SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 29, 1995
OR
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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 or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
P.O. Box 1498,
Reading, Pennsylvania 19603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 856-5500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $1.00 per share
(Title of Class)
Class B Common Stock, par value $1.00 per share
(Title of Class)
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
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Class B (voting) Common Stock
held by non-affiliates computed by reference to the NASDAQ National Market
System closing sale price for the registrant's Class A (non-voting) Common Stock
at January 26, 1996 was $5,550,046.
Class A Class B
Number of shares of each class
of common stock outstanding as
of January 26, 1996 (excluding
2,697,157 treasury shares): 5,835,078 453,065
<PAGE>
PART I
ITEM 1. BUSINESS.
Gilbert Associates, Inc. (the "registrant") was organized as a holding
company in 1984. Prior to forming the holding company, the registrant
was an operating company and owner of several subsidiaries. The
original Gilbert Associates, Inc. was organized in 1942. Through its
operating subsidiaries, the registrant is engaged in the businesses of
providing technical services and the manufacture and sale of
telecommunication equipment. The registrant and its subsidiaries are
sometimes referred to herein collectively as the "Gilbert companies."
The holding company structure separates the administrative and
financing activities of the registrant from the activities of its
operating subsidiaries. The revenues, operating profits and
identifiable assets of the registrant's technical services,
telecommunications, and real estate segments for 1995 are stated in Note
14 to the consolidated financial statements contained in Part II, Item 8
of this report.
1995 CORPORATE DEVELOPMENTS
During 1995, the registrant made several major strategic
transactions which move the Gilbert companies' out of the electric and
nuclear power generation consulting markets. Gilbert/Commonwealth, Inc.
(G/C) was sold to The Parsons Corporation, and the decision was made to
sell if possible or close United Energy Services Corporation. Using a
portion of the proceeds from the sale of G/C, the registrant purchased
XEL Corporation (XEL), based in Aurora, Colorado. XEL designs,
manufactures and markets telecommunication transmission system products
for use primarily by telecommunication network operators. XEL's
operations are included in the registrant's results beginning the date
of acquisition, October 27, 1995. XEL is part of the registrant's
telecommunications segment.
TECHNICAL SERVICES
The technical services business segment, formerly called the
professional services segment, consists of United Energy Services
Corporation ("UESC"), Resource Consultants, Inc. ("RCI"), SRA
Technologies, Inc. ("SRA"), which are wholly-owned subsidiaries, and,
until June 20, 1995, Gilbert/Commonwealth, Inc. ("G/C").
On June 20, 1995, the registrant completed the sale of G/C to The
Parsons Corporation (Parsons) for $45,932,000. The transaction resulted
in a $18,742,000 gain, net of income taxes of $7,800,000, or $2.74 per
share. As part of the agreement, Parsons entered into a ten year lease
with the registrant for 200,000 square feet of office space. G/C's
results of operations are excluded from the registrant's statement of
operations from April 1, 1995 forward.
<PAGE>
G/C, based in Reading, Pennsylvania, was the registrant's largest
subsidiary prior to its divestiture. G/C provided a wide range of
engineering and consulting services principally to the power generation
industry. The registrant had made a strategic decision to divest G/C
and focus its efforts and resources on expanding its telecommunication
segment. As a continuation of this strategy, the registrant announced
its decision to sell or close UESC, which is based in Atlanta, Georgia.
UESC was the registrant's last subsidiary principally engaged in
providing services to the power generation industry. The closure
resulted in a fourth quarter charge to income of $3,630,000, net of an
income tax benefit of $1,870,000, or $.57 per share to cover the cost to
wind down and close UESC.
Following the sale of G/C and the closure of UESC, the technical
services segment is now comprised of RCI and SRA. RCI, based in Vienna,
Virginia, provides engineering, outplacement services, technical and
other program support services to U.S. defense agencies, principally the
U.S. Navy and Army, and other U.S. Government agencies. SRA, based in
Falls Church, Virginia, is a technical services firm specializing in
providing contract research, analysis and management services in the
biomedical sciences, life and environmental sciences and energy areas.
SRA provides services principally to U.S. Governmental agencies and
commercial pharmaceutical companies.
There were no other significant new business developments relating
to the technical services segment during the fiscal year ended December
29, 1995.*
* All references to particular years in the balance of this report
refer to the fiscal year ended on or about December 31 of such
year. Thus, the fiscal year ended December 29, 1995 is from time
to time referred to as simply "1995" elsewhere in this report.
<PAGE>
The following table sets forth
for the past three fiscal years the revenues derived from the listed
categories of technical services rendered:
Technical Services Revenues
(in thousands of dollars)
1995 1994 1993
Design and Related Services $24,100 $111,359 $123,945
Operations Services 18,478 34,921 61,834
Defense Related Services 69,884 63,092 57,624
Life and Environmental Sciences Services 21,073 20,515 -
The revenue, operating profit and identifiable assets for the last three
years within the technical services segment are disclosed in Note 14 to
the consolidated financial statements in Part II, Item 8 of this report.
The following table sets forth the approximate percentage of
operating revenues derived from the principal markets served by the
technical services segment during 1995 and the approximate percentage of
backlog as of December 29, 1995 represented by work arrangements with
clients in such markets:
Percentage of Percentage of Backlog
1995 Revenues as of December 29, 1995
U.S. Private Industry 23 % 5 %
U.S. Federal, State and Local
Governments and Agencies 74 94
Foreign Governments and
Businesses 3 1
Assuming no changes in customers and markets during 1996, the
majority of the technical services revenue will be derived primarily
from U. S. Governmental agencies in 1996 primarily as a result of the
G/C sale and UESC closure and the concentration of SRA and RCI in the
governmental market.
The work arrangements of this segment, while varying, are
essentially either cost-plus or fixed-price. RCI and SRA have limited
the number and extent of their fixed-price commitments in light of their
experience that extended periods of performance and changes in
governmental requirements tend to make it difficult to make adequate
allowance for escalation and contingencies in fixed-price quotations.
The majority of the Gilbert companies' technical services revenues was
attributable to contracts other than fixed-price arrangements in each of
the last three years. In addition, fixed-price contracts represent less
than a majority of the backlog attributable to such segment at December
29, 1995. The ability to continue to sell services on a basis other
than fixed-price will, however, depend upon a number of factors
including the state of the national economy and the trend of contracting
practices in the markets in which such services are rendered.
<PAGE>
Inventory is not essential to the operations of the Gilbert
companies' technical services segment.
The subsidiaries comprising the Gilbert companies' technical
services segment own various patents and trademarks and have pending
applications for other patents. However, such patents and trademarks
are not individually or cumulatively significant to the business of such
segment.
The technical services segment's five largest clients have generally accounted
for approximately 60% of its total revenues. Due to the sale of G/C in
1995, the United States Government accounted for 60% of total technical
services revenues, and assuming no significant changes in business
during 1996, it is expected that it will represent a larger percentage
in 1996. During 1994, the United States Government and TVA accounted
for 34% and 13%, respectively, of total technical services revenues.
These amounts represent revenue earned by the registrant as prime
contractor. No other client or its affiliate accounted for 10% or more
of such revenues in 1995 or 1994.
A substantial portion of the business of the technical services
segment is obtained from clients served for a number of years. In the
years 1995 and 1994, services rendered to clients who had been served at
least four years earlier accounted for 91% and 89%, respectively, of the
Gilbert companies' technical services revenues. There is no assurance
that work authorizations from such clients will account for a similar
percentage of total revenues in the future.
As of December 29, 1995 and December 30, 1994, respectively, the
subsidiaries comprising the Gilbert companies' technical services
segment had backlogs of contracts or work authorizations from which they
had then anticipated estimated aggregate future revenues of
approximately $201,000,000 and $301,000,000. Backlog is recognized as
revenue when work is performed. The backlog of RCI and SRA accounted
for approximately 97% and 77% of the total segment backlog at December
29, 1995 and December 30, 1994, respectively. Substantially all of the
backlog of RCI and SRA at such dates represents work to be performed on
government contracts for which funding has not yet been authorized.
Such funding authorizations are generally issued by the government in
periodic increments during the contract term. The subsidiaries
comprising the technical services segment anticipate that approximately
$77,000,000 of the revenues to be recognized by them under work
authorizations outstanding at December 29, 1995 will be earned within
the fiscal year ending January 3, 1997 and that additional revenues will
be earned in 1996 from work authorizations received during the year.
Consistent with standard industry practice for technical services
organizations, work authorizations for the Gilbert companies' technical
services segment are terminable by their clients upon relatively brief
notice, whether by the express terms of such work authorizations or
otherwise. The completion dates for a number of projects have been
extended in the past, thereby lengthening the period of time during
which the backlog of estimated revenues for those projects was to be
earned. With the continued unsettled conditions within the governmental
agencies served by this segment, it is possible that one or more
projects included in the backlog at December 29, 1995 might be extended
or even canceled. Work authorizations from the largest client included
in such backlog total $75,000,000 for work on several U.S. Navy
programs, of which $61,000,000 is subject to government funding.
<PAGE>
Since the majority of the operating costs of the subsidiaries
comprising the Gilbert companies' technical services segment are payroll
and payroll-related costs, and since their business is dependent upon
the reputation and experience of their personnel, the quality of the
services they render and their ability to maintain an organization which
is qualified and adequately staffed to undertake and efficiently
discharge assignments in the various fields in which such subsidiaries
render services, a reasonable backlog is important for the scheduling of
their operations and for the maintenance of a reasonably staffed level
of operations.
To the best of the knowledge of the registrant, no reliable data are
available with respect to the total size of the market for technical
services for the full range of fields in which the registrant's
subsidiaries are engaged. The registrant's technical services
subsidiaries compete with a number of firms in each of the fields in
which they are active, and some of their competitors have substantially
larger total revenues, greater financial resources and more diversified
businesses. The registrant's competitors include SAIC, Booz Allen
Hamilton, Drake Beam & Morin and major universities containing schools
of public health. Competition is based primarily on quality, price,
reputation, experience and available skills and services. Since there
are a great many firms rendering similar services as a portion of their
businesses or to affiliated companies only, the registrant believes it
does not constitute a substantial part of the total market for such
services.
Future business of the technical services segment of the Gilbert
companies will be affected by the level of U.S. Governmental agency
expenditures and to the extent pharmaceutical companies outsource
laboratory work. Reductions in United States government defense
expenditures have recently been made and further reductions may follow.
Although the registrant has not been adversely affected by these events,
it is unable to estimate the degree or nature of the future impact of
any such reductions on the technical services segment.
The registrant's technical services subsidiaries spent approximately
$500,000 on company-sponsored research activities relating to the
development of new products or services or the improvement of existing
products or services.
On December 29, 1995, the technical services segment had a total of
1,446 employees, of which 1,069 employees were professional and
technical personnel. In comparison, such segment had a total of 2,945
employees on December 30, 1994, of which 2,115 employees were
professional and technical personnel. The large decrease in employees
stems from the sale of G/C and winding down of UESC.
<PAGE>
TELECOMMUNICATIONS
The telecommunications segment of the business of the Gilbert
companies consists of the design, manufacture and marketing of
telecommunications equipment for use in specialized industries,
telecommunications networks, and land mobile radio communication. The
Telecommunications Act of 1996 ("Act") became law in February 1996. The
Act is expected to result in further competition within the
telecommunications industry. Among other things, the Act provides for
cable television rate deregulation, a relaxation of restrictions in the
ownership of television and radio stations, allows local Bell companies
to provide long distance telephone service, and removes certain
restrictions to allow cable, long-distance and other companies to
provide local telecommunications services. The effect of these
provisions on the registrant's business is not certain. The
telecommunications segment of the registrant is comprised of GAI-Tronics
Corporation (GAI-Tronics) and XEL Corporation (XEL).
GAI-Tronics is principally engaged in the development, assembly and
marketing of communication systems for industrial operations. In
serving such customers, GAI-Tronics provides custom services by adapting
communication systems to operate under extraordinary plant conditions
such as excessive dust and explosive atmospheres. GAI-Tronics also
designs and manufactures land mobile radio communication devices.
On October 27, 1995, the registrant acquired all of the common stock
of XEL Corporation (XEL). Under the terms of the agreement, the
registrant paid XEL shareholders $30,000,000 in cash at closing plus
approximately $825,000 to be paid in the first quarter of 1996, and
additional incremental amounts, assuming XEL meets certain earnings and
revenue targets during the 1996 to 1998 period.
XEL designs, manufactures and markets over 300 voice and data
transmission system products for the telecommunications industry. XEL's
products provide access to telecommunications services and automated
monitoring and maintenance of telecommunication network performance, and
extend the distance over which network operators are able to offer
telecommunications services.
The value of orders within the telecommunications segment may range
from a minimal amount to over $1 million. The significant classes of
products or services for this segment are (1) the design and assembly of
communication systems for industrial operations, and (2) transmission
system products.
The following table sets forth for the past three fiscal years the sales
from each of the significant classes of products.
1995 1994 1993
Communication systems $46,169,000 $46,045,000 $41,987,000
Transmission system products (a) 5,679,000 - -
(a) - Sales derived from XEL Corporation which was acquired October 27,
1995. Separate financial statements for XEL as well as pro-forma
consolidated financial information were filed in the registrant's 8-K
dated December 15, 1995.
<PAGE>
The approximate percentage of sales derived from the principal markets
served by the telecommunications segment during 1995 and the approximate
percentage of its backlog as of December 29, 1995 represented by
contracts with clients in such markets, were as follows:
Percentage of Percentage of Backlog
Market for Products 1995 Revenues as of December 29, 1995
U.S. Private Industry 78 % 69 %
Foreign Governments and
Businesses 22 31
Revenue, operating profit and identifiable assets for the last three
years within the telecommunications segment are disclosed in Note 14 to
the consolidated financial statements in Part II, Item 8 of this report.
The companies within the telecommunications segment are continually
modifying their products and attempting to further expand their product
lines. The companies manufacture relatively few of the basic components
employed in their equipment; instead, they primarily design and assemble
their products and systems by use of standard or special components
manufactured by others. Several sources of supply exist for such
components so that the companies are not dependent upon any single
supplier.
The companies within the telecommunications segment maintain a
substantial inventory of components to satisfy their backlog of orders.
The communications systems part of the business requires keeping a
significant amount of inventory on hand due to the fact that many of the
orders are highly customized for specialized uses.
The companies own various patents and trademarks. However, such patents
and trademarks are of less significance to the companies' operations
than are experience and reputation.
The telecommunications segment's business is not dependent upon a
single customer or a very few customers, however, had the acquisition of
XEL Corporation taken place at the beginning of 1995, a major customer
would have accounted for approximately $27,000,000 in revenue.
A substantial part of the registrant's telecommunications business is
obtained from customers to whom it has made previous sales. In 1995 and
1994, telecommunications sales made to customers who had made purchases
at least four years earlier accounted for approximately 95% and 94%,
respectively, of total net sales. There is no assurance that sales to
such customers will account for a similar percentage of total revenues
in the future. Many of the segment's sales are made as a result of
proposals submitted in response to competitive bidding invitations.
As of December 29, 1995 and December 30, 1994, the subsidiaries
comprising the telecommunications segment had backlogs of contracts from
which they had anticipated estimated future revenue of approximately
$9,505,000 and $5,954,000, respectively. It is estimated that
substantially all of the goods reflected in the backlog at December 29,
1995 will be shipped in 1996. Also, the vast majority of revenues
earned in 1996 will be from orders received during the year.
<PAGE>
The companies comprising the telecommunications segment compete with a
number of other organizations that develop specialized communication
systems, design and produce transmission system products, and produce
land mobile radio communication devices. Some of these competitors have
larger total sales, greater financial resources, larger research and
development organizations and facilities and a more diversified range of
telecommunications services and products. The dominant industry
competitors of GAI-Tronics are believed to be Industronics, Fetre,
Motorola, Federal Signal and ATI. XEL, in particular, competes in an
industry subject to rapid technological changes. Direct competitors of
XEL in one or more of its markets include Adtran, Alcatel, Conklin,
Northern Telecom, Pulsecom, Teltrend, TXPORT, and Westell. Management
believes that a history of quality, reputation, experience and service
are the most important factors in being asked to submit bids and in
purchasing decisions made by customers.
The companies within this segment spent approximately $2,217,000,
$1,727,000 and $1,734,000 during 1995, 1994 and 1993, respectively, on
company-sponsored product development and improvement. The 1995 amount
includes only two months' research and development costs for XEL.
Several professional employees within these companies routinely engage
in company-sponsored product development and improvement on a full-time
basis.
On December 29, 1995, the telecommunications segment had a total
of 657 employees, of which 289 employees were professional and technical
personnel. In comparison, this segment had a total of 394 employees on
December 30, 1994, of which 169 were professional and technical
personnel. The increase in the number of employees is primarily due to
the acquisition of XEL.
REAL ESTATE
Due to the sale of G/C in 1995 and the related Parsons' lease
which commenced April 1, 1995, the registrant's real estate operations
became significant enough to warrant segmentation. The revenue,
operating profit, and identifiable assets for the real estate segment
are disclosed in Note 14 to the consolidated financial statements in
Part II, Item 8 of this report.
The real estate segment consists of the operations of Green Hills
Management Company (GHMC), an operating division of the registrant.
GHMC leases office space in five commercial buildings to tenants and
provides facility management and construction services in the suburban
Reading, Pennsylvania market. Of over 550,000 square feet of space
available for lease to outside parties, GHMC has leased 402,000 square
feet to outside parties, or 73% as of December 29, 1995, and has a
signed lease beginning February 1996 for an additional 67,000 square
feet bringing the total occupancy of outside parties to 85%. The
registrant and certain of its subsidiaries lease approximately 50,000
square feet of space within the buildings. Including this space, 94% of
the entire leasable space is occupied.
The real estate segment derives its main source of revenues from
lease income; however, a portion of income is derived from facility
management and construction services provided to tenants and other
parties. Total revenue for 1995 was $6,319,000, including rent from
related tenants, which is eliminated in consolidation. Two tenants
accounted for 73% of the total outside party rent for 1995. These
tenants have leases which extend through 2004 and 2005.
<PAGE>
These buildings reside on approximately 50 acres of a total 530
acres owned by the registrant. The registrant is reviewing all
alternatives regarding the real estate operations and assets in order to
monetize the real estate value. GHMC had 31 employees at December 29,
1995 and 88 employees at December 30, 1994.
MISCELLANEOUS
The registrant expects no material effect on the capital
expenditures, earnings and competitive position of the registrant and
its subsidiaries from its or their compliance with federal, state or
local laws or regulations controlling the discharge of materials into
the environment or otherwise relating to the protection of the
environment.
A portion of the revenue of the Gilbert companies is derived from
customers or projects located outside the United States. All foreign
revenues were from work authorizations with customers unaffiliated with
the Gilbert companies. The countries providing the largest portion of
foreign revenues in 1995 were Canada and South Korea.
The businesses of the registrant's subsidiaries are not seasonal
to any material extent.
ITEM 2. PROPERTIES.
The physical properties owned and leased within the technical
services and telecommunications segments consist primarily of office,
manufacturing, and laboratory space and furniture and equipment.
RCI leases a total of 192,000 square feet of office space,
primarily in the Washington, D.C. area, used for engineering and
technical support activities under leases expiring between 1996 and
1998. Of this total, 78,600 square feet is leased under two separate
agreements with limited partnerships in which certain officers of RCI
hold limited partnership interests representing approximately 22% of the
total equity of the partnerships, which existed prior to the
registrant's acquisition of RCI. These leases expire in 1996 and 1997.
<PAGE>
SRA leases from unrelated parties a total of 75,000 square feet of
both office and laboratory space primarily in the Washington, D.C. area
used for various engineering and biomedical research activities under
leases expiring between 1996 and 2005.
UESC leases approximating 60,000 square feet of office and
laboratory space primarily in the Louisville, Tennessee and Atlanta,
Georgia areas used for engineering activities under leases expiring
between 1996 and 1999.
GAI-Tronics' plants are located near Reading, Pennsylvania, and in
Memphis, Tennessee. The plant near Reading, Pennsylvania, which is used
to design and assemble communication systems, is owned by GAI-Tronics
and consists of approximately 74,000 square feet and is located on a 17
acre tract of land owned by GAI-Tronics. The plant located in Memphis,
Tennessee, which is used to design and assemble land mobile radio
communication devices is leased by GAI-Tronics and consists of
approximately 50,000 square feet with the lease expiring in 2000.
XEL owns its office and manufacturing facility located in Aurora,
Colorado. The entire facility is approximately 112,000 square feet.
XEL also has an option on approximately 5 acres of land adjacent to the
facility. All of XEL's manufacturing of telecommunication transmission
products is performed there, as are XEL's executive and administrative
functions.
Certain subsidiaries of the registrant lease, from unrelated
parties, facilities used for branch and project offices. None of these
leased facilities is material in relation to the total space occupied by
the registrant and its subsidiaries.
The registrant and its subsidiaries believe that their existing
facilities are suitable and adequate for their present purposes.
The registrant and its subsidiaries own the majority of the office
furniture and equipment used by them; however, they also lease a
substantial amount of equipment under agreements generally for terms not
in excess of five years.
ITEM 3. LEGAL PROCEEDINGS.
The registrant announced a $12,000,000 trial court verdict against
the registrant and a former subsidiary. This is more fully discussed in
Note 12 to the consolidated financial statements included in Part II
Item 8 of this report.
The registrant and its subsidiaries are involved in various other
disputes which have resulted in pending litigation arising in the
ordinary course of business as to which, in the opinion of the
management of the registrant, no material adverse effect on the
registrant's financial statements is expected to result.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter required to be reported pursuant to this item was
submitted to security holders in the fourth quarter of 1995.
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT.
The names, ages, positions and previous experience to the extent
required to be presented herein of all current executive officers of the
registrant are as follows:
Name Position and Previous Experience Age
Timothy S. Cobb Mr. Cobb has been Chairman of the Board of 54
Directors since July 1995. He was Chief
Executive Officer since March 1994 and President
and Chief Operating Officer since October 1993.
Mr. Cobb served as President of Gilbert/
Commonwealth, Inc. (former subsidiary of
registrant) from January 1991 to September
1993. He served as President of GAI-Tronics
Corporation (subsidiary of registrant) from
October 1988 to December 1990. Upon joining
the Gilbert companies, Mr. Cobb had 22 years
experience in the telecommunications industry,
culminating with being President of the
major systems subsidiary of Ameritech in
Chicago, Illinois.
Paul H. Snyder Mr. Snyder has been Vice President and 48
Chief Financial Officer since August 1995.
From August 1994 to July 1995, Mr. Snyder was
Vice President and Chief Financial Officer of
The Dreyfus Corporation, a subsidiary of Mellon
Bank Corporation. From 1988 through 1994, he
was Senior Vice President and Chief Financial Officer
of Mellon PSFS, Mellon Bank Corporation's
affiliate in Philadelphia, Pennsylvania.
Thomas F. Hafer Mr. Hafer has been Vice President since September 47
1995. He has served as General Counsel and
Corporate Secretary since February 1994. Mr. Hafer
was named President of Green Hills Management Co.,
a division of the registrant in September 1993.
He was named Vice President of Green Hills Management
Co. in February 1991.
None of the above officers has a family relationship with another such
officer. None of the officers was selected as a result of any arrangement or
understanding with any other person other than directors of the registrant
acting solely in their capacities as such.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS.
The registrant's Class A Common Stock is traded in the
over-the-counter market. Price quotations are available
through the NASDAQ National Market system under the symbol GILBA. The
following tabulation sets forth the high and low price quotations by
quarter as reported by the NASDAQ Stock Market and cash dividends
declared on each share of Class A and Class B Common Stock. Prices
quoted represent high and low closing sale prices on the NASDAQ National
Market System.
1995 1994 Dividends
High Low High Low 1995 1994
$13.75 $11.50 $18.75 $16.50 First Quarter $.20 $.20
13.25 12.00 17.75 14.75 Second Quarter .20 .20
14.38 11.75 15.50 14.00 Third Quarter .20 .20
15.50 12.25 15.00 12.00 Fourth Quarter .20 .20
At December 29, 1995, the approximate number of shareholders of
Class A and Class B common stock was 3,300 and 400, respectively.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
Gilbert Associates, Inc. and Subsidiaries
Five Year Summary / Selected Financial Data
<CAPTION>
Summary of Operations: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Revenue $ 193,495,000 $ 282,495,000 $ 291,606,000 $ 301,209,000 $ 277,428,000
Costs and Expenses 188,487,000 293,655,000 280,444,000 286,243,000 272,082,000
Net Income(Loss) 16,950,000(1) (11,620,000)(2) 6,452,000(3) 9,057,000 3,252,000(4)
Per Share of Class A and Class B
Common Stock:
Net Income(Loss) 2.57 (1.66) 0.87 1.19 0.42
Dividends to Stockholders 0.80 0.80 0.76 0.72 0.72
Average Shares Outstanding 6,592,174 7,002,834 7,417,272 7,605,567 7,748,736
Summary of Financial Position:
Total Assets $ 145,344,000 $ 147,085,000 $ 170,247,000 $ 165,424,000 $ 169,155,000
Long-Term Debt 2,226,000 871,000 1,066,000 1,097,000 4,330,000
Stockholders' Equity 102,481,000 99,514,000 118,114,000 124,042,000 125,268,000
Stockholders' Equity Per Share 16.30 14.30 16.82 16.65 16.25
Number of Employees 2,154 3,427 3,848 3,645 3,398
(1) Increased by a gain of $18,742,000 from the sale of Gilbert/Commonwealth, Inc., and
decreased by $3,630,000 relative to the closure of United Energy Services Corporation.
Also, decreased by $2,500,000 resulting from the write-off of purchased research and
development associated with the XEL transaction (Note 2).
(2) Decreased by $15,800,000 for expenses associated with the nuclear service business,
including a goodwill write-off, severance and idled leased facilities costs, and the increase
of reserves to cover contractual issues on contracts completed in prior years and increased by
$75,000 for closure of foreign subsidiaries and settlement of certain contractual issues (Note 9).
(3) Decreased by $1,320,000 to increase reserves for costs associated with resolving a series
of claims filed by former employees of a subsidiary which was closed in 1988 (Note 9) and
$200,000 for changes in accounting principles (Notes 3 and 6).
(4) Decreased by $4,920,000 for expenses associated with the realizability of certain assets,
anticipated losses on certain contracts and restructuring charges.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
RESULTS OF OPERATIONS
1995 vs. 1994
Results of operations for the year ended 1995 include a $18,742,000
gain, or $2.74 per share, relative to the sale of Gilbert/Commonwealth,
Inc. (G/C) and a loss on the pending disposition of United Energy
Services Corporation (UESC) of $3,630,000 or $.57 per share. In
accordance with the sales agreement, G/C's results of operations are
excluded from consolidated results from April 1, 1995 forward. Also
included in the results is a fourth quarter non-cash charge to income of
$2,500,000 or $.40 per share, associated with the write-off of purchased
in-process research and development. Note 2 to the consolidated
financial statements discusses these adjustments in more detail. In
1994, results of operations included a charge to income of $15,800,000
or $2.26 per share associated with the Company's nuclear service
business, and were increased by $75,000 or $.01 per share relative to
closing foreign subsidiaries and settlement of certain contractual
issues (Note 9).
Excluding all adjustments, net income for 1995 was $4,338,000 or $.66
per share compared to $4,105,000 and $.59 per share for 1994. The
increase primarily related to improved results within the
telecommunications segment, higher interest income derived from the
proceeds on the sale of G/C and improved UESC operations, offset in part
by the absence of G/C's earnings in the last three quarters of 1995.
Revenue declined 32% due primarily to the aforementioned exclusion of
G/C. On a percentage basis, earnings per share increased greater than
net income due to fewer shares outstanding.
1994 vs. 1993
Excluding all adjustments, net income decreased $3,867,000 or 49%, and
earnings per share decreased $.49 or 45%, in 1994 as compared to 1993.
These decreases related primarily to lower operating results within the
technical services segment. Revenue declined 3% due to declines within
the technical services segment, offset in part by higher revenue within
the telecommunications segment. The percentage changes in net income
compared to the percentage changes in earnings per share differed due to
fewer shares outstanding.
Technical Services Segment
The technical services segment, formerly the professional services
segment, reported a 42% decrease in revenue in 1995 as compared to 1994.
The large decrease was due primarily to the sale of G/C. The gross
profit percentage declined to 17% in 1995 from 22% in 1994, due
primarily to the absence of G/C and lower margins realized on services
provided to the U.S. Government.
Revenue in the technical services segment decreased 6% in 1994 as
compared to 1993. The decrease was due primarily to large declines in
volume of services provided to the nuclear power market, offset somewhat
by revenue derived from SRA Technologies, Inc. (SRA), which was acquired
on December 10, 1993. Nuclear power related revenue declined
approximately $36,000,000 in 1994 compared to 1993 which was somewhat
offset by $19,000,000 of additional revenue from SRA. The decline in
nuclear power related revenue resulted primarily from lower revenues
from UESC. The gross profit percentage was 22%, a decrease from 24% in
1993 due primarily to competitive pressures within the technical
services segment, particularly in the nuclear power market.
Telecommunications Segment
The telecommunications (formerly the communications equipment) segment's
sales increased 13% in 1995 as compared to 1994. The increase relates
primarily to the acquisition of XEL Corporation, which was acquired on
October 27, 1995. Sales are expected to increase substantially in 1996
due to having a full year of XEL's operations. The gross profit
percentage increased to 37% in 1995 from 36% in 1994. This increase is
primarily due to the benefits realized from consolidating manufacturing
facilities.
Telecommunications sales increased 10% in 1994 as compared to 1993,
which related primarily to the acquisition of Instrument Associates,
Inc. (IAI) on December 28, 1993. The gross profit percentage decreased
from 40% in 1993 to 36% in 1994 due primarily to IAI and to a lesser
extent, costs associated with consolidating manufacturing operations.
IAI is structured to operate on lower margins than other operations
within this segment. IAI's lower selling, general and administrative
expenses more than offset the impact of lower gross profit.
The gross profit percentages have changed from prior reports due to a
reclassification of costs within the telecommunications segment.
Real Estate Segment
As a result of the G/C sale, the Company's real estate operation became
significant enough to warrant separate segment disclosure beginning in
1995. As part of the G/C sale agreement, The Parsons Corporation has
signed a ten year lease with the Company for 200,000 square feet of
office space effective April 1, 1995. The Company owns approximately
550,000 square feet of leaseable office space of which approximately 94%
is leased. Approximately 9% is leased to related subsidiaries.
Included in the 94% occupancy rate is a 67,000 square foot office lease
for which rental income begins February 1, 1996.
Rental income derived from unrelated tenants amounted to $4,920,000 in
1995 compared to $2,284,000 in 1994. The increase is largely due to the
Parsons lease mentioned above.
Operating profits in fiscal 1996 are expected to increase substantially
compared to 1995 due to the 67,000 square feet of additional leased
space mentioned above and the fact that a full twelve months of rental
income will be realized from the Parsons lease.
Other Income
Included in other income is $1,439,000 of interest income which compares
to $144,000 earned in 1994. The increase was due to the proceeds
received from the G/C sale. Despite higher interest income, other
income declined $1,688,000 in 1995 to $2,795,000 as compared to 1994.
The decline was due primarily to including rental income as other income
in 1994. In 1995, rental income is presented separately within the real
estate segment.
Selling, General and Administration
Excluding the adjustments mentioned above, selling, general and
administrative expenses decreased 42% from 1994 to 1995 primarily due to
the absence of G/C for the last three quarters of 1995. Selling,
general and administrative expenses decreased 2% in 1994 from 1993
excluding a 1993 charge to increase reserves for a claim filed by former
employees (Note 9). The decrease related primarily to lower expenses
within the technical services segment, offset in part by expenses
relative to the SRA and IAI acquisitions.
Income before Provision for Taxes
Excluding the adjustments mentioned above, income before provision for
taxes on income and cumulative effect of changes in accounting
principles and net gain on dispositions of subsidiaries increased 5%
from 1994 to 1995. The increase related primarily to higher results
within the telecommunications segment and increased interest income
offset in part by the absence of G/C earnings in the last three quarters
of 1995.
Income before provision for taxes on income and cumulative effect of
changes in accounting principles decreased 46% from 1993 to 1994,
excluding the aforementioned adjustments. The decrease related
primarily to lower operating results within the technical services
segment, particularly the nuclear power market.
As mentioned above, real estate operating profits and telecommunications
sales are expected to increase in 1996. It should be noted, however,
that the Company continues to evaluate potential acquisitions and
divestitures. To the extent acquisitions and divestitures occur, future
results of operations will be affected.
Provision for Taxes
The provision for taxes on income, prior to all adjustments, decreased
from an effective rate of 43% in 1994 to 42% in 1995. Prior to all
adjustments, the effective tax rate increased to 43% in 1994 from 40% in
1993 due primarily to a higher effective state tax rate, which in part
was due to limitations in loss carrybacks and carryforwards in certain
jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased $8,074,000, or 19% in 1995. The decline
reflects the acquisition of XEL and the repurchase of the Company's
stock. Cash and cash equivalents increased $1,247,000 due primarily to
proceeds received on the sale of G/C. 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 the contingent payments to former IAI principals and XEL
shareholders.
Lines of credit with two banks aggregating $28,000,000 are available for
short-term cash needs. The short-term lines of credit consist of the
following: Meridian Bank, $25,000,000, which expires April 30, 1996;
and The Chase Manhattan Bank, N.A., $3,000,000, which expires June 30,
1996. At year end, the entire Chase line was available and $6,191,000
was available under the Meridian line. Outstanding borrowings under
these lines bear interest at a function of the prime rate. The Chase
line is used primarily to secure stand-by letters of credit posted by
the Company. The current Meridian line is used to fund short-term
working capital requirements as well as secure stand-by letters of
credit. The Company expects to establish a credit facility during 1996
which would be used to fund further acquisitions as well as other
working capital requirements. The Company estimates that its ongoing
capital expenditures in 1996 will be approximately $5,900,000. This
amount excludes an estimated $3,000,000 expenditure for a new office
facility for the Company's subsidiary, GAI-Tronics. No restrictions on
cash transfers between the Company and its subsidiaries exist.
The Company will adopt Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" beginning in 1996. The
Company has elected the disclosure-only alternative of the statement,
and thereby will continue to use Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", for accounting purposes.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management's Report on Responsibility for Financial Reporting
The accompanying consolidated financial statements and notes
thereto are the responsibility of, and have been prepared by, management
of the Company in accordance with generally accepted accounting
principles. Management believes the consolidated financial statements
reflect fairly the results of operations and financial position of the
Company in all material respects. The consolidated financial statements
include certain amounts that are based upon management's best estimates
and judgment regarding the ultimate outcome of transactions which are
not yet complete.
Management believes that the accounting systems and related
systems of internal control are sufficient to provide reasonable
assurance that assets are safeguarded, transactions are properly
authorized and included in the accounting records, and that those
records provide a reliable basis for preparation of the Company's
consolidated financial statements. Reasonable assurance is based upon
the concept that the cost of a system of internal control must be
related to the benefits derived. The Company maintains an internal
audit function that periodically assesses the effectiveness of the
systems of internal control and makes recommendations for possible
improvement.
The Company's financial statements have been audited by Coopers &
Lybrand L.L.P., independent accountants, as stated in their report
below. They have been elected to perform this function by the
stockholders of the Company. Management has made available to Coopers &
Lybrand L.L.P. all of the Company's financial records and related data,
as well as the minutes of stockholders' and directors' meetings.
T. S. Cobb
Chairman, President
and Chief Executive Officer
P. H. Snyder
Vice President and Chief
Financial Officer
<PAGE>
Report of Independent Accountants
To the Stockholders and Board of Directors, Gilbert Associates, Inc.:
We have audited the accompanying consolidated balance sheets of
Gilbert Associates, Inc. and Subsidiaries as of December 29, 1995 and
December 30, 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three
years in the period ended December 29, 1995. 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 in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Gilbert Associates, Inc. and Subsidiaries as of December 29, 1995 and
December 30, 1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 29, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 3 and 6 to the consolidated financial
statements, the Company changed its method of accounting for income
taxes and post-retirement benefits other than pensions in 1993.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1996
<PAGE>
<TABLE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Total revenue $193,495,000 $282,495,000 $291,606,000
----------- ----------- -----------
Costs and expenses:
Cost of revenue 147,132,000 208,640,000 210,554,000
Selling, general and administration 41,355,000 85,015,000 69,890,000
----------- ----------- -----------
Total costs and expenses 188,487,000 293,655,000 280,444,000
----------- ----------- -----------
Income(Loss) before provision for
taxes on income(loss), cumulative
effect of changes in accounting
principles and net gain on dispositions
of subsidiaries 5,008,000 (11,160,000) 11,162,000
Net gain on dispositions of
subsidiaries 21,042,000 - -
----------- ----------- ----------
Income(Loss) before provision for
taxes on income(loss) and cumulative
effect of changes in accounting
principles 26,050,000 (11,160,000) 11,162,000
Provision for taxes on income(loss) 9,100,000 460,000 4,510,000
----------- ----------- ----------
Income(Loss) before cumulative
effect of changes in accounting
principles 16,950,000 (11,620,000) 6,652,000
Cumulative effect of changes in
accounting principles - - (200,000)
---------- ----------- ---------
Net income(loss) $ 16,950,000 $(11,620,000) $ 6,452,000
========== =========== =========
Net income(loss) per average number of
Class A and Class B shares
outstanding:
Income(Loss) before cumulative effect
of changes in accounting principles $2.57 $(1.66) $0.90
Cumulative effect of changes in
accounting principles - - (0.03)
---------- --------- --------
Net income(loss) $2.57 $(1.66) $0.87
========== ========= ========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating activities:
Net income(loss) $ 16,950,000 $ (11,620,000) $ 6,452,000
Adjustments to reconcile net
income(loss) to net cash provided by
(used for) operating activities:
Gain on sale of
Gilbert/Commonwealth, Inc. (26,542,000) - -
Loss on disposition of United
Energy Services Corporation 5,500,000 - -
Depreciation and amortization 4,976,000 6,922,000 6,416,000
Goodwill write-off - 12,200,000 -
Purchased research and development
write-off 2,500,000 - -
Provision for doubtful accounts, net 54,000 (164,000) 810,000
Provision for estimated liability for
contract losses, net 49,000 3,700,000 223,000
Provision for self-insured retention 136,000 825,000 1,018,000
Benefit from deferred income taxes (68,000) (725,000) (1,000,000)
Cumulative effect of changes in
accounting principles - - 200,000
Changes in current assets and current
liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable and unbilled
revenue 1,069,000 9,148,000 9,542,000
Inventories (112,000) (359,000) 482,000
Other current assets (244,000) (287,000) (183,000)
Accounts payable and salaries
and wages (3,045,000) (3,039,000) (1,401,000)
Other accrued liabilities (1,859,000) (862,000) 290,000
Income taxes, currently payable 2,334,000 68,000 (505,000)
Estimated liability for contract
losses (2,750,000) (1,241,000) (572,000)
Contractual billings in excess of
recognized revenue (461,000) 280,000 61,000
Other, net 245,000 (492,000) 581,000
---------- ---------- ---------
Net cash provided by (used for)
operating activities (1,268,000) 14,354,000 22,414,000
---------- ---------- ----------
Cash flows from investing activities:
Payments for acquisitions, net of cash
acquired (23,164,000) (1,500,000) (14,161,000)
Proceeds from sale of
Gilbert/Commonwealth, Inc. 45,932,000 - -
Net decrease in short-term investment - - 6,149,000
Payments for property, plant and
equipment (4,406,000) (5,513,000) (4,441,000)
Proceeds from sale of property, plant
and equipment 665,000 202,000 1,263,000
---------- --------- ----------
Net cash provided by (used for)
investing activities 19,027,000 (6,811,000) (11,190,000)
---------- --------- ----------
<PAGE>
Cash flows from financing activities:
Payments of long-term debt (162,000) (364,000) (545,000)
Net (repayments) borrowings under
note payable (2,000,000) (3,000,000) 5,000,000
Issuance of treasury stock in connection
with stock option, award and purchase
plans 825,000 916,000 543,000
Payments to acquire treasury stock (9,511,000) (2,206,000) (7,262,000)
Cash dividends paid (5,297,000) (5,607,000) (5,650,000)
Other, net (367,000) (571,000) 454,000
---------- --------- ---------
Net cash used for financing
activities (16,512,000) (10,832,000) (7,460,000)
---------- ---------- ---------
Net increase(decrease) in cash and
cash equivalents 1,247,000 (3,289,000) 3,764,000
Cash and cash equivalents at beginning
of year 7,427,000 10,716,000 6,952,000
--------- ---------- ---------
Cash and cash equivalents at
end of year $ 8,674,000 $ 7,427,000 $ 10,716,000
========= ========= ==========
Supplemental cash flow disclosures:
Income taxes paid, net of
refunds received $ 6,834,000 $ 1,117,000 $ 6,015,000
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 29, 1995 and December 30, 1994
December 29, December 30,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 8,674,000 $ 7,427,000
Accounts receivable, net of allowance
for doubtful accounts of $2,005,000
in 1995 and $2,677,000 in 1994 24,717,000 33,452,000
Unbilled revenue 10,086,000 19,570,000
Inventories 11,548,000 6,761,000
Deferred income taxes 5,860,000 4,420,000
Other current assets 4,901,000 5,918,000
---------- ----------
Total current assets 65,786,000 77,548,000
---------- ----------
Property, plant and equipment, at cost:
Land 4,362,000 3,693,000
Buildings 43,838,000 43,002,000
Furniture and equipment 29,626,000 46,907,000
---------- ----------
77,826,000 93,602,000
Less accumulated depreciation and
amortization 33,855,000 51,534,000
---------- ----------
43,971,000 42,068,000
---------- ----------
Deferred income taxes 605,000 1,610,000
Other assets 1,320,000 1,566,000
Intangible assets 33,662,000 24,293,000
----------- -----------
Total Assets $145,344,000 $147,085,000
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 29, 1995 and December 30, 1994
December 29, December 30,
1995 1994
LIABILITIES
Current liabilities:
Note payable $ - $ 2,000,000
Accounts payable 5,143,000 3,784,000
Salaries and wages 4,158,000 8,239,000
Income taxes, currently payable 1,670,000 1,496,000
Estimated liability for contract losses 3,171,000 5,272,000
Other accrued liabilities 16,196,000 11,400,000
Contractual billings in excess of
recognized revenue 639,000 2,474,000
---------- ----------
Total current liabilities 30,977,000 34,665,000
---------- ----------
Long-term debt 2,226,000 871,000
Other long-term liabilities 7,068,000 6,704,000
Self-insured retention 2,592,000 5,331,000
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Capital stock:
Class A common stock, nonvoting,
par value $1 per share
Issued: 1995, 8,532,528 shares;
1994, 7,698,484 shares 8,532,000 7,698,000
Class B common stock, voting,
par value $1 per share
Issued and outstanding:
1995, 452,772 shares;
1994, 1,286,816 shares 453,000 1,287,000
Capital in excess of par value 38,492,000 38,707,000
Retained earnings 95,507,000 83,854,000
Class A common stock held in
treasury, at cost:
1995, 2,696,476 shares;
1994, 2,024,396 shares (40,503,000) (32,032,000)
----------- ----------
102,481,000 99,514,000
----------- ----------
Total Liabilities and Stockholders'
Equity $145,344,000 $147,085,000
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years 1995, 1994 and 1993
Common Stock
-----------------------------------------------
Class A Class B
-------------------- ----------------------
Shares Amount Shares Amount
Balances at January 1, 1993 7,699,632 $ 7,699,000 1,285,668 $ 1,286,000
Conversion from Class A to
Class B, net (74,066) (74,000) 74,066 74,000
--------- --------- --------- ----------
Balances at December 31, 1993 7,625,566 7,625,000 1,359,734 1,360,000
Conversion from Class B to
Class A, net 72,918 73,000 (72,918) (73,000)
--------- --------- --------- ---------
Balances at December 30, 1994 7,698,484 7,698,000 1,286,816 1,287,000
Conversion from Class B to
Class A, net 834,044 834,000 (834,044) (834,000)
--------- --------- --------- ---------
Balances at December 29, 1995 8,532,528 $ 8,532,000 452,772 $ 453,000
========= ========= ======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
GILBERT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years 1995, 1994 and 1993
Foreign Class A
Capital in Currency Treasury Stock
Excess of Retained Translation ----------------
Par Value Earnings Adjustments Shares Amount
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993 $ 38,899,000 $100,279,000 $ 94,000 1,533,618 $(24,215,000)
Net income 6,452,000
Cash dividends paid, $.76 per
share (5,650,000)
Translation adjustments (11,000)
Purchase of treasury stock 459,947 (7,262,000)
Issuance of treasury stock in
connection with stock option,
award and purchase plans 33,000 (32,091) 510,000
---------- ----------- ------ --------- ----------
Balances at December 31, 1993 38,932,000 101,081,000 83,000 1,961,474 (30,967,000)
Net loss (11,620,000)
Cash dividends paid, $.80 per
share (5,607,000)
Translation adjustments (83,000)
Purchase of treasury stock (8,000) 134,624 (2,198,000)
Issuance of treasury stock in
connection with stock option,
award and purchase plans (217,000) (71,702) 1,133,000
---------- ---------- ------ --------- ----------
Balances at December 30, 1994 38,707,000 83,854,000 - 2,024,396 (32,032,000)
Net income 16,950,000
Cash dividends paid, $.80 per
share (5,297,000)
Purchase of treasury stock 738,734 (9,511,000)
Issuance of treasury stock in
connection with stock option,
award and purchase plans (215,000) (66,654) 1,040,000
---------- ---------- ------ --------- ----------
Balances at December 29, 1995 $ 38,492,000 $ 95,507,000 $ - 2,696,476 $(40,503,000)
========== ========== ====== ========= ==========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR: The Company uses a 52-53 week fiscal year ending on the Friday
nearest December 31. The 1995, 1994 and 1993 fiscal years comprised 52 weeks
each and ended on December 29, 1995, December 30, 1994 and December 31, 1993,
respectively.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries. All material intercompany
transactions have been eliminated. Investments in joint ventures where the
Company does not have a controlling interest are accounted for under the equity
method.
RECOGNITION OF REVENUE: The Company recognizes revenue on contracts entered
into for technical services as the work is performed. Costs and expenses are
charged to operations as incurred. Losses, estimated to be sustained upon
completion of contracts, are charged to income in the year such estimates are
determinable.
INSURANCE PROGRAMS: The Company's overall insurance coverages, excluding
professional liability, contain provisions for large deductibles and funding on
a claims paid basis. Necessary accruals, which relate primarily to workers'
compensation, aggregate $2,698,000 and $3,494,000 at December 29, 1995 and
December 30, 1994, respectively, and are included in other accrued liabilities
on the consolidated balance sheets.
The accrual for reported claims and for claims incurred but not yet reported
relating to professional liability insurance is estimated on the basis of
historical claims experience. This accrual is reflected on the consolidated
balance sheets as self-insured retention.
PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION AND AMORTIZATION:
For financial reporting purposes, the Company provides for depreciation and
amortization of property, plant and equipment, including assets under capital
leases, on the straight-line method over the estimated useful lives of the
various classes of assets. For income tax purposes, the Company uses
accelerated depreciation where permitted.
Costs of maintenance and repairs are charged to expense as incurred. Renewals
and improvements are capitalized. Upon retirement or other disposition of items
of plant and equipment, cost of the item and related accumulated depreciation
are removed from the accounts and any gain or loss is included in income.
INTANGIBLE ASSETS: Goodwill is being amortized by charges to operations on a
straight-line basis over periods of 30 to 40 years, and such amortization
amounted to $713,000 in 1995, $842,000 in 1994, and $778,000 in 1993.
Accumulated amortization amounted to $3,977,000 at December 29, 1995 and
$3,264,000 at December 30, 1994. Goodwill, after accumulated amortization,
amounted to $33,087,000 and $23,418,000 at December 29, 1995 and December 30,
1994, respectively.
The Company periodically reviews goodwill to assess recoverability, and
impairments would be recognized in operating results if a permanent diminution
in value were to occur. The Company's primary financial indicator for assessing
recoverability of goodwill is whether a subsidiary is generating a sufficient
amount of income and cash flow on an undiscounted basis.
Other intangible assets include covenants not to compete. Purchased in-process
research and development is expensed and is more fully discussed in Note 2.
Other intangible assets are amortized on a straight-line basis over five years.
<PAGE>
INVENTORIES: Inventory values are determined on the first-in, first-out (FIFO)
method and are stated at the lower of cost or market.
INCOME TAXES: The Company utilizes the liability method of accounting for
income taxes. Under this method, deferred income taxes are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates.
RESEARCH AND DEVELOPMENT: Expenditures relating to the development of new
products and processes, including significant improvements, refinements and
engineering support to existing products, are expensed as incurred, and are
included in selling, general and administrative expenses. The amounts charged
against income were $6,322,000 in 1995, which includes $2,500,000 of purchased
in-process research and development, $2,324,000 in 1994, and $2,871,000 in 1993.
STATEMENTS OF CASH FLOWS: For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
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. Also, estimates are made for reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS: The consolidated statements of operations and balance sheets
have been reclassified to conform with current year presentation.
2. ACQUISITIONS/DISPOSITIONS:
In the last quarter of 1995, the Company decided to sell or close its United
Energy Services Corporation (UESC) subsidiary. Total reserves recorded in
connection with the disposition of assets and liabilities are $3,630,000, net of
an income tax benefit of $1,870,000, or $.57 per share. The majority of these
reserves are recorded in other accrued liabilities.
On October 27, 1995, the Company acquired all of the outstanding capital stock
of XEL Corporation (XEL) for $30,000,000 in cash plus approximately $825,000 to
be paid during the first quarter of 1996 and additional contingent payments.
The contingent payments will be made if certain revenue and earnings objectives
are achieved during the 1996 to 1998 periods. To the extent contingent payments
are made, goodwill will increase accordingly. In connection with the XEL
acquisition, the Company acquired research and development with a fair market
value of $2,500,000. Generally Accepted Accounting Principles require
in-process research and development costs to be expensed. Accordingly, the
Company expensed $2,500,000, or $.40 per share, in the fourth quarter of 1995
with no associated tax benefit.
<PAGE>
The following unaudited consolidated pro forma results of operations for the
years 1995 and 1994 include XEL as if it had been acquired at the beginning of
each of the respective periods:
1995 1994
---- ----
Revenue $228,108,000 $334,958,000
Net Income(loss) $ 17,230,000 $ (7,555,000)
Net income per average
number of Class A and
Class B shares $2.61 $(1.08)
The pro forma results of operations include adjustments for elimination of
interest income on cash used in the acquisition and amortization of intangible
assets. The 1994 pro forma results exclude the effect of the $2,500,000, or
$.40 per share, write-off of in-process research and development, which is
reflected in the 1995 pro forma amounts.
On June 16, 1995, the Company's Class B shareholders approved the sale of the
Gilbert/Commonwealth, Inc. (G/C) subsidiary to the Parsons Corporation (Parsons)
and on June 20, 1995, the Company completed the sale for a price of $45,932,000.
The purchase price was adjusted downward by $1,227,000 from the amount
previously disclosed in the Company's Proxy Statement dated May 26, 1995
primarily due to unanticipated severance costs incurred by G/C subsequent to
May 26, 1995. The sale of G/C resulted in a $18,742,000 gain, net of income
taxes of $7,800,000, or $2.74 per share. The tax benefit on a $8,758,000
capital loss carryforward, for which a valuation allowance was previously
recorded, was recognized to reflect utilization of the carryforward associated
with this transaction.
As part of the agreement, Parsons has signed a ten year lease with the Company
for 200,000 square feet of office space. The consolidated statements of
operations exclude the results of G/C subsequent to March 31, 1995, the
effective date of sale pursuant to the agreement with Parsons.
On December 10, 1993, the Company acquired all of the outstanding capital stock
of SRA Technologies, Inc. (SRA) for $6,500,000 in cash. The Company also paid
$1,500,000 in cash for other intangible assets, which resulted in a total
purchase price of $8,000,000. On December 28, 1993, the Company acquired the
net assets of Instrument Associates, Inc. (IAI) for $5,704,000 in cash plus an
additional amount not to exceed $1,000,000, to be paid if the business acquired
from IAI earns, prior to income taxes, $1,655,000 in a consecutive four quarter
period. The contingency payment period remains in effect indefinitely and when
made, will increase goodwill.
During the first quarter of 1994, the Company paid the former stockholders of
GENSYS Corporation $1,500,000 in cash as part of the April 1, 1991 purchase
agreement, which resulted in an increase in goodwill.
All acquisitions were accounted for as purchases, and goodwill was determined
based upon the fair values of assets acquired and liabilities assumed. At the
dates of acquisition, such liabilities aggregated $6,807,000 and $6,336,000 in
1995 and 1993, respectively. Goodwill for XEL, SRA and IAI was $10,382,000,
$3,563,000, and $5,639,000, respectively. The Company's consolidated
statements of operations include the results of operations of the acquired
businesses since the dates of acquisition.
<PAGE>
3. INCOME TAXES:
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, net income increased $700,000 or $.09 per share due to
the recording of deferred income tax assets not previously recognized. This
adjustment was recorded as a cumulative effect of a change in
accounting principles.
Income tax provisions consist of the following:
1995 1994 1993
---- ---- ----
Current:
Federal $ 6,635,000 $ 790,000 $ 5,035,000
State and foreign 2,533,000 395,000 475,000
---------- ---------- ----------
9,168,000 1,185,000 5,510,000
---------- ---------- ----------
Deferred:
Federal (440,000) (620,000) (900,000)
State 372,000 (105,000) (100,000)
---------- ---------- ----------
(68,000) (725,000) (1,000,000)
---------- ---------- ----------
$ 9,100,000 $ 460,000 $ 4,510,000
========== ========== ==========
The components of the net deferred income tax asset are as follows:
December 29, 1995 December 30, 1994
----------------- -----------------
Net current deferred income tax asset $ 5,860,000 $ 4,420,000
Net non-current deferred income tax asset 605,000 1,610,000
---------- ---------
Net deferred income tax asset $ 6,465,000 $ 6,030,000
========== =========
<PAGE>
The tax effects of temporary differences which comprise the deferred tax assets
and liabilities are as follows:
December 29, 1995 December 30, 1994
----------------- -----------------
Deferred income tax assets:
Retirement liabilities $ 3,074,000 $ 2,634,000
Reserves for contract disallowances
and bad debts 2,347,000 3,295,000
Closure of United Energy Services Corp. 1,670,000 -
Legal claims reserves 1,323,000 934,000
Self-insured retention 1,089,000 2,239,000
Workers' compensation reserves 958,000 898,000
Other 3,160,000 2,966,000
---------- ----------
13,621,000 12,966,000
---------- ----------
Deferred income tax liabilities:
Depreciation 3,114,000 2,936,000
Contract retention 1,703,000 2,214,000
Goodwill 489,000 310,000
Other 1,850,000 1,476,000
---------- ----------
7,156,000 6,936,000
---------- ----------
Net deferred income tax asset $ 6,465,000 $ 6,030,000
========== ==========
A reconciliation of the statutory income tax rate to the effective tax rate
follows:
1995 1994 1993
---- ---- ----
Federal statutory tax rate 35.0% (34.0)% 35.0%
Utilization of capital loss (11.8) - -
Purchased research and development
write-off 3.4 - -
Closure of foreign subsidiaries - (4.1) -
State and foreign taxes 7.0 2.1 2.2
Amortization and write-off of goodwill .6 39.0 2.1
Other, net .7 1.1 1.1
---- ---- ----
Effective tax rate 34.9% 4.1% 40.4%
==== ==== ====
The 1991 sale of stock of Gilbert/Commonwealth Inc. of Michigan resulted in a
capital loss for federal income tax purposes of $10,225,000. During 1995, the
remaining $8,758,000 of the original $10,225,000 of capital loss for which a
valuation allowance was previously recorded, was recognized to offset taxes on
the gain on the sale of Gilbert/Commonwealth, Inc.
<PAGE>
4. LONG-TERM DEBT:
Long-term debt consists of the following obligations:
December 29, December 30,
1995 1994
----------- -----------
Mortgage obligation, $21,000 due monthly
to 2001 including interest at 8.5% $1,188,000 $ -
Note payable, $6,000 due monthly to
1996, including interest at 8% 37,000 111,000
Notes payable, interest and principal due
at maturity, with maturity dates from
1996-1999 and interest rates from 6% to 9% 390,000 -
Capital lease obligation, with principal
payments not exceeding $9,000
due monthly to 2007, plus interest
at variable rates not exceeding
prime + 1/2% 834,000 871,000
Capital lease obligations, with monthly
payments not exceeding $9,000
with maturity dates from 1997 to 1999 and
interest rates from 8.0% to 14.5% 178,000 -
--------- ---------
2,627,000 982,000
Less current maturities (401,000) (111,000)
--------- ---------
$ 2,226,000 $ 871,000
========= =========
The aggregate maturities of long-term debt, including the capital lease
obligations, in each of the five years subsequent to 1995 are as follows:
1996 $ 401,000
1997 361,000
1998 251,000
1999 517,000
2000 290,000
The Company leases a building under a noncancelable capital lease which expires
in 2007. The agreement includes an option to purchase the building for a
nominal amount upon expiration of the lease.
In connection with the aforementioned capital leases and mortgage obligation,
the Company has pledged as collateral the following:
December 29,
1995
-----------
Land and building $2,986,000
Equipment 269,000
Less accumulated depreciation (366,000)
---------
$2,889,000
=========
<PAGE>
At December 29, 1995, minimum future lease payments under the capital leases and
the present value of minimum lease payments are as follows:
1996 $ 218,000
1997 202,000
1998 124,000
1999 117,000
2000 117,000
2001 and thereafter 746,000
---------
Total minimum lease payments 1,524,000
Less amount representing interest (512,000)
---------
Present value of minimum lease payments $1,012,000
=========
The Company and its subsidiaries have arrangements with several banks whereby
unused lines of credit aggregating $9,191,000 were available at December 29,
1995 for short-term financing, with interest charges based upon the banks' prime
lending rates.
5. INVENTORIES:
Inventories consist of the following:
December 29, December 30,
1995 1994
---------- ----------
Raw materials $ 6,789,000 $ 3,278,000
Work in process and
finished goods 4,759,000 3,483,000
---------- ---------
$11,548,000 $ 6,761,000
========== =========
6. POSTRETIREMENT BENEFITS:
Substantially all regular, full-time employees of the Company and its
subsidiaries are participants in various defined contribution retirement plans.
Employer contributions under these plans are generally at the discretion of the
Company, based upon profits and employees' voluntary contributions to the plans.
Company contributions charged to operations in 1995, 1994 and 1993 totaled
$2,734,000, $4,231,000, and $4,369,000, respectively.
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (SFAS 106). As a result, 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 a change in accounting principles. This statement requires
an accrual of the cost of providing postretirement benefits during the active
service period of employees. The Company currently provides life insurance
benefits for existing retirees. The Company is self-insured for these benefits,
which consist primarily of $5,000 policies. The accumulated benefit obligation
related to the life insurance policies approximated $1,800,000 as of
December 29, 1995, and is primarily unfunded. As of April 1, 1995, the Company
no longer offers this benefit to current employees. The discount factor used in
computing the accumulated benefit obligation is 6%. The adoption of SFAS 106
did not have a material impact on current operations.
<PAGE>
7. CAPITAL STOCK:
Except for voting privileges, shares of Class A and Class B common stock are
identical. Class B stockholders must be either directors of the Company, or
active employees of the Company or its subsidiaries. They may not sell or
transfer such stock without having first extended an offer of sale to the
Company. There were 12,000,000 authorized shares of Class A and Class B common
stock as of December 29, 1995 and December 30, 1994. The large transfer of
shares from Class B to Class A during 1995 was due primarily to the repurchase
of G/C employees' shares by the Company.
8. STOCK OPTION, AWARD AND PURCHASE PLANS:
Under the 1989 Gilbert Stock Option Plan, the Company may grant to officers and
other key management employees, incentive or non-qualified stock options to
purchase an aggregate of 250,000 shares of Class B common stock at a price not
less than seventy-five percent of the fair market value at the date of grant.
Fair market value of the Class B shares is deemed to be the closing price, as
quoted on the NASDAQ National Market System, of the Class A common stock on the
day prior to the grant. The term within which each option may be exercised is
at the discretion of the Company. In no case shall this term exceed ten years.
Options to purchase 139,000 Class B shares were granted at fair market value
during 1995 and are exercisable between April 28, 1997 and August 7, 2005. At
December 29, 1995, 14,700 shares remain available for future grants.
A summary of stock option activity related to this plan and other plans under
which the Company is no longer granting options is as follows:
Number of
Number of Option Price Shares
Shares Per Share Exercisable
--------- ------------ -----------
Outstanding at
Jan. 1, 1993 326,520 $11.84-$26.50 240,321
Granted 57,000 $21.00
Exercised (18,375) $11.84-$17.20
Expired (32,424) $17.20-$26.50
-------
Outstanding at
Dec. 31, 1993 332,721 $11.84-$26.50 237,172
Granted 63,550 $17.50
Exercised (62,500) $11.84-$17.20
Expired (54,824) $17.50-$26.50
-------
Outstanding at
Dec. 30, 1994 278,947 $12.00-$26.50 178,098
Granted 139,000 $12.00-$13.25
Exercised (34,325) $12.00-$12.80
Expired (102,698) $12.80-$26.50
-------
Outstanding at
Dec. 29, 1995 280,924 $12.00-$26.50 95,475
=======
<PAGE>
The Company has an Equity Award Plan whereby the Company may grant to officers
and other key management employees, awards to purchase an aggregate of 234,375
shares of common stock at a price equal to fair market value on the date of
purchase. Unless accepted, the awards expire fifteen days from the date of
grant. To date, awards to purchase 195,331 shares of the Company's common stock
have been granted and accepted at prices ranging from $11.04 to $22.20 per
share. As a result of subsequent sales by participants, 25,375 of these shares
remain outstanding at December 29, 1995. For a period of ten years subsequent
to the date of purchase, the Company is required, if requested by the
participant, to repurchase shares under the plan for an amount equal to 90% of
the original purchase price.
Under the Stock Bonus Purchase Plan, employees may use up to 50% of their annual
incentive compensation to purchase shares of common stock at fair market value.
Employees purchasing shares will receive a stock bonus as determined by the
Board of Directors each year. The Company may grant an aggregate of 200,000
shares under this plan. During 1995, no shares were issued under this plan. To
date, 41,104 shares have been issued, and 158,896 shares remain available for
future grants as of December 29, 1995.
9. SPECIAL CHARGES:
In the third quarter of 1994, the Company recorded a charge to income of
$15,800,000 (net of $2,000,000 income tax benefit) or $2.26 per share,
associated with its nuclear service business. The charge was comprised of a
$12,200,000 or $1.74 per share goodwill write-off and $1,025,000 or $.15 per
share for severance and idled leased facility costs to reflect the current
market conditions. The charge also included $2,575,000 or $.37 per share to
increase reserves to cover contractual issues on contracts completed in prior
years. The majority of this charge related to a specific audit issue for a
contract completed in 1991. The audit issue was not known by the Company until
the third quarter of 1994. The total charge was included in selling, general
and administrative expenses. The entire charge, including the goodwill
write-off, will not have a material impact on future results of operations.
The $12,200,000 goodwill write-off represented the entire goodwill amount
associated with United Energy Services Corporation (UESC) and its subsidiaries.
UESC provided consulting services principally to the nuclear power industry.
The goodwill write-off stems primarily from the deterioration in the commercial
nuclear power market. Market forces, including deregulation of the electric
utility industry, the emergence of independent power producers and technological
advances making fossil plants more efficient, have particularly affected the
commercial nuclear industry, resulting in a dramatic decline in the demand and
pricing of services. These changing market conditions have resulted in
increased competition on those services typically provided by UESC. UESC
incurred substantial losses late in 1993 and continued to operate at a loss
through 1994. For these reasons, and the continued uncertainty surrounding
UESC's nuclear business returning to a level of profitability sufficient to
recover the carrying values of goodwill, it became apparent to management that
UESC's goodwill was permanently impaired and no longer had any value.
<PAGE>
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(Loss) before provision for taxes on income(loss) 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(loss)
was reduced by $600,000 primarily due to a federal income tax deduction
associated with the closure of foreign subsidiaries.
In the second quarter of 1993, the Company recorded a charge to income of
$2,200,000 to increase reserves for costs associated with resolving a series of
claims filed by former employees of a subsidiary which was closed in 1988. This
reserve is recorded in other accrued liabilities on the consolidated balance
sheet. After the income tax benefit of $880,000, net income was reduced by
$1,320,000 or $.18 per share. The Company is contesting these matters
vigorously and is in the process of pursuing various legal actions. The timing
of the final resolution is not yet known.
10. OPERATING LEASES:
The Company leases, as lessee, facilities, data processing equipment, office
equipment and automobiles under leases expiring during the next ten years.
Total rental expense under operating lease agreements amounted to $5,200,000 in
1995, $7,000,000 in 1994, and $5,900,000 in 1993. Minimum future rentals under
noncancelable operating leases with initial or remaining terms in excess of one
year at December 29, 1995 are as follows:
1996 $ 4,903,000
1997 3,284,000
1998 2,565,000
1999 2,185,000
2000 1,709,000
2001 and thereafter 4,765,000
----------
Total minimum rentals $19,411,000
==========
The Company leases, as lessor, office space to unrelated parties under leases
expiring between 1996 and 2005. Minimum future rentals under noncancelable
operating leases at December 29, 1995 are as follows:
1996 $ 7,285,000
1997 7,302,000
1998 7,483,000
1999 7,602,000
2000 7,702,000
2001 and thereafter 31,652,000
----------
Total minimum rentals $69,026,000
==========
<PAGE>
11. FINANCIAL INSTRUMENTS:
Letters of credit and performance bonds are issued by the Company during the
ordinary course of business through major domestic banks and insurance
companies. The Company has outstanding letters of credit and performance bonds,
not reflected in the consolidated financial statements, in the amount of
$20,206,000 at December 29, 1995 and $5,814,000 at December 30, 1994.
Financial instruments which potentially subject the Company to the concentration
of credit risk, as defined by SFAS No. 105, consist principally of accounts
receivable. Concentration of credit risk with respect to receivables is
limited, as the majority of the balance represents billings for work performed
for the U.S. Government.
12. CONTINGENCIES:
On October 20, 1995, the Company announced a $12,000,000 trial court verdict
against the Company and Gilbert/Commonwealth, Inc. of Michigan relative to a
dispute concerning construction management work performed by the former
subsidiary of Gilbert/Commonwealth, Inc. (G/C) in 1987 for Alaska-based Homer
Electric Association. As previously reported, in June 1995 the Company sold its
G/C subsidiary to The Parsons Corporation. Pursuant to the Stock Purchase
Agreement, Parsons agreed to indemnify, defend and hold harmless, the Company
against any litigation, claim or judgment brought or continued against the
Company arising out of the actions or operations of its former G/C subsidiary.
The final judgment, including costs and attorney's fees, totaled $13,200,000,
and the Company has posted a bond in the amount of $15,300,000 relative to the
judgment plus statutory interest for up to eighteen months.
Both the Company and Gilbert/Commonwealth, Inc. of Michigan will appeal the
Court's judgment on independent grounds.
Although there can be no assurance as to the ultimate outcome of these
proceedings, the Company believes that the jury finding regarding its liability
in the case is contrary to established law and that it has substantial
justification for appeal. The Company further believes that its insurance
policies should ultimately provide coverage for liability arising from this
lawsuit. Given these factors and The Parsons Corporation's indemnification, no
provision for losses has been recorded as of December 29, 1995.
Various other lawsuits, claims and contingent liabilities arise in the ordinary
course of the Company's business. While the ultimate disposition of these
contingencies is not determinable at this time, management believes that any
liability resulting therefrom will not materially affect the consolidated
financial statements of the Company.
<PAGE>
<TABLE>
13. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a tabulation of the unaudited quarterly financial data
for each of the four quarters of the years 1995 and 1994:
QUARTER ENDED
------------------------------------------------------------------
March 31, 1995 June 30, 1995 Sept. 29, 1995 Dec. 29, 1995
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $64,584,000 $43,140,000 $40,888,000 $44,883,000
Gross profit 16,143,000 8,728,000 8,528,000 10,168,000
Income (Loss) before net gain on dispositions
of subsidiaries and provision for
taxes on income (loss) 2,019,000 1,841,000 1,712,000 (564,000)
Net income(loss) 1,134,000 19,813,000 999,000 (4,996,000)
Net income(loss) per share
of common stock $.16 $2.90 $.16 $(.79)
QUARTER ENDED
------------------------------------------------------------------
April 1, 1994 July 1, 1994 Sept. 30, 1994 Dec. 30, 1994
------------------------------------------------------------------
Revenue $74,852,000 $74,058,000 $67,919,000 $65,666,000
Gross profit 20,085,000 19,293,000 17,383,000 17,094,000
Income(Loss) before provision for taxes
on income(loss) 1,977,000 1,330,000 (15,940,000) 1,473,000
Net income(loss) 1,167,000 1,130,000 (14,750,000) 833,000
Net income(loss) per share
of common stock $.17 $.16 $(2.11) $.12
NOTES:
The results of operations for the quarter ended December 29, 1995
include charges to income of $3,630,000, net of income tax benefit of
$1,870,000, or $.57 per share, for closing the Company's United
Energy Services Corporation subsidiary and $2,500,000 or $.40 per
share relative to the write-off of purchased in-process research and
development associated with the XEL transaction.
The results of operations for the quarter ended June 30, 1995 include
a gain of $18,742,000 (net of $7,800,000 income tax expense), or
$2.74 per share, relative to the sale of Gilbert/Commonwealth, Inc.
The results of operations for the quarter ended September 30, 1994
include a charge to income of $15,800,000 (net of $2,000,000 income
tax benefit), or $2.26 per share, associated with the nuclear service
business.
<PAGE>
Results of operations for the quarter ended July 1, 1994 were
increased by $75,000 or $.01 per share due to the closure of foreign
subsidiaries and the settlement of certain contractual issues.
Earnings per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per
share in 1995 does not equal the total computed for the year due to
the timing of stock repurchases throughout the year, and the large
gain relative to the G/C sale which was recorded in the second
quarter.
</TABLE>
<TABLE>
14. SEGMENT INFORMATION:
The Company segregates its business into three segments- Technical
Services, Telecommunications and Real Estate. The Technical Services
segment provides electronic, engineering, and human resource services,
as well as life and environmental science services primarily to U.S.
government agencies. The Telecommunications segment develops and
manufactures industrial communication products and external transmission
products for a variety of customers. As a result of the
Gilbert/Commonwealth sale, the real estate operations are significant
enough to warrant separate segment disclosure in 1995. Information
about the Company's operations by segment for the years 1995, 1994 and
1993 is as follows:
Technical Tele- Real
Services communications Estate Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 29, 1995:
Revenue $133,535,000 $ 51,848,000 $ 6,319,000 $ (1,002,000) $190,700,000
=========== ========== ========== ========= ===========
Operating profit $ 6,150,000 $ 6,244,000 $ 538,000 $ 12,932,000
=========== ========== ==========
Interest expense (210,000)
General corporate expenses (6,647,000)
Other expenses (1,362,000)
Purchased in-process research and development (2,500,000)
Other income 2,795,000
------------
Income before income taxes
and net gain on dispositions
of subsidiaries $ 5,008,000
===========
Identifiable assets $ 39,684,000 $ 59,525,000 $ 29,720,000 $128,929,000
=========== ========== ==========
Corporate assets 16,415,000
-------------
Total assets, December 29, 1995 $145,344,000
============
Depreciation and amortization $ 1,988,000 $ 1,510,000 $ 1,420,000
=========== ========== ==========
Capital expenditures $ 1,805,000 $ 2,018,000 $ 411,000
=========== ========== ==========
<PAGE>
14. SEGMENT INFORMATION (continued)
Technical Tele-
Services communications Consolidated
- ---------------------------------------------------------------------------------------------------------------
Year ended December 30, 1994:
Revenue $229,887,000 $ 46,045,000 $275,932,000
=========== =========== ===========
Operating profit(loss) $(13,686,000) $ 4,872,000 $ (8,814,000)
=========== ===========
Interest expense (186,000)
General corporate expenses (6,024,000)
Other expenses (619,000)
Other income 4,483,000
-----------
Income(Loss) before income taxes
and cumulative effect of
changes in accounting
principles $(11,160,000)
===========
Identifiable assets $ 83,028,000 $ 32,534,000 $115,562,000
=========== ===========
Corporate assets 31,523,000
-----------
Total assets, December 30, 1994 $147,085,000
===========
Depreciation and amortization $ 5,081,000 $ 1,222,000
=========== ===========
Capital expenditures $ 4,244,000 $ 876,000
=========== ===========
<PAGE>
14. SEGMENT INFORMATION (continued)
Technical Tele-
Services communications Consolidated
- --------------------------------------------------------------------------------------------------------------
Year ended December 31, 1993:
Revenue $243,403,000 $ 41,987,000 $285,390,000
=========== =========== ===========
Operating profit $ 9,389,000 $ 3,914,000 $ 13,303,000
=========== ===========
Interest expense (205,000)
General corporate expenses (6,148,000)
Other expenses (598,000)
Other income 4,810,000
-----------
Income before income taxes and
cumulative effect of changes
in accounting principles $ 11,162,000
===========
Identifiable assets $101,472,000 $ 34,062,000 $135,534,000
=========== ===========
Corporate assets 34,713,000
-----------
Total assets, December 31, 1993 $170,247,000
===========
Depreciation and amortization $ 4,651,000 $ 1,167,000
=========== ===========
Capital expenditures $ 2,916,000 $ 694,000
=========== ===========
<PAGE>
14. SEGMENT INFORMATION (continued)
Revenue for the technical services and telecommunications segments
consists of sales to unaffiliated customers; intersegment sales are not
significant. The real estate segment includes revenue derived from
certain affiliated tenants which is eliminated in consolidation.
Operating profit(loss) is total revenue less operating expenses, and
excludes interest expense, general corporate expenses and other income.
Other expenses for 1995 include costs associated with non-recurring
operations related to the sale of Gilbert/Commonwealth Inc. Revenue
associated with this operation is reflected in other income, and the
amount approximates the expenses identified as other expenses. Other
expenses for 1994 and 1993 represent depreciation on the office
facility. In 1995, this depreciation is included in the real estate
segment above. Prior year segment information has been restated to be
consistent with current year presentation. Although the Company
receives technical services revenue from many customers, in 1995 the
Company had one major customer that accounted for revenue of
$82,000,000. In 1994 and 1993 the Company had two major customers that
accounted for revenues of $107,000,000, and $98,000,000, respectively.
Of these amounts, approximately $82,000,000, $77,000,000, and
$58,000,000 was received from several United States governmental
agencies in 1995, 1994 and 1993, respectively.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets are those assets not used
in the operations of a specific segment and consist primarily of cash
and cash equivalents, short-term investments, and in prior years, an
office facility. Capital expenditures for the office facility were
$393,000, and $831,000, in 1994 and 1993, respectively, and are excluded
from the capital expenditures above.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None.
PART III
Other than portions of Item 10, which are included in
Item A hereof, this part (i.e. Item 10 - Directors and Executive Officers of the
Registrant; Item 11 - Executive Compensation; Item 12 - Security Ownership of
Certain Beneficial Owners and Management; and Item 13 - Certain Relationships
and Related Transactions) is incorporated by reference to an amendment of this
Form 10-K, to be filed.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The financial statements filed herewith under Part II,
Item 8, include the consolidated balance sheets at December 29, 1995
and December 30, 1994, and the consolidated statements of operations,
consolidated statements of stockholders' equity and consolidated
statements of cash flows for the years 1995, 1994 and 1993 of Gilbert
Associates, Inc. and its subsidiaries.
(b) Reports on Form 8-K.
During the last quarter of 1995, the registrant filed
the following reports on Form 8-K:
(1) Form 8-K dated October 10, 1995 regarding the
announcement of agreement to acquire the stock of XEL Corporation.
(2) Form 8-K dated October 25, 1995 regarding the
announcement that the registrant will appeal a recent Alaska trial
court judgment against the registrant.
(3) Form 8-K dated December 15, 1995 which filed XEL
Corporation financial statements as well as pro forma consolidated
financial statements.
(c) Exhibits.
3.1 Restated Certificate of
Incorporation of Gilbert Associates, Inc. as currently in
effect. Incorporated by reference to Exhibit 3(a) of Annual
Report of the registrant on Form 10-K for the fiscal year
ended December 29, 1989 (File No. 0-12588).
3.2 By-laws of Gilbert
Associates, Inc. as currently in effect. Incorporated by
reference to Exhibit 28 to the Quarterly Report of the
registrant on Form 10-Q for the period ended March 30, 1990
(File No. 0-12588).
The following Exhibits 10.1 through 10.5 are compensatory plans or
arrangements required to be filed as exhibits to this Annual Report on Form
10-K pursuant to Item 14(c):
<PAGE>
10.1 Gilbert Associates, Inc. Equity Award Plan.
Incorporated by reference to Exhibit 4 to Registration
Statement on Form S-8 filed by registrant under the Securities
Act of 1933 (No. 33-15289).
10.2 1989 Gilbert Stock Option Plan. Incorporated by
reference to Exhibit 4(a) to Registration Statement on Form S-
8 filed by registrant under the Securities Act of 1933 (No.
33-32288).
10.3 Gilbert Associates, Inc. Stock Bonus Purchase Plan.
Incorporated by reference to Exhibit 4 to Registration
Statement on Form S-8 filed by registrant under the Securities
Act of 1933 (No. 33-37793).
10.4 Gilbert Associates, Inc. Benefit Equalization Plan,
effective January 1, 1989. Incorporated by reference to
Exhibit 10(g) of Annual Report of the registrant on Form 10-K
for the fiscal year ended January 1, 1993 (File No. 0-12588).
10.5 Gilbert Associates, Inc. split dollar life insurance
policy for an officer of the Company. Incorporated by
reference to Exhibit 10(h) of Annual Report of the registrant
on Form 10-K for the fiscal year ended January 1, 1993 (File
No. 0-12588).
21 A complete list of the registrant's subsidiaries.
23 Consent of Coopers & Lybrand L.L.P., registrant's
independent accountants, to the use of their report on the
consolidated financial statements.
27 Financial Data Schedules for the year ended
December 29, 1995.
99.1 Annual Report on Form 11-K, pursuant to Section 15(d)
of the Securities Exchange Act of 1934, of the Stock Purchase
Program for Employees of Gilbert Associates, Inc. and its
subsidiaries for the year ended December 31, 1995. (To be
filed by amendment.)
99.2 Annual Report on Form 11-K, pursuant to Section 15(d)
of the Securities Exchange Act of 1934, of the Retirement
Savings Plan for Employees of Gilbert Associates, Inc. and its
subsidiaries for the year ended December 31, 1995. (To be
filed by amendment.)
99.3 Annual Report on Form 11-K, pursuant to Section 15(d)
of the Securities Exchange Act of 1934, of United Energy
Services Corporation 401(k) Profit Sharing Plan for the year
ended December 31, 1995. (To be filed by amendment.)
99.4 Annual Report on Form 11-K, pursuant to Section 15(d)
of the Securities Exchange Act of 1934, of Resource
Consultants, Inc. 401(k) Profit Sharing Plan for the year
ended December 31, 1995. (To be filed by amendment.)
(d) Financial Statement Schedules, as required, are filed
herewith.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Gilbert Associates, Inc.:
Our report on the consolidated financial statements of Gilbert Associates,
Inc. and Subsidiaries is included in Part II of this Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedules included on Part IV, Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1996
<PAGE>
<TABLE>
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years 1995, 1994 and 1993
Column A Column B Column C Column D Column E Column F
Balance at Additions Balance at
Beginning Charged to Other End of
Description of Period Costs and Expenses Deductions Changes Period
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
1995:
Allowance for doubtful accounts $2,677,000 $ 479,000 $ 251,000 (A) $ (900,000)(C) $2,005,000
========= ========= ========= ========= =========
Estimated liability for
contract losses $5,272,000 $ 649,000 $2,750,000 (B) $ - $3,171,000
========= ========= ========= ========= =========
Inventory reserves $ 430,000 $ 33,000 $ 23,000 $ 496,000 (F) $ 936,000
========= ========= ========= ========= =========
1994:
Allowance for doubtful accounts $3,427,000 $ (164,000) $ 586,000 (A) $ - $2,677,000
========= ========= ========= ========= =========
Estimated liability for
contract losses $2,813,000 $3,700,000 $1,241,000 (B) $ - $5,272,000
========= ========= ========= ========= =========
Inventory reserves $ 790,000 $ 60,000 $ 420,000 $ - $ 430,000
========= ========= ========= ========= =========
1993:
Allowance for doubtful accounts $2,796,000 $ 810,000 $ 329,000 (A) $ 150,000 (E) $3,427,000
========= ========= ========= ========= =========
Estimated liability for
contract losses $2,862,000 $ 223,000 $ 572,000 (B) $ 300,000 (D) $2,813,000
========= ========= ========= ========= =========
Inventory reserves $ 730,000 $ 292,000 $ 645,000 $ 413,000 (E) $ 790,000
========= ========= ========= ========= =========
(A) Uncollectible accounts written off.
(B) Contract losses realized.
(C) Sale of Gilbert/Commonwealth, Inc.
(D) Acquisition of SRA Technologies, Inc.
(E) Acquisition of Instrument Associates, Inc.
(F) Acquisition of XEL Corporation.
</TABLE>
<PAGE>
<TABLE>
Gilbert Associates, Inc. and Subsidiaries
Schedule III
Real Estate and Accumulated Depreciation
December 29, 1995
Cost capitalized
Initial cost to subsequent to Gross amount at which
Company acquisition carried at close of period
--------------------- ---------------------- ------------------------------
Buildings and Carrying Buildings and Accumulated
Description Encumbrances Land improvements Improvements costs Land improvements Total depreciation
----------- ------------ ---- ------------- ------------ -------- ---- ------------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office Building N/A $2,461,000 $22,284,000 $ - $ - $2,461,000 $22,284,000 $24,745,000 $9,409,000
Office Building N/A 756,000 11,702,000 1,167,000 1,030,000 756,000 12,732,000 13,488,000 1,748,000
Life on which
depreciation in
latest income stmts
Date of construction Date Acquired is computed
Prior to 1982 N/A (1) 40 years
1992 N/A (1) 30 years
(1) Buildings were constructed by the registrant.
(2) These buildings were originally constructed prior to 1982 for use by the
registrant. The costs shown are as of December 29, 1995.
The following shows the changes in the total amounts at which real estate was
carried during the period:
Balances at December 30, 1994 $ 42,347,000
Additions during the period:
Purchases -
Improvements 53,000
-------
Total Additions 53,000
Deductions during the period:
Cost of real estate sold (4,167,000)
----------
Balances at December 29, 1995 $ 38,233,000
==========
The following shows changes in accumulated depreciation during the period:
Balances at December 30, 1994 $ 12,926,000
Depreciation during the period 1,184,000
Deductions for real estate sold (2,953,000)
----------
Balance at December 29, 1995 $ 11,157,000
==========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 8th day of
March, 1996.
GILBERT ASSOCIATES, INC.
By /s/T. S. Cobb
T. S. Cobb
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman, President
and Chief
Executive Officer
(Principal Executive
/s/T. S. Cobb Officer) and Director March 8, 1996
T. S. Cobb
Vice President and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
/s/P. H. Snyder and Director March 8, 1996
P. H. Snyder
/s/A. F. Smith. Director March 8, 1996
A. F. Smith
/s/J. W. Boyer, Jr. Director March 8, 1996
J. W. Boyer, Jr.
/s/D. E. Lyons Director March 8, 1996
D. E. Lyons
/s/J. W. Stratton Director March 8, 1996
J. W. Stratton
/s/J. A. Sutton Director March 8, 1996
J. A. Sutton
/s/D. K. Wilson, Jr. Director March 8, 1996
D. K. Wilson, Jr.
<PAGE>
<EX-21>
EXHIBIT 21
SUBSIDIARIES
The following list includes all significant subsidiaries of the
registrant and their state or jurisdiction of incorporation. The registrant
owns 100% of the outstanding voting stock of all of the subsidiaries listed.
The consolidated financial statements include the registrant and all
subsidiaries. Except as noted below, none of the subsidiaries does business
under a trade name different from its corporate name.
State or Jurisdiction in
Name of Subsidiary which Incorporated
GAI-Tronics Corporation * Delaware
XEL Corporation * Colorado
Resource Consultants, Inc. Virginia
SRA Technologies, Inc. District of Columbia
United Energy Services Corporation New York
* GAI-Tronics Corporation, in addition to doing business under its
corporate name, does business under the Instrument Associates, Inc. (IAI)
trade name.
XEL Corporation, in addition to doing business under its corporate name,
does business under the XEL Communications, Inc. trade name.
<PAGE>
<EX-23>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Gilbert Associates, Inc. on Form S-8 (File Nos. 33-55139, 2-91939, 2-91940,
33-11693, 33-15289, 33-32288, 33-37792, 33-37793, 33-37795, 33-43112,
33-43113, 33-44939 and 33-71242) of our reports dated January 31, 1996
(which includes an explanatory paragraph regarding the Company's change
in method of accounting for income taxes and post-retirement benefits
other than pensions in 1993) on our audits of the consolidated financial
statements and financial statement schedules of Gilbert Associates, Inc.
and Subsidiaries as of December 29, 1995 and December 30, 1994 and for
each of the three years in the period ended December 29, 1995, which
reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> DEC-29-1995
<CASH> 8,674,000
<SECURITIES> 0
<RECEIVABLES> 26,722,000
<ALLOWANCES> 2,005,000
<INVENTORY> 11,548,000
<CURRENT-ASSETS> 65,786,000
<PP&E> 77,826,000
<DEPRECIATION> 33,855,000
<TOTAL-ASSETS> 145,344,000
<CURRENT-LIABILITIES> 30,977,000
<BONDS> 0
0
0
<COMMON> 8,532,000
<OTHER-SE> 93,949,000
<TOTAL-LIABILITY-AND-EQUITY> 145,344,000
<SALES> 51,795,000
<TOTAL-REVENUES> 193,495,000
<CGS> 32,429,000
<TOTAL-COSTS> 147,132,000
<OTHER-EXPENSES> 41,355,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210,000
<INCOME-PRETAX> 26,050,000
<INCOME-TAX> 9,100,000
<INCOME-CONTINUING> 5,008,000
<DISCONTINUED> 0
<EXTRAORDINARY> 21,042,000
<CHANGES> 0
<NET-INCOME> 16,950,000
<EPS-PRIMARY> 2.57
<EPS-DILUTED> 2.57
</TABLE>
