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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2002
Commission File Number 0-30911
THE PBSJ CORPORATION
(Exact name of Registrant
as specified in its charter)
| FLORIDA |
|
59-1494168 |
| (State or other jurisdiction of
Incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
2001 N.W. 107th AVENUE
MIAMI, FLORIDA 33172-2507
(Address of principal executive offices)
(305) 592-7275
(Registrant’s telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant
to Section 12(g) of the Act:
Common Stock ($.00067 Par Value)
(Title of class)
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 filings for the past 90 days. Yes x No ¨
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment of this Form 10-K. ¨
The number of shares of Common Stock outstanding as of November 30, 2002 was 8,146,974. The aggregate market value of the voting stock
held by non-affiliates of the registrant based on the $17.80 closing price for the registrant’s Common Stock on December 15, 2002 was approximately $52,088,656. Directors, executive officers and 10% or greater shareholders are considered
affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Report on Form 10-K incorporates
information by reference from the registrant’s definitive Proxy Statement to be used in conjunction with its fiscal 2003 Annual Meeting of Shareholders.
THE PBSJ CORPORATION
FORM 10-K
SEPTEMBER 30, 2002
| Item Number
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CAPTION
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PAGE
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| PART I: |
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| Item 1. |
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3 |
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| Item 2. |
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15 |
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| Item 3. |
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15 |
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| Item 4. |
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15 |
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| PART II: |
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| Item 5. |
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16 |
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| Item 6. |
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17 |
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| Item 7. |
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| Item 8. |
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33 |
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| Item 9. |
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50 |
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| PART III: |
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| Item 10. |
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50 |
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| Item 11. |
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50 |
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| Item 12. |
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| Item 13. |
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50 |
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| Item 14. |
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50 |
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| PART IV: |
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| Item 15. |
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50 |
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54 |
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55 |
2
PART I
General
The PBSJ Corporation and its subsidiaries is an employee-owned professional services organization that provides a broad range of planning, design and construction services
to a variety of public and private sector clients. Our four major business segments are transportation, environmental, civil engineering and construction management, representing 42%, 26%, 19% and 13%, respectively, of our fiscal 2002 revenues. We
utilize our expertise in engineering, planning, management, environmental, architectural and surveying disciplines to solve complex problems in each of these basic service areas. We provide these services through our staff of 2,800 professional,
technical and support personnel. We believe our multi-disciplinary approach to problems facilitates our ability to effectively meet the needs of our clients.
Since our founding in 1960, we have grown from a small civil engineering practice with operations only in South Florida to a national design firm offering a full range of engineering, architectural and
planning services throughout the United States. Evidencing this, in 2002, Engineering News-Record ranked Post, Buckley, Schuh & Jernigan, Inc. 8th on its list of the top 100 pure design firms (traditional design firms with no construction
capability) in the United States, based on design revenue. During fiscal 2002, we provided services to approximately 3,000 clients in the public and private sectors. Approximately 95% of our clients had previously used our services. In fiscal 2002,
77% of our net revenues were derived from the public sector and 23% from the private sector.
We have built an
organization composed of highly skilled professionals and top level technical and administrative personnel with a wide variety of scientific, engineering, architectural and management resources. These resources enable us to develop and implement
innovative long-term solutions to the complex problems of our clients, many of which are the subject of public concern and extensive governmental regulation. We assist our clients in responding to these concerns, in obtaining governmental permits
and approvals and in complying with applicable laws and regulations.
We began operations on February 29, 1960.
Our holding company, The PBSJ Corporation, was incorporated in 1973. We engage in business primarily through two wholly-owned subsidiaries: Post, Buckley, Schuh & Jernigan, Inc., a Florida corporation (through which we provide the majority of
our engineering, architectural and planning services) and PBS&J Construction Services, Inc. (through which we provide the majority of our construction management services). In addition, we have two other active subsidiaries: Seminole Development
Corporation (through which we hold title to all our real property); and Post, Buckley International, Inc. (through which we provide services to our international clients). In this Form 10-K, all references to “PBSJ” or “our”
operations refer to The PBSJ Corporation and its wholly-owned subsidiaries and the activities of these entities on a consolidated basis. Our executive offices are located at 2001 N.W. 107th Avenue, Miami, Florida.
3
Acquisitions
Throughout our history, PBSJ has made selected strategic acquisitions to increase the firm’s geographic presence in the West and Central regions, to enhance its
technical capabilities firm-wide and to solidify our operations in the Eastern region. Once we acquire a firm it is integrated and consolidated into our existing operations and the subsidiary ceases to exist as a separate operating entity. The
following acquisitions occurred in the last three years:
| |
• |
|
January 2001 – J. Powell & Associates, Inc. |
The Company acquired certain assets from J. Powell & Associates, Inc., on January 1, 2001 for $2.2 million less the amount of J. Powell’s accrued vacation at January 1, 2001. The assets acquired include fixed assets,
goodwill of the trade name and deposits on leased properties. The acquisition of these assets contributes to the Company’s goal of increasing its presence in the Western region. J. Powell’s areas of specialty included civil engineering,
environmental engineering and construction management in both the private and public sectors. The acquisition was accounted for using the purchase method of accounting, and the results of operations were included as of the respective date of
acquisition, which is January 1, 2001.
Through our strategic acquisitions, PBSJ has developed solid technical
expertise, in both core services and emerging markets, and a nationwide presence that allows us to respond to clients in our “local” markets with the advantages of a national firm. Since the close of the fiscal year ended September 30,
2002, we acquired the stock of Durham Technologies, Inc. (DTI) on December 1, 2002, for $1.5 million. Although we do not currently have any probable plans with respect to any additional material acquisitions, we will continue to evaluate possible
strategic acquisitions of engineering or related service businesses in connection with our plan to diversify our sources of business and the geographic areas in which we operate.
Business Segments
The following table sets forth our
revenues, in thousands, from each of our four basic business segments for each of the three years ended September 30, 2002, 2001, and 2000, and the approximate percentage of our total revenues attributable to each business segment:
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| |
|
Revenues
|
|
%
|
|
|
Revenues
|
|
%
|
|
|
Revenues
|
|
%
|
|
| |
|
(dollars in thousands) |
|
| Transportation |
|
$ |
143,655 |
|
42 |
% |
|
$ |
128,098 |
|
41 |
% |
|
$ |
106,580 |
|
41 |
% |
| Environmental |
|
|
91,124 |
|
26 |
|
|
|
75,676 |
|
24 |
|
|
|
52,757 |
|
20 |
|
| Civil Engineering |
|
|
65,115 |
|
19 |
|
|
|
70,104 |
|
22 |
|
|
|
69,026 |
|
26 |
|
| Construction Management |
|
|
44,567 |
|
13 |
|
|
|
40,228 |
|
13 |
|
|
|
34,162 |
|
13 |
|
Additional information concerning segment profit and loss and assets is set forth in Item
7 under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 8, Note 12 of “Notes to Financial Statements” which are incorporated herein by reference.
4
Transportation
Industry Overview
The need to modernize and upgrade the
transportation infrastructure in the United States has been a source of continued business for us through the last ten years. Fueling the initial growth in this market was the Intermodal Surface Transportation Efficiency Act (“ISTEA”) of
1991. ISTEA placed funding emphasis on intermodalism and transportation efficiency, and established comprehensive planning systems. In 1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st Century (“TEA-21”). TEA-21
earmarks $218 billion for highway and transit projects through 2003. Although a United.States federal program, TEA-21 provides state and local governments considerable flexibility in project selection. In 2000, the Federal Government established the
Wendell H. Ford Aviation Act for the 21st Century (“AIR-21”). This greatly increased aviation
capitol improvement funding nationwide.
Our Services
Our activities in this area generally involve planning, design, right of way acquisition, development and design of intelligent transportation services and program
construction management services for highways, including interstate, primary, and arterial roads and toll facilities, bridges, transit, airports and port facilities. We currently serve 15 state departments of transportation throughout the U.S. and
numerous aviation authorities.
Our Program Management group provides many of our governmental clients the
necessary resources to manage large infrastructure programs from concept through construction. Our services include planning, programming, and contract support. During production we develop design standards, manage projects, perform design reviews
and develop cost estimates. Following production, we (1) facilitate environmental permitting, (2) coordinate right-of-way administration and (3) provide construction management oversight.
During 2002, projects in our Transportation Division included:
| |
• |
|
Overseeing all project planning and pre-construction requirements and activities and providing bond support services for the Florida Turnpike Enterprise’s
capital improvement program including coordinating acquisition of the necessary rights-of-way, and reviewing construction drawings and cost estimates. |
| |
• |
|
Providing general engineering consulting services to the Orlando-Orange County Expressway Authority, including the reconstruction of S.R. 408.
|
| |
• |
|
Preparing final design plans for the reconstruction of U.S. 95 in Las Vegas, Nevada Department of Transportation. |
| |
• |
|
Designing the widening and reconstruction of 17 miles of I-30 in and southwest of Little Rock for the Arkansas State Highway and Transportation Department.
|
| |
• |
|
Site preparation plans for the construction of the new fifth runway at Atlanta Hartsfield Airport. |
5
| |
• |
|
Planning and design services for the Charlotte 2025 Land Use/Transit plan for light rail and bus transit facilities. |
Environmental
Industry Overview
Over the past thirty years, significant environmental laws at the federal, state and local levels have been
enacted in response to public concern over the health of the nation’s air, water, and natural resources. Those laws and their implementation through regulation affect numerous industrial and governmental actions and form a key market driver for
the services of our Environmental business segment.
Two federal environmental laws, The Safe Drinking Water Act
of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws, Congress has authorized significant monies to assist state and local governments. According to the Environmental Protection Agency
(“EPA”), as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.
Our Services
Our Environmental business segment focuses on the delivery of
planning, design and construction management services for private and public sector clients related to:
| |
| |
|
|
| Air Quality Management |
|
Flood Insurance Studies |
| Energy Planning |
|
Hazardous and Solid Waste Management |
| Cultural Resources Assessments |
|
Information Solutions |
| Ecological Studies |
|
Wastewater Treatment |
| Environmental Toxicology Analysis |
|
Water Resources |
| Aquatic Treatment Systems |
|
Water Supply and Treatment |
During 2002, projects in our Environmental business segment included:
| |
• |
|
A multi-year contract with the Federal Emergency Management Agency (“FEMA”) to serve as Flood Mapping Coordination Contractor for FEMA’s Central
Region V (Illinois, Indiana, Michigan, Ohio, Minnesota and Wisconsin), Central Region VI (Texas, Oklahoma, Arkansas, Louisiana and New Mexico) and Central Region VII (Nebraska, Kansas, Idaho and Missouri). |
| |
• |
|
Providing engineering services during construction of the Washington Suburban Sanitary Commission’s 20-million-gallons-per-day advanced Seneca Wastewater
Treatment Plant in Montgomery County, Maryland, which utilizes biological nutrient removal. |
6
| |
• |
|
Continued to support the New York Power Authority, Consolidated Edison Company for New York, Orange and Rockland Utilities, and Central Hudson Gas and Electric
Corporation for assessing the impacts of power plant operations on Hudson River fish populations. |
| |
• |
|
The state of Florida and the Federal government have reached an agreement to implement a Comprehensive Everglades Restoration Project (“CERP”) in
south Florida. The CERP is budgeted to cost over $8 billion and the cost is to be shared equally between the Federal Government and the state and local agencies. The PBS&J team was selected by the Corps of Engineers to provide program management
support activities on the Federal portion of the CERP. The joint venture contract is budgeted for up to $6 million/year and the contract is for 3 years with provisions for up to 5 renewal periods. |
| |
• |
|
The City of San Diego, California, has retained PBSJ to conduct a series of condition assessment investigations as part of a 10-year, $1.2-billion sewer
assessment and rehabilitation program (one of the largest undertakings in the country) with the express purpose of reducing overflows and beach closures in San Diego County. With offices in Encinitas and San Diego; an existing, strong relationship
with the City; and substantial national resources to support this effort, PBSJ is uniquely poised to assist the City with this important program. The overall 10-year potential fee from this effort for PBSJ is in the $20 to $40 million range.
|
Civil Engineering
Industry Overview
The strong and long running national
economic climate we have all enjoyed came to an abrupt halt with the attack on September 11, 2001 and the resulting stock market plunge. The private sector slowed as companies reevaluated the impact of the terrorist attacks and “guarded
optimism” became their business mantra. Corporate relocations, new office buildings, commercial tracts, and retail centers slowed as the stock market continued to drop. Residential development maintained its momentum due to declining interest
rates and “guarded” feelings of job security. As corporate scandals began to emerge and the market refused to rebound, private sector development, and more particularly, residential development began to feel the pains of significant
layoffs and an increase in jobless rates. The momentum of the past decade was slowing.
Prior to the September 11,
2001 tragedy, our Civil Engineering business segment recognized the need for a better balance between public sector and private sector work, and subsequently developed a strategic plan to penetrate growth markets in the public sector areas in need
of civil engineering services. As a result of that effort, we have added federal planning, municipal services, education, ports, and emergency management services to our core business. This new mix of public sector clients has allowed our service to
better reflect the company’s vision and market direction, and position Civil to take advantage of a down turn in the private sector.
Our Services
Our Civil Engineering business segment provides general civil
engineering services to public and private clients. Included in these services are (1) site suitability studies, (2) master infrastructure engineering and planning, (3) site engineering, (4) municipal engineering, (5) regulatory permitting, (6)
7
construction phase services, (7) disaster planning and response and (8) homeland security and force
protection. Within our Civil Engineering business segment, we also have three additional service groups: Surveying and Mapping, Planning and Landscape Architecture, and Architecture.
Our Surveying and Mapping group provides clients GPS-based surveying, mobile surveying for roadways and other hard surfaces, land platting, right-of-way mapping,
construction layout and control, boundary and topographic surveys, control networks, tunnel surveying, commercial land title surveys, hydrographic surveying, movement detection and deformation surveys, and rail and mass transit surveys.
Our Planning and Landscape Architecture group provides clients master land use planning, site planning, urban and
regional planning, urban design, environmental planning, cultural resource identification, and landscape architecture.
Our Architecture group provides comprehensive architectural design, space planning and interior design, as well as electrical, mechanical and structural engineering services for educational, commercial, industrial transportation,
military, and other public and private entities.
During 2002, projects in our Civil Engineering business segment included:
| |
• |
|
Master planning services for Europe District Army Bases (EUD ACOE) located within Europe, the Middle East, Africa and former Soviet states.
|
| |
• |
|
General civil engineering services for $1.5 billion/ 5-year expansion program of the Centers for Disease Control facilities in Atlanta, Georgia.
|
| |
• |
|
Entitlement processing, final engineering design, and construction surveying for over 1,000 single-family homes for American West Development throughout Clark
County. |
| |
• |
|
Completed grading, drainage, and infrastructure engineering for 800 student housing units at the University of California Los Angeles for VTBS, Architects.
|
| |
• |
|
Water Sound North Development of Regional Impact for St. Joe/Arvida. |
| |
• |
|
Texas Veterans’ Land Board and General Land office, State cemetery programs for architectural and engineering services. |
Construction Management
Industry Overview
The demand for our construction management services has also been fueled
by the legislation and industry trends that are driving the growth in our Transportation and Environmental business segments, including ISTEA and TEA-21. These trends have resulted in a large number of infrastructure projects throughout the United
States, which are subject to increasingly complex governmental regulations. The role of the construction manager has become increasingly important to the success of these projects, requiring a new level of versatility and a wide range of skills.
Both public and private sector entities are under pressure to complete these projects at accelerated schedules, resulting in a myriad of project delivery
8
systems. With limited in-house staff, these entities must rely on experienced construction managers to
complete the project on time and within budget.
Our Services
In the area of construction management, we provide a wide range of services as an agent for our clients, including contract administration, inspection, field-testing,
scheduling/estimating, instituting project controls and quality assessment. Although we do not construct or build any projects, we may act as the program director of a project whereby on behalf of the owner of the project, we provide scheduling,
cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting.
During 2002, projects in our Construction Management Division included:
| |
• |
|
Providing construction engineering and inspection services to the Departments of Transportation in Alabama, Arkansas, Colorado, Nevada, Texas, Florida, Georgia
and North Carolina, as well as to County Municipalities such as Cobb County Water & Sewer Department and Collier County, Florida. |
| |
• |
|
Providing construction administration to the Clark County (Nevada) Department of Public Works, as well as the City of Oceanside (California).
|
| |
• |
|
Performing Structural Inspection Services for hurricane shelters for the State of Florida, Department of Community Affairs. |
| |
• |
|
Providing comprehensive services, including cost estimating, scheduling and construction claims reviews, to the school boards of Miami-Dade County and Broward
County, Florida; York County, SC; Cobb County DOT in Georgia and TTA (Texas Turnpike Authority – now included as a part of TxDot). |
| |
• |
|
Providing construction-related services to BellSouth throughout Florida and Georgia, including quality assurance inspections, verification of contractor’s
invoices, damage inspections and responding to natural disasters. |
| |
• |
|
Providing construction inspection services nationally to the National Park Service and Federal Highway Administration’s Central Lands Division.
|
| |
• |
|
Working as the Owner’s Representative providing construction management for a twin high-rise vertical project in Miami, Florida.
|
Other Services
In addition to our four national business segments, we have developed a National Information Solutions Division to address the digital infrastructure needs of our clients.
Our services include: training,
9
database analysis, system programming, land planning and design and geographic information systems.
Recent projects which have allowed our information solutions to address client needs include:
| |
• |
|
Development and implementation of an enterprise GIS system for Polk County, Florida Utilities department, including automated data access for planning and
mobile data collection tools for streamlining the utility locate process. |
| |
• |
|
Extensive GIS and database support for various utility master planning contracts in southern California, Nevada and Florida. |
| |
• |
|
Development of a Corridor Constraints Analysis tool for automating data calculations in the support of FERC permit filing in pipeline alignment studies.
|
| |
• |
|
Implementation of a web-based project collaboration system for approximately a dozen major program management contracts allowing team members to share
documents, events and messages over the web. |
| |
• |
|
Implementation of a web-based GIS system for management of all flood study data related to FEMA MCC program management efforts. |
Clients
Through our four national business segments, we provide our services to a broad range of clients, including state, local and municipal agencies, the Federal government and private sector businesses. Our state and local government
clients include approximately 15 state departments of transportation, water utilities, local power generators, waste water treatment agencies, environmental protection agencies, schools and colleges, law enforcement, judiciary, hospitals and
healthcare providers. We provide services to Federal agencies, including the Army Corps of Engineers, EPA, Navy, Air Force, Coast Guard, United States Postal Service, FEMA and Department of Energy, and local entities. Our contracts with federal,
state and local entities are subject to various methods of determining fees and costs. See “Contract Pricing and Terms of Engagement” for further discussion of our pricing arrangements with governmental clients.
10
Our private sector clients include retail and commercial, entertainment,
railroad, petro-chemical, food, telecommunications, oil and gas, power, semi-conductor, transportation, technology, public utility, mining and forest products entities. The table below indicates the revenue generated, by client type, for each of the
three years ended September 30, 2002, 2001 and 2000.
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| |
|
(dollars in thousands) |
|
| Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Local and state agencies |
|
$ |
237,165 |
|
69 |
% |
|
$ |
201,037 |
|
64 |
% |
|
$ |
170,641 |
|
65 |
% |
| Federal agencies |
|
|
26,494 |
|
8 |
|
|
|
21,530 |
|
7 |
|
|
|
8,611 |
|
3 |
|
| Private businesses |
|
|
80,562 |
|
23 |
|
|
|
89,735 |
|
28 |
|
|
|
81,383 |
|
31 |
|
| International |
|
|
240 |
|
0 |
|
|
|
1,804 |
|
1 |
|
|
|
1,890 |
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Total |
|
$ |
344,461 |
|
100 |
% |
|
$ |
314,106 |
|
100 |
% |
|
$ |
262,525 |
|
100 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2002, we derived approximately 18% of our engineering fees from
various districts and departments of the Florida Department of Transportation (“FDOT”) under numerous contracts. While we believe the loss of any individual contract would not have a material adverse effect on our results of operations and
would not adversely impact our ability to continue work under our other contracts with the FDOT, the loss of all the FDOT contracts would have a material adverse effect on our results of operations by causing a material decrease in our revenues and
profits.
International Business
During fiscal 2002, revenues from our international operations were approximately $240,000, or less than 1% of our total revenues, from a project in Venezuela, which is now closed. We do not currently
have any plans to expand or grow our international operations.
Marketing
Marketing activities are conducted by key operating and executive personnel, including specifically assigned business development personnel, as well as through
professional personnel who develop and maintain new and existing client relationships. Our continued ability to compete successfully in the areas in which we do business is largely dependent upon aggressive marketing, the development of information
regarding client requirements, the submission of responsive cost-effective proposals and the successful completion of contracts. Information concerning private and governmental requirements is obtained, during the course of contract performance,
from formal and informal briefings, from participation in activities of professional organizations, and from literature published by the government and other organizations.
11
Contract Pricing and Terms of Engagement
We earn our revenues for the various types of services we provide through cost-plus, time-and-materials, fixed price, and contracts, which combine any of the methods.
Cost-Plus Contracts. Under our cost-plus contracts, we charge clients negotiated rates based on our direct and
indirect costs. Labor costs and sub-contractor services are the principal components of our direct costs. Federal Acquisition Regulations, which are applicable to all Federal government contracts and which are partially incorporated in many local
and state agency contracts, limit the recovery of certain specified indirect costs or contracts subject to such regulations. In negotiating a cost-plus contract, we estimate all recoverable direct and indirect costs and then add a profit component,
which is either a percentage of total recoverable costs or a fixed negotiated fee, to arrive at a total dollar estimate for the project. We receive payment based on the total actual number of labor hours expended. If the actual total number of labor
hours is lower than estimated, the revenues from that project will be lower than estimated. If the actual labor hours expended exceed the initial negotiated amount, we must obtain a contract modification to receive payment for such overage. During
fiscal 2002, approximately 18% of our contracts were cost-plus contracts, primarily with state and local government agencies.
Cost-plus contracts covered by Federal Acquisition Regulations and certain state and local agencies require an audit of actual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed
recoverable costs. There are no open or pending audits by federal or state authorities as of September 30, 2002. The result of our last audit for the year ended September 30, 2001 resulted in no adjustments. Our contracts with governmental entities,
once executed, are not subject to renegotiation of profits at the election of the government, however, they are subject to continued funding. Our contracts generally provide that we receive our profit on a periodic basis through the course of the
project. Therefore, if a governmental agency fails to fund for a successive year, our profit will have been proportionally received as recognized.
Time-and-Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. In addition, clients reimburse us for the
actual out-of-pocket costs of materials and other direct incidental expenditures incurred in connection with performing the contract. Our profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs directly
charged or allocated to contracts compared with negotiated billing rates. During fiscal 2002, approximately 51% of our contracts were time-and-materials contracts, primarily with federal, state and local agencies, as well as some private sector
clients.
Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an agreed sum negotiated in
advance for the specified scope of work. Under fixed-price contracts, we make no payment adjustments if we over-estimate or under-estimate the number of labor hours required to complete the project, unless there is a change of scope in the work to
be performed. Accordingly, our profit margin will increase to the extent the number of labor hours and other costs are below the contracted amounts. The profit margin will decrease and we may realize a loss on the project if the number of labor
hours required and other costs exceed the estimate. During fiscal 2002, approximately 31% of our contracts were fixed-price contracts, primarily with private sector clients.
12
Competition
We face active competition in all areas of our business. As we provide a wide array of engineering, architectural, planning and construction management services to
companies in various industries throughout the United States, we encounter a different group of competitors in each of our markets. Our competitors include (1) national and regional design firms like PBSJ that provide a wide range of design services
to clients in all industries, including CH2M Hill and Parsons Brickerhoff, (2) industry specific firms that provide design as well as other services to customers in a specific industry, for example environmental firms such as Montgomery Watson, Camp
Dresser and McKee, Inc., and (3) local firms that provide some or all of our services in one of our markets. Some of our competitors are larger, more diversified firms having substantially greater financial resources and larger professional and
technical staffs than ours. Competition for major contracts is frequently intense and may entail public submittals and multiple presentations by numerous firms seeking to be awarded the contract. The extent of competition we will encounter in the
future will vary depending on changing customer requirements in terms of types of projects and technological developments. It has been our experience that the principal competitive factors for the type of service business in which we engage are a
firm’s demonstrated ability to perform certain types of projects, the client’s own previous experience with competing firms, the firm’s size and financial condition and the cost of the particular proposal.
No one firm currently dominates a significant portion of the sectors in which we compete. Given the expanding demand for some of the
services provided by PBSJ, it is likely that additional competitors will emerge. At the same time, consolidation continues to occur in certain of the sub-segments of the industry in the United States, including the environmental-focused firms.
We believe that we will retain the ability to compete effectively with other firms that provide similar services
by continuing to offer a broad range of high-quality consulting and environmental, transportation, and engineering and construction management services through our network of offices. Among other things, the wide range of expertise, which we
possess, permits us to remain competitive in obtaining government contracts despite shifts in governmental spending emphasis. Our multi-disciplinary capabilities enable us to compete more effectively for clients whose projects require that the
expertise of professionals in a number of different disciplines be brought to bear in the problem solving effort. We believe that our ability to offer our services over a large part of the United States is a positive factor in enabling us to attract
and retain clients who have a need for our services in different parts of the country.
Backlog
Our backlog for services was estimated to be approximately $339.0 million and $303.0 million as of September 30, 2002 and 2001,
respectively. We define backlog as contracted task orders less previously recognized revenue on such task orders. U.S. government agencies, and many state and local governmental agencies, operate under annual fiscal appropriations and fund various
contracts only on an incremental basis. Our ability to realize revenues from our backlog depends on the availability of funding for various federal, state and local government agencies.
A majority of our customer orders or contract awards and additions to contracts previously awarded are received or occur at random during the year and may have varying
periods of performance. The comparison of backlog amounts on the same date in successive years is not necessarily indicative of trends in our business or future revenues.
13
The major components of our operating costs are payroll and payroll-related
costs. Since our business is dependent upon the reputation and experience of our personnel and adequate staffing, a reasonable backlog is important for the scheduling of operations and for the maintenance of a fully-staffed level of operations.
Regulation
Compliance with federal, state and local regulations, which have been enacted or adopted relating to the protection of the environment is not expected to have any material effect upon the capital expenditures, earnings and
competitive position of PBSJ.
Personnel
As of September 30, 2002, we employed 2,800 persons, of which 275 were part time employees. Most of our employees are professional or technical personnel having specialized training and skills,
including engineers, architects, analysts, scientists, management specialists, technical writers and skilled technicians. Although many of our personnel are highly specialized in certain areas and while there is a nationwide shortage of certain
qualified technical personnel, we are not currently experiencing any material difficulty in obtaining the personnel we require to perform under our contracts. We believe that our future growth and success will depend, in large part, upon our
continued ability to attract and retain highly qualified personnel. We believe our employee relations to be good.
Liabilities and
Insurance
When we perform services for our clients, we can become liable for breach of contract, personal
injury, property damage and negligence. Such claims could include improper or negligent performance or design, failure to meet specifications and breaches of express or implied warranties. Our clients often require us to contractually assume
liabilities for damage or personal injury to the client, third parties and their property and for fines and penalties. Because our projects are typically large enough to affect the lives of many people, the damages available to a client or third
parties are potentially large and could include punitive and consequential damages. For example, our transportation projects involve services that affect not only our client, but also many end users of those services.
We seek to protect PBSJ from potential liabilities by obtaining indemnification, where possible, from our public and private sector
clients. However, even when we obtain such indemnification, it is generally not available if we fail to satisfy specified standards of care in performing our services or if the indemnifying person has insufficient assets to cover the liability.
Therefore, we also seek to protect PBSJ by maintaining a full range of insurance coverage, including worker’s compensation, general and professional liability (including pollution liability) and property coverage. Our professional liability
coverage is on a claims made basis (which means that the policy provides liability coverage for all claims made during the policy period, regardless of when the action occurred), while the rest of our insurance coverage is on an occurrence basis
(which means that the policy provides liability coverage only for injury or damage arising from an action that occurs during the policy period, regardless of when the claim is actually made). Our professional liability insurance provides for annual
coverage of up to $30 million with an annual deductible of $3.0 million. Based upon our previous experience with such claims and lawsuits, we believe our insurance coverage is adequate for all our present operational activities, although there can
14
be no assurances that such coverage will prove to be adequate in all cases. A successful claim or claims in an amount in excess of our insurance
coverage for which there is not coverage could have a material adverse effect on our results of operation.
We own our executive offices located at 2001 N.W. 107th Avenue, Miami,
Florida 33172, which consists of approximately 100,000 square feet of office space. We own our Orlando office located at 482 South Keller Road, Orlando, Florida 32810, which consists of approximately 90,000 square feet of office space. The Orlando
office building is held as collateral under the Company’s mortgage note. We own three additional office buildings in Ft. Myers, Florida, Homestead, Florida and Hollywood, Florida through our wholly-owned subsidiary, Seminole Development
Corporation. All of these properties are currently being leased to third parties.
We lease an additional 60
offices in 16 states in the United States and Puerto Rico, all of which are used for our four major business segments. Aggregate lease payments during fiscal year 2002 were approximately $9.9 million.
We believe that substantially all of our property and equipment are, in general, well maintained and in good operating condition. They are
considered adequate for present needs, and as supplemented by planned construction, are expected to remain adequate for the near future.
We are of the opinion that we, or our subsidiaries, have clear title to the properties owned and used in our business, subject to liens for current taxes and easements, restrictions and other liens, which do not materially
detract from the value of the properties or our interest in the properties or the use of those properties in our business.
ITEM 3.
LEGAL PROCEEDINGS
We are party to various legal proceedings arising from our
operations. We believe that we have sufficient professional liability insurance such that the outcome of any of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or results of
operations. However, if our insurance company were to deny coverage for a significant judgment or if a judgment were entered against us in an amount greater than our coverage, it could adversely affect our results of operations. Based upon our
previous experience with claims and lawsuits, we believe our insurance coverage is adequate.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
15
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is no established public trading market for our common stock.
As of November 30, 2002 there were no shares of common stock that were subject to outstanding warrants or options to purchase, or
securities convertible into, our common stock, and no shares of our common stock could be sold pursuant to Rule 144 under the Securities Act. No shares of our common stock are being, or have been, publicly offered.
As of November 30, 2002, there were 8,146,974 shares of common stock outstanding and held of record by 555 shareholders.
Dividends
Each share of our common stock is entitled to share equally in any dividends declared by our board of directors. Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We
have not in the past paid cash dividends on our common stock and have no present intention of paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.
16
ITEM 6.
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial
data as of and for the years ended September 30, 2002, 2001, 2000, 1999 and 1998. The financial data for each of the fiscal years has been derived from, and is qualified by reference to, our audited financial statements. You should read the
information set forth below in conjunction with our consolidated Financial Statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
| |
|
Year Ended September 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
| |
|
(dollars in thousands) |
| Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Engineering fees |
|
$ |
344,461 |
|
$ |
314,106 |
|
$ |
262,525 |
|
$ |
241,417 |
|
$ |
223,381 |
| Net earned revenue |
|
|
266,326 |
|
|
236,216 |
|
|
196,830 |
|
|
180,637 |
|
|
167,133 |
| Net income |
|
|
13,408 |
|
|
12,535 |
|
|
10,490 |
|
|
5,446 |
|
|
4,474 |
| |
| Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Working capital |
|
$ |
37,648 |
|
$ |
24,753 |
|
$ |
18,752 |
|
$ |
31,721 |
|
$ |
20,545 |
| Total assets |
|
|
136,403 |
|
|
129,004 |
|
|
120,306 |
|
|
103,835 |
|
|
96,425 |
| Long-term debt, less current portion |
|
|
20,996 |
|
|
9,929 |
|
|
10,800 |
|
|
13,337 |
|
|
8,589 |
| Total stockholders’ equity |
|
|
58,747 |
|
|
58,704 |
|
|
49,198 |
|
|
45,270 |
|
|
37,613 |
17
ITEM. 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of
Operation
The following table sets forth the percentage of net earned revenue represented by the items in our
consolidated statements of income:
| |
|
Year ended September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Engineering fees |
|
129.3 |
% |
|
133.0 |
% |
|
133.4 |
% |
| Direct expenses |
|
29.3 |
|
|
33.0 |
|
|
33.4 |
|
| |
|
|
|
|
|
|
|
|
|
| Net earned revenue |
|
100.0 |
|
|
100.0 |
|
|
100.0 |
|
| |
|
|
|
|
|
|
|
|
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
| Direct salaries |
|
36.3 |
|
|
36.5 |
|
|
37.1 |
|
| General and administrative expenses |
|
56.3 |
|
|
55.9 |
|
|
56.2 |
|
| |
|
|
|
|
|
|
|
|
|
| Operating income |
|
7.4 |
|
|
7.6 |
|
|
6.7 |
|
| Interest expense |
|
(0.4 |
) |
|
(0.5 |
) |
|
(0.6 |
) |
| Other, net |
|
0.2 |
|
|
0.2 |
|
|
(0.4 |
) |
| |
|
|
|
|
|
|
|
|
|
| Income before income taxes |
|
7.2 |
|
|
7.3 |
|
|
5.7 |
|
| Provision for income taxes |
|
2.2 |
|
|
2.0 |
|
|
0.3 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income |
|
5.0 |
% |
|
5.3 |
% |
|
5.4 |
% |
| |
|
|
|
|
|
|
|
|
|
A summary of operating results is as follows for each of the years
ended September 30 (dollars in thousands):
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Engineering fees |
|
$ |
344,461 |
|
|
$ |
314,106 |
|
|
$ |
262,525 |
|
| Direct expenses |
|
|
78,135 |
|
|
|
77,890 |
|
|
|
65,695 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earned revenue |
|
|
266,326 |
|
|
|
236,216 |
|
|
|
196,830 |
|
| Costs and expenses |
|
|
246,704 |
|
|
|
218,317 |
|
|
|
183,748 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
19,622 |
|
|
|
17,899 |
|
|
|
13,082 |
|
| Other expenses |
|
|
(469 |
) |
|
|
(556 |
) |
|
|
(2,003 |
) |
| Provision for income taxes |
|
|
5,745 |
|
|
|
4,808 |
|
|
|
589 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
13,408 |
|
|
$ |
12,535 |
|
|
$ |
10,490 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
18
Segment Results of Operations
Our businesses are reported as four segments, reflecting our management methodology and structure. The accounting policies of the segments are the same as those described
in the footnotes to the accompanying consolidated financial statements. We evaluate performance based on operating profit of the respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by
segment for 2002 as compared to 2001 and 2001 as compared to 2000.
Transportation
| |
|
2002
|
|
% Change
|
|
|
2001
|
|
% Change
|
|
|
2000
|
| |
|
(dollars in thousands) |
| Engineering Fees |
|
$ |
143,655 |
|
12.1 |
% |
|
$ |
128,098 |
|
20.2 |
% |
|
$ |
106,580 |
| Direct Expenses |
|
|
35,351 |
|
(3.2 |
) |
|
|
36,538 |
|
24.3 |
|
|
|
29,397 |
| Net Earned Revenue |
|
|
108,304 |
|
18.3 |
|
|
|
91,560 |
|
18.6 |
|
|
|
77,183 |
| Costs and Expenses |
|
|
96,694 |
|
18.2 |
|
|
|
81,794 |
|
19.2 |
|
|
|
68,632 |
| Operating Income |
|
$ |
11,610 |
|
18.9 |
% |
|
$ |
9,766 |
|
14.2 |
% |
|
$ |
8,551 |
2002 Compared To 2001
Engineering fees of $143.7 million for 2002 increased 12.1% as compared to 2001. Higher volumes from continued strength in the transportation services market and
engineering fees from new projects were the primary contributors to this increase during 2002.
Reported net
earned revenue was $108.3 million during 2002 as compared to $91.6 million for the same period in 2001, representing an increase of 18.3%. Net earned revenue increased at a greater percentage than engineering fees due to a 3.2% decrease in direct
expenses, from $36.5 million in 2001 to $35.4 million in 2002. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses.
Direct expenses, as a percentage of net earned revenue, were 32.6% for 2002 as compared to 39.9% for 2001. The decrease in direct expenses and direct expenses, as a percentage of net earned revenue, is due to the decreased use of sub-consultants as
a result of additional hiring and reduced employee turnover.
Reported operating income was $11.6 million for 2002
as compared to $9.8 million for 2001, representing an increase of 18.9%. Operating income, as a percentage of net earned revenue, was 10.7% for 2002 and 2001. The increase in operating income for 2002 is due to the growth in engineering fees as a
result of internal growth within this segment. The consistency in operating income, as a percentage of net earned revenue, is due to costs and expenses increasing at the same rate as net earned revenue in 2002. Costs and expenses consist of direct
salaries that are chargeable to clients and general and administrative expenses. Direct salaries were $39.0 million for 2002 as compared to $33.0 million for 2001, representing an increase of 18.2%. Direct salaries increased at a greater rate than
the increase in engineering fees due to additional staff hired in 2002 to support our internal growth. During 2001, the industry was experiencing an extremely competitive hiring atmosphere. Therefore, in 2001, additional labor required to support
our internal growth was supplied through the use of sub-consultants, or direct expenses. In addition, the Company’s turnover rate
19
has decreased since 2001. The increase in general and administrative expenses in 2002, as compared to 2001, was directly related to annual
increases in pay rates, as well as an increase in personnel. As a percentage of net earned revenue, general and administrative expenses remained consistent during 2002 as compared to 2001.
2001 Compared To 2000
Engineering fees of
$128.1 million for 2001 increased 20.2% as compared to 2000. Higher volumes from continued strength in the transportation services market and engineering fees from new projects were the primary contributors to this increase during 2001.
Reported net earned revenue was $91.6 million during 2001 as compared to $77.2 million in 2000, representing an
increase of 18.6%. Net earned revenue increased at a smaller percentage than engineering fees as a result of the percentage increase in direct expenses being greater than the percentage increase in engineering fees. Direct expenses consist of
out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and subcontractor expenses. Direct expenses were $36.5 million during 2001 as compared to $29.4 during 2000, representing
an increase of 24.2%. Direct expenses, as a percentage of net earned revenue was 39.9% in 2001 as compared to 38.1% in 2000. The increase in direct expenses and direct expenses as a percentage of net earned revenue is due to the increased use of
sub-consultants as a result of the significant growth in engineering fees. Higher engineering fees discussed above, offset by increased sub-consultant expenses, were the primary contributors for the overall 2001 increase compared to 2000.
Reported operating income was $9.8 million in 2001 as compared to $8.6 million in 2000, representing an increase
of 14.2%. The increase in operating income is due to higher volumes from continued strength in the transportation services market, engineering fees from new projects and improved cost control. Costs and expenses consist of direct salaries that are
chargeable to clients and general and administrative expenses. Direct salaries increased at a lesser rate than the increase in engineering fees due to an extremely competitive hiring atmosphere in the industry. Therefore, additional labor required
to support our internal growth was supplied through the use of sub-consultants, or direct expenses. The increase in general and administrative expenses, which was directly related to the increase in direct salaries and engineering fees, was
primarily due to annual increases in pay rates, increases in the accrual of insurance expenses relating to our medical plan and increases in expenses related to office relocations and building/equipment costs associated with those moves. Operating
income as a percentage of net earned revenue was 10.7% in 2001 as compared to 11.1% in 2000. The slight decrease in operating income as a percentage of net earned revenue is a result of an adjustment made during the third quarter of fiscal year 2000
to the total allowance for doubtful accounts. Due to improved collections during fiscal year 2000, the total allowance for doubtful accounts decreased approximately $2.6 million, from $4.9 million at September 30, 1999 to $2.3 million at September
30, 2000. This segment’s allocation from the adjustment in the allowance for doubtful accounts approximated $962,000. Operating income in 2000, without this adjustment, would have been $7.6 million instead of $8.6 million, thereby making
operating income as a percentage of net earned revenue 9.8% instead of 11.1% during 2000. Therefore, excluding the adjustment made in 2000, operating income as a percentage of net earned revenue increased from 9.8% in 2000 to 10.7% in 2001.
20
Civil Engineering
| |
|
2002
|
|
|
% Change
|
|
|
2001
|
|
% Change
|
|
|
2000
|
|
| |
|
(dollars in thousands) |
|
| Engineering Fees |
|
$ |
65,115 |
|
|
(7.1 |
%) |
|
$ |
70,104 |
|
1.6 |
% |
|
$ |
69,026 |
|
| Direct Expenses |
|
|
12,544 |
|
|
(10.5 |
) |
|
|
14,022 |
|
(9.0 |
) |
|
|
15,406 |
|
| Net Earned Revenue |
|
|
52,571 |
|
|
(6.3 |
) |
|
|
56,082 |
|
4.6 |
|
|
|
53,620 |
|
| Costs and Expenses |
|
|
53,965 |
|
|
(3.6 |
) |
|
|
55,987 |
|
2.7 |
|
|
|
54,514 |
|
| Operating (Loss) Income |
|
($ |
1,394 |
) |
|
(1567.4 |
%) |
|
$ |
95 |
|
110.6 |
% |
|
($ |
894 |
) |
2002 Compared To 2001
Engineering fees of $65.1 million for 2002 decreased 7.1% as compared to 2001. This decrease is directly related to reduced chargeability as a result of the slowdown in the
economy since late 2000. Civil engineering clients are typically private sector clients. Therefore, they tend to be affected by the fluctuations in the economy more than the public sector clients associated with our other segments.
Reported net earned revenue was $52.6 million for 2002 as compared to $56.1 million for 2001, representing a decrease of 6.3%.
Net earned revenue decreased at a slightly lesser rate than engineering fees as a result of the reduction in direct expenses, specifically the use of sub-consultants. Direct expenses consist of out-of-pocket expenses related to the delivery of
services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses were $12.5 million during 2002 as compared to $14.0 million for 2001, representing a decrease of 10.5%. Direct expenses, as a
percentage of net earned revenue, were 23.9% for 2002 as compared to 25.0% for 2001. The decrease in direct expenses and direct expenses, as a percentage of net earned revenue, is due to the decreased use of sub-consultants as a result of the
slowdown in the economy.
Reported operating loss was $1.4 million for 2002 as compared to operating income of
$95,000 for 2001, representing a decrease of 1567.4%. Operating (loss) income, as a percentage of net earned revenue, was (2.7%) for 2002 as compared to 0.2% for 2001. The decrease in operating income and operating income, as a percentage of net
earned revenue, is due to a decrease in chargeability and direct labor charges during 2002 as compared to 2001, as a result of the slowed economy during 2002. In an effort to address the decline in this segment, the Company’s management has
switched the roles of two key managers. In addition, beginning with fiscal year 2003, many of the Federal program projects will be incorporated into the civil segment. Direct labor charges are direct salaries that are chargeable to clients. These
costs, combined with general and administrative expenses, make up the total costs and expenses. General and administrative expenses, which also decreased for 2002 as compared to 2001, were 66.0% and 63.2% of net earned revenue for 2002 and 2001,
respectively. Although general and administrative expenses decreased as a result of the reduced revenue activity within this segment, these costs increased as a percentage of net earned revenue.
21
2001 Compared To 2000
Engineering fees of $70.1 million for 2001 increased 1.6% as compared to 2000. The smaller than usual increase is directly related to the slowdown in the economy since late
2000. Civil engineering clients are typically private sector clients. Therefore, they tend to be affected by the fluctuations in the economy more than the public sector clients associated with our other segments.
Reported net earned revenue was $56.1 million during 2001 as compared to $53.6 million in 2000, representing an increase of 4.6%. Net
earned revenue increased at a greater rate than engineering fees as a result of the reduction in the use of sub-consultants due to the slowdown in the economy. Direct expenses consist of out-of-pocket expenses related to the delivery of services
such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses were $14.0 million during 2001 as compared to $15.4 million in 2000, representing a decrease of 9.0%. Direct expenses, as a percentage
of net earned revenue decreased to 25.0% in 2001 from 28.7% in 2000. The decrease in direct expenses and direct expenses as a percentage of net earned revenue is due to the decreased use of sub-consultants as a result of the slowdown in the economy.
Reported operating income (loss) was $95,000 in 2001 as compared to ($894,000) in 2000, representing an increase
of 110.6%. Operating income as a percentage of net earned revenue was 0.2% in 2001 as compared to (1.7%) in 2000. The increase in operating income and operating income as a percentage of net earned revenue is due to increased efficiencies and
improved cost control related to direct salaries and general and administrative expenses. Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct salaries, as a percentage of net
earned revenue, decreased as a result of the downturn in the economy and improved efficiencies. General and administrative expenses increased more than the increase in engineering fees due in part to a significant adjustment made in 2000 to the
allowance for doubtful accounts. Due to improved collections during fiscal year 2000, the total allowance for doubtful accounts decreased approximately $2.6 million, from $4.9 million at September 30, 1999 to $2.3 million at September 30, 2000. This
segment’s allocation from the adjustment in the allowance for doubtful accounts approximated $806,000. Operating income in 2000, without this adjustment, would have been ($1.7) million instead of ($894,000), thereby making operating income as a
percentage of net earned revenue (3.2%) instead of (1.7%) during 2000. Therefore, excluding the adjustment made in 2000, operating income as a percentage of net earned revenue increased from (3.2%) in 2000 to 0.2% in 2001. In addition, general and
administrative expenses increased during 2001 due to annual increases in pay rates, increases in the accrual of insurance expenses relating to our medical plan and increases in expenses related to office relocations and building/equipment costs
associated with those moves.
22
Environmental
| |
|
2002
|
|
% Change
|
|
|
2001
|
|
% Change
|
|
|
2000
|
| |
|
(Dollars in Thousands) |
| Engineering Fees |
|
$ |
91,124 |
|
20.4 |
% |
|
$ |
75,676 |
|
43.4 |
% |
|
$ |
52,757 |
| Direct Expenses |
|
|
18,955 |
|
18.3 |
|
|
|
16,026 |
|
45.9 |
|
|
|
10,987 |
| Net Earned Revenue |
|
|
72,169 |
|
21.0 |
|
|
|
59,650 |
|
42.8 |
|
|
|
41,770 |
| Costs and Expenses |
|
|
66,340 |
|
20.7 |
|
|
|
54,976 |
|
38.0 |
|
|
|
39,852 |
| Operating Income |
|
$ |
5,829 |
|
24.7 |
% |
|
$ |
4,674 |
|
143.7 |
% |
|
$ |
1,918 |
2002 Compared To 2001
Engineering fees of $91.1 million for 2002 increased 20.4% as compared to $75.7 million for 2001. Higher volumes from renewed strength in the environmental services market
and engineering fees from new projects were the primary contributors to this increase during 2002. The two biggest contributors to this segment’s higher volumes and new projects were the acquisition of J. Powell & Associates, Inc. on
January 1, 2001 and the Company’s work with FEMA.
Reported net earned revenue was $72.2 million during 2002
as compared to $59.7 million for 2001, representing an increase of 21.0%. Net earned revenue increased at a slightly higher percentage than engineering fees for 2002 as a result of the percentage increase in direct expenses being less than the
percentage increase in engineering fees. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses were
$19.0 million during 2002 as compared to $16.0 million for 2001, representing an increase of 18.3%. The increase in direct expenses consists of higher sub-consultant fees as a result of the significant growth in this segment. However, as a result of
additional hiring and reduced employee turnover, direct expenses, as a percentage of net earned revenue, decreased slightly from 26.9% in 2001 to 26.3% for 2002.
Reported operating income was $5.8 million for 2002 as compared to $4.7 million for 2001, representing an increase of 24.7%. Operating income, as a percentage of net earned revenue, was 8.1% for 2002
as compared to 7.8% in 2001. The increase in operating income and operating income, as a percentage of net earned revenue, is due to the increase in engineering fees, as a result of internal growth within this segment, combined with improved cost
control. Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. For 2002, direct salaries increased at a greater percentage than engineering fees as a result of increased hiring of
technical staff to support the work related to FEMA. In addition, the Company’s turnover rate has decreased since 2001. The 16.9% increase in general and administrative expenses in 2002, as compared to 2001, was directly related to annual
increases in pay rates, as well as an increase in personnel. However, as a percentage of net earned revenue, general and administrative expenses fell to 57.6% for 2002 as compared to 57.9% for 2001.
23
2001 Compared To 2000
Engineering fees of $75.7 million for 2001 increased 43.4% as compared to 2000. Higher volumes from renewed strength in the environmental services market and engineering
fees from new projects were the primary contributors to this increase during 2001. The two biggest contributors to this segment’s higher volumes and new projects were the acquisition of J. Powell & Associates, Inc. on January 1, 2001 and
the increase in the number of Federal jobs, specifically the work with the Federal Emergency Management Agency FEMA. The acquisition of J. Powell & Associates, Inc. contributed to more than 25% of the increase and FEMA contributed to
approximately 50% of the increase.
Reported net earned revenue was $59.7 million during 2001 as compared to $41.8
million in 2000, representing an increase of 42.8%. Net earned revenue increased at a slightly smaller percentage than engineering fees as a result of the percentage increase in direct expenses being greater than the percentage increase in
engineering fees. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses were $16.0 million during 2001
as compared to $11.0 million for 2000, representing an increase of 45.9%. Direct expenses, as a percentage of net earned revenue was 26.9% in 2001 as compared to 26.3% in 2000. The increase in direct expenses and direct expenses as a percentage of
net earned revenue is due to the increased use of sub-consultants as a result of the significant growth in engineering fees within this segment.
Reported operating income was $4.7 million in 2001 as compared to $1.9 million in 2000, representing an increase of 143.7%. Operating income as a percentage of net earned revenue was 7.8% in 2001 as
compared to 4.6% in 2000. The increase in operating income and operating income as a percentage of net earned revenue is due to the acquisition of J. Powell & Associates, Inc., internal growth and improved cost control within this segment. Costs
and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct salaries increased at a lesser rate than the increase in engineering fees due to an extremely competitive hiring atmosphere in the
industry, causing employees to be more efficient and productive. Additional labor required to support our internal growth was supplied through the use of sub-consultants, or direct expenses. General and administrative expenses increased primarily
due to annual increases in pay rates, increases in the accrual of insurance expenses related to our medical plan and increases in expenses related to office relocations and building/equipment costs associated with those moves. Additionally, due to
improved collections during fiscal year 2000, our total allowance for doubtful accounts decreased during that year approximately $2.6 million, from $4.9 million at September 30, 1999 to $2.3 million at September 30, 2000. This segment’s
allocation from the adjustment made during 2000 reduced general and administrative expenses by approximately $598,000 during fiscal year 2000. Operating income in 2000, without this adjustment, would have been $1.3 million instead of $1.9 million,
thereby making operating income as a percentage of net earned revenue 3.2% instead of 4.6% during 2000. Therefore, excluding the adjustment made in 2000, operating income as a percentage of net earned revenue increased from 3.2% in 2000 to 7.8% in
2001.
24
Construction Management
| |
|
2002
|
|
% Change
|
|
|
2001
|
|
% Change
|
|
|
2000
|
| |
|
(Dollars in Thousands) |
| Engineering Fees |
|
$ |
44,567 |
|
10.8 |
% |
|
$ |
40,228 |
|
17.8 |
% |
|
$ |
34,162 |
| Direct Expenses |
|
|
11,285 |
|
(0.2 |
) |
|
|
11,304 |
|
14.1 |
|
|
|
9,905 |
| Net Earned Revenue |
|
|
33,282 |
|
15.1 |
|
|
|
28,924 |
|
19.2 |
|
|
|
24,257 |
| Costs and Expenses |
|
|
29,705 |
|
16.2 |
|
|
|
25,560 |
|
23.2 |
|
|
|
20,750 |
| Operating Income |
|
$ |
3,577 |
|
6.3 |
% |
|
$ |
3,364 |
|
-4.1 |
% |
|
$ |
3,507 |
2002 Compared to 2001
Engineering fees of $44.6 million for 2002 increased 10.8% as compared to $40.2 million for 2001. Higher volumes from renewed strength in the construction services market
and engineering fees from new projects were the primary contributors to this increase during 2002.
Reported net
earned revenue was $33.3 million for 2002 as compared to $28.9 million for 2001, representing an increase of 15.1%. In 2002, net earned revenue increased at a greater percentage than engineering fees due to a 0.2% decrease in direct expenses. Direct
expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses, as a percentage of net earned revenue, were 33.9% for
2002 as compared to 39.1% for 2001. The decrease in direct expenses and direct expenses, as a percentage of net earned revenue, is due to the decreased use of sub-consultants as a result of increased hiring of technical staff and a significant
reduction in employee turnover.
Reported operating income was $3.6 million for 2002 as compared to $3.4 million
for 2001, representing an increase of 6.3%. Operating income, as a percentage of net earned revenue, was 10.7% for 2002 as compared to 11.6% for 2001. The increase in operating income is directly related to the increase in engineering fees as a
result of the internal growth within this segment. However, the decrease in operating income, as a percentage of net earned revenue, is a result of (1) a decrease in chargeability during 2002 as compared to 2001 and (2) a higher increase in general
and administrative costs than in net earned revenue during 2002 as compared to 2001. Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Although direct salaries increased for 2002,
they decreased as a percentage of net earned revenue compared to 2001 due to reduced chargeability among the technical staff. This contributed to increased indirect labor costs during 2002 for this segment. As a result, general and administrative
expenses, which include indirect labor, increased at a greater rate than net earned revenue for 2002. The increase in general and administrative expenses was also due in part to an increase in the percentage of the corporate allocation applied to
this segment. Prior to October 1, 2000, the construction management business segment never received a corporate allocation of administrative services because all of its’ administrative work was handled by its own administrative personnel. Since
the beginning of fiscal year 2001, the corporate administrative services function began performing administrative services for the construction management business segment, and therefore, began charging construction management with a corporate
allocation charge, just as the other three
25
services received. However, the transition was gradual and, as a result, the allocation was minimal
during fiscal 2001. In fiscal 2002, since all transitions were complete, the allocation percentage was increased toreflect a full allocation percentage, based on the size of this segment and the administrative support it requires. Annual increases
in pay rates were also contributors to increased general and administrative costs.
2001 Compared to 2000
Engineering fees of $40.2 million for 2001 increased 17.8% as compared to 2000. Higher volume from renewed strength in the construction
services market and engineering fees from new projects were the primary contributors to this increase during 2001.
Reported net earned revenue was $28.9 million during 2001 as compared to $24.3 million in 2000, representing an increase of 19.2%. Net earned revenue increased at a greater percentage than engineering fees during 2001 as a result of
the percentage increase in direct expenses being less than the percentage increase in engineering fees. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges,
and travel and subcontractor expenses. Direct expenses were $11.3 million during 2001 as compared to $9.9 million for the same period in 2000, representing an increase of 14.1%. The increase in direct expenses is directly related to the increase in
engineering fees. Direct expenses, as a percentage of net earned revenue, decreased from 40.8% in 2000 to 39.1% in 2001. The decrease in direct expenses, as a percentage of net earned revenue, is due to a decrease in sub-consultant expenses.
Reported operating income was $3.4 million in 2001 as compared to $3.5 million in 2000, representing a decrease
of 4.1%. Operating income as a percentage of net earned revenue was 11.6% in 2001 as compared to 14.5% in 2000. The decrease in operating income and operating income as a percentage of net earned revenue is due to an increase in costs and expenses
and an adjustment made during the third quarter of fiscal year 2000 to the total allowance for doubtful accounts. Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct salaries
increased due to additional staff required to support our internal growth. The increase in general and administrative expenses increased primarily because of a first time corporate allocation charge that the Construction segment received. Prior to
October 1, 2000, the construction management business segment never received a corporate allocation of administrative services because all of its’ administrative work was handled by its own administration personnel. However, since the beginning
of fiscal year 2001, the corporate administrative services function began performing administrative services for the construction management business segment, and therefore, began charging construction management with a corporate allocation charge,
just as the other three services receive. In addition, annual increases in pay rates, increases in the accrual of insurance expenses related to our medical plan and increases in expenses related to office relocations and building/equipment costs
associated with those moves contributed to higher administrative costs. Due to improved collections during fiscal year 2000, the total allowance for doubtful accounts decreased approximately $2.6 million, from $4.9 million at September 30, 1999 to
$2.3 million at September 30, 2000. This segment’s allocation from the adjustment in the allowance for doubtful accounts decreased general and administrative expenses by approximately $234,000 during fiscal year 2000. Operating income in 2000,
without this adjustment, would have been $3.3 million instead of $3.5 million, thereby making operating income as a percentage of net earned revenue 13.5% instead of 14.5% during 2000. Therefore, excluding the adjustment made in 2000, operating
income as a percentage of net earned revenue decreased from 13.5% in 2000 to 11.6% in 2001 due to the increased allocation mentioned above.
26
Consolidated Results
Other income (expenses):
Other income and expenses
primarily consists of interest and dividend income and interest expense. Total other expenses were $469,000, $556,000 and $2.0 million for fiscal years 2002, 2001 and 2000, respectively. The decrease in total other expense during 2002 is due to
decreased interest expense as a result of interest rates dropping during 2002. The decrease in total other expenses during 2001 is directly related to an investment loss that was recognized in 2000 on the sale of investments. At September 30, 2000,
the fair value of our investments in marketable securities, all of which were classified as available-for-sale, was approximately $451,000 as compared to approximately $3.9 million at September 30, 1999. This decrease was due to a significant
impairment in the value of the common stock that we hold in our portfolio, from $344,000 at September 30, 1999 to $41,000 at September 30, 2000, combined with the sale of over 90% of our mutual fund portfolio during 2000 at a loss of $981,000. There
were no factors present at September 30, 1999 indicating such a significant impairment of value for the mutual fund and common stock investments. For the mutual fund portfolio, the net asset value fluctuated during fiscal year 1999 due to the
volatility of the stock market. For the common stock investment, subsequent to September 30, 1999, the investee company reported that it would restate the prior year’s financial statements following an internal review of revenue recognition for
cost-of-completion contracts. The impairment of the common stock was recorded in fiscal year 2000, resulting in a cost basis that equals the fair market value of the investments at September 30, 2000.
Net Income
Net
income was $13.4 million, $12.5 million and $10.5 million for fiscal years 2002, 2001 and 2000, respectively. The percentage of net income to net earned revenue was 5.0%, 5.3% and 5.4% for fiscal years 2002, 2001 and 2000. The 7.0% increase in net
income in 2002, as compared to 2001, was a result of internal growth combined with the acquisition of J. Powell & Associates, Inc. in 2001. In addition, there was an overall improvement in efficiency related to direct labor, which is
substantiated by each direct labor hour bringing in more net profit during 2002 than in 2001. General and administrative expenses increased in part due to annual increases in pay rates. However, the biggest contributor to increases in general and
administrative expenses during 2002 were the high increases in healthcare costs. As a result, general and administrative expenses, as a percentage of net earned revenue, were 56.3% in 2002 as compared to 55.9% in 2001 and 56.2% in 2000.
The Company’s effective income tax rate is lower than the marginal federal rate primarily as a result of the
Company’s ability to utilize research and development tax credits.
The 19.5% increase in net income during
fiscal year 2001 was a result of (1) internal direct labor growth, (2) the acquisition of J. Powell & Associates, Inc. and (3) a research and development tax credit that reduced our provision for income taxes. The reduction in the provision for
income taxes was due to an estimated $1.9 million research and development tax credit, net of tax effects, that was received in 2001.
Liquidity and Capital Resources
Cash Flows From Operating Activities
Although net income of $13.4 million for 2002 increased 7.0% as compared to net income of $12.5 million for 2001, net cash provided by
operating activities totaled $15.6 million for 2002 as compared to $19.6 million for 2001. The decrease in net cash provided by operations was a result of the following: (1) a reduction
27
in the net deferred tax liabilities as a result of a reduction in the Company’s valuation allowance
for research and development tax credits, (2) an increase in other current assets as a result of a net tax receivable balance, (3) an increase in accounts payable that is consistent with the growth in operations and (3) an increase in unbilled fees,
offset by the decrease in accounts receivable. During 2002, unbilled fees increased $4.4 million from $25.8 million at September 30, 2001 to $30.1 million at September 30, 2002. The increase in unbilled fees during 2002 is related to the increase in
engineering fees and the decrease in accounts receivable. In addition, new electronic billing procedures implemented by FDOT on new contracts has temporarily delayed some of our FDOT billings by one to two months. This time delay is a result of
set-up procedures FDOT must under-go with each new contract. However, once the contract set-up is complete, billing will resume on a monthly basis, with payments expected within one month’s time.
In fiscal year 2001, net cash provided by operating activities totaled $19.6 million as compared to $26.9 million in 2000. The significant
decrease is primarily a result of the increase in accounts receivable and the decrease in accounts payable, offset by an increase in the provision for deferred income taxes. Fluctuations in accounts payable are related to direct expenses, where the
timing of payment to subcontractors is directly related to the collection of related receivables.
Net income of
$12.5 million for fiscal year 2001 was 19.5% greater than net income of $10.5 million for fiscal year 2000 due to the growth in engineering fees. The increase in engineering fees resulted from internal direct labor growth and the acquisition of J.
Powell & Associates, Inc. in California, in addition to improved general and administrative cost control. General and administrative expenses, as a percentage of net earned revenue, decreased from 56.2% in 2000 to 55.9% in 2001. General and
administrative expenses increased in part due to annual increases in pay rates and increases in healthcare costs.
Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not previously paid cash dividends on our common stock and have no present intention of paying cash
dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.
Approximately 90% of our revenues are billed on a monthly basis. The remaining amounts are billed when we reach certain stages of completion as specified in the contract. Payment terms for accounts receivable and unbilled fees, when
billed, are net 30 days. As mentioned previously, during 2002, unbilled fees increased $4.4 million from $25.8 million at September 30, 2001 to $30.1 million at September 30, 2002. The increase in unbilled fees during 2002 is related to the increase
in engineering fees and the decrease in accounts receivable. In addition, new electronic billing procedures implemented by FDOT on new contracts has temporarily delayed some of our FDOT billings by one to two months. During 2001, the unbilled fees
account decreased $2.0 million, from $27.8 million at September 30, 2000 to $25.8 million at September 30, 2001. The decrease is related to improved efficiencies in the Company’s billings, including electronic billings to some State and Federal
clients, which leads to quicker receipt of payments. The number of days outstanding for unbilled fees was 32 days, 30 days and 39 days at September 30, 2002, 2001 and 2000, respectively. By comparison, according to PSMJ Resources, Inc., the average
days outstanding for unbilled fees for design firms of comparable size was 29.7 days in 2002 and 27.5 days in 2001.
As a result of gross accounts receivable decreasing $1.8 million and bad debt expense decreasing during 2002, the allowance for doubtful accounts decreased from $2.2 million at September 30, 2001 to $1.4 million at September 30,
2002. The allowance for doubtful accounts also decreased during 2001, from $2.3 million at September 30, 2000 to $2.2 million at September 30, 2001. The decrease in the
28
allowance during 2001 was due to improved collections of our accounts receivable balances over 90
days,which decreased 23.4% from $6.4 million at September 30, 2000 to $4.9 million at September 30, 2001. The number of days sales outstanding for accounts receivable was approximately 49 days, 49 days and 53 days at September 30, 2002, 2001 and
2000, respectively. By comparison, according to PSMJ Resources, Inc. the average days sales accounts receivables for design firms of comparable size to us was 66.5 days in 2002 and 69.8 days in 2001.
Cash Flows from Investing Activities
Net cash used in investing activities was $5.8 million, $15.7 million and $12.8 million in fiscal years 2002, 2001 and 2000, respectively. Investing activities consist of fixed asset purchases, such as survey equipment, computer
equipment, furniture and leasehold improvements. During 2002, purchases of property and equipment was the primary contributor to cash used in investing activities, offset by the sale of marketable securities and property and equipment. The higher
use of cash for investing activities in 2001 and 2000 is due largely to the purchase of land and the construction of a new office building for our Orlando office in Maitland, Florida. In addition, during fiscal year 2001, the Company acquired J.
Powell & Associates, Inc. in California. For more information regarding the investing activity of this acquisition, see Note 11, Supplemental Cash Flow Information, of the Notes to Financial Statements in Item 8 of this Form 10-K.
Cash Flows from Financing Activities
Net cash used in financing activities for fiscal year 2002 was $6.8 million, as compared to $4.1 million for fiscal year 2001. The increase in net cash used is primarily attributable to the re-purchase
of common stock from retired directors, combined with a reduction in the bank overdraft, offset by an increase in the net borrowings under the line of credit. Net cash used in financing activities for fiscal year 2001 was $4.1 million, as compared
to net cash used in financing activities of $13.9 million in fiscal year 2000. The change is attributable to increased borrowings related to the financing of our new office building in Maitland, Florida, increased borrowings under the line of credit
and increased proceeds from the sale of stock.
Capital Resources
On June 30, 2002, the Company entered into an amended and restated line of credit agreement with a bank. The amended and restated line of credit replaced a line of credit
previously held with two banks and increased the availability of funds from $37 million to $40 million. The expiration date on the new line of credit is June 30, 2005. The interest rate (2.31%, 3.13% and 7.12% at September 30, 2002, 2001 and 2000,
respectively) on our revolving line of credit ranges from LIBOR plus 50 basis points to prime minus 125 basis points if the Company’s funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus
100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. The Company mitigates interest rate risk by continually monitoring interest rates and electing the lower of the LIBOR or prime rate option available under the line of credit
or term loan. As of September 30, 2002, the fair value of the debt is consistent with the outstanding principal balance. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios. The line of credit is
collateralized by substantially all of our assets.
As of September 30, 2002, we had $12.1 million outstanding
under the line of credit, which accrued interest at an effective rate of 2.31% at September 30, 2002. By comparison, on September 30, 2001, we had no amounts outstanding under the line of credit. The increase in the line of credit during
29
2002 was directly related to the financing of our new office building in Maitland, Florida and the reduction in accounts payable.
On March 19, 2001, we entered into a mortgage note of $9.0 million due in monthly installments starting on April 16, 2001, with
interest. Interest on the mortgage is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The effective interest rate on the mortgage
note was 2.46% and 3.28% for the fiscal years ended September 30, 2002 and 2001, respectively. The mortgage note is collateralized by our office building located in Maitland, Florida.
On July 30, 1999, we consolidated our term loans. Although the term loan matured on July 31, 2002, the remaining obligation of $2.0 million was satisfied in full on July 1,
2002. The principal was amortized in annual installments of $2.0 million. Interest on the term loan was LIBOR plus 75 basis points. The effective interest rate on the term loan was 2.59% at June 30, 2002 as compared to 3.38% at September 30, 2001.
Our capital expenditures are generally for purchases of property and equipment. We spent $6.3 million, $14.8
million and $15.8 million on such expenditures in fiscal years 2002, 2001 and 2000, respectively. The capital expenditures in fiscal year 2002 consisted of equipment, furniture and leasehold improvement purchases, while the capital expenditures in
fiscal year 2001 were a result of all of these plus construction costs for the new Orlando office building, in addition to several office relocations. Higher levels of capital expenditures in fiscal year 2000 were a result of construction costs for
the new Maitland office building.
We believe that our existing financial resources, together with our cash flow
from operations and availability under our line of credit, will provide sufficient capital to fund our operations for fiscal year 2003.
Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income.
Inflation
The rate of inflation has not had a material impact on our operations. Moreover,
if inflation remains at its recent levels, it is not expected to have a material impact on our operations for the foreseeable future.
Significant Accounting Pronouncements
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 (“SFAS No. 133”). SFAS No. 133 established methods of accounting
for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. We adopted the new standard during fiscal year
2001 and there were no adjustments upon adoption.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”). SAB 101 summarizes certain areas of the Staff’s views in applying generally accepted accounting principles to revenue recognition in
financial
30
statements. We have adopted SAB 101 for each period presented in the accompanying statement of operations. There are no significant adjustments
posted as a result of the adoption of SAB 101.
In June 2001, the FASB issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations completed after June 30, 2001. SFAS No. 141 also specifies the types of
acquired intangible assets that are required to be recognized and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill. SFAS No. 142 will require that goodwill no longer be amortized,
but instead tested for impairment at least annually. SFAS No. 142 will also require recognized intangible assets be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment in accordance with the
Standard until its life is determined to no longer be indefinite. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001, while the provisions of SFAS No. 142 are effective for fiscal years beginning after December 15,
2001, and are effective for interim periods in the initial year of adoption. The Company is currently analyzing the effect the adoption of these standards will have on its financial statements.
In July 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years beginning after
December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and establishes a single accounting model, based on the framework established in SFAS No. 121, for long lived assets to
be disposed of by sale. The Company does not expect the adoption of this statement to have a material impact on the Company’s results of operations or its financial position.
Quantitative and Qualitative Disclosures
about Market Risk
We believe that our exposure to market risks is minimal. We do not hold market-risk sensitive instruments for trading purposes.
We entered into one derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate risk. Both at inception of the hedge and on an ongoing basis, we assume there is no ineffectiveness in the hedging
relationship of interest rate risk involving interest-bearing debt and the interest-rate swap. The effectiveness of the hedge is evaluated on a quarterly basis. We believe this instrument will be highly effective in the hedging of cash flows. We
hold no other financial instruments or derivative commodity instruments to hedge any market risk, nor do we currently plan to employ them in the near future.
The interest rate on the Company’s revolving line of credit ranges from LIBOR plus 50 basis points to prime minus 125 basis points if the Company’s funded debt coverage ratio is less than 2.5
(2.31%, 3.13% and 7.12% at September 30, 2002, 2001 and 2000, respectively). The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. The interest rate on the
Company’s mortgage note is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points (2.46% and 3.28% at September 30, 2002 and 2001, respectively). The Company mitigates interest rate risk by
continually monitoring interest rates and
31
electing the lower of the LIBOR or prime rate option available under the line of credit. As of September 30, 2002, the fair value of the debt is
consistent with the outstanding principal balance.
Because the interest rates under the Company’s revolving
line of credit and mortgage note are variable, to the extent that the Company has borrowings outstanding, there may be market risk relating to the amount of such borrowings, however, our exposure is minimal due to the short-term nature of these
borrowings.
32
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Certified Public
Accountants
To the Board of Directors and
Stockholders of The PBSJ Corporation
In our opinion, the consolidated financial statements, listed in the index appearing under Item 15(a)(1) on page 50, present fairly, in all material respects, the financial position of The PBSJ Corporation and its
subsidiaries (the “Company”) at September 30, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2002, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
December 13, 2002
Miami, Florida
33
THE PBSJ CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| |
|
Years ended September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| Assets
|
|
|
|
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
2,967 |
|
|
$ |
— |
|
| Marketable securities |
|
|
432 |
|
|
|
686 |
|
| Accounts receivable, net |
|
|
45,275 |
|
|
|
46,195 |
|
| Unbilled fees, net |
|
|
30,149 |
|
|
|
25,776 |
|
| Other current assets |
|
|
4,826 |
|
|
|
1,564 |
|
| |
|
|
|
|
|
|
|
|
| Total current assets |
|
|
83,649 |
|
|
|
74,221 |
|
| Property and equipment, net |
|
|
32,601 |
|
|
|
35,564 |
|
| Cash surrender value of life insurance |
|
|
6,622 |
|
|
|
6,209 |
|
| Deferred income taxes |
|
|
6,141 |
|
|
|
5,028 |
|
| Other assets |
|
|
7,390 |
|
|
|
7,982 |
|
| |
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
136,403 |
|
|
$ |
129,004 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
|
24,793 |
|
|
|
22,830 |
|
| Current portion of long-term debt |
|
|
991 |
|
|
|
2,992 |
|
| Accrued vacation |
|
|
6,565 |
|
|
|
5,851 |
|
| Deferred income taxes |
|
|
13,652 |
|
|
|
16,022 |
|
| Bank overdrafts |
|
|
— |
|
|
|
1,773 |
|
| |
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
46,001 |
|
|
|
49,468 |
|
| Long-term debt, less current portion |
|
|
20,996 |
|
|
|
9,929 |
|
| Deferred compensation |
|
|
5,932 |
|
|
|
6,595 |
|
| Other liabilities |
|
|
4,727 |
|
|
|
4,308 |
|
| |
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
77,656 |
|
|
|
70,300 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ Equity: |
|
|
|
|
|
|
|
|
| Redeemable common stock, par value $0.00067, 15,000,000 shares authorized, 8,346,524 and 9,265,721 shares issued and
outstanding at September 30, 2002 and 2001, respectively. Redeemable common stock had a redemption value of $118,521 and $99,329 at September 30, 2002 and 2001, respectively. |
|
|
6 |
|
|
|
6 |
|
| Retained earnings |
|
|
60,981 |
|
|
|
60,635 |
|
| Accumulated other comprehensive loss |
|
|
(501 |
) |
|
|
(283 |
) |
| Unearned compensation |
|
|
(1,739 |
) |
|
|
(1,654 |
) |
| |
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
58,747 |
|
|
|
58,704 |
|
| |
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
136,403 |
|
|
$ |
129,004 |
|
| |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
34
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
| |
|
Years ended September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| STATEMENT OF OPERATIONS DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
| Earned revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Engineering fees |
|
$ |
344,461 |
|
|
$ |
314,106 |
|
|
$ |
262,525 |
|
| Direct expenses |
|
|
78,135 |
|
|
|
77,890 |
|
|
|
65,695 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earned revenue |
|
|
266,326 |
|
|
|
236,216 |
|
|
|
196,830 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Direct salaries |
|
|
96,668 |
|
|
|
86,332 |
|
|
|
73,093 |
|
| General and administrative expenses |
|
|
150,036 |
|
|
|
131,985 |
|
|
|
110,655 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total costs and expenses |
|
|
246,704 |
|
|
|
218,317 |
|
|
|
183,748 |
|
| Operating income |
|
|
19,622 |
|
|
|
17,899 |
|
|
|
13,082 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
(1,109 |
) |
|
|
(1,211 |
) |
|
|
(1,173 |
) |
| Other, net |
|
|
640 |
|
|
|
655 |
|
|
|
(830 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total other expenses |
|
|
(469 |
) |
|
|
(556 |
) |
|
|
(2,003 |
) |
| Income before income taxes |
|
|
19,153 |
|
|
|
17,343 |
|
|
|
11,079 |
|
| Provision for income taxes |
|
|
5,745 |
|
|
|
4,808 |
|
|
|
589 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
13,408 |
|
|
$ |
12,535 |
|
|
$ |
10,490 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
35
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(in thousands, except share data)
| |
|
Redeemable Common Stock
|
|
|
Additional Paid-in Capital
|
|
|
Retained Earnings
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
Unearned Compensation
|
|
|
Total Stockholders’ Equity
|
|
| |
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
| Balance at September 30, 1999 |
|
10,366,805 |
|
|
$ |
7 |
|
|
$ |
8,145 |
|
|
$ |
38,481 |
|
|
$ |
(421 |
) |
|
$ |
(942 |
) |
|
$ |
45,270 |
|
| Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
10,490 |
|
|
|
|
|
|
|
|
|
|
|
10,490 |
|
| Unrealized gain on investments (net of tax of $291) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
457 |
|
|
|
|
|
|
|
457 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,947 |
|
| Sale of stock |
|
110,225 |
|
|
|
1 |
|
|
|
861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
862 |
|
| Purchase of stock |
|
(1,022,110 |
) |
|
|
(2 |
) |
|
|
(7,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,922 |
) |
| Issuance of restricted stock net of amortization and cancellations |
|
24,830 |
|
|
|
|
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
(49 |
) |
|
|
41 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2000 |
|
9,479,750 |
|
|
$ |
6 |
|
|
$ |
1,176 |
|
|
$ |
48,971 |
|
|
$ |
36 |
|
|
$ |
(991 |
) |
|
$ |
49,198 |
|
| Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
12,535 |
|
|
|
|
|
|
|
|
|
|
|
12,535 |
|
| Unrealized loss on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
(31 |
) |
| Unrealized loss on derivative (net of tax of $201) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288 |
) |
|
|
|
|
|
|
(288 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,216 |
|
| Sale of stock |
|
353,385 |
|
|
|
|
|
|
|
3,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,788 |
|
| Purchase of stock |
|
(647,488 |
) |
|
|
|
|
|
|
(5,919 |
) |
|
|
(871 |
) |
|
|
|
|
|
|
|
|
|
|
(6,790 |
) |
| Issuance of restricted stock net of amortization and cancellations |
|
80,074 |
|
|
|
|
|
|
|
955 |
|
|
|
|
|
|
|
|
|
|
|
(663 |
) |
|
|
292 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2001 |
|
9,265,721 |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
60,635 |
|
|
$ |
(283 |
) |
|
$ |
(1,654 |
) |
|
$ |
58,704 |
|
| Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
13,408 |
|
|
|
|
|
|
|
|
|
|
|
13,408 |
|
| Unrealized gain on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
| Unrealized loss on derivative (net of tax of $117) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(229 |
) |
|
|
|
|
|
|
(229 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,190 |
|
| Sale of stock |
|
295,596 |
|
|
|
|
|
|
|
4,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,197 |
|
| Purchase of stock |
|
(1,250,697 |
) |
|
|
|
|
|
|
(4,693 |
) |
|
|
(13,062 |
) |
|
|
|
|
|
|
|
|
|
|
(17,755 |
) |
| Issuance of restricted stock net of amortization and cancellations |
|
35,904 |
|
|
|
|
|
|
|
496 |
|
|
|
|
|
|
|
|
|
|
|
(85 |
) |
|
|
411 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2002 |
|
8,346,524 |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
60,981 |
|
|
$ |
(501 |
) |
|
$ |
(1,739 |
) |
|
$ |
58,747 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
NOTE: All common stock is considered redeemable.
36
THE PBSJ CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| |
|
Years ended September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
13,408 |
|
|
$ |
12,535 |
|
|
$ |
10,490 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Realized loss on sale of investments |
|
|
— |
|
|
|
— |
|
|
|
981 |
|
| Other |
|
|
132 |
|
|
|
(527 |
) |
|
|
(203 |
) |
| Depreciation and amortization |
|
|
9,359 |
|
|
|
8,715 |
|
|
|
7,916 |
|
| Provision for bad debt and unbillable amounts |
|
|
351 |
|
|
|
411 |
|
|
|
294 |
|
| Provision for deferred income taxes |
|
|
(3,367 |
) |
|
|
767 |
|
|
|
(2,875 |
) |
| Provision for deferred compensation |
|
|
(663 |
) |
|
|
680 |
|
|
|
825 |
|
| Change in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
| Decrease (increase) in accounts receivable |
|
|
569 |
|
|
|
(7.393 |
) |
|
|
(1,374 |
) |
| (Increase) decrease in unbilled fees |
|
|
(4,373 |
) |
|
|
2,029 |
|
|
|
(2,450 |
) |
| (Increase) decrease in other current assets |
|
|
(3,262 |
) |
|
|
1,499 |
|
|
|
(1,510 |
) |
| Decrease (increase) in other assets |
|
|
120 |
|
|
|
41 |
|
|
|
(1,143 |
) |
| Increase (decrease) in accounts payable and accrued expenses |
|
|
2,499 |
|
|
|
(1,773 |
) |
|
|
15,594 |
|
| Increase in accrued vacation |
|
|
714 |
|
|
|
1,288 |
|
|
|
868 |
|
| Increase (decrease) in other liabilities |
|
|
73 |
|
|
|
1,343 |
|
|
|
(474 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operating activities |
|
|
15,560 |
|
|
|
19,615 |
|
|
|
26,939 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from sale of marketable securities |
|
|
266 |
|
|
|
266 |
|
|
|
2,940 |
|
| Acquisitions, net of cash acquired |
|
|
— |
|
|
|
(984 |
) |
|
|
— |
|
| Investment in life insurance policies |
|
|
(413 |
) |
|
|
(566 |
) |
|
|
— |
|
| Sale of property and equipment |
|
|
628 |
|
|
|
360 |
|
|
|
— |
|
| Purchase of property and equipment |
|
|
(6,320 |
) |
|
|
(14,768 |
) |
|
|
(15,769 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(5,839 |
) |
|
|
(15,692 |
) |
|
|
(12,829 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| (Decrease) increase in bank overdraft |
|
|
(1,773 |
) |
|
|
118 |
|
|
|
(2,168 |
) |
| Borrowings under line of credit |
|
|
194,919 |
|
|
|
171,156 |
|
|
|
102,348 |
|
| Principal payments under line of credit |
|
|
(182,859 |
) |
|
|
(178,914 |
) |
|
|
(102,310 |
) |
| Principal payments under notes and mortgage payable |
|
|
(2,947 |
) |
|
|
(2,454 |
) |
|
|
(4,747 |
) |
| Proceeds from issuance of note payable |
|
|
— |
|
|
|
9,000 |
|
|
|
— |
|
| Proceeds from sale of common stock |
|
|
3,661 |
|
|
|
3,788 |
|
|
|
862 |
|
| Purchase of common stock |
|
|
(17,755 |
) |
|
|
(6,790 |
) |
|
|
(7,922 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in financing activities |
|
|
(6,754 |
) |
|
|
(4,096 |
) |
|
|
(13,937 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
|
2,967 |
|
|
|
(173 |
) |
|
|
173 |
|
| Cash and cash equivalents at beginning of year |
|
|
— |
|
|
|
173 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of year |
|
$ |
2,967 |
|
|
$ |
— |
|
|
$ |
173 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
37
NOTES TO FINANCIAL STATEMENTS
1. |
|
Organization and Summary of Significant Accounting Policies: |
|
|
Organization and Principles of Consolidation |
|
|
The consolidated financial statements include the accounts of The PBSJ Corporation and its wholly-owned subsidiaries, Post, Buckley, Schuh & Jernigan, Inc.,
a Florida corporation (“PBS&J”), PBS&J Construction Services, Inc., Post, Buckley International, Inc., Post Buckley de Mexico, S.A. de C.V., Seminole Development Corporation and HOH Associates, Inc. (collectively the
“Company”). All material intercompany transactions and accounts have been eliminated in the accompanying consolidated financial statements. |
|
|
In the course of providing its services, the Company routinely incurs direct expenses such as sub-contracts for services. In addition, the Company also includes
pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and sub-contractor costs when the Company determines that it is responsible for engineering specification, procurement and management of such cost
components on behalf of the customer. These direct expenses are principally passed through to the Company’s clients with minimal or no mark-up and, in accordance with industry practice, are included in the Company’s gross revenues.
Accordingly, the Company also reports net earned revenue, which is gross revenue less direct expenses. For cost-plus and time and material contracts, the Company reports fees earned based on actual labor multiplied by contractual rates or
multipliers. For fixed-price contracts, the Company reports fees earned on the percentage of completion basis, which includes revenue on the basis of costs incurred to date as a percentage of the total estimated costs.
|
|
|
Anticipated losses are recognized in total in the period in which they became determinable. Accounts receivable is presented net of an allowance for doubtful
accounts of $1.4 million and $2.2 million at September 30, 2002 and 2001, respectively. Unbilled fees are presented net of an allowance for estimated unbillable amounts of $0 and $611,000 at September 30, 2002 and 2001, respectively.
|
|
|
The Company has authorized 15,000,000 shares of common stock (par value $.00067). |
|
|
On November 21, 2000, the Company’s Board of Directors approved a five-for-one stock split that was effective on February 1, 2001. The stock split resulted
in an increase in the number of authorized shares from 3,000,000 to 15,000,000. In addition, the adjusted par value and market price of the Company’s Common Stock for the fiscal year ended September 30, 2001 was $.00067 and $10.72,
respectively. |
|
|
The by-laws of the Company require the Company to redeem, at fair market value, common stock held by shareholders who terminate employment with the Company.
Other than agreements with certain retired Directors as noted the in Proxy, as of September 30, 2002 and 2001, there is no outstanding redeemable common stock relating to employees no longer employed by the Company. The redemption value of all
outstanding shares was $118.5 million and $99.3 million at September 30, 2002 and 2001, respectively. |
|
|
Cash and Cash Equivalents |
|
|
Cash equivalents consist of all highly liquid investments with an original maturity of three months or less from their dates of purchase. Cash equivalents
consist primarily of money market accounts. |
38
Income Taxes
The Company uses the liability method of accounting for income taxes. The liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between tax bases and financial reporting bases of assets and liabilities. Such differences relate, primarily, to the Company’s use of the accrual method of accounting for financial reporting purposes, and the cash method
of accounting for tax purposes.
Basic and Diluted Earnings Per Share
In February of 1997, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings
per Share. SFAS No. 128 does not require presentation of earnings per share (“EPS”) for entities not currently selling their securities in a public market or planning to sell their securities in a public market in the future. Since the
Company’s securities are not currently publicly traded and are not currently in the process of being registered to be publicly traded in the future, no presentation has been made.
Marketable Securities
Marketable securities consist of equity
securities and mutual funds that are considered available-for-sale and are recorded at fair value. Changes in unrealized gains and losses for available-for-sale securities are charged or credited as a component of accumulated other comprehensive
income, net of tax. A decline in the fair value of an available-for-sale security below cost that is deemed other than temporary is charged to earnings. Investment security transactions are recorded on a trade date basis. The cost basis of
investments sold is determined by the specific identification method
Fair Value of Financial
Instruments
The fair value of the Company’s cash, accounts receivables, unbilled fees and trade accounts payable approximates book value due
to the short-term maturities of these instruments. The carrying amount of marketable securities is based on quoted market prices at the reporting date for those investments and approximates fair value. The fair value of the Company’s debt
approximates the carrying value, which was based on similar rates, terms and maturities of existing debt as compared to current market conditions.
In order to better manage its exposure to interest rate risk on its debt, the Company entered into an interest rate swap agreement. Such swap agreement, with a notional amount of $9.0 million, converts
the Company’s variable interest rate on its’ $9.0 million mortgage to a fixed interest rate, thereby limiting the variance amount paid or received by the Company. Under the terms of the SWAP, the Company pays 6.28% and receives the 30-day
LIBOR. The fair value of such derivative instrument was $835,000 and $489,000 at September 30, 2002 and 2001, respectively. The fair value is recorded in other liabilities and as an unrealized net loss in accumulated other comprehensive loss.
39
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the net assets of acquired businesses, and is currently being amortized on a weighted-average basis over 10 to 20
years. Amortization expense relating to goodwill amounted to $472,000, $439,000 and $656,000 for the years ended September 30, 2002, 2001 and 2000, respectively. The Company evaluates the realizability of goodwill based upon undiscounted forecasted
operating earnings over the remaining amortization period for each investment having a significant goodwill balance. If an impairment in the value of the goodwill were to occur, the Company would reflect the impairment through a reduction in the
carrying value of the goodwill based upon the estimated fair value of the investment. Management believes that no impairment of goodwill exists at September 30, 2002.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations completed after June 30, 2001. SFAS No. 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those
acquired intangible assets that are required to be included in goodwill. SFAS No. 142 will require that goodwill no longer be amortized, but instead tested for impairment at least annually. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001, while the provisions of SFAS No. 142 are effective for fiscal years beginning after December 15, 2001, and are effective for interim periods in the initial year of adoption. The Company is currently analyzing the
effect the adoption of these standards will have on its financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 the reported amounts of revenues and expenses during the reporting period. Such
estimates include the allowance for doubtful accounts, unbilled fees, and reserve for litigation. Actual results could differ from those estimates.
Stock Based Compensation
Non-vested, restricted stock awarded to certain employees is
measured at the estimated fair value of the stock at the grant date.
Property and Equipment
Property and equipment are stated at cost. Major renewals and improvements are capitalized, while repairs and maintenance are expensed as incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the terms of the leases or their estimated useful lives. Cost and accumulated depreciation of property and equipment retired or sold are eliminated from the accounts at the
time of retirement or sale and the resulting gain or loss is recorded in income.
Concentrations of Credit
Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, accounts
receivable and unbilled fees. The Company places its cash with high credit quality financial institutions. At times, such amounts may be in excess of the FDIC insurance limits.
40
Work performed for governmental entities accounted for approximately 77%, 71% and
69% of engineering fees for the years ended September 30, 2002, 2001 and 2000. For the years ended September 30, 2002, 2001 and 2000, approximately 18%, 19% and 17%, respectively, of engineering fees was derived from various districts of the Florida
Department of Transportation (FDOT) under numerous contracts. While the loss of any individual contract would not have a material adverse effect on our results of operations and would not adversely impact the Company’s ability to continue work
under other contracts with the FDOT, the loss of all the FDOT contracts could have a material adverse effect on results of operations. Ongoing credit evaluations of customers are performed and generally no collateral is required. The Company
provides an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Actual losses have historically been within management’s expectations and estimates.
Comprehensive Income
In 1999, the Company implemented SFAS No. 130, Reporting Comprehensive Income, which establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose
financial statements. This statement requires that an enterprise (a) classifyitems of other comprehensive income, such as unrealized holding gains and losses on investments, by their nature in the financial statements and(b) display the accumulated
balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The componentsof accumulated other comprehensive loss was as follows for the years ended September 30,
2002, 2001 and 2000 (dollars in thousands):
| |
|
September 30
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Unrealized gain (loss) on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
| Holding gain (loss) arising during period, net of tax |
|
$ |
11 |
|
|
$ |
(31 |
) |
|
$ |
(524 |
) |
| Reclassification adjustment, net of tax |
|
|
— |
|
|
|
— |
|
|
|
981 |
|
| Holding loss on interest rate swap agreement, net of tax |
|
|
(229 |
) |
|
|
(288 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) gain recognized in other comprehensive income, net of tax |
|
$ |
(218 |
) |
|
$ |
(319 |
) |
|
$ |
457 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations completed after June 30, 2001. SFAS No. 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those
acquired intangible assets that are required to be included in goodwill. SFAS No. 142 will require that goodwill no longer be amortized, but instead tested for impairment at least annually. SFAS No. 142 will also require recognized intangible assets
be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Any recognized intangible
asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment in accordance with the Standard until its life is determined to no longer be indefinite. SFAS No. 141 is effective for all business
combinations initiated after June 30, 2001, while the provisions of SFAS No. 142 are effective for fiscal years beginning after December 15, 2001, and are effective for interim periods in the initial year of adoption. The Company expects to adopt
these standards starting with its’ fiscal year 2003, beginning October 1, 2002, and does not anticipate the adoption of these standards having a materially negative effect on its financial statements.
In July 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective for
fiscal years beginning after December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and
41
establishes a single accounting model, based on the framework established in SFAS No. 121, for long lived assets to be
disposed of by sale. The Company does not expect the adoption of this statement to have a material impact on the Company’s results of operations or its financial position.
2. |
|
Marketable Securities: |
At September 30, 2002 and 2001, the Company held investments in marketable securities classified as available-for-sale, which consisted of mutual funds and equity securities. Available-for-sale securities at September 30,
2002 and 2001 consisted of the following (dollars in thousands):
| |
|
Cost
|
|
Fair Value
|
|
Unrealized (Loss) /
Gain
|
|
| September 30, 2002 |
|
|
|
|
|
|
|
|
|
|
| Mutual funds |
|
$ |
374 |
|
$ |
428 |
|
$ |
54 |
|
| Common stock |
|
|
41 |
|
|
4 |
|
|
(37 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
415 |
|
$ |
432 |
|
$ |
17 |
|
| |
|
|
|
|
|
|
|
|
|
|
| September 30, 2001 |
|
|
|
|
|
|
|
|
|
|
| Mutual funds |
|
$ |
640 |
|
$ |
671 |
|
$ |
31 |
|
| Common stock |
|
|
41 |
|
|
15 |
|
|
(26 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
681 |
|
$ |
686 |
|
$ |
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
3. |
|
Property and Equipment: |
Property and equipment consisted of the following (dollars in thousands):
| |
|
Estimated Useful
Lives
|
|
September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| Land |
|
— |
|
$ |
2,226 |
|
|
$ |
2,226 |
|
| Building and building improvements |
|
10 to 40 years |
|
|
14,371 |
|
|
|
14,845 |
|
| Furniture and equipment |
|
3 to 7 years |
|
|
36,033 |
|
|
|
34,933 |
|
| Computer equipment under capital leases |
|
3 years |
|
|
1,786 |
|
|
|
1,786 |
|
| Vehicles |
|
3 years |
|
|
2,492 |
|
|
|
3,017 |
|
| Leasehold improvements |
|
10 years |
|
|
8,107 |
|
|
|
8,218 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
65,015 |
|
|
|
65,025 |
|
| Less accumulated depreciation and amortization |
|
|
|
|
(32,414 |
) |
|
|
(29,461 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
$ |
32,601 |
|
|
$ |
35,564 |
|
| |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense relating to property and
equipment amounted to $8.6 million, $8.3 million and $7.9 million for the years ended September 30, 2002, 2001 and 2000, respectively. Our capital expenditures amounted to $6.3 million, $14.8 million and $15.8 million during fiscal years 2002, 2001
and 2000, respectively. Capital expenditures during 2002 consisted of fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements. The capital expenditures during fiscal years 2001 and 2000 included
leasehold improvements related to several office relocations, information technology purchases and construction costs for the new Orlando office building. Accumulated depreciation related to the computer equipment amounted to $1.3 million and $1.0
million at September 30, 2002 and 2001, respectively.
42
The Company acquired certain assets from J. Powell & Associates, Inc. on January 1, 2001 for $2.2 million less the amount of J. Powell’s accrued vacation at January 1, 2001. The assets acquired include fixed assets, goodwill
of the trade name and deposits on leased properties. The acquisition of these assets contributes to the Company’s goal of increasing its presence in the Western region. J. Powell’s areas of specialty included civil engineering,
environmental engineering and construction management in both the private and public sectors. The acquisition is accounted for using the purchase method of accounting, and the results of operations are included from the respective date of
acquisition, which is January 1, 2001.
The Company acquired the stock of Durham Technologies, Inc. (DTI) on December 1st, 2002 for $1.5 million. The acquisition of DTI contributes to the Company’s goal of enhancing its presence in the growing Emergency Management Services market. DTI’s area of specialty includes risk management
and risk assessment for public sector clients, primarily Federal. The acquisition is accounted for using the purchase method of accounting, and the results of operations are included from the respective date of acquisition, which is December 1,
2002.
43
Provision(benefit) for income taxes consisted of the following:
| |
|
Years Ended September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
2000
|
|
| Current |
|
$ |
9,112 |
|
|
$ |
4,041 |
|
$ |
3,464 |
|
| Deferred |
|
|
(3,367 |
) |
|
|
767 |
|
|
(2,875 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Total provision |
|
$ |
5,745 |
|
|
$ |
4,808 |
|
$ |
589 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Included in the 2002, 2001 and 2000 provision(benefit) for income
taxes are deferred state taxes of ($519), $85 and $261, respectively. The current portion of state taxes was $945, $985 and $838 for the years ended September 30, 2002, 2001 and 2000, respectively. A reconciliation of the income tax provision to
taxes computed at the U.S. federal statutory rate is as follows:
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| U.S. Statutory Rate |
|
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
| Federal Tax Credits |
|
(11.6 |
) |
|
(11.1 |
) |
|
(35.5 |
) |
| State Taxes, net of Federal Tax Benefit |
|
3.9 |
|
|
3.9 |
|
|
3.9 |
|
| Non-deductible Expenses |
|
2.6 |
|
|
1.9 |
|
|
3.9 |
|
| Other |
|
0.1 |
|
|
(2.0 |
) |
|
(2.0 |
) |
| |
|
|
|
|
|
|
|
|
|
| Effective tax rate |
|
30.0 |
% |
|
27.7 |
% |
|
5.3 |
% |
| |
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities consisted of the following:
| |
|
September 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| Deferred tax liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
$ |
17,612 |
|
|
$ |
17,970 |
|
| Unbilled fees |
|
|
11,728 |
|
|
|
10,028 |
|
| Depreciation |
|
|
1,083 |
|
|
|
2,122 |
|
| Other |
|
|
982 |
|
|
|
799 |
|
| |
|
|
|
|
|
|
|
|
| Gross deferred tax liabilities |
|
|
31,405 |
|
|
|
30,919 |
|
| |
|
|
|
|
|
|
|
|
| Deferred tax assets: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
|
(13,506 |
) |
|
|
(13,979 |
) |
| Compensation |
|
|
(428 |
) |
|
|
(338 |
) |
| Federal tax credit carry-forwards |
|
|
(7,887 |
) |
|
|
(6,277 |
) |
| Deferred credits |
|
|
(2,308 |
) |
|
|
(2,565 |
) |
| Other liabilities |
|
|
(1,839 |
) |
|
|
(1,676 |
) |
| |
|
|
|
|
|
|
|
|
| Gross deferred tax assets |
|
|
(25,968 |
) |
|
|
(24,835 |
) |
| Valuation allowance of deferred tax asset |
|
|
2,074 |
|
|
|
4,910 |
|
| |
|
|
|
|
|
|
|
|
| Net deferred tax assets |
|
|
(23,894 |
) |
|
|
(19,925 |
) |
| |
|
|
|
|
|
|
|
|
| Net deferred tax liabilities |
|
$ |
7,511 |
|
|
$ |
10,994 |
|
| |
|
|
|
|
|
|
|
|
44
The Company has research and development tax credit carry-forwards of
approximately $7.8 million as of September 30, 2002, which expire beginning 2017 through 2022. Valuation allowances of $2.1 million and $4.8 million at September 30, 2002 and 2001, respectively, have been provided for tax credit carry-forwards that,
in the opinion of management, may not be realized.
7. |
|
Deferred Compensation Plans: |
The Company maintains deferred compensation/consulting plans, which cover certain present key officers and employees and provides for payments upon retirement, death, or disability. The contracts fixed
a minimum level for retirement benefits to be paid to participants based on age at retirement with the Company. The deferred compensation plans are funded through life insurance plans and are being provided for currently. Total annual cash surrender
value increases for the years ended September 30, 2002, 2001 and 2000 for the plans amounted to $413,000, $1.1 million and $260,000, respectively. Total compensation expense, included in general and administrative expenses, relating to the plans
amounted to $1.1 million, $1.0 million and $959,000 in fiscal years 2002, 2001 and 2000, respectively.
8. |
|
Employee Benefit Plan: |
The Company has a qualified contributory profit-sharing and employee stock ownership plan (the “Plan”) providing benefits for all eligible employees. During 1999, the Plan was amended to include an employer
matching contribution up to 3% of the participants’ eligible compensation. Prior to 1999, the Plan included an employer matching contribution, equal to 1% of the participants’ eligible compensation. The Company’s matching contribution
was $3.0 million, $2.6 million and $2.4 million for the years ended September 30, 2002, 2001 and 2000, respectively. In addition, the Company accrued an additional $1.2 million, $1.0 million and $700,000 at September 30, 2002, 2001 and 2000,
respectively, as discretionary contributions to the profit sharing plan.
Restricted stock is offered to existing employees, which are subject to restrictions on transfer, and risk of forfeiture until earned by continued employment. The restricted stock is subject to total forfeiture if the
employee ceases to be employed prior to the maturity date of the restricted stock, except in certain limited circumstances described in the individual restricted stock award agreement. During the restriction period, holders have the rights of
shareholders, including the right to vote, but cannot transfer ownership. Restricted stock is recorded at fair value on the date of issuance. The stock vests over the service period, which is usually 5 years. The issuance of restricted stock gives
rise to unearned compensation that is amortized over the vesting period. Through September 30, 2002 and 2001, 617,493 and 577,014 shares of restricted stock have been issued, of which 136,045 and 118,675 shares had vested or had been canceled.
Unearned compensation is shown as a reduction of stockholders’ equity. The total amount of compensation expense recognized under these agreements during 2002, 2001 and 2000 was $370,000, $246,000 and $181,000 respectively.
45
10. |
|
Long Term Debt (dollars in thousands): |
| |
|
September 30, (in
thousands)
|
| |
|
2002
|
|
2001
|
| Line of credit unused availability of $27,940, and $37,000 at September 30, 2002 and 2001, respectively.
|
|
$ |
12,060 |
|
$ |
— |
| |
| Mortgage note payable due in monthly installments starting on April 16, 2001, with interest, collateralized by real
property; unpaid principal due March 16, 2011. Interest at LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. (2.46% and 3.28% at September 30, 2002 and September 30, 2001,
respectively.) |
|
|
8,645 |
|
|
8,887 |
| |
| Term loan due in annual installments of $2,000 through July 31, 2002. Interest at LIBOR plus 75 basis points or prime
minus 50 basis points (3.38% at September 30, 2001.) |
|
|
— |
|
|
2,000 |
| |
| Note payable to J. Powell & Associates, Inc. due in three annual installments of $333 with interest of 7.12% through
October 17, 2003. |
|
|
667 |
|
|
1,000 |
| |
| Note payable to current stockholder due in semi-annual installments with interest of 7.25% through January of
2002. |
|
|
— |
|
|
47 |
| |
| Capital lease of equipment, interest accrues at 8.3%, collateralized by certain equipment, due in monthly payments of
principal and interest of $36. |
|
|
615 |
|
|
987 |
| |
|
|
|
|
|
|
| |
|
|
21,987 |
|
|
12,921 |
| Less current portion |
|
|
991 |
|
|
2,992 |
| |
|
|
|
|
|
|
| |
| Long-term debt |
|
$ |
20,996 |
|
$ |
9,929 |
| |
|
|
|
|
|
|
Scheduled maturities are as follows (dollars in thousands):
2003 – $991; 2004 – $802; 2005 – $12,316; 2006 – $256 and 2007 and thereafter – $7,623.
On June 30, 2002, the Company entered into an amended and restated line of credit agreement with a bank. The amended and restated line of credit replaced a line
of credit previously held with two banks and increased the availability of funds from $37 million to $40 million. The expiration date on the new line of credit is June 30, 2005. The interest rate (2.31% and 3.13% at September 30, 2002 and 2001,
respectively) ranges from LIBOR plus 50 basis points to prime minus 125 basis points if the Company’s funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if the
Company’s funded debt coverage ratio is between 2.5 to 3.0. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios.
46
11. |
|
Commitments and Contingencies: |
The Company is obligated under various non-cancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options, escalation clauses and certain other operating
expenses of the properties. In the normal course of business, leases that expire are expected to be renewed or replaced by leases for other properties. As of September 30, 2002, the future minimum annual rental commitments under operating and
capital leases are as follows (dollars in thousands):
| Year ending September 30
|
|
Capitalized Leases
|
|
Operating Leases
|
| 2003 |
|
$ |
438 |
|
$ |
11,289 |
| 2004 |
|
|
219 |
|
|
7,907 |
| 2005 |
|
|
— |
|
|
6,519 |
| 2006 |
|
|
— |
|
|
5,043 |
| 2007 and thereafter |
|
|
— |
|
|
3,422 |
| |
|
|
|
|
|
|
| Total minimum lease payments |
|
|
657 |
|
$ |
34,180 |
| |
|
|
|
|
|
|
| Less: amount representing interest |
|
|
42 |
|
|
|
| |
|
|
|
|
|
|
| Present value of minimum lease payments |
|
$ |
615 |
|
|
|
| |
|
|
|
|
|
|
Total rent expense included in general and administrative expenses
was $11.9 million, $10.8 million and $10.7 million for fiscal years ended 2002, 2001 and 2000, respectively.
The
Company is involved in legal actions arising in the ordinary course of business. The Company maintains a full range of insurance coverage, including worker’s compensation, general and professional liability (including pollution liability) and
property coverage. The Company’s insurance policies may offset the amount of loss exposure from legal actions.
As of September 30, 2002, there were approximately 32 cases pending against the Company, where plaintiffs allege damages resulting from the Company’s engineering services. The plaintiffs’ allegations of liability in those
cases seek recovery for damages caused by the Company based on various theories of negligence, contributory negligence or breach of contract.
As of September 30, 2002, the Company had a reserve of approximately $3.9 million for all potential and existing claims, lawsuits and pending proceedings that, in management’s opinion, are
probable. The Company expects to pay these liabilities over the next one to three years. Management is of the opinion that the liabilities ultimately resulting from such existing and other pending proceedings, lawsuits and claims should not
materially affect the Company’s financial position, results of operations or cash flows.
47
12. |
|
Supplemental Cash Flow Information: |
| |
|
Years ended September 30, (in
thousands)
|
| |
|
2002
|
|
2001
|
|
|
2000
|
| Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
| Interest |
|
$ |
1,153 |
|
$ |
1,151 |
|
|
$ |
1,092 |
| Income taxes |
|
|
6,775 |
|
|
3,814 |
|
|
|
929 |
| Details of acquisition: |
|
|
|
|
|
|
|
|
|
|
| Fair value of assets acquired |
|
$ |
— |
|
$ |
244 |
|
|
$ |
— |
| Goodwill |
|
|
— |
|
|
1,960 |
|
|
|
— |
| Liabilities assumed |
|
|
— |
|
|
(220 |
) |
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
| Cash paid |
|
|
— |
|
|
1,984 |
|
|
|
— |
| Less: note payable and restricted stock to seller |
|
|
— |
|
|
(1,000 |
) |
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
| Net cash paid for acquisitions |
|
$ |
— |
|
$ |
984 |
|
|
$ |
— |
| |
|
|
|
|
|
|
|
|
|
|
Financial information relating to the Company’s operations by service is as follows:
| Year Ended September 30, 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Transportation |
|
|
Construction |
|
|
Civil |
|
|
|
Environmental |
|
|
Total |
| Engineering fees |
|
$ |
143,655 |
|
$ |
44,567 |
|
$ |
65,115 |
|
|
$ |
91,124 |
|
$ |
344,461 |
| Net earned revenue |
|
|
108,304 |
|
|
33,282 |
|
|
52,571 |
|
|
|
72,169 |
|
|
266,326 |
| Operating income (loss) |
|
|
11,610 |
|
|
3,577 |
|
|
(1,394 |
) |
|
|
5,829 |
|
|
19,622 |
| Depreciation and amortization |
|
|
3,344 |
|
|
727 |
|
|
2,703 |
|
|
|
2,585 |
|
|
9,359 |
| Total assets |
|
|
56,886 |
|
|
17,648 |
|
|
25,785 |
|
|
|
36,084 |
|
|
136,403 |
| Capital expenditures |
|
|
2,390 |
|
|
707 |
|
|
1,484 |
|
|
|
1,739 |
|
|
6,320 |
| |
| Year Ended September 30, 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Transportation |
|
|
Construction |
|
|
Civil |
|
|
|
Environmental |
|
|
Total |
| Engineering fees |
|
$ |
128,098 |
|
$ |
40,228 |
|
$ |
70,104 |
|
|
$ |
75,676 |
|
$ |
314,106 |
| Net earned revenue |
|
|
91,560 |
|
|
28,924 |
|
|
56,082 |
|
|
|
59,650 |
|
|
236,216 |
| Operating income |
|
|
9,766 |
|
|
3,364 |
|
|
95 |
|
|
|
4,674 |
|
|
17,899 |
| Depreciation and amortization |
|
|
3,554 |
|
|
1,116 |
|
|
1,945 |
|
|
|
2,100 |
|
|
8,715 |
| Total assets |
|
|
52,610 |
|
|
16,522 |
|
|
28,792 |
|
|
|
31,080 |
|
|
129,004 |
| Capital expenditures |
|
|
6,023 |
|
|
1,891 |
|
|
3,296 |
|
|
|
3,558 |
|
|
14,768 |
| |
| Year Ended September 30, 2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Transportation |
|
|
Construction |
|
|
Civil |
|
|
|
Environmental |
|
|
Total |
| Engineering fees |
|
$ |
106,580 |
|
$ |
34,162 |
|
$ |
69,026 |
|
|
$ |
52,757 |
|
$ |
262,525 |
| Net earned revenue |
|
|
77,183 |
|
|
24,257 |
|
|
53,620 |
|
|
|
41,770 |
|
|
196,830 |
| Operating income (loss) |
|
|
8,551 |
|
|
3,507 |
|
|
(894 |
) |
|
|
1,918 |
|
|
13,082 |
| Depreciation and amortization |
|
|
3,214 |
|
|
1,030 |
|
|
2,081 |
|
|
|
1,591 |
|
|
7,916 |
| Total assets |
|
|
48,842 |
|
|
15,655 |
|
|
31,632 |
|
|
|
24,177 |
|
|
120,306 |
| Capital expenditures |
|
|
6,402 |
|
|
2,052 |
|
|
4,146 |
|
|
|
3,169 |
|
|
15,769 |
48
14. |
|
Allowance for Doubtful Accounts and Estimatable Unbillable Amounts |
The activity in the allowance for doubtful and estimatable unbillable amounts were as follows (dollars in thousands):
| DESCRIPTION
|
|
BALANCE AT BEGINNING OF YEAR
|
|
ADDITIONS CHARGED TO COSTS AND EXPENSES
|
|
DEDUCTIONS
|
|
|
BALANCE AT END OF YEAR
|
| YEAR ENDED SEPTEMBER 30, 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance for doubtful accounts |
|
$ |
2,207 |
|
$ |
351 |
|
$ |
(1,204 |
) |
|
$ |
1,354 |
| Allowance for estimatable unbillable amounts |
|
|
611 |
|
|
0 |
|
|
(611 |
) |
|
|
0 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
2,818 |
|
$ |
351 |
|
$ |
(1,815 |
) |
|
$ |
1,354 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| YEAR ENDED SEPTEMBER 30, 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance for doubtful accounts |
|
$ |
2,296 |
|
$ |
411 |
|
$ |
(500 |
) |
|
$ |
2,207 |
| Allowance for estimatable unbillable amounts |
|
|
611 |
|
|
0 |
|
|
0 |
|
|
|
611 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
2,907 |
|
$ |
411 |
|
$ |
(500 |
) |
|
$ |
2,818 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| YEAR ENDED SEPTEMBER 30, 2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance for doubtful accounts |
|
$ |
4,952 |
|
$ |
294 |
|
$ |
(2,950 |
) |
|
$ |
2,296 |
| Allowance for estimatable unbillable amounts |
|
|
611 |
|
|
0 |
|
|
0 |
|
|
|
611 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
5,563 |
|
$ |
294 |
|
$ |
(2,950 |
) |
|
$ |
2,907 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Quarterly Financial Data (Unaudited)
| |
|
2002
|
|
2001
|
| |
|
9/30
|
|
6/30
|
|
3/31
|
|
12/31
|
|
9/30
|
|
6/30
|
|
3/31
|
|
12/31
|
| |
|
(dollars in thousands) |
| Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Engineering fees |
|
$ |
89,868 |
|
$ |
86,419 |
|
$ |
84,620 |
|
$ |
83,554 |
|
$ |
86,482 |
|
$ |
83,494 |
|
$ |
78,514 |
|
$ |
65,616 |
| Net earned revenues |
|
|
67,970 |
|
|
68,374 |
|
|
66,650 |
|
|
63,332 |
|
|
64,064 |
|
|
62,707 |
|
|
59,917 |
|
|
49,528 |
| Net income |
|
|
2,978 |
|
|
3,920 |
|
|
3,436 |
|
|
3,074 |
|
|
4,148 |
|
|
3,250 |
|
|
3,791 |
|
|
1,346 |
49
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
PART III
ITEM 10. |
|
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
Incorporated by reference from the Proxy Statement for the 2003 Annual Meeting of Shareholders to be held January 31, 2003, a copy of which will be filed with the Securities and
Exchange Commission.
Incorporated by reference from the Proxy Statement for the 2003 Annual Meeting of Shareholders to be held January 31, 2003, a copy of which will be filed with the Securities and
Exchange Commission.
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Incorporated by reference from the Proxy Statement for the 2003 Annual Meeting of Shareholders to be held January 31, 2003, a copy of which will be filed with the Securities and
Exchange Commission.
ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Incorporated by reference from the Proxy Statement for the 2003 Annual Meeting of Shareholders to be held January 31, 2003, a copy of which will be filed with the Securities and
Exchange Commission.
ITEM 14.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures:
John B. Zumwalt, III, our Chief Executive Officer, and Richard A. Wickett, our Chief Financial Officer, have
performed an evaluation of the Company's disclosure controls and procedures, as that term is defined in Rule 13a-14 (c) of the Securities Exchange Act of 1934, as mentioned ("the Exchange Act"), within 90 days of the date of this report and each has
concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time period
specified by the Securities and Exchange Commission's rules and regulations.
Changes in internal controls:
No significant changes in the Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses, were made as a result of the evaluation.
PART IV
ITEM 15. |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K |
| |
(a) |
|
The following is a list of financial information filed as a part of this Report: |
| |
(1) |
|
Consolidated Financial Statements - The following financial statements of The PBSJ Corporation and its subsidiaries are contained in Item 8 of this Form 10-K:
|
| |
1. |
|
Report of PricewaterhouseCoopers LLP, Independent Certified Public Accountants. |
| |
2. |
|
Consolidated Balance Sheets at September 30, 2002 and 2001. |
| |
3. |
|
Consolidated Statements of Operations for each of the three years in the period ended September 30, 2002. |
50
| |
4. |
|
Consolidated Statement of Stockholders’ Equity at September 30, 2002, 2001 and 2000. |
| |
5. |
|
Consolidated Statement of Cash Flows for each of the three years in the period ended September 30, 2002. |
| |
6. |
|
Notes to Consolidated Financial Statements. |
(2) Financial Statement Schedules - The financial statement schedule information is included as part of the Notes to Consolidated Financial Statements contained in Item 8 of this
Form 10-K.
(3) Exhibits including those incorporated by reference:
| Exhibit Number
|
|
|
|
Description
|
| |
| 3.1 |
|
– |
|
Articles of Incorporation, as amended (*) |
| |
| 3.2 |
|
– |
|
Amended and Restated Bylaws (*) |
| |
| 4.1 |
|
– |
|
Form of Specimen Stock Certificate (*) |
| |
| 10.1 |
|
– |
|
The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust, amended and restated, dated February 22, 2002. (**) (****) |
| |
| 10.1a |
|
– |
|
Promissory Note previously filed as Exhibit 10.1 in Form 10Q dated May 15, 2001; Promissory note, dated March 19, 2001, between Suntrust Bank, a Georgia
corporation, and Post, Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary |
| |
| 10.2 |
|
– |
|
Supplemental Income Plan effective as of January 12, 1988 (*) |
| |
| 10.2a |
|
– |
|
Mortgage Security Agreement previously filed as Exhibit 10.2 in Form 10Q dated May 15, 2001; Agreement, dated March 19, 2001, between Suntrust Bank, a Georgia
corporation, and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary. |
| |
| 10.3 |
|
– |
|
Consulting/Supplemental Retirement/Death Benefits Agreement, dated November 6, 1987, between the Registrant and H. Michael Dye, as amended on October 16, 1989,
March 1, 1993, February 6, 1995, May 19, 1998 and November 22, 1999 (*) |
| |
| 10.3a |
|
– |
|
ISDA Master Agreement previously filed as Exhibit 10.3 in Form 10Q dated May 15, 2001; Agreement, dated March 8, 2001, between Suntrust Bank and Post Buckley,
Schuh & Jernigan, Inc., the Registrant’s subsidiary. |
| |
| 10.4 |
|
– |
|
Supplemental Retirement/Death Benefits Agreement, dated December 17, 1987, between the Registrant and Robert J. Paulsen (*) |
| |
| 10.4a |
|
– |
|
Schedule to the ISDA Master Agreement previously filed as Exhibit 10.4 in Form 10Q dated May 15, 2001; Agreement, dated March 8, 2001, between Suntrust Bank and
Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary. |
| |
| 10.5 |
|
– |
|
Supplemental Income Agreement, dated as of July 29, 1996, between the Registrant and Robert J. Paulsen (*) |
| |
| 10.5a |
|
– |
|
Confirmation of Interest Rate Transaction previously filed as Exhibit 10.5 in Form 10Q dated May 15, 2001; Confirmation, dated March 9, 2001, between Suntrust
Bank and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary. |
| |
| 10.6 |
|
– |
|
Employment/Retirement Benefits Agreement, dated February 15, 1999, between the |
51
| Exhibit Number
|
|
|
|
Description
|
| |
| |
|
|
|
Registrant and William W. Randolph (*) |
| |
| 10.7 |
|
– |
|
Supplemental Retirement/Death Benefits Agreement, dated December 17, 1987, between the Registrant and Richard A. Wickett, as amended on April 27, 1989, May 19,
1998 and November 22, 1999 (*) |
| |
| 10.8 |
|
– |
|
Supplemental Retirement/Death Benefits Agreement dated December 17, 1987, between the Registrant and John B. Zumwalt, III, as amended on May 19, 1998 and
November 22, 1999 (*) |
| |
| 10.9 |
|
– |
|
Agreement, dated as of April 1, 1993, between the Registrant and John B. Zumwalt, III (*) |
| |
| 10.10 |
|
– |
|
Split-Dollar Life Insurance Agreement dated February 1, 1999, by and between The Randolph Insurance Trust and the Registrant (*) |
| |
| 10.11 |
|
– |
|
Credit Agreement, dated as of June 28, 1996, by and among Nationsbank, N.A., Suntrust Bank, Miami, N.A., Post, Buckley, Schuh and Jernigan, Inc., The PBSJ
Corporation, and the subsidiaries named therein, as amended on July 3, 1997, June 30, 1999 and June 30, 2002. (*) (****) |
| |
| 10.12 |
|
– |
|
Lease Agreement, dated as of March 25, 1998, by and between Post, Buckley, Schuh & Jernigan, Inc. and Highwoods/Florida Holdings L.P. as successor in
interest to Cypress-Tampa II L.P., as amended on May 26, 1998, December 26, 1998, November 29, 1999 and March 1, 2000 (*) |
| |
| 10.13 |
|
– |
|
Lease Agreement, dated as of November 23, 1999, by and between Post, Buckley, Schuh & Jernigan, Inc. and 1560 N. Orange Ltd. (*) |
| |
| 10.14 |
|
– |
|
The PBSJ Corporation Stock Ownership Plan (**) |
| |
| 21 |
|
– |
|
Subsidiaries (*) |
| |
| 27.1 |
|
– |
|
Financial Data Schedule - September 30, 2000 (***) |
| |
| 99.1 |
|
– |
|
Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(*****) |
| |
| 99.2 |
|
– |
|
Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(*****) |
(*) |
|
Previously filed with the Registration Statement on Form 10 filed with the Commission on June 27, 2000. |
(**) |
|
Previously filed with the Amended Registration Statement on Form 10-A filed with the Commission on September 26, 2000. |
(****) |
|
Previously filed with the Form 10-Q filed with the Commission on August 14, 2002. |
52
|
|
Report filed on Form 8-K for February 14, 2002- |
| |
|
|
Item 5, Other events: On January 18, 2002, at the Company’s annual stockholders’ meeting, the Company’s nominated Board of Directors was
officially approved for 2002. The new Chairman for 2002 is Mr. Richard A. Wickett, the Company’s current Chief Financial Officer and Treasurer. During 2001, Mr. Wickett held the positions of Vice Chairman, Chief Financial Officer, Treasurer and
Senior Vice President. The Company’s new Vice Chairman for 2002 is Mr. John B. Zumwalt, the Company’s current President and Chief Executive Officer. During 2001, Mr. Zumwalt held the positions of President and Chief Operating Officer. The
Company’s Chairman and Chief Executive Officer during 2001, Mr. H. Michael Dye, will remain on the Board of Directors serving as a Vice President as he enters into retirement. |
53
Pursuant to the requirements of Section 13 or 15(d) 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.
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The PBSJ Corporation |
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| Date: December 19, 2002 |
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By: |
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/s/ John B. Zumwalt, III
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John B. Zumwalt, III Vice Chairman and Chief Executive Officer (Principal Executive Officer) |
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| Date: December 19, 2002 |
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By: |
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/s/ Richard A. Wickett
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Richard A. Wickett Chairman and Chief Financial Officer (Principal Financial and Accounting Officer) |
54
I, John B. Zumwalt, III, certify that:
1. I have reviewed this annual report on Form 10-K of The PBSJ Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements,
and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The
registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: December 19,
2002
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| By: |
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/s/ John B. Zumwalt, III
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John B. Zumwalt, III |
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Vice Chairman and |
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Chief Executive Officer |
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(Principal Executive Officer) |
55
I, Richard A. Wickett, certify that:
1. I have reviewed this annual report on Form 10-K of The PBSJ Corporation;
2. Based on
my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other
certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: December 19, 2002
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| By: |
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/s/ Richard A. Wickett
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Richard A. Wickett |
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Chairman and |
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Chief Financial Officer |
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(Principal Financial and |
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Accounting Officer) |
56
POWER OF ATTORNEY
The undersigned directors and officers of The PBSJ Corporation hereby constitute and appoint John B. Zumwalt, III and Richard A. Wickett and each of them with full power to
act without the other and with the power of substitution, our attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Form 10-K and any and all amendments thereto and to file the same, with all
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm all that such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities indicated on December 19, 2002.
| Signature
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Capacity
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Date
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| /s/Richard A. Wickett
Richard A. Wickett |
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Chairman, Chief Financial Officer and Treasurer |
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December 19, 2002 |
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| /s/John B. Zumwalt, III
John B. Zumwalt, III |
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Vice Chairman, President and Chief Executive Officer |
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December 19, 2002 |
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| /s/Robert J. Paulsen
Robert J. Paulsen |
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Executive Vice President and Secretary |
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December 19, 2002 |
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| /s/Todd J. Kenner
Todd J. Kenner |
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Vice President |
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December 19, 2002 |
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| /s/John S. Shearer
John S. Shearer |
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Vice President |
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December 19, 2002 |
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| /s/H. Michael Dye
H. Michael Dye |
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Vice President |
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December 19, 2002 |
57
Exhibit Index
Exhibit Description
| Exhibit Number
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| 99.1 – |
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Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(****) |
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| 99.2 – |
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Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(****) |