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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
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For the Quarterly Period Ended November 30, 1995 Commission File No. 0-13965
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3051642
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(State of Incorporation) (I.R.S. Employer Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02164
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(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
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<TABLE>
<S> <C>
Number of Shares of Common Stock
outstanding at December 31, 1995 3,864,763
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</TABLE>
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INDEX
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND
AFFILIATE
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
- - Consolidated Balance Sheets -
November 30, 1995 (unaudited) and February 28, 1995 3
- - Consolidated Statements of Operations - (unaudited)
Three and Nine Months Ended November 30, 1995 and 1994 4
- - Consolidated Statements of Cash Flows - (unaudited)
Nine Months Ended November 30, 1995 and 1994 5
- - Notes to Consolidated Financial Statements -
November 30, 1995 6-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
</TABLE>
SIGNATURES
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 FEBRUARY 28, 1995
----------------- -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,880,000 $ 3,021,000
Restricted cash -- 1,900,000
Available-for-sale securities 2,552,000 2,033,000
Accounts receivable, net 17,605,000 15,572,000
Due from affiliate 565,000 687,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 5,685,000 5,123,000
Prepaid expenses and other current assets 1,290,000 1,191,000
Refundable income taxes 236,000 493,000
Deferred income taxes 800,000 800,000
------------ ------------
Total current assets 31,613,000 30,820,000
Property and equipment, net 5,569,000 5,938,000
Other assets, net 1,807,000 2,121,000
Due from affiliate 232,000 232,000
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Total assets $ 39,221,000 $ 39,111,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,043,000 $ 1,869,000
Current portion of long-term debt 799,000 835,000
Accounts payable, trade 7,150,000 6,086,000
Accrued payroll and expenses 4,345,000 5,448,000
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Total current liabilities 14,337,000 14,238,000
------------ ------------
Long-term debt 2,061,000 2,730,000
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Deferred income taxes 456,000 458,000
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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 3,864,763 at
November 30, 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 (31,000) (14,000)
Retained earnings 8,459,000 7,795,000
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Total stockholders' equity 22,367,000 21,685,000
------------ ------------
Total liabilities and stockholders' equity $ 39,221,000 $ 39,111,000
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</TABLE>
The accompanying notes are an integral part of these financial statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended November 30, Nine Months Ended November 30,
-------------------------------- --------------------------------
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $19,743,000 $20,128,000 $53,345,000 $49,247,000
Reimbursable expenses 9,142,000 9,527,000 22,490,000 17,835,000
------------ ------------ ------------ ------------
Net revenues 10,601,000 10,601,000 30,855,000 31,412,000
Costs and expenses:
Salaries and related costs 7,005,000 7,402,000 22,101,000 22,244,000
General and administrative expenses 2,565,000 2,767,000 7,257,000 7,375,000
------------ ------------ ------------ ------------
Income from continuing operations 1,031,000 432,000 1,497,000 1,793,000
------------ ------------ ------------ ------------
Interest and other income (expense) net
Interest income 59,000 91,000 139,000 161,000
Other income (expense) net -- -- 16,000 28,000
Interest expense (78,000) (79,000) (271,000) (205,000)
------------ ------------ ------------ ------------
(19,000) 12,000 (116,000) (16,000)
------------ ------------ ------------ ------------
Income from continuing operations before
tax provision 1,012,000 444,000 1,381,000 1,777,000
Provision for income taxes 444,000 167,000 552,000 816,000
------------ ------------ ------------ ------------
Net income from continuing operations 568,000 277,000 829,000 961,000
Discontinued operations (Note 3):
Loss from discontinued operations, net of
income tax benefit -- (25,000) (165,000) (215,000)
------------ ------------ ------------ ------------
Net income $ 568,000 $ 252,000 $ 664,000 $ 746,000
============ ============ ============ ============
Net income per share from continuing operations $ .15 $ .07 $ .21 $ .25
------------ ------------ ------------ ------------
Net loss per share from discontinued operations -- $ .00 $ (.04) $ (.05)
------------ ------------ ------------ ------------
Net income per share $ .15 $ .07 $ .17 $ .20
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding 3,865,000 3,795,000 3,854,000 3,777,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended November 30,
------------------------------
1995 1994
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 829,000 $ 746,000
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Discontinued Operations (165,000) --
Depreciation and Amortization 893,000 821,000
Change in deferred income taxes -- (20,000)
Gain on disposal of equipment (16,000) (28,000)
Change in assets and liabilities:
Increase in accounts receivable, net (2,033,000) (3,717,000)
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts (562,000) (786,000)
Increase in prepaid expenses and other current assets (99,000) (267,000)
Decrease in refundable income taxes 257,000 --
Increase in accounts payable, trade 1,064,000 3,007,000
Decrease in accrued payroll and expenses (1,103,000) (138,000)
Decrease in income taxes payable -- (305,000)
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Net cash used by operating activities (935,000) (687,000)
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Cash flows from investing activities:
(Increase) decrease in available-for-sale-securities, net (519,000) 1,837,000
Decrease (increase) in restricted cash 1,900,000 (1,920,000)
Decrease in due from affiliate 122,000 --
Proceeds from disposal of equipment 21,000 30,000
Acquisition of property and equipment (507,000) (671,000)
Decrease in other assets 308,000 36,000
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Net cash provided (used) by investing activities 1,325,000 (688,000)
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Cash flows from financing activities:
Net borrowing under notes payable 174,000 3,206,000
Repayments of long-term debt (705,000) (843,000)
Issuance of common stock -- 107,000
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Net cash (used) provided by financing activities (531,000) 2,470,000
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Net (decrease) increase in cash and cash equivalents (141,000) 1,095,000
Cash and cash equivalents at beginning of period 3,021,000 1,948,000
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Cash and cash equivalents at end of period $ 2,880,000 $ 3,043,000
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</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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
nine month period ended November 30, 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 - LONG-TERM CONTRACTS
The company has entered into several long-term government-funded and private
projects that are subject to risks regarding ultimate contract values. Under one
such government-funded contract, involving services provided by the Company as a
subcontractor, the amount of services required of the Company has exceeded the
original contract estimate, and the government agency funding the project has
sought to renegotiate with the prime contractor for a reduction in the total
amounts billed. The prime contractor is engaged in discussions with the
government agency to resolve the contract dispute. The Company believes that it
has recorded adequate reserves relating to this contract based upon the terms
and conditions of the contract. However, the outcome of the pending negotiations
could materially impact the future operating results of the Company, if the
price ultimately received by the Company for the additional work varies
significantly, either negatively or positively, from that currently anticipated
by the Company.
NOTE 3 - 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 nine-month periods ended November 30, 1994 reported in this Form
10-Q, are 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
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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.
NOTE 4 - 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.
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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
November 30, 1995 were unchanged from the corresponding period in the prior
fiscal year. The operating results reflect an increase in the Company's
engineering consulting and remediation net revenues which were offset by a
decrease in the Company's drilling services.
- - Salaries and Related Costs. Salaries and related costs for the three months
ended November 30, 1995 decreased by $397,000 (5.4%) compared to the
corresponding period in the prior fiscal year. The decrease was primarily
due to reduced staffing and associated salary costs.
- - General and Administrative Expenses. General and administrative expenses
for the three months ended November 30, 1995 decreased by $202,000 (7.3%)
compared to the corresponding period in the prior fiscal year. The decrease
primarily reflects a reduction in claims and legal costs and in bad debt
expense.
NINE MONTH COMPARISON FOR FISCAL YEARS 1996 AND 1995
- - Net Revenues. The Company's net revenues for the nine months ended November
30, 1995 decreased by $557,000 (1.8%) compared to the corresponding period
in the prior fiscal year. The decrease is due primarily to a decrease in
the volume of the Company's engineering consulting and drilling services
which were offset by increases in the volume of the Company's remediation
services.
- - Salaries and Related Costs. Salaries and related costs for the nine months
ended November 30, 1995 decreased by $143,000 (0.6%) compared to the
corresponding period in the prior fiscal year. The decrease is primarily
due to reduced compensation costs due to reduced staffing and a reduction
in medical costs which were partially offset by increased incentive
compensation expense and workmans compensation insurance expense.
- - General and Administrative Expenses. General and administrative expenses
for the nine months ended November 30, 1995 decreased by $118,000 (1.6%)
compared to the corresponding period in the prior fiscal year. The decrease
reflects primarily a decrease in claims and legal costs and in bad debt
expense which were partially offset by increases in consulting and
insurance expenses.
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LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended November 30, 1995, $935,000 of net cash was used
by operations. The Company made capital expenditures of approximately $507,000
for the first nine months of fiscal 1996.
The Company's working capital increased from $16,582,000 at February 28, 1995 to
$17,276,000 at November 30, 1995.
At November 30, 1995, the Company had cash on hand and cash equivalents of
$2,880,000, of which approximately $683,000 was invested in federally tax-exempt
bonds and short-term investments of $2,552,000 of which $598,000 was invested in
U.S. Treasury Notes and $1,954,000 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 3 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 receivable 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.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27. Financial Data Schedule
(B) REPORTS ON FORM 8-K
The Company did not file any report on Form 8-K during the nine
month period ended November 30, 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.
/s/ JOSEPH P. HEHIR
-------------------------------------------
JOSEPH P. HEHIR, Chief Financial Officer
Date: January 12, 1996 and Treasurer (Chief Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE REGISTRANT AT NOVEMBER 30, 1995 AND FEBRUARY
28, 1995 AND CONSOLIDATED STATEMENT OF OPERATIONS OF THE REGISTRANT FOR THE
THREE AND NINE MONTHS ENDED NOVEMBER 30, 1995 AND 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS IN THE FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED NOVEMBER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 2,880,000
<SECURITIES> 2,552,000
<RECEIVABLES> 17,605,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,613,000
<PP&E> 5,569,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,221,000
<CURRENT-LIABILITIES> 14,337,000
<BONDS> 0
39,000
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 39,221,000
<SALES> 0
<TOTAL-REVENUES> 53,345,000
<CGS> 0
<TOTAL-COSTS> 51,848,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 271,000
<INCOME-PRETAX> 1,381,000
<INCOME-TAX> 552,000
<INCOME-CONTINUING> 829,000
<DISCONTINUED> (165,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 664,000
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
