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, 1997
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, 1997 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
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenue $ 27,639,000 $ 30,143,000 $ 9,201,000 $ 9,047,000
Subcontract and Other
Direct Costs 8,064,000 9,435,000 2,722,000 2,596,000
------------ ------------ ------------ ------------
NET SERVICE REVENUE 19,575,000 20,708,000 6,479,000 6,451,000
Cost of Services 7,781,000 8,261,000 2,513,000 2,501,000
------------ ------------ ------------ ------------
GROSS PROFIT 11,794,000 12,447,000 3,966,000 3,950,000
Selling, General and
Administrative Expenses 11,266,000 11,471,000 3,840,000 3,825,000
------------ ------------ ------------ ------------
OPERATING INCOME 528,000 976,000 126,000 125,000
OTHER INCOME (EXPENSE):
Interest and other income 84,000 46,000 33,000 17,000
Interest expense (3,000) (28,000) (1,000) (6,000)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 609,000 994,000 158,000 136,000
INCOME TAX EXPENSE 279,000 428,000 77,000 27,000
------------ ------------ ------------ ------------
NET INCOME $ 330,000 $ 566,000 $ 81,000 $ 109,000
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ .73 $ 1.24 $ .18 $ .24
============ ============ ============ ============
AVERAGE COMMON SHARES
OUTSTANDING 455,000 455,000 455,000 455,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31, March 31,
1997 1997
ASSETS ----------- ----------
- ------
CURRENT ASSETS:
Cash $ 1,143,000 $ 1,459,000
Accounts receivable, net of allowance
for doubtful accounts of $164,000
and $127,000 5,211,000 3,682,000
Unbilled service revenue 3,250,000 3,955,000
Prepaid expenses and other current assets 122,000 210,000
Deferred income taxes 166,000 166,000
----------- -----------
Total current assets 9,892,000 9,472,000
Property and equipment, net 1,884,000 2,202,000
Other assets 47,000 62,000
Identifiable intangible assets, net of
accumulated amortization of
$895,000 and $852,000 143,000 186,000
Cost in excess of net assets of acquired
business, net of accumulated
amortization of $171,000
and $154,000 741,000 758,000
----------- -----------
TOTAL ASSETS $12,707,000 $12,680,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 16,000 $ 69,000
Accounts payable 2,371,000 2,080,000
Accrued payroll 299,000 633,000
Accrued incentive compensation 371,000 570,000
Accrued expenses 1,555,000 1,401,000
Unearned service revenue 1,862,000 1,938,000
----------- -----------
Total current liabilities 6,474,000 6,691,000
Long-term debt -- 7,000
Deferred Income Taxes 281,000 281,000
Other Liabilities 285,000 364,000
----------- -----------
Total liabilities 7,040,000 7,343,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000
shares authorized, 455,000 issued
and outstanding 5,000 5,000
Paid-in capital 3,537,000 3,537,000
Retained Earnings 2,125,000 1,795,000
----------- -----------
Total shareholders' equity 5,667,000 5,337,000
----------- -----------
$12,707,000 $12,680,000
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED DECEMBER 31
1997 1996
------------- --------------
OPERATING ACTIVITIES:
Net income $ 330,000 $ 566,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 572,000 563,000
(Gain) Loss on disposal of fixed assets (2,000) 11,000
Deferred rent charges (81,000) (70,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled
service revenue (824,000) 1,470,000
Other assets and prepaid expenses 95,000 86,000
Accounts payable and accrued expenses (86,000) (1,029,000)
Unearned service revenue (76,000) 457,000
----------- -----------
Net cash provided (used) by operating activities (72,000) 2,054,000
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (187,000) (318,000)
Proceeds from sale of fixed assets 3,000 7,000
----------- -----------
Net cash used by investing activities (184,000) (311,000)
----------- -----------
FINANCING ACTIVITIES:
Repayments of long-term debt (60,000) (346,000)
Net change in credit line payable
to bank -- (415,000)
Net proceeds from issuance of common stock -- 1,000
----------- -----------
Net cash used by financing activities (60,000) (760,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH (316,000) 983,000
CASH AT BEGINNING OF PERIOD 1,459,000 263,000
----------- -----------
CASH AT END OF PERIOD $ 1,143,000 $ 1,246,000
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DECEMBER 31, 1997
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, 1997.
2) Earnings per share of common stock are based on weighted average
number of shares outstanding during each period.
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 1998 was $27,639,000 as
compared to gross revenue of $30,143,000 for the first nine months of fiscal
1997. This 8% decrease resulted primarily from completing the design phase of
several large projects in the aviation and institutional programs. These
projects entered the construction administration phase which is less labor
intensive resulting in comparatively lower revenues. Declining gross revenues in
those programs were offset by increases in gross revenue for the public
infrastructure and commercial programs. Offsetting the gross revenue decrease
was a 15% decrease in subcontract and other direct costs for the first nine
months of fiscal 1998 over the same period for fiscal 1997. Decreased use of
subconsultants was experienced primarily in the aviation and institutional
programs as a result of project changes mentioned above. As a result of the
decreases in gross revenue and other direct costs, net service revenue decreased
5% to $19,575,000 for the first nine months of fiscal 1998 from $20,708,000 for
the first nine months of fiscal 1997.
Gross revenue for the third quarter of fiscal 1998 was $9,201,000 as compared to
gross revenue of $9,047,000 for the third quarter of fiscal 1997. This 2%
increase resulted primarily from increased revenues in the public infrastructure
and transportation programs. Offsetting this increase was a 5% increase in the
use of subcontract and other direct costs for the third quarter of fiscal 1998
over the same period for fiscal 1997. Increased use of subconsultants was
experienced primarily in the public
<PAGE>
infrastructure program. As a result of the increases in gross revenue and other
direct costs, net service revenue increased slightly by $28,000 for the third
quarter of fiscal 1998 from the third quarter of fiscal 1997.
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 1998
was $7,781,000, representing a 6% decrease from the same period for fiscal 1997.
Expressed as a percentage of net service revenue, cost of services remained
consistent at 40% for both the first nine months of fiscal 1998 and 1997. As a
result of the decrease in revenues, gross profit decreased 5% to $11,794,000 in
the first nine months of fiscal 1998 from $12,447,000 for the first nine months
of fiscal 1997. Cost of services for the third quarter of fiscal 1998 was
$2,513,000 as compared to $2,501,000 for the third quarter of fiscal 1997.
Expressed as a percentage of net service revenue, cost of services also remained
consistent at 39% for both the third quarters of fiscal 1998 and 1997. As a
result of the the slight increase in both net service fees and cost of services,
gross profit increased to $3,966,000 in the third quarter of fiscal 1998 from
$3,950,000 for the third quarter of fiscal 1997.
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 1998 were $11,266,000 as compared to $11,471,000 for the first nine
months of fiscal 1997. This 2% decrease was due primarily to a decrease in
warranty and temporary staffing expense. SG&A expenses for the third quarter of
fiscal 1998 were $3,840,000 as compared to $3,825,000 for the third quarter of
fiscal 1997. This slight increase was due primarily to an increase in incentive
compensation.
Income before income taxes was $609,000 for the first nine months of fiscal 1998
compared to $994,000 for the same period of fiscal 1997. This 39% decrease was
due to the decrease in gross revenues as discussed above. Income before income
taxes for the third quarter of fiscal 1998 was $158,000 compared to $136,000 for
the third quarter of fiscal 1997. This 16% increase was due primarily to the
increase in net service fees as discussed above.
Net income for the first nine months of fiscal 1998 was $330,000 compared to
$566,000 for the first nine months of fiscal 1997. Net income for the third
quarter of fiscal 1998 was $81,000 compared to $109,000 for the third quarter of
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of December 31, 1997 the Company had cash of $1,143,000 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.
<PAGE>
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.
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: February 3, 1998 REYNOLDS, SMITH AND HILLS, INC.
By /s/ Leerie T. Jenkins, Jr.
Leerie T. Jenkins, Jr.
Chairman of the Board
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-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,143,000
<SECURITIES> 0
<RECEIVABLES> 8,625,000
<ALLOWANCES> 164,000
<INVENTORY> 0
<CURRENT-ASSETS> 9,892,000
<PP&E> 5,632,000
<DEPRECIATION> 3,748,000
<TOTAL-ASSETS> 12,707,000
<CURRENT-LIABILITIES> 6,474,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 5,662,000
<TOTAL-LIABILITY-AND-EQUITY> 12,707,000
<SALES> 0
<TOTAL-REVENUES> 27,639,000
<CGS> 0
<TOTAL-COSTS> 15,845,000
<OTHER-EXPENSES> 11,128,000
<LOSS-PROVISION> 54,000
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 609,000
<INCOME-TAX> 279,000
<INCOME-CONTINUING> 330,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,000
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
</TABLE>
