<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
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 March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number
1-9812
TENERA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3213541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Spear Tower, Suite 1850, San Francisco, California 94105-1018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 536-4744
----------------------------
Securities registered pursuant to Section 12(b) of
the Act:
Common Stock
Securities registered pursuant to Section 12(g) of
the Act:
None
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 .
--------- ----------
The number of shares outstanding on March 31, 2000, was 9,948,759.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) ............................................. 1
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ..... 8
Item 3. Quantitative and Qualitative Disclosures of Market Risk ................................... 9
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ......................................................................... *
Item 2. Changes in Securities ..................................................................... *
Item 3. Defaults Upon Senior Securities ........................................................... *
Item 4. Submission of Matters to a Vote of Security Holders ....................................... *
Item 5. Other Information ......................................................................... *
Item 6. Exhibits and Reports on Form 8-K .......................................................... 10
</TABLE>
___________________
* None.
i
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
TENERA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue ................................................................... $ 9,647 $ 9,282
Direct Costs .............................................................. 7,721 7,285
General and Administrative Expenses ....................................... 1,781 1,489
Other Income .............................................................. 4 --
------------- ------------
Operating Income ........................................................ 149 508
Interest Income, Net ...................................................... 51 27
------------- ------------
Net Earnings Before Income Tax Expense................................... 200 535
Income Tax Expense ........................................................ 80 230
------------- ------------
Net Earnings .............................................................. $ 120 $ 305
============= ============
Net Earnings per Share-- Basic ............................................ $ 0.01 $ 0.03
============= ============
Net Earnings per Share-- Diluted .......................................... $ 0.01 $ 0.03
============= ============
Weighted Average Number of Shares Outstanding-- Basic ..................... 9,939 10,129
============= ============
Weighted Average Number of Shares Outstanding-- Diluted ................... 10,529 10,542
============= ============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
1
<PAGE>
TENERA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 4,470 $ 3,493
Receivables, less allowance of $1,291 (1999 - $1,298)
Billed ................................................................ 2,496 3,587
Unbilled .............................................................. 3,190 2,968
Other current assets .................................................... 392 369
------------- ------------
Total Current Assets ................................................ 10,548 10,417
Property and Equipment, Net ............................................... 393 293
Other Assets .............................................................. 166 --
------------- ------------
Total Assets ..................................................... $ 11,107 $ 10,710
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ........................................................ $ 3,184 $ 3,112
Accrued compensation and related expenses ............................... 1,952 1,838
Income taxes payable .................................................... 80 --
------------- ------------
Total Current Liabilities ........................................... 5,216 4,950
Commitments and Contingencies
Stockholders' Equity
Common Stock, $0.01 par value, 25,000,000 authorized, 10,417,345 issued
and outstanding ......................................................... 104 104
Paid in capital, in excess of par ....................................... 5,693 5,699
Retained earnings........................................................ 627 507
Treasury stock-- 468,586 shares (1999 - 483,586 shares).................. (533) (550)
------------- ------------
Total Shareholders' Equity ........................................ 5,891 5,760
------------- ------------
Total Liabilities and Stockholders' Equity ....................... $ 11,107 $ 10,710
============= ============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
2
<PAGE>
TENERA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Paid-In
Capital
Common in Excess Retained Treasury
Stock of Par Earnings Stock Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1999 .......... $ 104 $ 5,699 $ 507 $ (550) $ 5,760
Issuance of 15,000 Common
Stock Shares from Treasury.. -- (6) -- 17 11
Net Earnings ............... -- -- 120 -- 120
------------ ------------ ------------ ------------ ------------
March 31, 2000 ............. $ 104 $ 5,693 $ 627 $ (533) $ 5,891
============ ============ ============ ============ ============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
3
<PAGE>
TENERA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ............................................................ $ 120 $ 305
Adjustments to reconcile net earnings to cash provided (used) by
operating activities:
Depreciation and amortization.......................................... 68 48
Gain on sale of assets ................................................ (4) --
Decrease in allowance for sales adjustments ........................... (7) --
Changes in assets and liabilities:
Receivables ......................................................... 876 (1244)
Other current assets ................................................ (23) 29
Accounts payable .................................................... 72 392
Accrued compensation and related expenses ........................... 114 183
Income taxes payable ................................................ 80 150
------------- ------------
Net Cash Provided (Used) By Operating Activities .................. 1,296 (137)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ................................... (337) (60)
Proceeds from sale of assets ............................................ 7 --
------------- ------------
Net Cash Used in Investing Activities ............................. (330) (60)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock from Treasury.................................. 11 --
------------- ------------
Net Cash Provided by Financing Activities ........................ 11 --
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 977 (197)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 3,493 3,361
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 4,470 $ 3,164
============= ============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
4
<PAGE>
TENERA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
Note 1. Organization
TENERA, Inc. (the "Company"), a Delaware corporation,is the parent company
of the subsidiaries described below.
TENERA Rocky Flats, LLC ("Rocky Flats"), a Colorado limited liability
company, was formed by the Company in 1995, to provide consulting services in
connection with participation in the Performance Based Integrating Management
Contract ("Rocky Flats Contract") at the Department of Energy's ("DOE") Rocky
Flats Environmental Technology Site. In May 1997, the Company's other government
business was consolidated within the Rocky Flats subsidiary. This business
provides consulting and management services to the DOE directly and through
subcontracts with DOE prime contractors. These services provide assistance to
DOE-owned nuclear facilities in devising, implementing, and monitoring
strategies to upgrade from an operational, safety, and environmental
perspective.
TENERA Energy, LLC ("Energy"), a Delaware limited liability company, was
formed by the Company in May 1997, to consolidate its commercial electric power
utility business into a separate legal structure. The Energy subsidiary provides
professional technical consulting and management services, environmental
outsourcing and monitoring, risk analysis and modeling, and organizational
effectiveness and development.
TENERA GoTrain.Net, LLC ("GoTrain.Net"), a Delaware limited liability
company, was formed by the Company in October 1999, as a joint venture operation
to design, develop, market, and maintain a web-based Corporate Distance Learning
Center ("CDLC"). The joint venture was established with its minority interest
partner, SoBran, Inc., an Ohio corporation specializing in Internet
technologies. In February 2000, the Company purchased certain Internet-based
development assets from SoBran, Inc. for $307,000, including SoBran's minority
interest in GoTrain.Net. The purchase consideration was allocated to the
acquired assets based on deemed fair values as follows: computer equipment and
software ($289,000); office equipment ($18,000). After the asset acquisitiion
from SoBran, the Company consolidated its technology enhanced training services
group into GoTrain.Net.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries and are unaudited. All
intercompany accounts and transactions have been eliminated. In the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position at March 31, 2000, and the
results of operations and cash flows for the three-month periods ended March 31,
2000 and 1999, have been made. For further information, refer to the financial
statements and notes thereto contained in TENERA, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Cash and Cash Equivalents. Cash and cash equivalents consist of demand
deposits, money market accounts, and commercial paper issued by companies with
strong credit ratings. Cash and cash equivalents are carried at cost, which
approximates fair value. The Company includes in cash and cash equivalents, all
short-term, highly liquid investments which mature within three months of
acquisition.
5
<PAGE>
Concentrations of Credit Risk and Credit Risk Evaluations. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and accounts receivable.
Cash and cash equivalents consist principally of demand deposit, money market
accounts, and commercial paper issued by companies with strong credit ratings.
Cash and cash equivalents are held with various domestic financial institutions
with high credit standing. The Company has not experienced any significant
losses on its cash and cash equivalents. The Company conducts business with
companies in various industries primarily in the United States. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. Allowances are maintained for potential credit issues, and
such losses to date have been within management's expectations.
Property and Equipment. Property and equipment are stated at cost
($2,901,000 and $2,587,000 at March 31, 2000 and December 31, 1999,
respectively), net of accumulated depreciation ($2,342,000 and $2,294,000 at
March 31, 2000 and December 31, 1999, respectively). Depreciation is calculated
using the straight line method over the estimated useful lives, which range from
three to five years.
Revenue. The Company primarily offers its services to the electric power
industry and the DOE. Revenue from time-and-material and cost plus fixed-fee
contracts is recognized when costs are incurred; from fixed-price contracts, on
the basis of percentage of work completed (measured by costs incurred relative
to total estimated project costs).
The Company performs credit evaluations of these clients and normally does
not require collateral. Reserves are maintained for potential sales adjustments
and credit losses; such losses to date have been within management's
expectations. Actual revenue and cost of contracts in progress may differ from
management estimates and such differences could be material to the financial
statements.
During the first quarter of 2000, three clients accounted for 42%, 24%,
and 15% of the Company's total revenue. During the same period in 1999, three
clients accounted for 31%, 24% and 18% of the total revenue.
Income Taxes. The Company uses the liability method to account for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities. Deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
Per Share Computation. Basic earnings per share is computed by dividing
net earnings by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
by adding other common stock equivalents, including stock options, warrants and
convertible preferred stock, in the weighted average number of common shares
outstanding for a period, if dilutive.
6
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share as required by Financial Accounting Standards Board Statement
No. 128:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
--------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator:
Net earnings .................................................. $ 120 $ 305
============= ============
Denominator:
Denominator for basic earnings per share--
weighted-average shares outstanding............................. 9,939 10,129
Effect of dilutive securities:
Employee & Director stock options (Treasury stock method) ... 590 413
------------- ------------
Denominator for diluted earnings per share--
weighted-average common and common equivalent shares ........... 10,529 10,542
============= ============
Basic earnings per share ........................................ $ 0.01 $ 0.03
============= ============
Diluted earnings per share ...................................... $ 0.01 $ 0.03
============= ============
- --------------------------------------------------------------------------------------------------------
</TABLE>
Comprehensive Income. The Company does not have material components of
other comprehensive income. Therefore, comprehensive income is equal to net
earnings reported for all periods presented.
Disclosures about Segments of an Enterprise. The Company has one
reportable operating segment, which is providing services with respect to
operations, maintenance, safety, strategic business and risk management, and
environmental/ecological issues for electric utility and DOE facilities.
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"),
which establishes accounting and reporting standards for derivative instruments
and hedging activities. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The Company will be required to adopt FAS 133
effective January 1, 2001. Management of the Company does not believe the
adoption of this statement will have a material effect on the Company's
consolidated financial position, results of operations, or cash flows.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
TENERA, INC.
Results of Operations
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Percent of Revenue
-----------------------
Quarter Ended March 31,
-----------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue ......................................................................... 100.0% 100.0%
Direct Costs .................................................................... 80.0 78.5
General and Administrative Expenses ............................................. 18.5 16.0
Other Income .................................................................... * --
--------- ---------
Operating Income .............................................................. 1.5 5.5
Interest Income, Net ............................................................ 0.5 0.3
--------- ---------
Net Earnings Before Income Tax Expense .......................................... 2.0% 5.8%
========= =========
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 0.05%
Results of Operations
Net earnings before income tax expense was $200,000 for the three month
period ended March 31, 2000, compared to $535,000 for the first quarter of 1999.
During the first quarter of 2000, the Company received written contracts
and orders having an estimated value of approximately $9.5 million. The activity
primarily reflects the additional funding of the Company's contract at the DOE's
Rocky Flats Environmental Technology Site and a $.6 million GoTrain.Net contract
involving the development of Technology Enhanced Training courses ("TET
Courses") and future CDLC usage. Contracted backlog for current, active projects
totaled approximately $15.6 million as of March 31, 2000, up from $15.3 million
at December 31, 1999.
The 4% revenue increase in the first quarter of 2000, compared to a year
ago, is primarily the result of increased Rocky Flats Contract activity,
partially offset by a revenue decline in the commercial strategic consulting
business area. For the first quarter of 2000, the concentration of revenue from
the government sector increased to 86% of total revenue, from 82% for the same
period in 1999.
Direct costs were higher in the first quarter of 2000, compared to a year
ago, primarily as a result of increased revenue generation and the related use
of subcontractor teams under the Rocky Flats Contract. Gross margins decreased
to 20% in the first quarter of 2000, from 22% for the same period in 1999,
primarily due to an increase in the proportion of lower margin government
projects.
General and administrative costs were 20% higher compared to a year ago,
primarily reflecting increased costs associated with the development of TET
Courses and the purchase of the Internet-based development and support business
of SoBran, Inc. (see Note 1 to Consolidated Financial Statements).
Net interest income in 2000 and 1999 represents earnings from the
investment of cash balances in short-term, high-quality, money market accounts
and corporate debt instruments. The higher net interest income in 2000, as
compared to a year ago, primarily reflects larger average cash balances and
higher interest rates. The Company had no borrowings under its line of credit
during the first three months of 2000 and 1999.
8
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents increased by $977,000 during the first three
months of 2000. The increase was due to cash provided by operations ($1,296,000)
and the exercising of stock options ($11,000), partially offset by the net
acquisition of property and equipment ($330,000), associated with the purchase
of certain Internet-based development assets from SoBran, Inc. (see Note 1 to
Consolidated Financial Statements).
Receivables decreased by $876,000 from December 31, 1999, primarily due to
increased collections. The allowance for sales adjustments decreased by $7,000
from December 31, 1999.
Accounts payable increased by $72,000 since the end of 1999, primarily
associated with supporting increased revenues. Accrued compensation and related
expenses increased by $114,000 during the period, primarily reflecting the
annual merit increases in employee salaries and fewer holiday and vacation days
in the first quarter of the year.
No cash dividend was declared in the first three months of 2000.
The impact of inflation on project revenue and costs of the Company was
minimal.
At March 31, 2000, the Company had available $2,500,000 of a $3,000,000
revolving loan facility. The Company has no outstanding borrowing against the
line; however, $500,000 is assigned to support standby letters of credit. The
line of credit expires in May 2000. The Company expects to renew on
substantially the same terms.
Management believes that cash expected to be generated by operations, the
Company's working capital, and its loan facility are adequate to meet its
anticipated liquidity needs through the next twelve months.
Forward-Looking Statements
Statements contained in this report which are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected. Such risks and uncertainties include the reliance on major
customers and concentration of revenue from the government sector; the
uncertainty of future profitability; uncertainty regarding industry trends and
customer demand; uncertainty of access to additional capital; reliance on key
personnel; government contract audits; uncertainty regarding competition; and
unknown Year 2000 issues of third party vendors. Additional risks are detailed
in the Company's filings with the Securities and Exchange Commission ("SEC"),
including its Form 10-K for the year ended December 31, 1999.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Company has minimal exposure to market and interest risk as the
Company invests its excess cash in short-term instruments which mature within 90
days from the date of purchase. The Company does not have any derivative
instruments.
9
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.0 Statement regarding computation of per share earnings: See Notes
to Consolidated Financial Statements.
27.0* Financial Data Schedule
(b) Reports on Form 8-K
None.
_______________________________
* Filed herewith.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 11, 2000
TENERA, INC.
By /s/ JEFFREY R. HAZARIAN
------------------------------------------
Jeffrey R. Hazarian
Executive Vice President and
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 4,470
<SECURITIES> 0
<RECEIVABLES> 6,977
<ALLOWANCES> 1,291
<INVENTORY> 0
<CURRENT-ASSETS> 10,548
<PP&E> 393
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,107
<CURRENT-LIABILITIES> 5,216
<BONDS> 0
<COMMON> 5,797
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,107
<SALES> 0
<TOTAL-REVENUES> 9,647
<CGS> 0
<TOTAL-COSTS> 7,721
<OTHER-EXPENSES> 1,777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (51)
<INCOME-PRETAX> 200
<INCOME-TAX> 80
<INCOME-CONTINUING> 120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
