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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended August 31, 1995 Commission File No. O-13965
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3051642
(State of Incorporation) (I.R.S. Employer Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02164
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 969-0700
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 Common Stock
outstanding at September 30, 1995 3,864,763
----------------------
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INDEX
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets -
August 31, 1995 (unaudited) and February 28, 1995 3
Consolidated Statements of Operations (unaudited) -
Three and Six Months Ended August 31, 1995 and 1994 4
Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended August 31, 1995 and 1994 5
Notes to Consolidated Financial Statements -
August 31, 1995 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES
</TABLE>
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, 1995 February 28, 1995
--------------- -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,456,000 $ 3,021,000
Restricted cash -- 1,900,000
Available-for-sale securities 3,226,000 2,033,000
Accounts receivable, net 17,459,000 15,572,000
Due from affiliate 769,000 687,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 3,815,000 5,123,000
Prepaid expenses and other current assets 1,323,000 1,191,000
Refundable income taxes 379,000 493,000
Deferred income taxes 800,000 800,000
------------- -------------
Total current assets 30,227,000 30,820,000
Property and equipment, net 5,740,000 5,938,000
Other assets, net 2,035,000 2,121,000
Due from affiliate -- 232,000
------------- -------------
Total assets $ 38,002,000 $ 39,111,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,186,000 $ 1,869,000
Current portion of long-term debt 799,000 835,000
Accounts payable, trade 5,254,000 6,086,000
Accrued payroll and expenses 3,235,000 5,448,000
------------- -------------
Total current liabilities 13,474,000 14,238,000
------------- -------------
Long-term debt 2,260,000 2,730,000
Deferred income taxes 458,000 458,000
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized shares 1,000,000
Issued and outstanding - none --
Common stock - $.01 par value
Authorized shares 14,000,000
Issued and outstanding 3,850,413 at
August 31, 1995 and 3,824,544 at
February 28, 1995 39,000 38,000
Capital in excess of par value 13,900,000 13,866,000
Unrealized losses on available-for-sale securities (21,000) (14,000)
Retained earnings 7,892,000 7,795,000
------------- -------------
Total stockholders' equity 21,810,000 21,685,000
------------- -------------
Total liabilities and stockholders' equity $ 38,002,000 $ 39,111,000
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended August 31, Six Months Ended August 31,
----------------------------- ---------------------------
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 17,327,000 $ 15,530,000 $ 33,602,000 $ 29,119,000
Reimbursable expenses 7,150,000 4,881,000 13,348,000 8,309,000
------------ ------------ ------------ ------------
Net revenues 10,177,000 10,649,000 20,254,000 20,810,000
Costs and expenses:
Salaries and related costs 7,526,000 7,488,000 15,096,000 14,842,000
General and administrative
expenses 2,552,000 2,457,000 4,692,000 4,607,000
------------ ------------ ------------ ------------
Income from continuing operations 99,000 704,000 466,000 1,361,000
------------ ------------ ------------ ------------
Interest and other income (expense), net:
Interest income 48,000 36,000 80,000 69,000
Other income (expense), net 14,000 12,000 17,000 29,000
Interest expense (107,000) (71,000) (193,000) (126,000)
------------ ------------ ------------ ------------
(45,000) (23,000) (96,000) (28,000)
------------ ------------ ------------ ------------
Income from continuing operations before provision
for income taxes 54,000 681,000 370,000 1,333,000
Provision (benefit) for income taxes (18,000) 379,000 108,000 649,000
------------ ------------ ------------ ------------
Net income from continuing operations 72,000 302,000 262,000 684,000
Discontinued operations (Note 2)
Loss from discontinued operations, net of income tax
benefit (165,000) (80,000) (165,000) (190,000)
------------ ------------ ------------ ------------
Net income $ (93,000) $ 222,000 $ 97,000 $ 494,000
------------ ------------ ------------ ------------
Net income per share from
continuing operations .02 .08 .07 $ .18
------------ ------------ ------------ ------------
Net loss per share from
discontinued operations (.04) (.02) (.04) $ (.05)
------------ ------------ ------------ ------------
Net income per share $ (.02) $ .06 $ .03 $ .13
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding 3,850,000 3,810,000 3,848,000 3,810,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended August 31,
---------------------------
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 262,000 $ 684,000
Adjustments to reconcile net income to net cash (used)
by operating activities:
Discontinued operations (165,000) (190,000)
Depreciation and amortization 682,000 648,000
Gain on disposal of equipment (16,000) (28,000)
Changes in assets and liabilities:
Increase in accounts receivable, net (1,887,000) (346,000)
Decrease (increase) in costs and estimated earnings in
excess of billings on uncompleted contracts 1,308,000 (424,000)
Increase in prepaid expenses and other current
assets (132,000) (434,000)
Decrease in refundable income taxes 114,000 --
Decrease in accounts payable, trade (832,000) (288,000)
Decrease in accrued payroll and expenses (2,178,000) (685,000)
Decrease in income taxes payable -- (277,000)
----------- -----------
Net cash used by operating activities (2,844,000) (1,340,000)
----------- -----------
Cash flows from investing activities:
(Increase) decrease in available-for-sale securities, net (1,193,000) 2,934,000
Decrease (increase) in restricted cash 1,900,000 (1,900,000)
Decrease in due from affiliate 150,000 --
Proceeds from disposal of equipment 21,000 30,000
Acquisition of property and equipment (410,000) (534,000)
Decrease in other assets -- 106,000
----------- -----------
Net cash provided by investing activities 468,000 636,000
----------- -----------
Cash flows from financing activities:
Net borrowings under notes payable 2,317,000 1,821,000
Repayments of long-term debt (506,000) (649,000)
Issuance of common stock -- 47,000
----------- -----------
Net cash provided by financing activities 1,811,000 1,219,000
----------- -----------
Net (decrease) increase in cash and cash equivalents (565,000) 515,000
----------- -----------
Cash and cash equivalents at beginning of period 3,021,000 1,948,000
----------- -----------
Cash and cash equivalents at end of period $ 2,456,000 $ 2,463,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995
NOTE 1 -
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
without audit by GZA GeoEnvironmental Technologies, Inc. and Affiliate
(the "Company") in accordance with generally accepted accounting
principles for interim financial statements and pursuant to the rules
of the Securities and Exchange Commission for Form 10-Q. Certain
information and footnotes required by generally accepted accounting
principles for complete financial statements have been omitted. It is
the opinion of management that the accompanying consolidated financial
statements reflect all adjustments (which are normal and recurring)
considered necessary for a fair presentation. For further information
refer to the audited financial statements and footnotes included in the
Company's Annual Report to Stockholders for the year ended February 28,
1995, as filed with the Securities and Exchange Commission on June 12,
1995. Operating results for the three month period ended August 31,
1995 are not necessarily indicative of the results that may be expected
for succeeding periods or for the year ending February 29, 1996.
NOTE 2 -
DISCONTINUED OPERATIONS
As reported in the Company's Form 10-K for the fiscal year ended
February 28, 1995, in May 1995 the Company abandoned the specialty
construction business conducted by its 50%-owned joint venture,
Fonditek International, Inc. ("Fonditek") and reported the results of
that business as discontinued operations for the year ended February
28, 1995.
The Company's prior years' operating results, including the results for
the three-month and six-month periods ended August 31, 1994 reported in
this Form 10-Q, have been restated to reflect continuing operations.
On September 28, 1995, the Company and certain of its subsidiaries
entered into an agreement with Fonditek and P&P Service, Inc., the
other 50% stockholder of Fonditek (the "Settlement Agreement"). In the
Settlement Agreement, the parties agreed upon terms for the liquidation
of the assets and satisfaction or assumption of the liabilities of
Fonditek and for the settlement of certain related disputes. To reflect
the net effect of the Settlement Agreement on the Company's investment
in Fonditek and related rights and obligations, the Company recorded an
additional loss from discontinued operations, net of tax benefit, for
the three month period ended August 31, 1995, in the amount of
$165,000.
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NOTE 3 -
CONTINGENCIES
The Company's services involve risks of significant liability
for environmental and property damage, personal injury, economic loss,
and costs assessed by regulatory agencies. Claims may potentially be
asserted against the Company under federal and state statutes, common
law, contractual indemnification agreements or otherwise. The Company
is, from time to time, party to legal actions arising in the normal
course of business. Management believes that the outcomes of the legal
actions to which it is currently a party will not, in the aggregate,
have a material adverse effect on the financial condition of the
Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Month Comparison for Fiscal Years 1996 and 1995
NET REVENUES. The Company's net revenues for the three months ended
August 31, 1995 decreased by approximately $472,000 (4.4%) compared to
the corresponding period in the prior fiscal year. The decrease is
attributable primarily to a decrease in the volume of the Company's
engineering consulting business which was offset, in part, by increases
in the volume of the Company's remediation services.
SALARIES AND RELATED COSTS. Salaries and related costs for the three
months ended August 31, 1995 increased by approximately $38,000 (0.5%)
compared to the corresponding period in the prior fiscal year. A
decrease in compensation costs due to reduced staffing and a reduction
in incentive compensation expense were more than offset by severance
costs and by increases in health insurance costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the three months ended August 31, 1995 increased by
approximately $95,000 (3.9%) compared to the corresponding period in
the prior fiscal year. The increase primarily reflects expense related
to increased consulting services incurred for long-range marketing,
strategic planning, and business practice projects and the fact that a
lower percentage of the Company's capital equipment useage costs was
chargeable to jobs performed during the three months ended August 31,
1995. These factors were offset, in part, by a reduction in legal and
claims expenses.
Six Month Comparison for Fiscal Years 1996 and 1995
NET REVENUES. The Company's net revenues for the six months ended
August 31, 1995 decreased by approximately $556,000 (2.7%) compared to
the corresponding period in the prior fiscal year. The decrease is
attributable primarily to a decrease in the volume of the Company's
engineering consulting business which was offset, in part, by increases
in the volume of the Company's remediation services.
SALARIES AND RELATED COSTS. Salaries and related costs for the six
months ended August 31, 1995 increased by approximately $254,000 (1.7%)
compared to the corresponding period in the prior fiscal year. A
decrease in compensation costs due to reduced staffing and a reduction
in incentive compensation expense were more than offset by severance
costs and increases in health insurance and profit sharing expenses.
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the six months ended August 31, 1995 increased by
approximately $85,000 (1.8%) compared to the corresponding period in
the prior fiscal year. The increase primarily reflects expense related
to increased consulting services incurred for long-range marketing,
strategic planning, and business practice projects and the fact that a
lower percentage of the Company's capital equipment useage costs was
chargeable to jobs performed during the six months ended August 31,
1995. These factors were offset, in part, by the receipt of proceeds
from the settlement in the Company's favor of a lawsuit, and by a
reduction of legal expenses relating to that and other matters.
Liquidity and Capital Resources
For the six month period ended August 31, 1995, $2,844,000 of net cash
was used by operations. The Company made capital expenditures of
approximately $410,000 for the first six months of fiscal 1996.
The Company's working capital increased from $16,582,000 at February
28, 1995 to $16,753,000 at August 31, 1995.
At August 31, 1995, the Company had cash on hand and cash equivalents
of $2,456,000, of which approximately $475,000 was invested in
federally tax-exempt bonds and short-term investments of $3,226,000 of
which $1,095,000 was invested in U.S. Treasury Notes and $2,131,000 in
federally tax-exempt bonds. The Company believes that its cash and
cash equivalents on hand and cash generated from operations will be
sufficient to meet its cash requirements for at least the next twelve
months.
In May 1995, the Company made a decision to discontinue its specialty
construction business and to liquidate its investment in Fonditek
International, Inc., ("Fonditek"), a 50% joint venture company. In
connection with this decision, the Company recorded a loss from
discontinued operations, net of tax benefit, for the year ended
February 28, 1995, in the amount of $2,216,000.
On September 28, 1995, the Company entered into an agreement (the
"Settlement Agreement") providing for the liquidation of the assets and
satisfaction or assumption of the liabilities of Fonditek and for the
settlement of certain related disputes. See Note 2 of Notes to
Consolidated Financial Statements. To reflect the net effect of the
Settlement Agreement on the Company's investment in Fonditek and
related rights and obligations (including the adjustment of certain
amounts receivables from, and payable to, Fonditek and related
parties), the Company recorded a loss from discontinued operations, net
of tax benefit, for the three month period ended August 31, 1995, in
the amount of $165,000.
8
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the three month
period ended August 31, 1995.
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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.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
Date: October 13, 1995
________________________________________
JOSEPH P. HEHIR, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
10
