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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 1, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-12588
GILBERT ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2280922
(State of Incorporation) (IRS Employer
Identification No.)
Box 1498, Reading, Pennsylvania 19603
(Mailing address of principal executive offices) (Zip Code)
(610) 775-5900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Class A Class B
Number of shares of each class of
common stock outstanding as of
July 1, 1994 (excluding 1,979,525
Class A treasury shares): 5,669,951 1,335,824
This report consists of 10 pages
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Gilbert Associates, Inc.
Index
Part I. Financial Information
Item I.
Consolidated Condensed Balance Sheets at July 1, 1994 and
December 31, 1993 (unaudited)
Consolidated Condensed Statements of Income for the six
month and three month periods ended July 1, 1994 and
July 2, 1993 (unaudited)
Consolidated Condensed Statements of Cash Flows for the six
month periods ended July 1, 1994 and July 2, 1993 (unaudited)
Notes to Consolidated Condensed Financial Statements
Item II.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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Part I. Financial Information
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS July 1, 1994 Dec. 31, 1993
------------ -------------
Current assets:
Cash and cash equivalents $ 2,978,000 $ 10,716,000
Accounts receivable, net of allowance
for doubtful accounts of $2,345,000 and
$3,427,000, respectively 37,182,000 38,526,000
Unbilled revenue 23,109,000 23,480,000
Inventories 6,686,000 6,402,000
Deferred income taxes 3,705,000 4,205,000
Other current assets 5,673,000 5,751,000
----------- -----------
Total current assets 79,333,000 89,080,000
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Property, plant and equipment 91,768,000 89,475,000
Less accumulated depreciation and amortization 49,133,000 46,924,000
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42,635,000 42,551,000
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Other Assets 2,142,000 2,117,000
Deferred income taxes 1,200,000 1,100,000
Goodwill 36,266,000 35,399,000
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TOTAL ASSETS $161,576,000 $170,247,000
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See accompanying notes to consolidated condensed financial statements.
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GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
LIABILITIES & STOCKHOLDERS' EQUITY July 1, 1994 Dec. 31, 1993
------------ -------------
Current liabilities:
Note Payable $ - $ 5,000,000
Accounts payable 5,267,000 5,593,000
Salaries and wages 10,261,000 9,469,000
Income taxes 1,304,000 1,868,000
Estimated liability for contract losses 2,622,000 2,813,000
Contractual billings in excess of
recognized revenue 2,234,000 2,194,000
Other accrued liabilities 10,308,000 12,431,000
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Total current liabilities 31,996,000 39,368,000
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Self-insurance reserves 5,016,000 4,663,000
Other long-term liabilities 7,628,000 8,102,000
Commitments and contingencies - -
Stockholders' equity:
Common stock 8,985,000 8,985,000
Capital in excess of par value 38,715,000 38,932,000
Retained earnings 100,569,000 101,081,000
Foreign currency translation adjustments 49,000 83,000
Treasury stock (31,382,000) (30,967,000)
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Total stockholders' equity 116,936,000 118,114,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $161,576,000 $170,247,000
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See accompanying notes to consolidated condensed financial statements.
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GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 1, 1994 July 2, 1993 July 1, 1994 July 2, 1993
Revenue: ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Engineering and consulting revenue $123,243,000 $125,750,000 $61,607,000 $62,160,000
Communication equipment sales 22,839,000 20,971,000 11,210,000 10,874,000
Other income 2,828,000 2,848,000 1,241,000 1,240,000
----------- ----------- ---------- ----------
148,910,000 149,569,000 74,058,000 74,274,000
----------- ----------- ---------- ----------
Costs and expenses:
Engineering and consulting costs 94,985,000 95,585,000 47,589,000 47,448,000
Communication equipment costs 15,599,000 13,394,000 7,650,000 6,911,000
Selling, general and administrative
expenses 31,500,000 32,487,000 15,730,000 17,099,000
Depreciation and amortization 3,421,000 3,089,000 1,717,000 1,559,000
Interest expense 98,000 89,000 42,000 36,000
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145,603,000 144,644,000 72,728,000 73,053,000
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Income before provision
for taxes on income and cumulative
effect of changes in accounting
principles 3,307,000 4,925,000 1,330,000 1,221,000
Provision for taxes on income 1,010,000 1,951,000 200,000 470,000
----------- ----------- ---------- ----------
Income before cumulative effect of
changes in accounting principles 2,297,000 2,974,000 1,130,000 751,000
Cumulative effect of changes in
accounting principles - (200,000) - -
----------- ------------ ---------- ----------
Net income $ 2,297,000 $ 2,774,000 $ 1,130,000 $ 751,000
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Per share of common stock:
Income before cumulative effect of
changes in accounting principles $.33 $.40 $.16 $.10
Cumulative effect of changes in
accounting principles - (.03) - -
----------- ------------ ----------- ----------
Net income $.33 $.37 $.16 $.10
=========== ============ =========== ==========
Cash dividends $.40 $.36 $.20 $.18
Average number of shares of common
stock outstanding 7,020,944 7,442,858 7,013,628 7,440,460
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
July 1, 1994 July 2, 1993
------------ ------------
Cash flows from operating activities:
Net income $ 2,297,000 $ 2,774,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Items not affecting cash 3,865,000 3,068,000
Changes in current assets and
current liabilities (321,000) 8,839,000
Other, net (191,000) 320,000
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Net cash provided by operating activities 5,650,000 15,001,000
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Cash flows from investing activities:
Payment for acquisition of GENSYS Corporation (1,500,000) (1,250,000)
Net increase in short-term investments - (5,969,000)
Payments for property, plant and equipment (2,787,000) (2,101,000)
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Net cash used for investing activities (4,287,000) (9,320,000)
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Cash flows from financing activities:
Payments under note payable (5,000,000) -
Issuance of treasury stock in connection
with stock option and award plans 880,000 282,000
Payments to acquire treasury stock (1,512,000) (700,000)
Cash dividends paid (2,809,000) (2,680,000)
Other, net (660,000) 307,000
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Net cash used for financing activities (9,101,000) (2,791,000)
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Net (decrease)increase in cash and cash equivalents (7,738,000) 2,890,000
Cash and cash equivalents at beginning of period 10,716,000 6,952,000
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Cash and cash equivalents at end of period $ 2,978,000 $ 9,842,000
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Supplemental cash flow disclosures:
Interest paid $ 56,000 $ 49,000
Income taxes paid, net of refunds received $ 1,035,000 $ 3,589,000
See accompanying notes to consolidated condensed financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The financial statements furnished herein reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of financial position and results of operations for the
interim periods. Prior year's consolidated condensed balance sheet
and statement of cash flows have been reclassified to conform with
the current year presentation.
2. Net income per share of common stock was determined using the
average number of Class A and Class B shares outstanding. The
effect on net income per share resulting from dilution upon exercise
of outstanding stock options is not material, and therefore is not
shown.
3. During the second quarter of 1994, the company closed foreign
subsidiaries and settled certain contractual issues which had been
previously reserved. The combination of these two events increased
net income by $75,000 or $.01 per share. Income before provision
for taxes on income and cumulative effect of changes in accounting
principles was reduced by $525,000. Of this amount, $1,100,000
related primarily to a reserve for a lease obligation and severance
costs, which was partially offset by a $700,000 favorable outcome on
the aforementioned contract settlement. These amounts were recorded
in selling, general and administrative expenses. The provision for
taxes on income was reduced by $600,000 primarily due to a federal
income tax deduction associated with the closure of foreign
subsidiaries.
4. During the first quarter of 1994, the company paid the former
stockholders of GENSYS $1,500,000 as part of the purchase agreement
for achieving certain earnings objectives. This resulted in an
increase in goodwill of $1,360,000, net of an income tax benefit of
$140,000.
5. In the first quarter of 1993, the company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pension" (SFAS 106). As a
result of this change, a $900,000 charge (net of $600,000 income tax
benefit) or $.12 per share was recorded by the company as a cumulative
effect of change in accounting principle.
6. In the first quarter of 1993, the company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
(SFAS 109). As a result of this change, an increase to net income
of $700,000 or $.09 per share was recorded by the company as a
cumulative effect of change in accounting principle.
7. The consolidated net income for the quarter ended July 2, 1993
includes a charge to income of $1,320,000 (net of $880,000 income
tax benefit), or $.18 per share, to increase reserves for costs
associated with resolving a series of claims filed by former
employees of a subsidiary which was closed in 1988. The company
intends to contest these matters vigorously and is in the process of
pursuing various legal actions. The timing of the final resolution
is not yet known.
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Management's Discussion and Analysis of Results of
Operations and Financial Condition
Excluding adjustments, net income and earnings per share decreased 48%
and 45%, respectively, in the first six months of 1994 as compared to
the same period of 1993 and, in the current quarter, declined 49% and
46%, respectively, compared to the second quarter of 1993. Adjustments
included a $75,000 increase in net income or $.01 per share in the
current quarter relative to closing foreign subsidiaries and settlement
of certain contractual issues (Note 3), a $1,320,000 reduction in net
income or $.18 per share in the second quarter of 1993 to increase
reserves for claims filed by former employees (Note 7), and a $200,000
reduction in net income or $.03 per share for changes in accounting
principles in the first quarter of 1993 (Notes 5 and 6). The decreases
in net income relate primarily to lower operating results within the
engineering and consulting segment. The favorable relationships between
the changes in net income and earnings per share is due to fewer shares
outstanding.
The engineering and consulting segment revenue decreased 2% and 1% for
the six and three month periods in 1994, respectively, as compared to
the same periods in 1993. These decreases are primarily due to declines
in services provided to the nuclear power market. These declines are
partially offset by revenue from SRA Technologies, Inc. (SRA), which was
acquired on December 10, 1993. The gross profit percentage decreased
from 24% in both the six and three month periods of 1993 to 23% for the
same periods in 1994. These decreases are primarily due to competitive
pressures within the nuclear power market.
The communication equipment segment revenue increased 9% and 3% for the
six and three month periods in 1994, respectively, as compared to the
same periods in 1993. The increases relate primarily to the acquisition
of Instrument Associates, Inc. (IAI), which was acquired on December 28,
1993. The gross profit percentage decreased from 36% to 32% in both the
six and three month periods of 1994 as compared to 1993. The decreases
relate primarily to costs associated with consolidating manufacturing
operations.
Prior to the adjustments mentioned above, selling, general and
administrative expenses increased 3% for both the six and three month
periods of 1994 as compared to the same periods in 1993. The increases
relate primarily to the acquisition of SRA. Depreciation and
amortization increased 11% and 10% for the six and three month periods
in 1994, respectively, as compared to the same periods in 1993, due
primarily to the recent acquisitions.
Excluding the adjustments mentioned above, income before provision for
taxes on income and cumulative effect of changes in accounting
principles decreased 46% for both the six and three month periods of
1994 as compared to the same periods in 1993. The decreases relate
primarily to lower operating results within the engineering and
consulting segment, particularly the nuclear power market.
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Excluding the aforementioned adjustments, the effective tax rate for the
first six months of 1994 increased to 42% from 40% for the same period
last year. The effective tax rate for the current quarter increased to
43% from 39% for the second quarter of 1993. The increases relate to a
higher ratio of non-deductible expenses to income before provision for
taxes on income and cumulative effect of changes in accounting
principles.
Working capital decreased $2,375,000 and cash and cash equivalents
decreased $7,738,000 primarily due to the repayment of notes payable.
The company does not anticipate requiring outside long-term financing
during the next year. Amounts generated from operations, combined with
the available cash and cash equivalents and short-term lines of credit,
should provide adequate working capital to satisfy operating
requirements, contingent payment to former IAI principals and the
ongoing program to repurchase the company's Class A common stock, of
which approximately $3,500,000 remains. Unused lines of credit with
three banks aggregating $15,600,000 are also available for short-term
cash needs. No restrictions on cash transfers between the company and
its subsidiaries exist.
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Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The registrant was not required to report any items on Form
8-K during the three months ended July 1, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GILBERT ASSOCIATES, INC.
/s/J. R. Itin
---------------------------
J. R. Itin
Vice President and
Chief Financial Officer
Date: August 3, 1994
