-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JUVwNr3CKlKiARgYLoJr1RVmuxqJ1NCUJflo8xfC47aA4HHatyMgl6jAEVc/VyYH dujdHC4KX4d9a0GCiV3Xfw== 0000819977-95-000006.txt : 19950530 0000819977-95-000006.hdr.sgml : 19950530 ACCESSION NUMBER: 0000819977-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCON CENTRAL INDEX KEY: 0000819977 STANDARD INDUSTRIAL CLASSIFICATION: 8711 IRS NUMBER: 941738964 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16225 FILM NUMBER: 95537532 BUSINESS ADDRESS: STREET 1: 400 S EL CAMINO REAL STE 1200 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 4153751522 MAIL ADDRESS: STREET 1: P O BOX 349014 CITY: SACRAMENTO STATE: CA ZIP: 95834-9014 FORMER COMPANY: FORMER CONFORMED NAME: EMCON ASSOCIATES /CA/ DATE OF NAME CHANGE: 19910611 10-Q 1 1995 1ST QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission file number March 31, 1995 0-16225 EMCON ------------------------------------------------------ (Exact name of Registrant as specified in its charter) California 94-1738964 - - - - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 South El Camino Real, Suite 1200 San Mateo, California 94402 - - - - ------------------------------------ --------------- (Zip Code) (415) 375-1522 ----------------------------- Registrant's telephone number, including area code Indicate by check mark whether the Registrant (1) has filed all reports required to be filed 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 --- --- 8,245,126 shares of Common Stock Issued and Outstanding as of May 3, 1995. 1 EMCON FORM 10-Q QUARTERLY REPORT TABLE OF CONTENTS Page FACING SHEET..................................................................1 TABLE OF CONTENTS.............................................................2 PART I Financial Information ITEM 1 Financial Statements Consolidated Balance Sheets - March 31, 1995 and December 31, 1994........................3 Consolidated Statements of Income - Three months ended March 31, 1995 and 1994..................4 Consolidated Statements of Cash Flows - Three months ended March 31, 1995 and 1994..................5 Notes to Consolidated Financial Statements..................6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations................8 PART II Other Information............................................9 SIGNATURES ..................................................................10 INDEX TO EXHIBITS............................................................11 2 EMCON CONSOLIDATED BALANCE SHEETS
- - - - ------------------------------------------------------------------------------- March 31, December 31, 1995 1994 (In thousands, except share amounts) (Unaudited) (Audited) - - - - -------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents ......................... $ 2,584 $ 5,152 Marketable securities ............................. 1,975 2,436 Accounts receivable, net of allowance for doubtful accounts of $1,063 and $975 at March 31, 1995 and December 31, 1994, respectively .................................... 37,264 38,323 Prepaid expenses and other current assets ......... 4,281 3,253 -------- -------- Total Current Assets ......................... 46,104 49,164 Net property and equipment, at cost ............... 18,239 18,651 Intangible assets, net of amortization ............ 9,019 9,202 Other assets ...................................... 3,736 3,810 -------- -------- Total Assets ................................. $77,098 $80,827 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable .................................. $ 5,282 $ 8,846 Accrued payroll and related benefits .............. 4,751 5,580 Other accrued liabilities ......................... 2,043 1,908 Non-current obligations due within one year ....... 248 248 -------- -------- Total Current Liabilities .................... 12,324 16,582 Non-current obligations ........................... 1,116 1,186 Commitments and contingencies ..................... -- -- Shareholders' Equity: Preferred stock, no par value, 5,000,000 shares authorized; no shares issued or outstanding ..... -- -- Common stock, no par value, 15,000,000 shares authorized; 8,245,126 and 8,186,279 shares issued and outstanding at March 31, 1995 and December 31, 1994, respectively ................. 41,147 40,958 Retained earnings ................................. 22,529 22,132 Unrealized gains/(losses) on marketable securities. (18) (31) -------- -------- Total Shareholders' Equity ...................... 63,658 63,059 -------- -------- Total Liabilities and Shareholders' Equity ...... $77,098 $80,827 ======== ========
See accompanying notes 3 EMCON CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
- - - - -------------------------------------------------------------------------------- Three months ended March 31, ------------------ (In thousands, except per share amounts) 1995 1994 - - - - -------------------------------------------------------------------------------- Gross revenue ........................................ $30,369 $21,712 Outside services, at cost ............................ 4,093 2,970 -------- ------- Net revenue ........................................ 26,276 18,742 Costs and expenses: Direct expenses .................................... 9,986 7,070 Indirect expenses .................................. 15,762 11,523 -------- ------- Income from operations 528 149 Interest income, net ................................. 59 112 Equity in loss of affiliate .......................... (20) -- -------- ------- Income before provision for income taxes.............. 567 261 Provision for income taxes ........................... 170 73 -------- ------- Net income ........................................... $ 397 $ 188 ======== ======= Income per share ..................................... $ 0.05 $ 0.03 ======== =======
See accompanying notes 4 EMCON CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- - - - -------------------------------------------------------------------------------- Three months ended March 31, Increase (decrease) in cash and cash equivalents ------------------- (in thousands) 1995 1994 - - - - -------------------------------------------------------------------------------- Cash flow from operating activities: Net income .............................................. $ 397 $ 188 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization ......................... 1,361 893 Loss on sale/disposal of property and equipment ....... 29 18 Increase in salary continuation plan .................. 21 25 Changes in operating assets and liabilities: Accounts receivable ................................ 1,059 2,172 Prepaid expenses and other current assets .......... (1,028) (892) Other assets ....................................... 82 22 Accounts payable ................................... (3,564) (1,320) Accrued payroll and related benefits ............... (829) (677) Other accrued liabilities .......................... 135 (186) - - - - -------------------------------------------------------------------------------- Net cash provided by (used for) operating activities . (2,337) 243 - - - - -------------------------------------------------------------------------------- Cash flow from investing activities: Additions to property and equipment ..................... (844) (1,654) Purchases of available for sale securities .............. (25) (1,001) Maturities of available for sale securities ............. 499 2,000 Proceeds from sale of property and equipment ............ 20 59 - - - - -------------------------------------------------------------------------------- Net cash used for investing activities ................ (350) (596) - - - - -------------------------------------------------------------------------------- Cash flow from financing activities: Payment of current and noncurrent obligations ........... (70) 31 Issuance of common stock for cash ....................... 189 314 Repurchase of common stock .............................. -- (356) - - - - -------------------------------------------------------------------------------- Net cash provided by (used for) financing activities .. 119 (11) - - - - -------------------------------------------------------------------------------- Decrease in cash and cash equivalents ..................... (2,568) (364) Cash and cash equivalents, beginning of year .............. 5,152 10,578 - - - - -------------------------------------------------------------------------------- Cash and cash equivalents, end of period .................. $ 2,584 $10,214 - - - - --------------------------------------------------------------------------------
See accompanying notes 5 EMCON NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after elimination of all significant intercompany accounts and transactions. While the financial information is unaudited, the statements in this report reflect all adjustments, which are normal and recurring, that are necessary for a fair presentation of the results of operations for the interim periods covered and of the financial condition of the Company at the dates of the balance sheets. The operating results for the interim periods presented are not necessarily indicative of performance for the entire year. These financial statements and notes should be read in conjunction with the Company's consolidated financial statements for the fiscal year ended December 31, 1994. 2. Restructuring Charges In December 1994, as a result of changes in senior management, the Company's Board of Directors approved a corporate restructuring plan which included the write off of employment contracts with no current or future value, termination of personnel, and the elimination or abandonment of excess and underperforming assets and facilities. During the quarter ended March 31, 1995, $358,000 of cash charges related to the restructuring were incurred and charged against the established reserve. At March 31, 1995, $431,000 of accrued restructuring costs were included in other accrued liabilities. To-date, $750,000 of restructuring charges have been incurred. 3. Effective April 1, 1994, the Company acquired all of the capital stock of Wehran Envirotech, Inc. ("Wehran"), an environmental consulting company headquartered in Middletown, New York. The following summarizes the unaudited pro forma net revenue, net income, and income per share for the combined company for the three month period ended March 31, 1994, had the acquisition occurred at the beginning of the period presented. 6 Three months ended March 31, 1994 (Unaudited) (in thousands) - - - - -------------------------------------------------------------------------------- Net revenue ................................................... $23,510 Net loss ................................................... (967) Loss per share ................................................... $ (0.11) - - - - -------------------------------------------------------------------------------- The above proforma results of operations do not purport to reflect the actual results of operations had the Company actually acquired Wehran as of the beginning of the period presented. 4. Litigation As a professional services firm engaged in environmental-related matters, the Company encounters potential liability, including claims for significant environmental damage in the normal course of business. The Company is party to lawsuits and is aware of potential exposure related to certain claims, but in the opinion of management the resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows. 5. Income Per Share Income per share is based on the weighted average number of common and dilutive common - equivalent shares outstanding using the modified treasury stock method for the three months ended March 31, 1995 and 1994. 6. Other In 1994, the Company converted to a fifty-two/fifty-three week fiscal year which will result in a fifty-two week year in 1995. The Company's year end falls on the Friday closest to the last day of the calendar year. The Company also follows a five-four-four week quarterly cycle. For convenience, the accompanying financial statements have been shown as ending on the last day of the calendar period. 7 EMCON ITEM 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations. RESULTS OF OPERATIONS Net revenue for the first quarter of 1995 totalled $26,276,000, a 40.2% increase compared with $18,742,000 for the first quarter of 1994. The increase in net revenue is primarily due to the acquisition of Wehran in April, 1994 (Wehran contributed net revenue of $5,471,000 in the quarter ended March 31, 1995) and, to a lesser extent, the sale of certain proprietary technology and an increase in revenues of the Company's laboratory division, as a result of its new facilities in Florida and Southern California. Direct expenses for the quarter ended March 31, 1995, were $9,986,000, which includes compensation for billable hours for technical and professional staff and other project related costs charged to the client, compared with $7,070,000 in the same quarter of 1994. The increase in direct expenses is primarily due to the acquisition of Wehran in April, 1994 (Wehran incurred direct expenses of $1,980,000 in the quarter ended March 31, 1995) and to a lesser extent the growth of its laboratory facilities in Florida and Southern California. Direct expenses as a percent of net revenue in 1995 remained relatively unchanged from the same quarter of 1994. Indirect expenses for the quarter ended March 31, 1995, were $15,762,000, compared to $11,523,000 in the first quarter of 1994. Indirect expenses include non-billable hours for professional and technical staff, and general and administrative expenses such as rent, bonuses, benefits, insurance, legal and depreciation. Indirect expenses, as a percent of net revenue in the first quarter of 1995 and 1994, were 60.0% and 61.5%, respectively. The improvement was principally due to cost containment and restructuring measures put in place during the fourth quarter of 1994. Income from operations increased to $528,000 in the quarter ended March 31, 1995 from $149,000 in the same quarter of 1994. Income from operations in the first quarter of 1995 included approximately $250,000 directly attributable to the sale of proprietary technology. Interest income, net of interest expense, was $59,000 for the first quarter in 1995, versus $112,000 in the comparable 1994 quarter due to a decrease in average invested cash during the period. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of 1995, the Company financed its operations principally from cash and marketable securities on hand, cash generated by operations, and from the return on investment on its cash, cash equivalents and marketable securities. Net cash used by operations during the first quarter of 1995 was $2,337,000. The Company at March 31, 1995 had cash, cash equivalents, and marketable securities of $4,559,000. The Company invested $844,000 for the purchase of property and equipment in the first quarter of 1995, primarily for computers and communication systems and to a lesser extent, for laboratory equipment. The Company believes that cash generated from operations and its available bank line, together with existing cash and marketable securities, will be sufficient to meet the Company's capital needs for at least the next twelve months. 8 EMCON PART II OTHER INFORMATION Items 1. - 4. Not applicable. Item 5. Other Information In February 1995, Mr. Donald R. Kerstetter was appointed to the Board of Directors to fill the vacancy created by the expansion of the variable board to nine directors. Item 6. Exhibits and Reports (a) Exhibits - See Index to Exhibits on Page 11. (b) Reports on Form 8-K - No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended March 31, 1995. 9 EMCON 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. Date: May 9, 1995 EMCON R. Michael Momboisse -------------------------------- R. MICHAEL MOMBOISSE Chief Financial Officer and Vice President - Legal (Duly authorized and principal financial and accounting officer) 10 EMCON INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Page - - - - ------ ------------ 2.1 Agreement and Plan of Reorganization dated effective April * 1, 1994, among Wehran Envirotech, Inc., Registrant and certain other related parties, incorporated by reference from Exhibit 2.1 of the Current Report on Form 8-K dated May 26, 1994. 2.2 Certificate of Ownership reflecting the merger of * Registrant's wholly-owned subsidiary, Wehran/Emcon Northeast, Inc. into Registrant effective December 20, 1994, incorporated by reference from Exhibit 2.2 of the 1994 10-K. 2.3 Certificate of Ownership reflecting the merger of * Registrant's wholly-owned subsidiary, Wehran Engineering Corporation, into Registrant effective December 23, 1994, incorporated by reference from Exhibit 2.3 of the 1994 10-K. 2.4 Certificate of Ownership reflecting the merger of * Registrant's wholly-owned subsidiary, EA Associates, into Registrant effective December 31, 1994, incorporated by reference from Exhibit 2.4 of the 1994 10-K. 2.5 Certificate of Ownership reflecting the merger of * Registrant's wholly-owned subsidiaries, EMCON Northwest, Inc., EMCON Southeast, Inc., EMCON Baker-Shiflett, Inc., and Eldredge Engineering Associates, Inc., into Registrant effective December 31, 1994, incorporated by reference from Exhibit 2.5 of the 1994 10-K. 10.1 Standard Commercial Lease dated August 1, 1985, between * Archer Business Complex and Registrant (the "ABC Lease"), incorporated by reference from Exhibit 10.5 of the Registrant's Registration Statement on Form S-1 (File No. 33-16337) effective September 16, 1987 (the "Form S-1 Registration Statement"). 10.2 Amendment to the ABC Lease between Archer Business Complex * and Registrant dated September 30, 1992, incorporated by reference from Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (the "1992 10-K"). 11 EMCON (Index to Exhibit Continued) Sequentially Exhibit Numbered Number Page - - - - ------ ------------ 10.3 Second and Third Amendments to the ABC Lease between * Archer Business Complex and Registrant dated October 4, 1993 and January 1, 1994, respectively, incorporated by reference from Exhibit 10.2 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "1993 10-K"). 10.4 Standard Commercial Lease dated August 1, 1986, between * the Royal Partnership and Sweet-Edwards & Associates, Inc. (since merged into the Registrant) incorporated by reference from Exhibit 10.9 of the Form S-1 Registration Statement. 10.5 EMCON 1986 Incentive Stock Option Plan and Amendment, *(1) incorporated by reference from Exhibit 10.15 of the Form S-1 Registration Statement. 10.6 Form of Agreement pursuant to Salary Continuation Plan, *(1) incorporated by reference from Exhibit 10.17 of the Form S-1 Registration Statement. 10.7 Schedule identifying Agreements pursuant to Salary *(1) Continuation Plan between Registrant and certain employees incorporated by reference from Exhibit 10.7 of the 1994 10-K. 10.8 Form of Indemnity Agreement between the Registrant and * each of the Registrant's officers and directors, incorporated by reference from Exhibit 10.20 of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 (the "1988 10-K"). 10.9 EMCON 1988 Stock Option Plan, amended by shareholder *(1) approval on May 25, 1994, including form of Nonqualified Stock Option Agreement (Outside Directors), incorporated by reference from Exhibit 10.9 of Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994 (the "June 30, 1994 10-Q"). 10.10 EMCON Employee Stock Purchase Plan incorporated by *(1) reference from Exhibit 10.25 of the 1989 10-K. 12 EMCON (Index to Exhibit Continued) Sequentially Exhibit Numbered Number Page - - - - ------ ------------ 10.11 EMCON Restricted Stock Plan incorporated by reference from *(1) Exhibit 10.15 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1990. 10.12 EMCON Deferred Compensation Plan effective January 1, 1994 *(1) incorporated by reference from Exhibit 10.12 of the 1993 10-K. 10.13 Trust Agreement for the EMCON Deferred Compensation Plan *(1) and Salary Continuation Plan Trust dated February 29, 1994 between Registrant and Wells Fargo Bank, N.A. incorporated by reference from Exhibit 10.13 of the 1993 10-K. 10.14 Credit Agreement between The Bank of California, N.A. and * Registrant dated September 20, 1991 with Amendment dated May 31, 1992 incorporated by reference from Exhibits 10.11 and 10.12 of the 1992 10-K. 10.15 Second Amendment to Credit Agreement between The Bank of * California, N.A. and Registrant dated effective May 31, 1992 incorporated by reference from Exhibit 10.13 of Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1993. 10.16 Third Amendment to Credit Agreement between The Bank of * California, N.A. and Registrant dated effective June 2, 1994, incorporated by reference from Exhibit 10.16 of the June 30, 1994 10-Q. 10.17 Letter Agreement between Thorley D. Briggs and Registrant *(1) dated September 15, 1993 incorporated by reference from Exhibit 10.18 of Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (the "September 30, 1993 10-Q"). 10.18 Letter of Agreement between H. Lee Fortier and Registrant *(1) dated March 14, 1994 incorporated by reference from Exhibit 10.21 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994. 10.19 Letter of Agreement between James M. Felker and Registrant *(1) dated December 7, 1992, incorporated by reference from Exhibit 10.16 of the 1992 10-K. 13 EMCON (Index to Exhibit Continued) Sequentially Exhibit Numbered Number Page - - - - ------ ------------ 10.20 Letter Agreement between Thorley D. Briggs and Registrant *(1) dated July 19, 1994, incorporated by reference from Exhibit 10.20 of the 1994 10-K. 10.21 Letter Agreement between James M. Felker and Registrant *(1) dated October 31, 1994, incorporated by reference from Exhibit 10.21 of the 1994 10-K. 11.1 Computation of Income Per Share. Incorporated as part of 15 this submission as document type Ex-11.1. - - - - ------------ * Incorporated by reference (1) Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of the instructions to Form 10-K. 14 EX-11.1 2 COMPUTATION OF INCOME PER SHARE EXHIBIT 11.1 EMCON COMPUTATION OF INCOME PER SHARE (In thousands except per share data) Three months ended March 31, 1995 1994 ---------------- Net income ................................................ $ 397 $ 188 Proforma interest income related to modified treasury stock method ................................... 63 21 ------ ----- Adjusted net income ....................................... $ 460 $ 209 ====== ====== Weighted average number of common shares outstanding during the period ............................. 8,225 7,302 Common equivalent shares from outstanding stock options using the modified treasury stock method .................................................. 672 509 Incremental shares to reflect full dilution (1) ......... 0 0 ------ ------ Total shares for purposes of calculating diluted income per share (1) ...................................... 8,897 7,811 ====== ====== Primary income per share .................................. $ 0.05 $ 0.03 ====== ====== Fully diluted income per share ............................ $ 0.05 $ 0.03 ====== ====== - - - - ----------------------- (1) This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although not required by footnote 2 to paragraph 14 to APB opinion No. 15, because it results in dilution of less than 3%. 15 -----END PRIVACY-ENHANCED MESSAGE-----