Icf Kaiser International, Inc. Business Information, Profile, and History

Company Perspectives:

ICF Kaiser International's corporate mission is to be a major force worldwide in the environmental, infrastructure, process industries, and energy markets. We will grow by providing a full range of high-value-added services--from consulting, project development, and finance through all phases of engineering to construction, operations and maintenance, and by acquiring and applying innovative technologies. We will focus on a) solidifying and extending our position to win large Federal government projects; b) continuing to rebuild our industrial business; c) improving the profitability of our infrastructure business; d) fully leveraging our consulting skills and expertise; and e) expanding our presence internationally.

History of Icf Kaiser International, Inc.

ICF Kaiser International, Inc. is one of the largest engineering, construction, program management, and consulting services companies in the United States. Headquartered in northern Virginia, the company has 70 offices around the world. In 1998 projects included the U.S. Department of Energy's Rocky Flats Closure Project, the Nova Hût steel minimill in the Czech Republic, the Metro Manila Light Rail Transit System in the Philippines, expansion of an alumina refinery in western Australia, and facilities management support at the Kennedy Space Center and nearby rocket launch sites. Until 1999, three operating companies comprised ICF Kaiser: ICF Kaiser Engineers and Constructors, ICF Environment and Facilities Management Group, and ICF Kaiser Consulting Group. In March 1999 the company announced the sale of both the consulting group and the facilities management unit.

Early History

The "Kaiser" in ICF Kaiser International traces its roots to 1914, and the founding of the Henry J. Kaiser Company, Ltd., a construction company in Spokane, Washington, and the forerunner of Kaiser Aluminum & Chemical Corporation. Henry Kaiser's philosophy was "Do it faster, cheaper, and better," and he encouraged innovation among his employees. One early product of The Hobby Lobby (the company's research department) was the rubber-tired wheelbarrow. Kaiser's first big job, in 1927, was as a subcontractor building 200 miles of highway through the mountains and jungles of Cuba. The company finished a year ahead of schedule.

In the early 1930s the federal government began huge public works jobs to counter the Great Depression. In the West, this meant building dams to supply water for irrigation and power. Henry Kaiser and his engineers took part in building Bonneville (Hoover), Boulder, and Grand Coulee Dams. Even while working on the last of these giant projects, the company also was building a section of the Oakland-San Francisco Bay Bridge, tunnels, smaller dams, and a new set of locks for the Panama Canal. In 1939, when he lost out on the bid for building the Shasta Dam in northern California, Kaiser expanded into manufacturing. He designed and built the Permanente Cement Company in just seven months and provided the gravel to the Shasta builders.

When the United States entered World War II, Kaiser moved crews and equipment from Grand Coulee to San Francisco Bay and built a shipyard that eventually produced 1,490 merchant (Liberty) ships, aircraft carriers, and other warships. He built a second shipyard in Oregon, and his engineers, according to a company publication, "designed an entire city for 35,000 people and built it in three months." Kaiser also built planes and ship engines, and his engineers built airfields and other military installations. To supply steel plate, Kaiser built a steel plant and began production. During the war, Kaiser Industries had 300,000 people working for it. Before the war ended, the engineering department decided to seek projects outside Kaiser. This was the beginning of Kaiser Engineers, Inc.

Going International: 1950--76

During the 1950s, Kaiser Engineers increasingly took on jobs abroad, including designing and building a car factory in Argentina to produce Willys Jeeps and Kaiser automobiles. As the lead company in a seven-firm consortium, Kaiser took on the Snowy Mountains Hydroelectic Power project in Australia, a 25-year project, with Kaiser Engineers finishing their portion on time and under budget. Domestic projects included the dual-purpose reactor at Hanford, Washington. By 1965 Engineering News-Record ranked Kaiser Engineers as the number one contractor in the world. When Henry Kaiser died in 1967, Kaiser Engineers was operating in 21 states and 14 countries. The company continued designing and building, including steel-producing plants; cement plants; rapid transit projects in Baltimore, Maryland, and Washington, D.C.; aluminum and alumina factories; and the Great Plains Coal Gasification project in North Dakota.

A Part of Raymond International: 1977--86

In 1977 Kaiser Industries dissolved. In June, Raymond International Inc., a Houston-based construction company, paid $30 million for Kaiser Engineers, which had $172 million in revenues. Raymond, with $254 million in revenues, was shifting from big public works projects to concentrate on private jobs. With the purchase of Kaiser Engineers, it gained the management and design capabilities it lacked to compete in the increasingly complex construction business.

In 1983 Raymond went private in a leveraged buyout, borrowing about $200 million from nine banks to pay the purchase price. When the bottom fell out of the oil and gas market soon afterward, the company began defaulting on its loans.

A Separate Company: 1986--88

In 1986 the bank consortium split Kaiser Engineers from Raymond International, forming a separate company with some $60 million of debt. At the time, Kaiser Engineers had just started building the largest copper mine in the world, the Neves-Corvo project in Portugal. Because Portugal had so little industry, almost everything for the project had to be imported. This required 680 purchase orders from 16 countries on five continents, as Kaiser built, in addition to the copper mine itself, roads, a railroad, four dams, a copper concentrator, a 40-kilometer water pipe, and a port facility. To accomplish this, the company used its Kaiser Engineers Management System (KEMS), a computerized system for planning, monitoring, and cost control of huge projects.

When the company completed Neves-Corvo two years later, the bank consortium split Kaiser Engineers in two. It sold Kaiser's operations in Australia and Asia to the Australian conglomerate Elders Group IXL Ltd. The rest of Kaiser, including 2,000 employees and 1987 revenue of $300 million, was sold to tiny American Capital and Research Corp. (ACR) of Fairfax, Virginia. James O. Edwards, the chairman and president of ACR, developed the complicated transition in partnership with Elders.

American Capital and Research Corp.: 1969--88

ACR was a new private holding company established in 1987 and run by former top federal officials. Its primary business was ICF Inc., an energy, health, and environmental consulting company founded in 1969. ICF started life as Inner City Fund, a venture capital fund that helped minority-owned businesses raise money and win government contracts. The company reorganized itself as ICF in the mid-1970s and, following the passage of the first real hazardous waste disposal bill in 1976, grew by winning government contracts for energy and environmental policy analysis. Over the years ICF expanded to include subsidiaries handling economic analysis, biotechnology and risk assessment, defense analysis, and a computer group. In the process, it attracted senior government officials from energy, environmental, and health-related agencies. Critics complained that this created an unfair advantage in winning federal contracts, particularly in the hazardous waste field.

In the mid-1980s ICF began buying other consulting firms as part of a strategy to shift its primary business from analysis to field activities, particularly in the environmental field, and to increase its revenues to $100 million by 1990. Recent amendments to the hazardous waste disposal bill established "cradle to grave" liability for waste generators and required reams of documentation. "Big money was coming not from studying toxic waste dumps, but from cleaning them up," an ICF official recalled in a 1990 interview with Diablo Business.

Among its purchases was Clements Associates, Inc., a specialist in environmental risk assessment; K.S. Crump & Co., another risk assessment firm; SRW Associates, a small engineering firm; Buc & Associates, an economic consulting firm; and the Naisbitt Group, a trend analysis company. The purchase of Lewin and Associates Inc. made ICF the largest consulting practice in the healthcare and energy fields. In 1987 the company set up the ICF Defense Group to go after contracts in the national security and intelligence fields and established ACR.

Turning Around Kaiser Engineers: 1988--89

The Kaiser acquisition in 1988 greatly strengthened ACR's (and ICF's) engineering capabilities. Kaiser's current contracts included cleaning up Boston Harbor, construction and services work at the federal government's Hanford nuclear site in Washington state, and several highway and transit projects. Yet while Kaiser added some $300 million to ACR's annual revenues, it also brought ACR between $20 and $30 million in financial liabilities.

In less than a year, ACR trimmed Kaiser's debt through individual negotiations and slashed the company's overhead. Instead of losing $1 million a month, ICF Kaiser Engineers was profitable. ACR merged Kaiser with ICF Inc. in 1989, to form ICF Kaiser Engineers, a subsidiary of wholly owned ICFcorp International.

Later that year ACR bought CYGNA Group, a $30 million California firm that provided hazardous waste cleanup and plant reengineering services to the nuclear power industry. ACR was becoming an environmental conglomerate, providing government and industry with a single place to go for handling environmental problems.

ACR also strengthened its non-environmental subsidiaries. Its computer systems division, for example, acquired four local firms in barely more than a year, increasing its revenues to $37 million. The acquisitions left ACR with some $40 million in long-term debt, and in December 1989 it went public, raising about $26 million. Most of that was used to reduce the debt.

A Busy Year: 1990

ACR continued to expand into other markets, such as air-quality modeling services and negotiation and mediation services for big government and private contracts. By mid-1990 ACR owned 18 companies. In September 1990 ACR acquired International Waste Energy Systems, a design firm specializing in waste incineration systems. That same month it became one of the first U.S. companies to enter the huge pollution control market in the former Soviet Union and Eastern Europe, helping design systems to monitor pollution at Soviet coke plants. The company also purchased Kaiser Engineers Australia Pty Ltd. and Kaiser Engineers International from Elders Resources NZFP Ltd., recombining the original Kaiser Engineers. ACR had revenues of $503.9 million in fiscal 1990. Meanwhile, ICF Kaiser Engineers won a five-year, $50 million contract from the U.S. Air Force to design cleanup solutions for potentially hazardous waste sites on military bases around the world and was constructing Asia's largest high-speed railroad in Taiwan.

ICF Kaiser Engineers was one of the nation's top engineering firms specializing in toxic waste cleanup, with more than two-thirds of its contracts dealing with environmental projects. In addition to developing systems to actually clean up or destroy waste at a site, the subsidiary offered front-end services to determine the extent and nature of contamination at a site and conducted studies of alternative corrective actions.

Times of Trouble: 1991--93

Between 1989 and 1991, ACR's gross revenue more than doubled. The company began 1991 with a name change. To reflect both its roots and its growing international presence, the company became ICF International Inc. As it prepared for a $46 million stock offering in June, though, the fast-growing company ran into trouble. Known for its tight management controls, ICF International suddenly discovered that several of its noncore subsidiaries were performing poorly.

It appeared that the company tried to duplicate its successful shift in the environmental field to managing contracts and providing services without understanding the new fields into which it was moving. Providing services in areas such as health and information technology often meant developing products to be sold to new markets at a later date. Yet the subsidiaries continued to bill on ICF International's hourly model. As a stock analyst told the Washington Post in November of that year, "The company proved not particularly good at managing product-oriented businesses."

That discovery caused the company to cancel the stock offering and resulted in a first-ever quarterly loss. Its stock prices slumped, lenders demanded renegotiations, and over the next two years ICF International sold off 14 subsidiaries, although usually at a profit.

By 1993 ICF International had returned to profitability. It was now a company focused on its core business of environmental and transportation/infrastructure consulting and engineering. It had laid off employees and restructured both its credit agreements and its management, moving the president of ICF Kaiser Engineers (now called the Engineering & Construction Group) from Oakland, California to Fairfax, Virginia.

In June the company again changed its name, becoming ICF Kaiser International to underscore that it had integrated its California engineering firm with its Washington, D.C. consulting business, and in September it began trading on the New York Stock Exchange. But 1993 was a tough year for environmental markets, particularly for hazardous waste contracting, which saw a nine percent drop in billings by consulting firms. ICF Kaiser International registered a loss for the fiscal year.

The Mid-1990s

In 1994 ICF Kaiser focused increased emphasis on its domestic consulting services and set up an international company in Mexico to provide environmental consulting and engineering services in Mexico. It sold most of its Cygna Energy Services subsidiary and began unsuccessful talks to acquire a Pennsylvania-based hazardous waste cleanup company. Revenues in fiscal 1995 rose 32 percent from the previous year, but the company again reported a net loss of $1.66 million, down from $12.5 million for fiscal 1994.

The following year it won a $3.5 billion contract from the U.S. Department of Energy to clean up the Rocky Flats nuclear weapons plant in Colorado. In August, it bought EDA Inc., a Maryland engineering consulting firm, and later that year obtained the license to market a new process of making steel from steam coal, iron ore, and scrap.

In 1996 nearly 69 percent of the company's revenue came from contracts with the U.S. Department of Energy. But that year ICF Kaiser lost the Hanford nuclear waste contract, which it had had for 14 years and which represented approximately $10 million a year. At the same time, Congress failed to reauthorize the Superfund cleanup law and federal projects were on hold until the Republican leadership decided the direction it would take rewriting major environmental legislation and regulations. Among the contracts ICF Kaiser won in 1996 was that with a Czech steelmaker to build a minimill and another with the U.S. Army Corp of Engineers to clean up federal installations in its Southern Pacific region. Following the Hanford loss, the company took severe cost-cutting steps that continued into 1997.

The company's news coverage during 1997 had little to do with its work. First the media focused on the selection of former Energy Secretary Hazel O'Leary to ICF Kaiser's board and then on CEO James Edwards's name on a list of some 150 potential contributors Vice-President Al Gore was to call for the Democratic National Committee.

Financial Troubles: 1998 to the Present

In 1998 ICF Kaiser acquired ICT Spectrum Constructors Inc., one of the country's largest builders of semiconductor plants, in a move to broaden its construction services. ICT Spectrum had been spun off from its parent, Micron Technology Corp., in 1997. Later in the year ICF Kaiser announced a $35 million loss in the second quarter due to cost overruns at four nitric acid plant projects. The loss wiped out any hopes for a profit that year. ICF Kaiser replaced the company president and the president of the engineers and constructors group. At the same time, the company lost its contract to manage the upgrade of the Bath Iron Works in Maine, although it kept the contract for engineering work on the project.

In November, James Edwards, chairman and CEO since 1985 and a member of ICF Inc. since 1974, resigned. "I've had enough of difficult times and stress and no capital for growth," Edwards told Engineering News-Record. Keith Price, appointed president earlier in the year, was named CEO, and board member and former Congressman Tony Coelho was elected chairman.

Rumors about parts of the company being on the block soon proved true. On March 9, 1999, the company announced it was selling its consulting group, which accounted for about ten percent of company revenues, for $75 million. The new owners would be the group's management and CM Equity Partners L.P., a private, New York-based equity investment fund. The next day, ICF Kaiser announced that the IT Group, formerly known as International Technology Corp., was buying its environmental and facilities management group for $82 million. That sale was completed in April, just days before ICF Kaiser reported that its losses for 1998 totaled $100.5 million, compared with $5 million in 1997, and just days after naming James Maiwurm chief executive and president, the company's third head in five months.

With two of its three operating groups sold and the problems with the four nitric acid plants corrected, ICF Kaiser prepared to focus on and expand its engineering and construction business. As the new CEO stressed when he assumed office, "Our traditional expertise and our current book of business in the transit, water, alumina/aluminum, iron, steel, and mineral industries are real strengths. We believe transportation and infrastructure management, particularly when focused on large-scale public projects, including Rocky Flats, are all areas where Kaiser has an outstanding reputation, and we intend to strengthen these lines of business."

Principal Subsidiaries: ICF Information Technology, Inc.; Clement International Corp.; Cygna Group, Inc.; ICF Kaiser Holdings Unlimited, Inc.; ICF Kaiser Development Corp., Inc.; ICF Kaiser Engineers Group, Inc.; Monument Select Insurance Co.; Tudor Engineering Co.; Systems Applications International, Inc.; Systems Applications, Inc.; EDA, Inc.; K.S. Crump Group, Inc.