directors of the
Company on August 13, 1998;
WHEREAS, the execution and delivery of this Seventh Supplemental Indenture and
the Indenture Guarantee has been duly authorized by the Board of Directors of
the new Guarantor as of August 12, 1998;
WHEREAS, the Company and the Guarantors have determined that it is desirable
to enter into this Seventh Supplemental Indenture and have requested the Trustee
to join with them in the execution of this Seventh Supplemental Indenture; and
WHEREAS, the Trustee has accepted the trusts created by this Seventh
Supplemental Indenture and in evidence thereof has joined in the execution
hereof;
NOW, THEREFORE, THIS SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH, that, in
consideration of the premises and of acceptance by the Trustee of the trusts
created hereby and by the Indenture, and also for and in consideration of the
sum of One Dollar to the Company duly paid by the Trustee at or before the
execution and delivery of this Supplemental Indenture, the receipt of which is
hereby acknowledged, IT IS HEREBY COVENANTED AND AGREED, by and among the
Company, the existing and new Guarantors, and the Trustee, as follows:
1. Terms defined in the Indenture are used herein as therein defined.
2. Advanced Tech hereby acknowledges its execution and delivery of an
Indenture Guarantee dated as of August 13, 1998, in the form authorized by and
attached as Exhibit G to the Indenture.
3. The following sundry provisions shall be a part of this Seventh
Supplemental Indenture:
Section 4.01. Effect of Supplemental Indenture. Upon the execution and
delivery of this Seventh Supplemental Indenture by the Company and the Trustee,
the Indenture shall be supplemented in accordance herewith, and this Seventh
Supplemental Indenture shall form a part of the Indenture for all purposes, and
every Holder of Notes heretofore or hereafter authenticated and delivered under
the Indenture shall be bound thereby.
Section 4.02. Indenture Remains in Full Force and Effect. Except as
supplemented hereby and by the First Supplemental Indenture, all provisions in
the Indenture shall remain in full force and effect.
Section 4.03. Indenture and Supplemental Indentures Construed Together. This
Seventh Supplemental Indenture is an Indenture supplemental to and in
implementation of the Indenture, and the Indenture and all Supplemental
Indentures shall henceforth be read and construed together.
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<PAGE>
Section 4.04. Confirmation and Preservation of Indenture. The Indenture as
supplemented by the First through Sixth Supplemental Indentures is in all
respects confirmed and preserved.
Section 4.05 Conflict with Trust Indenture Act. If any provision of this
Seventh Supplemental Indenture limits, qualifies, or conflicts with any
provision of the Trust Indenture Act that is required under such Act to be part
of and govern any provision of this Seventh Supplemental Indenture, the
provision of such Act shall control. If any provision of this Seventh
Supplemental Indenture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the provision of such Act shall be
deemed to apply to the Indenture as so modified or to be excluded by this
Seventh Supplemental Indenture, as the case may be.
Section 4.06 Separability Clause. In case any provision in this Seventh
Supplemental Indenture shall be invalid, illegal, or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 4.07 Terms Defined in the Indenture. All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.
Section 4.08 Effect of Headings. The Article and Section headings herein are
for convenience only and shall not affect the construction hereof.
Section 4.09 Benefits of Seventh Supplemental Indenture, etc. Nothing in
this Seventh Supplemental Indenture, the Indenture, or the Notes, express or
implied, shall give to any Person, other than the parties hereto and thereto and
their successors hereunder and thereunder and the Holders of the Notes, any
benefit of any legal or equitable right, remedy, or claim under the Indenture,
the First through Seventh Supplemental Indentures, or the Notes.
Section 4.10 Successors and Assigns. All covenants and agreements in this
Seventh Supplemental Indenture by the Company and the Guarantors shall bind
their successors and assigns, whether so expressed or not.
Section 4.11 Trustee Not Responsible for Recitals. The recitals contained
herein shall be taken as the statements of the Company and the Guarantors, and
the Trustee assumes no responsibility for their correctness.
Section 4.12 Certain Duties and Responsibilities of the Trustee. In entering
into this Seventh Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
Section 4.13 Governing Law. This Seventh Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law principles thereof.
Section 4.14 Counterparts. This Seventh Supplemental Indenture may be
executed in counterparts, each of which, when so executed, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental
Indenture to be duly executed, and the Company, the existing and new Guarantors,
and the Trustee have caused their respective corporate seals to be hereunto
affixed and attested, all as of August 13, 1998.
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<PAGE>
Exhibit No. 4(g)(2)
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of August 13, 1998, is entered
into by and among ICF KAISER INTERNATIONAL, INC., a Delaware corporation (the
"Company"), THE BANK OF NEW YORK, a New York banking corporation (the
"Trustee"), the following existing GUARANTORS:
Cygna Consulting Engineers and Project Management, Inc., a Delaware
corporation ("Cygna");
ICF Kaiser Government Programs, Inc., a Delaware corporation ("ICFK-GP");
Systems Applications International, Inc., a Delaware corporation "(SAI")
EDA, Incorporated, a Maryland corporation ("EDA");
Global Trade & Investment, Inc., a Delaware corporation ("Global");
ICF Kaiser Europe, Inc., a Delaware corporation ("ICFK Europe");
ICF Kaiser / Georgia Wilson, Inc., a Delaware corporation ("ICFK/GW");
ICF Kaiser Overseas Engineering, Inc., a Delaware corporation ("ICFK
Overseas");
ICF Kaiser Engineers Pacific, Inc., a Delaware corporation ("ICFK
Pacific"); and
ICF Kaiser Remediation Company, a Delaware corporation ("Remcon")
and the following new GUARANTOR:
ICF Kaiser Advanced Technology, Inc., an Idaho Corporation ("Advanced
Tech").
WITNESSETH:
WHEREAS, the new Guarantor is an indirect Wholly Owned Restricted
Subsidiary of the Company;
WHEREAS, on December 3, 1997, the Company entered into an Amended and
Restated Credit Agreement with First Union Capital Markets, a division of Wheat
First Securities, Inc. ("First Union"), as Agent, the banking institutions named
therein (the "Banks"), and certain subsidiaries of the Company named therein
(the "Subsidiary Guarantors"), as a successor Bank Credit Agreement;
WHEREAS, as a condition to the Company's being permitted to include the
Accounts Receivable of the new Guarantor in the Borrowing Base as defined in and
provided for under the Bank Credit Agreement, the new Guarantor must become a
Subsidiary Guarantor under the Bank Credit Agreement;
WHEREAS, Advance Tech has determined that it is desirable to become
Subsidiary Guarantor under the Bank Credit Agreement;
WHEREAS, the Company and the Trustee have heretofore executed and delivered
an Indenture dated as of December 23, 1996 (the "Indenture"), for the purpose of
issuing $15,000,000 of 12% Senior Notes due 2003, Series B (the "Notes"), and
Section 10.01 of the Indenture provides that the Company (when authorized by a
Board Resolution) and the Trustee for the Notes, at any time and from time to
time, may enter into one or more indentures supplemental thereto, in form
satisfactory to such Trustee, for any of the purposes set forth in said Section
10.01 (each a "Supplemental Indenture");
WHEREAS, Section 5.11 of the Indenture requires that, prior to or
concurrently with the new Guarantor becoming a Subsidiary Guarantor under the
Bank Credit Agreement, the Company must cause the new Guarantor to execute and
deliver to the Trustee a Supplemental Indenture and a Indenture Guarantee
(substantially in the form attached as Exhibit G to the Indenture) pursuant to
which the new Guarantor will unconditionally guarantee the payment of principal
of, premium, if any, and interest on the Notes;
<PAGE>
WHEREAS, ICFK-GP became a Subsidiary Guarantor of the Bank Credit Agreement on
May 6, 1996, and was a Guarantor of the Indenture at the time the Notes were
issued;
WHEREAS, Cygna and SAI became Subsidiary Guarantors under the Bank Credit
Agreement on June 24, 1996, and were Guarantors of the Indenture at the time the
Notes were issued;
WHEREAS, EDA, Global, ICFK Europe, ICFK/GW, ICFK Overseas, ICFK Pacific, and
Remcon, became Subsidiary Guarantors under the Bank Credit Agreement on December
3, 1997;
WHEREAS, Advanced Tech will become a Subsidiary Guarantor under the Bank
Credit Agreement on August 13, 1998, and has determined that it is desirable
simultaneously or concurrently to become a new Guarantor under the Indenture;
WHEREAS, the execution and delivery of this Second Supplemental Indenture has
been duly authorized by the Finance Committee of the Board of Directors of the
Company on August 13, 1998;
WHEREAS, the execution and delivery of this Second Supplemental Indenture and
the Indenture Guarantee has been duly authorized by the Board of Directors of
the new Guarantor as of August 12, 1998;
WHEREAS, the Company and the Guarantors have determined that it is desirable
to enter into this Second Supplemental Indenture and have requested the Trustee
to join with them in the execution of this Second Supplemental Indenture; and
WHEREAS, the Trustee has accepted the trusts created by this Second
Supplemental Indenture and in evidence thereof has joined in the execution
hereof;
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH, that, in
consideration of the premises and of acceptance by the Trustee of the trusts
created hereby and by the Indenture, and also for and in consideration of the
sum of One Dollar to the Company duly paid by the Trustee at or before the
execution and delivery of this Second Supplemental Indenture, the receipt of
which is hereby acknowledged, IT IS HEREBY COVENANTED AND AGREED, by and among
the Company, the existing and new Guarantors, and the Trustee, as follows:
1. Terms defined in the Indenture are used herein as therein defined.
2. Advanced Tech hereby acknowledges its execution and delivery of an
Indenture Guarantee dated as of August 13, 1998, in the form authorized by and
attached as Exhibit G to the Indenture.
3. The following sundry provisions shall be a part of this Second
Supplemental Indenture:
Section 4.01. Effect of Supplemental Indenture. Upon the execution and
delivery of this Second Supplemental Indenture by the Company and the Trustee,
the Indenture shall be supplemented in accordance herewith, and this Second
Supplemental Indenture shall form a part of the Indenture for all purposes, and
every Holder of Notes heretofore or hereafter authenticated and delivered under
the Indenture shall be bound thereby.
Section 4.02. Indenture Remains in Full Force and Effect. Except as
supplemented hereby and by the First Supplemental Indenture, all provisions in
the Indenture shall remain in full force and effect.
Section 4.03. Indenture and Supplemental Indentures Construed Together. This
Second Supplemental Indenture is an Indenture supplemental to and in
implementation of the Indenture, and the Indenture and all Supplemental
Indentures shall henceforth be read and construed together.
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<PAGE>
Section 4.04. Confirmation and Preservation of Indenture. The Indenture as
supplemented by the First and Second Supplemental Indentures is in all respects
confirmed and preserved.
Section 4.05 Conflict with Trust Indenture Act. If any provision of this
Second Supplemental Indenture limits, qualifies, or conflicts with any provision
of the Trust Indenture Act that is required under such Act to be part of and
govern any provision of this Second Supplemental Indenture, the provision of
such Act shall control. If any provision of this Second Supplemental Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the provision of such Act shall be deemed to apply to the
Indenture as so modified or to be excluded by this Second Supplemental
Indenture, as the case may be.
Section 4.06 Separability Clause. In case any provision in this Second
Supplemental Indenture shall be invalid, illegal, or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 4.07 Terms Defined in the Indenture. All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.
Section 4.08 Effect of Headings. The Article and Section headings herein are
for convenience only and shall not affect the construction hereof.
Section 4.09 Benefits of Second Supplemental Indenture, etc. Nothing in this
Second Supplemental Indenture, the Indenture, or the Notes, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of the Notes, any benefit of
any legal or equitable right, remedy, or claim under the Indenture, the First
and Second Supplemental Indentures, or the Notes.
Section 4.10 Successors and Assigns. All covenants and agreements in this
Second Supplemental Indenture by the Company and the Guarantors shall bind their
successors and assigns, whether so expressed or not.
Section 4.11 Trustee Not Responsible for Recitals. The recitals contained
herein shall be taken as the statements of the Company and the Guarantors, and
the Trustee assumes no responsibility for their correctness.
Section 4.12 Certain Duties and Responsibilities of the Trustee. In entering
into this Second Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
Section 4.13 Governing Law. This Second Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law principles thereof.
Section 4.14 Counterparts. This Second Supplemental Indenture may be
executed in counterparts, each of which, when so executed, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed, and the Company, the existing and new Guarantors,
and the Trustee have caused their respective corporate seals to be hereunto
affixed and attested, all as of August 13, 1998.
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<PAGE>
EXHIBIT No. 10(00)
Employment Agreement
THIS AGREEMENT is made as of the 27th day of August, 1998, by and between
ICF Kaiser International, Inc., a Delaware corporation (the "Corporation"), and
Keith M. Price, presently a resident of Boise, Idaho (the "Executive").
WHEREAS, the Corporation desires to employ the Executive, and the Executive
desires to become an employee of the Corporation, on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, the Corporation and the
Executive agree as follows:
1. Employment Duties.
(a) Employment and Employment Period. The Corporation shall employ
the Executive to serve as President and Chief Operating Officer of ICF Kaiser
International, Inc., as set forth below for a continuous period of one (1) year
commencing August 5, 1998 (the "Employment Period"). The Employment Period may
be extended by mutual agreement of the parties.
(b) Offices, Duties and Responsibilities. As soon as the Executive
commences employment with the Corporation, he shall be elected President and
Chief Operating Officer of ICF Kaiser International, Inc. The Executive shall
report to the Chairman and Chief Executive Officer of the Corporation and shall
be a member of all senior management groups of the Corporation. The Executive
will have full authority over all line operations including business
development, marketing, sales organizational structure and strategy. The
Executive's offices shall be located at the Corporation's headquarters building
in Fairfax, Virginia.
(c) Devotion to Interests of the Corporation. Except as expressly
authorized by the Corporation's Board of Directors, until the effective date of
notice of termination of this Agreement by either the Executive or the
Corporation, with or without cause, the Executive shall render his business
services solely in the performance of his duties hereunder. The Executive shall
use his best efforts to promote the interests and welfare of the Corporation.
(d) Service as a Director of the Corporation. Executive is currently
serving as a director of the Corporation with a term ending at the Annual
Meeting of Shareholders in the year 2001 and until his successor is duly
elected. As soon as Executive commences employment with the Corporation, he
shall no longer be compensated as a non-employee director for his continuing
service as a director of the Corporation.
2. Compensation and Fringe Benefits.
(a) Base Compensation. The Corporation shall pay the Executive a base
salary at the rate of $375,000 per year through August 4, 1999, in installments
in accordance with the Corporation's regular practice for compensating executive
personnel. The amount of the Executive's base compensation on and after August
4, 1999 shall be subject to adjustment as recommended by the Compensation
Committee of the Corporation's Board of Directors ("Compensation Committee"),
but any adjustment shall not be less than the rate of $375,000 per year.
(b) Bonus Compensation. The Executive shall be paid a signing bonus
of $100,000, which shall be deemed earned and vested, $50,000 of which will be
paid upon commencement of employment (payable with Executive's first paycheck)
for calendar year 1998 and the other $50,000 of which will be paid on January 1,
1999. In addition, Executive shall be provided a bonus opportunity of not less
than fifty percent (50%) of the Executive's base salary based on the performance
of the Corporation for the period of August 5, 1998 to August 4,
<PAGE>
1999. The terms of such bonus opportunity shall be set by the Compensation
Committee within sixty (60) days after the Executive commences employment with
the Corporation.
(c) Fringe Benefits. The Executive shall be entitled to such fringe
benefits during the term of his employment as are generally made available by
the Corporation to executive personnel. Such benefits shall include
participation in the Corporation's defined contribution retirement plan, 401 (k)
Plan, and health, term life and disability insurance programs. The Executive
shall also be reimbursed for reasonable expenses incurred in connection with
travel and entertainment related to the Corporation's business and affairs and
will be paid by the Corporation in a manner consistent with past practice and as
amended by any subsequent changes of Corporate Policy.
3. Stock Options. Within thirty (30) days after the Executive commences
employment with the Corporation, the Corporation shall grant to the Executive
incentive stock options and non-qualified options under the Company's Stock
Incentive Plan to purchase an aggregate of 150,000 shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), at a purchase price
equal to the average of the closing prices of the Common Stock on the New York
Stock Exchange on each of the twenty (20) days ending the day immediately
preceding the date of such grant. Such options shall consist of non-qualified
options only to the extent required under the Corporation's Stock Incentive
Plan, or as required by law. In addition to the customary terms, such Options
will be subject to the following provisions:
(a) Option Term. The options expire three (3) years from the date of
grant.
(b) Vesting. Fifty percent (50%) of the options shall vest on
February 5, 1999, and fifty percent (50%) shall vest on August 4, 1999.
(c) Exercise. Subject to applicable securities laws and regulations,
all vested options are exercisable at any time prior to expiration of their
exercise period.
4. Payment of Certain Expenses.
(a) Payment of Temporary Living Expenses. In connection with the
Executive's temporary stay in the Washington, DC area for a period of up to one
(1) year and pending the relocation of his household from the Boise, Idaho area
to the Washington, DC area, he will be reimbursed for the following costs and
expenses, provided, in each case, that such costs are reasonable and
documentation is provided:
(i) The cost of travel (up to two [2] round trips per month)
between Boise, Idaho and the Washington, DC area incurred by the Executive or
Georganne Price; and
(ii) Furnished, short-term housing expenses for the Executive
in the Washington, DC area; and
(iii) All cost of moving the Executive's family and household
goods from the Boise, Idaho area to the Washington, DC area; and
(iv) The costs or otherwise make arrangements for an
appropriate standard rental car provided in Fairfax, Virginia.
(b) Payment of Other Expenses.
(i) The Corporation shall pay Executive the costs of legal
expenses related to the negotiation and execution of this Agreement; and
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<PAGE>
(c) Gross-up of Expenses. The Temporary Living Expenses reimbursements
set forth in subsection (a) above shall, to the extent appropriate, be "grossed
up." For this purpose, "grossed-up" means in case of a reimbursed expense that
is taxable to the Executive and is not deductible for Federal income tax
purposes, that the Executive will be paid an amount which, after Federal income
taxes on such amount, will equal the amount of the non-deductible reimbursable
expense.
5. Trade Secrets. The Executive shall not use or disclose any of the
Corporation's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, and other information of a similar nature to
the extent not available to the public, and plans for future development. After
termination of this Agreement, the Executive shall not use or disclose trade
secrets or other confidential information unless such information becomes a part
of the public domain other than through a breach of this Agreement or is
disclosed to the Executive by a third party who is entitled to receive and
disclose such information.
6. Return of Documents and Property. Upon the effective date of notice of
the Executive's or the Corporation's election to terminate this Agreement, or at
any time upon the request of the Corporation, the Executive (or his heirs or
personal representatives) shall deliver to the Corporation (a) all documents and
materials containing trade secrets or other confidential information relating to
the Corporation's business and affairs, and (b) all documents, materials and
other property belonging to the Corporation, which in either case are in the
possession or under the control of the Executive (or his heirs or personal
representatives).
7. Discoveries and Works. All discoveries and works made or conceived by
the Executive during his employment by the Corporation, jointly or with others,
that relate to the Corporation's activities shall be owned by the Corporation.
The term "discoveries and works" includes, by way of example, inventions,
computer programs (including documentation of such programs), technical
improvements, processes, drawings and works of authorship. The Executive shall
(a) promptly notify, make full disclosure to, and execute and deliver any
documents requested by, the Corporation to evidence or better assure title to
such discoveries and works in the Corporation, (b) assist the Corporation in
obtaining or maintaining for itself at its own expense United States and foreign
patents, copyrights, trade secret protection or other protection of any and all
such discoveries and works, and (c) promptly execute, whether during Executive's
employment by the Corporation or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
the Corporation and to protect its title thereto. Any discoveries and works
which, within six months after the termination of the Executive's employment by
the Corporation, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Executive and which pertain to
the business carried on or products or services being sold or developed by the
Corporation at the time of such termination shall, as between the Executive and
the Corporation, be presumed to have been made during the Executive's employment
by the Corporation. Set forth on Schedule 7 attached hereto is a list of
inventions, patented or unpatented, including a brief description thereof, which
are owned by the Executive, which the Executive conceived or made prior to
Executive's employment by the Corporation and which are excluded from this
Agreement.
8. Termination.
(a) Either the Corporation or the Executive can terminate this
Agreement, with or without "cause," upon thirty (30) days' prior written notice.
(b) In the event the Corporation elects to terminate this Agreement
without "cause", or the Executive elects to terminate this Agreement for "good
reason", subject to the provisions of Section 9, the
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<PAGE>
Corporation shall pay to the Executive, in addition to any amounts paid or
payable under other provisions of this Agreement or any other agreements between
the Corporation and the Executive, a severance payment equal to the balance of
the base compensation for the Employment Period. Such severance will be paid in
cash (with deduction of such amount as may be required to be withheld under
applicable law and regulations) within ten (10) working days of termination. In
such event, all unvested options will vest in full on the effective date of
termination and all options may be exercised any time within the term set forth
in Section3(a). All other compensation and benefits provided for in this
Agreement shall cease upon such termination to the extent allowable by law.
(c) For purposes of this Agreement, the Executive shall be considered
to have "good reason" to terminate this Agreement if (i) without his express
written consent, the liabilities of the Executive are substantially reduced
(except in connection with the termination of his employment voluntarily by the
Executive, by the Company for "cause", or under the circumstances described in
Section 9 hereof), or (ii) a majority of the Board of Directors of the Company
is not comprised of "Continuing Directors," where a "Continuing Director" of the
Company as of any date means a member of the Board of Directors of the Company
who (x) was a member of the Board of Directors of the Company on the effective
date of this Agreement or (y) was nominated for election or elected to the Board
of Directors of the Company with the a vote of at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election.
(d) In the event the Corporation terminates this Agreement for "cause"
or the Executive terminates this Agreement without "good reason", the
Executive's rights hereunder shall cease as of the effective date of such
termination, except as otherwise provided herein. In such event, all unvested
options shall be terminated and all vested options may be exercised anytime
within the term set forth in Section 3(a). For purposes of this Agreement, the
Corporation shall have "cause" to terminate the Executive's employment
hereunder upon (i) the continued, wilful and deliberate failure of the
Executive to perform his duties, in a manner substantially consistent with the
manner prescribed by the Board of Directors or the Chief Executive Officer of
the Corporation (other than any such failure resulting from his incapacity due
to physical or mental illness), (ii) the engaging by the Executive in
misconduct materially and demonstrably injurious to the Corporation, (iii) the
conviction of the Executive of commission of a felony, whether or not such
felony was committed in connection with the Corporation's business, or (iv) the
circumstances described in Section 9 hereof, in which case the provisions of
Section 9 shall govern the rights and obligations of the parties.
9. Disability; Death.
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar
months, the Corporation shall have the right to terminate this Agreement by
giving written notice to the Executive to that effect, but only if at the time
such notice is given such disability or impairment is still continuing. After
giving such notice, the Employment Period shall terminate with the payment of
the Executive's base compensation for the month in which notice is given. All
other compensation and benefits provided for in this Agreement shall cease upon
such termination to the extent allowable by law.
(b) In the event of a dispute as to whether the Executive is disabled
within the meaning of this Section 9, either party may from time to time
request a medical examination of the Executive by a doctor appointed by the
Chief of Staff of a hospital selected by mutual agreement of the parties, or as
the parties may otherwise agree, and the written medical opinion of such doctor
shall be conclusive and binding upon the parties as to whether the Executive
has become disabled and the date when such disability arose. The cost of any
such medical examinations shall be borne by the Corporation.
(c) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, the Corporation shall pay to the Executive's
estate his base compensation through the end of the month in
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<PAGE>
which the Executive's death occurred, at which time the Employment Period shall
terminate without further notice and the Corporation shall have no further
obligations hereunder.
(d) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of the Corporation which may be adopted by the Board of Directors
of the Corporation.
10. Non-Competition.
(a) Except as provided in paragraph (d) below, the Executive agrees
that for a period commencing as of the date of employment of the Executive by
the Corporation and running through the earlier of (i) the end of the
Employment Period if the Executive remains employed by the Corporation for the
entire Employment Period or (ii) one year following termination of the
Executive's employment by the Corporation for any reason, whether by action of
the Executive or the Corporation (the "Non-Competition Period"), the Executive
will not, except as otherwise provided herein, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant,
stockholder, partner or in any other individual capacity whatsoever, in the
conduct of, planning for, or management of, or own any stock or any other
equity investment in or debt of, any business which is directly in competition
with any business conducted by the Corporation.
For the purpose of this Agreement, a business shall be considered to
be directly in competition with the business of the Corporation only if such
business is engaged in providing services (i) similar to (x) any service
currently provided by the Corporation or provided by the Corporation during the
Employment Period; (y) any service in the ordinary course during the Non-
Competition Period which evolves from or results from enhancements to the
services provided by the Corporation as of the Effective Date hereof or during
the Non-Competition period; or (z) any future service of the Corporation as to
which the Executive materially and substantially participated in the design or
enhancement, and (ii) to customers and clients of the type served by the
Corporation during the Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition Period,
the Executive will not (for Executive's own benefit or for the benefit of any
person or entity other than the Corporation) solicit, or assist any person or
entity other than the Corporation to solicit, any officer, director, executive
or employee of the Corporation or its affiliates to leave his or her employment.
(c) Reasonableness. Executive acknowledges that (i) the markets
served by the Corporation are national and international and are not dependent
on the geographic location of executive personnel or the businesses by which
they are employed, (ii) the length of the Non-Competition Period is related to
the length of the Employment Period and the Corporation's agreement to provide
severance benefits as set forth in Section 8(b); and (iii) the above covenants
are manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of the Corporation.
(d) Investments. Nothing in this Agreement shall be deemed to
prohibit Executive from owning equity or debt investments in any corporation,
partnership or other entity which is competitive with the Corporation, provided
that such investments (i) are passive investments and constitute five percent
(5%) or less of the outstanding equity securities of such an entity the equity
securities of which are traded on a national securities exchange of other public
market, or (ii) are approved by the Corporation.
11. Enforcement. The Executive agrees that the Corporation's remedies
at law for any breach or threat of breach by him of the provisions of Sections
5, 6, 7, and 10 hereof will be inadequate, and that the Corporation shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of Sections 5, 6,
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<PAGE>
7, and 10 hereof and to enforce specifically the terms and provisions thereof,
in addition to any other remedy to which the Corporation may be entitled at law
or equity.
12. Severability. Should any provision of this Agreement be determined
to be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
13. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. The Corporation's rights
and obligations under this Agreement shall not be assignable by the Corporation
except as incident to the transfer, by merger or otherwise, of all or
substantially all of the business of the Corporation. In the event of any such
assignment by the Corporation, all rights of the Corporation hereunder shall
inure to the benefit of the assignee.
14. Notices. Any notice required or permitted under this Agreement shall
be deemed to have been effectively made or given if in writing and personally
delivered or mailed properly addressed in a sealed envelope, postage prepaid by
certified or registered mail. Unless otherwise changed by notice, notice shall
be properly addressed to Executive if addressed to:
Keith M. Price Keith Price
4750 River Vista Place c/o ICF Kaiser International, Inc,
Boise, Idaho 83703 9300 Lee Highway
Fairfax, VA 22031-1207
and properly addressed to the Corporation if addressed to:
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22031-1207
Attn: General Counsel
15. Miscellaneous. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. The validity, interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the Commonwealth of Virginia. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
/s/ ICF KAISER INTERNATIONAL
KEITH M. PRICE, Executive
By _________/s/_____________
James O. Edwards
Chairman and Chief Executive Officer
Page 6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,227,000
<SECURITIES> 0
<RECEIVABLES> 312,517,000
<ALLOWANCES> 18,139,000
<INVENTORY> 0
<CURRENT-ASSETS> 340,816,000
<PP&E> 50,263,000
<DEPRECIATION> 39,125,000
<TOTAL-ASSETS> 425,075,000
<CURRENT-LIABILITIES> 291,442,000
<BONDS> 157,866,000<F1>
0
0
<COMMON> 244,000
<OTHER-SE> (36,638,000)
<TOTAL-LIABILITY-AND-EQUITY> 425,075,000
<SALES> 0
<TOTAL-REVENUES> 909,796,000<F2>
<CGS> 0
<TOTAL-COSTS> 865,812,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 58,711,000
<INTEREST-EXPENSE> 14,901,000
<INCOME-PRETAX> (72,666,000)
<INCOME-TAX> (11,029,000)
<INCOME-CONTINUING> (61,637,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 6,000,000
<NET-INCOME> (73,514,000)
<EPS-PRIMARY> (3.05)
<EPS-DILUTED> (3.05)
<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 reinbursable direct project costs, such
as materials procured by the Company on behalf of its customers.
</FN>
</TABLE>
