FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 30, 1996
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to
------------------- ---------------
Commission File Number 0-17840
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HANDEX CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2941704
- - ---------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 Campus Drive, Morganville, New Jersey 07751
-----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(908) 536-8500
----------------
(Registrant's telephone number, including area code)
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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
---- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at April 30, 1996: 6,865,212
-----------
1<PAGE>
PART I: FINANCIAL INFORMATION
---------------------------------
Item 1. Financial Statements
-------------------------------
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 30, 1996 and December 30, 1995
March 30, December 30,
1996 1995
------ ------
Assets (unaudited)
---------
Current assets:
Cash and cash equivalents $ 2,769,899 3,821,474
Marketable securities 300,000 2,775,000
Accounts receivable, net 29,863,730 30,001,497
Inventories 553,648 539,491
Refundable income tax 510,805 666,060
Deferred income tax assets 727,476 705,453
Prepaid expenses and other 888,327 927,851
current assets ------------ ------------
Total current assets 35,613,885 39,436,826
Property, plant and equipment, net 10,980,217 9,643,124
Other non-current assets 1,995,658 1,888,174
Intangible assets 16,062,793 16,121,258
------------ ------------
$ 64,652,553 67,089,382
============ =============
See accompanying notes to condensed consolidated financial statements.
2<PAGE>
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 30, 1996 and December 30, 1995
March 30, December 30,
1996 1995
----- ----
(unaudited)
Liabilities and Stockholders' Equity
- - --------------------------------------
Current liabilities:
Current installments of long-term $ 681,124 447,227
obligations
Accounts payable 5,199,987 7,896,838
Accrued expenses 7,841,543 7,894,616
------------- -------------
Total current liabilities 13,722,654 16,238,681
Long-term obligations, excluding
current installments 1,107,072 649,941
Deferred income tax liability 842,550 772,466
Stockholders' equity:
Preferred stock, without par value,
2,000,000 shares authorized, no
shares issued -- --
Common stock, $.01 par value,
15,000,000 shares authorized;
issued 7,050,212 shares in 1996
and 1995 70,502 70,502
Additional paid-in capital 24,345,942 24,349,542
Retained earnings 25,861,958 26,306,375
Treasury stock at cost - 185,000
shares in 1996 and 1995 (1,298,125) (1,298,125)
------------- -------------
Total stockholders' equity 48,980,277 49,428,294
------------- -------------
$ 64,652,553 67,089,382
============= =============
See accompanying notes to condensed consolidated financial statements.
3<PAGE>
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months ended March 30, 1996 and April 1, 1995
(Unaudited)
March 30, April 1,
1996 1995
----- -----
Total operating revenues $ 23,503,406 20,384,713
Subcontractor costs 3,677,683 3,383,874
------------- -------------
Net operating revenues 19,825,723 17,000,839
Cost of net operating revenues 13,029,987 10,780,296
------------- -------------
Gross profit 6,795,736 6,220,543
Selling, general and
administrative expenses
7,433,175 5,906,653
------------- -------------
Operating income (loss) (637,439) 313,890
Interest income (expense):
Interest expense (54,120) (22,972)
Interest income 98,671 162,307
------------- -------------
44,551 (139,335)
------------- -------------
Income (loss) before income taxes (592,888) 453,225
Provision for income taxes
(benefit) (148,471) 179,353
------------- ------------
Net income (loss) $ (444,417) 273,872
============= =============
Net income (loss) per share $ (.07) .04
============= =============
Weighted average number of shares
outstanding 6,865,212 6,865,212
See accompanying notes to condensed consolidated financial statements.
4<PAGE>
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months ended March 30, 1996 and April 1, 1995
(Unaudited)
1996 1995
----- -----
Cash flows from operating activities:
Net (loss) income $ (444,417) 273,872
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,021,573 806,423
(Gain) loss on sale of equipment (1,329) 117
Deferred income taxes 48,061 9,896
Cash provided (used) from the change
in:
Accounts receivable 320,261 332,991
Inventories 3,237 (122,289)
Prepaid expenses and other current
assets 39,524 (173,061)
Refundable income tax 155,255 48,209
Other assets (88,288) 130,213
Accounts payable (2,945,834) (969,847)
Accrued expenses (300,704) 525,558
------------- -------------
Net cash (used) provided by
operating activities (2,192,661) 862,082
------------- -------------
Cash flows from investing activities:
4<PAGE>
Purchase of marketable securities -- (3,000,000)
Redemption of marketable securities 2,475,000 1,740,000
Additions to property, plant and equipment (1,685,880) (1,187,581)
Cash from acquired joint venture 57,615 --
Excess of cost over net assets of acquired
company (56,403) (200,268)
------------- -------------
Net cash provided (used) by investing
activities: 790,332 (2,647,849)
------------- -------------
Cash flows from financing activities:
Registration expenses on warrants issued (3,600) --
Proceeds from debt obligations 514,724 64,863
Principal payments on debt obligations (160,370) (432,082)
------------- -------------
Net cash provided (used) by financing
activities 350,754 (367,219)
------------- -------------
Net decrease in cash and cash equivalents (1,051,575) (2,152,986)
Cash and cash equivalents at beginning of
period 3,821,474 2,895,478
------------- -------------
Cash and cash equivalents at end of period $ 2,769,899 742,492
============= =============
Supplemental disclosure of cash flow
information
Cash was paid for:
Interest $ 54,120 22,972
============= =============
Income taxes $ 28,414 130,248
============= =============
See accompanying notes to condensed consolidated financial statements.
5<PAGE>
HANDEX CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 30, 1996 and April 1, 1995
Note 1 In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which are normal and
recurring in nature), necessary to present fairly the financial position
of the Company at March 30, 1996 and the results of operations for the
three month periods ended March 30, 1996 and April 1, 1995. The
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's annual report for the year
ended December 30, 1995.
Note 2 The consolidated financial statements include the assets and liabilities
as of March 30, 1996, and the results of operations for the quarter
ended March 30, 1996, of New Horizons Computer Learning Center of
Cleveland, Ltd., L.L.C., a joint venture in which the Company retained a
minority interest through December 30, 1995. With the bankruptcy of the
venture's majority member's parent corporation and the member therefore,
having no ability to conduct its business or that of the venture, and
with the Company, assuming control of and providing the financing and
management of the day to day operations of the venture, management
believed that the consolidation of the assets, liabilities and results
of operations of the venture beginning with the quarter ended March 30,
1996, was appropriate.
Note 3 Certain items on the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
6<PAGE>
PART I. FINANCIAL INFORMATION
---------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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GENERAL
- - -------
The Company conducts two distinct lines of business: the environmental segment,
through its wholly-owned environmental holding company, Handex Environmental,
Inc., and subsidiaries ("Handex Environmental"), and the educational segment,
through its wholly-owned education holding company, New Horizons Education
Corporation and subsidiaries ("New Horizons").
The discussion that follows, presents the business conditions and certain
financial information pertaining to each of the two business segments.
ENVIRONMENTAL BUSINESS SEGMENT
- - ------------------------------
Net operating revenues include fees for services provided directly by
Handex Environmental and fees for arranging for subcontractors' services, as
well as proceeds from the sale and rental of equipment. Handex Environmental,
in the course of providing its services, routinely subcontracts for outside
services such as soil cartage, laboratory testing and other specialized
services. These costs are generally passed through to clients and, in
accordance with industry practice, are included in total operating revenues.
Because subcontractor services can change significantly from project to project,
changes in total operating revenues may not be truly indicative of business
trends. Accordingly, Handex Environmental views net operating revenues, which
is total operating revenues less the cost of subcontractor services, as its
primary measure of revenue growth.
Cost of net operating revenues includes professional salaries, other direct
labor, material purchases and certain direct and indirect overhead costs.
Selling, general and administrative expenses include management salaries, sales
and marketing salaries and expenses, and clerical and administrative overhead.
Several trends, which began to develop in 1992, continued during the first
quarter of 1996. Handex Environmental believes that expenses for administration,
computerization, marketing and engineering will continue to increase as a result
of the increasing desire of its customers for more detailed information
concerning the status of their environmental projects. Marketing costs will
continue to increase due to the effects of increased competition in the
environmental industry and Handex Environmental's strategy to diversify its
client base and pursue the industrial market. Handex Environmental believes
these trends will continue to impact its future operating results.
Handex Environmental's customers have become increasingly cost conscious.
This cost consciousness on the part of customers has manifested itself primarily
in three areas: (i) the manner in which Handex Environmental obtains its
business and charges for its services; (ii) the use of other contractors to
provide certain services traditionally provided by Handex Environmental; and
(iii) an increasing preference to purchase, rather than lease, remediation
equipment.
Beginning in 1992, Handex Environmental has experienced a significant
increase in customer demand for competitive bidding and/or fixed price
contracts. During 1995 and the first quarter of 1996, a majority of Handex
Environmental's work was performed under fixed price contracts and unit prices.
However, management believes that, over the long term, the quality and cost
effectiveness of its services will continue to be an important competitive
advantage. Accordingly, in responding to price competition, Handex
Environmental will attempt to maintain a high level of technical quality in its
services.
7<PAGE>
A majority of Handex Environmental's major customers now purchase directly,
from other contractors, equipment and certain services, such as laboratory
analyses, which were formerly provided by or through Handex Environmental as
part of its full service approach. Management believes that this trend will
continue.
Handex Environmental's quarterly results may fluctuate from period to
period. Among the principal factors influencing quarterly variations are
weather, which may limit the amount of time Handex Environmental's professional
and technical personnel have in the field; the addition of new professionals who
require training and initially bill a lower percentage of their time; the timing
of receipt of discharge and other permits necessary to install dewatering and
recovery systems, and the opening of new offices, which initially have higher
expenses relative to revenues than established offices.
In recent years through the first quarter of 1995, Handex Environmental's
business has been helped considerably by the cost reimbursement program
maintained by the State of Florida through the Florida Inland Protection Trust
Fund ("Fund"). The Fund was revised in the first quarter of 1995 by the
Florida legislature and now requires site prioritization and prior approval of
costs, by the Florida Department of Environmental Protection, for reimbursement
of cleanup expenditures. These revisions, which were intended to assure its
economic integrity, have significantly limited the number and types of
environmental cleanup expenditures which would be reimbursable from the Fund and
have therefore adversely affected Handex Environmental's operating results in
Florida and its overall operating results. Management believes that these
revisions will continue to have an adverse effect on Handex Environmental's
operations in Florida and its overall environmental segment's results. During
1995, Handex Environmental made a strategic move to partially offset the revenue
loss resulting from the revisions to the Fund, by acquiring certain assets of a
small environmental concern in Florida. The purchase included the rights to
service certain customers of this environmental concern.
EDUCATIONAL BUSINESS SEGMENT
- - ----------------------------
New Horizons conducts two distinct businesses, one which operates wholly-
owned training centers, and the other which supplies systems of instruction, and
sales and management concepts concerning computer training to independent
franchisees.
Revenues for the training centers operated by New Horizons consist
primarily of training fees and fees derived from sales of courseware materials.
Cost of sales consists primarily of instructors' salaries and benefits,
facilities costs such as rent, utilities and classroom equipment, courseware,
and computer hardware, software and peripherals. Selling, general and
administrative expenses consist primarily of costs associated with technical
support personnel, facilities support personnel, scheduling personnel, training
personnel, accounting and finance support and sales executives.
Revenues for the franchising operation consist primarily of initial
franchise fees associated with the sale of a franchise, royalty and advertising
fees, based on a percentage of franchisee gross training revenues, and
percentage royalties received on the gross sales of courseware. Cost of sales
consists primarily of costs associated with franchise support personnel who
provide system guidelines and advice on daily operating issues including sales,
marketing, instructor training and general business problems. Selling, general
and administrative expenses consist primarily of technical support, courseware
development, accounting and finance support, national account sales support, and
advertising expenses.
8<PAGE>
RESULTS OF OPERATIONS
-----------------------
CONSOLIDATED
- - ------------
NET OPERATING REVENUES
- - ----------------------
Consolidated net operating revenues for the first quarter of 1996 grew
$2,825,000 or 16.6%, over the first quarter of 1995. Consolidated net operating
revenues of $19,826,000 for the first quarter of 1996 came from Handex
Environmental's net operating revenues of $10,733,000 (54.1% of consolidated net
operating revenues, down from 69.8% for the first quarter of 1995) and from New
Horizons' net operating revenues of $9,093,000 (45.9% of consolidated operating
revenues, up from 30.2% for the first quarter of 1995).
COST OF NET OPERATING REVENUES
- - ------------------------------
Consolidated cost of net operating revenues for 1996 increased $2,250,000 or
20.9% compared to the 1995 quarter. Of the consolidated cost of operating
revenues of $13,030,000, Handex Environmental contributed $8,624,000 (66.2% of
consolidated cost of net operating revenues, down from 74.2% in 1995); New
Horizons contributed $4,406,000 (33.8% of consolidated cost of net operating
revenues, up from 25.8% in 1995). As a percentage of consolidated net operating
revenues, consolidated cost of net operating revenues increased to 65.7% in the
first quarter of 1996, from 63.4% in the 1995 quarter.
GROSS PROFIT
- - ------------
Consolidated gross profit for the 1996 quarter increased $575,000 or 9.2%
compared to 1995. Of the consolidated gross profit of $6,796,000, Handex
Environmental contributed $2,108,000 (31.0% of consolidated gross profit, down
from 62.2% in 1995); New Horizons contributed $4,688,000 (69.0% of consolidated
gross profit, up from 37.8% in 1995). As a percentage of consolidated net
operating revenues, consolidated gross profit declined to 34.3% in 1996 from
36.6% in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- - --------------------------------------------
Consolidated selling, general and administrative expenses for 1996 increased
$1,527,000 or 25.8%, compared to 1995. Handex Environmental's selling, general
and administrative expenses amounted to $3,707,000 (49.9% of consolidated
selling, general and administrative expenses, down from 64.8% in 1995). New
Horizons' selling, general and administrative expenses amounted to $3,726,000
(50.1% of consolidated selling, general and administrative expenses, up from
35.2% in 1995). As a percentage of consolidated net operating revenues,
consolidated selling, general, and administrative expenses for 1996 increased to
37.5% from 34.7% in 1995.
INTEREST INCOME/EXPENSE
- - ------------------------
Consolidated interest expense for 1996 increased to $54,000 from $23,000 in
1995. As a percentage of consolidated net operating revenues, consolidated
interest expense rose to .3% in 1996 from .1% in 1995. The increase in interest
expense, both in absolute dollars and as a percentage of consolidated net
operating revenues, was due primarily to New Horizons' purchases of equipment
under capital lease arrangements.
9<PAGE>
Consolidated interest income for 1996 declined to $99,000 from $162,000 in 1995.
As a percentage of consolidated net operating revenues, consolidated interest
income declined to .5% in 1996 from 1.0% in 1995. The decline in interest
income, in absolute dollars and as a percentage of net operating revenues, was
due mainly to the lower tax-free interest income earned as a result of using
cash reserves to satisfy working capital requirements, combined with the higher
consolidated net operating revenues.
INCOME TAXES
- - ------------
The provision for income tax benefit as a percentage of loss before taxes was
25.0% in 1996. In 1995, the provision for income taxes as a percentage of income
before taxes was 39.6%.
NET INCOME (LOSS)
- - -----------------
Consolidated net loss for the 1996 quarter amounted to $444,000 compared to a
consolidated net income of $274,000 for 1995. As a percentage of consolidated
net operating revenues, consolidated net loss was 2.2% compared to a
consolidated net income of 1.6% in 1995.
ENVIRONMENTAL
- - -------------
OPERATING RESULTS
- - -----------------
1996 1995
----- -----
Net operating revenues $ 10,733 11,865
Cost of net operating revenues 8,624 7,995
-------- --------
Gross profit 2,109 3,870
Selling, general and
administrative expenses
before corporate SG&A 3,363 3,466
-------- --------
Operating income (loss)
before corporate SG&A $ (1,254) 404
========= =========
NET OPERATING REVENUES
- - ----------------------
Handex Environmental's net operating revenues of $10,733,000 for the 1996
quarter declined $1,132,000 or 9.5%, compared with the first quarter of 1995.
The decline was due principally to the unusually severe weather conditions in
the Northeast during the 1996 quarter which caused clients work deferrals to and
beyond the second quarter of 1996. In addition, the transfer of sites to Handex
Environmental, under its Alliance Agreement with Amoco Oil Company, which was
originally expected to be completed in February and March of 1996, was not
completed until the end of April 1996. For the first quarter of 1996, all
environmental operating subsidiaries, with the exception of its Maryland, North
Carolina and Colorado subsidiaries, experienced a decline in net operating
revenues ranging from 10.3% to 26.8%, compared to the 1995 quarter. The
Maryland, North Carolina and Colorado subsidiaries reported revenue increases
ranging from 16.2% to 56.9%, compared with the 1995 quarter.
COST OF NET OPERATING REVENUES
- - ------------------------------
Handex Environmental's cost of net operating revenues increased $629,000 or 7.9%
for the 1996 quarter compared to 1995. As a percentage of its net operating
10<PAGE>
revenues, cost of net operating revenues increased to 80.4% for 1996 from 67.4%
in the 1995 quarter. The increase in the cost of net operating revenues was due
principally to materials and supplies purchased and cost of equipment rentals in
connection with large industrial projects. In addition, cost of net operating
revenues also included approximately $104,000 of expenses relative to the staff
reduction which was made in April 1996. The increase in the cost of net
operating revenues as a percentage of net operating revenues was due principally
to the lower level of net operating revenues and personnel costs which were
substantially at the same level as in the 1995 quarter. In addition,
unrecoverable cost overruns were incurred for a large landfill project during
the 1996 quarter.
GROSS PROFIT
- - ------------
Handex Environmental's gross profit declined $1,761,000 or 45.5% for the 1996
quarter compared to the 1995 quarter. As a percentage of its net operating
revenues, gross profit declined to 19.6% in 1996 from 32.6% in 1995. The decline
in gross profit, both in absolute dollars and as a percentage of net operating
revenues, was due primarily to lower net operating revenues, personnel costs,
which remained substantially at the same level as in 1995 and included a
provision for the staff reduction which was made in April 1996, the growth in
materials and supplies purchases, cost overruns on a major landfill project and
lower margins on industrial projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BEFORE CORPORATE EXPENSES
- - ----------------------------------------------------------------------
Handex Environmental's selling, general and administrative expenses remained
substantially at the 1995 level, decreasing slightly by $102,000 or 2.9%
compared to 1995. As a percentage of net operating revenues, selling, general
and administrative expenses rose to 31.3% in 1996, from 29.2% in 1995. The
increase in selling, general and administrative expenses as a percentage of net
operating revenues was due primarily to lower net operating revenues.
EDUCATIONAL
- - ------------
OPERATING RESULTS
- - -------------------
10<PAGE>
1996 1995
----- -----
Net operating revenues $ 9,093 5,136
Cost of net operating revenues 4,406 2,785
---------- ----------
Gross profit 4,687 2,351
Selling, general and administrative
expenses before corporate SG&A 3,726 2,080
---------- ----------
Operating income before $ 961 271
corporate SG&A =========== ===========
Included in the above are the operating results of New Horizons' Cleveland
operations as follows:
1996 1995
------ ------
Net operating revenues $ 623 46
Cost of net operating revenues 376 44
---------- ----------
Gross profit 247 1
Selling, general and administrative
expenses 272 34
----------- ----------
Operating loss $ (25) (33)
=========== ===========
11<PAGE>
NET OPERATING REVENUES
- - -----------------------
New Horizons' net operating revenues of $9,093,000 for the first quarter of
1996, increased $3,957,000 or 77.0%, compared with the first quarter of 1995.
Company-operated training center revenues for 1996, increased 62.7% from
$4,136,000 in 1995 to $6,792,000 in 1996. Revenues grew from the addition of
classroom facilities and the company's proven marketing program. Franchising
revenues grew 136.2% from $1,000,000 in 1995 to $2,361,000 in 1996. Revenues
from the sale of franchises and revenues based on franchisees' sales, were more
than double that of the 1995 quarter.
COST OF NET OPERATING REVENUES
- - -------------------------------
New Horizons' cost of net operating revenues increased $1,620,000 or 58.2% for
the first quarter of 1996 compared to 1995. As a percentage of its net operating
revenues, cost of net operating revenues declined to 48.4% in the 1996 quarter
from 54.2% in the 1995 quarter. The increase in costs of net operating revenues
were due primarily to costs associated with personnel, courseware, facilities,
and equipment required to support the higher level of net operating revenues.
The decrease in costs of net operating revenues as a percentage of net operating
revenues was due principally to the higher level of net operating revenues.
GROSS PROFIT
- - ------------
New Horizons' gross profit increased $2,336,000 or 99.4% for the 1996 quarter
compared to 1995. As a percentage of its net operating revenues, gross profit
rose to 51.6% in the 1996 quarter from 45.8% in the 1995 quarter. The increase
in gross profit, both in terms of absolute dollars and as a percentage of net
operating revenues, was due principally to the higher level of net operating
revenues. Franchising and royalty fees for the 1996 quarter grew more than twice
as much as the fees for the 1995 quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BEFORE CORPORATE EXPENSES
- - ----------------------------------------------------------------------
New Horizons' selling, general and administrative expenses increased $1,646,000
or 79.1% for the 1996 quarter compared to 1995. As a percentage of its net
operating revenues, selling, general and administrative expenses for 1996 rose
to 41.0% from 40.5% in 1995. The increase in selling, general and
administrative expenses, both in absolute dollars and as a percentage of net
operating revenues, was due principally to the increased expenses in the sales
and marketing function required to service the higher level of net operating
revenues.
LIQUIDITY AND CAPITAL RESOURCES
- - ---------------------------------
As of March 30, 1996, the Company's working capital was $21,891,000, and its
cash, cash equivalents and short-term investments totaled $3,070,000. Working
capital as of March 30, 1996 reflected a decrease of $1,307,000 from $23,198,000
as of December 30, 1995. The Company had a negative cash flow from operating
activities primarily due to the reduction in accounts payable. The Company has
negotiated an extension to June 30, 1998 of its unsecured $5,500,000 credit
facility with a commercial bank under substantially the same terms and
conditions prior to the extension. This facility, which the Company has not used
since June 1991, bears interest at either the bank's prime rate, or LIBOR,
whichever the Company elects.
12<PAGE>
The full service approach to Handex Environmental's hydrocarbon recovery
business in certain markets and its continuing geographic expansion require
Handex Environmental to make capital expenditures for machinery and equipment
and to incur costs associated with the establishment of new office locations.
During the 1996 quarter, Handex Environmental spent approximately $476,000 on
capital equipment and anticipates spending up to $2,300,000 during 1996.
The nature of New Horizons' business requires substantial cash commitments for
the purchase of computer equipment, software and training facilities. During the
1996 quarter, New Horizons spent approximately $1,300,000 on capital equipment
and anticipates spending up to $3,200,000 during 1996.
Management believes that its current working capital position, together with
cash expected to be generated by operations, and its funds available under its
revolving credit facility will provide the liquidity necessary to support its
current and anticipated capital expenditures through the end of 1996.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual stockholders' meeting which was held on May 7, 1996, the
following matters were submitted to and voted upon by the stockholders:
1. The election of the following directors whose term of office will expire at
the 1999 annual stockholders' meeting:
"FOR" "WITHHELD"
-------- -----------
Curtis Lee Smith, Jr. 6,109,269 11,104
William H. Heller 6,107,673 12,700
2. The selection of KPMG Peat Marwick LLP as the Company's independent
auditors for 1996; "FOR" - 6,112,738; "AGAINST" 3,726; "ABSTAINED" 3,909.
13<PAGE>
Form 10Q - Part II: Other Information
-----------------------------------------
Item 6. Exhibits and other reports on Form 8-K
- - ------- ----------------------------------------
(a) Exhibit Index
Exhibit
Number Description of Documents
- - -------- --------------------------
4.1 Specimen Certificate for Share of Common Stock, $.01 par value, of the
Registrant(1)
4.2 Unsecured Revolving Loan Agreement(4)
4.3 First Amendment to Unsecured Revolving Loan Agreement (7)
4.4 Working Capital Line of Credit Note (7)
10.1 Key Employees Stock Option Plan of the Registrant(1)
10.2 Amendment No. 1 to Key Employees Stock Option Plan of the Registrant (7)
10.3 Form of Stock Option Agreement executed by recipients of options under
Key Employees Stock Option Plan(6)
10.4 Stock Option Agreement dated August 6, 1992, between the Registrant and
Thomas J. Bresnan (7)
10.5 Outside Directors Stock Option Plan of the Registrant(1)
10.6 Amendment No. 1 to the Outside Directors Stock Option Plan of the
Registrant (7)
10.7 Form of Stock Option Agreement executed by recipients of options under
the Outside Directors Stock Option Plan (7)
10.8 Amended and Restated 401(k) Profit Sharing Trust a nd Plan of the
Registrant(1)
10.9 Amendment No. 1 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(2)
10.10 Amendment No. 2 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(3)
10.11 Amendment No. 3 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(6)
10.12 Form of Indemnity Agreement with Directors and Officers of the
Registrant(6)
10.13 Employment Agreement dated August 3, 1992, between the Registrant and
Thomas J. Bresnan (7)
10.14 Lease Agreement dated April 26, 1988, between Jocama Construction Inc.
and the Registrant(1)
14<PAGE>
10.15 Addenda to the Lease Agreement dated April 6, 1988 between Jocama
Construction and the Registrant (8)
10.16 Indenture of Lease dated June 17, 1987, between Xednah Investments and
Handex of Florida, as amended (1)
10.17 Lease Agreement dated March 25, 1991, between Handex of New England,
Inc. and Metro Park Marlboro Realty Trust, as amended (6)
10.18 Lease Agreement dated January 20, 1992, between Handex of Maryland, Inc.
and Winmeyer Commons II Limited Partnership(6)
10.19 Lease Agreement dated March 1, 1995, between New Horizons Learning
Center of Metropolitan New York, Inc. and Mid City Associates,
guaranteed by the Registrant (10)
10.20 Lease Agreement dated February 24, 1995, between New Horizons Computer
Learning Center of Cleveland LTD., LLC, and Realty One Property
Management, guaranteed by the Registrant (10)
10.21 Consulting Agreement between the Registrant and The Nassau Group, Inc.
dated December 17, 1993 (9)
10.22 Warrants for the purchase of 25,000 shares of Common Stock $.01 par
value per share of the Registrant issued to The Nassau Group, Inc. on
December 17, 1993 (9)
10.23 Warrants for the purchase of 40,000 shares of Common Stock $.01 par
value per share of the Registrant issued to The Nassau Group, Inc. on
August 15, 1994. (10)
10.24 Asset Purchase Agreement, dated as of August 15, 1994, by and among New
Horizons Computer Learning Centers, Inc . a Delaware Corporation, New
Horizons Learning Center, Inc., a California Corporation and Michael A.
Brinda (11)
10.25 Stock Purchase Agreement dated as of August 15, 1994, by and among New
Horizons Education Corporation, a Delaware Corporation and Michael A.
Brinda (11)
10.26 Lease Agreement dated April 5, 1995, between New Horizons Computer
Learning Center of Chicago, Inc., and the Equitable Life Assurance
Society of the United States (12)
10.27 Lease Agreement dated March 7, 1996, between New H orizons Computer
Learning Centers, Inc. and Mani Brothers, LLC (13)
10.28 Contract for the sale of real estate dated January 15, 1996, between
Handex of Florida, Inc. and Xednah Investments (13)
10.29 New Horizons Education Corporation 401(k) Profit Sharing Trust and Plan
(13)
10.30 Amendment No. 4 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan (13)
15<PAGE>
15.0 Letter from Independent Certified Public Accountants*
27.0 Financial Data Schedule*
99.1 Directors and Officers and Company Indemnity Policy(5)
- - --------------------------------------------------------------
(1) Incorporated herein by reference to the appropriate exhibits to the
Registrant's Registration Statement on Form S-1 (File No. 33-28798).
(2) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
(3) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1990.
(4) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report or Form 10-Q for the period ended June 30,
1990.
(5) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.
(6) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.
(7) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31,1992.
(8) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended July 3,
1993.
(9) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended January 1, 1994.
(10) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Form 8-K dated August 15, 1994.
(11) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
(12) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended April 1,
1995.
(13) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 30,
1995.
* Filed herewith.
(b) Reports on Form 8-K
None
16<PAGE>
SIGNATURE
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 thereto duly authorized.
HANDEX CORPORATION
(Registrant)
Date: May 14, 1996 By: /s/ John T. St. James
--------------- --------------------------
John T. St. James
(Duly authorized officer and
Principal Financial Officer)
17<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 2,769,899
<SECURITIES> 300,000
<RECEIVABLES> 30,622,506
<ALLOWANCES> 758,776
<INVENTORY> 553,648
<CURRENT-ASSETS> 35,613,885
<PP&E> 29,147,253
<DEPRECIATION> (18,167,036)
<TOTAL-ASSETS> 64,652,553
<CURRENT-LIABILITIES> 13,722,654
<BONDS> 1,107,072
0
0
<COMMON> 70,502
<OTHER-SE> 48,909,775
<TOTAL-LIABILITY-AND-EQUITY> 64,652,553
<SALES> 19,825,723
<TOTAL-REVENUES> 19,825,723
<CGS> 13,029,987
<TOTAL-COSTS> 20,463,162
<OTHER-EXPENSES> 98,671
<LOSS-PROVISION> 46,800
<INTEREST-EXPENSE> (54,120)
<INCOME-PRETAX> (592,888)
<INCOME-TAX> (148,471)
<INCOME-CONTINUING> (444,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444,417)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
FORM 10-Q, PART II
Item 6
Exhibit 15.0
Independent Auditors' Review Report
The Board of Directors
Handex Corporation
and Subsidiaries
We have reviewed the condensed consolidated balance sheet of Handex Corporation
and subsidiaries as of March 30, 1996, and the related condensed consolidated
statements of operations, and cash flows for the three-month periods ended March
30, 1996 and April 1, 1995. These condensed consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Handex Corporation and subsidiaries
as of December 30, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 16, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 30, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick, LLP
Cleveland, Ohio
April 26, 1996
