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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 28, 1994 Commission File No. 1-12248
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ICF KAISER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1437073
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9300 Lee Highway, Fairfax, Virginia 22031-1207
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 934-3600
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates of the
registrant was $41.7 million based on the New York Stock Exchange closing price
of such stock ($2.625) on May 4, 1994.
On May 4, 1994, there were 20,961,850 shares of Common Stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the ICF Kaiser International, Inc. Proxy Statement for the
1994 Annual Meeting of Shareholders are incorporated by reference in Part III
hereof.
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PART 1
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Item 1. Business
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ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its
other operating subsidiaries, is one of the nation's largest engineering,
construction, and consulting services companies, providing fully integrated
engineering, construction and consulting services to public- and private-sector
clients in the related markets of environment, infrastructure, and industry. In
its most recent fiscal year ended February 28, 1994 (fiscal 1994), ICF Kaiser
reported gross and service revenue of $652 million and $383 million,
respectively. Service revenue is derived by deducting the costs of subcontracted
services and direct project costs from gross revenue and adding the Company's
share of income (loss) of joint ventures and affiliated companies. The Company
estimates that of its fiscal 1994 $383 million service revenue, approximately
74% was attributable to environmental services, 14% to infrastructure-related
work, 8% to industrial work, and 4% to other consulting services.
During the three years ended February 28, 1994, the Company operated
predominantly in one industry segment, in which it provided engineering,
consulting, and other professional services.
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Fiscal Year Ended
February 28, February 28, February 29,
1994 1993 1992
(in thousands)
Gross revenue.............. $651,657 $678,882 $710,873
Service revenue............ $382,708 $391,528 $385,942
Operating income (loss).... $ (5,230) $ 22,744 $(43,963)
Assets..................... $281,198 $293,076 $318,947
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As of February 28, 1994, the Company's contract backlog totaled
approximately $1.6 billion, of which approximately 42% is expected to be worked
off during the current fiscal year. Most of the backlog relates to public-
sector environmental projects that span from one to five years. In fiscal 1994,
approximately 58% of the Company's service revenue was derived from the federal
government. See "Backlog" section on page 8 of this Report.
The Company's headquarters is located at 9300 Lee Highway, Fairfax,
Virginia 22031-1207, and its telephone number is (703) 934-3600. Other offices
include Phoenix, Arizona; Livermore, Los Angeles, Oakland, Sacramento, San
Diego, San Rafael, and Universal City, California; Denver and Lakewood,
Colorado; Washington, DC; Jacksonville, Miami, Orlando, and Tampa, Florida;
Chicago, Illinois; Gary, Indiana; Baton Rouge and Ruston, Louisiana; Abingdon
and Baltimore, Maryland; Boston, Massachusetts; Las Vegas, Nevada; Edison, New
Jersey; New York, New York; Albuquerque and Los Alamos, New Mexico; Raleigh,
North Carolina; Cincinnati, Ohio; Pittsburgh, Pennsylvania; Houston, Texas;
Bellevue, Richland, and Seattle, Washington; Perth, Australia; Toronto, Canada;
London, England; Paris, France; Mexico City, Mexico; Lisbon, Portugal; Moscow,
Russia; and Taipei, Taiwan. As of May 1, 1994, ICF Kaiser employed
approximately 5,700 persons located in more than 80 offices worldwide.
Overview of Markets
Environmental. Demand for ICF Kaiser's environmental consulting and
engineering services is driven by a number of factors: the need to improve the
quality of the environment; environmental regulation and enforcement; and
increased liability associated with pollution-related injury and damage.
Significant environmental laws have been enacted in response to public concern
over the environment, and these laws and the implementing regulations affect
nearly every industrial activity. Increasingly strict federal, state, and local
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 2
government regulation has forced private industry and government agencies to
clean up contaminated sites, to bring production facilities into compliance with
current environmental regulations, and to minimize waste generation on an
ongoing basis.
Infrastructure. The global infrastructure market historically has been
driven by the need to maintain and expand roads, highways, mass transit systems,
and airports. In addition, environmental concerns, such as reducing automotive
air pollutant emissions, have become increasingly important factors in new
infrastructure and transportation initiatives. This market primarily is funded
by government dollars, although the private sector is seeking an increased role,
particularly in international projects. ICF Kaiser's services in this market
include design, engineering, and construction.
Industrial. ICF Kaiser's industrial work is funded almost exclusively by
the private sector and is driven by businesses' need to maintain and retrofit
existing plants and to replace aging production capacity with newer, more
environmentally responsible facilities. Through the acquisition of ICF Kaiser
Engineers, Inc. in 1988, the Company acquired the skills needed to serve the
basic metals and mining industries, including aluminum, steel, copper, and coal.
Strategic Considerations
The following points are important to understanding the Company's business
and strategy:
Full Front-end Capability. Through internal growth and acquisition, the
Company's skills have been expanded and now include: policy analysis and
consulting; scientific analysis and health/risk assessments; facility siting and
environmental assessments; remedial investigations and feasibility studies; and
engineering design. By possessing these front-end skills, the Company can
become involved at the outset of the problem identification phase which, in
turn, puts it in a position to participate in any follow-on engineering and
construction work.
High Value-added Services. The Company's marketing strategy is to provide
exceptional value to its clients. Within those markets that relate to
environmental services, the Company adds high value through specialized
environmental knowledge that (i) helps clients understand environmental threats
and opportunities and alternative ways in which each can be managed; (ii) allows
creation of customized solutions for the clients' environmental problems; and
(iii) combines problem identification, solution, and implementation.
Access to Technology. New technologies play a critical role in both the
cleanup of existing waste sites and in the reduction of waste generated by
ongoing and new production processes. The Company has access to key technologies
relating to reducing and monitoring stack emissions, bioremediation, coal
scrubbing, and industrial process technologies that can help minimize waste,
reduce costs, and improve the quality of a finished product. To assist clients
better and to increase its overall participation in clients' projects, the
Company continues to expand its access to leading environmental and process
technologies through various methods, including licensing and joint ventures.
Strategic Relationships. To extend its presence and reduce business
development risks, the Company has established business relationships through
joint ventures, marketing agreements, and direct equity investments. These
relationships facilitate management of the Company's existing international
operations and help to reduce the cost and risks associated with entering new
geographic regions.
Avoidance of Environmental Liability. To avoid the risks and potential
liability associated with hazardous waste, the Company has made the decision to
minimize its participation in the part of its business associated with
collection, treatment, storage, or disposal of hazardous waste. When such
services are required, the Company often subcontracts the work and obtains
indemnification from the subcontractor or assists the client in selecting
appropriate contractors.
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 3
Environmental Market
ICF Kaiser's environmental market includes work for clients in all major
industries, including many large domestic and multinational corporations, and
public-sector work, primarily for the U.S. Departments of Energy (DOE) and
Defense (DOD) and the U.S. Environmental Protection Agency (EPA). The Company
offers its clients over 20 years of experience in all aspects of environmental
regulation, compliance, and access to leading technologies, as well as skills in
the assessment, management, and remediation of existing hazardous and solid
wastes, and process redesign to minimize future waste.
Analysis/Assessment. The Company's analytic and scientific abilities allow
it to become involved in environmental issues and problems at their outset. In
the initial phase, ICF Kaiser provides a broad outline of the types of
environmental problems, health risks, and liabilities associated with the
client's business. In subsequent stages, ICF Kaiser conducts field assessments
to evaluate a site's waste, ground water, air, sediment, and soil
characteristics and to determine the extent of contamination, if any.
Remediation. In general, environmental restoration work is progressing
beyond study and analysis to remediation. Having already established a market
position in the consulting and front-end analysis phase, ICF Kaiser has been
able to follow market demand into remediation. After an environmental problem is
characterized, the Company offers alternative remediation approaches that may
involve providing on-site waste containment, on-site treatment, management of
on-site/off-site remediation, or waste removal. The Company also can redesign
the client's ongoing production processes or design new processes to minimize or
eliminate the generation of hazardous waste. The Company then develops
engineering plans and technical specifications. To minimize potential
liabilities associated with taking title to hazardous waste during the cleanup
process, ICF Kaiser often will provide construction management services and
assist the client in selecting cleanup contractors to handle the actual
remediation work.
Water Pollution. The major ports of many of the world's cities have serious
water pollution problems, and ICF Kaiser is part of several cities' efforts to
improve the condition of their harbors and waterways. The Company is the
construction manager of the cleanup of Boston Harbor, one of the largest
environmental projects in the country. Since the inception of the project in
1988, the Company has served as its construction manager, and currently manages
more than 2,800 construction workers, engineers, architects, and support
personnel working to construct the second largest wastewater treatment plant in
the United States on Deer Island in Boston Harbor.
Because of the Company's experience with the Boston Harbor project, it was
selected to be one of the companies currently working on San Diego, California's
clean water program. ICF Kaiser is providing program-wide services, including
policies and procedures, labor relations, public relations, and hazardous
materials mitigation for San Diego's construction of new wastewater and sludge
processing facilities; miles of pipelines, tunnels, and pump stations; and an
additional ocean outfall. ICF Kaiser's post-construction responsibilities will
include construction as well as contract closeout, startup, shakedown,
operational demonstration, and warranty condition. The goal of the project is
to serve 14 municipalities in San Diego County and to minimize dependence on
water importation from Northern California and Arizona.
Industrial Production. Increasingly, it is cost-effective for ICF Kaiser
clients to modify ongoing production processes to minimize or eliminate waste
generation. The Company's integration of engineering and environmental skills,
plus its access to innovative technologies, provides a competitive advantage in
redesigning production processes. For example, the Company has designed control
systems to enable steel producers to reduce harmful emissions and to
rehabilitate coke ovens while producing a better product.
DOE/DOD Facilities Restoration. Government estimates suggest that more than
$100 billion could be spent by DOD and DOE over the next 20 years cleaning up
closed weapons production facilities and military bases around the world. ICF
Kaiser already is working at 10 of 17 major DOE facilities and at DOD bases
around the world, including Alaska, California, Guam, Michigan, New Mexico, and
Washington. The DOD projects are part of a contract with the Air Force Center
for Environmental Excellence initially awarded to the Company in 1990. In
addition to the Air Force work, the Company provides environmental support to
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 4
the Army Environmental Center and the Corps of Engineers. Since 1990, the
Company has been assisting in the cleanup of an ordnance disposal site at a U.S.
Army installation in the eastern United States contaminated with chemical
warfare agents, unexploded munitions, radiological materials, and other
hazardous waste.
The Company has been the engineer/constructor at DOE's Hanford site in
Richland, Washington, since 1987. On October 15, 1993, the Company announced
that it had signed a material amendment to the contract it won in early 1993 to
continue to provide services at the Hanford site. The Company estimates that the
architect-engineering, construction management, and operating support services
to be provided under the amended contract will be worth more than $700 million
in gross revenue over the remaining term of the amendment. The Company estimates
that the fees it will be eligible to earn under this contract will increase
significantly as the amended contract provides the Company with the opportunity
to earn incentive fees related to technology transfers and efficiency savings.
In connection with the contract amendment and in order to reduce duplication of
work and to improve management control and efficiency of operation, DOE, with
the Company's concurrence, assigned management of substantially all aspects of
the amended contract to Westinghouse Hanford Company, another Management and
Operating contractor at DOE's Hanford site.
Clean Air. ICF Kaiser's clients continue to face complicated and costly
regulatory compliance obligations associated with the Clean Air Act Amendments
of 1990. The Company has developed comprehensive computer models that simulate
changes in air quality, visibility, and population exposure which are used to
examine air quality problems. ICF Kaiser assists clients by quantifying plant
emissions, developing strategies for complying with permit requirements,
evaluating and installing advanced control technologies, and redesigning
production processes to reduce pollutant emissions. For clients required to
reduce fugitive emissions resulting from equipment leaks, ICF Kaiser has
developed FUGEMS/TM/, a proprietary emissions monitoring system that identifies
and tracks the sources of air pollutant leaks. Under a three-year contract
awarded in 1992, the Company has been researching air quality problems that
might result from oil and gas exploration in the Gulf of Mexico. The Company
continues to work under a number of EPA contracts related to global climate
change, indoor air quality, and acid rain.
In 1993, ICF Kaiser announced that it had expanded its air-related services
to include emissions-trading assistance. This new service addresses areas
related to the nonattainment provisions of the Clean Air Act Amendments,
particularly as they affect industrial sources. These services also address
issues related to volatile organic compounds, nitrogen oxides, sulfur oxides,
carbon monoxide, and particulate matter emissions. In addition to the sulfur
dioxide allowance market assistance being provided to its electric utilities
clients, the Company assists clients in understanding other aspects of emissions
trading and market-based approaches to emissions reductions.
Energy. ICF Kaiser's energy clients include major U.S. electric utilities;
leading oil, natural gas, and coal companies; transportation companies; pipeline
entities; firms practicing energy law; environmental groups; and government and
regulatory agencies involved in energy and related environmental issues. ICF
Kaiser's expertise includes strategic planning and analysis; energy and
environmental policy analysis; supply and demand forecasting; and technology
assessments. ICF Kaiser uses its skills in the search for cleaner burning
sources of energy and the efforts to minimize waste generation in power
production. For example, a flue gas desulfurization process that removes
emissions that cause acid rain from power plant smokestacks (LIFAC) currently is
undergoing testing at the LIFAC clean coal demonstration project conducted by
ICF Kaiser for DOE in Richmond, Indiana. ICF Kaiser developed the project;
arranged for the license of the technology; participated in the project
implementation; and provided engineering design, project management, and
construction services for the installation of the technology. The Company
currently is conducting and managing the operational testing of the facility.
ICF Kaiser also markets Microcel/TM/, a microbubble column-flotation method for
cleaning fine coal, which currently is installed in coal facilities in five
states.
International. ICF Kaiser serves clients in Australia, Taiwan, France, the
former Soviet republics, Mexico, the Czech Republic and a number of other
countries. During the past year, ICF Kaiser has worked on global climate change
projects in more than 20 countries for clients such as the World Bank, the
United Nations, and foreign government agencies. ICF Kaiser has established an
initial international presence in Eastern Europe through analytical consulting
projects which may enable the Company to compete for larger
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 5
environmental and construction projects that may develop as the economies in
that region strengthen. The Company has increased its presence in France where
it announced in early 1994 that it had been awarded a contract to complete a
ground-water and soil remediation system at a former pigment manufacturing
facility. The Company will use NOVOC/TM/ well technology to treat volatile
organic compounds found at the site.
Infrastructure Market
The Company believes that there is a general recognition of the need to
restore and upgrade the public infrastructure of mass transit systems, airports,
highways, bridges, and water resource facilities worldwide. ICF Kaiser also
believes that environmental concerns increasingly foster new infrastructure and
transportation initiatives. The Company currently provides planning, feasibility
studies, design, and construction management services to the infrastructure
market. The Company's engineers and construction specialists provide a full
range of services such as master planning, alternative analysis, site
development studies, conceptual and preliminary engineering, detail design,
specifications development, quality assurance and quality control, construction
management, construction, and inspection.
Transportation. ICF Kaiser has over three decades of experience in
transportation projects, and its current transportation projects show the
breadth of this experience: engineering services for new rail rapid transit
system work in the Los Angeles area; evaluation of bus and light rail transit
alternatives in Sacramento, California; construction engineering and inspection
services for a "people mover" in Jacksonville, Florida; construction management
of several San Francisco, California, Bay Area Rapid Transit projects; and
subway system engineering services to the Maryland Department of Transportation.
More than $150 billion has been authorized through 1997 by the federal
government for programs mandated by the Intermodal Surface Transportation
Efficiency Act (ISTEA), a substantial portion of which will be directed to
upgrade the national highway and interstate systems and to enhance state roads
and bridge safety. ICF Kaiser recently has been awarded two contracts that are
partially funded through ISTEA. In early 1994, the Company announced that it had
been awarded the next project phase of its 1992 contract to serve as program
manager of the design of the Central Area Circulator, a light rail transit
system planned for downtown Chicago. The Company has worked in Chicago since
1981 when it was selected to serve as supervising consultant for a transit
project connecting the Chicago Loop and Midway Airport. In mid-1993, the Company
was selected to perform preliminary design services and prepare an environmental
impact statement for the development of the Miami Intermodal Center, a facility
that will offer South Florida travelers and commuters a variety of
transportation alternatives.
Other Infrastructure Services. ICF Kaiser offers specialized infrastructure
services such as structural and earthquake engineering, seismic evaluation, and
the rehabilitation of buildings. The Company currently is performing detail
design and inspection services for the refurbishing of the hydroelectric power
plant at the base of the Pardee Dam in Northern California. The Company's
presence in Seattle, Washington, has increased with the award of contracts in
1993 to provide bridge engineering design services and to provide engineering
services for the seismic retrofitting of 17 bridges. For the seismic
retrofitting project, the Company's responsibilities include structural
engineering design and preparation of plans, specifications, and estimates. The
Company will work with the city of Seattle to develop design criteria for the
final bridge retrofits, review preliminary seismic retrofit reports, subject
proposed retrofits to an "earthquake" simulated by computer modeling, and
conduct final design and detailing of the selected retrofits.
International. ICF Kaiser is a member of a joint venture that provides
planning, design, and construction services for the 88-kilometer Taipei, Taiwan,
rapid transit system. In April 1993 the Company announced that the joint venture
had signed a two-year contract extension with the Taipei Municipal Government to
continue providing consulting services on issues related to design, procurement,
installation, construction, and commissioning of this rapid transit system
project. The Company announced in June 1993 that it is part of an international
joint venture that was awarded a three-and-one-half year contract to upgrade a
railroad line that connects Portugal to central Europe. ICF Kaiser's services
include administrative and financial management, budgeting and cost control,
contract management, project planning and control, and interface with design and
operations personnel. The Company continues to provide construction engineering
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 6
and architectural services for a new Toronto, Canada, subway station and system-
wide electrical and mechanical design engineering and specification services for
a subway line extension in London, England.
Industrial Market
ICF Kaiser's engineering design, project management, and construction
services to the industrial market involve work with the steel, aluminum,
alumina, copper, tin, and other metals industries. In the coke, coal, and coal
chemicals area, ICF Kaiser's services include inspection of coke plants for
environmental compliance, facility design and construction, and equipment sales
and services. The Company provides services related to coal cleaning, handling,
and environmental controls. ICF Kaiser also designed, built, and now operates
and jointly owns a pulverized coal injection facility under a multiyear tolling
agreement. ICF Kaiser provides blast furnace design, repair, and construction to
the steel industry; in early 1993, the Company announced that it had been
awarded a contract to review, assess, and recommend the installation or
upgrading of management information systems and production management systems at
three steel plants in India. In addition, the Company has been awarded a similar
contract to assess the steel industry in the Czech Republic. The Company's
alumina work includes a contract to conduct a feasibility analysis for expanding
South America's largest alumina refinery.
Other Markets
ICF Kaiser serves numerous clients who need state-of-the-art technology and
consulting services for the management of information and solving information-
related problems, including business process redesign, systems automation,
modernization, and movement of systems from mainframes to client/server
platforms. The Company also assists clients in analyzing, designing, and
implementing modern financial systems often utilizing ICF Kaiser's GSA-approved
financial management system -- FEDERAL SUCCESS/TM/. The Company's contract
dispute management services help contractors, project owners, and developers to
resolve disputes without resorting to costly and time-consuming litigation. ICF
Kaiser's housing and community development specialists provide consulting
services to housing professionals in federal, state, and local governments; non-
profit organizations; tenant groups; financial services groups; and private
development firms.
Competition and Contract Award Process
The markets in which the Company operates are very competitive. The
Company's competitors range from small local firms to large multinational
companies. The Company believes that no single firm or small number of firms
dominates its markets.
Competition for private-sector work generally is based on several factors,
including quality of work, reputation, price, and marketing approach. The
Company's objective is to establish and maintain a strong competitive position
in its areas of operations by adhering to its basic philosophy of delivering
high-quality work in a timely fashion within its clients' budget constraints.
Most of the Company's contracts with public-sector clients are awarded
through a competitive bidding process that places no limit on the number or type
of offerors. The process usually begins with a government Request for Proposal
(RFP) that delineates the size and scope of the proposed contract. Proposals
submitted by ICF Kaiser and others are evaluated by the government on the basis
of technical merit (for example, response to mandatory solicitation provisions,
corporate and personnel qualifications, and experience) and cost. The Company
believes that its experience and ongoing work strengthen its technical
qualifications and, thereby, enhance its ability to compete successfully for
future government work.
In both the private and public sectors, the Company, acting either as a
prime contractor or as a subcontractor, may join with other firms to form a team
that competes for a single contract or submits a single proposal. Because a team
of firms almost always can offer a stronger set of qualifications than any firm
standing alone, these teaming arrangements often are very important to the
success of a particular competition or proposal. The Company maintains a large
network of business relationships with other companies and has drawn repeatedly
upon these relationships to form winning teams.
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 7
ICF Kaiser subsidiaries operate under a number of different types of
contract structures with its private-sector and public clients, the most
common of which are Cost Plus and Fixed Price. Under Cost Plus contracts, the
Company's costs are reimbursed with a fee (either fixed or percentage of cost)
and/or an incentive or award fee offered to provide inducement for effective
project management. A variation of Cost Plus contracts are time and materials
contracts under which the Company is paid at a specified fixed hourly rate for
direct labor hours worked. Under Fixed Price contracts, the Company is paid a
predetermined amount for all services provided as detailed in the design and
performance specifications agreed to at the project's inception.
Customers
The Company's clients include: DOD, DOE and EPA; major corporations in the
aerospace, energy, transportation, chemical, steel, aluminum, mining,
manufacturing, and computer industries; utilities; and a variety of state and
local government agencies throughout the United States. A substantial portion of
the Company's work is repeat business from existing clients. In many cases, the
Company has worked for the same client for many years, providing different
services at different times. DOE accounted for approximately 48% of the
Company's consolidated gross revenue during fiscal year 1994; DOD, EPA, and
other federal agencies collectively accounted for another approximately 17%. The
federal government accounted for approximately 65% of the Company's consolidated
gross revenue in fiscal year 1994, 47% in fiscal year 1993, and 42% in fiscal
year 1992.
The Company's international clients include both private firms and foreign
government agencies in such countries as Australia, Portugal, and Taiwan. In
fiscal year 1994, foreign operations accounted for approximately 6% of the
Company's consolidated gross revenue. For information concerning gross revenue,
operating income, and identifiable assets of the Company's business by
geographic area, see Note O to the Consolidated Financial Statements.
Backlog
Backlog refers to the aggregate amount of gross contract revenue remaining
to be earned pursuant to signed contracts extending beyond one year. At February
28, 1994, the Company's contract backlog was approximately $1.6 billion in gross
revenue, compared to approximately $1.0 billion in gross revenue at February 28,
1993. The Company expects that approximately 42% of the backlog at February 28,
1994, will be worked off during fiscal year 1995. Because of the nature of its
contracts, the Company is unable to calculate the amount or timing of service
revenue that might be earned pursuant to these contracts. The Company believes
that backlog is not a predictor of future gross or service revenue.
Differences in contracting practices between the public and private sectors
result in ICF Kaiser's backlog being weighted heavily toward contracts
associated with agencies of the federal government. Backlog under contracts with
agencies of the federal government that extend beyond the government's current
fiscal year includes the full contract amount, including in many cases amounts
anticipated to be earned in option periods and certain performance fees,
although generally annual funding of the amounts under such contracts must be
appropriated by Congress before the agency may expend funds during any year
under such contracts. In addition, the agency must allocate the appropriated
funds to these specific contracts and thereafter authorize work or task orders
to be performed under these specific contracts. Such authorizations are
generally for periods considerably shorter than the duration of the work the
Company expects to perform under a particular contract and generally cover only
a percentage of the contract revenue. Because of these factors, the amount of
federal government contract backlog for which funds have been appropriated and
allocated, and task orders issued, at any given date is a substantially smaller
amount than the total federal government contract backlog as of that date. In
the event that option periods under any given contract are not exercised or
funds are not appropriated, allocated, or authorized to be spent under any given
contract, the amount of backlog attributable to that contract would not result
in revenue to the Company. All contracts and subcontracts with agencies of the
federal government are subject to termination, reduction, or modification at any
time at the discretion of the government agency.
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ICF Kaiser Internationa, Inc. 1994 Annual Report on Form 10-K Page 8
Potential Environmental Liability
The assessment, remediation, analysis, handling, and management of
hazardous substances necessarily involve significant risks, including the
possibility of damages or personal injuries caused by the escape of hazardous
materials into the environment, and the possibility of fines, penalties, or
other regulatory action. These risks include potentially large civil and
criminal liabilities for violations of environmental laws and regulations, and
liabilities to customers and to third parties for damages arising from
performing services for the Company's clients.
ICF Kaiser provides consulting services and performs other work involving
or related to hazardous substances, toxic wastes, and other regulated materials
- - -- activities that involve the risks discussed above. The Company has endeavored
to protect itself from potential liabilities resulting from pollution or
environmental damage by obtaining indemnification from its private-sector
clients and intends to continue this practice in the future. Under most of these
contracts, the Company has been successful in obtaining such indemnification;
however, such indemnification generally is not available if such liabilities
arise as a result of breaches by the Company of specified standards of care.
For EPA contracts involving field services in connection with Superfund
response actions, the Company has obtained indemnification under Section 119 of
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), as amended by the Superfund Amendment and Reauthorization Act, for
pollution and environmental damage liability resulting from release or
threatened release of hazardous substances. Some of the Company's clients
(including private clients, DOD, and DOE) are Potentially Responsible Parties
(PRPs) under CERCLA. Under the Company's contracts with these PRPs, the Company
has the right to seek contribution from these PRPs for liability imposed on the
Company in connection with its work at these clients' CERCLA sites. In addition,
in connection with contracts involving field services at 10 of DOE's weapons
facilities, including the DOE's Hanford site, the Company is indemnified under
the Price-Anderson Act, as amended, against liability claims arising out of
contractual activities involving a nuclear incident.
In connection with its services to its environmental, infrastructure, and
industrial clients, the Company works closely with federal and state government
environmental compliance agencies, and occasionally contests the conclusions
those agencies reach regarding the Company's compliance with permits and related
regulations. To date, the Company never has paid a fine in a material amount or
had liability imposed on it for pollution or environmental damage in connection
with its services. However, there can be no assurance that the Company will not
have substantial liability imposed on it for any such damage in the future.
Insurance
Consistent with industry experience and trends, the Company has found it
difficult to obtain pollution insurance coverage, in amounts and on terms that
are economically reasonable, against possible liabilities that may be incurred
in connection with its conduct of its environmental business. An uninsured claim
arising out of the Company's environmental activities, if successful and of
sufficient magnitude, could have a material adverse effect on the Company.
The Company has a comprehensive risk management and insurance program that
provides a structured approach to protecting the Company. Included in this
program are coverages for general, automobile, and professional liability; for
workers' compensation; and for employers and property liability. The Company
believes that the insurance it maintains, including self-insurance, is in such
amounts and protects against such risks as is customarily maintained by similar
businesses operating in comparable markets. At this time, the Company expects to
continue to be able to obtain general, automobile, and professional liability;
workers' compensation; and employers and property insurance in amounts generally
available to firms in its industry. There can be no assurance that this
situation will continue, and if insurance of these types is not available, it
could have a material adverse effect on the Company.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 9
Regulation of the Company's Business
The Company is subject to general federal regulation with respect to its
contracting activities with the federal government. For example, the Company has
a substantial number of cost-reimbursement contracts with the U.S. government,
the costs of which are subject to audit by the U.S. government. As a result of
such audits, the federal government asserts from time to time that certain costs
claimed as reimbursable under government contracts either were not allowable or
not allocated in accordance with federal procurement regulations. Management
believes that the potential effect of disallowed costs, if any, for the periods
currently under audit and for periods not yet audited has been adequately
provided for and will not have a material adverse effect on the Company's
financial position.
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 is unable to
predict the outcome of the investigations in which it currently is involved.
Management does not believe that there will be any material adverse effect on
the Company's financial position as a result of these investigations.
Federal agencies that are the Company's regular customers (including DOD,
DOE, and EPA) have formal policies against awarding contracts that would present
actual or potential conflicts of interest with other activities of the
contractor. Because the Company provides a broad range of services in
environmental and related fields for the federal government, state governments,
and private customers, there can be no assurance that government conflict-of-
interest policies will not restrict the Company's ability to pursue business in
the future.
Because some of the Company's subsidiaries provide the federal government
with nuclear energy and defense-related services, these subsidiaries and a
substantial number of their employees are required to have and maintain security
clearances from the federal government. These subsidiaries and their employees
have been able to obtain these security clearances in the past, and the Company
has no reason to believe that there would be any problems in this area in the
future. However, there can be no assurance that the required security clearances
will be obtained and maintained in the future. Because of its nuclear energy and
defense-related services, the Company is subject to foreign ownership, control,
and influence (FOCI) regulations imposed by the federal government and designed
to prevent the release of classified information to contractors subject to FOCI.
Under these regulations, FOCI concerns may arise as a result of a variety of
factors, including foreign ownership of substantial percentages of equity
securities or debt, a high percentage of foreign revenue, and the number of
directors and officers who are not U.S. citizens. Subsidiaries of the Company
with facility security clearances or sensitive DOE contracts file reports with
DOD and DOE with respect to events and changes that affect the potential for
FOCI. The Company has implemented procedures designed to insulate such
subsidiaries from any FOCI that might affect the Company. There can be no
assurance that such measures will prevent FOCI policies from affecting the
ability of the Company's subsidiaries to secure and maintain certain types of
DOD and DOE contracts.
Employees
As of May 1, 1994, ICF Kaiser employed approximately 5,700 persons located
in more than 80 offices worldwide, and the Company believes that its relations
with its employees are good. Approximately one-half of the employees at the
Company's ICF Kaiser Hanford Company subsidiary are represented by unions,
including unions under the Hanford Atomic Metals Trades Council (HAMTC),
Building and Construction Trades, and the Office and Professional Employees
International Union (OPEIU). Collective bargaining agreements are in place with
the HAMTC, the OPEIU, Hanford Site Stabilization, NDT/QC Inspectors, and
Escorts/International Guards Units.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 10
Environmental Regulation
Significant environmental laws have been enacted in response to public
concern over the environment. These laws and the implementing regulations affect
nearly every industrial activity. Efforts to comply with the requirements of
these laws have increased demand for the Company's services. The principal
federal legislation having the most significant effect on the Company's business
includes the following:
The Comprehensive Environmental Response, Compensation and Liability Act.
CERCLA, as amended by the Superfund Amendments and Reauthorization Act,
established the Superfund program to clean up hazardous waste sites and provides
for penalties and punitive damages for noncompliance with EPA orders. Superfund
may impose strict liability (joint and several as well as individual) on certain
hazardous substance waste owners, operators, disposal "arrangers," transporters,
and disposal facility owners and operators (Potentially Responsible Parties or
PRPs) for the costs of removal or remedial action; for other necessary response
costs and damages for injury, destruction, or loss of natural resources; and for
the cost of any health effects study. Under certain circumstances federal funds
may be used to pay for the cleanup.
The Resource Conservation and Recovery Act (RCRA). RCRA, as amended by the
Hazardous and Solid Waste Amendments of 1984 (HSWA), provides a comprehensive
scheme for the regulation of hazardous waste from the time of generation to its
ultimate disposal (and sometimes thereafter), as well as the regulation of
persons engaged in the treatment, storage, and disposal of hazardous waste. The
RCRA scheme includes both a permitting and a manifest tracking system and
detailed regulations on the handling, treatment, transportation, storage, and
disposal of hazardous waste. Regulations have been issued pursuant to RCRA in
the following areas (among others) of importance to the Company: permitting
remediation of releases associated with underground storage tanks; municipal
solid waste disposal; and disposal of hazardous waste. HSWA has increased to an
estimated 100,000 the number of hazardous waste generators subject to RCRA. HSWA
also imposes land disposal restrictions/bans on certain listed and
characteristic hazardous wastes that do not meet specified treatment standards.
The Clean Air Act. Under the Clean Air Act of 1970, as amended, EPA is
empowered to establish and enforce National Ambient Air Quality Standards and
limits on the emissions of various pollutants from specific types of facilities.
The Clean Air Act Amendments of 1990 require certain sources emitting an air
pollutant regulated under the Clean Air Act to obtain an operating permit, which
includes enforceable emissions limitations and compliance schedules. In
addition, the Clean Air Act Amendments of 1990 limit acid rain by requiring a
reduction in sulfur dioxide and nitrogen oxides emissions. The mandated
reductions must be achieved by electric utility power plants in the United
States with specific emission levels or allowances allocated to each plant.
However, under the "marketable allowances" approach in the amendment, plants
could buy or sell allowances, shifting some or all of their control burden to
sources that can reduce emissions more efficiently.
The Safe Drinking Water Act. Under the Safe Drinking Water Act and its
subsequent reauthorizations, EPA is empowered to set drinking water standards
for the estimated 59,000 community water supply systems in the United States.
The Act requires that EPA set maximum ground-water contamination levels for 83
previously unregulated toxic substances and also requires EPA to establish a
priority list every three years of contaminants that may cause adverse health
effects and may require regulation. Water supply systems are required to begin
monitoring within defined time limits following the publication of the final
regulations. The Act also requires that EPA set criteria specifying when
utilities using surface water supplies should filter their water and issue
national primary drinking water regulations requiring all utilities to disinfect
their water.
The Clean Water Act. The Clean Water Act established a system of
standards, permits, and enforcement procedures for the discharge of pollutants
to surface water from industrial, municipal, and other wastewater sources. EPA
sets discharge standards for certain industrial and municipal wastewater
discharges and provides for federal grants to assist municipalities in complying
with treatment requirements. Key areas for which regulations recently have been
issued or are proposed include industrial wastewater pretreatment, surface water
toxics control, wastewater sludge disposal, and stormwater discharges. In cases
of noncompliance,
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 11
EPA may assess administrative penalties and may sue for court-ordered compliance
and penalties. Under the Ocean Dumping Ban Act of 1988, regulatory revisions to
the Clean Water Act were made to eliminate ocean dumping of sludge.
The Toxic Substance Control Act (TSCA). TSCA, enacted in 1976, establishes
requirements for identifying and controlling toxic chemical hazards to human
health and the environment. EPA has identified more than 60,000 chemical
substances (out of more than five million known chemical compounds) that were
manufactured or processed for commercial use in the United States in 1985. In
addition, more than 1,000 new chemicals are introduced each year. TSCA
authorizes EPA, in certain circumstances, to require testing of existing and new
chemicals used in commerce to determine their human health and environmental
effects. TSCA also gives EPA authority to prohibit or limit certain activities
associated with producing, distributing, and using a chemical that is found to
pose an unreasonable risk of injury to human health or the environment.
The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). FIFRA
focuses on the health-based risk of pesticides and requires the registration of
all pesticides, with a heavy emphasis on scientific data and risk assessment.
Under FIFRA, EPA establishes regulations that can include labeling restrictions,
use restrictions, or an outright ban of the pesticide. The 1972 amendments
substantially increased the scope of the Act to include biotechnology and to
expand the authority of EPA.
===============================================================================
Item 2. Properties
================================================================================
All of the Company's operations are conducted either in leased facilities
or in facilities provided by the federal government or other clients. As of
February 28, 1994, the Company leased an aggregate of approximately one million
square feet of space. The terms of these leases range from month-to-month to 15
years, and some may be renewed for additional periods. Some of the space leased
by the Company has been subleased to other entities under subleases expiring
from 1994 to 2000.
The Company's headquarters is located at 9300 Lee Highway, Fairfax,
Virginia 22031-1207, and its telephone number is (703) 934-3600. Other offices
include Phoenix, Arizona; Livermore, Los Angeles, Oakland, Sacramento, San
Diego, San Rafael, and Universal City, California; Denver and Lakewood,
Colorado; Washington, DC; Jacksonville, Miami, Orlando, and Tampa, Florida;
Chicago, Illinois; Gary, Indiana; Baton Rouge and Ruston, Louisiana; Abingdon
and Baltimore, Maryland; Boston, Massachusetts; Las Vegas, Nevada; Edison, New
Jersey; New York, New York; Albuquerque and Los Alamos, New Mexico; Raleigh,
North Carolina; Cincinnati, Ohio; Pittsburgh, Pennsylvania; Houston, Texas;
Bellevue, Richland, and Seattle, Washington; Perth, Australia; Toronto,
Canada; London, England; Paris, France; Mexico City, Mexico; Lisbon, Portugal;
Moscow, Russia; and Taipei, Taiwan.
Because the Company's operations generally do not require the maintenance
of unique facilities, suitable office space is readily available for lease in
most of the areas served. The Company believes that adequate space to conduct
its operations will be available for the foreseeable future. In 1987, the
Company entered into a 15-year lease agreement for a new headquarters building
in Fairfax, Virginia, containing approximately 200,000 square feet of office
space. In 1988, the Company signed a 15-year lease agreement to occupy
approximately 100,000 square feet of office space in a new building adjacent to
the headquarters building. In connection with the acquisition of ICF Kaiser
Engineers in 1988, ICF Kaiser acquired the lease for ICF Kaiser Engineers'
headquarters building in Oakland, California. The lease provides for
approximately 142,000 square feet of office space and expires in June 2000.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 12
================================================================================
Item 3. Legal Proceedings
================================================================================
ICF Kaiser International, Inc. is a Delaware corporation incorporated in
1987 under the name American Capital and Research Corporation. It is the
successor to ICF Incorporated, a nationwide consulting firm organized in 1969.
In 1988, the Company acquired the Kaiser Engineers business which dates from
1914.
In 1989, certain former holders of common stock of Kaiser Engineers Group,
Inc. filed an action in Chancery Court of the State of Delaware, County of New
Castle, entitled Aiken v. Kaiser Engineers Group, Inc. for appraisal of the
shares they held at the time ICF Kaiser International, Inc. acquired their
former company. The Company believes that those common shares had no value at
the time of the acquisition and that this litigation will not have a material
adverse effect on the Company.
The Company and its subsidiaries are involved in a number of lawsuits and
government regulatory proceedings arising in the ordinary course of its business
or arising in connection with the disposition of certain businesses and
investments. The Company believes that any ultimate liability resulting
therefrom will not have a material adverse effect on its operations and
financial condition.
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 is unable to predict the
outcome of the investigations in which it currently is involved. Management does
not believe there will be any material adverse effect on the Company's financial
position as a result of these investigations.
===============================================================================
Item 4. Submission of Matters to a Vote of Security Holders
===============================================================================
None
===============================================================================
Item 10. Executive Officers of the Registrant
===============================================================================
The names of the Company's executive officers and their ages (as of May 4,
1994), principal corporate positions, and business experience are set forth
below.
James O. Edwards, 50, has been Chairman of the Board and Chief Executive
Officer of ICF Kaiser International, Inc. since its establishment in 1987. He
also was President of ICF Kaiser International from 1987 to 1990. In 1974, he
joined ICF Incorporated, the predecessor of ICF Kaiser International, and was
its Chairman and Chief Executive Officer from 1986 until the 1987 establishment
of ICF Kaiser. Mr. Edwards graduated from Northwestern University (B.S.I.E.)
and Harvard University (M.B.A., High Distinction, George F. Baker Scholar).
Stephen W. Kahane, 43, is President of the Company's Environment & Energy
Group. He has held senior management positions in several of the Company's
operating subsidiaries since 1985. From 1981 to 1985, Dr. Kahane was
responsible for the Environmental and Hazardous Waste Programs at Jacobs
Engineering Group, Inc.; he was a Vice President when he left that firm. Dr.
Kahane graduated from the University of California, Los Angeles (B.A., M.S.P.H.,
D.Env.).
Douglas W. McMinn, 46, is the President of the Company's International
Operations Group. He has held senior management positions with the Company since
1987. From 1985 to 1987, he was Assistant Secretary for Economic and Business
Affairs, U.S. Department of State. Prior to that time, he was Director,
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 13
International Economic Affairs, National Security Council (1982-1985) and Deputy
Chief of Mission, Office of the United States Trade Representative, Geneva,
Switzerland (1979-1981). Mr. McMinn graduated from Gustavus Adolphus College
(B.A.), Johns Hopkins University (M.L.A.), and Johns Hopkins University School
of Advanced International Studies (M.A.).
George D. O'Brien, 56, has been President of ICF Kaiser Hanford Company
since January 1, 1994. Dr. O'Brien joined the Company in 1989 and was directing
the Company's infrastructure engineering and construction operations at the time
of his 1994 appointment as President of the Company's Hanford subsidiary. From
1986 to 1989, Dr. O'Brien was Commanding Officer of the nuclear-powered aircraft
carrier USS Carl Vinson; prior to that, he held a variety of assignments within
the U.S. Navy involving aircraft and ship operations, aircraft engineering
program management, and national strategic planning. Dr. O'Brien graduated from
the U.S. Naval Academy (B.S.) and the Navy Post Graduate School (Ph.D.),
Monterey, California.
Alvin S. Rapp, 54, has been President and Chief Executive Officer of the
Company's Engineering & Construction Group since November 1993. Prior to
joining the Company, he was a regional group vice president of Jacobs
Engineering Group, Inc., having joined Jacobs in 1981 as manager of engineering
in that company's Baton Rouge, Louisiana office. Prior to joining Jacobs, Mr.
Rapp held a variety of management positions with Ciba-Geigy Corporation, U.S.S.
Agri-Chemicals, and E.I. du Pont de Nemours & Company, Inc. Mr. Rapp graduated
from Christian Brothers College (B.S.E.E.), Memphis, Tennessee.
Marcy A. Romm, 35, has been Senior Vice President and Director of Human
Resources of the Company since June 1993. She has held Human Resources positions
at ICF Kaiser since 1984. Ms. Romm graduated from George Washington University
(B.A., M.B.A.).
Kenneth A. Schweers, 47, is Chairman of the Company's Consulting Group. He
has held senior management positions in several of ICF Kaiser's operating
subsidiaries since 1976. Mr. Schweers graduated from Stanford University (B.S.,
M.B.A.).
Ronald R. Spoehel, 36, has been Senior Vice President of ICF Kaiser
International, Inc. since 1990 and was elected Treasurer in 1992. He has been
the Chief Financial Officer (Acting) since March 1994. He was a Vice President
of Shearson Lehman Hutton Inc. from 1985 to 1990 and a Vice President of Bank of
America NT&SA from 1980 to 1985. Mr. Spoehel graduated magna cum laude from The
Wharton School (B.S.E.), The Moore School of Electrical Engineering (M.S.E.),
and The Wharton School (M.B.A.), all at the University of Pennsylvania.
Marc Tipermas, 46, has been Executive Vice President and Director of
Corporate Development for ICF Kaiser International, Inc. since May 1993. He has
held senior management positions in several of ICF Kaiser's operating
subsidiaries since joining the Company in 1981. From 1977 to 1981, Dr. Tipermas
was employed by the U.S. Environmental Protection Agency where he was the
Director of the Superfund Policy and Program Management Office from 1980 to
1981. Prior to joining EPA, he was Assistant Professor of Political Science at
the State University of New York at Buffalo from 1975 to 1977. Dr. Tipermas has
been a director of ICF Kaiser International, Inc. since October 1993. Dr.
Tipermas graduated from the Massachusetts Institute of Technology (S.B.) and
Harvard University (A.M., Ph.D.).
Paul Weeks, II, 50, has been Senior Vice President, General Counsel, and
Secretary of ICF Kaiser International, Inc. since 1990. He joined ICF Kaiser
Incorporated in May 1987 as its Vice President, General Counsel, and Secretary.
From 1973 to 1987, he was employed by Communications Satellite Corporation where
from 1983 to 1987 he was Assistant General Counsel for Corporate Matters. Mr.
Weeks graduated from Princeton University (B.S.E.E.) and The National Law Center
of George Washington University (J.D.).
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 14
PART II
================================================================================
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
================================================================================
Since September 14, 1993, the Common Stock has been traded on the New York
Stock Exchange (NYSE) under the symbol "ICF". Prior to that date, the Common
Stock was traded on the NASDAQ National Market System. At May 4, 1994, the
Company's record date for its 1994 Annual Meeting of Shareholders, there were
1,283 shareholders of record; the Company believes that there are approximately
6,783 beneficial owners of Common Stock.
On May 18, 1994, the closing price of the Common Stock as reported by the
NYSE was $2.625. The following table sets forth, for the periods indicated, the
high and low bid information for the Common Stock as reported on the NASDAQ
National Market System and the high and low sales prices on the NYSE:
===============================================================================
Common Stock Price
High Low
Fiscal Year Ended February 28, 1993
First Quarter............................... $10.875 $ 7.25
Second Quarter.............................. 7.75 5.00
Third Quarter............................... 7.50 4.00
Fourth Quarter.............................. 8.50 5.875
Fiscal Year Ended February 28, 1994
First Quarter............................... $ 6.875 $ 4.75
Second Quarter.............................. 5.50 3.75
Third Quarter (September 1 - September 13).. 4.875 4.375
Third Quarter (September 14 - November 30).. 5.375 4.00
Fourth Quarter.............................. 5.00 3.625
===============================================================================
The Corporation's Transfer Agent and Registrar is First Chicago Trust
Company of New York, Mail Suite 4692, P.O. Box 2534, Jersey City, NJ 07303-2534.
The Shareholder Relations telephone number is (201) 324-0498.
The Company has never paid cash dividends on its Common Stock. The Board of
Directors anticipates that no cash dividends will be paid on its Common Stock
for the foreseeable future and that the Company's earnings will be retained for
use in the business.
The Board of Directors determines the Company's Common Stock dividend
policy based on the Company's results of operations, payment of dividends on
preferred stock, financial condition, capital requirements, and other
circumstances. The Company's debt agreements allow dividends to be paid on its
capital stock provided that the Company complies with certain limitations
imposed by the terms of such agreements. See Note F to the Consolidated
Financial Statements.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 15
===============================================================================
Item 6. Selected Financial Data
===============================================================================
The selected consolidated financial data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto included elsewhere herein. Certain items in fiscal years 1993 and 1992
have been reclassified to conform to the fiscal year 1994 presentation.
==========================================================================================================================
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
Year ended February 28,
-----------------------
1994/(1)/ 1993 1992/(1)(3)/ 1991 1990
------ ------ ------ ------ ------
Statement of Operations Data:
Gross revenue.......................................... $651,657 $678,882 $710,873 $624,976 $503,904
Service revenue /(2)/.................................. 382,708 391,528 385,942 363,318 278,255
Operating income (loss)................................ (5,230) 22,744 (43,963) 33,287 22,563
Income (loss) before income taxes...................... (12,877) 14,894 (54,310) 24,018 14,906
Net income (loss) before extraordinary item............ (12,528) 8,639 (40,516) 14,291 8,794
Net income (loss) /(3)/................................ (18,497) 8,639 (40,516) 14,291 8,794
Net income (loss) available for common shareholders.... (25,322) 3,346 (42,932) 13,434 8,794
Primary Net Income (Loss) Per Common Share:
Before extraordinary item and redemption of
redeemable preferred stock......................... $(0.83) $0.16 $(2.25) $0.71 $0.57
Extraordinary loss on early extinguishment of debt... (0.29) --- --- --- ---
Redemption of redeemable preferred stock............. (0.09) --- --- --- ---
---------- -------- ----------- -------- --------
Total............................................... $(1.21) $0.16 $(2.25) $0.71 $0.57
========== ======== =========== ======== ========
Fully Diluted Net Income (Loss) Per Common Share:
Before extraordinary item and redemption of
redeemable preferred stock......................... $(0.83) $0.16 $(2.25) $0.68 $0.57
Extraordinary loss on early extinguishment of debt... (0.29) --- --- --- ---
Redemption of redeemable preferred stock............. (0.09) --- --- --- ---
---------- -------- ----------- -------- --------
Total............................................... $(1.21) $0.16 $(2.25) $0.68 $0.57
========== ======== =========== ======== ========
Weighted average common and common equivalent
shares outstanding, assuming full dilution.......... 20,886 21,272 19,085 20,308 15,527
Balance Sheet Data (end of period):
Total assets........................................... $281,198 $293,076 $318,947 $357,457 $237,057
Working capital........................................ 90,725 87,845 66,065 74,754 43,430
Long-term liabilities.................................. 130,752 75,602 85,675 109,820 53,019
Redeemable preferred stock............................. 20,212 44,824 45,161 26,498 3,997
Shareholders' equity................................... 30,780 58,521 51,151 88,839 58,503
___________________
(1) Gross revenue and service revenue for the fiscal year ended February 29, 1992, exclude businesses discontinued by
the Company in fiscal year 1992; the financial data for fiscal years 1990 through 1991 includes results for the
entire Company. In fiscal year 1994, the Company adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions. In fiscal year 1992, the Company adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.
(2) Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross
revenue and adding the Company's share of the income of joint ventures and affiliated companies.
(3) Fiscal year 1992 reflects an after-tax charge of $52.4 million associated with the disposal and restructuring of
certain businesses.
==========================================================================================================================
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 16
================================================================================
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
================================================================================
Overview
ICF Kaiser is one of the nation's largest engineering, construction, and
consulting services companies, providing fully integrated services to domestic
and foreign clients in the environmental, infrastructure, industrial, and energy
markets, in both the private and public sectors.
ICF Kaiser had operating and net income of $8.2 million and $2.0 million,
respectively, through the first nine months of fiscal 1994; however, in the
fourth quarter of fiscal 1994, there was an unanticipated sharp decline in ICF
Kaiser's operating performance, resulting in a fourth-quarter operating loss of
$13.5 million including unusual items and a $14.6 million net loss before
extraordinary item ($0.74 per share). Although revenue increased in the fourth
quarter, primarily due to a large expansion of ICF Kaiser's contract to provide
services at the U.S. Department of Energy's (DOE) Hanford, Washington, site,
other volume decreased significantly. This decrease was impacted by loss of
business days due to severe weather in the East and the Los Angeles earthquake,
and by deterioration of the Company's energy engineering business, as well as,
by increased marketing costs as the Company aggressively pursued new business.
This unexpected volume decline was not proportionately matched with immediate
cost reductions. Throughout the fourth quarter, ICF Kaiser had been continuing
its ongoing cost-cutting efforts and finalizing action plans for certain
operating units. The Company expanded and accelerated the scope of these
efforts late in the fourth quarter. By the end of the fourth quarter, the
Company's substantive actions to address the loss and to improve future
performance included: downsizing the work force, consolidating office space,
renegotiating significant leases, and restructuring certain international
operations. The Company recorded an $8.2 million unusual charge in the fourth
quarter for the cost of these actions; these actions are expected to save in
excess of $8.0 million of annual operating expenses in the future. Management
expects these actions to be fully completed in fiscal 1995.
The fourth-quarter loss eliminated the Company's operating and net income
recorded through the first nine months of fiscal 1994, resulting in a $5.2
million operating loss and a $12.5 million net loss before extraordinary item
($0.83 per share) in fiscal 1994, a $21.2 million ($0.99 per share) decrease
from fiscal 1993. Excluding unusual items and cost of disposal of businesses,
the Company had operating income of $3.5 million in fiscal 1994, a $20.6 million
decrease from the comparable amount in fiscal 1993. This decrease is primarily
the result of the items discussed above as well as a decline in the utilization
of professionals due to weakened demand in the Company's markets, a slowdown in
government contracting due to the change in Presidential Administrations
(particularly in the first half of fiscal 1994), delays in spending by clients
under existing contracts, the completion of several large industrial projects,
the sale of two income-producing businesses in fiscal 1993, and a delayed impact
of the Company's cost-reduction efforts which began in the fourth quarter of
fiscal 1993.
Although certain sectors of the overall economy have recently shown positive
trends, companies in ICF Kaiser's primary industrial markets have not yet
significantly increased their capital spending commitments, and many of ICF
Kaiser's public clients in the infrastructure market are experiencing strong
budgetary and regulatory pressure. This has resulted in a very competitive
operating environment for the Company. In order to compete effectively, ICF
Kaiser will continue to strengthen management control and reduce costs through
its reorganized operating structure and management team. The Company is also
committed to continuing its aggressive marketing and technology investment
program, which began in fiscal 1994. ICF Kaiser management believes that a
tightly controlled, lower cost structure, combined with strategic growth, will
return ICF Kaiser to long-term profitability.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 17
Outlook
Similar to many companies in its industry, ICF Kaiser continued to experience
weak demand in its key markets. The pace of federal spending under the
Company's existing environmental contracts, although improved in fiscal 1994,
has slowed considerably compared to prior years. This slowdown over prior years
was compounded by several factors, including the change in Presidential
Administrations, a continued sluggish market for major industrial and
environmental expenditures, and the completion of several large industrial
projects. These factors resulted in reduced levels of gross and service
revenue; however, ICF Kaiser expanded its backlog to $1.6 billion as of February
28, 1994, compared to $1.0 billion at February 28, 1993. The continuation of
positive trends in the U.S. economy, combined with an increasing domestic and
international focus on solving environmental and infrastructure issues, provides
ICF Kaiser with growth potential. Although the Company's recent strategic
actions could yield some short-term benefit, they are intended to position the
Company for long-term growth. ICF Kaiser management will continue to focus on
areas for additional cost-cutting, improving the efficiency of operations, and
developing marketing opportunities in order to improve the Company's operating
results.
On October 15, 1993, the Company announced that it had signed a material
amendment to the contract it won in early 1993 to continue to provide services
at the DOE Hanford site. The Company estimates that the architect-engineering,
construction management, and operating support services to be provided under the
amended contract will be worth more than $700 million in gross revenue over the
remaining term of the amendment. The Company estimates that the fees it will be
eligible to earn under this contract will increase significantly as the amended
contract provides the Company with the opportunity to earn incentive fees
related to technology transfers and efficiency savings. In connection with the
contract amendment and in order to reduce duplication of work and to improve
management control and efficiency of operation, DOE, with the Company's
concurrence, assigned management of substantially all aspects of the amended
contract to Westinghouse Hanford Company, another Management and Operating
contractor at DOE's Hanford site.
Recapitalization
To provide ICF Kaiser with a more stable, long-term financing structure, the
Company completed a recapitalization program in the fourth quarter of fiscal
1994 by issuing 125,000 Units, each Unit consisting of $1,000 principal amount
of the Company's newly issued 12% Senior Subordinated Notes due 2003 and 4.8
warrants, each to purchase one share of the Company's common stock at $5.00 per
share. ICF Kaiser used the proceeds to repurchase senior and subordinated debt,
certain series of preferred stock, and certain existing warrants (see "Liquidity
and Capital Resources" for further discussion). The recapitalization resulted
in a $6.0 million extraordinary charge (net of $0 tax benefit due to the
unanticipated decline in fourth-quarter results) for the early extinguishment of
debt and a $1.9 million charge to net income available for common shareholders
to repurchase the Company's Series 2C Senior Preferred Stock. These charges
reduced earnings per share $0.38 for a total loss of $1.21 per share in fiscal
1994.
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ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 18
Results of Operations
The following table summarizes key elements in the Consolidated Statements of
Operations for the years ended February 28, 1994, February 28, 1993, and
February 29, 1992. Certain items in fiscal 1993 and 1992 have been reclassified
to conform to the fiscal 1994 presentation.
1994 1993 1992
- - --------------------------------------------------------------------------------
(Dollars in millions)
Gross revenue $651.7 $678.9 $710.9
Service revenue $382.7 $391.5 $385.9
Service revenue as a percentage
of gross revenue 58.7% 57.7% 54.3%
Expenses as a percentage of
service revenue:
Direct cost of services and overhead 85.1% 80.0% 80.2%
Administrative and general 11.5% 11.2% 11.5%
Depreciation and amortization 2.5% 2.7% 2.4%
Unusual items, net 2.3% (0.0)% (1.6)%
Costs of disposal of businesses, net - 0.3% 19.0%
Operating income (loss) (1.4)% 5.8% (11.5)%
- - -------------------------------------------------------------------------------
Gross revenue represents services provided to customers with whom the Company
has a primary contractual relationship. Included in gross revenue are costs of
certain services subcontracted to third parties and other reimbursable direct
project costs, such as materials procured by the Company on behalf of its
customers.
Service revenue is derived by deducting the costs of subcontracted services
and direct project costs from gross revenue and adding the Company's share of
the income of joint ventures and affiliated companies. ICF Kaiser believes that
it is appropriate to analyze operating margins and other ratios in relation to
service revenue because such revenue and ratios reflect the work performed
directly by the Company.
Fiscal 1994 Compared to Fiscal 1993
Gross and service revenue declined 4.0% and 2.2%, respectively, to $651.7
million and $382.7 million in fiscal 1994 primarily due to the successful
completion of two large industrial projects during fiscal 1993 ($81.3 million
and $9.2 million, respectively); a significant decline in other engineering and
construction business ($38.1 million and $21.9 million, respectively); the sale
of an ICF Kaiser subsidiary during the third quarter of fiscal 1993 ($14.4
million and $10.3 million, respectively); a decline in the Company's energy
engineering business ($11.8 million and $9.6 million, respectively); and the
general impact of reduced government spending, loss of business days due to
severe weather in the East and the Los Angeles earthquake, and the sluggish
economy discussed above. The decrease was partially offset by a significant
increase in ICF Kaiser's services provided to DOE at the Hanford site ($120.8
million and $52.4 million, respectively). This
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 19
increase was primarily due to the amendment of ICF Kaiser's contract with DOE,
which was effective October 1, 1993. Service revenue as a percentage of gross
revenue increased as the Company continued its concerted efforts to shift more
work from subcontractors to Company personnel. Equity in income from joint
ventures and affiliated companies, and consequently service revenue, declined
due to the successful early completion of a natural gas liquefaction project on
Australia's Northwest Shelf ($2.8 million) and the sale of the Company's
interest in Acer Group Limited ($1.6 million), partially offset by $1.1 million
of income from the Company's interest in an entity that owns a coal
pulverization facility.
The Company's direct cost of services and overhead increased to 85.1% of
service revenue in fiscal 1994 from 80.0% in fiscal 1993. The relatively fixed
nature of certain of the Company's indirect costs (e.g., office rent) and the
timing of the actions discussed under "Overview," delayed the impact of cost
reductions in the fourth quarter. At the present time, strategic plans have
been developed and actions have been taken to position ICF Kaiser's operating
groups to compete effectively under current market conditions. ICF Kaiser also
increased its commitment to marketing in fiscal 1994, which contributed to the
overall increase in administrative and general expense.
Depreciation and amortization expense decreased $1.2 million to $9.6 million
for the year ended February 28, 1994, primarily as the result of the write-off
of certain software assets in the third quarter of fiscal 1993.
ICF Kaiser's interest expense for the year ended February 28, 1994, decreased
4.8% from fiscal 1993. The decrease is attributable to both the reduced average
amount of debt outstanding and lower prevailing interest rates. Interest
expense will increase in future periods as a result of the recapitalization
completed in fiscal 1994, discussed under "Liquidity and Capital Resources."
This increase in interest expense will be partially offset by a reduction in
preferred dividends.
ICF Kaiser's effective tax rate decreased to 2.7% in fiscal 1994 from 42% in
fiscal 1993 because the book loss includes a high level of nondeductible
expenses such as goodwill, differences between the book and tax basis of
businesses sold, and losses from controlled foreign corporations. This impact
was magnified by the unanticipated decline in operating results in the fourth
quarter of fiscal 1994. As a result of the combination of lower projected net
income levels and goodwill amortization, a nondeductible item, the Company's
effective tax rate is expected to be above traditional levels in the near-term
future. A $3.3 million valuation allowance was established in fiscal 1994 for
deferred tax assets, primarily net operating loss carryforwards, that might not
be realized in the near future. Although the Company believes it will
ultimately use all of its net operating loss carryforwards, the valuation
allowance was established due to the extraordinary item and recent operating
results. The Company has net operating losses of $12.1 million, of which $1.2
million expire in fiscal 2004 and $10.9 million expire in 2009. The Company has
recorded $0.9 million of tax credit carryforwards, the majority of which do not
expire. Management believes that due to actions taken in fiscal 1994, such as
the reorganization discussed under "Overview," the Company's expected levels of
pretax earnings for financial reporting purposes, when adjusted for
nondeductible expenses such as goodwill amortization, will generate sufficient
future taxable income to realize the $16.1 million deferred tax asset within the
15-year net operating loss carryforward period.
Fiscal 1993 Compared to Fiscal 1992
Gross revenue was $678.9 million in fiscal 1993, a $32.0 million or 4.5%
reduction from $710.9 million in fiscal 1992. This decrease in the Company's
gross revenue is primarily attributable to an Australian subsidiary, which
successfully wound down its natural gas liquefaction project in northwest
Australia ahead of schedule ($37.5 million); the completion of a large
industrial project in the first half of fiscal 1993 ($34.2 million); and the
impact of several other projects nearing completion; offset by an increase in
ICF Kaiser's project to manage the construction of a large industrial facility
($26.6 million) and an increase in ICF Kaiser's services provided to DOE at its
Hanford site ($21.6 million).
Fiscal 1993 service revenue increased slightly over fiscal 1992 service
revenue (1.5%). Also, service revenue as a percentage of gross revenue
increased, indicating that a greater portion of ICF Kaiser's gross
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 20
revenue was being provided by the Company and its personnel rather than
subcontractors. The majority of the projects that were completed or neared
completion in fiscal 1992 had a significant percentage of their gross revenue
being generated from subcontracted work and material costs. In fiscal 1993, the
decline in service revenue on the completed projects was offset by increased
environment- and infrastructure-related service revenue of $9.8 million and $8.3
million, respectively.
The percentage of service revenue represented by administrative and general
expenses decreased in fiscal 1993 resulting, in part, from the lower level of
costs associated with a restructuring program begun in fiscal 1992 and completed
in fiscal 1993.
Depreciation and amortization increased $1.6 million in fiscal 1993 compared
with fiscal 1992 which was primarily the result of a full year of amortization
of certain goodwill and intangible assets acquired in fiscal 1992.
Net interest expense decreased in fiscal 1993 primarily as the result of lower
prevailing interest rates and the use of proceeds from the sale of a health
consulting subsidiary and other discontinued businesses to pay down the
Company's credit facility.
The $6.3 million tax provision for fiscal 1993 differs from the statutory rate
primarily as a result of state income taxes and the amortization of goodwill.
Discontinued Businesses
At February 28, 1993, the Company had sold or otherwise disposed of all
businesses discontinued in fiscal 1992 when the Board of Directors approved
management's recommendation to discontinue certain non-core businesses,
resulting in a $73.4 million provision for restructuring and disposal of
businesses to provide for operating losses of discontinued businesses through
disposal; losses on the disposal of those businesses included in the plan at
that time; and one-time restructuring charges for closing and consolidating
certain operations of core businesses. In fiscal 1993, ICF Kaiser increased the
provision for restructuring and disposal of businesses by an additional $1.3
million to provide for the combined impact of the sale of a health consulting
subsidiary determined to be outside of the Company's core businesses and the
revisions to the estimates of remaining liabilities relating to discontinued
businesses.
Liquidity and Capital Resources
ICF Kaiser increased its liquidity in fiscal 1994. Cash and cash equivalents
increased $17.1 million to $25.5 million primarily due to the Company's
recapitalization program and the collection of outstanding accounts receivable.
Operating activities, primarily the collection of accounts receivable, partially
offset by decreased accounts payable, contributed $17.9 million, which was
slightly offset by investing activities. The Company's working capital
increased $2.9 million or 3.3% to $90.7 million at February 28, 1994.
Management believes that current projected levels of cash flows and operating
revenues and the availability of borrowings under the Company's Credit Facility
will be adequate to fund operations throughout fiscal 1995.
The composition of the Company's capital structure changed significantly as a
result of a recapitalization completed in fiscal 1994. Total debt increased by
$48.7 million and redeemable preferred stock and preferred stock decreased by
$24.6 million and $6.9 million, respectively. On January 11, 1994, ICF Kaiser
issued 125,000 Units, each Unit consisting of $1,000 principal amount of the
Company's newly issued 12% Senior Subordinated Notes due 2003 (12% Notes) and
4.8 warrants, each to purchase one share of the Company's common stock at an
exercise price of $5.00 per share. Of the net issue price of $121,487,500
($125,000,000 less a $3,512,500 discount), $900,000 was allocated to the value
of the 600,000 warrants and $120,587,500 to the 12% Notes. The net proceeds
were used to retire the Company's 13.5% Senior Subordinated Notes (13.5% Notes)
at 114.17% ($34.3 million), to repurchase warrants issued in connection with the
13.5% Notes ($1.6 million), to repurchase its Series 1 Junior Convertible
Preferred Stock and pay accrued dividends thereon ($5.1 million), to repurchase
its Series 2C Senior Preferred Stock at 106.25%
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 21
together with the Series 2C Warrants ($26.6 million), to repay the outstanding
balance on the Company's existing revolving credit facility ($45.0 million), and
to repay, on behalf of the Company's Employee Stock Ownership Plan (ESOP), the
outstanding balance on the ESOP loan ($1.7 million). The balance was used for
general corporate purposes.
An amended $60 million revolving credit facility (the Credit Facility) became
effective concurrently with the issuance of the 125,000 Units, replacing the
former credit facility which was due to expire on September 30, 1994. The
Credit Facility is provided by a lead bank and a consortium of other banks
(together, the Banks) with terms and covenants similar to those under the former
credit facility. ICF Kaiser International, Inc. and certain of its
subsidiaries, which are guarantors of the Credit Facility, granted the Banks a
security interest in certain accounts receivable and certain other assets. The
Credit Facility restricts the payment of cash dividends and requires the
maintenance of specified financial ratios. Effective April 22, 1994, ICF Kaiser
and the Banks entered into an amendment that modified certain of the financial
ratios and other terms of the agreement, including a $20 million limitation on
cash borrowings. As of February 28, 1994, there were no borrowings outstanding
under the Credit Facility, except for letters of credit, and the Company had
$50.7 million of available credit under the Credit Facility. The Credit
Facility expires on October 31, 1996, and contains Eurodollar and alternate base
interest rate alternatives with margins dependent upon the Company's financial
operating results.
Investments in subsidiaries and affiliates were $2.8 million for fiscal 1994.
The investments were primarily related to an investment in an entity that owns a
coal pulverization facility. The Company intends to continue to pursue joint-
venture and other investment opportunities in instances where it can acquire
access to technology or technical expertise not resident within the Company.
On January 31, 1994, ICF Kaiser completed the sale of a portion of its energy
engineering business, generating $2.6 million in cash. The proceeds were
received on March 4, 1994, and are classified in other current assets at
February 28, 1994, on the accompanying balance sheet.
Impact of New Accounting Standard
The Company adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions (SFAS No.
106), effective March 1, 1993. The Company's post-employment obligation extends
to only a limited group of retirees (and their spouses) who joined ICF Kaiser
through an acquisition, and their benefits are limited to a fixed amount per
person. SFAS No. 106 requires that companies accrue post-employment benefits
over the period benefits are earned. The Company has elected the prospective
transition method and is amortizing its $14.2 million transition obligation over
14.5 years, the average remaining life expectancy of the retirees and their
spouses. The Company's ongoing expense under SFAS No. 106 includes the interest
component and the amortization of the transition obligation.
Effects of Inflation
The majority of the Company's contracts are cost reimbursable and, therefore,
the inflation rate in the United States, as well as in other countries in which
the Company operates, generally has relatively little impact on operating
margins; however, as a professional services company, the Company is more labor-
intensive than an industrial firm. To attract and maintain the high-caliber
professional staff it needs, the Company must structure its compensation
programs competitively. The wage-demand effects of inflation, which have been
minimal in the past several years, would be felt almost immediately in the
Company's costs.
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 22
===============================================================================
Item 8. Financial Statements and Supplementary Data
===============================================================================
The Financial Statements and Supplementary Data appear on pages F-1 through
F-18 and S-1 through S-3 hereto.
===============================================================================
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
================================================================================
None
PART III
===============================================================================
Item 10. Directors and Executive Officers of the Registrant
===============================================================================
Information regarding the directors of the Registrant is included under the
caption "Election of Directors" in the Company's Proxy Statement for the 1994
Annual Meeting of Shareholders (the "Proxy Statement) and is incorporated herein
by reference. Information regarding executive officers of the Registrant is
included under a separate caption in Part I hereof. Information regarding
compliance with Section 16(a) of the Exchange Act is included under the caption
"Compliance with Section 16(a) of the Securities Exchange Act" in the Company's
Proxy Statement and is incorporated herein by reference.
===============================================================================
Item 11. Executive Compensation
===============================================================================
Information regarding this item is included under the caption "Executive
Compensation" in the Company's Proxy Statement and is incorporated herein by
reference.
===============================================================================
Item 12. Security Ownership of Certain Beneficial Owners and Management
===============================================================================
Information regarding this item is included under the caption "Voting
Securities of the Company and Certain Shareholdings" in the Company's Proxy
Statement and is incorporated herein by reference.
===============================================================================
Item 13. Certain Relationships and Related Transactions
===============================================================================
Information regarding this item is included under the captions "Certain
Transactions with Certain Directors," "Agreements and Transactions with
Executive Officers Named in the Summary Compensation Table," and "Agreements
and Transactions with Other Executive Officers" in the Company's Proxy
Statement and is incorporated herein by reference.
- - -------------------------------------------------------------------------------
ICF Kaiser international, Inc. 1994 Annual Report on Form 10-K Page 23
PART IV
================================================================================
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
================================================================================
(a) Documents filed as part of this Report Page
1. Consolidated Financial Statements of ICF Kaiser International, Inc.
and Subsidiaries
a. Report of Independent Accountants................................... F-1
b. Consolidated Balance Sheets as of February 28, 1994,
and February 28, 1993............................................... F-2
c. Consolidated Statements of Operations for the years ended
February 28, 1994, February 28, 1993, and February 29, 1992......... F-3
d. Consolidated Statements of Shareholders' Equity for the years ended
February 28, 1994, February 28, 1993, and February 29, 1992......... F-4
e. Consolidated Statements of Cash Flows for the years ended
February 28, 1994, February 28, 1993, and February 29, 1992......... F-5
f. Notes to Consolidated Financial Statements.......................... F-6
2. Supplemental Schedules Relating to the Consolidated Financial
Statements of ICF Kaiser International, Inc. and Subsidiaries for
each of the three years in the period ended February 28, 1994
a. Schedule II: Amounts receivable from related parties and underwriters,
promoters, and employees other than related parties................. S-1
b. Schedule VIII: Valuation and qualifying accounts.................... S-3
All Schedules except those listed above have been omitted because they are
not applicable or not required or because the required information is
included elsewhere in the financial statements in this filing.
3. Exhibits (listed according to the number assigned in the table in Item 601
of Regulation S-K).
(b) Exhibits
Exhibit No. 3 -- Articles of Incorporation and By-laws
3(a) Certificate of Incorporation of ICF Kaiser International, Inc. (restated
through June 26, 1993) (Incorporated by reference to Exhibit No. 3(a) to
Quarterly Report on Form 10-Q (Registration No. 1-12248) for the second
quarter of fiscal 1994 filed with the Commission on October 15, 1993)
3(b) Amended and Restated By-laws of ICF Kaiser International, Inc. (as
amended through June 29, 1992, and as further amended to reflect the
Corporation's name change on June 26, 1993) (Incorporated by reference to
Exhibit No. 3(b) to Quarterly Report on Form 10-Q (Registrant No. 1-
12248) for the second quarter of fiscal 1994 filed with the Commission on
October 15, 1993)
Exhibit No. 4 -- Instruments Defining the Rights of Security Holders, including
Indentures
4(a) Indenture dated as of January 11, 1994, between the Registrant and The
Bank of New York, as Trustee (Incorporated by reference to Exhibit No.
4(a) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the
third quarter of fiscal 1994 filed with the Commission on January 14,
1994)
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 24
4(b) Form of 12% Senior Subordinated Note due 2003 (Incorporated by reference
to Exhibit No. 4(b) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the third quarter of fiscal 1994 filed with the Commission
on January 14, 1994)
4(c) American Capital and Research Corporation $30,000,000 Senior Subordinated
Notes due 1999 and Common Stock Purchase Warrants expiring 1999, and
related agreements (Incorporated by reference to Exhibit No. 4(c) to
Registration Statement on Form S-1 (No. 33-31473) filed with the
Commission on October 6, 1989)
1. Modification Letter dated as of November 1, 1989 (Incorporated by
reference to Exhibit No. 4(c) to Amendment No. 2 to Registration
Statement on Form S-1 (No. 33-31473) filed with the Commission on
December 4, 1989)
2. Modification Letter dated as of January 13, 1992, (Incorporated by
reference to Exhibit No. 4(a)(2) to Quarterly Report on Form 10-Q for
the third quarter of fiscal 1992 filed with the Commission on January
14, 1992)
3. Modification Letter dated as of June 26, 1992 (together with Revised
Common Stock Purchase Warrants)(Incorporated by reference to Exhibit
No. 4(a)(3) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)
for the first quarter of fiscal 1993 filed with the Commission on July
10, 1992)
4. Modification Letter (HSRI) dated as of February 21, 1992
5. Modification Letter (Severn) dated as of February 21, 1992
6. Modification Letter (Lewin, DSC) dated as of November 24, 1992
7. Modification Letter (Acer) dated as of February 19, 1993
8. Modification Letter (PLS) dated as of February 24, 1993
(Items 4-8 are incorporated by reference to Exhibit No. 4(a) to Annual
Report on Form 10-K (Registrant No. 1-12248) for the fiscal year ended
February 28, 1993 filed with the Commission on May 21, 1993)
9. Modification Letter (Stitt) dated as of July 31, 1993
10. Modification Letter (Series 1 dividend) dated as of August 13, 1993
(Items 9-10 are incorporated by reference to Exhibit No. 4(a)(9-11) to
Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second
quarter of fiscal 1994 filed with the Commission on October 15, 1993)
11. Modification Letters (Note and Purchase Agreement) dated as of August
4, 1993, as amended October 20, 1993
12. Modification Letter (Stitt extension) dated as of October 20, 1993
(Items 11-12 are incorporated by reference to Exhibit No. 4(c)(11-12) to
Registration Statement on Form S-1 (No. 33-51677) filed with the
Commission on December 23, 1993)
4(d) Credit Agreement among ICF Kaiser International, Inc., certain Banks, and
Chemical Bank (Delaware), as Agent, dated as of December 8, 1993, as
amended (see Exhibit No. 10(a))
4(e) ICF Kaiser International, Inc. Series 2D Warrant, No. 2D-2, dated January
11, 1994 (Incorporated by reference to Exhibit No. 4(f) to Quarterly
Report on Form 10-Q for the third quarter of fiscal 1994 filed with the
Commission on January 14, 1994)
4(f) Securities Purchase Agreement by and among ICF Kaiser International,
Inc., IFINT-USA Inc., and FIMA Finance Management Inc., B.V.I. dated as
of December 20, 1990 (Incorporated by reference to Exhibit No. 4(b) to
Quarterly Report on Form 10-Q for the third quarter of fiscal 1991 filed
with the Commission on January 14, 1991)
1. Amendment No. 1 to Securities Purchase Agreement dated as of January 13,
1992 (Incorporated by reference to Exhibit No. 4(e)(1) to Quarterly
Report on Form 10-Q for the third quarter of fiscal 1992 filed with the
Commission on January 14, 1992)
2. Amendment No. 2 to Securities Purchase Agreement (Incorporated by
reference to Exhibit 4(g)(2) to Amendment No. 2 to Registration Statement
on Form S-1 (No. 33-70986) filed with the Commission on December 23,
1993)
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 25
4(g) Amended and Restated Registration Rights Agreement dated as of January
13, 1992, between ICF Kaiser International, Inc. and FIMA Finance
Management Inc., (Incorporated by reference to Exhibit No. 4(f) to
Quarterly Report on Form 10-Q for the third quarter of fiscal 1992 filed
with the Commission on January 14, 1992)
4(h) Registration Rights Agreement, dated as of November 13, 1991, between ICF
Kaiser International, Inc. and U.S. Trust Company of California, N.A., a
national association, solely in its capacity as trustee of the ICF Kaiser
International, Inc. Retirement Plan Trust (Incorporated by reference to
Exhibit No. 4(g) to Quarterly Report on Form 10-Q for the third quarter
of fiscal 1992 filed with the Commission on January 14, 1992)
4(i) Rights Agreement dated as of January 13, 1992 between ICF Kaiser
International, Inc. and Office of the Secretary, ICF Kaiser
International, Inc. as Rights Agent, including
1. Form of Certificate of Designations of Series 4 Junior Preferred Stock
2. Form of Rights Certificate
3. Summary of Rights to Purchase Preferred Stock
(Incorporated by reference to Exhibit No. 4(h) to Quarterly Report on
Form 10-Q for the third quarter of fiscal 1992 filed with the Commission
on January 14, 1992)
4(j) Restated Certificate of Incorporation of AEG Purchase Co., as amended by
Certificate of Correction to Restated Certificate of Incorporation of AEG
Purchase Co. (Pursuant to the Certificate of Merger of Kaiser Engineers
Group, Inc. into AEG Purchase Co.; AEG Purchase Co. changed its name to
Kaiser Engineers Group, Inc.) (Incorporated by reference to Exhibit No.
4(d) to Registration Statement on Form S-1 (No. 33-31473) filed with the
Commission on October 6, 1989)
4(k) Warrant Agreement dated as of January 11, 1994, between the Registrant
and The Bank of New York, as Warrant Agent (Incorporated by reference to
Exhibit No. 4(c) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the third quarter of fiscal 1994 filed with the Commission
on January 14, 1994)
4(l) Form of Warrant expiring December 31, 1998 (Incorporated by reference to
Exhibit No. 4(d) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the third quarter of fiscal 1994 filed with the Commission
on January 14, 1994)
4(m) Form of Common Stock Purchase Warrant expiring May 15, 1999 (as amended
and restated through January 11, 1994) (Incorporated by reference to
Exhibit No. 4(e) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the third quarter of fiscal 1994 filed with the Commission
on January 14, 1994 )
Exhibit No. 10 -- Material Contracts
10(a) Amended and Restated Credit Agreement dated as of December 8, 1993,
among the Registrant, the several Lenders from time to time parties
hereto, and Chemical Bank, as Agent, including Exhibits thereto (Closing
Date: January 11, 1994) (Incorporated by reference to Exhibit No. 10(a)
to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third
quarter of fiscal 1994 filed with the Commission on January 14, 1994)
1. Waiver and First Amendment dated as of April 18, 1994
10(b) ICF Kaiser International, Inc. Employee Stock Purchase Plan (as amended
and restated as of June 26, 1993) (Incorporated by reference to Exhibit
No. 10(b) to Quarterly Report on Form 10-Q for the second quarter of
fiscal 1994 filed with the Commission on October 15, 1993)
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 26
10(c) Trust Agreement for ICF Kaiser Incorporated Employee Stock Ownership
Plan (adopted by ICF Kaiser International, Inc. Board of Directors in
October 1987) (Incorporated by reference to Exhibit No. 10(c) to
Quarterly Report on Form 10-Q for the third quarter of fiscal 1992 filed
with the Commission on January 14, 1992)
10(d) ICF Kaiser International, Inc. Retirement Plan (as amended and restated
as of March 1, 1993) (and further amended with respect to name change
only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(d)
to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second
quarter of fiscal 1994 filed with the Commission on October 15, 1993)
10(e) ICF Kaiser International, Inc. Retirement Plan Trust Agreement (as
amended and restated effective as of November 13, 1991) (Incorporated by
reference to Exhibit No. 10(k) to Quarterly Report on Form 10-Q for the
third quarter of fiscal 1992 filed with the Commission on January 14,
1992)
10(f) Stock Contribution Agreement entered into on November 13, 1991, between
ICF Kaiser International, Inc. and U.S. Trust Company of California,
N.A., a national association, solely in its capacity as trustee of the
ICF Kaiser International, Inc. Retirement Plan Trust (Incorporated by
reference to Exhibit No. 10(l) to Quarterly Report on Form 10-Q for the
third quarter of fiscal 1992 filed with the Commission on January 14,
1992)
10(g) Lease Agreement between HMCE Associates (as Landlord) and ICF Kaiser
Incorporated (as Tenant), dated January 30, 1987, for the lease of the
Registrant's headquarters in Fairfax, Virginia (Incorporated by reference
to Exhibit No. 10(a) to Registration Statement on Form S-1 (No. 33-31473)
filed with the Commission on October 6, 1989)
1. First Amendment entered into August 31, 1987 (Incorporated by reference
to Exhibit No. 10(a) to Registration Statement on Form S-1 (No. 33-31473)
filed with the Commission on October 6, 1989)
2. Second Amendment entered into September 23, 1987 (Incorporated by
reference to Exhibit No. 10(a) to Registration Statement on Form S-1 (No.
33-31473) filed with the Commission on October 6, 1989)
3. Third Amendment entered into as of February 12, 1990 (Incorporated by
reference to Exhibit No. 10(a) to Annual Report on Form 10-K filed with
the Commission on April 25, 1990)
10(h) Lease Agreement between HMCE Associates Limited Partnership (as
Landlord) and American Capital and Research Corporation (as Tenant),
dated April 27, 1988, for the lease of space in the building adjacent to
the Registrant's headquarters in Fairfax, Virginia (Incorporated by
reference to Exhibit No. 10(b) to Registration Statement on Form S-1 (No.
33-31473) filed with the Commission on October 6, 1989)
1. First Amendment entered into July 29, 1988. (Incorporated by reference
to Exhibit No. 10(b) to Annual Report on Form 10-K filed with the
Commission on April 25, 1990)
2. Second Amendment entered into as of February 12, 1990 (Incorporated by
reference to Exhibit No. 10(b) to Annual Report on Form 10-K filed with
the Commission on April 25, 1990)
3. Third Amendment entered into as of December 22, 1992 (Incorporated by
reference to Exhibit No. 10(h)(3) to Annual Report on Form 10-K
(Registrant No. 1-12248) for the fiscal year ended February 28, 1993
filed with the Commission on May 21, 1993)
10(i) Amended and Restated Lease Agreement by and between Kaiser Engineers,
Inc. and 1800 Harrison Limited Partnership, dated as of July 1, 1988, for
the lease of the Registrant's offices in Oakland, California
(Incorporated by reference to Exhibit No. 10(c) to Registration Statement
on Form S-1 (No. 33-31576) filed with the Commission on October 13, 1989)
1. First Amendment made as of March 27, 1991 (Incorporated by reference to
Exhibit No. 10(a)(1) to Quarterly Report on Form 10-Q for the first
quarter of fiscal 1993 filed with the Commission on July 10, 1992)
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 27
2. Second Amendment made as of June 1992 (Incorporated by reference to
Exhibit No. 10(a)(2) to Quarterly Report on Form 10-Q for the first
quarter of fiscal 1993 filed with the Commission on July 10, 1992)
3. Third Amendment made as of April 27, 1993 (Incorporated by reference to
Exhibit No. 10(i)(3) to Annual Report on Form 10-K (Registrant No.
1-12248) for the fiscal year ended February 28, 1993 filed with the
Commission on May 21, 1993)
10(j) Guaranty provided by American Capital and Research Corporation to 1800
Harrison Limited Partnership, dated as of March 27, 1991, and First
Amendment thereto dated as of June 1992, guaranteeing the performance of
Kaiser Engineers, Inc. under an Amended and Restated Lease Agreement by
and between Kaiser Engineers, Inc. and the California Public Employee's
Retirement System, dated as of July 1, 1988, for the lease of the
Registrant's offices in Oakland, California (Incorporated by reference to
Exhibit No. 10(b) to Quarterly Report on Form 10-Q for the first quarter
of fiscal 1993 filed with the Commission on July 10, 1992)
10(k) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and
restated as of June 26, 1993) (Incorporated by reference to Exhibit No.
10(e) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the
second quarter of fiscal 1994 filed with the Commission on October 15,
1993)
10(l) ICF Kaiser International, Inc. Employee Stock Ownership Plan (as amended
and restated as of Marcy 1, 1993) (and further amended with respect to
name change only as of June 26, 1993) (Incorporated by reference to
Exhibit No. 10(c) to Quarterly Report on Form 10-Q (Registrant No.
1-12248)for the second quarter of fiscal 1994 filed with the Commission
on October 15, 1993)
10(m) Agreement between Kaiser Engineers Hanford Company and the U.S.
Department of Energy, with an effective date of October 1, 1993, for the
performance of construction, construction management, maintenance,
repair, and other construction related services and for the provision of
engineering support and other technical services (Contract No.s
DE-AC06-93RL12359) (Incorporated by reference to Exhibit No. 10(h) to
Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second
quarter of fiscal 1994 filed with the Commission on October 15, 1993)
1. Amendment/Modification No. M001, signed October 14, 1993 (Incorporated
by reference to Exhibit No. 10(h) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with
the Commission on October 15, 1993)
10(n) Assignment Agreement between the U.S. Department of Energy, Kaiser
Engineers Hanford Company, and Westinghouse Hanford Company, with an
effective date of October 1, 1993 (Contract No. DE-A06-93RL12359)
(Incorporated by reference to Exhibit No. 10(a) to Quarterly Report on
Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
1. Modification No. 1 dated October 25, 1993
10(o) Massachusetts Water Resources Authority Agreement with ICF Kaiser
Engineers, Inc. through its wholly owned subsidiary of ICF Kaiser
Engineers of Massachusetts, Inc. for construction management services for
Boston Harbor Project--Deer Island Related Facilities, Contract No. 5622
(June 1990) (Incorporated by reference to Exhibit No. 10(h) to Quarterly
Report on Form 10-Q for the second quarter of fiscal 1991 filed with the
Commission on October 12, 1990)
(Amendment Nos. 1-3 incorporated by reference to Exhibit No. 10(n)(1-3)
to Annual Report on Form 10-K (Registrant No. 1-12248) for the fiscal
year ended February 28, 1993 filed with the Commission on May 21, 1993)
P 1. Amendment No. 4 and Amendment No. 4A each dated December 2, 1993
[IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT NO.
10(o)(1) WAS FILED IN PAPER ON MAY 20, 1994, ON FORM SE PURSUANT TO A
CONTINUING HARDSHIP EXEMPTION]
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 28
10(p) ICF Kaiser International, Inc. Section 401(k) Plan (as amended and
restated as of March 1, 1993) (and further amended with respect to name
change only as of June 26, 1993) (Incorporated by reference to Exhibit
No. 10(f) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for
the second quarter of fiscal 1994 filed with the Commission on October
15, 1993)
10(q) ICF Kaiser International, Inc. Corporate Incentive Compensation Plan:
Annual Incentive Plan (dated as of September 29, 1993) (Incorporated by
reference to Exhibit No. 10(aa) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994 filed
with the Commission on October 15, 1993)
Exhibit No. 10 -- Material Contracts (management contracts, compensatory plans,
or arrangements.)
10(aa) Restated Executive Agreement dated as of December 20, 1990, and
Restated Compensation Agreement dated as of December 20, 1990, with
James O. Edwards (Incorporated by reference to Exhibit No. 10(p) to
Registration Statement on Form S-1 (No. 33-40628) filed with the
Commission on May 16, 1991)
1. Modification Letter dated January 13, 1992 (Incorporated by reference
to Exhibit No. 10(e) to Amendment No. 1 to Registration Statement on
Form S-1 (No. 33-44993) filed with the Commission on February 11,
1992)
10(bb) Restated Executive Agreement dated as of December 20, 1990, and
Restated Compensation Agreement dated as of December 20, 1990, with
Kenneth A. Schweers, Executive Vice President of the Registrant, and
Modification Letter dated January 13, 1992 (Incorporated by reference
to Exhibit No. 10(i) to Quarterly Report on Form 10-Q for the third
quarter of fiscal 1992 filed with the Commission on January 14, 1992)
10(cc) Letter Agreement with Ronald R. Spoehel dated December 20, 1990
(Incorporated by reference to Exhibit No. 10(z) to Annual Report on
Form 10-K for fiscal year 1992 filed with the Commission on May 29,
1992.)
10(dd) Letter Agreement with Michael J. Rowny dated March 4, 1992, as
modified by letters dated March 18, 1992, and March 19, 1992.
(Incorporated by reference to Exhibit No. 10(aa) to Annual Report on
Form 10-K for fiscal year 1992 filed with the Commission on May 29,
1992.)
10(ee) Letter Agreement with Norman A. Perry, Senior Vice President and
Controller of the Registrant, dated October 6, 1992 (Incorporated by
reference to Exhibit No. 10(ff) to Annual Report on Form 10-K
(Registrant No. 1-12248) for the fiscal year ended February 28, 1993,
filed with the Commission on May 21, 1993)
10(ff) Letter Agreement with Raymond E. List, Executive Vice President of the
Registrant, dated May 31, 1993 (Incorporated by reference to Exhibit
No. 10(bb) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)
for the first quarter of fiscal 1994 filed with the Commission on July
15, 1993)
10(gg) ICF Kaiser International, Inc. Corporate Incentive Compensation Plan:
Annual Incentive Plan (dated as of September 29, 1993) (Incorporated
by reference to Exhibit No. 10(aa) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994 filed
with the Commission on October 15, 1993)
10(hh) ICF Kaiser International, Inc. Non-employee Director Stock Option Plan
(as amended and restated as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(bb) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994 filed
with the Commission on October 15, 1993)
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 29
10(ii) ICF Kaiser International, Inc. Long Term Incentive Plan (as amended
and restated as of June 26, 1993) (Incorporated by reference to
Exhibit No. 10(cc) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second of fiscal 1994 quarter filed with the
Commission on October 15, 1993)
10(jj) Agreement with Alvin S. Rapp, Executive Vice President of the
Registrant, dated November 1, 1993 (Incorporated by reference to
Exhibit No. 10(ll) to Amendment No. 1 to Registration Statement on
Form S-1 (No. 33-70986) filed with the Commission on November 22,
1993)
10(kk) Agreement with Douglas W. McMinn, Executive Vice President of the
Registrant, signed November 23, 1993 (Incorporated by reference to
Exhibit No. 10(mm) to Amendment No. 2 to Registration Statement on
Form S-1 (No. 33-70986) filed with the Commission on December 23,
1993)
10(ll) Employment Agreement with Marc Tipermas effective as of March 1, 1994
10(mm) Employment Agreement with Stephen W. Kahane effective as of March 1,
1994
10(nn) ICF Kaiser International, Inc. Senior Executive Officers Severance
Plan as approved by the Compensation Committee of the Board of
Directors on April 4, 1994, and adopted by the Board of Directors on
May 5, 1994
Exhibit No. 11 -- Computation of Primary and Fully Diluted Earnings per Share
Exhibit No. 21 -- Subsidiaries of the Registrant as of May 1, 1994
Exhibit No. 23 -- Consent of Coopers & Lybrand (the Registrant's Independent
Accountants)
Exhibit No. 24 -- Powers of Attorney (included on signature pages of Form 10-K
for fiscal year 1994)
(c) Reports on Form 8-K
None
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ICF Kaiser International, Inc.
(Registrant)
Date: May 20, 1994 By /s/ James O. Edwards
--------------------------
James O. Edwards
Chairman and Chief Executive Officer
- - --------------------------------------------------------------------------------
POWER OF ATTORNEY
Each of the undersigned hereby appoints James O. Edwards, Marc Tipermas,
Ronald R. Spoehel, Richard K. Nason, Paul Weeks, II, and Cynthia L. Hathaway,
and each of them severally, his or her true and lawful attorneys to execute
(in the name of and on behalf of and as attorneys for the undersigned) this
Form 10-K for fiscal year 1994 and any and all amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection with,
the Securities and Exchange Commission.
- - --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(1) Principal executive officer
Date: May 20, 1994 By /s/ James O. Edwards
-------------------------------
James O. Edwards,
Chairman and Chief Executive Officer
(2) Principal financial and accounting officer
Date: May 20, 1994 By /s/ Ronald R. Spoehel
--------------------------------
Ronald R. Spoehel,
Senior Vice President,
Chief Financial Officer (Acting),
and Treasurer
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 31
- - --------------------------------------------------------------------------------
POWER OF ATTORNEY
Each of the undersigned hereby appoints James O. Edwards, Marc Tipermas,
Ronald R. Spoehel, Richard K. Nason, Paul Weeks, II, and Cynthia L. Hathaway,
and each of them severally, his or her true and lawful attorneys to execute
(in the name of and on behalf of and as attorneys for the undersigned) this
Form 10-K for fiscal year 1994 and any and all amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection with,
the Securities and Exchange Commission.
- - --------------------------------------------------------------------------------
(3) Board of Directors
Date: May 20, 1994 By /s/ Gian Andrea Botta
------------------------------
Gian Andrea Botta,
Director
Date: May 20, 1994 By /s/ Thomas Bradley
------------------------------
Thomas Bradley,
Director
Date: May 20, 1994 By /s/ Tony Coelho
------------------------------
Tony Coelho,
Director
Date: May 20, 1994 By /s/ James O. Edwards
------------------------------
James O. Edwards,
Director
Date: May 20, 1994 By /s/ Frederic V. Malek
------------------------------
Frederic V. Malek,
Director
Date: May 20, 1994 By /s/ Rebecca P. Mark
------------------------------
Rebecca P. Mark,
Director
Date: May 20, 1994 By /s/ Robert W. Page, Sr.
------------------------------
Robert W. Page, Sr.
Director
Date: May 20, 1994 By /s/ Marc Tipermas
------------------------------
Marc Tipermas,
Director
- - -------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page 32
Report of Independent Accountants
---------------------------------
To the Board of Directors and Shareholders
ICF Kaiser International, Inc.
We have audited the consolidated financial statements and financial
statement schedules of ICF Kaiser International, Inc. and Subsidiaries listed
in Item 14(a) of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ICF Kaiser
International, Inc. and Subsidiaries as of February 28, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND
Washington, D.C.
April 22, 1994
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-1
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Balance Sheets
February 28, February 28,
1994 1993
==============================
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 25,509 $ 8,445
Contract receivables, net 128,166 158,179
Prepaid expenses and other current assets 19,472 21,503
Refundable income taxes 979 1,294
Deferred income taxes 16,053 12,553
--------- ---------
Total Current Assets 190,179 201,974
--------- ---------
Fixed Assets
Furniture, equipment, and leasehold
improvements 40,630 40,120
Less depreciation and amortization (24,955) (20,440)
--------- ---------
15,675 19,680
--------- ---------
Other Assets
Goodwill, net 49,916 53,896
Investments in and advances to affiliates 5,600 2,207
Due from officers and employees 1,830 1,361
Other 17,998 13,958
--------- ---------
75,344 71,422
--------- ---------
$ 281,198 $ 293,076
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 54,181 $ 60,192
Accrued salaries and employee benefits 23,439 25,804
Current portion of long-term debt 1,088 5,276
Income taxes payable 1,511 1,448
Deferred revenue 8,462 11,302
Other 10,773 10,107
--------- ---------
Total Current Liabilities 99,454 114,129
--------- ---------
Long-term Liabilities
Long-term debt, less current portion 121,954 69,115
Other 8,798 6,487
--------- ---------
130,752 75,602
--------- ---------
Commitments and Contingencies
Redeemable Preferred Stock 20,212 44,824
Preferred Stock - 6,900
Common Stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 20,924,588 and
21,303,807 shares 209 213
Additional Paid-in Capital 63,572 65,040
Notes Receivable Related to Common Stock (1,732) (2,725)
Retained Earnings (Deficit) (29,528) (4,206)
Cumulative Translation Adjustment (1,741) (1,701)
ESOP Guaranteed Bank Loan - (5,000)
--------- ---------
$ 281,198 $ 293,076
========= =========
See notes to consolidated financial statements.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-2
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Statements of Operations
Year Ended
========================================
February 28, February 28, February 29,
1994 1993 1992
============ ============ ============
(In thousands, except per share amounts)
Gross Revenue $ 651,657 $ 678,882 $ 710,873
Subcontract and direct
material costs (272,169) (293,063) (330,940)
Equity in income of joint
ventures and affiliated
companies 3,220 5,709 6,009
--------- --------- ---------
Service Revenue 382,708 391,528 385,942
Operating Expenses
Direct cost of services and
overhead 325,521 313,030 309,374
Administrative and general 44,149 43,702 44,318
Depreciation and amortization 9,559 10,766 9,159
Unusual items, net 8,709 (50) (6,300)
Cost of disposal of businesses,
net - 1,336 73,354
--------- --------- ---------
Operating Income (Loss) (5,230) 22,744 (43,963)
Other Income (Expense)
Loss on sale of investment (925) (929) -
Interest income 1,490 1,708 1,931
Interest expense-core
businesses (8,212) (8,629) (10,778)
Interest expense-discontinued
businesses - - (1,500)
--------- --------- ---------
Income (Loss) Before Income Taxes (12,877) 14,894 (54,310)
Income tax provision (benefit) (349) 6,255 (13,794)
--------- --------- ---------
Net Income (Loss) Before
Extraordinary Item (12,528) 8,639 (40,516)
Extraordinary loss on early
extinguishment of debt (5,969) - -
--------- --------- ---------
Net Income (Loss) (18,497) 8,639 (40,516)
Preferred stock dividends and
accretion 4,896 5,293 2,416
Redemption of redeemable
preferred stock 1,929 - -
--------- --------- ---------
Net Income (Loss) Available for
Common Shareholders $ (25,322) $ 3,346 $ (42,932)
========= ========= =========
Primary and Fully Diluted Net
Income (Loss) Per Common
Share:
Before extraordinary item and
redemption of redeemable
preferred stock $ (0.83) $ 0.16 $ (2.25)
Extraordinary loss on early
extinguishment of debt (0.29) - -
Redemption of redeemable
preferred stock (0.09) - -
--------- -------- --------
Total $ (1.21) $ 0.16 $ (2.25)
========= ======== ========
Primary and Fully Diluted Weighted
Average Common and Common
Equivalent Shares Outstanding 20,886 21,272 19,085
========= ======== ========
See notes to consolidated financial statements.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-3
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Notes
Series 1 Junior Receivable
Convertible Preferred Additional Related to Retained Cumulative ESOP
Stock Common Stock Paid-in Common Earnings Translation Guaranteed
--------------------- ------------------
Shares Par Value Shares Par Value Capital Stock (Deficit) Adjustment Bank Loan
--------------------- ------------------ ---------- ---------- --------- ----------- ----------
(In thousands, except shares)
Balance, March 1, 1991 69 $6,900 18,498,893 $185 $55,358 $(911) $35,380 $(260) $(7,813)
Net loss (40,516)
Preferred stock dividends (2,203)
Preferred stock accretion (213)
Issuance of common stock 1,131,620 11 5,541
Repurchase of common
stock (954,961) (9) (15,169)
Issuance of common stock
to benefit plans 1,344,123 13 10,376
Issuance of common stock
in connection with
acquisitions 1,222,826 12 6,789
Exchange of Class A
Common Stock for
Series 3 Preferred
Stock (2,971,849) (30) 29
Issuance of notes
receivable (2,476)
Issuance of warrants 400
Increase in loan balance (520)
Foreign currency
translation
adjustment (781)
Tax effect from the
exercise of
non-qualified stock
options 983
Other 75
--------------------- ------------------ ---------- ---------- --------- ----------- ----------
Balance, February 29, 1992 69 6,900 18,270,652 182 64,382 (3,387) (7,552) (1,041) (8,333)
Net income 8,639
Preferred stock dividends (5,026)
Preferred stock accretion (267)
Issuance of common stock 105,740 1 619
Repurchase of common
stock (44,434) 0 (354)
Conversion of Series 3
Preferred Stock into
common stock 2,971,849 30 (29)
Payments received on
notes receivable 662
Decrease in loan balance 3,333
Foreign currency
translation
adjustment (660)
Tax effect from the
exercise of
non-qualified stock
options 559
Other (137)
--------------------- ------------------ ---------- ---------- --------- ----------- ----------
Balance, February 28, 1993 69 6,900 21,303,807 213 65,040 (2,725) (4,206) (1,701) (5,000)
Net loss (18,497)
Preferred stock dividends (4,670)
Preferred stock accretion (226)
Redemption of redeemable
preferred stock (1,929)
Repurchase of preferred
stock (69) (6,900) 2,050
Issuance of common stock 231,249 2 1,056
Repurchase of common
stock (610,468) (6) (3,716)
Issuance of warrants 900
Repurchase of warrants (1,909)
Payments received on
notes receivable 993
Decrease in loan balance 5,000
Foreign currency
translation
adjustment (40)
Other 151
--------------------- ------------------ ---------- ---------- --------- ----------- ----------
Balance, February 28, 1994 - $ - 20,924,588 $209 $63,572 $(1,732) $(29,528) $(1,741) $ -
===================== ================== ========== ========== ========= =========== ==========
See notes to consolidated financial statements.
- - --------------------------------------------------------------------------------
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-4
ICF Kaiser International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended
--------------------------------------------------
February 28, February 28, February 29,
1994 1993 1992
-------------- -------------- --------------
(In thousands)
Operating Activities
Net income (loss) $ (18,497) $ 8,639 $ (40,516)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary loss on early extinguishment of debt 5,969 - -
Depreciation and amortization 9,559 10,766 9,159
Provision for losses on accounts receivable 2,241 2,202 4,359
Provision for deferred income taxes (714) 4,311 (13,925)
Earnings in excess of cash distributions from joint
ventures and affiliated companies (1,708) (3,690) (1,539)
Loss on sale of investment 925 929 -
Unusual items, net of cash 7,786 (50) (6,300)
Increase (decrease) in provision for restructuring
and disposal of businesses, net of cash - (6,426) 52,289
Changes in operating assets and liabilities related to
operating activities, net of dispositions:
Contract receivables, net 26,292 (12,761) (23,017)
Prepaid expenses and other current assets 4,299 2,814 860
Other assets (745) (257) 1,532
Accounts payable and accrued expenses (10,233) (8,622) 31,222
Refundable income taxes and income taxes payable (2,163) 6 (3,522)
Deferred revenue (2,412) (11,753) 13,898
Other liabilities (2,660) (2,505) (4,409)
------------- ------------ -------------
Net Cash Provided by (Used in) Operating Activities 17,939 (16,397) 20,091
------------- ------------ -------------
Investing Activities
Investments in subsidiaries and affiliates (2,755) (1,146) (2,515)
Purchases of fixed assets, net (1,388) (4,638) (3,644)
Sales of subsidiaries and affiliates - 35,695 3,965
Other investing activities - 387 258
------------- ------------ -------------
Net Cash Provided by (Used in) Investing Activities (4,143) 30,298 (1,936)
------------- ------------ -------------
Financing Activities
Proceeds from issuance of senior subordinated notes and
related warrants 121,488 - -
Principal payments on credit facility (45,000) (38,099) (48,316)
Proceeds from borrowings from credit facility 10,000 30,000 35,000
Principal payments on other borrowings (2,010) (4,866) (10,609)
Proceeds from other borrowings - 4,357 108
Reacquisition of senior subordinated notes and related warrants (35,809) - -
Repurchase of redeemable preferred stock and related warrants (27,363) (799) (800)
Repurchase of preferred stock (4,850) - -
Proceeds from sale of redeemable preferred stock - - 19,500
Proceeds from (uses in) common stock transactions (1,520) 130 (7,425)
Preferred stock dividends (5,321) (3,876) (3,283)
Debt issuance costs (6,307) (159) (2,418)
------------- ------------ -------------
Net Cash Provided by (Used in) Financing Activities 3,308 (13,312) (18,243)
------------- ------------ -------------
Effect of Exchange Rate Changes on Cash (40) (660) (781)
------------- ------------ -------------
Increase (Decrease) in Cash and Cash Equivalents 17,064 (71) (869)
Cash and Cash Equivalents at Beginning of Period 8,445 8,516 9,385
------------- ------------ -------------
Cash and Cash Equivalents at End of Period $ 25,509 $ 8,445 $ 8,516
============= ============ =============
Supplemental Information:
Cash payments for interest 10,565 9,447 12,313
Cash payments (refunds) for income taxes (106) (416) 7,219
Non-cash Transactions:
Increase (decrease) of ESOP guaranteed bank loan (5,000) (3,333) 520
Sale of investment 2,600 - -
Common stock issued to retirement plan - - 5,787
See notes to consolidated financial statements.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--ORGANIZATION
ICF Kaiser International, Inc. (ICF Kaiser or the Company), formerly known
as ICF International, Inc., was formed on October 19, 1987, as a holding company
for the ICF Kaiser family of companies developed since inception (1969). These
companies provide engineering, construction, and consulting services primarily
to the environmental, infrastructure, industrial, and energy markets both in the
United States and abroad.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
all majority-owned subsidiaries of ICF Kaiser. Investments in joint ventures
and affiliated companies are accounted for using the equity method. All
significant intercompany accounts and transactions have been eliminated.
Revenue Recognition: Revenue is recorded on cost-type contracts as costs
are incurred. Revenue on time-and-materials contracts is recognized to the
extent of billable rates times hours delivered plus materials expense incurred.
Revenue on long-term, fixed-price contracts is generally recognized using the
percentage-of-completion method, and therefore includes a proportion of expected
earnings based on costs incurred to total estimated costs.
Foreign Currency Translation: Results of operations for foreign entities
are translated using the average exchange rates during the period. Assets and
liabilities are translated to U.S. dollars using the exchange rate in effect at
the balance sheet date. Resulting translation adjustments are reflected in
shareholders' equity as cumulative translation adjustment.
Statement of Cash Flows: ICF Kaiser considers all highly liquid financial
instruments purchased with original maturities of three months or less to be
cash equivalents. Other current assets included $4,606,000 of restricted cash
and short-term investments as of February 28, 1993, which primarily supported a
letter of credit for one of ICF Kaiser's subsidiaries. The consolidated
statements of cash flows are prepared on a basis that separately reflects
transactions related to the discontinued businesses discussed below under
"disposal of businesses."
Fixed Assets: Furniture and equipment are carried at cost, or fair value
if acquired through a purchase of a business, and are depreciated using the
straight-line method over their estimated useful lives ranging from three to ten
years. Leasehold improvements are carried at cost and are amortized using the
straight-line method over the remaining lease term.
Goodwill: Goodwill represents the excess of cost over the fair value of
the net assets of acquired businesses and is amortized using the straight-line
method over periods ranging from five to 40 years. Accumulated amortization was
$9,178,000 and $7,147,000 at February 28, 1994 and 1993, respectively.
Income Taxes: The Company provides for deferred income taxes using the
liability method on temporary differences between financial reporting and income
tax reporting, which primarily relate to reserves for adjustments and
allowances. If necessary, management records a valuation allowance for deferred
tax assets that may not be realizable. The most significant differences between
book and taxable income are goodwill, which is not deductible, and differences
between the book and tax basis of businesses sold.
Post-employment Benefits: Effective March 1, 1993, ICF Kaiser adopted
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS No. 106). Prior to the
adoption of SFAS No. 106, ICF Kaiser had been recognizing the cost of
postretirement benefits when paid. The Company elected the prospective
transition method of recognizing the transition obligation.
===============================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net Income (Loss) Per Common Share: Net income (loss) per common share is
computed using net income (loss) available to common shareholders, as adjusted
under the modified treasury stock method, and the weighted average number of
common stock and common stock equivalents outstanding during the year. Common
stock equivalents include stock options and warrants and the potential
conversion of convertible preferred stock. The adjustments required by the
modified treasury stock method to net income (loss) available for common
shareholders and the impact of common stock equivalents on the weighted average
number of shares are anti-dilutive for all periods presented and are, therefore,
excluded from earnings per share computations.
Concentrations of Credit Risk: The Company maintains cash balances
primarily in overnight Eurodollar deposits, bank certificates of deposit, and
U.S. government securities having maturities of less than one year. ICF Kaiser
grants uncollateralized credit to its customers. A large portion of ICF
Kaiser's receivables are from the U.S. government (see Note D). In order to
mitigate its credit risk to commercial customers, ICF Kaiser obtains advance
funding of costs for industrial construction work, when practical.
Disposal of businesses: At February 28, 1993, the Company had sold or
otherwise disposed of all businesses discontinued in fiscal 1992 when the
Company discontinued certain non-core businesses, resulting in a $73.4 million
provision for restructuring and disposal of businesses to provide for operating
losses of discontinued businesses through disposal; losses on the disposal of
those businesses included in the plan at that time; and one-time restructuring
charges for closing and consolidating certain operations of core businesses. In
fiscal 1993, ICF Kaiser increased the provision for restructuring and disposal
of businesses by an additional $1.3 million to provide for the combined impact
of the sale of a health consulting subsidiary determined to be outside of the
Company's core businesses and the revisions to the estimates of remaining
liabilities relating to discontinued businesses. In fiscal 1992, the Company
allocated interest expense related to discontinued businesses on the
accompanying statement of operations based on the imputed reduction in interest
cost from the assumed sale of the discontinued businesses. The cost of
restructuring and disposal of businesses included the net of revenue and
operating expenses of the discontinued businesses and estimated future losses of
such businesses.
Reclassification: Certain items in the fiscal 1993 and 1992 financial
statements have been reclassified to conform to the fiscal 1994 presentation.
NOTE C--DIVESTITURES AND ACQUISITIONS
On January 31, 1994, ICF Kaiser completed the sale of a portion of its
energy engineering business for $3.0 million, resulting in a $925,000 loss. On
March 4, 1994, ICF Kaiser received $2.6 million, which is classified in other
current assets at February 28, 1994, on the accompanying balance sheet. The
balance of the proceeds is being held in escrow and will be released to the
Company if certain contingencies are resolved.
All of the businesses acquired by the Company during the three-year period
ended February 28, 1994, were treated as purchases for financial reporting
purposes. Accordingly, the consolidated statements of operations include the
operations of the acquired companies from the date of acquisition.
===============================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE D--CONTRACT RECEIVABLES
February 28, February 28,
1994 1993
------------ ------------
(In thousands)
U.S. government agencies:
Currently due $ 30,392 $ 28,563
Retention 2,370 2,182
Unbilled 30,650 28,285
-------- --------
63,412 59,030
-------- --------
Commercial clients and state
and municipal governments:
Currently due 53,231 73,539
Retention 5,926 9,590
Unbilled 15,794 24,997
-------- --------
74,951 108,126
-------- --------
138,363 167,156
Less allowances for uncollectible receivables
and other adjustments 10,197 8,977
-------- --------
$128,166 $158,179
======== ========
U.S. government receivables arise from U.S. government prime contracts and
subcontracts. Unbilled receivables result from revenue which has been earned
but was not billed as of the end of the year. The unbilled receivables can be
invoiced at contractually defined intervals and milestones, as well as upon
completion of the contract or the federal government cost audit. Generally,
retention is not expected to be realized within one year; consistent with
industry practice, these receivables are classified as current. Management
anticipates that the remaining unbilled receivables will be substantially billed
and collected in one year.
NOTE E--JOINT VENTURES AND AFFILIATED COMPANIES
ICF Kaiser has ownership interests in certain corporate joint ventures and
affiliated companies that are engaged in the same general business as the
Company. ICF Kaiser's investments in and advances to these corporate joint
ventures and affiliated companies are summarized as follows (in thousands):
Ownership
Interest at
February 28, February 28, February 28,
1994 1994 1993
------------- ------------ ------------
Gary PCI Ltd. L.P. 50% $ 3,325 $ -
KJK Joint Venture 33% 2,769 1,735
LIFAC North America 50% 1,914 1,914
Other 20% to 50% 669 542
------ ------
8,677 4,191
Less amounts classified
within other current assets 3,077 1,984
------ ------
$ 5,600 $ 2,207
====== ======
===============================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Combined summarized unaudited financial information of all of ICF Kaiser's
corporate joint ventures and affiliated companies is as follows (in thousands):
February 28, February 28, February 29,
1994 1993 1992
------------ ------------ ------------
Current assets $ 27,041 $ 22,466 $ 128,011
Non-current assets 6,608 20,761 32,788
Current liabilities 19,034 20,630 105,271
Non-current liabilities 455 - 28,323
Gross revenue 51,282 226,944 442,142
Net income 8,908 17,471 16,940
NOTE F--LONG-TERM DEBT
ICF Kaiser's long-term debt is as follows (in thousands):
February 28, February 28,
1994 1993
------------ ------------
12% senior subordinated notes due 2003 $125,000 $ -
13.5% senior subordinated notes due 1999 - 30,000
Revolving credit facility (average interest rate of
6.8% for fiscal 1993) 0 35,000
ESOP guaranteed notes (average interest rate of 7.2%
for fiscal 1993) - 5,000
Other notes, principal, and interest at varying
rates and installments through February 2010 2,381 4,391
-------- --------
Total 127,381 74,391
Less unamortized discount on 12% senior
subordinated notes 4,339 -
-------- --------
123,042 74,391
Less current maturities 1,088 5,276
-------- --------
Long-term debt $121,954 $ 69,115
======== ========
Scheduled maturities of long-term debt outstanding at February 28, 1994, are
as follows: $1,088,000 in fiscal 1995, $664,000 in fiscal 1996, $40,000 in
fiscal 1997, $32,000 in fiscal 1998, $25,000 in fiscal 1999, and $125,532,000
thereafter.
On January 11, 1994, ICF Kaiser issued 125,000 Units, each Unit
consisting of $1,000 principal amount of the Company's 12% Senior Subordinated
Notes due 2003 (12% Notes) and 4.8 warrants, each to purchase one share of the
Company's common stock at an exercise price of $5.00 per share. The warrants
expire on December 31, 1998, and additional warrants may be issued under
certain anti-dilution provisions. Of the net issue price of $121,487,500
($125,000,000 less a $3,512,500 discount), $900,000 was allocated to the value
of the 600,000 warrants and $120,587,500 to the 12% Notes. The net proceeds
were used to retire the Company's 13.5% Senior Subordinated Notes due 1999
(13.5% Notes) at 114.17% ($34.3 million), to repurchase warrants issued in
connection with the 13.5% Notes ($1.6 million), to repurchase its Series 1
Junior Convertible Preferred Stock and pay accrued dividends thereon ($5.1
million), to repurchase its Series 2C Senior Preferred Stock (Series 2C
Preferred Stock) at 106.25% together with the Series 2C Warrants ($26.6
million), to repay the outstanding balance on the Company's existing revolving
credit facility ($45.0 million), and to repay, on behalf of the Company's
Employee Stock Ownership Plan (ESOP), the outstanding balance on the ESOP
guaranteed notes ($1.7 million). The balance was used for general corporate
purposes. The recapitalization resulted in a $6.0 million extraordinary charge
(net of $0 tax benefit) for the early extinguishment of debt and a $1.9
million charge to retained earnings to repurchase the Series 2C Senior
===============================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Preferred Stock.
The Company's payment obligations under the 12% Notes are subordinate to
its obligations under the Company's revolving credit facility. Interest
payments are due semiannually. The 12% Notes may not be prepaid at the
Company's option prior to December 31, 1998. Subsequent to that date, the
Company may prepay the 12% Notes at a premium. In addition, the Company agreed
to certain business and financial covenants including restrictions on
indebtedness, dividends, acquisitions, and certain types of investments and
asset sales. Debt issuance costs associated with the 12% Notes are classified
as other assets at February 28, 1994, in the accompanying balance sheet. These
costs and the discount on the 12% Notes are being amortized over the life of
the notes.
An amended $60 million revolving credit facility (the Credit Facility)
became effective concurrently with the issuance of the 125,000 Units,
replacing the former credit facility which was due to expire on September 30,
1994. The Credit Facility is provided by a lead bank and a consortium of other
banks (together, the Banks) with terms and covenants similar to those under
the former credit facility. ICF Kaiser International, Inc. and certain of its
subsidiaries, which are guarantors of the Credit Facility, granted the Banks a
security interest in certain accounts receivable and certain other assets. The
Credit Facility restricts the payment of cash dividends and requires the
maintenance of specified financial ratios. Effective April 22, 1994, ICF
Kaiser and the Banks entered into an amendment that modified certain of the
financial ratios and other terms of the agreement, including a $20 million
limitation on cash borrowings. As of February 28, 1994, there were no
borrowings outstanding under the Credit Facility, except for letters of
credit, and the Company had $50.7 million of available credit under the Credit
Facility. The Credit Facility expires on October 31, 1996, and contains
Eurodollar and alternate base interest rate alternatives with margins
dependent upon the Company's financial operating results. ICF Kaiser had
outstanding letters of credit in the amount of $9.3 million at February 28,
1994, principally in support of performance guarantees under certain
contracts.
The 13.5% Notes were issued in fiscal 1990 with detachable common stock
warrants. The 13.5% Notes required interest payments semiannually and five
annual principal payments of $4.5 million beginning May 15, 1994, with the
remaining $7.5 million principal due May 15, 1999. The 13.5% Notes and
1,558,840 of the warrants were repurchased in January 1994 out of the proceeds
from the issuance of the 125,000 Units discussed above. The remaining 275,088
warrants expire on May 15, 1999, and are exercisable at any time for shares of
ICF Kaiser Common Stock at $6.87 per share. Additional warrants may be issued
under certain anti-dilution provisions.
A portion of the ESOP guaranteed notes (ESOP Loan) repayment was made
out of the proceeds from the issuance of the 125,000 Units representing a
prepayment of the Company's ESOP contribution. As such, it is reflected in
other current assets at February 28, 1994, in the accompanying balance sheet.
At February 28, 1993, a portion of the shares of ICF Kaiser Common Stock owned
by the ESOP collateralized the ESOP Loan. The ESOP Loan had been reflected in
the Company's long-term debt with a corresponding reduction in equity because
ICF Kaiser had guaranteed the ESOP Loan and was obligated to contribute
sufficient cash to fund the ESOP's debt service.
NOTE G--CONTINGENCIES
Normally in the Company's business, various claims or charges are
asserted and litigation commenced against the Company arising from or related
to properties, injuries to persons and breaches of contract, as well as claims
related to acquisitions and dispositions. Claimed amounts may not bear any
reasonable relationship to the merits of the claim or to a final court award.
In the opinion of management, an adequate reserve has been provided for final
judgments, if any, in excess of insurance coverage, which might be rendered
against the Company in such litigation.
The Company may from time to time, either individually or in conjunction
with other government contractors operating in similar types of businesses, be
involved in U.S. government investigations for alleged
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 are
presently known to have been filed against the Company by these agencies. The
Company is unable to predict the outcome of the investigations in which it is
currently involved. Management does not believe that there will be any
material adverse effect on the Company's financial position as a result of these
investigations.
The Company has a substantial number of cost reimbursement contracts
with the U.S. government, the costs of which are subject to audit by the U.S.
government. As a result of such audits, the government asserts from time to
time that certain costs claimed as reimbursable under government contracts
either were not allowable or not allocated in accordance with federal
procurement regulations. Management believes that the potential effect of
disallowed costs, if any, for the periods currently under audit and for
periods not yet audited has been adequately provided for and will not have a
material adverse effect on the Company's financial position.
NOTE H--INCOME TAXES
The components of income (loss) before income taxes and the related
provision (benefit) for income taxes is as follows (in thousands):
February 28, February 28, February 29,
1994 1993 1992
------------- ------------ -------------
Income (loss) before income taxes:
Domestic $(11,894) $13,362 $(60,058)
Foreign (983) 1,532 5,748
--------- ------- ---------
$(12,877) $14,894 $(54,310)
========= ======= =========
Provision (benefit) for income taxes:
Federal:
Current $ - $ 1,074 $ (2,041)
Deferred (652) 3,517 (11,261)
-------- ------- --------
(652) 4,591 (13,302)
-------- ------- --------
State:
Current - 420 (189)
Deferred (62) 794 (2,664)
-------- ------- --------
(62) 1,214 (2,853)
-------- ------- --------
Foreign:
Current 365 450 2,361
-------- ------- --------
$ (349) $ 6,255 $(13,794)
========= ======= ========
The tax effect of the principal significant temporary differences and
carryforwards that give rise to the Company's deferred tax asset is as follows
(in thousands):
February 28, February 28,
1994 1993
------------- ------------
Reserves for adjustments and allowances $10,068 $ 6,372
Vacation accrual 3,053 2,991
Net operating loss carryforwards 4,321 -
Tax credit carryforwards 940 1,247
Incentive compensation accrual - 1,047
Other 1,001 896
------- -------
Deferred income tax asset 19,383 12,553
Valuation allowance (3,330) -
------- -------
Deferred income tax asset, net $16,053 $12,553
======= =======
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report of Form 10-K Page F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The $3.3 million valuation allowance was established in fiscal 1994 for
deferred tax assets, primarily net operating loss carryforwards, that might not
be realized in the near future. Although the Company believes it will
ultimately use all of its net operating loss carryforwards, the valuation
allowance was established due to the extraordinary item and recent operating
results. The Company has net operating losses of $12.1 million, of which $1.2
million expire in fiscal 2004 and $10.9 million expire in 2009. The Company has
recorded $0.9 million of tax credit carryforwards, the majority of which do not
expire.
The effective income tax (benefit) rate varied from the federal statutory
income tax rate over the last three years because of the following differences:
February 28, February 28, February 29,
1994 1993 1992
------------- ------------- -------------
Statutory tax rate (benefit) (34.0)% 34.0% (34.0)%
------ ---- ------
Changes in tax rate (benefit) from:
Goodwill amortization 9.9 5.3 2.6
Differences between book and tax
basis of businesses sold 7.3 (3.4) 8.6
State income taxes (0.3) 5.4 (1.6)
Foreign taxes 4.8 (1.4) 0.3
Valuation allowance 9.2 - -
Other 0.4 2.1 (1.3)
------ ----- ------
31.3 8.0 8.6
------ ----- ------
(2.7)% 42.0% (25.4)%
====== ===== ======
In fiscal 1993, ICF Kaiser reached a favorable settlement with the Internal
Revenue Service (IRS) on the examination of ICF Kaiser Engineers Group, Inc.'s
(KEGI) income tax returns for 1977-1986. The IRS had previously completed its
review of KEGI's 1987 and 1988 income tax returns without adjustment. As such,
all years through 1988 are closed. In fiscal 1992, a foreign tax audit of a
KEGI-controlled foreign corporation was resolved favorably for KEGI. These
resolutions allowed the Company to adjust a portion of the amounts previously
provided for in connection with the 1988 acquisition of KEGI and its
subsidiaries. The resolution of these pre-acquisition contingencies has been
reflected in unusual items in the accompanying statements of operations for
fiscal 1993 and 1992 (see Note P). Also, in fiscal 1993 ICF Kaiser reached an
agreement with a former subsidiary to retain its net operating losses, which
favorably reduced the effect of differences between the book and tax basis of
the Company.
ICF Kaiser adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109), effective March 1, 1991. The impact
to ICF Kaiser of adopting SFAS No. 109 in fiscal 1992 was to increase the
deferred tax benefit by $6.5 million. There was no cumulative impact resulting
from the adoption of SFAS No. 109 as of the beginning of fiscal 1992, since all
of the items giving rise to the additional benefit occurred in fiscal 1992,
namely the costs associated with the restructuring.
NOTE I--LEASES
Future minimum payments on noncancelable operating leases for office space,
and on other noncancelable operating leases with initial or remaining terms in
excess of one year, were as follows on February 28, 1994 (in thousands):
Year Ended Operating
February 28, Leases
------------ ---------
1995 $ 27,658
1996 21,391
1997 16,648
1998 12,919
1999 12,459
Thereafter 37,569
--------
$128,644
========
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The total rental expense for all operating leases was $30,833,000,
$31,567,000, and $32,582,000 in fiscal years 1994, 1993, and 1992, respectively.
Sublease rental income was $2,225,000, $1,435,000, and $1,079,000 in fiscal
years 1994, 1993, and 1992, respectively. Minimum future sublease rentals to be
received under noncancelable subleases during fiscal 1995 are approximately
$3,592,000.
NOTE J--PREFERRED STOCK
Preferred Stock of the Company is as follows:
February 28, February 28,
1994 1993
------------- -------------
(In thousands)
Redeemable Preferred Stock (of Subsidiary),
par value $0.01 per share; liquidation value
$21,280,000; authorized 3,500,000 shares;
issued and outstanding - 700,000 and
1,400,000 shares $ 799 $ 1,599
------- -------
Series 2C Senior Preferred Stock, par value
$0.01 per share; liquidation value
$25,000,000; 250 shares designated, issued,
and outstanding - 25,000
Less unamortized discount, warrant value,
and issue costs - (984)
------- -------
- 24,016
------- -------
Series 2D Senior Preferred Stock, par value
$0.01 per share; liquidation value
$20,000,000; 200 shares designated, issued,
and outstanding 20,000 20,000
Less unamortized discount, warrant value,
and issue costs (587) (791)
------- -------
19,413 19,209
------- -------
Redeemable Preferred Stock $20,212 $44,824
======= =======
Series 1 Junior Convertible Preferred Stock,
par value $0.01 per share; liquidation value
$20,000,000; designated 200 shares;
issued and outstanding - 69 shares $ - $ 6,900
Series 4 Junior Preferred Stock, par value
$0.01 per share; liquidation value $500,000;
designated 500,000 shares;
no shares issued or outstanding (see Note K) - -
------- -------
Preferred Stock $ - $ 6,900
======= =======
Redeemable Preferred Stock (of Subsidiary): In connection with the
acquisition of KEGI, 3,500,000 shares of KEGI Series 1 Redeemable Preferred
Stock were issued to the KEGI Employee Stock Plan Trust in partial
consideration for ICF Kaiser's purchase of all of the outstanding shares of
Series A and Series P Preferred Stock of KEGI. Dividends on these shares are
$0.0685 per share per annum noncumulative, payable annually. A total of
700,000 shares were redeemed during each of the fiscal years 1994, 1993, and
1992. The final redemption is scheduled for September 30, 1994. These shares
are callable by ICF Kaiser at any time through September 1994, at a price of
$1.10 per share as of February 28, 1994.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Senior Preferred Stock: On January 11, 1994, ICF Kaiser repurchased all
250 shares of Series 2C Preferred Stock at 106.25% together with all of the
Series 2C Warrants out of the proceeds received from the issuance of 125,000
Units (see Note F). The premium and remaining unamortized discount were
charged to retained earnings and reduced net income available to common
shareholders by $1.9 million.
The Series 2D Senior Preferred Stock (Series 2D Preferred Stock)
together with five-year detachable warrants (Series 2D Warrants) were issued
in fiscal 1992 for a price of $20,000,000 (less a discount of $100,000). Of
the net price of $19,900,000, $400,000 was allocated to the value of the
warrants and $19,500,000 was allocated to the value of the stock. The value of
the Series 2D Preferred Stock was reduced further by issue costs.
Dividends on the Series 2D Preferred Stock are $9,750 per share per annum,
cumulative. Each of the shares has a liquidation preference of $100,000 ($20
million in the aggregate). The issue carries voting rights equal to 2,380,952
shares of ICF Kaiser Common Stock. The Series 2D Preferred Stock may be
redeemed at ICF Kaiser's option at 106.25% of the original price and is subject
to mandatory redemption at liquidation value on January 13, 1997.
The Series 2D Warrants expire in May 1997 and may be exercised for
2,680,952 shares of ICF Kaiser Common Stock at an exercise price of $6.90 per
share. In lieu of exercising the warrants, the holder may, at the holder's
option, require the Company to issue shares of ICF Kaiser's Common Stock equal
to the difference between the current market price of the Company's common
stock and 90% of the warrants' current exercise price. Additional warrants may
be issued under certain anti-dilution provisions.
Series 1 Junior Convertible Preferred Stock: In January 1994, the Company
used $4.9 million from the proceeds received upon issuance of the 125,000 Units
(see Note F) to repurchase the 69 shares of Series 1 Junior Convertible
Preferred Stock then outstanding resulting in a gain of $2,050,000 which
increased additional paid-in capital.
NOTE K--COMMON STOCK
Notes Receivable Related to Common Stock: Notes receivable related to ICF
Kaiser Common Stock pertain to the issuance of promissory notes to certain
members of senior management in accordance with their compensation agreements
collateralized by shares of ICF Kaiser Common Stock.
Shareholder Rights Plan: The Shareholder Rights Plan (Rights Plan) is
designed to provide the Board with the ability to negotiate with a person or
group that might, in the future, make an unsolicited attempt to acquire control
of ICF Kaiser, whether through the accumulation of shares in the open market or
through a tender offer which does not offer an adequate price. The Rights Plan
provides for one Right (Right) for each outstanding share of ICF Kaiser Common
Stock. Each Right entitles the holder to purchase 1/100 of a share of Series 4
Junior Preferred Stock at a purchase price of $50. The Rights generally may
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board. The Rights should not interfere
with any merger or other business combination approved by the Board because the
Board may, at its option, following the acquisition by any person or group of
20% of the outstanding shares of ICF Kaiser Common Stock, redeem the Rights upon
payment of the redemption price of $0.01 per Right. The Rights are not
triggered by the acquisition of beneficial ownership of more than 20% of ICF
Kaiser Common Stock by the initial holder of the Series 2D Preferred Stock.
Unless redeemed earlier by the Board, unexercised Rights expire on January 13,
2002.
NOTE L--STOCK OPTIONS
The ICF Kaiser Stock Incentive Plan provides for the issuance of options,
stock appreciation rights, restricted shares, and restricted stock units of up
to an aggregate of 6,000,000 shares of ICF Kaiser Common Stock. Awards are made
to employees of ICF Kaiser at the discretion of the Compensation Committee of
the Board. The Plan provides that the option price is not to be less than the
fair market value on the date of grant.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Stock option activity under this Plan and other options granted for
the last three years is as follows:
Shares Option Price
---------- ---------------
Balance, March 1, 1991 1,756,000 $3.46 to $14.46
Granted 950,000 $6.07 to $17.00
Cancelled (134,000) $6.07 to $16.23
Expired (95,000) $6.07 to $9.51
Exercised (605,000) $4.00 to $8.46
---------
Balance, February 29, 1992 1,872,000 $3.46 to $17.00
Granted 1,096,000 $5.99 to $9.59
Cancelled (653,000) $3.46 to $16.23
Expired (339,000) $6.07 to $16.23
Exercised (30,000) $8.25
---------
Balance, February 28, 1993 1,946,000 $5.99 to $17.00
Granted 390,000 $4.17 to $6.79
Cancelled (10,000) $8.25 to $12.83
Expired (30,000) $5.04 to $12.83
---------
Balance, February 28, 1994 2,296,000 $4.17 to $17.00
=========
Exercisable at
February 28, 1994 1,657,000 $4.17 to $17.00
=========
The number of shares available for the granting of options was 2,087,000,
2,525,000, and 2,629,000 at February 28, 1994, February 28, 1993, and February
29, 1992, respectively. None of the options outstanding at February 28, 1994,
were at an option price below the fair market value of ICF Kaiser Common Stock
at February 28, 1994. In May 1992, the Company cancelled 570,000 options
granted to employees at exercise prices of $14.32 to $16.23 and granted an equal
number of options to them at an exercise price of $8.25.
NOTE M--EMPLOYEE BENEFIT PLANS
ICF Kaiser and certain of its subsidiaries sponsor several benefit plans
covering substantially all employees who meet minimum length of service
requirements. These plans include: the ICF Kaiser International, Inc.
Retirement Plan (Retirement Plan), a defined contribution profit sharing plan
that provides for contributions by the Company based on a percentage of covered
compensation; the ICF Kaiser International, Inc. Employee Stock Ownership Plan
(ESOP) under which the Company made contributions based on a percentage of
covered compensation; and the ICF Kaiser International, Inc. Section 401 (k)
Plan [the 401(k) Plan], a cash or deferred compensation arrangement that allows
employees to defer portions of their salary, subject to certain limitations.
Effective March 1, 1993, the Company began matching a percentage of eligible
employee contributions to the 401(k) Plan. In fiscal 1994, the Company made
contributions equal to 20% of the first 4% of employee contributions to the
401(k) Plan and 2% of covered compensation to the ESOP. Effective March 1,
1994, the Company increased its matching contribution to the 401(k) Plan to 50%
of the first 4% of employee contributions and discontinued contributions to the
ESOP. Total contributions to the Retirement Plan, ESOP, and 401(k) Plan for
fiscal years 1994, 1993, and 1992 were $8,041,000, $10,220,000, and $10,440,000,
respectively.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE N--POST-EMPLOYMENT BENEFITS
ICF Kaiser provides certain benefits, primarily health insurance, to a
limited group of retirees (and their spouses) who joined ICF Kaiser through an
acquisition. The cost of the postretirement benefits is funded when paid and
limited to a fixed amount per retiree or spouse per month. Effective March 1,
1993, ICF Kaiser adopted SFAS No. 106.
The Company elected the prospective transition method of recognizing the
postretirement benefit expenses. Under this method, the Company's $14.2 million
accumulated postretirement benefit obligation (APBO) at March 1, 1993, is being
amortized over 14.5 years, the average remaining life expectancy of the retirees
and their spouses. A discount rate of 7% was used to determine the APBO.
The funded status of the plan as of February 28, 1994, is as follows (in
thousands).
Accumulated postretirement benefit obligation $ 14,772
Unamortized transition obligation (13,236)
Unrecognized net gain (1,271)
--------
Accrued postretirement benefit cost $ 265
========
The net periodic post-employment benefit cost for fiscal 1994 was
$1,919,000, which included an interest component ($938,000) and amortization of
the transition obligation ($981,000). All service cost related to the retirees'
benefits was included in the Company's transition obligation due to the nature
of the plans which prevent additional employees from participating in them.
Prior to the adoption of SFAS No. 106, post-employment costs were recognized
when paid. Post-employment costs included in expenses in fiscal years 1993 and
1992 were $1,695,000 and $1,418,000, respectively.
NOTE O--BUSINESS SEGMENT, MAJOR CUSTOMERS, AND FOREIGN OPERATIONS
Business Segment: ICF Kaiser operates predominantly in one industry
segment in which it provides consulting, environmental, engineering, and other
professional services.
Major Customers: Gross revenue from major customers was as follows (in
thousands):
Fiscal Year
1994 1993 1992
-------- ----------- --------
U.S. Department of Energy $312,889 $201,149 $188,196
U.S. Environmental Protection Agency 63,109 72,382 70,686
Other U.S. government agencies 49,105 47,896 39,792
-------- -------- --------
Total U.S. government 425,103 321,427 298,674
USX Corporation and affiliates 2,861 90,185 97,767
-------- -------- --------
$427,964 $411,612 $396,441
======== ======== ========
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Foreign Operations: Gross revenue and operating income from foreign sales
(including sales originating in the United States) and foreign assets of all
consolidated subsidiaries and branches were as follows (in thousands):
Fiscal Year
1994 1993 1992
--------- ----------- --------
Foreign gross revenue
Europe $ 11,600 $ 16,698 $ 35,475
Pacific 21,997 33,709 67,904
Other 2,793 2,940 2,646
-------- -------- --------
$ 36,390 $ 53,347 $106,025
======== ======== ========
Foreign operating income (loss)
Europe $ 1,742 $ 682 $ 689
Pacific (1,899) 2,010 5,224
Other (255) 158 160
-------- -------- --------
$ (412) $ 2,850 $ 6,073
======== ======== ========
Foreign assets
Europe $ 6,410 $ 4,565 $ 6,505
Pacific 14,626 13,880 36,130
Other 14 29 65
-------- -------- --------
$ 21,050 $ 18,474 $ 42,700
======== ======== ========
NOTE P--UNUSUAL ITEMS
In fiscal 1994, the Company completed a corporate reorganization, performed
a comprehensive review of its key business lines and its cost structure, and
designed and implemented action plans intended to return the Company to long-
term profitability. As a result, the Company recorded an $8.7 million pretax
charge to cover the cost of downsizing the work force, consolidating office
space, renegotiating significant leases, and restructuring certain international
operations. Management expects these action to be fully completed in fiscal
1995.
During the year ended February 28, 1993, the Company recognized the impact
of several unusual items: a $5,000,000 adjustment to pre-acquisition
contingencies (see Note H), offset by a charge to accrue the net settlement cost
and legal expenses related to a shareholder lawsuit ($1,400,000), the write down
to net realizable value of certain software-related assets ($3,000,000), and a
charge for severance and related costs accrued as part of a cost reduction plan
($550,000).
In fiscal 1992, due to the favorable resolution of a foreign tax audit and
management's evaluation of the status of an IRS appeal, the Company adjusted a
portion of the amounts previously provided for in connection with the
acquisition of the related companies.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE Q--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for fiscal years 1994 and 1993 is presented
in the following tables (in thousands, except per share amounts):
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
--------- -------- -------- ---------
1994
----
Gross revenue $197,588 $179,227 $146,830 $128,012
Service revenue $100,919 $103,910 $ 89,215 $ 88,664
Net income (loss) before
extraordinary item $(14,567) $ 1,349 $ 1,347 $ (657)
Net income (loss) $(20,536) $ 1,349 $ 1,347 $ (657)
Primary and fully diluted
net income (loss) per common
share:
Before extraordinary item
and redemption of redeemable
preferred stock $ (0.74) $ 0.00 $ 0.00 $ (0.09)
Extraordinary loss on early
extinguishment of debt (0.29) - - -
Redemption of redeemable
preferred stock (0.09) - - -
-------- -------- -------- --------
Total $ (1.12) $ 0.00 $ 0.00 $ (0.09)
======== ======== ======== ========
Market price per share:
High $ 5.00 $ 5.38 $ 5.50 $ 6.88
Low $ 3.63 $ 4.00 $ 3.75 $ 4.75
1993
----
Gross revenue $150,921 $158,086 $172,551 $197,324
Service revenue $ 93,113 $ 96,357 $ 96,480 $105,578
Net income $ 1,518 $ 2,206 $ 1,897 $ 3,018
Primary and fully diluted
net income per common share $ 0.01 $ 0.04 $ 0.03 $ 0.08
Market price per share:
High $ 8.50 $ 7.50 $ 7.75 $ 10.88
Low $ 5.88 $ 4.00 $ 5.00 $ 7.25
At April 15, 1994, there were 20,961,850 shares of common stock outstanding
held by 1,296 holders of record.
================================================================================
ICF Kaiser International, Inc. 1994 Annual Report on Form 10-K Page F-18
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
- - --------------------------------------------------------------------------
| COLUMN A | COLUMN B | COLUMN C |
| --------------------------------- | ----------------| -----------------|
| | | |
| | Balance at | |
| | beginning | |
| Name of Debtor | of period | Additions |
| --------------------------------- | ----------------| -----------------|
| | | |
| Year ended February 28, 1994: | | |
| K. Schweers (9) | $ 858,741 | $ 67,896 |
| J. Edwards (1) | 880,276 | 72,100 |
| W. Stitt (10) | 927,399 | 13,469 |
| J. Balch (2) | 777,504 | 40,397 |
| R. List (6) | 269,835 | 5,092 |
| J. Kirk (11) | 13,379 | - |
| M. Goldman (7) | 205,514 | 18,581 |
| A. Rapp (3) | - | 548,546 |
| | --------- | --------- |
| | $ 3,932,648 | $ 766,081 |
| | ========= | ========= |
| Year ended February 28, 1993: | | |
| K. Schweers (9) | $ 1,031,806 | $ 125,108 |
| J. Edwards (1) | 870,902 | 72,548 |
| W. Stitt (10) | 862,521 | 109,327 |
| J. Balch (2) | 744,265 | 33,239 |
| R. List (6) | 306,656 | 23,435 |
| J. Kirk (11) | 259,600 | 32,096 |
| M. Goldman (7) | 205,562 | 17,249 |
| E. Anderson (5) | 127,858 | 9,358 |
| | --------- | --------- |
| | $ 4,409,170 | $ 422,360 |
| | ========= | ========= |
| Year ended February 29, 1992: | | |
| K. Schweers (9) | $ - | $ 1,031,806 |
| J. Edwards (1) | 630,034 | 259,993 |
| W. Stitt (10) | - | 862,521 |
| J. Balch (2) | 713,537 | 30,728 |
| R. List (6) | 300,339 | 26,406 |
| J. Kirk (11) | - | 259,600 |
| M. Goldman (7) | 198,431 | 11,618 |
| D. Anderson (8) | 150,000 | 3,740 |
| E. Anderson (5) | - | 127,858 |
| | --------- | --------- |
| | $ 1,992,341 | $ 2,614,270 |
| | ========= | ========= |
- - --------------------------------------------------------------------------
- - ------------------------------------------------------ ---------------------------------------------------
| COLUMN A | COLUMN D | COLUMN E |
| --------------------------------- | ---------------- -------------------| ------------------------------|
| | Deductions | Balance at end of period |
| | ---------------- -------------------| ------------------------------|
| | Amounts | Amounts | | Not |
| Name of Debtor | collected | written off | Current | current |
| --------------------------------- | -----------------| -----------------| --------------| ------------- |
| | | | | |
| Year ended February 28, 1994: | | | | |
| K. Schweers (9) | $ 187,500 | $ - | $ 52,331 | $ 686,806 |
| J. Edwards (1) | - | - | 129,636 | 822,740 |
| W. Stitt (10) | 940,868 (4) | - | - | - |
| J. Balch (2) | - | - | 679,387 | 138,514 |
| R. List (6) | 244,302 | - | 30,625 | - |
| J. Kirk (11) | 13,379 | - | - | - |
| M. Goldman (7) | 19,445 | - | 13,003 | 191,647 |
| A. Rapp (3) | - | - | - | 548,546 |
| | --------- | --------- | --------- | --------- |
| | $ 1,405,494 | $ - | $ 904,982 | $ 2,388,253 |
| | ========= | ========= | ========= | ========= |
| Year ended February 28, 1993: | | | | |
| K. Schweers (9) | $ 298,173 | $ - | $ 74,747 | $ 783,994 |
| J. Edwards (1) | 63,174 | - | 72,547 | 807,729 |
| W. Stitt (10) | 44,449 | - | 81,940 | 845,459 |
| J. Balch (2) | - | - | 34,387 | 743,117 |
| R. List (6) | 60,256 | - | 79,831 | 190,004 |
| J. Kirk (11) | 278,317 | - | - | 13,379 |
| M. Goldman (7) | 17,297 | - | 17,248 | 188,266 |
| E. Anderson (5) | 137,216 (12)| - | - | - |
| | --------- | --------- | --------- | --------- |
| | $ 898,882 | $ - | $ 360,700 | $ 3,571,948 |
| | ========= | ========= | ========= | ========= |
| Year ended February 29, 1992: | | | | |
| K. Schweers (9) | $ - | $ - | $ - | $ 1,031,806 |
| J. Edwards (1) | 19,125 | - | - | 870,902 |
| W. Stitt (10) | - | - | - | 862,521 |
| J. Balch (2) | - | - | - | 744,265 |
| R. List (6) | 20,089 | - | - | 306,656 |
| J. Kirk (11) | - | - | - | 259,600 |
| M. Goldman (7) | 4,487 | - | - | 205,562 |
| D. Anderson (8) | 153,740 | - | - | - |
| E. Anderson (5) | - | - | - | 127,858 |
| | --------- | --------- | --------- | --------- |
| | $ 197,441 | $ - | $ - | $ 4,409,170 |
| | ========= | ========= | ========= | ========= |
- - --------------------------------------------------------------------------------------------------------
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES (Continued)
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
(1) $622,740 note receivable, collateralized by 86,133 shares of Common Stock.
Balance due May 15, 1996, with interest at 9.0% per annum. $50,000 note
receivable, collateralized by 10,246 shares of Common Stock. Balance due
May 15, 1996, with interest at 9.0% per annum. $150,000 note receivable,
collateralized by 34,286 shares of Common Stock. Balance due May 15, 1996,
with interest at 8.0% per annum.
(2) $500,000 note receivable due May 1, 1994, with interest at 6% per annum.
$34,387 due from Clinton & Associates which is owned by Mr. Balch. Amount
due February 28, 1994 with zero percent interest. Employee receivable with
zero percent interest. Balance at February 28, 1994 was $138,514.
(3) $300,000 note receivable, collateralized by a deed of trust. Balance due
January 20, 1999, with interest at 0% per annum. $226,000 note receivable.
Balance due upon the sale of a property, with zero percent interest.
$22,546 note receivable. Balance due upon the sale of a property, with zero
percent interest.
(4) Note receivable partially repaid by delivery of 132,900 shares of Common
Stock, valued at $862,521, to ICF Kaiser towards the outstanding principle
and interest.
(5) Note receivable, collateralized by 37,456 shares of Common Stock. Balance
due May 15, 1996, with interest at 8.0% per annum.
(6) $122,500 note receivable, collateralized by 20,000 shares of Common Stock.
$52,875 plus interest at 10.5% due immediately following the first
Limited Market in fiscal year 1991. Remaining amounts due in four equal
annual installments, with interest at prime + 1/2% per annum. $192,500
note receivable, collateralized by a Second Deed of Trust. Balance due
December 15, 1994, with interest payable monthly at Prime + 1%.
(7) Note receivable, collateralized by 33,134 shares of Common Stock. Balance
due May 15, 1996, with interest at 9.0% per annum.
(8) Note receivable due June 1, 1991, with interest at 10.0% per annum.
(9) Note receivable, collateralized by 396,849 shares of Common Stock. Balance
due May 15, 1996, with interest at 9.5% per annum.
(10) Note receivable, collateralized by 331,739 shares of Common Stock. Balance
due May 15, 1996, with interest at 9.5% per annum.
(11) Note receivable, collateralized by 99,846 shares of Common Stock. Balance
due May 15, 1996, with interest at 9.5% per annum.
(12) Note receivable partially repaid by delivery of 15,000 shares of Common
Stock, valued at $106,215, to ICF Kaiser towards the outstanding principle
and interest.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
(in 000's)
-----------------------------------------------------
| COLUMN A | COLUMN B |
| ----------------------------------| ----------------|
| | |
| | |
| | Balance at |
| | beginning |
| Description | of period |
| ----------------------------------| ----------------|
| | |
| Year ended February 28, 1994: | |
| Deducted from asset account | |
| Allowance for doubtful accounts | $ 8,977 |
| | |
| Included in other liabilities | |
| Provision for future losses | |
| on contracts | 464 |
| | --------- |
| | $ 9,441 |
| | ========= |
| Year ended February 28, 1993: | |
| Deducted from asset account | |
| Allowance for doubtful accounts | $ 9,361 |
| | |
| Included in other liabilities | |
| Provision for future losses | |
| on contracts | 2,351 |
| | --------- |
| | $ 11,712 |
| | ========= |
| Year ended February 29, 1992: | |
| Deducted from asset account | |
| Allowance for doubtful accounts | $ 10,302 |
| | |
| Included in other liabilities | |
| Provision for future losses | |
| on contracts | 224 |
| | --------- |
| | $ 10,526 |
| | ========= |
--------------------------------- ----------------
--------------------------------------------------------------------------------------------------------
| COLUMN A | COLUMN C | COLUMN D | COLUMN E |
| ----------------------------------| ---------------------------------| -----------------| --------------|
| | Additions | | |
| | ---------------------------------| | |
| | Charged to | | | Balance at |
| | costs and | | | end of |
| Description | expenses | Other | Deductions | period |
| ----------------------------------| ---------------| ----------------| -----------------| ------------- |
| | | | | |
| Year ended February 28, 1994: | | | | |
| Deducted from asset account | | | | |
| Allowance for doubtful accounts | 2,509 | $ - | $ 1,289 (2)| $ 10,197 |
| | | | | |
| Included in other liabilities | | | | |
| Provision for future losses | | | | |
| on contracts | - | - | 285 (3)| 179 |
| | --------- | --------- | --------- | --------- |
| | 2,509 | $ - | $ 1,574 | $ 10,376 |
| | ========= | ========= | ========= | ========= |
| Year ended February 28, 1993: | | | | |
| Deducted from asset account | | | | |
| Allowance for doubtful accounts | 3,085 | $ - | $ 3,469 (5)| $ 8,977 |
| | | | | |
| Included in other liabilities | | | | |
| Provision for future losses | | | | |
| on contracts | 564 | - | 2,451 (3)| 464 |
| | --------- | --------- | --------- | --------- |
| | 3,649 | $ - | $ 5,920 | $ 9,441 |
| | ========= | ========= | ========= | ========= |
| Year ended February 29, 1992: | | | | |
| Deducted from asset account | | | | |
| Allowance for doubtful accounts | 4,359 | $ 2,166 (1)| $ 7,466 (5)| $ 9,361 |
| | | | | |
| Included in other liabilities | | | | |
| Provision for future losses | | | | |
| on contracts | 2,210 | 1,222 (4)| 1,305 (3)| 2,351 |
| | --------- | --------- | --------- | --------- |
| | 6,569 | $ 3,388 | $ 8,771 | $ 11,712 |
| | ========= | ========= | ========= | ========= |
--------------------------------- --------------- ---------------- -------------- --------------
(1) Reflects primarily net allowance for doubtful accounts from the purchase of
subsidiaries.
(2) Reflects amounts written off against the allowance and related accounts
receivable accounts.
(3) Reflects losses charged against the provision for contract losses.
(4) Reflects provision for future contract losses provided for in connection
with the purchase of subsidiaries.
(5) Reflects amounts written off against the allowance and related accounts
receivable accounts and amounts written off to the provision for
restructuring and disposal of businesses.