SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarter Ended September
27, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 0-18095
THE RANDERS GROUP INCORPORATED
(Exact name of Registrant as specified 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)
Registrant's telephone number, including area code: (616) 733-0036
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Pro Forma
Class Outstanding at September 27, 1997
------------------------------ ---------------------------------
Common Stock, $.0001 par value 121,554,895
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THE RANDERS GROUP INCORPORATED
Consolidated Balance Sheet
(Unaudited)
Assets
September 27, March 29,
(In thousands) 1997 1997
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 2,463 $ 1,737
Accounts receivable, less allowances of $531
and $706 15,097 11,613
Unbilled contract costs and fees 12,474 8,113
Prepaid income taxes 1,516 1,431
Prepaid expenses 634 478
Due from parent company 104 -
------- -------
32,288 23,372
------- -------
Property, Plant, and Equipment, at Cost 15,095 11,863
Less: Accumulated depreciation and amortization 3,380 2,828
------- -------
11,715 9,035
------- -------
Other Assets 902 1,373
------- -------
Cost in Excess of Net Assets of Acquired Companies
(Note 2) 45,740 41,654
------- -------
$90,645 $75,434
======= =======
2PAGE
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THE RANDERS GROUP INCORPORATED
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 27, March 29,
(In thousands except share amounts) 1997 1997
-----------------------------------------------------------------------
Current Liabilities:
Notes payable $ 211 $ 648
Accounts payable 3,181 2,023
Accrued payroll and employee benefits 3,040 3,124
Accrued income taxes 1,492 78
Other accrued expenses 1,098 1,425
Due to parent company - 36
------- -------
9,022 7,334
------- -------
Deferred Income Taxes 1,096 1,096
------- -------
Other Deferred Items 912 1,013
------- -------
Long-term Obligations 2,042 1,260
------- -------
Shareholders' Investment:
Common stock, $.0001 par value, 30,000,000 shares
authorized; 121,554,895 pro forma shares issued
and outstanding (Note 2) 12 -
Capital in excess of par value 76,137 -
Retained earnings 1,424 -
Parent company investment - 64,731
------- -------
77,573 64,731
------- -------
$90,645 $75,434
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
THE RANDERS GROUP INCORPORATED
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
----------------------------------------------------------------------
Revenues $ 18,231 $ 15,893
-------- --------
Costs and Operating Expenses:
Cost of revenues 13,486 11,637
Selling, general, and administrative expenses 2,973 2,305
-------- --------
16,459 13,942
-------- --------
Operating Income 1,772 1,951
Interest Income 24 37
Interest Expense (92) (48)
-------- --------
Income Before Provision for Income Taxes 1,704 1,940
Provision for Income Taxes 720 892
-------- --------
Net Income $ 984 $ 1,048
======== ========
Earnings per Share $ .01 $ .01
======== ========
Weighted Average Shares 121,555 107,439
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
THE RANDERS GROUP INCORPORATED
Consolidated Statement of Income
(Unaudited)
Six Months Ended
-----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $ 35,075 $ 33,615
-------- --------
Costs and Operating Expenses:
Cost of revenues 25,838 25,076
Selling, general, and administrative expenses 5,894 4,647
-------- --------
31,732 29,723
-------- --------
Operating Income 3,343 3,892
Interest Income 45 63
Interest Expense (116) (90)
-------- --------
Income Before Provision for Income Taxes 3,272 3,865
Provision for Income Taxes 1,447 1,788
-------- --------
Net Income $ 1,825 $ 2,077
======== ========
Earnings per Share $ .02 $ .02
======== ========
Weighted Average Shares 118,375 107,439
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<PAGE>
THE RANDERS GROUP INCORPORATED
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 1,825 $ 2,077
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 1,335 964
Provision for losses on accounts
receivable 81 -
Other noncash (income) expenses (101) 3
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (1,455) 294
Unbilled contract costs and fees (4,394) (1,500)
Other current assets (49) (354)
Accounts payable 618 531
Current liabilities (347) (2,270)
------- -------
Net cash used in operating activities (2,487) (255)
------- -------
Investing Activities:
Acquisition, net of cash acquired (Note 2) (3,258) -
Purchases of property, plant, and equipment (892) (435)
Proceeds from sale of property, plant, and
equipment 18 106
Other (38) -
------- -------
Net cash used in investing activities (4,170) (329)
------- -------
Financing Activities:
Repayment of note payable (125) (585)
Transfer from parent company to fund the
acquisition of Randers (Note 2) 3,258 -
Net transfer from parent company 4,250 1,631
-------- -------
Net cash provided by financing activities 7,383 1,046
-------- -------
Increase in Cash and Cash Equivalents 726 462
Cash and Cash Equivalents at Beginning
of Period 1,737 794
-------- -------
Cash and Cash Equivalents at End of Period $ 2,463 $ 1,256
======== =======
6PAGE
<PAGE>
THE RANDERS GROUP INCORPORATED
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ 6,790 $ -
Cash paid for acquired companies (4,700) -
------- --------
Liabilities assumed of acquired companies $ 2,090 $ -
======= ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
THE RANDERS GROUP INCORPORATED
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by The Randers Group Incorporated (Randers) without audit and,
in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of the financial position
at September 27, 1997, and the results of operations for the three- and
six-month periods ended September 27, 1997, and September 28, 1996, and
cash flows for the six-month periods ended September 27, 1997, and
September 28, 1996. Interim results are not necessarily indicative of
results for a full year.
The historical results of Randers have been restated to solely
reflect the results of The Killam Group, Inc. (The Killam Group), prior
to May 12, 1997. The Killam Group has been deemed "the accounting
acquiror" in a transaction described in Note 2.
The consolidated balance sheet presented as of March 29, 1997, has
been derived from the consolidated financial statements that have been
audited by The Killam Group's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of The Killam Group. The consolidated
financial statements and notes included herein should be read in
conjunction with the financial statements and notes included in Randers'
Current Report on Form 8-K/A with respect to the acquisition of The
Killam Group on September 19, 1997, filed with the Securities and
Exchange Commission on October 8, 1997.
2. Acquisition and Basis of Accounting
On May 12, 1997, Thermo TerraTech Inc. (Thermo TerraTech) purchased a
controlling interest in Randers. Thermo TerraTech purchased 7,100,000
shares of Randers common stock from certain members of Randers'
management, and 420,000 shares from Thermo Power Corporation, an
affiliate of Thermo TerraTech, at a price of $0.625 per share, for an
aggregate cost of approximately $4.7 million. Following these
transactions, Thermo TerraTech owns approximately 53.3% of Randers'
outstanding common stock. In addition, Thermo Electron Corporation,
parent company to Thermo TerraTech, owns approximately 8.9% of Randers'
outstanding common stock.
Thermo TerraTech has also entered into a definitive agreement to
transfer to Randers, The Killam Group, its wholly owned engineering and
consulting businesses, in exchange for newly issued shares of Randers'
common stock. The exact price for these businesses will be equal to the
book value of the transferred businesses as of the closing date of the
transfer. The number of new shares of Randers' common stock to be
8PAGE
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THE RANDERS GROUP INCORPORATED
2. Acquisitions (continued)
issued to Thermo TerraTech will equal such book value divided by $0.625.
Based on the unaudited book value of The Killam Group as of September 27,
1997, which was $67,150,000, Randers would issue 107,439,213 shares of
its common stock to Thermo TerraTech. Upon such issuance, Thermo
TerraTech and Thermo Electron would own approximately 94.6% and 1.03% of
Randers' outstanding common stock, respectively. The transfer is subject
to approval of the transaction by Randers' shareholders and continued
listing of the Randers common stock on the American Stock Exchange
following the transaction. However, because Thermo TerraTech currently
owns approximately 53.3% of Randers' outstanding common stock, approval
by Randers' shareholders is assured. For purposes of computing weighted
average shares, the 107,439,213 shares of Randers' common stock to be
issued in connection with the acquisition of the Killam Group are
considered to be outstanding for all periods presented, and the
14,115,682 shares of Randers' common stock that were outstanding as of
May 12, 1997, the date on which Thermo TerraTech acquired a majority
interest in Randers, are considered outstanding as of that date.
This acquisition has been accounted for in accordance with Staff
Accounting Bulletin Topic 2-A2, pursuant to which The Killam Group has
been treated as the "accounting acquiror" because Thermo TerraTech owns
the larger portion of the voting rights of Randers as a result of the
above mentioned transactions. Accordingly, the historical financial
information of Randers has been restated to solely reflect the results of
The Killam Group prior to May 12, 1997, the date on which Thermo
TerraTech acquired a majority interest in Randers. Results from May 12,
1997, have been restated to reflect the combined results of The Killam
Group and Randers. The aggregate cost of the acquisition of Randers by
Thermo TerraTech exceeded the estimated fair value of the acquired net
assets by $4,424,000, which is being amortized over 40 years. Allocation
of the purchase price for this acquisition was based on estimates of the
fair value of the net assets acquired and is subject to adjustment upon
finalization of the purchase price allocation. To date, no information
has been gathered that would cause management to believe that the final
purchase price allocation will be materially different than preliminary
estimates.
Based on unaudited data, the following table presents selected
financial information for The Killam Group and Randers on a pro forma
basis, assuming the companies had been combined since the beginning of
fiscal 1997.
Three
Months Ended Six Months Ended
------------ ------------------------
(In thousands except Sept. 28, Sept. 27, Sept. 28,
per share amounts) 1996 1997 1996
----------------------------------------------------------------------
Revenues $18,928 $36,212 $39,401
Net income 1,146 1,805 2,347
Earnings per share .01 .02 .02
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition been made at the beginning of fiscal 1997.
9PAGE
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THE RANDERS GROUP INCORPORATED
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
In May 1997, Thermo TerraTech purchased a controlling interest in The
Randers Group Incorporated (Randers; Note 2), a provider of design,
engineering, project management, and construction services for industrial
clients in the manufacturing, pharmaceutical, and chemical-processing
industries. Subsequently, Thermo TerraTech entered into a definitive
agreement to transfer The Killam Group to Randers in exchange for
additional shares of Randers' common stock. As a result of these
transactions (as more fully described in Note 2), The Killam Group is
deemed to be "the accounting acquiror" and historical results for Randers
have been restated to solely reflect the operating results of The Killam
Group for periods prior to May 12, 1997, and to reflect the combined
results of The Killam Group and Randers (collectively, the Company) from
May 12, 1997, the date on which Thermo TerraTech became the
majority-owner of Randers. The Company's wholly owned Killam Associates,
Inc. (Killam Associates) subsidiary provides environmental consulting and
engineering services and specializes in wastewater treatment and water
resources management. The Company's wholly owned Bettigole Andrews Clark
& Killam Inc. (BACKillam) subsidiary provides both private- and
public-sector clients with a range of consulting services that address
transportation planning and design. In November 1996, the Company
acquired Carlan Consulting Group, Inc. (Carlan), a provider of
transportation and environmental consulting and professional engineering
and architectural services.
Results of Operations
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
Revenues increased to $18.2 million in the second quarter of fiscal
1998 from $15.9 million in the second quarter of fiscal 1997, primarily
due to the inclusion of $4.5 million of revenues from Carlan and Randers
(Note 2), acquired in November 1996 and May 1997, respectively, offset in
part by a decrease in revenues due to the completion of two major
contracts in fiscal 1997 at Killam Associates and BACKillam.
The gross profit margin decreased to 26% in the second quarter of
fiscal 1998 from 27% in the second quarter of fiscal 1997, primarily due
to a change in sales mix to lower-margin revenues at BACKillam, and the
inclusion of lower-margin revenues from Carlan. These decreases were
offset in part by a change in sales mix to higher-margin contracts at
Killam Associates.
Selling, general, and administrative expenses as a percentage of
revenues increased to 16% in the second quarter of fiscal 1998 from 15%
in the second quarter of fiscal 1997, primarily due to a decrease in
revenues at Killam Associates and, to a lesser extent, an increase in
that business unit's marketing costs.
10PAGE
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THE RANDERS GROUP INCORPORATED
Second Quarter Fiscal 1998 Compared With Second Quarter Fiscal 1997
(continued)
Interest expense increased to $92,000 in the second quarter of fiscal
1998 from $48,000 in the second quarter of fiscal 1997, primarily due to
the inclusion of interest expense associated with debt at Randers in
fiscal 1998.
The effective tax rates were 42% and 46% in the second quarter of
fiscal 1998 and 1997, respectively. The effective tax rates exceeded the
statutory federal income tax rate primarily due to the nondeductible
amortization of cost in excess of net assets of acquired companies and
the impact of state income taxes. The effective tax rate decreased in
fiscal 1998, primarily due to a lower statutory state tax rate at
Randers.
First Six Months Fiscal 1998 Compared With First Six Months Fiscal 1997
Revenues increased to $35.1 million in the first six months of fiscal
1998 from $33.6 million in the first six months of fiscal 1997, primarily
due to the inclusion of $7.4 million of revenues from Carlan and Randers
(Note 2), acquired in November 1996 and May 1997, respectively, offset in
part by a decrease in revenues due to the completion of two major
contracts in fiscal 1997 at Killam Associates and BACKillam.
The gross profit margin increased to 26% in the first six months of
fiscal 1998 from 25% in the first six months of fiscal 1997, primarily
due to a change in sales mix to higher-margin contracts at Killam
Associates, offset in part by the inclusion of lower-margin revenues from
Carlan.
Selling, general, and administrative expenses as a percentage of
revenues increased to 17% in the first six months of fiscal 1998 from 14%
in the first six months of 1997, primarily due to a decrease in revenues
at Killam Associates and BACKillam and, to a lesser extent, increased
marketing costs at Killam Associates.
Interest expense increased to $116,000 in the first six months of
fiscal 1998 from $90,000 in the first six months of 1997, primarily due
to the inclusion of interest expense associated with debt at Randers in
fiscal 1998, offset in part by lower average outstanding debt during
fiscal 1998.
The effective tax rates were 44% and 46% in the first six months of
fiscal 1998 and 1997, respectively. The effective tax rates exceeded the
statutory federal income tax rate and decreased between periods primarily
due to the reasons discussed in the results of operations for the second
quarter.
11PAGE
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THE RANDERS GROUP INCORPORATED
Liquidity and Capital Resources
Consolidated working capital was $23.3 million at September 27, 1997,
compared with $16.0 million at March 29, 1997. Included in working
capital were cash and cash equivalents of $2.5 million at September 27,
1997, compared with $1.7 million at March 29, 1997. During the first six
months of fiscal 1998, $2.5 million of cash was used in operating
activities. The Company funded increases of $1.5 million and $4.4 million
increases in accounts receivable and unbilled contract costs and fees,
respectively, primarily due to an increase in accounts receivable under a
state government contract, which has subsequently been paid, and the
timing of billings at BACKillam.
The Company's investing activities in the first six months of fiscal
1998 primarily consisted of an acquisition and capital additions. In May
1997, Thermo TerraTech purchased a controlling interest in Randers for
approximately $4.7 million (Note 2). The Company also expended $0.9
million for purchases of property, plant, and equipment in the first six
months of fiscal 1998. The Company expects to expend approximately $0.8
million on purchases of property, plant, and equipment during the
remainder of fiscal 1998.
In the first six months of fiscal 1998, the Company's financing
activities provided cash of $7.4 million, primarily due to transfers from
parent company.
The Company has no material commitments for the acquisition of
businesses or for capital expenditures. Such expenditures will largely be
affected by the number and size of the complementary businesses that can
be acquired or developed during the year. Thermo Electron and Thermo
TerraTech have expressed their willingness to lend funds to the Company
for major capital expenditures and potential acquisitions that may occur
in the foreseeable future, although no agreements exist assuring the
availability of such funds on acceptable terms, or at all.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On October 3, 1997, the Company filed a Current Report on Form 8-K
dated September 19, 1997, pertaining to the acquisition of The Killam
Group. On October 8, 1997, the Company filed an amendment on Form 8-K/A,
the purpose of which was to file the financial information required by
Form 8-K concerning the acquisition.
12PAGE
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THE RANDERS GROUP INCORPORATED
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 as of the 3rd day of November
1997.
THE RANDERS GROUP INCORPORATED
Emil C. Herkert
-------------------------
Emil C. Herkert
Chief Executive Officer
Paul F. Kelleher
----------------------------
Paul F. Kelleher
Chief Accounting Officer
13PAGE
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THE RANDERS GROUP INCORPORATED
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2 Stock Purchase Agreement entered in September 19, 1997, by
and between Thermo TerraTech Inc. and The Randers Group
Incorporated (incorporated by reference from Exhibit (vii)
to Amendment No. 4 to Schedule 13D filed by Thermo Electron
Corporation and Thermo TerraTech on October 1, 1997).
10 Agreement by and among Thermo TerraTech Inc., The
Randers Group Incorporated, Thomas R. Eurich,
Michael J. Krivitzky, Thomas J. McEnhill, Bruce M.
Bourdon, and David A. Wiegerink (incorporated by
reference from Exhibit 10 to the Company's Current
Report on Form 8-K, filed with the Commission on
October 3, 1997).
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 11
THE RANDERS GROUP INCORPORATED
Computation of Earnings per Share
Three Months Ended
-----------------------------
September 27, September 28,
1997 1996
------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $ 984,000 $ 1,048,000
------------ ------------
Shares:
Shares issuable in connection with the
acquisition of The Killam Group 107,439,213 107,439,213
Randers' weighted average shares
outstanding from May 12, 1997, date
of acquisition by Thermo TerraTech 14,115,682 -
------------ ------------
Weighted average shares outstanding,
as adjusted (b) 121,554,895 107,439,213
------------ ------------
Primary Earnings per Share (a) / (b) $ .01 $ .01
============ ============
PAGE
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Exhibit 11
THE RANDERS GROUP INCORPORATED
Computation of Earnings per Share (continued)
Six Months Ended
----------------------------
September 27, September 28,
1997 1996
------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $ 1,825,000 $ 2,077,000
------------ ------------
Shares:
Shares issuable in connection with the
acquisition of The Killam Group 107,439,213 107,439,213
Randers' weighted average shares
outstanding from May 12, 1997, date of
acquisition by Thermo TerraTech 10,935,776 -
------------ ------------
Weighted average shares outstanding,
as adjusted (b) 118,374,989 107,439,213
------------ ------------
Primary Earnings per Share (a) / (b) $ .02 $ .02
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RANDERS
GROUP INCORPORATED'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-04-1998
<PERIOD-END> SEP-27-1997
<CASH> 2,463
<SECURITIES> 0
<RECEIVABLES> 15,628
<ALLOWANCES> 531
<INVENTORY> 0
<CURRENT-ASSETS> 32,288
<PP&E> 15,095
<DEPRECIATION> 3,380
<TOTAL-ASSETS> 90,645
<CURRENT-LIABILITIES> 9,022
<BONDS> 2,042
0
0
<COMMON> 12
<OTHER-SE> 77,561
<TOTAL-LIABILITY-AND-EQUITY> 90,645
<SALES> 0
<TOTAL-REVENUES> 35,075
<CGS> 0
<TOTAL-COSTS> 25,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 81
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> 3,272
<INCOME-TAX> 1,447
<INCOME-CONTINUING> 1,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,825
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
