<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 March 31, 1999 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 May 11, 1999, there were 24,833,890 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 -
March 31, 1999 and December 31, 1998.......................... 3
Consolidated Statements of Operations and Comprehensive
Income (Loss)-
Three Months Ended March 31, 1999 and 1998.................... 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998.................... 5
Notes to Consolidated Financial Statements.................... 6-16
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 17-26
Item 3 Quantitative and Qualitative Disclosures About Market Risk.... 26
Part 11 - Other Information
Item 1. Legal Proceedings............................................. 26
Item 2. Changes in Securities and Use of Proceeds..................... 26
Item 3. Defaults Upon Senior Securities............................... 26
Item 4. Submission of Matters to a Vote of Security Holders........... 26
Item 5. Other Information............................................. 26
Item 6. Exhibits and Reports on Form 8-K.............................. 26-27
</TABLE>
2
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except shares)
<TABLE>
<CAPTION>
======================================================================================================================
March 31, December 31,
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
(Uaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 14,282 $ 15,248
Contract receivables, net 214,312 234,320
Prepaid expenses and other current assets 13,831 11,918
Deferred income taxes 34,205 34,673
Net assets of discontinued operations 66,458 65,862
--------- --------
Total Current Assets 343,088 362,021
--------- --------
Fixed Assets
Furniture, equipment, and leaseholds 17,498 17,970
Less depreciation and amortization (13,184) (13,665)
--------- --------
4,314 4,305
--------- --------
Other Assets
Goodwill, net 22,967 23,323
Investments in and advances to affiliates 7,708 7,571
Capitalized software development costs 1,533 1,618
Other 12,119 12,745
--------- --------
44,327 45,257
--------- --------
Total Assets $ 391,729 $ 411,583
========= ========
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
Debt currently payable $ 36,876 $ 30,729
Accounts payable 168,036 179,451
Accrued salaries and benefits 31,231 31,141
Other accrued expenses 59,162 46,865
Deferred revenue 13,037 36,847
Income taxes payable 2,422 2,147
--------- --------
Total Current Liabilities 310,764 327,180
Long-term Liabilities
Long-term debt 137,610 137,488
Other 8,704 9,584
--------- --------
Total Liabilities 457,078 474,252
--------- --------
Commitments and Contingencies
Minority Interest 2,582 449
Shareholders' Equity (Deficit)
Preferred stock - -
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 23,790,995 and 24,257,828 shares 238 242
Additional paid-in capital 75,218 75,422
Notes receivable collateralized by common stock - (638)
Accumulated deficit (140,476) (134,757)
Accumulated other comprehensive income (loss) (2,911) (3,387)
--------- --------
Total Shareholders' Equity (Deficit) (67,931) (63,118)
--------- --------
Total Liabilities and Shareholders' Equity (Deficit) $ 391,729 $ 411,583
========= ========
=====================================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Gross Revenue $225,497 $ 256,839
Subcontract and direct material costs (162,858) (183,334)
-------- ---------
Service Revenue 62,639 73,505
Operating Expenses
Direct labor and fringe benefits 48,459 53,465
Group overhead 10,937 11,283
Corporate general and administrative 3,804 3,844
Depreciation and amortization 1,481 1,592
Other unusual charges 895 -
-------- ---------
Operating Income (Loss) (2,937) 3,321
Other Income (Expense)
Interest income 268 466
Interest expense (5,852) (4,821)
Equity in net income of
unconsolidated subsidiaries 1,520 1,027
-------- ---------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest (7,001) (7)
Income tax (benefit) (1,020) (468)
-------- ---------
Income (Loss) From Continuing Operations (5,981) 461
Before Minority Interest
Minority interest in net income of subsidiaries 2,082 2,511
-------- ---------
Income (Loss) Before Discontinued Operations (8,063) (2,050)
Income from discontinued operations (net of tax
of $1,546 and $1,617, respectively) 2,344 2,495
-------- ---------
Net Income (Loss) $ (5,719) $ 445
======== =========
Basic and Fully Diluted Earnings (Loss) Per Share:
Continuing operations $ (0.34) $ (0.08)
Discontinued operations 0.10 0.10
-------- ---------
$ (0.24) $ 0.02
======== =========
Weighted average shares for basic earnings per share 24,068 23,925
Effect of dilutive stock options - 1,571
-------- ---------
Weighted average shares for diluted earnings per share 24,068 25,496
======== =========
Comprehensive Income (Loss)
Net Income (Loss) $ (5,719) $ 445
Other Comprehensive Income (Loss)
Foreign currency translation adjustments 467 554
-------- ---------
Total Comprehensive Income (Loss) $ (5,252) $ 999
========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
-----------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Operating Activities
Net income (loss) $ (5,719) $ 445
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Income from discontinued operations (2,344) (2,495)
Depreciation and amortization 1,481 1,592
Provision (credit) for losses (2,555) 667
Provision for deferred income taxes 468 780
Note receivable write-off 638 -
Earnings in excess of cash distributions from
joint ventures and affiliated companies (137) 539
Minority interest in net income of subsidiaries 2,082 2,511
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Contract receivables, net 19,880 22,936
Prepaid expenses and other current assets (1,653) 2,960
Accounts payable and accrued expenses 11,550 (19,017)
Deferred revenue (23,810) 1,393
Income tax payable 275 158
-------- --------
Net Cash Provided by Operating Activities 156 12,469
-------- --------
Investing Activities
Investments in subsidiaries and affiliates, net of cash acquired - 3,841
Sales of subsidiaries and/or investments - 2,400
Investments in net assets of discontinued operations (596) (2,424)
Purchases of fixed assets (557) (1,033)
-------- --------
Net Cash Provided by (Used in) Investing Activities (1,153) 2,784
-------- --------
Financing Activities
Borrowings under revolving credit facility 57,064 35,000
Principal payments on revolving credit facility (50,942) (34,500)
Change in book overdraft (6,117) 5,988
Distribution of income to minority interest 51 (3,071)
Proceeds from issuances of common stock 38 47
-------- --------
Net Cash Provided by Financing Activities 94 3,464
-------- --------
Effect of Exchange Rate Changes on Cash (63) 74
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (966) 18,791
Cash and Cash Equivalents at Beginning of Period 15,248 20,009
-------- --------
Cash and Cash Equivalents at End of Period $ 14,282 $ 38,800
======== ========
Supplemental cash flow information is as follows:
Cash payments for interest $ - $ 90
Cash payments for income taxes 28 -
Non-cash transactions:
Issuance of common stock - 8,455
Reacquisition of common stock (247) (218)
- --------------------------------------------------------------------------------------------------------------------
</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, 1998 balance
sheet (derived from audited financial statements), 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, 1998 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, 1998. Certain
reclassifications have been made to the prior period financial statements to
conform them to the presentation used in the March 31, 1999 financial
statements.
2. Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of common shares outstanding for the period. The assumed
proceeds from the exercise of dilutive securities are used to purchase 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. The Company's common stock equivalents that would be antidilutive
have been excluded from the fully diluted EPS calculation.
3. Segment Information
The Company uses several segments for internal management reporting purposes.
The segments are compiled based on the similarities in each of their underlying
services, customers, and regulatory environments. The segment operating results
represent all activities that were controllable by the respective segment
business leaders and that had sole direct benefit to the respective segment.
Operating activities that are deemed to benefit more than one segment are not
managed by segment business leaders but are instead managed by the Company's
corporate overhead structure and are not allocated to the segments. The
accounting policies of the operating segments are the same as those described in
the Company's summary of significant accounting policies.
Discontinued Operating Segments: Pursuant to a plan intended to respond to
significant liquidity constraints followed by substantial cost overruns on four
fixed price projects, the Company announced its intention to sell two of its
major operating segments. As of the date of this report, the Company has either
completed or has committed to complete the sales of the two segments. The net
financial position and operating results of the two segments have been presented
in the accompanying financial statements as discontinued operations for the
entire period. All prior period financial information has also been restated to
conform to the current presentation.
. Sale of the Environment and Facilities Management Group (EFM): On April 9,
1999, the Company sold the majority of the active contracts and
investments, and transferred a substantial number of employees of EFM, to
The IT Group, Inc. (IT) for a cash purchase price of $82 million, less $8
million which was retained by IT for EFM's working capital requirements.
EFM contracts that were not sold to IT will be completed by the Company in
the near term. The gain on the sale has not been reflected in the
accompanying financial statements.
. Intent to sell the Consulting Group: On March 8, 1999, the Company signed a
non-binding letter of intent for the sale of its Consulting Group to CM
Equity Partners, L.P. and the Group's management. While final terms of the
sale are being negotiated, the transaction is expected to be completed by
mid-year 1999.
Continuing Business Segments: For purposes of providing segment information, the
Company's continuing business segments are:
. the Engineers and Constructors Group (E&C), which provides engineering and
construction services to commercial and federal, state, and local entities
in the areas of industry, infrastructure, transportation, water, and clean-
room technologies;
6
<PAGE>
. the Kaiser-Hill Company, LLC (Kaiser-Hill), a 50% owned subsidiary, which
performs and manages the Department of Energy's multibillion-dollar
management contract at Rocky Flats. The Company, through a majority
representation on Kaiser-Hill's board of directors, has a controlling
interest in Kaiser-Hill and therefore consolidates Kaiser-Hill's results of
operations with those of its now only other remaining business segment, E&C.
Although the Company has a controlling interest in Kaiser-Hill, as defined by
generally accepted accounting principles, the subsidiary's operations are
primarily directed by its own dedicated management team. Neither the
management of the Company nor the management of the other 50% owner has an
active role in Kaiser-Hill's day-to-day operations.
After the effective discontinuance of the operations discussed above, the
financial information for Kaiser-Hill represents a substantial portion of
many components of the Company's financial statements. Accordingly,
management believes that a separate presentation of Kaiser-Hill's financial
statements is meaningful in interpreting the financial results of the
remaining core E&C operations. See Note 5 for the condensed financial
statements of Kaiser-Hill Company, LLC.
Financial data for the three months ended March 31 for the remaining business
segments are as follows (in thousands):
<TABLE>
<CAPTION>
1999 Kaiser-Hill E&C TOTAL
---- ----------- ----------- ----------
<S> <C> <C> <C>
Gross revenue........................................................ $ 145,103 $ 80,344 $ 225,497
Subcontracts and materials.......................................... (110,341) (52,517) (162,858)
--------- -------- ---------
Service revenue...................................................... 34,762 27,877 62,639
Operating expenses:
Direct labor and fringe............................................. 30,622 17,837 48,459
General and administrative.......................................... -- 10,937 10,937
--------- -------- ---------
Segment income....................................................... $ 4,140 $ (897) 3,243
========= ========
Reconciliation of segment income to operating income (loss) from
continuing operations:
Corporate overhead.................................................. 3,804
Depreciation and amortization....................................... 1,481
Other unusual charges............................................... 895
---------
Operating income (loss) from continuing operations................... $ ( 2,937)
=========
1998
----
Gross revenue........................................................ $ 141,042 $115,797 $ 256,839
Subcontracts and materials.......................................... (105,356) (77,978) (183,334)
--------- -------- ---------
Service revenue...................................................... 35,686 37,819 73,505
Operating expenses:
Direct labor and fringe............................................. 30,686 22,779 53,465
General and administrative.......................................... -- 11,283 11,283
--------- -------- ---------
Segment income....................................................... $ 5,000 $ 3,757 8,757
========= ========
Reconciliation of segment income to operating income from continuing
operations:
Corporate overhead.................................................. 3,844
Depreciation and amortization....................................... 1,592
Other unusual charges............................................... 0
---------
Operating income from continuing operations.......................... $ 3,321
=========
</TABLE>
The levels of corporate overhead reflected in the costs reported above were
incurred by the Company prior to the completion of the sales of the recently
discontinued segments. Subsequent to those sales, corporate overhead as well as
segment overhead will need to be restructured and reduced to levels appropriate
for the Company's remaining core E&C operations.
7
<PAGE>
4. Condensed Financial Information for Kaiser-Hill Company, LLC
Unaudited financial information for the 50%-owned, controlled and consolidated
Kaiser-Hill subsidiary as of March 31, 1999 and December 31, 1998 and for each
of the three months then ended are as follows (see Note 3):
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents.................................................... $ 5,770 $ 3,644
Contract receivables, net.................................................... 125,528 127,163
-------- --------
Total Assets.................................................... 131,298 130,807
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Accounts payable........................................................... 110,944 115,730
Accrued salaries and benefits............................................ 13,779 12,666
-------- --------
Total Liabilities..................................................... 124,723 128,396
Commitments and contingencies
Net Assets................................................................... $ 6,575 $ 2,411
======== ========
INCOME STATEMENTS
-----------------
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
Gross Revenue................................................................ $ 145,103 $ 141,042
Subcontract and direct material costs.................................... (110,341) (105,356)
--------- ---------
Service Revenue.............................................................. 34,762 35,686
Operating Expenses
Direct labor and fringe benefits......................................... 30,622 30,686
--------- ---------
Operating Income Before Income Tax........................................... $ 4,140 $ 5,000
========= =========
Minority's interest in Kaiser-Hill net income................................ $ 2,070 $ 2,500
========= =========
Company's interest in Kaiser-Hill net income................................. $ 2,070 $ 2,500
========= =========
STATEMENTS OF CASH FLOWS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
Operating Activities 1999 1998
----- ----
Net Income................................................................... $ 4,140 $ 5,000
Changes in operating assets and liabilities:
Accounts receivable, net............................................. 1,635 10,195
Accounts payable and accrued expenses................................ (3,673) (6,747)
------- -------
Net cash provided by operating activities................................. 2,102 8,448
------- -------
Financing Activities
Distributions to shareholders........................................... - (3,968)
------- -------
Net cash used in financing activities..................................... - (3,968)
------- -------
Increase in cash and cash equivalents........................................ 2,126 4,556
Cash and cash equivalents at beginning of period............................. 3,644 10,181
------- -------
Cash and cash equivalents at end of period................................... $ 5,746 $14,661
======= =======
</TABLE>
8
<PAGE>
5. Contingencies
Certain Contracts: In March 1998, the Company entered into a $187 million
maximum price contract to construct a shipbuilding facility. The Company
subsequently learned that estimated costs to perform the contract as reflected
in actual proposed subcontracts were approximately $30 million higher than the
cost estimates used as the basis for contract negotiation between the Company
and the customer. 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 against the Company
requesting payment for estimated damages and entitlements pursuant to the
terminated contract. The Company and the customer are currently discussing the
customer's draft claim. No provision for loss for this matter has 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 as
there has not yet been significant activity in the negotiation process.
As a result of uncertainties surrounding the costs to complete certain large
fixed-price contracts, including the Nitric Acid Projects, the Company
established $66.0 million in reserves intended to cover its estimate of the
nitric acid contract cost overruns. 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.
Acquisition Contingency: The ICF Kaiser common shares exchanged for the stock of
ICT Spectrum in the March, 1998 acquisition, carry the guarantee that the fair
market value of each share of stock will reach $5.36 by March 1, 2001. In the
event that 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 with a total value equal to the
shortfall, depending upon the Company's preference. Pursuant to the terms of the
Agreement, however, the total number of contingently issuable shares of common
stock cannot exceed an additional 1.5 million. Given that the quoted fair market
value of the stock at March 31, 1999 was [$0.75] per share, and that the
Company's current debt instruments restrict the amount of cash that can be used
for acquisitions, the assumed issuance of an additional 1.5 million shares would
not completely extinguish the purchase price contingency. The Company therefore
would be required to obtain an amendment to current debt instruments or replace
them in order to complete a cash fill-up. Any future distribution of cash or
common stock would be recorded as a charge to the Company's paid-in-capital.
Until the earlier of the contingent purchase price resolution or March 1, 2001,
any additional shares assumed to be issued because of shortfalls in fair market
value will be included in the Company's diluted earnings per share calculations,
unless they are antidilutive. The exchanged shares also contain restrictions
preventing their sale prior to March 1, 2001.
On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf
of all others similarly situated, filed a class action lawsuit alleging false
and misleading statements made in a private offering memorandum, and otherwise,
in connection with the Company's acquisition of ICT Spectrum in 1998.
Litigation, Claims and Assessments: 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,
adequate reserves have 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.
9
<PAGE>
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. Neither the government nor the
Company, however, has quantified many of the issues, 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 on such
matters ensues.
Contract warranties and performance guarantees: In the course of the Company's
normal business activities, many of its contracts contain provisions for
warranties and performance guarantees. As progress on contracts ensues, the
Company regularly updates the estimates of the costs to perform such
contingencies and reserves a proportionate amount of the total related contract
value until such time as the contingency is resolved.
Discontinued Operations Indemnities: In connection with the sales of the
discontinued operations, the Company has made commitments to indemnify the
buyers of those businesses on certain matters, including, but not limited to
amounts incurred, if any, relating to unfavorable settlements and outcomes from
government audits. The Company intends to provide for estimates of such
contingencies at the time it records the gains from the respective sales.
6. 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) which unconditionally guarantee the
payment of the principal, premium, if any, and interest on the Company's Senior
Subordinated Notes and 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.
ICF Kaiser Remediation Company was included in the sale of the EFM Group to IT
on April 9, 1999 and accordingly will no longer be a guarantor.
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, 1998
condensed consolidating balance sheet, is unaudited.
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.
10
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
March 31, 1999
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
International,
Parent Subsidiary Non-Guarantor Discontinued Inc.
Company Guarantors Subsidiaries Operations Eliminations Consolidated
--------- ---------- -------------- ------------ ------------ ---------------
Unaudited
<S> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 440 $ 5,569 $ 8,292 $ (19) $ - $ 14,282
Contract receivables, net (347) 132,870 135,404 (53,615) - 214,312
Intercompany receivables, net 190,419 12,253 (202,672) - - 0
Prepaid expenses and other current assets 4,050 456 9,326 89 - 13,831
Deferred income taxes 30,096 3,284 825 - - 34,205
Net assets of discontinued operations - - - 66,458 - 66,458
--------- --------- --------- --------- ---------- ---------
Total Current Assets 224,658 154,432 (48,915) 12,913 - 343,088
--------- --------- --------- --------- ---------- ---------
Fixed Assets
Furniture, equipment, and leaseholds 4,891 3,219 35,362 (25,974) - 17,498
Less depreciation and amortization (4,122) (2,963) (29,884) 23,785 - (13,184)
--------- --------- --------- --------- ---------- ---------
769 256 5,478 (2,189) - 4,314
--------- --------- --------- --------- ---------- ---------
Other Assets
Goodwill, net - 8,545 40,031 (25,609) - 22,967
Investment in and advances to affiliates (60,090) 14 12,805 (5,242) 60,221 7,706
Capitalized software development costs 3,968 1,103 (3,538) 1,533
Other 5,238 22 6,960 (101) - 12,119
--------- --------- --------- --------- ---------- ---------
(50,884) 8,581 60,899 (34,490) 60,221 44,327
--------- --------- --------- --------- ---------- ---------
Total Assets $ 174,543 $ 163,269 $ 17,462 $ (23,766) $ 60,221 $ 391,729
========= ========= ========= ========= ========== =========
Liabilities and Shareholders' Equity
Current Liabilities
Debt currently payable $ 36,876 $ - $ - $ - $ - $ 36,876
Accounts payable and other accrued expenses 56,341 116,029 67,965 (13,137) - 227,198
Accrued salaries and employee benefits 4,666 15,291 19,502 (8,228) - 31,231
Other 2,507 895 14,458 (2,401) - 15,459
--------- --------- --------- --------- ---------- ---------
Total Current Liabilities 100,390 132,215 101,925 (23,766) - 310,764
Long-term Liabilities
Long-term debt, less current portion 137,609 - 1 - - 137,610
Other 1,955 26 6,723 - - 8,704
--------- --------- --------- --------- ---------- ---------
Total Liabilities 239,954 132,241 108,649 (23,766) - 457,078
--------- --------- --------- --------- ---------- ---------
Minority Interests in Subsidiaries - 2,582 - - - 2,582
Shareholders' Equity
Common Stock 225 8,179 122 - (8,288) 238
Additional Paid-in Capital 74,996 2,596 58,544 - (60,918) 75,218
Accumulated Earnings (Deficit) (140,632) 17,998 (147,269) - 129,427 (140,476)
Other Equity - (327) (2,584) - - (2,911)
--------- --------- --------- --------- ---------- ---------
Total Shareholders' Equity (65,411) 28,446 (91,187) - 60,221 (67,931)
--------- --------- --------- --------- ---------- ---------
Total Liabilities and Shareholders' Equity $ 174,543 $ 163,269 $ 17,462 $ (23,766) $ 60,221 $ 391,729
========= ========= ========= ========= ========== =========
</TABLE>
11
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 1999
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Parent Subsidiary Non-Guarantor Discontinued
Company Guarantors Subsidiaries Operations
----------- ---------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Gross Revenue $ 21 $ 156,509 $ 125,368 $ (56,401)
Subcontract and direct material costs (71) (116,301) (67,942) 21,456
----------- ---------- ------------- ------------
Service Revenue (50) 40,208 57,426 (34,945)
Operating Expenses
Operating expenses 2,362 33,406 57,718 (30,286)
Depreciation and amortization 780 245 1,251 (795)
Other unusual charges 895 - - -
----------- ---------- ------------- ------------
Operating Income (Loss) (4,087) 6,557 (1,543) (3,864)
Other Income (Expense)
Interest income 57 77 134 -
Interest expense (5,798) (46) (8) -
Equity in net income of unconsolidated subsidiaries 4,543 - 2,608 -
----------- ---------- ------------- ------------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest (5,285) 6,588 1,191 (3,864)
Income tax expense (benefit) 0 13 487 (1,520)
----------- ---------- ------------- ------------
Income (Loss) From Continuing Operations
Before Minority Interest (5,285) 6,575 704 (2,344)
Minority interests in net income of subsidiaries - 2,082 - -
----------- ---------- ------------- ------------
Income (Loss) Before Discontinued Operations (5,285) 4,493 704 (2,344)
Income from discontinued operations (net of tax) - - - 2,344
----------- ---------- ------------- ------------
Net Income (Loss) $ (5,285) $ 4,493 $ 704 $ -
=========== ========== ============= ============
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ICF Kaiser
International, Inc.
Eliminations Consolidated
------------ ----------------
<S> <C> <C>
Gross Revenue $ - $ 225,497
Subcontract and direct material costs - (162,858)
------------ ----------------
Service Revenue - 62,639
Operating Expenses
Operating expenses - 63,200
Depreciation and amortization 1,481
Other unusual charges - 895
------------ ----------------
Operating Income (Loss) - (2,937)
Other Income (Expense)
Interest income - 268
Interest expense - (5,852)
Equity in net income of unconsolidated subsidiaries (5,631) 1,520
------------ ----------------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest (5,631) (7,001)
Income tax expense (benefit) - (1,020)
------------ ----------------
Income (Loss) From Continuing Operations
Before Minority Interest (5,631) (5,981)
Minority interests in net income of subsidiaries - 2,082
------------ ----------------
Income (Loss) Before Discontinued Operations (5,631) (8,063)
Income from discontinued operations (net of tax) - 2,344
------------ ----------------
Net Income (Loss) $ (5,631) $ (5,719)
============ ================
</TABLE>
12
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 1999
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Parent Subsidiary Non-Guarantor Discontinued
Company Guarantors Subsidiaries Operations
----------- ---------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Cash Provided by (Used in) Operating Activities $ (2,017) $ 1,704 $ 4,697 $ (4,228)
----------- ---------- ------------- ------------
Investing Activities
Investments in subsidiaries and affiliates, net of cash acquired - - (4,374) 4,374
Sales of subsidiaries and/or investments - - - -
Investments in net assets of discontinued operations - - - (596)
Purchases of fixed assets - - (1,007) 450
----------- ---------- ------------- ------------
Net Cash Provided by (Used in) Investing Activities - - (5,381) 4,228
----------- ---------- ------------- ------------
Financing Activities
Borrowings under credit facility 57,064 - - -
Principal payments on credit facility (50,942) - - -
Change in book overdraft (6,117) - - -
Distribution of income to minority interest - 51 - -
Proceeds from issuances of common stock 38 - - -
----------- ---------- ------------- ------------
Net Cash Provided by (Used in) Financing Activities 43 51 - -
----------- ---------- ------------- ------------
Effect of Exchange Rate Changes on Cash - - (63) -
----------- ---------- ------------- ------------
Increase (Decrease) in Cash and Cash Equivalents (1,974) 1,755 (747) -
Cash and Cash Equivalents at Beginning of Period 2,414 3,814 9,039 (19)
----------- ---------- ------------- ------------
Cash and Cash Equivalents at End of Period $ 440 $ 5,569 $ 8,292 $ (19)
=========== ========== ============= ============
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ICF Kaiser
International, Inc.
Eliminations Consolidated
------------ -------------------
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities $ - $ 156
------------ -------------
Investing Activities
Investments in subsidiaries and affiliates, net of cash acquired - -
Sales of subsidiaries and/or investments - -
Investments in net assets of discontinued operations - (596)
Purchases of fixed assets - (557)
------------ -------------
Net Cash Provided by (Used) in Investing Activities - (1,153)
------------ -------------
Financing Activities
Borrowings under credit facility - 57,064
Principal payments on credit facility - (50,942)
Change in book overdraft - (6,117)
Distribution of income to minority interest - 51
Proceeds from issuances of common stock - 38
------------ -------------
Net Cash Used in Financing Activities - 94
------------ -------------
Effect of Exchange Rate Changes on Cash - (63)
------------ -------------
Increase (Decrease) in Cash and Cash Equivalents - (966)
Cash and Cash Equivalents at Beginning of Period - 15,248
------------ -------------
Cash and Cash Equivalents at End of Period $ - $ 14,282
============ =============
</TABLE>
13
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ICF Kaiser
Parent Subsidiary Non-Guarantor Discontinued International,
Company Guarantors Subsidiaries Operations Eliminations Inc. Consolidated
------- ---------- ------------ ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,414 $ 3,814 $ 9,039 $ (19) $ - $ 15,248
Contract receivables, net (5,283) 133,618 155,743 (49,758) - 234,320
Intercompany receivables, net 184,700 10,943 (195,643) - - -
Prepaid expenses and other current assets 2,185 431 10,225 (923) - 11,918
Deferred income taxes 30,367 3,245 1,061 - - 34,673
Net assets of discontinued operations - - - 65,862 - 65,862
--------- --------- --------- --------- ---------- -----------
Total Current Assets 214,383 152,051 (19,575) 15,162 - 362,021
--------- --------- --------- --------- ---------- -----------
Fixed Assets
Furniture, equipment, and leaseholds 4,589 3,456 35,951 (26,026) - 17,970
Less depreciation and amortization (4,040) (3,155) (30,216) 23,746 - (13,665)
--------- --------- --------- --------- ---------- -----------
549 301 5,735 (2,280) - 4,305
--------- --------- --------- --------- ---------- -----------
Other Assets
Goodwill, net - 8,745 40,547 (25,969) - 23,323
Investment in and advances to affiliates (64,556) 14 6,494 (157) 65,776 7,571
Capitalized software development costs 4,296 766 (3,444) 1,618
Other 4,910 523 8,094 (782) - 12,745
--------- --------- --------- --------- ---------- -----------
(55,350) 9,282 55,901 (30,352) 65,776 45,257
--------- --------- --------- --------- ---------- -----------
Total Assets $ 159,582 $ 161,634 $ 42,061 $ (17,470) $ 65,776 $ 411,583
========= ========= ========= ========= ========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Debt currently payable $ 30,729 $ - $ - $ - $ - $ 30,729
Accounts payable and other accrued expenses 39,759 121,833 72,160 (7,436) - 226,316
Accrued salaries and employee benefits 7,818 13,997 16,116 (6,790) - 31,141
Other 1,910 1,282 38,966 (3,164) - 38,994
--------- --------- --------- --------- ---------- -----------
Total Current Liabilities 80,216 137,112 127,242 (17,390) - 327,180
Long-term Liabilities
Long-term debt, less current portion 137,487 - 1 - - 137,488
Other 2,000 26 7,638 (80) - 9,584
--------- --------- --------- --------- ---------- -----------
Total Liabilities 219,703 137,138 134,881 (17,470) - 474,252
--------- --------- --------- --------- ---------- -----------
Minority Interests in Subsidiaries - 449 - - - 449
Shareholders' Equity
Common Stock 230 8,179 121 - (8,288) 242
Additional Paid-in Capital 75,200 2,596 58,544 - (60,918) 75,422
Accumulated Earnings (Deficit) (134,913) 13,542 (148,368) - 134,982 (134,757)
Other Equity (638) (270) (3,117) - - (4,025)
--------- --------- --------- --------- ---------- -----------
Total Shareholders' Equity (60,121) 24,047 (92,820) - 65,776 (63,118)
--------- --------- --------- --------- ---------- -----------
Total Liabilities and Shareholders' Equity $ 159,582 $ 161,634 $ 42,061 $ (17,470) $ 65,776 $ 411,583
========= ========= ========= ========= ========== ===========
</TABLE>
14
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Parent Subsidiary Non-Guarantor Discontinued
Company Guarantors Subsidiaries Operations Eliminations
(Unaudited)
-------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Gross Revenue $ (164) $ 146,340 $ 159,080 $ (48,417) $ -
Subcontract and direct material costs (175) (107,396) (91,449) 15,686 -
-------- --------- --------- --------- ---------
Service Revenue (339) 38,944 67,631 (32,731) -
Operating Expenses
Operating expenses 4,288 32,600 59,580 (27,876) -
Depreciation and amortization 663 292 1,380 (743) -
-------- --------- --------- --------- ---------
Operating Income (Loss) (5,290) 6,052 6,671 (4,112) -
Other Income (Expense)
Interest income 131 123 270 - (58)
Interest expense (4,816) (46) (12) - 53
Equity in net income of unconsolidated subsidiaries 10,593 - 2,084 - (11,650)
-------- --------- --------- --------- ---------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest 618 6,129 9,013 (4,112) (11,655)
Income tax expense (benefit) 173 1,716 2,523 (1,617) (3,263)
-------- --------- --------- --------- ---------
Income (Loss) From Continuing Operations
Before Minority Interest 445 4,413 6,490 (2,495) (8,392)
Minority interests in net income of subsidiaries - 2,538 (27) - -
-------- --------- --------- --------- ---------
Income (Loss) Before Discontinued Operations 445 1,875 6,517 (2,495) (8,392)
Income from discontinued operations (net of tax) - - - 2,495 -
-------- --------- --------- --------- ---------
Net Income (Loss) $ 445 $ 1,875 $ 6,517 $ - $ (8,392)
======== ========= ========= ========= =========
<CAPTION>
- --------------------------------------------------------------------------
ICF Kaiser
International, Inc.
Consolidated
-------------------
<S> <C>
Gross Revenue $ 256,839
Subcontract and direct material costs (183,334)
---------
Service Revenue 73,505
Operating Expenses
Operating expenses 68,592
Depreciation and amortization 1,592
Operating Income (Loss) 3,321
Other Income (Expense)
Interest income 466
Interest expense (4,821)
Equity in net income of unconsolidated subsidiaries 1,027
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest (7)
Income tax expense (benefit) (468)
Income (Loss) From Continuing Operations
Before Minority Interest 461
Minority interests in net income of subsidiaries 2,511
Income (Loss) Before Discontinued Operations (2,050)
Income from discontinued operations (net of tax) 2,495
Net Income (Loss) $ 445
=========
</TABLE>
15
<PAGE>
ICF Kaiser International, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Parent Subsidiary Non-Guarantor Discontinued
Company Guarantors Subsidiaries Operations
(Unaudited)
Net Cash Provided by (Used in) Operating Activities $ (3,558) $ 7,586 $ 6,450 $ 1,991
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Investing Activities
Investments in subsidiaries and affiliates, net of cash acquired 3,841 - - -
Sales of subsidiaries and/or investments 2,400 - - -
Investments in net assets of discontinued operations - (2,424)
Purchases of fixed assets (369) - (1,108) 444
------- ------- -------- --------
Net Cash Provided by (Used in) Investing Activities 5,872 - (1,108) (1,980)
------- ------- -------- --------
Financing Activities
Borrowings under credit facility 35,000 - - -
Principal payments on credit facility (34,500) - - -
Change in book overdraft 5,988 - - -
Distribution of income to minority interest - (3,071) - -
Proceeds from issuances of common stock 47 - - -
------- ------- ------- --------
Net Cash Provided by (Used in) Financing Activities 6,535 (3,071) - -
------- ------- ------- --------
Effect of Exchange Rate Changes on Cash - - 74 -
------- ------- ------- --------
Increase in Cash and Cash Equivalents 8,849 4,515 5,416 11
Cash and Cash Equivalents at Beginning of Period (4,843) 10,259 14,604 (11)
------- ------- ------- --------
Cash and Cash Equivalents at End of Period $ 4,006 $14,774 $20,020 $ -
======= ======= ======= ========
<CAPTION>
ICF Kaiser
International, Inc.
Eliminations Consolidated
------------ ------------------
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities $ - $ 12,469
-------- ---------
Investing Activities
Investments in subsidiaries and affiliates, net of cash acquired - 3,841
Sales of subsidiaries and/or investments - 2,400
Investments in net assets of discontinued operations - (2,424)
Purchases of fixed assets - (1,033)
-------- ---------
Net Cash Used in Investing Activities - 2,784
-------- ---------
Financing Activities
Borrowings under credit facility - 35,000
Principal payments on credit facility - (34,500
Change in book overdraft - 5,988
Distribution of income to minority interest - (3,071
Proceeds from issuances of common stock - 47
-------- ---------
Net Cash Used in Financing Activities - 3,464
-------- ---------
Effect of Exchange Rate Changes on Cash - 74
-------- ---------
Increase (Decrease) in Cash and Cash Equivalents - 18,791
Cash and Cash Equivalents at Beginning of Period - 20,009
-------- ---------
Cash and Cash Equivalents at End of Period $ - $ 38,800
========= =========
</TABLE>
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
During the three months ended March 31, 1999, the Company made significant
progress toward completion of four large fixed price contracts, involving the
construction of plants to produce nitric acid (the Nitric Acid Projects), which
caused the Company to recognize contract cost overruns in 1998 totaling $66.0
million. A significant amount of management activities have since been focused
on responding to the various cash flow consequences stemming from the
substantial loss. Management has now addressed the predominant issues related
to completing the Nitric Acid Projects and funding the related cost overruns.
Three of the four plants were complete and operating in 1998, while the fourth
became operational on April 15, 1999. The Company entered into arrangements
with several of the Nitric Acid Project customers and subcontractors in order to
minimize the remaining cost uncertainties. The Company may also continue to
pursue claims recoveries against certain subcontractors, but has not included
any estimate for recoveries in the total recorded cost overrun.
Anticipating the cash flow and liquidity issues that would result from the
Nitric Acid Project cost overruns and from significant ensuing restructuring
activities, the Company proceeded down two parallel paths addressing liquidity;
one intended to recognize significant cash from values inherent in the Company's
businesses; the other, involving the Company's revolving credit, was intended to
bridge short term needs.
In 1999, the Company announced its intention to sell the two major operating
segments described below:
. On March 8, 1999, the Company entered into a definitive asset purchase
agreement (the EFM Agreement) with The IT Group, Inc. (IT) for the sale of
the Company's Environment and Facilities Management Group (EFM). Pursuant
to the terms of the EFM Agreement, on April 9, 1999, the Company sold the
majority of the active contracts and investments, and transferred a
substantial number of employees to IT, for a purchase price of $82 million,
less $8 million to be retained by IT for EFM's working capital
requirements. IT also acquired the Company's interest in various operating
leases for equipment and facilities used by EFM.
. Also in March 1999, the Company announced its intention to sell its
Consulting Group. On March 8, 1999, a non-binding letter of intent was
signed with CM Equity Partners, L.P. (CMEP), an equity investment firm
based in New York City, and the Group's management for the sale of the
majority of the assets associated with the Consulting Group. Although terms
of the sale are not completely negotiated, the Company expects to sell 90%
of the Consulting Group for an amount in excess of $70 million. The sale is
expected to be completed by mid-year 1999.
The accompanying quarterly financial statements reflect these segments'
operations as "discontinued" and present the results separate from those of the
Company's continuing operations.
The erosion on the Nitric Acid Projects, combined with recent growth in the
Company's federal government business, pushed the Company to maximum available
borrowing levels and resulted in restrictive amendments to the recently secured
revolving line of credit. The amendments now limit cash borrowing and letter of
credit access only up to an aggregate of $30 million and require $10 million in
cash collateral for existing letters of credit. The Company's revolving credit
facility expires on June 30, 1999. Additionally, until the completion of the
sale of the discontinued Consulting Group segment, the Company has had and may
continue to extend the average age of its vendor obligations and to carefully
manage all cash disbursement activity. The payment delays to trade creditors
may, at least in the short term, have a negative impact upon the Company's
current and future ability to generate and secure business opportunities. The
Company is actively exploring means by which the available cash proceeds from
the sale of the Consulting Group may be used to facilitate transactions that
would reduce the Company's outstanding debt to levels supportable over the long
term by anticipated cash flows from operations remaining after the sale of the
Consulting Group. Such transactions may include proposals for the exchange of
cash, new debt, and equity for some or all of the Company's outstanding notes.
Some of the net cash proceeds from the completed sale of EFM and the pending
Consulting Group sale has been and will continue to be used to pay down the cash
borrowings on the Company's revolving line of credit and contribute to resolving
existing liquidity constraints. The Company also will continue to pursue
reductions in its cost structure. This effort, together with an increased focus
on risk mitigation and effective resource allocation, are aimed at improving the
profitability of the Company's remaining operations. The Company is committed to
implementing proper management controls and the processes necessary to deliver
high-quality, profitable projects throughout its
17
<PAGE>
operations. A plan that management began implementing late in 1998 provides for
the discontinuance of unprofitable market areas, the realignment of staff within
the Company to meet current needs, and the reduction of significant overhead
costs in light of the divestitures of two of its operating groups. The Company
anticipates that it will recognize a future charge for additional costs of the
restructuring once the plan is fully developed.
The Company ended the first quarter of 1999 with approximately $1.8 billion in
contract backlog for its continuing operations; $1.3 billion for Kaiser-Hill and
$0.5 billion for E&C. The backlog of the discontinued EFM and Consulting
Groups approximated [$600] million and [$500] million, respectively, as of
March 31, 1999.
Results of Continuing Operations
Gross Revenue
The Company's gross revenue by operating group for each of the three month
periods ended March 31 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Kaiser-Hill........................................... $145.1 $141.0
Engineering and Construction (E&C).................... 80.4 115.8
------ ------
Total............................................ $225.5 $256.8
====== ======
</TABLE>
Kaiser-Hill
Kaiser-Hill is a 50% owned, board-controlled and consolidated joint venture
between ICF Kaiser International, Inc. and CH2M Hill formed solely to perform
the U.S. Department of Energy's Rocky Flats Closure Project awarded in late
1995. The contract is cost-plus incentive fee in nature. Accordingly, the
changes in gross revenue earned by Kaiser-Hill during the comparable periods are
largely reflective of increased levels of reimburseable subcontractor costs
being incurred as the contract progress ensues.
Engineers & Constructors Group (E&C)
The E&C Group provides design engineering, procurement, and construction
services to domestic and international clients in the industrial, water,
transportation and transit, infrastructure, and semi-conductor (or clean room
technologies) markets. The decrease in gross revenue of $35.4 million during
the three months ended March 31, 1999 compared to 1998 is comprised primarily
of the following:
. a decline of $31.1 million in gross revenue generated by the Company's
construction management activities specializing in fabrication plants and
other facilities for semiconductor and microelectronics customers.
. an increase of $12.3 million in gross revenue generated by the Nova Hut
steel mini-mill contract in the Czech Republic primarily from completing
activities of the project involving the procurement of significant amounts
of subcontracted labor and direct materials. Currently contracted portions
of this project are expected to be completed during the latter half of
1999.
. a reduction of $13.8 million in gross revenue recognized from the Nitric
Acid Projects, partially reflective of the decreasing volume of activity on
the projects as they neared completion and partially of the reversal of
revenue as a result of changes in estimates of contract losses at
completion.
Service Revenue
The Company's service revenue for the three months ended March 31, as well
as the related percentage of service revenue to gross revenue, is as follows
(in millions):
<TABLE>
1998
----
1999 1998 CHANGE
----- ----- ------
<S> <C> <C> <C> <C> <C>
Kaiser-Hill................................... $34.7 24% $35.7 25% (3)%
Engineering and Construction (E&C)............ 27.9 35% 38.8 33% (26)%
----- -----
$62.6 28% $73.5 29% (15)%
===== =====
</TABLE>
18
<PAGE>
Kaiser-Hill
- ------------
Kaiser-Hill's service revenue is generated in part by fees earned as a
percentage of costs incurred to execute the project and in part by incentive
fees earned for attaining specified contract performance thresholds. The
incentive fees are not based on incurred costs. The service revenue decrease
of $0.9 million during the three months ended March 31, 1999 compared to 1998 is
reflective of changes in recorded incentive fee estimates between the periods as
current phases of the contract contain increased minimum performance levels.
Engineers & Constructors Group (E&C)
- -------------------------------------
The decrease in service revenue of $9.9 million during the three months ended
March 31, 1999 compared to the same quarter in 1998 is comprised primarily of:
. a reduction of $1.8 million previously generated from the Nitric Acid
Projects. The Projects generated no service revenue in 1999, largely
reflective of the large provisions for cost overruns recorded during 1998
and of the fact that the last phases of the contracts were more
subcontractor intensive. The related service revenue recognized during the
three months ended March 31, 1998 was on two Nitric Acid Projects for
which, as of March 31, 1998, the Company had not yet projected losses at
completion.. Although management believes that adequate provision for loss
reserves and profit estimates for these fixed-price contracts has been
reflected in these results, no assurance can be given that there will be no
additional future adjustments.
. a reduction of $2.2 million generated by the Asia-Pacific activities. The
effect on profits of this service revenue decline was somewhat offset by
increases over the prior quarter in Australian joint venture activities.
The Company records its ownership percentage of the joint venture's
results as equity in net income of unconsolidated subsidiaries.
. a reduction of $1.0 million representing the late 1998 discontinuance of
certain E&C operations in several foreign markets.
. other total net reductions of $4.9 million as current projects neared
completion compared to the same period in 1998 or entered phases
requiring proportionately more subcontractor and direct material costs than
the Group's own professional services. This result reflects the overall
decline in the Group's contract backlog and is the primary contributor to
the Company's operating losses for the three months ended March 31, 1999 -
since much of the direct labor that was previously deployed on such
projects is decreasingly utilized.
Operating Expenses
Segment operating expenses as a percentage of service revenue for each of the
three months ended March 31 are as follows:
<TABLE>
<CAPTION>
KAISER-HILL E&C
----------- ---
1999 1998 1999 1998
------ ------- ------- -------
<S> <C> <C> <C> <C>
Service Revenue . 100% 100% 100% 100%
Operating Expenses
Direct labor and fringe benefits.................... 88% 86% 64% 60%
Group overhead...................................... - - 39% 30%
---- ---- ---- ----
Segment income........................................ 12% 14% (3)% 10%
==== ==== ==== ====
</TABLE>
The segment operating results include all direct and overhead activities that
are typically controllable by the respective segment's business leaders and
consist of activities that had sole direct benefit to the respective segment.
Operating activities that are deemed to benefit more than one segment are not
managed by segment business leaders but are instead managed by the Company's
corporate overhead structure and are not allocated to the segments but instead
classified as corporate overhead on the Company's income statement.
The decline in Kaiser-Hill's operating income as a percentage of service
revenue for the three months ended March 31, 1999 versus 1998 is again
indicative of the profit-earning nature of the underlying contract - some
profit is earned as a percent of actual costs incurred and some profit is earned
based on incentives for attaining specified, qualitative contract performance
thresholds. Therefore, total profits may vary as a percentage of service
revenue. The reduced profit percentage of 12% above reflects changes in
recorded incentive fee estimates included in service
19
<PAGE>
revenue as compared to the same period in 1998 due to the current phase of the
contract containing increased minimum performance levels required to earn the
incentive fees. Actual direct labor of Kaiser-Hill remained consistent quarter
over quarter at $30.6 million.
The declining E&C results, quarter over quarter, stem from lower gross margins
being earned on projects and significant increases and volumes of indirect
labor, resulting from completion of projects and the declining backlog
prohibiting the redeployment of direct labor to more profitable projects.
There were no significant changes, quarter over quarter (amounts not depicted
above), in corporate general and administrative expense. However in light of
the significant 1998 contract overruns and ensuing activities directed at
resolving the resulting liquidity issues, the Company has been incurring costs
that it ordinarily would not incur without these strains. Such costs, including
divestiture-related expenses of professional fees as well as increased bank
fees, and fines and penalties, have been presented as unusual items in the
accompanying income statement.
It should also be noted that the levels of corporate overhead incurred during
the three months ended March 31, 1999 and 1998 were for the Company's
organization and size prior to the completion of the sales of the recently
discontinued segments. Subsequent to those sales, however, corporate overhead
and general and administrative spending will need to be restructured and reduced
to levels appropriate for the Company's continuing core E&C operations.
Management believes it can significantly reduce or "right-size" these costs.
The plan is currently being developed and should take effect beginning late in
the second quarter of 1999 - essentially following the completion of the sales
of the two discontinued business segments.
Interest Expense
The Company's average outstanding debt and the related average effective
interest rates for three months ended March 31, 1999 were $175.8 million and
13.3%, respectively, and $143.8 million and 13.4%, respectively for the three
months ended March 31, 1998. The increased borrowings were primarily necessary
to fund cost overruns on the Nitric Acid Projects and is the direct cause of the
$1.0 million increase in interest expense during the first quarter of 1999
compared to the first quarter of 1998.
Income Tax Expense
The net effect of the income tax activity for the three months ended March 31,
1999 was to continue with recently established practice of not recognizing
current financial statement benefits created by the future deductibility of net
operating losses, created largely by domestic operations in the current period.
Rather, the Company only provided for income taxes that will be due as a result
of current period foreign earnings. In addition to this quarter's operating
losses, the Company's balance sheet contains a deferred tax asset totaling $34.7
million. The asset is comprised of total future income tax credits of $60.0
million less $25.3 million in valuation allowances. The valuation allowances
have been recorded to reflect the current uncertainty over the Company's ability
to realize and use all of the net operating loss deductions in the future.
Management believes, however, that future earnings, including anticipated gains
from the sales of the discontinued segments will generate sufficient taxable
income within the next year to realize the entire net $34.7 million deferred tax
asset in addition to $24.1 million of benefits currently included in the
valuation allowance.
The income tax provision for the three months ended March 31, 1998 was computed
using an estimated average effective income tax rate of 28%. The effective rate
method was used at March 31, 1998, because the Company had not yet estimated
that it would incur significant net operating losses in 1998. Had the losses
been projected as of the end of March, 1998, the Company would have only
recorded income tax expense on foreign earnings similar to the methodology
used for the three months ended March 31, 1999.
The income tax provision for all periods presented excludes the minority's
interest in Kaiser-Hill's operating income because it is only 50% owned and is a
flow-through entity for income tax purposes.
20
<PAGE>
Results of Discontinued Operations
The operating results of the two discontinued segments has been included in the
accompanying financial statements, in accordance with generally accepted
accounting principles, in the form of their net results only. Summarized
results for the discontinued segments is as follows (in thousands):
<TABLE>
<CAPTION>
EFM CONSULTING
--------------------------- -----------------------------
THREE MONTHS ENDED MARCH 31, 1999 1998 1999 1998
------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Gross revenue................................................. $ 29,939 $ 22,994 $26,462 $25,423
Subcontracts and materials.................................. (16,377) (10,158) 5,079 (5,528)
-------- -------- ------- -------
Service revenue............................................... 13,562 12,836 21,383 19,895
Operating expenses:
Direct labor and fringe..................................... 6,975 6,566 9,973 9,404
Group overhead.............................................. 4,722 5,139 8,615 6,767
Depreciation and amortization............................... 455 455 340 288
-------- -------- ------- -------
Segment income before income tax.............................. $ 1,410 $ 676 $ 2,455 $ 3,436
======== ======== ======= =======
</TABLE>
Total segment income from the discontinued operations of $3.9 million and $4.1
million for the three months ended March 31, 1999 and 1998, respectively, is
presented in the accompanying income statement net of an applicable 40% income
tax rate of $1.6 million and $1.6 million, respectively. Regardless of the
income tax expense recognized on the earnings from the discontinued operations,
the Company's consolidated tax position has no net current income tax expense
(other than for foreign income taxes) - see Income Tax Expense. Therefore, the
tax expense attributable to the earnings from the discontinued operations has
been offset in the income tax provision from continuing operations by a similar
amount of income tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities: Apart from operating cash flows of $2.1 million
generated by Kaiser-Hill for the three months ended March 31, 1999, the
Company's remaining continuing operations used $2.0 million in cash during the
quarter - primarily for the additional funding of the Nitric Acid Project
overruns, as well as growth in its federal government contracts which,
generally, require that subcontractor invoices be paid by the Company prior to
the Company issuing an invoice to the government customer.
Investing activities: Fixed asset purchases in the first quarter of 1999 and
1998 consisted largely of the capitalized costs of either purchased or
internally developed software necessitated by the Company's software replacement
efforts for Year 2000 issues. The cash flows from the operations of the
discontinued segments, as well as net changes in working capital and investing
activities are all presented net in the Cash Flow Statement as "Investments in
Net Assets of Discontinued Operations".
During the first quarter of 1998, the Company collected $2.4 million from the
sale of its 1997 sale of a remaining minority investment in a pulverized coal
injection facility. Also during the first quarter of 1998, the Company acquired
cash of approximately $3.8 million when it completed the acquisition of the
former ICT Spectrum using common stock.
Financing activities: During the first quarter of 1999, the Company's trade
payables were aged significantly as operating activities continued to use cash.
Including the effects of book overdrafts, all available financing was fully
utilized during the entire quarter - therefore there were no net financing cash
flows during the quarter. During the first quarter of 1998, Kaiser-Hill
distributed $3.1 million to CH2M Hill.
As of March 31, 1999, the Company had $36.8 million in cash borrowings and $25.2
million in letters of credit outstanding under the revolver credit line, with no
additional availability.
21
<PAGE>
Liquidity and Capital Resource Outlook
Based on current plans and expectations, management believes that the net cash
proceeds from the completed EFM sale and the pending Consulting Group sale will
yield sufficient short-term liquidity to bridge the Company's financing needs
until such time as the Company can secure other longer-term funding
alternatives. Specifically, the cash proceeds from divestitures will be used to
retire outstanding cash borrowings from the revolving credit facility, provide
required collateral for contract performance guarantees (including letters of
credit), pay overdue vendor obligations and contribute to supporting the future
working capital requirements and capital expenditures of the Company's remaining
operations including the $9.1 million interest obligations due June 30, 1999 to
the Series B Senior and the Senior Subordinated Notes.
The Company's amended $30 million revolving line of credit (the Amended
Revolver) from its current lenders expires June 30, 1999. The terms of the
Amended Revolver include similar restrictive financial covenants as the Revolver
and in addition require the Company to cash collateralize $10.0 million of its
letters of credit previously secured by assets of the Company. To extend the
Amended Revolver beyond June 8, 1999, if necessary, through to June 30, 1999 a
substantial fee would have to be paid to the Company's existing lenders. Such
an extension of the Amended Revolver would be required in the event that the
sale of the Consulting Group is not consummated before June 8, 1999. Moreover,
based on preliminary discussions with existing and prospective senior lenders,
the Company does not presently expect to have available a revolving line of
credit after June 30, 1999. Accordingly, following the anticipated close of
the sale of the Consulting Group, the Company's present plan is to cash
collateralize all of the outstanding letters of credit, as well as any
additional letters of credit of the type often required to support certain
contract performance obligations, and utilize other available cash for working
capital purposes. This situation could limit the availability of letters of
credit to support the growth of the Company's business.
In the event the Consulting Group sale is not consummated, the Company currently
believes the cash flows from ongoing operations of the Consulting Group, Kaiser-
Hill, and the E&C Group would most likely generate sufficient collateral, in the
form of current trade accounts receivable, to adequately support a borrowing
base in the amount needed to secure the size of revolving credit line needed to
fund short-term borrowing needs of the Company's for those operations, as well
as the letter-of-credit capacity needed primarily by the E&C Group. However,
it is difficult to predict with certainty and no assurances can be given as to
whether a revolving credit facility would be available to the Company upon such
sale or as to the terms on which such a facility might be made available. The
Company does not currently have any commitments from lenders for a new line of
credit and there can be no assurances as to its ability to secure one.
Whether or not the sale of the Consulting Group is completed, management
believes that a factor critical to the Company's success in securing a
sufficient and affordable working capital facility in the near term is its
ability to immediately reduce sufficient overhead costs from remaining
operations and achieve improved operating results. Although management has taken
certain steps to accomplish these milestones, there can be no assurance that it
will be able to do so. In addition, management believes it is necessary for
the Company to realign its capital structure. The Company is actively exploring
means by which the available cash proceeds from the sale of the Consulting Group
may be used to facilitate transactions that would reduce the Company's
outstanding debt to levels supportable over the long term by anticipated cash
flows from operations remaining after the sale of the Consulting Group. Such
transactions may include proposals for the exchange of cash, new debt and equity
for some or all of the Company's outstanding notes. Any issuance of new debt
could impose restrictive covenants upon the Company's business operations.
Additionally, any equity issuance could result in substantial dilution to
current holders of the Company's common stock.
The Company also will continue to explore options that would provide additional
capital for longer-term objectives and operating needs, including the
possibility for divestiture of additional operating assets and additional equity
infusions.
22
<PAGE>
Other Matters
Bath Contingency: In March 1998, the Company entered into a $187 million
maximum price contract to construct a ship building facility. In May 1998, the
Company subsequently learned that estimated costs to perform the contract as
reflected in actual proposed subcontracts were approximately $30 million higher
than the cost estimates originally used as the basis for contract negotiation
between the Company and the customer. After learning this, the Company advised
the customer that it was not required to perform the contract in accordance with
its terms as a result of a mutual mistake among them in negotiating that
contract. In October 1998, the customer presented an initial draft of a claim
against the Company requesting payment for estimated damages and entitlements
pursuant to the terminated contract. The Company and the customer are currently
discussing the customer's draft claim. No provision for loss for this matter has
been included in the Company's financial results to date as management does not
believe that it has sufficient information to reasonably estimate the outcome as
negotiation activity has not been significant to date.
Acquisition Contingency: The ICF Kaiser common shares exchanged for the stock
of ICT Spectrum in the March, 1998 acquisition, carry the guarantee that the
fair market value of each share of stock will reach $5.36 by March 1, 2001. In
the event that 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 with a total value equal to the
shortfall, depending upon the Company's preference. Pursuant to the terms of the
Agreement, however, the total number of contingently issuable shares of common
stock cannot exceed an additional 1.5 million. Given that the quoted fair market
value of the stock at March 31, 1999 was [$1.44] per share, and that the
Company's current debt instruments restrict the amount of cash that can be used
for acquisitions, the assumed issuance of an additional 1.5 million shares would
not completely extinguish the purchase price contingency. The Company therefore
would be required to obtain an amendment to current debt instruments or replace
them in order to complete a cash fill-up. Any future distribution of cash or
common stock would be recorded as a charge to the Company's paid-in-capital.
Until the earlier of the contingent purchase price resolution or March 1, 2001,
any additional shares assumed to be issued because of shortfalls in fair market
value will be included in the Company's diluted earnings per share calculations,
unless they are antidilutive. The exchanged shares also contain restrictions
preventing their sale prior to March 1, 2001.
On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf
of all others similarly situated, filed a class action lawsuit alleging false
and misleading statements made in a private offering memorandum, and asserting
other claims, in connection with the Company's acquisition of ICT Spectrum in
1998.
Year-2000 Readiness: 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 that
were written using two digits rather than four to identify the year in a date
field. Although it is possible that certain programs could function if left
uncorrected, there is a significant risk that computer programs will recognize
any two digit date containing ''00'' to be referring to the year 1900 rather
than the year 2000. This could result in system failures and miscalculations
causing disruptions to regular operations.
The Company has developed and implemented a plan to achieve Year-2000 readiness.
The Year-2000 program, led and coordinated at the corporate level, consists of
senior management from all Company disciplines, and is being executed and
implemented by teams in each of the Company's operating groups throughout the
world. The Company has identified the following five areas in which Year-2000
readiness and/or risk assessment are critical operations:
(1) software applications used by management to run and monitor the
business (''Internal Systems'');
(2) the hardware and related software used internally to run the core
business--such as desk-top hardware and software applications,
communications networks, and systems used in the operation of office
facilities (''Hardware, Network, and Facilities Systems'');
(3) software that the Company has either purchased, designed, developed,
written, or interfaced, and sold to customers (''Customer Systems'');
(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
the system malfunctions (''Vendor Systems''); and
23
<PAGE>
(5) systems critical to the operations of Kaiser-Hill (''Kaiser-Hill
Systems'').
Within each category, the Company has identified and assigned criticality
priorities to the various systems. Levels of system criticality were defined as
those that might have a significant adverse effect to the Company in any of the
areas of safety, environmental, legal, financial, and service-delivery
capabilities.
Internal Systems: Management's ongoing assessment of the majority of its
Internal Systems began in 1995 and 1996 with the replacement of its main-frame
based financial and project management software systems with new client-server
applications which will be Year 2000 ready. The phased conversion to the new
systems began in 1996 and will be completed by September 1999. The costs of the
new software, external consultants, and the internal cost of implementation
labor is being capitalized and amortized over a period of five years. The total
remaining costs, excluding internal labor, of this aspect of the Year-2000
project, including nonrecurring costs associated with the historical archival of
main-frame-based computer data, is estimated to be less than $1.0 million.
Hardware, Network and Facilities Systems: The Company is finalizing the
inventory and assessment of these systems and is currently in the replacement
mode. Estimated costs of $0.2 million will be incurred to replace these critical
systems, primarily including the replacement of embedded technology in items
such as telephone switches. The Company will most likely finance the majority of
this obligation through operating leases just as it does for the majority of its
annual ongoing needs for technology updates for desk-top hardware and software.
Accordingly, the charges will be expensed as the lease financing is paid.
Customer Systems: The Company also is assessing the risk surrounding Year-2000
readiness in its customer systems, i.e. risk that may have been created through
the Company's contracts for services in which the Company's professionals wrote
and delivered software source code, or procured third party software for
modification and/or resale to customers. Based on the service orientations of
the Company's business, which historically did not make wide use of computer
software applications, management does not anticipate significant contract
exposures emanating from the improper functioning of delivered source code that
would still be covered under nonexpired contract warranty provisions. There can
be no assurances that the Company's customers would be unable to seek such
compensation even if the contracts do not provide for it.
Vendor Systems: The Company is also corresponding with all vendors and
subcontractors related to the Vendor Systems that have been identified through
reasonable risk assessment techniques as critical to the Company's operations
regarding their Year-2000 readiness. Compliance assessment in this area will be
ongoing throughout 1999. The Company will devise contingency plans in the event
it believes significant risk to a disruption of service to the Company is not
being adequately mitigated. Currently, management does not anticipate the need
for contingency plans. Of course, the ability of parties to be compensated for
monetary or other damages resulting from Year-2000 readiness risks is unknown.
Kaiser-Hill Systems: Kaiser-Hill also has a Year-2000 readiness program,
separate from that of the Company. The United States Department of Energy (DOE)
owns all property and equipment at the Rocky Flats Environmental Technology Site
near Denver, Colorado. While DOE bears the Year-2000 risk at Rocky Flats,
Kaiser-Hill manages and uses the DOE property in its execution of the site
closure contract. One work element of the Rocky Flats contract requires that
Kaiser-Hill plan and execute DOE's Year-2000 readiness activities at the site.
Costs incurred by Kaiser-Hill in the execution of the readiness activities are
fully reimbursed by the DOE. Additionally, Kaiser-Hill is eligible for
performance award fees for attaining certain plan performance milestones, and is
susceptible to penalties in the event certain plan milestones are not attained.
Successful progress on the plan execution to date has resulted in Kaiser-Hill
being awarded $0.5 million in performance award fees through March 31, 1999, as
well as attaining reductions to the total amount of potential penalties,
limiting the remaining potential penalty exposure to $0.5 million.
Although there can be no guarantee of complete readiness by the beginning of the
year 2000, the Company believes each of the business areas described above will
be Year-2000 ready or be substantially ready by November 1999 such that further
remediation and testing, if any, will not be significant. In the event the
Company does not complete its program, or fails to properly identify and modify
critical business applications, there may be an interruption to the Company's
business that may have a material adverse affect on its business, future
financial condition and results of
24
<PAGE>
operations. In addition, Year-2000-related disruptions in the general economy
may also have a materially adverse effect on the Company's future financial
condition and results of operations.
At this time, the Company has not developed a ''worst case'' scenario or an
overall Year-2000 contingency plan but will do so when, if ever, management
believes such plans are warranted. Management believes that the majority of the
risks to its critical business operations are within the Company's control and
ability to address. (see ''Forward-Looking Information'' below).
Forward-Looking Statements
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, and cost-
cutting measures. 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 that use words such as the Company ''believes,''
''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 will 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 requires access to a revolving credit line to fund short-term
borrowing needs of the Company's total remaining operations, as well as the
letter of credit capacity needed primarily by the E&C Group. The Company
may not be able to generate collateral to support a borrowing base of
sufficient size to obtain such credit or may not be able to improve
operating results enough, by removing overhead costs or otherwise, to be
able to obtain such credit.
. the Company may be precluded from attaining other satisfactory contract
performance guarantee mechanisms, such as performance bonding capabilities.
. the Company may consider the sale of various operating groups in order
togenerate liquidity sufficient to meet its obligations. In the event that
planned sales of operations cannot be consummated on a timely basis, the
Company will need access to other sources of working capital to adequately
fund its remaining operations.
. the Company may not be able to maintain the existing volume or size of
contracts and may not be able to realize increased contract performance
levels. The Company is involved in a number of fixed-price contracts under
which the Company can benefit from cost savings or performance
efficiencies, but if certain pricing and performance assumptions prove
inaccurate, unrecoverable cost overruns can occur.
. 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 new markets it chooses to
target. General economic conditions in the international arena, especially
Asia and Latin America, could negatively impact the Company's current
international business and its ability to expand in international markets.
. the Company's EFM and Consulting Groups are very dependent on federal
government contracts, which are subject to annual funding approvals and
cost audits, and may be terminated at any time, with or without cause; a
large number of federal government contracts are included in the Company's
contract backlog, which potentially means that not all contract backlog
will become future revenue of the Company;
25
<PAGE>
. the Company may not be able to make acquisitions and or enter into joint
ventures, and if made, acquisitions and joint ventures may take more time
to contribute favorably to the Company's financial results than was
formerly assumed. The Company is highly leveraged and is subject to
restrictive covenants that limit its ability to fund potential acquisitions
and joint ventures beyond certain levels established in its debt
agreements.
. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not believe that it has significant exposures to market risk.
The majority of its foreign contracts are denominated and executed in the
applicable local currency. The interest rate risk associated with the majority
of the Company's borrowing activities is fixed, however, a 10% increase or
decrease in the average annual prime rate would result in an increase or
decrease of .72% multiplied by the weighted-average amount of fluctuating rate
borrowings outstanding during a period.
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, 1998.
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. 4(a)(8) Eighth Supplemental Indenture dated as of April 9, 1999
No. 4(f)(3) Third Supplemental Indenture dated as of April 9, 1999
No. 4(g) Form of 12% Senior Note due 2003, Series B
No. 21 Consolidated Subsidiaries of the Registrant as of April 12, 1999
No. 27 Financial Data Schedule
26
<PAGE>
(b) Reports on Form 8-K
On March 10, 1999, ICF Kaiser filed a Form 8-K referencing the Letter of Intent
with CM Equity Partners, L.P. and a Definitive Purchase Agreement for the assets
of the company's Environmental and Facilities Management Group with The IT
Group.
On April 23, 1999, ICF Kaiser filed a Form 8-K referencing the sale of the
majority of the active contracts and investments of its Environmental and
Facilities Management Group with The IT Group.
On May 12, 1999, ICF Kaiser filed a Form 8-K referencing changes in senior
management.
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: May 17, 1999
/s/ Timothy P. O'Connor
-----------------------
Timothy P. O'Connor
Senior Vice President and Chief Financial Officer
(Duly authorized officer and principal financial
officer)
27
<PAGE>
EXHIBIT 4(a)(8)
================================================================================
ICF KAISER INTERNATIONAL, INC., Issuer
and
CYGNA CONSULTING ENGINEERS AND PROJECT MANAGEMENT, INC., Guarantor
ICF KAISER GOVERNMENT PROGRAMS, INC., Guarantor
SYSTEMS APPLICATIONS INTERNATIONAL, INC., Guarantor
EDA, INCORPORATED, Guarantor
GLOBAL TRADE & INVESTMENT, INC., Guarantor
ICF KAISER EUROPE, INC., Guarantor
ICF KAISER / GEORGIA WILSON, INC., Guarantor
ICF KAISER OVERSEAS ENGINEERING, INC., Guarantor
ICF KAISER ENGINEERS PACIFIC, INC., Guarantor
ICF KAISER REMEDIATION COMPANY, Guarantor
ICF KAISER ADVANCED TECHNOLOGY, INC., Guarantor
TO
THE BANK OF NEW YORK, Trustee
_______________
Eighth Supplemental Indenture
Dated as of April 9, 1999
to
Indenture dated as of January 11, 1994
_______________
$125,000,000 12% Senior Subordinated Notes due 2003
================================================================================
<PAGE>
THIS EIGHTH SUPPLEMENTAL INDENTURE, dated as of April 9, 1999, 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"), and the following GUARANTORS (the "Subsidiary 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");
ICF Kaiser Remediation Company, a Delaware corporation ("Remcon"); and
ICF Kaiser Advanced Technology, Inc., an Idaho Corporation ("Advanced
Tech").
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore executed and delivered an
Indenture dated as of January 11, 1994 (as amended and supplemented to date, the
"Indenture"), for the purpose of issuing $125,000,000 of 12% Senior Subordinated
Notes due 2003 (the "Notes");
WHEREAS, the Company has entered into an Asset Purchase Agreement with The IT
Group, Inc. dated March 8, 1999 providing for the sale of certain of the assets
of, including the stock of certain subsidiaries included in, the Company's
Environment & Facilities Management Group (the "EFM Agreement");
WHEREAS, the EFM Agreement provides for the sale, among other things, of the
stock of ICF Kaiser Remediation Company, a Delaware corporation ("Remcom"),
which is a Subsidiary Guarantor;
WHEREAS, the terms of the EFM Agreement require that Remcom be released from
its obligations as a Subsidiary Guarantor under the Indenture;
WHEREAS, the Company and its Restricted Subsidiaries intend to use the
proceeds of the transaction contemplated by the EFM Agreement in a manner
consistent with Section 5.09 of the Indenture;
WHEREAS, the execution and delivery of this Eighth Supplemental Indenture has
been duly authorized by the Board of Directors of the Company on February 26,
1999;
2
<PAGE>
WHEREAS, the Company and the Subsidiary Guarantors have determined that it is
desirable to enter into this Eighth Supplemental Indenture and have requested
the Trustee to join with them in the execution of this Eighth Supplemental
Indenture; and
WHEREAS, the Trustee has accepted the trusts created by this Eighth
Supplemental Indenture and in evidence thereof has joined in the execution
hereof;
NOW, THEREFORE, THIS EIGHTH 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 Subsidiary Guarantors, and the Trustee, as follows:
1. Terms defined in the Indenture are used herein as therein defined.
2. Effective upon the closing of the transactions contemplated by the EFM
Agreement, Remcom is hereby, and shall be, without further action of,
or the execution and delivery of any further documents or instruments
by, the Company, the Subsidiary Guarantors of the Trustee, released
from the Guarantee dated December 3, 1997 to which it is a party.
3. The following sundry provisions shall be a part of this Eighth
Supplemental Indenture:
Section 4.01. Effect of Supplemental Indenture. Upon the execution and
--------------------------------
delivery of this Eighth Supplemental Indenture by the Company, the Subsidiary
Guarantors and the Trustee, the Indenture shall be supplemented in accordance
herewith, and this Eighth 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 through Seventh Supplemental Indentures,
all provisions in the Indenture shall remain in full force and effect.
Section 4.03. Indenture and Supplemental Indentures Construed Together.
--------------------------------------------------------
This Eighth 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.
Section 4.04. Confirmation and Preservation of Indenture. The Indenture as
------------------------------------------
supplemented by the First through Seventh Supplemental Indentures is in all
respects confirmed and preserved.
Section 4.05 Conflict with Trust Indenture Act. If any provision of this
---------------------------------
Eighth 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 Eighth Supplemental Indenture, the provision of
such Act shall control. If any provision of this Eighth Supplemental
3
<PAGE>
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 Eighth Supplemental
Indenture, as the case may be.
Section 4.06 Separability Clause. In case any provision in this Eighth
-------------------
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 Eighth Supplemental Indenture, Etc. Nothing in
-----------------------------------------------
this Eighth 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 Eighth Supplemental Indentures, or the Notes.
Section 4.10 Successors and Assigns. All covenants and agreements in this
----------------------
Eighth Supplemental Indenture by the Company and the Subsidiary 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 Subsidiary
Guarantors, and the Trustee assumes no responsibility for their correctness.
Section 4.12 Certain Duties and Responsibilities of the Trustee. In
--------------------------------------------------
entering into this Eighth 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 Eighth 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 Eighth 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.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Eighth Supplemental
Indenture to be duly executed, and the Company, the Subsidiary Guarantors, and
the Trustee have caused their respective corporate seals to be hereunto affixed
and attested, all as of April 9, 1999.
ICF KAISER INTERNATIONAL, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Senior Vice President and Chief
Financial Officer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
THE BANK OF NEW YORK, as Trustee
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
CYGNA CONSULTING ENGINEERS AND
PROJECT MANAGEMENT, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER GOVERNMENT PROGRAMS, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
5
<PAGE>
SYSTEMS APPLICATIONS INTERNATIONAL,
INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
EDA, INCORPORATED
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
GLOBAL TRADE & INVESTMENT, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER EUROPE, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER / GEORGIA WILSON, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
6
<PAGE>
ICF KAISER OVERSEAS ENGINEERING, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER ENGINEERS PACIFIC, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER REMEDIATION COMPANY
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER ADVANCED TECHNOLOGY, INC.
By: /s/ Timothy P. O'Connor
--------------------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
7
<PAGE>
EXHIBIT 4(f)(3)
===============================================================================
ICF KAISER INTERNATIONAL, INC., Issuer
and
CYGNA CONSULTING ENGINEERS AND PROJECT MANAGEMENT, INC., Guarantor
ICF KAISER GOVERNMENT PROGRAMS, INC., Guarantor
SYSTEMS APPLICATIONS INTERNATIONAL, INC., Guarantor
EDA, INCORPORATED, Guarantor
GLOBAL TRADE & INVESTMENT, INC., Guarantor
ICF KAISER EUROPE, INC., Guarantor
ICF KAISER / GEORGIA WILSON, INC., Guarantor
ICF KAISER OVERSEAS ENGINEERING, INC., Guarantor
ICF KAISER ENGINEERS PACIFIC, INC., Guarantor
ICF KAISER REMEDIATION COMPANY, Guarantor
ICF KAISER ADVANCED TECHNOLOGY, INC., Guarantor
TO
THE BANK OF NEW YORK, Trustee
_______________
Third Supplemental Indenture
Dated as of April 9, 1999
to
Indenture dated as of December 23, 1996
_______________
$15,000,000 12% Senior Notes due 2003
===============================================================================
<PAGE>
THIS THIRD SUPPLEMENTAL INDENTURE, dated as of April 9, 1999, 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"), and the following GUARANTORS (the "Subsidiary 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");
ICF Kaiser Remediation Company, a Delaware corporation ("Remcon"); and
ICF Kaiser Advanced Technology, Inc., an Idaho Corporation ("Advanced
Tech").
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore executed and delivered an
Indenture dated as of December 23, 1996 (as amended and supplemented to date,
the "Indenture"), for the purpose of issuing $15,000,000 of 12% Senior Notes due
2003 (the "Notes");
WHEREAS, the Company has entered into an Asset Purchase Agreement with The IT
Group, Inc. dated March 8, 1999 providing for the sale of certain of the assets
of, including the stock of certain subsidiaries included in, the Company's
Environment & Facilities Management Group (the "EFM Agreement");
WHEREAS, the EFM Agreement provides for the sale, among other things, of the
stock of ICF Kaiser Remediation Company, a Delaware corporation ("Remcom"),
which is a Subsidiary Guarantor;
WHEREAS, the terms of the EFM Agreement require that Remcom be released from
its obligations as a Subsidiary Guarantor under the Indenture;
WHEREAS, the Company and its Restricted Subsidiaries intend to use the
proceeds of the transaction contemplated by the EFM Agreement in a manner
consistent with Section 5.09 of the Indenture;
WHEREAS, the execution and delivery of this Third Supplemental Indenture has
been duly authorized by the Board of Directors of the Company on February 26,
1999;
2
<PAGE>
WHEREAS, the Company and the Subsidiary Guarantors have determined that it is
desirable to enter into this Third Supplemental Indenture and have requested the
Trustee to join with them in the execution of this Third Supplemental Indenture;
and
WHEREAS, the Trustee has accepted the trusts created by this Third
Supplemental Indenture and in evidence thereof has joined in the execution
hereof;
NOW, THEREFORE, THIS THIRD 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 Subsidiary Guarantors, and the Trustee, as follows:
1. Terms defined in the Indenture are used herein as therein defined.
2. Effective upon the closing of the transactions contemplated by the EFM
Agreement, Remcom is hereby, and shall be, without further action of,
or the execution and delivery of any further documents or instruments
by, the Company, the Subsidiary Guarantors of the Trustee, released
from the Guarantee dated December 3, 1997 to which it is a party.
3. The following sundry provisions shall be a part of this Third
Supplemental Indenture:
Section 4.01. Effect of Supplemental Indenture. Upon the execution and
--------------------------------
delivery of this Third Supplemental Indenture by the Company, the Subsidiary
Guarantors and the Trustee, the Indenture shall be supplemented in accordance
herewith, and this Third 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 and Second Supplemental Indentures, all
provisions in the Indenture shall remain in full force and effect.
Section 4.03. Indenture and Supplemental Indentures Construed Together.
--------------------------------------------------------
This Third 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.
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
---------------------------------
Third 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 Third Supplemental Indenture, the provision of such
Act shall control. If any provision of this Third Supplemental Indenture
modifies
3
<PAGE>
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 Third Supplemental Indenture, as the case
may be.
Section 4.06 Separability Clause. In case any provision in this Third
-------------------
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 Third Supplemental Indenture, Etc. Nothing in this
----------------------------------------------
Third 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 Third Supplemental Indentures, or the Notes.
Section 4.10 Successors and Assigns. All covenants and agreements in this
----------------------
Third Supplemental Indenture by the Company and the Subsidiary 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 Subsidiary
Guarantors, and the Trustee assumes no responsibility for their correctness.
Section 4.12 Certain Duties and Responsibilities of the Trustee. In
--------------------------------------------------
entering into this Third 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 Third 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 Third 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.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
Indenture to be duly executed, and the Company, the Subsidiary Guarantors, and
the Trustee have caused their respective corporate seals to be hereunto affixed
and attested, all as of April 9, 1999.
ICF KAISER INTERNATIONAL, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Senior Vice President and Chief
Financial Officer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
THE BANK OF NEW YORK, as Trustee
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
CYGNA CONSULTING ENGINEERS AND
PROJECT MANAGEMENT, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER GOVERNMENT PROGRAMS, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
5
<PAGE>
SYSTEMS APPLICATIONS INTERNATIONAL, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
EDA, INCORPORATED
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
GLOBAL TRADE & INVESTMENT, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER EUROPE, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER / GEORGIA WILSON, INC.
By: /s/ Timothy P. O'Connor
------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
6
<PAGE>
ICF KAISER OVERSEAS ENGINEERING, INC.
By: /s/ Timothy P. O'Connor
--------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER ENGINEERS PACIFIC, INC.
By: /s/ Timothy P. O'Connor
------------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER REMEDIATION COMPANY
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
ICF KAISER ADVANCED TECHNOLOGY, INC.
By: /s/ Timothy P. O'Connor
-----------------------
[Seal] Name: Timothy P. O'Connor
Title: Assistant Treasurer
ATTEST:
/s/ Sandra D. Little
- --------------------
Assistant Secretary
7
<PAGE>
EXHIBIT 4(g)
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO
A NOMINEE OR THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
ICF KAISER INTERNATIONAL, INC.
12% SENIOR NOTE DUE 2003, SERIES B
CUSIP No. 449244
No. BQ- $_______________
ICF Kaiser International, Inc., a Delaware corporation (the "Company"), for
value received promises to pay to CEDE & Co., or registered assigns, the
principal sum of _____________________ Dollars on December 31, 2003.
Interest Payment Dates: June 30 and December 31
Record Dates: June 15 and December 15
<PAGE>
Reference is made to the further provisions of this Security contained herein,
which will for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused the Security to be signed manually or
by facsimile by its duly authorized officers.
Dated:
ICF KAISER INTERNATIONAL, INC.
By:_______________________________
By:_______________________________
(SEAL)
<PAGE>
Trustee's Certificate of Authentication
This is one of the Series B Notes referred to in the within-mentioned
Indenture.
Dated: THE BANK OF NEW YORK
as Trustee
By: _____________________________
Authorized Signatory
<PAGE>
12% SENIOR NOTE DUE 2003, SERIES B
Certain capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture under which this Note is issued.
1. Interest. ICF Kaiser International, Inc., a Delaware
corporation (the "Company," which term shall include any Successor under the
Indenture), promises to pay interest on the principal amount of this Note at
12% provided that one percent (1%) additional interest (the "Additional
Interest") is payable on the Notes from the date of, and as provided in, the
Indenture. The Company files its financial results with the Securities and
Exchange Commission on quarterly and annual reports, and these reports include
the Company's earnings after deducting minority interests and before interest,
taxes, depreciation, and amortization calculated in accordance with generally
accepted accounting principles ("Earnings"). The Company measures its Earnings
for trailing twelve month periods, each period to end on the last day of a
fiscal quarter and extend no further than March 31, 1998 (each a "Quarterly
Measurement Period"). If the Company's Earnings equal or exceed $36 million for
two consecutive Quarterly Measurement Periods, then the Company is relieved of
its obligation to pay any future Additional Interest. However, if the Company's
Earnings do not equal or exceed $36 million for any subsequent Quarterly
Measurement Period, up to and including the Quarterly Measurement Period ending
March 31, 1998, the Company is obligated to commence paying Additional Interest
until the Company's Earnings again equal or exceed $36 million on a trailing
twelve month basis calculated quarterly. The Company will pay interest
semiannually on June 30 and December 31 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from December 31,
1996; provided, that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest
shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be June 30, 1997. The
Company shall pay interest on overdue principal from time to time on demand at
the rate of 1% per annum in excess of the interest rate then in effect; it
shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. Holders must surrender Notes to a Paying Agent to
collect principal Payments. The Company will pay the principal of, premium, if
any, and interest on the Notes in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). The Company, however, may pay such amounts by check
payable in such U.S. Legal Tender. It may mail an interest check to a Holder's
registered address.
<PAGE>
3. Paying Agent and Registrar. Initially, The Bank of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-registrar without notice to any Holder. The
Company may act in any such capacity.
4. Indenture and Guarantees. The Company issued the Notes under an
Indenture dated as of December 23, 1996 (the "Indenture") between the Company
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb), as in effect on the date of
execution of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms.
Capitalized and certain other terms used herein and not otherwise defused have
the meanings set forth in the Indenture. The Notes are unsecured general
obligations of the Company limited to $15,000,000 in aggregate principal amount.
Payment on each Note is guaranteed, jointly and severally, by the Guarantors
pursuant to Section 5.11 of the Indenture.
5. Optional Redemption. The Notes may not be redeemed prior to
December 31, 1998, but will be redeemable at the option of the Company, in whole
or in part, at any time on or after December 31, 1998, at the following
redemption prices (expressed as percentages of principal amount), together with
accrued and unpaid interest, if any, thereon to the redemption date, if redeemed
during the 12month period beginning December 31:
<TABLE>
<S> <C>
Optional
Year Redemption Price
------------- ----------------------
1998 108.0%
1999 106.4%
2000 104.8%
2001 103.2%
2002 101.6%
</TABLE>
If fewer than all of the Notes are to be redeemed at any time,
selection of the Notes to be redeemed will be made by the Trustee from among the
outstanding Notes on a pro rata basis, by lot or by any other method permitted
in the Indenture. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder whose Notes are to
be redeemed at the registered address of such Holder. On and after the
redemption date, interest shall cease to accrue on the Notes or portions thereof
called for redemption.
<PAGE>
6. Offers to Repurchase.
(a) Change of Control Offer. In accordance with the terms of the
Indenture, upon the occurrence of a Change of Control, the Company will be
required to offer (a "Change of Control Offer") to purchase all outstanding
Notes at a purchase price equal to 101% of the aggregate principal amount of the
Notes, plus accrued and unpaid interest to the date of purchase.
A Holder of Notes may tender or refrain from tendering all or any
portion of his Notes at his discretion by completing the form entitled "OPTION
OF HOLDER TO ELECT PURCHASE" appearing below on this Note. Any portion of Notes
tendered must be in integral multiples of $1,000.
(b) Asset Sale Offer. In accordance with the terms of the Indenture,
if the Company or any Restricted Subsidiary consummates an Asset Sale, the
Company will, under certain circumstances, be required to utilize a portion of
the net proceeds received from such Asset Sale to offer to purchase Notes at a
purchase price equal to 100% of the aggregate principal amount of the Notes plus
accrued interest to the date fixed for the purchase.
A Holder of Notes may tender or refrain from tendering all or any
portion of his Notes at his discretion by completing the form entitled "OPTION
OF HOLDER TO ELECT PURCHASE" appearing below this Note. Any portion of Notes
tendered must be in integral multiples of $1,000.
Subject to the provisions described above and compliance with Article 6
of the Indenture, the Company may sell or otherwise dispose of all or
substantially all of its assets to a Successor that assumes all of the Company's
obligations under the Notes and Indenture, and thereafter be discharged from
such obligations.
7. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
8. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
9. Unclaimed Funds. If funds for the payment of principal or
interest remain unclaimed for two years, the Trustee and the Paying Agent will
repay the funds to the Company at its request. After that, all liability of the
Trustee and Paying Agent with respect to such funds shall cease.
<PAGE>
10. Discharge. The Company may be discharged from its
obligations under the Indenture and the Notes, except for certain provisions
thereof, upon satisfaction of certain conditions specified in the Indenture.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent (which
may include consents obtained in connection with a tender offer or exchange
offer for Notes) of the Holders of at least a majority in principal amount of
the Notes then outstanding, and any existing Default under, or compliance with
any provision of, the Indenture may be waived (other than any continuing Default
or Event of Default in the payment of interest on or the principal of the Notes,
or any failure to comply with the provisions of the Indenture relating to a
Change of Control Offer (as defined in the Indenture)) with the consent (which
may include consents obtained in connection with a tender offer or exchange
offer for Notes) of the Holders of a majority in principal amount of the Notes
then outstanding. Without the consent of any Holder, the Company and the
Trustee may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency; to provide for the assumption of the
Company's obligations to Holders in the case of a merger or acquisition; to
provide for uncertificated Notes in addition to or in place of certificated
Notes; to make any change that does not adversely affect the legal rights of any
Holder; to surrender any right or power conferred upon the Company in the
Indenture or the Notes; or to modify, eliminate or add to the provisions of the
Indenture or the Notes to such extent as shall be necessary to effect the
qualification of the Indenture under the TIA or under any similar federal
statute hereafter enacted.
The right of any Holder to participate in any consent required or sought
Pursuant to any provision of the Indenture (and the obligation of the Company to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Notes with respect to which such consent is required or sought as of a date
identified by the Trustee or the Company in a notice furnished to Holder in
accordance with the terms of the Indenture.
Without the consent of each Holder affected, the Company may not take
certain actions, including: (i) reduce the amount of Notes whose Holders must
Consent to an amendment, supplement or waiver; (ii) reduce the rate of or change
the time for payment of interest, including default interest, on any Note; (iii)
reduce the Principal of or change the fixed maturity of any Note or alter the
provisions with respect to optional redemption or mandatory repurchase of the
Notes under the Indenture; (iv) make any Note payable in money other than that
stated in this Note; (v) make any change in certain provisions of the Indenture
regarding a Change of Control, a waiver of past Defaults and the rights of
Holders to receive payment; or (vi) waive a continuing Default or Event of
Default in the payment of principal of or interest on the Notes or that resulted
from a failure to comply with the Change of Control provisions of the Indenture.
12. Restrictive Covenants. The Indenture contains certain covenants
which, among other things, limit: (i) the incurrence of additional Indebtedness
by the Company and Restricted Subsidiaries; (ii) the payment of dividends; (iii)
the repurchase of capital stock or subordinated indebtedness; (iv) the making of
certain other distributions, loans and investments;
<PAGE>
(v) the sale of assets and the sale of the stock of Restricted Subsidiaries;
(vi) the creation of restrictions on the ability of Restricted Subsidiaries, to
pay dividends or make other payments to the Company; and (vii) the ability of
the Company and Restricted Subsidiaries to enter into certain transactions with
Affiliates or to merge, consolidate or transfer substantially all assets. These
restrictions are subject to important qualifications and exceptions. The Company
must report to the Trustee on compliance with such limitations.
13. Defaults and Remedies. Events of Default include: default in
payment of interest on the Notes for 30 days; default in payment of principal on
the Notes; failure by the Company for 60 days after notice to it to comply with
any of its other agreements in the Indenture or the Notes; certain defaults
under other Indebtedness; certain final judgements that remain undercharged; and
certain events of bankruptcy or insolvency. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be immediately due and
payable for an amount equal to 100% of the principal amount of the Notes plus
accrued interest to the date of payment, except that in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes become due and payable immediately without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
14. Trustee Dealing with Company. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
15. No Records Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
-----
based on, in respect of or by reason of such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (-- tenants in common), TEN ENT (--
tenants by the entireties), JT TEN (-- joint tenants with right of survivorship
and not as tenants in common), CUST (--Custodian), and U/G/WA (-- Uniform Gifts
to Minors Act).
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Commission on Uniform Security Identification Procedures, the Company has caused
CUSIP
<PAGE>
Numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made to the accuracy of such numbers as provided on
the Notes, and reliance may be placed only on the other identification numbers
printed thereon.
19. Governing Law. THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22031-1207
Attention: Executive Vice President and
Chief Financial Officer
<PAGE>
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the Note upon
which this notation is endorsed and each hereinafter referred to as a
"Guarantor," which term includes any successor to a Guarantor) have
unconditionally guaranteed (such guarantee by each Guarantor being referred to
herein as the "Guarantee") (a) the full and prompt payment of the principal of
and premium, if any, on any Note when and as the same shall come due and
payable, whether at the stated maturity thereof, by acceleration, redemption or
otherwise and (b) the full and prompt payment of any interest on any Note when
and as the same shall become due, according to the terms of such Note and the
Indenture.
No stockholder, officer, director or incorporator, as such, past, present or
future, of any Guarantor shall have any liability under this Guarantee by reason
of his or its status as such stockholder, officer, director or incorporator.
The Guarantees shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the guarantees are noted
shall have been executed by the Trustee under the indenture by the manual
signature of its authorized officers.
GUARANTORS:
CYGNA CONSULTING ENGINEERS AND
PROJECTS MANAGEMENT, INC.
Attest: BY:
------------------------------------
Name:
Title:
ICF KAISER GOVERNMENT PROGRAMS, INC.
Attest: BY:
------------------------------------
Name:
Title:
PCI OPERATING COMPANY, INC.
Attest: BY:
------------------------------------
Name:
Title:
SYSTEMS APPLICATIONS INTERNATIONAL, INC.
Attest: BY:
------------------------------------
Name:
Title:
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- ------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or tax I.D. No.)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint___________________________to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date:___________________
Your Signature: ______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to an Asset Sale Offer or a Change in Control Offer, please execute and
return this form to the Company.
If you want to elect to have only part of the Note purchased by the
Company pursuant to the Indenture, state the amount you elect to have purchased:
$______________________
Date: ______________________
Your Signature: ______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:
<PAGE>
Exhibit 21
ICF KAISER INTERNATIONAL, INC.
9300 Lee Highway, Fairfax, Virginia 22031
(703) 934-3600
ICF Kaiser International, Inc.'s consolidated subsidiaries at April 12,
1999, are listed below. Consolidated subsidiaries which are less than wholly
owned are indicated by the ownership percentage figure in parentheses following
the name of the consolidated subsidiary.
<TABLE>
<CAPTION>
Jurisdiction
Consolidated Subsidiary of Formation
- ------------------------- --------------
<S> <C> <C>
I. Clement International Corporation Delaware
I. Cygna Group, Inc. Delaware
II. Liability Risk Management, Inc. California
I. EDA, Incorporated Maryland
I. HBG Hawaii, Inc. Delaware
I. HBG International, Inc. Delaware
I. ICF Consulting Group, Inc. Delaware
I. ICF Incorporated Delaware
II. CF/EKO (63.0%) Russia
I. ICF Information Technology, Inc. Delaware
II. Phase Linear Systems Incorporated Delaware
I. ICF Kaiser Development Corporation, Inc. Delaware
II. Global Trade & Investment, Inc. Delaware
I. ICF Kaiser Engineers Group, Inc. Delaware
II. Henry J. Kaiser Company Nevada
II. ICF Kaiser Engineers, Inc. Ohio
III. Henry J. Kaiser Company (Canada) Ltd. Canada
III. ICF Kaiser EFM Holdings, Inc. Delaware
III. ICF Kaiser Engineers & Builders, Inc. Delaware
III. ICF Kaiser Engineers (California) Corporation Delaware
III. ICF Kaiser Engineers Corporation New York
III. ICF Kaiser Engineers of Michigan, Inc. Michigan
III. ICF Kaiser International Planning & Design, Inc. (33 1/3%) Pennsylvania
III. ICF Kaiser Overseas Engineering, Inc. Delaware
III. Kaiser Engineers Limited United Kingdom
IV. Kaiser Engineers Technical Services Limited (80%) Cyprus
III. Kaiser Engineers and Constructors, Inc. Nevada
IV. ICF Kaiser Engenharia e Participacoes Ltda. (99.9%) Brazil
V. ICF Kaiser Construcoes e Engenharia Ltda (99.989%) Brazil
IV. ICF Pty. Ltd. (50%) Australia
IV. Kaiser Engineers Limited (0.02%) U.K.
IV. Kaiser Engenharia S.A. (50%) Portugal
V. ICF Kaiser Construcoes e Engenharia Ltda (0.01%) Brazil
IV. Kaiser Engineers (NZ) Ltd (1%) New Zealand
IV. Kaiser Engineers Pty. Ltd. (50%) Australia
V. KWA Kenwalt (50%) Australia
V. ICF Kaiser Aluterv KFT Hungary
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
Consolidated Subsidiary of Formation
- ------------------------- --------------
<S> <C> <C>
V. ICF Kaiser Engineers Asia Pacific Pty Ltd Australia
V. ICF Kaiser Engineers (Hong Kong) Ltd Hong Kong
V. ICF Kaiser Engineers (Singapore) Pte Ltd Singapore
V. Kaiser Engineers (NZ) Limited (99%) New Zealand
III. Kaiser Engineers International, Inc. Nevada
IV. ICF Pty. Ltd. (50%) Australia
IV. ICF Kaiser Engenharia e Participacoes Ltda.(0.1%) Brazil
IV. ICF Kaiser Panama S.A. Panama
IV. Kaiser Engenharia S.A. (50%) Portugal
IV. Kaiser Engineers Pty. Ltd. (50%) Australia
III. Kaiser Engineers Limited (99.98%) U.K.
IV. Kaiser Engineers Technical Services Limited (80%) Cyprus
IV. Kaiser Engineers (UK) Limited (50%) U.K.
III. Kaiser Engineers (UK) Limited (50%) U.K.
IV. Kaiser Engineers Technical Services Limited (20%) Cyprus
III. KE Services Corporation Delaware
III. Kaiser Engenharia e Constructoes Limitada Brazil
II. International Waste Energy Systems, Inc. Delaware
II. KE Livermore, Inc. Delaware
I. ICF Kaiser Engineers Massachusetts, Inc. Delaware
I. ICF Kaiser Engineers Pacific, Inc. Nevada
I. ICF Kaiser Europe, Inc. Delaware
I. ICF Kaiser / Georgia Wilson, Inc. Delaware
I. ICF Kaiser Government Programs, Inc. Delaware
II. Kaiser-Hill Company, LLC (50%) Colorado
III. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware
II. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware
I. ICF Kaiser Hanford Company Delaware
I. ICF Kaiser Holdings Unlimited, Inc. Delaware
II. American Venture Investments Incorporated Delaware
III. American Venture Holdings, Inc. Delaware
II. Cygna Consulting Engineers and Project Management, Inc. California
II. Excell Development Construction, Inc. Delaware
II. ICF Kaiser DPI Holding Co., Inc. Delaware
II. ICF Kaiser Engineers Eastern Europe, Inc. Delaware
III. ICF Kaiser Netherlands B.V. (10%) Netherlands
II. ICF Kaiser Hunters Branch Leasing, Inc. Delaware
II. ICF Kaiser Netherlands B.V. (90%) Netherlands
II. ICF Leasing Corporation, Inc. Delaware
I. ICF Kaiser Servicios Ambientales, S.A. de C.V. (66 2/3%) Mexico
I. ICF Kaiser Technology Holdings, Inc. Delaware
II. ICF Kaiser Advanced Technology, Inc. Idaho
III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico
I. ICF Resources Incorporated Delaware
II. ICF R G.P. No. 1, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
Consolidated Subsidiary of Formation
- ------------------------- -------------
<S> <C> <C>
II. Public/Private Policy Analysis, Inc. Delaware
I. Monument Select Insurance Company Vermont
I. Systems Applications International, Inc. Delaware
I. The K.S. Crump Group, Inc. Delaware
I. Tudor Engineering Company Delaware
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,282,000
<SECURITIES> 0
<RECEIVABLES> 223,965,000
<ALLOWANCES> (9,653,000)
<INVENTORY> 0
<CURRENT-ASSETS> 343,088,000
<PP&E> 17,498,000
<DEPRECIATION> (13,184,000)
<TOTAL-ASSETS> 391,729,000
<CURRENT-LIABILITIES> 310,764,000
<BONDS> 137,610,000
0
0
<COMMON> 238,000
<OTHER-SE> (67,931,000)
<TOTAL-LIABILITY-AND-EQUITY> 391,729,000
<SALES> 0
<TOTAL-REVENUES> 227,017,000<F1>
<CGS> 0
<TOTAL-COSTS> 211,317,000
<OTHER-EXPENSES> 17,117,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,584,000
<INCOME-PRETAX> (7,001,000)
<INCOME-TAX> (1,020,000)
<INCOME-CONTINUING> (8,063,000)
<DISCONTINUED> 2,344,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,719,000)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
<FN>
<F1>Represents gross revenue which includes costs of certain services
subcontracted to third parties and other reimbursable direct project costs,
such as materials procured by the company on behalf of its customers. Gross
revenue also includes equity in net income of unconsolidated subsidiaries for
purpose of this schedule.
</FN>
</TABLE>
