<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 May 31, 1998
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 0-17882
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-3051642
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02464
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 969-0050
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(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
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APPLICABLE ONLY TO CORPORATE ISSUERS: 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 June 30, 1998 4,066,968
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
* Consolidated Balance Sheets -
May 31, 1998 (unaudited) and February 28, 1998 3
* Consolidated Statements of Operations - (unaudited)
Three Months Ended May 31, 1998 and 1997 4
* Consolidated Statements of Cash Flows - (unaudited)
Three Months Ended May 31, 1998 and 1997 5
* Notes to Consolidated Financial Statements
6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
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PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, 1998 FEBRUARY 28, 1998
------------ -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,099,000 $ 4,594,000
Available-for-sale securities 3,655,000 3,519,000
Accounts receivable, net 11,311,000 11,423,000
Costs and estimated earnings in excess of billings on
uncompleted contracts, net 10,431,000 7,261,000
Prepaid expenses and other current assets 340,000 133,000
Deferred income taxes 1,029,000 1,029,000
------------ ------------
Total current assets 27,865,000 27,959,000
Property and equipment, net 5,504,000 5,344,000
Other assets, net 924,000 918,000
------------ ------------
Total assets $ 34,293,000 $ 34,221,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 2,834,000 $ 4,373,000
Accrued payroll and expenses 4,143,000 4,283,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 2,907,000 1,835,000
Income taxes payable 149,000 102,000
------------ ------------
Total current liabilities 10,033,000 10,593,000
Deferred income taxes 742,000 742,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized - 1,000,000 shares; issued and
outstanding - none
Common stock, $.01 par value; authorized - 14,000,000 shares; issued and
outstanding - 4,066,968 at
May 31, 1998 and 4,027,440 at February 28, 1998 41,000 40,000
Capital in excess of par value 14,594,000 14,430,000
Unrealized losses on available-for-sale securities (11,000) (6,000)
Retained earnings 10,865,000 10,393,000
------------ ------------
Subtotal 25,489,000 24,857,000
Less: Common stock held in treasury, at cost (400,475 at
May 31, 1998 and February 28, 1998) (1,971,000) (1,971,000)
------------ ------------
Total liabilities and stockholders' equity $ 34,293,000 $ 34,221,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 31,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Revenues $13,504,000 $12,856,000
Reimbursable expenses 3,903,000 3,267,000
----------- -----------
Net revenues 9,601,000 9,589,000
Costs and expenses:
Salaries and related costs 6,850,000 6,795,000
General and administrative expenses 2,094,000 2,286,000
----------- -----------
Income from operations, before other income and taxes 657,000 508,000
----------- -----------
Other income
Interest income 97,000 72,000
Gain on sale of equipment and other assets 3,000 --
Equity in net income of joint venture 30,000 30,000
----------- -----------
Total other income, net 130,000 102,000
----------- -----------
Income from operations before provision for income taxes 787,000 610,000
Provision for income taxes 315,000 244,000
----------- -----------
Net income $ 472,000 $ 366,000
=========== ===========
Basic earnings per share:
Earnings per share $ 0.13 $ 0.09
----------- -----------
Basic weighted average shares 3,646,000 3,988,000
----------- -----------
Diluted earnings per share:
Earnings per share $ 0.13 $ 0.09
----------- -----------
Diluted weighted average shares 3,728,000 3,988,000
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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<TABLE>
<CAPTION>
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended May 31,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations $ 472,000 $ 366,000
Adjustments to reconcile net income from continuing
operations to net cash used by operating activities:
Depreciation and amortization 303,000 294,000
Equity in net income of joint venture (30,000) (30,000)
Gain on disposal of equipment (3,000) --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net 112,000 (147,000)
Increase in costs and estimated earnings
in excess of billings on uncompleted contracts (2,098,000) (862,000)
Decrease (increase) in prepaid expenses (207,000) 9,000
Decrease in accounts payable, trade (1,539,000) (1,953,000)
Decrease in accrued payroll and expenses (140,000) (181,000)
Decrease (increase) in income taxes payable 47,000 (60,000)
----------- -----------
Net cash used by operating activities (3,083,000) (2,564,000)
----------- -----------
Cash flows from investing activities:
Decrease (increase) in available-for-sale securities (141,000) 204,000
Proceeds from sale of equipment 153,000 --
Acquisition of property and equipment (608,000) (225,000)
Increase in other assets 19,000 7,000
----------- -----------
Net cash used by investing activities (577,000) (14,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 165,000 171,000
----------- -----------
Net cash provided by financing activities 165,000 171,000
----------- -----------
Net decrease in cash and cash equivalents (3,495,000) (2,407,000)
Cash and cash equivalents at beginning of year 4,594,000 4,229,000
----------- -----------
Cash and cash equivalents at end of period $ 1,099,000 $ 1,822,000
=========== ===========
</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
MAY 31, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of GZA
GeoEnvironmental Technologies, Inc. and Affiliate (the "Company") have
been prepared in accordance with generally accepted accounting
principles for interim financial statements and pursuant to the rules
of the Securities and Exchange Commission for Form 10-Q. Certain
information and footnotes required by generally accepted accounting
principles for complete financial statements are omitted. It is the
opinion of management that the accompanying consolidated financial
statements reflect all adjustments (which are normal and recurring)
considered necessary for a fair presentation. For further information
refer to the audited financial statements and footnotes included in
the Company's Annual Report to Stockholders for the year ended
February 28, 1998, as filed with the Securities and Exchange
Commission on May 29, 1998. Operating results for the quarter ended
May 31, 1998 are not necessarily indicative of the results that may be
expected for succeeding periods or for the year ending February 28,
1999.
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying note. actual
results could differ from those estimates.
NOTE 2 - CONTINGENCIES
The Company is a party to several legal actions arising in the normal
course of business. Management believes that the outcomes of 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.
6
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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 1998 AND 1997
* NET REVENUES. The Company's net revenues for the three months ended May 31,
1998 increased by approximately $12,000 (.13%) compared with the
corresponding period in the prior fiscal year. The increase in net revenue
is attributable to a $496,000 (5.4%) increase in net revenues from
continuing operations, particularly in the Northeast Region. The increase
in net revenues was offset partially by the loss of net revenues received
from the Phoenix, Arizona and Grand Rapids, Michigan offices which were
closed in fiscal 1998. The net revenues of the closed offices for the
comparable fiscal period was approximately $484,000.
* SALARIES AND RELATED COSTS. Salaries and related costs for the three months
ended May 31, 1998 increased by $55,000 (.8%) compared with the
corresponding period in the prior fiscal year. The increase is attributable
primarily to professional and support staff salary increases and an
increase in Incentive Compensation Plan accruals which were offset
partially by a reduction of approximately $364,000 in salary and related
costs attributable to the offices closed during the prior fiscal year.
* GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended May 31, 1998 decreased by approximately $192,000
(8.5%) compared with the prior fiscal year. The decrease primarily reflects
lower bad debt reserve requirements, a decrease in occupancy expense, and
reductions in general and professional liability insurance premiums. The
cost reductions were offset, in part, by an increase in temporary help and
consulting expenditures. The Company anticipates that temporary help and
consulting expenditures will continue to increase from the prior fiscal
year. The increase in temporary help cost is reflective of the current
competitive labor market. The increase in consulting cost is reflective of
on going and planned compensation, process improvement, marketing,
management information systems, and general management consulting
assignments anticipated during fiscal 1999.
* LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended May 31, 1998, $3,083,000 of net cash
was used by operations, whereas for the three month period ended May
31, 1997, $2,564,000 of net cash was used by operations.
The greater use of cash in the first three months of fiscal 1999
is attributable primarily to approximately $2,000,000 in increase
costs and estimated earnings in excess of billings on uncompleted
contracts for
7
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several projects in which billings have been delayed pending final
approval for change orders, contract amendments, and payment
requisitions. In addition, because of a significant increase of
contract activity in the first quarter of fiscal 1999 the Company
experienced delays in gathering the detail necessary to bill
approximately $900,000 in invoices which were subsequently processed
and billed in the second quarter.
The Company made capital expenditures of approximately $608,000 and
$225,000 for the first three months of fiscal 1999 and 1998,
respectively.
The Company's working capital increased from $17,366,000 at February
28, 1998 to $17,832,000 at May 31, 1998.
At May 31, 1998, the Company had cash on hand and cash equivalents of
$1,099,000, and short-term investments of $3,655,000 compared with
$4,594,000 and $3,519,000 respectively, at February 28,1998. These
investments consist primarily of tax-exempt municipal bonds, taxable
U.S. Treasury Notes and other bonds and commercial paper. The Company
believes that its cash on hand and cash equivalents and future cash
generated from operations will be sufficient to meet its cash
requirements for at least the next twelve months.
FORWARD LOOKING STATEMENTS
The Company may make or publish statements or this report may contain
projections, estimates, and predictions relating to anticipated
financial performance, potential contract value, pending claims or
litigation, business strategy, plans, acquisitions, or technological
developments and other matters. A number of risks and uncertainties
could materially affect these forward looking statements, and the
Company's results of operations. These risks and uncertainties
include, but are not limited to competition, market pricing pressures,
changes in federal, state, and local legislation and regulations,
ability of the company to execute projects within contracted cost
estimates, current or future claims made against the company, ability
of the Company to resolve contract and change order disputes favorably
and availability of qualified personnel to execute contracts and work
plans.
8
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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
financial condition of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Restated Certificate of Incorporation of the Company (1)
3.3 Amended and Restated By-Laws of the Company (2)
27. Financial Data Schedule for the period ended May 31, 1998.
(b) REPORTS ON FORM 8-K
The Company did not file any report on form 8-K during the three month
period ended May 31, 1998.
(1) Incorporated by reference to the similarly numbered exhibit 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 exhibit 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.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
Date: July 13, 1998
/s/ Joseph P. Hehir
----------------------------------------
JOSEPH P. HEHIR, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLI-
DATED BALANCE SHEETS OF THE REGISTRANT AT MAY 31, 1998 AND FEBRUARY 28, 1998
AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT FOR THE THREE MONTH
PERIOD ENDED MAY 31, 1998 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENT IN THE FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 1,099,000
<SECURITIES> 3,655,000
<RECEIVABLES> 11,311,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,865,000
<PP&E> 5,504,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,293,000
<CURRENT-LIABILITIES> 10,033,000
<BONDS> 0
0
0
<COMMON> 41,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,293,000
<SALES> 0
<TOTAL-REVENUES> 13,504,000
<CGS> 0
<TOTAL-COSTS> 12,847,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 787,000
<INCOME-TAX> 315,000
<INCOME-CONTINUING> 472,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472,000
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
