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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
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of the Securities Exchange Act of 1934
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FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997 Commission File No. 0-13965
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
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(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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 969-0050
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
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Common stock, par value $.01
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Number of Shares of Common Stock
outstanding at May 20, 1997 4,013,548
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The aggregate market value of voting stock of the registrant held by
non-affiliates of the registrant (i.e., stockholders who are not directors,
officers or employees of the registrant and are not otherwise persons who
control or are controlled by or under common control with the registrant) was
$6,334,043 as of May 20, 1997.
Documents Incorporated by Reference
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Portions of the Annual Report to Stockholders of the registrant for fiscal year
1997 are incorporated by reference in Part II. Portions of the definitive proxy
statement for the Annual Meeting of Stockholders of the registrant to be held on
July 15, 1997 are incorporated by reference in Part III.
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The Index to Exhibits is located at Page 17.
PART I
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ITEM 1. BUSINESS
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GENERAL
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GZA GeoEnvironmental Technologies, Inc. ("GZA" or the "Company") provides
geotechnical engineering, environmental consulting and remediation services to
industrial, commercial, financial, public service and government clients.
Environmental services range from the initial assessment and evaluation of
contaminated sites to the design, construction and operation of remediation
systems to treat, control or remove contamination. GZA also helps clients to
plan, coordinate and implement effective environmental and occupational health
and safety management programs. Geotechnical services involve the evaluation of
soil, rock and groundwater conditions for the design and construction of
buildings, highways, tunnels, dams, piers and other structures. GZA also
provides drilling, laboratory and instrumentation services in support of its
environmental and geotechnical activities.
GZA's strategy is to provide vertically integrated services that range from the
identification of a potential problem through the design and implementation of a
solution, although the Company often enters into contracts requiring only one of
its services. Management believes that the Company's ability to combine
environmental and geotechnical capabilities differentiates GZA from many of its
competitors. Environmental problems frequently involve soil and groundwater
contamination. Often, geotechnical expertise is essential in developing the best
remedial solutions, which may involve excavation and removal of contaminated
soil and groundwater, containment by subsurface and surface hydraulic barriers,
and management of groundwater flow through soil and rock. In such situations,
GZA's geotechnical and environmental personnel work together to evaluate and
develop engineered solutions to environmental problems. Management believes that
these complementary skills enable GZA to offer a broad technical approach and
efficient solutions to clients' problems.
The Company provides services to clients through its subsidiaries and
affiliates. Environmental consulting, environmental remediation and geotechnical
services are performed primarily by GZA GeoEnvironmental, Inc. (GZA
GeoEnvironmental), and drilling operations by GZA Drilling, Inc. (GZA Drilling),
both wholly owned subsidiaries. Certain services in New York are provided by the
Company's affiliate, Goldberg-Zoino Associates of New York, P.C. (GZANY), doing
business as GZA GeoEnvironmental of New York, a professional corporation owned
by officers, directors and stockholders of the Company. Aquaterra Environmental
Consultants Limited, the Company's 50%-owned joint venture in the United
Kingdom, provides environmental services in Europe.
SERVICES
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The Company's services can be divided into three broad categories: environmental
consulting, environmental restoration and geotechnical engineering. Any given
project may involve activities in more than one of these categories.
ENVIRONMENTAL CONSULTING SERVICES
The Company provides a wide variety of services which deal with environmental
issues, seeking solutions that address regulatory requirements that are
acceptable to clients in terms of both cost and risk.
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ENVIRONMENTAL MANAGEMENT AND REGULATORY COMPLIANCE SERVICES. GZA's integrated
services help clients to plan, coordinate and implement effective strategies to
comply with current environmental and occupational health and safety
regulations. Services include:
- Compliance Audits
- Regulatory Training
- Occupational Health & Safety
- Wastewater Management
- Pollution Prevention
- Strategic Planning
- ISO 14000 Services
- Permitting Assistance
- Air Quality Engineering
- Community Relations
PROPERTY TRANSFER STUDIES/ENVIRONMENTAL SITE ASSESSMENTS. GZA helps clients
assess the risks associated with the purchase and/or management of real estate
and businesses. Services include:
- Phase I and Phase II Environmental Site Assessments
- Regulatory Compliance Audits of Operating Facilities
ENVIRONMENTAL INVESTIGATIONS OF CONTAMINATED SITES AND FACILITIES. GZA performs
all aspects of environmental investigation for projects ranging from individual
leaking underground storage tanks to Superfund sites. Services include:
- Hydrogeologic and Remedial Studies
- Facility Evaluation and Voluntary Corrective Actions
- Feasibility Studies and Remedial Design
RISK ASSESSMENT. GZA helps clients evaluate environmental data and quantify the
level of risk of various activities to human or ecological receptors. Services
include:
- Human Health and Ecological Risk Assessment
- Development of Risk-Based Cleanup Levels
NATURAL RESOURCE EVALUATION AND PERMITTING. GZA identifies potential risks posed
to natural resources and develops solutions that are environmentally acceptable
and economically viable. Environmental, geotechnical and civil engineering
services include:
- Water Resource Evaluation and Aquifer Protection
- Erosion Control and Stormwater Management
- Wildlife and Aquatic Habitat Evaluation
- Wetland Impact Assessment and Mitigation Design
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SOLID WASTE MANAGEMENT SERVICES. GZA assists the owners and operators of
landfills in the siting, design, construction, operation, maintenance,
remediation, and closure of solid waste landfills. Services include:
- Feasibility Studies
- Environmental Impact Studies
- Geologic and Hydrogeologic Evaluations
- Permitting
- Facility Design
- Facility Operation
- Closure/Post Closure
- Environmental Remediation
ENVIRONMENTAL RESTORATION SERVICES
GZA provides engineering and construction services to help clients locate,
identify and remediate environmental contamination. GZA can either design and
implement its own restoration plan or can construct and operate cleanup systems
designed by others.
DESIGN AND CONSTRUCTION OF ENVIRONMENTAL TREATMENT SYSTEMS. GZA performs some or
all aspects of design, construction, installation, and start-up of remedial
treatment systems. These systems utilize remediation techniques such as: soil
stabilization/fixation, soil vapor extraction, counter-current aeration, carbon
absorption, thermal desorption and bioremediation.
OPERATION AND MAINTENANCE SERVICES. GZA provides operation and maintenance
services for treatment systems as well as performance evaluations, including
periodic sampling and analyses of contaminants to monitor cleanup progress.
DESIGN AND CONSTRUCTION OF CONTAINMENT SYSTEMS. GZA designs and constructs
containment systems, using a variety of techniques to physically isolate
contaminants from the surrounding environment.
HAZARDOUS MATERIALS MANAGEMENT. GZA acts as a general contractor on assignments
where the chosen remedial alternative is removal and off-site disposal of
hazardous or contaminated material. GZA oversees excavation, performs testing
and waste characterization, evaluates and monitors transportation and disposal
vendors, and assists with administration and regulatory compliance.
REMOVAL AND/OR REPLACEMENT OF TANKS AND PIPING SYSTEMS. GZA provides underground
storage tank testing and assessment; regulatory compliance audit and planning
services; and management of tank or piping upgrade, removal and installation.
ASBESTOS AND LEAD MANAGEMENT AND ABATEMENT. GZA provides a variety of services
including asbestos surveys, and lead risk assessments, management of the
abatement process, air quality monitoring and development and periodic review of
asbestos management programs.
FACILITY CLOSURE AND RESTORATION. GZA provides integrated remediation services
to clients who are closing facilities and/or restoring contaminated sites for
redevelopment. Multi-phase services include environmental assessments,
cost-benefit analysis, and remedial design and construction management.
Applications include facility/equipment decontamination and decommissioning as
well as lagoon and landfill closures.
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GEOTECHNICAL ENGINEERING SERVICES
The Company's geotechnical engineers analyze the properties of soil and rock to
develop recommendations and specifications for the design and construction of
structures and civil works projects. Clients include engineers and architects,
construction firms, public agencies, real estate developers and property owners.
SOIL AND ROCK ENGINEERING. GZA provides engineering services for analysis,
design and construction monitoring of geotechnical construction challenges such
as earthwork, braced excavations, dewatering, slope stability, geosynthetics and
ground improvement.
FOUNDATION ENGINEERING. GZA makes recommendations to other design professionals
concerning foundation design and construction. To formulate its recommendations,
the Company performs geological studies, subsurface exploration and laboratory
testing and analysis to determine the engineering properties of subsurface
materials and to identify related engineering and construction issues.
DAMS. GZA provides consulting, design and inspection services in connection with
new construction and the rehabilitation of concrete and embankment dams, dikes
and levees.
MARINE FACILITIES. GZA provides specialized geotechnical engineering and
structural design for the construction of new marine facilities, both marginal
and off-shore, and the rehabilitation and remediation of existing facilities.
TUNNELS. GZA provides geotechnical engineering for the design and construction
of shafts, tunnels and underground chambers in soil and rock for mass transit
programs, utilities, water supply systems, highways and other uses. Services
range from geological investigations and mapping to recommendations for
structural design and construction to installation and monitoring of
instrumentation.
TRENCHLESS CONSTRUCTION. GZA helps owners, engineers and contractors make
decisions regarding the use of trenchless construction for utility development
and other projects. Services include equipment applicability evaluations,
subsidence evaluations and groundwater control, and involve use of pipe jacking,
microtunneling and directional drilling.
SERVICES TO CONTRACTORS. GZA assists construction companies with specialized
technical services that deal with design, safety, environmental and quality
control issues. Examples of these services include:
- Pile Driving Studies/Testing
- Earthwork Control
- Cofferdam/Underpinning Design
- Dewatering System Design
- Vibration/Noise Monitoring
- Health and Safety Plans
- Environmental Monitoring and Reporting
INFORMATION SERVICES
The Company has recently formed an Information Systems Division ("ISD") to
develop and deliver information management solutions to its existing and future
clients, as well as administer the Company's internal information management
strategy. This division was formed in recognition of the Company's traditional
role as a services firm, largely in the business of acquiring, accumulating and
processing data, and presenting information to, or on behalf of, its clients.
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The information related services and systems that GZA's ISD will provide to its
clients fall into one of three general categories: 1) services and products that
enhance communication between GZA and its client, 2) services and products that
enhance communication between a client and the outside world, and 3) services
and products that enhance the ability of a client to utilize data within its own
organization and improve operational and management efficiency, particularly in
the area of environmental information management.
SUPPORT SERVICES
To support its services to clients, GZA maintains a geotechnical instrumentation
group, an environmental laboratory, a geotechnical laboratory and a drilling
operation. Management believes that internal availability of these support
services enables the Company to control quality and to provide faster results
than could generally be obtained from independent commercial providers of such
services.
GEOTECHNICAL INSTRUMENTATION. GZA's Soil and Rock Instrumentation Division
("SRI") supports the Company's geotechnical and environmental projects, and also
provides specialty geotechnical instrumentation and engineering services to the
heavy construction industry and other clients. SRI maintains an instrumentation
laboratory and a fabrication shop. On geotechnical projects, SRI designs,
installs and monitors instruments to observe excavation support systems,
tunnels, and deep foundations during construction. On environmental projects,
SRI performs automated pump tests to determine the characteristics of aquifers.
SRI also develops custom software to be used in automatic data acquisition
systems for dams and construction projects where rapid collection and analysis
of data are required.
LABORATORIES. GZA's Environmental Chemistry Laboratory analyzes soil, water, air
and waste samples in connection with GZA's environmental studies. GZA's Mobile
Laboratory and Vibratory Drill Rig provide field sampling and small diameter
well installation as well as on-site, real-time chemical analysis. GZA's
Geotechnical Laboratory performs analyses to determine the permeability,
strength, compressibility and other engineering properties of rock cores and
soil samples. The Geotechnical Laboratory also has the equipment necessary to
determine geomembrane seam strength as well as frictional resistance between
geomembranes and soils or other geosynthetics.
DRILLING. GZA performs drilling, sampling and installation of monitoring and
recovery wells for clients who have engaged GZA to provide other services, for
other contractors and for government agencies. Drilling to obtain samples
usually forms part of the subsurface investigation phase of both environmental
and geotechnical projects. The drilling operation also provides dewatering and
pump testing support services.
JOINT VENTURES
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AQUATERRA (U.K.)
In 1991, the Company entered into a joint venture with Carl Bro Group (U.K.)
Limited to form Aquaterra Environmental Consultants Limited, a limited liability
company whose stock is owned equally by the Company and Carl Bro. Located in
Leeds, Great Britain, Aquaterra provides services related to contaminated land
and groundwater and to environmental concerns of operating facilities.
GEOAMBIENTE (MEXICO)
In July 1994, the Company and Grupo Sacmag, S de RL de CV (Sacmag), one of the
five largest engineering firms in Mexico, established a new Mexican company
called GeoAmbiente, SA de CV to perform environmental consulting, engineering
and construction services for public and private sector clients throughout
Mexico.
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GeoAmbiente's stock is owned 50 percent by the Company and 50 percent by Sacmag
and its affiliates. In August 1995, the shareholders of GeoAmbiente agreed to
suspend operations as of October 1, 1995, and that GeoAmbiente would be inactive
until at least September 30, 1996. In December, 1996, the Company agreed to sell
its interest in GeoAmbiente to its joint venture partner and three individual
investors.
CUSTOMERS
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The Company's client base includes industrial companies, owners and operators of
solid waste landfills, real estate developers, architects and engineers,
construction firms, parties to property transfers and financings (lenders, law
firms, corporations and developers) and public agencies. The Company derives
most of its revenues from the private sector, which accounted for approximately
83% of net revenues during the past year.
In fiscal 1997, the Company was actively engaged in approximately 3,600
assignments for approximately 1,700 clients. These assignments ranged from brief
projects (of one month or less) such as environmental site assessments and
geotechnical foundation evaluations to long-term projects such as multi-year
hazardous waste cleanups and geotechnical infrastructure projects. Most
assignments of the Company were short-term (less than six months in duration),
and management estimates that 43% of net revenues in fiscal 1997 were derived
from projects for which net revenues were $50,000 or less. In fiscal year 1997,
no one customer accounted for more than 10% of the Company's net revenues.
BACKLOG
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As of April 30, 1997, the Company had a backlog of orders it believed to be firm
of approximately $38 million. This amount includes estimated amounts under
orders on a time and materials, unit price or other basis without a fixed price,
and represents gross revenues, including cost of services and materials
subcontracted to third parties. Management anticipates that approximately $29
million of the total backlog will be completed in the current fiscal year. As of
April 30, 1996, the Company had a backlog of orders of approximately $41
million. The $3 million difference in backlog from April 1996 to April 1997 is
attributable principally to a decline in remedial construction and contractor
support services backlog. Because work under the Company's orders generally can
be terminated by the client at any time, there is no assurance that all amounts
included in backlog will ultimately be realized, even if covered by written
contracts.
COMPETITION
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The markets for environmental and geotechnical services have become increasingly
competitive. At each district office and for each service offered, the Company
competes with many different firms, ranging from small local firms to large
regional and national firms having substantially greater financial and marketing
resources than the Company. Competition in both the environmental and
geotechnical services markets is based primarily on quality, diversity of
services, geographic location, price and reputation. In some geographic markets,
GZA provides environmental engineering and consulting, geotechnical engineering
design and contractor support services. Some state and local statutes and
regulations may inhibit the Company's ability to compete for construction work
in areas at or near sites where the Company has formerly provided engineering or
design services. Management believes the Company is one of the few firms based
in the New England region that offers a combination of environmental consulting,
remediation services, and geotechnical engineering. Management believes that its
ability to provide this range of services enhances the Company's competitive
position in the New England market.
IMPACT OF ENVIRONMENTAL REGULATION
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The business of the Company and its clients is subject to a wide range of
overlapping federal, state and local laws and regulations concerned with
protection of the environment. These laws and regulations have helped to create
a demand for many of the services offered by the Company. Changes in
environmental laws and regulations, in the regulatory climate generally, and in
the resources available to and priorities of the federal, state and local
agencies responsible for enforcement of environmental laws and regulations could
materially affect demand for the Company's services.
Recent federal actions significantly reducing the budget of the U.S.
Environmental Protection Agency (EPA) and ongoing legislative proposals to
narrow the scope of the federal Superfund and Clean Water Acts and delays in EPA
rule making could result in reduced demand for the Company's services.
Conversely, regulatory reform initiatives designed to shift responsibility for
environmental compliance and enforcement from government agencies to private
parties could create new opportunities for the Company. Such privatization
initiatives have been taken in Massachusetts and Connecticut where, under a
statute analogus to the federal Superfund Act, supervision of the clean-up of
contaminated sites has for the most part been delegated by state regulatory
officials to "Licensed Site Professionals" or "Licensed Environmental
Professionals" employed by private entities. The Company employs a number of
individuals qualified and licensed in these and other states in which the
Company provides services. Regulatory reform initiatives may also reduce the
cost of environmental cleanups and therefore activate private remediation
projects that have been pending. Whether such initiatives will lead to increased
need for the Company's services is not yet known, and there can be no assurance
that changes in the regulatory climate and in environmental statutes and
regulations will not result in reduced demand for such services.
The principal statutes affecting the Company's business and the markets it
serves include the following:
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA"). RCRA, as amended by the
Hazardous and Solid Waste Amendments of 1984, establishes a comprehensive
regulatory scheme for the handling, transportation, treatment, storage and
disposal of hazardous waste. Although "cradle-to-grave" responsibility for
hazardous wastes rests with generators of the material, every facility that
treats, stores or disposes of specified minimum amounts of hazardous waste must
comply with specific operating, design, financial responsibility and closure
requirements. These requirements have contributed to demand for the Company's
consulting services, permitting assistance, remedial design and implementation
and waste management services.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980
("CERCLA" OR "SUPERFUND"). CERCLA, as amended by the Superfund Amendments and
Re-authorization Act of 1986 ("SARA"), addresses problems created by past
handling and disposal of hazardous substances. It requires the EPA to identify
contaminated sites and to compel a wide array of "responsible parties" to pay
for necessary cleanup activities. CERCLA also authorizes multiple damages and
penalties for non-compliance with EPA orders and provides funds (hence the name
"Superfund") for the EPA to perform cleanup activities in appropriate
circumstances. The Company's related services include site investigations,
feasibility studies, development and implementation of alternative remediation
plans, oversight of contractors and support and expert testimony for related
litigation.
FEDERAL WATER POLLUTION CONTROL ACT OF 1972 (THE "CLEAN WATER ACT"). The Clean
Water Act establishes a system of standards, permits and enforcement procedures
for the discharge to water of pollutants from industrial and municipal sources.
The law sets treatment standards for industries and wastewater treatment plants.
The law also regulates and requires permits for development and construction
activities involving wetlands and navigable waters. The Company provides a range
of services in connection with this regulatory scheme, including regulatory
permitting assessments, conceptual design planning, assistance with
environmental impact studies, reports and applications for environmental permits
and construction services.
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CLEAN AIR ACT AMENDMENTS OF 1990 (THE "CLEAN AIR ACT"). The Clean Air Act
consists of major initiatives to attain and maintain National Ambient Air
Quality Standards, to ensure that all new sources of potential atmospheric
emissions are equipped with appropriate pollution control technology and to
ensure that emissions of hazardous air pollutants are controlled to the maximum
extent possible. The law established a comprehensive new operating permit
program known as the Title V program. The Company provides a range of air
quality services including emission inventories and preparation of permit
applications.
OTHER REGULATIONS. In addition to federal environmental regulations, many states
and local authorities have enacted laws regulating activities affecting the
environment, some of which impose differing, and sometimes stricter, standards
than their federal counterparts. Examples include a variety of statutes related
to "Brownfields" initiatives. Brownfields are abandoned or underutilized
properties where actual or perceived contamination may interfere with
redevelopment. Many states are encouraging reuse of such sites through the
promulgation of regulations that establish clean-up standards based on current
risks and reasonably foreseeable future site use, rather than theoretical risks
and unlikely end uses that always require "clean closure" prior to
redevelopment. Some states may also provide covenants not to sue or "no further
action required" agreements that document the regulators' acceptance of the
clean-up process. Such covenants and agreements may be transferable with the
property. The Company is working on a number of projects involving Brownfields
sites, providing services ranging from initial investigation through final
construction.
POTENTIAL LIABILITY, RISK MANAGEMENT AND INSURANCE
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The Company's professional environmental consulting, remediation design and
geotechnical engineering services, as well as its remedial construction,
drilling and test boring operations, involve risks of significant liability for
environmental and property damage, personal injury, economic loss, and costs,
fines and penalties assessed by regulatory agencies. Liability for environmental
contamination and for the provision of environmental services is a rapidly
developing area of the law, and it is difficult to assess accurately the areas
and magnitude of potential risks to the Company.
Some statutes and judicial decisions impose strict liability on a party who
causes or contributes to the release of contaminants into the environment, even
if the party acted without negligence or fault. Under certain circumstances, a
government or private party might allege that the Company's own analytical,
consulting or remedial activities subject the Company to liability under various
statutes or regulations. Services by the Company's environmental consultants as
Licensed Site and Licensed Environmental Professionals may expose the Company to
additional liability. In addition to its potential liability under statutes and
common law, the Company sometimes agrees to indemnify clients for losses and
expenses they may incur as a result of the Company's services, some of which may
not be covered by the Company's insurance.
The Company maintains comprehensive programs for risk management, health and
safety training and medical monitoring of its field employees, quality assurance
and quality control and loss prevention. The Company seeks to include in its
contracts with clients provisions that limit GZA's liability to the client and
that require the client to indemnify GZA for costs and liabilities not caused by
the Company's negligence or misconduct. However, not all contracts include these
provisions and there is no assurance that such provisions can be enforced or
that the client will have adequate financial resources to stand behind its
indemnity.
The Company has a broad-range insurance program with large commercial insurers
designed to limit exposure arising out of its activities. It maintains
comprehensive general, automobile and excess liability coverage with aggregate
limits of $15 million written on an occurrence basis. It also maintains an
environmental professional liability policy which covers professional liability,
contractor's environmental liability and completed operations, with an aggregate
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limit of $3 million in excess of a deductible of $500,000, written on a
claims-made basis for occurrences since 1986. The law concerning the extent of
coverage available under the Company's liability insurance policies in the
context of environmental claims is unsettled and is likely to remain so in the
foreseeable future. All of the Company's policies permit termination by the
insurer without cause. There is no assurance that the Company will be able to
maintain or replace its insurance policies, that premiums will remain at levels
which economically permit the maintenance of such coverage, that all claims that
may be asserted against the Company will be covered by insurance or that such
claims will not exceed the coverage limits.
EMPLOYEES
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On April 30, 1997, the Company had 455 employees, including 369 technical
personnel. The Company's technical staff consists of civil and environmental
engineers, geologists, drillers and a number of specialists in such fields as
hydrology, chemistry, toxicology, biology and industrial hygiene. Management
believes that the future success of the Company depends in large part on its
ability to continue to attract and retain qualified professional staff. The
market for such professionals is competitive.
ITEM 2. PROPERTIES
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The Company's corporate and administrative headquarters, and one of its district
offices, are located in Newton Upper Falls, Massachusetts, where the Company
occupies two buildings. One of the buildings is approximately 42,000 square feet
and has a lease which extends through February 2001. During fiscal 1997, the
Company paid approximately $714,000 in base rent for this facility. The other
location in Newton Upper Falls is for approximately 10,880 square feet. In
fiscal 1997, the Company paid approximately $126,000 in base rent for this
facility.
The Company leases 21 other principal facilities located in Phoenix, Arizona;
Vernon, Connecticut; Duluth, Georgia; Portland, Maine; Brockton, Massachusetts;
West Newton, Massachusetts; Springfield, Massachusetts; Worcester,
Massachusetts; Livonia, Michigan; Grand Rapids, Michigan; Manchester, New
Hampshire; Lyndhurst, New Jersey; Marlton, New Jersey; Buffalo, New York;
Annapolis, Maryland; Charlotte, North Carolina; Providence, Rhode Island;
Dallas, Texas; Rutland, Vermont; South Burlington, Vermont; and Pewaukee,
Wisconsin. These other facilities have a combined square footage of
approximately 107,000 square feet. Aggregate base rent for all facilities leased
by the Company (other than its facilities in Newton Upper Falls) during fiscal
1997 totalled approximately $1,378,000. The lease terms expire at various times
through September 30, 2001.
The Company believes that its existing facilities are adequate to meet current
requirements and that suitable additional or substitute space will be available
on reasonable terms as needed to accommodate any expansion of operations and for
additional offices as required.
In addition to its leasehold interests in real property, the Company also owns
computer equipment, vehicles, drilling rigs, laboratory equipment and
instrumentation, remediation treatment equipment and other machinery, equipment
and furniture.
ITEM 3. LEGAL PROCEEDINGS
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The Company is party to several legal proceedings arising in the normal course
of business. Management believes that the outcome of these actions will not,
individually or in the aggregate, have a material adverse effect on the results
of operations or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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The information appearing under the caption "Supplemental Information" in the
Annual Report to Stockholders of the Company for the fiscal year ended February
28, 1997 (the "1997 Annual Report"), in the form included as Exhibit 13.1 to
this Annual Report on Form 10-K, is incorporated herein by reference.
RECENT SALES OF UNREGISTERED SECURITIES. During the three fiscal year period
ended February 28, 1997, the Company issued to 18 employees an aggregate of
35,881 shares of the Company's Common Stock ("Restricted Stock") pursuant to the
Company's 1995 Stock Incentive Plan. The Restricted Stock was awarded as
additional compensation in the nature of a bonus, and no separate consideration
was paid by the recipients. The issuances of Restricted Stock were exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Act"), by virtue of the exception set forth in Section 4(2) of the
Act.
ITEM 6. SELECTED FINANCIAL DATA
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The information appearing under the caption "Summary Financial Information" in
the 1997 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1997 Annual
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The information appearing under the captions "Consolidated Balance Sheets,"
"Consolidated Statements of Operations," "Consolidated Statements of
Stockholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to
Consolidated Financial Statements" in the 1997 Annual Report Exhibit 13.1 of
Form 10-K is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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FINANCIAL DISCLOSURE
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None
PART III
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ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
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EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
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MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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The information called for by Items 10, 11, 12 and 13 is incorporated by
reference to the definitive proxy statement relating to the Annual Meeting of
Stockholders of the Company to be held on July 15, 1997 (the "1997 Proxy
Statement"), as filed or to be filed with the Commission no later than 120 days
after the end of the fiscal year covered by this report.
11
<PAGE> 12
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K(a)(1)
- ------------------------------------------------------------------------------
AND (2)
- -------
The following consolidated financial statements of GZA GeoEnvironmental
Technologies, Inc. and its Subsidiaries and Affiliate included in the 1997
Annual Report are incorporated by reference in Item 8:
Report of Independent Accountants.
Consolidated Balance Sheets at February 28, 1997, and February 29, 1996.
Consolidated Statements of Operations for the fiscal years ended February
28, 1997, February 29, 1996 and February 28, 1995.
Consolidated Statements of Changes in Stockholders' Equity for the fiscal
years ended February 28, 1997, February 29, 1996 and February 28, 1995.
Consolidated Statements of Cash Flows for the fiscal years ended February
28, 1997, February 29, 1996 and February 28, 1995.
Notes to Consolidated Financial Statements for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28, 1995.
The following consolidated financial statement schedules of GZA GeoEnvironmental
Technologies, Inc. and its Subsidiaries and Affiliate are included as exhibits
to this report:
Page
----
Schedule II Valuation and Qualifying Accounts 16
(a)(3) EXHIBIT LIST. The documents listed below are filed as exhibits with this
report or are incorporated by reference to documents previously filed with the
Commission as exhibits. The Company's file number under the Act is 0-13965.
3.1 Restated Certificate of Incorporation of the Company(1)
3.3 Amended and Restated By-Laws of the Company(2)
4 Specimen certificate for the Common Stock of the Company(1)
10.2 Indenture of Lease dated September 5, 1984 and effective as of
December 1, 1981, and First Amendment to Indenture of Lease,
between GZA and Donald T. Goldberg and William S. Zoino, for the
GEO Building, Newton Upper Falls, Massachusetts(1)
10.6 1989 Incentive Stock Option Plan of the Company(1)
10.7 1989 Non-Qualified Stock Option Plan of the Company(1)
12
<PAGE> 13
10.21 Support Services Agreement among the Company, Goldberg-Zoino
Associates of New York, P.C. ("GZANY") and GZA, dated July 26,
1989(1)
10.22 Stockholders' Agreement among GZANY, Richard M. Simon and Joseph
D. Guertin, Jr. dated May 1, 1996, together with related Powers
of Attorney(3)
10.23 Voting Trust Agreement among the Company, GZANY, Messrs. Simon
and Guertin, and Richard M. Simon, as Trustee, dated May 1,
1996(3)
10.24 Indemnification Agreement among the Company, GZA
GeoEnvironmental, Inc. and Messrs. Simon and Guertin dated May 1,
1996(3)
10.25 Security Agreement between GZANY and the Company dated July 26,
1989(1)
10.26 Credit Agreement among the Company, GZANY and GZA dated July 26,
1989(1)
10.30 Revolving Credit and Term Loan Agreement among Fleet Bank and the
Company and its subsidiaries and affiliate dated February 28,
1994(2)
10.34 Amendment No. 1 to 1989 Incentive Stock Option Plan of the
Company(2)
10.35 GZA 1995 Stock Incentive Plan(2)
10.37 Lease Agreement dated January 1, 1992 between GZRI Associates and
GZA GeoEnvironmental, Inc. for the Providence, Rhode Island
district office(2)
10.38 Lease Agreement dated March 1, 1992 between GZAIAT Associates and
GZA Drilling, Inc. for the Brockton, Massachusetts facilities of
GZA Drilling, Inc.(2)
10.39 Second Amendment dated December 11, 1991 to Indenture of Lease
listed as Exhibit 10.2 hereto(2)
10.40 Form of Confidentiality, Non-Disclosure and Restrictive Covenant
Agreement between the Company and, respectively, Donald T.
Goldberg, Andrew P. Pajak, M. Joseph Celi, Richard M. Simon, John
E. Ayres, William E. Hadge, Lawrence Feldman, Joseph P. Hehir,
Joseph D. Guertin, Jr., and certain other employees(2)
10.42 Form of Group Life Insurance Plan for key employees; letter
describing coverage levels(2)
10.43 Form of Indemnity Agreement between the Company and its
respective directors(2)
10.51 Form of Assignment of Beneficial Interest between GZA
GeoEnvironmental, Inc. ("Assignee") and, respectively, John E.
Ayres, Joseph D. Guertin, Jr., and Steven J. Trettel
("Assignors"), dated June, 1996, to transfer each Assignor's one
sixth (1/6) beneficial interest in the GZA Investment Associates
Trust to Assignee.
10.52 Form of Assignment of Beneficial Interest and Indemnity Agreement
between GZA GeoEnvironmental, Inc. ("Assignee") and Donald T.
Goldberg ("Assignor"), dated June,
13
<PAGE> 14
1996, to transfer Assignor's one sixth (1/6) beneficial interest
in the GZA Investment Associates Trust to Assignee.
13.1 Annual Report to Stockholders of the Company for the fiscal year
ended February 28, 1997
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
(1) Incorporated by reference to the similarly numbered exhibits included
in the Company's Form S-1 Registration Statement, File No. 33-29369,
filed with the Commission on June 16, 1989.
(2) Incorporated by reference to the similarly numbered exhibits included
in the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1995, filed with the Commission on June 12, 1995.
(3) Incorporated by reference to similarly numbered exhibits included in
the Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 1996, filed with the Commission on May 24, 1996.
(b) Reports on Form 8-K
-------------------
None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
Date: May 29, 1997 /s/
-----------------------------------
Andrew P. Pajak
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Andrew P. Pajak Principal Executive May 29, 1997
- ---------------------- Officer and Director
Andrew P. Pajak
/s/ Joseph P. Hehir Chief Financial Officer May 29, 1997
- ---------------------- (Principal Financial and Accounting
Joseph P. Hehir Officer)
/s/ Donald T. Goldberg Director May 29, 1997
- ----------------------
Donald T. Goldberg
/s/ M. Joseph Celi Director May 29, 1997
- ----------------------
M. Joseph Celi
/s/ Lawrence Feldman Director May 29, 1997
- ----------------------
Lawrence Feldman
/s/ Joseph D. Guertin Director May 29, 1997
- ----------------------
Joseph D. Guertin
Director May __, 1997
- ----------------------
Irvine G. Reinig, II
/s/ Paul F. Gorman Director May 29, 1997
- ----------------------
Paul F. Gorman
Director May __, 1997
- ----------------------
Dr. Lewis Mandell
Director May __, 1997
- ----------------------
Dr. Thomas W. Philbin
Director May __, 1997
- ----------------------
Timothy W. Devitt
15
<PAGE> 16
SCHEDULE II
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
Years Ended February 28, 1995,
February 29, 1996, and February 28, 1997
<CAPTION>
Balance at Charged to
beginning costs and Balance at
Description of year expenses Write-offs end of year
----------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended February 28, 1995
Allowance for doubtful accounts
(deducted from accounts receivable) .... $460,000 $392,000 $168,000 $684,000
Year ended February 29, 1996
Allowance for doubtful accounts
(deducted from accounts receivable) .... $684,000 $240,000 $150,000 $774,000
Year ended February 28, 1997
Allowance for doubtful accounts
(deducted from accounts receivable) .... $774,000 $525,000 $455,000 $844,000
</TABLE>
16
<PAGE> 17
EXHIBIT INDEX
-------------
Exhibit
Number Description Page
- ------ ----------- ----
10.51 Form of Assignment of Beneficial Interest between GZA
GeoEnvironmental, Inc. ("Assignee") and, respectively, John E.
Ayres, Joseph D. Guertin, Jr., and Steven J. Trettel
("Assignor"), dated June, 1996, to transfer each Assignee's one
sixth (1/6) beneficial interest in the GZA Investment Associates
Trust to GZA GeoEnvironmental, Inc.
10.52 Form of Assignment of Beneficial Interest and Indemnity Agreement
between GZA GeoEnvironmental, Inc. ("Assignee") and Donald T.
Goldberg ("Assignor"), dated June, 1996, to transfer Assignee's
one sixth (1/6) beneficial interest in the GZA Investment
Associates Trust to GZA GeoEnvironmental, Inc.
13.1 Annual Report to Stockholders of the Company for the
fiscal year ended February 28, 1997
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
17
<PAGE> 1
Exhibit 10.51
GZA INVESTMENT ASSOCIATES TRUST
ASSIGNMENT OF BENEFICIAL INTEREST
FOR AND IN CONSIDERATION of the payment of Twelve Thousand Dollars
($12,000), the receipt of which is hereby acknowledged, JOHN E. AYRES, holder
and owner of a one sixth (1/6) Interest ("the Interest") in the GZA Investment
Associates Trust, under declaration of trust dated November 21, 1984 and
recorded at Plymouth County Registry of Deeds, Book 5887, Page 95 ("the Trust"),
hereby assigns and transfers to GZA GEOENVIRONMENTAL, INC. ("Assignee"), and its
successors and assigns, all of Assignor's right, title and interest in and to
the Interest and as beneficiary of the Trust, for Assignee to hold forever.
Assignor hereby covenants with Assignee that (i) Assignor is the owner of
the Interest, (ii) Assignor has good and marketable title thereto, (iii) the
Interest is free from all liens, encumbrances and charges, (iv) Assignor has
good right to assign and transfer the Interest, and (v) Assignor will warrant
and defend his title to the Interest, and his transfer to Assignee, against the
claims and demands of all persons.
Assignee does hereby accept such assignment and transfer of the Interest
and the powers, rights and obligations as beneficiary of the Trust.
IN WITNESS WHEREOF, Assignor and Assignee have respectively executed this
document as of this day of June 25, 1996.
Assignor: Assignee:
GZA GEOENVIRONMENTAL, INC.
/s/ By: /s/
- ------------------------- --------------------------------
JOHN E. AYRES LEONARD M. SEALE
/s/
- -------------------------
JOSEPH D. GUERTIN
/s/
- -------------------------
STEVEN J. TRETTEL
<PAGE> 1
Exhibit 10.52
GZA INVESTMENT ASSOCIATES TRUST
ASSIGNMENT OF BENEFICIAL INTEREST
FOR AND IN CONSIDERATION of the payment of Twelve Thousand Dollars
($12,000), the receipt of which is hereby acknowledged, DONALD T. GOLDBERG,
holder and owner of a one sixth (1/6) Interest ("the Interest") in the GZA
Investment Associates Trust, under declaration of trust dated November 21, 1984
and recorded at Plymouth County Registry of Deeds, Book 5887, Page 95 ("the
Trust"), hereby assigns and transfers to GZA GEOENVIRONMENTAL, INC.
("Assignee"), and its successors and assigns, all of Assignor's right, title and
interest in and to the Interest and as beneficiary of the Trust, for Assignee to
hold forever.
Assignor hereby covenants with Assignee that (i) Assignor is the owner of
the Interest, (ii) Assignor has good and marketable title thereto, (iii) the
Interest is free from all liens, encumbrances and charges, (iv) Assignor has
good right to assign and transfer the Interest, and (v) Assignor will warrant
and defend his title to the Interest, and his transfer to Assignee, against the
claims and demands of all persons.
Assignee does hereby accept such assignment and transfer of the Interest
and the powers, rights and obligations as beneficiary of the Trust.
IN WITNESS WHEREOF, Assignor and Assignee have respectively executed this
document as of this day of June 25, 1996.
Assignor: Assignee:
GZA GEOENVIRONMENTAL, INC.
/s/ By: /s/
- ------------------------- --------------------------------
DONALD T. GOLDBERG LEONARD M. SEALE
INDEMNITY
The undersigned hereby agrees to indemnify and hold harmless the
above-described Assignor, Donald T. Goldberg, from and against all claims,
damages, expenses, obligations, payments, debts and any amount owing to People's
Savings Bank of Brockton and its successors and assigns as a result of, or
accruing from, any failure by the above-described Trust on or after the date
hereof to pay when due the principal or interest on, or to perform any
obligation to be performed on or after the date hereof in connection with, the
loan by the Bank to the Trust as evidenced by Note dated December 24, 1985.
<PAGE> 1
Exhibit 13.1
<TABLE>
SUMMARY OF FINANCIAL INFORMATION
<CAPTION>
Years ended 2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
- ---------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues $38,211 $40,158 $40,995 $40,620 $37,641
Income from continuing operations 593 1,250 1,222 2,420 1,567
Income from continuing operations before taxes 821 1,283 1,272 2,718 1,770
Net income from continuing operations 529 798 822 1,672 1,091
Net income (loss) from discontinued operations - (99) (2,216) 4 (151)
Net income (loss) 529 699 (1,394) 1,676 940
Net income per share from continuing operations $ .13 $ .21 $ .22 $ .45 $ .29
Net loss per share from discontinued operations - $ (.03) $ (.59) - $ (.04)
Net income (loss) per share $ .13 $ .18 $ (.37) $ .45 $ .25
Weighted average shares outstanding 3,929 3,857 3,780 3,732 3,714
Dividends per common share - - - - -
BALANCE SHEET DATA:
Working capital $17,177 $18,175 $16,582 $17,745 $14,704
Total assets 35,535 37,614 39,111 38,294 32,854
Long-term debt (less current portion) - 1,860 2,730 3,409 790
Stockholders' equity $23,257 $22,465 $21,685 $22,807 $20,837
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth, for the periods indicated, (i) the percentage
which certain items in the consolidated statements of operations of the Company
bear to net revenues, and (ii) the percentage increase (decrease) in the dollar
amount of such items from year to year.
<TABLE>
<CAPTION>
Year-to-Year
Percentage
Percentage Increase
of Net Revenues (Decrease)
- -----------------------------------------------------------------------------------
Year Ended Fiscal Years
- -----------------------------------------------------------------------------------
February February February 1997 vs. 1996 vs.
28, 1997 29, 1996 28, 1995 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues 100% 100% 100% (5)% (2)%
Salaries and related costs 73 72 73 (4) (3)
General and administrative
expenses 26 25 24 (2) -
Income from continuing
operations 2 3 3 (53) 2
Other income, net 1 - - 591 (34)
Provision for income taxes 1 1 1 (40) 8
Net income from continuing
operations 1 2 2 (34) (3)
Net loss from discontinued
operations - - (5) (100) 96
Net income (loss) 1 2 (3) (24) 150
</TABLE>
GENERAL
The Company's gross revenues include the cost of services and materials
subcontracted to third parties and certain expenditures such as equipment
purchases, laboratory testing, use of Company-owned field and technical
equipment, travel, telephone and reproduction charges that, under the terms of
the Company's contracts, are billed to clients, generally with an added service
and handling charge. Net revenues exclude the amount of such reimbursable costs
and expenditures but include the corresponding service and handling charges.
Accordingly, the Company regards net revenues, which reflect services provided
and revenues earned directly by the Company, as the primary measure of its
business growth.
Salaries and related costs include the cost of professional, clerical and
administrative salaries, and related costs such as taxes, insurance,
performance-based bonuses and other fringe benefits. General and administrative
expenses include costs of marketing, professional development and training,
professional and general liability insurance, claims and legal proceedings,
occupancy, depreciation, amortization, and clerical and administrative overhead.
In May 1995, the Company discontinued its specialty construction business;
accordingly, the financial statements for the year ended February 29, 1996 have
been reclassified and prior years' results have been restated to report
separately the operating results of this business. The following discussion and
analysis relate to the continuing operations of the Company.
FISCAL 1997 AND 1996 VERSUS PRIOR YEARS
Net Revenues. The Company's net revenues decreased by approximately $1,947,000
(4.8%) in fiscal 1997 and by approximately $837,000 (2.0%) in fiscal 1996. The
decrease in fiscal 1997 is attributable to lower prices due to increasingly
competitive market conditions for geotechnical and environmental consulting
services and to a decrease in net revenues for drilling services of
approximately $1,519,000. The decline in drilling services net revenues resulted
from the closure of the Gainesville, Florida drilling operation and the
decreased demand and lower prices received for drilling services in the Central
New England Region. The reduction in drilling service net revenues was impacted
by the Company's decision to write off $500,000 for obsolete drilling equipment
and inventory which cannot be billed in future periods.
19
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FISCAL 1997 AND 1996 VERSUS PRIOR YEARS (CONTINUED)
The decrease in net revenues for fiscal 1997 was offset partially by the
Company's receipt of long-term contract settlements in the first and fourth
quarters of fiscal 1997 totaling $644,000 after payment of legal, expert witness
and consulting fees. These included a $575,000 settlement received by the
Company in the fourth quarter of fiscal 1997, which was offset by expenses of
$211,000 (including $128,000 incurred in the fourth quarter). The settlement
resulted in the addition of $447,000 to the Company's net revenues for the
fourth quarter, but a net recovery with respect to the matter for fiscal 1997 of
only $364,000. The $280,000 balance of long-term contract settlements was added
to net revenues in the first quarter of fiscal 1997. The decrease in fiscal 1996
was attributable to decreased demand for services and lower prices paid by
clients for the Company's consulting and drilling services which were offset
partially by increased demand and higher profit margins for remedial
construction contract activities.
Salaries and Related Costs. Salaries and related costs decreased by
approximately $1,136,000 (3.9%) in fiscal 1997 and decreased by approximately
$833,000 (2.8%) in fiscal 1996. The decrease for fiscal 1997 reflects reduced
salary and benefit costs caused by staff reductions and reduced
performance-based bonus payments as a result of the Company's not meeting
budgeted operating goals for fiscal 1997. This decrease was offset partially by
severance payments and salary costs associated with the hiring and transition
to a new Chief Executive Officer. The decrease in fiscal 1996 reflects reduced
salary and benefit costs caused by staff reductions and reduced medical and
health insurance costs which were offset partially by increased
performance-based bonus payments and increased workers' compensation insurance
costs.
General and Administrative Expenses. General and administrative expenses
decreased by approximately $154,000 (1.5%) in fiscal 1997 and by approximately
$32,000 (0.3% ) in fiscal 1996. The decrease in fiscal 1997 reflects decreases
in professional liability insurance premium cost, claims and legal defense cost,
and financial and general management consulting fees which were offset partially
by the Company's decision to write off $400,000 of goodwill based on current and
projected operating results of prior years' acquisitions. In addition, fiscal
1997 reflects $511,000 in costs related to the closure of the Gainesville,
Florida drilling operation and accruals for lease costs associated with closing
and consolidation of additional facilities and recruiting expenses associated
with the hiring of a new Chief Executive Officer. The decrease in fiscal 1996
reflects reductions in professional liability claims and related legal expenses,
business development cost and bad debt expenses which were offset partially by
lower billings to clients for equipment usage charges, higher occupancy cost,
increased consulting fees, and increased general and professional liability
insurance premiums.
Other Income, Net. Other income, net increased by approximately $195,000 in
fiscal 1997 due primarily to a significant decrease in cost of borrowing and
increased income realized from short-term investment securities. In fiscal 1996,
other income, net decreased by approximately $17,000 due in part to a net
increase in borrowing cost of approximately $134,000 which was offset partially
by a gain on sale of securities of $151,000.
Provision for Income Taxes. The provision for income taxes reflects effective
tax rates for fiscal 1997, 1996, and 1995 of 36%, 38%, and 35%, respectively.
Differences from the 34% federal statutory rate resulted primarily from the
combined effect of the addition of provisions for state taxes (net of federal
tax benefit), tax-exempt interest income, and other non-deductible items.
Quarterly Fluctuations and Seasonality. The Company's results may fluctuate from
quarter to quarter due to such factors as weather, the timing of major
contracts, the mix of projects and the level of subcontracted services involved,
the timing of additions to the Company's professional and support staff (who may
require health and safety training and technical and project management training
and, therefore, may initially charge clients a lower percentage of their time),
and the opening or closing of offices. Operating results for any one fiscal
quarter may not be indicative of the results that will be achieved in any
subsequent quarter or for the year.
Inflation. Management does not believe that inflation has had a significant
effect on the results of operations.
Future Operating Results. The volume of the Company's services will continue to
be adversely impacted by reduced federal and state government spending and
changes in environmental regulations. In addition, the industry is continuing to
experience a period of consolidation and significant price competition. These
trends are expected to continue through the foreseeable future.
To offset these trends, the Company closed three offices in fiscal 1997,
consolidated geotechnical engineering, remedial construction and environmental
consulting activities, and downsized technical and support staff in select
offices. In addition, the Company established a Leadership Team to focus on
operational and business development issues including strategic acquisitions,
geographic expansion, and new service areas. The Leadership Team will also
evaluate the impact of discontinuing limited-growth and low-margin commodity
services and products .
20
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FISCAL 1997 AND 1996 VERSUS PRIOR YEARS (CONTINUED)
Liquidity and Capital Resources. Cash provided by operating activities was
$5,246,000 in fiscal 1997 compared with $387,000 in 1996. The Company made
capital expenditures of $995,000 in fiscal 1997 and $929,000 in 1996. The
increase in capital expenditures in fiscal 1997 reflects the Company's increased
investment in computer technology to improve internal communications, increase
efficiency and expand client services. The Company has a Revolving Credit and
Term Loan Agreement with Fleet Bank which provides for unsecured borrowings in
the aggregate amount of $10,000,000. The facility consists of a revolving credit
line of $5,500,000 and a term loan facility of $4,500,000. Revolving credit
advances bear interest at the bank's floating base rate (8.25% at February 28,
1997) or, at the Company's option, at LIBOR plus 200 basis points. Term loans
bear interest at the bank's floating rate or, at the Company's option, at a
fixed rate equal to the bank's cost of funds plus 200 basis points. At February
28, 1997, the Company had no borrowings under the revolving credit line and no
term loans.
The Company's cash and cash equivalents were $4,229,000 at the end of fiscal
1997 compared with $3,318,000 at the end of fiscal 1996. Short-term investments
were $3,456,000 at the end of fiscal 1997 compared with $2,752,000 at the end of
fiscal 1996. These investments consist primarily of tax-exempt municipal bonds,
taxable U. S. Treasury Notes and other bonds and commercial paper.
In addition to routine new, replacement, and facility improvement capital
expenditures, the Company anticipates spending in excess of $1,000,000 during
fiscal 1998 to upgrade the Company's computer technology, software, and
management information systems. This is in response to professional and support
staff information needs and client data information transfer and shared data
management expectations, and to support business development opportunities.
Funding requirements for operations and for future growth are expected to be met
from existing cash and investments and funds generated from operations. The
Company believes that these sources will enable it to meet its cash requirements
for at least the next twelve months.
Newly Issued Accounting Standards. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per share". SFAS No. 128 establishes a different method of
computing net income per share than is currently required under the provisions
of Accounting Principles Board Opinion No. 15. Under SFAS No. 128, the Company
will be required to present both basic and diluted net income per share. The
Company plans to adopt SFAS No. 128 in its fiscal quarter ending February 28,
1998 and at that time all historical net income per share data presented will be
restated to conform to the provisions of SFAS No. 128.
21
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of GZA GeoEnvironmental
Technologies, Inc. and Affiliate:
We have audited the accompanying consolidated balance sheets of GZA
GeoEnvironmental Technologies, Inc. and its subsidiaries and affiliate as
of February 28, 1997 and February 29, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of
the three years in the period ended February 28, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
GZA GeoEnvironmental Technologies, Inc. and its subsidiaries and affiliate
as of February 28, 1997 and February 29,1996 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended February 28, 1997 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand LLP.
Boston, Massachusetts
May 2, 1997
22
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, 1997 and February 29, 1996 1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,229,000 $ 3,318,000
Available-for-sale securities 3,456,000 2,752,000
Accounts receivable, net 13,059,000 15,655,000
Due from affiliate - 676,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 6,953,000 5,834,000
Prepaid expenses and other current assets 371,000 1,365,000
Refundable income taxes - 138,000
Deferred income taxes 1,057,000 993,000
------------------------------------------------------------------------------
Total current assets 29,125,000 30,731,000
Property and equipment, net 5,514,000 5,690,000
Other assets, net 896,000 1,193,000
------------------------------------------------------------------------------
Total assets $35,535,000 $37,614,000
------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ 990,000
Current portion of long-term debt - 799,000
Accounts payable, trade 5,255,000 5,485,000
Accrued payroll and expenses 4,064,000 4,383,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,266,000 899,000
Income taxes payable 363,000 -
------------------------------------------------------------------------------
Total current liabilities 11,948,000 12,556,000
------------------------------------------------------------------------------
Long-term debt, less current portion - 1,860,000
------------------------------------------------------------------------------
Deferred income taxes 330,000 733,000
------------------------------------------------------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized -
1,000,000 shares; none issued or outstanding - -
Common stock, $.01 par value; authorized -
14,000,000 shares; issued and outstanding -
3,948,794 shares at February 28, 1997
and 3,865,610 shares at February 29, 1996 39,000 39,000
Capital in excess of par value 14,202,000 13,949,000
Unrealized losses on available-for-sale
securities (7,000) (17,000)
Retained earnings (includes $885,000 and
$1,263,000 of retained earnings of the
Company's consolidated affiliate at
February 28, 1997 and February 29, 1996,
respectively) 9,023,000 8,494,000
------------------------------------------------------------------------------
Total stockholders' equity 23,257,000 22,465,000
------------------------------------------------------------------------------
Total liabilities and stockholders' equity $35,535,000 $37,614,000
==============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE> 7
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended February 28, 1997, February 29, 1996, and February 28, 1995
1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $59,340,000 $69,825,000 $64,831,000
Reimbursable expenses 21,129,000 29,667,000 23,836,000
- ----------------------------------------------------------------------------------------------
Net revenues 38,211,000 40,158,000 40,995,000
Costs and expenses:
Salaries and related costs 27,782,000 28,918,000 29,751,000
General and administrative expenses 9,836,000 9,990,000 10,022,000
- ----------------------------------------------------------------------------------------------
Income from continuing operations 593,000 1,250,000 1,222,000
- ----------------------------------------------------------------------------------------------
Other income (expense):
Interest income 311,000 176,000 272,000
Gain on sale of equipment 27,000 - 41,000
Gain on insurance settlement - 16,000 -
Gain on sale of other assets - 151,000 -
Interest expense (110,000) (310,000) (263,000)
- ----------------------------------------------------------------------------------------------
Total other income, net 228,000 33,000 50,000
- ----------------------------------------------------------------------------------------------
Income from continuing operations before
provision for income taxes 821,000 1,283,000 1,272,000
Provision for income taxes 292,000 485,000 450,000
- ----------------------------------------------------------------------------------------------
Net income from continuing operations 529,000 798,000 822,000
Discontinued operations (Note 11):
Loss from discontinued operations, net of income tax - (99,000) (2,216,000)
- ----------------------------------------------------------------------------------------------
Net income (loss) $ 529,000 $ 699,000 $(1,394,000)
==============================================================================================
Net income per share from continuing operations $ .13 $ .21 $ .22
==============================================================================================
Net (loss) per share from discontinued operations - $ (.03) $ (.59)
==============================================================================================
Net income (loss) per share $ .13 $ .18 $ (.37)
==============================================================================================
Weighted average common and common equivalent
shares outstanding 3,929,000 3,857,000 3,780,000
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE> 8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
For the Years Ended Common Stock Losses on
February 28, 1997, ------------------ Capital in Available- Total
February 29, 1996, and Number Par Excess of for-Sale Retained Stockholders'
February 28, 1995 of Shares Value Par Value Securities Earnings Equity
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <S> <C> <C>
Balance,
February 28, 1994 3,762,839 $38,000 $13,580,000 $9,189,000 $22,807,000
Issuance of common stock 61,705 - 286,000 286,000
Change in unrealized losses
on available-for-sale
securities $(14,000) (14,000)
Net loss (1,394,000) (1,394,000)
- --------------------------------------------------------------------------------------------------------
Balance,
February 28, 1995 3,824,544 38,000 13,866,000 (14,000) 7,795,000 21,685,000
Issuance of common stock 41,066 1,000 83,000 84,000
Change in unrealized losses
on available-for-sale
securities (3,000) (3,000)
Net income 699,000 699,000
- --------------------------------------------------------------------------------------------------------
Balance,
February 29, 1996 3,865,610 39,000 13,949,000 (17,000) 8,494,000 22,465,000
Issuance of common stock 83,184 - 253,000 253,000
Change in unrealized losses
on available-for-sale
securities 10,000 10,000
Net income 529,000 529,000
- --------------------------------------------------------------------------------------------------------
Balance,
February 28, 1997 3,948,794 $39,000 $14,202,000 $(7,000) $9,023,000 $23,257,000
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE> 9
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended February 28, 1997, February 29, 1996, and February
28, 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $ 529,000 $ 798,000 $ 822,000
Adjustments to reconcile net income from continuing operations to net cash
provided by operating
activities:
Discontinued operations -- (99,000) (2,216,000)
Depreciation and amortization 2,295,000 1,166,000 1,325,000
Gain on sale of equipment (27,000) -- (41,000)
Gain on insurance settlement -- (16,000) --
Gain on sale of other assets -- (151,000) --
(Benefit) provision for deferred income taxes (461,000) 69,000 (184,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 2,596,000 (83,000) 370,000
Decrease in costs and estimated earnings in excess of
billings on uncompleted contracts 248,000 188,000 2,000
Decrease (increase) in prepaid expenses and other current assets 114,000 (174,000) 456,000
Decrease (increase) in refundable income taxes 138,000 355,000 (493,000)
(Decrease) increase in accounts payable, trade (230,000) (601,000) 2,181,000
(Decrease) increase in accrued payroll and expenses (319,000) (1,065,000) 168,000
Increase (decrease) in income taxes payable 363,000 -- (305,000)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,246,000 387,000 2,085,000
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash -- 1,900,000 (1,880,000)
(Increase) decrease in available-for-sale securities (700,000) (709,000) 1,832,000
Proceeds from disposal of equipment 216,000 23,000 59,000
Proceeds from sale of securities -- 703,000 --
Acquisition of property and equipment (995,000) (929,000) (1,284,000)
(Increase) decrease in other assets (136,000) 380,000 915,000
Decrease (increase) in due from affiliates 676,000 243,000 (919,000)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (939,000) 1,611,000 (1,277,000)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings of notes payable (990,000) (879,000) 1,050,000
Repayments of long-term debt (2,659,000) (906,000) (1,051,000)
Proceeds from issuance of common stock, net 253,000 84,000 286,000
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (3,396,000) (1,701,000) 285,000
- --------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 911,000 297,000 1,093,000
Cash and cash equivalents at beginning of year 3,318,000 3,021,000 1,928,000
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,229,000 $ 3,318,000 $ 3,021,000
==========================================================================================================================
Supplemental disclosure of cash flow information:
Interest expense paid $ 110,000 $ 310,000 $ 263,000
Income taxes paid (refunded), net $ 248,000 $ (14,000) $ 984,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation. The consolidated financial statements include the
accounts of GZA GeoEnvironmental Technologies, Inc. ("the Company"), its wholly
owned subsidiary GZA GeoEnvironmental, Inc. ("GZA"), GZA's wholly owned
subsidiaries GZA Drilling, Inc., ("GZAD") and GZA Texas, Inc., ("Texas") and
GZAD's wholly owned subsidiary Delta Geotechnical Services, Inc., the Company's
wholly owned subsidiary GZA Remediation, Inc. and its wholly owned subsidiary
Grover Enterprises, Inc., the Company's wholly owned subsidiary GZA Securities
Corporation, and the Company's affiliate, through common ownership and control,
Goldberg-Zoino Associates of New York, P.C., doing business as GZA
GeoEnvironmental of New York ("GZANY"). All material intercompany transactions
and balances have been eliminated.
Nature of the Business. The Company provides consulting services in geotechnical
engineering, applied geosciences and related environmental disciplines,
environmental seminar training, drilling and test boring services.
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 those estimates.
Revenues and Cost Recognition. Revenue from engineering service contracts is
recognized as the services are provided. Revenues from long-term contracts are
recognized on the percentage-of-completion method. Under this method, the
Company recognizes the proportion of the total profit anticipated from the
contract which the cost of the work completed bears to the estimated total cost
of the work covered under the contract. For contracts which extend over more
than one year, revisions in cost and earnings estimates during the course of the
work are reflected in the period in which the facts which require the revision
become known. Provisions for estimated losses on uncompleted contracts are made
in the period in which it is determined a loss will occur. For purposes of
determining the percentage of completion, contract costs include all material
and labor costs and those indirect costs related to contract performance.
Contracts relating to government-funded projects may include clauses under which
the contract may be terminated for the convenience of the government, or be
subject to renegotiation at the request of the government based upon certain
contractual conditions. If such contracts are terminated or renegotiated, the
Company will reflect any adjustments in the period they become known.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand and
investments in fixed income securities with original maturity dates of three
months or less.
Concentration of Credit Risk. Financial instruments which potentially expose the
Company to concentrations of credit risk consist primarily of trade accounts
receivable and costs and estimated earnings in excess of billings on uncompleted
contracts. The Company has not experienced significant losses related to
receivables from individual customers or groups of customers in a particular
industry or geographic area. Due to these factors, no additional credit risk
beyond amounts provided for collection losses is believed inherent in the
Company's accounts receivable and costs and estimated earnings in excess of
billings on uncompleted contracts.
Available-for-Sale Securities. Available-for-sale securities, consisting
primarily of municipal bonds with original maturity dates of three months or
more, are carried at fair value. The Company limits the amount of its
investments in any one institution to minimize exposure to loss. The investment
portfolio is reviewed monthly and investments are purchased and sold on a
regular basis. Pursuant to Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
which the Company adopted as of March 1, 1994, the Company has classified its
debt securities as "available-for-sale". Under the provisions of SFAS No. 115,
the securities are reported at fair value, with unrealized gains and losses
excluded from earnings and reported as an adjustment to stockholders' equity.
Property, Equipment and Depreciation. Property and equipment are stated at cost.
Additions and improvements, unless of a relatively minor amount, are
capitalized. Expenditures for normal maintenance and repairs are charged to
expense as incurred. The cost and related accumulated depreciation of property
and equipment sold or otherwise disposed of are eliminated from the accounts and
the resulting gains or losses are reflected in income. For financial reporting
purposes, depreciation is provided using various straight-line and accelerated
methods over the estimated useful lives of the individual assets which range
from three to ten years. Leasehold improvements are amortized on a straight-line
basis over the estimated useful life of the improvement or the remaining life of
the lease, whichever is shorter.
Other Assets. Other assets consist principally of investments in unconsolidated
companies and the excess of cost over net assets acquired resulting from
acquisitions of businesses (goodwill). Amortization of these costs is computed
on a straight-line basis over the estimated useful life of the asset, generally
twenty-five years. For the fiscal years ended February 28, 1997 and February 29,
1996, the Company recorded goodwill amortization expense of $439,000 and
$49,000, respectively.
In accordance with SFAS No. 121, "Accounting for Long-Lived Assets", the
Company periodically reviews the propriety of carrying amounts of its long-lived
and intangible assets, as well as reviews the amortization periods to determine
whether current events and circumstances warrant adjustments to the carrying
value or estimated useful lives. At each balance sheet date, management
evaluates
27
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
whether there has been a permanent impairment in the value of such assets by
assessing the carrying value against anticipated future operating results.
Factors which management considers in performing the assessment include past and
projected operating results, trends and prospects.
Income Taxes. Federal and state income taxes are based upon financial statement
income using the liability method of accounting for income taxes. Certain items
of income and expense are recognized for income tax purposes in different
periods than for financial reporting purposes. Temporary differences result
primarily from the use of accelerated depreciation methods for tax reporting
purposes.
Newly Issued Accounting Standards. In February 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 128, "Earnings per share". SFAS No. 128
establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board ("APB")
Opinion No. 15. Under SFAS No. 128, the Company will be required to present both
basic and diluted net income per share. The Company plans to adopt SFAS No. 128
in its fiscal quarter ending February 28, 1998 and at that time all historical
net income per share data presented will be restated to conform to the
provisions of SFAS No. 128.
Reclassifications. Certain reclassifications have been made to the prior years'
financial statements to conform to the current presentation.
28
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Condensed Financial Information of Affiliate
The condensed financial information of the Company's affiliate, GZANY, at
February 28, 1997 and February 29, 1996 and for each of the three years in the
period ended February 28, 1997 is as follows:
<TABLE>
<CAPTION>
Condensed Balance Sheets
February 28, 1997 and February 29, 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 105,000 $ 28,000
Accounts receivable, net 566,000 358,000
Costs and estimated earnings in excess of billings on uncompleted contracts 163,000 113,000
Due from affiliates 285,000 876,000
Refundable income taxes 44,000 128,000
Other current assets 82,000 13,000
Total current assets 1,245,000 1,516,000
Property and equipment, net 34,000 55,000
Other assets, net 25,000 4,000
- ------------------------------------------------------------------------------------------------------------------
Total assets 1,304,000 $1,575,000
==================================================================================================================
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $ 418,000 $ 240,000
Deferred income taxes - 71,000
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 418,000 311,000
- ------------------------------------------------------------------------------------------------------------------
Common stock 1,000 1,000
Retained earnings 885,000 1,263,000
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 886,000 1,264,000
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,304,000 $1,575,000
==================================================================================================================
</TABLE>
<TABLE>
Condensed Statements of Operations
<CAPTION>
For the Years Ended February 28, 1997, February 29,
1996 and February 28, 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $1,227,000 $1,390,000 $1,596,000
Costs and expenses 1,834,000 1,752,000 1,705,000
- -------------------------------------------------------------------------------------------------------------
Loss from operations (607,000) (362,000) (109,000)
Benefit for income taxes (229,000) (145,000) (52,000)
- -------------------------------------------------------------------------------------------------------------
Net loss $ (378,000) $ (217,000) $ (57,000)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Accounts receivable, net, include $37,000 due from GZA at February 28, 1997 and
$42,000 due at February 29, 1996. Substantially all the amounts shown as due
from affiliates at February 28, 1997 and February 29, 1996 were due from GZA. In
addition, approximately $235,000, $335,000 and $361,000 of net revenues were
billed to GZA in fiscal 1997, 1996 and 1995, respectively.
29
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Restricted Cash
In July 1994, the Company deposited $1,900,000 into a bank account, of which
funds $1,690,000 were restricted in response to a court order pending the
outcome of legal action. In May 1995, the case was settled and the restricted
funds were released.
Note 4. Available-for-Sale Securities
On March 1, 1994, the Company adopted SFAS No. 115. The effect on the Company's
financial statements of adoption of SFAS No. 115 was immaterial. Unrealized
losses on available-for-sale securities at February 28, 1997 were approximately
$7,000, net of deferred taxes. The maturities of available-for-sale securities
held at February 28, 1997 are $2,402,000 within one year and $1,054,000 from one
to five years. Certain of these available-for-sale securities have maturities in
excess of one year but are classified as current assets consistent with their
use. Gross realized gains and losses from available-for-sale securities were
immaterial to the Company's operating results.
<TABLE>
Note 5. Accounts Receivable
Accounts receivable consists of the following:
<CAPTION>
February 28, February 29,
1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $12,737,000 $12,710,000
Retainage 1,166,000 3,719,000
- -------------------------------------------------------------------------
13,903,000 16,429,000
Less - Allowance for doubtful accounts 844,000 774,000
- -------------------------------------------------------------------------
$13,059,000 $15,655,000
=========================================================================
</TABLE>
All amounts billed under retainage provisions of long-term contracts are
expected to be collected within one year of completion of the contracts.
<TABLE>
Note 6. Unbilled Costs and Estimated Earnings on Uncompleted Contracts
Unbilled costs and estimated earnings on uncompleted contracts, which
represent revenues earned but not billed as of February 28, 1997 and
February 29, 1996, respectively, under the terms of the related contracts,
are as follows:
<CAPTION>
February 28, February 29,
1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on uncompleted contracts $3,945,000 $3,449,000
Estimated earnings 3,008,000 2,385,000
- -----------------------------------------------------------------------------
$6,953,000 $5,834,000
=============================================================================
</TABLE>
Included in unbilled costs and estimated earnings on uncompleted contracts are
reserves of $678,000 and $1,200,000 as of February 28, 1997 and February 29,
1996, respectively, based on management's estimates of the contract values.
Management continuously evaluates and adjusts specific reserves based on
progress of contract negotiations and management's judgment of the ultimate
contract value. At the point when material changes are renegotiated or known,
the Company will reflect the appropriate adjustments. Costs incurred on
uncompleted contracts are typically billed at the end of a two-week or four-week
billing cycle.
30
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Property and Equipment
<TABLE>
Property and equipment are stated at cost and consist of the following:
<CAPTION>
February 28, 1997 February 29, 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $ 2,959,000 $ 2,470,000
Laboratory and technical equipment 3,334,000 3,208,000
Furniture, fixtures and computer
equipment 6,734,000 6,124,000
Motor vehicles, rigs and trucks 661,000 645,000
Leasehold improvements 2,463,000 2,408,000
- ----------------------------------------------------------------------------
16,151,000 14,855,000
Less - Accumulated depreciation and
amortization 10,637,000 9,165,000
- ----------------------------------------------------------------------------
$ 5,514,000 $ 5,690,000
============================================================================
</TABLE>
Depreciation expense for the years ended February 28, 1997, February 29, 1996
and February 28, 1995 was $1,857,000, $1,117,000, and $1,247,000, respectively.
Note 8. Financing and Other Obligations
On February 28, 1994, the Company entered into a Revolving Credit and Term Loan
Agreement which replaced its previous credit facility with the same bank.
Notes Payable. Notes payable represent borrowings from a bank pursuant to a
revolving line of credit. The Company has available an unsecured revolving line
of credit under which it can borrow up to $5,500,000 in a combination of cash
and letters of credit, with interest payable monthly at the bank's corporate
base rate (8.25% at February 28, 1997) or the applicable LIBOR rate plus 200
basis points. Under the terms of the line of credit, the Company is required to
maintain a minimum net worth, working capital, current ratio, quick ratio,
tangible net worth and cash flow coverage ratio. Borrowings under this revolving
credit agreement totaled $0 at February 28, 1997 and $990,000 at February 29,
1996. The Company had no letters of credit outstanding at February 28, 1997.
<TABLE>
Long-Term Debt. Long-term debt consists of the following:
<CAPTION>
February 28, February 29,
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Term facility with interest rates ranging from 6.99% to
8.25% at February 29, 1996, payable in monthly
installments of $66,565 - $2,659,000
Less - Current portion - 799,000
- -------------------------------------------------------------------------------
- $1,860,000
===============================================================================
</TABLE>
The Company also has available a $4,500,000 term loan facility, providing for
term borrowings amortized through July 31, 2000 bearing interest at a variable
rate equal to the bank's corporate base rate or a fixed rate over the term of
the loan. Borrowings under the term loan facility totaled $0 at February 28,
1997 and $2,659,000 at February 29, 1996. The term loan facility requires
maintenance of the same ratios and financial covenants as the revolving line of
credit.
31
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Accrued Payroll and Expenses.
Accrued payroll and expenses consist of the following:
February 28, February 29,
1997 1996
- -----------------------------------------------------------------------
Accrued payroll and related benefits $2,723,000 $2,830,000
Legal and claims reserves 739,000 743,000
Reserve for discontinued operations - 481,000
Other 602,000 329,000
- -----------------------------------------------------------------------
$4,064,000 $4,383,000
=======================================================================
Note 10. Stockholders' Equity
Stock Option Plans. Under the Company's 1989 Incentive Stock Option Plan, as
amended (the "Incentive Plan"), incentive stock options (as defined in Section
422A of the Internal Revenue Code of 1986, as amended) to purchase shares of
common stock may be issued to key employees including executive officers and
directors who are employees. The Incentive Plan is administered by the Company's
Board of Directors, which designates the optionees, option prices (which may not
be less than fair market value on the date of grant), date of grant, and terms
of options (which may not be more than ten years). All Incentive Plan options
are non-assignable. The Incentive Plan terminates when all options issuable
thereunder have been exercised.
During fiscal 1994, the shareholders voted to increase the number of
shares reserved for issuance under the Incentive Plan from 310,000 to 510,000
shares. During fiscal 1994, fiscal 1996 and fiscal 1997, the Board of Directors
approved reductions, from $6.28 to $5.25, $5.70 to $5.25 and $5.25 to $3.50
respectively, in the exercise price of outstanding options under the Incentive
Plan. The reduced exercise prices were not less than fair market value of the
Company's common stock on the date of the reductions and the reductions of the
exercise prices of the options did not result in compensation expense charges.
32
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Information related to the Incentive Plan is summarized as follows:
<CAPTION>
Incentive Stock Options Outstanding
-----------------------------------
Shares Exercise Price per Share
- --------------------------------------------------------------------------
<S> <C> <C>
Balance at February 28, 1993 196,034 $ 6.28
Granted 98,600 6.28
Cancelled (18,700) 5.25 - 6.28
- --------------------------------------------------------------------------
Balance at February 28, 1994 275,934 5.25
Granted 36,000 5.25 - 5.70
Cancelled (27,378) 5.25
- --------------------------------------------------------------------------
Balance at February 28, 1995 284,556 5.25 - 5.70
Granted 23,600 5.25
Cancelled (59,878) 5.25 - 5.70
- --------------------------------------------------------------------------
Balance at February 29, 1996 248,278 5.25
Granted 89,200 3.50 - 5.25
Cancelled (32,600) 3.50 - 5.25
- --------------------------------------------------------------------------
Balance February 28, 1997 304,878 $ 3.50
==========================================================================
</TABLE>
As of February 28, 1997 and February 29, 1996, options for 199,438 and 168,498
shares, with weighted average exercise prices of $3.50, were exercisable, and
options for 205,122 and 261,722 shares, respectively, were available to be
granted under the Incentive Plan.
Under the Company's 1989 Non-Qualified Stock Option Plan (the "Non-Qualified
Plan"), up to 15,000 common stock options, which are not "incentive stock
options" as defined in Section 422A, may be issued to key employees, executive
officers and directors of the Company, including directors who are not
employees. The Non-Qualified Plan is administered by the Company's Board of
Directors, which designates the optionees, option price, date of grant, and
terms of options (which may not be more than ten years). All Non-Qualified Plan
options are non-assignable. The Non-Qualified Plan terminates when all options
issuable thereunder have been exercised.
During fiscal 1994 and fiscal 1997, the Board of Directors approved a
reduction, from $7.00 to $5.25 and from $5.25 to $3.50, respectively, in the
exercise price of outstanding options under the Non-Qualified Plan. The
reduction of the exercise price of these options did not result in compensation
expense charges.
At February 28, 1997, options to purchase 10,000 shares of common stock at
an exercise price of $3.50 per share were outstanding under the Non-Qualified
Plan. All such options were exercisable.
On March 14, 1995, the Company's Board of Directors approved the GZA 1995
Stock Incentive Plan (the "Stock Plan"), and such Stock Plan was subsequently
approved by the shareholders on July 11, 1995. Pursuant to the Stock Plan, the
Company may grant certain key employees, at no cost, shares of "restricted
stock" of the Company in appreciation of services. A condition of receipt of
any award under the Stock Plan is that the employee must either own, or agree
to acquire within one year, an equivalent number of shares. All shares awarded
under the Stock Plan vest over a five-year period. The maximum number of shares
that may be granted under the Stock Plan is 200,000. Pursuant to the Stock
Plan, in November 1996, March 1996 and April 1995, 10,000, 5,053 and 12,418
shares, respectively, were issued to certain employees.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 is effective for periods beginning after December
15, 1995. SFAS No. 123 requires that companies either recognize compensation
expense for grants of stock, stock options, and other equity instruments based
on fair value, or provide pro forma disclosure of net income and earnings per
share in the notes to the financial statements. The Company adopted the
disclosure provisions of SFAS No. 123 in fiscal 1997 and has applied APB Opinion
No. 25 and related Interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS No. 123, the impact on the Company's net income and
earnings per share for the fiscal years ended February 28, 1997 and February 29,
1996 would not have been material.
The weighted average fair value of the common stock at date of grant for options
granted during 1997 and 1996 was $3.66 and $3.28 per option, respectively. The
fair value of these options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions for 1997 and
1996: risk free interest rates of 6.92% and 6.85%, respectively; dividend yields
33
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of 0%; volatility factors of the expected market price of the Company's common
stock of 30%; and a weighted average expected life of the options of 5 years.
Note 11. Discontinued Operations
The Company and P&P Service, Inc. ("P&P") were equal joint venture partners of
Fonditek International, Inc. ("Fonditek"), which performed specialty
construction services. As reported in financial statements for fiscal 1995, the
Company adopted a plan of complete liquidation and abandoned the specialty
construction business and reports results of that business as discontinued
operations.
The loss from discontinued operations for fiscal year ended February 28,
1995, net of tax benefit, was $704,000 and the estimated loss from liquidation
and disposal of the specialty construction business, net of tax benefit, for the
fiscal year ended February 28, 1995 was approximately $1,512,000. Revenue from
discontinued operations for the year ended February 28, 1995 was $1,129,000.
In fiscal 1996 a settlement agreement for liquidation of the assets and
satisfaction or assumption of liabilities and settlement of related disputes was
entered into by P&P, Fonditek and the Company. To reflect the net effect of the
settlement for the Company's investment and related rights and obligations, the
Company recorded an additional loss from discontinued operations of $99,000, net
of tax benefit of $68,000, in fiscal 1996.
Note 12. Income Taxes
<TABLE>
Provision for income taxes from continuing operations consisted of the
following:
<CAPTION>
February 28, February 29, February 28,
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
State $ 151,000 $162,000 $ 189,000
Foreign - 147,000 -
Federal 602,000 32,000 445,000
- ------------------------------------------------------------------------------------
Total current 753,000 341,000 634,000
- ------------------------------------------------------------------------------------
Deferred (prepaid):
State (121,000) 23,000 (44,000)
Federal (340,000) 121,000 (140,000)
- -----------------------------------------------------------------------------------
Total deferral (prepaid) (461,000) 144,000 (184,000)
- ------------------------------------------------------------------------------------
Total provision for income taxes $ 292,000 $485,000 $ 450,000
====================================================================================
</TABLE>
Deferred income taxes are provided to account for temporary differences between
the financial reporting basis and income tax basis of the Company's assets and
liabilities using the liability method of accounting for income taxes. Deferred
taxes represent the future income tax effect of reported differences between the
book and tax bases of the Company's assets and liabilities.
<TABLE>
Reconciliations of the U.S. federal statutory income tax rate to the effective
income tax rate are as follows:
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory income tax rate 34% 34% 34%
State and foreign income tax, net of
federal income tax benefit 3 11 (10)
Interest income exempt from federal tax (3) (4) 6
Reduction of valuation allowance - (4) -
Non-deductible expenses 2 1 5
- -------------------------------------------------------------------------------
Effective income tax rate 36% 38% 35%
===============================================================================
</TABLE>
34
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GZA's net deferred tax asset at February 28, 1997 and February 29, 1996 consists
of gross deferred tax liabilities of $347,000 and $687,000 and deferred tax
assets of $1,514,000 and $1,402,000, respectively. The components of GZA's net
deferred tax assets as of February 28, 1997 and February 29, 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 140,000 $ 92,000
Depreciation and amortization 207,000 594,000
Net operating loss carryforwards (211,000) --
Allowance for doubtful accounts (317,000) (497,000)
Restructuring reserve (321,000) (319,000)
Accrued vacation (278,000) (258,000)
Other accrued expenses (387,000) (327,000)
Valuation allowance 440,000 455,000
- ------------------------------------------------------------------
Total net deferred tax assets $(727,000) $(260,000)
==================================================================
</TABLE>
The components of GZA's deferred income tax provision (benefit) from continuing
operations for the years ended February 28, 1997 and February 29, 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 47,000 $(71,000)
Net operating loss carryforwards (211,000) --
Depreciation and amortization (390,000) 72,000
Allowance for doubtful accounts 181,000 (31,000)
Restructuring reserves - 10,000
Other accrued expenses (88,000) 164,000
- --------------------------------------------------------------------
Total deferred income tax provision (benefit) $(461,000) $144,000
====================================================================
</TABLE>
Note 13. Retirement and Benefit Plans
The Company maintains a Profit Sharing Plan under Section 401(k) of the Internal
Revenue Code which covers all employees who meet minimum age and service
requirements. Annual Company contributions are determined by the Board of
Directors. The year end for the profit sharing plan is December 31. Amounts
contributed by the Company under the plan vest according to a seven-year vesting
schedule. To participate in the plan, an employee must contribute a minimum of
2% of his or her base salary, and may contribute additional amounts. Participant
contributions are fully vested at all times. The Company's contributions to the
plan were $682,000, $709,000 and $707,000 in fiscal 1997, 1996 and 1995,
respectively. In fiscal 1997, 1996 and 1995, the Board of Directors voted to
make 25% of the Company's contribution to the Plan in stock of the Company. As a
result, in fiscal years 1997, 1996 and 1995, respectively, 58,064, 50,663 and
38,999 shares of the Company's stock (having a total fair value of approximately
$171,000, $177,000 and $176,000 on the date of contribution) were contributed in
addition to cash contributions of $511,000, $532,000 and $531,000, respectively.
The Company also maintains an employee stock purchase plan under which up
to 220,000 shares of the Company's common stock are available for purchase by
its employees. Eligible employees can purchase shares of the stock at the lower
of 85% of the fair market value of the stock on the first or last day of each
six month period beginning on March 1 or September 1. Monies to purchase the
shares are withheld from an employee's pay through payroll deductions. Under the
plan, 12,998, 22,510 and 26,542 shares were purchased for fiscal 1997, 1996 and
1995, respectively.
35
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Related Party Transactions
The Company leases office space from certain stockholders and from entities
owned by certain stockholders and employees. Lease payments, net of sublease
income, to these entities totaled $957,000, $990,000 and $1,027,000 in fiscal
1997, 1996 and 1995, respectively.
Note 15. Commitments and Contingencies
Commitments. The Company leases certain facilities under the terms of various
noncancellable operating leases, including leases with related parties described
in Note 14. Lease terms generally range from two to five years. Additionally,
the Company leases certain equipment under operating leases.
Future minimum lease payments under noncancellable operating leases are as
follows:
<TABLE>
<S> <C>
1998 $1,922,000
1999 1,473,000
2000 1,187,000
2001 939,000
2002 79,000
- -------------------------------------------------------------------------------
Total minimum lease payments $5,600,000
===============================================================================
</TABLE>
Rent expense charged to operations was $2,312,000, $2,224,000 and $2,201,000 in
fiscal 1997, 1996 and 1995, respectively.
Contingencies. 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 a party will not, in the aggregate, have a material
adverse effect on the results of operations or financial condition of the
Company.
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.
36
<PAGE> 20
SUPPLEMENTAL INFORMATION
PRICE RANGE OF COMMON STOCK
<TABLE>
The Company's common stock is traded in the over-the-counter market under the
symbol "GZEA" and is included in the National Association of Securities Common
Dealers, Inc. National Market System ("NASDAQ"). The following table sets forth
the quarterly range of high and low prices per share of common stock for fiscal
year 1997, as reported by NASDAQ.
<CAPTION>
Fiscal 1997: High Low
- -----------------------------------------------------------------
<S> <C> <C>
First Quarter 3-3/4 3-1/8
Second Quarter 3-3/4 2-11/16
Third Quarter 3-1/2 2-3/4
Fourth Quarter 3-1/2 2-7/8
</TABLE>
As of May 20, 1997, the Company's common stock was held by 352 holders of
record. The Company has never paid cash dividends on its common stock, and does
not intend to pay cash dividends in the foreseeable future. The Company
currently intends to retain any future earnings to finance growth.
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
Three months ended 2/28/97 11/30/96 8/31/96 5/31/96
- -------------------------------------------------------------------------------------------------------
In thousands except per share amounts (unaudited)
<S> <C> <C> <C> <C>
Revenues $15,453 $15,376 $15,042 $13,469
Net revenues 9,527 9,034 9,691 9,959
Income (loss) from continuing operations 682 (714) 281 344
Net income (loss) from continuing operations 615 (491) 179 226
Net loss from discontinued operations -- -- -- --
Net income (loss) 615 (491) 179 226
Net income (loss) per share from continuing operations $ .15 $ (.12) $ .04 $ .06
Net income (loss) per share from discontinued operations -- -- -- --
Net income (loss) per share $ .15 $ (.12) $ .04 $ .06
Weighted average common and
common equivalent shares outstanding 3,947 3,949 3,932 3,901
</TABLE>
<TABLE>
<CAPTION>
Three months ended 2/29/96 11/30/95 8/31/95 5/31/95
- -------------------------------------------------------------------------------------------------------
In thousands except per share amounts (unaudited)
<S> <C> <C> <C> <C>
Revenues $16,480 $19,743 $17,327 $16,275
Net revenues 9,303 10,601 10,177 10,077
Income (loss) from continuing operations (247) 1,031 99 367
Net income (loss) from continuing operations (32) 568 72 190
Net income (loss) from discontinued operations 66 -- (165) --
Net income (loss) 34 568 (93) 190
Net income (loss) per share from continuing operations $ (.01) $ .15 $ .02 $ .05
Net income (loss) per share from discontinued operations $ .01 -- $ (.04) --
Net income (loss) per share -- $ .15 $ (.02) $ .05
Weighted average common and
common equivalent shares outstanding 3,866 3,865 3,850 3,839
</TABLE>
37
<PAGE> 21
<TABLE>
<S> <C> <C>
CORPORATE INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
Donald T. Goldberg Joseph D. Guertin Paul F. Gorman
Chairman of the Board of Directors Director Director
Senior Vice President,
Andrew P. Pajak GZA GeoEnvironmental, Inc. Lewis Mandell
Director Director
President and Lawrence Feldman
Chief Executive Officer Director Thomas W. Philbin
Senior Vice President, Director
Joseph P. Hehir GZA GeoEnvironmental, Inc.
Chief Financial Officer John E. Ayres
Irvine G. Reinig II Executive Vice President,
M. Joseph Celi Director Business Development
Director
Executive Vice President, Timothy W. Devitt Richard M. Simon
Remediation Services Director Executive Vice President,
Professional Practice
STOCKHOLDER INFORMATION
Independent Accountants Annual Meeting Operations
Coopers & Lybrand LLP The Annual Meeting of Stockholders The Company conducts all
Boston, Massachusetts will be held at 10:00 a.m. on its operations through its
July 15, 1997 at the Sheraton wholly owned subsidiaries
Counsel Needham Hotel, 100 Cabot Street, GZA GeoEnvironmental,
Foley, Hoag & Eliot LLP Needham, Massachusetts. Inc. (GZA) and GZA
Boston, Massachusetts Remediation, Inc. (GZAR);
Stockholder Reports and through GZA's wholly
Registrant and Transfer Agent A copy of the Company's 10-K, owned subsidiary GZA
American Stock Transfer as filed with the Securities and Drilling, Inc.; through
& Trust Company Exchange Commission, may be the Company's affiliate
40 Wall Street obtained without charge by Aquaterra Environmental
New York, New York 10005 writing to Investor Relations, Consultants Limited, a joint
Tel 212/936-5100 GZA GeoEnvironmental venture of the Company and
Technologies, Inc., Carl Bro Group (UK) Ltd.;
Common Stock Listing 320 Needham Street, and through the Company's
The common stock of Newton Upper Falls, affiliate Goldberg-Zoino
GZA GeoEnvironmental Massachusetts 02164 Associates of New York,
Technologies, Inc. P.C. (doing business as GZA
is traded over the counter Coporate Headquarters GeoEnvironmental of New
in the NASDAQ national GZA GeoEnvironmental York), a New York professional
market quotation system Technologies, Inc. service corporation
under the symbol GZEA. 320 Needham Street wholly owned by officers,
Newton, Upper Falls directors, and stockholders
Massachusetts 02164 of the Company. The
Tel 617/969-0050 Company was incorporated
Fax 617/969-0715 in Delware on May 5, 1989.
</TABLE>
38
<PAGE> 1
Exhibit 22.1
Subsidiaries of the Registrant
------------------------------
Name of Subsidiary Jurisdiction of
- ------------------ ---------------
Incorporation
-------------
1. GZA GeoEnvironmental, Inc. Massachusetts
2. GZA Remediation, Inc. Massachusetts
3. GZA Securities Corporation Massachusetts
4. GZA Drilling, Inc. (a wholly owned Massachusetts
subsidiary of GZA GeoEnvironmental, Inc.)
5. Delta Geotechnical Services, Inc., (a wholly owned Massachusetts
subsidiary of GZA Drilling, Inc.)
6. Grover Enterprises, Inc. (a wholly owned subsidiary Massachusetts
of GZA Remediation, Inc.)
7. GZA Texas, Inc. (a wholly owned subsidiary of GZA Massachusetts
GeoEnvironmental, Inc.)
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
GZA GeoEnvironmental Technologies, Inc. on Form S-8 (File No. 33-63940 and File
No. 33-75688) of our report dated May 2, 1997, on our audits of the consolidated
financial statements and financial statement schedule of GZA GeoEnvironmental
Technologies, Inc. as of February 28, 1997 and February 29, 1996, and for the
three years in the period ended February 28, 1997, which report is included
and incorporated by reference in the Company's 1997 Form 10-K, Exhibit 13.1.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE REGISTRANT AT FEBRUARY 28, 1997 AND FEBRUARY
29, 1996 AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT FOR THE
TWELVE MONTHS ENDED FEBRUARY 28, 1997, FEBRUARY 29, 1996, AND FEBRUARY 28, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS IN THE FORM
10-K FOR THE TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 4,229,000
<SECURITIES> 3,456,000
<RECEIVABLES> 13,059,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,125,000
<PP&E> 5,514,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,535,000
<CURRENT-LIABILITIES> 11,948,000
<BONDS> 0
0
0
<COMMON> 39,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,535,000
<SALES> 0
<TOTAL-REVENUES> 59,340,000
<CGS> 0
<TOTAL-COSTS> 58,747,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,000
<INCOME-PRETAX> 821,000
<INCOME-TAX> 292,000
<INCOME-CONTINUING> 529,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529,000
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
