-----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, FeI+2qFiRTv1VJTnBlIPogn9BYRE8LIuqEC7j3oBrHPHFbsDgz78+r82+4cr6tQs zygRZF28LtvmWuEGnVUP5A== 0000818968-97-000012.txt : 19971015 0000818968-97-000012.hdr.sgml : 19971015 ACCESSION NUMBER: 0000818968-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971014 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: 97694807 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 August 31, 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 October 3, 1997 the registrant had issued and outstanding an aggregate of 4,970,167 shares of its common stock. INDEX HARDING LAWSON ASSOCIATES GROUP, INC. Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - August 31, 1997 (Unaudited) and May 31, 1997........................3 Condensed Consolidated Statements of Income - Three Months Ended August 31, 1997 and August 31, 1996 (Unaudited).....................................4 Condensed Consolidated Statements of Cash Flows - Three Months Ended August 31, 1997 and August 31, 1996 (Unaudited).........................................5 Notes to Condensed Consolidated Financial Statements August 31, 1997 (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 INDEX TO EXHIBITS ............................................................12 -2- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) August 31, 1997 May 31, 1997 - ------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $23,066 $24,464 Accounts receivable 22,457 22,911 Unbilled work in progress 6,452 6,221 Less allowances for receivables and unbilled work (1,408) (1,387) Prepaid expenses 1,386 1,073 Deferred income taxes 2,859 2,691 - ---------------------------------------------------------------------------------------------------------- Total current assets 54,812 55,973 - ---------------------------------------------------------------------------------------------------------- Equipment 21,870 21,701 Less accumulated depreciation (17,762) (17,299) - ----------------------------------------------------------------------------------------------------------- Net equipment 4,108 4,402 - ---------------------------------------------------------------------------------------------------------- Deposits and other assets 6,262 5,980 - ---------------------------------------------------------------------------------------------------------- Total assets $65,182 $66,355 ========================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,981 $ 4,538 Accrued expenses 4,352 4,845 Accrued compensation 5,273 6,632 Income taxes payable 1,538 1,962 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 15,144 17,977 - ---------------------------------------------------------------------------------------------------------- Other liabilities 1,524 1,453 - ---------------------------------------------------------------------------------------------------------- Total liabilities 16,668 19,430 - ---------------------------------------------------------------------------------------------------------- Commitments and Contingencies Minority interest in subsidiaries 299 323 - ---------------------------------------------------------------------------------------------------------- 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--4,970,167 and 4,864,503 at August 31, 1997 and May 31, 1997, respectively 50 49 Additional paid-in capital 18,674 17,982 Retained earnings 29,491 28,571 - ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 48,215 46,602 - ---------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $65,182 $66,355 ==========================================================================================================
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 August 31, 1997 1996 -------------------------------- Gross revenue $31,818 $30,944 Less: Cost of outside services 10,137 9,965 - ---------------------------------------------------------------------------------------------------------- Net revenue 21,681 20,979 - ---------------------------------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 14,592 14,787 General expenses 5,762 5,888 - ---------------------------------------------------------------------------------------------------------- Total costs and expenses 20,354 20,675 - ---------------------------------------------------------------------------------------------------------- Operating income 1,327 304 Interest in loss of unconsolidated subsidiaries (50) (53) Interest income, net 264 184 - ---------------------------------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 1,541 435 Provision for income taxes 645 205 Minority interest (24) 4 - ---------------------------------------------------------------------------------------------------------- Net income $ 920 $ 226 ========================================================================================================== Net income per common share $ 0.19 $ 0.05 ========================================================================================================== Shares used in per share calculation 4,928 4,920 ==========================================================================================================
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) Three Months Ended August 31, 1997 1996 ------------------------------- OPERATING ACTIVITIES Net income $ 920 $ 226 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 625 624 Net increase in current assets (237) (6,486) Net increase (decrease) in current liabilities (2,105) 3,054 Other, net (110) 294 - ---------------------------------------------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (907) (2,288) - ----------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of equipment, net (251) (649) Investment in acquisition (197) -- - ---------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (448) (649) - ----------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from sale of stock 37 58 Repurchase of common stock (80) -- - ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (43) 58 - ---------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,398) (2,879) Cash and cash equivalents at beginning of period 24,464 19,012 - ---------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $23,066 $16,133 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. -5- HARDING LAWSON ASSOCIATES GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) August 31, 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 for the fiscal year ended May 31, 1997. Reclassification of certain balances for the fiscal year ended May 31, 1997 have been made to conform to the August 31, 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 fully diluted earnings per share is not expected to be material. -6- 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's 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 revenues, and (ii) the percentage increase (decrease) in dollar amount of such items from year to year.
Percentage of Net Revenue For Three Months Percentage Ended August 31, Increase/(Decrease) Three Months 1997 1996 1997 vs. 1996 ---- ---- ------------- Net revenue 100% 100.0% 3.3% Costs and expenses Payroll and benefits 67.3 70.4 1.3 General expenses 26.6 28.1 (2.1) Operating income/margin 6.1 1.5 336.0 Interest income, net, and interest in loss of unconsolidated subsidiaries 1.0 0.6 62.6 Income before income taxes and minority interest 7.1 2.1 254.0 Provision for income taxes 3.0 1.0 214.0 Net income 4.1 1.1 306.8
First Quarter Comparison for Fiscal Years 1998 and 1997 - ------------------------------------------------------- Net revenue for the fiscal quarter ended August 31, 1997 totaled $21,681, an increase of 3.3 percent from net revenue of $20,979 for the first quarter of the prior fiscal year. The increase in net revenue for the quarter ended August 31, 1997 was primarily due to a 13 percent increase in public sector net revenue, partially offset by a seven percent decline in net revenue from domestic industrial clients and an 18 percent decline in international net revenue. The increase in public sector net revenue was due to a 46 percent increase in state and local net revenue partially offset by a seven percent decline in federal net revenue. Excluding international, the increase in net revenue was due to higher prices for the Company's services while demand was essentially unchanged compared to the same period in the prior fiscal year. International net revenue for the fiscal quarter ended August 31, 1997 was $1,314 or six percent of total net revenue compared to $1,607 or eight percent of total net revenue in the same quarter of the prior fiscal year. Operating income for the first quarter of fiscal 1998 was $1,327, an increase of 336 percent from $304 for the same period in fiscal 1997. Operating margin increased to 6.1 percent of net revenue in the current quarter compared with 1.5 percent in the first quarter of fiscal 1997. The Company has reduced both its payroll and general expenses compared to the prior fiscal year. Payroll expenses as a percent of net revenue was lower due primarily to the utilization of variable and part-time staff. General expenses were two percent lower than the prior year primarily due to the lower staff levels. Interest income for the first quarter of fiscal 1998 was $269 before interest expense of $5 compared to interest income of $194 before interest expense of $10 for the first quarter of the prior fiscal year. Net interest income was higher primarily due to the Company's increased cash position that resulted in higher balances of invested cash. In fiscal 1997 the Company invested in the start-up of a limited liability company, Standards Training Corporation, that specializes in ISO 14000 training. The minority position in this entity is accounted for using the equity method. The Company elected to fund the venture in the first quarter of fiscal 1998 with an additional $50,000 which was expensed in the first quarter of fiscal 1998. The Company has determined that it will make no further investments under this joint venture arrangement. The effective tax rate was 41.9 percent for the first quarter of fiscal 1998 and was 47.2 percent in the first quarter of the prior year. The effective tax rate in fiscal 1998 reflects the impact of increased domestic earnings relative to the results of international operations compared to last fiscal year. Net income for the quarter was $920 compared with $226 in the first quarter of 1997, an increase of 307 percent. Earnings per share were $0.19 on 4,928,000 weighted average shares outstanding compared to $0.05 per share on 4,920,000 weighted average shares outstanding in the same period last year. Liquidity and Capital Resources - ------------------------------- For the three months ended August 31, 1997, net cash used in operations was $907 compared to net cash used in operations of $2,288 for the same period last year. The decrease in cash used in operations was primarily due to a reduction in days sales in the Company's receivables in the current fiscal year compared to a year ago. The Company made capital expenditures of $251 in the first three months of fiscal 1998 compared to capital expenditures of $649 in the first three 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 made in the prior fiscal year. The Company made a payment of $197 under the terms of an acquisition agreement related to an acquisition completed in fiscal 1994. At August 31, 1997, the Company had cash on hand and cash equivalents of $23,066. The Company has a $20 million revolving credit line agreement that expires in October 1997. At August 31, 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 5.7 percent at August 31, 1997 and at May 31, 1997. The Company has a commitment from its bank renewing the credit agreement for a two-year period under substantially the same terms as the current 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 for the purpose of funding the Company's various employee stock programs. The Company repurchased 10,500 shares during the quarter ended August 31, 1997 at a price of $7.63. There were no repurchases during the first quarter of 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 design or 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 maintains a $5 million per occurrence professional liability policy and a $5 million per occurrence contractor's pollution liability insurance policy through an unrelated, rated carrier. The Company also maintains a general liability insurance policy with an unrelated, rated carrier. 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 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 August 31, 1997: 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: 10-9-97 /s/ Donald L. Schreuder Donald L. Schreuder President and Chief Executive Officer (Principal Executive Officer) Date: 10-9-97 /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
HARDING LAWSON ASSOCIATES GROUP, INC. Computation of Per Share Earnings (In thousands, except per share data) (Unaudited) Three Months Ended August 31, 1997 1996 PRIMARY Average shares outstanding 4,887 4,892 Net effect of dilutive stock options based on the treasury stock method in fiscal 1998 and the modified treasury stock method using the average market price in fiscal 1998 41 28 - ---------------------------------------------------------------------------------------------------------- TOTAL 4,928 4,920 ========================================================================================================== Net income $ 920 $ 226 ========================================================================================================== Net income per share $ 0.19 $ 0.05 ==========================================================================================================
EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 3-MOS MAY-31-1998 JUN-01-1997 AUG-31-1997 23066 0 28909 1408 0 54812 21870 17762 65182 15144 0 0 0 50 48165 65182 0 31818 0 10137 20354 0 5 1541 645 920 0 0 0 920 0.19 0.19
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