SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 20549
_________________________
FORM 10-Q/A No. 2
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
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.)
P.O. 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
March 31, 1995 (excluding 2,034,571
Class A treasury shares): 5,671,477 1,279,252
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Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Net income declined $33,000 and earnings per share decreased by $.01 in
the current quarter as compared to the first quarter of 1994. The
slight decline in earnings relates primarily to lower operating results
within the professional services segment offset in part by improvements
within the communication equipment segment.
The professional services segment reported a 18% decrease in revenue in
the first quarter of 1995 as compared to the same period in 1994. The
decline is primarily due to large decreases in services provided to the
nuclear power industry and public utility clients. The gross profit
percentage decreased from 23% to 22% in the current quarter due
primarily to lower margins realized on services provided to the U. S.
Government.
The communication equipment segment revenue increased 2% in the first
quarter of 1995 as compared to the same period in 1994 due primarily to
higher international sales and increased revenue from the Instrument
Associates, Inc. division. The gross profit percentage increased from
32% in the first quarter of 1994 to 35% in the current quarter. The
increase is due primarily to the benefits realized as a result of
consolidating operations and sales of higher margin products.
Other income increased 32% in the first quarter of 1995 compared to the
same period last year due primarily to higher income derived from a
joint venture within the professional services segment. The joint venture
is comprised of Gilbert/Commonwealth, Union Boiler and Morrison Knudson
Company, and was specifically established to service one contract. Each company
has equal voting rights and G/C receives 51% of the joint venture's profit,
if any. The contract expires at the end of 1996 and has an option for two
additional years.
Selling, general and administrative expenses declined 13% in the current
quarter compared to the first quarter of 1994. The decline is primarily
due to the lower business activity within the power industry.
Depreciation and amortization decreased 6% in the first quarter of 1995
compared to the same period last year due primarily to lower goodwill
amortization as a result of the 1994 third quarter goodwill write-off.
Income before provision for taxes on income increased 2% in the first
quarter of 1995 compared to the same period in 1994 due primarily to
higher results within the communication equipment segment, which was
offset in part by a decline within the professional services segment.
The effective tax rate increased from 41% to 44% from the first quarter
of 1994 to the first quarter of 1995 due to a higher effective state
income tax rate, which in part is due to limitation in loss carrybacks
and carryforwards in certain jurisdictions.
Deregulation in the domestic power utility industry, excess power
generation capacity, demand side management programs and aversion to
nuclear power will continue to put downward pressures on the level of
services provided by the company, particularly to nuclear power related
customers, until additional power generation capacity is needed. If
G/C is divested, the company's reliance on the power industry is reduced
greatly, therefore, any future negative impact as a result of changes in
the power market should not be significant to the company.
As described in Note 5, the company has entered into an agreement to
sell G/C, its largest subsidiary. The sale, if approved by the Class B
shareholders, will be effective April 1, 1995. As a result, the
company's results of operations will exclude G/C beginning April 1,
1995. The immediate impact to the company's operations following the
sale of G/C will result in approximately a 37% decline in total revenue
based upon the financial information for the year ended December 30,
1994 and the three months ended March 31, 1995. This considers
additional annual rental revenue of $3,000,000 as a result of the buyer
signing a ten year lease, but excludes any revenue to be derived from
interest income earned on the sale proceeds. Net income may decline
slightly from the first quarter of 1995. This assumes interest income
earned on sale proceeds will partially offset net income derived from
G/C and the corporate overhead expense that it absorbed. It is,
however, difficult to project the impact to net income and earnings per
share given the uncertainties regarding the amount, if any, of
repurchases of common stock and the price per share thereof, operations
of the company's remaining units, the extent to which corporate overhead
expenses are reduced and possible acquisitions. At this time, no
acquisitions are imminent.
After the sale of G/C, the company's primary future focus will be in the
manufacture and sale of communication equipment and professional
services which may complement our existing professional service
businesses. The company, as a result of the sale, has reduced its reliance
on the power market and does not consider this to be an area of major
focus in the future.
Liquidity and Capital Resources
Working capital decreased $228,000 and cash and cash equivalents declined
$2,122,000 in the first three months of 1995. The decline in cash and
cash equivalents is largely due to the repayment of a $2,000,000 note
payable, which was outstanding under the company's line of credit with
Meridian Bank for four days at an interest rate of 7.38%. The company
does not anticipate requiring outside long-term financing during the next
year. Amounts generated from operations, combined with available cash
and cash equivalents and short-term lines of credit, should provide
adequate working capital to satisfy operating requiremnt, contractual and
lease obligations related to the third quarter 1994 charge and the
contingent payment to former IAI principals. The anticipated cash proceeds
from the disposition of Gilbert/Commonwealth, Inc. (G/C), as discussed in
Note 5, will provide enough cash to satisfy the $15,000,000 stock repurchase
program as described in Note 6.
Unused lines of credit with three banks aggregating $16,500,000 are also
available for short-term cash needs. The short-term lines of credit consist
of the following: Meridian Bank, $10 million, which expires April 30, 1996;
Chemical Bank, $5 million, which expires June 30, 1995; and The Chase
Manhattan Bank, N.A., $3 million, which expires June 30, 1995. At March 31,
1995, the entire Chase line was available, and $9 million and $4.5 million
respectively, were available under the Meridian and Chemical lines.
Outstanding borrowings under these lines bear interest at a function of the
prime rate. The Chemical and Chase lines are used primarily to secure
letters of credit posted by the Company; the Meridian line is used to fund
short-term working capital requirments.
The company estimates that capital expenditures in 1995 will be approximately
$3,000,000, assuming G/C is sold.
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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.
Timothy S. Cobb
President, Chief Executive Officer
and Acting Chief Financial Officer
May 25, 1995
