<PAGE> 1
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, 1998
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)
<TABLE>
<S> <C>
Delaware 02-0324047
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
100 River Ridge Drive, Norwood, MA 02062
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (781) 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 10, 1998 the registrant had issued and outstanding an aggregate of
8,411,766 shares of its common stock.
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FLUOR DANIEL GTI, INC.
FORM 10-Q
TABLE OF CONTENTS
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<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
July 31, 1998 (Unaudited) and October 31, 1997 ..................................... 1-2
Condensed Consolidated Statements of Operations
Quarter ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited)............... 3
Condensed Consolidated Statements of Operations
Nine months ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited)........... 4
Condensed Consolidated Statements of Cash Flows
Nine months ended July 31, 1998 (Unaudited) and July 31, 1997 (Unaudited)........... 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 4 Submission of Matters to a Vote of Security Holders.................................... 10
Item 5 Other Information...................................................................... 10
Item 6 Exhibits and Reports on Form 8-K....................................................... 10
Signatures............................................................................. 11
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<PAGE> 3
Item 1. Financial Statements
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
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<CAPTION>
July 31, October 31,
Assets 1998 1997
-------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,845 $ 3,588
Marketable securities 13,295 7,396
Accounts receivable, less allowance of $2,318 at
July 31, 1998 and $2,049 at October 31, 1997 42,922 38,548
Unbilled revenues 20,291 25,567
Deferred income taxes 1,283 1,328
Other current assets 3,508 3,125
-------- --------
Total current assets 85,144 79,552
Deferred income taxes 3,508 3,508
Property, plant and equipment, net 5,225 6,624
Goodwill, net of accumulated amortization of $1,944 at
July 31, 1998 and $1,456 October 31, 1997 11,164 11,654
Other assets 1,544 1,798
-------- --------
Total assets $106,585 $103,136
======== ========
</TABLE>
(Continued on next page.)
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FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
July 31, October 31,
Liabilities and Stockholders' Equity 1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 9,456 $ 8,266
Accrued salaries and benefits 6,040 5,553
Advance billings on contracts 361 380
Other accrued liabilities 6,434 5,465
Income taxes payable -- 109
--------- ---------
Total current liabilities 22,291 19,773
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $.001 par value, 25,000,000 shares
authorized, 8,411,766 issued and outstanding at July 31, 1998;
8,323,790 issued and outstanding at October 31, 1997 8 8
Capital in excess of par value 82,716 82,162
Retained earnings 2,414 1,581
Cumulative currency translation adjustment (844) (388)
--------- ---------
Total stockholders' equity 84,294 83,363
--------- ---------
Total liabilities and stockholders' equity $ 106,585 $ 103,136
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter ended
-------------
July 31, July 31,
1998 1997
-------- --------
<S> <C> <C>
Revenues $ 51,320 $ 46,884
Cost of revenues 40,835 35,709
-------- --------
Gross profit 10,485 11,175
Selling, general and administrative expenses 9,121 9,630
License and other income(expense) (286) 91
-------- --------
Income before investment and interest income 1,078 1,636
Investment and interest income, net 179 305
-------- --------
Income before income taxes 1,257 1,941
Provision for income taxes 754 792
-------- --------
Net income $ 503 $ 1,149
======== ========
Basic and diluted earnings per common share $ 0.06 $ 0.14
======== ========
Shares used to compute basic earnings per common share 8,400 8,314
======== ========
Shares used to compute diluted earnings per common share 8,406 8,314
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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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,
1998 1997
--------- ---------
<S> <C> <C>
Revenues $ 148,309 $ 142,530
Cost of revenues 122,363 111,638
--------- ---------
Gross profit 25,946 30,892
Selling, general and administrative expenses 23,787 31,109
License and other income (expense) (602) 433
--------- ---------
Income before investment and interest income 1,557 216
Investment and interest income, net 525 568
--------- ---------
Income before income taxes 2,082 784
Provision for income taxes 1,249 329
--------- ---------
Net income $ 833 $ 455
========= =========
Basic and diluted earnings per common share $ 0.10 $ 0.06
========= =========
Shares used to compute basic earnings per common share 8,375 8,247
========= =========
Shares used to compute diluted earnings per common share 8,388 8,247
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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<CAPTION>
Nine months ended
-----------------
July 31, July 31,
1998 1997
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<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 833 $ 455
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,576 3,116
Deferred taxes 45 88
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenues 902 5,551
Other current assets (383) (677)
Other assets 231 434
Accounts payable 1,190 (445)
Accrued salaries and benefits 487 (113)
Other accrued liabilities 969 (163)
Advanced billing on contracts (19) 302
Income taxes payable (109) (14)
-------- --------
Net Cash provided by Operating Activities 6,722 8,534
Cash Flows From Investing Activities
Purchase of marketable securities (11,600) (6,700)
Sale of marketable securities 5,700 5,300
Expenditures for property, plant and equipment (1,287) (1,604)
Sale of property, plant and equipment 599 54
Other 25 (403)
-------- --------
Net Cash used in Investing Activities (6,563) (3,353)
Cash Flows From Financing Activities
Proceeds from sale of stock under employee stock purchase plans 554 1,159
-------- --------
Net Cash provided by Financing Activities 554 1,159
Effect of Exchange Rate Changes on Cash and Cash Equivalents (456) (312)
-------- --------
Net Increase in Cash and Cash Equivalents 257 6,028
Cash and Cash Equivalents at Beginning of Fiscal Year 3,588 2,552
-------- --------
Cash and Cash Equivalents at End of Period $ 3,845 $ 8,580
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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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, 1998, the related
condensed consolidated statements of operations and the related condensed
consolidated statements of cash flows for the quarters and nine months ended
July 31, 1998 and July 31, 1997, 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,
1998 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, 1997 (SEC File No. 0-15067). The results of operations for the
period ended July 31, 1998 are not necessarily indicative of the operating
results for the year.
NOTE 2. Earnings Per Share
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
information included in the accompanying financial statements. The Company has
adopted SFAS No. 128 for fiscal year 1998 and has restated earnings per share
information for fiscal year 1997 accordingly. The effect of dilutive securities
was immaterial for fiscal years 1998 and 1997.
NOTE 3. Taxes
Income tax payments, net of refunds were $995,000 and $44,000 for the nine
month periods ended July 31, 1998 and 1997, respectively. The provision for
income taxes was 60.0% for the nine months ended July 31, 1998. The Company's
effective tax rate of 60% for the nine months ended July 31, 1998 reflects the
Company's best estimate of the effective tax rate for the full fiscal year. The
effective tax rate for the full fiscal year will be negatively impacted by the
effect of a non-benefitable loss on the sale of the Company's Canadian
subsidiary and an increase in the valuation allowance recorded on foreign
operating losses.
NOTE 4. Sale of Assets
During the nine months ended July 31, 1998 the Company recorded a loss on
the sale of it's Wichita Kansas laboratory building of approximately $500,000.
Also during this period the Company completed the sale of its Canadian
subsidiary to Conor Pacific Environmental Technologies, Inc. The sale of this
subsidiary resulted in a loss of approximately $200,000. These losses were
offset by a gain of approximately $200,000 associated with the sale of the
Company's Australian laboratory assets.
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FLUOR DANIEL GTI, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Results for the Quarter Ended July 31, 1998
Results for the quarter ended July 31, 1998 were $51.3 million, an
increase of 9.4% compared to revenues of $46.9 million for the same period last
year. The Company experienced continued competition within all assessment and
remediation markets.
Gross profit for the quarter ended July 31, 1998 was $10.5 million, a
decrease of 6.3% compared to $11.2 million for the same quarter last year. As a
percentage of revenues, gross profit for the quarter ended July 31, 1998 was
20.4% compared to 23.8% for the same period last year. Gross profit decreased by
approximately $1.7 million for direct project expenses that in the previous
fiscal year were included in selling, general and administrative expenses. Prior
year amounts have not been reclassified. If the prior year were to be
reclassified, gross profit for the three months ended July 31, 1997 would have
been reduced by approximately $1.4 million of additional direct project expense.
As a percentage of revenues, if prior year amounts had been reclassified, gross
profit would have been 20.9%. The Company's gross profit continues to be
impacted by pricing pressure for services performed which continues to push
profit margins down.
Selling, general and administrative expenses for the quarter ended July 31,
1998 were $9.1 million, or 17.7% of revenues, compared to $9.6 million, or 20.5%
of revenues. This represents a decrease of $500,000 in selling, general and
administrative expenses for the three months ended July 31, 1998 compared to the
same period last year. As noted above, direct project expense totaling $1.4
million were included as part of selling, general and administrative expenses in
the fiscal year 1997, but have been reclassified to cost of revenues in fiscal
1998. As a percentage of revenues, if prior year amounts had been reclassified,
selling, general and administrative expenses would have been 17.5%.
License and other expense for the quarter ended July 31,1998 was $286,000
compared to income of $91,000 for the same period last year. During the third
quarter of this year, the Company recorded a loss on the sale of it's Wichita
Kansas laboratory building of approximately $500,000. This loss was offset by a
gain of approximately $200,000 associated with the sale of the Company's
Australian laboratory assets.
Investment and other income, net, was $179,000 for the quarter ended July
31, 1998 compared to $305,000 for the same period of the prior year. The
decrease is due to a reclassification in fiscal year 1998 of accounts related to
gain/(loss) on sale of fixed assets formerly grouped as part of Investment and
other income, now recorded grouped in License and other income (expense). The
amount of the reclassification for the quarter ended July 31, 1998 was
approximately $165,000. If prior year amounts had been restated Investment and
other income, net, for the quarter ended July 31, 1997 would have been $169,000.
The provision for income taxes was 60.0% for the quarter ended July 31,
1998 and 40.8% for the comparable period last year. The Company's effective tax
rate of 60% for the three months ended July 31, 1998 reflects the Company's best
estimate of the effective tax rate for the full fiscal year. The effective tax
rate for the full fiscal year will be negatively impacted by the effect of a
non-benefitable loss on the sale of the Company's Canadian subsidiary and an
increase in the valuation allowance recorded on foreign operating losses.
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Results for the Nine Months Ended July 31, 1998
Results for the nine months ended July 31, 1998 were $148.3 million, an
increase of 4.0% compared to revenues of $142.5 million for the same period last
year. The Company experienced continued competition within all assessment and
remediation markets.
Gross profit for the nine months ended July 31, 1998 was $25.9 million, a
decrease of 16.2% compared to $30.9 million for the same period last year. As a
percentage of revenues, gross profit for the nine months ended July 31, 1998 was
17.5% compared to 21.7%. Included in cost of revenues is approximately $5.6
million of direct project expenses that in the previous fiscal year were
included in selling, general and administrative expenses. Prior year amounts
have not been reclassified. If the prior year were to be reclassified, gross
profit for the nine months ended July 31, 1997 would have been reduced by
approximately $4.3 million of additional direct project expense. As a percentage
of revenues, if prior year amounts had been reclassified, gross profit would
have been 18.7%. The Company's gross profit continues to be impacted by pricing
pressure for services performed which continues to push profit margins down.
Selling, general and administrative expenses for the nine months ended
July 31, 1998 were $23.8 million, or 16.0% of revenues, compared to $31.1
million, or 21.8% of revenues. The decrease of $7.3 million in selling, general
and administrative expenses for the nine months ended July 31, 1998 compared to
the same period last year can be attributed to several factors. During the
second quarter of fiscal 1997, the company incurred a charge of $583,000 related
to government proposal costs as well as a charge of $830,000 for payroll and
benefits related to an overhead cost reduction plan. Additionally, as noted
above, direct project expenses of $5.6 million were included as part of selling,
general and administrative expenses in the fiscal year 1997, but have been
reclassified to cost of revenues in fiscal 1998. As a percentage of revenues, if
prior year amounts had been reclassified, selling, general and administrative
expenses would have been 18.8%.
License and other expense for the nine months ended July 31, 1998 was
$602,000 in expense compared to income of $433,000 for the same period last
year. The expense in fiscal 1998 resulted from the write off of $406,000 in
uncollectible advances made to the acquiring company of Fluor Daniel GTI's
analytical laboratory business. In addition, during the third quarter of this
year, the Company recorded a loss on the sale of it's Wichita Kansas laboratory
building of approximately $500,000. These losses were offset by a gain of
approximately $200,000 associated with the sale of the Company's Australian
laboratory assets.
Investment and other income, net, was $525,000 for the nine months ended
July 31, 1998 compared to $568,000 for the same period of the prior year.
Investment and other income experienced an increase is due to interest earned on
the Company's marketable securities portfolio and cash and cash equivalents as
well as smaller losses in equity investments than were experienced in the prior
fiscal year. However this increase is offset by the reclassification in fiscal
year 1998 of accounts related to gain/(loss) on sale of fixed assets formerly
grouped as part of Investment and other income, now recorded grouped in License
and other income (expense). The amount of the reclassification for the nine
months ended July 31, 1998 was approximately $110,000. If prior year amounts had
been restated Investment and other income, net, for the quarter ended July 31,
1997 would have been $456,000.
The provision for income taxes was 60.0% for the nine months ended July
31, 1998 and 42.0% for the comparable period last year. The Company's effective
tax rate of 60% for the nine months ended July 31, 1998 reflects the Company's
best estimate of the effective tax rate for the full fiscal year. The effective
tax rate for the full fiscal year will be negatively impacted by the effect of a
non-benefitable loss on the sale of the Company's Canadian subsidiary and an
increase in the valuation allowance recorded on foreign operating losses.
The Company's operating results may fluctuate from quarter to quarter.
Factors influencing such variations include: spending decisions by major
customers, delays in the release of committed projects, modifications of the
delivery orders issued by contracting government entities, and holidays and
vacation time which limit the amount of time Company personnel and subcontracted
services have in the field.
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<PAGE> 11
The Company ended the nine month period with 55 consulting offices in 32
states and 3 foreign countries. Total employees as of July 31, 1998 were 1,110
as compared to 1,193 for the same period last year.
Liquidity and Capital Resources
At July 31, 1998, the Company's primary source of liquidity was $17.1
million in cash, cash equivalents and marketable securities. The Company has no
long-term borrowings. At July 31, 1998, 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 $6.7 million in net cash for the nine months
ended July 31, 1998. At July 31, 1998, the Company's working capital was $62.9
million. Total assets were $106.6 million at the end of the same period.
Cash flows from investing activities were impacted by approximately
$1,287,000 of expenditures in property, plant and equipment that were made to
upgrade the Company's computer equipment. The Company had no material
commitments for capital expenditures as of July 31, 1998 and estimates spending
for the next three months to be approximately $425,000.
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 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, 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.
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FLUOR DANIEL GTI, INC.
PART II
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Under the Company's Bylaws, a stockholder who wishes to propose
business for consideration at the Annual Meeting or to nominate persons
for election to the Board of Directors must deliver to the Company
between December 29, 1998 and January 13, 1999, the information specified
in the Company's Bylaws regarding such proposal or nomination. Under the
SEC's Rule 14a-4, as recently amended, the Company may exercise
discretionary voting authority under proxies it solicits to vote on a
proposal made by a stockholder that the stockholder does not seek to
include in the Company's proxy statement pursuant to Rule 14a-8, unless
the Company is notified about the proposal between December 29, 1998,
and January 13, 1999, and the stockholder satisfies the other requirement
to Rule 14a-4(c). Separately, under the SEC Rule 14a-8, a stockholder
wishing to submit a proposal that qualifies for inclusion in the
Company's proxy statement must submit his or her proposal to the Company
before October 31, 1998, and must satisfy the other requirements of SEC
Rule 14a-8.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
a) Reports on Form 8-K
None
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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 14, 1998 /s/ Walter C. Barber
-------------------------- --------------------------
Walter C. Barber
President and Chief Executive Officer
Date: September 14, 1998 /s/ Mary C. Stack
-------------------------- --------------------------
Mary C. Stack
Vice President, Treasurer and
Chief Accounting Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-START> Nov-01-1997
<PERIOD-END> Jul-31-1998
<CASH> 3,845
<SECURITIES> 13,295
<RECEIVABLES> 42,922
<ALLOWANCES> 2,318
<INVENTORY> 0
<CURRENT-ASSETS> 85,144
<PP&E> 5,225
<DEPRECIATION> 0
<TOTAL-ASSETS> 106,585
<CURRENT-LIABILITIES> 22,291
<BONDS> 0
8
0
<COMMON> 0
<OTHER-SE> 84,286
<TOTAL-LIABILITY-AND-EQUITY> 106,585
<SALES> 148,309
<TOTAL-REVENUES> 148,309
<CGS> 122,363
<TOTAL-COSTS> 122,363
<OTHER-EXPENSES> 23,787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,082
<INCOME-TAX> 1,249
<INCOME-CONTINUING> 833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 833
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
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