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 September 30, 2000
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, Suite 400 32256
Jacksonville, Florida (Zip Code)
(Address of principal executive offices)
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 September 30, 2000 was 453,140 shares.
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PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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<TABLE>
Six Months Ended Three Months Ended
September 30 September 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
GROSS REVENUE $ 28,449,000 $ 22,602,000 $ 14,570,000 $ 11,352,000
SUBCONTRACT AND OTHER
DIRECT COSTS 6,995,000 4,967,000 3,474,000 2,355,000
--------------- --------------- --------------- ---------------
Net service revenue 21,454,000 17,635,000 11,096,000 8,997,000
COST OF SERVICES 8,145,000 6,890,000 4,215,000 3,499,000
--------------- --------------- --------------- ---------------
Gross profit 13,309,000 10,745,000 6,881,000 5,498,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,608,000 10,313,000 6,456,000 5,266,000
--------------- --------------- --------------- ---------------
Operating income 701,000 432,000 425,000 232,000
OTHER INCOME (EXPENSE)
Interest and other income 26,000 24,000 23,000 12,000
Interest expense ( 7,000) (29,000) ( 3,000) (21,000)
--------------- --------------- --------------- ---------------
Income before income taxes 720,000 427,000 445,000 223,000
INCOME TAX EXPENSE 303,000 185,000 183,000 94,000
--------------- --------------- --------------- ---------------
NET INCOME $ 417,000 $ 242,000 $ 262,000 $ 129,000
=============== =============== =============== ===============
BASIC EARNING PER SHARE $ .92 $ .54 $ .58 $ .29
--------------- --------------- --------------- ---------------
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 453,000 448,000 453,000 448,000
=============== =============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
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REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
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<TABLE>
SEPT 30, MARCH 31,
ASSETS 2000 2000
------
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,000 $ 457,000
Accounts receivable, net of allowance for doubtful accounts of
$130,000 and $131,000 7,853,000 6,490,000
Unbilled service revenue 5,383,000 5,179,000
Prepaid expenses and other current assets 79,000 159,000
Deferred income taxes 431,000 431,000
---------------- ----------------
Total current assets 13,750,000 12,716,000
PROPERTY AND EQUIPMENT, net 2,366,000 2,513,000
OTHER ASSETS 171,000 180,000
COST IN EXCESS OF NET ASSETS OF ACQUIRED
BUSINESSES, net of accumulated amortization of $359,000
and $313,000 1,261,000 1,308,000
---------------- ----------------
$ 17,548,000 $ 16,717,000
================ ================
LIABILITIES AND SHAREHOLDERS EQUITY
-----------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 342,000 $ 100,000
Accounts payable 2,866,000 3,120,000
Accrued payroll 531,000 466,000
Accrued incentive compensation 495,000 883,000
Accrued expenses 1,249,000 1,268,000
Unearned service revenue 3,749,000 2,919,000
---------------- ----------------
Total current liabilities 9,232,000 8,756,000
LONG-TERM DEBT 0 100,000
DEFERRED INCOME TAXES 173,000 173,000
OTHER LIABILITIES 368,000 387,000
---------------- ----------------
Total liabilities 9,773,000 9,416,000
---------------- ----------------
SHAREHOLDERS EQUITY:
Common Stock, $.01 par value, 4,000,000 shares authorized,
453,000 and 448,000 issued and outstanding 5,000 5,000
Paid-in capital 3,627,000 3,570,000
Retained earnings 4,143,000 3,726,000
---------------- ----------------
Total shareholders' equity 7,775,000 7,301,000
---------------- ----------------
$ 17,548,000 $ 16,717,000
================ ================
See accompanying notes to consolidated financial statements.
</TABLE>
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REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED SEPTEMBER 30
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<TABLE>
2000 1999
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 417,000 $ 242,000
Adjustments to reconcile net income to net cash:
Depreciation and amortization 475,000 455,000
Deferred rent charges (19,000) (23,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled service revenue (1,567,000) (1,517,000)
Other assets and prepaid expenses 75,000 35,000
Accounts payable and accrued expenses (539,000) (194,000)
Unearned service revenue 830,000 1,144,000
--------------- --------------
Net cash (used) provided by operating activities (328,000) 142,000
--------------- --------------
INVESTING ACTIVITIES:
Capital expenditures (267,000) (636,000)
Other 0 3,000
--------------- --------------
Net cash used by investing activities (267,000) (633,000)
--------------- --------------
FINANCING ACTIVITIES:
Repayments of long-term debt (100,000) (100,000)
Net increase in credit line payable to bank 242,000 653,000
--------------- --------------
Net cash provided by financing activities 142,000 553,000
--------------- --------------
NET (DECREASE) INCREASE IN CASH (453,000) 62,000
CASH AT BEGINNING OF PERIOD 457,000 68,000
--------------- --------------
CASH AT END OF PERIOD $ 4,000 $ 130,000
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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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, 2000.
2) Earnings per share of common stock are based on weighted average number
of shares outstanding during each period.
3) The Company has acknowledged the SEC's recent release of SAB No. 101
"Revenue Recognition in Financial Statements". This guidance will be
adopted in the fourth quarter of fiscal 2001 and is not expected to
have a material impact on the Company's financial position, results of
operations, or cash flow.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Gross revenue for the first six months of fiscal 2001 was $28.4 million
as compared to $22.6 million for the first six months of fiscal 2000. This $5.8
million increase (25%) was due primarily to increased revenues in the
transportation, aviation, aerospace/defense, and commercial programs as a result
of current and prior year marketing efforts.
Gross revenue for the second quarter of fiscal 2001 was $14.6 million
as compared to $11.4 million for the second quarter of fiscal 2000. Revenues
increased in five of the six programs with the exception of public
infrastructure that showed no change.
Subcontract and other direct costs were 32% and 28% of net service
revenues for the first six months of fiscal years 2001 and 2000, respectively.
This increase in fiscal 2001 relates to the increase in gross revenues, plus an
increase in subconsultants and temporary staffing in the aerospace/defense
program. Subcontract and other direct costs were 31% and 26% of net service
revenues for the second quarter of fiscal years 2001 and 2000, respectively.
This increase for the second quarter also corresponds to the increase in gross
revenues and the increase in subconsultants and temporary staffing noted above
for the six month period.
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Net service revenue more accurately reflects revenue for services
performed by the Company. Net service revenue was $21.5 million for the first
six months of fiscal 2001 compared to $17.6 million for the first six months of
fiscal 2000. This 22% increase corresponds to the increase in gross revenues
offset partially by the increase in direct costs. Net service revenue was $11.1
million for the second quarter of fiscal 2001 as compared to $9.0 million for
the prior years quarter. This 23% increase also corresponds to the increase in
gross revenues offset by the increase in direct costs.
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, remained consistent at 37% and 39%, respectively for the first
six months and the second quarter of fiscal 2001 and 2000. Gross profit, as a
result, also remained consistent at 63% and 61% for the same periods of fiscal
2001 and 2000, respectively.
Selling, general and administrative (SG&A) expenses consist of labor
costs of production 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 to $12.6
million in the first six months of fiscal 2001 from $10.3 million in the first
six months of fiscal 2000. This 22% increase was due primarily to increases in
personnel and associated costs. The number of employees increased to 510 at
September 30, 2000 from 450 at September 30, 1999 as a result of the increased
workload. Other increases in SG&A expenses were experienced in cost of
technology equipment, recruiting costs, office rent, and insurance premiums.
Also, as a result of the Company"s increased earnings for the first six months
of fiscal 2001, incentive compensation increased from the first six months of
fiscal 2000.
SG&A expenses increased to $6.5 million for the second quarter of
fiscal 2001 from $5.3 million for the second quarter fiscal 2000. This 22%
increase relates to the reasons set forth above for the six month period for
fiscal years 2001 and 2000.
Net income was $417,000 for the first six months of fiscal 2001 as
compared to $242,000 for the first six months of fiscal 2000. Net income was
$262,000 for the second quarter of fiscal 2001 as compared to $129,000 for the
same period of fiscal 2000. These increases are primarily a result of increased
net service revenues.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of September 30, 2000 the Company had cash of $4,000. The Company
renegotiated its lending arrangements as of July, 2000 and now has in place a
$3.0 million line of credit. There was $2.8 million in borrowings available on
the line of credit at September 30, 2000.
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Operations for the first six months of fiscal year 2001 generated a
need for cash due primarily to increases in accounts receivable and unbilled
service revenue. Combined days outstanding for accounts receivable and unbilled
service revenue were 85 days and 94 days at September 30, 2000 and 1999,
respectively.
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 2001. This
statement is based on information that is currently available, however, a
variety of factors could cause actual results to differ materially from expected
results.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk exposures to the Company are not material.
7
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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 copies distributed to shareholders
and others.
(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, this report
has been signed below by the following on behalf of the Registrant in the
capacities indicated.
Reynolds, Smith and Hills, Inc.
Dated: November 9, 2000
/s/ Leerie T. Jenkins, Jr. Chairman of the Board
--------------------------------------- and Chief Executive Officer
Leerie T. Jenkins, Jr. (Principal Executive Officer)
/s/ Kenneth R. Jacobson Chief Financial Officer, Executive
------------------------------------ Vice President, and General Counsel
Kenneth R. Jacobson (Principal Financial and
Accounting Officer)
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