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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to_____________
Commission File No. 0-4643
ROY F. WESTON, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1501990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 WESTON WAY, WEST CHESTER, PENNSYLVANIA 19380-1499
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610)-701-3000
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
---- ----
As of September 30, 1996, the registrant
had outstanding 7,497,849 shares of Series A common stock and
2,111,634 shares of common stock.
<PAGE> 2
<TABLE>
<CAPTION>
Index Page
----- ----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 1-2
Consolidated Statements of Income (Loss) -
Three Months Ended September 30, 1996 and 1995 3
Consolidated Statements of Income (Loss) -
Nine Months Ended September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II - Other Information 10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
<PAGE> 3
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,709 $ 12,980
Marketable securities 10,372 2,813
Accounts receivable, trade, net of allowance for doubtful
accounts of $1,510 in 1996 and $1,800 in 1995 64,264 78,374
Unbilled costs and estimated earnings on contracts in process 19,032 17,935
Prepaid and refundable income taxes 2,153 1,369
Deferred income taxes 7,921 3,145
Other 2,399 2,602
------------ ------------
Total current assets 117,850 119,218
------------ ------------
PROPERTY AND EQUIPMENT
Land 215 215
Buildings and improvements 11,355 11,308
Furniture and equipment 58,565 58,348
Leasehold improvements 9,669 7,580
Construction in progress 33 1,842
------------ ------------
Total property and equipment 79,837 79,293
Less accumulated depreciation and amortization 67,611 58,777
------------ ------------
Property and equipment, net 12,226 20,516
------------ ------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $3,997 in
1996 and $1,203 in 1995 1,955 4,751
Deferred income taxes 1,691 1,491
Other 15,230 17,430
------------ ------------
Total other assets 18,876 23,672
------------ ------------
TOTAL ASSETS $ 148,952 $ 163,406
============ ============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE> 4
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,220 $ 2,261
Accounts payable and accrued expenses 12,312 12,444
Billing on contracts in process in excess of costs and
estimated earnings 14,221 15,346
Employee compensation, benefits and payroll taxes 14,735 11,348
Income taxes payable 294 208
Other 15,811 9,736
------------ -----------
Total current liabilities 59,593 51,343
------------ -----------
LONG TERM DEBT 19,540 24,673
------------ -----------
OTHER LIABILITIES 4,380 4,489
------------ -----------
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,500,000 shares
authorized; 3,192,909 shares issued in 1996; 3,193,059
shares issued in 1995 319 319
Series A common stock, $.10 par value, 20,500,000 shares
authorized; 8,168,854 shares issued in 1996; 8,028,082
shares issued in 1995 817 803
Unrealized gain on investments 538 514
Additional paid-in capital 54,702 54,143
Retained earnings 13,673 30,929
------------ -----------
70,049 86,708
Less treasury stock at cost, 1,081,275 common shares in 1996 and
1995; 671,005 Series A common shares in 1996
and 513,105 Series A common shares in 1995 4,610 3,807
------------ -----------
Total stockholders' equity 65,439 82,901
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 148,952 $ 163,406
============ ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE> 5
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
(Thousands of Dollars)
<S> <C> <C>
Gross revenues $ 63,482 $ 79,737
Direct project costs 21,206 27,119
----------- ------------
Net revenues 42,276 52,618
----------- ------------
Expenses:
Direct salaries and other operating costs 40,524 44,136
General and administrative expenses 6,965 7,130
Restructuring charges 14,421 -
Impairment of long-lived assets 3,146 -
------------ ------------
65,056 51,266
------------ ------------
Income (loss) from operations (22,780) 1,352
----------- ------------
Other income (expense):
Investment income 357 361
Interest expense (444) (546)
Other 265 2
----------- ------------
178 (183)
----------- ------------
Income (loss) before income taxes (22,602) 1,169
Provision (benefit) for income taxes (5,999) 421
------------ ------------
Net income (loss) $ (16,603) $ 748
=========== ============
Net income (loss) per share $ (1.73) $ .08
============ ============
Weighted average shares outstanding 9,620,771 9,565,903
============ ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 6
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
(Thousands of Dollars)
<S> <C> <C>
Gross revenues $ 197,254 $ 231,741
Direct project costs 61,639 73,768
----------- -------------
Net revenues 135,615 157,973
----------- -------------
Expenses:
Direct salaries and other operating costs 120,806 132,461
General and administrative expenses 21,014 21,702
Restructuring charges 14,421 -
Impairment of long-lived assets 3,146 -
------------ -------------
159,387 154,163
------------ -------------
Income (loss) from operations (23,772) 3,810
------------ -------------
Other income (expense):
Investment income 1,260 1,096
Interest expense (1,488) (1,756)
Other 378 416
----------- -------------
150 (244)
----------- -------------
Income (loss) before income taxes (23,622) 3,566
Provision (benefit) for income taxes (6,366) 1,284
------------ ------------
Net income (loss) $ (17,256) $ 2,282
============ ============
Net income (loss) per share $ (1.80) $ .24
============ =============
Weighted average shares outstanding 9,567,918 9,524,196
============ =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 7
ROY F . WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1996 1995
---- ----
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (17,256) $ 2,282
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 6,435 7,207
Provision for losses on accounts receivable 160 450
Restructuring charges 14,421 -
Impairment of long-lived assets 3,146 -
Other 511 1,342
Change in assets and liabilities:
Accounts receivable, trade 14,150 (11,561)
Unbilled costs and estimated earnings on contracts in process (1,097) 615
Other current assets 203 519
Accounts payable and accrued expenses 407 (32)
Billings on contracts in excess of costs and estimated earnings (1,125) 10,224
Employee compensation, benefits and payroll taxes 2,697 2,854
Income taxes (698) 1,400
Deferred income taxes (4,989) (1,458)
Other current liabilities (712) 1,079
Other assets and liabilities (751) (377)
------------- ---------------
Net cash provided by operating activities 15,502 14,544
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 13,162 17,370
Payments for purchase of investments (20,930) (8,102)
Purchase of property and equipment, net (2,899) (6,241)
Investments in other assets (367) (2,601)
------------- ---------------
Net cash provided by (used for) investing activities (11,034) 426
------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt (5,475) (4,855)
Proceeds from issuance of Series A common stock 539 753
Purchase of Series A common treasury stock (803) (1,297)
------------- ---------------
Net cash used for financing activities (5,739) (5,399)
------------- ---------------
Net increase (decrease) in cash and cash equivalents (1,271) 9,571
Cash and cash equivalents:
Beginning of period 12,980 5,745
------------- ---------------
End of period $ 11,709 $ 15,316
============= ===============
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE> 8
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods. The unaudited consolidated financial statements do not include all of
the information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
and should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's 1995 Annual Report to Shareholders
which is incorporated by reference in its Form 10-K filed with the Securities
and Exchange Commission. Results for the three months and nine months ended
September 30, 1996 are not necessarily indicative of results for the full year
1996.
NOTE 2 - LINE OF CREDIT AGREEMENT
The Company's operating results for the nine months ended September 30, 1996
have required the Company to seek a waiver of compliance with certain covenants
under the agreement for its $45,000,000 unsecured credit facility. As part of
the waiver, the agreement was amended to reduce the maximum amount of direct
cash borrowings from $25,000,000 to $5,000,000. The Company did not have any
direct cash borrowings under this agreement during the nine months ended
September 30, 1996.
NOTE 3 - RESTRUCTURING AND IMPAIRMENT CHARGES
During the three months ended September 30, 1996, the Company recorded a
restructuring charge of $14,421,000 consisting principally of writedown of
assets and other expenses associated with a plan to withdraw from the
analytical laboratory business, costs to close or reduce the size of certain
office facilities and severance costs associated with reducing the Company's
work force. In addition, the Company recorded a charge of $3,146,000 to
recognize the impairment in value of its thermal incineration assets and a
minority interest investment in a bioremediation company.
-6-
<PAGE> 9
NOTE 4 - INCOME TAXES
During the three months ended September 30, 1996, the company changed its
estimated effective income tax (benefit) rate to 27% for the nine months ended
September 30, 1996 from 36% for the six months ended June 30, 1996. The change
in the effective tax rate was due to the absence of tax benefits associated
with the writedown of certain assets included in the Company's restructuring
and an increase in the valuation allowance previously established for deferred
tax assets relating to state income tax benefits. This change in accounting
estimate increased net loss and net loss per share for the three months ended
September 30, 1996 by $2,138,000 and $.22, respectively.
NOTE 5 - CONSOLIDATED STATEMENTS OF CASH FLOW
During the first nine months of 1996 there were net cash refunds for income
taxes of $663,000. During the first nine months of 1995 there were net cash
payments for income taxes of $1,361,000. Cash payments for interest were
$1,123,000 and $1,308,000 in the nine months ended September 30, 1996 and 1995,
respectively.
Capital lease obligations of $301,000 and $55,000 were incurred in the nine
months ended September 30, 1996 and 1995, respectively.
-7-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents decreased $1,271,000 in the first nine months of 1996
to $11,709,000 from $12,980,000 at December 31, 1995. Marketable securities
increased $7,559,000 in the first nine months of 1996 to $10,372,000 from
$2,813,000 at December 31, 1995.
Operating activities provided cash of $15,502,000 for the nine months ended
September 30, 1996, compared to $14,544,000 in the nine months ended September
30, 1995. Net cash investments in property and equipment and other assets were
$3,266,000 in the first nine months of 1996, compared to $8,842,000 in the
comparable 1995 period. Net cash investments for the first nine months of 1995
included a $2,000,000 investment for a minority interest in a bioremediation
company. The Company used cash of $5,739,000 in financing activities in the
first nine months of 1996, compared to $5,399,000 in the comparable 1995
period. The availability of direct cash borrowings under the Company's line of
credit agreement has been reduced from $25,000,000 to $5,000,000. The Company
had no cash borrowings under the line of credit agreement in the nine months
ended September 30, 1996. The Company expects to be able to fund working
capital requirements from available investments and operating cash flow.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net loss for the three months ended September 30, 1996 was $16,603,000 or $1.73
per share, compared to net income of $748,000 or $.08 per share, for the three
months ended September 30, 1995. Net loss for the nine months ended September
30, 1996 was $17,256,000 or $1.80 per share, compared to net income of
$2,282,000 or $.24 per share, for the nine months ended September 30, 1995.
Gross revenues decreased 20% to $63,482,000 for the three months ended
September 30, 1996, and 15% to $197,254,000 for the nine months ended September
30, 1996, compared to the 1995 periods. Net revenues decreased 20% to
$42,276,000 for the three months ended September 30, 1996, and 14% to
$135,615,000 for the nine months ended September 30, 1996, compared to the 1995
periods. Net revenues from consulting projects declined 17% and 12% in the
three months and nine months ended September 30, 1996, respectively, due
principally to a diminished level of available business as a result of a lack
of federal regulatory progress. Construction and remediation net revenues
declined 51% and 32% to $4,265,000 and $15,668,000 in the three months and nine
months ended September 30, 1996, respectively, due principally to government
funding delays and the recognition of $1,200,000 and $1,800,000 representing
completion of a remediation project contract negotiation in the three and nine
months ended September 30, 1995, respectively.
-8-
<PAGE> 11
Loss from operations for the three months ended September 30, 1996 was
$22,780,000 compared to income from operations of $1,352,000 for the three
months ended September 30, 1995. Loss from operations for the nine months
ended September 30, 1996 was $23,772,000 compared to income from operations of
$3,810,000 for the nine months ended September 30, 1995. The losses in the
three months and nine months ended September 30, 1996 were partially due to the
lower 1996 net revenues. In addition, the three months and nine months ended
September 30, 1996 include restructuring charges of $14,421,000 consisting
principally of writedown of assets and other expenses associated with a plan to
withdraw from the analytical laboratory business, costs to close or reduce the
size of certain office facilities and severance costs associated with reducing
the Company's work force. Further, the Company recorded a charge of $3,146,000
to recognize the impairment in value of its thermal incineration assets and a
minority interest investment in a bioremediation company. General and
administrative expenses, while less in 1996 than comparable 1995 periods,
nevertheless increased as a percentage of net revenues to 16.5% and 15.5% in
the three months and nine months ended September 30, 1996, respectively, from
13.6% and 13.7% in the three months and nine months ended September 30, 1995,
respectively, due to lower net revenues. General and administrative expenses
for the nine months ended September 30, 1996 include a provision of
approximately $775,000 relating to severance benefits for the Company's former
Chairman of the Board.
Investment income increased $164,000, or 15%, for the nine months ended
September 30, 1996 due to gains realized on sale of investments held in the
Company's captive insurance subsidiary. Interest expense declined $102,000, or
19%, and $268,000, or 15%, in the three months and nine months ended September
30, 1996, respectively, due to lower borrowings. Other income for the three
months and nine months ended September 30, 1996 includes a $273,000 gain
realized on purchase of the Company's 7% Convertible Subordinated Debentures.
Other income for the nine months ended September 30, 1995 includes a $376,000
gain realized on purchase of Debentures.
-9-
<PAGE> 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits are numbered in accordance with the
Exhibit Table of Item 601 of Regulation S-K.
Exhibit No. Description
----------- -----------
11 Statements of Computation
of Net Income (Loss) Per Share
27 Financial Data Schedule
(b) On October 4, 1996 the Company filed a Form 8-K under
Item 5, Other Events, which incorporated by reference
the Company's News Release dated September 26, 1996.
-10-
<PAGE> 13
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.
ROY F. WESTON, INC.
(Registrant)
Date: November 12, 1996 By:/s/ M. Christine Murphy
--------------------------------------
M. Christine Murphy
Executive Vice President
Quality Assurance/Finance
(Duly Authorized Officer)
(Principal Financial Officer)
Date: November 12, 1996 By:/s/ William G. Mecaughey
--------------------------------------
William G. Mecaughey
Vice President and
Corporate Controller
(Chief Accounting Officer)
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
11 Statements of Computation of
Net Income (Loss) Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---- ----
(Thousands of Dollars)
<S> <C> <C>
PRIMARY
-------
Net income (loss) $ (16,603) $ 748
============== =============
Weighted average shares outstanding 9,620,771 9,565,903
============== =============
Net income (loss) per share $ (1.73) $ .08
============== =============
FULLY DILUTED
-------------
Net income (loss) $ (16,603) $ 748
ADD:
Interest on 7% Convertible Subordinated Debentures, net
of applicable income taxes 302 247
-------------- -------------
Net income (loss) for fully diluted net income (loss) per share $ (16,301) $ 995
============== =============
Weighted average number of shares used in calculating
primary net income (loss) per share 9,620,771 9,565,903
ADD:
Shares issuable upon conversion of 7% Convertible Sub-
ordinated Debentures 861,134 1,033,128
Stock options - 693
-------------- -------------
Weighted average number of shares used in calculating fully
diluted net income (loss) per share 10,481,905 10,599,724
============== =============
Fully diluted net income (loss) per share $ (1.56) $ .09
============== =============
</TABLE>
<PAGE> 2
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
(Thousands of Dollars)
<S> <C> <C>
PRIMARY
-------
Net income (loss) $ (17,256) $ 2,282
============== =============
Weighted average shares outstanding 9,567,918 9,524,196
============== =============
Net income (loss) per share $ (1.80) $ .24
============== =============
FULLY DILUTED
-------------
Net income (loss) $ (17,256) $ 2,282
ADD:
Interest on 7% Convertible Subordinated Debentures, net
of applicable income taxes 791 772
-------------- -------------
Net income (loss) for fully diluted net income (loss) per share $ (16,465) $ 3,054
============== =============
Weighted average number of shares used in calculating
primary net income (loss) per share 9,567,918 9,524,196
ADD:
Shares issuable upon conversion of 7% Convertible Sub-
ordinated Debentures 975,378 1,094,496
Stock options 995 231
-------------- -------------
Weighted average number of shares used in calculating fully
diluted net income (loss) per share 10,544,291 10,618,923
============ =============
Fully diluted net income (loss) per share $ (1.56) $ .29
============== =============
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of September 30, 1996 and the consolidated statements
of income for the nine months ended September 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,709
<SECURITIES> 10,372
<RECEIVABLES> 83,296(F1)
<ALLOWANCES> 1,510
<INVENTORY> 0
<CURRENT-ASSETS> 117,850
<PP&E> 79,837
<DEPRECIATION> 67,611
<TOTAL-ASSETS> 148,952
<CURRENT-LIABILITIES> 59,593
<BONDS> 19,540
0
0
<COMMON> 1,136
<OTHER-SE> 64,303
<TOTAL-LIABILITY-AND-EQUITY> 148,952
<SALES> 0
<TOTAL-REVENUES> 197,254
<CGS> 0
<TOTAL-COSTS> 221,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 160
<INTEREST-EXPENSE> 1,488
<INCOME-PRETAX> (23,622)
<INCOME-TAX> (6,366)
<INCOME-CONTINUING> (17,256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,256)
<EPS-PRIMARY> (1.80)
<EPS-DILUTED> 0
<FN>
(F1) Includes 19,032 of unbilled costs and estimated earnings thereon.
</FN>
</TABLE>
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