As filed with the Securities and Exchange Commission September 19, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 10549
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AMENDMENT NO. 1
TO
FORM 10
GENERAL FORMS FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
THE PBSJ CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1494168
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2001 N.W. 107th AVENUE
MIAMI, FLORIDA 33172
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(305) 592-7275
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(REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock ($.0033 Par Value)
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(TITLE OF CLASS)
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<PAGE>
ITEM 1. BUSINESS
GENERAL
The PBSJ Corporation and its subsidiaries is an employee-owned
professional services organization that provides a broad range of planning,
design and construction services to a variety of public and private sector
clients. Our four major service disciplines are transportation, environmental,
civil engineering and construction management, representing 37%, 25%, 27% and
11%, respectively, of our fiscal 1999 revenues. We utilize our expertise in
engineering, planning, management, environmental, architectural and surveying
disciplines to solve complex problems in each of these basic service areas. We
provide these services through our staff of over 2,200 professional, technical
and support personnel. We believe our multi-disciplinary approach to problems
facilitates our ability to effectively meet the needs of our clients.
Since our founding in 1960, we have grown from a small civil
engineering practice with operations only in South Florida to a national design
firm offering a full range of engineering, architectural and planning services
throughout the United States. Evidencing this, in 1999, ENGINEERING NEWS-RECORD
ranked PBSJ 12th on its list of the largest 100 pure design firms (traditional
design firms with no construction capability) in the United States, based on
design revenue. During fiscal 1999, we provided services to approximately 3,000
clients in the public and private sectors. Approximately 95% of our clients had
previously used our services. In fiscal 1999, 66% of our net revenues were
derived from the public sector and 34% from the private sector.
We have built an organization composed of highly skilled professionals
and top level technical and administrative personnel with a wide variety of
scientific, engineering, architectural and management resources. These resources
enable us to develop and implement innovative long-term solutions to the complex
problems of our clients, many of which are the subject of public concern and
extensive governmental regulation. We assist our clients in responding to these
concerns, in obtaining governmental permits and approvals and in complying with
applicable laws and regulations.
We began operations on February 29, 1960. Our holding company, The PBSJ
Corporation, was incorporated in 1973. We engage in business primarily through
two wholly-owned subsidiaries: Post, Buckley, Schuh & Jernigan, Inc., a Florida
corporation (through which we provide the majority of our engineering,
architectural and planning services) and PBS&J Construction Services, Inc.
(through which we provide the majority of our construction management services).
In addition, we have two other active subsidiaries: Seminole Development
Corporation (through which we hold title to all our real property); and Post,
Buckley International, Inc. (through which we provide services to our
international clients). In this registration statement, all references to "PBSJ"
or "our" operations refer to The PBSJ Corporation and its wholly-owned
subsidiaries and the activities of these entities on a consolidated basis. Our
executive offices are located at 2001 N.W. 107th Avenue, Miami, Florida.
ACQUISITIONS
Throughout our history, PBSJ has made selected strategic acquisitions
to increase the firm's geographic presence and to enhance its technical
capabilities. In the last eight years, we have used acquisitions to
significantly expand our operations in the West and Central regions and to
solidify our operations in the Eastern region. Once we acquire a firm it is
integrated and consolidated into our existing operations and the subsidiary
ceases to exist as a separate operating entity.
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o November 1992 - Church Engineering and Church Engineering of
Nevada. Our acquisition of Church Engineering gave us a stronger
presence in California and introduced the firm to Nevada and the
Intermountain region. Through Church's participation in the
Corridor Design Management Group joint venture, we began our
long-running relationship with the Transportation Corridor
Agencies in California, while Church Engineering's experience in
and solid reputation for land development services and public
works allowed us to launch operations in the Las Vegas market.
o June 1995 - The Nelson Corporation.
The acquisition of The Nelson Corporation, a 100-member firm,
helped us establish a solid foothold in the Dallas, Texas area.
Nelson's area of specialty included land development, surveying,
planning and landscape architecture.
o July 1996 - Coastal Environmental Services, Inc.
Coastal Environmental gave us world-class environmental
capabilities in the specialized fields of biostatistics,
ecological risk assessment, and watershed management. This highly
regarded firm had 50 employees working on projects in the Hudson
River, Chesapeake Bay, and Tampa Bay areas.
o August 1996 - Frank Coleman and Associates, Inc.
Our acquisition of Frank Coleman and Associates, an established
North Carolina firm, strengthened our capabilities in the growing
Raleigh and Charlotte communities. Coleman's operations primarily
involved transportation projects, but also supported general civil
engineering and surveying assignments.
o August 1997 - Espey, Huston & Associates, Inc.
Our acquisition of EH&A, a 374-person firm headquartered in
Austin, Texas with offices in Houston, Dallas, Nashville,
Cincinnati, Charlotte and Newport News, significantly advanced our
strategic program of geographic and technical diversification.
EH&A's strong environmental engineering, ecological science, and
cultural resources capabilities rounded out the land development
services that PBSJ already offered in Texas. The EH&A acquisition
also provided PBSJ with a nationally recognized presence in the
aviation services market.
o December 1997 - Kercheval and Associates, Inc.
Our acquisition of Kercheval, a 100-person firm headquartered in
San Diego, California with offices in California, Nevada and
Alabama, strengthened our capabilities in Southern California and
provided a strong entry into the telecommunications market.
Kercheval's operations primarily involved transportation,
telecommunications and civil and structural engineering projects.
Through our strategic acquisitions, PBSJ has developed solid technical
expertise, in both core services and emerging markets, and a nationwide presence
that allows us to respond to clients in our "local" markets with the advantages
of a national firm. Although we do not currently have any probable plans with
respect to any additional material acquisitions, we will continue to evaluate
possible strategic acquisitions of engineering or related service businesses in
connection with our plan to diversify our sources of business and the geographic
areas in which we operate.
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SERVICES
The following table sets forth our revenues, in thousands, from each of
our four basic service disciplines for each of the three years ended September
30, 1999, 1998 and 1997, and the approximate percentage of our total revenues
attributable to each service discipline:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ----------------------
(DOLLARS IN THOUSANDS)
REVENUES % REVENUES % REVENUES %
------------- ------ -------------- ---- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Transportation $ 87,464 37% $ 82,651 37% $ 63,878 37%
Environmental 61,278 25 51,377 23 37,982 22
Civil Engineering 65,336 27 62,547 28 50,067 29
Construction Management 27,339 11 26,806 12 20,717 12
</TABLE>
TRANSPORTATION
INDUSTRY OVERVIEW
The need to modernize and upgrade the transportation infrastructure in
the United States has been a source of continued business for us through the
last ten years. Fueling the initial growth in this market was the Intermodal
Surface Transportation Efficiency Act ("ISTEA") of 1991. ISTEA established
funding for mass transportation and public transit programs, introduced the
Congestion Mitigation and Air Quality program to provide funding for areas that
have not yet met air quality standards under the Clean Air Act to meet air
quality deadlines and included funding for alternative-fuel transit buses. In
1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st
Century ("TEA-21"). TEA-21 earmarks $218 billion for highway and transit
projects over the next six years. Although a U.S. federal program, TEA-21
provides state and local governments considerable flexibility in project
selection.
OUR SERVICES
Our activities in this area generally involve planning, design, right
of way acquisitions, development and design of intelligent transportation
services and program construction management services for highways, including
interstate, primary, and arterial roads and toll facilities, bridges, transit,
airports and port facilities. We currently serve 15 state departments of
transportation throughout the U.S. and three foreign agencies.
Our Program Management group provides many of our governmental clients
the necessary resources to manage large infrastructure programs from concept
through construction. Our services include planning, programming, and contract
support. During production we develop design standards, manage projects, perform
design reviews and develop cost estimates. We (1) facilitate environmental
permitting, by advising clients of the permitting requirements and assisting in
the completion of the permit applications and the resolution of any issues
raised by the applicable regulatory agency issuing the permit, (2) coordinate
right-of-way administration and (3) provide construction management oversight.
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During 1999, projects in our Transportation Division included:
o Designing three segments for the reconstruction of 11.4 miles of
interstate highway for the Florida Department of Transportation.
o Overseeing all project planning and pre-construction requirements
and activities and providing bond support services for the Florida
Turnpike's capital improvement program including coordinating
acquisition of the necessary rights-of-way, and reviewing
construction drawings and cost estimates.
o Overseeing the management of the York County (South Carolina) $100
million transportation capital improvement program.
o An on-call three-year contract with the South Carolina Department
of Transportation to provide surveying, planning and design
services for various state highway projects.
o Providing engineering services at the Port of Miami for the
renovation of berthing facilities.
o Providing design services for the construction of various runways
at the Cincinnati/Northern Kentucky International Airport.
ENVIRONMENTAL
INDUSTRY OVERVIEW
Over the past twenty-five years, significant environmental laws at the
federal, state and local levels have been enacted in response to public concern
over the environment. Those laws and their implementation through regulation
affect numerous industrial and governmental actions and form a key market driver
for the products and services of our Environmental Division.
Two of these federal environmental water regulations, The Safe Drinking
Water Act of 1974 and the Safe Drinking Water Act Amendments of 1996, have
brought substantial changes to the regulation and financing of water systems.
Pursuant to these amendments, Congress has authorized nearly $9.6 billion
through 2003 to be allotted to states to create low interest loan funds for
installing and upgrading drinking water treatment facilities. The Federal Water
Pollution Control Act of 1972 also established a system of standards, permits
and enforcement procedures for the discharge of pollutants from industrial and
municipal wastewater sources. According to the EPA's survey of wastewater and
sewage treatment needs issued in 1996, as much as $139.5 billion will be needed
for construction and upgrade of wastewater treatment facilities by the year
2016.
OUR SERVICES
Our Environmental Division focuses on the delivery of planning, design
and construction services for private and public sector clients. Included in
this division's services are:
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Air Quality Management Flood Insurance Studies
Chemical Testing Analysis Hazardous and Solid Waste Management
Cultural Resources Assessments Information Solutions
Ecological Studies Wastewater Treatment
Environmental Toxicology Analysis Water Resources
Flood Control Facility Planning and Design Water Supply and Treatment
During 1999, projects in our Environmental Division included:
o A multi-year contract with the Federal Emergency Management Agency
("FEMA") to serve as Flood Map Production Coordination Contractor
for FEMA's Central Region V (Illinois, Indiana, Michigan, Ohio,
Minnesota and Wisconsin), Central Region VI (Texas, Oklahoma,
Arkansas, Louisiana and New Mexico) and Central Region VII
(Nebraska, Kansas, Idaho and Missouri).
o Providing support to the Water Replenishment District of Southern
California, including completion of a water resources master plan
concept report and assisting in the implementation of a $60
million capital improvements program.
o A contract with the Dallas/Fort Worth International Airport to
identify the boundaries of adjoining wetlands, obtain Clean Water
Act permits and develop off-site mitigation strategies in
conjunction with FAA requirements to remove wetlands that pose a
potential safety hazard.
o Designing the Washington Suburban Sanitary Commission's
20-million-gallons-per-day advanced Seneca Wastewater Treatment
Plant in Montgomery County, Maryland which utilizes biological
nutrient removal.
CIVIL ENGINEERING
INDUSTRY OVERVIEW
A strong and long-running national economic expansion has fueled demand
for services from our Civil Engineering Division. As private sector companies
have spent increased dollars on corporate relocations and office, commercial,
industrial and residential development and public sector agencies have allocated
additional funds to replace aging infrastructure and revitalize their urban
cores, the demand for engineering and design services has grown. One example of
this growth is the increase in design revenues generated by the top 500 design
firms. According to Engineering News-Record, in 1999 ENR's top 500 design firms
generated $33.2 billion in design revenue from U.S.-based projects, up 15.3%
from the $28.8 billion generated by these same firms in 1998. By offering a wide
range of design and engineering services, PBSJ believes it is well positioned to
serve these companies.
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OUR SERVICES
Our Civil Engineering Division provides general civil engineering
services to public and private clients. Included in these services are (1) site
suitability studies, (2) master infrastructure engineering and planning, (3)
site engineering, (4) regulatory permitting and (5) disaster planning and
response. Within our Civil Engineering Division, we also have three additional
service groups: Surveying Engineering, Planning and Landscape Architecture, and
Architecture.
Our Surveying Engineering group provides clients GPS-based surveying,
mobile surveying for roadways and other hard surfaces, land platting,
right-of-way mapping, construction layout and control, boundary and topographic
surveys, control networks, tunnel surveying, commercial land title surveys,
hydrographic surveying, movement detection and deformation surveys, and rail and
mass transit surveys.
Our Planning and Landscape Architecture group provides clients master
land use planning, site planning, urban and regional planning, urban design,
environmental planning, cultural resource identification, and landscape
architecture.
Our Architecture group provides clients architectural design, space
planning and interior design, as well as electrical, mechanical and structural
engineering services.
During 1999, projects in our Civil Engineering Division included:
o Completing the master infrastructure and site engineering for
Universal Studio's Portofino Bay Hotel along with regulatory
permitting and construction phase services.
o Providing engineering services to Cagles Poultry, one of the
largest poultry production and processing companies in the U.S.,
for feed mills, hatcheries and processing plants across North
Georgia.
o Providing engineering and surveying services for a 200 acre
commercial subdivision in Henderson, Nevada.
o Providing master planning, urban design and landscape architecture
services for the City of Decatur and Georgia's MARTA Plans and
Church Street Renovation project.
o Completing the mechanical, electrical, plumbing, structural and
civil engineering design of the new Tri-Cities Regional Airport
Concourse Expansion in Tennessee.
CONSTRUCTION MANAGEMENT
INDUSTRY OVERVIEW
The demand for our construction management services has also been
fueled by the legislation and industry trends that are driving the growth in our
Transportation and Environmental Divisions, including ISTEA and TEA-21. These
trends have resulted in a large number of infrastructure projects throughout the
U.S. which are subject to increasingly complex governmental regulations. The
role of the construction manager has become increasingly important to the
success of these projects, requiring a new level of versatility and a wide range
of skills. Both public and private sector entities are under pressure to
complete
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these projects at accelerated schedules, resulting in a myriad of project
delivery systems. With limited in-house staff, these entities must rely on
experienced construction managers to complete the project on time and within
budget.
OUR SERVICES
In the area of construction management, we provide a wide range of
services as an agent for our clients, including contract administration,
inspection, field testing, scheduling/estimating, instituting project controls
and quality assessment. Although we do not construct or build any projects, we
may act as the program director of a project whereby on behalf of the owner of
the project, we provide scheduling, cost estimating and construction observation
services for the project, or our services may be limited to providing
construction consulting.
During 1999, projects in our Construction Management Division included:
o Providing construction engineering and inspection services to the
Departments of Transportation in Alabama, Colorado, Georgia,
Florida and North Carolina.
o Providing construction administration to the Clark County (Nevada)
Department of Public Works for the Desert Inn Detention Basin
project in Las Vegas, Nevada.
o Providing comprehensive services, including cost estimating,
scheduling and construction claims reviews, to the school boards
of Miami-Dade County and Broward County, Florida.
o Providing construction-related services to BellSouth throughout
Florida and Georgia, including quality assurance inspections,
verification of contractor's invoices, damage inspections and
responding to natural disasters.
OTHER SERVICES
In addition to our four national service disciplines, we have developed
a National Information Solutions Division to address the digital infrastructure
needs of our clients. Our services include: training, database analysis, system
programming, land planning and design and geographic information systems. Recent
projects which have allowed our information solutions to address client needs
include:
o Continued development of the Florida Department of Transportation
Turnpike District's Turnpike Asset Management System, which will
utilize an interactive Internet-based mapping application.
o Implementing a Geographic Permit Management and Compliance System
for the City of Tucson, Arizona that will track all environmental
permit requirements and water quality monitoring data.
CLIENTS
Through our four national service disciplines, we provide our services
to a broad range of clients, including state, local and municipal agencies, the
Federal government and private sector businesses. Our state and local government
clients include approximately 15 state departments of transportation, water
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utilities, local power generators, waste water treatment agencies, environmental
protection agencies, schools and colleges, law enforcement, judiciary, hospitals
and healthcare providers. We provide services to Federal agencies, including the
Army Corps of Engineers, Environmental Protection Agency, Navy, Air Force, Coast
Guard, United States Postal Service, Federal Emergency Management Agency and
Department of Energy, and local entities. Our contracts with federal, state and
local entities are subject to various methods of determining fees and costs. See
"Contract Pricing and Terms of Engagement" for a further discussion of our
pricing arrangements with governmental clients.
Our private sector clients include retail and commercial,
entertainment, railroad, petro-chemical, food, telecommunications, oil and gas,
power, semi-conductor, transportation, technology, public utility, mining and
forest products entities. The table below indicates the revenue generated, by
client type, for each of the three years ended September 30, 1999, 1998 and
1997.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic
Local and state agencies......... $155,245 64% $138,496 62% $107,039 62%
Federal agencies................. 4,828 2 8,935 4 6,906 4
Private businesses............... 79,668 33 71,482 32 55,246 32
International...................... 1,676 1 4,468 2 3,453 2
-------- --- -------- --- -------- ---
Total............................ $241,417 100% $223,381 100% $172,644 100%
======== === ======== === ======== ===
</TABLE>
In 1999, we derived approximately 15% of our net earned revenue from
various districts and departments of the Florida Department of Transportation
(the "FDOT") under numerous contracts. While we believe the loss of any
individual contract would not have a material adverse effect on our results of
operations and would not adversely impact our ability to continue work under our
other contracts with the FDOT, the loss of all the FDOT contracts would have a
material adverse effect on our results of operations by causing a material
decrease in our revenues and profits.
INTERNATIONAL BUSINESS
During fiscal 1999, revenues from our international operations were
approximately $1.7 million, or less than 1% of our total revenues. We currently
have on-going projects in three countries (Venezuela, Argentina, and India).
Although we do not currently have any plans to expand our international
operations, we anticipate that our international operations will continue at
this same level.
MARKETING
Marketing activities are conducted by key operating and executive
personnel, including specifically assigned business development personnel, as
well as through professional personnel who develop and maintain new and existing
client relationships. Our continued ability to compete successfully in the areas
in which we do business is largely dependent upon aggressive marketing, the
development of information regarding client requirements, the submission of
responsive cost-effective proposals and the
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successful completion of contracts. Information concerning private and
governmental requirements is obtained, during the course of contract
performance, from formal and informal briefings, from participation in
activities of professional organizations, and from literature published by the
government and other organizations.
CONTRACT PRICING AND TERMS OF ENGAGEMENT
We earn our revenues for the various types of services we provide
through cost-plus, time-and-materials and fixed price contracts, and contracts
which combine any of the methods.
COST-PLUS CONTRACTS. Under our cost-plus contracts, we charge clients
negotiated rates based on our direct and indirect costs. Labor costs and
subcontractor services are the principal components of our direct costs. Federal
Acquisition Regulations, which are applicable to all Federal government
contracts and which are partially incorporated in many local and state agency
contracts, limit the recovery of certain specified indirect costs or contracts
subject to such regulations. In negotiating a cost-plus contract, we estimate
all recoverable direct and indirect costs and then add a profit component, which
is either a percentage of total recoverable costs or a fixed negotiated fee, to
arrive at a total dollar estimate for the project. We receive payment based on
the total actual number of labor hours expended. If the actual total number of
labor hours is lower than estimated, the revenues from that project will be
lower than estimated. If the actual labor hours expended exceed the initial
negotiated amount, we must obtain a contract modification to receive payment for
such overage. During fiscal 1999, approximately 65% of our contracts were
cost-plus contracts, primarily with federal, state and local government
agencies.
Cost-plus contracts covered by Federal Acquisition Regulations and
certain state and local agencies require an audit of actual costs and provide
for upward or downward adjustments if actual recoverable costs differ from
billed recoverable costs. There are no open or pending audits by federal or
state authorities as of August 25, 2000. The result of our last audit at
September 30, 1999 resulted in no adjustments. Our contracts with governmental
entities, once executed, are not subject to renegotiation of profits at the
election of the government, however, they are subject to continued funding. Our
contracts generally provide that we receive our profit on a periodic basis
through the course of the project. Therefore, if a governmental agency fails to
fund for a successive year, our profit will have been proportionally received as
recognized.
TIME-AND-MATERIALS CONTRACTS. Under our time-and-materials contracts,
we negotiate hourly billing rates and charge our clients based on actual time
expended. In addition, clients reimburse us for the actual out-of-pocket costs
of materials and other direct incidental expenditures incurred in connection
with performing the contract. Our profit margins on time-and-materials contracts
fluctuate based on actual labor and overhead costs directly charged or allocated
to contracts compared with negotiated billing rates. During fiscal 1999,
approximately 20% of our contracts were time-and-materials contracts, primarily
with private sector clients.
FIXED-PRICE CONTRACTS. Under our fixed-price contracts, clients pay us
an agreed sum negotiated in advance for the specified scope of work. Under
fixed-price contracts, we make no payment adjustments if we over-estimate or
under-estimate the number of labor hours required to complete the project,
unless there is a change of scope in the work to be performed. Accordingly, our
profit margin will increase to the extent the number of labor hours and other
costs are below the contracted amounts. The profit margin will decrease and we
may realize a loss on the project if the number of labor hours required and
other costs
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exceed the estimate. During fiscal 1999, approximately 15% of our contracts were
fixed-price contracts, primarily with private sector clients.
COMPETITION
We face active competition in all areas of our business. As we provide
a wide array of engineering, architectural, planning and construction management
services to companies in various industries throughout the United States, we
encounter a different group of competitors in each of our markets. Our
competitors include (1) national and regional design firms like PBSJ that
provide a wide range of design services to clients in all industries, including
CH2M Hill and Parsons Brickenhoff, (2) industry specific firms that provide
design as well as other services to customers in a specific industry, for
example environmental firms such as Montgomery Watson, Camp Dresser and McGee,
Inc., and (3) local firms that provide some or all of our services in one of our
markets. Some of our competitors are larger, more diversified firms having
substantially greater financial resources and larger professional and technical
staffs than ours. Competition for major contracts is frequently intense and may
entail public submittals and multiple presentations by numerous firms seeking to
be awarded the contract. The extent of competition which we will encounter in
the future will vary depending on changing customer requirements in terms of
types of projects and technological developments. It has been our experience
that the principal competitive factors for the type of service business in which
we engage are a firm's demonstrated ability to perform certain types of
projects, the client's own previous experience with competing firms, and the
firm's size and financial condition and the cost of the particular proposal.
No one firm currently dominates a significant portion of the sectors in
which we compete. Given the expanding demand for some of the services provided
by PBSJ, it is likely that additional competitors will emerge. At the same time,
consolidation continues to occur in certain of the sub-segments of the industry
in the United States , including the environmental-focused firms, due to
mergers.
We believe that we will retain the ability to compete effectively with
other firms that provide similar services by continuing to offer a broad range
of high-quality consulting and environmental, transportation, and engineering
and construction management services through our network of offices. Among other
things, the wide range of expertise which we possess permits us to remain
competitive in obtaining government contracts despite shifts in governmental
spending emphasis. Our multi-disciplinary capabilities enable us to compete more
effectively for clients whose projects require that the expertise of
professionals in a number of different disciplines be brought to bear in the
problem solving effort. We believe that our ability to offer our services over a
large part of the United States is a positive factor in enabling us to attract
and retain clients who have a need for our services in different parts of the
country.
BACKLOG
Our backlog for services as of June 30, 2000 was estimated to be
approximately $238.5 million. We define backlog as contracted task orders less
previously recognized revenue on such task orders. U.S. government agencies, and
many state and local governmental agencies, operate under annual fiscal
appropriations and fund various contracts only on an incremental basis. Our
ability to realize revenues from our backlog depends on the availability of
funding for various federal, state and local government agencies.
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A majority of our customer orders or contract awards and additions to
contracts previously awarded are received or occur at random during the year and
may have varying periods of performance. The comparison of backlog amounts on
the same date in successive years is not necessarily indicative of trends in our
business or future revenues.
The major components of our operating costs are payroll and
payroll-related costs. Since our business is dependent upon the reputation and
experience of our personnel and adequate staffing, a reasonable backlog is
important for the scheduling of operations and for the maintenance of a
fully-staffed level of operations.
REGULATION
Compliance with federal, state and local regulations which have been
enacted or adopted relating to the protection of the environment is not expected
to have any material effect upon the capital expenditures, earnings and
competitive position of PBSJ.
PERSONNEL
As of July 31, 2000, we employed 2,330 persons. Most of our employees
are professional or technical personnel having specialized training and skills,
including engineers, architects, analysts, scientists, management specialists,
technical writers and skilled technicians. Although many of our personnel are
highly specialized in certain areas and while there is a nationwide shortage of
certain qualified technical personnel, we are not currently experiencing any
material difficulty in obtaining the personnel we require to perform under our
contracts. We believe that our future growth and success will depend, in large
part, upon our continued ability to attract and retain highly qualified
personnel. We believe our employee relations to be good.
LIABILITIES AND INSURANCE
When we perform services for our clients, we can become liable for
breach of contract, personal injury, property damage and negligence. Such claims
could include improper or negligent performance or design, failure to meet
specifications and breaches of express or implied warranties. Our clients often
require us to contractually assume liabilities for damage or personal injury to
the client, third parties and their property and for fines and penalties.
Because our projects are typically large enough to affect the lives of many
people, the damages available to a client or third parties are potentially large
and could include punitive and consequential damages. For example, our
transportation projects involve services that affect not only our client, but
also many end users of those services.
We seek to protect PBSJ from potential liabilities by obtaining
indemnification, where possible, from our public and private sector clients.
However, even when we obtain such indemnification, it is generally not available
if we fail to satisfy specified standards of care in performing our services or
if the indemnifying person has insufficient assets to cover the liability.
Therefore, we also seek to protect PBSJ by maintaining a full range of insurance
coverage, including worker's compensation, general and professional liability
(including pollution liability) and property coverage. Our professional
liability coverage is on a claims made basis, while the rest of our insurance
coverage is on an occurrence basis. Our professional liability insurance
provides for annual coverage of up to $30 million with an annual deductible of
$1.5 million. Based upon our previous experience with such claims and lawsuits,
we believe our insurance coverage is adequate for all our present operational
activities, although there can be no
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assurances that such coverage will prove to be adequate in all cases. A
successful claim or claims in an amount in excess of our insurance coverage for
which there is not coverage could have a material adverse effect on our results
of operation.
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ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data as of
and for the years ended September 30, 1999, 1998, 1997, 1996 and 1995 and for
the nine months ended June 30, 2000 and 1999. The financial data for each of the
fiscal years has been derived from, and is qualified by reference to, our
audited financial statements which PricewaterhouseCoopers LLP, our independent
certified public accountants, have audited. The financial data for the nine
months ended June 30 2000 and 1999 is unaudited. You should read the information
set forth below in conjunction with our consolidated Financial Statements,
including the notes thereto, and Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this
registration statement.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, JUNE 30
--------------------------------------------------------- ---------------------
1999 1998 1997 1996 1995 2000 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Engineering fees $ 241,417 $ 223,381 $ 172,644 $ 143,731 $ 130,903 $ 194,274 $ 176,771
Net earned revenues 180,637 167,133 131,423 110,080 101,255 146,789 132,174
Net income 5,446 4,474 4,000 3,363 3,343 6,004 4,036
Common stock per share data:
Basic and diluted earnings per share $ 2.87 $ 2.40 $ 2.16 $ 1.78 $ 1.77 $ 3.16 $ 2.13
Weighted average shares of common
stock outstanding 1,896,533 1,861,022 1,852,051 1,892,996 1,889,799 1,899,759 1,896,533
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital $ 31,721 $ 20,545 $ 19,186 $ 14,802 $ 14,280 $ 27,412
Total assets 103,835 96,425 83,457 63,601 56,817 113,200
Long-term debt (less current
portion) 13,337 8,589 11,064 3,414 3,708 13,065
Common stockholders' equity $ 45,270 $ 37,613 $ 31,508 $ 27,782 $ 25,328 $ 44,448
Cash dividends per common share -- -- -- -- -- --
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis explains our general financial
condition, changes in financial condition and results of operations as a whole
including:
o Factors affecting our business
o Our revenues and profits
o Where our revenues and profits came from
o Why those revenues and profits were different from year to year
o Where our cash came from and how it was used
o How all of this affects our overall financial condition
OVERVIEW
The PBSJ Corporation and its subsidiaries is an employee-owned
professional services organization that provides a broad range of planning,
design and construction services to a variety of public and private sector
clients. Our four major service disciplines are transportation, environmental,
civil engineering and construction management, representing 37%, 25%, 27% and
11%, respectively, of our fiscal 1999 revenues. We utilize our expertise in
engineering, planning, management, environmental, architectural and surveying
disciplines to solve complex problems in each of these basic service areas. We
provide these services through our staff of over 2,200 professional, technical
and support personnel. We believe our multi-disciplinary approach to problems
facilitates our ability to effectively meet the needs of our clients.
Since our founding in 1960, we have grown from a small civil engineering
practice with operations only in South Florida to a national design firm
offering a full range of engineering, architectural and planning services
throughout the United States. Evidencing this, in 1999, ENGINEERING NEWS-RECORD
ranked PBSJ 12th on its list of the largest 100 pure design firms in the United
States, based on design revenue. During fiscal 1999, we provided services to
approximately 3,000 clients in the public and private sectors. Approximately 95%
of our clients had previously used our services. In fiscal 1999, 66% of our net
revenues were derived from the public sector and 34% from the private sector.
We began operations on February 29, 1960. Our holding company, The PBSJ
Corporation, was incorporated in 1973. We engage in business primarily through
two wholly-owned subsidiaries: Post, Buckley, Schuh & Jernigan, Inc., a Florida
corporation (through which we provide the majority of our engineering,
architectural and planning services) and PBS&J Construction Services, Inc
(through which we provide the majority of our construction management services).
In addition, we have two other active subsidiaries: Seminole Development
Corporation (through which we hold title to all our real property); and Post,
Buckley International, Inc. (through which we provide services to our
international clients).
On August 7, 1997, we acquired all of the outstanding capital stock of
Espey, Huston & Associates, Inc., a Texas corporation ("EH&A"). Our acquisition
of EH&A, a 374-person firm headquartered in
15
<PAGE>
Austin, Texas with offices in Houston, Dallas, Nashville, Cincinnati, Charlotte
and Newport News, significantly advanced our strategic program of geographic and
technical diversification.
On December 1, 1997, we acquired all of the outstanding capital stock of
Kercheval and Associates, Inc., a California corporation ("Kercheval"). Our
acquisition of Kercheval, a 100-person firm headquartered in San Diego,
California with offices in California, Nevada and Alabama strengthened our
transportation and civil engineering capabilities in Southern California and
provided a strong entry into the telecommunications market.
The operations of EH&A and Kercheval have been integrated and consolidated
into our existing operations.
Effective October 1, 1998, we merged the following subsidiaries into our
wholly owned subsidiary, Post, Buckley, Schuh & Jernigan, Inc., a Florida
corporation: Post, Buckley, Schuh & Jernigan, Inc., a Texas corporation, Post,
Buckley, Schuh & Jernigan, Inc., a California corporation, Post, Buckley, Schuh
& Jernigan, Inc., a Nevada corporation, Post, Buckley, Schuh & Jernigan, Inc. of
Arizona, Coastal Environmental Services, Inc. and Kercheval and effective
January 15, 1999, we merged Survey Resources, Inc. and EH&A into Post Buckley
Schuh and Jernigan.
Over 95% of our revenues are billed on a monthly basis. The remaining
amounts are billed when we reach certain stages of completion as specified in
the contract. Payment terms for accounts receivable and unbilled fees, when
billed, are net 30 days.
RESULTS OF OPERATION
The following table sets forth the percentage of net earned service
revenue represented by the items in our consolidated statements of income:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED
JUNE 30,
1999 1998 1997 2000 1999
-------------- ------------- ------------- -------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Engineering fees 133.6% 133.6% 131.4% 132.4% 133.7%
Direct expenses 33.6 33.6 31.4 32.4 33.7
-------------- ------------- ------------- -------------- -------------
Net earned revenue 100.0 100.0 100.0 100.0 100.0
Costs and Expenses:
Direct salaries 36.7 36.8 38.1 37.1 37.2
Selling, general and
administrative expenses 58.4 58.5 56.8 55.2 57.5
-------------- ------------- ------------- -------------- -------------
Operating income 4.9 4.7 5.1 7.7 5.3
Interest expense (.6) (.7) (.5) (.7) (.7)
Other, net .6 .5 .5 (.3) .4
-------------- ------------- ------------- -------------- -------------
Income before income taxes 4.9 4.5 5.1 6.7 5.0
Income tax expense 1.9 1.8 2.1 2.6 2.0
-------------- ------------- ------------- -------------- -------------
Net income 3.0% 2.7% 3.0% 4.1% 3.0%
============== ============= ============= ============== =============
</TABLE>
16
<PAGE>
A summary of operating results is as follows for each of the years
ended September 30 (dollars in thousands):
1999 1998 1997
--------- --------- ---------
Engineering fees ......... $ 241,417 $ 223,381 $ 172,644
Direct Expenses .......... 60,780 56,248 41,221
--------- --------- ---------
Net Earned Revenue ....... 180,637 167,133 131,423
Costs and Expenses ....... 171,637 159,349 124,761
--------- --------- ---------
Operating Income ......... 9,000 7,784 6,662
Other Income (expenses)... (54) (360) 121
Income tax expense ....... 3,500 2,950 2,783
--------- --------- ---------
Net Income ............... $ 5,446 $ 4,474 $ 4,000
========= ========= =========
SEGMENT RESULTS OF OPERATIONS
Our businesses are reported as four segments, reflecting our management
methodology and structure. The accounting policies of the segments are the same
as those described in the footnotes to the accompanying consolidated financial
statements. We evaluate performance based on operating profit of the respective
segments. In fiscal years 1999, 1998 and 1997, certain expenses such as direct
salaries and general and administrative expenses were allocated to the segments
based on the segments' direct costs as a percentage of total direct costs.
Additionally, in fiscal 1998 and 1997, we estimated our engineering fee
allocations to each segment based on estimates of the segments' historical
engineering fees as a percentage of total engineering fees. The discussion that
follows is a summary analysis of the primary changes in operating results by
segment for 1999 as compared to 1998 and 1998 as compared to 1997 and the nine
months ended June 30, 2000 and 1999.
FISCAL YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
TRANSPORTATION
<TABLE>
<CAPTION>
1999 % Change 1998 % Change 1997
------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Engineering Fees.............................. $87,464 5.8% $82,651 29.4% $63,878
Direct Expenses............................... 22,364 7.5 20,812 36.5 15,251
Net Earned Revenue............................ 65,100 5.3 61,839 27.2 48,627
Costs and Expenses............................ 61,784 5.6 58,482 28.1 45,670
Operating Income.............................. $ 3,316 -1.2% $ 3,357 13.5% $ 2,957
</TABLE>
17
<PAGE>
1999 COMPARED TO 1998
Engineering fees of $87.5 million for 1999 increased 5.8% as compared
to 1998. Higher volumes from continued strength in the transportation services
market and engineering fees from new projects were the primary contributors to
this increase during 1999.
Reported net earned revenue was $65.1 million during 1999 as compared
to $61.8 million in 1998, representing an increase of 5.3%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 34.3% in
1999 as compared to 33.6% in 1998. The increase in direct expenses of 7.5% has a
direct relationship with the increase in engineering fees. In addition, the use
of subconsultants increased during this period.
Reported operating income was $3.3 million as compared to $3.4 million
in 1998, representing a decrease of 1.2%. Operating income as a percentage of
net earned revenue was 5.1% in 1999 as compared to 5.4% in 1998. The decrease is
due to a combination of increased direct salaries and general and administrative
expenses. Direct salaries increased as more employees worked on projects during
1999 as compared to the prior year. General and administrative expenses
increased due to higher expenses relating to the implementation and installation
fees for our information systems upgrade, increased depreciation expense due to
increased purchases and increased insurance expenses relating to our medical
insurance plan. Due to the larger scale of operations for this segment, the
general and administrative expenses had a larger effect on this segment's
operations.
1998 COMPARED TO 1997
Engineering fees for 1998 were $82.7 million compared to $63.9 million
for 1997, which represented a 29.4% increase. Higher engineering fee volumes and
continued growth in the business were the primary reasons for the increase
during 1998. The higher volumes during 1998 primarily related to new projects
from the acquisition of EH&A and Kercheval. Engineering fees from these new
entities represented 16.4% of total engineering fees during fiscal 1998.
Reported net earned revenue was $61.8 million during 1998 as compared
to $48.6 million in 1997, representing an increase of 27.2%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 33.6% in
1998 and 31.4 % in 1997. The increase in direct expenses of 36.5% is due to an
increase in subconsultant expenses and the other direct expenses mentioned above
related to new projects from the EH&A and Kercheval acquisitions. Direct
expenses have a direct relationship with engineering fees. As engineering fees
increase, direct expenses increase to a certain extent. Higher engineering fees
discussed above offset by increased subconsultant expenses were the primary
contributors for the overall 1999 increase compared to 1998.
Reported operating income was $3.4 million as compared to $3.0 million
in 1997, representing an increase of 13.5%. Operating income as a percentage of
net earned revenue was 5.4% in 1998 as compared to 6.1% in 1997. The increase in
operating income is due to higher engineering fees offset by an increase in
direct salaries and general and administrative expenses. Overall, the direct
salaries and general and administrative expenses increased due to additional
monitoring expenses relating to the EH&A and
18
<PAGE>
Kercheval acquisitions. Direct salaries increased as there were more employees
working on transportation projects in 1998 as compared to the prior year
primarily as a result of the acquisition. Additionally, there were increases in
overall general and administrative expenses resulting from the acquisitions such
as rent, telephone, travel, computer, software license, and administrative
payroll and payroll taxes resulting from the additional capacity. Since costs
increased at a higher rate than the engineering fees, the percentage of
operating income to net earned revenue decreased.
CIVIL ENGINEERING
<TABLE>
<CAPTION>
1999 % Change 1998 % Change 1997
------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Engineering Fees........................... $65,336 4.5% $62,547 24.9% $50,067
Direct Expenses............................ 13,840 -12.1 15,750 31.8 11,954
Net Earned Revenue......................... 51,496 10.0 46,797 22.8 38,113
Costs and Expenses......................... 48,813 8.1 45,120 22.8 36,742
Operating Income........................... $ 2,683 60.0% $ 1,677 22.3% $ 1,371
</TABLE>
1999 COMPARED TO 1998
Engineering fees of $65.3 million for 1999 increased 4.5% as compared
to 1998. Higher volumes from continued strength in the civil engineering market,
and engineering fees from new projects were the primary contributors to this
increase during 1999.
Reported net earned revenue was $51.5 million during 1999 as compared
to $46.8 million in 1998, representing an increase of 10%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 26.9% in
1999 as compared to 33.6% in 1998. Direct expenses decreased in 1999 because we
lessened our use of subconsultants as compared to the prior year. As a result,
we used our own technical staff to complete projects, thereby increasing direct
salaries significantly in 1999. Higher engineering fees discussed above and a
decrease in subconsultant expenses were the primary contributors for the overall
1999 increase compared to 1998.
Reported operating income was $2.7 million as compared to $1.7 million
in 1998, representing an increase of 60%. Operating income as a percentage of
net earned revenue was 5.2% in 1999 as compared to 3.6% in 1998. The increase in
operating income for this segment is due to the higher engineering fees as
discussed above offset by increased direct salaries and general and
administrative expenses. The increase in direct salaries was due to more
employees working on projects during 1999 as compared to the prior year. The
increase in direct salaries has a negative effect on the direct expenses as
discussed above. Increased general and administrative costs was primarily due to
the implementation and installation fees for our information systems upgrade,
increased depreciation expense due to increased purchases and increased
insurance expenses relating to our medical insurance plan.
19
<PAGE>
1998 COMPARED TO 1997
Engineering fees for 1998 were $62.5 million compared to $50.1 million
for 1997, which represented a 24.9% increase. Higher engineering fee volumes and
continued growth in the business were the primary reasons for the increase
during 1998. The higher volumes during 1998 primarily related to the acquisition
of new projects. Additionally, our acquisition of EH&A and Kercheval resulted in
slightly higher engineering fees for this segment.
Reported net earned revenue was $46.8 million during 1998 as compared
to $38.1 million in 1997 representing an increase of 22.8%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 33.6% in
1998 as compared to 31.4% in 1997. Due to the acquisition of additional work
from internal growth and the acquisition of EH&A and Kercheval, we increased our
use of subconsultants on projects, thereby causing direct expenses to increase
by 31.8% from 1997 to 1998. Higher engineering fees discussed above offset by
higher subconsultant expenses resulted in increased net earned revenue during
1998.
Reported operating income was $1.7 million in 1998 as compared to $1.4
million in 1997, representing an increase of 22.3%. Operating income as a
percentage of net earned revenue was consistent at 3.6% in 1998 and 1997. The
increase in operating income is due to higher engineering fees offset by an
increase in direct salaries and general and administrative expenses. Overall,
the direct salaries and general and administrative expenses increased due to
additional monitoring expenses relating to the EH&A and Kercheval acquisitions.
Direct salaries increased as there were more employees working on civil projects
in 1998 as compared to the prior year primarily as a result of the acquisitions.
Additionally, there were increases in overall general and administrative
expenses resulting from the acquisitions such as rent, telephone, travel,
computer, software license, and administrative payroll and payroll taxes
resulting from the additional capacity. Since costs increased at a higher rate
than the engineering fees, the percentage of operating income to net earned
revenue decreased.
ENVIRONMENTAL
<TABLE>
<CAPTION>
1999 % Change 1998 % Change 1997
------- -------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Engineering Fees......................... $61,278 19.3% $51,377 35.3% $37,982
Direct Expenses.......................... 15,009 16.0 12,936 42.6 9,070
Net Earned Revenue....................... 46,269 20.3 38,441 33.0 28,912
Costs and Expenses....................... 44,257 20.2 36,830 33.9 27,506
Operating Income......................... $ 2,012 24.9% $ 1,611 14.6% $ 1,406
</TABLE>
20
<PAGE>
1999 COMPARED TO 1998
Engineering fees of $61.3 million for 1999 increased 19.3% as compared
to 1998. Higher volumes from continued strength in the environmental services
sector, and engineering fees from new projects were the primary contributors to
this increase during 1999.
Reported net earned revenue was $46.3 million during 1999 as compared
to $38.4 million in 1998, representing an increase of 20.3%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 32.4% in
1999 as compared to 33.7% in 1998. Direct expenses increased 16% from 1998 to
1999 as a direct result of the increase in engineering fees. Direct salaries
increased in 1999 because we used more of our technical staff on projects rather
than subcontractors. As a result, the percentage of direct expenses to net
earned revenue decreased during 1999. Higher engineering fees discussed above
offset by increased subconsultant expenses were the primary contributors for the
overall 1999 increase compared to 1998.
Reported operating income was $2.0 million in 1999 as compared to $1.6
million in 1998, representing an increase of 24.9%. Operating income as a
percentage of net earned revenue was 4.3% in 1999 as compared to 4.2% in 1998.
The increase in operating income is offset by a combination of increased direct
salaries and general and administrative expenses. Direct salaries increased as
more employees worked on projects during 1999 as compared to the prior year.
General and administrative expenses increased due to increased expenses relating
to the implementation and installation fees for our information systems upgrade,
increased depreciation expense due to increased purchases and increased
insurance expenses relating to our medical insurance plan. Due to the larger
scale of operations for this segment, general and administrative expenses had a
larger effect on this segment's operations.
1998 COMPARED TO 1997
Engineering fees for 1998 were $51.3 million compared to $38.0 million
for 1997, which represented a 35.3% increase. Higher engineering fee volumes and
continued growth in the business were the primary reasons for the increase
during 1998. The higher volumes during 1998 primarily related to new projects
from the acquisition of EH&A and Kercheval. Engineering fees from these new
entities represented 46% of total engineering fees during fiscal 1998.
Reported net earned revenue was $38.4 million during 1998 as compared
to $28.9 million in 1997, representing an increase of 33.0%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 33.7% in
1998 as compared to 31.4% in 1997. Direct expenses increased by 42.6% because we
had to use subconsultants on projects obtained from the acquisitions, as there
was turnover of technical staff in 1998. Due to the increased use of
subconsultants during 1998 and the other direct expenses mentioned above, the
percentage of direct expenses to net earned revenue increased during 1998.
Higher engineering fees discussed above offset by increased subconsultant
expenses were the primary contributors for the overall 1998 increase compared to
1997.
Reported operating income was $1.6 million as compared to $1.4 million
in 1997, representing a increase of 14.6%. Operating income as a percentage of
net earned revenue was 4.2% in 1998 as compared to 4.9% in 1997. The increase in
operating income is due to the higher engineering fees offset
21
<PAGE>
by an increase in direct salaries and general and administrative expenses.
Direct salaries increased slightly as we had more technical staff working on
projects and increased salaries for new technical staff hired to offset the
effects of personnel turnover. Additionally, there were increases in overall
general and administrative expenses resulting from the acquisitions such as
rent, telephone, travel, computer, software license, and administrative payroll
and payroll taxes resulting from the additional capacity. Since costs increased
at a higher rate than the engineering fees, the percentage of operating income
to net earned revenue decreased.
CONSTRUCTION MANAGEMENT
<TABLE>
<CAPTION>
1999 % Change 1998 % Change 1997
------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Engineering Fees......................... $27,339 2.0% $26,806 29.4% $20,717
Direct Expenses.......................... 9,567 41.7 6,750 36.5 4,946
Net Earned Revenue....................... 17,772 -11.4 20,056 27.2 15,771
Costs and Expenses....................... 16,783 -11.2 18,917 27.4 14,843
Operating Income......................... $ 989 -13.2% $ 1,139 22.7% $ 928
</TABLE>
1999 COMPARED TO 1998
Engineering fees of $27.3 million for 1999 increased 2.0% as compared
to 1998. Higher volumes from continued strength in the construction services
discipline, and engineering fees from some projects were the primary
contributors to this increase during 1999.
Reported net earned revenue was $17.8 million during 1999 as compared
to $20.1 million in 1998, representing a decrease of 11.4%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 53.9% in
1999 as compared to 33.6% in 1998. Direct expenses increased due to the increase
in subconsultant expenses and the other direct expenses mentioned above related
to projects obtained from the EH&A and Kercheval acquisitions. The segment had
personnel turnover during 1999 and as a result had to increase our use of
subcontractors. Higher engineering fees discussed above offset by increased
subconsultant expenses were the primary contributors for the overall 1999
increase compared to 1998.
Reported operating income was $1.0 million as compared to $1.1 million
in 1998, representing a decrease of 13.2%. Operating income as a percentage of
net earned revenue was 5.6% in 1999 as compared to 5.7% in 1998. General and
administrative expenses increased due to increased expenses relating to the
implementation and installation fees for our information systems upgrade,
increased depreciation expense due to increased purchases and increased
insurance expenses relating to our medical insurance plan and increased payroll
related expenses due to turnover of administrative personnel. The increase in
costs and expense increased at a higher rate as compared to the engineering fees
as a result of the computer upgrade and turnover of personnel. As a result,
operating income decreased as compared to 1998.
22
<PAGE>
1998 COMPARED TO 1997
Engineering fees for 1998 were $26.8 million compared to $20.7 million
for 1997, which represented a 29.4% increase. Higher engineering fee volumes and
continued growth in the business were the primary reasons for the increase
during 1998. The higher volumes during 1998 primarily related to the acquisition
of new projects resulting from our acquisition of EH&A and Kercheval.
Reported net earned revenue was $20.1 million during 1998 as compared
to $15.8 million in 1997 representing an increase of 27.2%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 33.6% as
compared to 31.3% in 1997. Increased direct expenses are due to the increase in
subconsultant expenses related to the projects. Due to the acquisition of
additional work from internal growth and acquisition of EH&A and Kercheval, we
increased our use of subconsultants on our projects. Higher engineering fees
discussed above offset by higher subconsultant expenses resulted in increased
net earned revenue during 1998.
Reported operating income was $1.1 million as compared to $0.9 million
in 1997, representing an increase of 22.7%. Operating income as a percentage of
net earned revenue was 5.7% in 1998 as compared to 5.9% in 1997. The decrease in
operating income as a percentage of net earned revenue is due to the higher
engineering fees offset by an increase in direct salaries and general and
administrative expenses. Overall, the direct salaries and general and
administrative expenses increased due to additional monitoring expenses relating
to the EH&A and Kercheval acquisitions. Direct salaries increased as there were
more employees working on projects in 1998 as compared to the prior year
primarily as a result of the acquisitions. Additionally, there were increases in
overall general and administrative expenses resulting from the acquisitions such
as rent, telephone, travel, computer, software license, and administrative
payroll and payroll taxes resulting from the additional capacity. As a result,
operating income as a percentage of net earned revenue decreased slightly during
1998. Since costs increased at a higher rate than the engineering fees, the
percentage of operating income to net earned revenue decreased.
CONSOLIDATED RESULTS
OTHER INCOME (EXPENSES):
Other income and expenses primarily consists of interest and dividend
income and interest expense. Other income (expenses) was ($54,000), ($360,000)
and $121,000 for fiscal 1999, fiscal 1998 and fiscal 1997, respectively. The
decrease in other expenses, net during fiscal 1999 was a result of (i) realized
gains of $620,000 on the sale of investments and a decrease of 5% in interest
expense due to lower average borrowings outstanding during fiscal 1999 as
compared to the prior year, offset by (ii) decreases in interest and dividend
income related to investments. The decrease in other income and expenses from
fiscal 1997 to fiscal 1998 was primarily due to increased interest expense as
there were increased borrowings relating to the Kercheval and EH&A acquisitions.
NET INCOME:
Net income was $5.4 million, $4.5 million and $4.0 million for fiscal
1999, 1998 and 1997, respectively. The percentage of net income to net earned
revenue was 3% in fiscal 1999 as compared to 2.7% in fiscal 1998 and 3.0% in
fiscal 1997. The 22% increase in net income in fiscal 1999 was a result of an 8%
increase in engineering fees offset by an 8% increase in direct and general and
administrative
23
<PAGE>
expenses, in addition to a 5% decrease in interest expense and a 28% increase in
other income. Net income increased 12% during fiscal 1998 due to increased
engineering fees and related increased costs, offset by an increase in interest
expense related to the financing of the Kercheval and EH&A acquisitions.
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999
A summary of our operating results is as follows for each of the nine months
ended June 30 (dollars in thousands):
2000 1999
-------- --------
(Unaudited)
Engineering Fees......................... $194,274 $176,771
Direct Expenses.......................... 47,485 44,597
-------- --------
Net Earned Revenue....................... 146,789 132,174
Costs and Expenses....................... 135,367 125,155
-------- --------
Operating Income......................... 11,422 7,019
Operating Expense........................ (1,580) (402)
Income tax expense....................... 3,838 2,581
-------- --------
Net Income............................... $ 6,004 $ 4,036
======== ========
TRANSPORTATION
2000 % Change 1999
------- -------- -------
(Unaudited) (Unaudited)
(Dollars in Thousands)
Engineering Fees.................... $77,426 18.4% $65,405
Direct Expenses..................... 20,784 26.0 16,501
Net Earned Revenue.................. 56,643 15.8 48,904
Costs and Expenses.................. 49,533 7.0 46,307
Operating Income.................... $ 7,110 173.8% $ 2,597
Engineering fees for the nine months ended June 30, 2000 were $77.4
million compared to $65.4 million for 1999, which represented an 18.4% increase.
Higher volume and continued growth in the business, specifically with various
state departments of transportation, were the primary reasons for the increase
during 2000.
Reported net earned revenue was $56.6 million during 2000 as compared
to $48.9 million in 1999, representing an increase of 15.8%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 36.7% in
2000 as compared to 33.7% in 1999. The increase in direct expenses is due to
increased subconsultant expenses
24
<PAGE>
related to growth in engineering fees. Higher engineering fees discussed above
offset by increased subconsultant expenses were the primary contributors for the
overall 2000 increase compared to 1999.
Reported operating income was $7.1 million in 2000 as compared to $2.6
million in 1999, representing an increase of 173.8%. Operating income as a
percentage of net earned revenue was 12.6% in 2000 as compared to 5.3% in 1999.
The increase in operating income is due to higher engineering fees offset by an
increase in direct salaries and general and administrative expenses. Direct
salaries increased due to additional work performed by technical staff relating
to the new project discussed above. General and administrative expenses
increased due to increased payroll due to increases in pay rates and an accrual
of bonuses and insurance expenses relating to our medical plan.
CIVIL ENGINEERING
2000 % Change 1999
------- -------- -------
(Unaudited) (Unaudited)
(Dollars in Thousands)
Engineering Fees..................... $52,492 6.1% $49,496
Direct Expenses...................... 12,099 -3.1 12,487
Net Earned Revenue................... 40,393 9.1 37,009
Costs and Expenses................... 39,753 13.9 34,903
Operating Income..................... $ 640 -69.6% $ 2,106
Engineering fees for the nine months ended June 30, 2000 were $52.5
million compared to $49.5 million for 1999, which represented a 6.1% increase.
Higher volume and continued growth in the business were the primary reasons for
the increase during 2000.
Reported net earned revenue was $40.4 million during 2000 as compared
to $37.0 million in 1999, representing an increase of 9.1%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 30.0% in
2000 as compared to 33.7% in 1999. The decrease in direct expenses is due to the
decreased use of subconsultants and other expense related to the projects.
Additionally, we are treating certain expenses such as travel and other non-
reimbursable expenses as general and administrative expense whereas in the past
these expenses were reimbursable and, is classified as direct expenses.
Reported operating income was $0.6 million in 2000 as compared to $2.1
million in 1999, representing a decrease of 69.6%. Operating income as a
percentage of net earned revenue was 1.6% in 2000 as compared to 5.6% in 1999.
The decrease in operating income is due to higher direct salaries and general
and administrative expenses. Direct salaries increased due to additional work
performed by technical staff. General and administrative expenses increased due
to increases in pay rates and accrual of bonuses and insurance expenses relating
to our medical plan.
25
<PAGE>
ENVIRONMENTAL
2000 % Change 1999
-------- -------- -------
(Unaudited) (Unaudited)
(Dollars in Thousands)
Engineering Fees................... $40,231 -1.0% $40,657
Direct Expenses.................... 7,976 -22.2 10,257
Net Earned Revenue................. 32,254 6.1 30,400
Costs and Expenses................. 31,209 8.2 28,856
Operating Income................... $ 1,045 -32.3% $ 1,544
Engineering fees for the nine months ended June 30, 2000 were $40.2
million compared to $40.6 million for 1999, which represented a 1.0% decrease.
Engineering fees were flat as a result of lack of growth as the segment was
unable to obtain a significant amount of new projects during 2000.
Reported net earned revenue was $32.2 million during 2000 as compared
to $30.4 million in 1999, representing an increase of 6.1%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 24.7% in
2000 as compared to 33.7% in 1999. The decrease in direct expenses is due to the
decrease in subconsultant expenses and other expenses which were reimbursable in
prior years but now are nonreimbursable under the contracts and, therefore, are
treated as general and administrative expenses.
Reported operating income was $1.0 million in 2000 as compared to $1.5
million in 1999, representing a decrease of 32.3%. Operating income as a
percentage of net earned revenue was 3.2% in 2000 as compared to 5.1% in 1999.
The decrease in operating income is due to higher direct salaries and general
and administrative expenses. General and administrative expenses increased due
to increased payroll caused by increases in pay rates and accrual of bonuses and
insurance expenses relating to our medical plan.
CONSTRUCTION MANAGEMENT
1999 % Change 1998
------- -------- -------
(Unaudited) (Unaudited)
(Dollars in Thousands)
Engineering Fees.................... $24,125 13.7% $21,213
Direct Expenses..................... 6,626 23.8 5,352
Net Earned Revenue.................. 17,499 10.3 15,861
Costs and Expenses.................. 14,872 -1.4 15,089
Operating Income.................... $ 2,627 240.3% $ 772
26
<PAGE>
Engineering fees for the nine months ended June 30, 2000 were $24.1
million compared to $21.2 million for 1999, which represented a 13.7% increase.
Higher volume and continued growth in the business were the primary reasons for
the increase during 2000.
Reported net earned revenue was $17.5 million during 2000 as compared
to $15.9 million in 1999, representing an increase of 10.3%. Direct expenses
consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and subcontractor
expenses. Direct expenses, as a percentage of net earned revenue was 37.9% in
2000 as compared to 33.7% in 1999. The increase in direct expenses is due to the
increase in subconsultant expenses and other expense related to the new
projects. Additionally, we are treating certain expenses such as travel and
other non-reimbursable expenses as general and administrative expense whereas in
the past these expenses were reimbursable and, is classified as direct expenses.
Reported operating income was $2.6 million in 2000 as compared to $0.8
million in 1999, representing an increase of 240.3%. Operating income as a
percentage of net earned revenue was 15.0% in 2000 as compared to 4.9% in 1999.
The increase in operating income is due to the higher engineering fees offset by
increases in direct salaries and general and administrative expenses. Direct
salaries increased due to additional work performed by technical staff. General
and administrative expenses increased due to increases in pay rates and accrual
of bonuses and insurance expenses relating to our medical plan.
CONSOLIDATED RESULTS
OTHER EXPENSES:
Other expenses were $1.6 million for the nine months ended June 30,
2000 as compared to approximately $402,000 for the nine months ended June 30,
1999. This 293.0% increase is directly related to an increase in interest rates
and a $946,000 loss on the sale of investments.
NET INCOME:
Net income was $6.0 million for the nine months ended June 30, 2000 as
compared to $4.0 million for the nine months ended June 30, 1999. The 48.8%
increase was a result of internal growth, good economic conditions and improved
production efficiencies, offset by an increase in other expenses.
LIQUIDITY AND CAPITAL RESOURCES
CASH FROM OPERATING ACTIVITIES
In fiscal 1999 net cash used in operating activities totaled $522,000
as compared to net cash provided by operating activities of $6.4 million for
fiscal 1998. This significant change is primarily a result of (i) an increase in
accounts and unbilled receivables which increased as revenues increased and (ii)
an increase in accounts payable primarily attributable to the increase in direct
expenses where the timing of payment is tied to collection of related
receivables.
Net cash provided by operating activities for fiscal 1998 totaled $6.4
million as compared to $8.3 million for fiscal 1997. The most significant factor
affecting this decrease is the growth in accounts and unbilled receivables
primarily due to increased revenues arising from the acquisition of EH&A in
fiscal 1997. The decrease was offset by (i) decreases in accounts payable and
(ii) increases in the provision for deferred taxes.
27
<PAGE>
The unbilled fees account increased $5.6 million from $25.3 million at
September 30, 1999 to $30.9 million at June 30, 2000. Similarly, unbilled fees
increased $4.3 million from $21.0 million at September 30, 1998 to $25.3 million
at September 30, 1999. The increase in unbilled fees during both periods is
directly related to the increase in engineering fees. The number of days
outstanding for unbilled fees was 38 days, 34 days and 44 days at September 30,
1999, 1998, and June 30, 2000, respectively. By comparison, according to PSMJ
Resources, Inc., the average days outstanding for unbilled fees for design firms
of comparable size was 31.3 days in 1999 and 39.0 days in 1998.
For the nine months ended June 30, 2000 and 1999, net cash provided by
operating activities totaled $21.6 million in 2000 as compared to $5.9 million
in 1999. The significant change is a result of an increase in net income, an
increase in accounts payable and accrued expenses and deferred income taxes,
offset by an increase in unbilled fees and a decrease in the allowance for
doubtful accounts.
Net income of $6.0 million for the nine months ended June 30, 2000 was
50% greater than net income of $4.0 million for the same period in 1999 due to
increased efficiencies in production. The increase in accounts payable and
accrued expenses is due to increased growth in the business, higher accruals for
incentive bonuses and company contributions to the employee benefit plan and
higher medical expenses for our medical program. In addition, fluctuations in
accounts payable are related to direct expenses, where the timing of payment to
subcontractors is directly related to the collection of related receivables.
The increase in deferred income taxes is directly related to the
increased timing differences in accounts receivable and unbilled fees.
The allowance for doubtful accounts decreased approximately $2.4
million from $4.9 million at September 30, 1999 to $2.5 million at June 30,
2000. The number of days sales outstanding for accounts receivable was
approximately 54 days, 50 days and 54 days at September 30, 1999 and 1998 and
June 30, 2000, respectively. The allowance was reduced due to improved
collections of our accounts receivable balances over 90 days which decreased 37%
from $10.2 million at September 30, 1999 to $6.5 million at June 30, 2000. This
improvement relates to a decrease in our international activity and better
collections of international project revenue. By comparison, according to PSMJ
Resources, Inc. the average days sales accounts receivables for design firms of
comparable size to us was 73.4 days in 1999 and 67.7 days in 1998.
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities was $7.0 million in fiscal 1999,
comprised principally of purchases of property and equipment. By comparison net
cash used in fiscal 1998 was $8.0 million. The difference was principally due to
the acquisitions made during 1998.
Net cash used in investing activities for the nine months ended June
30, 2000 and 1999 was $6.9 million in 2000 as compared to $6.1 million in 1999.
The increase in the use of cash for investing activities is due to increased
computer equipment purchases and leasehold improvements to various office
locations, offset by the sale of a substantial portion of our mutual fund
portfolio.
28
<PAGE>
CASH FLOW FROM FINANCING ACTIVITIES
Net cash used in financing activities for fiscal 1999 was $5.7 million
as compared to $1.7 million in fiscal 1998. The increase in the cash used by
financing activities is attributable to a net increase in bank borrowings of
$2.6 million, combined with a net increase of $1.3 million in stock financing.
Net cash provided by financing activities for fiscal 1998 was $1.7 million as
compared to $8.9 million in fiscal 1997. The decrease is due to the fact that we
obtained $10 million in notes payable related to the acquisition of EH&A in
fiscal 1997. The decrease is offset by additional borrowings used in the
acquisition of Kercheval in fiscal 1998 and repayments of long-term debt.
Net cash used in financing activities for the nine months ended June
30, 2000 and 1999 was $13.5 million in 2000 as compared to net cash provided by
financing activities of $108,000 in 1999. The increase in the cash used in
financing activities is attributable to a smaller amount of proceeds from the
issuance of our stock coupled with repayment of borrowings. Stock purchases by
employees decreased significantly for the nine months ended June 30, 2000 due to
two items: (i) a reduced number of shares offered and (ii) employees not being
able to purchase stock through our Profit Sharing Plan as was allowed in the
previous year.
CAPITAL RESOURCES
On June 30, 1999, we entered into a new revolving line of credit
agreement. The new revolving line of credit increased the availability of funds
from $12 million to $37 million. The expiration of the new revolving line of
credit is June 30, 2002. The interest rate on the revolving line of credit
ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our
funded debt average ratio is less than 2.5 (5.87%, 6.125% and 7.142% at
September 30, 1999 and 1998 and June 30, 2000, respectively). The range
increases to LIBOR plus 75 basis points to prime minus 100 basis points if our
funded debt coverage ratio is between 2.5 and 3.0. As of June 30, 2000, we had
$7.9 million outstanding under the revolving line of credit which accrued
interest at an effective rate of 7.142% for the nine months ended June 30, 2000.
By comparison, on September 30, 1999, we had $7.7 million outstanding under the
revolving line of credit which accrued interest at an effective rate of 5.87%
for the year ended September 30, 1999.
On June 30, 1999, we also consolidated our term loans. The new term
loan matures on July 31, 2002, and principal is amortized in annual installments
of $2.0 million. Interest on the term loan is either LIBOR plus 75 basis points
or prime minus 100 basis points. As of June 30, 2000, we had $6.0 million
outstanding under the term loan, unchanged from September 30, 1999. For the nine
months ended June 30, 2000, the effective interest rate on the term loan was
7.392% as compared to 6.113% for the year ended September 30, 1999. The
revolving line of credit is collateralized by substantially all of our assets.
Pursuant to the terms of our credit agreement, we cannot declare or pay
dividends in excess of 50% of our net income.
Our capital expenditures are generally for purchases of property and
equipment. We spent $7.0 million, $6.7 million and $3.8 million on such
expenditures in fiscal years 1999, 1998 and 1997, respectively. The increase in
capital expenditures in fiscal years 1999 and 1998 was a result of increased
leasehold improvements and information technology purchases, such as equipment
and software.
29
<PAGE>
We believe that our existing financial resources, together with our
cash flow from operations and availability under our revolving line of credit,
will provide sufficient capital to fund our operations for fiscal 2000.
INFLATION
The rate of inflation has not had a material impact on our operations.
Moreover, if inflation remains at its recent levels, it is not expected to have
a material impact on our operations for the foreseeable future.
SIGNIFICANT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133
established methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. We believe that the effect of SFAS No. 133 is immaterial on our
operations and financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes certain areas of the Staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. We have adopted SAB 101 for each period presented in the
accompanying statement of operations. There are no significant adjustments
posted as a result of the adoption of SAB 101.
CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information contained in this registration
statement constitute "forward- looking statements." These statements contain or
express our intentions, beliefs, expectations, strategies or predictions for the
future. Discussions containing forward-looking statements may be found in the
material set forth in this section and "Business" section as well as in this
registration statement generally. In addition, from time to time we or our
representatives may make forward-looking statements, orally or in writing.
Furthermore, such forwarding-looking statements may be included in our future
filings with the Securities and Exchange Commission or our press releases.
Forward looking statements in this registration statement, include, among
others, statements regarding:
o the continued demand for our services, including the demand
for multiservice firms such as ours and our ability to capture
that demand;
o our ability to utilize our multi-disciplinary approach to
effectively meet the needs of our clients and compete for
business;
o our plan to evaluate possible strategic acquisitions of
engineering or related services business in connection with
our plan to diversify our sources of business and the
geographic areas in which we operate;
o the effect of the loss of any contract or customer;
o our ability to finance our operations from cash flow and
availability of funds under our revolving line of credit;
o the effect of market risks on our financial condition; and
o the possible impact of any current or future claims against us
based on theories of negligence and other theories of
liability.
30
<PAGE>
These forward-looking statements involve known and unknown issues,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance,
or achievements expressed or implied by these forward-looking statements. These
factors include, among other things:
o the possibility that the demand for our services may decline
due to general and industry specific economic conditions and
the effects of competition;
o our ability to attract and retain key professional employees;
o our ability to perform within budget or contractual
limitations;
o our ability to convert backlog into revenue; and
o the availability of insurance coverage for any current or
future claims made against us.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We believe that our exposure to market risks is minimal. We do not hold
market-risk sensitive instruments for trading purposes. We do not employ any
derivative financial instruments, other financial instruments or derivative
commodity instruments to hedge any market risk, and we do not currently plan to
employ them in the near future. The interest rate on our revolving line of
credit and term loan ranges from LIBOR plus 50 basis points to prime minus 125
basis points if our funded debt coverage ratio is less than 2.5 (5.87%, 6.125%
and 7.142% at September 30, 1999 and 1998 and June 30, 2000, respectively). The
range increases to LIBOR plus 75 basis points to prime minus 100 basis points if
our funded debt coverage ratio is between 2.5 to 3.0.
Because the interest rates under our revolving line of credit and term
loan are variable, to the extent that we have borrowings outstanding, there may
be market risk relating to the amount of such borrowings, however, our exposure
is minimal due to the short-term nature of these borrowings.
ITEM 3. PROPERTIES
We own our executive offices located at 2001 N.W. 107th Avenue, Miami,
Florida 33172 which consists of approximately 100,000 square feet of office
space. We own three additional office buildings in Ft. Myers, Florida,
Homestead, Florida and Hollywood, Florida through our wholly-owned subsidiary,
Seminole Development Corporation. All of these properties are currently being
leased to third parties. We are in the process of constructing a 90,000 square
foot facility in Maitland, Florida which will replace office space we are
currently leasing in Winter Park, Florida.
We lease an additional 60 offices in 16 states in the U.S. and Puerto
Rico and lease offices in Argentina and Venezuela. Aggregate lease payments
during fiscal year 1999 were approximately $9.3 million.
We believe that substantially all of our property and equipment are, in
general, well maintained and in good operating condition. They are considered
adequate for present needs, and as supplemented by planned construction, are
expected to remain adequate for the near future.
We are of the opinion that we, or our subsidiaries, have clear title to
the properties owned and used in our business, subject to liens for current
taxes and easements, restrictions and other liens which do not
31
<PAGE>
materially detract from the value of the properties or our interest in the
properties or the use of those properties in our business.
32
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table provides information with respect to the beneficial
ownership of our common stock as of July 31, 2000 by:
o each of our shareholders who is the beneficial owner of more than 5% of
our outstanding common stock;
o each of our directors;
o each Named Officer; and
o all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) NUMBER PERCENT
------------------------------------------ ------ -------
<S> <C> <C>
PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust.......... 967,768(3) 50.1
William W. Randolph...................................................... 188,814(4) 9.9
H. Michael Dye........................................................... 71,021(5) 3.7
Richard A. Wickett....................................................... 58,552(6) 3.1
John B. Zumwalt, III..................................................... 43,800(7) 2.4
Robert J. Paulsen........................................................ 25,716(8) 1.4
Richard M. Grubel........................................................ 25,105(9) 1.3
David A. Twiddy.......................................................... 20,230(10) 1.1
All executive officers and directors as a group (15 persons).......... 597,318(11) 31.3
</TABLE>
--------------------------
(1) The address of each person or entity named in this table is c/o The PBSJ
Corporation, 2001 N.W. 107th Ave., Miami, Florida 33172.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In general, a person who has voting
power and/or investment power with respect to securities is treated as a
beneficial owner of those securities. Shares of common stock subject to
options and/or warrants currently exercisable or exercisable within 60 days
of the date of this registration statement count as outstanding for
computing the percentage beneficially owned by the person holding these
options. Except as otherwise indicted by footnote, we believe that the
persons named in this table have sole voting and investment power with
respect to the shares of common stock shown.
(3) The Trust has sole voting power with respect to these shares, however
participants are entitled to direct the trustees to vote in accordance with
their instructions. The trustees of the Trust are: Richard A. Wickett
(Managing Trustee), Judith A. Squillante, John B. Zumwalt, III, Bernard F.
Silver, Thomas D. Pellarin, Becky S. Schaffer and Robert J. Paulsen.
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<PAGE>
(4) Includes (i) 86,196 shares held of record by the Trust and (ii) 31,554
shares held in three trusts for the benefit of Mr. Randolph's children. Mr.
Randolph serves as trustee of, and has sole voting power for the shares in,
these trusts. Mr. Randolph disclaims any pecuniary interest in shares held
for the benefit of his children.
(5) Includes 25,389 shares held of record by the Trust.
(6) Includes 29,401 shares held of record by the Trust.
(7) Includes 17,331 shares held of record by the Trust and 4,800 shares of
restricted stock, all of which shall vest on April 16, 2007.
(8) Includes 4,176 shares held of record by the Trust.
(9) Includes 1,520 shares held of record by the Trust.
(10) Includes 8,950 shares held of record by the Trust.
(11) Includes 215,104 shares held of record by the Trust.
THE PBSJ CORPORATION STOCK OWNERSHIP PLAN
The PBSJ Corporation Stock Ownership Plan (the "Plan") is an employee stock
purchase plan. The Plan was approved by our stockholders on December 14, 1985
and was amended and restated as of December 31, 1998. The Plan is not subject to
any of the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended, and is not a qualified plan under Section 401(a) of the
Internal Revenue Code.
The Plan is administered by our board of directors and provides that the
board may grant eligible employees rights to purchase a number of shares of our
common stock at the exercise price and on the terms and conditions determined by
the board, provided that, the exercise price cannot be less than 100% of the
fair market value of one share of our common stock as determined by an
independent appraisal performed at the end of the most recent fiscal year prior
to the date of exercise of the right. An eligible employee means an individual
who performs services for us and is included in our regular payroll. An employee
to whom stock purchase rights are granted will have the right, during the term
of the stock purchase rights, which shall be determined by the board, to
exercise the rights in whole or in part and purchase shares of our common stock.
Unless otherwise provided by the board, generally, an employee exercising
the stock purchase rights may either pay the total exercise price for the shares
in full in cash upon exercise of the rights or make payment of the total
purchase price pursuant to the terms and procedures instituted by the board at
the time the stock purchase rights are granted to the employee.
If an employee is permitted to purchase shares through payroll deductions
and chooses to do so, he will be entitled to exercise all rights as a
stockholder with respect to the full number of shares purchased, but will not
receive certificates for the shares until he has paid the full exercise price
for the stock. If an employee purchasing stock through payroll deductions is
terminated for any reason prior to the issuance of the shares, all of his stock
purchase rights will terminate and we will refund all prior payroll deductions
to the employee, without interest.
Historical example: On January 3, 2000, we granted 500 stock purchase
rights each to 400 of our employees who are eligible employees. The Stock
Ownership Rights Agreement signed by each employee
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<PAGE>
who received the rights provided that the employee could exercise a minimum of
50 and a maximum of 500 stock purchase rights on or before February 3, 2000. If
the employee did not exercise the rights prior to February 3, 2000, the rights
terminated. The exercise price was $39.10 based on an independent appraisal of
the fair market value of one share of our common stock on September 30, 1999.
The exercise price was payable in full by the employee not later than September
30, 2000. The exercise price could be paid by the employee through payroll
deductions with a balloon payment due on September 30, 2000.
If an employee's employment is terminated after he has exercised his stock
purchase rights, the employee must sell his stock back to us. If he has held the
stock for less than six months, we may repurchase the stock at the lesser of the
exercise price for the stock or the fair market value of our common stock at the
time of termination. If the employee has held the stock for more than six months
or if the stock is repurchased by us due to the death or disability of the
employee, we will repurchase the stock at the fair market value of our common
stock at the time of termination or death.
RESTRICTED STOCK AWARDS
Our board of directors has granted restricted stock to certain of our
employees in connection with their initial employment or as an incentive,
performance or retention bonus. Our board of directors has granted restricted
stock to 51 of our employees between January 15, 1991 and November 30, 1999. The
restricted stock is subject to total forfeiture if the employee ceases to be
employed with us prior to the maturity date of the restricted stock, except in
certain limited circumstances described in the individual restricted stock award
agreement.
The holders of restricted stock have no right to sell the restricted stock
prior to the expiration of the restricted period but are entitled to exercise
all rights including voting rights as a stockholder with respect to the
restricted stock from the date he is granted the restricted stock.
On occasion, we have also issued restricted stock to certain of our Named
Officers. A description of the relevant restricted stock agreements is set forth
under "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements."
THE PBSJ EMPLOYEE PROFIT SHARING AND STOCK OWNERSHIP PLAN AND TRUST
We have an Employee Profit Sharing and Stock Ownership Plan and Trust, which is
an employee stock ownership plan ("ESOP") and a 401(k) savings plan (the
"Trust"). Pursuant to the terms of the Trust, employees may purchase shares of
our common stock in our stock purchase plan and place them in the Trust. In
addition, each of the participants in the Trust, may be granted certain stock as
part of our profit sharing plan.
An ESOP is a tax-qualified defined contribution plan of deferred
compensation under Section 401(a) of the Internal Revenue Code of 1986, as
amended, with its primary objective to provide stock ownership to employees.
Unlike other defined contribution plans, an ESOP must invest primarily in
employer securities. Moreover, an ESOP may borrow against the employer's credit,
provided the loan proceeds are used to acquire employer securities. The ESOP
also functions as a source through which departing employees may sell their
shares back to us. Depending on our profits, each year we may make a tax
deductible contribution to the ESOP. The contributions are allocated to the ESOP
participants, subject to a seven year vesting schedule, based on the ratio of a
participant's compensation for the year to the total compensation of all
participants for the year. Contributions are converted to our common stock by
35
<PAGE>
purchasing stock from terminating employees. In accordance with the terms of the
Trust, shares held by the Trust are voted by the Trustees. The participants are
entitled to direct the Trustees to vote in accordance with their instructions,
subject to the Trustees' ERISA obligations.
The current trustees of the Trust are Richard A. Wickett, Judith A.
Squillante, John B. Zumwalt, III, Bernard F. Silver, Thomas P. Pellarin, Becky
S. Schaffer and Robert J. Paulsen.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
All of our directors are elected for one year terms at each annual
meeting of the shareholders. As of June 15, 2000 the following persons served as
directors of The PBSJ Corporation. In addition each of these persons served as a
director and executive officer of PBS&J, our wholly-owned subsidiary.
Directors
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
H. Michael Dye 59 Chairman of the Board of Directors and Chief Executive Officer
John B. Zumwalt, III 49 President, Chief Operating Officer and Director
Richard A. Wickett 58 Vice Chairman of the Board of Directors, Vice President, Chief Financial Officer
and Treasurer
William W. Randolph 62 Vice President and Director
David A. Twiddy 67 Executive Vice President and Director
Robert J. Paulsen 47 Senior Vice President, Secretary and Director
</TABLE>
As of June 15, 2000 the following persons served as executive officers
of either The PBSJ Corporation or as executive officers of PBS&J, our
wholly-owned subsidiary.
Officers
NAME AGE POSITION
---- --- --------
Richard M. Grubel 53 Senior Vice President
Craig T. Curry 55 Executive Vice President
Charles I. Homan 56 Executive Vice President
Todd J. Kenner 38 Executive Vice President
James M. Killough, Jr. 61 Executive Vice President
Everett M. Owen 54 Executive Vice President
Thomas D. Pellarin 47 Executive Vice President
John S. Shearer 48 Executive Vice President
Judith A. Squillante 58 Senior Vice President
H. MICHAEL DYE has been Chairman of the Board of Directors and our
Chief Executive Officer since January 2000 and has served as a Director since
December 1980. From 1991 to January 2000, Mr. Dye served as our President. Mr.
Dye has been employed with us for over 23 years. Mr. Dye also
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serves as a director of our wholly-owned subsidiary, PBS&J. He holds a bachelors
degree in Economics from the University of Charleston and a Masters of Public
Administration from Florida State University.
JOHN B. ZUMWALT, III has been our President since January 2000, and our
Chief Operating Officer since January 1998 and has served as a Director since
January 1990. From September 1992 to January 1998, Mr. Zumwalt served as a
Senior Vice President and Director of Civil Engineering. Mr. Zumwalt has been
employed with us for over 27 years. Mr. Zumwalt also serves as a director of our
wholly-owned subsidiary, PBS&J. He holds a bachelors degree in Civil and
Environmental Engineering from the University of Rhode Island.
RICHARD A. WICKETT has been Vice Chairman of the Board of Directors
since January 2000, Chief Financial Officer since January 1993 and
Treasurer/Senior Vice President since February 1989 and has served as a Director
since January 1992. Mr. Wickett has been employed with us for over 27 years. Mr.
Wickett also serves as a director of our wholly-owned subsidiary, PBS&J. He
holds a bachelors degree from the University of Miami and holds a Certified
Public Accountant certification in the State of Florida.
WILLIAM W. RANDOLPH has been a Vice President since January 2000 and
has served as a Director since November 1972. From 1983 to January 2000, Mr.
Randolph served as Chairman of the Board of Directors and our Chief Executive
Officer, and as our President from January 1992 to December 1996. Mr. Randolph
has been employed with us for over 32 years. He holds a bachelors degree in
Civil Engineering from the Georgia Institute of Technology.
DAVID A. TWIDDY has been an Executive Vice President since February
1989 and has served as a Director since January 1988. Prior to January 1996, he
was also our Director of Transportation. Mr. Twiddy has been employed with us
for over 14 years. He holds a bachelors degree in Civil Engineering from the
University of Florida.
ROBERT J. PAULSEN has been a Senior Vice President since January 2000
and has served as a Director since January 1996. He became our Director of
Transportation in January 1996 and served as an Executive Vice President since
January 1996. Mr. Paulsen has been employed with us for over 14 years. Mr.
Paulsen also serves as a director of our wholly-owned subsidiary, PBS&J. He
holds a bachelors degree in Civil Engineering from Iowa State University.
RICHARD M. GRUBEL has been a Senior Vice President responsible for our
real estate and lease agreements since January 1998. From January 1991 to
January 1998, Mr. Grubel served as Assistant Secretary. Mr. Grubel has been
employed with us for over 15 years. He holds a bachelors degree in Business
Administration and a Masters of Business Administration from Rutgers State
University.
CRAIG T. CURRY has been an Executive Vice President and Regional
Manager in our South Central Region since June 1999. Mr. Curry served as
President and Chief Operating Officer of PBS&J Inc. of Texas from June 1995 to
June 1999, when we merged this subsidiary into PBS&J. Mr. Curry also serves as
an executive officer of our wholly-owned subsidiary, PBS&J. He holds a bachelors
degree in Landscape Design from Oklahoma State University.
CHARLES I. HOMAN has been an Executive Vice President and Regional
Director of our Northeastern Region since January 2000. From 1994 to 1999, Mr.
Homan served as Chief Executive Officer of Michael Baker Corporation, a
publicly-held engineering company. Mr. Homan also serves as a director and
executive officer of our wholly-owned subsidiary, PBS&J and as a Director of Sky
Financial
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Group, a publicly-held financial services holding company. He holds a bachelors
degree in Civil Engineering from West Virginia University.
TODD J. KENNER has been an Executive Vice President and Regional
Director of our West Region since January 1999. From March 1995 to January 1999,
Mr. Kenner served as an Executive Vice President. Mr. Kenner also serves as a
director and executive officer of our wholly-owned subsidiary, PBS&J. He holds a
bachelors degree in Civil Engineering from South Dakota School of Mines and
Technology.
JAMES M. KILLOUGH, JR. has been President and Chief Operating Officer
of our Construction Services Division since 1991. Mr. Killough also serves as a
director and executive officer of our wholly- owned subsidiary, PBS&J. He holds
a bachelors degree in Civil Engineering from The Citadel.
EVERETT M. OWEN has been an Executive Vice President and Regional
Manager in our South Central Region since June 1999. From July 1997 to June
1999, Mr. Owen served as Executive Vice President and Senior Deputy Service
Director. Mr. Owen served as an Executive Vice President and Chief Engineer of
EH&A from 1979 until July 1997 when we acquired EH&A. Mr. Owen also serves as a
director and executive officer of our wholly-owned subsidiary, PBS&J. He holds a
bachelors degree in Civil Engineering from Oklahoma State University.
THOMAS D. PELLARIN has been an Executive Vice President and Senior
Director of Civil Engineering since January 2000. From January 1998 to January
2000, Mr. Pellarin served as Executive Vice President and Director of Civil
Engineering. Mr. Pellarin has been employed with us for over 6 years. Mr.
Pellarin also serves as a director and executive officer of our wholly-owned
subsidiary, PBS&J. He holds a bachelors degree in Civil Engineering from the
University of Dayton and a bachelors degree in Political Science from Thiel
College.
JOHN S. SHEARER has been an Executive Vice President and Senior
Director of our Environmental Division since January 1991. Mr. Shearer also
serves as a director and executive officer of our wholly- owned subsidiary,
PBS&J. He holds a bachelors degree of Civil Engineering from the University of
South Florida.
JUDITH A. SQUILLANTE has been Senior Vice President and Director of
Human Resources since January 1995. Since joining PBSJ in November 1979, Ms.
Squillante held various positions in PBSJ, including Director of Human Resources
and Vice President and Director of Human Resources. Ms. Squillante also serves
as a director of our wholly-owned subsidiary, PBS&J. She holds a bachelors
degree in Business Administration from Bryant College and a Management
Certification from the University of Rhode Island.
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ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth compensation information with respect to
our Chief Executive Officer and our four most highly compensated executive
officers whose total annual salary and bonus for the last completed fiscal year
exceeded $100,000. In this document, we refer to these executive officers as the
"Named Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
Long-Term
Annual Compensation Compensation
------------------------------ ----------------
Name and Principal Other Annual Restricted Stock All Other
Position Year Salary($) Bonus($) Compensation($) Award(s)($)(2) Compensation ($)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Michael Dye, 1999 $208,308 $78,000 * -- --
Chairman and Chief 1998 198,796 83,500 * -- --
Executive Officer 1997 200,260 70,000 * -- --
William W. Randolph, 1999 $226,308 $84,100 * -- $113,332 (3)
Vice President 1998 216,796 60,000 * -- --
1997 218,260 70,000 * -- --
John B. Zumwalt, 1999 $164,000 $57,000 * $20,460 --
President and Chief 1998 149,046 46,000 * 16,920 --
Operating Officer 1997 152,260 35,500 * 11,880 --
Richard A. Wickett, 1999 $148,808 $51,200 * -- --
Vice Chairman, 1998 140,546 48,750 * -- --
V.P. and Chief 1997 142,260 36,000 * -- --
Financial Officer
Robert J. Paulsen, 1999 $151,500 $51,900 * -- --
Sr. Vice President 1998 140,796 47,700 * -- --
1997 133,510 36,000 * -- --
</TABLE>
---------------------
* Value of perquisites and other personal benefits paid does not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus
reported for the executive officer and therefore is not required to be
disclosed pursuant to Securities and Exchange Commission rules.
(1) Certain columns have been omitted because they do not apply.
(2) The aggregate number of shares of restricted stock held by the Named
Officers is 6,816 valued at $266,505.60 based on the value of our stock
as of September 30, 1999 as determined by an independent appraisal.
Although we do not intend to declare or pay any dividends in the
foreseeable future and are limited in this respect by the terms of our
credit agreement, if we did declare or pay any dividends, any Named
Officer holding restricted stock would be entitled to receive dividends
on their restricted stock.
(3) Represents the actuarial present value of imputed interest for advance
contract premiums paid on split dollar life insurance policies for Mr.
Randolph and his wife.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
We currently have in effect employment/supplemental retirement/death
benefits agreements with Messrs. Dye, Randolph, Zumwalt, Wickett and Paulsen and
restricted stock agreements with Messrs. Zumwalt and Paulsen. The following is a
brief description of the agreements:
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EMPLOYMENT/SUPPLEMENTAL RETIREMENT/DEATH BENEFITS AGREEMENTS
Pursuant to the agreement with Mr. Wickett dated December 17, 1987, as
amended, we agreed to pay Mr. Wickett $75,000 per year, as adjusted. We also
agreed to reimburse Mr. Wickett for certain business expenses for 15 years
following his retirement. Additionally, during the first five years of his
retirement, we agreed to pay him a maximum of $25,000 per year for providing
consulting services to us. We also agreed to provide him and his wife with major
medical and hospitalization insurance benefits equivalent to those offered to
our executives for so long as either of them are alive. In the event of a change
of control (as defined in the agreement), if Mr. Wickett is terminated after the
change of control without cause (as defined in the agreement), or Mr. Wickett
resigns for good reason (as defined in the agreement) at any time after six
months from the change of control, the terms and conditions of the agreement
remain in full force and effect.
Pursuant to the agreement with Mr. Zumwalt dated December 17, 1987, as
amended, we agreed to pay Mr. Zumwalt $50,000 per year, as adjusted. We also
agreed to reimburse Mr. Zumwalt for certain business expenses for 15 years
following his retirement. Additionally, during the first five years of his
retirement, we agreed to pay Mr. Zumwalt $25,000 per year for providing
consulting services to us. We also agreed to provide him and his wife with major
medical and hospitalization insurance benefits equivalent to those offered to
our executives for so long as either of them are alive. In the event if a change
of control (as defined in the agreement), if Mr. Zumwalt is terminated after a
change of control without cause (as defined in the agreement), or Mr. Zumwalt
resigns for good reason (as defined in the agreement) at any time after six
months from the change of control, the terms and conditions of the agreement
remain in full force and effect.
Pursuant to the agreement with Mr. Paulsen dated December 17, 1987, if
Mr. Paulsen remains in our employment until he is 56, we agreed to pay him
$25,000 per year, increased by $2,778 per year until the earlier of such time as
Mr. Paulsen terminates his employment with us or he is 65, at which time we will
pay him $50,000 per year whether or not he continues to be actively employed
with us. If Mr. Paulsen does not remain in our employment until he is 56, he
will receive $12,500 per year for a period of ten years beginning the year in
which he attains age 56. If Mr. Paulsen does not attain age 56, his designated
beneficiary shall receive an annual death benefit of $10,000 per year for a
period of ten years.
We entered into an agreement with Mr. Randolph, dated February 15,
1999, in which we agreed to employ Mr. Randolph until March 1, 2005. We agreed
to pay Mr. Randolph (i) $226,000 for his full-time employment for the period
from February 15, 1999 to December 31, 1999, (ii) 60% of his 1999 compensation
as salary and 60% of the average of our three highest executive officer's 2000
bonuses as bonus, for his part-time employment for the calendar year 2000 and
(iii) $1,000 per day for each day in excess of 45 days worked by Mr. Randolph in
any calendar year between January 1, 2001 and March 1, 2005. In addition, for a
period of 11 years after March 1, 2005, Mr. Randolph will receive supplemental
retirement income equal to $1,000 per day for each day that he is requested to
work. If Mr. Randolph dies or is disabled any time prior to March 1, 2016, we
have agreed to pay his wife $25,000 per year, as adjusted, through December 31,
2015. In addition, we agreed to reimburse Mr. Randolph for certain business
expenses, up to $25,000 per year, until March 1, 2016. We also agreed to provide
him and his wife with major medical and hospitalization insurance benefits
equivalent to those offered to our executives for so long as either of them are
alive.
In 1999, we also entered into a split dollar insurance agreement with
Mr. Randolph whereby we agreed to advance premiums, for ten years, for
$4,500,000 life insurance policies on each of Mr. Randolph
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<PAGE>
and his wife. The advances are secured by the proceeds of the policies, and are
repayable to us fifteen years from the date of the agreement; provided, however,
if the policies are surrendered or if both Mr. Randolph and his wife die prior
to the fifteen years, then the advances will be repaid from the proceeds of the
policies.
Mr. Dye has entered into an agreement with us with respect to various
employment and benefit matters. Pursuant to the terms of the agreement, as
amended, Mr. Dye's term of employment extends to January 1, 2001 during which
term he is eligible to receive a salary of at least $120,000. Subsequent to the
termination of his employment we have agreed to retain Mr. Dye as a consultant
for a period of 5 years at a rate of $100,000 per year. At the end of the 5-year
consulting period, he is eligible to receive supplemental retirement income
equal to $75,000 per year plus certain other benefits for 10 years. We have also
agreed to provide him and his wife with major medical and hospitalization
insurance benefits equivalent to those offered to our executives for so long as
either of them are alive. In addition, we agreed to reimburse Mr. Dye for
certain business expenses, up to $25,000 per year, during his 5-year consulting
period and the 10-year period in which he receives supplemental retirement
income.
RESTRICTED STOCK AGREEMENTS
Pursuant to the agreement with Mr. Zumwalt dated April 1, 1993, we
granted Mr. Zumwalt 600 shares of restricted stock, and agreed to grant him an
additional 600 shares of restricted stock per year until April 1, 2002, provided
that he is still a full-time employee. Such restricted stock is both forfeitable
and non-transferable in the event Mr. Zumwalt does not remain continuously
employed by us until April 16, 2007.
Pursuant to the agreement with Mr. Paulsen dated July 29, 1996, we
granted Mr. Paulsen 2,616 shares of restricted stock. Such restricted stock is
both forfeitable and non-transferable in the event Mr. Paulsen does not remain
continuously employed by us until July 26, 2009.
COMPENSATION OF DIRECTORS
Because all of our directors are also executive officers, no additional
compensation is paid to any director for any services performed by him in his
capacity as director. We reimburse our directors for any expenses incurred by
them in connection with their duties as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not have a compensation committee. All of the members of our
board of directors participated in deliberations concerning executive officer
compensation. All of our directors are also executive officers.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 8. LEGAL PROCEEDINGS
We are party to various legal proceedings arising from our operations.
We believe that we have sufficient professional liability insurance such that
the outcome of any of these proceedings, individually
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<PAGE>
and in the aggregate, will not have a material adverse effect on our financial
position or results of operations. However, if our insurance company were to
deny coverage for a significant judgment or if a judgment were entered against
us in an amount greater than our coverage, it could adversely affect our results
of operations. Based upon our previous experience with claims and lawsuits, we
believe our insurance coverage is adequate.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no established public trading market for our common stock.
As of July 31, 2000 there were no shares of common stock that were
subject to outstanding warrants or options to purchase, or securities
convertible into, our common stock, and no shares of our common stock could be
sold pursuant to Rule 144 under the Securities Act. No shares of our common
stock are being, or have been, publicly offered.
As of July 31, 2000, there were 1,903,139 shares of common stock
outstanding and held of record by 353 shareholders.
DIVIDENDS
Each share of our common stock is entitled to share equally in any
dividends declared by our board of directors. Pursuant to the terms of our
credit agreement, we cannot declare or pay dividends in excess of 50% of our net
income. We have not in the past paid cash dividends on our common stock and have
no present intention of paying cash dividends on our common stock in the
foreseeable future. All earnings are retained for investment in our business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
EMPLOYEE STOCK PURCHASE PLAN
Between February 23 and March 24, 1998, we sold 74,152 shares of our
common stock to 266 of our employees pursuant to the terms of The PBSJ
Corporation Stock Ownership Plan ("Plan") and related Stock Ownership Rights
Agreements for $28.20 per share. The aggregate offering price for these shares
was $2,091,086.
Between February 1 and March 2, 1999, we sold 242,436 shares of our
common stock to 174 of our employees pursuant to the terms of the Plan and
related Stock Ownership Rights Agreements for $34.10 per share. The aggregate
offering price for these shares was $8,267,068.
Between January 3 and February 1, 2000, we sold 21,895 shares of our
common stock to 145 of our employees pursuant to the terms of the Plan and
related Stock Ownership Rights Agreements for $39.10 per share. The aggregate
offering price of these shares was $856,095.
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<PAGE>
We also issued 22,045, 24,722 and 91,190 shares of restricted stock to
148, 119 and 174 of our employees during each of the last three years. These
issuances were sporadic and were issued pursuant to the terms of the Plan and
individual restricted stock agreements. Employees are not required to pay for
the restricted stock. Other than restricted stock issued to Named Officers, the
restricted stock is subject to total forfeiture if the employee ceases to be
employed with us prior to the maturity date of the restricted stock, except in
certain limited circumstances described in the individual restricted stock award
agreement. For a description of the restricted stock issued to Named Officers,
read the relevant description under "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements."
The sale of stock and the issuance of restricted stock to our employees
pursuant to the terms of the Plan is exempt from registration pursuant to Rule
701 of the Securities Act of 1933, as amended which exempts offers and sales of
securities under a written compensation benefit plan established by an issuer of
securities for the participation of their employees, directors, officers and,
under certain circumstances, family members of these persons. In all instances,
the sales price or amount of stock sold by us under Rule 701 during any 12-month
period did not exceed the greater of $1,000,000, 15% of our total assets for
that period or 15% of the number of outstanding shares of our common stock as of
our most recent balance sheet date.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following is a summary description of the material provisions of
our Articles of Incorporation and Amended and Restated Bylaws relating to our
capital stock. You may find more detailed information by reading our Articles of
Incorporation and Amended and Restated Bylaws, copies of which are filed as
exhibits to this registration statement.
AUTHORIZED CAPITAL STOCK
We are authorized to issue 3,000,000 shares of common stock, par value
of $.0033 per share. As of July 31, 2000, there were 1,903,139 shares of common
stock issued and outstanding and held of record by approximately 353
shareholders. Other than the Trust, all of the holders of record of outstanding
shares of our common stock on July 31, 2000 were our officers, directors,
employees or former employees pending repurchase.
Our board of directors has the authority, without shareholder approval,
to issue all or any portion of the authorized but unissued shares of our common
stock, subject to the ownership restrictions included in our Amended and
Restated Bylaws. The issuance of a significant number of shares could
potentially dilute the value of outstanding shares. In addition, our board of
directors is authorized to issue shares of our common stock as partly paid
stock. These shares are subject to any conditions, limitations and restrictions
relating to ownership, sale and transfer which are set forth in any agreement
with the holder of the partly paid shares.
VOTING AND DISTRIBUTION RIGHTS
Each share of our common stock is entitled to one vote on all matters
on which shareholders are entitled to vote. Pursuant to the terms of the Trust,
shares owned of record by the Trust are voted by the trustees of the Trust in
accordance with the instructions received from each of the participants, subject
to the trustees' ERISA obligations. As of July 31, 2000, the Trust owned 50.1%
of the outstanding share of common stock.
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If we liquidate, dissolve or wind up, holders of our common stock are
entitled to share ratably in all assets remaining after payment of all our
liabilities. There is no cumulative voting for directors, and there are no
preemptive or other subscription rights.
OWNERSHIP AND TRANSFER RESTRICTIONS
Our Amended and Restated Bylaws provide that our shares of capital
stock may be owned only by our employees, the Trust and personal trusts created
by our shareholders. Non-employees are not permitted to own our capital stock
unless they are a member of our board of directors or a spouse or child of one
of our employees, provided that at all times at least 95% of the value of our
capital stock must be held by our current employees, retired employees or the
estate of a deceased employee.
All of our shares of capital stock are subject to the following
restrictions set forth in our Amended and Restated Bylaws:
1. Right of Repurchase Upon Termination of Employment. When a
shareholder's employment is terminated for any reason, including death, the
shareholder and his guardian, heirs, trustees, beneficiaries or personal
representatives are required to sell all of the employee's shares of our capital
stock to us at the fair market value of the shares, as determined by an
independent appraiser. A former employee may continue to own shares of our
capital stock if the former employee has entered into a separate written share
redemption or purchase agreement with us and the agreement is approved prior to
the employee's termination by more than 50% of the shares of our capital stock
entitled to vote.
2. Right of First Refusal. We are required to purchase any
shareholder's shares of capital stock if he so requests at the fair market value
of the shares, as determined by an independent appraiser. The Trust may assume
our obligation to purchase the shares on the same terms and conditions. If we
and the Trust are prohibited by law from purchasing the employee's shares, the
other shareholders shall have the right (but not the obligation) to purchase the
employee's shares.
These provisions of our Amended and Restated Bylaws may only be amended
by approval of the majority of the outstanding shares.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 607.0850, Florida Statutes permits a corporation to indemnify
any director or officer of the corporation against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or proceeding brought by
reason of the fact that the person is or was a director or officer of the
corporation, if the person acted in good faith and in a manner that he
reasonably believed to be in, or not opposed, to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reason to believe his conduct was unlawful. In a derivative action,
indemnification may be made only for expenses, actually and reasonably incurred
by any director or officer in connection with the defense or settlement of an
action or suit, if the person acted in good faith and in a manner that he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made if the person shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which the action or suit was brought determines that
the defendant is fairly and reasonably entitled to indemnity for these expenses
despite an adjudication of liability.
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As provided for in Chapter 607.0831 directors are not liable to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except for liabilities arising (i) from acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (ii) under Chapter 607.0834, Florida Statutes, or (iii) from any
transactions from which the director derived an improper personal benefit.
We currently have in effect director and officer liability insurance.
At present, there is no pending or threatened litigation or proceeding
involving any of our directors or officers, employees or agents where
indemnification will be required or permitted.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained in the financial
statements beginning on page F-1. This registration statement includes the
following financial statements: (i) audited balance sheets as of September 30,
1998 and 1999, and the unaudited balance sheet as of June 30, 2000; (ii) audited
statements of operations for the fiscal years ended September 30, 1997, 1998 and
1999, and unaudited statements of operations for the nine month periods ended
June 30, 1999 and 2000; (iii) audited statements of stockholders' equity for the
fiscal years ended September 30, 1997, 1998 and 1999, and the unaudited
statement of stockholders' equity for the nine month period ended June 30, 2000,
and (iv) audited statements of cash flows for the fiscal years ended September
30, 1997, 1998 and 1999, and the unaudited statements of cash flows for the nine
months ended June 30, 1999 and 2000.
ITEM 14. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following is a list of financial information filed as a part of
this registration statement:
(1) Consolidated Financial Statements of The PBSJ
Corporation and its subsidiaries as of June 30, 2000
(unaudited), September 30, 1999 and 1998, and for the
nine months ended June 30, 2000 and 1999 (unaudited)
and the fiscal years ended September 30, 1999, 1998
and 1997.
(b) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 - Articles of Incorporation, as amended (1)
3.2 - Amended and Restated Bylaws (1)
4.1 - Form of Specimen Stock Certificate (1)
10.1 - The PBSJ Employee Profit Sharing and Stock Ownership Plan
and Trust (2)
10.2 - Supplemental Income Plan effective as of January 12,
1988 (1)
10.3 - Consulting/Supplemental Retirement/Death Benefits
Agreement, dated November 6, 1987, between the Registrant
and H. Michael Dye, as amended on October 16, 1989, March
1, 1993, February 6, 1995, May 19, 1998 and November 22,
1999 (1)
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EXHIBIT
NUMBER DESCRIPTION
10.4 - Supplemental Retirement/Death Benefits Agreement, dated
December 17, 1987, between the Registrant and Robert J.
Paulsen (1)
10.5 - Supplemental Income Agreement, dated as of July 29, 1996,
between the Registrant and Robert J. Paulsen (1)
10.6 - Employment/Retirement Benefits Agreement, dated February
15, 1999, between the Registrant and William W.
Randolph (1)
10.7 - Supplemental Retirement/Death Benefits Agreement, dated
December 17, 1987, between the Registrant and Richard A.
Wickett, as amended on April 27, 1989, May 19, 1998 and
November 22, 1999 (1)
10.8 - Supplemental Retirement/Death Benefits Agreement dated
December 17, 1987, between the Registrant and John B.
Zumwalt, III, as amended on May 19, 1998 and November 22,
1999 (1)
10.9 - Agreement, dated as of April 1, 1993, between the
Registrant and John B. Zumwalt, III (1)
10.10 - Split Dollar Life Insurance Agreement dated February 1,
1999, by and between The Randolph Insurance Trust and the
Registrant (1)
10.11 - Credit Agreement, dated as of June 28, 1996, by and among
Nationsbank, N.A., Suntrust Bank, Miami, N.A., Post,
Buckley, Schuh and Jernigan, Inc., The PBSJ Corporation,
and the subsidiaries named therein, as amended on July 3,
1997 and June 30, 1999 (1)
10.12 - Lease Agreement, dated as of March 25, 1998, by and
between Post, Buckley, Schuh & Jernigan, Inc. and
Highwoods/Florida Holdings L.P. as successor in interest
to Cypress-Tampa II L.P., as amended on May 26, 1998,
December 26, 1998, November 29, 1999 and March 1, 2000 (1)
10.13 - Lease Agreement, dated as of November 23, 1999, by and
between Post, Buckley, Schuh & Jernigan, Inc. and 1560 N.
Orange Ltd. (1)
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EXHIBIT
NUMBER DESCRIPTION
10.14 - The PBSJ Corporation Stock Ownership Plan (2)
21 - Subsidiaries (1)
27.1 - Financial Data Schedule - September 30, 1999 (1)
27.2 - Financial Data Schedule - June 30, 2000 (2)
---------------
(1) Previously filed with the Registration Statement on Form 10 filed with
the Commission on June 27, 2000.
(2) Filed herewith.
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III. SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment No. 1 to Registration
Statement on Form 10 to be signed on its behalf by the undersigned, thereunto
duly authorized.
The PBSJ Corporation
By: /s/ H. MICHAEL DYE
------------------------------
H. Michael Dye
Chairman and Chief Executive
Officer
Date: September 19, 2000
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of The PBSJ Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the consolidated financial position of The
PBSJ Corporation and subsidiaries (the "Company") at September 30, 1999 and
1998, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 30, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
December 3, 1999
Miami, Florida
F-1
<PAGE>
The following financial statements should be read in conjunction with the
accompanying notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<TABLE>
<CAPTION>
THE PBSJ CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Nine months
Years ended September 30, ended June 30,
Assets 1999 1998 2000
--------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $ 1,857 $ 1,160
Marketable securities 3,904 3,087 473
Accounts and notes receivable, net 37,608 33,889 38,473
Unbilled fees, net 25,355 21,062 30,959
Other current assets 1,553 1,619 1,852
--------- --------- ---------
Total current assets 68,420 61,514 72,917
Property and equipment, net 21,203 19,268 25,614
Cash surrender value of life insurance 4,856 4,577 5,369
Deferred income taxes 2,476 2,764 2,476
Other assets 6,880 8,302 6,824
--------- --------- ---------
Total assets $ 103,835 $ 96,425 $ 113,200
========= ========= =========
Liabilities and Shareholders Equity
Current Liabilities:
Accounts payable and accrued expenses $ 9,009 $ 14,384 $ 20,295
Current portion of long term debt 4,594 8,540 2,417
Accrued vacation 3,695 3,060 4,444
Deferred income taxes 15,578 14,985 18,349
Bank overdrafts 3,823 -- --
--------- --------- ---------
Total current liabilities 36,699 40,969 45,505
Long term debt 13,337 8,589 13,065
Deferred compensation 5,090 5,057 5,693
Other liabilities 3,439 4,197 4,489
--------- --------- ---------
Total liabilities 58,565 58,812 68,752
--------- --------- ---------
Stockholders' equity:
Common stock, par value $0.0033, 3,000,000 shares
authorized, 2,073,361 and 1,993,347 shares issued
and outstanding at September 30, 1999 and 1998,
respectively and 1,909,940 shares issued and
outstanding at June 30, 2000 7 7 6
Additional paid in capital 8,145 5,311 1,675
Retained earnings 38,481 33,035 44,485
Accumulated other comprehensive income (421) 330 34
Notes receivable from stockholders -- -- (733)
Unearned compensation (942) (1,070) (1,019)
--------- --------- ---------
Total stockholders' equity 45,270 37,613 44,448
--------- --------- ---------
Total liabilities and stockholders' equity $ 103,835 $ 96,425 $ 113,200
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years ended September 30, Nine months ended June 30,
STATEMENT OF OPERATIONS DATA: 1999 1998 1997 2000 1999
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Earned revenue:
Engineering fees $ 241,417 $ 223,381 $ 172,644 $ 194,274 $ 176,771
Direct Expenses 60,780 56,248 41,221 47,485 44,597
----------- ----------- ----------- ----------- -----------
Net earned revenue 180,637 167,133 131,423 146,789 132,174
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Direct salaries 66,291 61,538 50,126 54,412 49,107
General and administrative expenses 105,346 97,811 74,635 80,955 76,048
----------- ----------- ----------- ----------- -----------
Total costs and expenses 171,637 159,349 124,761 135,367 125,155
Operating income 9,000 7,784 6,662 11,422 7,019
----------- ----------- ----------- ----------- -----------
Other income (expenses):
Interest expense (1,162) (1,227) (659) (1,083) (897)
Other, net 1,108 867 780 (497) 495
----------- ----------- ----------- ----------- -----------
Total other expenses (54) (360) 121 (1,580) (402)
Income before income taxes 8,946 7,424 6,783 9,842 6,617
Provision for income taxes 3,500 2,950 2,783 3,838 2,581
----------- ----------- ----------- ----------- -----------
Net income $ 5,446 $ 4,474 $ 4,000 $ 6,004 $ 4,036
=========== =========== =========== =========== ===========
Common stock per share data:
Basic and diluted earnings per share $ 2.87 $ 2.40 $ 2.16 $ 3.16 $ 2.13
=========== =========== =========== =========== ===========
Weighted average shares of
common stock outstanding 1,896,533 1,861,022 1,852,051 1,899,759 1,896,533
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND YEARS ENDED
SEPTEMBER 30, 1999, 1998 AND 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated Note
Common Stock Additional Other Receivable Total
-------------------- Paid-in Retained Comprehensive from Unearned Stockholders'
Shares Amount Capital Earnings Income (Loss) Shareholders Compensation Equity
---------- -------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 1,960,676 $ 7 $ 4,144 $ 24,561 $ 178 $ (28) $ (1,079) $ 27,782
Comprehensive income:
Net income 4,000 4,000
Unrealized gain on investments
(net of tax of $98) 153 153
----------
Total comprehensive income 4,153
Sale of stock 70,721 1,400 (1,400)
Purchase of stock (121,348) (2,402) (2,402)
Note Payments 1,428 1,428
Issuance of restricted stock
net of amortization and
cancellations 26,376 571 (24) 547
---------- -------- ----------- ----------- ----------- ----------- ----------- ----------
Balance at September 30, 1997 1,936,425 $ 7 $ 3,713 $ 28,561 $ 331 $ -- $ (1,103) $ 31,508
Comprehensive income:
Net income 4,474 4,474
----------
Total comprehensive income 4,474
Sale of stock 143,836 4,056 (4,056) --
Purchase of stock (90,889) (2,561) (2,561)
Note Payments 4,056 4,056
Issuance of restricted stock
net of amortization and
cancellations 3,975 103 33 136
---------- -------- ----------- ----------- ----------- ----------- ----------- ----------
Balance at September 30, 1998 1,993,347 $ 7 $ 5,311 $ 33,035 $ 331 $ -- $ (1,070) $ 37,613
Comprehensive income:
Net income 5,446 5,446
Unrealized loss on investments
(net of tax of $198) (752) (752)
----------
Total comprehensive income 4,694
Sale of stock 239,329 1 8,150 8,151
Purchase of stock (156,268) (1) (5,317) (5,318)
Issuance of restricted stock
net of amortization and
cancellations (3,047) 2 128 130
---------- -------- ----------- ----------- ----------- ----------- ----------- ----------
Balance at September 30, 1999 2,073,361 $ 7 $ 8,145 $ 38,481 $ (421) $ -- $ (942) $ 45,270
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Accumulated Note
Common Stock Additional Other Receivable Total
-------------------- Paid-in Retained Comprehensive from Unearned Stockholders'
Shares Amount Capital Earnings Income (Loss) Shareholders Compensation Equity
---------- -------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comprehensive income:
Net income 6,004 6,004
Unrealized gain on investments
(net of tax of $239) 455 455
----------
Total comprehensive income 6,459
Sale of stock 22,045 1 861 (791) 71
Purchase of stock (189,963) (2) (7,403) (7,405)
Note Payments 58 58
Issuance of restricted stock
net of amortization and
cancellations 4,497 -- 72 -- -- (77) (5)
---------- -------- ----------- ----------- ----------- ----------- ----------- ----------
Balance at June 30, 2000* 1,909,940 $ 6 $ 1,675 $ 44,485 $ 34 $ (733) $ (1,019) $ 44,448
---------- -------- ----------- ----------- ----------- ----------- ----------- ----------
</TABLE>
*Equity activity during the nine months ended June 30, 2000 is unaudited.
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
Nine months
Years ended September 30, ended June 30,
1999 1998 1997 2000 1999
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flow from operating activities:
Net income $ 5,446 $ 4,474 $ 4,000 $ 6,004 $ 4,036
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Realized (gain) loss on sale of investments (620) -- -- 946 --
Non-cash special charges 131 135 547 (5) 28
Depreciation and amortization 6,113 5,330 3,931 5,718 4,356
Provision for bad debt and unbillable amounts 1,899 1,579 1,537 (1,173) 855
Provision for deferred income taxes 880 2,743 694 2,771 60
Provision for deferred compensation 33 557 1,014 603 145
Net investment in life insurance policies (279) (446) (317) (513) (74)
Change in operating assets and liabilities, net of
acquisitions:
(Increase) decrease in accounts and notes
receivable (5,617) (4,174) (928) 308 (1,852)
(Increase) in unbilled fees (4,292) (3,686) (227) (5,604) (1,655)
Decrease (increase) in other current assets 65 22 (527) (299) 35
Decrease (increase) in other assets 1,217 (309) -- (198) (417)
(Decrease) increase in accounts payable and
accrued expenses (5,375) (427) (1,411) 11,286 345
Increase in accrued vacation 635 653 -- 749 428
(Decrease) increase in other liabilities (758) (80) -- 1,050 (432)
-------- -------- -------- -------- --------
Net cash (used in) provided by operating
activities (522) 6,371 8,313 21,643 5,858
-------- -------- -------- -------- --------
Cash flows from investing activities:
Purchases of marketable securities (1,968) -- (620) -- --
Proceeds from sale of marketable securities 1,636 -- -- 2,940 --
Acquisitions, net of cash acquired -- (1,285) (11,803) -- --
Sale of property and equipment 350 -- -- -- --
Purchase of property and equipment (7,025) (6,748) (3,757) (9,875) (5,919)
-------- -------- -------- -------- --------
Net cash used in investing activities (7,007) (8,033) (16,180) (6,935) (5,919)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Increase (decrease) in bank overdraft 3,823 -- -- (3,823) --
Borrowings under line of credit 92,975 69,153 60,699 73,814 70,860
Principal payments under line of credit (93,345) (65,160) (59,630) (73,647) (71,870)
Proceeds from issuance of notes payable -- -- 10,000 -- 1,786
Principal payments under notes and mortgage
payable (614) (3,793) (1,145) (2,616) (2,415)
Proceeds from sale of the Company's common
stock 8,151 4,056 1,400 71 6,705
Repayment of notes receivable from stockholders -- -- 28 58 --
Decrease in notes receivable from stockholders -- -- --
Purchase of the Company's common stock (5,318) (2,561) (2,403) (7,405) (4,976)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities: 5,672 1,695 8,949 (13,548) 90
-------- -------- -------- -------- --------
Net (decrease) increase in cash and cash equivalents (1,857) 33 1,082 1,160 29
Cash and cash equivalents at beginning of period 1,857 1,824 742 -- 1,857
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period $ -- $ 1,857 $ 1,824 $ 1,160 $ 1,886
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of The PBSJ
Corporation and its wholly-owned subsidiaries, Post, Buckley, Schuh &
Jernigan, Inc., a Florida corporation ("PBS&J"), PBS&J Construction
Services, Inc., Post, Buckley International, Inc., Post Buckley de Mexico,
S.A. de C.V., Seminole Development Corporation and HOH Associates, Inc.
(collectively the "Company"). All material intercompany transactions and
accounts have been eliminated in the accompanying consolidated financial
statements.
During fiscal year 1999, PBS&J became the successor to Post, Buckley, Schuh
& Jernigan, Inc., a Texas corporation, Post, Buckley, Schuh & Jernigan,
Inc., a California corporation, Post, Buckley, Schuh & Jernigan, Inc., a
Nevada corporation, Post, Buckley, Schuh & Jernigan, Inc. of Arizona,
Coastal Environmental Services, Inc., Espey, Huston & Associates, Inc.,
Survey Resources, Inc., and Kercheval and Associates, Inc. (collectively
"Related Entities") through the merger of PBS&J and the Related Entities of
the Company. The acquisition of the Related Entities has been accounted for
in a manner similar to a pooling of interest since it was acquired from
companies under common control. There was no consideration given by PBS&J
for the acquisition of these Related Entities. The merger does not have an
effect on the accompanying financial statements.
UNAUDITED INTERIM RESULTS
The accompanying consolidated balance sheet as of June 30, 2000 and
statements of income, stockholders' equity and cash flows for the nine
months ended June 30, 2000 and 1999 are unaudited. In the opinion of
management, these financial statements have been prepared on the same basis
as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's consolidated results of operations and cash
flows for the interim period presented. The data for the nine months ended
June 30, 2000 and 1999 included in notes to the consolidated financial
statements is also unaudited.
REVENUE RECOGNITION
In the course of providing its services, the Company routinely incurs
direct expenses such as subcontracts for services. In addition, the Company
also includes pass-through costs on cost plus contracts which are
customer-reimbursable materials, equipment and subcontractor costs when the
Company determines that it is responsible for engineering specification,
procurement and management of such cost components on behalf of the
customer. These direct expenses are principally passed through to the
Company's clients with minimal or no mark-up and, in accordance with
industry practice, are included in the Company's gross revenues.
Accordingly, the Company also reports net earned revenue, which is gross
revenue less direct expenses. For cost-plus and time and material
contracts, the Company reports fees earned based on actual labor multiplied
by contractual rates or multipliers. For fixed price contracts, the Company
reports fees earned on the percentage of completion basis which includes
revenue on the basis of costs incurred to date as a percentage of the total
estimated costs.
Anticipated losses are recognized in total in the period in which they
became determinable. Accounts receivable is presented net of an allowance
for doubtful accounts of $4,952, $4,954 and $2,485 at September 30, 1999
and 1998, and June 30, 2000, respectively. Unbilled fees are presented net
of an allowance for estimated unbillable amounts of $611, $295, and $530 at
September 30, 1999 and 1998 and June 30, 2000, respectively.
CAPITAL STRUCTURE
The company has authorized 3,000,000 shares of common stock (par value
$.0033).
The by-laws of the Company require the Company to redeem, at fair market
value, common stock held by shareholders who terminate employment with the
Company. The redemption value of all outstanding shares is as follows:
September 30, 1999 - $81,068; September 30, 1998 - $67,973; September 30,
1997 - $54,607; and June 30, 2000 - $74,678.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of all highly liquid investments with an original
maturity of three months or less from their dates of purchase. Cash
equivalents consist primarily of money market accounts.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. The
liability method requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between tax bases and financial reporting bases of assets and liabilities.
Such differences relate, primarily, to the Company's use of the accrual
method of accounting for financial reporting purposes, and the cash method
of accounting for tax purposes.
F-7
<PAGE>
BASIC AND DILUTED EARNINGS PER SHARE
Basic net income attributable to common stockholders per share has been
computed by dividing net income attributable to common stockholders by the
weighted average number of common shares outstanding. Diluted net income
attributable to common stockholders per share reflects the potential
dilution that could occur assuming the inclusion of dilutive potential
common shares and has been computed by dividing net income attributable to
common stockholders by the weighted average number of common shares and
dilutive potential common shares outstanding. Dilutive potential common
shares include all outstanding restricted stock awards after applying the
treasury stock. The restricted stock does not have a material impact on the
diluted earnings per share calculation.
MARKETABLE SECURITIES
Marketable securities consist of equity securities and mutual funds that
are considered available-for-sale and are recorded at fair value. Changes
in unrealized gains and losses for available-for-sale securities are
charged or credited as a component of accumulated other comprehensive
income, net of tax. A decline in the fair value of an available-for-sale
security below cost that is deemed other than temporary is charged to
earnings.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash, accounts receivables, unbilled fees
and trade accounts payable approximates book value due to the short-term
maturities of these instruments. The carrying amount of marketable
securities is based on quoted market prices at the reporting date for those
investments and approximates fair value. The fair value of the Company's
debt approximates the carrying value which was based on similar stated
rates, terms and maturities of existing debt as compared to current market
conditions.
GOODWILL
Goodwill, in the amount of $5,813, included in other assets, represents the
difference between the purchase price and the fair value of the net assets
of acquired businesses, and is being amortized on a weighted-average basis
over 10 to 20 years. A change in accounting estimate was made effective
June 30, 2000, to change the maximum useful life of goodwill from 40 years
to 20 years. The effect of this change had no material impact on operating
income for the years ended September 30, 1999, 1998 and 1997. The increase
in amortization expense due to this change was $232 for the nine months
ended June 30, 2000. Amortization expense relating to goodwill amounted to
$206, $199 and $180 for the years ended September 30, 1999, 1998 and 1997,
respectively, and $405 and $150 for the nine months ended June 30, 2000 and
1999, respectively. The Company evaluates the realizability of goodwill
based upon undiscounted forecasted operating earnings over the remaining
amortization period for each investment having a significant goodwill
balance. If an impairment in the value of the goodwill were to occur, the
Company would reflect the impairment through a reduction in the carrying
value of the goodwill based upon the estimated fair value of the
investment. Management believes that no impairment of goodwill exists at
June 30, 2000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Such estimates include the allowance for
doubtful accounts, unbilled fees, and reserve for litigation. Actual
results could differ from those estimates.
STOCK BASED COMPENSATION
Non-vested, restricted stock awarded to certain employees are measured at
the estimated fair value of the stock at the grant date.
CHANGES IN PRESENTATION
Certain financial statement reclassifications have been made to conform
prior years' data to the 1999 financial statement presentations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and improvements
are capitalized, while repairs and maintenance are expensed as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the terms of the
leases or their estimated useful lives. Cost and accumulated depreciation
of property and equipment retired or sold are eliminated from the accounts
at the time of retirement or sale and the resulting gain or loss is
recorded in income.
F-8
<PAGE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash, accounts
receivable and unbilled fees. The Company places its cash with high credit
quality financial institutions. At times, such amounts may be in excess of
the FDIC insurance limits.
Work performed for governmental entities accounted for approximately 66% of
engineering fees for the years ended September 30, 1999, 1998 and 1997 and
for the nine months ended June 30, 2000 and 1999. For the years ended
September 30, 1999, 1998 and 1997, we derived approximately 15%, 17% and
21%, respectively, of our net earned revenue from various districts and
departments of FDOT under numerous contracts. While we believe the loss of
any individual contract would not have a material adverse effect on our
results of operations and would not adversely impact our ability to
continue work under our other contracts with the FDOT, the loss of all the
FDOT contracts could have a material adverse effect on our results of
operations. Ongoing credit evaluations of customers are performed and
generally no collateral is required. The Company provides an allowance for
doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends and other information. Actual losses
have historically been within management's expectations and estimates.
COMPREHENSIVE INCOME
In 1999, the Company implemented Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income," which
establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
This statement requires that an enterprise (a) classify items of other
comprehensive income, such as unrealized holding gains and losses on
investments, by their nature in the financial statements and (b) display
the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of
the balance sheet. The entire accumulated other comprehensive income
consisted of unrealized holding gains and losses on investments as of
September 30, 1999, 1998 and 1997 and June 30, 2000. The components of the
unrealized gain on investments was as follows for the years ended September
30, 1999, 1998 and 1997, and nine months ended June 30, 2000:
<TABLE>
<CAPTION>
June 30 September 30
------- ---------------------------------
Unrealized gain on investments: 2000 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
- Holding loss arising during period, net of tax ($132) ($491) -- 153
Reclassification adjustment, net of tax (620) 946 --
----- --- ---- ----
Net (loss) gain recognized in other comprehensive ($752) $455 -- 153
income
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133
established methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. The Company believes that the effect of SFAS No. 133 is
immaterial on the operations and financial position of the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB101"). SAB 101 summarizes certain areas of the Staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The Company has adopted SAB101 for each period
presented in the accompanying statement of operations. There are no
significant adjustments posted as a result of the adoption of SAB101.
2. MARKETABLE SECURITIES:
At June 30, 2000 and September 30, 1999 and 1998, the Company held
investments in marketable securities classified as available-for-sale which
consisted of mutual funds and equity securities. Available-for-sale
securities at June 30, 2000 and September 30, 1999 and 1998 consisted of
the following:
F-9
<PAGE>
FAIR UNREALIZED
COST VALUE (LOSS) / GAIN
--------------- ------------- -------------
JUNE 30, 2000
Mutual funds $ 272 $ 397 $ 125
Common stock 76 76 0
--------------- ------------- -------------
Total $ 348 $ 473 $ 125
=============== ============= =============
SEPTEMBER 30, 1999
Mutual funds $ 3,905 $ 3,560 $ (345)
Common stock 618 344 (274)
--------------- ------------- -------------
Total $ 4,523 $ 3,904 $ (619)
=============== ============= =============
SEPTEMBER 30, 1998
Mutual funds $ 2,756 $ 3,087 $ 331
=============== ============= =============
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
ESTIMATED --------------------------- JUNE 30,
USEFUL LIVES 1999 1998 2000
--------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Land - $ 596 $ 470 $ 2,226
Building and building improvements 10 to 31.5 years 4,633 4,633 7,233
Furniture and equipment 5 to 7 years 32,969 32,612 36,314
Computer equipment under capital lease 3 years 1,786 - 1,786
Vehicles 3 years 3,042 3,419 3,228
Leasehold improvements 10 years 5,574 5,327 6,219
------------- ----------- ------------
48,600 46,461 57,006
Less accumulated depreciation and amortization (27,397) (27,193) (31,392)
------------- ----------- ------------
$ 21,203 $ 19,268 $ 25,614
============= =========== ============
</TABLE>
Depreciation and amortization expense relating to property and equipment
amounted to $5,908, $5,131 and $3,751 for the years ended September 30,
1999, 1998 and 1997, respectively, and $5,465 and $4,232 for the nine
months ended June 30, 2000 and 1999, respectively. The computer equipment
is held under a capitalized lease. Accumulated depreciation related to the
computer equipment amounted to $310 and $758 at September 30, 1999 and June
30, 2000, respectively.
4. ACQUISITION:
On December 1, 1997 and August 7, 1997, respectively, the Company acquired
all of the outstanding stock of Kercheval and Associates, Inc. (a
California corporation) for $1,324 and Espey, Huston & Associates, Inc.
("EH&A") (a Texas corporation) for $12,046.
The acquisitions were accounted for using the purchase method of
accounting, and the results of operations have been included since their
respective dates of acquisition. The Company has recorded goodwill in the
amount of $65 related to Kercheval and $5,280 related to EH&A, which is the
cost in excess of fair value of net assets acquired in these purchase
transactions.
F-10
<PAGE>
5. INCOME TAXES:
Provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------- --------------------------
1999 1998 1997 2000 1999
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Current $ - $ 207 $ 2,089 $ - $ -
Deferred 3,500 2,743 694 3,838 2,581
---------- ---------- ---------- ----------- ----------
$ 3,500 $ 2,950 $ 2,783 $ 3,838 $ 2,581
========== ========== ========== =========== ==========
</TABLE>
Included in the 1999 and 1998 and 1997 provisions for income taxes are
deferred state taxes of $581 and $454 and $145, respectively. The current
portions of state taxes was $0, $0, $283, for the years ended September 30,
1999, 1998 and 1997. A reconciliation of the income tax provision to taxes
computed at the U.S. federal statutory rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
U.S. Statutory Rate 35.0% 35.0% 35.0%
State Taxes, net of Federal Tax Benefit 3.9 3.9 3.9
Nondeductible expenses 0.2 0.9 2.1
---------- ---------- ----------
Effective tax rate 39.1% 39.8% 41.0%
========== ========== ==========
</TABLE>
The provision for income taxes for the nine months ended June 30, 2000 and
1999 were calculated at an effective tax rate of approximately 39%.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities consisted
of the following:
DECEMBER 31,
------------------------------
1999 1998
------------ -----------
Deferred tax liabilities:
Accounts receivable $ 14,665 $ 13,072
Unbilled fees 8,316 8,193
Depreciation 836 836
Other 841 604
------------ -----------
Gross deferred tax liabilities 24,658 22,705
Deferred tax assets:
Accounts payable and accrued expenses (5,538) (6,884)
Net operating loss carryforwards (1,806) -
Compensation (900) -
Deferred credits (2,120) (1,925)
Other liabilities (1,192) (1,675)
------------ -----------
Gross deferred tax assets (11,556) (10,484)
------------ -----------
Net deferred tax liabilities $ 13,102 $ 12,221
============ ===========
6. DEFERRED COMPENSATION PLANS:
The Company maintains deferred compensation/consulting plans which cover
certain present key officers and employees and provides for payments upon
retirement, death, or disability. The contracts fixed a minimum level for
retirement benefits to be
F-11
<PAGE>
paid to participants based on age at retirement with the Company. The
deferred compensation plans are funded through life insurance and are being
provided for currently. Total annual cash surrender value increase for the
years ended September 30, 1999, 1998 and 1997 for the plans amounted to
$279, $446 and $558, respectively. For the nine months ended June 30, 2000
and 1999, total annual cash surrender value increase for the plans was $513
and $460, respectively. Total compensation expense, included in general and
administrative expenses, related to the plans amounted to $566, $557, $659,
$656 and $408 in fiscal years 1999, 1998 and 1997 and for the nine months
ended June 30, 2000 and 1999, respectively.
7. EMPLOYEE BENEFIT PLAN:
The Company has a qualified contributory profit-sharing and employee stock
ownership plan (the "Plan") providing benefits for all eligible employees.
During 1999, the Plan was amended to include an employer matching
contribution up to 3% of the participants' eligible compensation. Prior to
1999, the Plan included an employer matching contribution, equal to 1% of
the participants' eligible compensation. The Company's matching
contribution was $1,831, $909 and $0 for the fiscal years 1999, 1998 and
1997, respectively. The Company's matching contribution for the nine months
ended June 30, 2000 and 1999 was $1,776 and $1,309, respectively. In
addition, the Company accrued an additional $400 and $1,631 at September
30, 1999 and 1998, respectively, as discretionary contributions to the
profit sharing plan.
8. RESTRICTED STOCK:
Restricted stock is offered to existing employees, which are subject to
restrictions on transfer, and risk of forfeiture until earned by continued
employment. The restricted stock is subject to total forfeiture if the
employee ceases to be employed with us prior to the maturity date of the
restricted stock, except in certain limited circumstances described in the
individual restricted stock award agreement. During the restriction period,
holders have the rights of shareholders, including the right to vote, but
cannot transfer ownership. Restricted stock is recorded at fair value on
the date of issuance. The stock vests over the service period, which is
usually 5 years. The issuance of restricted stock gives rise to unearned
compensation that is amortized over the vesting period. Through June 30,
2000 and September 30, 1999, 95,283 and 99,602 shares of restricted stock
have been issued, of which 7,227 and 14,269 shares had vested or had been
canceled. Unearned compensation is shown as a reduction of stockholders'
equity in the accompanied financial statements. The total amount of
compensation expense recognized under these agreements during 1999, 1998
and 1997 was $280, $183 and $175, respectively.
F-12
<PAGE>
9. LONG TERM DEBT:
<TABLE>
<CAPTION>
September 30, June 30,
1999 1998 2000
----------------- ---------------- ----------------
<S> <C> <C> <C>
Line of credit unused availability of $29,113,
$5,910 and $29,425 at September 30, 1999 and
1998 and June 30, 2000, respectively. $ 7,720 $ 6,090 $ 7,887
Term loan due in annual installments of $2,000,000
through July 31, 2002. Interest at LIBOR plus 75
basis points or prime minus 50 basis points
(6.1125%, 5.98% and 7.3919% at September 30,
1999 and 1998 and June 30, 2000, respectively). 6,000 8,000 6,000
Mortgage note payable due in monthly installments
of $36, including interest at 6.87%, collateralized
by real property, unpaid principal due May 31, 2000. 2,044 2,294 -
Notes payable to current and former stockholders
due in monthly and quarterly installments with
interest of 7.25% through 2002. 527 745 179
Capital lease of equipment, interest accrues at 7.75%,
collateralized by certain equipment due in monthly
payments of principal and interest of $36,481. 1,640 - 1,416
--------------- ---------------- ----------------
17,931 17,129 15,482
Less current portion 4,594 8,540 2,417
--------------- ---------------- ----------------
$ 13,337 $ 8,589 $ 13,065
=============== ================ ================
</TABLE>
Scheduled maturities are as follows:
2000 - $2,210; 2001 - $2,445; 2002 - $10,318; 2003 - 415, and 2004 and
thereafter - $94.
On June 30, 1999, the Company entered into a new line of credit agreement
with a bank. The line of credit replaced a line of credit with two other
banks and increased the availability of funds from $12 million to $37
million. The expiration date on the new line of credit is June 30, 2002.
The interest rate ranges from LIBOR plus 50 basis points to prime minus 125
basis points if the Company's funded debt coverage ratio is less than 2.5
(5.87% , 6.125% and 7.1419% at September 30, 1999 and 1998 and June 30,
2000, respectively). The range increases to LIBOR plus 75 basis points to
prime minus 100 basis points if the Company's funded debt coverage ratio is
between 2.5 to 3.0. The line of credit contains clauses requiring the
maintenance of various covenants and financial ratios.
Additionally, on June 30, 1999, the Company consolidated the term loans
with one bank. The line of credit and term loans are collateralized by
substantially all the assets of the Company.
10. COMMITMENTS AND CONTINGENCIES:
The Company is obligated under various noncancelable leases for office
facilities, furniture and equipment. Certain leases contain renewal
options, escalation clauses and certain other operating expenses of the
properties. In the normal course of business, leases that expire are
expected to be renewed or replaced by leases for other properties. As of
September 30, 1999, the future minimum annual rental commitments under
operating and capital leases are as follows:
F-13
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZED OPERATING
YEAR ENDING SEPTEMBER 30 LEASES LEASES
--------------- ---------------
<S> <C> <C>
2000 $ 438 $ 8,735
2001 438 6,199
2002 438 4,097
2003 438 2,816
2004 218 676
--------------- ---------------
Total minimum lease payments 1,970 $ 22,523
===============
Less: amount representing interest 330
---------------
Present value of minimum lease payments $ 1,640
===============
</TABLE>
Total rent expense included in general and administrative expenses was
$8,903, $8,089, $5,922, $7,655 and $6,443 for fiscal years ended 1999,
1998, 1997 and for the nine months ended June 30, 2000 and 1999,
respectively.
The Company is involved in legal actions arising in the ordinary course of
business. The Company maintains a full range of insurance coverage,
including worker's compensation, general and professional liability
(including pollution liability) and property coverage. The Company
insurance policies may offset the amount of loss exposure from legal
actions.
As of September 30, 1999, there were approximately 17 cases pending against
the Company, where plaintiffs allege damages resulting from the Company's
engineering services. The plaintiffs' allegations of liability in those
cases seek recovery for damages caused by the Company based on various
theories of negligence, contributory negligence or breach of contract.
As of September 30, 1999, the Company had a reserve of $2.4 million for all
potential and existing liabilities that, in management's opinion, are
probable. The Company expects to pay these liabilities over the next one to
three years. Management is of the opinion that the liabilities ultimately
resulting from such existing and other pending proceedings, lawsuits and
claims should not materially affect the Company's financial position,
results of operations or cash flows.
11. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Years ended September 30, Nine months ended
June 30,
1999 1998 1997 2000 1999
<S> <C> <C> <C> <C> <C>
Cash paid during the year for:
Interest $ 1,115 $ 1,366 $ 659 $ 1,083 $ 897
Income taxes 33 2,170 1,509 - -
Non-cash investing activities:
Computer equipment acquired
through capital leases 1,786 - - - -
Investments received in the
sale of fixed assets 618 - - - -
Details of acquisition:
Fair value of assets acquired $ - $ 4,121 $ 12,165 $ - $ -
Goodwill - 65 5,280 - -
Liabilities assumed - (2,862) (5,399) - -
---------- ---------- ---------- ---------- -----------
Cash paid - 1,324 12,046 - -
Less: cash acquired - (39) 243 - -
---------- ---------- ---------- ---------- -----------
Net cash paid for acquisitions $ - $ 1,285 $ 11,803 $ - $ -
========== ========== ========== ========== ===========
</TABLE>
F-14
<PAGE>
12. SEGMENT REPORTING
Financial information relating to the Company's operations by service are
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, 2000
TRANSPORTATION CONSTRUCTION CIVIL ENVIRONMENTAL TOTAL
<S> <C> <C> <C> <C> <C>
Engineering fees $77,426 $24,125 $52,492 $40,231 $194,274
Net earned revenue 56,643 17,499 40,393 32,254 146,789
Operating income 7,110 2,627 640 1,045 11,422
Depreciation and amortization 2,280 710 1,544 1,184 5,718
Total assets 41,884 12,452 33,960 24,904 113,200
Capital expenditures 3,936 1,227 2,670 2,042 9,875
<CAPTION>
NINE MONTHS ENDED JUNE 30, 1999
TRANSPORTATION CONSTRUCTION CIVIL ENVIRONMENTAL TOTAL
<S> <C> <C> <C> <C> <C>
Engineering fees $65,405 $21,213 $49,496 $40,657 $176,771
Net earned revenue 48,904 15,861 37,009 30,400 132,174
Operating income 2,597 772 2,106 1,544 7,019
Depreciation and amortization 1,612 479 1,307 958 4,356
Total assets 37,416 11,124 30,338 22,247 101,125
Capital expenditures 2,190 651 1,776 1,302 5,919
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999
TRANSPORTATION CONSTRUCTION CIVIL ENVIRONMENTAL TOTAL
<S> <C> <C> <C> <C> <C>
Engineering fees $87,464 $27,339 $65,336 $61,278 $241,417
Net earned revenue 65,100 17,772 51,496 46,269 180,637
Operating income 3,316 989 2,683 2,012 9,000
Depreciation and amortization 2,262 672 1,834 1,345 6,113
Total assets 38,263 11,411 30,953 23,208 103,835
Capital expenditures 2,589 772 2,094 1,570 7,025
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
TRANSPORTATION CONSTRUCTION CIVIL ENVIRONMENTAL TOTAL
<S> <C> <C> <C> <C> <C>
Engineering fees $82,651 $26,806 $62,547 $51,377 $223,381
Net earned revenue 61,839 20,056 46,797 38,441 167,133
Operating income 3,357 1,139 1,677 1,611 7,784
Depreciation and amortization 2,299 780 1,148 1,103 5,330
Total assets 41,588 14,107 20,770 19,960 96,425
Capital expenditures 2,910 987 1,453 1,398 6,748
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
TRANSPORTATION CONSTRUCTION CIVIL ENVIRONMENTAL TOTAL
<S> <C> <C> <C> <C> <C>
Engineering fees $63,878 $20,717 $50,067 $37,982 $172,644
Net earned revenue 48,627 15,771 38,113 28,912 131,423
Operating income 2,957 928 1,371 1,406 6,662
Depreciation and amortization 1,744 548 809 830 3,931
Total assets 37,038 11,626 17,176 17,617 83,457
Capital expenditures 1,667 523 773 794 3,757
</TABLE>
Prior to fiscal year 2000, general and administrative costs were allocated
based on each segment's direct costs, as a percentage of total direct costs.
Beginning with fiscal year 2000, each segment's general and administrative costs
are a combination of its' actual relative direct expenses and an allocation of
corporate expenses based on the same percentage noted above. As a result, the
operating income for each segment represented the segment's actual expenses plus
an allocation of corporate overhead. The effect of this charge on operating
income at June 30, 2000 was as follows:
F-15
<PAGE>
OPERATING INCOME UNDER OLD METHOD OF GENERAL AND ADMINISTRATIVE
EXPENSE ALLOCATION:
Transportation Construction Civil Environmental
$4,569 $1,371 $3,084 $2,399
F-16
<PAGE>
13. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND ESTIMATABLE UNBILLABLE AMOUNTS
The activity in the allowance for doubtful and estimatable unbillable
amounts were as follows:
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
DESCRIPTION YEAR EXPENSES DEDUCTIONS END OF YEAR
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999
Allowance for doubtful accounts $ 4,954 $ 1,262 $(1,264) $ 4,952
Allowance for estimatable unbillable amounts 295 637 (321) 611
------------ ----------- ---------- -----------
$ 5,249 1,899 $(1,585) $ 5,563
============ =========== ========== ===========
YEAR ENDED SEPTEMBER 30, 1998
Allowance for doubtful accounts $ 4,128 $ 1,579 $ (753) $ 4,954
Allowance for estimatable unbillable amounts 295 0 (0) 295
------------ ----------- ---------- -----------
$ 4,423 $ 1,579 $ (753) $ 5,249
============ =========== ========== ===========
YEAR ENDED SEPTEMBER 30, 1997
Allowance for doubtful accounts $ 3,316 $ 1,537 $ (725) $ 4,128
Allowance for estimatable unbillable amounts 345 0 (50) 295
------------ ----------- ---------- -----------
$ 3,661 $ 1,537 $ (775) $ 4,423
============ =========== ========== ===========
</TABLE>
F-17
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
10.1 The PBSJ Employee Profit Sharing and Stock Ownership Plan
and Trust
10.14 The PBSJ Corporation Stock Ownership Plan
27.2 Financial Data Schedule - June 30, 2000
