U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 1, 2002
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file Number 001-14137
---------
HLM Design, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 56-2018819
(State or Other Jurisdiction (I.R.S Employer Identification No.)
of Incorporation or
Organization)
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (704) 358-0779
Indicate by check 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 ____
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of Each Class Outstanding at March 4, 2002
- ------------------- ----------------------------
Common stock, par value $.001 per share 2,297,586 shares
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
INDEX TO FORM 10-Q
PAGE
NO.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets - April 27, 2001 and
February 1, 2002 3
Condensed Consolidated Statements of Operations - Nine Month Periods
Ended January 26, 2001 and February 1, 2002 and Three Month
Periods Ended January 26, 2001 and February 1, 2002 5
Condensed Consolidated Statement of Stockholders' Equity - Nine
Month Period Ended February 1, 2002 6
Condensed Consolidated Statements of Cash Flows - Nine Month
Periods Ended January 26, 2001 and February 1, 2002 7
Notes to Unaudited Condensed Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 15
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 24
ITEM 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 27, February 1,
2001 2002
---- ----
(Unaudited)
ASSETS:
Current Assets:
Cash $ 243,148 $ 1,565,374
Trade and other receivables, less allowance for
doubtful accounts at April 27, 2001 and February 1, 2002
of $726,473 and $623,331, respectively 11,977,393 13,360,173
Costs and estimated earnings in excess of billings on
uncompleted projects, net 9,767,618 7,786,571
Prepaid expenses and other 1,423,399 1,196,064
-----------------------------
Total Current Assets 23,411,558 23,908,182
-----------------------------
Other Assets:
Goodwill, net 12,166,149 12,276,868
Non-compete agreements 60,417 316,667
Other 1,019,785 1,414,004
-----------------------------
Total Other Assets 13,246,351 14,007,539
-----------------------------
Property and Equipment:
Leasehold improvements 1,925,075 2,057,970
Furniture and fixtures 4,523,544 5,058,949
-----------------------------
Property and equipment, at cost 6,448,619 7,116,919
Less Accumulated depreciation 4,362,817 5,379,256
-----------------------------
Property and equipment, net 2,085,802 1,737,663
-----------------------------
TOTAL ASSETS $38,743,711 $39,653,384
=============================
See notes to unaudited condensed consolidated financial statements.
3
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 27, February 1,
2001 2002
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current maturities of long-term debt
and capital lease obligations $ 1,848,248 $ 2,903,631
Accounts payable 8,864,277 10,441,644
Billings in excess of costs and estimated earnings
on uncompleted projects 1,646,954 1,478,793
Accrued expenses and other 4,883,141 4,394,978
--------------------------------
Total Current Liabilities 17,242,620 19,219,046
--------------------------------
Long-term debt and other 10,730,764 9,653,325
--------------------------------
TOTAL LIABILITIES 27,973,384 28,872,371
--------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Capital Stock:
Preferred, $.10 par value, voting, authorized 1,000,000
shares, no shares outstanding
Common, $.001 par value, voting, authorized 9,000,000
shares; issued 2,426,330 and 2,533,585 at
April 27, 2001 and February 1, 2002, respectively (includes
227,221 and 235,998 to be issued on a delayed
delivery schedule at April 27, 2001 and
February 1, 2002, respectively) 2,427 2,534
Additional paid in capital 7,744,023 7,986,612
Retained earnings 3,066,074 2,837,290
Accumulated other comprehensive loss (42,197) (45,423)
--------------------------------
Total stockholders' equity 10,770,327 10,781,013
--------------------------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 38,743,711 $ 39,653,384
================================
See notes to unaudited condensed consolidated financial statements.
4
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
CONDENDSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Nine Three Three
Months Months Months Months
Ended Ended Ended Ended
January 26, February 1, January 26, February 1,
2001 2002 2001 2002
---- ---- ---- ----
REVENUES:
Fee Income $ 44,311,647 $ 41,836,122 $ 14,335,080 $ 13,793,203
Reimbursable Income 3,006,213 3,222,006 1,043,024 1,392,139
---------------------------- ---------------------------
Total Revenues 47,317,860 45,058,128 15,378,104 15,185,342
---------------------------- ---------------------------
CONSULTANT EXPENSE 13,883,798 15,201,523 4,709,803 5,450,171
---------------------------- ---------------------------
PROJECT EXPENSES:
Direct Expenses 763,946 700,853 224,855 221,665
Reimbursable expenses 1,693,604 1,793,155 522,600 497,366
---------------------------- ---------------------------
Total project expenses 2,457,550 2,494,008 747,455 719,031
---------------------------- ---------------------------
NET PRODUCTION INCOME 30,976,512 27,362,597 9,920,846 9,016,140
DIRECT LABOR 9,795,810 9,237,700 3,078,637 2,698,024
INDIRECT EXPENSES 18,541,171 17,564,533 6,201,398 5,563,819
---------------------------- ---------------------------
OPERATING INCOME 2,639,531 560,364 640,811 754,297
INTEREST EXPENSE 1,363,003 882,643 442,708 210,848
---------------------------- ---------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 1,276,528 (322,279) 198,103 543,449
INCOME TAX EXPENSE (BENEFIT) 707,413 (92,929) 135,870 265,139
---------------------------- ---------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST 569,115 (229,350) 62,233 278,310
MINORITY INTEREST IN (LOSS) INCOME (566) 15,368
---------------------------- ---------------------------
NET INCOME (LOSS) $ 569,115 $ (228,784) $ 62,233 $ 262,942
============================ ===========================
NET INCOME (LOSS) PER SHARE
Basic $ 0.24 $ (0.09) $ 0.03 $ 0.10
============================ ===========================
NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA
Basic 2,413,897 2,524,782 2,415,953 2,531,564
============================ ===========================
NET INCOME (LOSS) PER SHARE
Diluted $ 0.24 $ (0.09) $ 0.03 $ 0.10
============================ ===========================
NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA
Diluted 2,442,703 2,540,449 2,430,113 2,547,231
============================ ===========================
See notes to unaudited condensed consolidated financial statements.
5
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Accumulated
Additional Other Total
Common Stock Paid-In Retained Comprehensive Stockholders'
------------
Shares Amount Capital Earnings Loss Equity
------ ------ ------- -------- ---- ------
Balance, April 27, 2001 2,426,330 $ 2,427 $7,744,023 $ 3,066,074 $ (42,197) 10,770,327
Foreign Currency Translation
Adjustment, net of tax (3,226) (3,226)
Net Loss (228,784) (228,784)
----------
Comprehensive Loss (232,010)
----------
Issuance of Common Stock
for Purchase of Business 90,000 90 211,440 211,530
Issuance of Common Stock 17,255 17 31,149 31,166
----------------------------------------------------------------------------------
Balance, February 1, 2002 2,533,585 $2,534 $7,986,612 $ 2,837,290 $ (45,423) $10,781,013
==================================================================================
See notes to unaudited condensed consolidated financial statements.
6
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Nine
Months Months
Ended Ended
January 26, February 1,
2001 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 569,115 $ (228,784)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 711,680 718,719
Amortization of intangible assets 496,275 43,750
Amortization of deferred loan fees 154,284 166,472
Changes in assets and liabilities, net of effects from purchase of
acquired companies:
Increase in trade and other accounts receivable (194,641) (1,590,991)
Net (increase) decrease in costs and estimated earnings in excess of billings
on uncompleted projects (2,995,240) 1,812,886
Increase in prepaid expenses and other assets (704,112) (11,121)
Increase in accounts payable 1,811,546 1,454,958
Increase (decrease) in accrued expenses and other 1,003,956 (777,832)
----------------------------------
Net cash provided by operating activities 852,863 1,588,057
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (380,789) (370,580)
Payment for acquisition activities and purchase of business, net of cash acquired (2,135,394) (141,576)
----------------------------------
Net cash used in investing activities (2,516,183) (512,156)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving credit facility 2,158,560 651,578
Borrowings on long-term debt - 457,589
Payment on long-term borrowings (760,127) (894,008)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan 18,835 31,166
----------------------------------
Net cash provided by financing activities 1,417,268 246,325
----------------------------------
(DECREASE) INCREASE IN CASH (246,052) 1,322,226
CASH BALANCE:
Beginning of period 285,616 243,148
----------------------------------
End of period $ 39,564 $ 1,565,374
==================================
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 1,517,264 $ 794,764
Income tax payments $ 146,011 $ 135,140
Noncash investing and financing transactions:
Acquisition of acquired businesses, net of imputed interest:
Notes payable issued to former acquired company shareholder $ 1,871,496 $ -
Fair value of assets acquired and liabilities assumed, net $ 281,126 $ 243,669
Common stock to be issued on delayed delivery schedule $ 256,250 $ 211,530
Payment of note payable with trade accounts receivable $ - $ 237,213
See notes to unaudited condensed consolidated financial statements.
7
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business-HLM Design, Inc. ("HLM Design") and Subsidiaries
and Affiliates ("the Company") is a professional consultancy that provides
management services to architectural, engineering and planning design
entities ("Managed Firms") under long-term management and services
agreements ("MSAs"). As of February 1, 2002, the Company had wholly-owned
affiliates and subsidiaries as follows:
Affiliates:
. HLM Design of North America, Inc. ("HLMNA");
. HLM Design USA, Inc. ("HLMUSA");
. HLM Design Architecture, Engineering and Planning, P.C. ("HLMAEP");
Subsidiaries:
. JPJ Architects, Inc. ("JPJ");
. G.A. Design International Holdings, Ltd. ("GAIH"); and
. BL&P Engineers, Inc. ("BL&P").
Financial Statement Presentation - The accompanying unaudited financial
information for the three and nine month periods ended January 26, 2001 and
February 1, 2002 has been prepared in accordance with accounting principles
generally accepted in the United States of America. All significant
intercompany accounts and transactions have been eliminated. These
unaudited consolidated financial statements reflect, in the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and the
results of operations for the interim periods presented. The results for
interim periods are not necessarily indicative of the results to be
expected for the entire fiscal year. These interim financial statements
should be read in conjunction with the Company's audited consolidated
financial statements for the year ended April 27, 2001.
New Accounting Standards -In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. This new standard requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. As of April 28, 2001, the Company
adopted SFAS No. 133. The adoption of this statement did not have a
material impact on the Company's consolidated financial statements.
8
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES-continued
In June 2001, the FASB issued SFAS 141, "Business Combinations", which
requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method. SFAS 141 also sets forth
guidelines for applying the purchase method of accounting in the
determination of intangible assets, including goodwill acquired in a
business combination, and expands financial disclosures concerning business
combinations consummated after June 30, 2001. The application of SFAS 141
did not affect any of the previously reported amounts included in goodwill
or other intangible assets.
Effective April 28, 2001, the Company early adopted SFAS 142, "Goodwill and
Other Intangible Assets", which establishes new accounting and reporting
requirements for goodwill and other intangible assets. Under SFAS 142, all
goodwill amortization ceased effective April 28, 2001. The Company
identified reporting units based on the current reporting structure,
assigned all goodwill to the reporting units, as well as other assets and
liabilities, to the extent that they related to the reporting unit. The
Company has completed the first step of the transitional goodwill
impairment test by comparing the fair value of each reporting unit to its
carrying value and has determined that no impairment exists at the
effective date of the implementation of the new standard. Fair value of
each reporting unit was measured using a valuation by an independent third
party as of April 28, 2001 which was based on the market multiples,
comparable transactions and discounted cash flow methodologies.
This valuation indicated an aggregate fair value of the reporting units
significantly in excess of the Company's market capitalization as of April
28, 2001. The Company believes the market capitalization is not
representative of the fair value of the Company because the common stock of
the Company is not actively traded. On an ongoing basis, the Company will
obtain an independent valuation and perform an annual goodwill impairment
test.
The Company's operations have improved significantly for the months of
October 2001 through January 2002. At least quarterly, management will
evaluate to determine if an event has occurred that would more likely than
not reduce the fair value of a reporting unit below its carrying amount.
The Company, if appropriate, will perform a goodwill impairment test
between the annual dates. Impairment adjustments recognized after adoption,
if any, will be recognized as operating expenses.
Impairment indicators which may be considered include, but are not limited
to, the following:
. A significant adverse change on legal factors or in the business
climate
. Unanticipated competition
. A significant decline in the operating performance
. Adverse action or assessment by a regulator
9
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
continued
The following financial information is presented as if SFAS No. 142 was
adopted at the beginning of the fiscal year ended April 27, 2001:
Nine-Months Three-Months
January 26, January 26,
2001 2001
---- ----
Reported net income $ 569,115 $ 62,233
Goodwill amortization 477,525 159,724
-------------- -------------
Adjusted net income $ 1,046,640 $ 221,957
============== =============
Goodwill $ 12,314,407 $ 12,314,407
============== =============
Basic income per share:
Reported net income $ 0.24 $ 0.03
Goodwill amortization 0.19 0.06
-------------- -------------
Adjusted net income $ 0.43 $ 0.09
============== =============
Reported diluted income per share:
Reported net income $ 0.24 $ 0.03
Goodwill amortization 0.19 0.06
-------------- -------------
Adjusted net income $ 0.43 $ 0.09
============== =============
The financial information for acquired intangible assets included in other
non-current assets is as follows:
April 27, February 1,
2001 2002
---- ----
Amortized intangible assets-non compete agreements:
Original Cost $100,000 $400,000
Accumulated Amortization $ 39,583 $ 83,333
The non-compete intangible assets are amortized over their contractual life
ranging from four to nine years. Amortization expense for the three months
and nine months ended February 1, 2002 was $14,585 and $43,750,
respectively, and annual estimated amortization for the non-compete
agreements are as follows:
Estimated Amortization Expense
------------------------------
Fiscal 2002 $58,333
Fiscal 2003 $58,333
Fiscal 2004 $43,749
Fiscal 2005 $33,336
Fiscal 2006 $33,336
10
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
continued
The changes in carrying amount of goodwill for the nine months ended
February 1, 2002 is as follows:
Total
-----
Balance, April 27, 2001 $ 12,166,149
Goodwill acquired during the period 110,719
------------
Balance, February 1, 2002 $ 12,276,868
============
Newly Issued Accounting Standards-In October 2001, the FASB issued SFAS No.
144, "Accounting for Impairment or Disposal of Long-Lived Assets," which
supercedes SFAS No. 121, "Accounting for the Impairment or Disposal of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," but retains
many of its fundamental provisions. Additionally, this statement expands
the scope of discontinued operations to include more disposal transactions.
The Company is currently assessing the impact of this statement, which will
be effective for the Company for fiscal year 2003.
In November 2001, the FASB issued Topic D-103, "Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket" Expenses
Incurred". Topic D-103 requires reimbursements for out-of-pocket expenses
incurred to be characterized as revenue in the income statement. Currently,
the Company accounts for out-of-pocket expenses as reimbursable income.
Topic D-103 is effective for periods beginning after December 1, 2001.
Topic D-103 will not have an impact on the condensed consolidated financial
statements.
2. CONTRACTS IN PROGRESS
Information relative to contracts in progress is as follows:
April 27, February 1,
2001 2002
---- ----
Costs incurred on uncompleted projects
(excluding overhead) $ 90,872,392 $ 125,028,278
Estimated earnings thereon 77,505,622 93,828,677
------------- ---------------
Total 168,378,014 218,856,955
Less billings to date 160,257,350 212,549,176
------------- ---------------
Net underbillings $ 8,120,664 $ 6,307,779
============= ===============
11
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. CONTRACTS IN PROGRESS-continued
Net underbillings are included in the accompanying balance sheets as
follows:
April 27, February 1,
2001 2002
---- ----
Costs and estimated earnings in excess of billings
on uncompleted projects $9,767,618 $7,786,573
Billings in excess of costs and estimated earnings
on uncompleted projects (1,646,954) (1,478,793)
---------- ----------
Net underbillings $8,120,664 $6,307,779
========== ==========
3. FINANCING ARRANGEMENTS
Effective December 18, 2001, the Company entered into an amendment to its
revolving credit, term loan and capital expenditure loan with IBJ Whitehall
Business Credit Corporation ("IBJ"). The amendment is summarized as
follows:
a. Revolving credit-The maximum revolving advance amount is $10,500,000.
b. Revolving credit-Waiver of the leverage and senior leverage financial
covenants as of quarter ended November 2, 2001.
c. Revolving credit-Modification of certain future financial covenants.
On March 15, 2002, the Company obtained a Waiver and Consent Letter to its
revolving credit, term loan, capital expenditure loan with IBJ. This Waiver and
Consent Letter is summarized as follows:
a. Revolving credit-Waiver of the leverage and senior leverage financial
covenants as of the quarter ended February 1, 2002 waiving compliance
through February 2003.
b. Revolving credit-Modification of calculation of the leverage and
senior leverage ratio as of the quarter ended May 3, 2002 which the
Company expects to meet for the fiscal year ended May 3, 2002.
The amount available to borrow is calculated based on the aging of certain
assets. As of February 1, 2002 the Company had borrowings outstanding under
the revolver of $8,842,609.
Substantially all assets are pledged under this financing arrangement. This
financing arrangement requires that certain financial requirements be
maintained such as minimum net worth, minimum EBITDA, maximum leverage and
senior leverage ratios, maximum fixed charge coverage and senior fixed
charge coverage ratios and maximum capital expenditure commitments. All
covenants are determined quarterly and the leverage and senior leverage
covenants are based on a trailing four quarters ending on each
determination date. At February 1, 2002, the Company was in compliance with
the minimum net worth, maximum capital expenditure commitments and maximum
fixed charge coverage and senior fixed charge coverage ratios; however, the
Company was not in compliance with the maximum leverage and senior leverage
ratios. The Company has obtained a waiver from IBJ as of February 1, 2002
as discussed above. The Company expects to meet the covenants at future
determination dates.
Due to lower than anticipated cash flow during the six months ended
November 2, 2001 of fiscal year ended May 3, 2002, the Company extended its
current year payment obligations under certain note agreements with former
acquired company shareholders (the subordinated notes payable) as follows:
12
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. FINANCING ARRANGEMENTS-continued
Notes payable to former JPJ Architect, Inc. shareholders: The current year
installment due October 2001 of $348,000 plus interest has been modified to
agreed upon payments of $31,628 plus interest, $40,953 plus interest,
$63,274 plus interest, $94,911 plus interest, $94,911 plus interest and
$22,323 plus interest for the quarters ending November 2, 2001, February 1,
2002, May 3, 2002, August 2, 2002, November 1, 2002, and January 4, 2003,
respectively. In addition, 72,001 shares scheduled to be delivered October
2001 were delayed until January 2002.
Notes payable to former ESS Architects, Inc. shareholders: The current year
installment due September 2001 of $125,000 plus interest has been modified
to agreed upon payments of $31,285 plus interest and $93,715 plus interest
for the quarters ending November 2, 2001 and May 3, 2002, respectively.
Notes payable to former BL&P shareholder: The current year installment due
October 2001 of $612,000 plus interest has been modified to agreed upon
payments of $61,200 plus interest, $122,400 plus interest, $183,600 plus
interest, $183,600 plus interest, and $61,200 plus interest for the
quarters ending February 1, 2002, May 3, 2002, August 2, 2002, November 1,
2002, and January 4, 2003, respectively. In addition, in October 2001, the
Company negotiated approximately $237,000 reduction in this note payable in
exchange for a like amount of the Company's trade accounts receivable.
The Company has obtained approval from IBJ (as required by The Revolving
Credit, Term Loan and Capital Expenditure Loan Agreement) for the
modification of the repayment dates of the subordinated notes payable
discussed above.
4. STOCKHOLDERS' EQUITY
In June 2001, 7,480 shares of common stock were issued under the HLM
Design, Inc. Employee Stock Purchase Plan. In September 2001, 6,604 shares
of common stock were issued under the HLM Design, Inc. Employee Stock
Purchase Plan. In December 2001, 3,171 shares of common stock were issued
under the HLM Design, Inc. Employee Stock Purchase Plan.
13
HLM DESIGN, INC. AND SUBSIDIARIES AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SUBSEQUENT EVENT
HLM Design Ltd. ("HLM Ltd.")-not previously affiliated with the Company
Effective February 26, 2002, the Company purchased all of the issued and
outstanding common stock for $3.0 million in cash, subordinated promissory
notes bearing interest at 7 percent in the aggregate amount of $3.6 million
(the "Notes") and 400,000 shares of common stock. IBJ reviewed and approved
the transaction, including the issuance of the subordinated promissory
notes, prior to entering into this transaction.
The Stock Purchase Agreement ("Agreement") provides for, among other
things, the delivery to HLM Ltd.'s former stockholders of 25% of the shares
of common stock on each of February 26, 2003, February 26, 2004, February
26, 2005 and February 26, 2006.
Notes totaling $3.1 million provide for payment of 42.2% of the principal
amount on each of February 26, 2003 and February 26, 2004 and 7.8% of the
principal amount on February 26, 2005 and February 26, 2006. A note for
$0.2 million provides for six-month installments beginning August 26, 2002
with final payment on February 26, 2006. A note for $0.3 million provides
for payment on August 26, 2002. Note payments will be made provided there
exists sufficient cash flow in HLM Ltd. as defined in the subordinated
promissory notes.
Following the consummation of the Agreement, the Company and HLM Ltd. will
enter into a Management and Services Agreement, whereby the Company will
manage all aspects of HLM Ltd. other than the provision of professional
architecture and engineering services.
The acquisition will be accounted for using the purchase method of
accounting. The purchase price will be allocated to the assets and
liabilities acquired based on their estimated fair value at the acquisition
date of which amounts have not been determined.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements and related notes thereto included elsewhere in this report.
RESULTS OF OPERATIONS
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
January 26, February 1, January 26, February 1,
2001 2002 2001 2002
---- ---- ---- ----
Revenues $15,378,104 $15,185,342 $47,317,860 $45,058,128
Consultant and project expenses 5,457,258 6,169,202 16,341,348 17,695,531
----------- ----------- ----------- -----------
Net production income 9,920,846 9,016,140 30,976,512 27,362,597
----------- ----------- ----------- -----------
Direct labor 3,078,637 2,698,024 9,795,810 9,237,700
Operating costs 6,035,425 5,549,234 18,044,896 17,520,783
Amortization of intangible assets 165,973 14,585 496,275 43,750
----------- ----------- ----------- -----------
Total costs and expenses 9,280,035 8,261,843 28,336,981 26,802,233
----------- ----------- ----------- -----------
Operating income 640,811 754,297 2,639,531 560,364
Interest expense, net 442,708 210,848 1,363,003 882,643
----------- ----------- ----------- -----------
Income (loss) before income taxes and
minority interest 198,103 543,449 1,276,528 (322,279)
Income tax expense (benefit) 135,870 265,139 707,413 (92,929)
----------- ----------- ----------- -----------
Income (loss) before minority interest 62,233 278,310 569,115 (229,350)
Minority interest in income (loss) - 15,368 - (566)
----------- ----------- ----------- -----------
Net income (loss) $ 62,233 $ 262,942 $ 569,115 $ (228,784)
=========== =========== =========== ===========
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
RESULTS OF OPERATIONS
For the three months ended February 1, 2002 and January 26, 2001
Revenues were $15.2 million for the three-month period ended February 1,
2002 as compared to $15.4 million for the three-month period ended January 26,
2001. This decrease of 1% is due to the (a) economic downturn in the United
States economy resulting in certain clients delaying project start dates which
has delayed related revenue recognition, and (b) lack of new projects of certain
clients in markets affected by the nation's economic downturn, principally in
the commercial segment. Management believes that clients may continue to delay
project start dates through the remainder of fiscal year ending May 3, 2002.
Direct costs, which include consultant costs and reimbursable project
expenses, total $6.2 million, or 41% of revenues, for the three month period
ended February 1, 2002 as compared to $5.5 million, or 35% of revenues, for the
three month period ended January 26, 2001. This increase is due to an increased
use of consultants to meet certain project requirements.
Direct labor cost was $2.7 million, or 30% of net production income, for
the three month period ended February 1, 2002 as compared to $3.1 million, or
31% of net production income, for the three-month period ended January 26, 2001.
This decrease as a percentage of net production income is due to management's
reduction of salary costs during the second quarter ended November 2, 2001 in an
effort to offset the economic downturn which is partially offset by: (a)
tightening of project profit margins (b) certain clients delaying project start
dates, (c) lack of new projects of certain clients and the time required to
adjust to these changes, and (d) increase in salary and salary related costs
which has not been passed through to the clients in all cases. The Company is
continuing to work with the project managers of the Managed Firms to improve the
effectiveness and efficiency of each project and ultimately decrease direct
labor cost as a percentage of net production income.
Operating costs were $5.5 million, or 62 % of net production income, for
the three-month period ended February 1, 2002 as compared to $6.0 million, or
61% of net production income, for the three-month period ended January 26, 2001.
This increase as a percentage of net production income is principally due to an
increase in rent and occupancy costs, professional liability insurance, and
equipment rentals. This increase as a percentage of net production income is
partially offset by a decrease in indirect labor due in part to management's
reduction of salary costs during the second quarter ended November 2, 2001 and,
to a lesser extent, a decrease in travel expenses.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
Amortization of intangible assets was $ 14,585 for the three months
ended February 1, 2002 as compared to $ 165,973 for the three months ended
January 26, 2001. This decrease is due to the Company's adoption of SFAS 142,
Goodwill and Other Intangible Assets. In June 2001, the FASB issued SFAS 141,
"Business Combinations", which requires all business combinations initiated
after June 30, 2001 to be accounted for under the purchase method. SFAS 141 also
sets forth guidelines for applying the purchase method of accounting in the
determination of intangible assets, including goodwill acquired in a business
combination, and expands financial disclosures concerning business combinations
consummated after June 30, 2001. The application of SFAS 141 did not affect any
of the previously reported amounts included in goodwill or other intangible
assets.
Effective April 28, 2001, the Company early adopted SFAS 142, "Goodwill
and Other Intangible Assets", which establishes new accounting and reporting
requirements for goodwill and other intangible assets. Under SFAS 142, all
goodwill amortization ceased effective April 28, 2001. The Company identified
reporting units based on the current reporting structure, assigned all goodwill
to the reporting units, as well as other assets and liabilities, to the extent
that they related to the reporting unit. The Company has completed the first
step of the transitional goodwill impairment test by comparing the fair value of
each reporting unit to its carrying value and has determined that no impairment
exists at the effective date of the implementation of the new standard. Fair
value of each reporting unit was measured using a valuation by an independent
third party as of April 28, 2001 which was based on the market multiples,
comparable transactions and discounted cash flow methodologies.
This valuation indicated an aggregate fair value of the reporting units
slightly higher than the recorded book value as of April 28, 2001. The Company
believes the market capitalization is not representative of the fair value of
the Company because the common stock of the Company is not actively traded. On
an ongoing basis, the Company will obtain an independent valuation and perform
an annual goodwill impairment test.
The Company's operations have improved significantly for the months of
October 2001 through January 2002. At least quarterly, management will evaluate
if an event has occurred that would more likely than not reduce the fair value
of a reporting unit below its carrying value. The Company, if appropriate, will
perform a goodwill impairment test between the annual dates. Impairment
adjustments recognized after adoption, if any, will be recognized as operating
expenses.
Impairment indicators which may be considered include, but are not
limited to, the following:
[X] A significant adverse change on legal factors or in the business
climate
[X] Unanticipated competition
[X] A significant decline in the operating
performance
[X] Adverse action or assessment by a regulator
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
The following financial information is presented as if SFAS No. 142 was
adopted at the beginning of the fiscal year ended April 27, 2001:
Nine Months Three Months
January 26, January 26,
2001 2001
---- ----
Reported net income $ 569,115 $ 62,233
Goodwill amortization 477,525 159,724
----------- --------------
Adjusted net income $ 1,046,640 $ 221,957
=========== ==============
Goodwill $12,314,407 $ 12,314,407
=========== ==============
Basic income per share:
Reported net income $ 0.24 $ 0.03
Goodwill amortization 0.19 0.06
------------ --------------
Adjusted net income $ 0.43 $ 0.09
============ ==============
Reported diluted income per share:
Reported net income $ 0.24 $ 0.03
Goodwill amortization 0.19 0.06
----------- --------------
Adjusted net income $ 0.43 $ 0.09
=========== ==============
The financial information for acquired intangible assets included in
other non-current assets is as follows:
April 27, February 1,
2001 2002
---- ----
Amortized intangible assets-non compete
agreements:
Original Cost $100,000 $400,000
Accumulated Amortization $ 39,583 $ 83,333
The non-compete intangible assets are amortized over their contractual
life ranging from four to nine years. Amortization expense for the
three months and the nine months ended February 1, 2002 was $14,585 and
$43,750, respectively, and annual estimated amortization for the
non-compete agreements are as follows:
Estimated Amortization
----------------------
Expense
-------
Fiscal 2002 $58,333
Fiscal 2003 $58,333
Fiscal 2004 $43,749
Fiscal 2005 $33,336
Fiscal 2006 $33,336
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
The changes in carrying amount of goodwill for the nine months ended
February 1, 2002 is as follows:
Total
-----
Balance, April 27, 2001 $12,166,149
Goodwill acquired during the period 110,719
-----------
Balance, February 1, 2002 $12,276,868
===========
Interest expense was $0.2 million for the three-month period ended February
1, 2002 as compared to $0.4 million for the three-month period ended January 26,
2001. This decrease is principally due to: (a) a decrease in the Company's
effective interest rate in the current year and (b) a decrease in the borrowings
under the Company's revolving credit facility with IBJ Whitehall Business Credit
Corporation ("IBJ").
Income tax expense was $0.3 million for the three-month period ended
February 1, 2002 as compared to $0.1 million expense for the three-month period
ended January 26, 2001. The effective income tax rate was 49 % and 69% for the
three-month periods ended February 1, 2002 and January 26, 2001, respectively.
This effective rate is lower principally due to the decrease in non-deductible
goodwill amortization resulting from the adoption of SFAS No. 142 for the fiscal
year beginning April 28, 2001.
For the nine months ended February 1, 2002 and January 26, 2001
Revenues were $45.1 million for the nine-month period ended February 1,
2002 as compared to $47.3 million for the nine-month period ended January 26,
2001. This decrease of 5% is due to the: (a) economic downturn in the United
States economy resulting in certain clients delaying project start dates which
has delayed related revenue recognition, (b) impact of the September 11, 2001
terrorist attacks as the Company's work was virtually stopped for ten days which
resulted in a revenue loss through inefficiency and loss of productivity of more
than $750,000, and (c) lack of new projects of certain clients in markets
affected by the nation's economic downturn, principally in the commercial
segment. The firm returned to profitability in October. Management believes that
clients may continue to delay project start dates through the remainder of
fiscal year ending May 3, 2002.
Direct costs, which include consultant costs and reimbursable project
expenses, total $17.7 million, or 39% of revenues, for the nine-month period
ended February 1, 2002 as compared to $16.3 million, or 35% of revenues, for the
nine-month period ended January 26, 2001. This increase is due to an increased
use of consultants to meet certain project requirements.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
Direct labor cost was $9.2 million, or 34% of net production income, for
the nine-month period ended February 1, 2002 as compared to $9.8 million, or 32%
of net production income, for the nine-month period ended January 26, 2001. This
increase as a percentage of net production income is due to the: (a)
over-utilization of personnel on projects, (b) tightening of project profit
margins, (c) certain clients delaying project start dates, (d) lack of new
projects of certain clients and the time required to adjust to these changes,
and (e) increase in salary and salary related costs which has not been passed
through to the clients in all cases. This increase as a percentage of net
production income is partially offset by management's reduction of salary costs
during the second quarter ended November 2, 2001 in an effort to offset the
economic downturn. The Company is continuing to work with the project managers
of the Managed Firms to improve the effectiveness and efficiency of each project
and ultimately decrease direct labor cost as a percentage of net production
income.
Operating costs were $17.5 million, or 64% of net production income, for
the nine-month period ended February 1, 2002 as compared to $18.0 million, or
58% of net production income, for the nine-month period ended January 26, 2001.
This increase as a percentage of net production income is principally due to an
increase in indirect labor due in part to the effects of September 11, 2001 and
related fringe benefits, professional liability insurance, and rent and
occupancy expenses. This increase as a percentage of net production income is
partially offset by a decrease in indirect labor due in part to management's
reduction of salary costs during the second quarter ended November 2, 2001, and,
to a lesser extent, a decrease in travel expenses.
Amortization of intangible assets was $43,750 for the nine months ended
February 1, 2002 as compared to $496,275 for the nine months ended January 26,
2001. This decrease is due to the Company's adoption of SFAS 142, Goodwill and
Other Intangible Assets as discussed in the three months ended February 1, 2002
section beginning on page 16 in Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Interest expense was $0.9 million for the nine-month period ended February
1, 2002 as compared to $1.4 million for the nine-month period ended January 26,
2001. This decrease is principally due to: (a) a decrease in the Company's
effective interest rate in the current year and (b) a decrease in the borrowings
under the Company's revolving credit facility with IBJ.
Income tax expense (benefit) was ($0.1) million for the nine-month period
ended February 1, 2002 as compared to $0.7 million expense for the nine-month
period ended January 26, 2001. The effective income tax rate was 29 % and 55%
for the nine-month periods ended February 1, 2002 and January 26, 2001,
respectively. This effective rate is lower principally due to the decrease in
non-deductible goodwill amortization resulting from the adoption of SFAS No. 142
for the fiscal year beginning April 28, 2001.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has met working capital and capital expenditure
needs through cash from operations and bank financing. At February 1, 2002, the
Company's current assets of $23.9 million exceeded current liabilities of $19.2
million, resulting in net working capital of $4.7 million. During the nine month
period ended February 1, 2002, the Company's operating activities provided $1.6
million cash from operations primarily from a decrease in costs and estimated
earnings in excess of billings on uncompleted projects and an increase in
accounts payable which is partially offset by an increase in trade and other
accounts receivable. The Company used $0.5 million primarily for capital
expenditures, and to a lesser extent, acquisition activities. The Company
provided cash of $0.5 million from financing activities primarily on borrowings
under the Company's revolving credit facility with IBJ and borrowings under the
term loan agreement with IBJ, which was partially offset by payment on other
long-term borrowings.
The Company's growth and operating strategy will require substantial
capital and may result in the Company from time to time incurring additional
debt, issuing equity securities or obtaining additional bank financing. As a
management company, HLM Design is responsible for the financing of working
capital growth, capital growth and other cash needs of its managed firms.
During fiscal year end April 27, 2001, the Company entered into a revolving
credit, term loan and capital expenditure loan for a total of $20 million.
Effective June 2001, the Company entered into an amendment to (a) reduce the
maximum revolving advance amount; (b) cancel the capital expenditure loan
commitment and (c) increase the unpaid principal of the term loan to repay
amounts under the revolving credit facility, which was based on an evaluation of
the Company's revolving advance, term loan and capital expenditure loan needs.
The amendment is summarized as follows:
a. Revolving credit--The maximum revolving advance amount is $12,500,000
b. Term loan--The unpaid principal balance was increased to $1.6 million.
c. Capital expenditure loan--The Capital Expenditure Loan commitment has
been cancelled.
Effective December 18, 2001, the Company entered into an amendment to its
revolving credit, term loan and capital expenditure loan with IBJ. The amendment
is summarized as follows:
a. Revolving credit-The maximum revolving advance amount is $10,500,000.
b. Revolving credit-Waiver of the leverage and senior leverage financial
covenants as of quarter ended November 2, 2001.
c. Revolving credit-Modification of certain future financial covenants.
On March 15, 2002, the Company obtained a Waiver and Consent Letter to its
revolving credit, term loan, capital expenditure loan with IBJ. This Waiver and
Consent Letter is summarized as follows:
a. Revolving credit-Waiver of the leverage and senior leverage financial
covenants as of the quarter ended February 1, 2002 waiving compliance
through February 2003.
b. Revolving credit-Modification of calculation of the leverage and
senior leverage ratio as of the quarter ended May 3, 2002 which the
Company expects to meet for the fiscal year ended May 3, 2002.
At February 1, 2002, the Company had borrowings outstanding under the
revolver of $8.8 million. The amount available to borrow is calculated based on
the aging of certain assets and generally, the Company borrows the maximum
amount available under the terms of this agreement. At February 1, 2002, the
Company had borrowings outstanding under the term loan of $1.0 million.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
Substantially all assets are pledged under this financing arrangement. This
financing arrangement requires that certain financial requirements be maintained
such as minimum net worth, minimum EBITDA, maximum leverage and senior leverage
ratios, maximum fixed charge coverage and senior fixed charge coverage ratios
and maximum capital expenditure commitments All covenants are determined
quarterly and the leverage and senior leverage covenants are based on a trailing
four quarters ending on each determination date. At February 1, 2002, the
Company was in compliance with the minimum net worth, maximum capital
expenditure commitments and maximum fixed charge coverage and senior fixed
charge coverage ratios; however, the Company was not in compliance with the
maximum leverage and senior leverage ratios. The Company has obtained a waiver
from IBJ as of February 1, 2002, as discussed above. The Company expects to meet
the covenants at future determination dates.
Due to lower than anticipated cash flow during the six months ended
November 2, 2001 of fiscal year ending May 3, 2002, the Company extended its
current year payment obligations under certain note agreements with former
acquired company shareholders (the subordinated notes payable) as discussed in
Note 3 in Notes to Unaudited Condensed Consolidated Financial Statements. The
Company has obtained approval from IBJ (as required by The Revolving Credit,
Term Loan and Capital Expenditure Loan Agreement) for the modification of the
repayment dates of the subordinated notes payable.
The Company expects to continue expanding the operations through internal
growth and strategic acquisitions. The Company believes that its revolving line
of credit, anticipated funds from future operations coupled with the
modification of repayment terms on certain notes payable discussed above will be
sufficient to meet the Company's operating needs for the next twelve months, but
offers no assurances. However, in order to continue its expansion program
through acquisitions, the Company will require additional capital. If the
Company is unable to obtain additional capital, its acquisition strategy will be
adversely affected.
This discussion contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from those forward-looking statements. Factors that may
cause actual results to differ materially include the Company's ability to
contract with architectural engineering and planning firms, the limited number
of management services agreements with such firms, the ability to receive
payments from the managed firms, dependence on key personnel, dependence on the
managed firms, the risks inherent in the provision of professional services,
competition, the uncertainties concerning additional financings by the Company
and government regulation, as described in Exhibit 99.1 to this Form 10-Q.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The most
significant estimates impacting the condensed consolidated financial statements
relate to revenue recognition under the percentage of completion method and the
allowance for doubtful accounts.
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED
The majority of the Company's revenues are recorded from fixed fee
contracts on a percentage of completion basis based on assumptions regarding
estimated direct labor costs to complete. Each month actual labor costs incurred
to date are accumulated on each project and estimated labor cost to complete is
forecasted for each project. Actual labor costs incurred to date and estimated
labor costs to complete are added together to determine projected final labor
cost. The percentage complete is determined by dividing the actual labor cost
incurred to date by the projected final labor cost. This percentage complete is
multiplied by the contract value, net of direct costs, which may include direct
subconsultants, travel, printing, etc. to determine the amounts of revenue that
can be recognized. Under this method, any projected loss would be immediately
recognized in the consolidated condensed financial statements. Historically, the
majority of the Company's estimates to complete have been materially correct,
but these estimates might not continue to be accurate.
Included in accounts receivable and costs and estimated earnings in excess
of billings on uncompleted projects on the condensed consolidated balance sheets
are reserves for doubtful accounts. Generally, before the Company does business
with a new client, the Company reviews their creditworthiness. Senior management
reviews the accounts receivable aging on a monthly basis to determine if any
receivables will be potentially uncollectible. Based on the information
available to the Company, we believe the reserve for doubtful accounts as of
February 1, 2002 was adequate. However, no assurances can be given that actual
write-offs will not exceed the recorded reserve.
In the normal course of business, the Company is party to various claims
and legal proceedings. The Company records a reserve for these matters when an
adverse outcome is probable and the amount of the potential liability is
reasonable estimable. Although the ultimate outcome of these matters is
currently not determinable, the Company does not believe that the resolution of
these matters will have a material effect upon the financial condition, results
of operations or cash flows for an interim or annual period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
affecting the credit arrangements, including a variable rate revolving credit
arrangement and term loan agreement, which may adversely affect the results of
operations and cash flows. We seek to minimize the interest rate risk through
the Company's day-to-day operating and financing activities. We do not engage in
speculative or derivative financial or trading activities.
A hypothetical 100 basis point adverse change (increase) in interest rates
relating to the revolving credit arrangement and term loan agreement would have
decreased pre-tax income for the nine-month period ended February 1, 2002 by
approximately $61,000. The Company has no other material exposure to market risk
sensitive instruments.
23
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company's Revolving Credit, Term Loan, Capital Expenditure Loan,
Guaranty and Security Agreement, as amended as of June 29, 2001, provide that
the Company may not pay cash dividends on its common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
99.1 Cautionary Statement under Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
None.
Items 1, 3, 4 and 5 are not applicable and have been omitted.
24
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.
HLM DESIGN, INC.
(Registrant)
Date: March 18, 2002 By: /s/ Joseph M. Harris
-------------- ---------------------
Joseph M. Harris
President, Chairman and Director
Date: March 18, 2002 By: /s/ Vernon B. Brannon
-------------- ---------------------
Vernon B. Brannon
Senior Vice President, Chief Operating
Officer and Chief Financial Officer
25