-----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, M8jogbiBPMA7emJTWc0tTOjNoLIFIWCycAmVC6O2mVMFfh8xGGwnylzBhIIcnmJl 4Hi/vfRtrgYMckR++rF6kQ== 0000818968-97-000002.txt : 19970114 0000818968-97-000002.hdr.sgml : 19970114 ACCESSION NUMBER: 0000818968-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970113 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: 1934 Act SEC FILE NUMBER: 000-16169 FILM NUMBER: 97504771 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, 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 January 8, 1997 the registrant had issued and outstanding an aggregate of 4,963,769 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, 1996 (Unaudited) and May 31, 1996...........................................................3 Condensed Consolidated Statements of Income - Three and Six Months Ended November 30, 1996 and November 30, 1995 (Unaudited)..........................................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended November 30, 1996 and November 30, 1995 (Unaudited)..........................................5 Notes to Condensed Consolidated Financial Statements November 30, 1996 (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............11 Item 6. Exhibits and Reports on Form 8-K...............................12 SIGNATURES...................................................................13 INDEX TO EXHIBITS............................................................14 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) November 30, 1996 May 31, 1996 - -------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $16,800 $19,012 Accounts receivable 28,358 24,080 Unbilled work in progress 7,787 4,903 Less allowances for receivables and unbilled work (1,397) (1,476) Prepaid expenses 1,769 1,304 Deferred income taxes 1,339 1,474 - -------------------------------------------------------------------------------- Total current assets 54,656 49,297 - -------------------------------------------------------------------------------- Equipment 21,784 21,021 Less accumulated depreciation (17,380) (16,677) - -------------------------------------------------------------------------------- Net equipment 4,404 4,344 - -------------------------------------------------------------------------------- Deposits and other assets 6,744 6,723 - -------------------------------------------------------------------------------- Total assets $65,804 $60,364 ================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $5,092 $2,754 Accrued expenses 4,981 5,936 Accrued compensation 6,329 5,086 Income taxes payable 718 --- - -------------------------------------------------------------------------------- Total current liabilities 17,120 13,776 Other liabilities 2,457 1,983 - -------------------------------------------------------------------------------- Total liabilities 19,577 15,759 - -------------------------------------------------------------------------------- Commitments and Contingencies Minority interest in subsidiaries 325 248 - -------------------------------------------------------------------------------- Shareholders' equity: Preferred stock--$.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--4,963,769 and 4,845,207 at November 30, 1996 and May 31, 1996, respectively 50 48 Additional paid-in capital 18,709 18,142 Retained earnings 27,143 26,167 - -------------------------------------------------------------------------------- Total shareholders' equity 45,902 44,357 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $65,804 $60,364 ================================================================================ 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, 1996 1995 1996 1995 - -------------------------------------------------------------------------------- Gross revenue $32,286 $35,554 $63,230 $67,302 Less: Cost of outside services 11,004 12,853 20,969 21,893 - -------------------------------------------------------------------------------- Net revenue 21,282 22,701 42,261 45,409 - -------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 14,220 15,044 29,007 30,354 General expenses 5,832 6,282 11,720 12,324 - -------------------------------------------------------------------------------- Total costs and expenses 20,052 21,326 40,727 42,678 - -------------------------------------------------------------------------------- Operating income 1,230 1,375 1,534 2,731 Interest in loss of unconsolidated subsidiaries (57) --- (110) --- Interest income, net 157 194 341 370 - -------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 1,330 1,569 1,765 3,101 Provision for income taxes 558 621 763 1,223 Minority interest 22 (11) 26 (16) - -------------------------------------------------------------------------------- Net income $ 750 $ 959 $ 976 $ 1,894 ================================================================================ Net income per common share $ 0.15 $ 0.20 $ 0.20 $ 0.39 ================================================================================ Shares used in per share calculation 4,996 4,871 4,958 4,837 ================================================================================ 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, 1996 1995 OPERATING ACTIVITIES Net income $ 976 $1,894 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,267 1,236 Net increase in current assets (7,560) (1,215) Net increase in current liabilities 4,009 158 Other increase 346 153 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (962) 2,226 - -------------------------------------------------------------------------------- INVESTING ACTIVITIES Net purchase of equipment (1,109) (1,043) - -------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,109) (1,043) - -------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from sale of common stock 58 -- Repurchase of common stock (159) -- Principal payments on capital lease obligations (40) -- - -------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (141) -- - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,212) 1,183 Cash and cash equivalents at beginning of period 19,012 12,648 - -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,800 $13,831 ================================================================================ 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, 1996 NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared without audit by Harding Lawson Associates Group, Inc., formerly Harding Associates, 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, 1996. Reclassification of certain balances for the fiscal year ended May 31, 1996 have been made to conform to the November 30, 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, lawsuits were 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 suits sought 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. 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. 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 cost controls and reductions, the expected resolution of delays in billing of certain projects, the possible impact of current and future claims against the Company based upon negligence and other theories of liability, the anticipation that capital expenditures will be approximately the same as in fiscal 1996, 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 Mos Ended Six Mos Ended (Decrease) November 30, November 30, November 30, Three Mos Six Mos 1996 1996 1996 1995 1996 1995 vs 1995 vs 1995 ---- ---- ---- ---- --------- ------- Net revenue 100.0% 100.0% 100.0% 100.0% (6.3%) (6.9%) Costs and expenses Payroll and benefits 66.8 66.3 68.7 66.9 (5.5) (4.4) General expenses 27.4 27.7 27.7 27.1 (7.1) (4.9) Operating income/margin 5.8 6.0 3.6 6.0 (10.5) (43.8) Interest income, net and interest in loss of uncon- solidated subsidiaries .4 .9 .6 .8 (48.5) (37.6) Income before income taxes and minority interest 6.2 6.9 4.2 6.8 (15.2) (43.1) Provision for income taxes and minority interest 2.7 2.7 1.9 2.7 (4.9) (34.6) Net income 3.5 4.2 2.3 4.1 (21.8) (48.5) Second Quarter Comparison for Fiscal Years 1997 and 1996 - -------------------------------------------------------- Net revenue for the fiscal quarter ended November 30, 1996 totaled $21,282, a decrease of 6.3 percent from net revenue of $22,701 for the second quarter of the prior fiscal year. The decline in net revenue for the quarter ended November 30, 1996 was primarily due to a 29 percent decline in net revenue from federal contracts, partially offset by a 49 percent increase in net revenue from international operations. Sales of services to all public sector clients decreased by approximately 18 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 48 percent in the prior year. Net revenue from domestic industrial sector clients, while virtually unchanged from the prior fiscal quarter, was 5 percent lower than in the second quarter of the prior fiscal year. Excluding international, the decrease in net revenue was due to lower demand for the Company's services while prices were essentially unchanged compared to the same period in the prior fiscal year. International net revenue for the fiscal quarter ended November 30, 1996 was $1,700 or 8 percent of total net revenue compared to $1,138 or 5 percent of total net revenue in the same quarter of the prior fiscal year. A significant portion of the services provided by the Company to its public sector clients are performed under a relatively small number of larger contracts compared to private sector clients. During fiscal 1997, certain of these public sector contracts will be substantially completed. The Company has been awarded certain contracts that could potentially offset revenue which has and will be lost under nearly completed contracts. However, if the Company is unsuccessful in realizing the full potential of these contracts or winning new contracts, or if funding delays are experienced on these or previously awarded federal contracts, a material decline in revenue could result. Further, management believes that the outlook for the industrial sector is uncertain and will continue to be strongly influenced by general economic conditions and any congressional action on pending environmental regulations. Operating income amounted to $1,230, a decrease of 10.5 percent from $1,375 for the same period in fiscal 1996. Operating margin decreased to 5.8 percent of net revenue in the current quarter compared to 6.0 percent in the second quarter of fiscal 1996. While the Company continued to lower its operating costs, such reductions were not sufficient to offset the effect of lower net revenue discussed above. Management is continuing efforts to better align the Company's cost structure with current revenue levels. Net interest income for the second quarter ended November 30, 1996 was $157, a decrease of $37 or 19 percent from the same quarter in the previous year. Net interest income is lower due to interest expense on capital leases in our Australian subsidiary and a reduction in interest rates on our invested cash. At the end of the prior fiscal year, the Company invested in the start-up of a limited liability company, Integrated Software Systems, which specializes in software for the mining industry. In addition, the Company has invested in the start-up of another limited liability company, Standards Training Corporation, in the second fiscal quarter. The Company's minority position in both entities is accounted for using the equity method. The Company's portion of the second quarter loss for these investments was $57. The effective tax rate was 41.9 percent for the second quarter of fiscal 1997 and was 39.6 percent in the second quarter of the prior year. 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 quarter was $750 compared with $959 in the second quarter of fiscal 1996, a decrease of 21.8 percent. Earnings per share were $0.15 on 4,996,000 weighted average shares outstanding compared to $0.20 per share on 4,871,000 weighted average shares outstanding in the same period last year. Six Month Comparison for Fiscal Years 1997 and 1996 - --------------------------------------------------- Net revenue for the six months ended November 30, 1996 amounted to $42,261 a decrease of 6.9 percent from net revenue of $45,409 for the six months ended November 30, 1995. The decrease in net revenue was due primarily to lower federal agency work and a 4 percent decline in commercial sales compared to the six months ended November 30, 1995, partially offset by higher international sales. Domestically the Company experienced lower demand for its services with virtually no change in pricing for those services. Operating income amounted to $1,534 a decrease of 43.8 percent from operating income of $2,731 for the first six months of the prior year. The operating margin decreased to 3.6 percent from 6.0 percent a year ago. The Company continued to lower its operating expenses, but the reductions were not sufficient to offset the effect of lower revenue discussed above. Net interest income for the six months ended November 30, 1996 was $341, a decrease of 8 percent from net interest income of $370 for the second quarter of the prior fiscal year. The decrease was due to interest expense on capital leases in our Australian operations and a decline in interest rates offset by an increase in invested cash. The effective tax rate for the six months ended November 30, 1996 was 43.2 percent and for the six months ended November 30, 1995 was 39.4. 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 $976, down from net income of $1,894 for the six month period in the prior year, a decrease of 48.5 percent. Earnings per share were $0.20 on 4,958,000 weighted average shares outstanding compared to $0.39 on 4,837,000 weighted average shares outstanding in the first six month period of the prior year. Liquidity and Capital Resources - ------------------------------- For the six months ended November 30, 1996, net cash used in operations was $962 compared to net cash provided by operations of $2,226 for the same period last year. The increase in cash used in operations was primarily due to an increase in the Company's receivables, partially offset by an increase in trade payables in the current fiscal year. The increase in trade receivables was primarily due to delays in billing certain remedial construction projects in the second quarter of fiscal 1996 resulting in delays in collection of the billed fees. Such delays are expected to be resolved in the Company's third quarter. The Company made capital expenditures of $1,109 in the first six months of fiscal 1997 compared to capital expenditures of $1,043 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 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 or 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 is provided 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 general liability insurance policy with an unrelated, rated carrier. At November 30, 1996, the Company had cash on hand and cash equivalents of $16,800. The Company has a $20 million revolving credit line agreement which expires in October 1997. At November 30, 1996 and 1995, 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 5.6 percent at November 30, 1996, and 5.4 percent at May 31, 1996. The Company is in compliance with all covenants pertaining to the credit line agreement. 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 23,500 shares for $159 in the second fiscal quarter of 1997 under this program. No repurchases were made in the same period of the prior fiscal 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 October 30, 1996 and two proposals were presented to security holders for a vote; election of two directors and ratification of independent auditors. The seven-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 1996 annual meeting was Class III, consisting of two incumbent directors: Richard S. Harding and Donald L. Schreuder. The terms for Class I Directors, Retired Rear Admiral Stuart F. Platt, Barton W. Shackelford, and Donald K. Stager expire in 1997, and the terms for Class II Directors, Richard D. Puntillo and James M. Edgar expire in 1998. The following table lists the votes cast: For Withheld Proposal 1 Election of Directors Richard S. Harding 3,909,188 106,920 Donald L. Schreuder 3,906,167 109,941 For Against Abstain Proposal 2 Ratification of Ernst & Young, LLP Independent Auditors 3,986,873 23,825 5,410 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, 1996: 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 10, 1997 /s/ Donald L. Schreuder ----------------------- Donald L. Schreuder President and Chief Executive Officer (Principal Executive Officer) Date: January 10, 1997 /s/ Gregory A. Thornton ----------------------- Gregory A. Thornton Vice President and Chief Financial Officer (Principal Accounting Officer) HARDING LAWSON ASSOCIATES GROUP, INC. EXHIBIT INDEX Exhibit No. 11 Computation of Per Share Earnings 27 Financial Data Schedule 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, 1996 1995 1996 1995 - -------------------------------------------------------------------------------- PRIMARY Average shares outstanding 4,980 4,845 4,933 4,803 Net effect of dilutive stock options based on the modified treasury stock method using the average market price 16 26 25 34 - -------------------------------------------------------------------------------- TOTAL 4,996 4,871 4,958 4,837 ================================================================================ Net income $ 750 $ 959 $ 976 $1,894 ================================================================================ Net income per share $ 0.15 $ 0.20 $ 0.20 $ 0.39 ================================================================================ EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 6-MOS MAY-31-1997 JUN-01-1996 NOV-30-1996 16800 0 36145 1397 0 54656 21784 17380 65804 17120 0 0 0 50 45852 65804 0 63230 0 20969 40727 0 26 1765 763 976 0 0 0 976 0.20 0.20
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