SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
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[ ] TRANSITION REPORT PUSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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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 [ ]
NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AT
JANUARY 9, 1998 6,234,658
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
INDEX
Page
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PART I FINANCIAL INFORMATION......................................................3
ITEM 1 Financial Statements.......................................................3
Consolidated Balance Sheets - Assets...................................4
Consolidated Balance Sheets - Liabilities and Stockholders' Equity.....5
Consolidated Statements of Income......................................6
Consolidated Statements of Cash Flows..................................7
Notes to Consolidated Financial Statements.............................8
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................12
PART II OTHER INFORMATION..........................................................15
ITEM 6 Exhibits and Reports on Form 8-K...........................................15
(a) Exhibits.............................................................15
11 Schedule of Weighted Shares Outstanding............................15
27 Financial Data Schedule............................................15
(b) Reports on Forms 8-K...............................................15
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The consolidated financial statements included herein for EA Engineering,
Science, and Technology, Inc. and 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 include all adjustments necessary for a fair
representation. 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. The Company believes, however, that the disclosures are
adequate to understand the information presented. These consolidated financial
statements should be read in conjunction with the Company's August 31, 1997
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K dated November 17, 1997.
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EA ENGINEERING, SCIENCE AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
November 30 August 31,
1997 1997
(As Restated)
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CURRENT ASSETS:
Cash and cash equivalents ...................... $ 1,659,600 $ 2,333,300
Accounts receivable, net ....................... 8,612,800 9,498,800
Costs and estimated earnings in excess of
billings on uncompleted contracts ........ 6,299,700 5,653,800
Refundable income taxes ........................ 1,816,700 1,883,900
Prepaid expenses and other ..................... 1,904,500 1,865,500
-------------------- -------------------
Total Current Assets ......... 20,293,300 21,235,300
PROPERTY AND EQUIPMENT, at cost:
Furnitire, fixtures, and equipment ............. 12,704,600 12,599,200
Leasehold improvements ......................... 3,689,200 3,664,800
-------------------- -------------------
16,393,800 16,264,000
Less - Accumulated depreciation and amortization (14,132,400) (13,867,200)
-------------------- -------------------
Net Property and Equipment ... 2,261,400 2,396,800
OTHER ASSETS ...................................... 2,723,400 2,708,800
-------------------- -------------------
Total Assets ...................................... $ 25,278,100 $ 26,340,900
==================== ===================
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The accompanying notes are an integral part of these statements.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
November 30 August 31,
1997 1997
(As Restated)
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CURRENT LIABILITIES:
Accounts Payable ........................................ $ 3,978,900 $ 4,306,900
Accrued Expenses ........................................ 1,688,000 2,553,600
Accrued Salaries, wages and benefits .................... 2,739,800 2,891,200
Current portion of long-term debt ....................... 639,200 648,300
Billings in excess of costs and estimated
earnings on uncompleted contracts ................... 531,700 512,200
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Total Current Liabilities ............. 9,577,600 10,912,200
LONG-TERM DEBT, net of current portion ..................... 2,438,400 2,331,700
-------------- --------------
Total Liabilities ...................... 12,016,000 13,243,900
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 10,000,000 shares
authorized; 6,236,300 and 6,227,300 shares
issued and outstanding .............................. 62,400 62,300
Preferred stock, $.01 par value; 8,000,000 shares
authorized; none issued ............................. -- --
Capital in excess of par value .......................... 10,920,200 10,902,300
Notes receivable from stockholders ...................... (160,000) (160,000)
Retained Earnings ....................................... 2,439,500 2,292,400
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Total Stockholders' Equity .............. 13,262,100 13,097,000
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Total Liabilities and Stockholders' Equity $ 25,278,100 $ 26,340,900
============== ==============
</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 INCOME
Three Months Ended
November 30,
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1997 1996
(As Restated)
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Total revenue .............................. $ 15,969,800 $ 22,178,500
Less - Subcontractor costs ................. (3,488,600) (7,196,400)
Less - Other direct project costs .......... (1,983,400) (2,482,700)
---------------------------------------
Net revenue ................................ 10,497,800 12,499,400
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Operating expenses:
Direct salaries and other operating ..... 7,947,700 10,207,300
Sales, general and administrative ....... 2,301,200 1,926,900
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Total operating expenses ................... 10,248,900 12,134,200
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Income from operations ..................... 248,900 365,200
Interest expense ........................... (65,400) (68,200)
Interest income ............................ 15,500 14,100
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Income before income taxes ................. 199,000 311,100
Provision for income taxes ................. 51,900 124,400
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Net income ................................. $ 147,100 $ 186,700
=======================================
Basic earnings per Share ................... $ 0.02 $ 0.03
Dilutive earnings per share ................ $ 0.02 $ 0.03
Weighted average shares outstanding ........ 6,233,400 6,185,100
Effect of dilutive stock options ........... 14,900 12,700
Dilutive weighted average shares outstanding 6,248,300 6,197,800
</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
Three Months Ended
November 30
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1997 1996
(As Restated)
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CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income ......................................... $ 147,100 $ 186,700
Noncash expenses included in net income -
Depreciation and amortization ................ 293,200 408,400
Current provision for income taxes ........... -- 124,400
Net (increase) decrease in noncash assets -
Accounts receivable, net ..................... 886,000 (112,900)
Costs and estimated earnings in excess of
billings on uncompleted contracts ........ (645,900) 783,100
Prepaid expenses and other assets ............ (53,600) (549,400)
Net increase (decrease) in nondebt liabilities -
Accounts payable and accrued expenses ........ (1,345,000) (383,900)
Refunds of income taxes ...................... 67,200 72,600
Payments of income taxes ..................... -- (19,000)
Billings in excess of costs and estimated
earnings on uncompleted contracts ........ 19,500 (37,700)
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Net cash flows from (used for) operating activities (631,500) 472,300
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CASH FLOWS USED FOR INVESTING ACTIVITIES
Purchase of equipment, net ......................... (157,800) (143,000)
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Net cash flows used for investing activities ....... (157,800) (143,000)
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CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
Reduction of long-term debt ........................ (204,000) (1,285,300)
Proceeds from issuance of long-term debt ........... 301,600 929,900
Proceeds from issuance of common stock ............. 18,000 30,600
-----------------------------------------
Net cash flows from (used for) financing activities 115,600 (324,800)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (673,700) 4,500
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CASH AND CASH EQUIVALENTS, beginning of period ..... 2,333,300 1,308,600
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CASH AND CASH EQUIVALENTS, ending of period ........ $ 1,659,600 $ 1,313,100
=========================================
</TABLE>
The accompanying notes are an integral part of these statements.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 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
subsidiaries, EA International, Inc. and 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.
Accounting Irregularities-
On February 4, 2000, the Company reported that management had discovered
accounting irregularities related to unbilled revenue which will cause the
Company to restate earnings for the prior years. Upon discovering the
irregularities, the Company, through the Audit Committee of the Board of
Directors, began an intensive investigation and notified the appropriate
authorities.
On April 10, 2000, the Company further reported that the previously disclosed
investigation, conducted in association with the Company's current auditors,
PricewaterhouseCoopers LLP, isolated the restatements to fiscal years 1999 and
1998. As previously disclosed, the cumulative effect of the restatements would
reduce pre-tax earnings $1.4 million.
On April 7, 2000, Arthur Anderson LLP, who served as the Company's auditors
through August 31, 1999, notified the Company by letter that its previously
issued reports on the financial statements of the Company for the years ended
August 31, 1999 and 1998 should no longer be relied upon.
The Audit Committee's investigation has been completed and, as a result of its
findings, the Company has restated its previously reported financial results for
fiscal years 1999 and 1998. The fiscal year 1998 financial information set forth
herein incorporates all relevant information obtained from the investigation. As
a result of the accounting irregularities, the Company will file audited
restated financial statements and related financial data schedule for the fiscal
years ended August 31, 1999 and August 31, 1998 on an amended Form 10-K/A for
the fiscal year ended August 31, 1999 and will file unaudited restated quarterly
financial statements and related financial data schedules for the three months
ended November 30, 1999, 1998, and 1997; the six months ended February 29, 2000
and February 28, 1999 and 1998; and the nine months ended May 31, 1999 and 1998
on amended Forms 10-Q/A. The Company has provided a condensed reconciliation of
the financial statement amounts, which were reported in prior filings, to the
restated amounts, which are included in the financial statements presented in
this Form 10-Q/A (see Note 2).
In the opinion of the Company's management, all adjustments considered necessary
for a fair presentation have been included.
Revenue Recognition-
The Company is a multidisciplinary energy and 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's Management Consulting Services segment 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 contracts are recognized currently as the work
is performed. Revenue on cost-plus-fixed fee contracts are recognized to the
extent of costs
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incurred plus a proportionate amount of the contracted fee.
Certain cost-plus-fixed fee contracts also include provisions for earning
performance based incentive fees. 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-
Various agencies of the federal government accounted for approximately 50% and
44% of the Company's net revenue for the three months ended November 30, 1997
and 1996, respectively. Additionally, various agencies of the federal government
accounted for approximately 40% of the Company's accounts receivable and costs
and estimated earnings in excess of billings on uncompleted contracts as of
November 30, 1997. Approximately 60% of the Company's current net contract
backlog is with the federal government. Net contract backlog amounts as of
November 30, 1997 and August 31, 1997 were $21.6 million and $22.6 million,
respectively.
Cash and Cash Equivalents-
Cash equivalents consist of money market instruments with a purchased original
maturity of three months or less, stated at cost, which approximates the market.
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 largely within one industry segment, providing a wide range
of consulting, engineering, remediation, and analytical services.
Reclassifications-
For historical comparisons, net revenue in past periods has been adjusted to
include other direct project costs in addition to subcontract costs. In previous
years, only subcontract costs were deducted from total revenue to arrive at net
revenue. Additionally, operating costs in past years have been adjusted to
include sales and marketing costs in the category of sales, general and
administrative costs. In previous periods, these costs were included in direct
salaries and other operating expenses.
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
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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.
Supplemental Disclosures of Cash Flow Information-
Cash paid for interest during the three months ended November 30, 1997 and 1996
for interest was $48,900 and $43,500, respectively. Retirements of property and
equipment for the same periods were $28,000 and $21,900, respectively.
Accounting for Income Taxes-
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities by applying
currently enacted statutory rates applicable to future years. Valuation
allowances are established when deferred tax assets are not currently assured of
realization.
Note 2. RESTATEMENT
On April 10, 2000, the Company reported that the Audit Committee's investigation
into the accounting irregularities was complete. The accompanying restated
financial statements incorporate all relevant information obtained in the
investigation. The Company has identified and recorded all corrections arising
from the findings of the investigation and the process of restating the
Company's consolidated financial statements. The corrections are the result of
the accounting irregularities. Provided below is a summary of the impact of
these corrections and a reconciliation of the financial results from amounts
previously reported to the restated financial statement amounts, as presented in
this quarterly report on Form 10-Q/A. A more detailed explanation of the
adjustments and a detailed reconciliation of the effects that such adjustments
had on the annual financial statements from 1998 through 1999, will be provided
in the Company's restated audited financial statements on amended Form 10-K/A
for the fiscal year ended August 31, 1999.
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Balance Sheet at November 30, 1997
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As Previously Accounting As
Reported* Irregularities Restated
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Total Assets ....... 25,415,300 (137,200) 25,278,100
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Total Liabilities .. 12,016,000 -- 12,016,000
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Shareholders' Equity 13,399,300 (137,200) 13,262,100
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</TABLE>
* Certain previously reported balances primarily related to notes receivable
from stockholders have been reclassed as of November 30, 1997 to conform to
current quarterly presentation.
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Three Months Ended November 30, 1997
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As Previously Accounting As
Reported Irregularities Restated
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Net Revenue ............... 10,721,300 (223,500) 10,497,800
Total Expenses ............ 10,248,900 -- 10,248,900
---------- ---------- ----------
Income from Operations .... 472,400 (223,500) 248,900
Interest expense, net ..... (49,900) -- (49,900)
Provision for Income Taxes 138,200 (86,300) 51,900
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Net Income (loss) ......... 284,300 (137,200) 147,100
======= ======== =======
Earnings per Share, Basic . 0.04 (0.02) 0.02
Earnings per Share, Diluted 0.04 (0.02) 0.02
</TABLE>
Note 3. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
The Company maintains a Stock Option Plan ("the Plan"), which provides for the
granting of nonqualified stock options and incentive 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 574,200
options was issued and outstanding as of November 30, 1997 having an average
exercise price of $2.29. Of the outstanding options, 200,000 are held by Donald
A. Deieso, President and CEO. The exercise price of the 200,000 shares is $2.25,
which was equal to the market price on the grant date. There are 346,000 options
available for issuance as of November 30, 1997.
The Company maintains an Employee Stock Purchase Plan to provide eligible
employees with the opportunity to purchase shares of the Company's Common Stock
through voluntary payroll deductions. Under the Plan, eligible employees may
purchase shares through monthly 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 142,300 shares remain authorized for
distribution under the Plan as of November 30, 1997.
The Company maintains two Non-Employee Director Stock Option Plans (1993 and
1995) which provide for the granting of nonqualified stock options to its four
non-employee directors. The exercise price of the 40,000 options, which were
outstanding as of November 30, 1997 ranged between $2.03 and $6.13, which
equaled the fair market value at the dates of grant. A total of 37,500 options
remain reserved for the Director Stock Option Plans as of November 30, 1997.
Note 4. 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 $3,000,100 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 staff reduction of approximately 125 employees.
As of November 30, 1997 and August 31, 1997, the Company had accrued expenses of
$532,700 and $880,100, respectively, in the accompanying consolidated balance
sheets for costs to be incurred in future periods.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
ITEM 2. 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.
For historical comparisons, net revenue in past periods has been adjusted to
include other direct project costs in addition to subcontract costs. In previous
years, only subcontract costs were deducted from total revenue to arrive at net
revenue. Additionally, operating costs in past years have been adjusted to
include sales and marketing costs in the category of sales, general and
administrative costs. In previous periods, these costs were included in direct
salaries and other operating expenses.
On February 4, 2000, as a result of the discovery of accounting irregularities,
related to unbilled revenue, the Audit Committee of the Company's Board of
Directors ("Audit Committee") initiated an investigation into such matters. The
Audit Committee recently completed the investigation into such matters. In June
2000, the Company has restated its financial results for fiscal years 1999 and
1998 and the interim quarterly periods during 1998 through February 2000. The
financial information contained herein has been restated to incorporate all
relevant information obtained from the aforementioned investigation.
Three Months Ended November 30, 1997
Net revenue for the three months ended November 30, 1997 was $10,497,800, a
decrease of 16.0% from $12,499,400 for the same period in 1997. The decrease is
attributable to lower contract volume across all client sectors resulting from
greater selectivity in the pursuit of opportunities. Additionally, price
competition remains intense within the energy and environmental services
industry, further surpressing net revenue levels compared to the prior year's
first quarter.
Direct salaries and other operating costs decreased to $7,947,700 from
$10,207,300, representing 75.7% and 81.7% of net revenue for the three months
ended November 30, 1997 and 1996, respectively. The decreases were attributable
to increased staff utilization and lower overall operating costs from quarter to
quarter.
Sales, general and administrative costs increased to $2,301,200 from $1,926,900.
The increase in costs was primarily related to an additional investment in sales
and marketing expenses.
As a result of the above factors, income from operations for the three months
ended November 30, 1997 and 1996 decreased 31.8% to $248,900 from $365,200
representing 2.4% and 2.9% of net revenue. Interest expense, net, decreased
$4,200 for the three months ended November 30, 1997, compared to the prior year.
The net decrease in interest expense is primarily the result of decreasing
long-term debt principal balances and interest paid on its revolving line of
credit due to lower average daily amounts outstanding.
The provision for income taxes was $51,900 and $124,400 for the three months
ended November 30, 1997 and 1996, respectively. This represents effective rates
of 26.0% and 40.0%, respectively.
Net income for the three months ended November 30, 1997 and 1996 decreased 21.2%
to $147,100 from $186,700, representing 1.4% and 1.5% of net revenue.
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Three Months Ended November 30, 1996
Net revenue for the three months ended November 30, 1996 was $12,499,400, a
decrease of 13.7% from $14,490,300 for the same period in 1995. The decrease was
attributable to lower contract volume associated with the Department of Defense
activities, partially offset by increases in Industrial, State and Local
Government, Federal Non-DOD agency activities, and increased recovery of General
and Administrative expenses and fees on subcontracted work.
Direct salaries and other operating costs decreased to $10,207,300 from
$11,487,700, representing 81.6% and 79.3% of net revenue for the three months
ended November 30, 1996 and 1995, respectively. As a percentage of net revenue,
the increase was attributable to decreased staff utilization, and increased
information systems costs.
Sales, general and administrative costs decreased to $1,926,900 from $2,008,400.
The decrease in costs was related to the reduction of administrative staff
quarter to quarter.
As a result of the above factors, income from operations for the three months
ended November 30, 1996 and 1995 decreased 63.3% to $365,200 from $994,200
representing 2.9% and 6.9% of net revenue. Interest expense, net, decreased
$47,100 for the three months ended November 30, 1996, compared to the prior
year. The net decrease in interest expense is primarily the result of decreasing
long-term debt principal balances, partially offset by increased short-term
borrowings to fund federal subcontracting payment requirements on certain
contracts.
The provision for income taxes was $124,400 and $357,200 for the three months
ended November 30, 1996 and 1995, respectively, representing effective rates of
40% for both years.
Net income was $186,700 for the three months ended November 30, 1996, compared
to $535,800 for the three months ended November 30, 1995.
Liquidity and Capital Resources
Cash and cash equivalents (cash) decreased by $673,700 for the three months
ended November 30, 1997. The decrease principally resulted from the payout of
cash related to FY97 restructuring expenses.
The Company's capital expenditures, consisting primarily of purchases of
equipment and leasehold improvements, were approximately $157,800 and $143,000
for the three months ended November 30, 1997 and 1996, respectively.
At November 30, 1997, the Company had outstanding long-term debt, including the
current portion, of $3,077,600. This represents a net increase of $97,600 from
the $2,980,000 balance at August 31, 1997. The increase is the result of a
$920,600 increase in its revolving line of credit balance, partially offset by
net repayments of $540,600 for equipment loans and $282,400 for computer
equipment.
The Company's existing funds, cash from operations, and the available portion of
its $8,500,000 revolving line and $1,500,000 equipment line of credit
arrangements 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.
While the Company believes that there is sufficient market demand to absorb the
additional contracting capacity resulting from its continued expansion, 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.
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Forward-Looking Statements
The foregoing contains "forward-looking information" within the meaning of The
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements may be identified by an asterisk (*) or by such forward-looking
terminology as "may," "will," "believe," "anticipate," "expect," or similar
words or variations thereof. Such forward-looking statements involve significant
risks and uncertainties, including, among other things, risks associated with
(1) substantial reliance on government contracts, public budgetary restrictions
and uncertainties, discrepancies between awarded contract amounts and actual
revenues, and cancellation of contracts at the option of the government, (2)
timing and award of contracts, (3) timing and performance of contracts, and (4)
successful bidding of government and non-government contracts in a very
competitive environment. IN EACH CASE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
SUCH FORWARD-LOOKING STATEMENTS.
Important assumptions and other important factors that could cause actual
results to differ materially from those in the forward-looking statements
include, but are not limited to the accounting irregularities discussed in the
explanatory Note 2 and their further impact, if any, on the Company's operations
and/or the Company's future profitability. Other important factors that the
Company believes may cause actual results to differ materially from such
forward-looking statements are discussed throughout this Report and in the
Company's other filings with the Securities and Exchange Commission. The Company
does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes indicate that any such results or events
(expressed or implied) will not be realized.
14
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Schedule of Weighted Average Shares Outstanding (see page 17)
27. Financial Data Schedule (see page 18)
(b) Reports on Form 8-K
- On February 4, 2000, the Company filed a Form 8-K relative to
a press release of the same date announcing that management
had discovered accounting irregularities related to unbilled
revenue which will cause the Company to restate earnings for
prior years.
- The Company filed a report on Form 8-K dated April 10, 2000
reporting in Item 5 that the Company's investigation into the
accounting irregularities had been concluded; that Arthur
Anderson LLP, the Company's auditors through the end of the
Company's 1999 Fiscal Year, advised that their reports for
the affected fiscal years 1998 and 1999 could not be relied
upon; and that the Company would be restating earnings for
fiscal years 1998 and 1999.
- The Company filed a report on Form 8-K dated June 8, 2000
reporting that the Company's common stock would continue to
trade on Nasdaq Smallcap Market under the symbol EACEC to
signify that continued trading is under exception to Nasdaq
listing requirements and is subject to satisfying certain
conditions, specifically filing by June 16, 2000 the
Company's amended financial statements for 1998 and 1999 and
satisfying Nasdaq's $1.00 minimum bid price requirement by
September 16, 2000.
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)
June 16, 2000 By: /s/ Loren D. Jensen
----------------- -----------------------------
(Signature)
Loren D. Jensen
----------------------------------
Chairman of the Board, President
and CEO
----------------------------------
(Title)
June 16, 2000 By: /s/ Barbara L. Posner
----------------- ----------------------------------
(Signature)
Barbara L. Posner
---------------------------------
Chief Operating Officer and
Chief Financial Officer
----------------------------------
(Title)
16
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EXHIBIT 11
<TABLE>
<CAPTION>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
SCHEDULE OF WEIGHTED AVERAGE SHARES OUTSTANDING
Three Months Ended
November 30,
------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Weighted average shares of common stock .. 6,233,400 6,185,100
Impact of dilutive stock options as of
November 30, 1997 and 1996, respectively 14,900 12,700
------------------------------
Weighted average shares of common stock .. 6,248,300 6,197,800
==============================
</TABLE>
17
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