UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended February 29, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
From the transition period to
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Commission File Number 0-15587
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 I.R.S. Employer
Incorporation or Organization) ID Number
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 [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the Registrant's Common Stock, $.01 par value,
outstanding on April 10, 2000, was 6,156,465.
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1
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<CAPTION>
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..........................................................16
ITEM 4 Submission of Matters to Vote of Security Holders..........................16
ITEM 6 Exhibits and Reports on Form 8-K...........................................16
(a) Exhibits.............................................................16
27 Financial Data Schedule..........................................16
(b) Reports on Form 8-K..................................................16
</TABLE>
2
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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 its 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 considered 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. Operating results and cash flows for the interim period
are not necessarily indicative of the results that may be expected for the full
fiscal year. Accordingly, these consolidated financial statements should be read
in conjunction with the Company's August 31, 1999 consolidated financial
statements and notes thereto included in the Company's 1999 Annual Report on
Form 10-K/A filed June 16, 2000.
3
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<TABLE>
<CAPTION>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
February 29, August 31,
2000 1999
(As Restated) (As Restated)
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CURRENT ASSETS:
Cash and cash equivalents .................... $ 1,617,300 $ 1,963,000
Accounts receivable, net ..................... 7,069,100 8,679,600
Costs and estimated earnings in excess of
billings on uncompleted contracts .......... 7,909,100 5,176,000
Prepaid expenses and other ................... 1,533,700 1,234,500
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Total Current Assets ....................... 18,129,200 17,053,100
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PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment ............ 9,365,300 8,920,600
Leasehold improvements ....................... 1,031,700 1,031,700
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Total property and equipment, at cost ........ 10,397,000 9,952,300
Less-Accumulated depreciation and amortization (9,273,400) (9,102,900)
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Net Property and Equipment ................... 1,123,600 849,400
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OTHER ASSETS .................................... 4,555,800 4,761,500
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Total Assets ................................. $ 23,808,600 $ 22,664,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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<TABLE>
<CAPTION>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
February 29, August 31,
2000 1999
(As Restated) (As Restated)
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ........................... $ 4,989,100 $ 3,555,300
Accrued expenses ........................... 897,700 1,443,200
Accrued salaries, wages and benefits ....... 2,005,500 2,228,400
Current portion of long-term debt .......... -- 87,500
Billings in excess of costs and estimated
Earnings on uncompleted contracts ........ 926,800 407,800
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Total Current Liabilities ................ 8,819,100 7,722,200
LONG-TERM DEBT, net of current portion ........ 3,363,100 3,326,200
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Total Liabilities ........................ 12,182,200 11,048,400
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; voting;
10,000,000 shares authorized; 6,358,400
and 6,335,000 shares issued; 6,090,800
and 6,335,000 outstanding .................. 63,600 63,400
Preferred stock, $.01 par value; 8,000,000
shares authorized; none issued ............. -- --
Capital in excess of par value ................ 11,131,900 11,108,300
Treasury stock, at cost; 267,600 and 0 shares . (298,700) --
Notes receivable from stockholders ............ (78,000) (78,000)
Retained earnings ............................. 807,600 521,900
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Total Stockholders' Equity ............... 11,626,400 11,615,600
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Total Liabilities and Stockholders' Equity $ 23,808,600 $ 22,664,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
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<TABLE>
<CAPTION>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
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February 29, February 28, February 29, February 28,
2000 1999 2000 1999
(As Restated) (As Restated)
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<S> <C> <C> <C> <C>
Total revenue ........................... $ 13,830,200 $ 10,940,400 $ 28,638,800 $ 22,624,400
Less - Subcontractor costs .............. (3,800,300) (1,879,700) (8,381,800) (4,008,400)
Less - Other direct project costs ....... (1,251,000) (1,398,700) (2,776,000) (2,920,200)
------------ ------------ ------------ ------------
Net revenue .......................... 8,778,900 7,662,000 17,481,000 15,695,800
Operating costs and expenses:
Direct salaries and other operating .. 6,817,600 6,554,400 13,452,800 12,561,500
Sales, general and administrative .... 1,812,100 2,155,100 3,451,100 4,194,400
Restructuring ........................ -- 2,132,600 -- 2,132,600
------------ ------------ ------------ ------------
Total operating expenses ........... 8,629,700 10,842,100 16,903,900 18,888,500
------------ ------------ ------------ ------------
Income (loss) from operations ........... 149,200 (3,180,100) 577,100 (3,192,700)
Interest expense ........................ (76,000) (57,800) (149,100) (123,500)
Interest income ......................... 22,400 14,900 48,700 48,300
------------ ------------ ------------ ------------
Income (loss) before income taxes ....... 95,600 (3,223,000) 476,700 (3,267,900)
Provision for (benefit from) income taxes 38,200 (1,297,800) 191,000 (1,315,100)
------------ ------------ ------------ ------------
Net income (loss)from continuing
operations ............................ 57,400 (1,925,200) 285,700 (1,952,800)
Income from operations of discontinued
segment (net of tax) .................. -- (147,000) -- (119,000)
------------ ------------ ------------ ------------
Net income (loss) ....................... $ 57,400 $ (2,072,200) $ 285,700 $ (2,071,800)
Earnings per share - basic
Continued operations ................. $ 0.01 $ (0.31) $ 0.05 $ (0.31)
Discontinued operations .............. -- $ (0.02) -- $ (0.02)
Net income (loss) .................... $ 0.01 $ (0.33) $ 0.05 $ (0.33)
============ ============ ============ ============
Earnings per share - diluted
Continued operations ................. $ 0.01 $ (0.31) $ 0.05 $ (0.31)
Discontinued operations .............. -- $ (0.02) -- $ (0.02)
Net income (loss) .................... $ 0.01 $ (0.33) $ 0.05 $ (0.33)
============ ============ ============ ============
Weighted average shares outstanding ..... 6,135,400 6,306,200 6,161,000 6,299,200
Effect of dilutive stock options ........ 10,300 -- 1,350 --
Diluted weighted average shares
outstanding .......................... 6,145,700 6,306,200 6,162,350 6,299,200
</TABLE>
The accompanying notes are an integral part of these statements.
6
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<TABLE>
<CAPTION>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
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February 29, February 28,
2000 1999
(As Restated)
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CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss) .................................................. $ 285,700 $(2,071,800)
Noncash expenses included in net income -
Provision for restructuring ..................................... -- 2,132,600
Provision for doubtful accounts .................................. 97,200 --
Gain on sale of assets ........................................... (7,300) --
Depreciation and amortization .................................... 196,200 423,700
Deferred provision for income taxes .............................. 189,400 --
Changes in operating assets and liabilities -
Decrease in accounts receivable, net ............................. 1,513,300 1,063,400
Decrease (increase) in costs and estimated
earnings in excess of billings on uncom-
pleted contracts ............................................... (2,733,100) (1,179,300)
Decrease (increase) in prepaid
expenses and other assets ...................................... (282,900) (1,442,800)
Increase (decrease) in accounts payable and
accrued expenses ............................................... 665,400 (1,295,900)
Increase (decrease) in billings in excess of
of costs and estimated earnings on
uncompleted contracts .......................................... 519,000 (138,900)
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Net cash provided from (used in) operating
activities ..................................................... 442,900 (2,509,000)
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CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of equipment, net ......................................... (470,400) (173,000)
Proceeds from sale of equipment .................................... 7,300 --
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Net cash flows (used in) provided from
investing activities ........................................... (463,100) (173,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving line of credit ....................... 36,900 2,950,600
Proceeds from issuance of common stock ............................. 23,800 33,800
Reduction of long-term debt and short-term
borrowings ....................................................... (87,500) (269,600)
Purchase of treasury stock ......................................... (298,700) --
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Net cash flows (used in) provided from
financing activities ........................................... (325,500) 2,714,800
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................. (345,700) 32,800
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CASH AND CASH EQUIVALENTS, beginning of period ........................ 1,963,000 1,850,200
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CASH AND CASH EQUIVALENTS, end of period .............................. $ 1,617,300 $ 1,883,000
=========== ===========
The accompanying notes are an integral part of these statements
</TABLE>
7
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
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); its wholly-owned subsidiaries,
EA International, Inc. and EA Financial, Inc. (EA Financial); and the
wholly-owned subsidiaries of EA Financial, EA Global, Inc. and EA de Mexico,
S.A. de C.V. The entities are collectively referred to herein as the "Company."
All significant intercompany transactions have been eliminated in consolidation.
Reclassifications -
Certain prior year balances have been reclassified to conform to current year
presentation.
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 financial data schedules 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 schedule 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.
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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 such
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.
Balance Sheet at August 31, 1999
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<CAPTION>
Balance Sheet at August 31, 1999
--------------------------------------------------
As Previously Accounting As
Reported* Irregularities Restated
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<S> <C> <C> <C>
Total Assets 23,565,700 (901,700) 22,664,000
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Total Liabilities 11,048,400 -- 11,048,400
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Shareholder' Equity 12,517,300 (901,700) 11,615,600
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</TABLE>
* Certain previously reported balances primarily related to notes receivable
from stockholders have been reclassed as of August 31, 1999 and February 29,
2000 to conform to current quarterly presentation.
Balance Sheet at February 29, 2000
- The cumulative effect of accounting irregularities for the balance sheet
at February 29, 2000 was to decrease total assets and stockholders' equity
by $901,700.
Six Months Ended February 29, 2000
- No Restatements
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Six Months Ended February 28, 1999
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<CAPTION>
Six Months Ended February 28, 1999
---------------------------------------------------
As Previously Accounting As
Reported Irregularities Restated
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Net Revenue ........................ 15,686,100 9,700 15,695,800
Total Expenses ..................... 18,888,500 -- 18,888,500
---------- ----- ----------
Income from Operations ............. (3,202,400) 9,700 (3,192,700)
Interest expense, net .............. (75,200) -- (75,200)
Provision for Income Taxes ......... (1,318,800) 3,700 (1,315,100)
---------- ----- ----------
Net loss for continuing operations . (1,958,800) 6,000 (1,952,800)
Net loss for discontinued operations (119,000) -- (119,000)
---------- ----- ----------
Net Income (loss) .................. (2,077,800) 6,000 (2,071,800)
========== ===== ==========
Earnings per Share, Basic:
Continued operations ............. (0.31) -- (0.31)
Discontinued operations .......... (0.02) -- (0.02)
---------- ----- ----------
Net loss ......................... (0.33) -- (0.33)
========== ===== ==========
Earnings per Share, Diluted:
Continued operations ............. (0.31) -- (0.31)
Discontinued operations .......... (0.02) -- (0.02)
---------- ----- ----------
Net loss ......................... (0.33) -- (0.33)
========== ===== ==========
</TABLE>
Note 3. DISPOSAL OF ANALYTICAL SERVICES SEGMENT
On April 30, 1999, the Company completed the cash sale of the EA Laboratories
division to Severn Trent Laboratories, Inc. The assets of the analytical
sampling segment sold consisted primarily of an inventory of supplies, the
balance of costs and estimated earnings in excess of billings on uncompleted
contracts as of the transaction date, and property, plant and equipment. The
cash transaction resulted in a net pretax gain of $58,800.
Since the Analytical Services segment was discontinued on April 30, 1999, there
are no comparative results to discuss. However, operating results of the
Analytical Services segment for the three and six months ended February 28, 1999
have been restated and are shown separately in the accompanying income
statements under operations of discontinued segment.
Gross revenues of the Analytical Services segment for the three and six months
ended February 28, 1999 were $1,559,200 and $3,367,200, respectively. These
amounts are not included in the accompanying income statement's total revenue
from continuing operations, but are reflected within operations of discontinued
segment.
Note 4. EMPLOYEE STOCK PURCHASE PLAN
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 90% of current market
value at the time of purchase. The Company pays all administrative expenses
related to employee purchases. During the quarter and six months ended February
29, 2000, 9,706 and 23,392 shares, respectively, were purchased under this Plan.
A total of 46,944 shares remain authorized for distribution under the Purchase
Plan as of February 29, 2000.
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Note 5. STOCK PURCHASE
On November 2, 1999, the Company announced that its Board of Directors
authorized management to purchase up to 500,000 shares of its common stock.
During the second quarter and six months ended February 29, 2000, the Company
purchased 202,100 and 267,600 shares, respectively, of common stock under this
plan. The Company suspended the repurchase program on February 4, 2000, when it
was reported that management had discovered accounting irregularities (see Note
2). The Company has purchased these shares, at cost, which are presented as
Treasury Stock in the consolidated balance sheet. There is no assurance as to
the actual number of shares that will be purchased under the program should it
be reactivated.
11
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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
General
The Company's results of operations are significantly affected by the timing of
the award of contracts, the timing of performance of contracts, and the extent
to which the Company's employees are performing billable tasks as opposed to
engaging in preparing contract proposals and other required non-billable
activities. Results of operations may also be affected to the extent that the
Company chooses not to reduce its professional staff during a period of reduced
demand for its services. Due to these factors, quarterly results of operations
are not necessarily indicative of the results of operations for longer periods.
The Company, in the course of providing its services, routinely subcontracts
such services as drilling, certain laboratory analyses, and other specialized
services. In addition, the use of teaming partners for the performance of
services similar to those of the Company, is included in subcontracts. In
accordance with industry practice and contract terms that generally provide for
the recovery of overhead costs, these costs are passed directly through to
clients and are included in total revenue. Because subcontractor costs and
direct charges can change significantly from project to project, the change in
total revenue is not necessarily a true indication of business trends.
Accordingly, the Company considers net revenue, which is total revenue less
subcontractor and other direct project costs, as its primary measure of revenue.
Recent Developments
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.
RESULTS OF OPERATIONS
Three Months Ended February 29, 2000 Versus Three Months Ended February 28, 1999
Net revenue for the three months ended February 29, 2000 was $8,778,900, an
increase of 14.6%, compared to $7,662,000 for the same period in the prior
fiscal year. This increase in net revenue, primarily in the federal sector, is
due to several new contracts underway in the Company's Mid-Atlantic, Northeast
and South Central branches. Additionally, an increase in technical headcount has
also contributed to the increase.
Direct salaries and other operating costs for the three months ended February
29, 2000 increased 4.0% to $6,817,600 or 77.7% of net revenue from $6,554,400 or
85.5% for the three-month period ended February 28, 1999. This increase is
primarily due to higher technical headcount and also reflects a net savings of
costs on a per employee basis quarter to quarter.
12
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Sales, general and administrative costs for the three months ended February 29,
2000 decreased by 15.9% to $1,812,100 or 20.6% of net revenue, from $2,155,100
or 28.1% of net revenue, for the three-month period ended February 28, 1999. The
decrease is due to lower sales and marketing related costs from quarter to
quarter. This reduction is a direct result of the fiscal 1999 second quarter
restructuring which included a reduction in corporate sales and marketing
personnel and cost savings resulting from the decentralization of EA's marketing
and business development program. The decrease also included a non-recurring
forfeiture recapture associated with the Company's 401(k) plan of approximately
$240,000.
The provision for income taxes was $38,200 for the three months ended February
29, 2000 compared to a benefit from income taxes of $1,297,800 in the second
quarter of fiscal 1999. This represents an effective tax rate of 40% in both
quarters.
The Company recorded a net loss from operations of its now discontinued
Analytical Services segment of $147,000 in the second quarter of fiscal 1999.
The segment was sold in the second quarter of fiscal 1999.
As a result of the above factors, the Company incurred net income of $57,400, or
0.7% of net revenue, for the second quarter ended February 29, 2000 compared to
a net loss of $2,072,200, or 27.0%, in the second quarter of fiscal 1999.
Six Months Ended February 29, 2000 Versus Six Months Ended February 28, 1999
Net revenue for the six months ended February 29, 2000 was $17,481,000, an
increase of 11.4%, compared to $15,695,800 for the same period in the prior
fiscal year. This increase in net revenue, primarily in the federal sector, is
attributable to several new contracts underway in the Company's Mid-Atlantic,
Northeast and South Central branches. Additionally, an increase in technical
headcount has also contributed to the increase.
Direct salaries and other operating costs increased 7.1% to $13,452,800 or 77.0%
of net revenue from $12,561,500, or 80.0% of net revenue for the six-month
periods ended February 29, 2000 and February 28, 1999, respectively. This
increase is primarily due to higher technical headcount and also reflects a net
savings of costs on a per employee basis year to year.
Sales, general and administrative costs decreased by 17.7% to $3,451,100, or
19.7% of net revenue, from $4,194,400 or 26.7% of net revenue, for the six-month
periods ended February 29, 2000 and February 28, 1999, respectively. This
decrease is primarily due to lower sales and marketing related costs in the
current period. This reduction is a direct result of the fiscal 1999 second
quarter restructuring which included a reduction in corporate sales and
marketing personnel and cost savings resulting from the decentralization of EA's
marketing and business development program.
The provision for income taxes was $191,000 and the benefit from income taxes
was $1,315,100 for the six months ended February 29, 2000 and February 28, 1999,
respectively. This represents an effective tax rate of 40% in both periods.
The Company reported a net loss from operations of its now discontinued
Analytical Services segment of $119,000 for the six months ended February 28,
1999. The segment was sold in the second quarter of fiscal 1999.
13
<PAGE>
As a result of the above factors, the Company incurred net income of $285,700
and a net loss of $2,071,800, or 1.6% and 13.2% of net revenue, for the six
months ended February 29, 2000 and February 28, 1999, respectively.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $345,700 for the six months ended
February 29, 2000. The decrease was primarily due to the purchase of equipment
of $470,400 and purchase of treasury stock of $298,700, offset by cash provided
by operations of $423,400 attributable primarily to improvements in working
capital.
The Company's capital expenditures, consisting primarily of purchases of
equipment, were approximately $470,400 for the six months ended February 29,
2000. The Company anticipates the level of capital expenditures for the
remainder of fiscal year 2000 to remain fairly consistent with the level in the
first six months ended February 29, 2000 and to be financed by cash generated
from operations.
At February 29, 2000, the Company had outstanding long-term debt of $3,363,100.
This represents a net increase of $36,900 from the $3,326,200 balance at August
31, 1999.
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 and
immediately foreseeable 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 various indefinite
delivery/indefinite quantity contracts, there can be no assurance that this
demand will, in fact, materialize.* 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.
Year 2000
EA recognized the seriousness of the challenge businesses worldwide faced as a
result of the Year 2000 problem. EA put in place a formal Year 2000 project in
early 1998. As a result of these efforts, the Company transitioned into the new
millennium without incident. EA does not foresee any additional risks associated
with Year 2000 issues.*
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.
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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.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a vote of Security Holders
At the Annual Meeting of Stockholders held on January 13, 2000, the following
proposals were adopted as indicated:
1. To elect four directors to serve until the next annual meeting and
until their successors are elected and qualified.
Director For Withheld
-------- --- --------
E. Cashman 5,672,597 157,491
L. Jensen 5,670,243 159,845
R. Lamone 5,666,271 163,817
C. Miller 5,772,709 57,379
2. To approve the appointment of PricewaterhouseCoopers LLP, as the
independent public accountants of the corporation.
For 5,815,439
Against 12,671
Abstain 1,978
Broker Non-Votes
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (see page 19)
(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 6,
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
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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.
17
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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)
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