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UNITED STATES
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 JUNE 30, 1995
[ ] 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 NUMBER
1-9812
TENERA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 94-3213541
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2001 Center Street, Berkeley, California 94704-1204
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 845-5200
_________________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Common Stock
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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 [ ]
The number of Shares outstanding on June 30, 1995, was 10,417,345.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) ............................. 1
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ........................... 6
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ............................................ *
Item 2. Changes in Securities ........................................ *
Item 3. Defaults Upon Senior Securities .............................. *
Item 4. Submission of Matters to a Vote of Security Holders .......... 8
Item 5. Other Information ............................................ *
Item 6. Exhibits and Reports on Form 8-K ............................. 8
_____________________
* None.
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i
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TENERA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
___________________________________________________________________________________
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1995 1994 1995 1994
___________________________________________________________________________________
<S> <C> <C> <C> <C>
Revenue .............................. $ 5,664 $ 6,418 $ 11,008 $ 13,497
Direct Costs ......................... 3,265 3,690 6,464 8,002
General and Administrative Expenses .. 2,154 3,021 4,110 5,657
Other Income (Expenses) .............. 2 (2) 9 0
Special Item ......................... 0 500 0 500
--------- --------- --------- ---------
Operating Income ................... 247 205 443 338
Interest Income (Expense) ............ (6) 7 (6) 19
--------- --------- --------- ---------
Net Earnings ......................... $ 241 $ 212 $ 437 $ 357
========= ========= ========= =========
Pro Forma Net Earnings per Share ..... $ 0.02 $ 0.03
========= =========
Weighted Average Number of
Shares Outstanding ................... 9,380 9,451
========= =========
___________________________________________________________________________________
See accompanying notes.
</TABLE>
1
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TENERA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share amounts)
__________________________________________________________________________________________
June 30, December 31,
1995 1994
(Unaudited)
__________________________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents .............................. $ 1,388 $ 1,943
Receivables, less allowances of $2,808 (1994 - $2,897):
Billed ............................................... 3,471 3,448
Unbilled ............................................. 2,345 2,021
Other current assets ................................... 622 681
---------- ----------
Total Current Assets ............................... 7,826 8,093
Property and Equipment, Net .............................. 348 476
Other Assets ............................................. 47 47
---------- ----------
Total Assets ..................................... $ 8,221 $ 8,616
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank loan payable ...................................... $ 0 $ 750
Accounts payable ....................................... 824 1,665
Accrued compensation and related expenses .............. 1,595 1,654
---------- ----------
Total Current Liabilities ........................ 2,419 4,069
Shareholders' Equity
Common Stock, $0.01 par value, 10,417,345 issued and
outstanding ............................................ 104 --
Paid in capital, in excess of par ...................... 5,698 --
Retained earnings ...................................... 0 --
General Partner ........................................ -- 312
Limited Partners' Units issued and
outstanding - 9,108,803 (1994 - 9,351,284) ............. -- 5,376
Treasury Units - 668,117 (1994 - 425,636) .............. -- (1,141)
---------- ----------
Total Shareholders' Equity ......................... 5,802 4,547
---------- ----------
Total Liabilities and Shareholders' Equity ......... $ 8,221 $ 8,616
========== ==========
__________________________________________________________________________________________
See accompanying notes.
</TABLE>
2
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TENERA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except share amounts)
________________________________________________________________________________________________________
Paid In
Capital
In
Common Excess Retained General Limited Treasury
Stock of Par Earnings Partner Partners Units Total
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994................. $ -_ $ -- $ -- $ 312 $ 5,376 $(1,141) $ 4,547
Net Earnings ..................... -- -- -- 4 192 -- 196
-------- -------- -------- -------- -------- -------- --------
March 31, 1995 ................... -- -- -- 316 5,568 (1,141) 4,743
Repurchase of 242,481 Units ...... -- -- -- -- -- (182) (182)
Net Earnings ..................... -- -- -- 5 236 -- 241
Merger of Predecessor
Partnership into TENERA, Inc. .... 93 4,709 -- (321) (5,804) 1,323 0
Common Stock Issued at
$0.89 per Share .................. 11 989 -- -- -- -- 1,000
-------- -------- -------- -------- -------- -------- --------
June 30, 1995 .................... $ 104 $ 5,698 $ 0 $ -- $ -- $ -- $ 5,802
======== ======== ======== ======== ======== ======== ========
________________________________________________________________________________________________________
See accompanying notes.
</TABLE>
3
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TENERA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands)
_____________________________________________________________________________________
Six Months Ended
June 30,
-----------------------
1995 1994
_____________________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ............................................. $ 437 $ 357
Adjustments to reconcile net earnings to cash provided
(used) by operating activities:
Depreciation ........................................... 149 202
Gain on sale of equipment .............................. (7) --
Decrease in allowance for sales adjustments ............ (89) (1,189)
Amortization of Limited Partners' notes ................ -- 4
Changes in assets and liabilities:
Receivables .......................................... (258) (64)
Other current assets ................................. 59 (39)
Other assets ......................................... -- (7)
Accounts payable ..................................... (841) 498
Accrued compensation and related expenses ............ (59) (222)
-------- --------
Net Cash Used By Operating Activities .............. (609) (460)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment ................................. (21) (203)
Proceeds from sale of equipment .......................... 7 7
-------- --------
Net Cash Used in Investing Activities .............. (14) (196)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment under bank loan agreement ...................... (750) --
Net repurchase of Equity ................................. (182) (73)
Issuance of Equity ....................................... 1,000 --
-------- --------
Net Cash Provided (Used) by Financing Activities ... 68 (73)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS .................. (555) (729)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........... 1,943 1,580
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 1,388 $ 851
======== ========
_____________________________________________________________________________________
See accompanying notes.
</TABLE>
4
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TENERA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 AND 1994
(Unaudited)
NOTE 1. ORGANIZATION
TENERA, Inc. (the "Company"), a Delaware corporation, was formed in
connection with the conversion of TENERA, L.P. (the predecessor of the
Company; the "Predecessor Partnership") into corporate form.
On June 30, 1995, the Company completed its conversion to corporate form by
means of a merger (the "Merger") of the Predecessor Partnership, its General
Partner (Teknekron Technology MLP I Corporation) and its Operating Partnership
(TENERA Operating Company, L.P.) with, and into, TENERA, Inc. Pursuant to the
Merger: i) the Company succeeded to the business, assets, and liabilities of
the Predecessor Partnership; ii) each limited partner Unit previously held by
Unitholders in the Predecessor Partnership, (including 184,946 equivalent
Units representing the interest in the Partnership of the General Partner),
automatically converted to one share of Common Stock of TENERA, Inc.; and iii)
an additional 1,123,596 shares of Common Stock were issued to the sole
shareholder of the General Partner in consideration of the contribution of
$1,000,000 made to TENERA, Inc. by the General Partner in connection with the
Merger. The Merger was approved by the Unitholders of the Predecessor
Partnership pursuant to the Consent Solicitation Statement/Prospectus dated
June 6, 1995, included in the Company's Registration Statement on Form S-4
(Registration Number 33-58393; the "Form S-4").
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying consolidated financial statements
have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position at June 30, 1995 and the
results of operations and cash flows at June 30, 1995 and 1994, have been
made. For further information refer to the financial statements and notes
thereto contained in the Form S-4.
Income Taxes. As a result of the Company's conversion from partnership to
corporate form after the close of business on June 30, 1995, the Company is no
longer subject to partnership tax treatment where the Company pays no tax
itself on Company earnings. Accordingly, the Company became a C Corporation
subject to federal and state statutory income tax rates for income earned
after the close of business on June 30, 1995. No provision for income taxes
has been made by the Company for the three and six months ended June 30, 1995.
Per Share Information. In accordance with financial reporting guidelines,
historical earnings per share information is deleted from the face of the
historical income statements because this data is not indicative of the
ongoing Company's change in tax treatment. Pro forma per share data for the
most recent year and interim period is shown. Pro forma per share data
assumes the Company is taxed for federal and state income tax purposes as a C
Corporation at a 40% effective tax rate, and is computed on the basis of:
weighted average of shares of Common Stock and Common Stock Equivalents
outstanding during each period, and is adjusted for the assumed conversion of
shares issuable upon exercise of options, after the assumed repurchase of
common shares with the related proceeds.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
TENERA, INC.
RESULTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________
Percent Percent
Increase Increase
(Decrease) (Decrease)
from from
Prior Prior
Percent of Revenue Year Percent of Revenue Year
---------------------- ---------- ---------------------- ----------
Quarter Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1995 1994 1995 1994
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Revenue .............................. 100.0% 100.0% (11.8)% 100.0% 100.0% (18.4)%
Direct Costs ......................... 57.6 57.5 (11.5) 58.7 59.3 (19.2)
General and Administrative Expenses .. 38.0 47.1 (28.7) 37.3 41.9 (27.3)
Other Income ......................... -- -- -- 0.1 -- --
Special Item ......................... -- 7.8 (100.0) -- 3.7 (100.0)
---------- ---------- ---------- ---------- ---------- ----------
Operating Income ................... 4.4 3.2 20.5 4.1 2.5 31.1
Interest Income ...................... (0.1) 0.1 (185.7) 0.1 0.1 (131.6)
---------- ---------- ---------- ---------- ---------- ----------
Net Earnings ......................... 4.3% 3.3% 13.7% 4.0% 2.6% 22.4%
========== ========== ========== ========== ========== ==========
_______________________________________________________________________________________________________________
</TABLE>
RESULTS OF OPERATIONS
Lower revenue in the second quarter and first half of 1995 was offset by
lower direct costs and general and administrative expenses. This resulted in
net earnings of $241,000 in the second quarter of 1995, compared to a
quarterly net loss of $295,000 before the special item in 1994. Likewise, the
Company reported first-half net earnings to $437,000 in 1995, compared to a
loss of $143,000 in 1994 before the special item.
The revenue decrease is primarily a result of significantly reduced overall
technical services sales and staffing throughout the Company compared to 1994.
The number of clients served during the respective quarters, however, remained
relatively constant at 58 in 1995 compared to 59 in 1994. Concentration of
revenue from the government sector decreased slightly to 34% of total revenue
in both the second quarter and first half of 1995 from 38% and 35%,
respectively, in 1994, while software revenue increased slightly to 22% of
total revenue in the second quarter and 20% in the first half of 1995, from
18% in both comparable periods of 1994. Revenue from software license and
maintenance fees rose to $431,000 and $539,000 in the second quarter and first
half of 1995, respectively, from $123,000 and $197,000 in the comparable
periods of 1994, primarily due to the recognition of license fees associated
with certain milestone achievements in the ongoing New York Metropolitan
Transit Authority installation.
6
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Direct costs were lower overall reflecting the reduced revenue levels.
Gross margin contribution from overall project activity remained constant at
approximately 42% during the second quarters of 1995 and 1994, and at
approximately 41% for the first half of each year. These 1995 margins reflect
improved pricing and percentage of completion efforts in software services.
The 1994 margins include a reduction in the second quarter of 1994 of contract
completion and warranty accruals established in 1993, as a result of improved
performance on certain fixed-price projects during the period.
General and administrative expenses decreased by $425,000 in the second
quarter versus 1994, and by $1,538,000 in the first half of 1995 compared to
1994, primarily due to overall reduced staff size, professional services,
facilities, travel and office equipment costs in 1995, partially offset by an
incentive compensation award and costs associated with converting the Company
structure to corporate form in 1995. The pace of these net cost reductions
exceeded the revenue decline resulting in a drop in general and administrative
expenses as a percentage of revenue in the second quarter and first half to
38% and 37%, respectively, from 47% and 42% in comparable periods in 1994.
Other income for the first half of 1995 includes a gain on the sale of
assets related to facility downsizing ($9,000).
Net interest income represents earnings from the investment of cash
balances in short-term, high quality, corporate debt instruments, offset by
interest charges on borrowing under the Company's line of credit. The Company
had no outstanding borrowing under its line of credit at the end of the first
half of 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $555,000 during the first half of
1995. The decrease was due to cash used by operations ($609,000), and net
acquisition of equipment ($14,000), offset by cash provided by financing
activities ($68,000).
Receivables increased by $258,000 from December 31, 1994, primarily due to
a continued increase in quarterly revenue during the first half of 1995
compared to the fourth quarter of 1994. The allowance for sales adjustments
decreased $89,000 from December 31, 1994 due to the write-off of a disputed
outstanding receivable.
Accounts payable and accrued compensation and related expenses decreased by
$900,000 during the period, primarily due to a decrease in overall direct
costs and general and administrative expenses, as well as, the payment of the
Company's 1994 contribution to the 401(k) and Money Purchase Plan. During the
second quarter of 1995, the Company also paid off its outstanding borrowing
under the line of credit ($750,000).
Equity increased by $1,255,000 in the period due to the receipt of
additional capital ($1,000,000) in connection with the Merger and net earnings
during the period ($437,000), partially offset by the repurchase of Units
prior to the Merger ($182,000).
No cash distribution was declared in 1995.
The impact of inflation on revenue and projects of the Company was minimal.
At June 30, 1995, the Company had available $4,500,000 of a $5,000,000
revolving loan facility with a new lender which expires in May 1996. The
Company has no outstanding borrowing against the line, however, $500,000 was
assigned to support standby letters of credit.
Management believes that cash expected to generated by operations, and the
Company's working capital, and its loan facility are adequate to meet its
anticipated liquidity needs through December 31, 1995.
7
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PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Consents of the Unitholders of the Predecessor Partnership to the
conversion of the Company to corporate form (the "Conversion") were solicited
pursuant to the Consent Solicitation Statement/Prospectus dated June 6, 1995,
included in the Company's Registration Statement on Form S-4 (Registration
Number 33-58393). The number of votes cast for the Conversion were 5,413,583,
the number of votes cast against the Conversion were 12,817, and the number of
votes abstaining were 9,428.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
11.0 Statement regarding computation of per share earnings:
See Notes to Consolidated Financial Statements.
(B) REPORTS ON FORM 8-K
None.
SIGNATURES
PURSUANT TO THE REQUIREMENT 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.
TENERA, INC.
Dated: August 11, 1995 By: JEFFREY R. HAZARIAN
------------------------------
Jeffrey R. Hazarian
Chief Financial Officer,
Corporate Secretary, and
Vice President, Finance
8
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EXHIBIT INDEX
Ex. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1995
<PERIOD-END> Jun-30-1995
<CASH> 1,388
<SECURITIES> 0
<RECEIVABLES> 5,816
<ALLOWANCES> 2,808
<INVENTORY> 0
<CURRENT-ASSETS> 7,826
<PP&E> 348
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,221
<CURRENT-LIABILITIES> 2,419
<BONDS> 0
<COMMON> 5,802
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,221
<SALES> 0
<TOTAL-REVENUES> 11,008
<CGS> 0
<TOTAL-COSTS> 6,464
<OTHER-EXPENSES> 4,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 437
<INCOME-TAX> 0
<INCOME-CONTINUING> 437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
