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, 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 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, 1999 was 448,000 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
----------------- ------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross Revenue $ 37,220,000 $ 31,044,000 $ 14,617,000 $ 10,763,000
Subcontract and Other
Direct Costs 9,290,000 8,156,000 4,323,000 2,684,000
------------ ------------ ------------ ------------
NET SERVICE REVENUE 27,930,000 22,888,000 10,294,000 8,079,000
Cost of Services 10,771,000 8,745,000 3,880,000 3,051,000
------------ ------------ ------------ ------------
GROSS PROFIT 17,159,000 14,143,000 6,414,000 5,028,000
Selling, General and
Administrative Expenses 16,098,000 13,771,000 5,783,000 4,841,000
------------ ------------ ------------ ------------
OPERATING INCOME 1,061,000 372,000 631,000 187,000
OTHER INCOME (EXPENSE):
Interest and other income 33,000 72,000 9,000 9,000
Interest expense (46,000) (16,000) (17,000) (6,000)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,048,000 428,000 623,000 190,000
INCOME TAX EXPENSE 418,000 198,000 233,000 76,000
------------ ------------ ------------ ------------
NET INCOME $ 630,000 $ 230,000 $ 390,000 $ 114,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE $ 1.41 $ .51 $ .87 $ .26
============ ============ ============ ============
AVERAGE COMMON SHARES
OUTSTANDING 448,000 455,000 448,000 444,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31, March 31,
1999 1999
------------ ---------
ASSETS
CURRENT ASSETS:
Cash $ 145,000 $ 68,000
Accounts receivable, net of allowance
for doubtful accounts of $165,000
and $181,000 7,121,000 5,392,000
Unbilled service revenue 5,219,000 4,281,000
Prepaid expenses and other current assets 136,000 195,000
Deferred income taxes 206,000 206,000
----------- -----------
Total current assets 12,827,000 10,142,000
Property and equipment, net 2,527,000 2,294,000
Other assets 65,000 41,000
Identifiable intangible assets, net of
accumulated amortization of
$1,009,000 and $966,000 28,000 71,000
Cost in excess of net assets of acquired
business, net of accumulated
amortization of $295,000
and $243,000 1,325,000 1,378,000
----------- -----------
TOTAL ASSETS $16,772,000 $13,926,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 260,000 $ 100,000
Accounts payable 3,241,000 2,393,000
Accrued payroll 878,000 792,000
Accrued vacation pay 294,000 360,000
Accrued incentive compensation 564,000 398,000
Accrued expenses 1,013,000 953,000
Unearned service revenue 2,676,000 1,639,000
----------- -----------
Total current liabilities 8,926,000 6,635,000
Long-term debt 100,000 200,000
Deferred Income Taxes 170,000 170,000
Other Liabilities 436,000 461,000
----------- -----------
Total liabilities 9,632,000 7,466,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000
shares authorized, 448,000 and 444,000
issued and outstanding 4,000 4,000
Paid-in capital 3,570,000 3,520,000
Retained Earnings 3,566,000 2,936,000
----------- -----------
Total shareholders' equity 7,140,000 6,460,000
----------- -----------
$16,772,000 $13,926,000
=========== ===========
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
1999 1998
--------- ---------
OPERATING ACTIVITIES:
Net income $ 630,000 $ 230,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 691,000 601,000
Loss on disposal of fixed assets 8,000 8,000
Deferred rent charges (37,000) (47,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled
service revenue (2,667,000) (1,538,000)
Other assets and prepaid expenses 35,000 76,000
Accounts payable and accrued expenses 1,156,000 325,000
Unearned service revenue 1,037,000 419,000
----------- -----------
Net cash provided by operating activities 853,000 74,000
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (839,000) (951,000)
Purchase of subsidiary -- (387,000)
Proceeds from sale of fixed assets 3,000 6,000
----------- -----------
Net cash used by investing activities (836,000) (1,332,000)
----------- -----------
FINANCING ACTIVITIES:
Repayments of debt (100,000) (55,000)
Net increase in credit line payable to bank 160,000 --
Net proceeds from issuance of common stock -- 1,000
Repurchase of common stock -- (91,000)
----------- -----------
Net cash provided (used) by financing activities 60,000 (145,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH 77,000 (1,403,000)
CASH AT BEGINNING OF PERIOD 68,000 2,364,000
----------- -----------
CASH AT END OF PERIOD $ 145,000 $ 961,000
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
December 31, 1999
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, 1999.
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 2000 was $37,220,000 as
compared to gross revenue of $31,044,000 for the first nine months of fiscal
1999. This 20% increase occurred primarily in the transportation, aviation,
aerospace/defense, and institutional programs. Sales in these programs have been
strong in both the current and last fiscal year. Net service revenues increased
22% to $27,930,000 in the first nine months of fiscal 2000 from $22,888,000 in
the first nine months of fiscal 1999 as a result of the gross revenue increases
mentioned above. Gross revenue for the third quarter of fiscal 2000 was
$14,617,000 as compared to gross revenue of $10,763,000 for the third quarter of
fiscal 1999. This 36% increase occurred primarily in the aviation,
aerospace/defense, and institutional programs. Net service revenues increased
27% to $10,294,000 in the third quarter of fiscal 2000 from $8,079,000 in the
third quarter of fiscal 1999 as a result of the gross revenue increases
mentioned above.
Cost of services represents direct labor costs associated with the generation of
net service revenue. Cost of services for the first nine months of fiscal 2000
was $10,771,000, representing a 23% increase from the same period for fiscal
1999. This increase was due to the addition of personnel to handle the increased
workload. Expressed as a percentage of net service revenue, cost of services
remained consistent at approximately 38% for the first nine months of both
fiscal 2000 and 1999. As a result, gross profit also remained consistent at 62%
of net service revenue. Cost of services for the third quarter of fiscal 2000
was $3,880,000, representing a 27% increase from the same period for fiscal
1999. This increase was due to the addition of personnel to handle the increased
workload. Expressed as a percentage of net service revenue, cost of services
remained consistent at 38% for the third quarters of both fiscal 2000 and 1999.
As a result, gross profit remained consistent at 62% of net service revenue.
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 2000 were $16,098,000 as compared to $13,771,000 for the first nine
months of fiscal 1999. This 17% increase was due primarily to an increase in
labor costs (both addition of personnel and salary increases, and related
benefits). In addition, rent expense increased due to: 1) the relocation of the
Orlando office in fiscal 1999 into larger space to accommodate growth and 2) new
offices in Miami, Michigan, Texas, and Illinois also in fiscal 1999. Increases
in recruiting and employee relocation, depreciation, office supplies,
communication, professional fees, and incentive compensation expenses also
accounted for the change.
SG&A expenses for the third quarter of fiscal 2000 were $5,783,000 as compared
to $4,841,000 for the third quarter of fiscal 1999. This 19% increase was due
primarily to an increase in labor costs (both addition of personnel and salary
increases, and related benefits). In addition, rent expense increased due to new
offices in Miami, Michigan, Texas, and Illinois. Increases in recruiting, office
supplies, communication, professional fees, general liability insurance, and
incentive compensation expenses also accounted for the change between quarters.
Income before income taxes was $1,048,000 for the first nine months of fiscal
2000 compared to $428,000 for the same period of fiscal 1999. Net income for the
first nine months of fiscal 2000 was $630,000 compared to $230,000 for the first
nine months of fiscal 1999. These 145% and 174% respective increases were due to
the increase in gross revenue as discussed above. Income before income taxes was
$623,000 for the third quarter of fiscal 2000 compared to $190,000 for the same
period of fiscal 1999. Net income for the third quarter of fiscal 2000 was
$390,000 compared to $114,000 for the third quarter of fiscal 1999. These 228%
and 242% respective increases were due to the increase in gross service revenue
as discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999 the Company had cash of $145,000 with $1,840,000 of
borrowings available under its revolving line of credit. 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. Increases in accounts
receivable, unbilled service revenue, and accounts payable were due to the
corresponding increase in gross revenue and company growth. These increases
resulted in lower cash balances at December and March 31, 1999 compared to
December and March 31, 1998. The Company believes, based on information
currently available, that its existing financial resources, together with its
cash flow from operations and its unused amounts under its line of credit, will
provide sufficient capital to fund its operations for the foreseeable future. A
variety of factors could cause actual results to differ materially from expected
results.
YEAR 2000
The Company experienced no significant problems with either its internal or
third-party information technology or non-information technology (i.e. building
operating systems) when the date changed from 1999 to 2000. The primary
operating systems (general ledger, payroll, and communications) functioned
properly at the change of century beginning January 1, 2000. In addition, since
applications related to the development and processing of architectural and
engineering documents were not date-driven, they were also not affected by Year
2000 issues. The costs associated with Year 2000 activities were not material to
the Company's financial position or results of operations.
Based on operations since January 1, 2000, the Company does not expect any
significant impact to its ongoing business as a result of the Year 2000 issue.
It is possible, however, that the full impact of the date change has not been
fully recognized. The Company believes that any such problems are likely to be
minor and correctable. In addition, the Company could still be negatively
impacted if its third party vendors are adversely impacted by the Year 2000
issue. The Company currently is not aware of any significant Year 2000 problems
that have arisen for its third-party vendors.
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 copies distributed to shareholders and others.
(b) There were no Form 8-K reports filed during the quarter for which
this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 14, 2000 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/ Kenneth R. Jacobson
----------------------
Kenneth R. Jacobson
Executive Vice President,
Chief Financial Officer,
and General Counsel
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 145,000
<SECURITIES> 0
<RECEIVABLES> 12,505,000
<ALLOWANCES> 165,000
<INVENTORY> 0
<CURRENT-ASSETS> 12,827,000
<PP&E> 7,191,000
<DEPRECIATION> 4,664,000
<TOTAL-ASSETS> 16,772,000
<CURRENT-LIABILITIES> 8,926,000
<BONDS> 100,000
0
0
<COMMON> 4,000
<OTHER-SE> 7,136,000
<TOTAL-LIABILITY-AND-EQUITY> 16,772,000
<SALES> 0
<TOTAL-REVENUES> 37,220,000
<CGS> 0
<TOTAL-COSTS> 20,061,000
<OTHER-EXPENSES> 16,062,000
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 46,000
<INCOME-PRETAX> 1,048,000
<INCOME-TAX> 418,000
<INCOME-CONTINUING> 630,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 630,000
<EPS-BASIC> 1.41
<EPS-DILUTED> 1.41
</TABLE>
