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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
______ EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 1995
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 0-15067
GROUNDWATER TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 02-0324047
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 River Ridge Drive, Norwood, MA 02062
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 769-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
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At September 7, 1995 the registrant had issued and outstanding an aggregate of
6,906,392 shares of its common stock.
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GROUNDWATER TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
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Item 1 Financial Statements
Consolidated Balance Sheets
July 29, 1995 (Unaudited) and April 29, 1995........................................... 1-2
Consolidated Statements of Operations
Thirteen weeks ended July 29, 1995 (Unaudited) and July 30, 1994 (Unaudited)........... 3
Consolidated Statements of Cash Flows
Thirteen weeks ended July 29, 1995 (Unaudited) and July 30, 1994 (Unaudited)........... 4
Notes to Consolidated Financial Statements (Unaudited).................................. 5
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations... 6-8
PART II OTHER INFORMATION
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Item 6 Exhibits and Reports on Form 8-K........................................................ 9
Signatures.............................................................................. 10
</TABLE>
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Item 1. Financial Statements
GROUNDWATER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 29, April 29,
1995 1995
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,692 $ 10,747
Marketable securities 18,351 15,173
Accounts receivable, less allowances of $3,084 at July 29, 1995
and $3,100 at April 29, 1995 45,779 46,139
Unbilled revenues 19,313 21,172
Other current assets 7,044 7,072
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Total Current Assets 96,179 100,303
Property, plant and equipment, net 13,245 14,193
Other assets, net of accumulated amortization of $400 at July 29, 1995
and $339 at April 29, 1995 7,104 6,249
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$116,528 $120,745
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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GROUNDWATER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
July 29, April 29,
1995 1995
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(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 7,768 $ 10,989
Accrued salaries and benefits 4,009 4,441
Other accrued liabilities 7,689 8,050
Income taxes payable 24 495
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Total Current Liabilities 19,490 23,975
Stockholders' Equity
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value, 25,000,000 authorized, 8,078,748
issued at July 29, 1995 and at April 29, 1995, respectively 80 80
Capital in excess of par value 54,315 54,315
Retained earnings 61,475 60,980
Treasury stock, at cost, 1,172,356 shares at July 29, 1995 and
1,145,116 at April 29, 1995 (17,681) (17,353)
Cumulative currency translation adjustment (1,151) (1,252)
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Total Stockholders' Equity 97,038 96,770
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$116,528 $120,745
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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GROUNDWATER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen weeks ended
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July 29, July 30,
1995 1994
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<S> <C> <C>
Gross revenue $46,063 $ 45,911
Cost of subcontracted services 15,010 15,366
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Net revenue 31,053 30,545
Cost of net revenue 21,280 19,056
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Gross profit 9,773 11,489
Selling, general and administrative expenses (9,557) (10,026)
Licenses and other income 153 108
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Income before investment and other income 369 1,571
Investment and other income, net 313 312
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Income before provision for income taxes 682 1,883
Provision for income taxes 270 744
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Net income $ 412 $ 1,139
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Earnings per common share $.06 $.16
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Shares used to compute earnings per common share 6,932 7,179
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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GROUNDWATER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Thirteen weeks ended
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July 29, July 30,
1995 1994
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<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 412 $ 1,139
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,859 2,048
Deferred income taxes (260) 339
Changes in operating assets and liabilities:
Accounts receivable 2,219 (7,507)
Other current assets 288 52
Other assets (126) --
Accounts payable (3,221) (721)
Accrued salaries and benefits (432) 949
Other accrued liabilities (365) (1,521)
Income taxes payable (471) 566
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Net Cash used in Operating Activities (97) (4,656)
Cash Flows From Investing Activities
Expenditures for property, plant and equipment (1,097) (1,165)
Purchase of marketable securities (3,003) (450)
Sale of marketable securities -- 4,798
Other (343) (1,365)
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Net Cash (used in) provided by Investing Activities (4,443) 1,818
Cash Flows From Financing Activities
Purchase of treasury stock (893) (203)
Proceeds of stock under employee stock purchase plans 277 205
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Net Cash (used in) provided by Financing Activities (616) 2
Effect of Exchange Rate Changes on Cash and Cash Equivalents 101 93
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Decrease in Cash and Cash Equivalents (5,055) (2,743)
Cash and Cash Equivalents at Beginning of Fiscal Year 10,747 4,909
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Cash and Cash Equivalents at End of Period $ 5,692 $ 2,166
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</TABLE>
Non-Cash Investing Activities:
Reissued $180,000 of Treasury Stock related to a prior acquisition.
The accompanying notes are an integral part of the financial statements.
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GROUNDWATER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1. Consolidated Financial Statements
The consolidated balance sheet as of July 29, 1995 and the related
consolidated statements of operations for the thirteen weeks ended July 29, 1995
and July 30, 1994, and the related consolidated statements of cash flows for the
thirteen weeks ended July 29, 1995 and July 30, 1994, have been prepared by the
Company without audit. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations and changes in
cash flows at July 29, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested this information be read in
conjunction with the Annual Report on Form 10-K for fiscal year ended April 29,
1995 (SEC File No. 0-15067). The results of operations for the period ended
July 29, 1995 are not necessarily indicative of the operating results for the
year.
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GROUNDWATER TECHNOLOGY, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
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The Company's services are primarily related to the assessment and remediation
of contaminated soil and groundwater for customers in a variety of industries
and for federal and state governments. The demand for the Company's services
is a result of governmental regulation and enforcement related to hazardous
contaminants in the environment and public awareness of environmental issues.
The Company, in the course of providing its services, routinely subcontracts
for certain specialized services. These costs are passed through to customers
and, in accordance with industry practice, are included in gross revenue.
Because subcontractor services can vary significantly from project to project,
changes in gross revenue may not be truly indicative of business activity or
trends. Accordingly, the Company views net revenue, which excludes the cost of
services performed by subcontractors, as a more meaningful measure of business
performance.
Net revenue includes fees billed for services provided directly by the
Company, fees charged by the Company for arranging and managing subcontractor
services, and fees for laboratory services. Cost of net revenue includes
professional salaries incurred in rendering services to customers, other direct
labor, purchases of equipment and materials and certain direct and indirect
overhead costs. Selling, general and administrative expenses include management
salaries, facility costs, and clerical and administrative overhead. License and
other income includes license and royalty income earned on the Company's
intellectual property and income from direct equity investments in the
environmental industry.
The Company's operating results may fluctuate from quarter to quarter.
Factors influencing such variations include: spending decisions by major
customers, delays in the release of committed projects, modifications of
delivery orders issued by contracting government entities, and holidays and
vacation time which limit the amount of time Company personnel and subcontracted
services have in the field.
The Company ended the first quarter with 59 consulting offices and four
laboratories in 31 states and 6 foreign countries. Additionally, the Company's
joint venture with a German company had offices in Germany, Austria and Hungary.
Total employees as of July 29, 1995 was 1,568 as compared to 1,652 as of April
29, 1995 and 1,587 as of July 30, 1994.
In the first quarter of fiscal 1996, the Company determined that a captive
laboratory does not provide a strategic advantage to either the Company or GTEL,
the analytical laboratory business, and is pursuing divestiture options. The
Company has no specific plan for divesting the laboratory at this time.
Gross revenue increased to $46.1 million for the first quarter of fiscal 1996,
compared to gross revenue of $45.9 million for the same period last year and
decreased 4% from $47.8 million in the fourth quarter of fiscal 1995. Net
revenue increased 2% to $31.1 million for the three month period, compared to
$30.5 million for the corresponding period last year, and decreased 6% from
$32.9 million in the previous quarter. Laboratory revenues were down 16% from
the first quarter of fiscal 1995 primarily due to the decrease in lab sample
volume. Overall billable hours for the Company increased 5% as compared to the
corresponding period last year but decreased 5% from the fourth quarter of
fiscal 1995. The Company experienced a decrease in work from petroleum
customers in the first quarter of fiscal 1996, which primarily reflected the
funding reductions in reimbursement programs in Michigan and Florida during the
first quarter. The Company continued to see increases in work received from
commercial/industrial customers as well as government customers.
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Gross profit for the three months ended July 29, 1995 was $9.8 million, a
decrease of 15% compared to $11.5 million for the same quarter last year and a
decrease o f 18% compared to $12.0 million for the previous quarter. As a
percentage of net revenue, gross profit for the three months ended July 29, 1995
was 32% compared to 38% for the same period in fiscal 1995 and 37% for the
previous quarter. Headcount increased faster than the growth in revenues in the
first quarter of fiscal 1996 as a result of acquisitions in fiscal 1995.
Increased labor and benefit expenses in the first quarter of fiscal 1996
accounted for approximately $2.0 million of the $2.2 million increase in cost of
net revenue, as compared to the same quarter of the prior year. Headcount
adjustments were made in the first quarter of fiscal 1996 but underutilized
labor salaries and approximately $350,000 in severance costs during the quarter
reduced gross profits. The reclassification of approximately $390,000 of
certain overhead costs from selling, general and administrative expenses related
to the costs of subcontracted services also negatively impacted gross profits.
Gross profit was also impacted by the performance of GTEL, the analytical
laboratory business. GTEL incurred a loss of $290,000 in the first quarter of
fiscal 1996 compared to a profit of $244,000 in the same period last year.
Selling, general and administrative expenses were $9.6 million, or 31% of net
revenue, in the three months ended July 29, 1995 compared to $10.0 million, or
33% of net revenue, in the same period of the prior year. In fiscal 1996, the
Company has reclassified approximately $390,000 of certain costs from selling,
general and administrative expenses to costs of subcontracted services to more
appropriately classify overhead costs related to the processing and management
of rebillable activities. In addition, approximately $128,000 of severance
costs related to the downsizing of headcount in the first quarter of fiscal 1996
increased operating expenses.
License and other income was $153,000 in the first quarter ended July 29, 1995
compared to $108,000 for the same period of the prior year. Other income in the
first quarter of fiscal 1996 was positively impacted by a $40,000 increase in
royalty income from Kurita Water Industries Ltd., of Japan, in connection with
an exclusive technology license agreement.
Investment and other income, net, was $313,000 in the first quarter of fiscal
1996 compared to $312,000 in the first quarter of fiscal 1995.
The Company's effective tax rate was 39.5% for both the three months ended
July 29, 1995 and the three months ended July 30, 1994.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents decreased $5.1 million in the three months ending
July 29, 1995 from $10.7 million at April 29, 1995. Marketable securities
increased $3.2 million during the same period. At July 29, 1995, the Company's
primary source of liquidity was $24.0 million in cash, cash equivalents and
marketable securities. The Company has no long-term borrowings.
The Company used $97,000 in net cash to fund operating activities during the
first three months of fiscal 1996. The use of cash to fund operating activities
was principally due to the payout of accrued liabilities related to routine
activities. The decrease in accounts receivable balances primarily reflects the
decrease in revenues, as well as increased management of the collection of
receivables. The Company used approximately $4.7 million to fund operating
activities for the same period in fiscal 1995. The use of cash to fund
operating activities for the period ended July 30, 1994 was primarily due to the
increase in accounts receivables balances. At July 30, 1994, the centralization
of invoicing, as well as credit and collection activities, while resulting in a
more efficient and effective process long term, negatively impacted the timing
of collections of the accounts receivable balances. At July 29, 1995, the
Company's working capital increased to $76.7 million from $76.3 million at April
29, 1995. Total assets decreased to $116.5 million at July 29, 1995 from $120.7
million at April 29, 1995.
Cash flows from investing activities were impacted by approximately $1.0
million of expenditures in property, plant and equipment that were made to
upgrade the Company's computer, laboratory and rental equipment. The Company had
no material commitments for capital expenditures as of July 29, 1995 and
estimates spending for the remaining year to be approximately $4.5 million. The
Company used cash to finance the purchase of $3.0 million of marketable
securities during the three months ended July 29, 1995.
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Cash flows from financing activities were primarily impacted by the purchase
of treasury stock. In August 1993, the Board of Directors authorized the
Company to repurchase an aggregate of 2,173,500 shares of its common stock from
time to time through open market purchases or privately negotiated transactions.
The Company used cash to finance the purchase of 70,000 shares during the three
months ended July 29, 1995.
Funding requirements for operations and repurchases of the Company's common
stock are expected to be met from existing cash, cash equivalents, marketable
securities and cash generated from operations. The Company believes that cash
provided from these sources will be sufficient to meet its operating
requirements for the near term.
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GROUNDWATER TECHNOLOGY, INC.
PART II
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a.) No exhibits are required to be filed herewith.
b.) On a Form 8-K filed July 26, 1995 the Registrant reported a change in
certifying accountants from Ernst & Young L.L.P. to Coopers &
Lybrand L.L.P.
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GROUNDWATER TECHNOLOGY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROUNDWATER TECHNOLOGY, INC.
Date: September 11, 1995
/s/ Walter C. Barber
--------------------------------------
Walter C. Barber
President and Chief Executive Officer
Date: September 11, 1995
/s/ Robert E. Sliney, Jr.
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Robert E. Sliney, Jr.
Vice President, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 1Q for
period ended July 29, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-27-1996
<PERIOD-START> APR-30-1995
<PERIOD-END> JUL-29-1995
<CASH> 5,692
<SECURITIES> 18,351
<RECEIVABLES> 45,779
<ALLOWANCES> 3,084
<INVENTORY> 0
<CURRENT-ASSETS> 96,179
<PP&E> 13,245
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,528
<CURRENT-LIABILITIES> 19,490
<BONDS> 0
<COMMON> 80
0
0
<OTHER-SE> 97,038
<TOTAL-LIABILITY-AND-EQUITY> 116,528
<SALES> 46,063
<TOTAL-REVENUES> 46,063
<CGS> 21,280
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 682
<INCOME-TAX> 270
<INCOME-CONTINUING> 412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 412
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
