-----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, RV+8bsY5c5yQShTmf7QEnhgvE/xJBawljDWBHbhOtPHM3lpNNuuOHITNI0prfvdZ AcNEq/Hc9ZwYY8t0aAFWVQ== 0000818968-98-000005.txt : 19980406 0000818968-98-000005.hdr.sgml : 19980406 ACCESSION NUMBER: 0000818968-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980403 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: 98587386 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 February 28, 1998 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 2, 1998 the registrant had issued and outstanding an aggregate of 4,986,690 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 28, 1998 (Unaudited) and May 31, 1997.................................................................3 Condensed Consolidated Statements of Income - Three and Nine Months Ended February 28, 1998 and February 28, 1997 (Unaudited)................................................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended February 28, 1998 and February 28, 1997 (Unaudited)...............................................5 Notes to Condensed Consolidated Financial Statements February 28, 1998 (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..................................11 SIGNATURES....................................................................12 EXHIBIT INDEX.................................................................13 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) February 28, 1998 May 31, 1997 - ------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $26,864 $24,464 Accounts receivable 21,208 22,911 Unbilled work in progress 3,843 6,221 Less allowances for receivables and unbilled work (1,356) (1,387) Prepaid expenses 1,211 1,073 Deferred income taxes 2,864 2,691 - ---------------------------------------------------------------------------------------------------------- Total current assets 54,634 55,973 - ---------------------------------------------------------------------------------------------------------- Equipment 23,604 21,701 Less accumulated depreciation (19,312) (17,299) - ----------------------------------------------------------------------------------------------------------- Net equipment 4,292 4,402 - ---------------------------------------------------------------------------------------------------------- Deposits and other assets 6,178 5,980 - ---------------------------------------------------------------------------------------------------------- Total assets $65,104 $66,355 ========================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $3,654 $4,538 Accrued expenses 4,528 4,845 Accrued compensation 5,229 6,632 Income taxes payable 561 1,962 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 13,972 17,977 Other liabilities 1,412 1,453 - ---------------------------------------------------------------------------------------------------------- Total liabilities 15,384 19,430 - ---------------------------------------------------------------------------------------------------------- Commitments and Contingencies Minority interest in subsidiaries 336 323 - ---------------------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock--$.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--4,986,193 and 4,864,503 at February 28,1998 and May 31, 1997, respectively 50 49 Additional paid-in capital 18,698 17,982 Retained earnings 30,636 28,571 - ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 49,384 46,602 - ---------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $65,104 $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 Nine Months Ended February 28, February 28, 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------- Gross revenue $28,040 $28,364 $93,486 $91,594 Less: Cost of outside services 8,959 8,844 31,444 29,813 - ---------------------------------------------------------------------------------------------------------- Net revenue 19,081 19,520 62,042 61,781 - ---------------------------------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 13,250 13,102 41,759 42,109 General expenses 5,629 5,605 17,489 17,325 - ---------------------------------------------------------------------------------------------------------- Total costs and expenses 18,879 18,707 59,248 59,434 - ---------------------------------------------------------------------------------------------------------- Operating income 202 813 2,794 2,347 Interest in loss of unconsolidated subsidiaries -- (180) (50) (290) Interest income, net 277 183 784 524 - ---------------------------------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 479 816 3,528 2,581 Provision for income taxes 168 370 1,450 1,133 Minority interest 57 (16) 13 10 - ---------------------------------------------------------------------------------------------------------- Net income $254 $462 $2,065 $1,438 ========================================================================================================== Basic and diluted earnings per common share $ .05 $ .09 $ .41 $ .29 ========================================================================================================= Shares used in basic per share calculation 4,986 4,942 5,016 4,938 ========================================================================================================== Shares used in diluted per share calculation 5,142 4,974 5,097 4,963 ==========================================================================================================
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) Nine Months Ended February 28, 1998 1997 - --------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $2,065 $1,438 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,899 1,920 Net (increase) decrease in current assets 3,738 (4,626) Net increase (decrease) in current liabilities (3,258) 1,974 Other (decrease) (249) (127) - ----------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,195 579 - ---------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Net purchase of equipment (1,738) (1,804) - ----------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,738) (1,804) - ----------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from sale of common stock 348 95 Repurchase of common stock (405) (577) - ----------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (57) (482) - ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,400 (1,707) Cash and cash equivalents at beginning of period 24,464 19,012 - ---------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $26,864 $17,305 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. HARDING LAWSON ASSOCIATES GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) February 28, 1998 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 February 28, 1998 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 28) was issued and is effective for the year ending May 31, 1998. The Company has changed its method for computing earnings per share for both the three months and nine months ended February 28, 1998, and restated the same periods in the prior year. The new method requires calculation of basic earnings per share excluding the dilutive effect of common stock equivalents such as stock options and warrants. The impact of this change was not material. 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 revenues, and (ii) the percentage increase (decrease) in dollar amount of such items from year to year.
Percentage of Net Revenue Percentage Three Months Ended Nine Months Ended Increase/(Decrease) February 28, February 28, February 28, Three Months Nine Months 1998 1997 1998 1997 1998 vs 1997 1998 vs 1997 ---- ---- ---- ---- ------------ ------------ Net revenue 100.0% 100.0% 100.0% 100.0% (2.3%) 0.4% Costs and expenses Payroll and benefits 69.4 67.1 67.3 68.2 1.1 (0.8) General expenses 29.5 28.7 28.2 28.0 0.4 0.9 Operating income/margin 1.1 4.2 4.5 3.8 (75.2) 19.0 Interest income, net and interest in loss of uncon- solidated subsidiaries 1.4 0.0 1.2 0.4 N/A 214.6 Income before income taxes and minority interest 2.5 4.2 5.7 4.2 (41.3) 36.7 Provision for income taxes and minority interest 1.2 1.8 2.4 1.9 (36.3) 28.0 Net income 1.3 2.4 3.3 2.3 (45.1) 43.6
Third Quarter Comparison for Fiscal Years 1998 and 1997 - ------------------------------------------------------- Net revenue for the fiscal quarter ended February 28, 1998 totaled $19,081, a decrease of 2.3% from net revenue of $19,520 for the third quarter of the prior fiscal year. The decline in net revenue was primarily due to a 21% decline from the public sector net revenue, and a 3% decline in net revenue from international operations, partially offset by a 13% increase in revenue from domestic industrial contracts. The decrease in public sector net revenue was reflected equally in both federal and state and local contracts. Overall, net revenue from public sector contracts accounted for 38% of total net revenue compared to 46% in the prior year. Net revenue from domestic industrial clients has increased over the previous quarter for each of the three quarters this fiscal year. The improvement in the industrial sector was primarily due to growth in environmental services outside the site restoration market. Domestically, net revenue declined in the third quarter due to lower demand for the Company's services, partially offset by higher prices compared to the same period in the prior year. Net revenue from international operations for the fiscal quarter ended February 28, 1998 was $1,266 or 7% of total net revenue compared to $1,323 or 7% in the prior fiscal year. Operating income was $202 in the third quarter of fiscal 1998, a decrease of 75% from $813 for the same period in fiscal 1997. Operating margin decreased to 1.1% of net revenue in the current quarter compared to 4.2% in the third quarter of fiscal 1997. The decrease in operating income and margin was primarily due to the lower net revenue discussed above, compounded by slightly higher payroll costs and general expenses. During the third quarter of the prior fiscal year the Company recorded losses of $180 from operations of two limited liability companies. The Company has since written off the remaining investment and as such no losses have been recognized in the third quarter of fiscal 1998. Net interest income for the third quarter ended February 28, 1998 rose by $94 compared to the prior year due primarily to a $8.7 million increase in the average cash balance compared to the third quarter of last year. The effective tax rate was 35% for the third quarter of fiscal 1998 and was 45% in the third quarter of fiscal 1997. The decrease in the tax rate was attributable to profits from the international operations for which the Company had prior year losses where no tax benefits had been recorded. Net income for the quarter was $254 compared with $462 in the third quarter of fiscal 1997, a decrease of 45%. Basic and diluted earnings per share were $0.05 on 4,986,000 and 5,142,000 weighted average shares outstanding, respectively compared to $0.09 per share on 4,942,000 and 4,974,000 weighted average shares outstanding, respectively in the same period last year. The increase in the weighted average diluted 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 Nine Month Comparison for Fiscal Years 1998 and 1997 - ---------------------------------------------------- Net revenue for the nine months ended February 28, 1998 was $62,042, slightly higher than for the nine months ended February 28, 1997 of $61,781. The increase in net revenue was due primarily to an increase in both public sector and industrial sales, partially offset by a decline in international sales. Domestically, the Company received higher prices for its services sufficient to offset lower demand. Net revenue from international operations was down 17% compared to the same nine months in the prior fiscal year. Operating income was $2,794, an increase of 19% from operating income of $2,347 for the nine months ended February 28, 1998. The operating margin increased to 4.5% from 3.8% a year ago. The improved operating income and margin was due primarily to lower payroll costs experienced earlier in the fiscal year compared to the prior year, and to a lesser extent, improved pricing for the Company's services. Interest in the loss of unconsolidated subsidiaries was $50 for the nine months ended February 28, 1998 compared to a loss of $290 in the same period of the prior fiscal year. The $50 represents the final write down of such investments, and the Company does not intend to make further investments in these companies. Net interest income for the nine months ended February 28, 1998 was $784, an increase of 50% from net interest income of $524 for the same period of the prior fiscal year. The increase was primarily due to a $7.4 million increase in the average cash balance compared to the prior year. The effective tax rate for the nine months ended February 28, 1998 was 41% and for the nine months ended February 28, 1997 was 44%. The effective tax rate in fiscal 1997 reflected the impact of losses from the start-up of certain international operations for which no tax benefit was realized. Net income for the nine months was $2,065, higher than net income of $1,438 for the nine month period in the prior year, an increase of 44 percent. Basic and diluted earnings per share were $0.41 on 5,016,000 and 5,097,000 weighted average shares outstanding, respectively compared to $0.29 on 4,938,000 and 4,963,000 weighted average shares outstanding, respectively in the first nine month period of the prior year. The increase in weighted average diluted 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. Liquidity and Capital Resources - ------------------------------- For the nine months ended February 28, 1998, net cash provided by operations was $4,195 compared to $579 for the first nine months of the prior year. The increase in cash provided by operations was primarily due to a decrease in the Company's receivables, partially 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 more focused management of billing and collections this fiscal year compared with the same period in the prior fiscal year. The Company made net capital expenditures of $1,738 in the first nine months of fiscal 1998 compared to net capital expenditures of $1,804 in the first nine 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 February 28, 1998 the Company had cash on hand and cash equivalents of $26,864. The Company has a $20 million revolving credit line agreement that expires in November 1999. At February 28, 1998 and 1997, 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 5.7% at February 28, 1998 and May 31, 1997. The Company is in compliance with all convenants 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 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 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 has repurchased 46,300 shares for $405 in the first nine months of fiscal 1998 under this program compared to 83,500 shares for $577 in the same period of 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 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 28, 1998: Exhibit No. 11 Computation of Per Share Earnings Exhibit No. 27 Financial Data Schedule (Electronic copy only) 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: April 3, 1998 /s/ Donald L. Schreuder ----------------------- Donald L. Schreuder President and Chief Executive Officer (Principal Executive Officer) Date: April 3, 1998 /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 Nine Months Ended February 28, February 28, 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------------------- Average basic shares outstanding 4,986 4,942 5,016 4,938 Net effect of dilutive stock options based on the treasury stock method. 156 32 81 25 - -------------------------------------------------------------------------------------------------------------- Average diluted shares outstanding 5,142 4,974 5,097 4,963 ============================================================================================================== Net income $ 254 $ 462 $2,065 $1,438 ============================================================================================================== Basic and diluted earnings per common share $ .05 $ .09 $ .41 $ .29 ==============================================================================================================
EX-27 3 FDS --
5 1000 9-MOS MAY-31-1998 JUN-01-1997 FEB-28-1998 26864 0 25051 1356 0 54634 23604 19312 65104 13972 0 0 0 50 49334 65104 0 93486 0 31444 59248 0 23 3528 1450 2065 0 0 0 2065 0.41 0.41
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