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 November 30, 1999 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 0-16169
HARDING LAWSON ASSOCIATES GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 68-0132062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 17th Street, Suite 2400
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 293-6100
Indicate by check mark whether the registrant (1) has filed all reports required
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 |_|
At December 30, 1999, the registrant had issued and outstanding an aggregate of
5,004,328 shares of its common stock.
<PAGE>
INDEX
HARDING LAWSON ASSOCIATES GROUP, INC.
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
November 30, 1999 (Unaudited) and May 31, 1999....................3
Condensed Consolidated Statements of Income -
Three and Six Months Ended November 30, 1999
and November 30, 1998 (Unaudited).................................4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended November 30, 1999 and
November 30, 1998 (Unaudited).....................................5
Notes to Condensed Consolidated Financial Statements
November 30, 1999 (Unaudited).....................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..............13
Item 6. Exhibits and Reports on Form 8-K.................................14
SIGNATURES...................................................................15
INDEX TO EXHIBITS............................................................16
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
November 30, 1999 May 31, 1999
- ----------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $16,250 $17,108
Investments - rabbi trust 2,849 3,629
Accounts receivable 35,943 30,443
Unbilled work in progress 9,535 15,685
Less allowances for receivables and unbilled work (2,797) (2,464)
Prepaid expenses 1,379 1,282
Deferred income taxes 3,139 5,017
- ----------------------------------------------------------------------------------------------------------------
Total current assets 66,298 70,700
- ----------------------------------------------------------------------------------------------------------------
Equipment 26,934 27,947
Less accumulated depreciation (21,873) (22,056)
- ----------------------------------------------------------------------------------------------------------------
Net equipment 5,061 5,891
- ----------------------------------------------------------------------------------------------------------------
Deposits and other assets 10,189 10,550
- ----------------------------------------------------------------------------------------------------------------
Total assets $81,548 $87,141
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,841 $9,290
Accrued expenses 5,608 10,558
Accrued compensation 6,784 7,967
Deferred compensation - rabbi trust 3,354 4,236
Billings in excess of costs and estimated earnings
on uncompleted contracts 5,141 4,558
Income taxes payable 416 1,394
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 29,144 38,003
- ----------------------------------------------------------------------------------------------------------------
Other liabilities 1,388 1,635
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 30,532 39,638
- ----------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Minority interest in subsidiaries 48
- ----------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, $0.01 par value;
authorized 1,000,000 shares; none issued
and outstanding
Common stock, $0.01 par value; authorized 10,000,000 shares; issued
5,076,370 and 4,963,336 at November 30, 1999 and May 31, 1999,
respectively 51 50
Additional paid-in capital 18,869 18,066
Stockholder note receivable (243) (243)
Rabbi trust shares, 72,042 and 70,354 at November
30, 1999 and May 31, 1999, respectively (564) (607)
Retained earnings 32,903 30,189
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 51,016 47,455
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $81,548 $87,141
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
November 30, November 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross revenue $46,060 $40,697 $87,755 $80,140
Less: Cost of outside services 15,948 13,900 29,704 25,662
- ----------------------------------------------------------------------------------------------------------------
Net revenue 30,112 26,797 58,051 54,478
- -------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Payroll and benefits 20,737 18,690 40,148 37,623
General expenses 6,715 7,987 13,390 15,089
- -------------------------------------------------------------------------------------------------------------------
Total costs and expenses 27,452 26,677 53,538 52,712
- -------------------------------------------------------------------------------------------------------------------
Operating income 2,660 120 4,513 1,766
Interest income, net 102 106 214 219
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes
and minority interest 2,762 226 4,727 1,985
Provision for income taxes 1,193 96 2,000 836
Minority interest (9) 8 (3)
- -------------------------------------------------------------------------------------------------------------------
Net income $1,569 $139 $2,719 $1,152
===================================================================================================================
Basic net income per share $0.31 $0.03 $0.55 $0.24
===================================================================================================================
Shares used in computing basic net
income per share 4,998 4,835 4,975 4,859
===================================================================================================================
Diluted net income per share $0.30 $0.03 $0.53 $0.23
===================================================================================================================
Shares used in computing diluted net
income per share 5,163 4,854 5,152 4,920
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended November 30,
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $2,719 $1,152
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,608 1,641
Net decrease (increase) in current assets 1,853 (173)
Net increase (decrease) in current liabilities (6,432) 1,358
Other, net (597) (3)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (849) 3,975
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of equipment, net (1,297) (1,127)
Sale of Australian operations 484
Investment in acquisition (184)
- -----------------------------------------------------------------------------------------------------------
Net cash used in investment activities (813) (1,311)
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from sale of stock 804 201
Repurchase of common stock (2,702)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 804 (2,501)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (858) 163
Cash and cash equivalents at beginning of period 17,108 15,118
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $16,250 $15,281
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
November 30, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
without audit by Harding Lawson Associates Group, Inc. (the "Company") in
accordance with generally accepted accounting principles for interim financial
statements and pursuant to the rules of the Securities and Exchange Commission
for Form 10-Q. Certain information and footnotes required by generally accepted
accounting principles for complete financial statements have been omitted. It is
the opinion of management that all adjustments considered necessary for a fair
presentation have been included, and that all such adjustments are of a normal
and recurring nature. For further information, refer to the audited financial
statements and footnotes included in the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1999. Reclassification of certain balances
from the prior fiscal year have been made to conform to the November 30, 1999
presentation.
NOTE 2: COMMITMENTS AND CONTINGENCIES
The Company is currently subject to certain claims and lawsuits arising in the
ordinary course of its business. In the opinion of management, adequate
provision has been made for all known liabilities that are currently expected to
result from these claims and lawsuits, and in the aggregate such claims are not
expected to have a material effect on the financial position of the Company. The
estimates used in establishing these provisions could differ from actual
results. Should these estimates change significantly, the effect on operations
for any quarterly or annual reporting period could be material.
NOTE 3: COMPREHENSIVE INCOME
Comprehensive income (in thousands) for the six months ending November 30 is as
follows:
- --------------------------------------------------------------------------------
Six Months Ending November 30,
1999 1998
- --------------------------------------------------------------------------------
Net income $2,719 $1,152
Foreign currency translation adjustment (5) (20)
- --------------------------------------------------------------------------------
Comprehensive income $2,714 $1,132
- --------------------------------------------------------------------------------
6
<PAGE>
NOTE 4: RESTRUCTURING CHARGES
During May, 1999, the Company recorded charges of $4,383,000 for i) anticipated
losses associated with the planned disposal of its investments in its Australian
and Mexican operations; such investments were written down to their anticipated
net realizable value, ii) severance and other costs associated with the
corporate reorganization and corporate office relocation, and iii) the writedown
of goodwill associated with the Company's acquisition of EEC Environmental, Inc.
in 1993. As of November 30, 1999 and May 31, 1999 the accompanying consolidated
financial statements reflect $787,000 and $2,768,000 in accrued expenses,
respectively, in connection with the restructuring charges. The remaining
accrued expenses at November 30, 1999 primarily relate to severance benefits
that will be paid subsequent to November 30, 1999.
NOTE 5: SEGMENT INFORMATION
The Company has determined that the services provided by the Company represent
one reportable segment. At the end of fiscal 1999, the Company formally merged
its primary domestic operating divisions into a single operating Company. The
table below presents information (in thousands) about net revenue from external
customers attributable to the Company's country of domicile and attributable to
all foreign countries. The method for attributing net revenues from particular
countries is based on the location where the service was provided. The Company's
foreign operations have been mainly in Australia, which were sold during the
second quarter of fiscal 2000, and Mexico, which discontinued operations during
fiscal 1999.
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
November 30, November 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
United States $29,680 $25,823 $56,301 $52,353
Australia/Mexico 432 974 1,750 2,125
- --------------------------------------------------------------------------------
Company Total $30,112 $26,797 $58,051 $54,478
- --------------------------------------------------------------------------------
The table below presents information about total assets attributable to the
Company's country of domicile and attributable to all foreign countries (in
thousands):
- --------------------------------------------------------------------------------
November 30, May 31,
1999 1999
- --------------------------------------------------------------------------------
United States $81,548 $86,691
Australia 450
- --------------------------------------------------------------------------------
Company Total $81,548 $87,141
- --------------------------------------------------------------------------------
The amounts included for net revenue and total assets are based on the financial
information used to produce these financial statements.
7
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
- ---------------------------------------------------------
The statements in this report that are forward-looking are based on current
expectations, and actual results may differ materially. The forward-looking
statements include those regarding the level of future purchases of fixed
assets, the possible impact of current and future claims against the Company
based upon negligence and other theories of liability, and the possibility of
the Company making acquisitions during the next 12 to 18 months. Forward-looking
statements involve numerous risks and uncertainties that could cause actual
results to differ materially, including, but not limited to, the possibilities
that the demand for the Company's services may decline as a result of possible
changes in general and industry specific economic conditions and the effects of
competitive services and pricing; one or more current or future claims made
against the Company may result in substantial liabilities; and such other risks
and uncertainties as are described in reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission.
Results of Operations
- ---------------------
(In thousands, except per share data)
The following table sets forth for the periods indicated, (i) the percentage
that certain items in the condensed consolidated income statements of the
Company bear to net revenues, and (ii) the percentage increase (decrease) in
dollar amount of such items from year to year.
<TABLE>
<CAPTION>
Percentage of Net Revenue Percentage
Three Months Ended Six Months Ended Increase (Decrease)
November 30, November 30, November 30,
Three Months Six Months
1999 1998 1999 1998 1999 vs. 1998 1999 vs. 1998
---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0% 12.4% 6.6%
Costs and expenses
Payroll and benefits 68.9 69.8 69.1 69.1 11.0 6.7
General expenses 22.3 29.8 23.1 27.7 (15.9) (11.3)
Operating income/margin 8.8 0.4 7.8 3.2 2,116.7 155.5
Interest income, net 0.3 0.4 0.3 0.4 (3.8) (2.3)
Income before income taxes
and minority interest 9.1 0.8 8.1 3.6 1,122.1 138.1
Provision for income taxes
and minority interest 3.9 0.3 3.4 1.5 1,271.3 141.1
Net income 5.2 0.5 4.7 2.1 1,028.8 136.0
</TABLE>
Second Quarter Comparison for Fiscal Years 2000 and 1999
- --------------------------------------------------------
Net revenue for the fiscal quarter ended November 30, 1999 totaled $30,112, an
increase of 12.4% from net revenue of $26,797 for the comparable quarter in the
prior fiscal year. The increase in net revenue for the quarter ended November
30, 1999 was attributable to a 58% increase in net revenue from state and local
government contracts and a 9% increase in net revenue from domestic industrial
clients, partially offset by a 56% decrease in net revenue from international
operations, primarily due to the sale of the Australian operations during the
second quarter of fiscal year 2000. Net revenue from domestic industrial clients
accounted for 49% of total net revenue for the current fiscal quarter
8
<PAGE>
compared to 51% for the prior fiscal quarter. Net revenue from federal
government contracts accounted for 25% of total net revenue for the current
fiscal quarter compared to 28% in the prior fiscal quarter. Net revenue from
state and local government contracts was 24% of total net revenue for the
current fiscal quarter compared to 17% for the prior fiscal quarter. Net revenue
from international operations was 2% of total net revenue for the current fiscal
quarter compared to 4% in the prior fiscal quarter. The increase in net revenues
during the current fiscal quarter is partially due to one additional week in the
accounting period compared to the prior fiscal quarter. During the second
quarter of fiscal 2000, the Company also generated more chargeable hours than in
the prior fiscal quarter. This positive impact on revenue was partially offset
by the Company obtaining a lower rate per hour for services provided.
A significant portion of the services provided by the Company to its public
sector clients are performed under a relatively small number of larger contracts
compared to private sector clients. Similar to situations that have occurred in
the past few years, some of these public sector contracts will be substantially
completed during the current fiscal year. The Company has been awarded certain
contracts that potentially could offset revenue that will be lost under nearly
completed contracts. However, if the Company is unsuccessful in realizing the
full potential of these contracts or winning new contracts, or if funding delays
are experienced on previously awarded federal contracts, a material decline in
revenue could result.
Operating income for the second quarter of fiscal 2000 was $2,660, an increase
of 2,116.7% from $120 for the same period in fiscal 1999. Operating margin
increased to 8.8% of net revenue in the current quarter compared to 0.4% in the
second quarter of fiscal 1999. The increase in operating income resulted from
increased sales volume and the favorable impact of the Company's restructuring
which has resulted in reduced operating costs. In addition, during the second
quarter of the prior fiscal year, approximately $700 in charges were incurred
for severance and recruiting expenses associated with the Company's change in
its chief executive officer and the write-down of certain excess office leases.
The effective tax rate was 43.2% for the second quarter of fiscal 2000 and was
42.5% in the second quarter of the prior year.
Net income for the quarter was $1,569 compared with $139 in the second quarter
of 1999, an increase of 1,028.8%. Basic earnings per share were $0.31 on 4,998
basic weighted average shares outstanding compared to $0.03 per share on 4,835
basic weighted average shares outstanding in the same period last year. Diluted
earnings per share were $0.30 on 5,163 diluted weighted average shares
outstanding compared to $0.03 per share on 4,854 diluted weighted average shares
outstanding in the same period last year.
Six Month Comparison for Fiscal Years 2000 and 1999
- ---------------------------------------------------
Net revenue for the six months ended November 30, 1999 was $58,051, an increase
of 6.6% from net revenue of $54,478 for the six months ended November 30, 1998.
The increase in net revenue during fiscal 2000 was attributable to a 57%
increase in net revenue from state and local government contracts and a 4%
increase in net revenue from domestic industrial clients, partially offset by a
13% decrease in net revenue from federal contracts and a 18% decrease in net
revenue from international operations, primarily due to the sale of the
Australian operations during the second quarter of fiscal year 2000. Net revenue
from domestic industrial clients accounted for 49% of total net revenue for the
current fiscal year compared to 50% for the prior fiscal year. Net revenue from
federal government contracts accounted for 24% of total net revenue for the
current fiscal year compared to 30% in the prior fiscal year. Net revenue from
state and local government contracts was 24% of total net revenue for the
current fiscal quarter compared to 16% for the prior fiscal quarter. Net revenue
from international operations was 3% of total net revenue for the current fiscal
year compared to 4% in the prior fiscal quarter. The increase in net revenues
during the current fiscal year is partially due to one additional week in the
accounting period compared to the prior fiscal year. During the first six months
of fiscal 2000, the Company also generated more chargeable hours than in the
prior year. This positive impact on revenue was partially offset by the Company
obtaining a lower rate per hour for services provided.
Operating income was $4,513, an increase of 155.5% from operating income of
$1,766 for the first six months of the prior year. The operating margin
increased to 7.8% from 3.2% a year ago. The increase in operating income was due
to increased sales volume and the Company's restructuring which has
9
<PAGE>
resulted in reduced operating expenses. In addition, during the second quarter
of the prior fiscal year, approximately $700 in charges were incurred for
severance and recruiting expenses associated with the Company's change in its
chief executive officer and the write-down of certain excess office leases.
The effective tax rate for the six months ended November 30, 1999 was 42.3%, and
for the six months ended November 30, 1998 was 42.1%.
Net income for the six months was $2,719, a 136.0% increase from net income of
$1,152 for the six month period in the prior year. Basic earnings per share were
$0.55 on 4,975 weighted average basic shares outstanding compared to $0.24 on
4,859 weighted average basic shares outstanding in the first six month period of
the prior year. Diluted earnings per share were $0.53 on 5,152 weighted average
diluted shares outstanding compared to $0.23 per share on 4,920 weighted average
diluted shares outstanding in the same period last year.
Liquidity and Capital Resources
- -------------------------------
For the six months ended November 30, 1999, net cash used in operations was $849
compared to cash provided by operations of $3,975 for the same period last year.
The decrease in cash provided by operations was due primarily to increased
payments of the Company's payables and accrued liabilities, including those
related to the Company's restructuring costs. This decrease is cash was
partially offset by improved collections of the Company's receivables compared
to the prior year.
The Company made net capital expenditures of $1,297 in the first six months of
fiscal 2000 compared to capital expenditures of $1,127 in the first six months
of the prior year. The Company anticipates that its capital expenditures,
excluding acquisitions, for the current fiscal year will be approximately the
same as those incurred in the prior fiscal year.
On March 7, 1996 the Board of Directors of the Company approved a Common Stock
Repurchase Program ("1996 Program") that authorized the Company to purchase up
to a maximum of 500,000 shares of stock on the open market for the purpose of
funding the Company's various employee stock programs. The Company repurchased
310,000 shares during the first six months of fiscal 1999 at an average price of
$8.72. No shares were repurchased during the same period of fiscal 2000. There
are 4,500 shares that remain available to be repurchased under the 1996 Program.
On September 25, 1998, the Board authorized management to repurchase up to
500,000 shares over four years.
The Company is a consulting engineering services firm engaged in providing
environmental, infrastructure, geotechnical and construction related services,
and encounters potential liability including claims for errors and omissions
resulting from construction defects, construction cost overruns, environmental
or other damage in the normal course of business. The Company is party to
lawsuits and is aware of potential exposure related to certain claims. In the
opinion of management, adequate provision has been made for all known
liabilities that are currently expected to result from these matters, and in the
aggregate, such claims are not expected to have a material impact on the
financial position and liquidity of the Company. The Company maintains a
contractor's operations and professional services insurance policy as well as a
general liability insurance policy through an unrelated, rated carrier.
At November 30, 1999 the Company had cash on hand and cash equivalents of
$16,250. The Company has a $20 million revolving credit line agreement that
expires in November 2000. At November 30, 1999 and 1998, the Company had no
borrowings outstanding under its line of credit. Borrowings were available to
the Company at an interest rate of 7.9% at November 30, 1999. The Company
believes it is in compliance with all covenants pertaining to the credit line
agreement.
The Company believes that its available cash and cash equivalents, as well as
cash generated from operations and its available credit line, will be sufficient
to meet the Company's cash requirements for the balance of the fiscal year.
During the remainder of fiscal 2000 the Company intends to actively continue its
search for acquisitions to expand its geographical representation and enhance
its technical
10
<PAGE>
capabilities. The Company expects to utilize a portion of its liquidity over the
next 12 to 18 months for capital expenditures, including acquisitions. There can
be no assurances that the Company will be able to identify suitable acquisition
candidates, and if such are identified, that the Company will be able to
successfully negotiate and consummate a transaction.
Year 2000 Compliance
- --------------------
Overview
- --------
Computer systems and software have historically been coded to accept only two
digit entries for the year. If computers cannot properly distinguish between the
years 1900 and 2000, computers may shut down or perform incorrect calculations.
Scope & Status
- --------------
In late 1997, the Company established a Year 2000 Project Team ("Project Team").
The Project Team was established to address the following key components related
to the Year 2000 issue:
o Information applications, including the Company's project management and
accounting systems
o Computer hardware, software, operating systems and network infrastructure
including telecommunications systems
o Facility and administrative systems
o Digital systems and devices with embedded processors installed on client
projects
o Major suppliers and customers' systems
Prior to December 31, 1999, the Company completed the upgrade and testing of its
major information technology system (a project management and accounting
system). This version of the third party business application is warranted as
Year 2000 compliant.
In addition, the Company completed an inventory and assessment of its hardware,
software, operating systems, network infrastructure, facility and administrative
systems (such as telephone, security systems, etc.) for Year 2000 compliance
with upgrades made as appropriate. The Company considers risks in these areas to
be minimal. Contingency plans are in place where necessary.
Also, prior to December 31, 1999, the Company completed an analysis of its
vendors and suppliers to determine potential areas of risk with regard to their
failure to achieve Year 2000 compliance. Written requests were sent to
appropriate vendors and suppliers to determine their Year 2000 readiness. The
Company inventoried software and equipment supplied by vendors under contracts
or relationships with the Company's clients. Contingency plans are in place as
appropriate to address any potential supply problems.
At this time the Company has not identified any significant problems associated
with Year 2000 compliance; however, the Company will continue to monitor its
information applications, its hardware and software systems as well as vendors
and suppliers' systems for compliance.
Costs
- -----
The costs associated with Year 2000 compliance have not been material and
generally fall within normally anticipated operating and capital spending.
Although the Company does not currently anticipate additional material costs for
Year 2000 compliance, it cannot ensure Year 2000 compliance by third parties.
11
<PAGE>
Risks
- -----
The upgrade of the Company's project management and accounting systems to a Year
2000 compliant version mitigates the risk that the Company is unable to maintain
accurate client records and billings. The Company's efforts to evaluate and
remediate software and equipment supplied to its clients have mitigated
potential interruption in services provided by such clients; however, there can
be no assurance nonetheless that such mitigation will be effective to avoid such
service interruptions.
The Company cannot predict with accuracy the extent to which its vendors and
clients are compliant. The Company's financial position could be adversely
affected if major vendors or clients have not adequately completed Year 2000
requirements. The Company believes that the most significant risk it faces with
regard to Year 2000 compliance issues is if disruptions occurred to a
significant portion of the Company's client base that could cause delayed
contracting for and/or payment of the Company's services.
At this time, the Company has not encountered any significant problems
associated with the risks of Year 2000 compliance.
12
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Registrant was held on September 17, 1999 and two
proposals were presented to security holders for a vote; election of two
directors and ratification of the appointment of independent auditors.
The six-member Board of Directors is divided into three classes. Each year one
of the classes stands for election to a term of three years. The class standing
for election at the 1999 annual meeting was Class III, consisting of two
directors: incumbent director Ross K. Anderson and newly nominated director
Frank S. Waller. The terms for Class I Directors, Robert L. Costello, Jr.,
Retired Rear Admiral Stuart F. Platt and Donald K. Stager, expire in 2000, and
the terms for Class II Directors, James M. Edgar and Richard D. Puntillo, expire
in 2001.
The following table lists the votes cast:
For Withheld
--- --------
Proposal 1
Election of Directors
Ross K. Anderson 3,341,337 1,103,683
Frank S. Waller 3,432,275 1,012,745
For Against Abstain Non-Vote
--- ------- ------- --------
Proposal 2
Ratification of Ernst & Young LLP
Independent Auditors 4,430,930 11,146 2,944 0
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following exhibits are furnished along with this Form 10-Q
Quarterly Report for the period ended November 30, 1999:
Exhibit No. 11 Computation of Net Income Per Share
Exhibit No. 27 Financial Data Schedule
b. Reports on Form 8-K
None
14
<PAGE>
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.
HARDING LAWSON ASSOCIATES GROUP, INC.
Date: January 7, 2000 /s/ Robert L. Costello, Jr.
------------------ -------------------------------------------
Robert L. Costello, Jr.
President, Chief Executive Officer,
and interim Chief Financial Officer
(Principal Executive and Financial Officer)
/s/ Valorie B. Feher
-------------------------------------------
Valorie B. Feher
Vice President Finance and Administration
(Duly Authorized Officer)
15
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
EXHIBIT INDEX
Exhibit No.
-----------
11 Computation of Net Income Per Share
27 Financial Data Schedule
16
Exhibit No. 11
HARDING LAWSON ASSOCIATES GROUP, INC.
Computation of Net Income Per Share
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
November 30, November 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average basic shares outstanding 4,998 4,835 4,975 4,859
Net effect of dilutive stock options
based on the treasury stock method 165 19 177 61
- -------------------------------------------------------------------------------------------------------------------
Total 5,163 4,854 5,152 4,920
===================================================================================================================
Net income $1,569 $ 139 $2,719 $1,152
===================================================================================================================
Basic net income per share $ 0.31 $ 0.03 $ 0.55 $ 0.24
===================================================================================================================
Diluted net income per share $ 0.30 $ 0.03 $ 0.53 $ 0.23
===================================================================================================================
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 16250
<SECURITIES> 2849
<RECEIVABLES> 45478
<ALLOWANCES> 2797
<INVENTORY> 0
<CURRENT-ASSETS> 66298
<PP&E> 26934
<DEPRECIATION> 21873
<TOTAL-ASSETS> 81548
<CURRENT-LIABILITIES> 29144
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 50965
<TOTAL-LIABILITY-AND-EQUITY> 81548
<SALES> 0
<TOTAL-REVENUES> 87755
<CGS> 0
<TOTAL-COSTS> 29704
<OTHER-EXPENSES> 53538
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4727
<INCOME-TAX> 2000
<INCOME-CONTINUING> 2719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2719
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.53
</TABLE>
