-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TGaS3ahujbHvCpi0TsLxKRIYtx+61LdltGybo/6E7zaxv13jq9Iyff9UmkWr32Mw FaSx95NCDVFbgFRNRK3OUw== 0000818968-98-000002.txt : 19980113 0000818968-98-000002.hdr.sgml : 19980113 ACCESSION NUMBER: 0000818968-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDING LAWSON ASSOCIATES GROUP INC CENTRAL INDEX KEY: 0000818968 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 680132062 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16169 FILM NUMBER: 98505039 BUSINESS ADDRESS: STREET 1: 7655 REDWOOD BLVD CITY: NOVATO STATE: CA ZIP: 94945 BUSINESS PHONE: 4158920821 MAIL ADDRESS: STREET 1: 7655 REDWOOD BLVD CITY: NOVATO STATE: CA ZIP: 94945 FORMER COMPANY: FORMER CONFORMED NAME: HARDING ASSOCIATES INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the ----- Securities Exchange Act of 1934 For the quarterly period ended November 30, 1997 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _____________ Commission file number 0-16169 HARDING LAWSON ASSOCIATES GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 68-0132062 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7655 Redwood Boulevard Novato, California 94945 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 892-0821 Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At January 7, 1998 the registrant had issued and outstanding an aggregate of 4,991,936 shares of its common stock. INDEX HARDING LAWSON ASSOCIATES GROUP, INC. Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - November 30, 1997 (Unaudited) and May 31, 1997...................................................3 Condensed Consolidated Statements of Income - Three and Six Months Ended November 30, 1997 and November 30, 1996 (Unaudited)..................................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended November 30, 1997 and November 30, 1996 (Unaudited)..................................5 Notes to Condensed Consolidated Financial Statements November 30, 1997 (Unaudited)..................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders...........10 Item 6. Exhibits and Reports on Form 8-K..............................11 SIGNATURES..................................................................12 INDEX TO EXHIBITS...........................................................13 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) November 30, 1997 May 31, 1997 - ------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $24,441 $24,464 Accounts receivable 25,419 22,911 Unbilled work in progress 4,999 6,221 Less allowances for receivables and unbilled work (1,356) (1,387) Prepaid expenses 1,371 1,073 Deferred income taxes 2,429 2,691 - ---------------------------------------------------------------------------------------------------------- Total current assets 57,303 55,973 - ---------------------------------------------------------------------------------------------------------- Equipment 22,281 21,701 Less accumulated depreciation (18,148) (17,299) - ----------------------------------------------------------------------------------------------------------- Net equipment 4,133 4,402 - ---------------------------------------------------------------------------------------------------------- Deposits and other assets 6,109 5,980 - ---------------------------------------------------------------------------------------------------------- Total assets $67,545 $66,355 ========================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $5,609 $4,538 Accrued expenses 4,204 4,845 Accrued compensation 6,161 6,632 Income taxes payable 785 1,962 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 16,759 17,977 Other liabilities 1,365 1,453 - ---------------------------------------------------------------------------------------------------------- Total liabilities 18,124 19,430 - ---------------------------------------------------------------------------------------------------------- Commitments and Contingencies Minority interest in subsidiaries 279 323 - ---------------------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock--$.01 par value; authorized shares 1,000,000; issued and outstanding--none Common stock--$.01 par value authorized shares 10,000,000; issued and outstanding--4,978,317 and 4,864,503 at November 30, 1997 and May 31, 1997, respectively 50 49 Additional paid-in capital 18,710 17,982 Retained earnings 30,382 28,571 - ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 49,142 46,602 - ---------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $67,545 $66,355 ==========================================================================================================
The accompanying notes are an integral part of these financial statements.
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended November 30, November 30, 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------- Gross revenue $33,628 $32,286 $65,446 $63,230 Less: Cost of outside services 12,348 11,004 22,485 20,969 - ---------------------------------------------------------------------------------------------------------------- Net revenue 21,280 21,282 42,961 42,261 - ---------------------------------------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 13,917 14,220 28,509 29,007 General expenses 6,098 5,832 11,860 11,720 - ---------------------------------------------------------------------------------------------------------------- Total costs and expenses 20,015 20,052 40,369 40,727 - ---------------------------------------------------------------------------------------------------------------- Operating income 1,265 1,230 2,592 1,534 Interest in loss of unconsolidated subsidiaries -- (57) (50) (110) Interest income, net 243 157 507 341 - ---------------------------------------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 1,508 1,330 3,049 1,765 Provision for income taxes 637 558 1,282 763 Minority interest (20) 22 (44) 26 - ---------------------------------------------------------------------------------------------------------------- Net income $891 $750 $1,811 $976 ================================================================================================================ Net income per common share $0.17 $0.15 $0.36 $0.20 ================================================================================================================ Shares used in per share calculation 5,133 4,996 5,031 4,958 ================================================================================================================
The accompanying notes are an integral part of these financial statements.
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended November 30, 1997 1996 OPERATING ACTIVITIES Net income $ 1,811 $ 976 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,246 1,267 Net increase in current assets (1,353) (7,560) Net increase (decrease) in current liabilities (478) 4,009 Other increase (decrease) (216) 306 - ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,010 (1,002) - ----------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Net purchase of equipment (1,009) (1,109) - ----------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,009) (1,109) - ----------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from sale of common stock 156 58 Repurchase of common stock (180) (159) - ----------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (24) (101) - ----------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (23) (2,212) Cash and cash equivalents at beginning of period 24,464 19,012 - ---------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,441 $16,800 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. HARDING LAWSON ASSOCIATES GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) November 30, 1997 NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared without audit by Harding Lawson Associates Group, Inc. (the "Company") in accordance with generally accepted accounting principles for interim financial statements and pursuant to the rules of the Securities and Exchange Commission for Form 10-Q. Certain information and footnotes required by generally accepted accounting principles for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal and recurring nature. For further information, refer to the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K dated May 31, 1997. Reclassification of certain balances for the fiscal year ended May 31, 1997 have been made to conform to the November 30, 1997 presentation. NOTE 2: COMMITMENTS AND CONTINGENCIES The Company is currently subject to certain claims and lawsuits arising in the ordinary course of its business. In the opinion of management, adequate provision has been made for all known liabilities that are currently expected to result from these claims and lawsuits, and in the aggregate such claims are not expected to have a material effect on the financial position of the Company. The estimates used in establishing these provisions could differ from actual results. Should these provisions change significantly, the effect on operations for any quarterly or annual reporting period could be material. NOTE 3: NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Statement of Financial Accounting Standards No. 128 "Earnings per Share," (FAS 128) was issued and is effective for the year ending May 31, 1998. The Company will change its method for computing earnings per share and restate all periods to reflect the change in its consolidated statements of income effective with the issuance of the Company's third and fourth quarters and annual report for 1998. The new method requires calculation of earnings per share excluding the dilutive effect of common stock equivalents such as stock options and warrants. The impact of FAS 128 on basic earnings per share and diluted earnings per share would not have had a material effect on earnings per share for the six months ended November 30, 1997 and 1996. HARDING LAWSON ASSOCIATES GROUP, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward Looking Statements - --------------------------------------------------------- The statements in this report that are forward-looking are based on current expectations, and actual results may differ materially. The forward-looking statements include those regarding the level of future purchases of fixed assets, the possible impact of current and future claims against the Company based upon negligence and other theories of liability and the possibility of the Company making acquisitions during the next 12 to 18 months. Forward-looking statements involve numerous risks and uncertainties that could cause actual results to differ materially, including, but not limited to, the possibilities that the demand for the Company's services may decline as a result of possible changes in general and industry specific economic conditions and the effects of competitive services and pricing; one or more current or future claims made against the Company may result in substantial liabilities; and such other risks and uncertainties as are described in reports and other documents filed by the Company from time to time with the Securities and Exchange Commission. Results of Operations - --------------------- (In thousands, except share data) The following table sets forth, for the periods indicated, (i) the percentage that certain items in the condensed consolidated income statements of the Company bear to net revenue, and (ii) the percentage increase (decrease) in dollar amount of such items from year to year.
Percentage of Net Revenue Percentage Three Months Ended Six Months Ended Increase (Decrease) November 30, November 30, November 30, Three Months Six Months 1997 1996 1997 1996 1997 vs 1996 1997 vs 1996 ---- ---- ---- ---- ------------ ------------ Net revenue 100.0% 100.0% 100.0% 100.0% 0.0% 1.7% Costs and expenses Payroll and benefits 65.4 66.8 66.4 68.7 (2.1) (1.7) General expenses 28.7 27.4 27.6 27.7 4.6 1.2 Operating income/margin 5.9 5.8 6.0 3.6 2.9 69.0 Interest income, net and interest in loss of uncon- solidated subsidiaries 1.2 0.4 1.1 0.6 142.7 97.7 Income before income taxes and minority interest 7.1 6.2 7.1 4.2 13.4 72.7 Provision for income taxes and minority interest 2.9 2.7 2.9 1.9 6.4 56.9 Net income 4.2 3.5 4.2 2.3 18.8 85.5
Second Quarter Comparison for Fiscal Years 1998 and 1997 - -------------------------------------------------------- Net revenue for the fiscal quarter ended November 30, 1997 totaled $21,280, virtually unchanged from net revenue of $21,282 for the second quarter of the prior fiscal year. Although net revenue was unchanged for the quarter ended November 30, 1997, the Company did experience a 3 percent decline in net revenue from domestic industrial contracts, and a 26 percent decline in net revenue from international operations compared to the same quarter in the prior year, offset by an 8 percent increase in net revenue from public sector contracts. The increase in public sector net revenue was due to an increase in net revenue from state and local agency's contracts. Revenue from this component of the public sector derived significant benefit from certain contracts that were completed or suspended in the first half of fiscal 1998. This increase was partially offset by a decline in net revenue from federal contracts. Overall, net revenue from public sector clients accounted for 46 percent of total net revenue compared to 43 percent in the prior year. Although net revenue from domestic industrial clients was 3 percent lower than in the second quarter of the prior fiscal year, it was 3 percent higher than the prior fiscal quarter. Domestic revenue in the second quarter was positively affected by higher prices for the Company's services compared to the same period in the prior fiscal year, offset by slightly lower demand. International net revenue for the fiscal quarter ended November 30, 1997 was $1,253 or 6 percent of total net revenue compared to $1,700 or 8 percent of total net revenue in the same quarter of the prior fiscal year. Operating income was $1,265 in the second quarter of fiscal 1998, an increase of 2.9 percent from $1,230 for the same period in fiscal 1997. Operating margin increased to 5.9 percent of net revenue in the current quarter compared to 5.8 percent in the second quarter of fiscal 1997. The increase in operating income and margin was the result of lower payroll costs due primarily to a lower full time equivalent staff count. General expenses were 6.0 percent higher than the prior year reflecting in part the Company's spending on new marketing initiatives begun in the current fiscal year. Net interest income for the second quarter ended November 30, 1997 rose by $86 compared to the prior year due primarily to a $7.3 million increase in the average cash balance compared to the second quarter of last year. The effective tax rate was 42.2 percent for the second quarter of fiscal 1998 and was 41.9 percent in the second quarter of the prior year. Net income for the quarter was $891 compared with $750 in the second quarter of fiscal 1997, an increase of 18.8 percent. Earnings per share were $0.17 on 5,133,000 weighted average shares outstanding compared to $0.15 per share on 4,996,000 weighted average shares outstanding in the same period last year. The increase in weighted average shares outstanding was primarily due to the increase in the price per share of the Company's common stock resulting in an increase in share equivalents used in the per share calculation. Six Month Comparison for Fiscal Years 1998 and 1997 - --------------------------------------------------- Net revenue for the six months ended November 30, 1997 amounted to $42,961, an increase of 1.7 percent from net revenue of $42,261 for the six months ended November 30, 1996. The increase in net revenue was due primarily to a 10 percent increase in public sector work offset by a decline in commercial and international sales compared to the six months ended November 30, 1996. Domestically the Company received higher prices for its services sufficient to offset slightly lower demand. Operating income amounted to $2,592, an increase of 69.0 percent from operating income of $1,534 for the first six months of the prior year. The operating margin increased to 6.0 percent from 3.6 percent a year ago. The improved operating income and margin was due primarily to lower payroll costs combined with improved revenue compared to the same six months in the prior year, partially offset by higher general expenses. Net interest income for the six months ended November 30, 1997 was $507, an increase of 48.6 percent from net interest income of $341 for the same period of the prior fiscal year. The increase was primarily due to a $6.5 million increase in the average cash balance compared to the prior year. The effective tax rate for the six months ended November 30, 1997 was 42.0 percent, and for the six months ended November 30, 1996 was 43.2 percent. The effective tax rate in fiscal 1997 reflects the impact of losses from the start-up of certain international operations for which no tax benefit has been realized. Net income for the six months was $1,811, higher than net income of $976 for the six month period in the prior year, an increase of 85.6 percent. Earnings per share were $0.36 on 5,031,000 weighted average shares outstanding compared to $0.20 on 4,958,000 weighted average shares outstanding in the first six month period of the prior year. The increase in weighted average shares outstanding was primarily due to the increase in the price per share of the Company's stock resulting in an increase in share equivalents used in the per share calculation. Liquidity and Capital Resources - ------------------------------- For the six months ended November 30, 1997, net cash provided by operations was $1,010 compared to net cash used in operations of $1,002 for the same period last year. The increase in cash provided by operations was primarily due to a decrease in the Company's receivables offset by a decrease in current liabilities, and by an increase in prepaid taxes in the current fiscal year. The decrease in trade receivables was primarily due to better management of billing and collections this fiscal year compared with the same period in the prior fiscal year. The Company made capital expenditures of $1,009 in the first six months of fiscal 1998 compared to capital expenditures of $1,109 in the first six months of the prior year. The Company anticipates that its capital expenditures, excluding acquisitions, for the current fiscal year will be approximately the same as those incurred in the prior fiscal year. The Company made a payment of $197 in the first fiscal quarter of 1998 under terms of an acquisition agreement related to an acquisition completed in fiscal 1994. At November 30, 1997 the Company had cash on hand and cash equivalents of $24,441. The Company has a $20 million revolving credit line agreement that expires in November 1999. At November 30, 1997 and 1996, the Company had no borrowings outstanding under its line of credit leaving $20 million available to the Company. Borrowings were available to the Company at an interest rate of 6.0 percent at November 30, 1997, and 5.7 percent at May 31, 1997. The Company is in compliance with all covenants pertaining to the credit line agreement. The Company is a consulting engineering services firm engaged in providing environmental, infrastructure, geotechnical and construction related services, and encounters potential liability including claims for errors and omissions resulting from construction defects, construction cost overruns, environmental or other damage in the normal course of business. The Company is a party to lawsuits and is aware of potential exposure related to certain claims. In the opinion of management, adequate provision has been made for all known liabilities that are currently expected to result from these matters, and in the aggregate such claims are not expected to have a material impact on the financial position and liquidity of the Company. The Company maintains a $5 million per occurrence professional liability policy and a $5 million per occurrence contractor's pollution insurance policy through an unrelated, rated carrier. The Company also maintains a general liability insurance policy with an unrelated, rated carrier. The Board of Directors of the Company has approved a Common Stock Repurchase Program that authorizes the Company to purchase up to a maximum of 500,000 shares of stock on the open market from time to time for the purpose of funding the Company's various employee stock programs. The Company repurchased 21,300 shares for $180 in the first six months of fiscal 1998 under this program compared to 23,500 shares for $159 in the prior year. The Company believes that its available cash and cash equivalents, as well as cash generated from operations and its available credit line, will be sufficient to meet the Company's cash requirements for the balance of the fiscal year. The Company intends to actively continue its search for acquisitions to expand its geographical representation and enhance its technical capabilities. The Company expects to utilize a portion of its liquidity over the next 12 to 18 months for capital expenditures, including acquisitions and investments in aligned businesses. HARDING LAWSON ASSOCIATES GROUP, INC. PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of the Registrant was held on November 5, 1997 and three proposals were presented to security holders for a vote; election of two directors, approval of the Non-employee Director Compensation Stock Plan, and ratification of independent auditors. The six-member Board of Directors is divided into three classes. Each year one of the classes stands for election to a term of three years. The class standing for election at the 1997 annual meeting was Class I, consisting of two incumbent directors: Retired Rear Admiral Stuart F. Platt and Donald K. Stager. The terms for Class II Directors, Richard D. Puntillo and James M. Edgar expire in 1998, and the terms for Class III Directors, Richard S. Harding and Donald L. Schreuder expire in 1999. The following table lists the votes cast:
For Withheld Proposal 1 Election of Directors Stuart F. Platt 4,031,949 294,164 Donald K. Stager 4,191,366 134,747 For Against Abstain Proposal 2 Approval of Non-employee Director Compensation Stock Plan 4,310,041 14,395 1,677 For Against Abstain Non-Vote Proposal 3 Ratification of Ernst & Young, LLP Independent Auditors 4,162,352 46,118 32,925 84,718
HARDING LAWSON ASSOCIATES GROUP, INC. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits The following exhibits are furnished along with this Form 10-Q Quarterly Report for the period ended November 30, 1997: Exhibit No. 11 Computation of Per Share Earnings Exhibit No. 27 Financial Data Schedule b. Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARDING LAWSON ASSOCIATES GROUP, INC. Date: January 12, 1998 /s/ Donald L. Schreuder ----------------------- Donald L. Schreuder President and Chief Executive Officer (Principal Executive Officer) Date: January 12, 1998 /s/ Gregory A. Thornton ----------------------- Gregory A. Thornton Vice President and Chief Financial Officer (Principal Accounting Officer) HARDING LAWSON ASSOCIATES GROUP, INC. EXHIBIT INDEX Sequential Exhibit No. Page No. 11 Computation of Per Share Earnings 14 27 Financial Data Schedule (Electronic Filing Only) EX-11 2 COMPUTATION OF PER SHARE EARNINGS
Exhibit No. 11 HARDING LAWSON ASSOCIATES GROUP, INC. Computation of Per Share Earnings (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended November 30, November 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------- PRIMARY Average shares outstanding 4,971 4,980 4,974 4,933 Net effect of dilutive stock options based on the treasury stock method 162 16 56 25 - ------------------------------------------------------------------------------------------------------------ TOTAL 5,133 4,996 5,030 4,958 ============================================================================================================ Net income $891 $750 $1,811 $976 ============================================================================================================ Net income per share $0.17 $0.15 $0.36 $0.20 ============================================================================================================
EX-27 3 FDS --
5 1000 6-MOS MAY-31-1998 JUN-01-1997 NOV-30-1997 24441 0 30418 1356 0 57303 22281 18148 67545 16759 0 0 0 50 49092 67545 0 65446 0 22485 40369 0 17 3049 1282 1811 0 0 0 1811 0.36 0.36
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