SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
OR
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- --------------------
Commission file number 0-15067
FLUOR DANIEL GTI, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 02-0324047
State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
100 River Ridge Drive, Norwood, MA 02062
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 769-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
--- ---
At September 13, 1997 the registrant had issued and outstanding an aggregate of
8,323,790 shares of its common stock.
FLUOR DANIEL GTI, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
- ------ --------------------- -----------
<S> <C> <C>
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
July 31, 1997 (Unaudited) and October 31, 1996 ..................................................1-2
Condensed Consolidated Statements of Operations
Quarter ended July 31, 1997 (Unaudited) and July 31, 1996 (Unaudited)..............................3
Condensed Consolidated Statements of Operations
Nine months ended July 31, 1997 (Unaudited) and July 31, 1996 (Unaudited)1.........................4
Condensed Consolidated Statements of Cash Flows
Nine months ended July 31, 1997 (Unaudited) and July 31, 1996 (Unaudited)1.........................5
Notes to Condensed Consolidated Financial Statements (Unaudited).......................................6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations................7-9
PART II OTHER INFORMATION
- ------- -----------------
Item 2 Changes in Securities.................................................................................10
Item 6 Exhibits and Reports on Form 8-K......................................................................10
Signatures............................................................................................11
</TABLE>
1 Reflects the historical results of the predecessor entity Fluor Daniel
Environmental Services, Inc. (FDESI) for the six months ended April 30, 1996 and
Fluor Daniel GTI, Inc. for the three months ended July 31, 1996.
Item 1. Financial Statements
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 31, October 31,
Assets 1997 1996
- ------ ---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,580 $ 2,552
Marketable securities 5,501 4,101
Accounts receivable, less allowance of $1,850 at
July 31, 1997 and $1,740 at October 31, 1996 39,111 46,438
Unbilled revenues 20,693 18,917
Deferred income taxes 849 937
Other current assets 3,202 2,525
----------- -----------
Total current assets 77,936 75,470
Deferred income taxes 2,967 2,967
Property, plant and equipment, net 6,680 7,776
Goodwill, net of accumulated amortization of $1,320 at
July 31, 1997 and $860 at October 31, 1996 10,695 10,218
Other assets 2,967 3,962
----------- -----------
Total assets $101,245 $100,393
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
July 31, October 31,
Liabilities and Stockholders' Equity 1997 1996
- ------------------------------------ ---- ----
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 7,589 $ 8,034
Accrued salaries and benefits 3,910 4,023
Advance billings on contracts 754 452
Other accrued liabilities 5,742 5,905
Income taxes payable 87 101
-------------- ------------
Total current liabilities 18,082 18,515
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $.001 par value, 25,000,000 shares
authorized, 8,323,790 issued and outstanding at July 31, 1997;
8,155,832 issued and outstanding at October 31, 1996 8 8
Capital in excess of par value 82,162 81,003
Retained earnings 1,280 825
Cumulative currency translation adjustment (287) 42
------------- -------------
Total stockholders' equity 83,163 81,878
----------- ----------
Total liabilities and stockholders' equity $101,245 $100,393
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter ended
-------------
July 31, July 31,
1997 1996
---- ----
<S> <C> <C>
Revenues $46,884 $42,056
Cost of revenues 35,709 32,668
-------- --------
Gross profit 11,175 9,388
Selling, general and administrative expenses 9,630 9,561
License and other income 91 37
----------- -----------
Income (loss) before investment and interest income 1,636 (136)
Investment and interest income, net 305 159
---------- ----------
Income before provision for income taxes 1,941 23
Provision for income taxes 792 --
---------- -------------
Net income $ 1,149 $ 23
======== ==========
Earnings per common share $ .14 $ --
========== ============
Shares used to compute earnings per common share 8,314 8,229
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine months ended
-----------------
July 31, July 31,
1997 1996(1)
---- -------
<S> <C> <C>
Revenues $142,530 $58,542
Cost of revenues 111,638 44,966
--------- --------
Gross profit 30,892 13,576
Selling, general and administrative expenses 31,109 9,561
Indirect expense -- 3,491
License and other income 433 37
------------ -----------
Income before investment and interest income 216 561
Investment and interest income, net 568 159
------------ ----------
Income before income taxes 784 720
Provision for income taxes 329 272
------------ ----------
Net income $ 455 $ 448
=========== =========
Earnings per common share $ .06 $ --
============ ============
Shares used to compute earnings per common share 8,247 --
=========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1 Reflects the historical results of the predecessor entity Fluor Daniel
Environmental Services, Inc. (FDESI) for the six months ended April 30, 1996 and
Fluor Daniel GTI, Inc. for the three months ended July 31, 1996. Pro forma
results for the period, presented as though the merger of FDESI and Groundwater
Technology, Inc. had occurred at the beginning of the period, were net income of
approximately $1,099,000 on gross revenues of approximately $140,501,000.
-4-
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
July 31, July 31,
1997 1996(1)
---- -------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 455 $ 448
Adjustments to reconcile net income to net cash provided by (used by)
operating activities:
Depreciation and amortization 3,116 1,226
Loss on fixed assets -- 59
Deferred taxes 88 --
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenues 5,551 (5,979)
Other current assets (677) 3,080
Other assets 434 (115)
Accounts payable (445) (2,096)
Accrued salaries and benefits (113) 668
Other accrued liabilities (163) (1,461)
Advance billings on contracts 302 329
Income taxes payable (14) (78)
Advances from parent -- 311
------------ ---------
Net Cash provided by (used by) Operating Activities 8,534 (3,608)
Cash Flows From Investing Activities
Purchase of marketable securities (6,700) (650)
Sale of marketable securities 5,300 --
Expenditures for property, plant and equipment (1,604) (611)
Investment in joint ventures -- 102
Sale of property, plant and equipment 54 --
Other (403) (283)
Cash acquired in merger with Groundwater Technology, Inc. -- 36,729
Cash paid to shareholders -- (60,102)
------------ --------
Net Cash used in Investing Activities (3,353) (24,815)
Cash Flows From Financing Activities
Proceeds from sale of stock under employee stock purchase plans 1,159 359
Cash received from Fluor Daniel, Inc. -- 33,350
------------ -------
Net Cash provided by Financing Activities 1,159 33,709
Effect of Exchange Rate Changes on Cash and Cash Equivalents (312) 54
--------- ----------
Increase in Cash and Cash Equivalents 6,028 5,340
Cash and Cash Equivalents at Beginning of Fiscal Year 2,552 --
-------- ------------
Cash and Cash Equivalents at End of Period $8,580 $ 5,340
======= =======
The accompanying notes are an integral part of the financial statements.
Supplemental disclosure of non-cash financing activities:
Received net assets from merger with Groundwater Technology, Inc. -- $70,858
</TABLE>
1 Reflects the historical results of the predecessor entity Fluor Daniel
Environmental Services, Inc. (FDESI) for the six months ended April 30, 1996 and
Fluor Daniel GTI, Inc. for the three months ended July 31, 1996.
-5-
FLUOR DANIEL GTI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheets as of July 31, 1997 and October
31, 1996, the related condensed consolidated statements of operations for the
quarter and nine months ended July 31, 1997 and July 31, 1996, and the related
condensed consolidated statements of cash flows for the nine months ended July
31, 1997 and July 31, 1996, have been prepared by Fluor Daniel GTI, Inc. (the
"Company") without audit. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position, results of operations and changes in cash flows at July 31,
1997 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested this information be read in
conjunction with the Annual Report on Form 10-K for fiscal year ended October
31, 1996 (SEC File No. 0-15067) and the Proxy Statement/Prospectus dated April
5, 1996, of Groundwater Technology, Inc. ("GTI"), relating to the May 10, 1996
Special Meeting of Stockholders at which the Change of Control Transactions
(defined below) were approved. The results of operations for the three and nine
month periods ended July 31, 1997 are not necessarily indicative of the
operating results for the year.
NOTE 2. Earnings Per Share
Earnings per share for the nine month period ended July 31, 1996 is not
meaningful.
NOTE 3. Merger and Recapitalization Activities
On May 10, 1996, the Company closed a series of transactions (the "Change
of Control Transactions") pursuant to which it became a majority-owned
subsidiary of Fluor Daniel, Inc. ("Fluor Daniel"), a global construction,
engineering, maintenance and services company. The Change of Control
Transactions included a recapitalization of the Company's common stock, and the
merger of one of the Company's subsidiaries and Fluor Daniel Environmental
Services, Inc. ("FDESI"), a wholly-owned subsidiary of Fluor Daniel that
provides environmental services primarily to agencies of the federal government.
In exchange for FDESI and $35 million in cash, Fluor Daniel received 4,400,000
shares of the Company's "new" common stock and an option to purchase 1,768,970
additional shares at $13.1274 per share that expires on December 11, 1998. In
the recapitalization, each holder of "old" common stock received $8.62 in cash
and .5274 of a share of "new" common stock of the Company. In addition, the
Company entered into a Marketing Agreement with Fluor Daniel, and the Company
changed its name from "Groundwater Technology, Inc." to "Fluor Daniel GTI, Inc."
to emphasize the new relationship.
The merger was treated as a reverse acquisition for accounting purposes,
and therefore, the unaudited condensed consolidated statements of operations and
condensed consolidated statements of cash flows for the nine months ended July
31, 1996 reflect the historical results of FDESI, which is the predecessor
entity for accounting purposes, for the six months ended April 30, 1996 and the
results of Fluor Daniel GTI, Inc. for the three months ended July 31, 1996.
Pro forma results for the nine month period ended July 31, 1996, presented
as though the merger of FDESI and GTI had occurred on November 1, 1995, were net
income of $1,099,000 on revenues of approximately $140.5 million.
NOTE 4. Change in Fiscal Year
The Company changed its year end from April 30 to October 31. Accordingly,
the Company began a new 12-month fiscal year on November 1, 1996.
-6-
FLUOR DANIEL GTI, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
On May 10, 1996, the Company closed a series of transactions (the "Change
of Control Transactions") pursuant to which it became a majority-owned
subsidiary of Fluor Daniel, Inc. ("Fluor Daniel"), a global construction,
engineering, maintenance and services company. The Change of Control
Transactions included a recapitalization of the Company's common stock, and the
merger of one of the Company's subsidiaries and Fluor Daniel Environmental
Services, Inc. ("FDESI"), a wholly-owned subsidiary of Fluor Daniel that
provides environmental services primarily to agencies of the federal government.
In exchange for FDESI and $35 million in cash, Fluor Daniel received 4,400,000
shares of the Company's "new" common stock and an option to purchase 1,768,970
additional shares at $13.1274 per share that expires on December 11, 1998. In
the recapitalization, each holder of "old" common stock received $8.62 in cash
and .5274 of a share of "new" common stock of the Company. In addition, the
Company entered into a Marketing Agreement with Fluor Daniel, and the Company
changed its name from "Groundwater Technology, Inc." to "Fluor Daniel GTI, Inc."
to emphasize the new relationship.
The merger was treated as a reverse acquisition for accounting purposes,
and therefore, the unaudited condensed consolidated statements of operations and
condensed consolidated statements of cash flows for the nine months ended July
31, 1996 reflect the historical results of FDESI, which is the predecessor
entity for accounting purposes, for the six months ended April 30, 1996 and the
results of Fluor Daniel GTI, Inc. for the three months ended July 31, 1996.
The Company changed its year end from April 30 to October 31. Accordingly,
the Company began a new 12-month fiscal year on November 1, 1996.
Results of Operations
Results for the Quarter Ended July 31, 1997
Revenues for the quarter ended July 31, 1997 were $46.9 million, an
increase of 11.4% compared to revenue of $42.1 million for the same period last
year. Although the Company experienced continued competition within almost all
assessment and remediation markets, the increase in revenues was in large part
due to work on alliance projects with Fluor Daniel, Inc.
Gross profit for the three months ended July 31, 1997 was $11.2 million, an
increase of 19.1% compared to $9.4 million for the same period last year. As a
percentage of revenues, gross profit for the quarter was 23.9% as compared to
22.3% for the same period last year. The gross profit for the three months was
favorably impacted by the strong performance of several key programs.
The increase in both revenues and gross profit was in large part driven by
the shared projects between the Company and Fluor Daniel. A recent example is
the previously announced award by Witco Corporation to Fluor Daniel, Inc., of
which our portion is valued at $100 million over three years. We are providing
environmental services in support of Witco's program to restructure and
consolidate its worldwide manufacturing facilities.
Selling, general and administrative expenses for the quarter ended July 31,
1997 were $9.6 million or 20.5% of revenues, compared to $9.6 million, or 22.8%
of revenue in the same period last year. The lower percentage is a reflection of
the initial benefits of the overhead cost reduction plan implemented during the
quarter ended April 30, 1997.
Results for the Nine Months Ended July 31, 1997
Revenues for the nine months ended July 31, 1997 were $142.5 million. The
Company experienced continued competition within almost all assessment and
remediation markets for the nine months ended.
Gross profit for the nine months ended July 31, 1997 was $30.9 million. As
a percentage of revenues, gross profit for the nine months ended was 21.7%. The
gross profit for the nine months has been impacted
-7-
by continued pricing pressures for services performed and a charge of $1.15
million in labor and salary costs associated with writing government proposals
incurred during the first six months of this fiscal year. These additional costs
had an adverse impact on the gross margins.
Selling, general and administrative expenses for the nine months ended July
31, 1997 were $31.1 million. Included in this cost is $583,000 in outside
vendors costs associated with the preparation of government proposals. Also
included is a charge of $830,000 for payroll and benefits related to an overhead
cost reduction plan implemented during the quarter ended April 30, 1997. When
fully implemented, it is expected that this overhead cost reduction plan will
yield approximately $2 million in annualized salary and benefit savings.
Pro forma results for the nine month period ended July 31, 1996, presented
as though the merger of FDESI and GTI had occurred on November 1, 1995, were net
income of $1,099,000 on revenues of approximately $140.5 million.
Liquidity and Capital Resources
At July 31, 1997, the Company's primary source of liquidity was $14.1
million in cash, cash equivalents and marketable securities. The Company has no
long-term borrowings. At July 31, 1997, the Company had a line of credit with a
bank providing for borrowings up to $10.0 million through April 30, 1999. There
have been no borrowings under the line of credit.
Operating activities provided $8.5 million in net cash for the nine months
ended July 31, 1997, principally due to improvements in collections of
receivables. At July 31, 1997, the Company's working capital was $59.9 million.
Total assets were $101.2 million at the end of the same period.
Cash flows from investing activities were impacted by approximately $1.6
million of expenditures in property, plant and equipment that primarily related
to an upgrade the Company's computer and rental equipment. The Company had no
material commitments for capital expenditures as of July 31, 1997, and estimates
spending for the next three months to be approximately $600,000.
Funding requirements for operations are expected to be met from existing
cash, cash equivalents, marketable securities and cash generated from
operations. The Company believes that cash provided from these sources will be
sufficient to meet its operating requirements for the near term.
Forward-Looking Information
Any of the comments in this Form 10-Q that refer to the Company's estimated
or future results, including its estimates of the cost savings from the overhead
cost reduction plan, are forward-looking and reflect the Company's current
analysis of existing trends and information. Actual results may differ
materially from current expectations or projections based on a number of factors
affecting the Company's businesses. These factors include, in the case of the
overhead cost reduction plan, the ability to achieve estimated staff reductions
while maintaining workflow in the functional areas affected. Other risk factors
affecting the Company's estimated or future results include, but are not limited
to, cost overruns on fixed, maximum, or unit- priced contracts; contract
performance risks; the uncertain timing of awards and contracts; and changes in
environmental regulations; as well as, the enforcement of those regulations.
These forward-looking statements represent the Company's judgement only as of
the date of this Form 10-Q. As a result, the reader is cautioned not to rely on
these forward-looking statements. The Company disclaims any intent or obligation
to update these forward-looking statements.
Additional information concerning these and other factors can be found in
the Company's public periodic filings with the Securities and Exchange
Commission.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131.)
-8-
SFAS No. 131 establishes new standards for the way that public business
enterprises report information about operating segments in interim financial
reports issued to shareholders. This statement is effective for the Company's
fiscal year 1999. Adoption of this standard is not expected to have a material
impact on the Company's financial statements or results of operations.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128.)
SFAS No. 128 redefines the standards for computing earnings per share and is
effective for the Company's fiscal year 1998. The Company believes adoption of
the new standards will not have a material impact on future earnings per share
calculations.
-9-
FLUOR DANIEL GTI, INC.
PART II
Item 2: Changes in Securities
In connection with the purchase of Hall Southwest Corporation as of May 26,
1994, the Company issued 49,074 shares of Common Stock during the quarter
covered by this report to one individual who is currently an employee of the
Company. With respect to the issuance of such securities, the Company relied
upon the provisions of Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), in that such transaction did not involve a public
offering and was thereby exempt from registration under the Securities Act. The
offering was not made by means of any general solicitation, and the purchaser
represented that he (i) was an "accredited investor" as defined in Regulation D
promulgated under the Securities Act, (ii) was acquiring the securities for his
own account for the purpose of investment, and (iii) had no present plans to
effect any distribution thereof. The securities were issued with an investment
legend thereon, and stop transfer instructions were noted on the Company's
transfer ledgers.
Item 6. Exhibits and Reports on Form 8-K
None
-10-
FLUOR DANIEL GTI, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLUOR DANIEL GTI, INC.
----------------------
Date: September 15, 1997 /s/ Walter C. Barber
---------------------------- -------------------------------------
Walter C. Barber
President and Chief Executive Officer
Date: September 15, 1997 /s/ Mary C. Stack
---------------------------- -------------------------------------
Mary C. Stack
Vice President and Treasurer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 8,580
<SECURITIES> 5,501
<RECEIVABLES> 40,961
<ALLOWANCES> 1,850
<INVENTORY> 0
<CURRENT-ASSETS> 77,936
<PP&E> 6,680
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,245
<CURRENT-LIABILITIES> 18,082
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 82,162
<TOTAL-LIABILITY-AND-EQUITY> 101,245
<SALES> 142,530
<TOTAL-REVENUES> 142,530
<CGS> 111,638
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 784
<INCOME-TAX> 329
<INCOME-CONTINUING> 455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 455
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
