-----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, NWvzFK/WWxtO2UrLz6GM1GndBJc1D+gbk6npYLILpnYxGD6lxaXPMsalZlRnnD+d zFdOr3H87s3XmW1kZsg51Q== 0000818968-96-000003.txt : 19960412 0000818968-96-000003.hdr.sgml : 19960412 ACCESSION NUMBER: 0000818968-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960411 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDING ASSOCIATES 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: 1934 Act SEC FILE NUMBER: 000-16169 FILM NUMBER: 96546312 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 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 February 29, 1996 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 April 4, 1996 the registrant had issued and outstanding an aggregate of 4,845,207 shares of its common stock. INDEX HARDING LAWSON ASSOCIATES GROUP, INC. Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - February 29, 1996 (Unaudited) and May 31, 1995...............................................3 Condensed Consolidated Statements of Income - Three and Nine Months Ended February 29, 1996 and February 28, 1995 (Unaudited)..............................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended February 29, 1996 and February 28, 1995 (Unaudited).............................5 Notes to Condensed Consolidated Financial Statements February 29, 1996 (Unaudited)..............................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..........................10 SIGNATURES ..........................................................11 EXHIBIT INDEX ..........................................................12 -2- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) - -------------------------------------------------------------------------------- Feb. 29, 1996 May 31, 1995 - -------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $17,396 $12,648 Accounts receivable 24,934 28,343 Unbilled work in progress 4,593 6,935 Less allowances for receivables and unbilled work (1,503) (1,553) Deferred income taxes 823 2,235 - -------------------------------------------------------------------------------- Total current assets 48,072 49,533 Net equipment 4,259 4,442 Deposits and other assets 6,687 6,813 - -------------------------------------------------------------------------------- Total assets $59,018 $60,788 ================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $2,013 $3,383 Accrued expenses 4,737 5,642 Accrued compensation 4,500 6,518 Income taxes payable --- 621 - -------------------------------------------------------------------------------- Total current liabilities 11,250 16,164 Other liabilities 2,131 1,715 - -------------------------------------------------------------------------------- Total liabilities 13,381 17,879 - -------------------------------------------------------------------------------- Commitments and Contingencies --- --- Minority interest in subsidiary 260 224 - -------------------------------------------------------------------------------- Shareholders' equity: Preferred stock--$.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--4,845,090 and 4,719,320 at February 29, 1996 and May 31, 1995, respectively 48 47 Additional paid-in capital 18,142 17,424 Retained earnings 27,187 25,214 - -------------------------------------------------------------------------------- Total shareholders' equity 45,377 42,685 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $59,018 $60,788 ================================================================================ The accompanying notes are an integral part of these financial statements. -3- HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) - -------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Feb. 29, Feb. 28, Feb. 29, Feb. 28, 1996 1995 1996 1995 - -------------------------------------------------------------------------------- Gross revenue $27,091 $31,248 $94,393 $99,073 Less: Cost of outside services 6,854 9,079 28,747 29,794 - -------------------------------------------------------------------------------- Net revenue 20,237 22,169 65,646 69,279 - -------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 14,150 15,463 44,504 47,255 General expenses 6,250 6,170 18,574 18,586 - -------------------------------------------------------------------------------- Total costs and expenses 20,400 21,633 63,078 65,841 - -------------------------------------------------------------------------------- Operating income (loss) (163) 536 2,568 3,438 Interest income, net 248 92 618 162 - -------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 85 628 3,186 3,600 Provision for income taxes 34 248 1,257 1,422 Minority interest (28) 4 (44) 4 - -------------------------------------------------------------------------------- Net income $ 79 $ 376 $ 1,973 $ 2,174 ================================================================================ Net income per common share $ .02 $ .08 $ .41 $ .45 ================================================================================ Shares used in per share calculation 4,866 4,804 4,847 4,807 ================================================================================ The accompanying notes are an integral part of these financial statements. -4- HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) - -------------------------------------------------------------------------------- Nine Months Ended Feb. 29, Feb. 28, 1996 1995 - -------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $1,973 $2,174 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,877 2,493 Net decrease in current assets 6,209 3,162 Net decrease in current liabilities (4,196) (2,567) Other increase (decrease) 272 (547) - -------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,135 4,715 - -------------------------------------------------------------------------------- INVESTING ACTIVITIES Net purchase of equipment (1,387) (752) Investment in acquisition (net of acquired cash) --- (1,683) - -------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,387) (2,435) - -------------------------------------------------------------------------------- FINANCING ACTIVITIES Repayment of debt --- (2,024) Proceeds from sale of common stock --- 116 - -------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES --- (1,908) - -------------------------------------------------------------------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 4,748 372 Cash and cash equivalents at beginning of period 12,648 8,896 - -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $17,396 $9,268 ================================================================================ The accompanying notes are an integral part of these financial statements. -5- HARDING LAWSON ASSOCIATES GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) February 29, 1996 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, 1995. Reclassification of certain balances for the fiscal year ended May 31, 1995 have been made to conform to the February 29, 1996 presentation. NOTE 2: COMMITMENTS AND CONTINGENCIES On May 19, 1995, the Company filed a lawsuit in Texas State Court, Harris County, Texas, entitled Harding Lawson Associates, Inc., a wholly owned subsidiary of Harding Associates, Inc. vs., Bailey Site Settlors Committee, an unincorporated association, seeking collection of approximately $1.0 million in fees billed for engineering services performed. On June 21, 1995, a lawsuit was filed against the Company in Federal District Court, Jefferson County, Texas, and in Texas State Court, Orange County, Texas, entitled Bailey Site Settlors Committee vs. Harding Lawson Associates. The suit seeks monetary damages in the amount of $7.9 million for alleged breach of contract and negligence in the performance of certain engineering services. The suits filed in Jefferson and Orange Counties have been dismissed or stayed. Subsequently, a counterclaim containing similar allegations was filed against the Company in the Harris County suit. The Company believes it has meritorious defenses to these allegations. The Company is currently subject to certain other 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. -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 revenues, and (ii) the percentage increase (decrease) in dollar amount of such items from year to year. Percentage of Net Revenue Percentage 3 Mos Ended 9 Mos Ended Inc./(Dec.) Feb. 29, Feb. 29, Feb. 29, 3 Mos 9 Mos 1996 1996 vs vs 1996 1995 1996 1995 1995 1995 ---- ---- ---- ---- ---- ---- Net revenue 100.0% 100.0% 100.0% 100.0% (8.7)% (5.2)% Costs and expenses Payroll and benefits 69.9 69.8 67.8 68.2 (8.5) (5.8) General expenses 30.9 27.8 28.3 26.8 1.2 (.3) Operating income (loss)/margin (.8) 2.4 3.9 5.0 (130.4) (25.3) Net interest income 1.2 .4 .9 .2 169.6 281.5 Income before income taxes and minority interest .4 2.8 4.8 5.2 (86.5) (11.5) Provision for taxes .1 1.1 1.9 2.1 (86.3) (11.6) Minority interest (.1) --- (.1) --- --- --- Net income .4 1.7 3.0 3.1 (79.0) (9.2) Third Quarter Comparison for Fiscal Years 1996 and 1995 Net revenue for the fiscal quarter ended February 29, 1996 totaled $20,237, a decrease of 9 percent from net revenue of $22,169 for the third quarter of the prior fiscal year. The shortfall in net revenue was primarily due to a decrease in revenue from public agency contracts of approximately $2.5 million resulting from a decline in awards of new public agency contracts and funding on existing federal agency contracts, as well as government inefficiencies due to shutdowns and the lengthy budget impasse and continuing legislative gridlock with regard to environmental regulations. Net revenue from such public sector clients decreased by approximately 22 percent from the same period in the prior year. Overall, net revenue from public sector clients accounted for 43 percent of total net revenue compared to 50 percent in the same period of the prior year. Net revenue from industrial sector clients increased approximately 2 percent over the prior year. In domestic operations, the lower demand for services was partially offset by slightly improved pricing compared to the third quarter of fiscal 1995. International operations were virtually unchanged from the third quarter of fiscal 1995, accounting for approximately 5 percent of net revenue in both years. The Company recorded an operating loss of $163 or 0.8 percent of net revenue compared to operating income of $536 and margin of 2.4 percent for the same period in fiscal 1995. The lower operating income and margin were primarily due to the lower net revenue discussed above and slightly higher general expenses. General expenses were higher than the previous year due mainly to costs -7- associated with the relocation of a principal operating unit to less expensive space. Labor expenses were lower than in the prior year due to staff reductions. As in the first and second quarters, the performance on several firm fixed price contracts favorably contributed to operating results. There can be no assurance that such contracts will continue to be available to the Company in the future or that the performance of such contracts will have a favorable outcome. Net interest income for the third quarter of fiscal 1996 was $248 compared to net interest income of $92 for the third quarter of the prior fiscal year. Net interest income was higher due to the Company's increased cash position that resulted in higher balances of invested cash, and to a lesser extent, improved interest rates. The effective tax rate was 39.9 percent for the third quarter of fiscal 1996 and 39.5 percent in the same period last year. Net income for the quarter was $79 compared with $376 in the third quarter of fiscal 1995, a decrease of 79 percent. Earnings per share were $0.02 on 4,865,560 weighted average shares outstanding compared to $0.08 per share on 4,803,732 weighted average shares outstanding in the same period last year. Nine Month Comparison for Fiscal Years 1996 and 1995 Net revenue for the nine months ended February 29, 1996 (39 weeks) amounted to $65,646, a decrease of 5 percent from net revenue of $69,279 for the nine months ended February 28, 1995 (40 weeks). On a comparable basis with the prior year, the Company experienced lower demand for its services, partially offset by slightly improved pricing for those services. The lower demand was primarily related to public sector work. Net revenues from international operations was 5 percent in fiscal 1996 compared to 2 percent in the prior year. The increase was due primarily to an acquisition completed in November of the prior fiscal year. Operating income amounted to $2,568, a decrease of 25 percent from operating income of $3,438 for the first nine months of the prior year. The operating margin decreased to 4 percent from 5 percent a year ago. While the Company continued to lower its operating costs, such reductions were not sufficient to offset the effect of lower revenue discussed above. Net interest income for the nine months ended February 29, 1996 was $618, up from $162 in the same period in the prior year. The increase in net interest income was due primarily to the Company's increased cash position that resulted in higher balances of invested cash and, to a lesser extent, improved interest rates. The effective tax rate was 39.5 percent for the first nine months of fiscal 1996 and fiscal 1995. Net income for the nine months ended February 29, 1996 was $1,973, down from net income of $2,174 for the nine month period in the prior year, a decrease of 9 percent. Earnings per share were $0.41 on 4,846,675 weighted average shares outstanding compared to $0.45 per share on 4,806,964 weighted average shares outstanding in the first nine month period of the prior year. Due to seasonal factors, operating results for the nine month period ended February 29, 1996 are not necessarily indicative of the results that may be expected for the entire fiscal year ending May 31, 1996. -8- Liquidity and Capital Resources For the nine months ended February 29, 1996, net cash provided by operations was $6,135 compared with net cash provided by operations of $4,715 for the same period last year. The increase in cash provided by operations was primarily due to improved accounts receivable balances. The Company made net capital expenditures of $1,387 in the first nine months of fiscal 1996 compared to net capital expenditures of $752 in the first nine months of the prior year. The Company anticipates that its capital expenditures, excluding investments in acquisitions, for the current fiscal year will continue to be at slightly higher levels than those incurred in the prior fiscal year. The Company is a consulting engineering services firm engaged in providing environmental, infrastructure and geotechnical related services, and encounters potential liability including claims for errors and omissions resulting from construction defects, construction cost overruns or environmental or other damage in the normal course of business. The Company is 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 adverse impact on the financial position and liquidity of the Company. The Company is provided a $5 million professional liability insurance policy through an unrelated, rated carrier. At February 29, 1996, the Company had cash on hand and cash equivalents of $17,396. The Company has a $20 million revolving credit line agreement which expires in October 1997. At February 29, 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 5.3 percent at February 29, 1996, and at 6.1 percent at May 31, 1995. The Company is in compliance with all covenants pertaining to the credit line agreement. 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, from time to time, considers acquisitions to expand its geographical representation and to 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 possible investments in acquisitions. Forward-Looking Statements Except for the historical information contained herein, certain of the matters discussed in this report are forward-looking statements that involve risks and uncertainties, including the demand for the Company's services and the strength of the economy domestically and internationally, and such risks and uncertainties as are described in the reports and other documents filed by the Company from time to time with the Securities and Exchange Commission. -9- 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 February 29, 1996: Exhibit No. 11 Computation of Per Share Earnings Exhibit No. 27 Financial Data Schedule b. Reports on Form 8-K None -10- 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: April 5, 1996 /s/ Donald L. Schreuder ----------------------- Donald L. Schreuder President and Chief Executive Officer (Principal Executive Officer) Date: April 5, 1996 /s/ Gregory A. Thornton ----------------------- Gregory A. Thornton Vice President and Chief Financial Officer (Principal Accounting Officer) -11- HARDING LAWSON ASSOCIATES GROUP, INC. EXHIBIT INDEX Exhibit No. 11 Computation of Per Share Earnings 27 Financial Data Schedule -12- 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 Mos Ended Nine Mos Ended Feb. 29, Feb. 28, Feb. 29, Feb. 28, 1996 1995 1996 1995 - -------------------------------------------------------------------------------- PRIMARY Average shares outstanding 4,845 4,703 4,817 4,677 Net effect of dilutive stock options based on the modified treasury stock method using the average market price 21 101 30 130 - -------------------------------------------------------------------------------- TOTAL 4,866 4,804 4,847 4,807 ================================================================================ Net income $ 79 $376 $1,973 $2,174 ================================================================================ Net income per share $.02 $.08 $ .41 $ .45 ================================================================================ EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 9-MOS MAY-31-1996 JUN-01-1995 FEB-29-1996 17396 0 29527 1503 0 48072 21436 17177 59018 11250 0 0 0 48 45329 59018 0 94393 0 28747 63078 0 36 3186 1257 1973 0 0 0 1973 0.41 0.41
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