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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16225
EMCON
(Exact name of Registrant as specified in its charter)
California 94-1738964
---------------------------------- -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1200
San Mateo, California 94402
- ---------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 375-1522
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 [ ]
8,528,526 shares of Common Stock Issued and Outstanding as of July 31, 1996.
1
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EMCON
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
Page
Number
-----
FACING SHEET.......................................................... 1
TABLE OF CONTENTS..................................................... 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995................... 3
Consolidated Statements of Income -
Three months and six months ended
June 30, 1996 and 1995................................ 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995............... 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 9
PART II. OTHER INFORMATION............................................ 12
Signatures............................................................ 14
Index to Exhibits..................................................... 15
2
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EMCON
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1996 1995
(In thousands, except share amounts) (Unaudited) (Audited)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ..................................................................... $ 3,492 $ 9,451
Marketable securities ......................................................................... -- 501
Accounts receivable, net of allowance for doubtful accounts of $1,190
and $1,052 at June 30,1996 and December 31, 1995, respectively ............................. 42,191 34,925
Prepaid expenses and other current assets ..................................................... 5,341 3,066
-------- --------
Total Current Assets ....................................................................... 51,024 47,943
Net property and equipment, at cost ........................................................... 22,459 16,690
Other assets .................................................................................. 4,451 3,579
Deferred tax assets ........................................................................... 1,823 1,677
Intangible assets, net of amortization ........................................................ 20,539 8,747
-------- --------
Total Assets ............................................................................... $100,296 $ 78,636
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .............................................................................. $ 5,528 $ 4,174
Accrued payroll and related benefits .......................................................... 6,453 4,975
Other accrued liabilities ..................................................................... 2,575 2,109
Non-current obligations due within one year ................................................... 1,627 372
-------- --------
Total Current Liabilities .................................................................. 16,183 11,630
Non-current obligations ....................................................................... 17,852 1,700
Commitments and contingencies ................................................................. -- --
Shareholders' Equity:
Preferred stock, no par value, 5,000,000 shares authorized; no shares issued
or outstanding ............................................................................. -- --
Common stock, no par value, 15,000,000 shares authorized; 8,483,346
and 8,329,343 shares issued and outstanding at June 30, 1996 and
December 31, 1995, respectively ............................................................ 41,944 41,401
Retained earnings ............................................................................. 24,317 23,918
Unrealized losses on marketable securities .................................................... -- (13)
-------- --------
Total Shareholders' Equity ................................................................. 66,261 65,306
-------- --------
Total Liabilities and Shareholders' Equity ................................................. $100,296 $ 78,636
======== ========
</TABLE>
See accompanying notes
3
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<TABLE>
<CAPTION>
EMCON
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------------------- -------------------------
(In thousands, except per share amounts) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross revenue .............................................. $ 35,881 $ 31,116 $ 64,445 $ 61,485
Outside services, at cost .................................. 5,339 4,663 9,296 8,756
-------- -------- -------- --------
Net revenue ............................................. 30,542 26,453 55,149 52,729
Costs and expenses:
Direct expenses ......................................... 13,030 10,050 22,719 20,036
Indirect expenses ....................................... 16,722 15,418 31,521 31,180
-------- -------- -------- --------
Income from operations ............................... 790 985 909 1,513
Interest income (expense), net ............................. (277) 36 (299) 95
Equity in income (loss) of affiliates ...................... 47 (5) 3 (25)
-------- -------- -------- --------
Income before provision for income taxes ................... 560 1,016 613 1,583
Provision for income taxes ................................. 195 305 214 475
-------- -------- -------- --------
Net income ................................................. $ 365 $ 711 $ 399 $ 1,108
======== ======== ======== ========
Income per share ........................................... $ 0.05 $ 0.09 $ 0.06 $ 0.14
======== ======== ======== ========
</TABLE>
See accompanying notes
4
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<TABLE>
<CAPTION>
EMCON
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Six months ended
June 30,
------------------------------
Increase (decrease) in cash and cash equivalents (in thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net income ..................................................................... $ 399 $ 1,108
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization ................................................ 3,234 2,562
Loss on sale/disposal of property and equipment .............................. 39 56
Increase in salary continuation plan ......................................... 53 35
Changes in operating assets and liabilities:
Accounts receivable ...................................................... (3,074) 343
Prepaid expenses and other current assets ................................ (950) (153)
Other assets ............................................................. (1,228) (288)
Accounts payable ......................................................... (306) (3,633)
Accrued payroll and related benefits ..................................... 1,094 (293)
Other accrued liabilities ................................................ (1,608) 21
- ----------------------------------------------------------------------------------- ------- -------
Net cash used for operating activities ......................................... (2,347) (242)
- ----------------------------------------------------------------------------------- ------- -------
Cash flow from investing activities:
Additions to property and equipment ........................................... (2,095) (1,830)
Purchases of available for sale securities .................................... -- (28)
Maturities of available for sale securities ................................... 514 469
Acquisitions, net of cash acquired ........................................... (3,827) --
Proceeds from sale of property and equipment .................................. 70 52
- ----------------------------------------------------------------------------------- ------- -------
Net cash used for investing activities ......................................... (5,338) (1,337)
- ----------------------------------------------------------------------------------- ------- -------
Cash flow from financing activities:
Proceed of new debt obligation ................................................ 6,755
Payment of current and noncurrent obligations ................................. (5,572) (51)
Issuance of common stock for cash ............................................. 543 286
- ----------------------------------------------------------------------------------- ------- -------
Net cash provided by financing activities ...................................... 1,726 235
- ----------------------------------------------------------------------------------- ------- -------
Decrease in cash and cash equivalents ............................................. (5,959) (1,344)
Cash and cash equivalents, beginning of year ...................................... 9,451 5,152
- ----------------------------------------------------------------------------------- ------- -------
Cash and cash equivalents, end of period .......................................... $ 3,492 $ 3,808
- ----------------------------------------------------------------------------------- ------- -------
</TABLE>
See accompanying notes
5
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EMCON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries after elimination of all
significant intercompany accounts and transactions.
While the financial information is unaudited, the statements in this report
reflect all adjustments, which are normal and recurring, that are necessary
for a fair presentation of the results of operations for the interim periods
covered and of the financial condition of the Company at the dates of the
balance sheets. The operating results for the interim periods presented are
not necessarily indicative of performance for the entire year.
These financial statements and notes should be read in conjunction with the
Company's consolidated financial statements for the fiscal year ended
December 31, 1995.
2. Restructuring Charges
In December 1994, as a result of changes in senior management, the Company's
Board of Directors approved a corporate restructuring plan which included
the write off of employment contracts with no current or future value,
termination of personnel, and the elimination or abandonment of excess and
underperforming assets and facilities. During the six months ended June 30,
1996, $62,000 of cash charges related to the restructuring were incurred and
charged against the established reserve. At June 30, 1996, $90,000 of
accrued restructuring costs remained and were included in other accrued
liabilities. To date, $1,074,000 of restructuring costs have been
incurred.
3. On February 29, 1996, EMCON acquired all of the outstanding capital stock of
Organic Waste Technologies, Inc. ("OWT"), a Cleveland based construction,
equipment and operations and maintenance company with significant expertise
in solid waste management. The Company purchased OWT for $13,859,000 in cash
plus the issuance of convertible notes held by certain senior OWT management
in the aggregate principal amount of $1,747,000 and other direct acquisition
costs of $77,000. The notes bear interest at the rate of 8% per annum with
all principal due and payable in full on March 1, 2001. The notes may be
converted into shares of OWT common stock upon an underwritten public
offering of OWT's common stock in an amount in excess of $10,000,000. In the
event that the notes have not been converted into OWT shares, they may
instead be converted into shares of EMCON common stock for a period of
ninety days after November 30, 2001, at a conversion price of $6.50 per
share.
Specifically identifiable intangible assets and goodwill of approximately
$11,786,000 resulting from this acquisition are included in intangible
assets and are being amortized over periods not exceeding thirty years.
Accumulated amortization as of June 30, 1996 was approximately $131,000.
6
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The following summarizes the unaudited pro forma net revenue, net income,
and income per share for the combined company for the six month period ended
June 30, 1996 and 1995 had the acquisition occurred at the beginning of the
period presented.
(unaudited)
Six months ended
June 30,
--------------------------------
(in thousands) 1996 1995
---------------------------------------------------------------------------
Net revenue $58,048 $60,306
Net income 83 927
Income per share $ 0.02 $ 0.12
---------------------------------------------------------------------------
The above proforma results of operations do not purport to reflect the
actual results of operations had the Company actually acquired OWT as of the
beginning of the period presented.
On May 31, 1996, EMCON acquired the operations of Cascade Pacific
Engineering, Inc. ("Cascade"). The transaction was structured as an asset
acquisition with EMCON acquiring substantially all of the assets of Cascade
for $546,000 in cash plus the assumption of substantially all of Cascade's
liabilities. The tangible net assets acquired were valued at $96,000. The
$450,000 excess of cost over the fair value of net assets acquired is
included in intangible assets and is being amortized over three years.
Accumulated amortization as of June 30, 1996 was approximately $13,000.
4. Credit Agreement
In conjunction with the acquisition of OWT, the Company entered into a
$20,000,000 secured credit agreement with its existing commercial bank,
replacing its previous $10,000,000 unsecured line of credit. Under the new
agreement, the Company borrowed $10,000,000 on a long term basis with an
interest rate not to exceed the prime rate. Principal is to be amortized
over seven years, but with any unpaid amount finally due and payable on June
30, 2001. The remaining $10,000,000 under the credit agreement is available
on a line of credit basis for working capital purposes (with up to
$5,000,000 available for non-working capital purposes). The line of credit
component of the credit agreement expires on May 31, 1997.
5. Litigation
As a professional services firm engagedin environmental-related matters, the
Company encounters potential liability, including claims for significant
environmental damage in the normal course of business. The Company is party
to lawsuits and is aware of potential exposure related to certain claims,
but in the opinion of management the resolution of these matters will not
have a material adverse effect on the Company's financial position, results
of operations or cash flows.
7
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6. Income Per Share
Income per share is based on the weighted average number of common and
dilutive common equivalent shares outstanding using the modified treasury
stock method for the three months and six months ended June 30, 1996 and
1995.
7. Other
In 1994, the Company converted to a fifty-two/fifty-three week fiscal year
which will result in a fifty-three week year in 1996. The Company's year end
falls on the Friday closest to the last day of the calendar year. The
Company also follows a five-four-four week quarterly cycle. For convenience,
the accompanying financial statements have been shown as ending on the last
day of the calendar period.
8
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EMCON
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
Of Operations.
RESULTS OF OPERATIONS
CURRENT YEAR-TO-DATE VERSUS PRIOR YEAR-TO-DATE. Net revenue for the first six
months of 1996 totalled $55,149,000, including $7,623,000 contributed by OWT
following its acquisition on February 29, 1996. Excluding OWT, net revenue
totalled $47,526,000, a 9.9% decrease compared with $52,729,000 for the first
six months of 1995. The decrease was attributable to significant
underperformance of the Company's Laboratory Division in the Alaska and
Northeast markets and the Consulting Division in the Alaska, Washington and
Southeast markets combined with a decrease in revenue due to a reduced headcount
following recent reductions in force in those markets. The decrease was, to a
lesser extent, also attributable to particularly difficult weather conditions in
the Northeast and Northwest areas during the first quarter.
Direct expenses for the first six months of 1996 totalled $22,719,000, including
direct expenses from OWT of $4,818,000. Direct expenses include compensation for
billable hours for technical and professional staff and other project related
expenses and direct labor and materials for laboratory testing. Excluding OWT,
direct expenses for the first six months of 1996 totalled $17,901,000; a
decrease of 10.7% compared with $20,036,000 for the same period in 1995.
Excluding OWT, direct expenses as a percent of net revenue in the first six
months of 1996 decreased slightly to 37.7% from 38.0% in the same period in
1995.
Indirect expenses for the first six months of 1996 totalled $31,521,000,
including indirect expenses from OWT of $1,320,000. Indirect expenses include
nonbillable hours for professional, technical and administrative staff and
general expenses such as rent, bonuses, benefits, insurance, severance, legal
and depreciation. Excluding OWT, indirect expenses for the first six months of
1996 totalled $30,201,000; a decrease of 3.1% compared with $31,180,000 for the
same period in 1995. Excluding OWT, indirect expenses as a percent of net
revenue increased to 63.5% in the first six months of 1996 from 59.1% in the
same period in 1995. The increase was principally due to significant severance
costs incurred during the period combined with higher start up costs associated
with the expansion of the Company's Operation and Construction (EOC) division.
This increase was offset in part by prior reductions in force and continued
implementation of the Company's previously announced cost containment measures.
Income from operations for the first six months of 1996 totalled $909,000; a
39.9% decrease compared to $1,513,000 for the comparable period in 1995.
The Company recorded interest expense net of interest income of ($299,000) and
interest income net of interest expense of $95,000 for the first six months of
1996 and 1995, respectively. The net decrease was primarily attributable to an
increase in the Company's long term indebtedness (including assumption of the
outstanding OWT convertible notes and other project/equipment related
indebtedness and the $10,000,000 loan undertaken to partially fund the OWT
acquisition), and a reduction in the Company's cash available for investment as
a result of the OWT acquisition.
9
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QUARTERS ENDED JUNE 30, 1996 AND 1995. For the quarter ended June 30, 1996, net
revenue totalled $30,542,000, including $5,948,000 contributed by OWT. Excluding
OWT, net revenue in the quarter totalled $24,594,000, a 7.0% decrease compared
with $26,453,000 in the second quarter of 1995. The decrease on the quarter was
attributable to significant underperformance of the Company's Laboratory
Division in the Alaska and Northeast markets and the Consulting Division in the
Alaska, Washington and Southeast markets combined with a decrease in revenue due
to reduced headcount following recent reductions in force in those markets.
Direct expenses in the quarter ended June 30, 1996 totalled $13,030,000,
including direct expenses from OWT of $3,673,000. Excluding OWT, direct expenses
for second quarter totalled $9,357,000; a decrease of 6.9% compared with
$10,050,000 for the same period in 1995. Excluding OWT, direct expenses as a
percent of net revenue in the second quarters of 1996 and 1995 remained
relatively constant at 38.0%.
Indirect expenses in the quarter ended June 30, 1996 totalled $16,722,000,
including indirect expenses from OWT of $980,000. Excluding OWT, indirect
expenses for the second quarter of 1996 totalled $15,742,000; an increase of
2.1% compared with $15,418,000 for the same period in 1995. Excluding OWT,
indirect expenses as a percent of net revenue increased to 64.0% in the second
quarter of` 1996 from 58.3% in the same period in 1995. The increase was
principally due to significant severance costs incurred during the period
combined with higher start up costs associated with the expansion of the
Company's Operation and Construction (EOC) Division. This increase was offset in
part by cost savings from prior reductions in force and continued implementation
of the Company's previously announced cost containment measures.
Income from operations for the quarter ended June 30, 1996 totalled $790,000; a
19.8% decrease compared to $985,000 for the comparable period in 1995.
The Company recorded interest expense net of interest income of ($277,000) and
interest income net of interest expense of $36,000 for the quarters ended June
30, 1996 and 1995, respectively. The net decrease was primarily attributable to
an increase in the Company's long term indebtedness (including assumption of the
outstanding OWT convertible notes and other project/equipment related
indebtedness and the $10,000,000 loan undertaken to partially fund the OWT
acquisition), and a reduction in the Company's cash available for investment as
a result of the OWT acquisition.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, the Company financed its operations
principally from cash and marketable securities on hand, cash generated by
operations and the issuance of common stock under the Company's Employee Stock
Purchase Plan, and from the return on investment on its cash, cash equivalents
and marketable securities. Net cash used by operations during the six months
ended June 30, 1996 was $2,347,000. The Company at June 30, 1996 had cash and
cash equivalents of $3,492,000.
10
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The Company invested $2,095,000 for the purchase of property and equipment in
the first six months of 1996, primarily for field equipment, computers and
communication systems and laboratory equipment. In conjunction with the
acquisition of OWT, the Company entered into a $20,000,000 secured credit
agreement with its existing commercial bank, replacing its previous $10,000,000
unsecured line of credit. Under the new agreement, the Company borrowed
$10,000,000 on a term loan basis with interest at a variable rate, generally not
to exceed the prime rate. Principal is to be amortized over seven years, but
with any unpaid amount finally due and payable on June 30, 2001. The remaining
$10,000,000 under the credit agreement is available on a line of credit basis
for working capital purposes (with up to $5,000,000 of this amount also being
available for non-working capital purposes). The line of credit component of the
credit agreement expires on May 31, 1997.
11
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EMCON
PART II OTHER INFORMATION
Items 1. - 3. Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders
On May 17, 1996, the Annual Meeting of the Shareholders of EMCON was held at
3:00 p.m., local time, at 1921 Ringwood Avenue, San Jose, California. Of the
8,480,158 shares outstanding as of the record date, 6,306,246 shares were
present or represented by proxies at the meeting.
ELECTION OF DIRECTORS. An election of directors was held with the following
individuals being elected to the Board of Directors:
For Withheld
--------- --------
Douglas P. Crane 6,132,790 173,456
Eugene M. Herson 6,131,424 174,822
Stephen W. Vincent 6,132,511 173,735
H. Lee Fortier 6,121,891 184,355
Donald R. Andres 6,007,752 298,494
Richard A. Peluso 5,999,093 307,153
Jack M. Marzluft 6,011,551 294,695
Donald R. Kerstetter 6,132,836 173,410
Peter Vardy 6,133,535 172,711
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. The shareholders voted to
ratify the appointment of Ernst & Young LLP as EMCON's independent auditors for
the fiscal year ending December 31, 1996. The proposal received 6,263,034
affirmative votes, 34,077 negative votes, and 9,135 abstentions.
Item 5. Other Information
Effective May 1, 1996, Mr. R. Michael Momboisse was elected the Corporate
Secretary of the Company to replace the retiring Mollie C. Mortyn.
12
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Item 6. Exhibits and Reports
(a) Exhibits - See Index to Exhibits on Page 15
(b) Reports on Form 8-K
i) A Current Report on Form 8-K/A (Amendment No. 1) dated April 15,
1996 was filed with the Securities and Exchange Commission (the
"Commission") on April 16, 1996, to amend certain information
inadvertently left out of the Current Report on form 8-K dated
February 29, 1996, announcing the completion of the OWT
acquisition.
ii) A Current Report on Form 8-K/A (Amendment No. 2) dated May 10,
1996 was filed with the Commission on May 13, 1996 to submit
financial statements and other pro forma information relating to
the acquisition of OWT.
13
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EMCON
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.
Date: August 12, 1996 EMCON
R. Michael Momboisse
-----------------------
R. MICHAEL MOMBOISSE
Chief Financial Officer,
Vice President - Legal, and Secretary
(Duly authorized and principal
financial and accounting officer)
14
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EMCON
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Page
- -------- --------
2.1 Agreement and Plan of Reorganization dated effective *
April 1, 1994, among Wehran Envirotech, Inc.,
Registrant and certain other related parties,
incorporated by reference from Exhibit 2.1 of the
Current Report on Form 8-K dated May 26, 1994.
2.2 Certificate of Ownership reflecting the merger of *
Registrant's wholly-owned subsidiary, Wehran/Emcon
Northeast, Inc., into Registrant effective December
20,1994, incorporated by reference from Exhibit 2.2 of
the Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (the "1994 10-K").
2.3 Certificate of Ownership reflecting the merger of *
Registrant's wholly-owned subsidiary, Wehran
Engineering Corporation, into Registrant effective
December 23, 1994, incorporated by reference from
Exhibit 2.3 of the 1994 10-K.
2.4 Certificate of Ownership reflecting the merger of *
Registrant's wholly-owned subsidiary , EA Associates,
into Registrant effective December 31, 1994,
incorporated by reference from Exhibit 2.4 of the 1994
10-K.
2.5 Certificate of Ownership reflecting the merger of *
Registrant's wholly-owned subsidiaries, EMCON
Northwest, Inc., EMCON Southeast, Inc., EMCON
Baker-Shiflett, Inc., and Eldredge Engineering
Associates, Inc., into Registrant effective December
31, 1994, incorporated by reference from Exhibit 2.5 of
the 1994 10-K.
2.6 Stock Purchase Agreement dated January 30, 1996, among *
Organic Waste Technologies, Inc. ("OWT"), Registrant
and the selling shareholders and option holders of OWT,
incorporated by reference from Exhibit 2.1 of the
Amendment No. 1 to Form 8-K /A dated April 15, 1996.
3.1 Articles of Incorporation, as amended, incorporated by *
reference from Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (File No. 33-16337)
effective September 16, 1987 (the "Form S-1
Registration Statement").
3.2 Certificate of Amendment of Restated Articles of *
Incorporation as filed on May 24, 1988, incorporated by
reference from Exhibit 3.2 of the Annual Report on Form
10-K for the fiscal year ended December 31, 1988 (the
"1988 10-K").
3.3 Certificate of Amendment of Restated Articles of *
Incorporation as filed on June 4, 1991, incorporated by
reference from Exhibit 4.1 of the Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1991
(the "June 1991 10-Q").
3.4 Bylaws, as amended, incorporated by reference from *
Exhibit 4.2 of the June 1991 10-Q.
10.1 Standard Commercial Lease dated August 1, 1985, between *
Archer Business Complex and Registrant (the "ABC
Lease"), incorporated by reference from Exhibit 10.5 of
the Form S-1 Registration Statement.
10.2 Amendment to the ABC Lease between Archer Business *
Complex and Registrant dated September 30, 1992,
incorporated by reference from Exhibit 10.10 of the
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (the "1992 10-K").
15
<PAGE>
Sequentially
Exhibit Numbered
Number INDEX TO EXHIBITS (Continued) Page
- --------- ------------
10.3 Second and Third Amendment to the ABC Lease between *
Archer Business Complex and Registrant dated October 4,
1993 and January 1, 1994, respectively, incorporated by
referenced from Exhibit 10.2 of the Annual Report on
Form 10-K for the fiscal year ended December 31, 1993
(the "1993 10-K").
10.4 Standard Commercial Lease dated August 1, 1986, between *
the Royal Partnership and Sweet-Edwards & Associates,
Inc. (since merged into the Registrant) incorporated by
reference from Exhibit 10.9 of the Form S-1
Registration Statement.
10.5 EMCON 1986 Incentive Stock Option Plan and Amendment, *(1)
incorporated by reference from Exhibit 10.15 of
the Form S-1 Registration Statement.
10.6 Form of Agreement pursuant to Salary Continuation Plan, *(1)
incorporated by reference from Exhibit 10.17 of
the Form S-1 Registration Statement.
10.7 Schedule identifying Agreements pursuant to Salary *(1)
Continuation Plan between Registrant and certain
employees, incorporated by reference from Exhibit 10.7
of the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 10-K").
10.8 Form of Indemnity Agreement between the Registrant and *
each of the Registrant's officers and directors,
incorporated by reference from Exhibit 10.20 of the
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988 (the "1988 10-K").
10.9 EMCON 1988 Stock Option Plan, amended by shareholder *(1)
approval on May 25,1994, including form of Nonqualified
Stock Option Agreement (Outside Directors),
incorporated by reference from Exhibit 10.9 of the
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994 (the "June 30, 1994 10-Q").
10.10 EMCON Employee Stock Purchase Plan incorporated by *(1)
reference from Exhibit 10.10 of the Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1995.
10.11 EMCON Restricted Stock Plan incorporated by reference *(1)
from Exhibit 10.15 of the Annual Report on Form 10-K
for the fiscal year ended December 31, 1990.
10.12 EMCON Deferred Compensation Plan effective January 1, *(1)
1994, incorporated by reference from Exhibit 10.12 of
the 1993 10-K.
10.13 Trust Agreement for the EMCON Deferred Compensation *(1)
Plan and Salary Continuation Plan Trust dated February
19, 1994, between Registrant and Wells Fargo Bank, N.A.
incorporated by reference from Exhibit 10.13 of the
1993 10-K.
10.14 Credit Agreement between The Bank of California, N.A. *
and Registrant dated September 20, 1991 with Amendment
dated May 31, 1992, incorporated by reference from
Exhibits 10.11 and 10.12 of the 1992 10-K.
10.15 Second Amendment to Credit Agreement between The Bank *
of California, N.A. and Registrant dated effective May
31, 1993, incorporated by reference from Exhibit 10.13
of Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.
16
<PAGE>
Sequentially
Exhibit Numbered
Number INDEX TO EXHIBITS (Continued) Page
- ---------- ------------
10.16 Third Amendment to Credit Agreement between The Bank of *
California, N.A. and Registrant dated effective June
2, 1994, incorporated by reference from Exhibit 10.16
of Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.
10.17 Fourth Amendment to Credit Agreement between the Bank *
of California, N.A. and Registrant dated effective
May 31, 1995, incorporated by reference from Exhibit
10.17 of the June 30, 1995 10-Q.
10.18 Letter Agreement between H. Lee Fortier and Registrant *(1)
dated March 14, 1994, incorporated by reference
from Exhibit 10.21 of the September 30, 1994 Form 10-Q.
10.19 Letter Agreement between Thorley D. Briggs and *(1)
Registrant dated July 19, 1994, incorporated by
reference from Exhibit 10.20 of the 1994 10-K.
10.20 Letter Agreement between James M. Felker and Registrant *(1)
dated October 31, 1994, incorporated by reference
from Exhibit 10.21 of the 1994 10-K.
10.21 Agreement between Eugene M. Herson and Registrant *(1)
dated November 30, 1995, incorporated by reference
from Exhibit 10.21 of the 1995 10-K.
10.22 Agreement between R. Michael Momboisse and Registrant *(1)
dated November 10, 1995, incorporated by reference
from Exhibit 10.22 of the 1995 10-K.
10.23 Credit Agreement between The Bank of California, N.A. *
and Registrant dated February 29, 1996, incorporated
by reference from Exhibit 10.2 of the Current Report on
Form 8-K dated February 29, 1996 (the "February 1996
8-K.").
10.24 Security Agreement between The Bank of California, N.A. *
and Registrant dated February 29, 1996, incorporated
by reference from Exhibit 10.3 of the February 1996
8-K.
10.25 Pledge Agreement between The Bank of California, N.A. *
and Registrant dated February 29, 1996, incorporated
by reference from Exhibit 10.4 of the February 1996
8-K.
10.26 Eurodollar Rate Option Agreement between The Bank of *
California, N.A. and Registrant dated February 29,
1996, incorporated by reference from Exhibit 10.5 of
the February 1996 8-K.
10.27 Fixed Rate Amortization Option Agreement between The *
Bank of California, N.A. and Registrant dated
February 29, 1996, incorporated by reference from
Exhibit 10.6 of the February 1996 8-K.
10.28 Note Agreement among the Registrant, OWT, Mark H. *
Shipps, and certain employees of OWT , incorporated
by reference from Exhibit 10.1 of the February 1996
8-K.
11.1 Computation of Income Per Share, incorporated as part 18
of this submission as document type EX-11.1.
* Incorporated by reference
(1) Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(c) of the instructions to
Form 10-K.
17
<TABLE>
<CAPTION>
EXHIBIT 11.1
EMCON
COMPUTATION OF INCOME PER SHARE
(In thousands except per share data)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income ......................................................... $ 365 $ 711 $ 399 $1,108
Proforma interest income related to modified
treasury stock method ........................................... 58 54 116 109
------ ------ ------ ------
Adjusted net income ................................................ $ 457 $ 765 $ 515 $1,217
====== ====== ====== ======
Weighted average number of common shares
outstanding during the period ...................................... 8,481 8,245 8,463 8,235
Common equivalent share from outstanding
stock options using the modified treasury
stock method .................................................... 716 680 799 679
Incremental shares to reflect full dilution (1) ................. 0 0 0 0
------ ------ ------ ------
Total shares for purposes of calculating diluted
income per share (1) ............................................... 9,197 8,925 9,242 8,914
====== ====== ====== ======
Primary income per share ........................................... $ 0.05 $ 0.09 $ 0.06 $ 0.14
====== ====== ====== ======
Fully diluted income per share ..................................... $ 0.05 $ 0.09 $ 0.06 $ 0.14
====== ====== ====== ======
</TABLE>
- -----------------------
(1) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 to APB
opinion No. 15, because it results in dilution of less than 3%.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and consolidated
statements of cash flows included in the Company's Form 10-Q for the six month
period ended June 30, 1996, and is qualified in its entirety by reference to
such financial statements and the notes thereto.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,492,000
<SECURITIES> 0
<RECEIVABLES> 43,381,000
<ALLOWANCES> 1,190,000
<INVENTORY> 0
<CURRENT-ASSETS> 51,024,000
<PP&E> 48,227,000
<DEPRECIATION> 25,768,000
<TOTAL-ASSETS> 100,296,000
<CURRENT-LIABILITIES> 16,183,000
<BONDS> 0
0
0
<COMMON> 41,944,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 100,296,000
<SALES> 55,149,000
<TOTAL-REVENUES> 55,149,000
<CGS> 22,719,000
<TOTAL-COSTS> 22,719,000
<OTHER-EXPENSES> 31,520,000
<LOSS-PROVISION> (156,000)
<INTEREST-EXPENSE> 453,000
<INCOME-PRETAX> 613,000
<INCOME-TAX> 214,000
<INCOME-CONTINUING> 399,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 399,000
<EPS-PRIMARY> $0.06
<EPS-DILUTED> $0.06
