<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, 2000
Commission File No. 1-12248
KAISER GROUP INTERNATIONAL, INC.
(formerly 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) 934-3300
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 15, 2000, there were 23,419,828 shares of Kaiser Group International,
Inc. Common Stock, par value $0.01 per share, outstanding.
<PAGE>
KAISER GROUP INTERNATIONAL, INC.
INDEX TO FORM 10-Q
Page
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999........................... 3
Consolidated Statements of Operations and Comprehensive (Loss)
Three Months Ended March 31, 2000 and 1999..................... 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999..................... 5
Notes to Consolidated Financial Statements..................... 6-14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 15-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 23
Part II - Other Information
Item 1. Legal Proceedings Item......................................... 23
Item 2. Changes in Securities and Use of Proceeds...................... 23
Item 3. Defaults Upon Senior Securities................................ 23
Item 4. Submission of Matters to a Vote of Security Holders............ 23
Item 5. Other Information.............................................. 23
Item 6. Exhibits and Reports on Form 8K................................ 24
2
<PAGE>
KAISER GROUP INTERNATIONAL, INC.
Consolidated Balance Sheets
(In thousands, except shares)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Uaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 19,969 $ 26,391
Restricted cash 16,425 16,386
Contract receivables, net 184,232 158,319
Prepaid expenses and other current assets 5,856 5,350
--------- ---------
Total Current Assets 226,482 206,446
--------- ---------
Fixed Assets
Furniture, equipment, and leaseholds 14,089 14,224
Less depreciation and amortization (11,320) (11,403)
--------- ---------
2,769 2,821
--------- ---------
Other Assets
Goodwill, net 17,323 17,581
Investments in and advances to affiliates 8,264 10,040
Notes receivable 6,550 6,550
Capitalized software development costs 1,507 1,601
Other 8,580 8,524
--------- ---------
42,224 44,296
--------- ---------
Total Assets $ 271,475 $ 253,563
========= =========
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
Accounts payable $ 142,227 $ 119,556
Accrued salaries and benefits 27,984 27,249
Other accrued expenses 23,857 26,921
Deferred revenue 6,363 9,015
Accrued interest 4,095 --
Income taxes payable 4,041 6,597
--------- ---------
Total Current Liabilities 208,567 189,338
Long-term Liabilities
Long-term debt 124,329 124,218
Other 7,489 7,577
--------- ---------
Total Liabilities 340,385 321,133
Commitments and Contingencies
Minority Interest 1,950 2,333
Shareholders' Equity (Deficit)
Preferred stock - -
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 23,474,828 and 23,655,500 shares 234 237
Additional paid-in capital 73,594 73,643
Accumulated deficit (143,007) (140,681)
Accumulated other comprehensive income (loss) (1,681) (3,102)
--------- ---------
Total Shareholders' Equity (Deficit) (70,860) (69,903)
--------- ---------
Total Liabilities and Shareholders' Equity (Deficit) $ 271,475 $ 253,563
========= =========
</TABLE>
See notes to consolidated financial statements.
3
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KAISER INTERNATIONAL, INC.
Consolidated Statements of Operations and Comprehensive (Loss)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Gross Revenue $ 218,574 $ 225,497
Subcontract and direct material costs (146,902) (162,858)
Equity in income of joint ventures and affiliated companies 280 1,520
--------- ---------
Service Revenue 71,952 64,159
Operating Expenses
Direct labor and fringe benefits 52,986 48,459
Selling, general and administrative 11,246 14,741
Depreciation and amortization 958 1,481
Restructuring charges 667 895
--------- ---------
Operating Income (Loss) 6,095 (1,417)
Other Income (Expense)
Interest income 676 268
Interest expense (4,222) (5,852)
--------- ---------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest 2,549 (7,001)
Income tax (provision) benefit (75) 1,020
--------- ---------
Income (Loss) From Continuing Operations 2,474 (5,981)
Before Minority Interest
Minority interest in net income of subsidiaries (4,800) (2,082)
--------- ---------
(Loss) From Continuing Operations (2,326) (8,063)
Income from discontinued operations (net of tax
in 1999 of $1,521) - 2,344
--------- ---------
Net (Loss) $ (2,326) $ (5,719)
========= =========
Basic and Fully Diluted Earnings (Loss) Per Share:
Continuing operations $(0.10) $(0.34)
Discontinued operations 0.00 0.10
--------- ---------
$(0.10) $(0.24)
========= =========
Weighted average shares for basic earnings per share 23,562 24,068
Effect of dilutive stock options - -
========= =========
Weighted average shares for diluted earnings per share 23,562 24,068
========= =========
Comprehensive (Loss)
Net (Loss) $(2,326) $(5,719)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments 1,421 467
--------- ---------
Total Comprehensive (Loss) $ (905) $ (5,252)
========= =========
</TABLE>
See notes to consolidated financial statements.
4
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KAISER GROUP INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Operating Activities
Net income (loss) $ (2,326) $ (5,719)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Income from discontinued operations - (2,344)
Depreciation and amortization 958 1,481
Provision (credit) for losses - (2,555)
Provision for deferred income taxes - 468
Note receivable write-off - 638
Earnings in excess of cash distributions from
joint ventures and affiliated companies - (137)
Minority interest in net income of subsidiaries 4,800 2,082
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Contract receivables, net (25,913) 19,880
Prepaid expenses and other current assets (506) (1,653)
Accounts payable and accrued expenses 20,306 11,550
Deferred revenue (2,652) (23,810)
Income tax payable (2,556) 275
Other operating activities 1,663 -
-------- --------
Net Cash (Used in) Provided by Operating Activities (6,226) 156
-------- --------
Investing Activities
Proceeds from sale of investment 977 --
Investments in net assets of discontinued operations - (596)
Purchases of fixed assets (135) (557)
-------- --------
Net Cash Provided by (Used in) Investing Activities 842 (1,153)
-------- --------
Financing Activities
Borrowings under revolving credit facility - 57,064
Principal payments on revolving credit facility - (50,942)
Change in book overdraft 4,072 (6,117)
Distribution of income to minority interest (5,183) 51
Proceeds from issuances of common stock - 38
-------- --------
Net Cash (Used in) Provided by Financing Activities (1,111) 94
-------- --------
Effect of Exchange Rate Changes on Cash 73 (63)
-------- --------
(Decrease) in Cash and Cash Equivalents (6,422) (966)
Cash and Cash Equivalents at Beginning of Period 26,391 15,248
-------- --------
Cash and Cash Equivalents at End of Period $ 19,969 $ 14,282
======== ========
Supplemental cash flow information is as follows:
Cash payments for interest $ - $ -
Cash payments for income taxes 2,556 28
Non-cash transactions:
Reacquisition of common stock - (247)
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
KAISER GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements of Kaiser Group
International, Inc. and subsidiaries (the Company), except for the December 31,
1999 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, 1999 and the information included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. Certain reclassifications have
been made to the prior period financial statements to conform them to the
presentation used in the March 31, 2000 financial statements.
2. Liquidity and Capital Resource Outlook
The accompanying financial statements have been prepared assuming that
Kaiser Group International, Inc. and Subsidiaries ("Kaiser" or "the Company")
will continue as a going concern. Significant losses on four large fixed price
projects to construct plants to produce nitric acid incurred primarily during
1998 within the Engineering Operations caused the Company to respond to the
resulting negative cash flows and to other operating losses experienced within
that Group, by implementing a corporate reorganization plan designed to
significantly restructure operations and restore profitability. In summary, the
components of the corporate reorganization plan developed by management and the
Board of Directors included:
. Divesting non-engineering operating units and reinvesting the proceeds in the
Company to provide working capital necessary to stabilize the retained
business activities - completed primarily in 1999;
. Reducing the Company's overhead cost structure that would remain after the
divestitures of the operating units referenced above - completed primarily in
1999; and;
. Revising the Company's capital structure, including substantial modification
of its outstanding debt, in order to eliminate barriers to securing new
business and improve accessibility to new sources of working capital.
Cash proceeds from the divestitures were subsequently used, in part, to
complete the nitric acid projects and to repay cash borrowings from a revolving
line of credit that had been used primarily to fund the project losses, as well
as for working capital needs accumulated by the Company's other growing
operating units prior to their 1999 divestitures. Also, in 1999, the Company
used some of the proceeds from the divestitures to repurchase $14.0 million of
$15.0 million in outstanding Senior Notes.
The Company currently has no working capital facility and is financing its
Engineering Operations' working capital needs through the use of cash from
operations, from the residual cash proceeds from the sale of its Consulting
Group completed in June 1999, and from distributions by its Kaiser-Hill
subsidiary. Based on (i) current expectations for near-term operating results,
(ii) its current available cash position and (iii) recent trends and projections
in liquidity and capital needs, management believes the Company has sufficient
short-term liquidity to bridge current operating needs until the implementation
of a modified debt restructuring, assuming that such a restructuring can be
accomplished within the reasonably near term. There is no assurance that a
successful restructuring can be accomplished.
Actions remaining critical to the Company's long-term liquidity include
completing a restructuring of its $125.0 million Senior Subordinated Notes prior
to the next interest payment due date of June 30, 2000, securing a sufficient
working capital facility with acceptable terms, obtaining successful outcomes
regarding significant contingent liabilities (see Note 5), and improving
operating results. Management believes that, if these steps can be achieved, the
Company will have sufficient liquidity generated by improved operating results,
substantially decreased interest expense and borrowings on a possible new credit
facility to meet its longer-term working capital requirements. The inability of
the Company to accomplish a combination of actions described above would have a
material adverse impact on the financial condition, operating results, and the
business.
The Company has continued negotiations with representatives of its Senior
Subordinated Notes and, while it has no assurance, believes it may be able to
implement a modified restructuring of those notes. Such a transaction could
involve an exchange of Senior Subordinated Notes for a combination of new common
stock and newly issued preferred stock. The Company believes that such a
restructuring would substantially improve its financial condition and provide a
basis for ongoing operations and continuation of the Company's turnaround.
However, such a restructuring would result in substantially more dilution of the
equity of existing common stockholders than the restructuring terms proposed
during the fall of 1999.
6
<PAGE>
While continuing negotiations with representatives of its Senior
Subordinated Noteholders, the Company has been exploring strategic alternatives,
including the possible sale of certain of its assets or businesses. The Company
is currently engaged in discussions with several potential purchasers concerning
the sale of its Engineering Operations in two separate transactions. The
Company has reached general understandings as to the scope and price range of
such transactions. However, the transactions remain subject to, among other
things, completion of diligence and successful negotiation of definitive
agreements. The Company also continues to explore strategic alternatives for
its interest in Kaiser-Hill Company, LLC. The Company presently believes that
one or more of the transactions under discussion will take place, but there can
be no assurance that any transaction concerning any of the Company's business
units will be completed. The Company expects to be able to reach a conclusion
with respect to its strategic direction and begin to implement its
reorganization, either with or without business unit sale transactions, prior to
the end of the second quarter of calendar year 2000.
The Company expects its financial condition to be materially affected by
the implementation of any debt restructuring or strategic alternatives. The
consummation of any debt restructuring, any transactions for the sale of
business units, or any combination of debt restructuring and business unit sale
transactions will likely be completed through a "prepackaged" plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan were
selected as the mechanism for completing the Company's restructuring, the
Company expects that it would have the support of the largest holders of its
Senior Subordinated Notes and, therefore, be able to implement the plan
relatively promptly. If the Company commences such a proceeding, the goals of
any such plan would be to (i) minimize adverse effects on Kaiser's ongoing
operations, trade creditors and employees, (ii) facilitate possible business
unit sale transactions, and (iii) result in a financially strengthened and
stable organization for purposes of ongoing operations.
The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the classification of liabilities that might result should the Company not be
successful in attempts to enact the critical actions summarized above.
3. 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.
4. 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. The accounting policies of the operating segments are the
same as those described in the Company's summary of significant accounting
policies.
Historical segment information has not been presented in the accompanying
financial statements for any of the business units that were divested in 1999
(Note 2). The Company's continuing business segments are:
. the Engineers and Constructors Group (E&C), which provides engineering,
construction management and project and program management services to
commercial and federal, state, and local entities in the areas of transit
and transportation, alumina and aluminum, facilities engineering and
management, iron and steel and microelectronics and clean technology;
. Kaiser-Hill Company, LLC (Kaiser-Hill), a 50% owned subsidiary, which
serves as the integrated management contractor at the U.S. Department of
Energy's Rocky Flats Environmental Technology Site near Denver, Colorado.
The Company, through a designated majority representation on Kaiser-Hill's
board of managers, has a controlling interest in Kaiser-Hill and therefore
consolidates Kaiser-Hill's results of operations with those of its only
other remaining business segment, E&C. On January 24, 2000, Kaiser-Hill was
awarded the follow-on Rocky Flats Contract (the Closure Contract). The
Closure Contract became effective February 1, 2000, essentially terminating
the predecessor contract that would otherwise have been executed through to
its original ending date of September 30, 2000. Correspondingly, certain
performance elements of the predecessor contract were shifted into the new
Closure Contract. Under the predecessor contract, Kaiser-Hill was awarded
and paid approximately $7.0 million of performance fee during the first
quarter of 2000. The Company recognized the entire $7.0 million award in
January 2000. As of January 31, 2000, the Company had recognized the entire
value of the predecessor contract.
7
<PAGE>
Financial data for the continuing business segments are as follows
(in thousands):
<TABLE>
<CAPTION>
Statements of Operations For the three months ended March 31,
- -------------------------------------------------------------
2000 (unaudited) Kaiser-Hill E&C Total
- --------------- ----------- -------- ---------
<S> <C> <C> <C>
Gross revenue......................................... $ 171,790 $ 46,784 $ 218,574
Subcontracts and materials.......................... (125,523) (21,379) (146,902)
Equity in unconsolidated subsidiaries............... -- 280 280
--------- -------- ---------
Service revenue....................................... 46,267 25,685 71,952
Operating expenses:
Direct labor and fringe............................. 36,772 16,214 52,986
Selling, general and administrative................. -- 11,246 11,246
Depreciation and amortization....................... -- 958 958
Restructuring charges............................... -- 667 667
--------- -------- ---------
Segment operating income (loss)....................... $ 9,495 $ (3,400) $ 6,095
========= ======== =========
1999 (unaudited)
- ----------------
Gross revenue......................................... $ 145,103 $ 80,394 $ 225,497
Subcontracts and materials.......................... (110,341) (52,517) (162,858)
Equity in unconsolidated subsidiaries............... -- 1,520 1,520
--------- -------- ---------
Service revenue....................................... 34,762 29,397 64,159
Operating expenses:
Direct labor and fringe............................. 30,622 17,837 48,459
Selling, general and administrative................. -- 14,741 14,741
Depreciation and amortization....................... -- 1,481 1,481
Restructuring charges............................... -- 895 895
--------- -------- ---------
Segment operating income (loss) $ 4,140 $ (5,557) $ (1,417)
========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
Kaiser-Hill E&C
------------------------------ -----------------------------
March 31, December 31 March 31, December 31
Balance Sheets 2000 1999 2000 1999
- -------------- --------- ---------------- --------- -----------------
Assets (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 6,338 $ 5,243 $ 13,631 $ 21,148
Restricted cash................................... -- -- 16,425 16,386
Contract receivables, net......................... 127,715 104,740 56,517 53,579
Other current assets.............................. 91 126 5,765 5,224
Other long-term assets............................ 496 587 44,497 46,530
--------- -------- --------- --------
Total Assets $ 134,640 $110,696 $ 136,835 $142,867
Liabilities
Accounts payable.................................. 115,845 91,313 26,382 28,743
Accrued salaries and benefits..................... 14,896 14,717 13,088 12,532
Other current liabilities......................... -- -- 38,356 42,533
Other long-term liabilities....................... -- -- 131,818 131,795
--------- -------- --------- --------
Total Liabilities 130,741 106,030 209,644 215,603
Commitments and contingencies.........................
Minority Interest..................................... 1,950 2,333 -- --
--------- -------- --------- --------
Net Assets/(Liabilities).............................. $ 1,949 $ 2,333 $ (72,809) $(72,736)
========= ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows Kaiser-Hill E&C
- ---------------------------------- ------------------------------ -----------------------------
For the three months ended March 31: 2000 1999 2000 1999
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities..... $ 6,278 $ 2,102 $ (12,504) $ (1,946)
Net cash provided by (used in) investing activities..... -- -- 842 (1,153)
Net cash (used in) provided by financing activities..... (5,183) -- 4,072 94
Effect of exchange rate changes on cash................. -- -- 73 (63)
--------- -------- --------- --------
Increase (decrease) in cash and cash equivalents........... 1,095 2,102 (7,517) (3,068)
Cash and cash equivalents at beginning of period........... 5,243 3,644 21,148 11,604
--------- -------- --------- --------
Cash and cash equivalents at end of period................. $ 6,338 $ 5,746 $ 13,631 $ 8,536
========= ======== ========= ========
</TABLE>
8
<PAGE>
5. Contingencies
Bath Contingency: In March 1998, the Company entered into a $187 million
maximum price contract with Bath Iron Works 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
customer has also subsequently asserted a claim based on alleged differing site
conditions that allegedly should have been identified by the Company. In March
2000, Bath filed a combined claim against the Company in U.S. District Court in
the District of Maine requesting payment for $38 million. The Company continues
to object to Bath's allegations and is vigorously defending its position.
Although no resolution has been reached, management has recorded a provision in
the financial statements for the Company's proposed settlement of the non-
insured portion of the loss.
Acquisition Contingency: The 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.
In December, 1999, the Company and certain former Company employees and
shareholders of ICT Spectrum agreed to amend the applicable agreements in a
manner that had the result of reducing the amount of the taxable gain created by
former shareholder-employees' involuntary departures from the Company. As
permitted per the agreement, the shareholders agreed to allow the Company to
retain some of the vested shares as payment of the income tax withholding in
lieu of cash. In total, the Company retained 255,669 shares and recorded the
transaction as a $1.37 million reduction to goodwill and paid-in-capital.
Given that the quoted fair market value of the Company's common stock at
May 19, 2000 was $0.19 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 (now adjusted downward by
the 255,669 retained shares to 1,244,331), would not completely extinguish the
remaining purchase price contingency. In this event, the Company will need to
fund the contingency in cash and would need 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 in the
U.S. District Court for the District of Idaho 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. The Company subsequently
filed a motion to dismiss the case. On March 14, 2000, the court ordered the
plaintiff to address certain claim deficiencies. The plaintiff filed an amended
complaint on May 15, 2000. The court is expected to consider the amended
complaint in light of the Company's motion to dismiss and complete its ruling
relative to the Company's motion.
Litigation, Claims and Assessments Contingencies: In the course of the
Company's normal business activities, various claims or charges have been
asserted and litigation commenced against the Company arising from or related to
properties, injuries to persons, and breaches of contract, as well as claims
related to acquisitions and dispositions. Claimed amounts may not bear any
reasonable relationship to the merits of the claim or to a final court award. In
the opinion of management, 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>
Prior to the divestitures of its EFM and Consulting Groups, the Company had
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 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 guaranty contingencies: 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.
6. Guarantor Subsidiaries
Pursuant to SEC rules regarding publicly held debt, the Company is required
to provide financial information for wholly owned subsidiaries of Kaiser Group
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; Kaiser Government
Programs, Inc; Global Trade & Investment, Inc; Kaiser Europe, Inc;
Kaiser/Georgia Wilson, Inc; Kaiser Overseas Engineering, Inc; EDA Incorporated,
Inc.; Kaiser Engineers Pacific, Inc; and Kaiser Advanced Technology, Inc.
Kaiser Remediation Company, a former Guarantor, was included in the sale of
the EFM Group to IT on April 9, 1999, Systems Applications International, Inc.,
also a former Guarantor, was included in the sale of the Consulting Group on
June 30, 1999 and the majority of the assets of EDA Incorporated, Inc. were sold
in an unrelated transaction on August 13, 1999. The guarantor information has
been updated to reflect these transactions.
Condensed consolidating financial information for Kaiser Group
International, Inc. (Parent Company), the Subsidiary Guarantors, and the Non-
Guarantor Subsidiaries follow on pages 11-14. The information, except for the
December 31, 1999 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>
Kaiser Group International, Inc.
Condensed Consolidating Balance Sheet
March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Parent Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
---------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,998 $ 9,528 $ 7,443 $ - $ 19,969
Restricted cash 13,822 - 2,603 - 16,425
Contract receivables, net (4,271) 129,293 59,210 - 184,232
Intercompany receivables, net 195,309 21,694 (217,003) -
Prepaid expenses and other current assets 436 612 4,808 - 5,856
--------- -------- --------- ---------
Total Current Assets 208,294 161,127 (142,939) - 226,482
--------- -------- --------- -------- ---------
Fixed Assets
Furniture, equipment, and leaseholds 3,608 1,115 9,366 - 14,089
Less depreciation and amortization (3,078) (1,029) (7,213) - (11,320)
--------- -------- --------- -------- ---------
530 86 2,153 - 2,769
--------- -------- --------- -------- ---------
Other Assets
Goodwill, net - 2,950 14,373 - 17,323
Investment in and advances to affiliates (139,262) 1 8,113 139,412 8,264
Notes receivable 6,550 - - - 6,550
Capitalized software development costs 1,507 - - 1,507
Other 2,889 583 5,108 - 8,580
--------- -------- --------- -------- ---------
(128,316) 3,534 27,594 139,412 42,224
--------- -------- --------- -------- ---------
Total Assets $ 80,508 $164,747 $(113,192) $139,412 $ 271,475
========= ======== ========= ======== =========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other accrued expenses $ 20,190 $118,411 $ 27,483 - $ 166,084
Accrued salaries and employee benefits (12,582) 17,134 23,432 - 27,984
Interest payable 4,095 - - - 4,095
Other 8,572 (3,160) 4,992 - 10,404
--------- -------- --------- -------- ---------
Total Current Liabilities 20,275 132,385 55,907 - 208,567
Long-term Liabilities
Long-term debt, less current portion 124,328 - 1 - 124,329
Other 5,250 - 2,239 - 7,489
--------- -------- --------- -------- ---------
Total Liabilities 149,853 132,385 58,147 - 340,385
--------- -------- --------- -------- ---------
Minority Interests in Subsidiaries - 1,950 - - 1,950
Shareholders' Equity
Common Stock 224 6,809 114 (6,913) 234
Additional Paid-in Capital 73,595 2,372 48,266 (50,639) 73,594
Accumulated Earnings (Deficit) (143,164) 21,591 (218,398) 196,964 (143,007)
Other Equity - (360) (1,321) - (1,681)
--------- -------- --------- -------- ---------
Total Shareholders' Equity (69,345) 30,412 (171,339) 139,412 (70,860)
--------- -------- --------- -------- ---------
Total Liabilities and Shareholders' Equity $ 80,508 $164,747 $(113,192) $139,412 $ 271,475
========= ======== ========= ======== =========
</TABLE>
11
<PAGE>
Kaiser Group International, Inc.
<TABLE>
<CAPTION>
Kaiser Group
International
Parent Subsidiary Non-Guarantor Inc.
Condensed Consolidating Statement of Operations Company Guarantors Subsidiaries Eliminations Consolidated
Three Months Ended March 31, 2000 --------- ---------- ------------ ------------- ------------
(In thousands) (Unaudited)
<S> <C> <C> <C> <C> <C>
Gross Revenue $ 1,762 $ 175,743 $ 41,069 $ - $ 218,574
Subcontract and direct material costs (1,754) (128,214) (16,934) - (146,902)
Equity in net income of unconsolidated subsidiaries 5,799 - 307 (5,826) 280
------- --------- -------- ------------ ---------
Service Revenue 5,807 47,529 24,442 (5,826) 71,952
Operating Expenses
Operating expenses 3,367 37,697 23,168 - 64,232
Depreciation and amortization 242 89 627 - 958
Restructuring charges 667 - - - 667
------- --------- -------- ------------ ---------
Operating Income (Loss) 1,531 9,743 647 (5,826) 6,095
Other Income (Expense)
Interest income 350 116 210 - 676
Interest expense (4,207) (12) (3) - (4,222)
------- --------- -------- ------------ ---------
Income (Loss) Before Income Taxes
and Minority Interest (2,326) 9,847 854 (5,826) 2,549
Income tax (expense) benefit - - (75) - (75)
------- --------- -------- ------------ ---------
Income (Loss) Before Minority Interest (2,326) 9,847 779 (5,826) 2,474
Minority interests in net income of subsidiaries - (4,800) - - (4,800)
------- --------- -------- ------------ ---------
Income (Loss) $(2,326) $ 5,047 $ 779 $(5,826) $ (2,326)
======= ========= ======== ============ =========
</TABLE>
<TABLE>
<CAPTION>
Kaiser Group
Condensed Consolidating Statement of Cash Flows International
Three Months Ended March 31, 2000 Parent Subsidiary Non-Guarantor Inc.
(In thousands) Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------ ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Cash Provided by (Used in) Operating Activities $(12,456) $ 6,703 $ (473) $ - $(6,226)
-------- ------- ------ -------- -------
Investing Activities
Sales of subsidiaries and/or investments - - 977 - 977
Purchases of fixed assets (90) - (45) - (135)
-------- ------- ------ -------- -------
Net Cash Provided by (Used in) Investing Activities (90) - 932 - 842
-------- ------- ------ -------- -------
Financing Activities
Change in book overdraft 4,072 - - - 4,072
Distribution of income to minority interest - (5,183) - - (5,183)
-------- ------- ------ -------- -------
Net Cash Provided by (Used in) Financing Activities 4,072 (5,183) - - (1,111)
-------- ------- ------ -------- -------
Effect of Exchange Rate Changes on Cash - - 73 - 73
-------- ------- ------ -------- -------
Increase in Cash and Cash Equivalents (8,474) 1,520 532 - (6,422)
Cash and Cash Equivalents at Beginning of Period 11,472 8,008 6,911 - 26,391
-------- ------- ------ -------- -------
Cash and Cash Equivalents at End of Period $ 2,998 $ 9,528 $7,443 $ - $19,969
======== ======= ====== ======== =======
</TABLE>
12
<PAGE>
KAISER GROUP INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
As of December 31, 1999
Values in this worksheet are in thousands, except where noted.
Kaiser Group
International,
Parent Subsidiary Non-Guarantor Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 11,472 $ 8,008 $ 6,911 $ -- $ 26,391
Restricted cash 13,816 -- 2,570 -- 16,386
Contract receivables, net (3,698) 106,841 55,176 -- 158,319
Intercompany receivables, net 194,308 17,466 (211,774) -- --
Prepaid expenses and other current assets 554 949 3,847 -- 5,350
--------- -------- --------- -------- ---------
Total Current Assets 216,452 133,264 (143,270) -- 206,446
Fixed Assets
Furniture, equipment, and leasehold improvements 3,520 1,115 9,589 -- 14,224
Less depreciation and amortization (3,057) (1,013) (7,333) -- (11,403)
--------- -------- --------- -------- ---------
463 102 2,256 -- 2,821
Other Assets
Goodwill, net -- 3,029 14,552 -- 17,581
Investment in and advances to affiliates (144,683) 1 8,844 145,878 10,040
Notes receivable 6,550 -- -- -- 6,550
Capitalized software development costs 1,601 -- -- -- 1,601
Other 3,403 587 4,534 -- 8,524
--------- -------- --------- -------- ---------
(133,129) 3,617 27,930 145,878 44,296
--------- -------- --------- -------- ---------
Total Assets $ 83,786 $136,983 $(113,084) $145,878 $ 253,563
========= ======== ========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other accrued expenses $ 21,587 $ 94,542 $ 30,348 $ -- $ 146,477
Accrued salaries and employee benefits (11,788) 17,126 21,911 -- 27,249
Other 11,956 (2,382) 6,038 -- 15,612
--------- -------- --------- -------- ---------
Total Current Liabilities 21,755 109,286 58,297 -- 189,338
Long-term Liabilities
Long-term debt, less current portion 124,217 -- 1 -- 124,218
Other 4,781 -- 2,796 -- 7,577
--------- -------- --------- -------- ---------
Total Liabilities 150,753 109,286 61,094 -- 321,133
--------- -------- --------- -------- ---------
Minority interests in subsidiaries -- 2,333 -- -- 2,333
Shareholders' equity
Common stock 227 6,809 114 (6,913) 237
Additional paid-in capital 73,644 2,372 48,266 (50,639) 73,643
Accumulated earnings (deficit) (140,838) 16,545 (219,818) 203,430 (140,681)
Accumulated other comprehensive (loss) -- (362) (2,740) -- (3,102)
--------- -------- --------- -------- ---------
Total Shareholders' Equity (Deficit) (66,967) 25,364 (174,178) 145,878 (69,903)
--------- -------- --------- -------- ---------
Total Liabilities and Shareholders' Equity (Deficit) $ 83,786 $136,983 $(113,084) $145,878 $ 253,563
========= ======== ========= ======== =========
</TABLE>
13
<PAGE>
Kaiser Group International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Kaiser Group
Condensed Consolidating Statement of Operations International,
Three Months Ended March 31, 1999 Parent Subsidiary Non-Guarantor Discontinued Inc.
(In thousands) Company Guarantors Subsidiaries Operations Eliminations Consolidated
------- ---------- ------------- ------------ ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Gross Revenue $ 21 $ 156,509 $125,368 $(56,401) $ - $ 225,497
Subcontract and direct material costs (71) (116,301) (67,942) 21,456 - (162,858)
Equity in net income of unconsolidated
subsidiaries 4,109 - 2,608 - (5,197) 1,520
------- --------- -------- -------- --------- ---------
Service Revenue 4,059 40,208 60,034 (34,945) (5,197) 64,159
Operating Expenses
Operating expenses 2,362 33,406 57,718 (30,286) - 63,200
Depreciation and amortization 780 245 1,251 (795) - 1,481
Other unusual charges 895 - - - - 895
------- --------- -------- -------- --------- ---------
Operating Income (Loss) 22 6,557 1,065 (3,864) (5,197) (1,417)
Other Income (Expense)
Interest income 57 77 134 - - 268
Interest expense (5,798) (46) (8) - - (5,852)
------- --------- -------- -------- --------- ---------
Income (Loss) From Continuing Operations
Before Income Taxes and Minority Interest (5,719) 6,588 1,191 (3,864) (5,197) (7,001)
Income tax expense (benefit) 0 13 487 (1,520) - (1,020)
------- --------- -------- -------- --------- ---------
Income (Loss) From Continuing Operations
Before Minority Interest (5,719) 6,575 704 (2,344) (5,197) (5,981)
Minority interests in net income of
subsidiaries - 2,082 - - - 2,082
------- --------- -------- -------- --------- ---------
Income (Loss) Before Discontinued Operations (5,719) 4,493 704 (2,344) (5,197) (8,063)
Income from discontinued operations
(net of tax) - - - 2,344 - 2,344
------- --------- -------- -------- --------- ---------
Net Income (Loss) $(5,719) $ 4,493 $ 704 $ - $ (5,197) $ (5,719)
======= ========= ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows Kaiser Group
Three Months Ended March 31, 1999 International
(In thousands) Parent Subsidiary Non-Guarantor Discontinued Inc.
Company Guarantors Subsidiaries Operations Eliminations Consolidated
------- ---------- ------------ ----------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Cash Provided by (Used in) Operating
Activities $ (2,017) $ 1,704 $ 4,697 $ (4,228) $ - $ 156
-------- ------- -------- -------- --------- --------
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) - (596)
Purchases of fixed assets - - (1,007) 450 - (557)
------- --------- -------- -------- --------- --------
Net Cash Provided by (Used in) Investing
Activities - - (5,381) 4,228 - (1,153)
------- --------- -------- -------- --------- --------
Financing Activities:
Borrowings under credit facility 57,064 - - - - 57,064
Principal payments on credit facility (50,942) - - - - (50,942)
Change in book overdraft (6,117) - - - - (6,117)
Distribution of income to minority interest - 51 - - - 51
Proceeds from issuances of common stock 38 - - - - 38
------- --------- -------- -------- -------- ---------
Net Cash Provided by (Used in) Financing
Activities 43 51 - - - 94
------- --------- -------- -------- -------- ---------
Effect of Exchange Rate Changes on Cash - - (63) - - (63)
------- --------- -------- -------- -------- ---------
Increase (Decrease) in Cash and Cash
Equivalents (1,974) 1,755 (747) - - (966)
------- --------- -------- -------- -------- ---------
Cash and Cash Equivalents at Beginning of
Period 2,414 3,814 9,039 (19) - 15,248
------- --------- -------- -------- -------- ---------
Cash and Cash Equivalents at End of Period $ 440 $ 5,569 $ 8,292 $ (19) $ - $ 14,282
======= ========= ======== ======== ========= =========
</TABLE>
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Status of Corporate Reorganization
The Company has continued negotiations with representatives of its
Senior Subordinated Notes and, while it has no assurance, believes it may be
able to implement a modified restructuring of those notes. Such a transaction
could involve an exchange of Senior Subordinated Notes for a combination of new
common stock and newly issued preferred stock. The Company believes that such a
restructuring would substantially improve its financial condition and provide a
basis for ongoing operations and continuation of the Company's turnaround.
However, such a restructuring would result in substantially more dilution of the
equity of existing common stockholders than the restructuring terms proposed
during the fall of 1999.
While continuing negotiations with representatives of its Senior
Subordinated Noteholders, the Company has been exploring strategic alternatives,
including the possible sale of certain of its assets or businesses. The Company
is currently engaged in discussions with several potential purchasers concerning
the sale of its Engineering Operations in two separate transactions. The
Company has reached general understandings as to the scope and price range of
such transactions. However, the transactions remain subject to, among other
things, completion of diligence and successful negotiation of definitive
agreements. The Company also continues to explore strategic alternatives for
its interest in Kaiser-Hill Company, LLC. The Company presently believes that
one or more of the transactions under discussion will take place, but there can
be no assurance that any transaction concerning any of the Company's business
units will be completed. The Company expects to be able to reach a conclusion
with respect to its strategic direction and begin to implement its
reorganization, either with or without business unit sale transactions, prior to
the end of the second quarter of calendar year 2000.
The Company expects its financial condition to be materially affected
by the implementation of any debt restructuring or strategic alternatives. The
consummation of any debt restructuring, any transactions for the sale of
business units, or any combination of debt restructuring and business unit sale
transactions will likely be completed through a "prepackaged" plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan were
selected as the mechanism for completing the Company's restructuring, the
Company expects that it would have the support of the largest holders of its
Senior Subordinated Notes and, therefore, be able to implement the plan
relatively promptly. If the Company commences such a proceeding, the goals of
any such plan would be to (i) minimize adverse effects on Kaiser's ongoing
operations, trade creditors and employees, (ii) facilitate possible business
unit sale transactions, and (iii) result in a financially strengthened and
stable organization for purposes of ongoing operations.
Results of Operations
The Company's business is currently comprised of its Engineering
Operations and its 50% interest in the Kaiser-Hill subsidiary. The following
discussions separately address the operating results of the two different
operations. In all cases, if necessary, conforming changes to current period
presentation formats have been made to the historical results presented.
Kaiser-Hill
Kaiser-Hill is a 50% owned joint venture between Kaiser Group
International, Inc. and CH2M Hill, formed solely to perform the U.S. Department
of Energy's Rocky Flats Closure Project (the Rocky Flats Contract) initially
awarded in late 1995. The Kaiser-Hill operating results for each of the three
months ended March 31 were as follows (in thousands):
<TABLE>
<CAPTION>
Kaiser-Hill 2000 1999
--------- ---------
<S> <C> <C>
Gross Revenue.................. $ 171,790 $ 145,103
Subcontracts and materials... (125,523) (110,341)
--------- ---------
Service Revenue.............. 46,267 34,762
Operating Expenses:
Direct labor and fringe...... 36,772 30,622
--------- ---------
Operating Income............... $ 9,495 $ 4,140
========= =========
</TABLE>
The Rocky Flats Contract is primarily cost-reimbursable in nature, but
it also contains certain minimum and incentive fee elements based on qualitative
and quantitative factors of actual performance levels compared to annually
negotiated and established benchmarks or milestones. Accordingly, apart from a
shift of some performance milestones from the fourth quarter of 1999 into the
first quarter of 2000, fluctuations in gross and service revenue earned by
Kaiser-Hill during the comparable periods above were largely reflective of
increased levels of reimbursable subcontractor costs, i.e., pass-throughs, being
incurred
15
<PAGE>
as the contract progress continued and as the term of the contract
neared its original completion date of June 30, 2000. Although annual operating
results are not directly comparable because of changes in the underlying
performance milestones that are established annually by the DOE, the service
revenue and operating income increases from 1999 to 2000 are largely the result
of the January 24, 2000 award of the new Rocky Flats Closure Contract, effective
February 1, 2000. The new Closure Contract essentially terminated the
predecessor contract that would otherwise have been executed through to its
original ending date of September 30, 2000. Correspondingly, certain performance
elements of the predecessor contract were shifted into the new Closure Contract.
Under the predecessor contract, Kaiser-Hill was awarded and paid approximately
$7.0 million of performance fee during the first quarter of 2000. The Company
recognized the entire $7.0 million award in January 2000. As of January 31,
2000, the Company had recognized the entire value of the predecessor contract.
On January 24, 2000, Kaiser-Hill was awarded the follow-on Rocky Flats
Contract pursuant to which Kaiser-Hill will provide services through to closure
of the Rocky Flats site (the Closure Contract). The Closure Contract became
effective February 1, 2000, essentially terminating the remaining period of the
original contract. The economic terms of the Closure Contract are significantly
different from the original contract in that Kaiser-Hill will earn revenue based
on the actual cost of physical completion and will earn a performance fee based
on a combination of the actual cost of completion and the actual date of
physical completion, both as compared to contracted targets. The Closure
Contract fee may range from $150.0 million to $460.0 million based on Kaiser-
Hill's costs falling within the range of targeted completion cost of $3.6
billion to $4.8 billion, respectively, if completed within various dates between
March 31, 2006 - March 31, 2007. Physical completion above the target cost
would result in a reduction to the fee whereby Kaiser-Hill will share 30% in all
costs incurred after such date, subject to a maximum Kaiser-Hill liability of
$20.0 million. Until such time as Kaiser-Hill can reasonably predict the likely
outcome of the total fee to be earned by contract completion, the fee will be
accrued at the minimum on a straight-line basis from February 1, 2000 through
December 31, 2007. Estimated changes in the earned fee will be recognized as
contract to date adjustments at such time as the estimate is revised. The
Closure Contract currently provides for Kaiser-Hill to invoice DOE quarterly
based on a $340.0 million target fee pool, less a 50% retainage for 2000.
Thereafter, the quarterly invoicing will revert to a formula such that
cumulative contract billings would not exceed the minimum fee of $150.0 million
spread over a 7 year timeframe, with retainages. All invoice payments made by
DOE to Kaiser-Hill will be distributed to the joint venture owners immediately
upon receipt, less certain Kaiser-Hill reimbursements.
Engineering Operations
The Engineering Operations provide design, engineering, procurement, and
construction and project management services to domestic and international
clients in the infrastructure, facilities, metals, mining and industrial
markets. The operating results for each of the three months ended March 31 was
as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
--------- --------
<S> <C> <C>
Gross Revenue.......................... $ 46,784 $ 80,394
Subcontracts and materials........... (21,379) (52,517)
Equity income of affiliates.......... 280 1,520
--------- --------
Service Revenue........................ 25,685 29,397
Operating Expenses:
Direct labor and fringe.............. 16,214 17,837
Selling, general and administrative.. 11,246 14,741
Depreciation/amortization............ 958 1,481
Restructuring charges................ 667 895
--------- --------
Operating (Loss)....................... $ (3,400) $ (5,557)
========= ========
</TABLE>
Gross Revenue: Gross revenue represents the amount of goods and services
provided to the customer through primary contract relationships. Often included
as a component of gross revenue, and reimbursed by the customers, are costs of
certain services which the Company subcontracts to and procures from third
parties, including direct project costs and materials. These costs are excluded
from gross revenue to derive the Company's service revenue. Engineering
Operations derive the majority of their economic benefit, however, in the form
of engineering, procurement and construction management services performed
directly - this element is referred to as service revenue and is used as the
basis for managing the Engineering Operations.
The majority of the gross revenue fluctuations noted above are attributable
to the completion or near completion, between the time span of the two periods,
of several large fixed price projects that also contained large amounts of
construction materials and passed-through subcontractor costs. Although included
in the Company's gross revenues, the quantities of such pass-through costs
typically have nominal effect on overall project profitability. The largest
reductions in gross revenue were due to:
16
<PAGE>
. the large fixed-price Nitric Acid projects, completed in the first quarter of
1999, resulting in gross revenue of $13.8 million in the first quarter of
1999 compared to $0 during the first quarter of 2000;
. the large fixed-price project to construct the Nova Hut steel mini-mill in
the Czech Republic generated gross revenue of $12.3 million in the first
quarter of 1999 versus $1.0 million during the first quarter of 2000; and
. a $5.3 million reduction in gross revenue generated by the Microelectronics
business unit during the first quarter of 2000 as compared to 1999.
The Engineering Operations had approximately $187 million in signed contract
backlog at March 31, 2000.
Service Revenue: Service revenue of the Company's engineering operations
declined during the first three months of 2000 by 12.6% compared to the same
period in 1999 as it continued to experience strains in new business development
activities, primarily in all business lines in the Asia-Pacific region and
within the iron and steel and microelectronics business lines in North America,
stemming in part from the Company's financial condition and, in part, from
overall continued softness in those markets.
Operating gross margins - defined as service revenue less direct labor and
fringe costs - as a percent of service revenue remained relatively constant
during the first quarters of 2000 and 1999. Excluding the equity income in
affiliates, the gross margins as a percent of service revenue were 36.2.% and
36.0%, respectively, during the three months ended March 31, 2000 and 1999.
The decrease in equity in income from affiliates from 1999 to 2000 reflects
the culmination of an alumina refinery project in Australia during 1999 being
performed by one of the Company's joint ventures.
Operating Expenses: The restructuring plan implemented in 1999 and late 1998
included actions to realign and reduce the Company's post-divestiture overhead
cost structure such that the remaining levels more appropriately fit the needs
and size of its continuing operations. Elements of the overhead reduction plan
included an approximate 25% personnel reduction in the Company's wholly-owned
North American operations with lesser percentage reductions in International
operations, eliminating regional overhead layers, downsizing facilities, closing
of marginally profitable office locations, discontinuing certain business
offerings, improving direct labor utilization on projects and enhancing project
controls to minimize risks of future contract losses. Because of certain
centralized aspects of the Company's organizational structure that existed prior
to completing the divestitures discussed above, the cost reduction elements of
this phase of the plan could not begin until after the divestitures were
completed. To date, the results from the cost reduction plan have been positive
- - administrative expenses have been reduced by more than $14.6 million on an
annualized basis when comparing the first quarter of 2000 to that of 1999 and an
absolute reduction of $3.5 million from the three months ended March 31, 1999 to
2000. Although the majority of the reduction initiatives have been enacted, the
Company remains focused on controlling overhead spending.
In connection with its plan of reorganization discussed in the Overview, the
Company recorded charges for restructuring costs of $0.7 million and $0.9
million during the first quarters of 2000 and 1999, respectively. Components of
this quarter's charge consisted of professional fees incurred in connection with
the Company's debt restructuring activities. Components of the 1999 charge,
among others recorded later in 1999, included amounts for severance and related
matters, and for business unit divestiture costs. These restructuring charges
have been presented individually on the Consolidated Statements of Operations.
Interest: The Company's average annual outstanding debt and the related
average effective interest rates for the three months ended March 31, 2000 and
1999, respectively, were $126.0 million and 13.0%, and $175.8 million and
13.3%. The rate of interest expense was higher in 1999 than in 2000 due to the
incurrence of rollover, loan origination fees and points charged in connection
with noncompliance with the terms of the revolving credit facility in early
1999. The reduction in the average outstanding debt balance was from 1999 to
2000 was as a result of the pay off of the average revolver balance of $325.8
million in April of 1999 and of the repurchase of $14.0 million of outstanding
Senior Notes in October of 1999.
Interest income is earned on available cash balances that were generated
primarily from the unused proceeds from the divestitures in 1999 and prior to
those sales, largely only by Kaiser-Hill and foreign operations. All other cash
not required for operations was historically used to pay down outstanding cash
borrowings.
Income Tax Expense: The income tax provision for all periods presented excludes
the minority's interest in Kaiser-Hill's operating income because it is owned
partially by another company and is a flow-through entity for income tax
purposes.
The Company recorded income tax expense of $0.1 million on income from
continuing operations of $3.3 million during the three months ended March 31,
2000 - as it continued with the established practice of not recognizing current
17
<PAGE>
financial statement benefits of net operating losses since the likelihood of
being able to utilize such deductions in the future is uncertain at this time.
Rather, the Company only provided for income taxes that will be due as a result
of current period foreign earnings. The Company will not recognize an income
statement benefit for any previously unbenefitted or future operating losses or
future tax deductions until such time as management believes it is more likely
than not that the Company's future operations will generate sufficient taxable
income to be able to realize such benefits. As of March 31, 2000, the Company
had provided a valuation allowance against the entire remaining deferred tax
asset of $40.9 million.
Similarly, during the three months ended March 31, 1999, the Company
recorded an income tax benefit of $1.0 million on a loss from continuing
operations of $7.0 million - largely to offset the effect of the income tax
expense of $1.6 million recorded on the $3.9 million of income generated from
discontinued operations, as well as to provide for its estimate of tax due on
foreign earnings.
Results of Discontinued Operations
Divested Operating Units
. 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 $82.0 million, less
$8.0 million which was retained by IT for EFM's working capital
requirements. The Company then completed EFM contracts that were not sold
to IT. Net of income tax expense of $24.5 million, the Company recognized a
gain of $12.0 million from the sale.
. Sale of the Consulting Group: On June 30, 1999, the Company sold 90% of its
Consulting Group to CM Equity Partners, L.P. and the Group's management for
$64.0 million in cash and $6.6 million of interest-bearing notes. The
Company retained a 10% ownership interest in the new and independent
consulting company, now known as ICF Consulting Group, Inc. Net of income
tax expense of $11.2 million, the Company recognized a gain of $30.3
million from the sale.
The combined net financial position, operating results and cash flows of the
EFM and Consulting Groups have been presented in the accompanying consolidated
financial statements as 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
for the three months ended March 31, 1999 is as follows (as these operations
were disposed on in April and June of 1999, respectively, there were no
comparable earnings for the quarter ended March 31, 2000) (in thousands):
<TABLE>
<CAPTION>
EFM CONSULTING
--- ----------
THREE MONTHS ENDED MARCH 31, 1999
<S> <C> <C>
Gross revenue..................... $ 29,939 $26,462
Subcontracts and materials....... (16,377) (5,079)
-------- -------
Service revenue................... 13,562 21,383
Operating expenses:
Direct labor and fringe.......... 6,975 9,973
Group overhead................... 4,722 8,615
Depreciation and amortization.... 455 340
--- ---
Segment income before income tax.. $ 1,410 $ 2,455
======== =======
</TABLE>
Total segment income from the discontinued operations of $3.9 million for
the three months ended March 31, 1999 is presented in the accompanying income
statement net of an applicable 40% income tax of $1.6 million.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
Operating activities: Kaiser-Hill generated operating cash flows of $7.5
million and $2.1 million during the three months ended March 31, 2000 and 1999,
respectively. Kaiser-Hill's cash flows become available to the Company only
upon actual periodic distributions of earnings to the Company and to the other
50% owner. The Company's continuing E&C operations used $12.4 million and $1.9
million in cash during the first quarters of 2000 and 1999, respectively. The
cash used for E&C operating activities in the first quarter of 2000 included
approximately $0.7 million for the payment of professional fees associated with
debt restructuring and corporate reorganization activities, $2.6 million for the
payment of income taxes generated primarily from the gains on the sales of the
EFM and Consulting Groups in 1999 and approximately $9.1 million resulting from
the cash flow timing of other working capital components.
Investing activities: Fixed asset purchases in the first quarter of 2000
were minimal following the Company's Year 2000 readiness activities completed in
1999. Fixed asset purchases in the first quarter of 1999 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.
During the first quarter of 2000, the Company sold its 35% interest in an
environmental holding company based in France generating approximately $1.0
million in cash from investing activities.
Financing activities: During the first quarter of 2000, Kaiser-Hill
distributed $6.5 million to CH2M Hill. As of March 31, 2000, the Company
reported a temporary $4.1 million book overdraft as a financing cash proceed. As
of March 31, 2000 the Company had $12.6 million in letters of credit outstanding
collateralized by restricted cash balances.
Liquidity and Capital Resource Outlook
The Company currently has no working capital facility and is financing its
Engineering Operations' working capital needs through the use of cash from
operations, from the residual cash proceeds from the sale of its Consulting
Group completed in June 1999, and from distributions by its Kaiser-Hill
subsidiary. Based on (i) current expectations for near-term operating results,
(ii) its current available cash position and (iii) recent trends and projections
in liquidity and capital needs, management believes the Company has sufficient
short-term liquidity to bridge current operating needs until the implementation
of a modified debt restructuring, assuming that such a restructuring can be
accomplished within the reasonably near term. There is no assurance that a
successful restructuring can be accomplished.
Actions remaining critical to the Company's long-term liquidity include
completing a restructuring of its $125.0 million Senior Subordinated Notes prior
to the next interest payment due date of June 30, 2000, securing a sufficient
working capital facility with acceptable terms, obtaining successful outcomes
regarding significant contingent liabilities (see Other Matters below), and
improving operating results. Management believes that, if these steps can be
achieved, the Company will have sufficient liquidity generated by improved
operating results, substantially decreased interest expense and borrowings on a
possible new credit facility to meet its longer-term working capital
requirements. The inability of the Company to accomplish a combination of
actions described above would have a material adverse impact on the financial
condition, operating results, and the business.
The Company has continued negotiations with representatives of its Senior
Subordinated Notes and, while it has no assurance, believes it may be able to
implement a modified restructuring of those notes. Such a transaction could
involve an exchange of Senior Subordinated Notes for a combination of new common
stock and newly issued preferred stock. The Company believes that such a
restructuring would substantially improve its financial condition and provide a
basis for ongoing operations and continuation of the Company's turnaround.
However, such a restructuring would result in substantially more dilution of the
equity of existing common stockholders than the restructuring terms proposed
during the fall of 1999.
While continuing negotiations with representatives of its Senior
Subordinated Noteholders, the Company has been exploring strategic alternatives,
including the possible sale of certain of its assets or businesses. The Company
is currently engaged in discussions with several potential purchasers concerning
the sale of its Engineering Operations in two separate transactions. The
Company has reached general understandings as to the scope and price range of
such transactions. However, the transactions remain subject to, among other
things, completion of diligence and successful negotiation of definitive
agreements. The Company also continues to explore strategic alternatives for
its interest in Kaiser-Hill Company, LLC. The Company presently believes that
one or more of the transactions under discussion will take place, but there can
be no assurance that any transaction concerning any of the Company's business
units will be completed. The Company expects to be able to reach a conclusion
with respect to its strategic direction and begin to implement its
reorganization, either with or without business unit sale transactions, prior to
the end of the second quarter of calendar year 2000.
19
<PAGE>
The Company expects its financial condition to be materially affected by
the implementation of any debt restructuring or strategic alternatives. The
consummation of any debt restructuring, any transactions for the sale of
business units, or any combination of debt restructuring and business unit sale
transactions will likely be completed through a "prepackaged" plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. If such a plan
were selected as the mechanism for completing the Company's restructuring, the
Company expects that it would have the support of the largest holders of its
Senior Subordinated Notes and, therefore, be able to implement the plan
relatively promptly. If the Company commences such a proceeding, the goals of
any such plan would be to (i) minimize adverse effects on Kaiser's ongoing
operations, trade creditors and employees, (ii) facilitate possible business
unit sale transactions, and (iii) result in a financially strengthened and
stable organization for purposes of ongoing operations.
Other Matters
Bath Contingency: In March 1998, the Company entered into a $187 million
maximum price contract with Bath Iron Works 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
customer has also subsequently asserted a claim based on alleged differing site
conditions that allegedly should have been identified by the Company. In March
2000, Bath filed a combined claim against the Company in U.S. District Court in
the District of Maine requesting payment for $38 million. The Company continues
to object to Bath's allegations and is vigorously defending its position.
Although no resolution has been reached, financial statements contain a
provision for the amount of the Company's proposed settlement of the non-insured
portion of the loss.
Acquisition Contingency: The 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.
In December, 1999, the Company and certain former Company employees and
shareholders of ICT Spectrum agreed to amend the applicable agreements in a
manner that had the result of reducing the amount of the taxable gain created by
former shareholder-employees' involuntary departures from the Company. As
permitted per the agreement, the shareholders agreed to allow the Company to
retain some of the vested shares as payment of the income tax withholding in
lieu of cash. In total, the Company retained 255,669 shares and recorded the
transaction as a $1.37 million reduction to goodwill and paid-in-capital.
Given that the quoted fair market value of the Company's common stock at
May 19, 2000 was $0.19 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 (now adjusted downward by
the 255,669 retained shares to 1,244,331), would not completely extinguish the
remaining purchase price contingency. In this event, the Company will need to
fund the contingency in cash and would need 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 in the
U.S. District Court for the District of Idaho 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. The Company subsequently
filed a motion to dismiss the case. On March 14, 2000, the court ordered the
plaintiff to address certain claim deficiencies. The plaintiff filed an amended
complaint on May 15, 2000. The court is expected to consider the amended
complaint in light of the Company's motion to dismiss and complete its ruling
relative to the Company's motion.
Litigation, Claims and Assessments Contingencies: In the course of the
Company's normal business activities, various claims or charges have been
asserted and litigation commenced against the Company arising from or related to
properties, injuries to persons, and breaches of contract, as well as claims
related to acquisitions and dispositions. Claimed amounts may
20
<PAGE>
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.
Prior to the divestitures of its EFM and Consulting Groups, the Company had
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 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 guaranty contingencies: 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.
Year-2000 Readiness: The Company, to date, has not experienced any material
systems failures related to the Year 2000 (Y2K) rollover. Our remediation plan
for the Y2K issue is discussed in detail in the Company's 1999 Annual Report to
Shareholders and in 1999 Forms 10-Q. The Company will continue to monitor and
address any issues that may arise from internal systems or those of third
parties. These costs were largely comprised of the costs to replace financial
accounting and other software applications. Apart from the system replacement
costs, other costs related to Y2K have not had a material adverse effect on the
Company's results of operation or financial condition.
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
forward-looking statements, including those that use words such as the Company
"anticipates," "expects," "estimates," and "believes", are subject to certain
risks and uncertainties which could cause actual results of operations to differ
materially from expectations. These forward-looking statements 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 must significantly revise its capital structure, in the form of a
debt to equity conversion or a combination of other equity investments, joint
ventures or asset sales. The inability of the Company to accomplish one or a
combination of transactions described above would have a material adverse
effect on the business.
. The Company requires access to a revolving credit line to fund short-term
borrowing needs and provide letter of credit capacity required in connection
with certain projects. Kaiser may not be able to generate collateral to
support a borrowing
21
<PAGE>
base of sufficient size to obtain such credit or may not be able to
improve operating results enough to be able to obtain such credit.
. The Company may not be able to obtain satisfactory contract performance
guarantee mechanisms, such as performance bonds.
. The Company's financial performance is significantly tied to Kaiser-Hill
Company, LLC, which is subject to uncertainties that may adversely affect its
and the Company's operating results.
. 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. The
Company's revenue and profit recognition policies are based on making a
series of assumptions including aspects relative to contract pricing and
performance capabilities. The Company's contract to construct the Nova Hut
steel mini-mill in the Czech Republic includes such aspects. In the event
that such assumptions cannot be met or change as contract progress ensues,
the Company may have to make downward adjustments to revenue and profit
already recognized in the financial statements. Possible results of changes
in such assumptions could include the inability to realize all contract
performance fees or other incentives already recognized as revenue in the
financial statements, and may result in other unrecoverable cost overruns.
. 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 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 portion of the Company's business is generated either directly or
indirectly as a result of federal and state laws, regulations, and programs;
a reduction in the number or scope of these laws, regulations or programs
could materially affect the Company's business.
. The Company's ability to attract and retain business is closely related to
its ability to attract and retain key management and operating personnel. The
market for professionals of the types employed by the Company is quite
competitive. The Company may not be able to attract and retain personnel
necessary for successful operations.
. The Company has several significant contingent liabilities arising out of
prior operations and contracts, its 1998 acquisition of ICT Spectrum
Constructors, Inc. and the dispositions of its Environment and Facilities
Management and Consulting Groups. Adverse resolution of one or more of those
contingencies could adversely affect the Company's financial performance and
condition.
. Certain of the Company's environmental work poses risks of large civil and
criminal liabilities for violations of environmental laws and regulations,
and liabilities to customers and to third parties for damages arising from
the Company's performing environmental services to its clients. A large fine
or penalty imposed on the Company could negatively impact contract
performance fees under certain existing contracts or otherwise negatively
affect the Company's financial results.
. The Company generally grants uncollateralized credit to its customers and is
therefore subject to risks of financial instability on the part of its
customers. In certain cases, the Company secures project specific insurance
policies related to various insurable risks such as certain non-payment due
to insolvency of the customer. Negative changes in the financial condition of
its customers could expose the Company to adverse financial consequences.
22
<PAGE>
Item 3. Quantitative and Qualitative Information about Market Risk
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.
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, 1999. See also Note 5 to the financial statements contained
herein.
Item 2. Changes in Securities
(a) None
(b) None
(c) None
(d) Not applicable
Item 3. Defaults Upon Senior Securities
(a) None
(b) None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed as part of this report are listed below:
No. 21 Consolidated Subsidiaries of the Registrant as of May 1, 2000.
No. 27 Financial Data Schedule
(b) Reports on Form 8-K
On May 2, 2000, Kaiser Group International, Inc. filed a Form 8-K
referencing the April 13, 2000 amendments of its Section 401(k) Plan dated
March 1, 1989 and its Retirement Plan dated August 1, 1971.
23
<PAGE>
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.
KAISER GROUP INTERNATIONAL, INC.
(Registrant)
Date: May 22, 2000
/s/ Timothy P. O'Connor
-----------------------
Timothy P. O'Connor
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
(Duly authorized officer and principal
financial officer)
24
<PAGE>
Exhibit 21
KAISER GROUP INTERNATIONAL, INC.
9300 Lee Highway, Fairfax, Virginia 22031
(703) 934-3300
Kaiser Group International, Inc.'s consolidated subsidiaries 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>
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. Henry J. Kaiser Development Corporation, Inc. Delaware
II. Global Trade & Investment, Inc. Delaware
I. Kaiser Engineers Group, Inc. Delaware
II. Henry J. Kaiser Company Nevada
II. Kaiser Engineers, Inc. Ohio
III. Henry J. Kaiser Company (Canada) Ltd. Canada
III. Kaiser Engineers & Builders, Inc. Delaware
III. Kaiser Engineers (California) Corporation Delaware
III. Kaiser Engineers Corporation New York
III. Kaiser Engineers of Michigan, Inc. Michigan
III. ICF Kaiser International Planning & Design, Inc. (33 1/3%) Pennsylvania
III. 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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C>
IV. 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. Kaiser Engineers Massachusetts, Inc. Delaware
I. Kaiser Engineers Pacific, Inc. Nevada
I. Kaiser Europe, Inc. Delaware
I. Kaiser/Georgia Wilson, Inc. Delaware
I. Kaiser Government Programs, Inc. Delaware
II. Kaiser K-H Holdings, Inc. Delaware
III. Kaiser-Hill Company, LLC (50%) Colorado
IV. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware
III. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware
I. Kaiser Hanford Company Delaware
I. 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. Kaiser DPI Holding Co., Inc. Delaware
II. Kaiser Engineers Eastern Europe, Inc. Delaware
III. Kaiser Netherlands B.V. (10%) Netherlands
II. Kaiser Hunters Branch Leasing, Inc. Delaware
II. Kaiser K-T Holdings, Inc. Delaware
II. Kaiser K-A Louisiana, Inc. Louisiana
II. Kaiser K-A Services, Inc. Delaware
II. Kaiser Netherlands B.V. (90%) Netherlands
II. Kaiser Leasing Corporation, Inc. Delaware
I. ICF Kaiser Servicios Ambientales, S.A. de C.V. (66 2/3%) Mexico
I. Kaiser Technology Holdings, Inc. Delaware
II. Kaiser Advanced Technology, Inc. Idaho
III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico
I. Kaiser R G.P. No. 1, Inc. Delaware
I. Monument Select Insurance Company Vermont
I. Phase Linear Systems Incorporated Delaware
I. Tudor Engineering Company Delaware
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 19,969,000
<SECURITIES> 0
<RECEIVABLES> 193,951,000
<ALLOWANCES> (9,719,000)
<INVENTORY> 0
<CURRENT-ASSETS> 226,482,000
<PP&E> 14,089,000
<DEPRECIATION> (11,320,000)
<TOTAL-ASSETS> 271,475,000
<CURRENT-LIABILITIES> 208,567,000
<BONDS> 124,329,000
0
0
<COMMON> 234,000
<OTHER-SE> (70,860,000)
<TOTAL-LIABILITY-AND-EQUITY> 271,475,000
<SALES> 0
<TOTAL-REVENUES> 218,854,000
<CGS> 0
<TOTAL-COSTS> 199,888,000
<OTHER-EXPENSES> 12,871,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,546,000)
<INCOME-PRETAX> 2,549,000
<INCOME-TAX> (75,000)
<INCOME-CONTINUING> (2,326,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,326,000)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
