<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, 1998
( ) 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.)
1400 WESTON WAY, WEST CHESTER, PA 19380
(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 October 23, 1998, the registrant had outstanding 7,857,973 shares of
Series A common stock and 2,089,019 shares of common stock.
<PAGE> 2
Index Page
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 1-2
Consolidated Statements of Operations -
Three Months Ended September 30, 1998 and 1997 3
Consolidated Statements of Operations -
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Part II - Other Information 12
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
<PAGE> 3
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,656 $ 10,767
Marketable securities 3,600 4,168
Accounts receivable, trade, net of allowance for doubtful
accounts of $1,816 in 1998 and $1,750 in 1997 50,823 54,497
Unbilled costs and estimated earnings on contracts in process 24,429 20,920
Prepaid and refundable income taxes -- 1,000
Deferred income taxes 2,250 3,104
Other 4,775 2,643
-------- --------
Total current assets 90,533 97,099
-------- --------
PROPERTY AND EQUIPMENT
Land 215 215
Buildings and improvements 11,553 11,625
Furniture and equipment 30,528 38,803
Leasehold improvements 1,771 2,849
Construction in progress 24 8
-------- --------
Total property and equipment 44,091 53,500
Less accumulated depreciation and amortization 34,722 43,248
-------- --------
Property and equipment, net 9,369 10,252
-------- --------
OTHER ASSETS
Goodwill, net of accumulated amortization of $4,122 in
1998 and $4,076 in 1997 1,832 1,878
Deferred income taxes 6,012 5,125
Other 10,798 10,894
-------- --------
Total other assets 18,642 17,897
-------- --------
TOTAL ASSETS $118,544 $125,248
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,300 $ 2,914
Accounts payable and accrued expenses 13,588 13,879
Billings on contracts in process in excess of costs and
estimated earnings 11,080 14,275
Employee compensation, benefits and payroll taxes 9,697 8,721
Income taxes payable 137 59
Other 9,516 11,012
-------- --------
Total current liabilities 46,318 50,860
-------- --------
LONG TERM DEBT 13,047 15,884
-------- --------
OTHER LIABILITIES 3,397 3,137
-------- --------
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,500,000 shares authorized;
3,170,294 shares issued in 1998; 3,170,494
shares issued in 1997 317 317
Series A common stock, $.10 par value, 20,500,000
shares authorized; 8,650,778 shares issued in 1998; 8,581,821
shares issued in 1997 865 858
Unrealized gain on investments 450 733
Additional paid-in capital 55,928 55,700
Retained earnings 3,312 2,849
-------- --------
60,872 60,457
Less treasury stock at cost, 1,081,275 common shares in 1998
and 1997; 792,805 Series A common shares in 1998 and 1997 5,090 5,090
-------- --------
Total stockholders' equity 55,782 55,367
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $118,544 $125,248
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
(Thousands of Dollars)
<S> <C> <C>
Gross revenues $ 62,416 $ 60,463
Direct project costs 25,864 24,238
----------- -----------
Net revenues 36,552 36,225
----------- -----------
Expenses:
Direct salaries and other operating costs 32,074 32,709
General and administrative expenses 4,323 5,955
Pension curtailment gain -- (3,899)
----------- -----------
36,397 34,765
----------- -----------
Income from operations 155 1,460
----------- -----------
Other income (expense):
Investment income 369 393
Interest expense (325) (402)
Other (27) 128
----------- -----------
17 119
----------- -----------
Income before income taxes 172 1,579
Provision for income taxes 68 537
----------- -----------
Net income $ 104 $ 1,042
=========== ===========
Basic earnings per share $ .01 $ .11
=========== ===========
Weighted average shares outstanding - basic 9,946,992 9,772,139
=========== ===========
Diluted earnings per share $ .01 $ .11
=========== ===========
Weighted average shares outstanding - diluted 9,970,024 9,787,751
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
(Thousands of Dollars)
<S> <C> <C>
Gross revenues $ 175,873 $ 177,720
Direct project costs 71,634 67,786
----------- -----------
Net revenues 104,239 109,934
----------- -----------
Expenses:
Direct salaries and other operating costs 90,021 102,140
General and administrative expenses 13,547 19,584
Pension curtailment gain -- (3,899)
Restructuring credit -- (1,668)
----------- -----------
103,568 116,157
----------- -----------
Income (loss) from operations 671 (6,223)
----------- -----------
Other income (expense):
Investment income 1,156 1,262
Interest expense (1,031) (1,227)
Other (25) 194
----------- -----------
100 229
----------- -----------
Income (loss) before income taxes 771 (5,994)
Provision (benefit) for income taxes 308 (2,038)
----------- -----------
Net income (loss) $ 463 $ (3,956)
=========== ===========
Basic earnings (loss) per share $ .05 $ (.41)
=========== ===========
Weighted average shares outstanding - basic 9,903,457 9,692,350
=========== ===========
Diluted earnings (loss) per share $ .05 $ (.41)
=========== ===========
Weighted average shares outstanding - diluted 9,931,479 9,692,350
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 463 $ (3,956)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 2,877 4,081
Pension curtailment gain -- (3,899)
Provision for losses on accounts receivable 339 358
Other 278 389
Change in assets and liabilities:
Accounts receivable, trade 3,335 3,970
Unbilled costs and estimated earnings on contracts in process (3,509) (1,093)
Other current assets (2,132) (502)
Accounts payable and accrued expenses (291) 1,580
Billings on contracts in excess of costs and estimated earnings (3,195) 299
Employee compensation, benefits and payroll taxes 976 (3,482)
Income taxes 1,078 1,610
Deferred income taxes 113 (132)
Other current liabilities (1,775) (2,732)
Other assets and liabilities 890 3,373
-------- --------
Net cash used for operating activities (553) (136)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 7,436 12,470
Payments for purchase of investments (6,663) (10,778)
Purchase of property and equipment, net (1,490) (2,075)
Investments in other assets (964) (77)
-------- --------
Net cash used for investing activities (1,681) (460)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt (4,112) (1,880)
Proceeds from issuance of Series A common stock 235 335
Purchase of Series A common treasury stock -- (84)
-------- --------
Net cash used for financing activities (3,877) (1,629)
-------- --------
Net decrease in cash and cash equivalents (6,111) (2,225)
Cash and cash equivalents:
Beginning of period 10,767 9,878
-------- --------
End of period $ 4,656 $ 7,653
======== ========
</TABLE>
See notes to consolidated financial statements.
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<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 1997 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, 1998 are not necessarily indicative of results for the full year
1998.
NOTE 2 - LINE OF CREDIT AGREEMENT
On June 5, 1998, the Company entered into an $18,000,000 revolving credit
facility with a bank to provide cash borrowings and letters of credit. The
facility, which replaced the Company's previous credit arrangements, is for a
two-year period with a one-year renewal option and is available for working
capital and other general corporate purposes including permitted acquisitions.
Under the terms of the agreement, cash borrowings bear interest at 1% over the
prime rate or, at the Company's option, other variable rates. Cash borrowings
for purposes other than acquisitions are limited to 125% of cash and marketable
securities pledged by the Company. The Company is subject to a 3/8% annual
charge on the unused portion of the facility. The agreement requires the Company
to maintain minimum levels of cash and marketable securities, tangible net worth
and certain financial ratios and restricts certain expenditures and debt outside
the agreement.
The Company had no outstanding cash borrowings under the facility at September
30, 1998 and had outstanding letters of credit aggregating $2,776,000.
NOTE 3 - RESTRUCTURING CREDIT
During the nine months ended September 30, 1997, the Company completed the sale
of net assets of its Weston Interactive, Inc. subsidiary and the sale of net
assets of its Environmental Metrics Division. The proceeds from these
transactions exceeded amounts anticipated in recording the restructuring charge
in the three months ended September 30, 1996. The excess is included as
restructuring credit in the accompanying consolidated statements of operations
for the nine months ended September 30, 1997.
NOTE 4 - PENSION CURTAILMENT GAIN
The Company elected to freeze benefits under its defined benefit pension plan as
of July 1, 1997, resulting in recognition of a curtailment gain of $3,899,000 in
accordance with Statement of Financial Accounting Standards No. 88, "Employer's
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits."
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<PAGE> 9
NOTE 5 - COMPREHENSIVE INCOME
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The statement,
which became effective January 1, 1998, establishes rules for the reporting of
comprehensive income and its components in financial statements. Comprehensive
income consists of net income, adjusted for other increases and decreases
affecting stockholders' equity that, under generally accepted accounting
principles, are excluded from the determination of net income.
The calculation of comprehensive income (loss) for the three months and nine
months ended September 30, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 104 $ 1,042 $ 463 $ (3,956)
Unrealized gain (loss) on
investments, net of tax (436) 273 (283) 418
-------- --------- -------- ---------
Comprehensive income (loss) $ (332) $ 1,315 $ 180 $ (3,538)
======== ========= ======== =========
</TABLE>
NOTE 6 - CONSOLIDATED STATEMENTS OF CASH FLOW
Net cash refunds for income taxes were $1,085,000 and $3,562,000 in the first
nine months of 1998 and 1997, respectively. Cash payments for interest were
$680,000 and $802,000 in the nine months ended September 30, 1998 and 1997,
respectively.
Capital lease obligations of $661,000 were incurred in the nine months ended
September 30, 1998.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following information should be read in conjunction with the unaudited
interim consolidated financial statements and the notes thereto included in this
Quarterly Report and the audited financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1997.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1998 was $104,000, or $.01
per share, compared to net income of $1,042,000, or $.11 per share, for the
three months ended September 30, 1997. Net income for the nine months ended
September 30, 1998 was $463,000, or $.05 per share, compared to a net loss of
$3,956,000, or $.41 per share, for the nine months ended September 30, 1997.
Net revenues increased 1% to $36,552,000 for the three months ended September
30, 1998 and decreased 5% to $104,239,000 for the nine months ended September
30, 1998 compared to the 1997 periods. Net revenues for the nine months ended
September 30, 1998 include approximately $800,000 from a U.S. government agency
in payment for work performed in an earlier period. A significant portion of the
revenue decline in the nine months ended September 30, 1998 is due to the sale
of the Company's analytical laboratory operations in May 1997.
The Company had income from operations of $155,000 and $671,000 in the three
months and nine months ended September 30, 1998, respectively, compared to
income from operations of $1,460,000 in the three months ended September 30,
1997 and a loss from operations of $6,223,000 in the nine months ended September
30, 1997. The 1997 periods include a gain of $3,899,000 from curtailment of the
Company's defined benefit pension plan. The improved results for the three
months and nine months ended September 30, 1998 are due to higher margins and
cost reduction efforts that began in the middle of 1997. The nine months ended
September 30, 1997 also included charges of $2,500,000 for reductions in the
Company's workforce and changes to its Board of Directors and senior management.
Investment income in the three months ended September 30, 1998, includes a gain
on the sale of certain investments of $227,000. Interest expense declined
$77,000, or 19%, and $196,000, or 16%, in the three months and nine months ended
September 30, 1998, due to the reduction of 7% Convertible Subordinated
Debentures outstanding and the repayment of a term loan.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents decreased $6,111,000 in the first nine months of 1998
to $4,656,000 from $10,767,000 at December 31, 1997. Marketable securities
decreased $568,000 in the first nine months of 1998 to $3,600,000 from
$4,168,000 at December 31, 1997.
Operating activities used cash of $553,000 for the first nine months of 1998,
and used cash of $136,000 in the comparable 1997 period. Net cash investments in
property and equipment and other assets were $2,454,000 in the first nine months
of 1998, compared to $2,152,000 in the comparable 1997 period. The Company used
cash of $3,877,000 in financing activities in the first
-8-
<PAGE> 11
nine months of 1998, compared to $1,629,000 in the comparable 1997 period. The
nine months ended September 30, 1998 included the repurchase of $3,393,000
principal amount of the Company's 7% Convertible Subordinated Debentures in
order to satisfy the April 15, 1998 sinking fund requirement and a portion of
the April 15, 1999 sinking fund requirement. Further debenture repurchases of
$1,976,000 are required before April 15, 1999.
On June 5, 1998 the Company entered into an $18,000,000 revolving credit
facility to provide cash borrowings and letters of credit. The facility is for a
two-year period with a one-year renewal option and is available for working
capital and other general corporate purposes including permitted acquisitions.
YEAR 2000 ISSUES
Year 2000 Readiness Disclosure:
Many computer systems and other equipment with embedded chips or processors use
only two digits to represent the year and may be unable to accurately process
data and transactions after January 1, 2000 (Y2K Issues). As a result, there are
risks of miscalculations or system failures, which could cause disruptions of
business operations.
The Company is in the process of implementing a readiness program with the
objective of having all significant exposures under its direct control
functioning properly with respect to Y2K Issues before January 1, 2000. The
Company expects that its readiness program will achieve this objective and that
the costs of Y2K readiness will not have a material adverse effect on the
Company's results of operations or financial condition.
The Y2K readiness program is organized into functional areas including business
systems; computer hardware infrastructure; office facilities and equipment;
legal and insurance matters; and communications with clients and vendors. The
Company has formed a Y2K Readiness team, which is addressing the following:
- Inventorying Y2K Issues
- Assigning priorities to identified Y2K Issues;
- Assessing Y2K compliance of material items;
- Repair or replacement of any items found to be non-compliant;
- Testing of repaired or replaced items;
- Design and implementation of contingency and business
continuation plans.
The Company has substantially completed its inventory of Y2K Issues and has
assigned priorities to the identified Issues. The assessment of compliance is
more than 50% complete and the process of repair and replacement of
non-compliant systems is underway and is expected to be completed by August
1999. In addition, the Company is in the process of identifying and contacting
service providers, suppliers and clients whose activities are believed to be
critical to business operations to determine their compliance with Y2K Issues.
The Company has begun to develop contingency plans intended to mitigate possible
disruptions in business that may result from Y2K Issues. These plans will
address special payment considerations
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<PAGE> 12
from clients, alternate suppliers and alternate methods of processing business
transactions. The contingency plans will be continually modified as additional
information becomes available.
As part of the Company's ongoing plan to reduce overhead costs, the Company is
in the process of installing new business systems, which are designed to more
efficiently manage the Company's operations. The vendor of these systems has
warranted that they are Y2K compliant. The new systems are expected to be fully
operational during 1999 and the Company believes that it will be Y2K compliant.
The cost of implementation of the new business systems is expected to be
$4,250,000 to $5,250,000, of which approximately $2,250,000 was expended as of
September 30, 1998.
In addition to the cost of implementation of the new business systems, the
Company currently estimates that the cost of identifying, evaluating and
correcting Y2K issues will be $500,000 to $1,000,000. Expenditures as of
September 30, 1998 are approximately $250,000. The costs of replacing systems,
including hardware and software packages will be capitalized and amortized over
their useful lives, while all other costs will be expensed as incurred.
The Company's Y2K readiness program is an ongoing process and the estimates of
costs and completion dates, as well as the Company's expectations, described
above are subject to uncertainties. For example, the total costs which the
Company will incur in connection with Year 2000 Issues will be influenced by the
Company's ability to successfully complete its Y2K readiness program, including
identification of issues, the nature and amount of programming required to fix
affected programs, the related labor and/or consulting costs for such
remediation and the ability of third parties with whom the Company has business
relationships to successfully address their own Y2K issues. The failure of the
Company to successfully identify and fix all Y2K Issues in critical operations,
or the failure of critical customers or critical systems vendors to continue
operations due to their Y2K issues, could have a material adverse effect on the
Company's results of operations and financial condition.
FORWARD LOOKING STATEMENTS
From time to time, the Company, its management, or other Company representatives
may make or publish statements that contain projections, beliefs, expectations,
predictions or intentions relating to anticipated financial performance,
business prospects, potential contract value, business strategy and plans,
technological developments and other matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for these forward looking statements.
In order to comply with the terms of the safe harbor, the Company notes that a
number of factors could cause the Company's actual results, experience or
outcome to differ materially from projections, beliefs, expectations,
predictions or intentions expressed in forward looking statements. These risks
and uncertainties which may affect the operations, performance, development and
results of the Company's business, include, but are not limited to, the
following:
- - The highly competitive marketplace for the Company's services.
- - Changes in and levels of enforcement of federal, state and local
environmental legislation and regulations.
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<PAGE> 13
- - The Company's ability to obtain new contracts from existing as well as new
clients, and the uncertain timing of awards and contracts.
- - The Company's ability to execute new projects and those currently in
backlog within reasonable cost estimates, as well as other contract
performance risks.
- - Funding appropriation, funding delay, and issuance of work orders on
government projects.
- - The Company's ability to achieve any planned overhead or other cost
reductions while maintaining adequate work flow.
- - The Company's ability to successfully implement its readiness program for
Y2K Issues.
- - The Company's ability to obtain adequate financing for its current
operations and future expansion.
- - The Company's ability to execute its strategic plan through successful
marketing activities and continued cost containment.
- - The nature of the Company's work with hazardous materials, toxic wastes,
and other pollutants, and the potential for uninsured claims or claims in
excess of insurance limits.
The Company disclaims any intent or obligation to update forward looking
statements.
-11-
<PAGE> 14
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
10.6 First Amendment to Credit Agreement
dated August 14, 1998.
11 Statements of Computation of Basic
and Diluted Earnings (Loss) Per Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three
months ended September 30, 1998.
-12-
<PAGE> 15
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 11, 1998 By: /s/ William Robertson
--------------------------------
William Robertson
Chairman and Chief Executive Officer
(Duly Authorized Officer)
Date: November 11, 1998 By: /s/ William G. Mecaughey
-------------------------------
William G. Mecaughey
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT
THIS FIRST AMENDMENT dated as of August 14, 1998 (this "Amendment") amends
the Credit Agreement dated as of June 5, 1998 (the "Credit Agreement") among ROY
F. WESTON, INC. (the "Company") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank"). Terms defined in the Credit Agreement are, unless
otherwise defined herein or the context otherwise requires, used herein as
defined therein.
WHEREAS, the Company and the Bank have entered into the Credit
Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as more fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
I. SECTION Amendments. Effective on (and subject to the occurrence of)
the Amendment Effective Date (as defined below), the Credit Agreement shall be
amended in accordance with Sections 1.1 through 1.4:
A. Addition of Definitions. Section 1.1 is amended by adding the
following definitions of "Acquisition Loans" and "Loan Limit" in appropriate
alphabetical sequence:
Acquisition Loans means at any time the outstanding principal amount
of all Loans which were used to consummate Permitted Acquisitions (as such
principal amount is amortized from time to time) as agreed by the Company
and the Bank in writing prior to or at the time of completion of any
applicable Permitted Acquisition.
Loan Limit means an amount equal to 125% of the cash and Cash
Equivalent Investments pledged by the Company to the Bank and with respect
to which the Bank has a first-priority perfected security interest.
<PAGE> 2
A. Amendment to Section 2.1.1. Section 2.1.1 is amended by (a) deleting
the word "and" between clauses (i) and (ii) of the proviso therein and (ii)
replacing the period at the end thereof with a semi-colon followed by the
following language:
and (iii) the aggregate outstanding principal amount of all Loans (other
than Acquisition Loans) shall not at any time exceed the Loan Limit.
A. Amendment to Section 6.2.1. Section 6.2.1 is amended by adding the
following clause (b) thereto:
(b) On any date on which the aggregate principal amount of all Loans
(other than Acquisition Loans) exceeds the Loan Limit, the Company will
make a prepayment of Loans in an amount equal to such excess (rounded
upward, if necessary, to an integral multiple of $100,000).
A. Amendment to EBITDA Ratio. Section 10.6.2 is amended in its entirety
to read as follows:
1. EBITDA Ratio. Not permit, as of the end of any Fiscal Quarter ending
after December 31, 1998, the ratio of (a) the sum of (i) EBITDA for any period
of four consecutive Fiscal Quarters plus (ii) all cash and Cash Equivalent
Investments of the Company and its Subsidiaries as of the last day of such
period plus (iii) all payments on leases (including Capital Leases) of the
Company and its Subsidiaries during such period to (b) the sum, without
duplication, of (i) principal payments on Indebtedness during such period plus
(ii) Interest Expense for such period plus (iii) all payments on leases
(including Capital Leases) of the Company and its Subsidiaries during such
period plus (iv) income tax expense for such period plus (v) Capital
Expenditures for such period to be less than 1.5 to 1.
I. SECTION Representations and Warranties. The Company represents and
warrants to the Bank that (a) each warranty set forth in Section 9 of the Credit
Agreement is true and correct as of the date of the execution and delivery of
this Amendment by the Company, with the same effect as if made on such date
(except to the extent such
<PAGE> 3
representations and warranties expressly refer to an earlier date, in which case
they were true and correct as of such earlier date), (b) the execution and
delivery by the Company of this Amendment and the performance by the Company of
its obligations under the Credit Agreement, as amended hereby (as so amended,
the "Amended Credit Agreement"), (i) are within the corporate powers of the
Company, (ii) have been duly authorized by all necessary corporate action on the
part of the Company, (iii) have received all necessary governmental approval and
(iv) do not and will not contravene or conflict with any provision of law or of
the charter, by-laws or other organizational documents of the Company or any
Subsidiary or of any agreement, indenture, instrument or other document, or any
judgment, order or decree, which is binding on the Company or any Subsidiary and
(c) the Amended Credit Agreement is the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditors' rights or by
general principles of equity limiting the availability of equitable remedies.
I. SECTION Effectiveness. The amendments set forth in Section 1 above
shall become effective on the date (the "Amendment Effective Date") when the
Bank shall have received (a) a counterpart of this Amendment signed by Company
and (b) a confirmation in the form of Exhibit A signed by the Company and each
Guarantor.
I. SECTION Miscellaneous.
A. Continuing Effectiveness, etc. As herein amended, the Credit Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. After the Amendment Effective Date, all references in the Credit
Agreement and the other Loan Documents to "Credit Agreement" or similar terms
shall refer to the Amended Credit Agreement.
A. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto on separate counterparts, and each such
counterpart shall be deemed to be an original but all such counterparts shall
together constitute one and the same Amendment.
<PAGE> 4
A. Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such State.
A. Successors and Assigns. This Amendment shall be binding upon the
Company and the Bank and their respective successors and assigns and shall inure
to the benefit of the Company and the Bank and the respective successors and
assigns of the Bank.
Delivered at Chicago, Illinois, as of the day and year first above
written.
ROY F. WESTON, INC.
By: /s/ William G. Mecaughey
----------------------------------------
Title: Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Venita Fields
----------------------------------------
Title: Sr. Vice President
<PAGE> 1
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
---- ----
(Thousands of Dollars)
<S> <C> <C>
BASIC
Net income $ 104 $ 1,042
========== ==========
Weighted average shares outstanding 9,946,992 9,772,139
========== ==========
Basic earnings per share $ .01 $ .11
========== ==========
DILUTED
Net income $ 104 $ 1,042
========== ==========
Weighted average number of shares used in calculating
basic earnings per share 9,946,992 9,772,139
ADD:
Dilutive impact of stock options 23,032 15,612
---------- ----------
Weighted average number of shares used in calculating
diluted earnings per share 9,970,024 9,787,751
========== ==========
Diluted earnings per share $ .01 $ .11
========== ==========
</TABLE>
<PAGE> 2
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1998 1997
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
BASIC
Net income (loss) $ 463 $ (3,956)
=========== ===========
Weighted average shares outstanding 9,903,457 9,692,350
=========== ===========
Basic earnings (loss) per share $ .05 $ (.41)
=========== ===========
DILUTED
Net income (loss) $ 463 $ (3,956)
=========== ===========
Weighted average number of shares used in calculating
basic earnings (loss) per share 9,903,457 9,692,350
ADD:
Dilutive impact of stock options 28,022 --
----------- -----------
Weighted average number of shares used in calculating
diluted earnings (loss) per share 9,931,479 9,692,350
=========== ===========
Diluted earnings (loss) per share $ .05 $ (.41)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENT
OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,656
<SECURITIES> 3,600
<RECEIVABLES> 75,252<F1>
<ALLOWANCES> 1,816
<INVENTORY> 0
<CURRENT-ASSETS> 90,533
<PP&E> 44,091
<DEPRECIATION> 34,722
<TOTAL-ASSETS> 118,544
<CURRENT-LIABILITIES> 46,318
<BONDS> 13,047
0
0
<COMMON> 1,182
<OTHER-SE> 54,600
<TOTAL-LIABILITY-AND-EQUITY> 118,544
<SALES> 0
<TOTAL-REVENUES> 175,873
<CGS> 0
<TOTAL-COSTS> 175,202
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 339
<INTEREST-EXPENSE> 1,031
<INCOME-PRETAX> 771
<INCOME-TAX> 308
<INCOME-CONTINUING> 463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 463
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<FN>
<F1>INCLUDES 24,429 OF UNBILLED COSTS AND ESTIMATED EARNINGS THEREON.
</FN>
</TABLE>
