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, 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 June 30, 2000 was 452,473 shares.
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED JUNE 30
2000 1999
--------------- -------------
GROSS REVENUE $ 13,879,000 $ 11,251,000
SUBCONTRACT AND OTHER
DIRECT COSTS 3,521,000 2,612,000
--------------- -------------
Net service revenue 10,358,000 8,639,000
COST OF SERVICES 3,930,000 3,392,000
--------------- -------------
Gross profit 6,428,000 5,247,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,152,000 5,047,000
--------------- -------------
Operating income 276,000 200,000
OTHER INCOME (EXPENSE)
Interest and other income 3,000 12,000
Interest expense (4,000) (8,000)
--------------- -------------
Income before income taxes 275,000 204,000
INCOME TAX EXPENSE 120,000 90,000
--------------- -------------
NET INCOME $ 155,000 $ 114,000
=============== =============
BASIC EARNING PER SHARE $ .34 $ .25
=============== =============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 452,000 448,000
=============== =============
See accompanying notes to consolidated financial statements.
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REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
JUNE 30, MARCH 31,
ASSETS 2000 2000
- ------ ------------- ---------------
CURRENT ASSETS:
Cash $ 1,993,000 $ 457,000
Accounts receivable, net of allowance for doubtful accounts of
$130,000 and $131,000 6,284,000 6,490,000
Unbilled service revenue 5,030,000 5,179,000
Prepaid expenses and other current assets 66,000 159,000
Deferred income taxes 431,000 431,000
------------- ------------
Total current assets 13,804,000 12,716,000
PROPERTY AND EQUIPMENT, net 2,400,000 2,513,000
OTHER ASSETS 170,000 180,000
COST IN EXCESS OF NET ASSETS OF ACQUIRED
BUSINESSES, net of accumulated amortization of $331,000
and $313,000 1,290,000 1,308,000
------------- --------------
$ 17,664,000 $ 16,717,000
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 2,233,000 3,120,000
Accrued payroll 1,009,000 466,000
Accrued incentive compensation 1,031,000 883,000
Accrued expenses 1,180,000 1,268,000
Unearned service revenue 4,064,000 2,919,000
------------ -------------
Total current liabilities 9,617,000 8,756,000
LONG-TERM DEBT 0 100,000
DEFERRED INCOME TAXES 173,000 173,000
OTHER LIABILITIES 371,000 387,000
------------ ------------
Total liabilities 10,161,000 9,416,000
------------- ------------
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 4,000,000 shares authorized,
452,000 and 448,000 issued and outstanding 5,000 5,000
Paid-in capital 3,617,000 3,570,000
Retained earnings 3,881,000 3,726,000
--------------- ------------
Total shareholders' equity 7,503,000 7,301,000
--------------- ------------
$ 17,664,000 $ 16,717,000
=============== ============
See accompanying notes to consolidated financial statements.
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REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED JUNE 30
2000 1999
--------------- --------------
OPERATING ACTIVITIES:
Net income $ 155,000 $ 114,000
Adjustments to reconcile net income to net cash:
Depreciation and amortization 245,000 239,000
Deferred rent charges (17,000) (16,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled service revenue 355,000 (949,000)
Other assets and prepaid expenses 89,000 48,000
Accounts payable and accrued expenses (236,000) (167,000)
Unearned service revenue 1,145,000 538,000
--------------- --------------
Net cash provided (used) by operating activities 1,736,000 (193,000)
--------------- --------------
INVESTING ACTIVITIES:
Capital expenditures (100,000) (327,000)
--------------- --------------
Net cash used by investing activities (100,000) (327,000)
--------------- --------------
FINANCING ACTIVITIES:
Repayments of long-term debt (100,000) (100,000)
Net increase in credit line payable to bank 0 1,292,000
--------------- --------------
Net cash (used) provided by financing activities (100,000) 1,192,000
--------------- --------------
NET INCREASE IN CASH 1,536,000 672,000
CASH AT BEGINNING OF YEAR 457,000 68,000
--------------- --------------
CASH AT END OF PERIOD $ 1,993,000 $ 740,000
=============== ==============
See accompanying notes to consolidated financial statements.
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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 three months of fiscal 2001 was $13.9
million as compared to $11.3 million for the first three months of fiscal 2000.
This $2.6 million increase (23%) was due primarily to increased revenues in the
aviation, aerospace/defense, and commercial programs as a result of current and
prior year marketing efforts. A breakdown of gross revenues by program is set
forth below for the first quarter of the fiscal year.
FY 2001 FY 2000
--------------- -----------------
Transportation $5,100,000 $5,000,000
Aviation 2,000,000 1,400,000
Aerospace/Defense 1,900,000 500,000
Public Infrastructure 1,000,000 900,000
Commercial 1,600,000 1,200,000
Institutional 2,300,000 2,300,000
--------------- -----------------
Total $13,900,000 $11,300,000
=============== =================
Subcontract and other direct costs were 34% and 30% of net service
revenues for the first three months of fiscal years 2001 and 2000, respectively.
The 35% increase in fiscal 2001 corresponded to the increase in gross revenues.
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Net service revenue more accurately reflects revenue for services
performed by the Company. Net service revenue was $10.4 million for the first
three months of fiscal 2001 compared to $8.6 million for the first three months
of fiscal 2000. This 20% increase also corresponded to the increase in gross
revenues.
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 38% and 39%, respectively for the first
three months of fiscal 2001 and 2000. Gross profit, as a result, also remained
consistent at 62% and 61% for the first three months 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 $6.2 million
in the first three months of fiscal 2001 from $5.0 million in the first three
months of fiscal 2000. This 22% increase was due primarily to increases in
personnel and associated costs. The number of employees grew to 506 at June 30,
2000 from 439 at June 30, 1999 as a result of the increased workload. Other
increases in SG&A expenses were experienced in telephone expense, recruiting
costs, reprographics, and rent expense. Also, as a result of the Company's
increased earnings for the first three months of fiscal 2001, incentive
compensation increased from the first three months of fiscal 2000.
Net income was $155,000 for the first three months of fiscal 2001 as
compared to $114,000 for the first three months of fiscal 2000. The increase in
the first three months of fiscal 2001 was primarily a result of increased net
service revenues.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000 the Company had cash of $1,993,000. The Company
renegotiated its lending arrangements as of July 27, 2000 and now has in place a
$3,000,000 line of credit. There were no borrowings on the line of credit. The
line of credit agreement expires September 30, 2001.
Cash flows from operations were positive for the first three months of
fiscal year 2001 due primarily to decreases in accounts receivable and unbilled
service revenue, and increases in unearned service revenue. Combined days
outstanding for accounts receivable and unbilled service revenue were 74 days
and 81 days at June 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.
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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: August 11, 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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