<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------ ------
Commission file number 0-18095.
THE RANDERS GROUP INCORPORATED
--------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 38-2788025
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
570 Seminole Road, Norton Shores, Michigan 49444
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(616) 733-0036
-------------------------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
--- ----
Number of Common shares, par value $.0001, outstanding at April 30, 1997:
14,115,682
<PAGE> 2
THE RANDERS GROUP INCORPORATED
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Facing Sheet.......................................................... 1
TABLE OF CONTENTS..................................................... 2
PART I Financial Information
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) -
March 31, 1997 and December 31, 1996................... 3
Condensed Consolidated Statements of Operations
(Unaudited) - Three months ended March 31, 1997 and
1996................................................... 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Three months ended March 31, 1997 and
1996................................................... 6
Notes to Condensed Consolidated Financial Statements... 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 11
PART II Other Information............................................ 14
SIGNATURES........................................................ 15
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE............. 16
FINANCIAL DATA SCHEDULE........................................... 17
</TABLE>
2
<PAGE> 3
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------ ------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 669,322 $ 476,694
Accounts receivable, less
allowances of $47,000
and $62,000 for possible
losses 2,373,135 2,971,425
Notes and accounts receivable -
Affiliate 1,315,935 -
Prepaid expenses and other 48,897 100,868
Future income tax benefits 85,000 85,000
----------- -----------
TOTAL CURRENT ASSETS 4,492,289 3,633,987
----------- -----------
NET PROPERTY AND EQUIPMENT 2,534,162 2,582,495
----------- -----------
OTHER ASSETS:
Notes and accounts receivable -
Affiliate - 1,315,935
Goodwill, less accumulated
amortization of $112,437
and $109,368 132,080 135,149
Miscellaneous 3,681 5,140
----------- -----------
TOTAL OTHER ASSETS 135,761 1,456,224
----------- -----------
$ 7,162,212 $ 7,672,706
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable - bank $ 897,000 $ 301,000
Accounts payable 407,565 1,299,068
Billings in excess of costs and
estimated earnings on contracts
in progress 16,000 89,000
Accrued compensation 303,225 222,070
Accrued income taxes 13,183 78,533
Other accrued expenses 44,269 191,626
Current maturities of long-term debt 96,672 96,672
---------- ----------
TOTAL CURRENT LIABILITIES 1,777,914 2,277,969
LONG-TERM DEBT, less current
maturities 945,472 969,638
---------- ----------
TOTAL LIABILITIES 2,723,386 3,247,607
---------- ----------
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 2,900,975 2,887,248
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 4,438,826 4,425,099
---------- ----------
$7,162,212 $7,672,706
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------------ --------------
<S> <C> <C>
REVENUES:
Service/consulting $ 1,944,990 $ 2,606,712
Construction 305,165 216,373
Rental 77,572 82,666
------------ ------------
Total Revenues 2,327,727 2,905,751
------------ ------------
COSTS AND EXPENSES:
Costs of services/consulting 1,518,312 1,716,778
Construction costs 267,827 177,864
Rental costs 62,138 54,209
Selling, administrative and
general expenses 433,442 448,880
------------ ------------
Total Costs and Expenses 2,281,719 2,397,731
------------ ------------
Operating income 46,008 508,020
------------ ------------
OTHER INCOME (EXPENSES):
Interest expense (29,878) (49,771)
Interest income 5,097 26,531
------------ ------------
Other Income (Expense) - Net (24,781) (23,240)
------------ ------------
Income before taxes on income 21,227 484,780
INCOME TAXES 7,500 173,000
------------ ------------
NET INCOME $ 13,727 $ 311,780
============ ============
NET INCOME PER SHARE $ .00 $ .02
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 14,115,682 14,115,682
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATIONS:
Cash received from customers $ 2,941,017 $ 2,763,436
Cash paid to suppliers and employees (3,205,428) (2,527,776)
Interest received 5,097 4,659
Interest paid (29,878) (49,771)
Income taxes paid (72,850) (26,500)
----------- -----------
Net Cash From (For) Operations (362,042) 164,048
----------- -----------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures (17,164) (112,043)
Advance to affiliate - (10,000)
----------- -----------
Net Cash From (For) Investing
Activities (17,164) (122,043)
----------- -----------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Net borrowings (payments) on line of credit 596,000 (10,000)
Principal payments on loans (24,166) (37,771)
Payments received on note from affiliate - 12,200
----------- -----------
Net Cash From (For) Financing Activities 571,834 (35,571)
----------- -----------
NET INCREASE (DECREASE) IN CASH 192,628 6,434
Cash and cash equivalents, at
beginning of period 476,694 409,087
----------- -----------
Cash and cash equivalents, at
end of period $ 669,322 $ 415,521
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1997 1996
-------- --------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO
NET CASH FROM (FOR) OPERATIONS:
Net income $ 13,727 $ 311,780
Provision for (reduction in) allowance
on accounts receivable (15,000) 10,000
Depreciation 65,497 59,778
Amortization 3,069 3,069
Changes in operating assets and
liabilities:
Accounts and notes receivable 613,290 (132,315)
Prepaid expenses and other 53,430 (36,599)
Accounts payable and billings
in excess of costs and estimated
earnings on contracts in progress (964,503) (363,542)
Accrued expenses (131,552) 311,877
--------- ----------
NET CASH FROM (FOR) OPERATIONS $(362,042) $ 164,048
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
THE RANDERS GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The Randers Group Incorporated and its Subsidiaries (the Company) provide
design, engineering, project management, general contracting and development
services to industrial and commercial clients throughout the United States. The
Company considers such operations to constitute one business segment.
The condensed 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.
The financial information included herein as of any date other than
December 31, is unaudited; however, such information reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. Financial information as
of December 31, has been taken from the audited financial statements of the
Company, however, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Accordingly, these
condensed consolidated financial statements and notes should be read in
conjunction with the Company's audited consolidated financial statements for the
year ended December 31, 1996.
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.
A portion of the Company's business is derived from long-term contracts,
the income from which is recognized on the percentage-of-completion method.
Results of operations for any quarter may include revisions to estimated
earnings for such contracts that were recorded in prior periods and these
revisions may again be adjusted in subsequent quarters as further information
becomes available or the contracts are completed.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year.
8
<PAGE> 9
THE RANDERS GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment used in the construction and service/ consulting
operations consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
<S> <C> <C>
Cost $ 2,287,997 $ 2,270,833
Less accumulated amortization 1,187,163 1,135,437
------------ ------------
Net $ 1,100,834 $ 1,135,396
============ ============
Property and equipment used in rental operations consist of the following:
Cost $ 1,758,966 $ 1,758,966
Less accumulated amortization 325,638 311,867
------------ ------------
Net $ 1,433,328 $ 1,447,099
============ ============
Net Property and Equipment - total $ 2,534,162 $ 2,582,495
============ ============
</TABLE>
NOTE 3 - NOTES AND ACCOUNTS RECEIVABLE - AFFILIATE
The Company's balance sheets include various amounts receivable from First
Venture Associates Limited Partnership (FVALP), an entity owned by four of the
Company's officers/directors. The amounts receivable from FVALP consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1997(A) 1996
------------ ------------
<S> <C> <C>
Notes receivable $ 393,111 $ 393,111
Accrued interest receivable 93,730 93,730
Accounts receivable 829,094 829,094
------------ ------------
$ 1,315,935 $ 1,315,935
============ ============
</TABLE>
(A) The notes and accounts receivable are shown as a current asset in the
accompanying balance sheet as of March 31, 1997, as such amounts were collected
in May, 1997.
9
<PAGE> 10
THE RANDERS GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - NOTE PAYABLE - BANK
The Randers Group Incorporated has a line of credit which provides for
advances up to $1,500,000. The line bears interest at the prime rate. The
prime rate was 8.25% at December 31, 1996 and at March 31, 1997.
The loan agreement, which expired May 1, 1997, has been verbally extended
by the bank. The Company is currently renegotiating the loan and expects that
it will be renewed under similar terms and conditions.
The line of credit is collateralized by all the assets of the Company and
its subsidiaries. The loan agreement further provides that the Company is to
maintain consolidated net worth of at least $1,500,000. Unrestricted equity was
$2,925,099 at December 31, 1996 and $2,938,826 at March 31, 1997.
NOTE 5 - CONTINGENCIES
Due to the limited availability and high cost of professional liability
insurance covering services related to the chemical industry, Randers
Engineering, a subsidiary of the Company, does not maintain such insurance.
Management is not aware of any uninsured claims or potential claims which may be
asserted against the Company. Although the Company has never incurred a
significant liability because of work performed, there can be no assurances that
the Company will not incur such a liability in the future.
NOTE 6 - NET INCOME 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 the
period.
10
<PAGE> 11
ITEM 2
MANAGEMENT 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 Company's March 31, 1997 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. Such
amounts include notes and accrued interest receivable from FVALP of $393,111 and
$93,730, respectively, and accounts receivable from FVALP of $829,094. These
amounts were collected in May, 1997, and accordingly these amounts have been
classified as a current asset in March 31, 1997 balance sheet.
The following table sets forth information related to the Company's
liquidity as of the dates indicated.
<TABLE>
<CAPTION>
March 31,
------------------------
1997 1996
--------- --------
<S> <C> <C>
Cash and cash equivalents $ 669,000 $ 416,000
Working capital $ 2,714,000 $ 821,000
Ratio of current assets to current
liabilities 2.53 to 1 1.35 to 1
Available funds under line of credit $ 603,000 $ 171,000
</TABLE>
The Company's cash position of $669,000 at March 31, 1997, reflects an
increase of approximately $193,000 since December 31, 1996.
Operations for the first quarter of 1997 consumed $362,000 of cash. Net
income of $14,000 for the period combined with non-cash expenses of $54,000 and
a $667,000 decrease in accounts receivable and prepaid expenses were not
sufficient enough to offset a $965,000 decrease in accounts payable and billings
in excess of cost and estimated earnings on contracts in progress and a $132,000
decrease in accrued expenses. The decrease in accounts receivable and accounts
payable was due primarily to changes in business activity rather than from a
change in the timing of cash collections or disbursements.
11
<PAGE> 12
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
In addition to the $362,000 of cash consumed by operations during the first
three months of 1997, the Company expended $17,000 for property and equipment
and used $24,000 to reduce its long-term debt. During this same period the
Company borrowed $596,000 on its line of credit thus resulting in a $192,000 net
increase in cash.
* * * * * * * * *
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 March 31, 1997, the Company had outstanding borrowings of
$897,000 on the line. Management expects that the line of credit, which expired
May 1, 1997, will be renewed under similar terms and conditions.
As previously discussed, the Company collected the $1,315,935 due from an
affiliate during May, 1997. The funds were used to repay the Company's
borrowings on its line of credit with the remaining portion invested in cash
equivalents.
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 that the current agreement will
be extended.
The Company does not have any material commitment for capital expenditures
which are outside the ordinary course of business.
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 Condensed Consolidated Statements of
Operations bear to revenues:
12
<PAGE> 13
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------- --------
<S> <C> <C>
Revenues 100.0% 100.0%
Direct Expenses 79.4% 67.1%
Selling Administrative
and General Expenses 18.6% 15.4%
Operating Income 2.0% 17.5%
Other Income (Expenses)- Net (1.1%) (.8%)
Income Taxes (Reduction) .3% 6.0%
Net Income (Loss) .6% 10.7%
</TABLE>
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Revenues for the first months of 1997 were $2,328,000 compared to
$2,906,000 for the same period in 1996, a decrease of 19.9% Service/consulting
fees decreased $662,000 (25.4%) while construction revenues increased $89,000
(41.0%). The decrease in service/ consulting revenues results primarily from
the completion in 1996 of two large design/construction management projects
which were active during the first quarter of 1996. Construction revenues
continued to reflect a slow down in construction spending among the Company's
traditional client base. However, the design and manufacturer of specialized
equipment system accounted for the additional revenues recognized in 1997.
The Company reported an operating profit of $46,000 during the first three
months of 1997 compared to an operating profit of $508,000 during the same
period of 1996. Gross profit from service/consulting fees were $427,000 (21.9%)
for the first quarter of 1997 compared to a gross profit of $890,000 (34.1%) in
1996. The decrease in the gross profit percentage results primarily from a
decrease in staff utilization related to the decreased volume of work.
Construction operations reported a gross profit of $37,000 (12.2%) compared to a
gross profit of $39,000 (17.8%) for 1996. Selling, administrative, and
general expenses were $434,000 during the first quarter of 1997 compared to
$449,000 for the same period in 1996, a decrease of $15,000 or 3.4%. Such costs,
however, represented 18.6% of revenue in 1997 compared to 15.4% in 1996.
Net interest expense was $25,000 for the first three months of 1997
compared to net interest expense of $23,000 in 1996.
13
<PAGE> 14
PART II - OTHER INFORMATION
Items 1-5
Not applicable.
Item 6
6(a) Exhibits:
#11 - Statement Regarding Computation of Earnings Per Share (Part I
Exhibit).
#27 - Financial Data Schedule (Part I Exhibit).
6(b) Reports on Form 8-K: None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE RANDERS GROUP INCORPORATED
Date: May 14, 1997 |s| Thomas R. Eurich
---------------------------
Thomas R. Eurich, President
Date: May 14, 1997 |s| Michael J. Krivitzky
---------------------------
Michael J. Krivitzky
Senior Vice President and
Treasurer
Date: May 14, 1997 |s| David A. Wiegerink
---------------------------
David A. Wiegerink, Vice
President Finance and
Administration Principal
Accounting Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
11 Computation of Earnings Per shares
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
THE RANDERS GROUP INCORPORATED AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS 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 periods included herein are as follows:
<TABLE>
<CAPTION>
Weighted Average
Three Months Weighted Average Number of Dilutive
Ended Number of Common Common Equivalent
March 31, Shares Outstanding Shares Outstanding Total
-------------- ------------------ ------------------ ------
<S> <C> <C> <C>
1997 14,115,682 --- 14,115,682
1996 14,115,682 --- 14,115,682
</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).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENT OF THE RANDERS GROUP INCORPORATED FOR
THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 669,322
<SECURITIES> 0
<RECEIVABLES> 2,420,135
<ALLOWANCES> 47,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,492,289
<PP&E> 4,046,963
<DEPRECIATION> 1,512,801
<TOTAL-ASSETS> 7,162,212
<CURRENT-LIABILITIES> 1,777,914
<BONDS> 0
0
0
<COMMON> 1,412
<OTHER-SE> 4,437,414
<TOTAL-LIABILITY-AND-EQUITY> 7,162,212
<SALES> 305,165
<TOTAL-REVENUES> 2,327,727
<CGS> 267,827
<TOTAL-COSTS> 1,848,277
<OTHER-EXPENSES> 433,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,878
<INCOME-PRETAX> 21,227
<INCOME-TAX> 7,500
<INCOME-CONTINUING> 13,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,727
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
