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, 1996
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4651 Salisbury Road, Jacksonville, Florida 32256
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(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 September 30, 1996 was 455,000 shares.
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
REYNOLDS, SMITH AND HILLS, INC
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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SIX MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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1996 1995 1996 1995
---- ---- ---- ----
GROSS REVENUE $ 21,097,000 $ 16,218,000 $ 10,530,000 $ 8,166,000
SUBCONTRACT AND
OTHER DIRECT COSTS 6,839,000 3,757,000 3,601,000 1,879,000
--------- --------- --------- ---------
Net service revenue 14,258,000 12,461,000 6,929,000 6,287,000
COST OF SERVICES 5,760,000 5,030,000 2,775,000 2,502,000
--------- --------- --------- ---------
Gross profit 8,498,000 7,431,000 4,154,000 3,785,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 7,647,000 7,226,000 3,823,000 3,646,000
--------- --------- --------- ---------
Operating income 851,000 205,000 331,000 139,000
OTHER INCOME (EXPENSE):
Interest and other income (expense) 29,000 17,000 24,000 15,000
Interest expense (22,000) (87,000) (8,000) (41,000)
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Income before income taxes 858,000 135,000 347,000 113,000
INCOME TAX EXPENSE 401,000 79,000 190,000 58,000
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NET INCOME $ 457,000 $ 56,000 $ 157,000 $ 55,000
============ ============ ============ ============
NET INCOME PER
COMMON SHARE $ 1.00 $ 0.13 $ 0.35 $ 0.12
============ ============ ============ ============
AVERAGE COMMON
SHARES OUTSTANDING 455,000 448,000 455,000 448,000
============ ============ ============ ============
See accinoanying notes to consolidated financial statements
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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ASSETS September 30, 1996 March 31, 1996
- ------ ------------------ --------------
CURRENT ASSETS:
Cash $ 1,206,000 $ 263,000
Accounts receivable, net of allowance
for doubtful accounts of $161,000 and $148,000 4,884,000 5,178,000
Unbilled service revenue 3,281,000 3,312,000
Prepaid expenses 82,000 185,000
Other current assets 8,000 12,000
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Total current assets 9,461,000 8,950,000
PROPERTY AND EQUIPMENT, net 2,235,000 2,456,000
OTHER ASSETS 70,000 91,000
IDENTIFIABLE INTANGIBLE ASSETS, net of accumulated
amortization of $824,000 and $795,000 214,000 243,000
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESS,
net of accumulated amortization $143,000 and $131,000 770,000 781,000
----------- -----------
$12,750,000 $12,521,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt $ 257,000 $ 863,000
Accounts payable 1,577,000 2,244,000
Accrued payroll 634,000 639,000
Accrued expenses 1,588,000 1,193,000
Unearned service revenue 2,809,000 2,053,000
Current portion of deferred income taxes 23,000 23,000
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Total current liabilities 6,888,000 7,015,000
LONG-TERM DEBT 26,000 76,000
DEFERRED INCOME TAXES 223,000 223,000
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OTHER LIABILITIES 414,000 466,000
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Total liabilities 7,551,000 7,780,000
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SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 4,000,000 shares
authorized, 455,000 issued and outstanding 5,000 5,000
Paid-in capital 3,535,000 3,534,000
Retained earnings 1,659,000 1,202,000
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Total shareholders' equity 5,199,000 4,741,000
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$12,750,000 $12,521,000
=========== ===========
See accompanying notes to consolidated financial statements.
REYNOLDS, SMITH AND HILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED SEPTEMBER 30
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1996 1995
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OPERATING ACTIVITIES
Net income $ 457,000 $ 56,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 375,000 352,000
(Gain) loss on disposal of fixed assets (2,000) 0
Deferred rent charges (46,000) (40,000)
Change in operating assets and liabilities:
Accounts receivable and unbilled service revenue 325,000 162,000
Other assets and prepaid expenses 123,000 59,000
Accounts payable and accrued expenses (283,000) (206,000)
Unearned service revenue 756,000 236,000
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Net cash provided by operating activities 1,705,000 619,000
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INVESTING ACTIVITIES:
Capital expenditures (115,000) (436,000)
Proceeds from sale of fixed assets 7,000 0
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Net cash used by investing activities (108,000) (436,000)
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FINANCING ACTIVITIES:
Repayments of long-term debt (240,000) (267,000)
Net decrease in credit line payable to bank (415,000) (279,000)
Net proceeds from issuance of common stock 1,000 1,000
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Net cash used by financing activities (645,000) (545,000)
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NET INCREASE (DECREASE) IN CASH 943,000 (362,000)
CASH AT BEGINNING OF PERIOD 263,000 577,000
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CASH AT END OF PERIOD $ 1,206,000 $ 215,000
=========== ===========
See accompanying notes to consolidated financial statements.
REYNOLDS, SMITH AND HILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SEPTEMBER 30, 1996
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, 1996.
2) Earnings per share of common stock are based on weighted average number
of shares outstanding during each period.
3) Certain reclassifications have been made in the fiscal year 1996
financial statements to conform to classifications used in the fiscal
year 1997 financial statements.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
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Gross revenue for the first six months of fiscal 1997 was $21,097,000 as
compared to gross revenue of $16,218,000 for the first six months of fiscal
1996. Gross revenue for the second quarter of fiscal 1997 was $10,530,000 as
compared to gross revenue of $8,166,000 for the second quarter of fiscal 1996.
These respective 30% and 29% increases were due primarily to the increased
workload in the transportation, aviation, aerospace and defense, commercial and
institutional programs. Revenues in these program areas increased as a result of
intensive sales efforts throughout the current and prior years. Corresponding
with these increases were an 82% and 92% increase in subcontract and other
direct costs for the respective first six months and second quarter of fiscal
1997 over the same periods for fiscal 1996. Increased use of subconsultants was
experienced in the transportation, aviation, commercial and institutional
programs for both periods. As a result of the increase in both gross revenue and
other direct costs, net service revenue increased 14% to $14,258,000 for the
first six months of fiscal 1997 from $12,461,000 for the first six months of
fiscal 1996. For the second quarter of fiscal 1997, net service revenue
increased 10% to $6,929,000 from $6,287,000 for the second quarter of fiscal
1996.
Cost of services represents direct labor costs associated with the generation of
net service revenues. Cost of services, for the first six months of fiscal 1997
was $5,760,000, representing a 15% increase over the same period for fiscal
1996. Expressed as a percentage of net service revenue, cost of services
remained consistent at 40% for both the first six months of fiscal 1997 and
1996. As a result of these factors and increased revenues, gross profit
increased 14% to $8,498,000 in fiscal 1997 from $7,431,000 in fiscal 1996. Cost
of services, for the second quarter of fiscal 1997 was $2,775,000, representing
an 11% increase over the second quarter of fiscal 1996. As with the first six
months, cost of services remained consistent at 40% of net service revenue for
both the second quarters of fiscal 1997 and 1996. Gross profit increased 10% to
$4,154,000 in the second quarter of fiscal 1997 from $3,785,000 in the second
quarter of fiscal 1996.
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 six months
of fiscal 1997 were $7,647,000 as compared to $7,226,000 for the first six
months of fiscal 1996. This 6% increase was due primarily to increases in
compensation, further acquisition and implementation of computer and
communications technology, professional fees and temporary help. SG&A expenses
for the second quarter of fiscal 1997 were $3,823,000 as compared to $3,646,000
for the second quarter of fiscal 1996. This 5% increase was due primarily to
increases in compensation, professional fees and temporary help.
Income before income taxes was $858,000 for the first six months of fiscal 1997
versus $135,000 for the same period of fiscal 1996. Income before income taxes
was $347,000 for the second quarter of fiscal 1997 versus $113,000 for the
second quarter of fiscal 1996. These increases were primarily attributable to
the increase in net service fees as described above.
Net income was $457,000 for the first six months of fiscal 1997 as compared to
$56,000 for the first six months of fiscal 1996. Net income was $157,000 for the
second quarter of fiscal 1997 as compared to $55,000 for the second quarter of
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
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As of September 30, 1996 the Company had cash of $1,206,000 and additional
borrowing available on the revolving line of credit of $1,750,000. The Company
believes that its existing financial resources, together with its future cash
flow from operations and its unused bank lines of credit, will provide
sufficient capital to fund its operations.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of the Shareholders was held on
July 30, 1996. The matters voted on at the Annual Meeting (as
described in the Company's definitive proxy material dated
June 20, 1996 previously filed with the Commission) were as
follows:
(a) Proposal to elect six directors to serve until next year's
Annual Meeting of Shareholders
Votes Votes Votes
Nominees For Against Withheld
-------- --- ------- --------
Leerie Jenkins 335,209 0 1,878
David Robertson 335,209 0 1,878
Darold Cole 337,087 0 0
J. Ron Ratliff 337,087 0 0
David Thomas 337,087 0 0
Alexander Zechella 337,087 0 0
(b) Proposal to ratify the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the 1997 fiscal
year.
337,087 Votes For 0 Votes Against 0 Withheld
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule. This schedule reports
certain financial data in electronic format for Electronic
Data Gathering and Retrieval (EDGAR) purposes only. This
exhibit is not included in this conforming paper filing.
(b) There were no Form 8-K reports filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 6, 1996 REYNOLDS, SMITH AND HILLS, INC.
By /s/ Leerie T. Jenkins, Jr.
--------------------------
Leerie T. Jenkins, Jr.
Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer)
By /s/ David K. Robertson
----------------------
David K. Robertson
Executive Vice President,
Secretary, Treasurer, Chief
Financial Officer and Director
(Principal Financial and
Accounting Officer)