UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended November 30, 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 I.R.S. Employer ID Number
of Incorporation or Organization)
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 January 10, 2001, was 5,998,283.
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
INDEX
<TABLE>
Page
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<S> <C>
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..................................................9
PART II OTHER INFORMATION..........................................................10
ITEM 6 Exhibits and Reports on Form 8-K...........................................11
(a) Exhibits..............................................................11
(b) Reports on Form 8-K...................................................11
</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, 2000 consolidated financial
statements and notes thereto included in the Company's 2000 Annual Report on
Form 10-K filed on November 15, 2000.
3
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
November 30, August 31,
2000 2000
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,523,000 $ 1,663,700
Accounts receivable, net 9,567,800 10,829,200
Costs and estimated earnings in excess of
billings on uncompleted contracts 6,851,500 6,027,700
Prepaid expenses and other 434,200 377,200
Deferred income taxes 311,900 311,900
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Total Current Assets 18,688,400 19,209,700
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PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment 9,983,500 9,816,500
Leasehold improvements 1,039,100 1,039,100
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Total property and equipment 11,022,600 10,855,600
Accumulated depreciation and amortization (9,461,000) (9,344,000)
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Net Property and Equipment 1,561,600 1,511,600
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OTHER ASSETS:
Deferred income taxes 3,586,500 3,586,500
Other assets 1,226,300 1,207,900
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Total Other Assets: 4,812,800 4,794,400
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Total Assets $ 25,062,800 $ 25,515,700
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</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
November 30, August 31,
2000 2000
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 5,437,000 $ 5,673,200
Accrued expenses 392,200 459,800
Accrued salaries, wages and benefits 2,733,300 2,320,800
Current portion of capital lease obligation 51,400 44,700
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,194,600 1,872,500
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Total Current Liabilities 9,808,500 10,371,000
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LONG-TERM DEBT
Capital lease obligation, net of current portion 305,200 187,300
Long-term debt, net of current portion 3,417,400 3,486,100
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Total Long-Term Debt 3,722,600 3,673,400
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Total Liabilities 13,531,100 14,044,400
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; voting;
10,000,000 shares authorized; 6,386,397
and 6,378,800 shares issued and outstanding 63,900 63,800
Preferred stock, $.01 par value; 8,000,000
shares authorized; none issued -- --
Capital in excess of par value 11,158,900 11,149,700
Retained earnings 852,300 749,100
Treasury Stock, 514,600 and 463,600
shares, at cost (543,400) (491,300)
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Total Stockholders' Equity 11,531,700 11,471,300
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Total Liabilities and Stockholders' Equity $ 25,062,800 $ 25,515,700
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</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended
November 30,
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2000 1999
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<C> <S> <S>
Total revenue $ 14,713,600 $ 14,808,600
Less - Subcontractor costs (4,742,000) (4,581,500)
Less - Other direct project costs (1,478,500) (1,525,000)
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Net revenue 8,493,100 8,702,100
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Operating costs and expenses:
Direct salaries and other operating 6,686,100 6,635,200
Sales, general and administrative 1,545,800 1,639,000
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Total operating expenses 8,231,900 8,274,200
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Income from operations 261,200 427,900
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Interest expense (108,600) (73,100)
Interest income 19,700 26,300
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Income before income taxes 172,300 381,100
Provision for income taxes 69,000 152,800
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Net Income $ 103,300 $ 228,300
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Net Income Per Share -
Basic $ 0.02 $ 0.04
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Diluted $ 0.02 $ 0.04
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Weighted average shares outstanding 5,900,100 6,322,400
Effect of dilutive stock options 1,800 --
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Diluted weighted average shares outstanding 5,901,900 6,322,400
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</TABLE>
The accompanying notes are an integral part of these statements.
6
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
November 30,
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 103,300 $ 228,300
Noncash expenses included in net income-
Depreciation and amortization 121,600 86,100
Gain on sale of assets (5,300) --
Provision for doubtful accounts 48,600 --
Changes in operating assets and liabilities -
Decrease in accounts receivable 1,212,800 104,200
(Increase) in costs and estimated earnings
in excess of billings on uncompleted contracts (823,800) (2,381,800)
(Increase) decrease in prepaid expenses and other assets (75,400) 131,000
Increase in accounts payable and accrued expenses 108,700 1,062,100
(Decrease) increase in billings in excess of
of costs and estimated earnings on
uncompleted contracts (677,900) 981,800
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Net cash flows from operating activities 12,600 211,700
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CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of equipment (30,300) (179,000)
Proceeds from sale of equipment 6,000 --
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Net cash flows used for investing activities (24,300) (179,000)
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CASH FLOWS FROM USED FOR FINANCING ACTIVITIES:
Net (repayments) borrowings on revolving line of credit (68,700) 12,800
Proceeds from issuance of common stock 9,300 11,300
Reduction of long-term debt -- (87,500)
Purchase of treasury stock (52,100) (62,600)
Repayment of capital lease obligations (17,500) --
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Net cash flows used for financing activities (129,000) (126,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (140,700) (93,300)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,663,700 1,963,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,523,000 $ 1,869,700
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases $ 142,000 $ --
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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 THREE MONTHS ENDED NOVEMBER 30, 2000 AND 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.
Note 2. 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 Purchase 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 ended
November 30, 2000, 11,143 shares were purchased under this Plan. A total of
15,202 shares remain authorized for distribution under the Purchase Plan as of
November 30, 2000.
Note 3. 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 quarter ended November 30, 2000, the Company purchased 51,000 shares
of common stock under this plan. In total, 444,200 shares have been purchased
under this plan as of November 30, 2000. The Company purchased these shares, at
cost, and has reflected them 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 and, in fact, the program can be suspended by the
Board at any time.
8
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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.
On September 18, 2000, the Company announced that it's Board of Directors had
retained investment bankers Legg Mason Wood Walker, Inc. and TechKNOWLEDGEy
Strategic Group to explore strategic alternatives that may be available to the
Company to maximize shareholder value, including but not limited to, the sale of
the Company or business combination with another company. The Company continues
to explore its strategic alternatives.
RESULTS OF OPERATIONS
Three Months Ended November 30, 2000
Net revenue for the three months ended November 30, 2000 was $8,493,100, a
decrease of 2.4%, compared to $8,702,100 for the same period in the prior fiscal
year. This slight decrease in net revenue is directly attributable to higher
subcontractor costs, partially offset by a reduction in other direct project
costs for the quarter.
Direct salaries and other operating costs increased 0.8% to $6,686,100 or 78.7%
of net revenue from $6,635,200 or 76.2% for the three-month period ended
November 30, 2000. This increase is primarily due to higher regional costs for
overhead, sales, and bid and proposals. The Company's continued investment in
these areas contributed to the Company receiving $15.5 million in contract
awards, a 20% increase over the prior year period. In addition to these contract
awards, the Company received notification from the U.S. Army Corps of Engineers,
Kansas City District that it has been selected for award of two contracts, each
valued at approximately $25 million, for the performance of Long Term Remedial
Action at NPL sites in EPA Region II and Long Term Operations and Maintenance
services at Department of Defense facilities in EPA Region VII, respectively.
The period of performance of each of these contracts is expected to begin in
March 2001 and will continue for five years.
Sales, general and administrative costs decreased by 5.7% to $1,545,800, or
18.2% of net revenue, from $1,639,000 or 18.8% of net revenue, for the
three-month period ended November 30, 2000. The decrease is due to lower
corporate general and administrative costs, primarily in the finance and
information technology departments, which is mainly attributable to a planned
lower headcount.
The provision for income taxes was $69,000 for the three months ended November
30, 2000 compared to a provision for income taxes of $152,800 in the first
quarter of fiscal 2000. This represents an effective tax rate of 40%
respectively for both fiscal years.
As a result of the above factors, the Company had net income of $103,300, or
1.2% of net revenue, for the three months ended November 30, 2000 compared to
$228,300, or 2.6%, in the first quarter of fiscal 2000.
9
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Liquidity and Capital Resources
Cash and cash equivalents decreased by $140,700 for the three months ended
November 30, 2000. The decrease was primarily due to the acquisition of
equipment of $30,300, the purchase of treasury stock of $52,100, the net
repayment of borrowings of $68,700 and the repayment of capital lease
obligations of $17,500. The decreases were partially offset by net cash provided
from operations of $12,600 and cash provided by the issuance of common stock of
$9,300.
The Company's capital expenditures, consisting primarily of purchases of
equipment, were approximately $30,300 and $179,000 for the three months ended
November 30, 2000 and 1999, respectively. The Company anticipates the level of
total annual capital expenditures for fiscal year 2001 will remain fairly
consistent with the level in fiscal year 2000 and will be financed by cash
generated from operations.
At November 30, 2000, the Company had outstanding long-term debt of $3,417,400.
This represents a net decrease of $68,700 from the $3,486,100 balance at August
31, 2000.
The Company's existing funds, cash from operations, and the available portion of
its $7,000,000 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.
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.
10
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EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
11
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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
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(Registrant)
January 12, 2001 By: /s/ Loren D. Jensen
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(Signature)
Loren D. Jensen
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Chairman of the Board, President
and CEO
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(Title)
January 12, 2001 By: /s/ Barbara L. Posner
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(Signature)
Barbara L. Posner
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Chief Financial Officer and
Chief Operating Officer
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(Title)
