<PAGE>
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 March 31, 2000
Commission File Number 0-19655
THE KEITH COMPANIES, INC.
---------------
(Exact name of registrant as specified in its charter)
California 33-0203193
------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2955 REDHILL AVENUE, COSTA MESA, CALIFORNIA 92626
----------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (714) 540-0800
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.________
- -------
The number of shares outstanding of the registrant's common stock as of April
28, 2000 was 5,076,604.
<PAGE>
THE KEITH COMPANIES, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to the Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Qualitative and Quantitative Disclosures about Market Risk 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE KEITH COMPANIES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
------------------- ------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 585,000 $ 1,569,000
Contracts and trade receivables, net of allowance for doubtful accounts of
$825,000 and $612,000 at March 31, 2000 and December 31, 1999,
respectively 7,870,000 7,176,000
Costs and estimated earnings in excess of billings 5,757,000 5,037,000
Prepaid expenses and other current assets 392,000 501,000
------------------- ------------------
Total current assets 14,604,000 14,283,000
Equipment and leasehold improvements, net 4,507,000 4,536,000
Goodwill, net of accumulated amortization of $157,000 and $109,000 at March 31,
2000 and December 31, 1999, respectively 4,630,000 4,678,000
Other assets 178,000 164,000
------------------- ------------------
Total assets $ 23,919,000 $ 23,661,000
=================== ==================
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 1,212,000 $ 1,292,000
Trade accounts payable 756,000 1,048,000
Accrued employee compensation 2,814,000 2,342,000
Current portion of deferred tax liabilities 1,102,000 1,102,000
Other accrued liabilities 1,302,000 734,000
Billings in excess of costs and estimated earnings 635,000 552,000
------------------- ------------------
Total current liabilities 7,821,000 7,070,000
Long-term debt and capital lease obligations, less current portion 2,379,000 3,543,000
Other liabilities 205,000 212,000
------------------- ------------------
Total liabilities 10,405,000 10,825,000
------------------- ------------------
Shareholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; no shares
issued or outstanding - -
Common stock, $0.001 par value. Authorized 100,000,000 shares at March
31, 2000 and December 31, 1999; issued and outstanding 5,076,598 and
5,070,224 shares at March 31, 2000 and December 31, 1999, respectively,
including shares held in treasury 5,000 5,000
Additional paid-in capital 12,334,000 12,317,000
Retained earnings 1,823,000 1,061,000
------------------- ------------------
14,162,000 13,383,000
Less treasury stock, at cost of 117,100 and 97,600 shares at March 31, 2000
and December 31, 1999, respectively 648,000 547,000
------------------- ------------------
Total shareholders' equity 13,514,000 12,836,000
------------------- ------------------
Commitments and contingencies (Note 3)
Total liabilities and shareholders' equity $ 23,919,000 $ 23,661,000
=================== ==================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE>
THE KEITH COMPANIES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Gross revenue $13,107,000 $ 9,999,000
Subcontractor costs 688,000 1,030,000
---------------- ----------------
Net revenue 12,419,000 8,969,000
Costs of revenue 8,382,000 5,914,000
---------------- ----------------
Gross profit 4,037,000 3,055,000
Selling, general and administrative expenses 2,650,000 1,896,000
---------------- ----------------
Income from operations 1,387,000 1,159,000
Interest expense 107,000 260,000
Other expense (income), net 10,000 (19,000)
---------------- ----------------
Income before provision for income taxes 1,270,000 918,000
Provision for income taxes 508,000 389,000
---------------- ----------------
Net income 762,000 529,000
Accretion of redeemable securities to redemption value - (57,000)
---------------- ----------------
Net income available to common shareholders $ 762,000 $ 472,000
================ ================
Earnings per share data:
Basic $ 0.15 $ 0.14
================ ================
Diluted $ 0.15 $ 0.13
================ ================
Weighted average number of shares outstanding:
Basic 4,959,107 3,485,634
================ ================
Diluted 5,241,667 3,750,627
================ ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
THE KEITH COMPANIES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
2000 1999
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 762,000 $ 529,000
Adjustments to reconcile net income to net cash provided by (used in)
Depreciation and amortization 357,000 191,000
Changes in operating assets and liabilities:
Contracts and trade receivables (694,000) (542,000)
Costs and estimated earnings in excess of billings (720,000) (965,000)
Prepaid expenses and other current assets 224,000 9,000
Deferred tax assets - 270,000
Other assets (14,000) (142,000)
Trade accounts payable and accrued liabilities 748,000 622,000
Billings in excess of costs and estimated earnings 83,000 124,000
Other liabilities (7,000) (123,000)
------------------ -----------------
Net cash provided by (used in) operating activities 739,000 (27,000)
------------------ -----------------
Cash flows from investing activities-
additions to equipment and leasehold improvements (280,000) (298,000)
------------------ -----------------
Cash flows from financing activities:
(Payments on) proceeds from line of credit, net (985,000) 354,000
Principal payments on long-term debt and capital lease obligations, (374,000) (287,000)
Purchase of common stock for treasury (101,000) -
Proceeds from issuance of common stock 17,000 -
Payment of deferred offering costs - (55,000)
------------------ -----------------
Net cash (used in) provided by financing activities (1,443,000) 12,000
------------------ -----------------
Net decrease in cash and cash equivalents (984,000) (313,000)
Cash and cash equivalents, beginning of period 1,569,000 457,000
------------------ -----------------
Cash and cash equivalents, end of period $ 585,000 $ 144,000
================== =================
</TABLE>
See supplemental cash flow information at Note 6
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
THE KEITH COMPANIES, INC. AND SUBSIDIARY
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of March 31,
2000, the consolidated statements of income for the three months ended
March 31, 2000 and 1999, and the condensed consolidated statements of
cash flows for the three months ended March 31, 2000 and 1999, are
unaudited and in the opinion of management include all adjustments
necessary to present fairly the information set forth therein, which
consist solely of normal recurring adjustments. The results of
operations for these interim periods are not necessarily indicative of
results for the full year. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Annual Report on
Form 10-K of The Keith Companies, Inc. ("TKCI" and together with its
subsidiary, the "Company") for the fiscal year ended December 31, 1999
as certain disclosures which would substantially duplicate those
contained in such audited financial statements have been omitted from
this report.
2. Treasury Stock Purchased
During the three months ended March 31, 2000, the Company acquired
19,500 shares of its common stock at a cost of $101,000. There were no
such purchases during the three months ended March 31, 1999.
3. Per Share Data
Basic EPS is computed by dividing earnings available to common
shareholders during the period by the weighted average number of common
shares outstanding during each period. Diluted EPS is computed by
dividing earnings available to common shareholders during the period by
the weighted average number of shares that would have been outstanding
assuming the issuance of common shares for all dilutive potential
common shares outstanding during the reporting period, net of shares
assumed to be repurchased using the treasury stock method.
The following is a reconciliation of the denominator for the basic EPS
computation to the denominator of the diluted EPS computation. Net
income available to common shareholders is used in the basic and
diluted EPS calculations as the assumed impact of the redeemable
securities would be anti-dilutive.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Weighted average shares used for the basic EPS computation
(deemed outstanding the entire period) 4,959,107 3,485,634
Incremental shares from the assumed exercise of dilutive stock 162,560 264,993
Contingently issuable shares 120,000 -
---------------- ----------------
Weighted average shares used for the diluted EPS computation 5,241,667 3,750,627
================ ================
</TABLE>
In conjunction with the acquisition of substantially all of the assets
and the assumption of substantially all of the liabilities of
Thompson-Hysell, Inc. ("Thompson-Hysell") in July 1999, the Company
agreed to pay contingent consideration consisting of shares of its
common stock, which may be issuable in 2000 based on certain 1999
financial targets being met. As of March 31, 2000, the contingent
consideration to be issued has not been finalized, therefore, the
Company estimated and included 120,000 weighted average contingently
issuable shares in its weighted average shares used for the diluted EPS
computation.
Anti-dilutive potential common shares excluded from the above
calculations were 546,356 and 118,518 for the three months ended March
31, 2000 and 1999, respectively.
5
<PAGE>
THE KEITH COMPANIES, INC. AND SUBSIDIARY
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
4. Indebtedness
On September 1, 1999, the Company entered into a new line of credit
agreement with a bank to fund working capital needs and acquisitions of
equipment. As of March 31, 2000, there were no outstanding borrowings
on the equipment component of the line of credit and the working
capital component had outstanding borrowings of $315,000 bearing
interest at 9.0%.
5. Segment and Related Information
The Company evaluates performance and makes resource allocation
decisions based on the overall type of services provided to customers.
For financial reporting purposes, we have grouped our operations into
two primary reportable segments. The Real Estate Development, Public
Works and Telecommunications ("REPWT") segment includes engineering and
consulting services for the development of both private projects, like
residential communities, commercial and industrial properties and
recreational projects; public works projects, such as transportation
and water/sewage facilities; and site acquisition and construction
management services for wireless telecommunications. The Industrial,
Process and Manufacturing ("IPM") segment provides the technical
expertise and management required to design and test manufacturing
facilities and processes.
The following tables set forth certain information regarding the
Company's operating segments as of and for the three months ended March
31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
--------------------------------------------------------------------------------------------------------------
REPWT IPM Corporate Costs Consolidated
------------------ ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net revenue $ 11,282,000 $ 1,137,000 $ - $ 12,419,000
Income (loss) from operations $ 2,376,000 $ 212,000 $(1,201,000) $ 1,387,000
Identifiable assets $ 22,553,000 $ 1,366,000 $ - $ 23,919,000
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
--------------------------------------------------------------------------------------------------------------
REPWT IPM Corporate Costs Consolidated
------------------ ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net revenue $ 7,993,000 $ 976,000 $ - $ 8,969,000
Income (loss) from operations $ 1,974,000 $ 32,000 $ (847,000) $ 1,159,000
Identifiable assets $14,167,000 $ 1,522,000 $ - $15,689,000
</TABLE>
6. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------
2000 1999
-------------------- ---------------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 114,000 $ 240,000
==================== =====================
Cash paid for income taxes $ 204,000 $ 2,000
==================== =====================
Noncash financing and investing activities:
Purchase price adjustment $ - $ 60,000
==================== =====================
Accretion of redeemable securities $ - $ 57,000
==================== =====================
Insurance financing $ 115,000 $ -
==================== =====================
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the condensed
consolidated financial statements of TKCI and its subsidiary and the related
notes included elsewhere in this Form 10-Q and the Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 filed by the Company. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of any number of factors,
including those set forth under "Risk Factors" and elsewhere in the Annual
Report on Form 10-K filed by the Company. In this Management's Discussion and
Analysis of Financial Condition and Results of Operations section, references to
"TKCI", "we", "our" and "us" mean TKCI and its subsidiary.
Overview
In December 1997, TKCI purchased ESI and its wholly-owned subsidiary ESII,
Engineered Systems Integration, Inc., which was subsequently merged into ESI. In
August 1998, TKCI purchased John M. Tettemer and Associates. In July 1999, we
acquired substantially all of the assets and assumed substantially all of the
liabilities of Thompson-Hysell.
We derive most of our revenue from professional service activities. The majority
of these activities are billed under various types of contracts with our
clients, including fixed fee and time and material contracts. Most of our time
and material contracts have not-to-exceed provisions. Revenue is recognized on
the percentage of completion method of accounting based on the proportion of
actual direct contract costs incurred to total estimated direct contract costs.
We believe that costs incurred are the best available measure of progress
towards completion on the contracts. In the course of providing services, we
sometimes subcontract for various services. These costs are included in billings
to clients and, in accordance with industry practice, are included in our gross
revenue. Because subcontractor services can change significantly from project to
project, changes in gross revenue may not be indicative of business trends.
Accordingly, we also report net revenue, which is gross revenue less
subcontractor costs. Our revenue is generated from a large number of relatively
small contracts.
For the periods presented, a substantial portion of our net revenue was derived
from services rendered in connection with commercial and residential real estate
development projects. The real estate market has historically experienced
pronounced business cycles. Our consolidated results of operations can be
adversely impacted by downturns in the real estate market. Based upon the number
of building permits issued, the last peak of the business cycle in the southern
California real estate market was in 1989 and the last trough was in 1996. A
majority of our net revenue for the periods presented, was derived from services
rendered in southern California. Consequently, adverse economic conditions
affecting the southern California economy could also have an adverse effect on
our consolidated results of operations. We anticipate that as we consummate
acquisitions in the future, the concentration of revenue from both real estate
development and southern California may decline.
Costs of revenue include labor, non-reimbursable subcontract costs, materials
and various direct and indirect overhead costs including rent, utilities and
depreciation. Selling, general, and administrative expenses consist primarily of
corporate costs related to finance and accounting, information technology,
business development and marketing, contract proposal, executive salaries,
provisions for doubtful accounts and other indirect overhead costs.
7
<PAGE>
Results of Operations
The following table sets forth unaudited historical consolidated operating
results for each of the periods presented as a percentage of net revenue.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Gross revenue 106% 111%
Subcontractor costs 6% 11%
----- -----
Net revenue 100% 100%
Costs of revenue 67% 66%
----- -----
Gross profit 33% 34%
Selling, general and administrative expenses 21% 21%
----- -----
Income from operations 12% 13%
Interest expense 2% 3%
----- -----
Income before provision for income taxes 10% 10%
Provision for income taxes 4% 4%
----- -----
Net income 6% 6%
Accretion of redeemable securities to - (1%)
----- -----
Net income available to common shareholders 6% 5%
===== =====
</TABLE>
Three Months Ended March 31, 2000 and March 31, 1999
Revenue. Net revenue for the three months ended March 31, 2000 was $12.4 million
compared to $9.0 million for the three months ended March 31, 1999, an increase
of $3.5 million, or 38%. Net revenue increased by $2.7 million as a result of
the acquisition of Thompson-Hysell in July 1999. Excluding the revenue from the
acquisition, our net revenue grew $764,000 or 9%, compared to the three months
ended March 31, 1999. The net revenue growth resulted primarily from the
continued demand for housing, energy and water resource projects in California.
Subcontractor costs, as a percentage of net revenue, declined to 6% for the
three months ended March 31, 2000 compared to 11% for the three months ended
March 31, 1999, resulting primarily from a decrease in services for our primary
telecommunications contract, which was finalized in 1999 and a significant
reduction in subcontract services for a large contract in our industrial,
process and manufacturing segment.
Gross Profit. Gross profit for the three months ended March 31, 2000 was $4.0
million compared to $3.1 million for the three months ended March 31, 1999, an
increase of $982,000, or 32%. The gross profit growth is attributable to both
the acquisition of Thompson-Hysell and certain other revenue
increases. As a percentage of net revenue, gross profit decreased slightly to
33% for the three months ended March 31, 2000 compared to 34% for the three
months ended March 31, 1999. The decrease in gross profit as a percentage of net
revenue for the three months ended March 31, 2000 is attributable primarily to
lower margins on two large projects. The gross profit percentage was further
reduced by an increase in the employer matching contribution of our 401(K) plan
in 2000 and an increase in our medical insurance premiums, which was not passed
through to our employees, in an effort to continue to attract and retain quality
professionals. Excluding the impact of the lower margins on the two large
projects referred to previously, gross profit as a percentage of net revenue
would have been 34% for the three months ended March 31, 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 2000 were $2.7
million as compared to $1.9 million for the three months ended March 31, 1999,
an increase of $754,000, or 40%. The increase in selling, general and
administrative expense resulted primarily from the acquisition of
Thompson-Hysell, including the amortization of goodwill; employee recruiting
costs; and other costs as a result of operating as a public company. As a
percentage of net revenue, selling, general and administrative expenses remained
flat at 21% compared to the previous year period.
Interest expense. Interest expense for the three months ended March 31, 2000 was
$107,000 as compared to $260,000 for the three months ended March 31, 1999, a
decrease of $153,000, or 59%. The lower interest expense resulted primarily from
the
8
<PAGE>
repayment of our line of credit and various related party notes payable with a
portion of the net proceeds from the initial public offering in July 1999.
Income Taxes. The provision for income taxes for the three months ended March
31, 2000 was $508,000 compared to $389,000 for the three months ended March 31,
1999, an increase of $119,000 or 31%. The increase in income tax expense was due
primarily to a higher taxable income base, mitigated by a lower effective income
tax rate.
Liquidity and Capital Resources
We have financed our working capital needs and capital expenditure requirements
primarily through a combination of internally generated funds and bank
borrowings.
Working capital as of March 31, 2000 was $6.8 million compared to $7.2 million
as of December 31, 1999, a decrease of $430,000 or 6%, primarily due to lower
cash balances resulting from the partial repayment of our line of credit, which
is included in long-term debt. Debt to net worth ratio as of March 31, 2000 was
0.27 to 1 compared to 0.38 to 1 as of December 31, 1999, an increase of 29%. Net
cash provided by operating activities increased $766,000 to $739,000 for the
three months ended March 31, 2000, compared to net cash used in operating
activities of $27,000 for the three months ended March 31, 1999. The growth in
operating cash flow resulted primarily from higher income before the effects of
depreciation and amortization. The growth in cash generated from operating
activities was used primarily to make principal payments on long-term and
short-term debt and capital leases and to purchase 19,500 treasury shares at a
cost of $101,000.
Our line of credit agreement has a working capital component with a maximum
outstanding principal balance of $6,000,000 and an equipment component with a
maximum outstanding principal balance of $3,500,000. The aggregate outstanding
principal balance of working capital advances and equipment advances can not
exceed $8,500,000. As of March 31, 2000, there were no outstanding borrowings on
the equipment component of the line of credit and the working capital component
had outstanding borrowings of $315,000 bearing interest at 9.0%.
We believe existing cash balances, internally generated funds, and availability
under credit facilities will be sufficient to fund our anticipated internal
operating needs for the next twelve months.
Inflation
Although our operations can be influenced by general economic trends, we do not
believe that inflation had a significant impact on our results of operations for
the periods presented. Due to the short-term nature of most of our contracts, if
costs of revenue increase, we attempt to pass these increases to our clients.
Impact of the Year 2000 Issue
To date, we have not experienced any significant disruptions to our financial or
operating activities caused by failure of our computerized systems resulting
from Year 2000 issues. We do not expect Year 2000 issues to have a material
adverse effect on our operations or financial results in 2000.
In addition, we have no information that indicates a significant vendor or
service provider may be unable to sell goods or provide services to us or that
any significant customer may be unable to purchase from us because of Year 2000
issues. Further, we have not received any notifications from lenders or
regulatory agencies to which we are subject indicating that (1) a lender
considers or may consider us to be in violation of a loan agreement or (2)
significant regulatory action is being or may be taken against us as a result of
Year 2000 issues.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
We are exposed to interest rate changes primarily as a result of our line of
credit and long-term debt, which are used to maintain liquidity and to fund
capital expenditures and our expansion. To help limit the impact of interest
rate changes on earnings and cash flows, we have borrowed at fixed rates where
possible. Our bank line of credit is based on variable interest rates and is
therefore affected by changes in market rates. We do not enter into derivative
or interest rate transactions.
9
<PAGE>
The table below presents the principal amounts of debt (excluding capital lease
obligations), weighted average interest rates, fair values and other items
required by year of expected maturity to evaluate the expected cash flows and
sensitivity to interest rate changes as of March 31, 2000.
<TABLE>
<CAPTION>
Fair
2000 2001 2002 2003 2004 Total Value/(1)/
---- ---- ---- ---- ---- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt/(2)/ $246,000 $1,473,000 $110,000 $ 70,000 $ 15,000 $1,914,000 $1,914,000
Average interest rate 8.1% 9.8% 8.3% 8.3% 8.5% 9.4% 9.4%
Variable rate debt - $ 315,000 - - - $ 315,000 $ 315,000
Average interest rate - 9.0% - - - 9.0% 9.0%
</TABLE>
______________________
/(1)/ The fair value of fixed rate debt and variable rate debt was determined
based on current rates offered for debt instruments with similar risks and
maturities.
/(2)/ Fixed rate debt excludes notes payable with an aggregate principal amount
of $201,000 as there is no established market for these notes.
As the table incorporates only those exposures that existed as of March 31,
2000, it does not consider those exposures or positions which could arise after
that date. Moreover, because firm commitments are not presented in the table
above, the information presented in the table has limited predictive value. As a
result, our ultimate realized gain or loss with respect to interest rate
fluctuations will depend on those exposures or positions that arise during the
period and interest rates.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On August 13, 1999, a complaint was filed in the Stanislaus County, California
Superior Court against Thompson-Hysell, Inc. ("Thompson-Hysell"), four
shareholders of Thompson-Hysell (the "Defendant Shareholders"), T-H Liquidation
Corporation, Thompson-Hysell Engineers, Inc. ("T-H Engineers") and us. This
complaint was filed by Phillip Kirk Delamare and his wife Catherine A. Delamare
who are shareholders of T-H Engineers, a corporation in which the Defendant
Shareholders were majority shareholders and directors. The complaint alleges,
among other things, that Thompson-Hysell was an alter ego of T-H Engineers and
as such, when we acquired substantially all of the assets and assumed
substantially all of the liabilities of Thompson-Hysell, the plaintiffs were
fraudulently deprived of any benefit derived from their ownership interest in
the shares of T-H Engineers. The complaint further alleges that the Defendant
Shareholders breached their fiduciary duties as directors and majority
shareholders of T-H Engineers and that they conspired with Thompson-Hysell and
us to defraud T-H Engineers of its assets and to exclude plaintiffs from any
benefit derived from the acquisition. The plaintiffs in this action are seeking
injunctive relief and general monetary damages in an unspecified amount, special
damages in the amount of $600,000, interest, costs and punitive and exemplary
damages. The trial, which was previously set to occur on April 17, 2000, has
been continued until July 17, 2000. A motion is currently pending to have TKCI
dismissed as defendants in this litigation. We believe that the claim made
against us is completely without merit and intend to vigorously defend ourselves
in this action.
Item 2. Changes In Securities and Use of Proceeds
On July 12, 1999, our Registration Statement on Form S-1 (333-77273) pertaining
to our initial public offering of 1,500,000 shares of our common stock, par
value $0.001 per share, was declared effective by the Securities and Exchange
Commission. The managing underwriters in the offering were Wedbush Morgan
Securities.
The offering commenced on July 12, 1999 and closed and terminated on July 15,
1999. The initial public offering price was $9 per share for an aggregate
initial public offering price of $13,500,000.
Of the $13,500,000 in gross proceeds raised in connection with the offering, (i)
$1,080,000 was paid to the managing underwriter in connection with underwriting
discounts and expenses and (ii) approximately $747,000 was paid by us in
connection with expenses, including legal, accounting, printing, filing and
other fees, in connection with the offering. Of the remaining net proceeds, we
have paid cash of $4,295,000 in connection with the acquisition of substantially
all of the assets and assumption of substantially all of the liabilities of
Thompson-Hysell; paid off the outstanding line of credit balance of $4,731,000;
and repaid debts to related parties of $1,407,000 to Aram Keith, our Chief
Executive Officer and Chairman of the Board, $703,000 to Walter Cruttenden III,
one of our directors, $165,000 to Floyd Reid, a former director and executive
officer, and an aggregate of $372,000 to various other related parties. There
were no other direct or indirect payments to any of our officers or directors,
their associates, ten-percent shareholders or any other affiliate of ours. As of
March 31, 2000, all of the proceeds from the initial public offering have been
applied.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits
Number Description
-------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
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.
Dated: May 12, 2000 THE KEITH COMPANIES, INC.
By: /s/ Aram H. Keith
-----------------------------------
Aram H. Keith
Chairman of the Board of Directors
and Chief Executive Officer
By: /s/ Gary C. Campanaro
-----------------------------------
Gary C. Campanaro
Chief Financial Officer and Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 585,000 1,569,000
<SECURITIES> 0 0
<RECEIVABLES> 8,695,000 7,788,000
<ALLOWANCES> (825,000) (612,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,604,000 14,283,000
<PP&E> 8,706,000 8,456,000
<DEPRECIATION> (4,199,000) (3,920,000)
<TOTAL-ASSETS> 23,919,000 23,661,000
<CURRENT-LIABILITIES> 7,821,000 7,070,000
<BONDS> 0 0
0 0
0 0
<COMMON> 12,339,000 12,322,000
<OTHER-SE> 1,175,000 514,000
<TOTAL-LIABILITY-AND-EQUITY> 23,919,000 23,661,000
<SALES> 12,419,000 8,969,000
<TOTAL-REVENUES> 12,419,000 8,969,000
<CGS> 8,382,000 5,914,000
<TOTAL-COSTS> 8,382,000 5,914,000
<OTHER-EXPENSES> 2,660,000 1,877,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 107,000 260,000
<INCOME-PRETAX> 1,270,000 918,000
<INCOME-TAX> 508,000 389,000
<INCOME-CONTINUING> 762,000 529,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 762,000 529,000
<EPS-BASIC> .15 .14
<EPS-DILUTED> .15 .13
</TABLE>
