<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-18095
THE RANDERS GROUP INCORPORATED
--------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 38-2788025
- - ------------------------------------- ------------------------------------
STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
570 SEMINOLE ROAD, NORTON SHORES, MICHIGAN 49444
- - -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER (616) 733-0036
-----------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
COMMON STOCK (PAR VALUE $.0001 PER SHARE) AMERICAN STOCK EXCHANGE -
EMERGING COMPANY
- - ----------------------------------------- ----------------------------------
MARKETPLACE
----------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
---------------
(TITLE OF CLASS)
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 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 _____
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF
REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY
AMENDMENT TO THIS FORM 10-KSB. [X]
ISSUER'S REVENUES FOR THE YEAR ENDED DECEMBER 31, 1995 WERE $10,191,710.
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT AS OF THE CLOSE OF BUSINESS ON FEBRUARY 29,
1996 WAS APPROXIMATELY $2,620,000.
AS OF FEBRUARY 29, 1996, THE REGISTRANT HAS 14,115,682 SHARES OF COMMON STOCK
($.0001 PAR VALUE) OUTSTANDING.
<PAGE> 2
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Development of the Business
The Randers Group Incorporated and its subsidiaries ("the Company")
provide design, engineering, project management, general contracting and
development services primarily to industrial and commercial clients throughout
the United States. The Company's principal market areas are Michigan, Ohio,
Illinois, Massachusetts and West Virginia. A substantial portion of the
Company's revenues is derived from clients in the chemical or process related
industries.
The original operating entity, Randers Engineering, Inc., was formed
as a partnership in January 1974, and was incorporated in January 1976. In
June of 1987, Randers Engineering, Inc. and other related corporations, through
a series of transactions, were merged into a publically-held corporation which
became known as The Randers Group Incorporated.
As of the close of business on December 31, 1993, the Company, through
its wholly-owned subsidiary, Randers Engineering of Illinois Incorporated,
acquired the assets and assumed the liabilities of EPC International, Inc.
("EPC"). EPC, with operations located at 1699 Wall Street, Mt. Prospect,
Illinois, was founded in 1983, as a privately held engineering and
construction management firm. EPC employed approximately 45 full time
employees. The Company provided services primarily to petroleum refining,
petro-chemical, pharmaceutical and other process related industries in Illinois
and the surrounding areas. EPC reported revenues of $2,119,000 and a net loss
of $67,000 for the year ended December 31, 1993. During 1995 the Company
closed the Chicago office (the former EPC International, Inc.) due to poor
operating results and decreasing revenues.
In June 1995, the Company opened an office in Springfield,
Massachusetts to better serve the needs of an existing client in that area. As
of February 28, 1996, the Company employed four people in the Springfield, MA
office.
Also during June 1995, the Company formed a new subsidiary, Viridian
Technology, Inc., to design and manufacturer modular process equipment systems
for the chemical and process related industries. The products are expected to
complement the services currently provided by the Company. As of February 28,
1996, the Company has begun marketing efforts related to the new subsidiary,
however, no products have been sold as of that date.
2
<PAGE> 3
Business Operations
The Company currently has seven wholly-owned subsidiaries:
Redeco Incorporated ("Redeco")
Randers Engineering, Inc. ("Randers Engineering")
Clark-Trombley Consulting Engineers, Inc. ("Clark-
Trombley-Randers")
Randers Group Property Corporation ("Group Property")
Viridian Technology, Inc.
Randers-EPC Incorporated ("Randers-EPC") (inactive)
Randers Engineering of Massachusetts, Inc. (inactive)
The following table presents, for the periods indicated, the Company's
revenues by principal type of service as a percentage of total revenue:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Construction 28.6% 36.8% 67.3%
Service/consulting 68.3% 60.7% 31.4%
Rental 3.1% 2.5% 1.3%
------ ------ ------
Total 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Construction Operations
Redeco provides general contracting and development services. The
design/build method employed by Redeco provides clients a single focus of
responsibility for the success of a project by combining the design,
engineering and general contracting services into one entity. Redeco's
services are provided out of all of the Company's offices.
The Company anticipates that most general contracting services will be
provided to industrial clients, however, the Company does derive a portion of
its construction revenues from non-industrial clients. The following table
sets forth, for the periods indicated, the percentage of construction revenues
by type of project:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Industrial 78.5% 81.3% 78.7%
Non-Industrial 21.5% 18.7% 21.3%
------ ------ ------
Total 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
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Construction revenues are normally generated from a limited number of higher
value contracts. Accordingly, construction revenues have varied from year to
year depending on the number of contracts in process during any given period.
Service/Consulting Operations
Randers Engineering and Clark-Trombley-Randers provide design,
engineering and construction management services. Randers Engineering has
offices in Norton Shores (Muskegon) and Detroit, Michigan; Cincinnati, Ohio;
Springfield, Massachusetts; and Charleston, West Virginia.
Clark-Trombley-Randers is located in Lansing, Michigan. As discussed earlier,
Randers-EPC located in Chicago, Illinois was closed during 1995.
Due to the limited availability and the high cost of professional
liability insurance covering services provided to the chemical industry,
Randers Engineering does not maintain professional liability insurance.
Although the Company has never incurred a significant liability because of work
performed, there can be no assurance that the Company will not incur such a
liability in the future.
At the present time, the Company is not aware of any threatened or
pending litigation, claims or assessments or any unasserted possible claims or
assessments against the Company in connection with work performed.
Rental Operations
Group Property owns and operates the Company's real estate business.
The properties include two office buildings which are owned and held as rental
properties, one office building which is leased and sublet, and two condominium
units which are held for resale. All of the properties are located in the area
around Muskegon, Michigan.
The Company occupies half of one of the office buildings for its
Muskegon operations and its corporate headquarters.
General
The Company has no current plans regarding a new product, service or
entry into a new industry segment which would require the investment of a
material amount of assets or is otherwise material in nature.
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<PAGE> 5
The Company competes with many local, regional, and national
architectural, engineering, general contracting and development firms which
offer similar type services. However, a substantial portion of the Company's
revenues are derived from clients in the chemical and process related
industries which are highly technical in nature and are served by a relatively
limited number of firms.
The Company competes against many firms, most of which are privately
held and for which accurate public information is not available. Furthermore,
management is not aware of any industry survey reviewing the position of the
Company with respect to its competitors. Public information regarding the
principal markets in which the Company competes is largely random and
subjective and, therefore, the exact nature of the Company's competitive
position is not known or available to the Company.
The Company's regular source of new business is from new projects for
existing clients and by invitation to bid on specific projects. Although price
is normally one of the competitive factors, other items such as technical
expertise, scope of services available, local presence, management experience
and other similar matters are also taken into account.
Management believes that it has an advantage in that many of its
competitors do not offer the full scope of services that can be provided by the
Company. Management also believes, however, that certain competitors may be
better capitalized than the Company which, if true, would place such
competitors in a better financial position to compete with the Company.
Since the Company's business is service oriented, it does not involve
the processing of raw materials and is not dependent on fluctuations in the
supply or price of raw materials.
The business of the Company is not dependent upon a single customer,
or a few customers, the loss of any one of which would have a material adverse
effect on the Company. However, during the three years ended December 31,
1995, the Company acted as a general contractor on various construction
projects the revenues from which, when combined with other service and
consulting fees from the same customer, each exceeded 10% of consolidated
revenue. Information related to these customers is summarized as follows:
5
<PAGE> 6
<TABLE>
<CAPTION>
Percent of
Consolidated Revenue
------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Chemical producer located
in Michigan and Massachusetts 27.8 1.5 0.8
Chemical producer located
in West Virginia 6.1 31.4 38.4
Manufacturer of pigments
and related products -
Michigan and Ohio 0.2 2.4 13.1
Chemical producer located
in Western Michigan 0.0 0.1 11.4
</TABLE>
A substantial amount of the Company's revenue is derived from and,
therefore, a significant amount of its accounts receivable are related to
companies in the chemical industry. For the years ended December 31, 1995 and
1994, approximately 67% and 77%, respectively, of the Company's revenues were
from customers related to the chemical industry and at December 31, 1995
approximately 61% of its accounts receivable were from these companies.
The Company does not hold under ownership or license any patents,
trademarks, licenses, franchises or concessions which are material to the
Company's business. The business of the Company is not seasonal.
No material portion of the Company's business is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the federal government or any state or local government or
authority. Although various states regulate the licensing of professional
engineers and architects, and require registration of firms providing such
services, the services provided by the Company are not subject to governmental
approval. However, many of the services relate to client projects which are
subject to governmental regulation and/or approval.
The Company is not aware of any material adverse effect upon it
related to capital expenditures, earnings or competitive position of the
Company because of compliance with any existing or probable governmental
regulations.
The Company has not engaged in any research and development activities
during the last three years.
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<PAGE> 7
The Company has not incurred any material costs related to compliance
with federal, state or local laws regarding the environment. The Company is
not directly involved in the handling of hazardous substances, however, it does
provide construction and consulting services to companies which manufacture,
transport or are otherwise involved in handling hazardous substances.
The Company employs approximately 100 professional and support staff
out of its six offices. The Company may also hire contract employees on a
temporary basis to meet its staffing requirements. At the highest point during
1995, the Company had five contract employees on staff to meet its needs. The
Company is not subject to any collective bargaining agreement. The Company
considers its employee relations to be satisfactory.
The Company's services are performed by its employees working
primarily in the Company's various offices. Certain construction and
engineering services are rendered at the construction site or in a client's
facility, but the percentage of such on-site services to the total services
provided by the Company is not significant.
ITEM 2. PROPERTIES
Company Offices
The Company's headquarters and principal office are located at 570
Seminole Road, Norton Shores, Michigan 49444. The office occupies
approximately 9,000 square feet of space in a building which is owned by the
Company. The remaining portion of the building, approximately 9,000 square
feet, is held as rental property.
The Springfield, Massachusetts office, which provides service to only
one client, conducts its operations out of office facilities provided by the
client.
The other offices conduct business operations out of leased space as
follows:
<TABLE>
<CAPTION>
Office Location Leased Space Expiration Date of Lease
- - --------------- ------------ ------------------------
<S> <C> <C>
Detroit, Michigan 2,985 sq./ft. August, 1996
Cincinnati, Ohio 2,500 sq./ft. January, 1997
Charleston, West
Virginia 3,535 sq./ft. September, 1997
Lansing, Michigan 3,300 sq./ft. June, 1998
</TABLE>
7
<PAGE> 8
In general, the buildings are in good condition, are considered to be
adequate for the uses to which they are being put and are in regular use.
Rental and Investment Properties
In addition to the approximate 9,000 square feet of space in the
Company's headquarters building which is held as rental property, the Company
owns a 9,300 square foot office building located at 3391 Merriam Avenue,
Muskegon Heights, Michigan which is also held as rental property. The
building, and the Company's headquarters building located at 570 Seminole Road,
Norton Shores, Michigan, are used as collateral for a mortgage loan of
approximately $1,163,000. The mortgage is due in January 1998, bears interest
at prime (8.25% at February 28, 1996), and is payable in monthly installments
of $8,056 plus interest. The balance at maturity is estimated to be $970,000.
To satisfy the debt retirement, the Company anticipates that the current
agreement will be extended or a new source of financing will be secured.
The Company is the lessee of approximately 9,000 square feet of space
at 3355 Merriam Avenue, Muskegon Heights, Michigan which was previously used as
its headquarters and principal office. The Company currently pays
approximately $141,000 in annual rentals and the lease expires December, 1997.
The Company subleases this space for approximately the same amount it pays in
rental costs and the sublease expires at the same time as the Company's lease.
The Company owns two condominium units which are held for resale. The
condominium units are in a project the Company is developing with an affiliated
party.
Investment Policies
The Company does not have a formal policy regarding the percentage of
its assets which may be invested in any one property or in total real estate
investments, the types of real estate in which it may invest, the geographic
areas in which it may own real estate, or whether properties may be acquired
only for income or capital appreciation. In the opinion of management, all
properties, whether owned or leased, are adequately insured.
8
<PAGE> 9
Real Estate Rental Operations
Rental Properties
The following table sets forth information related to the Company's
rental properties:
<TABLE>
<CAPTION>
Location of Property
----------------------------------
570 3355 3391
Seminole (A) Merriam Merriam
------------ ------- -------
<S> <C> <C> <C>
Occupancy Rate 100.0% 100.0% 78.8%
Number of tenants
occupying 10% or more
of space 2 1 3
Nature of Tenant's
Business:
#1 Health Care Telephone Insurance
Administrative Directory Agency
Office Sales
#2 Title Insur. N/A Education
Company Association
#3 N/A N/A Cable System
Design
Average Annual Rental
Per Square Foot $15.16 $15.80 $11.24
Lease Expiration
Information (B):
#1 - Date of expiration Oct., 1998 Dec., 1997 March, 1996
- Square feet of
rental space 3,400 9,000 2,000
- Current annual
rental $58,300 $142,300 $25,500
- Percentage of
gross annual
rentals 17.9% 43.7% 7.8%
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Location of Property
----------------------------------
570 3355 3391
Seminole (A) Merriam Merriam
------------ ------- -------
<S> <C> <C> <C>
#2 - Date of expiration March, 1998 N/A Feb., 1999
- Square feet of
rental space 2,215 N/A 2,040
- Current annual
rental $30,100 N/A $22,700
- Percentage of
gross annual
rentals 9.2% N/A 7.0%
#3 - Date of expiration N/A N/A July, 1996
- Square feet of
rental space N/A N/A 2,158
- Current annual
rental N/A N/A $21,600
- Percentage of gross
annual rentals N/A N/A 6.6%
Federal Income Tax
Information:
Tax basis (excluding
land) $951,000 Not Owned $537,000
Depreciation method 150% Not Owned 150%
Declining Declining
Balance Balance
Life 31.5 Years Not Owned 31.5 Years
Depreciation rate
per year 4.8% Not Owned 4.8%
Real Estate Taxes:
Rate (Mills) 52.4152 45.1633 51.1633
Annual Taxes $34,900 $ 6,100 $12,700
</TABLE>
(A) Information relates to one half of the building which is held for
rental purposes.
(B) All leases not disclosed individually expire within the next five
years.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending or known to be
contemplated to which the Company is a party or of which any of its property is
the subject. Ordinary routine litigation incidental to the Company's business
is not material. There are no such proceedings to which the Company is a party
involving primarily a claim for damages, exclusive of interest and costs, which
exceeds ten percent (10%) of the current assets of the Company.
10
<PAGE> 11
As previously discussed, due to the limited availability and the high
cost of professional liability insurance covering consulting services related
to the chemical industry, one of the Company's subsidiaries, Randers
Engineering, does not maintain professional liability insurance. At the
present time, management is not aware of any threatened or pending litigation,
claims or assessments or any unasserted possible claims or assessments against
the Company. The Company is engaged in providing construction and consulting
services to companies which manufacture, transport or are otherwise involved in
handling hazardous substances. However, the Company is not directly involved
in handling hazardous substances.
There are no bankruptcy, receivership, or similar proceedings pending
with respect to the Company.
There are no administrative or judicial proceedings to which the
Company is a party arising under any federal, state, or local provisions that
have been enacted or adopted regulating the discharge of materials into the
environment or primarily for the purpose of protecting the environment.
There are no material proceedings to which any director, officer or
affiliate of the Company, and owner of record or beneficiary of more than five
percent (5%) of any class of voting securities of the Company, or any associate
of any such director, officer, affiliate of the Company, or security holder is
a party adverse to the Company or has a material interest adverse to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Emerging Company
Marketplace of the American Stock Exchange.
The following table sets forth, for each quarter in the last two
years, market information related to the Company's common stock. The table
indicates the high and low sale's price as provided by the American Stock
Exchange.
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C> <C>
1994: First quarter $1.2500 $1.0000
Second quarter 1.2500 .6250
Third quarter .8750 .6875
Fourth quarter .7500 .3125
1995: First quarter $ .8125 $ .4375
Second quarter .7500 .5625
Third quarter 1.2500 .5000
Fourth quarter .8750 .3750
</TABLE>
As of February 29, 1996, there were 219 holders of record of the
Company's common stock.
The Company has never paid a dividend on its common stock and, at the
present time, management has no intention of paying a dividend in the
foreseeable future. It is management's present intention to retain all
earnings and reinvest them in the Company's business. There are no
restrictions on the ability of the Company's subsidiaries to transfer funds to
the Company in the form of cash dividends. However, one of the Company's loan
agreements requires it to maintain consolidated net worth of at least
$1,500,000. Unrestricted equity was $2,104,824 at December 31, 1995.
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<PAGE> 13
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's construction and service/consulting operations normally
do not require a significant investment in property and equipment or other
long-term assets. Short-term needs for cash may develop as the
service/consulting business expands and cash is consumed by operations prior to
the collection of the related revenue. Construction operations may provide
temporary cash resources as amounts payable to subcontractors and suppliers are
normally not due until after the related receivable from the client is
collected.
The Company's rental operations have required a significant investment
in real estate. These operations have been primarily financed by long-term
debt.
The following table sets forth information related to the Company's
liquidity as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash and cash equivalents $ 409,087 $ 776,430 $1,696,874
Working capital $ 604,191 $ 625,946 $1,211,576
Ratio of current assets to
current liabilities 1.25 to 1 1.26 to 1 1.28 to 1
Available funds under line
of credit $ 161,000 $ 470,000 $ 8,000
</TABLE>
The Company's cash position of $409,000 at December 31, 1995, reflects
a decrease in such balances of approximately $367,000 from December 31, 1994.
The Company's December 31, 1995 balance sheet includes various amounts
related to the Company's activities with First Venture Associates Limited
Partnership (FVALP), an entity owned by four of the Company's
officers/directors, including real estate held for sale of $237,853, notes
receivable and accrued interest due from FVALP of $435,911 and $3,196,
respectively, and accounts receivable from FVALP of $621,926. In addition, the
Company has guaranteed FVALP's borrowings under its line of credit. Such
borrowings amounted to $457,000 at December 31, 1995.
13
<PAGE> 14
The $237,853 of real estate held for resale represents two
condominiums that were turned over to the Company as settlement for certain
advances made to partners of FVALP. The carrying value of the assets held for
sale approximates the estimated fair market value less cost to sell based on
comparable properties. The estimate of the fair market value of the assets
held for sale is dependent on current market conditions which could change in
the near term. The amounts the Company could ultimately realize on the sale of
the condominiums could differ from the amounts estimated. It is management's
belief that the sale of these condominiums will not result in any material
adverse impact to the Company's financial statements.
The $435,911 notes receivable balance is comprised of $177,426 of
accrued interest receivable on a note due from FVALP that was converted to a
note receivable from FVALP in 1995, and $258,485 representing the remaining
balance on the note receivable that the Company accepted when it sold certain
assets to FVALP prior to 1993. The $621,926 accounts receivable due from FVALP
resulted from services provided and advances made to FVALP for the joint
development of a condominium project. Based on cash projections, the
condominium project is expected to provide sufficient cash flows to cover its
borrowings from a bank which the Company has guaranteed, but not the entire
receivables balances. No impairment has been recognized for the projected
shortfall on the receivables, as the partners of FVALP have collateralized the
receivables with 1,480,000 shares of the Company's common stock that are
collectively owned by the partners of FVALP and FVALP, and these shares are
estimated to have sufficient market value to cover any remaining balances due
from FVALP after the sale of the condominium project. Management has not
reclassified any portion of the amounts due from FVALP as a contra to
stockholders' equity as it believes that the Company will receive cash or other
assets in full satisfaction of the amounts owed to it by FVALP.
The Company's accounting for and classifications of these amounts is
based on sensitive estimates used to derive FVALP's projected construction
costs on the condominium project, the time the condominiums will be held prior
to sale, interest rates during these periods, the ultimate net sale price that
will be received on the sale of the condominium project, the market value of
the Company's common stock that was provided as collateral and the steps that
will be taken to satisfy the receivables.
The amounts FVALP ultimately realizes on the sale of the condominium
project and the value of the collateral could differ from the amounts assumed
in arriving at the carrying value and classification of the related
receivables. It is management's belief that the sale of the condominium
project and the ultimate settlement of the receivables from FVALP will not
result in any material adverse impact to the Company's financial statements.
14
<PAGE> 15
1995 Cash Flows
Operations for 1995 consumed $332,000 of cash. Net income of $125,000
for the year combined with non-cash expenses of $215,000 were not sufficient
to offset the $313,000 increase in accounts receivable and prepaid expenses and
the $359,000 decrease in accounts payable, accrued expenses and billings in
excess of cost and estimated earnings on contracts in progress. The increase
in accounts receivable and the decrease in accounts payable was due primarily
to changes in business activity rather than from a change in the timing of cash
collections or disbursements.
In addition to the $332,000 of cash consumed by operations during
1995, the Company expended $267,000 for property and equipment and used
$149,000 to reduce its long-term debt.
The preceding uses of cash during 1995 were only partially offset by
$22,000 collected on notes receivable and $359,000 additional borrowing on the
line of credit.
In June 1995, the Company opened an office in Springfield,
Massachusetts. The Company is not expected to incur any major commitments for
capital expenditures related to the new office, however, cash may be consumed
during the initial operations as funds are converted into accounts receivable.
As of December 31, 1995, there were four people employed in the Springfield
office while a significant portion of the work generated from that location was
being done in other offices.
Also during June 1995, the Company announced that it had formed a new
subsidiary, Viridian Technology, Inc., to design and manufacture modular
process equipment systems for the chemical and process related industries. The
new business is not expected to require a significant cash investment as the
Company plans to sell the systems on a basis requiring progress payments which
approximate out of pocket costs and that, at least initially, the manufacturing
of the systems will be sub-contracted to others. Management does not expect
that Viridian will have a material impact on revenues or profits in the near
future.
1994 Cash Flows
Operations for 1994 consumed $565,000 of cash. A net loss of $247,000
combined with a decrease of $1,987,000 in accounts payable, accrued expenses
and billings in excess of costs and estimated earnings on contracts in progress
were only partially offset by a net decrease of $1,421,000 in accounts
receivable and prepaid expenses and non-cash expense of $248,000. The decrease
in accounts receivable and accounts payable is due primarily to decreased
business activity during 1994.
15
<PAGE> 16
In addition to the $565,000 cash consumed by operations during the
year, the Company used $167,000 to reduce debt and $282,000 for capital
expenditures. These uses of cash were only partially offset by additional
borrowings of $94,000 thus resulting in a $920,000 reduction in cash during
1994.
Effective as of the close of business on December 31, 1993, the
Company acquired the assets and assumed the liabilities of EPC International,
Inc. (EPC) for $142,931. The amount was payable in annual installments of
$40,000, beginning December 31, 1994, with the remainder of the note due on
December 31, 1997. The note bore interest at 5%. In 1994, the Company
renegotiated the purchase price related to the acquisition and satisfied the
debt by making a one time payment of $25,000.
1993 Cash Flows
Operations for 1993 provided $962,000 of cash. Net income of $516,000
for the year, combined with an increase of $1,323,000 in accounts payable,
accrued expenses, and billings in excess of costs and estimated earnings on
contracts in progress and non-cash expenses of $164,000, were more than
sufficient to offset the $1,041,000 increase in accounts receivable and prepaid
expenses. The increase in accounts receivable and accounts payable was due
primarily to increased business activity during 1993. The increase in accounts
receivable would have been $465,000 higher had it not been for the collection
of accounts receivable from an affiliate related to the joint development of a
condominium project. The project had been financed by use of the Company's
working capital and borrowing on its line of credit. During 1993, the
affiliate obtained a $665,000 line of credit from a bank then borrowed $465,000
on the line and paid amounts it owed the Company. The Company has guaranteed
the affiliate's line of credit.
In addition to the $962,000 of cash provided by operations during
1993, the Company received $88,000 from additional borrowings and payments on
notes receivable. However, during the year, the Company used $287,000 to
reduce debt and $388,000 on capital expenditures resulting in a net increase in
cash of $375,000.
* * * * *
Management is not aware of any known trends, demands, commitments,
events or uncertainties, other than the following, that will result in the
Company's liquidity increasing or decreasing in any material way.
The Company has a line of credit with a bank which provides for
advances up to $1,500,000. At December 31, 1995, the Company had outstanding
borrowings of $1,339,000 on the line. Management expects that the line of
credit, which expires April 1, 1996, will be renewed under similar terms and
conditions.
16
<PAGE> 17
In January 1998, the Company will be required to pay the remaining
balance on a mortgage note. It is estimated that the balance will be $970,000
at that time. To satisfy the debt requirement, the Company anticipates that a
new source of long-term financing will be secured or the current agreement
extended.
The Company does not have any material commitment for capital
expenditures which are outside the ordinary course of business other than the
services and advances the Company may make on further development of the
condominium project summarized under the Liquidity and Capital Resource
discussion above.
Management does not contemplate or expect any change in capital
resources of the Company, including any material changes in the mix or relative
cost of such capital resources or any changes between debt and equity except as
discussed. Accordingly, management expects that other cash flow needs will be
provided primarily from operations.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of which certain items in the Company's Consolidated Statements of
Operations bear to revenues:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Direct Expenses 77.8% 86.6% 87.0%
Selling, Administrative and
General Expenses 18.4% 15.1% 8.0%
Operating Income (Loss) 3.8% (1.7%) 5.0%
Other Income (Expenses) - net (1.8%) (1.1%) (.5%)
Income Taxes (Reduction) .8% (.9%) 1.7%
Net Income (Loss) 1.2% (2.0%) 2.8%
</TABLE>
1995 Compared to 1994
Revenues for 1995 were $10,192,000 compared to $12,605,000 for 1994,
an decrease of 19.1%. Construction revenues decreased $1,716,000 (37.0%)
while revenues from service/consulting fees decreased $697,000 (9.1%).
Construction revenues continued to experience a decline as spending among the
Company's traditional client base for these services remains low. The decrease
in service/consulting fees relates to the closing of the Chicago office. The
Chicago office had revenues of approximately $1,840,000 in 1994 compared to
$350,000 in 1995.
17
<PAGE> 18
The Company reported operating income of $389,000 during 1995 compared
to an operating loss of $218,000 during 1994. Construction operations reported
a gross profit of $175,000 (6.0%) compared to a gross profit of $334,000 (7.2%)
for 1994. The gross-profit percentage was lower because a large part of the
1995 revenues came from a non-industrial client in the Chicago area. The
project had been taken on at a lower profit margin in an attempt to gain entry
into the Chicago market area. Gross profit from service/consulting fees was
$1,984,000 (28.5%) for 1995 compared to $1,242,000 (16.2%) in 1994. The
increase in the gross profit percentage for service/consulting fees resulted
primarily from increased staff productivity. The increase in productivity came
about in part from the closing of the Chicago office and in part from an
increase in the amount of work for the available staff in most other offices.
Selling, general and administrative expenses were $1,870,000 a decrease of
$35,000 (1.9%) compared to 1994. The decrease in costs relates primarily to
the closing of the Chicago operations. Such costs, however, were 18.4% of
revenue in 1995 compared to 15.1% of revenue in 1994.
Net interest expense was $186,000 for 1995 compared to net interest
expense of $138,000 in 1994. Approximately 87% of the increase in interest
expense relates to a change in interest rates while the remainder relates to
increased levels of borrowing.
1994 Compared to 1993
Revenues were $12,605,000 in 1994, down $5,624,000 or 30.9%, compared
to the $18,229,000 reported for 1993. A decrease of $7,644,000 (62.3%) in
construction revenues was only partially offset by increases of $1,933,000
(33.8%) in service/consulting fees and $87,000 (37.8%) in rental. The increase
in service/consulting revenues relates primarily to the acquisition of EPC
which was purchased at the end of 1993. The decrease in construction revenues
results from the completion in 1993 of two non-industrial projects (not the
Company's normal source of business) which were not replaced in 1994, and a
slow down in construction spending among the Company's traditional clients.
The Company reported an operating loss of $218,000 during 1994
compared to operating income of $910,000 for 1993. Construction operations
reported a gross profit of $334,000 (7.2%) compared to a gross profit of
$812,000 (6.6%) in 1993. Although the gross profit percentage on construction
operations was somewhat higher in 1994 than in 1993, the significant decrease
in construction revenue resulted in a reduction in gross profit. The gross
profit margin was lower in 1993 as one of the large non-industrial projects had
been taken on at lower than normal profit margin. The gross profit from
service/consulting fees was $1,242,000 (16.2%) compared to the
18
<PAGE> 19
$1,545,000 (27.0%) recognized in 1993. The gross profit percentage on
service/consulting operations was lower than that realized in 1993 because of
increased costs which have been difficult to pass through in increased billing
rates, because an increasing portion of the Company's work is being done at
negotiated fees which normally have a lower profit margin than the Company's
traditional rate schedule, and, in part, due to the acquisition of EPC.
Selling, general and administrative expenses were $1,906,000 in 1994
compared to $1,468,000 in 1993; an increase of $438,000 (29.8%). The increase
in these costs is primarily the result of the acquisition of Randers-EPC.
Net interest expense was $138,000 in 1994 compared to $92,000 in 1993.
Approximately 20% of the increase relates to increased rates with the remainder
due to increases in the Company's net borrowing.
19
<PAGE> 20
ITEM 7. FINANCIAL STATEMENTS
Index to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Page
Financial Statements: ----
<S> <C>
Consolidated Statements of Operations, Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . 21
Consolidated Balance Sheets, December 31, 1995 and 1994. . 22
Consolidated Statements of Stockholders' Equity, Years
Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . 24
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . 28
Report of Independent Certified Public Accountants . . . . 41
</TABLE>
20
<PAGE> 21
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Construction $ 2,916,505 $ 4,632,401 $12,276,763
Service/consulting 6,957,608 7,654,846 5,721,639
Rental 317,597 317,275 230,254
---------- ---------- ----------
Total Revenues 10,191,710 12,604,522 18,228,656
---------- ---------- ----------
COSTS AND EXPENSES:
Construction costs 2,741,787 4,298,065 11,464,930
Costs of service/
consulting 4,973,555 6,412,486 4,176,477
Rental costs 216,620 205,958 209,571
Selling, general and
administrative
expenses 1,870,373 1,905,783 1,468,038
---------- ---------- ----------
Total Costs and
Expenses 9,802,335 12,822,292 17,319,016
---------- ---------- ----------
Operating Income (Loss) 389,375 (217,770) 909,640
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (230,961) (184,395) (143,639)
Interest income 45,421 46,629 51,679
---------- ---------- ----------
Other Income (Expense) - Net (185,540) (137,766) (91,960)
---------- ---------- ----------
Income (Loss) Before Taxes
on Income 203,835 (355,536) 817,680
INCOME TAXES (REDUCTION) 79,000 (109,000) 302,000
---------- ---------- ----------
NET INCOME (LOSS) $ 124,835 $ (246,536) $ 515,680
========== ========== ==========
NET INCOME (LOSS) PER SHARE $ .01 $ (.02) $ .04
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON AND DILUTIVE COMMON
EQUIVALENT SHARES
OUTSTANDING 14,115,682 14,114,924 14,097,500
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1995 1994
------ ---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 409,087 $ 776,430
Accounts receivable, less
allowances of $45,000
and $81,000 for possible
losses 2,499,199 1,967,584
Refundable income taxes - 72,907
Prepaid expenses and other 59,847 104,863
Future income tax benefits 62,000 102,000
---------- ----------
TOTAL CURRENT ASSETS 3,030,133 3,023,784
---------- ----------
NET PROPERTY AND EQUIPMENT 2,617,919 2,609,084
---------- ----------
OTHER ASSETS:
Notes and accounts receivable -
affiliate 1,061,033 1,096,849
Real estate held for resale 237,853 237,853
Goodwill, less accumulated
amortization of $97,092
and $84,816 147,425 159,701
Miscellaneous 20,623 31,046
---------- ----------
TOTAL OTHER ASSETS 1,466,934 1,525,449
---------- ----------
$7,114,986 $7,158,317
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
December 31,
1995 1994
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable - bank $1,339,000 $ 980,000
Accounts payable 680,332 985,144
Billings in excess of costs and
estimated earnings on contracts
in progress 54,000 66,000
Accrued income taxes 28,975 -
Accrued compensation 162,113 181,108
Other accrued expenses 37,409 50,032
Current maturities of long-term debt 124,113 135,554
---------- ----------
TOTAL CURRENT LIABILITIES 2,425,942 2,397,838
LONG-TERM DEBT, less current
maturities 1,084,220 1,221,563
DEFERRED CREDIT, less accumulated
amortization of $14,732 in 1994 - 58,927
---------- ----------
TOTAL LIABILITIES AND DEFERRED
CREDIT 3,510,162 3,678,328
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par - shares
authorized 30,000,000; issued
14,115,682 1,412 1,412
Additional paid-in capital 1,536,439 1,536,439
Retained earnings 2,066,973 1,942,138
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,604,824 3,479,989
---------- ----------
$7,114,986 $7,158,317
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number Additional
of Common Paid-In Retained
Shares Stock Capital Earnings
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1993 14,097,500 $ 1,410 $1,536,441 $1,672,994
Net income for the year - - - 515,680
---------- --------- --------- ---------
BALANCE, December 31, 1993 14,097,500 1,410 1,536,441 2,188,674
Issuance of common stock
through stock option plan 18,182 2 (2) -
Net loss for the year - - - (246,536)
---------- --------- --------- ---------
BALANCE, December 31, 1994 14,115,682 1,412 1,536,439 1,942,138
Net income for the year - - - 124,835
---------- --------- --------- ---------
BALANCE, December 31, 1995 14,115,682 $ 1,412 $1,536,439 $2,066,973
========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 25
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATIONS:
Cash received from customers $9,729,825 $14,123,005 $17,159,140
Cash paid to suppliers and
employees (9,919,788) (14,490,280) (15,779,910)
Interest received 25,907 28,423 33,311
Interest paid (230,961) (184,395) (143,639)
Income taxes (paid) refunded 62,882 (41,862) (306,903)
---------- ---------- ----------
Net Cash From (For) Operations (332,135) (565,109) 961,999
---------- ---------- ----------
CASH FLOWS FROM (FOR) INVESTING
ACTIVITIES:
Capital expenditures (267,024) (282,166) (387,724)
Payments received on note 21,600 - 10,000
---------- ---------- ----------
Net Cash From (For) Investing
Activities (245,424) (282,166) (377,724)
---------- ---------- ----------
CASH FLOWS FROM (FOR) FINANCING
ACTIVITIES:
Net borrowings (payments) on
line of credit 359,000 53,000 (48,000)
Proceeds of long-term debt - 40,513 78,010
Principal payments on long-term
debt (148,784) (166,682) (239,018)
---------- ---------- ----------
Net Cash From (For)
Financing Activities 210,216 (73,169) (209,008)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (367,343) (920,444) 375,267
Cash and cash equivalents, at
beginning of year 776,430 1,696,874 1,321,607
---------- ---------- ----------
Cash and cash equivalents, at
end of year $ 409,087 $ 776,430 $ 1,696,874
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 26
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH FROM (FOR) OPERATIONS:
Net income (loss) $ 124,835 $ (246,536) $ 515,680
Depreciation and amortization 211,538 259,217 232,469
Provision for (reduction in)
allowance on accounts receivable (36,000) 36,000 7,000
Deferred income taxes 40,000 (47,000) (75,000)
Changes in operating assets and
liabilities, net of the effect
from the purchase of the net
assets of EPC International, Inc.:
Accounts receivable (495,615) 1,524,236 (1,074,408)
Prepaid expenses and other 182,562 (103,354) 33,474
Accounts payable and billings
in excess of costs and
estimated earnings on contracts
in progress (316,812) (1,954,176) 1,172,020
Accrued expenses (42,643) (33,496) 150,764
---------- ---------- ----------
NET CASH FROM (FOR) OPERATIONS $ (332,135) $ (565,109) $ 961,999
========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 27
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
YEAR ENDED DECEMBER 31, 1995
The Company converted $177,426 of accrued interest receivable from an
affiliate into a note receivable bearing interest at the prime rate.
(See Note 7)
YEAR ENDED DECEMBER 31, 1994
The Company renegotiated the purchase of EPC International, Inc.
resulting in a $117,931 reduction in the related note payable.
The Company issued 18,182 shares of common stock in exchange for the
surrender of an option to purchase an additional 21,818 shares at $.75
per share.
YEAR ENDED DECEMBER 31, 1993
The Company acquired the assets and assumed the liabilities of EPC
International, Inc. in exchange for a note payable of $142,931.
See accompanying notes to consolidated financial statements.
27
<PAGE> 28
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
The Randers Group Incorporated and its subsidiaries (the Company),
provide design, engineering, project management, general contracting and
development services primarily to industrial and commercial clients throughout
the United States. The Company's principal market areas are Michigan, Ohio,
Illinois, Massachusetts and West Virginia. A substantial portion of the
Company's revenues are derived from clients in the chemical or process related
industries.
The Company considers such operations to constitute one business
segment.
NOTE 2 - USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of revenues and expenses reported during the period.
Actual results could differ from those estimates.
NOTE 3 - SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of The
Randers Group Incorporated and all of its subsidiaries. On consolidation all
material intercompany accounts and transactions are eliminated.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all highly liquid debt
instruments with a maturity of three months or less when purchased are
considered to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade receivables,
other current assets, notes and accounts payable, billings in excess of cost
and estimated earnings on contracts in progress and other current liabilities
meeting the definition of a financial instrument approximate fair value.
The fair value of the Company's remaining financial instruments are
estimated using projected cash flows or other estimating methods. The carrying
amounts of the Company's long-term debt approximates fair value.
28
<PAGE> 29
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Concentrations of Credit Risk
The majority of the Company's accounts receivable are from clients in
the chemical or other process related industries and are concentrated in areas
near one of its offices. Most contracts require payments as the projects
progress. The Company generally does not require collateral but, in most
cases, can place a lien against the property, plant or equipment constructed if
a default occurs. The Company maintains adequate reserves for potential credit
losses and such losses, which have been minimal, have been within management's
estimates. (See Note 10)
Property, Equipment, and Depreciation
Property and equipment are stated at cost. Depreciation is computed
over the estimated useful lives of the assets primarily using accelerated
methods.
Lives used in computing depreciation are as follows:
<TABLE>
<S> <C>
Land Improvements 15 years
Buildings and Improvements 31.5 years
Furniture and Equipment 3-7 years
Vehicles and Other 5 years
Leasehold Improvements 5 years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Long-term
improvements are capitalized. Upon retirement, or other disposal, the asset
cost and related accumulated depreciation are removed from the accounts.
Goodwill
Goodwill is being amortized over 20 years.
Deferred credit, which represented the excess of assets acquired over
their cost, was being amortized over 5 years. (See Note 4)
Construction Revenues
Revenues from long-term construction contracts are recognized under
the percentage-of-completion method and include earnings expected to be
realized on the contracts in the same ratio that costs incurred bear to
estimated total costs.
29
<PAGE> 30
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Results of operations for a period may include revisions to estimated
earnings for such contracts that were reported in a prior period and these
revisions may again be adjusted in subsequent periods as further information
becomes available or the contracts are completed.
Advertising Costs
All advertising and marketing costs are expensed as incurred. Such
costs are immaterial to the Company's operations.
Taxes On Income
The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events which have been recognized in the
Company's financial statements or tax returns.
Net Income (Loss) Per Share
Net income (loss) per share is computed on the basis of the weighted
average number of common and dilutive common equivalent shares outstanding
during the year.
New Accounting Standards
The Company will be required to adopt Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," by its year
ending December 31, 1996. The new statement will require companies to review
long-lived assets for impairment of value and, if it is determined that an
impairment loss has occurred, to recognize any such loss in the statement of
operations for the year in which the impairment occurred. The Company does not
expect the adoption of SFAS No. 121 to have a material impact on the Company's
financial position or results of operations.
NOTE 4 - ACQUISITION
Effective as of the close of business on December 31, 1993, the
Company acquired the assets and assumed the liabilities of EPC International,
Inc. (EPC). The purchase price of $142,931 was in the form of a 5% note
payable.
The acquisition has been accounted for as a purchase. The Company did
not assume operations of EPC until January 1, 1994 and, therefore, the
accompanying statement of operations for 1993 does not include the results of
EPC's operations.
30
<PAGE> 31
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 1994, the Company renegotiated the purchase price related to the
acquisition of EPC. The Company satisfied its debt requirements by making a
one-time payment of $25,000. The adjustment of the purchase price has been
reflected in the financial statements by reducing the non-current assets
acquired to zero value, and the remaining excess of assets acquired over the
adjusted purchase price has been recorded as a deferred credit.
During 1995, the Company closed the Chicago office (the former EPC
operation) and the remaining deferred credit of $52,000 was written off as a
reduction of selling, general and administrative expenses. The office had
revenues of approximately $1,840,000 in 1994 compared to $350,000 in 1995.
NOTE 5 - CONTRACTS IN PROGRESS
Contracts in progress are reported as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Costs and estimated earnings $ 579,000 $ 2,979,000
Billings applicable thereto 633,000 3,045,000
----------- -----------
Total $ (54,000) $ (66,000)
=========== ===========
</TABLE>
The amounts are included as current liabilities in the accompanying
consolidated balance sheets.
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment used in the construction and service/ consulting
operations consist of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Land and improvements $ 181,187 $ 181,187
Buildings 628,013 628,013
Furniture and equipment 1,082,994 950,370
Vehicles and other 165,858 166,083
Leasehold improvements 11,356 11,356
--------- ---------
2,069,408 1,937,009
Less accumulated depreciation 928,076 773,946
--------- ---------
Net property and equipment used in
the construction and service/
consulting operations $1,141,332 $1,163,063
========= =========
</TABLE>
31
<PAGE> 32
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property and equipment used in rental operations consist of the
following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Land and improvements $ 381,206 $ 381,206
Buildings 1,294,654 1,209,045
Furniture and equipment 58,225 58,225
--------- ---------
1,734,085 1,648,476
Less accumulated depreciation 257,498 202,455
--------- ---------
Net property and equipment used in
rental operations $1,476,587 $1,446,021
========= =========
Net property and equipment - total $2,617,919 $2,609,084
========= =========
</TABLE>
NOTE 7 - REAL ESTATE HELD FOR RESALE AND NOTES AND ACCOUNTS RECEIVABLE
- - - AFFILIATE
The $237,853 of real estate held for resale in 1995 and 1994,
represents two condominiums that were turned over to the Company as settlement
for certain advances made to partners of FVALP. The carrying value of the
assets held for sale approximates the estimated fair market value less cost to
sell based on comparable properties. The estimate of the fair market value of
the assets held for sale is dependent on current market conditions which could
change in the near term. The amounts the Company could ultimately realize on
the sale of the condominiums could differ from the amounts estimated. It is
management's belief that the sale of these condominiums will not result in any
material adverse impact to the Company's financial statements.
32
<PAGE> 33
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Notes and accounts receivable from FVALP consist of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Notes receivable $ 435,911 $ 280,085
Accrued interest receivable 3,196 161,108
Accounts receivable 621,926 655,656
--------- ---------
$1,061,033 $1,096,849
========= =========
</TABLE>
The notes receivable bear interest at the prime rate (8.5% at December
31, 1995) and is comprised of $177,426 of accrued interest receivable on a note
due from FVALP that was converted to a note receivable from FVALP in 1995 and
$258,485 representing the remaining balance on the note receivable that the
Company accepted when it sold certain assets to FVALP prior to 1993. The
$621,926 accounts receivable due from FVALP resulted from services provided and
advances made to FVALP for the joint development of a condominium project for
which the Company has the right to place a lien on the condominium project if a
default was to occur (See Notes 13 and 14). Based on cash projections, the
condominium project is expected to provide sufficient cash flows to cover its
borrowings from a bank which the Company has guaranteed, discussed in Note 14,
but not the entire receivables balances and the charges for future services and
interest and advances that may be made to FVALP in connection with the
condominium project. No impairment has been recognized for the projected
shortfall on the receivables as the partners of FVALP have collateralized the
receivables with 1,480,000 shares of the Company's common stock that is
collectively owned by the partners of FVALP and FVALP, and these shares are
estimated to have sufficient market value to cover any remaining balances due
from FVALP after the sale of the condominium project. Management has not
reclassified any portion of the amounts due from FVALP as a contra to
stockholders' equity as it believes that the Company will receive cash or other
assets in full satisfaction of the amounts owed to it by FVALP.
The Company's accounting for and classification of these amounts is
based on sensitive estimates used to derive FVALP's projected construction
costs on the condominium project, the time the condominiums will be held prior
to sale, interest rates during these periods, the ultimate net sale price that
will be received on the sale of the condominium project, the market value of
the Company's common stock that was provided as collateral and the steps that
will be taken to satisfy the receivables.
33
<PAGE> 34
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The amounts FVALP ultimately realizes on the sale of the condominium
project and the value of the collateral could differ from the amounts assumed
in arriving at the carrying value and classification of the related
receivables. It is management's belief that the sale of the condominium
project and the ultimate settlement of the receivables from FVALP will not
result in any material adverse impact to the Company's financial statements.
Due to the uncertainties discussed above, it is not practical to estimate the
fair market value of these receivables.
Other than interest earned on the notes receivable from FVALP, the
Company has deferred recognizing revenues, costs and profits associated with
transactions with FVALP until the Company has been reimbursed for all costs
incurred. Amounts collected from FVALP are treated as a reduction of the
accounts and notes receivable from FVALP.
NOTE 8 - NOTE PAYABLE - BANK
The Randers Group Incorporated has a line of credit which provides for
advances up to $1,500,000. The loan bears interest at the prime rate; 8.5% at
December 31, 1995.
Information regarding the Company's short-term borrowings is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Average amount outstanding
during the year $ 1,292,000 $ 1,093,000 $ 806,900
Weighted average interest
rate during the year 8.97% 7.33% 5.99%
Maximum amount of short-term
borrowings at any month end $ 1,339,000 $ 1,209,000 $ 1,023,000
</TABLE>
The line of credit, which expires April 1, 1996, is collateralized by
all the assets of the Company. The loan agreement further provides that the
Company is to maintain consolidated net worth of at least $1,500,000.
Unrestricted equity was $2,104,824 at December 31, 1995.
34
<PAGE> 35
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Mortgage payable $1,162,977 $1,259,644
Vehicle and equipment notes 45,356 97,473
---------- ----------
Total 1,208,333 1,357,117
Less current maturities 124,113 135,554
---------- ----------
Long-term debt, less current
maturities $1,084,220 $1,221,563
========== ==========
</TABLE>
Long-term debt matures as follows:
<TABLE>
<S> <C>
1996 $124,113
1997 112,380
1998 971,840
</TABLE>
The mortgage provides for monthly principal payments of $8,056 through
January 1998 plus interest at the prime rate (8.5% at December 31, 1995). The
mortgage is collateralized by two pieces of real estate which have a combined
net book value of $2,141,000 at December 31, 1995.
The vehicle and equipment notes bear interest at varying rates
(generally at 1.5% - 2% over prime), require monthly payments of approximately
$2,600 including interest, and are collateralized by assets with a net book
value of $52,000.
NOTE 10 - MAJOR CUSTOMERS
The business of the Company is not dependent upon a single customer,
or a few customers, the loss of any one of which would have a material adverse
effect on the Company. However, during the three years ended December 31,
1995, the Company acted as a general contractor on various construction
projects the revenue from which, when combined with other service and
consulting fees from the same customers, each exceeded 10% of consolidated
revenue. Information related to these customers is summarized as follows:
35
<PAGE> 36
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Percent of Consolidated Revenue
-------------------------------
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Chemical producer located in
Michigan and Massachusetts 27.8 1.5 0.8
Chemical producer located in
West Virginia 6.1 31.4 38.4
Manufacturer of pigments and
related products - Michigan
and Ohio 0.2 2.4 13.1
Chemical producer located in
western Michigan 0.0 0.1 11.4
</TABLE>
A substantial amount of the Company's revenue is derived from and,
therefore, a significant amount of its accounts receivable are related to
companies in the chemical industry. For the years ended December 31, 1995 and
1994, approximately 67% and 77%, respectively, of the Company's revenues were
from customers related to the chemical industry and at December 31, 1995
approximately 61% of its accounts receivable were from these companies.
NOTE 11 - 401(k) PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan which covers
substantially all employees. Eligible employees may contribute a portion of
their compensation to the plan with a partial matching contribution by the
Company. The amount of the Company's matching contribution was $31,209 in
1995, $34,819 in 1994, and $19,599 in 1993. The plan also provides that the
Company may make a discretionary profit sharing contribution if approved by the
Board of Directors. A discretionary profit sharing contribution was not
approved for 1995 or 1994. A discretionary profit sharing contribution of
$15,000 was made for 1993.
NOTE 12 - INCOME TAXES (REDUCTION)
Components of the provision for income taxes (reduction) are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current $ 39,000 $ (62,000) $377,000
Deferred 40,000 (47,000) (75,000)
-------- --------- --------
Total $ 79,000 $(109,000) $302,000
======== ======== ========
</TABLE>
36
<PAGE> 37
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effective tax rates on income before taxes differ from the federal
statutory tax rates. The following summary reconciles taxes at the federal
statutory tax rate with the actual taxes:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income taxes (reduction)
at federal statutory
rates $ 63,000 $(121,000) $ 278,000
State income taxes, net
of federal tax benefits 10,000 - 22,000
Effect of non-deductible
amortization of goodwill,
life insurance premiums
and other 6,000 12,000 2,000
-------- -------- --------
Income taxes (reduction) $ 79,000 $(109,000) $ 302,000
======== ======== ========
</TABLE>
The tax effects of temporary differences which give rise to the
Company's net deferred tax assets are as follows at December 31, 1995, 1994 and
1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Accrued compensation $48,000 $ 46,000 $38,000
Account receivable - allowance
for possible losses 15,000 28,000 15,000
Renegotiation of purchase price
of EPC International, Inc. - 27,000 -
Other (1,000) 1,000 2,000
-------- ------- -------
Total $62,000 $102,000 $55,000
======= ======== =======
</TABLE>
NOTE 13 - RELATED PARTY TRANSACTIONS
The Company has a Development Agreement with FVALP. Under the terms
of the agreement, the Company is to (1) provide its services to complete all
engineering, architectural and project management work for improvements to be
erected on a parcel of land owned by FVALP, (2) assist in the management,
financing and marketing of the development, and (3) lead, direct and manage the
legal, real estate, financing, accounting and administration of the project on
behalf of the developer. In exchange for its services, the Company is to
receive design and project management fees not to exceed 10% of the total cost
of the project and to share in 30% of the net development profits. The
agreement terminates on the earlier of the completion and sale of the
development or December 31, 1998.
37
<PAGE> 38
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Transactions with the affiliate over the last three years have been as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Services provided $ 69,178 $ 327,095 $ 93,663
Advances made 37,000 23,144 12,700
Interest earned 19,534 18,206 18,368
Amounts collected (161,528) (100,000) (589,022)
</TABLE>
FVALP is owned by four officers/directors of The Randers Group
Incorporated. See also Notes 7 and 14.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office facilities under operating leases, one of
which is being subleased. Future minimum lease payments and sub-lease income
are as follows:
<TABLE>
<CAPTION>
Lease Sublease
Payments Income
-------- --------
<S> <C> <C>
1996 $ 241,000 $142,000
1997 181,000 145,000
1998 26,000 24,000
--------- -------
Total $ 448,000 $311,000
========= =======
</TABLE>
Rent expense, including amounts under short-term leases, was $335,000
in 1995, $380,000 in 1994, and $236,000 in 1993. Sublease income was $147,000
in 1995, $143,000 in 1994, and $137,000 in 1993.
The Company owns and leases two buildings which provide for future
minimum lease payments to be received as follows:
<TABLE>
<S> <C>
1996 $156,000
1997 137,000
1998 77,000
1999 16,000
2000 2,000
</TABLE>
Guarantee
The Company has guaranteed the payment of a $475,000 line of credit by
a bank to FVALP. There was $456,625 outstanding on the line at December 31,
1995. The loan relates to the joint development of a condominium project by
FVALP and the Company (See Notes 7 and 13).
38
<PAGE> 39
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Insurance Coverage
Due to the limited availability and the high cost of professional
liability insurance covering services provided to the chemical industry,
Randers Engineering does not maintain professional liability insurance.
Although the Company has never incurred a significant liability because of work
performed, there can be no assurance that the Company will not incur such a
liability in the future.
At the present time, the Company is not aware of any threatened or
pending litigation, claims or assessments or any unasserted possible claims or
assessments against the Company in connection with work performed.
NOTE 15 - STOCK OPTION PLAN
The Company has a stock option plan which authorizes a maximum of
1,000,000 shares to be reserved for options which may be granted to key
employees of the Company. The option agreements provide that no more than 50%
of the aggregate option shares may be acquired prior to the first anniversary
of the grant and no more than 75% of the aggregate option shares may be
acquired prior to the second anniversary of the grant. The options terminate
no later than the tenth anniversary from the date of grant.
The following is a summary of activity for the stock option plan for
the periods indicated:
<TABLE>
<CAPTION>
Shares Exercisable
Available Options Price at End of
For Grant Outstanding Range Year
--------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balance January 1, 1993 57,000 693,000 $ .625/2.1250
Options granted (215,000) 215,000 $1.000/1.3125
Canceled or expired 170,000 (170,000) $ .750/2.0000
-------- ---------
Balance December 31, 1993 12,000 738,000 $ .625/2.1250 636,750
Amendment of plan 250,000 -
Options granted (4,000) 4,000 $ .875
Exercised - (18,182) $ .750
Surrendered in
consideration of
shares issued - (21,818) $ .750
Canceled or expired 46,000 (46,000) $ .750
-------- ---------
Balance December 31, 1994 304,000 656,000 $ .625/2.1250 605,250
Canceled or expired 66,000 (66,000) $ .625/2.000
--------- ---------
Balance December 31, 1995 370,000 590,000 $ .625/2.1250 589,000
========= ==========
</TABLE>
39
<PAGE> 40
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1995, options covering 174,000 shares of stock were rewritten
changing the exercise price to $.625 per share. The options were previously
exercisable at $1.00 (150,000 shares) and $.75 (24,000 shares).
At December 31, 1995, there were 960,000 shares of the Company $.0001
par value stock reserved for issuance under the plan.
NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes quarterly financial data for 1995 and
1994 (in thousands except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995
Revenues $ 2,657 $ 2,554 $ 2,041 $ 2,940
Gross Profit $ 307 $ 568 $ 566 $ 819
Net Income (Loss) $ (138) $ 66(A) $ 37 $ 160
Income (Loss) Per Share $ (.01) $ .00 $ .00 $ .02
Year Ended December 31, 1994
Revenues $ 3,332 $ 2,907 $ 3,234 $ 3,132
Gross Profit $ 341 $ 535 $ 535 $ 277
Net Income (Loss) $ (111) $ - $ (24) $ (112)
Income (Loss) Per Share $ (.01) $ .00 $ (.00) $ (.01)
</TABLE>
(A) Operations for the second quarter of 1995 include $52,000 of income
related to the write-off of a deferred credit.
40
<PAGE> 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
The Randers Group Incorporated
Norton Shores, Michigan
We have audited the accompanying consolidated balance sheets of The Randers
Group Incorporated and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Randers Group
Incorporated and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Grand Rapids, Michigan
March 1, 1996
41
<PAGE> 42
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
Company's directors and officers as of December 31, 1995:
<TABLE>
<CAPTION>
Directorship and/or
Name Age Office with the Company
- - ------------------- --- -----------------------
<S> <C> <C>
Thomas R. Eurich 49 Director and President of the
Company since its inception
in 1976.
Michael J. Krivitzky 50 Director, Senior Vice
President, and Treasurer of
the Company since its
inception in 1976.
Thomas J. McEnhill 47 Director and Vice President
of the Company since 1978 and
Secretary since 1987.
Bruce M. Bourdon 42 Director since 1987 and Vice
President of the Company
since 1985.
David A. Wiegerink 52 Vice President of Finance and
Administration since 1988.
</TABLE>
Under the Company's Bylaws, the entire Board of Directors is elected at
each annual meeting of the shareholders for terms of office which commence
immediately after the shareholders meeting at which they were elected and
terminate at the next annual meeting of the shareholders or until their
successors are elected and qualified, or until resignation or removal.
Officers are appointed by the Board of Directors at each meeting of the Board
which immediately follows the annual meeting of the shareholders. The officers
are appointed for a term which ends at the conclusion of their stated term of
office or until their successors are qualified or until the resignation or
removal of a given officer. The Company has not entered into and is not aware
of any arrangements, understandings, or agreements pursuant to which the
directors or executive officers were selected as a director or executive
officer or as a nominee for such position.
42
<PAGE> 43
Biographical information on the officers and directors of the Company is
set forth in the following paragraphs:
THOMAS R. EURICH, P.E. Mr. Eurich has been President and Director of
The Randers Group Incorporated since its inception. Mr. Eurich has been
responsible for major project involvements for manufacturing plants,
environmental systems, project management consulting, and construction
management. Prior to joining The Randers Group Incorporated, he functioned as
manager of engineering for a small chemical company's engineering department.
Mr. Eurich holds a Bachelor of Science degree in Chemical Engineering from
Michigan State University and a Masters degree in Business Administration in
Finance and Management from Western Michigan University.
MICHAEL J. KRIVITZKY, P.E. Mr. Krivitzky has been Senior Vice
President and Director of The Randers Group Incorporated since its inception.
Mr. Krivitzky is responsible for company administration, project management,
engineering process design and consulting, pollution control design and
consulting and business development. Mr. Krivitzky previously has been a
project manager, process engineering group leader and pilot plant manager. Mr.
Krivitzky received a Bachelor of Science degree in Chemical Engineering from
Michigan State University and a Masters degree in Chemical Engineering from
Wayne State University.
THOMAS J. MCENHILL, P.E. Mr. McEnhill has been Vice President and
Director of The Randers Group Incorporated since November, 1978. He has been
secretary of The Randers Group Incorporated since June, 1987. Mr. McEnhill's
current function includes project management, engineering design and
consulting, pollution control design and consulting, business development,
construction management, and supervision of staff as required to complete
project activities in the industrial and commercial areas. Prior to joining
The Randers Group Incorporated, he was a senior process engineer and a
production area supervisor for a chemical manufacturing company. Mr. McEnhill
received a Bachelor of Science degree in Chemical Engineering from Michigan
Technological University.
BRUCE M. BOURDON, P.E. Mr. Bourdon has been Vice President of The
Randers Group Incorporated since January, 1985 and a Director since June, 1987.
Mr. Bourdon has primary responsibility for business development and conduct of
the Company's construction related activities. This includes construction
management programs, development, and design/build projects. His activities
include coordinating all construction supervision, cost control, construction
scheduling, and interfacing with design groups. Mr. Bourdon received a
Bachelor of Science degree in Civil Engineering from Michigan Technological
University.
43
<PAGE> 44
DAVID A. WIEGERINK, C.P.A. Mr. Wiegerink has been a Vice President of
Randers Engineering since December 1, 1988 and a Vice President of The Randers
Group Incorporated since January 3, 1990. Prior to joining Randers
Engineering, Inc. he was a partner with BDO Seidman, a national certified
public accounting firm. Mr. Wiegerink holds a Bachelor of Business
Administration degree in accounting from Western Michigan University.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation of the chief executive
officer and the three most highly compensated executive officers of the Company
for services rendered in all capacities to the Company and its subsidiaries for
the last three years:
<TABLE>
<CAPTION>
Securities
Underlying
Other Annual Options/
Name/Capacity Served Year Salary Bonus Compensation SARs
- - -------------------- ---------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Thomas R. Eurich 1995 $ 129,500 $ - $ 2,589 -
Director and President 1994 120,000 - 1,997 -
1993 110,000 - 1,501 -
Michael J. Krivitzky 1995 129,500 - 940 -
Director, Senior Vice 1994 120,000 - 908 -
President and Treasurer 1993 110,000 - 1,026 -
Thomas J. McEnhill 1995 129,500 - 2,550 -
Director, Vice President 1994 120,000 - 2,245 -
and Secretary 1993 110,000 - 1,780 -
Bruce M. Bourdon 1995 129,500 - 2,342 150,000
Director and Vice President 1994 120,000 - 4,691 -
1993 110,000 - 2,196 150,000
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- - ----------------------------------------------------------------------------------------
% of Total
Options/SARs
Number of Securities Granted to Exercise or
Underlying Options/ Employees in Base Price Expiration
Name SARs Granted Fiscal Year ($/share) Date
- - ---- -------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bruce M. Bourdon 150,000 86.2% $.625(A) October 25,
2003
</TABLE>
(A) This option replaces an option granted on October 26, 1993, to
purchase 150,000 shares of the Company's $.0001 par common stock at $1.00 per
share.
44
<PAGE> 45
401(k) Profit Sharing Plan
The Company has a 401(k) profit sharing plan covering all employees
who are 21 years of age and have one or more years of service with the Company.
Eligible employees may contribute a portion of their compensation to the plan
with a partial matching contribution by the Company as determined annually by
the Board of Directors. Currently the Company matches 50% of an employee's
contribution up to a maximum of $500. The plan also provides that the Company
may make a profit sharing contribution if approved by the Board of Directors.
Amounts contributed by the employees and the Company's contributions, are
included in the preceding summary compensation table. A profit sharing
contribution of $15,000 was approved for 1993. No profit sharing contribution
was approved for 1995 or 1994.
Flexible Compensation Plan
The Company has a flexible compensation plan which covers full time
employees who have completed 90 days of service. Eligible employees may elect
to reduce their compensation in exchange for which the Company will pay for
certain health and/or dependent care benefits. Amounts by which employees have
reduced their compensation in exchange for the benefit received are included as
salary in the preceding summary compensation table.
Stock Option Plan
The Company has a Stock Option Plan which provides for the grant of
options to employees of the Company and its subsidiaries. The Plan, which is
administered by a committee appointed by the Board of Directors, provides that
options to purchase a total of 1,000,000 shares of the Company's $.0001 par
value common stock may be granted to eligible employees. Each option agreement
must specify the number of shares to which it applies, the option price, the
time within which the option shares may be acquired, the manner of payment and
the conditions that shall terminate the rights of the optionee. The terms of
any option granted under the Plan must specify whether such option shall
qualify as an incentive stock option under Section 422A of the Internal Revenue
Code or shall be treated as non-statutory, non-tax qualified stock options.
The Plan provides that the Board of Directors, at its sole discretion, may
modify, revise or terminate the Plan at any time, provided that it may not
materially increase the benefits of participants or change the number of shares
which may be issued under the Plan without the approval of a majority of the
shareholders.
There were no additional options granted during 1995, to any of the
executive officers named in the summary compensation table. However, during
1995, options covering 174,000 shares were rewritten changing the exercise
price to $.625 per share. The options were previously exercisable at $1.00
(150,000 shares) and $.75 (24,000 shares).
45
<PAGE> 46
The following table sets forth information concerning the year end
value of unexercised stock options for all executive officers named in the
summary compensation table who have unexercised stock options under the
Company's plan.
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-The-
Shares Unexercised Money Options
Acquired Options At Year End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- - ---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Bruce M. Bourdon - - (A) 300,000 $ -0-
David A. Wiegerink - - (A) 74,000 $ -0-
</TABLE>
(A) Number of shares under option which could be exercised as of December 31,
1995.
Compensation of Directors
No directors of the Company receive any compensation for their
services as directors. The Company is not subject to any arrangements or
agreements whereby it is required to provide compensation to its directors.
Employment Contracts and Termination of Employment and Change of Control
Arrangement
The Company does not have any long-term employment contracts with any
executive officer.
The Company has not entered into any compensation plan or arrangement
with respect to any director or executive officer which will result in lump sum
or installment payments of more than $60,000 upon the resignation, retirement
or any other termination of such individual's employment with the Company or
from a change in control of the Company or a change in the individual's
responsibilities following a change in control.
46
<PAGE> 47
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 29, 1996, information
regarding the beneficial ownership of the Company's common stock by each person
known by the Company to own beneficially more than 5% of the Company's common
stock, and for each of the Company's directors, and all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
Amount
Name and Address and Nature of Percent
of Beneficial of
Title of Class Beneficial Owner Ownership (1) Class
- - --------------- ---------------------- ------------- -------
<S> <C> <C> <C>
CERTAIN BENEFICIAL OWNERS
- - -------------------------
Common Shares Thermo Electron Corporation
101 First Avenue
Waltham, Massachusetts
02254 1,680,000 (2) 11.6%
DIRECTORS AND EXECUTIVE OFFICERS
- - --------------------------------
Common Shares Thomas R. Eurich 2,896,500 20.0%
1619 Brookwood
Muskegon, MI 49441
Michael J. Krivitzky 3,114,000 21.5%
1052 W. Randall
Muskegon, MI 49441
Thomas J. McEnhill 3,091,000 21.3%
454 Melody Lane
N. Muskegon, MI 49445
Bruce M. Bourdon 1,003,750 (3) 6.9%
5031 Lake Harbor
Muskegon, MI 49441
EXECUTIVE OFFICER
- - -----------------
Common Shares David A. Wiegerink 84,100 (4) 0.6%
3859 Marlboro N.W.
Grand Rapids, MI 49504
DIRECTORS AND EXECUTIVE OFFICERS
- - --------------------------------
Common Shares All directors and
executive officers as
a group (5 persons) 10,189,350 (5) 70.3%
</TABLE>
47
<PAGE> 48
(1) For purposes of the foregoing table, a person shall be deemed to be
the beneficial owner of shares of the Company's common stock if that
person, directly or indirectly, has or shares with others: (a) the
power to vote or direct the voting of such securities; or (b)
investment power with respect to such securities, which includes the
power to dispose or direct the disposition of such securities.
Further, a person shall be deemed to be the beneficial owner of the
Company's common stock if that person has the right to acquire
beneficial ownership as set forth above within 60 days and as
otherwise provided in Rule 13d-3(d) (1).
(2) Includes 420,000 shares owned by Thermo Power Corporation, a 52% owned
subsidiary of Thermo Electron Corporation.
(3) Includes 300,000 shares which can be acquired within sixty days
through the exercise of stock options.
(4) Includes 74,000 shares which can be acquired within sixty days through
exercise of stock options.
(5) Includes 374,000 shares which can be acquired within sixty days
through the exercise of stock options.
The Company is not aware of any arrangements, including any pledge by
any person, of the Company's common stock, the operation of which may at a
subsequent date result in a change in control of the Company.
There are no material proceedings to which any director, officer or
affiliate of the Company, and owner of record or beneficiary of more than five
percent (5%) of any class of voting securities of the Company, or any associate
of any such director, officer, affiliate of the Company, or security holder is
a party adverse to the Company or any of the subsidiaries or has a material
interest adverse to the Company or any of the subsidiaries.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock of the Company. Officers, directors
and greater than ten percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1995 all Section
16(a) filing requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with.
48
<PAGE> 49
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a development agreement with FVALP. Under the terms of
the agreement, the Company is to (1) provide its services to complete all
engineering, architectural and project management work for all improvements to
be erected on a parcel of land owned by FVALP, (2) assist in the management,
financing and marketing of the development, and (3) shall lead, direct and
manage the legal, real estate, financing, accounting and administration of the
project on behalf of the developer. In exchange for its services, the Company
is to receive design and project management fees not-to-exceed 10% of the total
cost of the project and to share in 30% of the net development profits. The
agreement terminates on the earlier of the completion and sale of the
development or December 31, 1998.
Other than interest earned on the notes receivable from FVALP, the
Company has deferred recognizing revenues, costs and profits associated with
FVALP until the Company has been reimbursed for all costs incurred. Amounts
collected from FVALP are treated as a reduction of the accounts and notes
receivable from FVALP.
Transactions with the affiliate over the last three years have been as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Services provided $ 69,178 $ 327,095 $ 93,663
Advances made 37,000 23,144 12,700
Interest earned 19,534 18,206 18,368
Amounts collected (161,528) (100,000) (589,022)
</TABLE>
In addition, the Company has $435,911 in notes receivable from FVALP
which bear interest at the prime rate. The accrued interest receivable was
$3,196 at December 31, 1995. Repayment terms are related to completion of the
planned real estate development. The notes are collateralized by 1,480,000
shares of common stock of The Randers Group Incorporated that is collectively
owned by the partners of FVALP and FVALP. Ownership of FVALP is composed of
the following individuals:
<TABLE>
<CAPTION>
Percent of
Directorship and/or Office Ownership
Name with the Registrant in FVALP
- - -------------------------- -------------------------- ----------
<S> <C> <C>
Thomas R. Eurich Director and President 25%
Michael J. Krivitzky Director, Senior Vice
President and Treasurer 25%
Thomas J. McEnhill Director, Vice President
and Secretary 25%
Bruce M. Bourdon Director and Vice President 25%
</TABLE>
49
<PAGE> 50
PART IV
ITEM 13. EXHIBITS AND REPORTS ON
FORM 8-K
(a) Exhibits
2(a). Asset Purchase Agreement between Randers Engineering of Illinois
Incorporated and EPC International, Inc. Incorporated by reference to Exhibit
2(a) to the Company's Form 8-K dated December 9, 1993.
3(a). Certificate of Incorporation of The Randers Group Incorporated
as filed with the Delaware Secretary of State on June 19, 1987. Incorporated
by reference to Exhibit 3(a) to the Company's Registration Statement on Form
10.
3(b). Certificate of Amendment to Certificate of Incorporation of The
Randers Group Incorporated, dated November 2, 1987 and filed with the Delaware
Secretary of State on March 7, 1988. Incorporated by reference to Exhibit 3(b)
to the Company's Registration Statement on Form 10.
3(c). Amended and Restated Bylaws of The Randers Group Incorporated.
Incorporated by reference to Exhibit 3(a) to the Company's Registration
Statement on Form 10.
4. Instruments defining rights of security holders, including
indentures. All incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form 10.
4(a) See paragraphs 4, 8 and 9 of the Certificate of Incorporation of
The Randers Group Incorporated [Exhibit Table Number 3(a) above.].
4(b) See the following relevant provisions of the amended and
restated bylaws of The Randers Group Incorporated [Exhibit Table Number 3(c)
above]:
(i) Article II, Section 4, Notice of Meeting of
Shareholders;
(ii) Article II, Section 8, Vote of Shareholders;
(iii) Article II, Section 10, Proxies;
(iv) Article II, Section 12, Consent of Shareholders in
Lieu of Meeting;
(v) Article VII, Section 2, Share Certificates; Required
Provisions;
(vi) Article VII, Section 4, Registered Shareholders;
50
<PAGE> 51
(vii) Article VIII, Section 1, Dividends or Other
Distributions in Cash or Property; and
(viii) Article IX, Amendments.
10(a). Development Agreement dated December 1, 1988 between First
Venture Associates Limited Partnership ("FVALP") and Redeco Incorporated.
Incorporated by reference to Exhibit 10(a) to the Company's Registration in
Statement on Form 10.
10(b). Addendum to Development Agreement between First Venture
Associates Limited Partnership and Redeco Incorporated extending the expiration
date until December 31, 1998. Incorporated by reference to Exhibit 10(b) to
the Company's Form 10-KSB for the year ended December 31, 1993.
10(c). Lease, dated April 28, 1986, between American Acquest Mona
Shores I Limited Partnership, landlord, and Randers Engineering, Inc., tenant,
regarding 9,000 square feet of space located at 3355 Merriam Avenue, Muskegon
Heights, Michigan. Incorporated by reference to Exhibit 10 (b) to the
Company's Registration Statement on Form 10.
10(d). Office Lease, dated April 13, 1990, between Randers Group
Property Corporation, landlord, and GTE Directories Sales Corporation, tenant,
regarding the sublease of 9,000 square feet of space located at 3355 Merriam
Avenue, Muskegon Heights, Michigan. Incorporated by reference to Exhibit 10(c)
to the Company's form 10-K for the year ended December 31, 1991.
10(e). Office Lease dated April 12, 1993, between Randers Engineering,
Inc., tenant, and Northwood Corporate Park Limited Partnership, landlord,
regarding 2,985 square feet of space located at 41280 Six Mile Road, Northville
Township, Michigan. Incorporated by reference to Exhibit 10(a) to the
Company's Form 10-QSB for the quarter ended September 30, 1993.
10(f). Agreement dated January 12, 1995, between Randers Engineering,
Inc., sub-tenant, and Applicon, Inc., sub-lessor, regarding the sharing of 4,015
square feet of based space located at 5412 Courseview Drive, Mason, Ohio 45040.
Incorporated by reference to Exhibit 10(f) to the Company's Form 10-KSB for the
year ended December 31, 1994.
10(g). Office Lease, dated July 2, 1992 between Randers Engineering,
Inc., tenant, and Technical Center Employees Federal Credit Union, landlord,
regarding 1,400 square feet of space located at 318 Fifth Avenue, South
Charleston, West Virginia 25303. Incorporated by reference to Exhibit 10(i) to
the Company's form 10-KSB for the year ended December 31, 1993.
51
<PAGE> 52
10(h). Office Lease dated October 15, 1987 between Redeco Incorporated,
landlord, and Borgman Carpenter Insurance Agency, tenant, regarding 2,000
square feet of space located at 3391 Merriam Avenue, Muskegon Heights, Michigan
(Randers Professional Building III). Incorporated by reference to Exhibit
10(e) to the Company's Registration Statement on Form 10.
10(i). Office Lease, dated September 18, 1992, between Randers Group
Property Corporation, landlord, and Michigan Education Association, tenant,
regarding 1,752 square feet of space located at 3391 Merriam Avenue, Muskegon
Heights, Michigan (Randers Professional Building III). Incorporated by
reference to Exhibit 10(j) to the Company's form 10-KSB for the year ended
December 31, 1992.
10(j). Office Lease, dated June 4, 1993, between Randers Group Property
Corporation, landlord, and Mapping & Printing Specialties, Inc., tenant,
regarding 1,300 square feet of space located at 3391 Merriam Avenue, Muskegon
Heights, Michigan. Incorporated by reference to Exhibit 10(j) to the Company's
Form 10-KSB for the year ended December 31, 1994.
10(k). Office Lease, dated September 24, 1993, between Randers Group
Property Corporation, landlord, and HHS, Inc., tenant, regarding 3,440 square
feet of space located at 570 Seminole Road, Norton Shores, Michigan.
Incorporated by reference to Exhibit 10(b) of the Company's Form 10-QSB for the
quarter ended September 30, 1993.
10(l). Office Lease, dated February 10, 1994, between Randers Group
Property Corporation, landlord, and Transamerica Title Insurance Company,
tenant, regarding 1,541 square feet of space located at 570 Seminole Road,
Muskegon, Michigan. Incorporated by reference to Exhibit 10(l) to the
Company's Form 10-KSB for the year ended December 31, 1994.
10(m). Addendum No. 1 to lease agreement dated February 10, 1994, between
Randers Group Property Corporation, landlord, and Transamerica Title Insurance
Company, tenant, increasing tenants space, rent and lease term. Incorporated
by reference to Exhibit 10(m) to the Company's Form 10-KSB for the year ended
December 31, 1994.
10(n). The Randers Group Incorporated 1988 Stock Option Plan, effective
February 8, 1988. Incorporated by reference to Exhibit 10(m) to the Company's
Registration Statement on Form 10.
10(o). Indemnification Agreement, dated November 2, 1987, between The
Randers Group Incorporated and Thomas R. Eurich. Incorporated by reference to
Exhibit 10(n) to the Company's Registration Statement on Form 10.
10(p). Indemnification Agreement, dated November 2, 1987, between The
Randers Group Incorporated and Thomas J. McEnhill. Incorporated by reference
to Exhibit 10(o) to the Company's Registration Statement on Form 10.
52
<PAGE> 53
10(q). Indemnification Agreement, dated November 2, 1987, between The
Randers Group Incorporated and Michael J. Krivitzky. Incorporated by reference
to Exhibit 10(p) to the Company's Registration Statement on Form 10.
10(r). Indemnification Agreement, dated November 2, 1987, between The
Randers Group Incorporated and Bruce M. Bourdon. Incorporated by reference to
Exhibit 10(q) to the Company's Registration Statement on Form 10.
10(s). Adoption Agreement for Aetna Life Insurance and Annuity Company
Standardized 401(k) Profit Sharing Plan and Trust. Aetna Life Insurance and
Annuity Company 401(k) Profit Sharing Plan and Trust. Incorporated by
reference to Exhibit 10(u) of the Company's Form 10-K for the year ended
December 31, 1990.
10(t). The Randers Group Incorporated Flexible Compensation Plan effective
January 1, 1991. Incorporated by reference to Exhibit 10(a) to the Company's
Form 10-K for the year ended December 31, 1991.
11. Statement regarding Computation of Earnings per Share. Page 55
of 56.
21. Subsidiaries of The Randers Group Incorporated. Page 56 of 56.
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Commission for the quarter ended
December 31, 1995.
53
<PAGE> 54
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, The Randers
Group Incorporated has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
By /S/ Thomas R. Eurich
---------------------------
Thomas R. Eurich, President
Date March 29, 1996
-------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Name
/S/ Thomas R. Eurich
- - ---------------------------------
Thomas R. Eurich, President and
Director (Principal Executive
Officer)
/S/ David A. Wiegerink
- - ---------------------------------
David A. Wiegerink, Vice President
of Finance and Administration
(Principal Financial Officer)
/S/ Michael J. Krivitzky
- - ---------------------------------
Michael J. Krivitzky, Senior Vice
President, Treasurer, and Director
/S/ Thomas J. McEnhill
- - ---------------------------------
Thomas J. McEnhill, Vice President,
Secretary, and Director
/S/ Bruce M. Bourdon
- - ---------------------------------
Bruce M. Bourdon, Vice President
and Director
54
<PAGE> 1
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER SHARE
Primary Earnings Per Share
Net income per share is computed on the basis of the weighted average number
of common and dilutive common equivalent shares outstanding during each period.
The number of shares used in computing net income per share for each of the
three years included herein are as follows:
<TABLE>
<CAPTION>
Weighted Average
Weighted Average Number of Common
Number of Common Equivalent
Year Shares Outstanding Shares Outstanding Total
- - ---- ------------------ ------------------ -----
<S> <C> <C> <C>
1995 14,115,682 - 14,115,682
1994 14,114,924 - 14,114,924
1993 14,097,500 - 14,097,500
</TABLE>
Fully Diluted Earnings Per Share
The Company's outstanding stock options are exercisable at prices which are at
or in excess of the market price. Under the treasury stock method of computing
fully diluted earnings per share, the calculation of earnings per share based
upon the exercise of the stock options would be antidilutive (would result in
increased earnings per share).
55
<PAGE> 1
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
LISTING OF SUBSIDIARIES
The following companies are subsidiaries of The Randers Group Incorporated.
Each of the following companies are (a) wholly owned subsidiaries, and (b) are
incorporated in the state shown beside their respective names:
Redeco Incorporated (Michigan)
Randers Engineering, Inc. (Michigan)
Clark-Trombley Consulting Engineers, Inc. (Michigan)
Randers Group Property Corporation (Michigan)
Viridian Technology, Inc. (Michigan)
Randers-EPC Incorporated (Illinois) (Inactive at December 31, 1995)
Randers Engineering of Massachusetts, Inc. (Michigan) (Inactive)
Clark-Trombley Consulting Engineers, Inc. does business under the name
"Clark-Trombley-Randers." No other subsidiary operates under an assumed name.
56
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Financial Statements of The Randers Group Incorporated
for the year ended December 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 409,087
<SECURITIES> 0
<RECEIVABLES> 2,544,199
<ALLOWANCES> 45,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,030,133
<PP&E> 3,803,493
<DEPRECIATION> 1,185,574
<TOTAL-ASSETS> 7,114,986
<CURRENT-LIABILITIES> 2,425,942
<BONDS> 0
0
0
<COMMON> 1,412
<OTHER-SE> 3,603,412
<TOTAL-LIABILITY-AND-EQUITY> 7,114,986
<SALES> 2,916,505
<TOTAL-REVENUES> 10,191,710
<CGS> 2,741,787
<TOTAL-COSTS> 7,931,962
<OTHER-EXPENSES> 1,870,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230,961
<INCOME-PRETAX> 203,835
<INCOME-TAX> 79,000
<INCOME-CONTINUING> 124,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,835
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
