UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the transition period from __to___
Commission File Number 0-18984
REYNOLDS, SMITH AND HILLS, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2986466
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4651 Salisbury Road, Jacksonville, Florida 32256
------------------------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (904) 296-2000
-------------------------
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 ( )
The number of shares outstanding of the registrant's Common stock, par value
$.01 per share, at December 31, 1996 was 455,000 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenue $30,143,000 $24,884,000 $ 9,047,000 $ 8,666,000
Subcontract and Other
Direct Costs 9,435,000 6,177,000 2,596,000 2,421,000
----------- ----------- ----------- -----------
NET SERVICE REVENUE 20,708,000 18,707,000 6,451,000 6,245,000
Cost of Services 8,261,000 7,569,000 2,501,000 2,539,000
----------- ----------- ----------- -----------
GROSS PROFIT 12,447,000 11,138,000 3,950,000 3,706,000
Selling, General and
Administrative Expenses 11,471,000 10,823,000 3,825,000 3,597,000
----------- ----------- ----------- -----------
OPERATING INCOME 976,000 315,000 125,000 109,000
OTHER INCOME (EXPENSE):
Interest and other income 46,000 16,000 17,000 (1,000)
Interest expense (28,000) (116,000) (6,000) (29,000)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 994,000 215,000 136,000 79,000
INCOME TAX EXPENSE 428,000 125,000 27,000 45,000
----------- ----------- ----------- -----------
NET INCOME $ 566,000 $ 90,000 $109,000 $34,000
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $ 1.24 $ .20 $ .24 $ .07
=========== =========== =========== ===========
AVERAGE COMMON SHARES
OUTSTANDING $ 455,000 $ 450,000 $ 455,000 $ 454,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1996 1996
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,246,000 $ 263,000
Accounts receivable, net of allowance
for doubtful accounts of $161,000
and $148,000 3,723,000 5,178,000
Unbilled service revenue 3,297,000 3,312,000
Prepaid Expenses 122,000 185,000
Other current assets 5,000 12,000
---------- ----------
Total current assets 8,393,000 8,950,000
Property and equipment, net 2,261,000 2,456,000
Other assets 67,000 91,000
Identifiable intangible assets, net of
accumulated amortization of
$838,000 and $795,000 200,000 243,000
Cost in excess of net assets of acquired
business, net of accumulated
amortization of $148,000
and $131,000 764,000 781,000
---------- ----------
TOTAL ASSETS $ 11,685,000 $ 12,521,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 162,000 $ 863,000
Accounts payable 1,560,000 2,244,000
Accrued payroll 296,000 639,000
Accrued expenses 1,192,000 1,193,000
Unearned service revenue 2,510,000 2,053,000
Current portion of deferred
income taxes 23,000 23,000
---------- ----------
Total current liabilities 5,743,000 7,015,000
Long-term debt 16,000 76,000
Deferred Income Taxes 223,000 223,000
Other Liabilities 395,000 466,000
---------- ----------
Total liabilities 6,377,000 7,780,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000
shares authorized, 455,000 issued
and outstanding 5,000 5,000
Paid-in capital 3,535,000 3,534,000
Retained Earnings 1,768,000 1,202,000
---------- ----------
Total shareholders' equity 5,308,000 4,741,000
---------- ----------
$ 11,685,000 $ 12,521,000
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED DECEMBER 31
1996 1995
------------- --------------
OPERATING ACTIVITIES:
Net income $ 566,000 $ 90,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 563,000 532,000
(Gain)loss on disposal of fixed assets 11,000 6,000
Deferred rent charges (70,000) (60,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled
service revenue 1,470,000 252,000
Other assets and prepaid expenses 86,000 18,000
Accounts payable and accrued expenses (1,029,000) 8,000
Unearned service revenue 457,000 (36,000)
--------- ---------
Net cash provided by operating activities 2,054,000 810,000
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (318,000) (803,000)
Proceeds from sale of fixed assets 7,000 --
--------- ---------
Net cash used by investing activities (311,000) (803,000)
--------- ---------
FINANCING ACTIVITIES:
Repayments of long-term debt (346,000) (389,000)
Net change in credit line payable
to bank (415,000) 94,000
Net proceeds from issuance of
common stock 1,000 49,000
--------- ---------
Net cash used by financing activities (760,000) (246,000)
--------- ---------
NET INCREASE (DECREASE) IN CASH 983,000 (239,000)
CASH AT BEGINNING OF PERIOD 263,000 577,000
--------- ---------
CASH AT END OF PERIOD $ 1,246,000 $ 338,000
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DECEMBER 31, 1996
1) The accompanying unaudited financial statements, in the opinion of
management, include all adjustments (consisting of normal recurring
accruals) necessary to present fairly the results of operations and
financial position of the Company for the periods indicated. However,
certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements,
schedules, and notes thereto included in the Company's annual report on
Form 10-K for the fiscal year ended March 31, 1996.
2) Earnings per share of common stock are based on weighted average number
of shares outstanding during each period.
3) Certain reclassifications have been made in the fiscal year 1996
financial statements to conform to classifications used in the fiscal
year 1997 financial statements.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Gross revenue for the first nine months of fiscal 1997 was $30,143,000 as
compared to gross revenue of $24,884,000 for the first nine months of fiscal
1996. This 21% increase was due primarily to the increased workload in the
transportation, aviation, aerospace and defense, commercial and institutional
programs. Revenues in these program areas increased as a result of intensive
sales efforts throughout the current and prior years. Corresponding with this
increase was a 53% increase in subcontract and other direct costs for the first
nine months of fiscal 1997 over the same period for fiscal 1996. Increased use
of subconsultants was experienced primarily in the transportation, aviation,
commercial and institutional programs. As a result of the increase in both gross
revenue and other direct costs, net service revenue increased 11% to $20,708,000
for the first nine months of fiscal 1997 from $18,707,000 for the first nine
months of fiscal 1996. Gross revenue for the third quarter of fiscal 1997
increased to $9,047,000 from $8,666,000 for the third quarter of fiscal 1996.
This 4% increase was due primarily to increases in the aviation and commercial
programs. Corresponding with this increase, net service revenue increased 3% to
$6,451,000 for the third quarter of fiscal 1997 from $6,245,000 for the third
quarter of fiscal 1996.
Cost of services represents direct labor costs associated with the generation of
net service revenues. Cost of services, for the first nine months of fiscal 1997
was $8,261,000, representing a 9% increase over the same period for fiscal 1996.
Expressed as a percentage of net service revenue, cost of services remained
consistent at 40% for both the first nine months of fiscal 1997 and 1996. As a
result of these factors and increased revenues, gross profit increased 12% to
$12,447,000 in fiscal 1997 from $11,138,000 in fiscal 1996. Cost of services,
for the third quarter of fiscal 1997 was $2,501,000, a 1% decrease over the
third quarter of fiscal 1996. As with the first nine months, cost of services
remained relatively consistent at 39% and 41% of net service revenue for the
third quarters of fiscal 1997 and 1996, respectively. Gross profit increased 7%
to $3,950,000 in the third quarter of fiscal 1997 from $3,706,000 in the third
quarter of fiscal 1996.
Selling, general and administrative (SG&A) expenses consist of labor costs of
operational personnel not utilized on projects (i.e. indirect labor), labor
costs of administrative and support personnel, office rent, depreciation,
insurance and other operating expenses. SG&A expenses for the first nine months
of fiscal 1997 were $11,471,000 as compared to $10,823,000 for the first nine
months of fiscal 1996. For the third quarter of fiscal 1997 SG&A expenses were
<PAGE>
$3,825,000 as compared to $3,597,000 for the third quarter of fiscal 1996. These
6% increases were due primarily to increases in compensation, further
acquisition and implementation of computer and communications technology,
professional fees and temporary help.
Income before income taxes was $994,000 for the first nine months of fiscal 1997
versus $215,000 for the same period of fiscal 1996. Income before income taxes
was $136,000 for the third quarter of fiscal 1997 versus $79,000 for the third
quarter of fiscal 1996. These increases were primarily attributable to the
increase in net service fees as described above.
Net income was $566,000 for the first nine months of fiscal 1997 as compared to
$90,000 for the first nine months of fiscal 1996. Net income was $109,000 for
the third quarter of fiscal 1997 as compared to $34,000 for the third quarter of
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996 the Company had cash of $1,246,000 and additional
borrowing available on the revolving line of credit of $1,750,000. The Company
believes that its existing financial resources, together with its future cash
flow from operations, will provide sufficient capital to fund its operations for
the foreseeable future.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule. This schedule
reports certain financial data in electronic format
for Electronic Data Gathering and Retrieval (EDGAR)
purposes only. This exhibit is not included in this
conforming paper filing.
(b) There were no Form 8-K reports filed during the
quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 31, 1997 REYNOLDS, SMITH AND HILLS, INC.
By /s/ Leerie T. Jenkins, Jr.
Leerie T. Jenkins, Jr.
Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer)
By /s/ David K. Robertson
David K. Robertson
Executive Vice President,
Secretary, Treasurer, Chief
Financial Officer and Director
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,246,000
<SECURITIES> 0
<RECEIVABLES> 7,181,000
<ALLOWANCES> 161,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,393,000
<PP&E> 5,384,000
<DEPRECIATION> 3,123,000
<TOTAL-ASSETS> 11,685,000
<CURRENT-LIABILITIES> 5,743,000
<BONDS> 16,000
0
0
<COMMON> 5,000
<OTHER-SE> 5,303,00
<TOTAL-LIABILITY-AND-EQUITY> 11,685,000
<SALES> 0
<TOTAL-REVENUES> 30,143,000
<CGS> 0
<TOTAL-COSTS> 17,696,000
<OTHER-EXPENSES> 11,368,000
<LOSS-PROVISION> 57,000
<INTEREST-EXPENSE> 28,000
<INCOME-PRETAX> 994,000
<INCOME-TAX> 428,000
<INCOME-CONTINUING> 566,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 566,000
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
