<PAGE> 1
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 August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-13965
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3051642
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02164
(Address of principal executive offices) (Zip Code)
(617) 969-0700
(Registrant's telephone number, including area code)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of Shares of Common Stock outstanding at September 30, 1996 3,948,794
<PAGE> 2
INDEX
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
- - Consolidated Balance Sheets -
August 31, 1996 (unaudited) and February 29, 1996 3
- - Consolidated Statements of Operations (unaudited) -
Three and Six Months Ended August 31, 1996 and 1995 4
- - Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended August 31, 1996 and 1995 5
- - Notes to Consolidated Financial Statements -
August 31, 1996 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
SIGNATURES 11
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, 1996 February 29, 1996
--------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,951,000 $ 3,318,000
Available-for-sale securities 2,701,000 2,752,000
Accounts receivable, net 13,931,000 15,655,000
Due from affiliate 282,000 676,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 6,267,000 4,935,000
Prepaid expenses and other current assets 1,460,000 1,365,000
Refundable income taxes 123,000 138,000
Deferred income taxes 993,000 993,000
----------- -----------
Total current assets 27,708,000 29,832,000
Property and equipment, net 5,474,000 5,690,000
Other assets, net 1,235,000 1,193,000
----------- -----------
Total assets $34,417,000 $36,715,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 278,000 $ 990,000
Current portion of long-term debt 782,000 799,000
Accounts payable trade 3,862,000 5,485,000
Accrued payroll and expenses 4,235,000 4,383,000
----------- -----------
Total current liabilities 9,157,000 11,657,000
----------- -----------
Long-term debt, less current portion 1,479,000 1,860,000
Deferred income taxes 733,000 733,000
Commitments and contingencies -- --
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 3,942,486 at
August 31, 1996 and 3,865,610 at
February 29, 1996 39,000 39,000
Capital in excess of par value 14,126,000 13,949,000
Unrealized losses on available-for-sale securities (16,000) (17,000)
Retained earnings 8,899,000 8,494,000
----------- -----------
Total stockholders' equity 23,048,000 22,465,000
----------- -----------
Total liabilities and stockholders' equity $34,417,000 $36,715,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended August 31, Six Months Ended August 31,
----------------------------- ---------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $15,042,000 $17,327,000 $28,511,000 $33,602,000
Reimbursable expenses 5,351,000 7,150,000 8,861,000 13,348,000
----------- ----------- ----------- -----------
Net revenues 9,691,000 10,177,000 19,650,000 20,254,000
Costs and expenses:
Salaries and related costs 7,052,000 7,526,000 14,214,000 15,096,000
General and administrative expenses 2,358,000 2,552,000 4,811,000 4,692,000
----------- ----------- ----------- -----------
Income from continuing operations 281,000 99,000 625,000 466,000
----------- ----------- ----------- -----------
Other income (expense), net:
Interest income 52,000 48,000 115,000 80,000
Other income -- 14,000 -- 17,000
Interest expense (35,000) (107,000) (65,000) (193,000)
----------- ----------- ----------- -----------
Total other income (expense) 17,000 (45,000) 50,000 (96,000)
----------- ----------- ----------- -----------
Income from continuing operations before
provision for income taxes 298,000 54,000 675,000 370,000
Provision (benefit) for income taxes 119,000 (18,000) 270,000 108,000
----------- ----------- ----------- -----------
Net income from continuing operations 179,000 72,000 405,000 262,000
Discontinued operations (Note 2)
Loss from discontinued operations, net of income tax
benefit -- (165,000) -- (165,000)
----------- ----------- ----------- -----------
Net income (loss) $ 179,000 $ (93,000) $ 405,000 $ 97,000
----------- ----------- ----------- -----------
Net income per share from continuing
operations .04 .02 .10 $ .07
----------- ----------- ----------- -----------
Net loss per share from discontinued
operations -- (.04) -- $ (.04)
----------- ----------- ----------- -----------
Net income (loss) per share $ .04 $ (.02) $ .10 $ .03
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding 3,932,000 3,850,000 3,916,000 3,848,000
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended August 31,
---------------------------
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 405,000 $ 262,000
Adjustments to reconcile net income to net cash (used)
by operating activities:
Discontinued operations -- (165,000)
Depreciation and amortization 570,000 682,000
Loss (gain) on disposal of equipment 2,000 (16,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 1,724,000 (1,887,000)
Increase (decrease) in costs and estimated earnings in
excess of billings on uncompleted contracts (1,332,000) 1,308,000
Increase in prepaid expenses and other
current assets (95,000) (132,000)
Decrease in refundable income taxes 15,000 114,000
Decrease in accounts payable, trade (1,623,000) (832,000)
Decrease in accrued payroll and expenses (148,000) (2,178,000)
------------ ------------
Net cash used by operating activities (482,000) (2,844,000)
------------ ------------
Cash flows from investing activities:
Decrease (increase) in available-for-sale securities, net 51,000 (1,193,000)
Decrease in restricted cash -- 1,900,000
Decrease in due from affiliate 394,000 150,000
Proceeds from disposal of equipment 118,000 21,000
Acquisition of property and equipment (469,000) (410,000)
Increase in other assets (46,000) --
------------ ------------
Net cash provided by investing activities 48,000 468,000
------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings under notes payable (712,000) 2,317,000
Repayments of long-term debt (398,000) (506,000)
Issuance of common stock 177,000 --
------------ ------------
Net cash used by financing activities (933,000) 1,811,000
------------ ------------
Net decrease in cash and cash equivalents (1,367,000) (565,000)
------------ ------------
Cash and cash equivalents at beginning of period 3,318,000 3,021,000
------------ ------------
Cash and cash equivalents at end of period $ 1,951,000 $ 2,456,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements were 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 are 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 29, 1996, as filed with the
Securities and Exchange Commission on May 24, 1996. Operating results for
the three month period ended August 31, 1996 are not necessarily indicative
of the results that may be expected for succeeding periods or for the year
ending February 28, 1997.
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.
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.
NOTE 3 - LONG - TERM CONTRACTS
The Company has entered into several long-term private and
government-funded projects that are subject to risks regarding ultimate
contract values. As reported in the Company's Form 10-K for the fiscal year
ended February 29, 1996, under one such government-funded contract,
involving services provided by the Company as a subcontractor, the amount
of services required of the Company exceeded the original contract
estimate. Based on progress of ultimate contract settlement approximately
$288,000 is reflected in revenue for the six month period ended August 31,
1996.
6
<PAGE> 7
NOTE 4 - AVAILABLE-FOR-SALE SECURITIES
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115. The effect of adoption is that the Company reported
losses on available-for-sale securities at August 31, 1996 of approximately
$16,000. The maturities of available-for-sale securities held at August 31,
1996 are $2,002,000 within one year and $699,000 from one to five years.
Certain of these available-for-sale securities have maturities in excess of
one year and are classified as current assets consistent with their use.
Gross realized gains and losses are immaterial to the Company's operating
results.
NOTE 5 - 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 a party to several 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 results of operations or financial condition
of the Company.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH COMPARISON FOR FISCAL YEARS 1997 AND 1996
- - NET REVENUES. The Company's net revenues for the three months ended August
31, 1996 decreased by approximately $486,000 (4.8%) compared to the
corresponding period in the prior fiscal year. The decrease is attributable
primarily to a decrease in the volume and profit margins of the Company's
drilling business which was offset, in part, by increases in the volume of
the Company's engineering consulting and remediation service business.
- - SALARIES AND RELATED COSTS. Salaries and related costs for the three months
ended August 31, 1996 decreased by approximately $474,000 (6.3%) compared
to the corresponding period in the prior fiscal year. A decrease in
compensation costs due to reduced staffing, was offset, in part, by an
increase in incentive compensation expense.
- - GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended August 31, 1996 decreased by approximately
$194,000 (7.6%) compared to the corresponding period in the prior fiscal
year. The decrease primarily reflects reduced expenses and reserves for
legal, claims and consulting expenses, which were offset, in part, by an
additional $121,000 charge as a result of the Company's decision in the
first quarter to close the Gainesville, Florida drilling operation, and by
increased bad debt expenses.
SIX MONTH COMPARISON FOR FISCAL YEARS 1997 AND 1996
- - NET REVENUES. The Company's net revenues for the six months ended August
31, 1996 decreased by approximately $604,000 (3.0%) compared to the
corresponding period in the prior fiscal year. The decrease is attributable
primarily to a decrease in the volume and profit margins of the Company's
drilling business which was offset, in part, by increases in the volume of
the Company's engineering consulting and remediation service business.
- - SALARIES AND RELATED COSTS. Salaries and related costs for the six months
ended August 31, 1996 decreased by approximately $882,000 (5.8%) compared
to the corresponding period in the prior fiscal year. A decrease in
compensation costs due to reduced staffing was offset, in part, by an
increase in incentive compensation expense.
- - GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the six months ended August 31, 1996 increased by approximately
$119,000 (2.5%) compared to the corresponding period in the prior fiscal
year. The increase primarily reflects a $296,000 charge as a result of the
Company's decision to close the Gainesville, Florida drilling operation.
This charge was partially offset by reductions in claims and consulting
expenses.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended August 31, 1996, $482,000 of net cash was
used by operations. The Company made capital expenditures of approximately
$469,000 for the first six months of fiscal 1997.
The Company's working capital increased from $18,175,000 at February 29,
1996 to $18,551,000 at August 31, 1996.
At August 31, 1996, the Company had cash on hand and cash equivalents of
$1,951,000, of which approximately $539,000 was invested in federally
tax-exempt bonds and short-term investments of $2,701,000 of which $600,000
was invested in federally tax-exempt bonds. The Company believes that its
cash and cash equivalents on hand and future 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 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.
9
<PAGE> 10
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 three month
period ended August 31, 1996.
10
<PAGE> 11
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 14, 1996 /s/ JOSEPH P. HEHIR
----------------------------------------
JOSEPH P. HEHIR, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE REGISTRANT AT 8/31/96 AND 2/29/96 AND
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT FOR THE 3 & 6 MTHS
PERIODS ENDED 8/31/96 AND 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENTS IN THE FORM-10Q FOR THE QTRLY PERIOD ENDED 8/31/96.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 1,951,000
<SECURITIES> 2,701,000
<RECEIVABLES> 13,931,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,708,000
<PP&E> 5,474,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,417,000
<CURRENT-LIABILITIES> 9,157,000
<BONDS> 0
0
0
<COMMON> 39,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,417,000
<SALES> 0
<TOTAL-REVENUES> 28,511,000
<CGS> 0
<TOTAL-COSTS> 27,886,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,000
<INCOME-PRETAX> 675,000
<INCOME-TAX> 270,000
<INCOME-CONTINUING> 405,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405,000
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
