<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 April 30, 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)
Delaware 02-0324047
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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 June 11, 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
PART I FINANCIAL INFORMATION PAGE NUMBER
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
April 30, 1998 (Unaudited) and October 31, 1997 ............. 1-2
Condensed Consolidated Statements of Operations
Quarter ended April 30, 1998 (Unaudited) and
April 30, 1997 (Unaudited)................................... 3
Condensed Consolidated Statements of Operations
Six months ended April 30, 1998 (Unaudited) and
April 30, 1997 (Unaudited)................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended April 30, 1998 (Unaudited) and
April 30, 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 6 Exhibits and Reports on Form 8-K................................. 10
Signatures....................................................... 11
<PAGE> 3
Item 1. Financial Statements
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
April 30, October 31,
Assets 1998 1997
- ------ ----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,132 $ 3,588
Marketable securities 4,695 7,396
Accounts receivable, less allowance of $1,945 at
April 30, 1998 and $2,049 at October 31, 1997 43,992 38,548
Unbilled revenues 20,875 25,567
Deferred income taxes 1,293 1,328
Other current assets 3,343 3,125
-------- --------
Total current assets 86,330 79,552
Deferred income taxes 3,508 3,508
Property, plant and equipment, net 6,285 6,624
Goodwill, net of accumulated amortization of $1,797 at
April 30, 1998 and $1,456 October 31, 1997 11,309 11,654
Other assets 1,648 1,798
-------- --------
Total assets $109,080 $103,136
======== ========
</TABLE>
(Continued on next page.)
-1-
<PAGE> 4
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
April 30, October 31,
Liabilities and Stockholders' Equity 1998 1997
- ------------------------------------ -------- ----------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,845 $ 8,266
Accrued salaries and benefits 6,702 5,553
Advance billings on contracts -- 380
Other accrued liabilities 5,911 5,465
Income taxes payable -- 109
-------- --------
Total current liabilities 25,458 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, 8,373,410 issued and outstanding
at April 30, 1998; 8,323,790 issued and
outstanding at October 31, 1997 8 8
Capital in excess of par value 82,467 82,162
Retained earnings 1,911 1,581
Cumulative currency translation adjustment (764) (388)
-------- --------
Total stockholders' equity 83,622 83,363
-------- --------
Total liabilities and stockholders' equity $109,080 $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
April 30, April 30,
1998 1997
-------- --------
<S> <C> <C>
Revenues $50,042 $48,052
Cost of revenues 42,720 37,588
------- -------
Gross profit 7,322 10,464
Selling, general and administrative expenses 7,255 12,081
License and other income 7 172
------- -------
Income (loss) before investment and interest income 74 (1,445)
Investment and interest income, net 202 174
------- -------
Income (loss) before income taxes 276 (1,271)
Provision (benefit) for income taxes 263 (515)
------- -------
Net income (loss) $ 13 $ (756)
======= =======
Basic and diluted earnings (loss) per common share $ -- $ (.09)
======= =======
Shares used to compute basic earnings (loss) per common share 8,372 8,213
======= =======
Shares used to compute diluted earnings (loss) per common share 8,390 8,213
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 6
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Six months ended
April 30, April 30,
1998 1997
------- -------
<S> <C> <C>
Revenues $96,989 $95,646
Cost of revenues 81,528 75,929
------- -------
Gross profit 15,461 19,717
Selling, general and administrative expenses 14,666 21,479
License and other income (expense) (316) 342
------- -------
Income (loss) before investment and interest income 479 (1,420)
Investment and interest income, net 346 263
------- -------
Income (loss) before income taxes 825 (1,157)
Provision (benefit) for income taxes 495 (463)
------- -------
Net income (loss) $ 330 $ (694)
======= =======
Basic and diluted earnings (loss) per common share $ .04 $ (.08)
======= =======
Shares used to compute basic earnings (loss) per common share 8,364 8,203
======= =======
Shares used to compute diluted earnings (loss) per common share 8,380 8,203
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 7
FLUOR DANIEL GTI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
April 30, April 30,
1998 1997
------- -------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 330 $ (694)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,676 2,210
Deferred taxes 35 86
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenues (752) 669
Other current assets (218) 191
Other assets 126 (50)
Accounts payable 4,579 884
Accrued salaries and benefits 1,149 1,683
Other accrued liabilities 446 (1,032)
Advanced billing on contracts (380) 185
Income taxes payable (109) (101)
------- -------
Net Cash provided by Operating Activities 6,882 4,031
Cash Flows From Investing Activities
Purchase of marketable securities (1,999) (5,701)
Sale of marketable securities 4,700 4,950
Expenditures for property, plant and equipment (986) (1,337)
Sale of property, plant and equipment 133 166
Other 25 (368)
------- -------
Net Cash provided by (used in) Investing Activities 1,873 (2,290)
Cash Flows From Financing Activities
Proceeds from sale of stock under employee
stock purchase plans 305 427
------- -------
Net Cash provided by Financing Activities 305 427
Effect of Exchange Rate Changes on Cash and Cash Equivalents (516) (218)
------- -------
Net Increase in Cash and Cash Equivalents 8,544 1,950
Cash and Cash Equivalents at Beginning of Fiscal Year 3,588 2,552
------- -------
Cash and Cash Equivalents at End of Period $12,132 $ 4,502
======= =======
</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 April 30, 1998, the
related condensed consolidated statements of operations and the related
condensed consolidated statements of cash flows for the quarters and six months
ended April 30, 1998 and April 30, 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 April 30, 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 April 30, 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 presented 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 PAID
Income tax payments, net of refunds were $880,000 and $27,000 for the
six month periods ended April 30, 1998 and 1997, respectively.
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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 April 30, 1998
Results for the quarter ended April 30, 1998 were $50.0 million, an
increase of 4.0% compared to revenues of $48.1 million for the same period last
year. The Company experienced continued competition within all assessment and
remediation markets.
Gross profit for the quarter ended April 30, 1998 was $7.3 million, a
decrease of 30.5% compared to $10.5 million for the same quarter last year. As a
percentage of revenues, gross profit for the quarter ended April 30, 1998 was
14.6% compared to 21.8% for the same period last year. Gross profit decreased by
approximately $2.0 million for direct project expenses that previously 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 April 30, 1997 would have been reduced by
approximately $1.5 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 quarter ended April
30, 1998 were $7.3 million, or 14.6% of revenues, compared to $12.1 million, or
25.1% of revenues. The decrease of $4.8 million in selling, general and
administrative expenses for the three months ended April 30, 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 expense totaling $2.0 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 22%. There were no unusual expenses in
selling, general and administrative during this period.
License and other income was for the quarter ended April 30, 1998 was
$7,000 compared to $172,000 for the same period last year. During the second
quarter of this year, the Company recorded an additional $100,000 in expenses
related to the fiscal 1995 sale of the Company's analytical laboratory business.
Investment and other income, net, was $202,000 for the quarter ended
April 30, 1998 compared to $174,000 for the same period of the prior year. The
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.
The provision for income taxes was 95.3% for the quarter ended April 30,
1998 and a benefit of 40.5% for the comparable period last year. The effective
tax rate for the six months ended April 30, 1998 increased to 60%, causing the
effective tax rate for the three months ended April 30, 1998 to increase to
95.3%. The Company's effective tax rate of 60% for the six months ended April
30, 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 allow and
recorded on foreign operating losses.
-7-
<PAGE> 10
Results for the Six Months Ended April 30, 1998
Results for the six months ended April 30, 1998 were $97.0 million, an
increase of 1.5% compared to revenues of $95.6 million for the same period last
year. The Company experienced continued competition within all assessment and
remediation markets.
Gross profit for the six months ended April 30, 1998 was $15.5 million,
a decrease of 21.3% compared to $19.7 million for the same period last year. As
a percentage of revenues, gross profit for the six months ended April 30, 1998
was 16.0% compared to 20.6%. Gross profit decreased by approximately $4.0
million of direct project expenses that previously 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
six months ended April 30, 1997 would have been reduced by approximately $2.9
million of additional direct project expense. As a percentage of revenues, if
prior year amounts had been reclassified, gross profit would have been 17.6%.
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 six months ended
April 30, 1998 were $14.7 million, or 15.1% of revenues, compared to $21.5
million, or 22.5% of revenues. The decrease of $6.8 million in selling, general
and administrative expenses for the six months ended April 30, 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 $4.0 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 18.3%. There were no unusual expenses in selling,
general and administrative during this period.
License and other income (expense) for the six months ended April 30,
1998 was $316,000 in expense compared to income of $342,000 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 and an additional expense of $100,000 for
expenses related to the sale of GTEL.
Investment and other income, net, was $346,000 for the six months ended
April 30, 1998 compared to $263,000 for the same period of the prior year. The
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.
The provision for income taxes was 60.0% for the six months ended April
30, 1998 and benefit of 40.0% for the comparable period last year. The Company's
effective tax rate of 60% for the six months ended April 30, 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 allow and 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.
The Company ended the six month period with 57 consulting offices in 32
states and 4 foreign countries. Total employees as of April 30, 1998 were 1,142
as compared to 1,252 for the same period last year.
-8-
<PAGE> 11
Liquidity and Capital Resources
At April 30, 1998, the Company's primary source of liquidity was $16.8
million in cash, cash equivalents and marketable securities. The Company has no
long-term borrowings. At April 30, 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 $6.9 million in net cash for the six
months ended April 30, 1998. At April 30, 1998, the Company's working capital
was $60.9 million. Total assets were $109.1 million at the end of the same
period.
Cash flows from investing activities were impacted by approximately
$986,000 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 April 30, 1998 and estimates spending
for the next six months to be approximately $1,200,000.
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.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No 131, "Disclosures about Segments of and
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 established 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. The Company is still
evaluating the impact of this new standard.
-9-
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FLUOR DANIEL GTI, INC.
PART II
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) An Annual Meeting of the Registrant was held on March 17, 1998.
b) Election of Directors - Voting Results
For Against Abstain No-Vote
Walter C. Barber 6,269,662 69,204
Allan S. Bufferd 6,331,878 6,988
J. Michal Conaway 6,270,868 67,998
Ernie Green 6,271,783 67,083
David L. Myers 6,270,825 68,041
Ronald G. Peterson 6,271,086 67,780
c) Matters Voted Upon.
Selection of Auditors
Ernst & Young LLP 6,334,084 1,723 3,059
d) None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
None
-10-
<PAGE> 13
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: June 15, 1998 /s/ Walter C. Barber
------------- --------------------
Walter C. Barber
President and Chief Executive
Officer
Date: June 15, 1998 /s/ Mary C. Stack
------------- -----------------------------
Mary C. Stack
Vice President, Treasurer and
Chief Accounting Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 12,132
<SECURITIES> 4,695
<RECEIVABLES> 43,992
<ALLOWANCES> (1,945)
<INVENTORY> 0
<CURRENT-ASSETS> 86,330
<PP&E> 6,285
<DEPRECIATION> 0
<TOTAL-ASSETS> 109,080
<CURRENT-LIABILITIES> 25,458
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 83,614
<TOTAL-LIABILITY-AND-EQUITY> 109,080
<SALES> 96,989
<TOTAL-REVENUES> 96,989
<CGS> 81,528
<TOTAL-COSTS> 81,528
<OTHER-EXPENSES> 14,666
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 825
<INCOME-TAX> 495
<INCOME-CONTINUING> 330
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
