SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: May 31, 1997 Commission File No. 0-15587
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EA Engineering, Science, and Technology, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 52-0991911
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(State or other jurisdiction of(IRS Employer
incorporation or organization) identification No.)
11019 McCormick Road, Hunt Valley, Maryland 21031
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (410) 584-7000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK
OUTSTANDING AT JULY 11, 1997 6,183,400
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Page 1 of 18
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets - Assets......................................................................... 4
Consolidated Balance Sheets - Liabilities and Stockholders' Equity........................................... 5
Consolidated Statements of Operations........................................................................ 6
Consolidated Statements of Cash Flows........................................................................ 7
Notes to Consolidated Financial Statements................................................................... 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................................................12
PART II - OTHER INFORMATION......................................................................................15
EXHIBIT 1
Schedule of Weighted Average Shares Outstanding............................................................17
EXHIBIT 27
Financial Data Schedule....................................................................................18
</TABLE>
2
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PART I - FINANCIAL INFORMATION
The consolidated financial statements included herein for EA Engineering,
Science, and Technology, Inc. & Subsidiaries (the "Company") have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In management's opinion, the interim
financial data presented includes all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation. Certain information
and footnote disclosures normally included in the consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to understand the
information presented. It is suggested that these consolidated financial
statements be read in conjunction with the Company's August 31, 1996
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K dated November 22, 1996.
3
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
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<S> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 1,632,500 $ 1,308,600
Accounts receivable, net........................ 8,753,500 12,692,700
Costs and estimated earnings in excess of
billings on uncompleted contracts............ 6,355,400 12,482,200
Prepaid expenses and other...................... 3,184,400 1,576,900
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Total Current Assets......................... 19,925,800 28,060,400
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PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment............... 12,335,100 12,784,500
Leasehold improvements.......................... 3,627,800 3,677,800
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15,962,900 16,462,300
Less-Accumulated depreciation and amortization.. (13,568,700) (13,337,400)
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Net Property and Equipment................... 2,394,200 3,124,900
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OTHER ASSETS....................................... 3,156,100 2,143,200
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Total Assets................................. $25,476,100 $33,328,500
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</TABLE>
The accompanying notes are an integral part of these statements.
4
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
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<S> <C>
CURRENT LIABILITIES:
Accounts payable................................. $ 3,961,100 $ 6,061,000
Short-term borrowings............................ 1,569,400 --
Accrued expenses................................. 2,246,600 1,019,200
Accrued salaries, wages and benefits............. 3,179,800 3,183,400
Current portion of long-term debt................ 857,400 644,600
Billings in excess of costs and estimated
earnings on uncompleted contracts............. 396,500 1,197,700
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Total Current Liabilities..................... 12,210,800 12,105,900
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LONG-TERM DEBT, net of current portion.............. 453,500 2,664,500
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Total Liabilities 12,664,300 14,770,400
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares
authorized; 6,176,800 and 6,175,000 shares
issued and outstanding........................ 61,800 61,800
Preferred stock, $.01 par value; 8,000,000 shares
authorized; none issued....................... -- --
Capital in excess of par value................... 10,803,300 10,796,300
Retained earnings................................ 1,946,700 7,700,000
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Total Stockholders' Equity.................... 12,811,800 18,558,100
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Total Liabilities and Stockholders' Equity. $25,476,100 $33,328,500
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</TABLE>
The accompanying notes are an integral part of these statements.
5
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
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<S> <C>
Total revenue............................. $16,660,600 $22,339,700 $56,376,500 $ 64,472,600
Less - Subcontractor costs................ (4,176,000) (5,708,600) (17,377,900) (15,971,300)
----------- ----------- ----------- -----------
Net revenue............................ 12,484,600 16,631,100 38,998,600 48,501,300
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Operating expenses:
Direct salaries and other operating.... 7,621,300 7,320,800 21,291,800 21,759,600
Selling, general, and administrative... 6,867,600 8,831,100 23,317,500 26,536,800
Restructuring.......................... 3,000,100 -- 3,000,100 --
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Total operating expenses............ 17,489,000 16,151,900 47,609,400 48,296,400
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Income from operations................... (5,004,400) 479,200 (8,610,800) 204,900
Interest expense, net.................... (76,500) (73,700) (297,900) (290,600)
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Income (loss) before income taxes........ (5,080,900) 405,500 (8,908,700) (85,700)
Provision for (benefit from)income taxes. (1,624,300) 162,200 (3,155,400) (34,300)
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Net income (loss)........................ $(3,456,600) $ 243,300 $(5,753,300) $ (51,400)
========== ========== ========== ===========
Net loss per share...................... $(0.56) $0.04 $(0.93) $(0.01)
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Weighted average shares outstanding..... 6,200,300 6,194,000 6,195,200 6,127,700
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
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May 31, May 31,
1997 1996
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<S> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
Net Loss.................................................... $(5,753,300) $ (51,400)
Noncash expenses included in net income (loss) -
Depreciation and amortization........................... 1,126,300 1,208,300
Deferred income taxes................................... -- (85,600)
Current benefit from income taxes....................... (3,155,400) 51,300
Net (increase) decrease in noncash assets -
Accounts receivable, net................................ 3,939,200 2,559,600
Costs and estimated earnings in excess of
billings on uncompleted contracts..................... 6,126,800 (3,281,900)
Prepaid expenses and other assets....................... 328,100 14,700
Net increase (decrease) in nondebt liabilities -
Accounts payable and accrued expenses................... (876,100) (1,595,900)
Refunds of income taxes................................. 338,100 2,200
Payments of income taxes................................ (131,200) (528,500)
Billings in excess of costs and estimated
earnings on uncompleted contracts..................... (801,200) 50,700
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Net cash flows used for operating activities............ 1,141,300 (1,656,500)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Proceeds from long-term debt and short-term borrowings 929,900 --
Proceeds from issuance of common stock...................... 7,000 216,100
Reduction of long-term debt and short-term borrowings....... (1,358,700) (441,700)
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Net cash flows from (used for) financing
activities............................................ (421,800) (225,600)
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CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of equipment, net.................................. (395,600) (621,000)
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Net cash flows used for investing activities............. (395,600) (621,000)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 323,900 (2,503,100)
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CASH AND CASH EQUIVALENTS, beginning of period.................. 1,308,600 3,813,900
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CASH AND CASH EQUIVALENTS, end of period........................ $1,632,500 $1,310,800
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</TABLE>
The accompanying notes are an integral part of these statements.
7
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1997 AND 1996
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation--
The accompanying consolidated financial statements present the accounts of
EA Engineering, Science, and Technology, Inc. (EA) and its wholly-owned
subsidiary, EA Financial, Inc., and its wholly-owned subsidiaries, EA Global,
Inc., and EA Engineering, Science, and Technology de Mexico, S.A. de C.V. (EA de
Mexico). The entities are collectively referred to herein as the "Company." All
significant intercompany transactions have been eliminated in consolidation.
Revenue Recognition--
The Company is a multidisciplinary environmental services and consulting
engineering organization providing a wide range of consulting, engineering,
remediation, and analytical services. These services are generally performed
under time and material, fixed price and cost plus fixed fee contracts which
vary in length from one month to ten years.
The Company accounts for contract revenues and costs under fixed price
contracts using the percentage-of-completion method. The
percentage-of-completion is determined using the "cost-to-cost" method for each
contract cost component. Under this method, direct labor and other contract
costs incurred to date are compared to periodically revised estimates of the
total of each contract cost component at contract completion to determine the
percentage of revenues to be recognized. Revenues from time and material and
cost plus fixed fee contracts are recognized currently as the work is performed.
Provision for estimated losses on uncompleted contracts, to the full extent of
the loss, is made during the period in which the Company first becomes aware
that a loss on a contract is probable.
Contract costs and estimated earnings recognized in excess of amounts
billed are classified as current assets under "costs and estimated earnings in
excess of billings on uncompleted contracts." Billings in excess of contract
costs and estimated earnings are classified as current liabilities under
"billings in excess of costs and estimated earnings on uncompleted contracts."
Generally, contracts provide for the billing of costs incurred and
estimated fees on a monthly basis. Amounts included in "costs and estimated
earnings in excess of billings on uncompleted contracts" in the accompanying
financial statements will be billed within twelve months of the balance sheet
date.
Major Clients--
For the nine months ended May 31, 1997 and 1996, various agencies of the
federal government provided 46% and 46% of net revenue, and as of May 31, 1997
accounted for approximately 35% of the Company's accounts receivable and costs
and estimated earnings in excess of billings on uncompleted contracts.
Cash and Cash Equivalents--
Cash equivalents consist of obligations and money market instruments with a
purchased original maturity of three months or less, stated at cost, which
approximates market.
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Property and Equipment--
Property and equipment are depreciated using the straight-line method over
their estimated useful lives ranging from 3 to 10 years. Leasehold improvements
are amortized over the shorter of the estimated useful life or the term of the
lease.
Segment Information--
The Company operates within one industry segment, providing a wide range of
consulting, engineering, remediation, and analytical services.
Risks and Uncertainties--
Reliance on major government contracts subjects the Company to risks
associated with public budgetary restrictions and uncertainties, discrepancies
between awarded contract amounts and actual revenues, and cancellation at the
option of the government. The Company attempts to mitigate these risks by
staffing only to meet reasonably anticipated average workloads, by using
subcontractors to handle peak workloads, and by obtaining termination benefit
contract provisions. Cancellation of any of the Company's major government
contracts, however, could have a material adverse effect on the Company.
Use of Estimates--
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues and
expenses in the financial statements and in the disclosures of contingent assets
and liabilities. While actual results could differ from these estimates,
management believes that actual results will not be materially different from
amounts provided in the accompanying consolidated financial statements.
Reclassifications--
Certain prior year balances have been reclassified to conform with current
year presentation.
Supplemental Disclosures of Cash Flow Information--
Cash paid during the nine months ended May 31, 1997 and 1996 for interest
was $281,800 and $370,200, respectively. Retirements of property and equipment
for the same periods were $895,000 and $-0-, respectively.
Accounting for Income Taxes--
Deferred income taxes are recorded to reflect the tax consequences on
future years for differences between the tax basis of assets and liabilities and
their financial reporting amounts.
Note 2. BANK FINANCING ARRANGEMENTS:
As of May 31, 1997, short-term borrowings under the Company's $6 million
line of credit arrangement with Signet Bank were $1,569,400. The Company was
either in compliance with or obtained waivers for certain loan covenants under
this credit agreement with an expiration date of November 30, 1997. Debt under
the previous financing arrangements has been reclassified as short-term
borrowings. The new facility, which became effective April 18, 1997, is secured
by certain receivables and property and equipment and bears interest at a rate
of 3 points above the prime rate. Borrowings are limited to $6 million, or a
borrowing base computation consisting of a percentage of certain accounts
receivable and costs and estimated earnings in excess of billings on uncompleted
contracts, whichever
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is lower. Borrowings can exceed the borrowings base by $750,000 for short-term
periods. The interest rate on the excess borrowings will be 13 points above the
prime rate.
For the nine months ended May 31, 1996, there were no short-term borrowings.
The maximum short-term borrowings outstanding during the same period in fiscal
1996 were $1,721,800 and the average outstanding month-end balance was $263,200.
The weighted average interest rate during the period and at May 31, 1997 was
11.2% and 8.5%, respectively. The weighted average interest rate has been
calculated based upon the actual daily interest expense and the daily average
balance outstanding.
In addition, as a result of the non-compliance with certain financial
covenants, Signet has amended the maturity date for the notes payable agreement
for leasehold improvements and certain laboratory equipment to November 30,
1997.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
---------------------
1997 1996
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<S> <C>
Note payable to Signet Bank in monthly installments
of interest only; interest at prime or
LIBOR plus 150 basis points through January
1997, repaid in connection with revolving
credit facility refinancing........................ $ -- $3,000,000
Notes payable to Signet Bank in equal monthly
installments of $43,650, plus interest at
250 points above LIBOR through November 1997,
with unpaid balance due on November 30, 1997,
secured by leasehold improvements and certain
of EA's analytical laboratory equipment............ 519,000 1,042,900
Note payable to a commercial bank payable in equal
monthly installments of $29,600, plus interest at
9.1% through December 1999, secured by certain
computer equipment................................. 791,900 --
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Total long-term debt................................. 1,310,900 4,042,900
Less-current portion................................. 857,400 705,100
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Long-term portion.................................... $ 453,500 $3,337,800
========== ==========
</TABLE>
Note 3. NET INCOME (LOSS) PER SHARE:
Net income (loss) per share amounts are based on the weighted average number
of shares of common stock and common stock equivalents outstanding during the
period. Common stock equivalents are calculated using the treasury stock method.
In February 1997, the FASB issued Statement No. 128 (SFAS 128), "Earnings
Per Share," which establishes new standards for computing and presenting
earnings per share. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Management
has not yet determined whether the implementation of SFAS 128 will have any
impact on the Company's per share amounts.
10
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Note 4. SAVINGS AND RETIREMENT PLAN
EA maintains a defined contribution plan covering all employees who are at
least 21 years of age and have completed one year of credited service, as
defined by the plan. The plan provides for discretionary employer contributions
for each fiscal year, in amounts determined annually by the Board of Directors,
and for voluntary employee contributions. The plan also includes a 401(k)
provision, allowing for Company matching contributions.
Note 5. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
The Company maintains a Stock Option Plan which provides for the grant of
incentive and nonqualified stock options to certain key employees and officers
of the Company. The exercise price of an option granted under the Plan may not
be less than the fair market value of the underlying shares of Common Stock on
the date of the grant. A total of 520,581 options are issued and outstanding as
of May 31, 1997 having an average exercise price of $2.392. There were 402,031
shares available for issuance as of May 31, 1997.
The Company maintains an Employee Stock Purchase Plan to provide eligible
employees the opportunity to purchase shares of the Company's Common Stock
through voluntary payroll deductions. Under the Plan, eligible employees may
purchase shares monthly through payroll deductions at 95% of current market
value at the time of purchase. The Company pays all administrative expenses
related to employee purchases. A total of 161,625 shares remain authorized for
distribution under the Plan as of May 31, 1997.
The Company maintains two Non-Employee Director Stock Option Plans (1995 and
1993) which provide for the granting of nonqualified stock options to its three
non-employee directors. The exercise price of the 33,000 options, which were
outstanding as of May 31, 1997, ranged between $2.375 and $6.125, which equaled
the fair market value at the date of grant. A total of 44,000 options remain
reserved for the Director Stock Option Plans as of May 31, 1997.
Note 6. COMPANY RESTRUCTURING
On March 25, 1997 the Company announced a major organizational realignment
to reposition itself in the marketplace. In connection with the restructuring,
the Company incurred charges of $3 million during the third quarter related to
severance, planned reduction in office space, the suspension of the
implementation of a new project/financial system, and other related costs.
This restructuring included a reduction of approximately 125 staff.
As of May 31, 1997, the Company had accruals of $1,297,000 included as other
current liabilities in the accompanying consolidated balance sheet for costs to
be incurred in future periods.
11
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's results of operations are significantly affected by the timing
of the award of contracts, the timing of performance on contracts, and the
extent to which the Company's employees are performing billable tasks as opposed
to engaging in preparing bid proposals and other required non-billable
activities. Due to these factors, the results of operations for interim periods
are not necessarily indicative of the results of operations for longer periods
and interim period comparisons may not be as meaningful as comparisons over
longer periods.
Three Months Ended February 28, 1997
Net revenue for the three months ended May 31, 1997 was $12,484,600, a
decrease of 24.9% from $16,631,100 for the same period in 1996. The decrease was
attributable to lower contract volume associated with the Department of Defense
activities, industrial, and federal non-DOD agency activities. The decreases in
these client sectors were partially offset by increased revenue in the state and
local government sectors. Additionally, price competition remains intense within
the environmental services industry, further surpressing net revenue levels
compared to the prior year's third quarter.
Direct salaries and other operating costs increased 4.1% to $7,621,300 from
$7,320,800, representing 61.0% and 44.0% of net revenue for the three months
ended May 31, 1997 and 1996, respectively. As a percentage of net revenue, the
increase was primarily attributable to project costs in excess of contract
amounts of $1,400,000 related to certain landfill capping projects.
Selling, general, and administrative costs decreased 22.2% to $6,867,600
from $8,831,100, reflecting staff reductions made in March, 1997 and increased
to 55.0% from 53.1% of net revenue, respectively. The increase as a percentage
of net revenue is related to decreased staff utilization in connection with the
reduction in available work during the month of March.
Additionally, on March 25, 1997 the Company announced a major organizational
realignment to reposition itself in the marketplace. In connection with the
restructuring, the Company incurred charges of $3 million during the third
quarter related to severance, planned reduction in office space, the suspension
of the implementation of a new project/financial system, and other related
costs. This restructuring included a reduction of approximately 125 staff.
As a result of the above factors, the loss from operations for the three
months ended May 31, 1997 was $5,004,400 or 40.1% of net revenue compared to the
previous year's income from operations of $479,200 or 2.9% of net revenue for
the three months ended May 31, 1996. Interest expense, net, increased $2,800 for
the three months ended May 31, 1997, compared to the prior year.
The benefit from income taxes was $1,624,300 for the three months ended May
31, 1997 compared to the provision for income taxes of $162,200 for the three
months ended May 31, 1996, representing effective rates of 32% and 40%,
respectively.
Net loss for the three months ended May 31, 1997 was $3,456,600, 27.7% of
net revenue, compared to the previous year's third quarter income of $243,300,
1.5% of net revenue for the nine months ended May 31, 1996.
Nine Months Ended May 31, 1997
Net revenue for the nine months ended May 31, 1997 was $38,998,600, a
decrease of 19.6% from $48,501,300 for the same period in 1996. The decrease
12
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was attributable to lower contract volume in industrial and federal agency
activities. This decrease was partially offset by increases in state and local
government activity. However, price competition remains intense within the
environmental services industry, further surpressing net revenue levels compared
to the prior year's third quarter.
Direct salaries and other operating costs decreased to $21,291,800 from
$21,759,600, representing 54.6% and 44.9% of net revenue for the nine months
ended May 31, 1997 and 1996, respectively. As a percentage of net revenue, the
increase was primarily attributable to unrecoverable costs on certain projects
and project costs in excess of contract amounts of $1,400,000 related to certain
landfill projects.
General and administrative costs decreased to $23,317,500 from $26,536,800,
and increased to 59.8% from 54.7% of net revenue, respectively. The increase as
a percentage of net revenue is related to decreased staff utilization in
connection with the reduction in available work during the first seven months of
the year.
Additionally, on March 25, 1997 the Company announced a major organizational
realignment to reposition itself in the marketplace. In connection with the
restructuring, the Company incurred charges of $3 million during the third
quarter related to severance, planned reduction in office space, the suspension
of the implementation of a new project/financial system, and other related
costs. This restructuring included a reduction of approximately 125 staff.
As a result of the above factors, the loss from operations for the nine
months ended May 31, 1997 was $8,610,800, or 22.1% of net revenue compared to
the previous year's income from operations of $204,900, or 0.4% of net revenue
for the nine months ended May 31, 1996. Interest expense, net, increased $7,300
for the nine months ended May 31, 1997, compared to the prior year. The increase
was primarily attributable to an interest payment made in connection with
Maryland tax settlement and increased interest rates of the Company's revolving
credit facility. These increases were offset partially by decreasing debt
principal balances.
The benefit from income taxes was $3,155,400 for the nine months ended May
31, 1997 compared to a benefit from income taxes of $34,300 for the nine months
ended May 31, 1996, representing effective rates of 35.5% and 40%, respectively.
Net loss for the nine months ended May 31, 1997 was $5,753,300, or 14.8% of
net revenue, compared to net loss of $51,400, or 0.1% of net revenue for the
nine months ended May 31, 1996.
Liquidity and Capital Resources
Cash and cash equivalents increased by $323,900 for the nine months ended
May 31, 1997. The increase principally resulted from a decrease in accounts
receivable, costs and estimated earnings in excess of billings on uncompleted
contracts, and proceeds from long-term debt.
The Company's capital expenditures, consisting primarily of purchases of
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equipment and leasehold improvements, were approximately $395,600 and $621,000
for the nine months ended May 31, 1997 and 1996, respectively.
At May 31, 1997, the Company had outstanding debt, including current
portion, of $2,880,300. This represents a net decrease of $428,800 from the
August 31, 1996 balance of $3,309,100. The decrease is primarily the result of
repayments of $651,700 related to notes payable, and repayments of $707,000
related to the revolving credit facility. These decreases were partially offset
by new borrowings of $929,900 for a project/financial system and related
computer equipment.
As of May 31, 1997, short-term borrowings under the Company's $6 million
line of credit arrangement with Signet Bank were $1,569,400. However, the
Company was not in compliance with certain loan covenants under this credit
agreement. The Company has obtained waivers from Signet related to these
covenants. The new facility, which became effective April 18, 1997, is secured
by certain receivables and property and equipment and bears interest at a rate
of 3 points above the prime rate. Borrowings are limited to $6 million, or a
borrowing base computation consisting of a percentage of certain accounts
receivable and costs and estimated earnings in excess of billings on uncompleted
contracts, whichever is lower. Borrowings can exceed the borrowings base by
$750,000 for short-term periods. The interest rate on any excess borrowings will
be 13 points above prime rate.
The Company's existing funds, cash from operations, and the available
portion of its $6.0 million credit arrangement are expected to be sufficient to
meet the Company's present cash needs. The Company also has access to certain
capital equipment financing arrangements through various equipment suppliers.
The Company also believes it has the ability to raise capital through public or
private placement of debt and will pursue such options as the need arises to
expand business services, facilities, or acquire equipment in conjunction with a
review of the most cost effective means for the Company and its stockholders.
The Company's credit arrangements have an expiration date of November 30,
1997. The Company is pursuing additional longer-term credit arrangements and
management believes that such efforts will result in increased availability.
On March 25, 1997, as a result of the Company's losses for the second
quarter, the Company announced a major organizational realignment to reposition
itself in the marketplace. In connection with the restructuring, the Company
incurred restructuring charges during the third quarter of $3 million related to
severance, planned reduction in office space, the suspension of the
implementation of a new project/financial system, and other related costs.
This restructuring, which included a reduction of approximately 125 staff,
along with earlier layoffs in January and February 1997, is expected to
significantly reduce operating and administrative costs in future periods.
While the Company believes that there is sufficient market demand to absorb
its available contracting capacity, there can be no assurance that this demand
will exist or continue. Although the Company has the ability to reduce its
professional staff in periods of reduced demand, it may choose not to make full
reductions in such periods, with resulting adverse effects on operations.
14
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6
(a) Exhibits
None
(b) Reports on Form 8-K
None
15
<PAGE>
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.
EA Engineering, Science, and
Technology, Inc. & Subsidiaries
-------------------------------
(Registrant)
July 15, 1997 By: /s/ Donald A. Deieso
- ----------------- ----------------------------------
(Signature)
Donald A. Deieso
----------------------------------
President and
Chief Executive Officer
----------------------------------
(Title)
July 15, 1997 By: /s/ Joseph A. Spadaro
- ----------------- ----------------------------------
(Signature)
Joseph A. Spadaro
----------------------------------
Executive Vice President,
Chief Financial Officer
----------------------------------
(Title)
16
EXHIBIT 1
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
SCHEDULE OF WEIGHTED AVERAGE SHARES OUTSTANDING
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
---------- ---------- --------- ---------
<S> <C>
Weighted average shares of common stock 6,200,300 6,155,700 6,195,200 6,127,700
Impact of dilutive stock options of
553,600 and 207,800 as of May 31, 1997
and May 31, 1996, respectively -- 38,300 -- --
--------- --------- --------- ---------
Weighted average shares of common stock 6,200,300 6,194,000 6,195,200 6,127,700
========= ========= ========= =========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 1,632,500
<SECURITIES> 0
<RECEIVABLES> 8,753,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,925,800
<PP&E> 15,962,900
<DEPRECIATION> 13,476,100
<TOTAL-ASSETS> 25,476,100
<CURRENT-LIABILITIES> 12,210,800
<BONDS> 0
0
0
<COMMON> 61,800
<OTHER-SE> 12,750,000
<TOTAL-LIABILITY-AND-EQUITY> 25,476,100
<SALES> 56,376,500
<TOTAL-REVENUES> 56,376,500
<CGS> 38,669,700
<TOTAL-COSTS> 65,285,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,800
<INCOME-PRETAX> (8,908,600)
<INCOME-TAX> (3,155,400)
<INCOME-CONTINUING> (5,753,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,753,300)
<EPS-PRIMARY> (0.93)
<EPS-DILUTED> (0.93)
</TABLE>
