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 June 30, 1998
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 June 30, 1998 was 460,000 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED JUNE 30
1998 1997
------------ ------------
Gross Revenue $ 10,238,000 $ 9,514,000
Subcontract and Other
Direct Costs 2,898,000 2,804,000
------------ ------------
NET SERVICE REVENUE 7,340,000 6,710,000
Cost of Services 2,856,000 2,711,000
------------ ------------
GROSS PROFIT 4,484,000 3,999,000
Selling, General and
Administrative Expenses 4,373,000 3,783,000
------------ ------------
OPERATING INCOME 111,000 216,000
OTHER INCOME (EXPENSE):
Interest and other income 39,000 22,000
Interest expense (4,000) (1,000)
------------ ------------
INCOME BEFORE INCOME TAXES 146,000 237,000
INCOME TAX EXPENSE 66,000 105,000
------------ ------------
NET INCOME $ 80,000 $ 132,000
============ ============
BASIC EARNINGS PER SHARE $ .17 $ .29
============ ============
AVERAGE COMMON SHARES
OUTSTANDING 460,000 455,000
============ ============
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
ASSETS ----------- -----------
- ------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,650,000 $ 2,364,000
Accounts receivable, net of allowance
for doubtful accounts of $168,000
and $162,000 5,297,000 4,113,000
Unbilled service revenue 3,864,000 3,680,000
Prepaid expenses and other current assets 81,000 225,000
Deferred income taxes 219,000 219,000
----------- -----------
Total current assets 11,111,000 10,601,000
Property and equipment, net 1,941,000 1,798,000
Other assets 46,000 47,000
Identifiable intangible assets, net of
accumulated amortization of
$924,000 and $909,000 114,000 128,000
Cost in excess of net assets of acquired
business, net of accumulated
amortization of $190,000
and $177,000 1,391,000 736,000
----------- -----------
TOTAL ASSETS $14,603,000 $13,310,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 100,000 $ 7,000
Accounts payable 2,501,000 1,933,000
Accrued payroll 361,000 646,000
Accrued incentive compensation 643,000 548,000
Accrued expenses 1,474,000 1,487,000
Unearned service revenue 2,563,000 2,054,000
----------- -----------
Total current liabilities 7,642,000 6,675,000
Long-term debt 200,000 0
Deferred Income Taxes 206,000 206,000
Other Liabilities 505,000 521,000
----------- -----------
Total liabilities 8,553,000 7,402,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000
shares authorized, 460,000 and 455,000
issued and outstanding 5,000 5,000
Paid-in capital 3,603,000 3,541,000
Retained Earnings 2,442,000 2,362,000
----------- -----------
Total shareholders' equity 6,050,000 5,908,000
----------- -----------
$14,603,000 $13,310,000
=========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30
1998 1997
----------- ------------
OPERATING ACTIVITIES:
Net income $ 80,000 $ 132,000
Adjustments to reconcile net income to
net cash (used) provided by operating
activities:
Depreciation and amortization 195,000 188,000
Deferred rent charges (16,000) (27,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled
service revenue (1,368,000) 366,000
Other assets and prepaid expenses 145,000 147,000
Accounts payable and accrued expenses 420,000 129,000
Unearned service revenue 509,000 (217,000)
----------- -----------
Net cash (used) provided by operating activities (35,000) 718,000
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (289,000) (94,000)
Purchase of subsidiary (335,000) --
----------- -----------
Net cash used by investing activities (624,000) (94,000)
----------- -----------
FINANCING ACTIVITIES:
Repayments of debt (55,000) (41,000)
----------- -----------
Net cash used by financing activities (55,000) (41,000)
----------- -----------
NET (DECREASE)INCREASE IN CASH (714,000) 583,000
CASH AT BEGINNING OF PERIOD 2,364,000 1,459,000
----------- -----------
CASH AT END OF PERIOD $ 1,650,000 $ 2,042,000
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 1998
BASIS OF PRESENTATION
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, 1998.
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 quarter of fiscal 1999 was $10,238,000 as compared
to gross revenue of $9,514,000 for the first quarter of fiscal 1998. This 8%
increase occurred primarily in the transportation, aerospace/defense, and
institutional programs. Work on several large new projects in these areas began
after the first quarter of fiscal 1998. Net service revenues increased 9% to
$7,340,000 in the first quarter of fiscal 1999 from $6,710,000 in the first
quarter of fiscal 1998 as a result of the gross revenue increases mentioned
above.
Cost of services represents direct labor costs associated with the generation of
net service revenues. Cost of services for the first quarter of fiscal 1999 was
$2,856,000, representing a 5% increase from the same period for fiscal 1998.
Expressed as a percentage of net service revenue, cost of services improved
slightly to 39% for the first quarter of fiscal 1999 from 40% for the first
quarter of fiscal 1998. As a result of the increase in revenues, gross profit
increased 12% to $4,484,000 in the first quarter of fiscal 1999 from $3,999,000
for the first quarter of fiscal 1998.
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 quarter of
fiscal 1999 were $4,373,000 as compared to $3,783,000 for the first quarter of
<PAGE>
fiscal 1998. This 16% increase was due primarily to an increase in labor costs.
Increased marketing and proposal efforts resulted in a lower project utilization
(labor charged to cost of services). The acquisition of an eleven person
architectural firm in Miami attributed to increases in expenses such as
professional fees, travel, payroll and benefits, and goodwill amortization. In
addition, rent expense increased due to the acquisition and the relocation of
the Ft. Myers and Orlando offices into larger space to accommodate growth.
Increases in telephone and related annual maintenance fees, leased computer
expense, annual software license fees, travel, and recruiting also accounted for
the change.
Income before income taxes was $146,000 for the first quarter of fiscal 1999
compared to $237,000 for the same period of fiscal 1998. Net income for the
first quarter of fiscal 1999 was $80,000 compared to $132,000 for the first
quarter of fiscal 1998. These 38% and 39% decreases were due to the increase in
operating expenses as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998 the Company had cash of $1,650,000. The Company has in place
a revolving line of credit which provides for borrowing up to $2,000,000. The
Company also has a committed credit facility of $2,000,000 which may be used for
the acquisition or merger of other architectural/engineering companies. There
were no borrowings outstanding under either borrowing agreement at June 30,
1998. The company believes that its existing financial resources, together with
its cash flow from operations and its unused lines of credit, will provide
sufficient capital to fund its operations for the foreseeable future.
On May 8, 1998, the Company acquired all of the outstanding shares of Lemuel
Ramos and Associates, Inc., an eleven person architectural firm located in
Miami, Florida. The Company paid cash of $335,000 and signed a $300,000 note
payable to obtain the company. The acquisition has been accounted for using the
purchase method of accounting, and, accordingly, the purchase price has been
allocated to the assets purchased and the liabilities assumed based upon the
fair market values at the date of acquisition. The excess of the purchase price
over the fair values of the net assets was $668,000 and has been recorded as
goodwill, which is being amortized on a straight-line basis over 15 years. The
net purchase price was allocated as follows:
Accounts receivable $ 25,000
Fixed assets 21,000
Goodwill 668,000
Liabilities (79,000)
--------
Purchase price $635,000
========
<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: August 7, 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>
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: 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)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 1,650,000
<SECURITIES> 0
<RECEIVABLES> 9,329,000
<ALLOWANCES> 168,000
<INVENTORY> 0
<CURRENT-ASSETS> 11,111,000
<PP&E> 5,998,000
<DEPRECIATION> 4,057,000
<TOTAL-ASSETS> 14,603,000
<CURRENT-LIABILITIES> 7,642,000
<BONDS> 200,000
0
0
<COMMON> 5,000
<OTHER-SE> 6,045,000
<TOTAL-LIABILITY-AND-EQUITY> 14,603,000
<SALES> 0
<TOTAL-REVENUES> 10,238,000
<CGS> 0
<TOTAL-COSTS> 5,754,000
<OTHER-EXPENSES> 4,328,000
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> 146,000
<INCOME-TAX> 66,000
<INCOME-CONTINUING> 80,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,000
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
