1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13
or 15 (d) of THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995 Commission File No. 0-11917
THE DAVEY TREE EXPERT COMPANY
(Exact name of Registrant as specified in its charter)
Ohio 34-0176110
(State of Incorporation) (IRS Employer Identification No.)
1500 North Mantua Street
P. O. Box 5193
Kent, OH 44240-5193
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 673-9511
Number of Common Shares Outstanding as of November 10, 1995: 2,299,489
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 and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
_____ _____
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THE DAVEY TREE EXPERT COMPANY
INDEX
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Page No.
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PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets - Periods Ended September 30,
1995, October 1, 1994 and December 31, 1994 3
Consolidated Statements of Income - Three Months
Ended September 30, 1995 and October 1, 1994 4
Consolidated Statements of Income - Nine Months
Ended September 30, 1995 and October 1, 1994 5
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1995 and October 1, 1994 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II: OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 6: Exhibits and Reports on Form 8-K 12
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THE DAVEY TREE EXPERT COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
Sept. 30, October 1, Dec. 31,
1995 1994 1994
------------- ------------- -------------
ASSETS (UNAUDITED)
- ------ ------------------------------
CURRENT ASSETS
Cash and Cash Equivalents $ 664 $ 846 $ 973
Accounts Receivable 38,100 33,555 29,313
Operating Supplies 2,106 2,505 2,568
Prepaid Expenses 2,411 2,411 3,133
Deferred Income Taxes 1,738 2,086 1,898
------------- ------------- -------------
Total Current Assets 45,019 41,403 37,885
OTHER ASSETS AND INTANGIBLES 6,974 5,738 7,470
PROPERTY AND EQUIPMENT:
Gross Property and Equipment 159,907 155,276 154,890
Accumulated Depreciation 105,632 98,746 100,466
------------- ------------- -------------
Net Property and Equipment 54,275 56,530 54,424
------------- ------------- -------------
TOTAL ASSETS $ 106,268 $ 103,671 $ 99,779
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Notes Payable to Banks $ 74 $ 232 $ 99
Accounts Payable 10,553 7,910 9,092
Accrued Liabilities 9,740 11,059 6,396
Accrued Insurance Liabilities 5,801 2,322 4,564
Income Taxes Payable 1,708 33 1,307
Current Maturities of Long-Term Debt 4,749 4,834 3,844
------------- ------------- -------------
Total Current Liabilities $ 32,625 $ 26,390 $ 25,302
------------- ------------- -------------
LONG-TERM DEBT
Notes Payable 9,500 8,000 8,000
Term Note Agreement 9,600 12,120 12,000
Prime Rate Borrowings 3,300 7,200 2,700
Long-Term Debt of ESOT 121 217 193
Term Loans 220 1,185 1,401
Subordinated Notes - Stock Redemption 673 212 212
Other 334 590 462
------------- ------------- -------------
23,748 29,524 24,968
Less: Current Maturities 4,749 4,834 3,844
------------- ------------- -------------
Total Long-Term Debt 18,999 24,690 21,124
------------- ------------- -------------
DEFERRED INCOME TAXES 3,456 4,566 3,256
------------- ------------- -------------
INSURANCE LIABILITIES 5,942 4,474 5,050
OTHER LIABILITIES 1,137 589 516
------------- ------------- -------------
TOTAL LIABILITIES $ 62,159 $ 60,709 $ 55,248
------------- ------------- -------------
SHAREHOLDERS' EQUITY
Preferred Shares - No Par Value $ - - - $ - - - $ - - -
Authorized 4,000,000 Shares; None Issued
Common Shares - $1.00 Par Value;
Authorized 12,000,000 Shares; Issued
4,364,220 Shares at September 30, 1995,
October 1, 1994 and December 31, 1994 4,364 4,364 4,364
Additional Paid-In Capital 7,707 7,389 7,531
Retained Earnings 65,481 60,858 62,851
------------- ------------- -------------
77,552 72,611 74,746
LESS:
Treasury Shares at cost: 2,055,971
Shares at September 30, 1995; 1,900,207
Shares at October 1, 1994; and 1,921,217
Shares at December 31, 1994 (33,014) (28,814) (29,416)
Subscriptions Receivable from Employees (308) (618) (606)
Future Contributions to ESOT (121) (217) (193)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 44,109 $ 42,962 $ 44,531
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 106,268 $ 103,671 $ 99,779
============= ============= =============
See Notes to Consolidated Financial Statements
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THE DAVEY TREE EXPERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
(DOLLARS IN THOUSANDS EXCEPT INCOME PER SHARE AMOUNTS)
(UNAUDITED)
September 30, 1995 October 1, 1994
---------------------------- ----------------------------
REVENUES $ 61,972 100.0% $ 56,433 100.0%
------------- ----------- ------------- -----------
COSTS AND EXPENSES
Operating 42,410 68.4 39,390 69.8
Selling 8,222 13.3 7,524 13.3
General and Administrative 3,477 5.6 3,214 5.7
Depreciation and Amortization 3,328 5.4 3,354 5.9
------------- ----------- ------------- -----------
TOTAL COSTS AND EXPENSES 57,437 92.7 53,482 94.7
------------- ----------- ------------- -----------
INCOME BEFORE INTEREST, OTHER
EXPENSE AND INCOME TAXES 4,535 7.3 2,951 5.3
INTEREST EXPENSE (634) (1.0) (716) (1.3)
OTHER INCOME/(EXPENSE) - NET (71) (0.1) 43 0.1
------------ ----------- ------------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,830 6.2 2,278 4.1
INCOME TAXES 1,570 2.5 903 1.6
------------- ----------- ------------- -----------
INCOME FROM CONTINUING OPERATIONS 2,260 3.7 1,375 2.5
DISCONTINUED OPERATIONS, NET (61) (0.1)
------------- ----------- ------------ -----------
NET INCOME $ 2,260 3.7% $ 1,314 2.4%
============= =========== ============= ===========
INCOME PER COMMON SHARE
FROM CONTINUING OPERATIONS $ 0.93 $ 0.58
============= =============
NET INCOME PER COMMON SHARE $ 0.93 $ 0.55
============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
INCLUDING COMMON STOCK
EQUIVALENTS 2,434,720 2,385,093
============= =============
See Notes to Consolidated Financial Statements
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THE DAVEY TREE EXPERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
(DOLLARS IN THOUSANDS EXCEPT INCOME PER SHARE AMOUNTS)
(UNAUDITED)
SEPTEMBER 30, 1995 OCTOBER 1, 1994
------------------------------ --------------------------------
REVENUES $ 169,631 100.0% $ 160,335 100.0%
--------------- ----------- --------------- -----------
COSTS AND EXPENSES
Operating 119,432 70.4 114,098 71.2
Selling 22,200 13.1 20,567 12.8
General and Administrative 10,829 6.4 10,936 6.8
Depreciation and Amortization 9,418 5.6 9,751 6.1
--------------- ----------- --------------- -----------
TOTAL COSTS AND EXPENSES 161,879 95.5 155,352 96.9
--------------- ----------- --------------- -----------
INCOME BEFORE INTEREST, OTHER
EXPENSE AND INCOME TAXES 7,752 4.5 4,983 3.1
INTEREST EXPENSE (1,866) (1.1) (1,851) (1.2)
OTHER EXPENSE - NET (223) (0.1) (177) (0.1)
-------------- ----------- --------------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 5,663 3.3 2,955 1.8
INCOME TAXES 2,322 1.4 1,171 0.7
--------------- ----------- --------------- -----------
INCOME FROM CONTINUING OPERATIONS 3,341 1.9 1,784 1.1
DISCONTINUED OPERATIONS, NET 236 0.1 (201) (0.1)
--------------- ----------- --------------- -----------
NET INCOME $ 3,577 2.0% $ 1,583 1.0%
=============== =========== =============== ============
INCOME PER COMMON SHARE
FROM CONTINUING OPERATIONS $ 1.37 $ 0.70
=============== ===============
NET INCOME PER COMMON SHARE $ 1.46 $ 0.62
=============== ===============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, INCLUDING
COMMON STOCK EQUIVALENTS 2,447,046 2,534,247
=============== ===============
See Notes to Consolidated Financial Statements
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THE DAVEY TREE EXPERT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, OCTOBER 1,
1995 1994
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,577 $ 1,583
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 9,742 9,956
Deferred Income Taxes 359 (16)
--------------- ---------------
13,678 11,523
Change in Operating Assets and Liabilities:
(Increase) Decrease In:
Accounts Receivable (8,787) (5,267)
Refundable Income Taxes
Operating Supplies 462 140
Prepaid Expenses 722 (358)
Other Assets 172 (948)
Increase (Decrease) In:
Accounts Payable 1,461 (2,940)
Accrued Liabilities 3,344 5,314
Accrued Insurance Liabilities 2,129 1,090
Income Taxes Payable 401 (433)
Other Liabilities 453 (196)
--------------- ---------------
Net Cash Provided By Operating Activities 14,035 7,925
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Property and Equipment 701 392
Capital Expenditures:
Land and Buildings (258)
Equipment (9,779) (6,817)
--------------- --------------
Net Cash Used In Investing Activities (9,078) (6,683)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
ESOT Payment of Debt Guaranteed by the Company 72 72
Net Borrowings (Payments) Under Notes Payable, Bank (25) 152
Principal Payments of Long-Term Debt (3,861) (740)
Proceeds from Issuance of Long-Term Debt 2,641 1,836
Sales of Treasury Shares 847 1,225
Receipts from Stock Subscriptions 298 357
Dividends Paid (969) (975)
Repurchase of Common Shares (4,269) (3,345)
--------------- --------------
Net Cash (Used In)/Provided By Financing Activities (5,266) (1,418)
--------------- --------------
NET CHANGE IN CASH AND EQUIVALENTS (309) (176)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 973 1,022
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 664 $ 846
=============== ===============
See Notes to Consolidated Financial Statements
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THE DAVEY TREE EXPERT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995
UNAUDITED
---------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited Consolidated Financial Statements as of
September 30, 1995 and October 1, 1994 have been prepared in accordance with
the instructions to Form 10-Q, but do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
NOTE 2 - DISCONTINUED OPERATIONS
- --------------------------------
On March 31, 1995 the Registrant sold substantially all of the
operating assets, excluding real estate, of its interior plant care business to
Barefoot Grass Lawn Service, Inc. for approximately $1,300,000. The sale
agreement provided for settlement of the purchase price in cash on April 3,
1995.
Amounts related to the discontinued operations and recognized in the
financial statements are as follows:
NINE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1995 OCTOBER 1, 1994
------------------ ---------------
Revenues $ 555,000 $ 1,907,000
================= =================
Loss from discontinued operations, net of
applicable income tax credits of $71,000 in
1995 and $92,000 in 1994 $ (102,000) $ (201,000)
Gain on sale of assets, less applicable
income taxes of $234,000 338,000
----------------- -----------------
Discontinued operations, net $ 236,000 (201,000)
================= =================
Assets and liabilities as of September 30, 1995:
Remaining assets:
Real estate, net 460,000
-----------------
Total assets $ 460,000
=================
Liabilities which remain the obligation of
the Registrant:
Notes payable and current portion of
long-term debt $ 80,000
Accounts payable 50,000
Accrued liabilities and other 73,000
Long-term debt less current portion 187,000
-----------------
Total liabilities $ 390,000
=================
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NOTE 3 - ACQUISITION
- --------------------
Effective January 1, 1995, the Registrant acquired the common stock of
B. D. Wilhelm Company, a residential and commercial tree and lawn care company
in Denver, Colorado. The Registrant recorded the approximate $1,650,000 price
using the purchase method of accounting and has included its results of
operations in the consolidated financial statements. Goodwill acquired as a
result of this purchase will be amortized over 15 years using the straight-line
method.
NOTE 4 - RESULTS OF OPERATIONS
- ------------------------------
Due to the seasonal nature of some of the Company's services, the
results of operations for the quarters ended September 30, 1995 and October 1,
1994 are not necessarily indicative of the results to be expected for the full
year.
NOTE 5 - DIVIDENDS
- ------------------
On September 10, 1995 the Registrant paid a $.14 per share dividend to
all shareholders of record at September 1, 1995. This compares to a $.13 per
share dividend paid in the third quarter of 1994. For the year the Registrant
paid a $.41 per share dividend, as compared to a $.39 per share dividend paid
the first nine months of 1994.
NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARD
- --------------------------------------------
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption no later than fiscal years beginning
after December 15, 1995. The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period.
Pursuant to the new standard, companies are encouraged, but not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to the
financial statements pro forma net income and, if presented, earnings per share
as if the company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption.
The Registrant has not yet determined if it will elect to change to the fair
value method, nor has it determined the effect the new standard will have on
net income and earnings per share should it elect to make such a change.
Adoption of the new standard will have no effect on the Registrant's cash
flows.
NOTE 7 - RECLASSIFICATIONS
- --------------------------
Reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
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THE DAVEY TREE EXPERT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $14,035,000 in cash for the first nine
months of 1995, an increase of $6,110,000 when compared to the $7,925,000
provided during the same period last year. The improvement was mainly due to
increases in net income, accounts payable, accrued insurance liabilities, and
income taxes payable, along with decreases in prepaid expenses and other
assets. These items were partially offset by an increase in accounts
receivable and a lower increase in accrued liabilities.
Net income of $3,577,000 was $1,994,000 higher than the prior year. The
increase was primarily attributable to higher income in most of the
Registrant's service lines and to a lesser extent was impacted by a gain on the
disposal of certain assets associated with its Interiorcare operations. (See
note #2 to the Financial Statements on page 7 of the quarterly report on Form
10-Q.) Residential and Commercial services income continue to be favorably
impacted by improved economic conditions generally. In addition, the
Registrant's Western Canadian and Western U.S. Utility operations have
experienced significant operating profit improvement due primarily to
productivity gains associated with certain contracts. These increased earnings
are the primary factor contributing to the net increase in amounts payable for
income taxes, and reinforce the Registrant's expectations that revenues and
earnings will reflect an improvement over 1994.
Cash provided by accounts payable of $1,461,000 reflects a $4,401,000
increase when compared to the $2,940,000 used during the same time period last
year. The increase was primarily the result of higher equipment purchases
entered into during the fourth quarter of 1993 and paid the first quarter of
1994, as well as higher liabilities for group insurance costs. To a lesser
extent, it reflects a slight increase in payment cycles initiated by the
Registrant during the latter half of 1994 and continued into the current year.
Accrued insurance liabilities provided $2,129,000, or $1,039,000 more
than that provided during the first nine months of 1994. The increase was
primarily due to changes in estimates of ultimate costs resulting from further
maturity of the related claims.
The decrease in prepaid expenses of $722,000 during the first nine
months of 1995, compared to an increase of $358,000 in the prior year, was
mainly the result of a reduction in the deposits required by the Registrant's
insurance carrier.
Other assets provided $172,000 in cash, an improvement of $1,120,000
when compared to the $948,000 used in the prior year. The change was primarily
attributable to amounts earned under a contract with two of the Registrant's
Utility customers, as well as an advance funded according to the terms of The
Big Tree Company, Inc. acquisition agreement, both of which occurred in the
prior year.
Cash flows from operating activities were reduced by an $8,787,000
increase in accounts receivable, an increase in cash used of $3,520,000 when
compared to last year. Average days outstanding of 54.7 increased .2 days from
54.5 at December 31, 1994, and increased 1.6 days from last year's third
quarter. The increase was attributable largely to work in process related to
certain contracts with one of the Registrant's Western Utility customers.
These contracts will continue to unfavorably influence days outstanding in that
they call for amounts earned to be billed and paid at intervals of
approximately six months. The increase also resulted from the acquisition of
the B.D. Wilhelm Company receivables in January, 1995, along with an overall
increase in Residential and Commercial service line
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revenues. Although accounts receivable continues to remain at a higher than
desired level in both dollars and days outstanding, the Registrant did,
excluding the amounts earned under contracts with the utility customer
previously discussed, reduce its average days outstanding by a full day since
year end 1994. Excluding those amounts earned, average days outstanding were
53.5 days, a 1.0 day decrease from year end 1994, and an increase of only .4
days from the same period last year. The Registrant is not concerned as to the
collectability of the accounts, and therefore considers no allowance necessary.
Nevertheless, it is continuing its efforts to attain permanent reductions in
both days and dollars outstanding.
At September 30, 1995, accrued liabilities provided $3,344,000,
$1,970,000 less than that provided in 1994. The reduction was mainly the
result of lower accruals for period costs associated with the Registrant's
casualty insurance liability exposures and interest, partially offset by higher
payroll and related tax accruals.
During the first nine months, investing activities used $9,078,000, an
increase of $2,395,000 when compared to the first nine months of 1994. The
primary factor contributing to the increase was higher capital equipment
expenditures, partially offset by the sale of certain Interiorcare assets noted
previously. At approximately $10,300,000 for the current year, the budget for
capital expenditures is consistent with the Registrant's plan to expand
services, maintain equipment on existing operations, and provide for suitable
branch office facilities.
Financing activities used $5,266,000, a net increase of $3,848,000 when
compared to the $1,418,000 used in the prior year. The increase was mainly due
to principal payments on the Registrant's term note agreement, as well as the
payment of a bank term loan by one of the Registrant's subsidiaries. To a
lesser extent, the increase resulted from higher repurchases of common shares
of the Registrant.
In September, 1995 the Registrant entered into a new credit agreement
with two banks. It not only consolidates the Registrant's credit facilities,
but provides greater flexibility in the choice of interest rates, amounts
available to be borrowed, and increased participation by the second bank. It
is a revolving credit agreement that provides for borrowings as defined. At
September 30, 1995, the Registrant's principal source of liquidity consisted of
$664,000 in cash and cash equivalents; short-term lines of credit and amounts
available to be borrowed from banks via notes payable totaling $3,420,000, of
which $187,000 had been drawn at the end of the third quarter; and the new
credit agreement in the amount of $35,000,000, of which $12,800,000 had been
drawn and $6,973,000 was considered drawn to cover outstanding standby letters
of credit. Including the outstanding balance on the term note agreement of
$9,600,000, the Registrant's credit facilities now total $48,020,000. The
Registrant believes its available credit will exceed credit requirements, and
that its liquidity is adequate.
RESULTS OF OPERATIONS
Revenues of $169,631,000 for the first nine months increased $9,296,000
or 5.8% when compared to the same period in 1994. Third quarter revenues of
$61,972,000 exceeded third quarter 1994 revenues by $5,539,000 or 9.8%. The
current year to date and quarter increases are mainly due to increased
revenues in the Registrant's Residential and Commercial services and its
Western Utility operations. As previously mentioned, Residential and
Commercial services continue to be positively influenced by favorable economic
conditions, as well as heightened sales efforts. The increase in Western
Utility revenues is mainly attributable to production gains on certain
contracts and contracts obtained through the ordinary course of competitive
bidding. Despite the gains in certain utility markets, as a whole the
Registrant's Utility services continue to be somewhat affected by budget
reductions on existing Utility contracts and discontinued Utility contracts
experienced in the ordinary course of competitive bidding.
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For the year and the quarter operating costs increased $5,334,000 to
$119,432,000 and $3,020,000 to $42,410,000, respectively. However, as a
percentage of revenues these costs decreased .8% to 70.4% for the first nine
months and 1.4% to 68.4% for the quarter. The percentage reduction in
operating costs was due to lower direct labor, related payroll taxes and
fringes, and materials costs in the current year, as well as non-recurring
shutdown and relocation costs incurred in 1994 associated with discontinued
utility operations. The Registrant anticipates that operating costs will
remain, as a percentage of revenues, slightly below 1994 levels.
Selling costs for the year increased $1,633,000 to $22,200,000, and as a
percentage of revenues increased .3% to 13.1%. For the quarter, these costs
rose $698,000 to $8,222,000, but as a percentage of revenues, they remained
constant with last year at 13.3. Significant factors affecting the percentage
increase for the year include higher Residential sales commissions, related
payroll tax and group insurance costs, partially offset by lower advertising
costs.
For the year, General and Administrative (G & A) expenses of $10,829,000
declined $107,000 or .4% as a percentage of revenues to 6.4%. In the quarter,
these expenses increased $263,000 to $3,477,000, but as a percentage of
revenues they decreased .1% to 5.6%. The year to date decrease was primarily
driven by corporate cost containment efforts, most notably in office and
administrative salaries.
For the year, depreciation and amortization declined $333,000 or .5% as
a percentage of revenues to $9,418,000 or 5.6%. Quarterly results reflected a
decline of $26,000 or .5% as a percentage of revenues to $3,328,000 or 5.4%.
The lower depreciation levels were generally a function of lower capital
expenditures over the past two years. The Registrant anticipates that 1995
depreciation expense will approximate $13,000,000.
Interest expense in the first nine months of $1,866,000 remained
virtually even with last year, but as a percentage of revenues declined .1% to
1.1%. For the quarter, interest expense declined $82,000 to $634,000, or .3%
as a percentage of revenues to 1.0%. Despite a reduction in the Registrant's
long term debt, interest charges exceed last years levels primarily due to an
approximate 260 basis point rise in interest rates.
As a result of the above factors, year to date income from continuing
operations before income taxes increased $2,708,000 to $5,663,000 or 1.5% to
3.3% as a percentage of revenues. For the quarter, this income increased
$1,552,000 to $3,830,000 or 2.1% to 6.2% as a percentage of revenues. After
reflecting a net $236,000 contributed by the Registrant's discontinued
Interiorcare operations, for the year the Registrant's net income of $3,577,000
increased $1,994,000 or 1.0% as a percentage of revenues. Quarter results
reflected similar increases, rising $946,000 to $2,260,000 or 1.3% to 3.7% as a
percentage of revenues. Effective income tax rates of 41.0% and 39.6% were
used to compute the tax provisions for 1995 and 1994, respectively.
The net income per common share from continuing operations and the net
income per common share was calculated by using the weighted average number of
common shares outstanding, including common stock equivalents during the
period.
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THE DAVEY TREE EXPERT COMPANY
PART II: OTHER INFORMATION
---------------------------
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 16, 1995, the Registrant held its annual meeting of
shareholders. The shareholders voted to:
a. Set the number of directors to ten and elect the following persons
to serve as directors for a term to expire on the date of the
annual meeting in 1998:
Eugene Haupt
James H. Miller
R. Cary Blair
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been 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.
THE DAVEY TREE EXPERT COMPANY
BY: /s/David E. Adante
----------------------
David E. Adante
Executive Vice President, CFO and
Secretary-Treasurer
BY: /s/Bradley L. Comport
----------------------
Bradley L. Comport
Corporate Controller
November 14, 1995
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