<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended_____________November 30, 1996__________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________to____________________________
Commission file number 0-13965
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
---------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3051642
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02164
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 969-0700
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of Shares of Common Stock outstanding at December 31, 1996 3,948,794
-----------
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<TABLE>
INDEX
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
[Bullet] Consolidated Balance Sheets -
November 30, 1996 (unaudited) and February 29, 1996 3
[Bullet] Consolidated Statements of Operations - (unaudited)
Three and Nine Months Ended November 30, 1996 and 1995 4
[Bullet] Consolidated Statements of Cash Flows - (unaudited)
Nine Months Ended November 30, 1996 and 1995 5
[Bullet] Notes to Consolidated Financial Statements -
November 30, 1996 6-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
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<TABLE>
PART I: FINANCIAL INFORMATION
ITEM 1:FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<CAPTION>
NOVEMBER 30, 1996 FEBRUARY 29, 1996
----------------- -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,749,000 $ 3,318,000
Available-for-sale securities 2,508,000 2,752,000
Accounts receivable, net 14,280,000 15,655,000
Due from affiliate 277,000 676,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 6,342,000 4,935,000
Prepaid expenses and other current assets 862,000 1,365,000
Refundable income taxes 322,000 138,000
Deferred income taxes 993,000 993,000
----------- -----------
Total current assets 30,333,000 29,832,000
Property and equipment, net 5,306,000 5,690,000
Other assets, net 1,009,000 1,193,000
----------- -----------
Total assets $36,648,000 $36,715,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 827,000 $ 990,000
Current portion of long-term debt 745,000 799,000
Accounts payable, trade 4,908,000 5,485,000
Accrued payroll and expenses 5,042,000 4,383,000
Billings in excess of costs and estimated earnings on
uncompleted contracts 518,000 --
----------- ----------
Total current liabilities 12,040,000 11,657,000
----------- ----------
Long-term debt 1,315,000 1,860,000
Deferred income taxes 733,000 733,000
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized shares 1,000,000
Issued and outstanding - none -- --
Common stock - $.01 par value
Authorized shares 14,000,000
Issued and outstanding 3,943,741 at
November 30, 1996 and 3,865,610 at
February 29, 1996 39,000 39,000
Capital in excess of par value 14,127,000 13,949,000
Unrealized losses on available-for-sale securities (12,000) (17,000)
Retained earnings 8,406,000 8,494,000
---------- -----------
Total stockholders' equity 22,560,000 22,465,000
---------- ----------
Total liabilities and stockholders' equity $36,648,000 $36,715,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended November 30, Nine Months Ended November 30,
------------------------------- ------------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $15,376,000 $19,743,000 $43,887,000 $53,345,000
Reimbursable expenses 6,342,000 9,142,000 15,203,000 22,490,000
----------- ----------- ----------- -----------
Net revenues 9,034,000 10,601,000 28,684,000 30,855,000
Costs and expenses:
Salaries and related costs 6,721,000 7,005,000 20,935,000 22,101,000
General and administrative expenses 3,027,000 2,565,000 7,838,000 7,257,000
----------- ----------- ----------- -----------
Income (loss) from continuing operations (714,000) 1,031,000 (89,000) 1,497,000
----------- ----------- ----------- -----------
Other income (expense) net:
Interest income 81,000 59,000 196,000 139,000
Other income (expense) net 2,000 -- 2,000 16,000
Interest expense (21,000) (78,000) (86,000) (271,000)
----------- ----------- ----------- -----------
Total other income (expense) 62,000 (19,000) 112,000 (116,000)
----------- ----------- ----------- -----------
Income (loss) from continuing operations before
tax provision (652,000) 1,012,000 23,000 1,381,000
Provision (credit) for income taxes (161,000) 444,000 109,000 552,000
----------- ----------- ----------- -----------
Net income (loss) from continuing operations (491,000) 568,000 (86,000) 829,000
Discontinued operations (Note 2):
Loss from discontinued operations, net of
income tax benefit -- -- -- (165,000)
----------- ----------- ----------- -----------
Net income (loss) $ (491,000) $ 568,000 $ (86,000) $ 664,000
----------- ----------- ----------- -----------
Net income (loss) per share from continuing operations $ (.12) $ .15 $ (.02) $ .21
----------- ----------- ----------- -----------
Net loss per share from discontinued operations -- -- $ -- $ (.04)
----------- ----------- ----------- -----------
$ (.12) $ .15 $ (.02) $ .17
Net income (loss) per share ----------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 3,949,000 3,865,000 3,927,000 3,854,000
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended November 30,
------------------------------
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (86,000) $ 829,000
Adjustments to reconcile net (loss) income to net cash
provided (used) by operating activities:
Discontinued operations -- (165,000)
Depreciation and amortization 879,000 893,000
Provision for inventory writedown 500,000 --
Loss (gain) on disposal of equipment 108,000 (16,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 1,375,000 (2,033,000)
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts, net (889,000) (562,000)
Decrease (increase) in prepaid expenses and
other current assets 3,000 (99,000)
(Increase) decrease in refundable income taxes (184,000) 257,000
(Decrease) increase in accounts payable, trade (577,000) 1,064,000
Increase (decrease) in accrued payroll and expenses 659,000 (1,103,000)
--------- -----------
Net cash provided (used) by operating activities 1,788,000 (935,000)
---------- -----------
Cash flows from investing activities:
Decrease (increase) in available-for-sale securities, net 244,000 (519,000)
Decrease in restricted cash -- 1,900,000
Decrease in due from affiliate 399,000 122,000
Proceeds from disposal of equipment 159,000 21,000
Acquisition of property and equipment (759,000) (507,000)
Decrease in other assets 184,000 308,000
---------- -----------
Net cash provided by investing activities 227,000 1,325,000
---------- -----------
Cash flows from financing activities:
Net (repayments) borrowings under notes payable (163,000) 174,000
Repayments of long-term debt (599,000) (705,000)
Issuance of common stock 178,000 --
---------- -----------
Net cash used by financing activities (584,000) (531,000)
---------- -----------
Net increase (decrease) in cash and cash equivalents 1,431,000 (141,000)
---------- -----------
Cash and cash equivalents at beginning of period 3,318,000 3,021,000
---------- -----------
Cash and cash equivalents at end of period $4,749,000 $ 2,880,000
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
- ------ ----------------------
The accompanying consolidated financial statements have been prepared without
audit by GZA GeoEnvironmental Technologies, Inc. and Affiliate (the "Company")
in accordance with generally accepted accounting principles for interim
financial statements and pursuant to the rules of the Securities and Exchange
Commission for Form 10-Q. Certain information and footnotes required by
generally accepted accounting principles for complete financial statements have
been omitted. It is the opinion of management that the accompanying consolidated
financial statements reflect all adjustments (which are normal and recurring)
considered necessary for a fair presentation. For further information refer to
the audited financial statements and footnotes included in the Company's Annual
Report to Stockholders for the year ended February 29, 1996, as filed with the
Securities and Exchange Commission on May 24, 1996. Operating results for the
nine month period ended November 30, 1996 are not necessarily indicative of the
results that may be expected for succeeding periods or for the year ending
February 28, 1997.
NOTE 2 - DISCONTINUED OPERATIONS
- ------ -----------------------
As reported in the Company's Form 10-K for the fiscal year ended February 28,
1995, in May 1995 the Company abandoned the specialty construction business
conducted by its 50%-owned joint venture, Fonditek International, Inc.
("Fonditek") and reported the results of that business as discontinued
operations for the year ended February 28, 1995.
On September 28, 1995, the Company and certain of its subsidiaries entered into
an agreement with Fonditek and P&P Service, Inc., the other 50% stockholder of
Fonditek (the "Settlement Agreement"). In the Settlement Agreement, the parties
agreed upon terms for the liquidation of the assets and satisfaction or
assumption of the liabilities of Fonditek and for the settlement of certain
related disputes. To reflect the net effect of the Settlement Agreement on the
Company's investment in Fonditek and related rights and obligations, the Company
recorded an additional loss from discontinued operations, net of tax benefit,
for the three month period ended August 31, 1995, in the amount of $165,000.
NOTE 3 - LONG-TERM CONTRACTS
- ------ -------------------
The Company has entered into several long-term private and government-funded
projects that are subject to risks regarding ultimate contract values. As
reported in the Company's Form 10-K for the fiscal year ended February 29, 1996,
under one such government-funded contract, involving services provided by the
Company as a subcontractor, the amount of services required of the Company
exceeded the original contract estimate. Based on ultimate contract
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settlement approximately $288,000 is reflected in revenue for the nine month
period ended November 30, 1996.
NOTE 4 - AVAILABLE-FOR-SALE SECURITIES
- ------ -----------------------------
The Company reported losses on available-for-sale securities at November 30,
1996 of approximately $12,000. The maturities of available-for-sale securities
held at November 30, 1996 are $1,759,000 within one year and $749,000 from one
to five years. Certain of these available-for-sale securities have maturities in
excess of one year and are classified as current assets consistent with their
use. Gross realized gains and losses are immaterial to the Company's operating
results.
NOTE 5 - CONTINGENCIES
- ------ -------------
The Company's services involve risks of significant liability for environmental
and property damage, personal injury, economic loss and costs assessed by
regulatory agencies. Claims may potentially be asserted against the Company
under federal and state statutes, common law, contractual indemnification
agreements or otherwise. The Company is a party to several legal actions arising
in the normal course of business. Management believes that the outcomes of the
legal actions to which it is currently a party will not, in the aggregate, have
a material adverse effect on the results of operations or financial condition of
the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE MONTH COMPARISON FOR FISCAL YEARS 1997 AND 1996
- -----------------------------------------------------
[Bullet] NET REVENUES. The Company's net revenues for the three months ended
November 30, 1996 decreased by $1,567,000 (15.0%) from the
corresponding period in the prior fiscal year primarily as a result of
a $500,000 non-recoverable write-down to adjust the Company's project
related drilling inventory, which is normally recovered as
reimbursable expenses, to fair market value, a decrease in volume of
the Company's drilling and remediation business, and a decrease in the
realized rate per hour for the Company's services.
[Bullet] SALARIES AND RELATED COSTS. Salaries and related costs for the three
months ended November 30, 1996 decreased by $284,000 (4.1%) compared
to the corresponding period in the prior fiscal year. The decrease was
due primarily to reduced cost of $171,000 for reductions in staff and
associated salary cost, and a reduction of $199,000 in Incentive
Compensation Plan accruals, which were offset by severance payments of
$86,000 resulting from consolidation of Buffalo and Rochester offices
and downsizing of the administrative staff associated with the
Company's drilling operations.
[Bullet] GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the three months ended November 30, 1996 increased by
$462,000 (18.0%) compared to the corresponding period in the prior
fiscal year. The increase reflects charges of approximately $140,000
for lease costs associated with consolidation of Buffalo and Rochester
offices and an accrual adjustment for lease expenses attributable to
excess space of a downsized office, a $250,000 write-down of goodwill
in light of changed market conditions for services provided by a
March, 1992 acquisition, and an increase in bad debts of
approximately $180,000 which were offset, in part, by reductions
in claims and legal expenses of $297,000.
NINE MONTH COMPARISON FOR FISCAL YEARS 1997 AND 1996
- ----------------------------------------------------
[Bullet] NET REVENUES. The Company's net revenues for the nine months ended
November 30, 1996 decreased by $2,171,000 (7.0%) compared to the
corresponding period in the prior fiscal year primarily as a result of
a $500,000 non-recoverable write-down to adjust the Company's project
related drilling inventory, which is normally recovered as
reimbursable expenses, to fair market value, a decrease in volume of
the Company's drilling and
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remediation business, and a decrease in the realized rate per hour for
the Company's services.
[Bullet] SALARIES AND RELATED COSTS. Salaries and related costs for the nine
months ended November 30, 1996 decreased by $1,166,000 (5.3%) compared
to the corresponding period in the prior fiscal year. The decrease was
due primarily to reduced cost of $1,206,000 for reductions in staff
and associated salary and reduced severance costs of $84,000 which
were offset by $124,000 in increased Incentive Compensation Plan
accruals.
[Bullet] GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the nine months ended November 30, 1996 increased by
$581,000 (8.0%) compared to the corresponding period in the prior
fiscal year. The increase reflects charges of approximately $140,000
for lease costs associated with consolidation of Buffalo and Rochester
offices and an accrual adjustment for lease expenses attributable to
excess space of a downsized office, a $250,000 write-down of goodwill
in light of changed market conditions for services provided by a
March, 1992 acquisition, an increase in bad debts of approximately
$195,000, and approximately $300,000 of costs associated with the
Company's decision to close the Gainesville, Florida drilling
operation which were offset, in part, by a reduction in claims and
legal expenses of approximately $285,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the nine month period ended November 30, 1996, $1,788,000 of net cash was
provided by operations. The Company made capital expenditures of approximately
$759,000 for the first nine months of fiscal 1997.
The Company's working capital increased from $18,175,000 at February 29, 1996 to
$18,293,000 at November 30, 1996.
At November 30, 1996, the Company had cash on hand and cash equivalents of
$4,749,000, of which approximately $342,000 was invested in federally tax-exempt
bonds and short-term investments of $2,508,000 of which $402,000 was invested in
federally tax-exempt bonds. The Company believes that its cash and cash
equivalents on hand and cash generated from operations will be sufficient to
meet its cash requirements for at least the next twelve months.
In May 1995, the Company made a decision to discontinue its specialty
construction business and to liquidate its investment in Fonditek International,
Inc., ("Fonditek"), a 50% joint venture company. In connection with this
decision, the Company recorded a loss from discontinued operations, net of tax
benefit, for the year ended February 28, 1995, in the amount of $2,216,000.
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On September 28, 1995, the Company entered into an agreement (the "Settlement
Agreement") providing for the liquidation of the assets and satisfaction or
assumption of the liabilities of Fonditek and for the settlement of certain
related disputes. See Note 2 of Notes to Consolidated Financial Statements. To
reflect the net effect of the Settlement Agreement on the Company's investment
in Fonditek and related rights and obligations (including the adjustment of
certain amounts receivable from, and payable to, Fonditek and related parties),
the Company recorded a loss from discontinued operations, net of tax benefit,
for the three month period ended August 31, 1995, in the amount of $165,000.
10
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) EXHIBITS
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Company did not file any report on Form 8-K during the three
month period ended November 30, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
---------------------------------------
/s/ Joseph P. Hehir
---------------------------------------
JOSEPH P. HEHIR, Chief Financial Officer
Date: January 13, 1997 and Treasurer (Chief Accounting Officer)
12
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE REGISTRANT AT NOVEMBER 30, 1996 AND FEBRUARY
29, 1996 AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT FOR THE
THREE AND NINE MONTH PERIODS ENDED NOVEMBER 30, 1996 AND 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS IN THE FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED NOVEMBER 30, 1996.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 4,749,000
<SECURITIES> 2,508,000
<RECEIVABLES> 14,280,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,333,000
<PP&E> 5,306,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,648,000
<CURRENT-LIABILITIES> 12,040,000
<BONDS> 0
0
0
<COMMON> 39,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,648,000
<SALES> 0
<TOTAL-REVENUES> 43,887,000
<CGS> 0
<TOTAL-COSTS> 43,976,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,000
<INCOME-PRETAX> 23,000
<INCOME-TAX> 109,000
<INCOME-CONTINUING> (86,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
