UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1999
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 No. 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 32256
Jacksonville, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (904) 296-2000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $.01 par value None
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 estimated aggregate market value of Common Stock held by
non-affiliates as of June 21, 1999 computed with reference to the last sales
price, was $4,312,000.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The number of shares of Common Stock outstanding as of June 21, 1999
was 448,353 shares.
Documents incorporated by reference:
DOCUMENT WHERE INCORPORATED
-------- ------------------
Proxy Statement Dated June 21, 1999 Part III
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
FORM 10-K
Item
Number CAPTION PAGE
PART I
<S> <C> <C>
Item 1. BUSINESS 3
Item 2. PROPERTIES 5
Item 3. LEGAL PROCEEDINGS 5
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 5
EXECUTIVE OFFICERS OF THE REGISTRANT 5
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 6
Item 6. SELECTED FINANCIAL DATA 7
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 13
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 13
Item 11. EXECUTIVE COMPENSATION 13
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 13
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 14
2
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
Reynolds, Smith and Hills, Inc. (the Company) is a professional service
firm operating in the engineering, architectural design and environmental
services industry. The Company was incorporated in the state of Florida in 1989.
As used herein, the Company refers to Reynolds, Smith and Hills, Inc. and its
subsidiaries.
The Company provides a full range of architectural, engineering,
planning and environmental services to public and private sector clients
primarily in the Southeastern United States. Specific industry markets are also
served nationally and internationally. Services are provided through the
following market-focused programs of the Company:
* Transportation - Services are provided to governmental
agencies and private entities and include planning, design,
environmental, and construction engineering and inspection
services for various modes of transportation (including
highways and bridges, mass transit, rail and port).
* Aviation - Services are provided to governmental agencies and
private entities (including air carriers and manufacturers)
and include planning, design, and environmental services for
airfields, terminals, and support buildings.
* Aerospace and Defense - Services are provided to NASA,
Department of Defense, Spaceport Florida Authority and major
aerospace contractors. The Company develops launch and
processing facilities for the Shuttle and expendable vehicles
including the latest multi-use launch pads.
* Public Infrastructure - Services are provided to local
government and quasi-governmental agencies. Services include
planning, evaluation, architectural and engineering design,
permitting, and construction administration for road, water,
wastewater, storm water and solid waste systems. These
services are also provided for public facilities such as parks
and public buildings.
* Commercial - Services are provided to commercial and
industrial entities engaged in planning, designing and
construction of a wide variety of structures and land
development (including office buildings and office parks,
warehouses, distribution and manufacturing facilities,
financial facilities, and data centers).
* Institutional - Services are provided to public agencies
engaged in governmental, educational, recreational, medical
and scientific facilities, and land development. Services
include planning and designing of a wide variety of structures
(including schools and campus master planning, courthouses and
other governmental buildings,
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research and technical facilities, community parks and
recreational facilities, and media centers).
Competition. The engineering and architectural services industry is
highly competitive. The Company's competitors include large national firms as
well as many small local firms. The Company competes with these firms on the
basis of technical capabilities, qualifications of personnel, reputation,
quality and price. Additionally, a local presence is important in certain areas.
No one firm currently dominates a significant portion of the industry.
Major Customers. For each of the years ended March 31, 1999, 1998 and
1997, approximately 80% of the Company's business was with departments or
agencies of federal, state and local governments. Contracts with the Florida
Department of Transportation provided approximately 35% of total revenues for
each of the fiscal years 1999, 1998 and 1997. The loss of a significant client
such as the Florida Department of Transportation would have a material adverse
effect on the Company. No other customer accounted for 10% or more of total
revenues.
Backlog. Gross revenue backlog is the estimated revenue from contracts
entered into with clients, less that portion which has been recognized as
revenue. Backlog is subject to revision due to cancellations, modifications or
changes in the scope of projects. There can be no assurance that signed
contracts will ultimately be authorized or will not be canceled by clients in
accordance with their terms. Net revenue backlog is estimated revenue excluding
subconsultant and other direct costs and more accurately reflects the amounts to
be earned for activities performed by the Company.
The Company's gross backlog at March 31, 1999 was $34.3 million
compared to $29.5 million at March 31, 1998. Net backlog was $25.7 million at
March 31, 1999 as compared to $21.8 million at March 31, 1998. Approximately $27
million of services included in the Company's gross backlog as of March 31, 1999
will be performed in fiscal year 2000. The Company expects additional revenue in
fiscal year 2000 from sales generated during the year which are not included in
the March 31, 1999 backlog.
Governmental Contracts. Some service contracts with departments or
agencies of federal, state, and local governments are subject to renegotiation
of profits or termination at the election of the government. The Company is not
aware of any adjustments which would have a material impact on the Company.
Compliance with Environmental Laws. Compliance with federal, state and
local regulations which have been enacted or adopted relating to the protection
of the environment is not expected to have any material effect upon the capital
expenditures, earnings and competitive position of the Company. However, such
compliance by the Company's clients may require the need for the
environmental-related services which the Company provides.
Employees. At March 31, 1999 the Company employed approximately 419
persons.
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Item 2. PROPERTIES
The Company leases its principal office space in Jacksonville, Florida
and seven branches occupy leased office space in the following Florida
locations: Ft. Myers, Merritt Island, Miami, Orlando, Plantation, Tallahassee,
and Tampa. The Company also maintains leased offices in Flint, Michigan,
Houston, Texas, and Naperville, Illinois. In addition, the Company leases space
for construction sites at approximately six locations in Florida. These leases
expire at various dates through 2005. The current facilities are sufficient for
the operation of the business.
Item 3. LEGAL PROCEEDINGS
The Company is subject to lawsuits that arise in the normal course of
business involving claims typical of those filed against engineering and
architectural professions, alleging primarily professional errors and/or
omissions. The Company maintains professional liability insurance which insures
against risk within the policy limits. There can be no assurances that the
policy limits are sufficient to cover all claims. There are no legal proceedings
pending or, to the knowledge of the Company, threatened against the Company
which in management's opinion would have a material adverse effect on the
Company's financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
March 31, 1999.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons serve as the executive officers of the Company:
Name Age Position Held
---- --- -------------
<S> <C> <S>
Leerie T. Jenkins, Jr. 50 Chairman of the Board
and Chief Executive Officer
David K. Robertson 47 Executive Vice President, Secretary,
Treasurer, Chief Financial Officer,
Chief Operating Officer, and Director
Darold F. Cole 57 Senior Vice President and Director
J. Ronald Ratliff 50 Senior Vice President and Director
</TABLE>
Mr. Jenkins' principal positions are Chairman of the Board and Chief
Executive Officer of the Company, which he has held since June 1990. Mr. Jenkins
has been employed with the
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Company or other architectural, engineering, planning and environmental services
companies for over 27 years. He holds a Masters and Bachelors degree in
landscape architecture from the University of Michigan and University of
Georgia, respectively.
Mr. Robertson's principal positions are Executive Vice President, which
he has held since January 1995, Chief Operating Officer, to which he was
appointed in June 1999, Secretary, Treasurer, Chief Financial Officer and
Director of the Company, which he has held since June 1990. Prior to January
1995 Mr. Robertson was Senior Vice President of the Company. Mr. Robertson has
been employed with the Company or other architectural, engineering, planning and
environmental services companies for over 17 years. He graduated from Florida
State University with a degree in Business.
Mr. Cole's principal positions are Senior Vice President and Director
of the Company, which he has held since June 1990. Mr. Cole has been employed
with the Company or other architectural, engineering, planning and environmental
services companies for over 30 years. He holds a degree in electrical
engineering from Kansas State University.
Mr. Ratliff's principal positions are Senior Vice President and
Director of the Company, which he has held since June 1990. Mr. Ratliff has been
employed with the Company or other architectural, engineering, planning and
environmental services companies for over 21 years. He holds a Masters and
Bachelors degree from the University of South Florida.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's securities are not presently traded on any public stock
exchange or other public market. The Company had approximately 205 shareholders
of record at March 31, 1999, including persons owning stock through the
Company's 401(k) plan. The Company pays no dividends on its common stock but
instead reinvests earnings into the Company to fund growth.
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Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the financial statements of the Company, including the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
YEAR ENDED MARCH 31
1999 1998 1997 1996 1995
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Gross revenue $ 42,919 $ 37,122 $ 39,065 $ 34,070 $ 30,524
Net service revenue 31,583 26,734 27,397 25,595 23,620
Net income 581 567 593 92 350
Common stock per share data:
Basic earnings per share 1.29 1.25 1.30 .20 .78
Weighted average shares of
common stock outstanding 452,000 455,000 455,000 451,000 446,000
BALANCE SHEET DATA:
Working capital 3,508 3,926 2,781 1,935 2,314
Total assets 13,926 13,310 12,680 12,521 11,858
Long-term debt (less current portion) 200 0 7 76 524
Common stockholders' equity 6,460 5,908 5,337 4,741 4,576
</TABLE>
7
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage of net service revenue
represented by the items in the Company's consolidated statements of income:
Year Ended March 31,
1999 1998 1997
------ ------ ------
Gross revenue 135.9% 138.9% 142.6%
Subcontract and other
direct costs 35.9 38.9 42.6
------ ------ ------
Net service revenue 100.0 100.0 100.0
Cost of services 37.8 39.2 39.5
------ ------ ------
Gross profit 62.2 60.8 60.5
Selling, general, and
administrative expenses 59.3 57.4 56.9
------ ------ ------
Operating income 2.9 3.4 3.6
Other income (expense) .2 .4 .2
------ ------ ------
Income before income taxes 3.1 3.8 3.8
Income tax expense 1.3 1.7 1.6
------ ------ ------
Net income 1.8% 2.1% 2.2%
====== ====== ======
Gross Revenue:
Revenue for fiscal 1999 was $42.9 million as compared to $37.1 million
for fiscal 1998. This 16% increase was due primarily to increased revenues in
the transportation and institutional programs. Revenue for fiscal 1998 was $37.1
million as compared to $39.1 million for fiscal 1997.
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This 5% decrease was due primarily to decreased sales in the institutional and
aviation programs. In addition, the design phases for a few large projects in
the institutional and aviation programs were completed and had entered the
construction administration phase in fiscal 1998. This phase is less labor
intensive resulting in comparatively lower revenues. Gross backlog decreased 10%
in fiscal 1998 from fiscal 1997 and net backlog decreased 6% in fiscal 1998 from
fiscal 1997.
For each of the fiscal years ended March 31, 1999, 1998 and 1997,
approximately 80% of the Company's revenues were generated from public sector
clients. For each of the same periods, approximately 35% of the Company's
revenues resulted from services provided to the Florida Department of
Transportation.
Subcontract and Other Direct Costs:
Subcontract and other direct costs (ODC's) increased 9% in fiscal 1999
from fiscal 1998. This is a direct result of increases in the institutional
program's revenue. ODC's for fiscal 1998 decreased 11% from fiscal 1997. This
decrease occurred primarily in the institutional and aviation programs as a
result of the change in projects from design to construction administration
stage as discussed above.
Net Service Revenue:
Net service revenue was $31.6 million for fiscal 1999 as compared to
$26.7 million for fiscal 1998. This 18% increase was the result of increases in
gross revenues as discussed above. Net service revenue was $26.7 million for
fiscal 1998 as compared to $27.4 million for fiscal 1997. This 2% decrease was a
result of decreases in gross revenues as discussed above.
Cost of Services:
Cost of services represents direct labor costs associated with the
generation of net service revenues. Cost of services, as a percentage of net
service revenue, continued to improve to 37.8%, 39.2%, and 39.5%, respectively
for fiscal years ended March 31, 1999, 1998, and 1997. This percentage reflects
improving project efficiency. Gross profit, as a result, has also improved at
62.2%, 60.8% and 60.5% for fiscal years 1999, 1998 and 1997, respectively.
Selling, General and Administrative Expenses:
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 increased 22% to $18.7 million in fiscal 1999 from $15.3
million in fiscal 1998. This increase was due primarily to a net 20% increase in
personnel, resulting in increases in indirect labor and related benefits. The
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Orlando and Ft. Myers, Florida offices moved into larger office space, and new
offices were established in Flint, Michigan, Houston, Texas, and Naperville,
Illinois. As a result, there were increases in rent, telephone, leased computer,
software license, consultant and travel expenses. The Company also acquired an
eleven person architectural firm in Miami, Florida which also resulted in
increases in payroll and related benefits, travel, and amortization of goodwill.
There were also increases in professional fees related to project litigation.
SG&A expenses decreased to $15.3 million in fiscal 1998 from $15.6 million in
fiscal 1997. This 2% decrease was due primarily to a decrease in indirect labor
and related benefits, and a decrease in temporary staffing.
Net Income:
Net income was $581,000 in 1999, $567,000 in 1998, and $593,000 in
1997. The increase in fiscal 1999 was a result of increased gross revenues
offset by increases in costs of services and general and administrative
expenses. The decrease in 1998 from 1997 was due primarily to the decrease in
net service revenue (gross revenue less subcontract costs) as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital measurements are set forth below:
March 31
---------------
1999 1998 1997
------ ------ ------
Working capital (in thousands) $3,508 $3,926 $2,781
Current ratio 1.53:1 1.59:1 1.42:1
Ratio of liabilities to equity 1.16:1 1.25:1 1.38:1
Cash flows from operations were negative for the fiscal year ended
March 31, 1999 due primarily to an increase in accounts receivable and unbilled
service revenue balances. These increases were in conjunction with the growth in
revenue. For fiscal years ended March 31, 1998 and 1997 cash flows from
operations were positive. The Company has made a significant investment of
working capital in information technology over the last several years. Payments
on notes payable and long-term debt totaled $55,000 in fiscal 1999.
The Company has in place a line of credit with a bank which provides
for additional borrowing up to $2,000,000 at March 31, 1999, with interest at
the lower of the bank's prime rate plus .1% or LIBOR plus 2.8%. There were no
borrowings outstanding under the line of credit at March 31, 1999. In addition,
the Company has also secured a committed credit facility of $2,000,000 which may
be used for the acquisition or merger of other architectural/engineering
companies. The interest rate on this facility is the lower of the bank's prime
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rate or LIBOR plus 2.55%. These borrowing agreements, which expire September 30,
1999, contain covenants related to working capital and debt to net worth. The
Company is in compliance with all provisions of these lines of credit.
The Company believes that its existing financial resources, together
with its cash flow from operations and its unused bank line of credit, will
provide sufficient capital to fund its operations for fiscal 2000. This
statement is based on information that is currently available.
BUSINESS ACQUIRED
- -----------------
On May 7, 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 $387,000 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 $708,000 and has been recorded as
goodwill, which is being amortized on a straight-line basis over 15 years. The
fair value of assets acquired and liabilities assumed are as follows:
Fair value of assets acquired $ 71,000
Goodwill 708,000
-------
Total purchase price 779,000
Less:
Cash paid 387,000
Note payable to seller 300,000
-------
Liabilities assumed $ 92,000
=========
Pro forma income statements are not included due to the insignificance of the
acquisition.
YEAR 2000
- ---------
State of Readiness:
The Company is in process of preparing its computer systems and
applications for the Year 2000. This process involves developing and acting on a
plan for the Year 2000 issue. It includes identifying and communicating with
external service providers to ascertain what steps they are taking to remedy
their Year 2000 issues, as well as modifying or replacing certain hardware and
software maintained by the Company. Most of the Company's information technology
systems were purchased from vendors who have represented that these systems will
not be affected by the change of century beginning January 1, 2000. The Company
maintains contact with third party vendors to monitor their progress with Year
2000 issues. Management expects to have substantially all of its currently
identified system and application changes completed in the second quarter of
fiscal 2000 (September 30, 1999).
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The Company has been informed by its third party vendors, and has also
internally ascertained, that its computer applications related to the
development and processing of architectural and engineering documents are not
date-driven and will not be affected by Year 2000 issues. In addition, hardware
supporting these applications has already been upgraded to respond correctly to
the Year 2000 issue. These upgrades have been in process over the last few years
as part of the Company's ongoing technological advancements.
The Company has identified three material operating systems that may be
affected by the Year 2000 issue. They are the general ledger accounting system
(including billings), the third party payroll service, and telecommunications
systems. Upgrades related to the general ledger accounting software and hardware
have been completed. The Company is currently in its fiscal year 2000 and the
general ledger system, including billings, is functioning properly. The third
party payroll service states that its systems are not expected to experience
Year 2000 related problems and has disclosed this in its recent 10K and
subsequent 10Q filings. Upgrades for hardware and software related to the
payroll service have been made and are currently being tested. Actual use of the
upgraded payroll system is expected by the second quarter of fiscal 2000.
Upgrades to the Company's main and branch offices telecommunications systems are
in process and are also expected to be completed by the second quarter of fiscal
2000. Finally, the Company has been given assurances by its third party
telecommunication hardware and service providers that there will be no
interruption in telecommunications resulting from the Year 2000 issue.
The Company's primary non-information technology systems are those
related to the buildings in which the Company leases space. These include, but
are not limited to, heating and air conditioning systems, elevators, and
security access systems. The owners of the properties have represented to the
Company that the systems should be able to respond correctly to the Year 2000
issue in the second quarter of fiscal 2000. Any risk associated with the failure
of these systems, is not expected to be material to the Company's business.
Associated Costs:
The Company expects that the principal costs will be those associated
with testing of its computer applications. The total cost to the Company of
these Year 2000 activities has not been, and is not anticipated to be, material
to its financial position or results of operations in any given year. These
costs and completion dates are based on management's best estimates, which were
derived utilizing numerous assumptions of future events including third party
modification plans. There can be no assurances that these estimates will be
achieved.
Risks:
The risks associated with a failure of systems to respond correctly to
the Year 2000 are delays in production of architectural/engineering documents
due to hardware, software, telecommunication or other problems between offices
and clients (wide area network file sharing and transmission). In addition, to
the extent that the Company's material vendors, subconsultants, customers, and
financial institutions, experience material adverse effects from Year 2000
issues, the Company's own operations may be affected. Various factors, many of
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which are beyond the Company's control, could cause actual plans and results to
differ materially from those contemplated by management. Based on management's
current assessment and estimates, the Company does not believe that the Year
2000 issue will have a material impact on its business, financial condition or
operating results. However, there can be no assurance that the failure of any
such system will not have a material adverse effect on or result in material
litigation brought against the Company.
Contingency Plans:
In the event that the material core systems fail to function properly
given the Year 2000 problems, the Company has established various contingency
plans to maintain operations. Payroll services could be processed through the
general ledger or processed manually. Architectural and engineering document
production could be developed independently in each office and delivered to
respective parties by mail.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that its exposure to market risks is immaterial.
The Company holds no market-risk sensitive instruments for trading purposes. At
present, the Company does not employ any derivative financial instruments, other
financial instruments or derivative commodity instruments to hedge any market
risk, and the Company does not currently plan to employ them in the near future.
To the extent that the Company has borrowings outstanding under either of the
credit facilities, there may be market risk relating to the amounts of
borrowings due to the fact that interest rates under the credit facilities are
variable. The Company's exposure is immaterial due to the short-term nature of
these borrowings.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated Financial Statements of the registrant are set forth
beginning on page 17 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 through 13.
The information required by Items 10 through 13 is included in the
Company's definitive proxy statement dated June 21, 1999 and is incorporated
herein by reference.
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PART IV
<TABLE>
<CAPTION>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
PAGE
----
<S> <C>
(a)(1) Financial Statements
Independent Auditors' Report 17
Consolidated Statements of Income, years ended
March 31, 1999, 1998 and 1997 18
Consolidated Balance Sheets as of March 31,
1999 and 1998 19
Consolidated Statements of Shareholders'
Equity, years ended March 31, 1999, 1998
and 1997 20
Consolidated Statements of Cash Flows, years
ended March 31, 1999, 1998 and 1997 21
Notes to Consolidated Financial Statements 22
(a)(2) Financial Statement Schedule
Independent Auditors' Report 31
Schedule II - Valuation and Qualifying Accounts 32
(a)(3) Exhibits
3.1* Articles of Incorporation of the Company, as amended
3.2* By-Laws of the Company
10.1** Reynolds, Smith and Hills, Inc. Amended and Restated 1991 Employee Stock Bonus
Plan
10.2** Reynolds, Smith and Hills, Inc. Amended and Restated 1991 Nonqualified Stock Option
Plan
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10.3** Reynolds, Smith and Hills, Inc. Amended and Restated 1991 Incentive Stock Option
Plan
21 List of Subsidiaries 33
23 Consent of Deloitte & Touche LLP 34
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 copies of this report distributed to
shareholders and others.
* Filed in connection with and incorporated by reference to Registration
Statement on Form 10 (filed January 15, 1991).
** Filed in connection with and incorporated by reference to the
Company's September 30, 1997 Quarterly Report on Form 10-Q (filed
November 12, 1997).
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended March 31, 1999.
</TABLE>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Reynolds, Smith and Hills, Inc.
Dated: June 21, 1999 By /s/David K. Robertson
------------- ------------------------
David K. Robertson
Executive Vice President, Secretary,
Treasurer, Chief Financial Officer,
Chief Operating Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/Leerie T. Jenkins, Jr. Chairman of the Board June 21, 1999
- ------------------------- and Chief Executive Officer
Leerie T. Jenkins, Jr. (Principal Executive Officer)
/s/David K. Robertson Executive Vice President, June 21, 1999
- --------------------- Secretary, Treasurer, Chief Financial
David K. Robertson Officer, Chief Operating Officer, and
Director (Principal Financial
and Accounting Officer)
/s/Darold F. Cole Director June 21, 1999
- -----------------
Darold F. Cole
/s/J. Ronald Ratliff Director June 21, 1999
- -------------------
J. Ronald Ratliff
____________________ Director
David E. Thomas, Jr.
/s/Alexander P. Zechella Director June 21, 1999
- ------------------------
Alexander P. Zechella
_____________________ Director
R. Ray Goode
_____________________ Director
James W. Apthorp
</TABLE>
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Reynolds, Smith and Hills, Inc.
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Reynolds, Smith
and Hills, Inc. and its subsidiaries as of March 31, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principals used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Reynolds, Smith and Hills, Inc. and
its subsidiaries as of March 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999 in conformity with generally accepted accounting principals.
/s/ Deloitte and Touche LLP
Jacksonville, Florida
May 21, 1999
17
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
GROSS REVENUE $42,919,000 $37,122,000 $39,065,000
SUBCONTRACT AND OTHER DIRECT COSTS 11,336,000 10,388,000 11,668,000
---------- ---------- ----------
Net service revenue 31,583,000 26,734,000 27,397,000
COST OF SERVICES 11,930,000 10,482,000 10,817,000
---------- ---------- ----------
Gross profit 19,653,000 16,252,000 16,580,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 18,716,000 15,337,000 15,581,000
---------- ---------- ----------
Operating income 937,000 915,000 999,000
OTHER INCOME (EXPENSE):
Interest and other income 81,000 109,000 90,000
Interest expense (22,000) (4,000) (31,000)
---------- ---------- ----------
Income before income taxes 996,000 1,020,000 1,058,000
INCOME TAX EXPENSE 415,000 453,000 465,000
---------- ---------- ----------
NET INCOME $ 581,000 $ 567,000 $ 593,000
========== ========== ==========
BASIC EARNINGS PER SHARE $ 1.29 $ 1.25 $ 1.30
========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 452,000 455,000 455,000
========== ========== ==========
</TABLE>
See accompnaying notes to consolidated financial statements.
18
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 68,000 $ 2,364,000
Accounts receivable, net of allowance for
doubtful accounts of $181,000 and $162,000 5,392,000 4,113,000
Unbilled service revenue 4,281,000 3,680,000
Prepaid expenses and other current assets 195,000 225,000
Deferred income taxes 206,000 219,000
---------- ----------
Total current assets 10,142,000 10,601,000
PROPERTY AND EQUIPMENT, net 2,294,000 1,798,000
OTHER ASSETS 41,000 47,000
IDENTIFIABLE INTANGIBLE ASSETS, net of accumulated
amortization of $966,000 and $909,000 71,000 128,000
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES,
net of accumulated amortization of $243,000 and $177,000 1,378,000 736,000
---------- ----------
$13,926,000 $13,310,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 100,000 $ 7,000
Accounts payable 2,393,000 1,933,000
Accrued expenses 2,503,000 2,681,000
Unearned service revenue 1,639,000 2,054,000
---------- ----------
Total current liabilities 6,635,000 6,675,000
LONG-TERM DEBT 200,000 0
DEFERRED INCOME TAXES 170,000 206,000
OTHER LIABILITIES 461,000 521,000
---------- ----------
Total liabilities 7,466,000 7,402,000
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000 shares
authorized, 444,000 and 455,000 issued and outstanding 4,000 5,000
Paid-in capital 3,520,000 3,541,000
Retained earnings 2,936,000 2,362,000
---------- ----------
Total shareholder's equity 6,460,000 5,908,000
---------- ----------
$13,926,000 $ 13,310,000
========== ==========
</TABLE>
19
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------
Paid-in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1996 455,000 $5,000 $3,534,000 $1,202,000 $4,741,000
Issuance of common stock,
net of issuance costs -- -- 3,000 -- 3,000
Net income 593,000 593,000
------- ----- --------- --------- ---------
BALANCE, MARCH 31, 1997 455,000 5,000 3,537,000 1,795,000 5,337,000
Issuance of common stock,
net of issuance costs -- -- 4,000 -- 4,000
Net income 567,000 567,000
------- ----- --------- --------- ---------
BALANCE, MARCH 31, 1998 455,000 5,000 3,541,000 2,362,000 5,908,000
Issuance of common stock,
net of issuance costs 5,000 -- 63,000 -- 63,000
Repurchase of common stock (16,000) (1,000) (84,000) (7,000) (92,000)
Net income 581,000 581,000
------- ----- --------- --------- ---------
BALANCE, MARCH 31, 1999 444,000 $4,000 $3,520,000 $2,936,000 $6,460,000
======= ===== ========= ========= =========
</TABLE>
20
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 581,000 $ 567,000 $ 593,000
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization 817,000 760,000 747,000
Deferred income taxes (23,000) (128,000) (131,000)
(Gain) loss on disposal of fixed assets 11,000 (2,000) 11,000
Deferred rent charges (63,000) 155,000 (97,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled service revenue (1,832,000) (156,000) 853,000
Other assets and prepaid expenses 37,000 (9,000) 6,000
Accounts payable and accrued expenses 303,000 (67,000) 605,000
Unearned service revenue (415,000) 116,000 (115,000)
---------- -------- --------
Net cash (used) provided by operating activities (584,000) 1,236,000 2,472,000
---------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures (1,185,000) (269,000) (422,000)
Purchase of subsidiary (387,000) 0 0
Proceeds from sale of fixed assets 6,000 4,000 8,000
---------- -------- --------
Net cash used by investing activities (1,566,000) (265,000) (414,000)
---------- -------- --------
FINANCING ACTIVITIES:
Repayments of long-term debt (55,000) (69,000) (448,000)
Net decrease in credit line payable to bank 0 0 (415,000)
Repurchase of common stock (92,000) 0 0
Net proceeds from issuance of common stock 1,000 3,000 1,000
---------- ---------- ----------
net cas used by financing activities (146,000) (66,000) (862,000)
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH (2,296,000) 905,000 1,196,000
CASH AT BEGINNING OF PERIOD 2,364,000 1,459,000 263,000
---------- ---------- ----------
CASH AT END OF PERIOD $ 68,000 $2,364,000 $1,459,000
========== ========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID:
Interest paid $ 20,000 $ 4,000 $ 36,000
Income taxes paid $ 383,000 $ 471,000 $ 444,000
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Note payable - owner financing $ 300,000 -- --
Stock bonuses issued $ 62,000 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - Reynolds, Smith and Hills, Inc. (the Company)
is a professional service firm operating in the engineering and
architectural design services industry. The Company provides a full
range of architectural, engineering, planning and environmental
services.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Revenue Recognition - Revenue from contract services is recognized on
the percentage-of- completion method. Revenue is recorded as costs are
incurred, and profit is recognized on each contract based on the
percentage that incurred costs bear to estimated total costs. In the
event of an anticipated loss, the entire amount of the loss is charged
to current operations.
The Company incurs subcontract and other direct costs (out-of-pocket
expenses) some of which are passed through directly to its clients. The
Company believes that revenue excluding subcontract and other direct
costs, more accurately reflects the amounts earned for activities
performed by the Company. Accordingly, the Company reports such costs
as a reduction of gross revenue to arrive at net service revenue.
Unbilled service revenue represents revenues recognized in excess of
amounts billed. Unearned service revenue represents billings in excess
of revenues recognized. Unbilled service revenues which will not be
collected during the next year are not significant.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed principally on the straight-line method over
the estimated useful lives of the assets. Depreciation of assets
recorded under capitalized leases is computed on the straight-line
method over the lesser of the estimated useful life of the asset or the
term of the lease. Property and equipment is periodically reviewed by
management for impairment whenever changes in circumstances indicate
that the carrying value may not be recoverable.
22
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Identifiable Intangible Assets - Identifiable intangible assets consist
of values allocated to key employees, contract backlog, proposals, and
a covenant not to compete and are being amortized on a straight-line
basis over periods of 2 to 10 years.
Cost in Excess of Net Assets of Acquired Businesses-Cost in excess of
net assets of acquired businesses is being amortized on the
straight-line method over periods varying from fifteen to forty years.
The carrying value of cost in excess of net assets of acquired business
is periodically reviewed by management and impairment, if any, is
recognized when the projected undiscounted cash flows are less than the
carrying value.
Income Taxes - The Company and its subsidiaries file consolidated
Federal income tax returns. Deferred income taxes result from temporary
differences which arise from certain transactions being reported in
different periods for financial statement purposes than for tax
purposes. Deferred tax assets and liabilities are recognized using an
asset and liability approach and are based on differences between the
financial statement and tax basis of assets and liabilities using
presently enacted tax rates.
Basic Earnings Per Share - Basic earnings per share is computed by
dividing net income by the weighted average number of common shares
outstanding. Options outstanding to purchase common stock had no
significant dilutive effect.
Cash Equivalents - The Company considers cash on hand and cash held in
banks subject to immediate withdrawal to represent cash.
New Accounting Standards - For the fiscal year ended March 31, 1999 the
Company adopted SFAS No. 130 "Reporting Comprehensive Income", SFAS No.
131 "Disclosure About Segments of an Enterprise and Related
Information", and SFAS No. 132 "Employer's Disclosures about Pensions
and Other Post-Retirement Benefits". The impact of these statements is
not material on the financial statements.
2. ACQUIRED BUSINESS
On May 7, 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 $387,000 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 $708,000 and has been recorded as
23
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
goodwill, which is being amortized on a straight-line basis over 15
years. The fair value of assets acquired and liabilities assumed are as
follows:
Fair value of assets acquired $ 71,000
Goodwill 708,000
-------
Total purchase price 779,000
Less:
Cash paid 387,000
Note payable to seller 300,000
-------
Liabilities assumed $ 92,000
========
Pro forma income statements are not included due to the insignificance of the
acquisition.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Leasehold improvements $ 245,000 $ 168,000
Equipment 6,194,000 5,519,000
------------ ------------
6,439,000 5,687,000
Accumulated depreciation (4,145,000) (3,889,000)
------------ -----------
$ 2,294,000 $ 1,798,000
=========== ===========
</TABLE>
24
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4. ACCRUED EXPENSES
Accrued expenses consist of the following at March 31:
1999 1998
---- ----
<S> <C> <C>
Accrued payroll $ 792,000 $ 646,000
Accrued vacation pay 360,000 265,000
Accrued incentive compensation 398,000 548,000
Other 953,000 1,222,000
------------ -----------
$ 2,503,000 $ 2,681,000
============ ============
5. DEBT
Long-term debt consists of the following at March 31:
1999 1998
---- ----
<S> <C> <C>
Note payable; interest at 8%,
maturing May 7, 2001, $300,000 $ -----
$100,000 due annually
Capital lease obligations ----- 7,000
-------- ---------
300,000 7,000
Less current portion (100,000) (7,000)
---------- -----------
Total long-term debt $200,000 $ ----
========= =========
</TABLE>
At March 31, 1999, the Company had $2,000,000 of additional borrowing
available under a credit line, with interest at the lower of the bank's
prime rate plus .1% or LIBOR plus 2.8%. In addition, the Company has
secured a committed credit facility of $2,000,000 which is reserved for
the potential acquisition or merger of other architectural/engineering
firms. The interest rate on this facility is the lower of the bank's
prime rate or LIBOR plus 2.55%. These borrowing agreements, which
expire September 30, 1999, require the Company to be in compliance with
financial covenants relating to working capital and debt to net worth.
Substantially all of the Company's tangible assets are pledged as
security.
25
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. INCOME TAXES
The provision for income taxes for the years ended March 31 consist of
the following:
1999 1998 1997
--------- --------- ---------
Current:
Federal $ 354,000 $ 454,000 $ 495,000
State 84,000 93,000 101,000
Deferred:
Federal (19,000) (78,000) (109,000)
State (4,000) (16,000) (22,000)
--------- --------- ---------
$ 415,000 $ 453,000 $ 465,000
========= ========= =========
The differences between the provision for income taxes and income taxes
computed using the U.S. Federal statutory rate are as follows:
1999 1998 1997
--------- --------- ---------
Amount computed using
the statutory rate $ 339,000 $ 347,000 $ 360,000
Increase in taxes resulting from:
State income taxes 53,000 44,000 51,000
Goodwill amortization 9,000 9,000 9,000
Meals and entertainment 53,000 40,000 37,000
Other (39,000) 13,000 8,000
--------- --------- ---------
$ 415,000 $ 453,000 $ 465,000
========= ========= =========
The following table identifies net deferred taxes recognized in the
Company's balance sheet at March 31:
1999 1998
--------- ---------
Deferred tax asset $ 545,000 $ 633,000
Deferred tax liability (509,000) (620,000)
--------- ---------
Total deferred taxes $ 36,000 $ 13,000
========= =========
26
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The types of temporary differences and their related tax effects which
create deferred taxes at March 31 are summarized as follows:
1999 1998
--------- ---------
Assets:
Allowance for doubtful accounts $ 69,000 $ 62,000
Allowance for warranty claims 92,000 131,000
Excess rental expense over payments 95,000 119,000
Accruals not currently deductible 289,000 321,000
--------- ---------
$ 545,000 $ 633,000
========= =========
Liability:
Excess of tax over book depreciation $(288,000) $(324,000)
Accrued Liabilities ( 71,000) ( 85,000)
Capitalized expenses (150,000) (211,000)
--------- ---------
$(509,000) $(620,000)
========= =========
7. LEASES
The Company leases certain facilities and equipment under
noncancellable leases expiring in various years through 2005. Some of
the operating leases provide that the Company pay taxes, maintenance,
insurance and other occupancy costs applicable to these premises. Rent
expense for the years ended March 31, 1999, 1998 and 1997 amounted to
$2,402,000, $2,157,000 and $2,109,000, respectively.
Future minimum payments under noncancellable operating leases are as
follows:
Operating
Leases
------
2000 $ 2,039,000
2001 1,813,000
2002 1,448,000
2003 1,114,000
2004 78,000
Thereafter 3,000
-----------
Total minimum payments $ 6,495,000
-----------
27
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. CONTINGENCIES
The Company is subject to lawsuits involving claims typical of those
filed against engineering and architectural professions. In
management's opinion the potential losses not covered by insurance
would not be material to the Company's financial position.
For each of the years ended March 31, 1999, 1998 and 1997,
approximately 80% of the Company's business is with departments or
agencies of Federal, state and local governments. For the same periods
approximately 35% of the Company's gross revenues resulted from
services provided to the Florida Department of Transportation. These
contracts may be subject to renegotiation or termination at the
election of the government. The Company is subject to examinations by
representatives of certain governmental agencies for which it provides
services. In management's opinion the results of any examination would
not have a significant effect on the Company's financial position.
9. EMPLOYEE BENEFIT PLAN
The Company sponsors a Profit Sharing Plan which qualifies under
Section 401(k) of the Internal Revenue Code. The Plan allows
participating employees to contribute from 2% to 15% of their earned
compensation to the plan. The Company contributes to the plan 25% of
each participant's contribution, up to the 6% level of the
participant's contribution. For the years ended March 31, 1999, 1998
and 1997 the Company contributed $161,000, $163,000 and $167,000,
respectively. Participants in the plan have the option to purchase
shares of the Company's common stock. At March 31, 1999, 96,000 shares
of Company stock have been issued and 294,000 shares are reserved for
future issuance under the plan.
10. STOCK BONUS AND OPTION PLAN
The Company has a stock bonus plan that provides for the awarding of
the Company's common stock to selected employees. At March 31, 1999,
34,000 shares are reserved for future issuance under the plan.
The Company has considered SFAS No. 123 and has determined that its
application is not material to the financial statements.
28
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has stock option plans that provide to selected employees
the granting of incentive and non-qualified options to purchase the
Company's common stock. A summary of option transactions is shown
below.
1999 1998
-------------------- -----------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding at
beginning of year 36,400 $ 12 28,300 $ 11
Options granted 3,000 14 22,400 13
Options exercised (100) 10 (200) 11
Options forfeited (10,300) 11 (14,100) 12
------- -------
Outstanding at
end of year 29,000 $ 12 36,400 $ 12
======= =======
Options exercisable at
year end 11,200 11,600
The following table summarizes information about stock options outstanding at
March 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 3/31/99 Life (years) Price at 3/31/99 Price
------ ---------- ------------ ----- ---------- -----
<S> <C> <C> <C> <C> <C>
$10.25-$10.99 2,500 .5 $10.55 2,500 $10.55
$11.00-$11.99 11,400 5.9 11.39 4,900 11.25
$12.00-$12.99 5,100 7.3 12.59 1,500 12.44
$14.00-$14.99 10,000 3.7 14.00 2,300 14.00
------ -------
29,000 4.9 12.43 11,200 11.82
====== ======
</TABLE>
29
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Remaining non-exercisable stock options as of March 31, 1999 become
available as follows:
2000 6,000
2001 5,900
2002 3,400
2003 2,500
-------
17,800
======
At March 31, 1999, 121,000 stock options are reserved for future
issuance under the plans.
11. FINANCIAL INSTRUMENTS
The Company used the following methods and assumptions to estimate the
fair value of the following financial instrument:
Debt. Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt instruments. The
Company believes the carrying amount is a reasonable estimate of such
fair value.
30
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Reynolds, Smith and Hills, Inc.
Jacksonville, FL
We have audited the accompanying consolidated financial statements of Reynolds,
Smith and Hills, Inc. and its subsidiaries as of March 31, 1999 and 1998 and for
each of the three years in the period ended March 31, 1999, and have issued our
report thereon dated May 21, 1999; such report is included elsewhere in this
Form 10-K. Our audits also included the consolidated financial statement
schedule of Reynolds, Smith and Hills, Inc., listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte and Touche LLP
Jacksonville, FL
May 21, 1999
31
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
REYNOLDS, SMITH AND HILLS, INC.
-------- -------- -------- -------- --------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS: DEDUCTIONS:
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
DESCRIPTION OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
----------- --------- -------- ---------- ---------
Year ended march 31, 1999:
Allowance for
doubtful accounts $162,000 $29,000 ($10,000) $181,000
Year ended march 31, 1998:
Allowance for
doubtful accounts $127,000 $70,000 ($35,000) $162,000
Year ended March 31, 1997:
Allowance for
doubtful accounts $148,000 $68,000 ($89,000) $127,000
32
<PAGE>
Exhibit 21
List of Subsidiaries
--------------------
1. Reynolds, Smith and Hills CS, Incorporated
(a Florida corporation)
2. Lemuel Ramos and Associates, Inc.
(a Florida corporation)
3. RS&H Architects-Engineers-Planners, Inc.
(a North Carolina corporation)
33
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements number
33-33536, 33- 40551, 33-40552, 33-40553, 33-40554, 33-51100, 33-51102, 33-51320,
and 333-40237 of Reynolds, Smith and Hills, Inc. on Form S-8 of our report dated
May 21, 1999 appearing in this Annual Report on form 10-K of Reynolds, Smith and
Hills, Inc. for the years ended March 31, 1999, 1998 and 1997.
/s/ Deloitte and Touche LLP
Jacksonville, FL
June 22, 1999
34
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 68,000
<SECURITIES> 0
<RECEIVABLES> 9,854,000
<ALLOWANCES> 181,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,142,000
<PP&E> 6,439,000
<DEPRECIATION> 4,145,000
<TOTAL-ASSETS> 13,926,000
<CURRENT-LIABILITIES> 6,635,000
<BONDS> 200,000
0
0
<COMMON> 4,000
<OTHER-SE> 6,456,000
<TOTAL-LIABILITY-AND-EQUITY> 13,926,000
<SALES> 0
<TOTAL-REVENUES> 42,919,000
<CGS> 0
<TOTAL-COSTS> 23,266,000
<OTHER-EXPENSES> 18,607,000
<LOSS-PROVISION> 28,000
<INTEREST-EXPENSE> 22,000
<INCOME-PRETAX> 996,000
<INCOME-TAX> 415,000
<INCOME-CONTINUING> 581,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581,000
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.29
</TABLE>
