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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998 Commission File No. 0-17882
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
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 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 No X
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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. [ ]
Number of Shares of Common Stock
outstanding at May 22, 1998 4,066,968
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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 or
officers of the registrant and are not otherwise persons who control or are
controlled by or under common control with the registrant) was $17,546,700 as of
May 22, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders of the registrant for fiscal year
1998 are incorporated by reference in Part II. The registrant intends to file
with the Securities and Exchange Commission a definitive proxy statement for the
Company's 1998 Annual Meeting of Stockholders within 120 days of the end of the
fiscal year ended February 28, 1998. Certain portions of such definitive proxy
statement are incorporated by reference in Part III of this Form 10-K.
The Index to Exhibits is located at Page 20.
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PART I
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ITEM 1. BUSINESS
GENERAL
GZA GeoEnvironmental Technologies, Inc. ("GZA" or the "Company") provides
geotechnical engineering, environmental consulting, environmental remediation
and information systems and management services to industrial, commercial,
financial, public service and government clients. 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.
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. GZA designs and implements environmental health
and safety information management systems, applications and networks focused on
intranet networking platforms. The Company also provides drilling, laboratory
and instrumentation services in support of environmental and geotechnical
activities, and through its Information Systems Division ("ISD"), provides
integrated information management services.
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, geotechnical and information systems 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. The
Company's ISD gives clients greater power and flexibility to control their
operation and comply with complex regulations. 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, geotechnical
and information management services are performed primarily by GZA
GeoEnvironmental, Inc., and drilling operations are performed primarily by GZA
Drilling, Inc., both of which are wholly owned subsidiaries of the Company.
Certain services in New York are provided by the Company's affiliate,
Goldberg-Zoino Associates of New York, P.C., doing business as GZA
GeoEnvironmental of New York, a professional corporation owned by officers,
directors and stockholders of the Company. Aquaterra Environmental Consultants
Limited, ("Aquaterra") the Company's 50%-owned joint venture in the United
Kingdom, provides environmental services in Europe.
SERVICES
The Company's services can be divided into four broad categories: geotechnical
engineering, environmental consulting, environmental restoration, and
information management services. Any given project may involve activities in
more than one of these categories.
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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 the 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, storm water runoff management
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 - Vibration/Noise Monitoring
- Earthwork Control - Health and Safety Plans
- Cofferdam/Underpinning Design - Environmental Monitoring and Reporting
- Dewatering System Design
ENVIRONMENTAL CONSULTING SERVICES
The Company provides a wide variety of services that 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 plan, coordinate and implement effective strategies to
comply with environmental and occupational health and safety regulations.
Services include:
- Compliance and Management Systems Audits - Strategic Planning
- Regulatory Training - ISO 14000 Services
- Occupational Health & Safety - Permitting Assistance
- Wastewater Management - Air Quality Engineering
- Solid and Hazardous Waste Management - Environmental Information
- Pollution Prevention Management
- Raw Materials Storage and Management - Community Relations
ENVIRONMENTAL INVESTIGATIONS OF CONTAMINATED SITES AND FACILITIES. GZA performs
all aspects of environmental investigations for projects ranging from Superfund
sites to individual leaking underground storage tanks. 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
potential risks posed 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
PROPERTY TRANSFER STUDIES/ENVIRONMENTAL SITE ASSESSMENTS. GZA helps clients
assess risks associated with the purchase or management of real estate and
businesses. Services include:
- Phase I and Phase II Environmental Site and Physical Condition Assessments
- Regulatory Compliance Audits of Operating Facilities
WATER RESOURCES ASSESSMENTS. GZA conducts water quality and benthic condition
surveys of reservoir and riverine systems, physical condition assessments for
dams and pumping networks associated with water supply facilities, and dredge
materials management investigation related to navigation channels.
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SOLID WASTE MANAGEMENT SERVICES. GZA assists the owners and operators of
transfer stations and landfills in the siting, design, construction, operation,
maintenance, remediation, and closure of facilities. Services include:
- Feasibility Studies - Construction Management and
- Environmental Impact Studies Quality Inspection/Testing
- Geologic and Hydrogeologic Evaluations - Facility Operation
- Permitting - Closure/Post Closure
- Facility Design - Environmental Remediation
ENVIRONMENTAL RESTORATION SERVICES
GZA provides engineering, construction and construction management services to
help clients locate, identify and remediate environmental contamination. GZA can
design and implement its own restoration plan or 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. Remote monitoring, operation
and control using radio, dial-up and web-based information systems add value to
GZA remedial designs.
OPERATION AND MAINTENANCE SERVICES. GZA provides traditional and remote
telemetry-based 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 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 survey 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 that 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. Projects can be delivered via conventional
owner, engineer, contractor, contractual relationships and design-remediate
project delivery mechanisms that include fixed price to closure agreements.
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INFORMATION MANAGEMENT SERVICES
The Company's ISD develops and delivers information management solutions to
clients, as well as administers the Company's internal information management
strategy. This division complements and enhances 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.
ISD's approach to information management combines the latest information
technology, the communication and computing power of internal information
systems (intranets), the resources of the Internet and sound principles of the
strategic use of information. Information-related services and systems that
GZA's ISD provides to its clients include: 1) 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
and health and safety information management, 2) services and products that
enhance communication between GZA and its client and 3) services and products
that enhance communication between a client and the outside world, including
buyers of the client's products. GZA's products and services are primarily
web-enabled applications that enhance the client's use of the Internet and
intranets.
Examples of these applications include the following:
CustomerLink(SM). CustomerLink(SM) is a web-based application that allows
clients to access information concerning their projects that is maintained on
GZA's systems. Through CustomerLink(SM), clients enter a secure on-line
environment where they can access electronic file cabinets of project-specific
information or collaborate with their project teams. This allows them to
directly participate in their projects from anywhere in the world.
Safety/Health Incident Tracking System. The Safety/Health Incident Tracking
System simplifies and automates the recording, tracking, analysis and reporting
of work-related illness and injury incident information. This web-based
application allows personnel designated by the client to enter plant-specific
incident data on-line, which can be used to update a central database at the
client's facility or at its corporate headquarters. The database produced by the
system complies with OSHA 101 data collection requirements and provides a
variety of other time-saving features.
InfoLink(SM). InfoLink(SM) is a web-based environmental information management
system designed to simplify and streamline environmental health and safety
information management reporting. A modular suite of easily customized
applications that are deployed according to a client's specific needs and
priorities, InfoLink(SM) modules include MSDS Management, Safety/Health Incident
Tracking, Chemical Tracking and Reporting, Employee Training Management, Storage
Tank Management and IS014000 Environmental Management, as well as other custom
applications.
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 aquifers characteristics. SRI
also works with ISD and develops web-based applications and custom software to
be used in automatic data acquisition systems for dams and construction projects
in which rapid collection and analysis of data are required.
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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 Rigs provide field sampling and small diameter
well installation as well as on-site, real-time chemical analyses. 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 determines 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 that 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 VENTURE
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AQUATERRA (U.K.)
In 1991, the Company entered into a joint venture with Carl Bro Group (U.K.)
Limited ("CarlBro") to form Aquaterra Environmental Consultants Limited, a
limited liability company whose stock is owned equally by the Company and Carl
Bro. Originally located in Leeds, Great Britain, Aquaterra has recently expanded
to London and Edinburgh where it provides services related to contaminated land
and groundwater and to environmental concerns of operating facilities as well as
geotechnical engineering.
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
82% of net revenues during the past year.
In fiscal year 1998, the Company was actively engaged in approximately 3,500
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 of the
Company's assignments were short-term (less than six months in duration), and
management estimates that 40% of net revenues in fiscal 1998 were derived from
projects for which net revenues were $50,000 or less. In fiscal year 1998, no
one customer accounted for more than 10% of the Company's net revenues.
BACKLOG
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As of April 30, 1998 the Company had a backlog of orders it believed to be firm
of approximately $26 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. Backlog at April 30, 1998 excludes the value of
government contracts that have been awarded but have not yet been executed
and/or funded, as well as the value of contract options that have not yet been
exercised. As of April 30, 1997, the Company had a backlog of orders calculated
on same basis of approximately $29 million. Because work under the Company's
orders can in general be terminated by the client at any time, there is no
assurance that all the amounts included in backlog will ultimately be realized,
even if covered by written contracts or task orders.
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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 a few firms that
offers a combination of environmental consulting, remediation, geotechnical
engineering with integrated information management services. Management believes
that its ability to provide this range of services enhances the Company's
competitive position in its market areas.
IMPACT OF ENVIRONMENTAL REGULATION
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The business of the Company and its clients are 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.
Reductions of the budgets of the U.S. Environmental Protection Agency ("EPA"),
Department of Defense ("DOD") 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 analogous 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 may
activate private remediation projects that have been pending. Whether such
initiatives will lead to an 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
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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.
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. The Company is also seeking investments in contaminated property
to apply its remediation experience to produce attractive financial returns
through a limited liability company, or other affiliations with experienced
property developers, the Company is seeking premium returns with controlled
risks.
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 that
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 subjected 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
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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's information management services also pose risks associated
primarily with systems security.
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
client contracts 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. The Company's property is
insured for loss or damage. It also maintains an environmental professional
liability policy that covers professional liability, contractor's environmental
liability and completed operations, with an aggregate limit of $5 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 unsettled 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 that 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, 1998, the Company had 442 employees, including 339 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
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 that extends through February 2001. During fiscal year 1998, the
Company paid approximately $714,000 in base rent for this facility. The other
location in Newton Upper Falls is for approximately 14,000 square feet. In
fiscal year 1998, the Company paid approximately $140,000 in base rent for this
facility.
The Company leases 20 other principal facilities located in: Vernon,
Connecticut; Duluth, Georgia; Portland, Maine; Brockton, Massachusetts; West
Newton, Massachusetts; Worcester, Massachusetts; Livonia, Michigan; Grand
Rapids, Michigan; Manchester, New Hampshire; Wayne, New Jersey; Hammonton, New
Jersey; Buffalo, New York; Great Neck, New York; Rochester, New York; Charlotte,
North Carolina; Coraopolis, Pennsylvania; Providence, Rhode Island; Dallas,
Texas; Rutland, Vermont; and Pewaukee, Wisconsin. These other facilities have a
combined square footage of approximately 98,000 square feet. Aggregate base rent
for all facilities leased by the Company (other than its facilities in Newton
Upper Falls) during fiscal year 1998 totalled approximately $1,193,000. The
lease terms expire at various times through September 30, 2001.
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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
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
Not Applicable
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information appearing under the caption "Supplemental Information" in the
Annual Report to Stockholders of the Company for the fiscal year ended
February 28, 1998 (the "1998 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 year period ended
February 28, 1998, the Company issued to 18 employees, without registration
under the Securities Act of 1933, as amended (the "Act"), 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 Act, by virtue of the
exception set forth in Section 4(2) of the Act.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Summary Financial Information" in
the 1998 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1998 Annual
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 1998 Annual Report is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
--------
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 14, 1998 (the "1998 Proxy
Statement"), to be filed with the Commission no later than 120 days after the
end of the fiscal year covered by this report.
12
<PAGE> 13
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) Documents filed as part of the report:
(1) The following consolidated financial statements of GZA GeoEnvironmental
Technologies, Inc. and its Subsidiaries and Affiliate included in the
1998 Annual Report are incorporated by reference in Item 8:
Report of Independent Accountants.
Consolidated Balance Sheets at February 28, 1998 and 1997.
Consolidated Statements of Operations for the fiscal years ended
February 28, 1998, 1997 and February 29, 1996.
Consolidated Statements of Stockholders' Equity for the fiscal years
ended February 28, 1998, 1997 and February 29, 1996.
Consolidated Statements of Cash Flows for the fiscal years ended
February 28, 1998, 1997 and February 29, 1996.
Notes to Consolidated Financial Statements for the fiscal years
ended February 28, 1998, 1997 and February 29, 1996.
(2) The following consolidated financial statement schedule of GZA
GeoEnvironmental Technologies, Inc. and its Subsidiaries and Affiliate
is included in this report:
Report of Independent Accountants
Page
----
Schedule II Valuation and Qualifying Accounts 18
(3) EXHIBITS.
EXHIBIT NO. DESCRIPTION
3.1* Restated Certificate of Incorporation of the Company
3.3* Amended and Restated By-Laws of the Company
4.1* Specimen certificate for the Common Stock of the Company
10.2* Indenture of Lease dated September 5, 1984 and effective as of
December 1, 1981, and First Amendment to Indenture of Leases,
between GZA and Donald T. Goldberg and William S. Zoino, for the
GEO Building, Newton Upper Falls, Massachusetts
10.6* 1989 Incentive Stock Option Plan of the Company
10.7* 1989 Non-Qualified Stock Option Plan of the Company
13
<PAGE> 14
10.21* Support Services Agreement among the Company, Goldberg-Zoino
Associates of New York, P.C. and GZA, dated July 26, 1989
10.22*** Stockholders' Agreement among GZANY, Richard M. Simon and Joseph
D. Guertin, Jr. dated May 1, 1996, together with related Powers of
Attorney
10.23*** Voting Trust Agreement among the Company, GZANY, Messrs. Simon and
Guertin, and Richard M. Simon, as Trustee, dated May 1, 1996
10.24*** Indemnification Agreement among the Company, GZA GeoEnvironmental,
Inc. and Messrs. Simon and Guertin dated May 1, 1996
10.25* Security Agreement between GZANY and the Company dated July
26,1989
10.26* Credit Agreement among the Company, GZANY and GZA dated July 26,
1989
10.30** Revolving Credit and Term Loan Agreement among Fleet Bank and the
Company and its subsidiaries and affiliate dated February 28, 1994
10.34** Amendment No. 1 to 1989 Incentive Stock Option Plan of the Company
10.35** GZA 1995 Stock Incentive Plan
10.37** Lease Agreement dated January 1, 1992 between GZRI Associates and
GZA GeoEnvironmental, Inc. for the Providence, Rhode Island
district office
10.38** Lease Agreement dated March 1, 1992 between GZAIAT Associates and
GZA Drilling, Inc. for the Brockton, Massachusetts facilities of
GZA Drilling, Inc.
10.39** Second Amendment dated December 11, 1991 to Indenture of Lease
listed as Exhibit 10.2 hereto
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
10.42** Form of Group Life Insurance Plan for key employees; letter
describing coverage levels
10.43** Form of Indemnity Agreement between the Company and its respective
directors
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 1996, to transfer Assignor's one
sixth (1/6) beneficial interest in the GZA Investment Associates
Trust to Assignee
14
<PAGE> 15
10.53 Second Loan Modification Agreement, dated as of August 7, 1997, to
the Revolving Credit and Term Loan Agreement among Fleet Bank and
the Company and its subsidiaries and affiliate included as Item
10.30, including a Promissory Note dated August 7, 1997 and a form
of Promissory Note.
13.1 Annual Report to Stockholders of the Company for the fiscal year
ended February 28, 1998
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for the fiscal year ended
February 29, 1996
27.3 Restated Financial Data Schedule for the fiscal year ended
February 28, 1997
- --------------
* Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (File No. 333-29369)
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1995, as filed with the Commission on
June 12, 1995.
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996, as filed with the Commission on
May 24, 1996.
+ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1997, as filed with the Commission on
May 29, 1997.
(b) Reports on Form 8-K: None.
15
<PAGE> 16
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 27, 1998 /s/ Andrew P. Pajak
-----------------------
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 Chief Executive Officer and Director May 27, 1998
- ---------------------- (Principal Executive Officer)
Andrew P. Pajak
/s/ Joseph P. Hehir Chief Financial Officer May 27, 1998
- ---------------------- (Principal Financial and
Joseph P. Hehir Accounting Officer)
/s/ Donald T. Goldberg Director May 27, 1998
- ----------------------
Donald T. Goldberg
/s/ M. Joseph Celi Director May 27, 1998
- ---------------------
M. Joseph Celi
/s/ Joseph D. Guertin Director May 27, 1998
- ---------------------
Joseph D. Guertin
16
<PAGE> 17
/s/ William E. Hadge Director May 27, 1998
- -------------------------
William E. Hadge
/s/ Dr. Lewis Mandell Director May 27, 1998
- -------------------------
Dr. Lewis Mandell
/s/ Dr. Thomas W. Philbin Director May 27, 1998
- -------------------------
Dr. Thomas W. Philbin
/s/ Timothy W. Devitt Director May 27, 1998
- -------------------------
Timothy W. Devitt
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of GZA
GeoEnvironmental Technologies, Inc. as of February 28, 1998 and 1997 and each of
the three years in the period ended February 28, 1998, we have also audited the
consolidated schedule included in this Annual Report (Form 10-K) for the year
ended February 28, 1998 as listed in Item 14(a)(2).
In our opinion, the consolidated schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be stated therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 5, 1998
18
<PAGE> 19
SCHEDULE II
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
VALUATION AND QUALIFYING ACCOUNTS
Years Ended February 29, 1996,
February 28, 1997, and 1998
<TABLE>
<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 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
Year ended February 28, 1998
Allowance for doubtful accounts
(deducted from accounts
receivable)...................... $844,000 $378,000 $323,000 $899,000
</TABLE>
19
<PAGE> 20
EXHIBIT INDEX
-------------
Exhibit
Number Description Page
- ------- ----------- ----
10.53 Second Loan Modification Agreement, dated as of August 7,
1997, to the Revolving Credit and Term Loan Agreement among
Fleet Bank and the Company and its subsidiaries and affiliate
included as Item 10.30, including a Promissory Note dated
August 7, 1997 and a form of Promissory Note.
13.1 Annual Report to Stockholders of the Company for the fiscal
year ended February 28, 1998
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for the fiscal year ended
February 29, 1996
27.3 Restated Financial Data Schedule for the fiscal year ended
February 28, 1997
20
<PAGE> 1
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement ("this Agreement") is made as of
August 7, 1997 by and among Fleet National Bank (the "Bank") (the Bank being the
successor by merger to Fleet National Bank of Massachusetts, said Fleet National
Bank of Massachusetts being formerly known as "Shawmut Bank, N.A."), GZA
GeoEnvironmental Technologies, Inc., a Delaware corporation ("GZA"), GZA
GeoEnvironmental, Inc., a Massachusetts corporation ("GZA Associates"), GZA
Drilling, Inc., a Massachusetts corporation ("GZA Drilling"), GZA Remediation,
Inc., a Massachusetts corporation ("GZA Remediation"), GZA Securities Corp., a
Massachusetts corporation ("GZA Securities"), Delta Geotechnical Services, Inc.,
a Massachusetts corporation ("Delta"), Grover Enterprises, Inc., a Massachusetts
corporation ("Grover") and Goldberg Zoino Associates of New York, P.C. ("GZA New
York") (GZA, GZA Associates, GZA Drilling, GZA Remediation, GZA Securities,
Delta, Grover and GZA New York being hereinafter referred to collectively as the
"Borrowers" and individually as a "Borrower"). For good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrowers and the Bank act and agree as follows:
1. Reference is made to: (i) that certain Revolving Credit and Term Loan
Agreement dated as of February 28, 1994 among Shawmut Bank, N.A. and the
Borrowers, as amended (as so amended, the "Loan Agreement"), the Bank having
succeeded by merger to the rights of Shawmut Bank, N.A. thereunder; (ii) that
certain $5,500,000 face principal amount promissory note dated February 28, 1994
(the "1994 Line of Credit Note") made by the Borrowers and payable to the order
of Shawmut Bank, N.A.; (iii) those promissory notes (collectively, the "Term
Notes") made by GZA (or, in certain cases, GZA and another Borrower) which have
heretofore been issued and may hereafter be issued pursuant to Section 1.02(B)
of the Loan Agreement (the Borrowers hereby representing and agreeing that the
obligations of those Borrowers named in each such Term Note are joint and
several), the Bank having succeeded by merger to the rights of Shawmut Bank,
N.A. under said Term Notes; (iv) those certain guaranties (collectively, the
"Guaranties") executed and delivered in favor of Shawmut Bank, N.A. by each of
the Borrowers pursuant to clause (iii) of Section 3.01(b) of the Loan Agreement,
the Bank having succeeded by merger to the rights of Shawmut Bank, N.A.
thereunder; and (v) that certain $5,500,000 face principal amount promissory
note of even date herewith (the "1997 Line of Credit Note") made by the
Borrowers and payable to the order of the Bank. The Loan Agreement, the 1997
Line of Credit Note, the Term Notes and the Guaranties are hereinafter
collectively referred to as the "Financing Documents".
2. The Bank hereby waives the Event of Default under the Loan Agreement
which consists of GZA's failure to comply, as at August 31, 1996, with paragraph
(b) of Section 4.08 of the Loan Agreement (the Cash Flow Coverage test);
provided that this waiver is limited to said paragraph (b) and does not extend
to any other provision of the Loan Agreement, nor does it apply as at any other
date.
<PAGE> 2
3. The Loan Agreement is hereby amended:
a. By providing that all references therein to the "Lender" will be
deemed to refer to Fleet National Bank, having a place of business at One
Federal Street, Boston, MA. 02211.
b. By deleting from the first sentence of Section 1.01(A) of the
Loan Agreement the words "in an aggregate principal amount not to exceed at any
time outstanding the sum of Five Million Five Hundred Thousand Dollars
($5,500,000)" and by substituting in their stead the following:
"; provided that such Line of Credit Loans will be limited in
aggregate principal amount so that the total Revolving Credit
Liabilities (hereinafter defined) will never exceed $5,500,000"
c. By inserting into the third sentence of Section 1.01(A) of the
Loan Agreement, immediately after the words "by the Lender", the following:
"(except as otherwise provided below with respect to LIBOR Loans)"
d. By inserting into the last sentence of Section 1.01 of the Loan
Agreement, immediately after the words "except that the Converted Loan", the
following:
"made at the Expiration Date"
e. By inserting into the first sentence of Section 1.01(B) of the
Loan Agreement, immediately after the words "to the Borrowers", the following:
"(such Term Loan being made either to GZA singly or to GZA and another
Borrower jointly and severally)"
f. By providing that all references in the Loan Agreement to the
"Corporate Base Rate" will be deemed to refer to the Prime Rate (hereinafter
defined) of Fleet National Bank.
g. By deleting from Section 1.01(C) of the Loan Agreement the words
"`Expiration Date' means July 31, 1996" and by substituting in their stead the
following:
"`Expiration Date' means July 31, 1999"
h. By deleting from Section 1.01(D) of the Loan Agreement the words
"`Maturity Date' means July 31, 2000" and by substituting in their stead the
following:
"Maturity Date' means July 31, 2004"
-2-
<PAGE> 3
i. By deleting in its entirety Section 1.03 of the Loan Agreement
and by substituting in its stead the following:
"SECTION 1.03. FIXED RATE LOANS; BORROWING MECHANICS.
(a) DEFINITIONS. As used in this Agreement, the following terms have
the following respective meanings:
`Adjusted COF Rate' - As defined in Section 1.03(b) below.
`Bank Certificate' - A certificate signed by an officer of the Lender
setting forth any additional amount required to be paid by the
Borrowers to the Lender pursuant to Sections 1.03(b) and 1.03(f)
and/or 1.03(g) of this Agreement, which certificate shall be submitted
by the Lender to the Borrowers in connection with each demand made at
any time by the Lender upon the Borrowers with respect to any such
additional amount, and each such certificate shall, save for manifest
error, constitute conclusive evidence of the additional amount
required to be paid by the Borrowers to the Lender upon each demand. A
claim by the Lender for all or any part of any additional amount
required to be paid by the Borrowers may be made before and/or after
the end of the Interest Period to which such claim relates or during
which such claim has arisen and before and/or after any payment
hereunder to which such claim relates. Each Bank Certificate shall set
forth in reasonable detail the basis for and the calculation of the
claim to which it relates.
`Business Day' - Any day which is not a Saturday, nor a Sunday nor a
public holiday under the laws of the United States of America or The
Commonwealth of Massachusetts applicable to a national bank; provided
however that if the applicable provision relates to a LIBOR Loan, then
the term `Business Day' shall not include any day on which dealings
are not carried on in the London interbank market or on which banks
are not open for business in London.
`COF Loan' - Any Term Loan which bears interest at an Adjusted COF
Rate.
`Eurocurrency Liabilities' - Has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System
(or any successor), as in effect from time to time, or in any
successor regulation relating to the liabilities described in said
Regulation D.
-3-
<PAGE> 4
`Eurodollar Interest Rate' - For any Interest Period relating to a
LIBOR Loan, an interest rate per annum, expressed as a percentage,
determined by the Lender pursuant to the following formula:
*EIR = LIBOR + ERI
-------------
[1.00 - RR]
Where EIR = Eurodollar Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
ERI = Eurodollar Rate Increment
*EIR and each component thereof to be rounded upwards to the
next higher 1/8 of 1%
`Eurodollar Rate Increment' - One and one-half percent (1.5%) per
annum.
`Fixed Rate Loan" - Any Loan which is a LIBOR Loan or a COF Loan.
`Floating Rate' - As defined in Section 1.03(b).
`Floating Rate Loan' - Any Loan which bears interest at the Floating
Rate.
`Impositions' - All present and future taxes, levies, duties,
impositions, deductions, charges and withholdings applicable to the
Lender with respect to any Fixed Rate Loan, excluding, however, any
taxes imposed directly on the Lender's income and any franchise taxes
imposed on it by the jurisdiction under the laws of which the Lender
is organized or any political subdivision thereof.
`Interest Payment Date(s)' - As to each LIBOR Loan, the last day of
the Interest Period applicable thereto; provided that if any such
Interest Period for a LIBOR Loan is more than one month, then there
will be multiple Interest Payment Dates for such LIBOR Loan, the first
of which shall be on the 30th day of such Interest Period, with a
subsequent Interest Payment Date to occur at the end of each 30-day
period thereafter and on the last day of such Interest Period. As to
each COF Loan, the Interest Payment Date will be the last day of the
Interest Period applicable thereto.
-4-
<PAGE> 5
`Interest Period' - As to each LIBOR Loan, the period commencing with
the date of the making of such LIBOR Loan and ending one, two or three
months thereafter, as the Borrowers may select; provided that (A) any
such Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day
unless such Business Day occurs in a new calendar month, in which case
such Interest Period shall end on the immediately preceding Business
Day, (B) any such Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during
which such Interest Period is to end shall end on the last Business
Day of such calendar month, and (C) no Interest Period may be selected
which would end after the Expiration Date. The Interest Period for
each COF Loan will be a period of 30 days commencing on the date of
the making of such COF Loan and ending on the date occurring 30 days
thereafter; provided, however, that (A) each such Interest Period
which would otherwise end on a day which is not a Business Day shall
end on the immediately succeeding Business Day and (B) no such
Interest Period may be selected which would end after the Maturity
Date.
`LIBOR' - With respect to each Interest Period for a LIBOR Loan, that
rate of interest per annum (rounded upward, if necessary, to the
nearest 1/8 of 1%) at which deposits in United States Dollars are
offered to the Lender, for delivery on the first day of the applicable
Interest Period, in the London interbank market at 10:00 a.m. London
time, two Business Days prior to the first day of the applicable
Interest Period for a term equal to the term of the LIBOR Loan
requested for such Interest Period and in an amount substantially
equal to the principal amount of the relevant LIBOR Loan. The Lender
shall give prompt notice to the Borrowers of LIBOR as determined for
each LIBOR Loan and such notice shall be conclusive and binding,
absent manifest error.
`LIBOR Loan' - Any Line of Credit Loan which bears interest at a
Eurodollar Interest Rate.
`London' - The City of London in England.
`Prime Rate' - That interest rate per annum announced by the Lender
from time to time as its `prime rate', it being acknowledged that such
rate is merely a reference rate, not necessarily the lowest, which
serves as the basis upon which effective rates of interest are
calculated for obligations making reference thereto.
-5-
<PAGE> 6
`Revolving Credit Liabilities' - At any time, the sum of (i) the
principal amount of all Line of Credit Loans then outstanding, plus
(ii) all then undrawn amounts of letters of credit issued by the
Lender for the account of any Borrower, plus (iii) all amounts then
drawn on any such letter of credit which at said date shall not have
been reimbursed to the Lender by the Borrowers.
`Reserve Rate' - The aggregate rate, expressed as a decimal, at which
the Lender would be required to maintain reserves under Regulation D
of the Board of Governors of the Federal Reserve System (or any
successor or similar regulation relating to such reserve requirements)
against Eurocurrency Liabilities, as well as any other reserve
required of the Lender with respect to the LIBOR Loans. The Eurodollar
Interest Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Rate.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any
defined term used in the singular preceded by `any' shall be taken to
indicate any number of the members of the relevant class.
(b) INTEREST RATES. Except as provided below in this Section 1.03(b),
interest on all Loans will be payable (subject to the provisions of
the Notes for default rate interest) at a fluctuating rate per annum
(the `Floating Rate') which shall at all times be equal to the Prime
Rate as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law), with a change in such
rate of interest to become effective on each day when a change in the
Prime Rate becomes effective. Subject to the conditions set forth
herein, the Borrowers may elect that any Line of Credit Loan will be
made as a LIBOR Loan. Such election shall be made by the Borrowers
giving to the Lender a written or telephonic notice received by the
Lender within the time period and containing the information described
in the next following sentence (a `LIBOR Borrowing Notice'). The LIBOR
Borrowing Notice must be received by the Lender no later than 10:00
a.m. (Boston time) on that day which is two Business Days prior to the
date of the proposed borrowing and must specify the amount of the
LIBOR Loan requested (which shall be $250,000 or an integral multiple
thereof), whether the Interest Period is proposed to be one month, two
months or three months and the proposed commencement date of the
relevant Interest Period. Any LIBOR Borrowing Notice shall, upon
receipt by the Lender, become irrevocable and binding on the
Borrowers, and the Borrowers shall, upon demand and receipt of a Bank
Certificate from the Lender
-6-
<PAGE> 7
with respect thereto, forthwith indemnify (and shall be jointly and
severally obligated to indemnify) the Lender against any loss or
expense incurred by the Lender as a result of any failure by the
Borrowers to obtain or maintain any requested LIBOR Loan, including,
without limitation, any loss or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by the
Lender to fund or maintain such LIBOR Loan. Each LIBOR Loan will be
due and payable in full (if not required to be repaid earlier pursuant
to the terms of this Agreement) on the last day of the Interest Period
applicable thereto. The principal amount of any such LIBOR Loan so
repaid may be reborrowed as a new LIBOR Loan to the extent and on the
terms and conditions contained in this Agreement by delivery to the
Lender of a new LIBOR Borrowing Notice conforming to the requirements
set forth above in this Section (and any LIBOR Loan not so repaid and
not so reborrowed as a new LIBOR Loan will be deemed to have been
reborrowed as a Floating Rate Loan). Notwithstanding any other
provision of this Agreement, the Lender need not make any LIBOR Loan
at any time when there exists any Event of Default under this
Agreement or any event or circumstance which, with the giving of
notice or the passage of time or both, could become an Event of
Default.
Each Term Loan will be made (as GZA may designate in writing) either
to GZA singly or to GZA and another Borrower, jointly or severally.
Subject to the conditions set forth below, the relevant Borrower or
Borrowers may request that any Term Loan be made as a COF Loan (or, if
a Term Loan is already outstanding as a Floating Rate Loan, that same
be converted into a COF Loan). Any such request must be received by
the Lender not later than 10:00 A.M. (Boston time) two Business Days
prior to the date of the proposed borrowing (or if the relevant Term
Loan is already outstanding, the date on which the Adjusted COF Rate
is proposed to take effect). Each such request must include the
principal amount of any proposed COF Loan, must identify any
outstanding Term Loan as to which an Adjusted COF Rate is requested
and must state the date on which such COF Loan is proposed to be made
(or, if relating to an outstanding Term Loan as to which an Adjusted
COF Rate is requested, the date on which such Adjusted COF Rate is to
take effect). Following each request for a COF Loan, the Lender will
endeavor to offer a proposed Adjusted COF Rate at a rate determined as
provided below and under conditions for acceptance determined by the
Lender in its sole discretion. The relevant Borrower or Borrowers may
elect to accept such offer in the manner and within the time period
specified in such offer. Any
-7-
<PAGE> 8
such acceptance shall be irrevocable on the part of such Borrowers.
Upon such acceptance, the interest rate payable with respect to the
subject Term Loan shall be fixed (subject to adjustment as provided in
this Agreement) for the Interest Period specified in the Borrowers'
request and at the rate communicated by the Lender as its proposed
Adjusted COF Rate. Any proposed Adjusted COF Rate offered under this
paragraph will be a rate per annum equal to the sum of (i) two percent
(2%) per annum plus (ii) the COF Rate (defined below) for the
applicable Interest Period (expressed as a per annum rate); provided,
however, that the Adjusted COF Rate shall in no event exceed the
maximum rate permitted by applicable law. The `COF Rate' shall be
determined by the Lender in its discretion for the purpose of any
proposed Adjusted COF Rate offered under this Section and, in this
determination, the Lender will attempt to reflect the cost of
obtaining funds at fixed rates from the sources hereinafter provided.
The Lender may base the COF Rate for the purpose of computing a
proposed Adjusted COF Rate on any (or any combination of) recognized
sources of available funding for transactions of this type, including,
but not limited to, the interbank market, the domestic and European
certificate of deposit market and sales of commercial paper. The COF
Rate for purposes of this computation shall in any event include
adjustments for the costs of maintaining reserves, insurance
(including, without limitation, assessments by the Federal Deposit
Insurance Corporation), taxes, hedging and other costs which may be
incurred by the Lender with respect to the applicable sources or
sources of funding, all as determined by the Lender in its reasonable
discretion. The source or sources of funding utilized for the
computation of the proposed rate shall be selected by the Lender at
its sole discretion for offering to the Borrowers, and no Borrower
shall have any claim against the Lender with respect to computation of
any proposed Adjusted COF Rate. If any Borrower is dissatisfied with
any proposed Adjusted COF Rate, the Borrowers' sole remedy with
respect thereto shall be not to accept such proposed Adjusted COF Rate
within the applicable time period, and thus not to borrow the proposed
Term Loan (or, in the case of any outstanding Term Loan, to continue
such Term Loan as a Floating Rate Loan). Notwithstanding the foregoing
provisions hereof, the Lender need not offer a proposed Adjusted COF
Rate for any period of time with respect to which the Lender, in its
sole discretion, determines that there are no recognized sources of
funding available to it for such time period or principal amount or
that the cost of funds with respect thereto would be unreasonably
high. If any one or more of the Borrowers shall accept a proposed
Adjusted COF Rate offered hereunder and
-8-
<PAGE> 9
shall then fail for any reason to borrow the COF Loan to which such
offer related, the Borrowers shall, upon submission by the Lender of a
Bank Certificate with respect thereto, forthwith indemnify the Lender
(and shall be jointly and severally obligated to indemnify the Bank)
against any loss or expense incurred by the Lender as a result of any
such failure by the Borrowers, including, without limitation, any loss
or expense incurred by reason of the liquidation or redeployment of
deposits or other funds acquired by the Lender to fund or maintain the
requested COF Loan. Each Adjusted COF Rate accepted hereunder will
remain in effect through the last day of the Interest Period
applicable thereto. At the end of such Interest Period, the relevant
Borrower or Borrowers may request, subject to all of the terms and
conditions contained in this Agreement, that a new Interest Period
commence with an Adjusted COF Rate to be offered and accepted as
provided above or that such Term Loan become a Floating Rate Loan (and
any COF Loan as to which a new Adjusted COF Rate is not so offered and
accepted for a new Interest Period will be deemed to have become a
Floating Rate Loan). Notwithstanding any other provision of this
Agreement, the Lender need not make any COF Loan at any time when
there exists any Event of Default under this Agreement or any event or
circumstance which, with the giving of notice or the passage of time
or both, could become an Event of Default.
(c) REPAYMENTS. The Borrowers may repay, at any time, without penalty
or premium, the whole or any portion of any Loan which is a Floating
Rate Loan. The Borrowers may repay the whole or any portion of any
Loan which is a Fixed Rate Loan; provided that (i) the Borrowers give
the Lender not less than two (2) Business Days' prior written notice
of their intent so to repay, (ii) the Borrowers pay all interest on
the Fixed Rate Loan (or portion thereof) so repaid accrued to the date
of such repayment, (iii) any voluntary repayment of a LIBOR Loan shall
be in a principal amount of $250,000 or an integral multiple thereof
and (iv) if the Borrowers for any reason make any payment with respect
to principal of a Fixed Rate Loan prior to the last day of the
Interest Period applicable thereto, the Borrowers shall forthwith pay
(and shall be jointly and severally obligated to pay) all amounts
owing to the Lender pursuant to the provisions of Section 1.03(f) with
respect to such Fixed Rate Loan.
(d) INTEREST PAYMENTS. The Borrowers will pay interest on the
principal amount of the Loans outstanding from time to time, from the
date hereof until payment of the Loans in full and the
-9-
<PAGE> 10
termination of this Agreement. Interest on Floating Rate Loans will be
payable monthly in arrears on the first day of each month. Interest on
each Fixed Rate Loan will be paid in arrears on each of the Interest
Payment Date or Dates applicable thereto. In any event, interest on
the Line of Credit Loans shall also be paid on the date of payment of
the Line of Credit Loans in full and interest on each Term Loan shall
be paid on the date of payment of such Term Loan in full (and, if such
Term Loan is being converted from being a Floating Rate Loan to a COF
Loan, on the date of such conversion). Interest on Floating Rate Loans
shall be payable at the Floating Rate. The rate of interest payable on
any LIBOR Loan will be the Eurodollar Interest Rate applicable
thereto. The rate of interest payable on any COF Loan shall be the
Adjusted COF Rate applicable thereto. All interest, fees, other
amounts and other amounts payable under this Agreement and/or under
any note now or hereafter evidencing the Loans will be calculated on
the basis of a 360-day year for the actual number of days elapsed.
(e) RATE DETERMINATION PROTECTION. In the event that:
(i) the Lender shall determine that, by reason of circumstances
affecting the London interbank market or otherwise, adequate and
reasonable methods do not exist for ascertaining the Eurodollar
Interest Rate which would otherwise be applicable during any Interest
Period, or
(ii) the Lender shall determine that:
(A) the making or continuation of any LIBOR Loan has been made
impracticable or unlawful by (1) the occurrence of any
contingency that materially and adversely affects the London
interbank market or (2) compliance by the Lender in good faith
with any applicable law or governmental regulation, guideline or
order or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental
authority (whether or not having the force of law); or
(B) LIBOR will not, in the reasonable determination of the
Lender, adequately and fairly reflect the cost to the Lender of
funding the LIBOR Loans for such Interest Period
then the Lender shall forthwith give notice of such determination
(which shall be conclusive and binding on the
-10-
<PAGE> 11
Borrowers) to the Borrowers. In such event, the obligations of
the Lender to make LIBOR Loans shall be suspended until the
Lender determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Lender shall notify the
Borrowers.
(f) PREPAYMENT OF FIXED RATE LOANS. The following provisions of this
Section 1.03(f) shall be effective only with respect to Fixed Rate
Loans: If, due to acceleration of or demand with respect to any Loan
or due to voluntary prepayment or due to exercise of rights and
remedies against collateral or due to any other reason, the Lender
receives payment of any principal of a Fixed Rate Loan on any date
prior to the last day of the relevant Interest Period, the Borrowers
shall, upon demand and receipt of a Bank Certificate from the Lender
with respect thereto, pay (and shall be jointly and severally
obligated to pay) forthwith to the Lender all amounts required to
compensate the Lender for losses, costs or expenses which it may have
incurred and may reasonably incur as a result of such payment,
including, without limitation, any loss or expense incurred by reason
of the liquidation or redeployment of funds acquired by the Lender to
fund or maintain such Fixed Rate Loan.
(g) INCREASED COSTS; CAPITAL ADEQUACY.
(i) If the adoption, effectiveness or phase-in, after the date
hereof, of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Lender with any request or directive (whether or not
having the force of law) of any such authority, central bank or
comparable agency:
(A) shall subject the Lender to any Imposition or other charge
with respect to any Fixed Rate Loan or the Lender's agreement to make
Fixed Rate Loans, or shall change the basis of taxation of payments to
the Lender of the principal of or interest on any Fixed Rate Loan or
any other amounts due under this agreement in respect of the Fixed
Rate Loans or the Lender's agreement to make Fixed Rate Loans (except
for changes in the rate of tax on the over-all net income of the
Lender); or
(B) shall impose, modify or deem applicable any reserve, special
deposit, deposit insurance or similar requirement (including, without
limitation, any such requirement imposed by
-11-
<PAGE> 12
the Board of Governors of the Federal Reserve System, but excluding,
with respect to any Fixed Rate Loan, any such requirement already
included in the applicable Reserve Rate) against assets of, deposits
with or for the account of, or credit extended by, the Lender or shall
impose on the Lender or on the London interbank market any other
condition affecting any Fixed Rate Loans or the Lender's agreement to
make Fixed Rate Loans
and the result of any of the foregoing is to increase the cost to the
Lender of making or maintaining any Fixed Rate Loan or to reduce the
amount of any sum received or receivable by the Lender under this
Agreement or under any related note with respect to any Fixed Rate
Loan by an amount deemed by the Lender to be material, then, within 30
days following the Borrowers' receipt of a Bank Certificate from the
Lender with respect thereto, the Borrowers shall pay (and shall be
jointly and severally obligated to pay) to the Lender such additional
amount or amounts as the Lender certifies to be necessary to
compensate the Lender for such increased cost or reduction in amount
received or receivable.
(ii) If the Lender shall have determined that the adoption or
phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding
companies, or any change therein after the date hereof, or any change
after the date hereof in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Lender with any request or directive of such entity
regarding capital adequacy (whether or not having the force of law)
has or would have the effect of reducing the return on the Lender's
capital with respect to its agreement hereunder to make Loans or with
respect to any Loan (whether or not then subject to any COF Rate or
Eurodollar Interest Rate) to a level below that which the Lender could
have achieved (taking into consideration the Lender's policies with
respect to capital adequacy immediately before such adoption,
phase-in, change or compliance and assuming that the Lender's capital
was then fully utilized) by any amount deemed by the Lender to be
material: (A) the Lender shall promptly after its determination of
such occurrence give notice thereof to the Borrowers; and (B) the
Borrowers shall pay (and shall be jointly and severally obligated to
pay) to the Lender as an additional fee from time to time, within 30
days following the Borrowers' receipt of a Bank Certificate with
respect thereto, such amount as the Lender certifies to be the amount
that will compensate it for such reduction. A Bank
-12-
<PAGE> 13
Certificate given by the Lender claiming compensation under this
Section shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise
to such compensation, the additional amount or amounts to be paid to
the Lender hereunder and the method by which such amounts are
determined. In determining any such amount, the Lender may use any
reasonable averaging and attribution methods.
(iii) No failure on the part of the Lender to demand compensation
on any one occasion shall constitute a waiver of its right to demand
such compensation on any other occasion and no failure on the part of
the Lender to deliver any Bank Certificate in a timely manner shall in
any way reduce any obligation of the Borrowers to the Lender under
this Section.
(h) ILLEGALITY OR IMPOSSIBILITY. Notwithstanding any other provision
of this Agreement, if the introduction of or any change in or in the
interpretation or administration of any law or regulation applicable
to the Lender or the Lender's activities in the London interbank
market shall make it unlawful, or any central bank or other
governmental authority having jurisdiction over the Lender or the
Lender's activities in the London interbank market shall assert that
it is unlawful, or otherwise make it impossible, for the Lender to
perform its obligations hereunder to make LIBOR Loans or to continue
to fund or maintain LIBOR Loans, then on notice thereof and demand
therefor by the Lender to the Customer, (i) the obligation of the
Lender to fund LIBOR Loans shall terminate and (ii) the Customer shall
prepay in full all affected LIBOR Loans within five (5) Business Days
and, in any event, on or prior to the last day on which such LIBOR
Loans may legally remain outstanding."
j. By adding to Section 1.04(A) of the Loan Agreement, at the end
hereof, the following:
"Letters of credit may be issued from time to time for the account of
the Borrowers under the Lender's then customary documentation at the
written request of the Borrowers; provided that (i) all of the
conditions to advance contained in Article III shall have been
satisfied as at the date of such issuance, and (ii) at the date of
such issuance, and after giving effect thereto, the Revolving Credit
Liabilities will not aggregate in excess of $5,500,000. The Borrowers
hereby authorize the Lender, without further request from any
Borrower, to cause the liability of any Borrower or Borrowers to the
Lender for reimbursement of funds drawn under
-13-
<PAGE> 14
any letter of credit issued by the Lender to be repaid from the
proceeds of a Line of Credit Loan to be made hereunder. The Borrowers
hereby irrevocably request that such Line of Credit Loans be made."
k. By deleting in its entirety paragraph (a) of Section 4.08 of the
Loan Agreement (the Minimum Net Worth test) and by substituting in its stead the
following:
"Maintain Minimum Net Worth, measured as at the end of each fiscal
quarter of GZA, of not less than $21,000,000."
l. By deleting from paragraph (d) of Section 4.08 of the Loan
Agreement (the Working Capital test) the words "Ten Million Dollars
($10,000,000)" and by substituting in their stead the following:
"$15,000,000"
m. By deleting from the definition of "Cash Flow Coverage" appearing
in Section 4.08 of the Loan Agreement the words "Unfinanced Capital Expenditures
and".
n. By adding to Section 7.01 of the Loan Agreement, at the end
thereof, the following:
"All representations, covenants and agreements of the Borrowers
contained herein will be deemed the joint and several obligations of
the Borrowers, whether or not expressly so stated herein."
o. By changing the Bank's notice address, pursuant to Section 7.06
of the Loan Agreement, to the following:
"Fleet National Bank
One Federal Street, 4th Floor
Boston, MA 02211
Attention: Thomas F. Brennan, Vice President"
p. By deleting in its entirety Exhibit A to the Loan Agreement and
by substituting in its stead Exhibit A in the form attached hereto.
q. By deleting in its entirety Exhibit B to the Loan Agreement and
by substituting in its stead Exhibit B in the form attached hereto. Said Exhibit
B in the form attached hereto will be used for all future Term Loans.
r. By modifying Exhibit C to the Loan Agreement (i) to take into
account the changes made by the foregoing provisions of this Agreement as to the
identity and address of the
-14-
<PAGE> 15
Bank, (ii) by replacing the words "Corporate Base Rate" with the words "Prime
Rate", and (iii) by replacing the words "Fixed Rate" with the words "Adjusted
COF Rate".
s. By modifying Exhibit E to the Loan Agreement to take into account
the above-described change as to the identity of the Bank.
t. By deleting in its entirety Exhibit F to the Loan Agreement and
by substituting in its stead Exhibit F in the form attached hereto.
4. Each presently outstanding Term Note is hereby amended:
a. By providing that the "Lender" described therein is Fleet
National Bank, having an office at One Federal Street, Boston, MA 02211.
b. By providing that all references therein to the "Corporate Base
Rate" will be deemed to refer to Fleet National Bank's "Prime Rate", as defined
above in this Agreement.
c. By providing that all references therein to a "Fixed Rate" will
be deemed to refer to the "Adjusted COF Rate", as defined in this Agreement.
d. By providing that the provisions of the Loan Agreement (as
amended by this Agreement) relating to the method of determination of an
interest rate for Term Loans (as defined in the Loan Agreement), to the
prerequisites for borrowing a Term Loan, to the time for payment of interest of
any Term Loan and to the additional amount, if any, payable upon any prepayment
of principal of any Term Loan, will be deemed to supersede any inconsistent
provisions of the existing Term Notes.
5. Whenever in any Financing Document, or in any borrowing request,
certificate or opinion to be delivered in connection therewith, reference is
made to a "Loan Agreement" (or, in the case of a request for a Term Loan, to the
"Agreement"), from and after the date hereof same will be deemed to refer to the
Loan Agreement, as hereby amended.
6. In order to induce the Bank to enter into this Agreement, the
Borrowers further jointly and severally represent and warrant to the Bank as
follows:
a. The execution, delivery and performance of this Agreement, the
1997 Line of Credit Note and each Term Note to be delivered hereafter have
been duly authorized by each Borrower by all necessary corporate and other
action, will not require the consent of any third party and will not
conflict with, violate the provisions of, or cause a default or constitute
an event which, with the passage of time or the giving of notice or both,
could cause a default on the part of any Borrower under its charter
documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the
imposition of any lien or encumbrance on any property or assets of any
Borrower.
-15-
<PAGE> 16
b. Each Borrower has duly executed each of this Agreement and the
1997 Line of Credit Note and has delivered same to the Bank.
c. Each of this Agreement and the 1997 Line of Credit Note is the
legal, valid and binding obligation of the Borrowers, enforceable jointly
and severally against each of the Borrowers in accordance with its
respective terms. Each Term Note now outstanding is (and each Term Note
hereafter issued will be) the legal, valid and binding obligation of the
Borrower or Borrowers named therein, enforceable against each of them in
accordance with its terms.
d. The representations and warranties made in the Loan Agreement
continue to be correct as of the date hereof, except as supplemented and/or
modified on the attached supplemental disclosure schedule.
e. Giving effect to the waiver set forth in Section 2 above and to
certain prior written waivers, the covenants and agreements of the
Borrowers contained in the Loan Agreement (as amended hereby) have been
compiled with on and as of the date hereof.
f. Giving effect to the waiver set forth in Section 2 above and to
certain prior written waivers, no event which constitutes or which, with
notice or lapse of time, or both, could constitute, an Event of Default (as
defined in the Loan Agreement) has occurred and is continuing.
g. No material adverse change has occurred in the financial
condition of the Borrowers from that disclosed in the financial statements
of GZA as at February 28, 1997, heretofore provided to the Bank.
7. Except as expressly affected hereby, the Loan Agreement and each of
the other Financing Documents remains in full force and effect as heretofore.
Each Borrower hereby agrees that the respective Guaranty heretofore given by
such Borrower (i) remains in full force and effect, (ii) runs to the benefit of
Fleet National Bank and (iii) includes, as obligations guaranteed thereunder,
the Loan Agreement (as amended by this Agreement), the 1997 Line of Credit Note,
the existing Term Notes (as amended by this Agreement) and all future Term
Notes.
8. Nothing contained herein will be deemed to constitute a waiver (other
than the express written waiver set forth in Section 2 of this Agreement) or a
release of any provision of any of the Financing Documents. Nothing contained
herein will in any event be deemed to constitute an agreement to give a waiver
or release or to agree to any amendment or modification of any provision of any
of the Financing Documents on any other or future occasion.
-16-
<PAGE> 17
Executed, as an instrument under seal, as of the date and year first above
written.
FLEET NATIONAL BANK
By: /s/ Thomas F. Brennan
--------------------------------------------
Name: Thomas F. Brennan
Title: VP
GZA GEOENVIRONMENTAL
TECHNOLOGIES, INC.
By: /s/ Joseph P. Hehir
--------------------------------------------
Name: Joseph P. Hehir
Title: Chief Financial Officer and Treasurer
GZA GEOENVIRONMENTAL, INC.
By: /s/ Joseph P. Hehir
--------------------------------------------
Name: Joseph P. Hehir
Title: Treasurer
GZA DRILLING, INC.
By: /s/ M. Joseph Celi
--------------------------------------------
Name: M. Joseph Celi
Title: President
GZA REMEDIATION, INC.
By: /s/ M. Joseph Celi
--------------------------------------------
Name: M. Joseph Celi
Title: President
-17-
<PAGE> 18
GZA SECURITIES CORP.
By: /s/ Joseph P. Hehir
-----------------------------------------
Name: Joseph P. Hehir
Title: Treasurer
DELTA GEOTECHNICAL SERVICES, INC.
By: /s/ Joseph P. Hehir
-----------------------------------------
Name: Joseph P. Hehir
Title: Treasurer
GROVER ENTERPRISES, INC.
By: /s/ M. Joseph Celi
-----------------------------------------
Name: M. Joseph Celi
Title: President
GOLDBERG ZOINO ASSOCIATES OF NEW YORK, P.C.
By: /s/ Richard M. Simon
-----------------------------------------
Name: Richard M. Simon
Title: President
-18-
<PAGE> 19
SUPPLEMENTAL DISCLOSURE SCHEDULE
[To be provided by Borrowers, if needed]
<PAGE> 20
EXHIBIT F
---------
EMPLOYEES OF GZA AUTHORIZED
TO REQUEST LINE OF CREDIT ADVANCES
----------------------------------
[To be provided by GZA]
OFFICERS OF GZA AUTHORIZED
TO REQUEST TERM LOANS
[To be provided by GZA]
OFFICERS OF BORROWERS AUTHORIZED
TO EXECUTE TERM NOTES
Borrower Authorized Signatory (Name and Title)
-------- -------------------------------------
GZA GeoEnvironmental Technologies, Inc. [To be provided by Borrowers.]
GZA GeoEnvironmental, Inc. [To be provided by Borrowers.]
GZA Drilling, Inc. [To be provided by Borrowers.]
GZA Remediation, Inc. [To be provided by Borrowers.]
GZA Securities Corporation [To be provided by Borrowers.]
Delta Geotechnical Services, Inc. [To be provided by Borrowers.]
Grover Enterprises, Inc. [To be provided by Borrowers.]
Goldberg-Zoino Associates of New York, P.C. [To be provided by Borrowers.]
-20-
<PAGE> 21
Exhibit A
PROMISSORY NOTE
$5,500,000.00 Boston, Massachusetts
August 7, 1997
FOR VALUE RECEIVED, the undersigned GZA GeoEnvironmental Technologies,
Inc., a Delaware corporation ("GZA"), GZA GeoEnvironmental, Inc., a
Massachusetts corporation ("GZA Associates"), GZA Drilling, Inc., a
Massachusetts corporation ("GZA Drilling"), GZA Remediation, Inc., a
Massachusetts corporation ("GZA Remediation"), GZA Securities Corp., a
Massachusetts corporation ("GZA Securities"), Delta Geotechnical Services, Inc.,
a Massachusetts corporation ("Delta"), Grover Enterprises, Inc., a Massachusetts
corporation ("Grover") and Goldberg Zoino Associates of New York, P.C. ("GZA New
York") (GZA, GZA Associates, GZA Drilling, GZA Remediation, GZA Securities,
Delta, Grover and GZA New York being hereinafter referred to collectively as the
"Borrowers" and individually as a "Borrower") hereby jointly and severally
promise to pay to the order of FLEET NATIONAL BANK (the "Bank") the principal
amount of Five Million Five Hundred Thousand and 00/100 ($5,500,000.00) Dollars
or such portion thereof as may be advanced by the Bank (or may have heretofore
been advanced by the Bank or any corporate predecessor thereof) pursuant to
Section 1.01(A) of the below-described Loan Agreement and remains outstanding
from time to time hereunder ("Principal"), with interest, at the rate
hereinafter set forth, on the daily balance of all unpaid Principal, from the
date hereof until payment in full of all Principal and interest hereunder. As
used herein, "Loan Agreement" means that certain Revolving Credit and Term Loan
Agreement dated as of February 28, 1994 among the Borrowers and Shawmut Bank,
N.A., as amended (Fleet National Bank having succeeded by merger to the rights
and obligations of Shawmut Bank, N.A. thereunder).
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law), with a change in the aforesaid
rate of interest to become effective on the same day on which any change in the
Prime Rate is effective; provided, however, that if a Eurodollar Interest Rate
(as defined in the Loan Agreement) shall have become applicable to all or any
portion of the outstanding Principal for any Interest Period (as defined in the
Loan Agreement), then interest on such Principal or portion thereof shall accrue
at said applicable Eurodollar Interest Rate for such Interest Period and shall
be payable on the last day of such Interest Period. Overdue Principal and, to
the extent permitted by law, overdue interest shall bear interest at a
fluctuating rate per annum which at all times shall be equal to the sum of (i)
two (2%) percent per annum plus (ii) the per annum rate otherwise payable under
this note with respect to the Principal which is overdue (or as to which such
interest is overdue) (but in no event in excess of the maximum rate permitted by
then applicable law), compounded monthly and payable on demand. As used herein,
"Prime Rate" means that rate of interest per annum announced by the Bank from
time to time as its prime rate, it being understood that such rate is merely a
reference rate, not necessarily the lowest, which serves as the basis upon which
effective rates of interest are
<PAGE> 22
calculated for obligations making reference thereto. If the entire amount of any
required Principal and/or interest is not paid within ten (10) days after the
same is due, the Borrowers shall pay to the Bank a late fee equal to five
percent (5%) of the required payment.
All outstanding Principal and all interest accrued thereon shall be due and
payable in full on the first to occur of: (i) an acceleration under Article VI
of the Loan Agreement or (ii) July 31, 1999. The Borrowers may at any time and
from time to time prepay all or any portion of said Principal, but, as to LIBOR
Loans (as defined in the Loan Agreement), only at the times and in the manner,
and (under certain circumstances) with the additional payments, provided for in
the Loan Agreement. Any prepayment of Principal, in whole or in part, will be
without premium or penalty (but, in the case of LIBOR Loans, may require payment
of additional amounts, as provided for in the Loan Agreement).
Payments of both Principal and interest shall be made, in immediately
available funds, at the office of the Bank located at One Federal Street,
Boston, Massachusetts 02211, or at such other address as the Bank may from time
to time designate.
Each of the undersigned Borrowers irrevocably authorizes the Bank to make
or cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any Line of Credit Loan (as defined in
the Loan Agreement) and of receiving any payment of Principal, an appropriate
notation reflecting such transaction (including date, amount and maturity) and
the then aggregate unpaid balance of Principal. Failure of the Bank to make any
such notation shall not, however, affect any obligation of any Borrower
hereunder or under the Loan Agreement. The unpaid Principal amount of this note,
as recorded by the Bank from time to time on such schedule or on such books,
shall constitute presumptive evidence of the aggregate unpaid principal amount
of the Line of Credit Loans.
Each Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred or paid by the Bank in
enforcing this note and any collateral or security therefor, all whether or not
litigation is commenced.
This note is the Line of Credit Note referred to in the Loan Agreement.
This note is subject to prepayment as set forth in the Loan Agreement. The
maturity of this note may be accelerated upon the occurrence of an Event of
Default, as provided in the Loan Agreement. All obligations of the Borrowers
hereunder and/or under the Loan Agreement are joint and several. This note is
governed by, and shall be construed and enforced in accordance with, the laws of
The Commonwealth of Massachusetts.
-2-
<PAGE> 23
Executed, as an instrument under seal, as of the day and year first above
written.
CORPORATE SEAL GZA GEOENVIRONMENTAL
TECHNOLOGIES, INC.
ATTEST:
____________________________ By:__________________________
Secretary Name:
Title:
CORPORATE SEAL GZA GEOENVIRONMENTAL, INC.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
CORPORATE SEAL GZA DRILLING, INC.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
CORPORATE SEAL GZA REMEDIATION, INC.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
-3-
<PAGE> 24
CORPORATE SEAL GZA SECURITIES CORP.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
CORPORATE SEAL DELTA GEOTECHNICAL SERVICES, INC.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
CORPORATE SEAL GROVER ENTERPRISES, INC.
ATTEST:
____________________________ By:__________________________
Clerk Name:
Title:
CORPORATE SEAL GOLDBERG ZOINO ASSOCIATES
OF NEW YORK, P.C.
ATTEST:
____________________________ By:__________________________
Secretary Name:
Title:
-4-
<PAGE> 25
EXHIBIT B
---------
PROMISSORY NOTE
Boston, Massachusetts
$____________ [_________________]
FOR VALUE RECEIVED, the undersigned [add name of applicable company]
and GZA GeoEnvironmental Technologies, Inc., a Delaware corporation ("GZA")
(said [name of applicable company] and GZA being hereinafter referred to
collectively as the "Borrowers" and individually as a "Borrower") hereby jointly
and severally promise to pay to the order of FLEET NATIONAL BANK (the "Bank")
the principal amount of ($____________) Dollars ("Principal"), with interest, at
the rate hereinafter set forth, on the daily balance of all unpaid Principal,
from the date hereof until payment in full of all Principal and interest
hereunder. As used herein, "Loan Agreement" means that certain Revolving Credit
and Term Loan Agreement dated as of February 28, 1994 among the Borrowers and
Shawmut Bank, N.A., as amended (Fleet National Bank having succeeded by merger
to the rights and obligations of Shawmut Bank, N.A. thereunder).
Principal will be repaid in [ ] equal monthly installments, each in the
amount of $___________, each such installment being due on the first day of each
month, commencing with the first such date following the date hereof, and
continuing on the first day of each month thereafter until all Principal shall
have been paid in full. Interest on all unpaid Principal shall be due and
payable monthly in arrears, on the first day of each month, commencing on the
first such date after the date hereof and continuing on the first day of each
month thereafter and on the date of payment of this note in full, at a
fluctuating rate per annum (computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed) which shall at all times
be equal to the Prime Rate, as in effect from time to time (but in no event in
excess of the maximum rate permitted by then applicable law), with a change in
the aforesaid rate of interest to become effective on the same day on which any
change in the Prime Rate is effective; provided, however, that if an Adjusted
COF Rate (as defined in the Loan Agreement) shall have become applicable to the
outstanding Principal for any Interest Period (as defined in the Loan
Agreement), then interest on such Principal shall accrue at said applicable
Adjusted COF Rate for such Interest Period and shall be payable on the last day
of such Interest Period. (If the Term Loan represented by this note is being
converted from a Floating Rate Loan (as defined in the Loan Agreement) to a COF
Loan (as defined in the Loan Agreement), interest shall also be paid on the date
of such conversion). Overdue Principal and, to the extent permitted by law,
overdue interest shall bear interest at a fluctuating rate per annum which at
all times shall be equal to the sum of (i) two (2%) percent per annum plus (ii)
the per annum rate otherwise payable under this note with respect to the
Principal which is overdue (or as to which such interest is overdue) (but in no
event in excess of the maximum rate permitted by then applicable law),
compounded monthly and payable on demand. As used herein, "Prime Rate" means
that rate of interest per annum announced by the Bank from time to time as its
prime rate, it being
<PAGE> 26
understood that such rate is merely a reference rate, not necessarily the
lowest, which serves as the basis upon which effective rates of interest are
calculated for obligations making reference thereto. If the entire amount of any
required Principal and/or interest is not paid within ten (10) days after the
same is due, the Borrowers shall pay to the Bank a late fee equal to five
percent (5%) of the required payment.
All outstanding Principal and all interest accrued thereon shall become
due and payable in full upon an acceleration under Article VI of the Loan
Agreement. The Borrowers may at any time and from time to time prepay all or any
portion of said Principal, but, as to any prepayment of COF Loan, only at the
times and in the manner, and (under certain circumstances) with the additional
payments, provided for in the Loan Agreement. Any prepayment of Principal, in
whole or in part, will be without premium or penalty (but, in the case of any
prepayment of a COF Loan, may require payment of additional amounts, as provided
for in the Loan Agreement).
Payments of both Principal and interest shall be made, in immediately
available funds, at the office of the Bank located at One Federal Street,
Boston, Massachusetts 02211, or at such other address as the Bank may from time
to time designate.
Each of the undersigned Borrowers irrevocably authorizes the Bank to
make or cause to be made, on a schedule attached to this note or on the books of
the Bank, at or following the time of making the Term Loan (as defined in the
Loan Agreement) evidenced by this note and of receiving any payment of
Principal, an appropriate notation reflecting such transaction (including date,
amount and maturity) and the then aggregate unpaid balance of Principal. Failure
of the Bank to make any such notation shall not, however, affect any obligation
of any Borrower hereunder or under the Loan Agreement. The unpaid Principal
amount of this note, as recorded by the Bank from time to time on such schedule
or on such books, shall constitute presumptive evidence of the unpaid principal
amount of the Term Loan evidenced by this note.
Each Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred or paid by the Bank in
enforcing this note and any collateral or security therefor, all whether or not
litigation is commenced.
This note is a Term Note referred to in the Loan Agreement. This note
is subject to prepayment as set forth in the Loan Agreement. The maturity of
this note may be accelerated upon the occurrence of an Event of Default, as
provided in the Loan Agreement. All obligations of the Borrowers hereunder
and/or under the Loan Agreement are joint and several. This note is governed by,
and shall be construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
-2-
<PAGE> 27
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL GZA GEOENVIRONMENTAL
TECHNOLOGIES, INC.
ATTEST:
By:
- ---------------------------- ----------------------------
Secretary Name:
Title:
CORPORATE SEAL [Applicable Company]
ATTEST:
By:
- ---------------------------- ----------------------------
Clerk Name:
Title:
-3-
<PAGE> 1
Exhibit 13.1
SUMMARY OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years ended 2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
- -----------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues $37,851 $38,211 $40,158 $ 40,995 $40,620
Income from continuing operations, before
other income and taxes 1,810 565 1,260 1,179 2,424
Income from continuing operations before taxes 2,247 821 1,283 1,272 2,718
Income from continuing operations 1,370 529 798 822 1,672
Income (loss) from discontinued operations - - (99) (2,216) 4
Net income (loss) 1,370 529 699 (1,394) 1,676
BASIC EARNINGS PER SHARE:
Earnings per share from continuing operations $ .35 $ .13 $ .21 $ .22 $ .45
Loss per share from discontinued operations - - $ (.03) $ (.59) -
Basic earnings (loss) per share $ .35 $ .13 $ .18 $ (.37) $ .45
Basic weighted average shares outstanding 3,932 3,929 3,857 3,780 3,732
DILUTED EARNINGS PER SHARE:
Earnings per share from continuing operations $ .34 $ .13 $ .21 $ .22 $ .45
Loss per share from discontinued operations - - $ (.03) $ (.59) -
Diluted earnings (loss) per share $ .34 $ .13 $ .18 $ (.37) $ .45
Diluted weighted average shares outstanding 3,973 3,929 3,857 3,780 3,732
BALANCE SHEET DATA:
Working capital $17,366 $17,177 $18,175 $ 16,582 $17,745
Total assets 34,221 35,535 37,614 39,111 38,294
Long-term debt (less current portion) - - 1,860 2,730 3,409
Stockholders' equity $22,886 $23,257 $22,465 $ 21,685 $22,807
</TABLE>
1
<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
of Net Revenues Increase (Decrease)
- --------------------------------------------------------------------------------------------------------
Year Ended Fiscal Years
- --------------------------------------------------------------------------------------------------------
February 28, February 28, February 29, 1998 vs. 1997 vs.
1998 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues 100% 100% 100% (1)% (5)%
Salaries and related costs 71 73 72 (3) (4)
General and administrative expenses 24 26 25 (8) (1)
Income from continuing operations,
before other income and taxes 5 1 3 220 (55)
Other income, net 1 1 - 71 1,013
Provision for income taxes 2 1 1 200 (40)
Income from continuing operations 4 1 2 159 (34)
Loss from discontinued operations - - - - (100)
Net income (loss) 4 1 2 159 (24)
</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, Incentive
Compensation Plan 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 fiscal 1996 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 the business. The following discussion and
analysis relates to the continuing operations of the Company.
<TABLE>
<CAPTION>
FISCAL 1998 AND 1997 VERSUS PRIOR YEARS 1998 vs. 1997 1997 vs. 1996
Decrease Decrease 1996 Amount
----------------- ------------------- -----------
<S> <C> <C> <C>
Net Revenues. ($360,000) (0.9%) ($1,947,000) (4.8%) $40,158,000
</TABLE>
The net revenues decrease in fiscal 1998 is attributable to the Company's
decision to discontinue operations of the Phoenix, Arizona office in the second
quarter of fiscal 1998 and lower prices due to increasingly competitive market
conditions for geotechnical, environmental consulting and drilling services. The
net revenues decline was offset partially by an increase in billable hours of
the technical staff for contracted activity in the Northeast Region and by an
increase in net revenues from the Company's drilling operations.
2
<PAGE> 3
The net revenues decrease for fiscal 1997 is attributable to lower prices due to
increasingly competitive market conditions for geotechnical, environmental
consulting and drilling services. The decline in net revenues was also
attributable in part to the closure of the Gainesville, Florida drilling
operation and by the Company's decision to write off $500,000 for obsolete
drilling equipment and inventory which could not be billed to clients in future
periods. The decrease for fiscal 1997 was offset partially by favorable contract
settlements amounting to $644,000 after payment of legal, expert witness and
consulting fees.
<TABLE>
<CAPTION>
1998 vs. 1997 1997 vs. 1996
Decrease Decrease 1996 Amount
----------------- ------------------- -----------
<S> <C> <C> <C>
Salaries and Related Costs. ($801,000) (2.9%) ($1,136,000) (3.9%) $28,918,000
</TABLE>
The decrease in fiscal 1998 salaries and related costs reflects reduced salary
and benefit costs of approximately $907,000 as result of staffing and management
restructuring efforts which were initiated in fiscal 1997 and continued into
fiscal 1998 and, to a lesser extent, the Company's decision to discontinue
operations of the Phoenix office. The salaries and related cost reductions were
offset, in part, by an increase in Incentive Compensation Plan (bonus) payments
of approximately $106,000.
The decrease for fiscal 1997 is attributable to reduced salary and benefit costs
as result of staff reductions and reduced bonus payments as result of the
Company's not meeting budgeted operating goals. The decrease was offset
partially by severance payments for downsized operations and salary costs
associated with the hiring and transition to a new Chief Executive Officer.
<TABLE>
<CAPTION>
1998 vs. 1997 1997 vs. 1996
Decrease Decrease 1996 Amount
----------------- ------------------- -----------
<S> <C> <C> <C>
General and Administrative Expenses. ($804,000) (8.2%) ($116,000) (1.2%) $9,980,000
</TABLE>
The decrease in fiscal 1998 general and administrative expenses reflects
approximately $222,000 in lower occupancy cost as result of lease cost
reductions associated with the Company's decision to downsize operations in
fiscal 1997 and the decision to discontinue operations of the Phoenix office in
the second quarter of fiscal 1998. In addition, fiscal 1997 reflects a goodwill
write-down of $400,000 for prior years' acquisitions and approximately $300,000
in closing costs for the Gainesville drilling operation.
The decrease in fiscal 1997 is attributable to 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 for prior years'
acquisitions based on projected operating results. In addition, fiscal 1997
reflects costs for closing the Gainesville drilling operation and recruiting
expenses associated with the hiring of a new Chief Executive Officer.
<TABLE>
<CAPTION>
1998 vs. 1997 1997 vs. 1996
Increase Increase 1996 Amount
--------------- ---------------- -----------
<S> <C> <C> <C>
Other Income, Net. $181,000 70.7% $233,000 1013% $23,000
</TABLE>
The increase in fiscal 1998 other income, net is due primarily to a $35,000
increase in interest income, a reduction of $110,000 in borrowing cost and a
$69,000 increase in the Company's equity income from Aquaterra Environmental
Consultants Ltd., a 50% owned joint venture with Carl Bro Group (UK) Ltd.
The increase in fiscal 1997 is attributable primarily to a $135,000 increase in
interest income, a $200,000 decrease in borrowing costs and a $38,000 increase
in joint venture equity investments which were offset partially by a $151,000
reduction in income from sale of securities.
Provision for Income Taxes. The provision for income taxes reflects effective
tax rates for fiscal 1998, 1997, and 1996 of 39%, 36%, and 38%, 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.
3
<PAGE> 4
Inflation. Management does not believe that inflation has had a significant
effect on the Company's results of operations.
Future Operating Results. The volume of the Company's services is affected by
reduced federal and state government spending and changes in environmental
regulations. In addition, the industry is continuing to experience a period of
consolidation, continuing price competition and increasing salaries and demand
for entry level and experienced project managers. These trends are expected to
continue.
Liquidity and Capital Resources. Cash provided by operating activities was
$3,265,000 in fiscal 1998 compared with $5,218,000 in fiscal 1997. The Company
made capital expenditures of $1,232,000 in fiscal 1998 and $995,000 in 1997. The
increase in capital expenditures in fiscal 1998 reflects the Company's
investments in computer technology to improve internal communications, increase
efficiency and expand client services.
The Company announced a 500,000 share buyback program during fiscal 1998 and had
purchased 400,475 shares at a cost of $1,971,000 as of February 28, 1998. The
Company may continue to purchase shares from time to time at prevailing market
prices in the open market.
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 or, at the Company's option, at LIBOR 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. 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, 1998, the Company had no
borrowings under the revolving credit line and no term loans.
The Company's cash and cash equivalents were $4,594,000 at the end of fiscal
1998 compared with $4,229,000 at the end of fiscal 1997. Short-term investments
were $3,519,000 at the end of fiscal 1998 compared with $3,456,000 at the end of
fiscal 1997. 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 approximately $900,000 during
fiscal 1999 to continue to upgrade the Company's computer technology, software
and management information systems and approximately $300,000 for drilling
equipment required to complete contracts in fiscal years 1999 and 2000.
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.
OTHER ACCOUNTING MATTERS. The Company is evaluating its present in-house
computer applications and their functionality with respect to the "Year 2000."
Based on the results of such evaluation to date, the Company does not expect to
incur material "Year 2000" remediation costs in the current or future fiscal
years.
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 130 (SFAS 130), "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. Management has not yet
determined whether the implementation of SFAS 130 will have any impact on the
Company's financial reporting.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement specifies new guidelines for determining a company's operating
segments and related requirements for disclosure. Management has not yet
determined whether the implementation of SFAS 131 will have any impact on the
Company's financial reporting.
4
<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, 1998 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
in the period ended February 28, 1998. 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, 1998 and 1997 and the consolidated results of their operations
and cash flows for each of the three years in the period ended February 28,
1998 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 5, 1998
5
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, 1998 and 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,594,000 $ 4,229,000
Available-for-sale securities 3,519,000 3,456,000
Accounts receivable, net 11,423,000 13,059,000
Costs and estimated earnings in excess of
billings on uncompleted contracts, net 7,261,000 6,953,000
Prepaid expenses and other current assets 133,000 371,000
Deferred income taxes 1,029,000 1,057,000
- --------------------------------------------------------------------------------------------------
Total current assets 27,959,000 29,125,000
Property and equipment, net 5,344,000 5,514,000
Other assets, net 918,000 896,000
- --------------------------------------------------------------------------------------------------
Total assets $ 34,221,000 $ 35,535,000
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 4,373,000 $ 5,255,000
Accrued payroll and expenses 4,283,000 4,064,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,835,000 2,266,000
Income taxes payable 102,000 363,000
- --------------------------------------------------------------------------------------------------
Total current liabilities 10,593,000 11,948,000
- --------------------------------------------------------------------------------------------------
Deferred income taxes 742,000 330,000
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 - 4,027,440 shares at February 28,
1998 (including treasury shares) and
3,948,794 shares at February 28, 1997 40,000 39,000
Capital in excess of par value 14,430,000 14,202,000
Unrealized losses on available-for-sale securities (6,000) (7,000)
Retained earnings (includes $890,000 and $886,000 of retained
earnings of the Company's consolidated affiliate at
February 28, 1998 and 1997, respectively) 10,393,000 9,023,000
- --------------------------------------------------------------------------------------------------
Subtotal 24,857,000 23,257,000
Less: Common stock held in treasury, at cost (400,475 and
0 shares at February 28, 1998 and 1997, respectively) (1,971,000) -
==================================================================================================
Total stockholders' equity 22,886,000 23,257,000
==================================================================================================
Total liabilities and stockholders' equity $ 34,221,000 $ 35,535,000
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended February 28, 1998, 1997, and February 29, 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $59,546,000 $59,340,000 $69,825,000
Reimbursable expenses 21,695,000 21,129,000 29,667,000
- ---------------------------------------------------------------------------------------------------------------------
Net revenues 37,851,000 38,211,000 40,158,000
Costs and expenses:
Salaries and related costs 26,981,000 27,782,000 28,918,000
General and administrative 9,060,000 9,864,000 9,980,000
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations, before other income and taxes 1,810,000 565,000 1,260,000
- ---------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 346,000 311,000 176,000
Gain (loss) on sale of equipment, and other assets (6,000) 27,000 151,000
Gain on insurance settlement - - 16,000
Equity in net income (loss) of joint venture 97,000 28,000 (10,000)
Interest expense - (110,000) (310,000)
- ---------------------------------------------------------------------------------------------------------------------
Total other income, net 437,000 256,000 23,000
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations before provision for income taxes 2,247,000 821,000 1,283,000
Provision for income taxes 877,000 292,000 485,000
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations 1,370,000 529,000 798,000
Discontinued operations (Note 12):
Loss from discontinued operations, net of income taxes - - (99,000)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1,370,000 $ 529,000 $ 699,000
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
Earnings per share from continuing operations $ .35 $ .13 $ .21
Loss per share from discontinued operations - - $ (.03)
Basic earnings per share $ .35 $ .13 $ .18
Basic weighted average shares 3,932,000 3,929,000 3,857,000
Diluted earnings per share:
Earnings per share from continuing operations $ .34 $ .13 $ .21
Loss per share from discontinued operations - - $ (.03)
Diluted earnings per share $ .34 $ .13 $ .18
Diluted weighted average shares 3,973,000 3,929,000 3,857,000
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Unrealized Treasury Stock
-------------------- Losses on --------------------
Number of Capital in Available- Total
Shares Par Excess of for-Sale Retained Number of Stockholders'
Securities Value Par Value Securities Earnings Shares Amount Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Issuance of common stock 78,646 1,000 228,000 229,000
Change in unrealized losses on
available-for-sale securities 1,000 1,000
Net income 1,370,000 1,370,000
Buy back of treasury
shares (Note 10) 400,475 (1,971,000) (1,971,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance
February 28, 1998 4,027,440 $40,000 $14,430,000 $(6,000) $10,393,000 400,475 $(1,971,000) $22,886,000
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended February 28, 1998, 1997 and February 29, 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 1,370,000 $ 529,000 $ 798,000
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Discontinued operations - - (99,000)
Depreciation and amortization 1,333,000 2,295,000 1,166,000
(Gain) loss on sale of equipment, other asset 6,000 (27,000) (151,000)
Gain on insurance settlement - - (16,000)
Equity in net income (loss) of joint venture (97,000) (28,000) 10,000
Deferred (prepaid) income taxes 442,000 (461,000) 69,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 1,636,000 2,596,000 (83,000)
Decrease (increase) in costs and estimated earnings in excess of
billings on uncompleted contracts, net (739,000) 248,000 188,000
Decrease (increase) in prepaid expenses and other current assets 238,000 114,000 (174,000)
Decrease in refundable income taxes - 138,000 355,000
Decrease in accounts payable, trade (882,000) (230,000) (601,000)
(Decrease) increase in accrued payroll and expenses 219,000 (319,000) (1,065,000)
Increase (decrease) in income taxes payable (261,000) 363,000 -
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,265,000 5,218,000 397,000
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash - - 1,900,000
Increase in available-for-sale securities (64,000) (700,000) (709,000)
Proceeds from disposal of equipment 82,000 216,000 23,000
Proceeds from sale of securities - - 703,000
Acquisition of property and equipment (1,232,000) (995,000) (929,000)
(Increase) decrease in other assets 56,000 (108,000) 370,000
Decrease in due from affiliates - 676,000 243,000
- ---------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (1,158,000) (911,000) 1,601,000
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable - (990,000) (879,000)
Repayments of long-term debt - (2,659,000) (906,000)
Proceeds from issuance of common stock, net 229,000 253,000 84,000
Acquisition of treasury stock (1,971,000) - -
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (1,742,000) (3,396,000) (1,701,000)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 365,000 911,000 297,000
Cash and cash equivalents at beginning of year 4,229,000 3,318,000 3,021,000
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,594,000 $ 4,229,000 $ 3,318,000
=====================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ - $ 110,000 $ 310,000
Income taxes paid (refunded), net $ 696,000 $ 248,000 $ (14,000)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GZA GeoEnvironmental Technologies, Inc. and subsidiaries and affiliate (the
"Company") prepares its financial statements in accordance with generally
accepted accounting principles and has adopted accounting policies and practices
which are generally accepted in the industries in which it operates. The
Company, a multi-disciplinary consulting firm, provides a wide range of
environmental consulting, remediation, geotechnical and information system
services to industrial, commercial, financial, public service, and government
clients. The following are the Company's significant accounting policies.
Basis of Consolidation. The accompanying consolidated financial statements
include the accounts of GZA GeoEnvironmental Technologies, Inc. and its wholly
owned subsidiaries and affiliate. All material intercompany transactions and
balances have been eliminated.
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 reported amounts that
reflect estimates that require the use of significant judgment by management.
Such amounts include, but are not limited to, allowances for doubtful accounts,
reserves for unbilled amounts and claims reserves.
Revenues and Cost Recognition. Revenue from engineering service contracts is
recognized as the services are provided. Revenue from long-term contracts is
generally 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 contractual work. 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 when the facts requiring the revision become known.
Provisions for estimated losses on uncompleted contracts are made in the period
when it is determined a loss may occur. For purposes of determining the
percentage of completion, contract costs include all material, labor, and
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 reflects 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 present 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 tax exempt municipal bonds, taxable U.S. treasury notes and other
bonds and commercial paper, 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 entity to minimize exposure to loss. 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. 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.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1998, 1997 and
February 29, 1996, the Company recorded goodwill amortization expense of
$19,000, $439,000 and $49,000, respectively.
The Company periodically reviews the propriety of carrying amounts of its
long-lived and intangible assets, and periodically 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 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.
During fiscal 1997 the Company wrote off $400,000 of goodwill related to prior
years' acquisitions.
Income Taxes. The Company accounts for income taxes pursuant to the Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," under
which the liability method is used to account for deferred income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Computation of Earning Per Share. Effective December 15, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"), which requires the presentation of Basic and Diluted earnings per
share, which replace primary and fully diluted earnings per share. Earnings per
share have been restated for all periods presented to reflect the adoption of
SFAS 128. Basic earnings per share is computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding during
the period, including the dilutive effect of common stock equivalents. Stock
options having an exercise price below the average fair market value of the
Company's common stock during the fiscal year are deemed to be a common stock
equivalent.
Reclassification. Certain reclassifications have been made to the prior years'
financial statements to conform to the current presentation.
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. CONDENSED FINANCIAL INFORMATION OF AFFILIATE
The condensed financial information of the Company's affiliate, GZA
GeoEnvironmental of New York, at February 28, 1998 and 1997 and for each of the
three years in the period ended February 28, 1998 is as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets $1,038,000 $1,304,000
================================================================================
Total liabilities $ 144,000 $ 418,000
- --------------------------------------------------------------------------------
Total stockholders' equity $ 890,000 $ 886,000
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS
1998 1997 1996
- --------------------------------------------------------------------------------
Net revenues $1,099,000 $1,227,000 $1,390,000
- --------------------------------------------------------------------------------
Net income (loss) $ 4,000 $ (378,000) $ (217,000)
- --------------------------------------------------------------------------------
</TABLE>
Accounts receivable, net, include $ 0 and $37,000 due from GZA GeoEnvironmental,
Inc. ("GZA") at February 28, 1998 and 1997. In addition, approximately $198,000,
$235,000 and $335,000 of net revenues were billed to GZA in fiscal 1998, 1997
and 1996, respectively.
NOTE 3. AVAILABLE-FOR-SALE SECURITIES
Unrealized losses on available-for-sale securities at February 28, 1998 and 1997
were approximately $6,000 and $7,000, respectively, net of deferred taxes. The
maturities of available-for-sale securities held at February 28, 1998 are as
follows:
1998
----------
Within one year $ 504,000
From 1-5 years $3,015,000
----------
Total $3,519,000
----------
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.
NOTE 4. ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following at February 28:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable, principally trade $11,410,000 $12,737,000
Retainage 912,000 1,166,000
- --------------------------------------------------------------------------------
12,322,000 13,903,000
Less - Allowance for doubtful accounts 899,000 844,000
- --------------------------------------------------------------------------------
$11,423,000 $13,059,000
================================================================================
</TABLE>
All amounts billed under retainage provisions of long-term contracts are
expected to be collected within one year of completion of the contracts.
12
<PAGE> 13
NOTE 5. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS, NET
Costs and estimated earnings in excess of billings on uncompleted contracts,
net, which represent revenues earned but not billed under the terms of the
related contracts, are as follows, as of February 28:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 4,168,000 $ 3,945,000
Estimated earnings 3,093,000 3,008,000
- --------------------------------------------------------------------------------
$ 7,261,000 $ 6,953,000
================================================================================
</TABLE>
Included in unbilled costs and estimated earnings on uncompleted contracts are
reserves of $582,000 and $678,000 as of February 28, 1998 and 1997,
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
reflects the appropriate adjustments. Costs incurred on uncompleted contracts
are typically billed at the end of a two-week or four-week billing cycle.
NOTE 6. PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost and consist of the following as of
February 28:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $ 3,103,000 $ 2,959,000
Laboratory and technical equipment 3,448,000 3,334,000
Furniture, fixtures and computer equipment 7,387,000 6,734,000
Motor vehicles, rigs and trucks 748,000 661,000
Leasehold improvements 2,495,000 2,463,000
- --------------------------------------------------------------------------------
17,181,000 16,151,000
Less - Accumulated depreciation and amortization 11,837,000 10,637,000
- --------------------------------------------------------------------------------
$ 5,344,000 $ 5,514,000
================================================================================
</TABLE>
Depreciation expense for the years ended February 28, 1998, 1997 and
February 29, 1996 was $1,315,000, $1,857,000 and $1,117,000, respectively.
NOTE 7. REVOLVING LINE OF CREDIT AND TERM LOAN FACILITY
The Company has entered into two financing arrangements with a financial
institution (the "Bank"). 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, as defined, 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, 1998 and 1997. The Company had no letters of credit
outstanding at February 28, 1998 or 1997.
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, as defined, or a fixed rate over
the term of the loan. Borrowings under the term loan facility totaled $0 at
February 28, 1998 and 1997. The term loan facility requires maintenance of the
same ratios and financial covenants as the revolving line of credit.
13
<PAGE> 14
NOTE 8. ACCRUED PAYROLL AND EXPENSES
Accrued payroll and expenses consist of the following at February 28:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Accrued payroll and related benefits $3,230,000 $2,723,000
Legal and claims reserves 675,000 739,000
Other 378,000 602,000
- --------------------------------------------------------------------------------
$4,283,000 $4,064,000
================================================================================
</TABLE>
NOTE 9. EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998
- --------------------------------------------------------------------------------
Income Shares (000s) Per share Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS
Income available to common
shareholders $1,370,000 3,932 $.35
- --------------------------------------------------------------------------------
Effect of dilutive securities
Stock options - 41 -
- --------------------------------------------------------------------------------
Diluted EPS
Income available to
common shares and common
share equivalents $1,370,000 3,973 $.34
================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 28, 1997
- --------------------------------------------------------------------------------
Income Shares (000s) Per share Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic and Diluted EPS
Income available to common
shareholders $ 529,000 3,929 $.13
================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 29, 1996
- --------------------------------------------------------------------------------
Income Shares (000s) Per share Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic and Diluted EPS
Income from continuing
operations $ 798,000 3,857 $.21
- --------------------------------------------------------------------------------
Basic and Diluted EPS
Income available to common
shareholders $ 699,000 3,857 $.18
================================================================================
</TABLE>
14
<PAGE> 15
NOTE 10. TREASURY STOCK
In 1997, the Board of Directors authorized the repurchase of up to 500,000
shares of the Company's common stock in the open market at prevailing prices.
The amount and timing of stock repurchases depends on market conditions, share
price and other factors. During the year ended February 28, 1998, the Company
repurchased 400,475 shares of common stock at a cost of $1,971,000, which
includes transaction fees. The Company may suspend or discontinue its stock
repurchase program at any time.
NOTE 11. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLAN
Under the Company's 1989 Incentive Stock Option Plan, as amended (the "Incentive
Plan"), options 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. Option
prices may not be less than fair market value on the date of grant and terms of
options may not be more than ten years. All Incentive Plan options are
non-assignable and vest over a five-year period. The Incentive Plan terminates
when all options issuable thereunder have been exercised.
The number of shares reserved for issuance under the Incentive Plan is 510,000
shares. During 1996 and 1997, the Board of Directors approved reductions, from
$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 therefore did not result in compensation expense charges to the
Company.
Information related to the Incentive Plan is summarized as follows:
<TABLE>
<CAPTION>
Incentive Stock Options Outstanding
------------------------------------------
Number of
Shares Range of Exercise Prices
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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 at February 28, 1997 304,878 3.50
Granted 10,000 3.50
Cancelled (18,200) 3.50
Exercised (3,600) 3.50
- --------------------------------------------------------------------------------
Balance at February 28, 1998 293,078 $3.50
- --------------------------------------------------------------------------------
</TABLE>
As of February 28, 1998, 1997 and February 29, 1996 options for 224,158, 199,348
and 168,998 shares, with weighted-average exercise prices of $3.50, $3.50 and
$5.25 (giving effect to option repricing in 1997 and 1996) were exercisable. As
of February 28, 1998 options for 213,322 were available to be granted under the
Incentive Plan. The weighted-average remaining contractual life of the options
outstanding is 3.6 years.
Under the Company's 1989 Non-Qualified Stock Option Plan (the "Non-Qualified
Plan"), up to 15,000 common stock options may be issued to key employees,
executive officers and directors of the Company. The Non-Qualified Plan is
administered by the Company's Board of Directors. All Non-Qualified Plan options
are non-assignable and vest over a five-year period. The Non-Qualified Plan
terminates when all options issuable thereunder have been exercised.
During fiscal 1997, the Board of Directors approved a reduction, from $5.25 to
$3.50, 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.
As of February 28, 1998, options to purchase 7,500 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.
15
<PAGE> 16
Under the Company's 1995 Stock Incentive Plan (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. Unearned compensation related to the award of
restricted stock is recorded at the date of award based on the fair market value
of the shares against paid in capital, and is amortized to expense over the
applicable vesting period. The maximum number of shares that may be granted
under the Stock Plan is 200,000. Pursuant to the Plan, 2,273, 15,053 and 12,418
shares were issued to certain employees during fiscal years ending 1998, 1997
and 1996, 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,
11,102, 12,998 and 22,510 shares were purchased for fiscal 1998, 1997 and 1996,
respectively.
The Company applies Accounting Principles Board Opinion No. 25 in accounting for
its stock option and employee stock purchase 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
market value at the grant dates as calculated in accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and diluted net income per common share
amounts would have been reduced.
The Company's pro forma net income amounts would have been $1,304,000, $485,000
and $691,000 for the fiscal years ended February 28, 1998 and 1997 and
February 29, 1996. The Company's pro forma diluted net income per share would
have been $0.32, $0.12 and $0.18 for the fiscal years ended February 28, 1998
and 1997 and February 29, 1996, respectively.
The weighted-average fair value of options granted during 1998, 1997 and 1996
was $1.47, $1.47 and $1.30 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 fiscal years 1998, 1997 and 1996:
risk free interest rates of 6.16%, 6.68% and 6.52% respectively, dividend yields
of 0%; volatility factors of the expected market price of the Company's common
stock of 43%, and a weighted-average expected life of the options of five years.
Because SFAS 123 is applicable only for awards granted subsequent to December
31, 1994, its pro forma effect will not be reflected fully until fiscal year
1999.
NOTE 12. DISCONTINUED OPERATIONS
Until fiscal 1995, 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.
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.
16
<PAGE> 17
NOTE 13. INCOME TAXES
The provision for income taxes from continuing operations consisted of the
following for fiscal years:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
State $109,000 $ 151,000 $162,000
Foreign - - 147,000
Federal 326,000 602,000 32,000
- ------------------------------------------------------------------------------
Total current 435,000 753,000 341,000
- ------------------------------------------------------------------------------
Deferred (prepaid):
State 98,000 (121,000) 23,000
Federal 344,000 (340,000) 121,000
- ------------------------------------------------------------------------------
Total deferred (prepaid) 442,000 (461,000) 144,000
- ------------------------------------------------------------------------------
Total provision for income taxes $877,000 $ 292,000 $485,000
==============================================================================
</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.
17
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliations of the U.S. federal statutory income tax rate to the effective
income tax rate are as follows for fiscal years:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------
<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 6 3 11
Interest income exempt from federal tax - (3) (4)
Reduction of valuation allowance (1) - (4)
Non-deductible expenses - 2 1
- -----------------------------------------------------------------------------------------
Effective income tax rate 39% 36% 38%
=========================================================================================
</TABLE>
The Company's net deferred tax asset at February 28, 1998 and 1997 consists of
gross deferred tax liabilities of $656,000 and $347,000 and deferred tax assets
of $1,339,000 and $1,514,000, respectively. The Company's net operating loss
carryforwards expire in fiscal 2010 through fiscal 2013. The components of the
Company's net deferred tax assets as of February 28, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 164,000 $ 140,000
Depreciation and amortization 492,000 207,000
Net operating loss carryforwards (231,000) (211,000)
Allowance for doubtful accounts (359,000) (317,000)
Restructuring reserve (150,000) (321,000)
Other accrued expenses (599,000) (665,000)
Valuation allowance 396,000 440,000
- ----------------------------------------------------------------------
Total net deferred tax assets $(287,000) $(727,000)
======================================================================
</TABLE>
The components of GZA's deferred income tax provision (benefit) from continuing
operations for the years ended February 28, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 24,000 $ 47,000
Depreciation and amortization 266,000 (390,000)
Net operating loss carryforwards (21,000) (211,000)
Allowance for doubtful accounts (41,000) 181,000
Restructuring reserves 172,000 -
Other accrued expenses 68,000 (88,000)
Valuation allowance (26,000) -
- ----------------------------------------------------------------------
Total deferred income tax provision
(benefit) $ 442,000 $(461,000)
======================================================================
</TABLE>
NOTE 14. RETIREMENT PLAN
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 $661,000, $682,000 and $709,000 for fiscal 1998, 1997 and 1996,
respectively. In fiscal 1998, 1997 and 1996, 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 1998, 1997 and 1996, respectively, 32,445, 58,064 and
50,663 shares of the Company's stock (having a total fair value of approximately
18
<PAGE> 19
$165,000, $171,000 and $177,000 on the date of contribution) were contributed in
addition to cash contributions of $496,000, $511,000 and $532,000, respectively.
NOTE 15. 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 $901,000, $957,000 and $990,000 in fiscal
1998, 1997 and 1996, respectively.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Lease Commitments. The Company leases certain facilities and equipment under the
terms of various noncancellable operating leases, including leases with related
parties described in Note 15. 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 as of
February 28, 1998 are as follows:
<TABLE>
<C> <C>
1999 $1,763,000
2000 1,343,000
2001 1,112,000
2002 235,000
2003 127,000
- ------------------------------------------------------------
Total minimum lease payments $4,580,000
============================================================
</TABLE>
Rent expense charged to operations was $2,137,000, $2,312,000 and $2,224,000 in
fiscal 1998, 1997 and 1996, respectively.
Claims and Legal Proceedings. The Company is a party to several legal actions
claiming damages in connection with environmental remediation, environmental
consulting, and construction projects 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 for which insurance coverage or the contractual provisions
may apply. Claims may potentially be asserted against the Company under federal
and state statutes, common law, contractual indemnification agreements or
otherwise.
19
<PAGE> 20
SUPPLEMENTAL INFORMATION
PRICE RANGE OF COMMON STOCK (UNAUDITED)
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 Dealers,
Inc. National Market System ("NASDAQ"). The following table sets forth the
quarterly range of high and low sale prices per share of the Company's common
stock for fiscal year 1998, as reported by NASDAQ.
<TABLE>
<CAPTION>
Fiscal 1998: High Low
- ----------------------------------------------------------------------------
<S> <C> <C>
First Quarter 3 1/16 2 1/2
Second Quarter 3 3/4 2 1/2
Third Quarter 5 1/4 3 11/16
Fourth Quarter 5 1/8 4 3/4
</TABLE>
As of May 22, 1998, the Company's common stock was held by 328 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 (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended 2/28/98 11/30/97 8/31/97 5/31/97
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
In thousands except per share amounts
Revenues $15,406 $ 15,900 $15,384 $12,856
Net revenues 9,011 9,686 9,565 9,589
Income from continuing operations,
before other income and tax 157 747 398 508
Net income 221 503 280 366
Basic earnings per share $ .07 $ .12 $ .07 $ .09
Diluted earnings per share $ .06 $ .12 $ .07 $ .09
</TABLE>
<TABLE>
<CAPTION>
Three months ended 2/28/97 11/30/96 8/31/96 5/31/96
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
In thousands except per share amounts
Revenues $15,453 $ 15,376 $15,042 $13,469
Net revenues 9,527 9,034 9,691 9,959
Income (loss) from continuing operations,
before other income and tax 676 (720) 275 334
Net income (loss) 615 (491) 179 226
Basic and diluted earnings (loss) per share $ .15 $ (.12) $ .04 $ .06
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C>
CORPORATE INFORMATION
Directors and Executive Officers
Donald T. Goldberg Joseph D. Guertin William E. Hadge
Chairman of the Board of Directors Director Director
Senior Vice President Senior Vice President
Andrew P. Pajak GZA GeoEnvironmental, Inc. GZA GeoEnvironmental, Inc.
Director
President and Timothy W. Devitt Lewis Mandell
Chief Executive Officer Director Director
Joseph P. Hehir Thomas W. Philbin
Chief Financial Officer Director
Executive Vice President
Annual Meeting
M. Joseph Celi The Annual Meeting of Stockholders will be held John E. Ayres
Director at 10:00 a.m. on July 14, 1998 at the Sheraton Executive Vice President
Executive Vice President, Needham Hotel, 100 Cabot Street, Needham,
GZA GeoEnvironmental, Inc. Massachusetts Richard M. Simon
Secretary
Stockholders Reports Executive Vice President
STOCKHOLDER INFORMATION A copy of the Company's Annual Report Form 10-K,
as filed with the Securities and Exchange
Independent Accountants Commission, may be obtained without charge by Operations
Coopers & Lybrand L.L.P. writing to Investor Relations, GZA The Company conducts all its
Boston, Massachusetts GeoEnvironmental Technologies, Inc., 320 Needham operations through its wholly owned
Street, Newton Upper Falls, Massachusetts 02464 subsidiaries GZA GeoEnvironmental,
Counsel Inc. (GZA) and GZA Remediation, Inc.
Foley, Hoag & Eliot LLP (GZAR); and through GZA's wholly
Boston, Massachusetts Corporate Headquarters owned subsidiary GZA Drilling, Inc.;
GZA GeoEnvironmental through the Company's affiliate
Registrar and Transfer Agent Technologies, Inc. Aquaterra Environmental Consultants
American Stock Transfer & Trust Company 320 Needham Street Limited, a joint venture of the
40 Wall Street Newton Upper Falls Company and Carl Bro Group (UK) Ltd.;
New York, New York 10005 Massachusetts 02464 and through the Company's affiliate
Tel 212/936-5100 Tel 617/969-0050 Goldberg-Zoino Associates of New
Fax 617/969-0715 York, P.C. (doing business as GZA
GeoEnvironmental of New York), a New
Common Stock Listing The common stock York professional service corporation
of GZA GeoEnvironmental Technologies, wholly owned by officers, directors,
Inc. is traded over the counter in and stockholders of the Company. The
the NASDAQ national market quotation Company was incorporated in Delaware
system under the symbol GZEA. on May 5, 1989.
</TABLE>
21
<PAGE> 1
Exhibit 22.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
Name of Subsidiary 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, File
No. 33-75688 and File No. 333-24423) of our report dated May 5, 1998 on our
audits of the consolidated financial statements and financial statement schedule
of GZA GeoEnvironmental Technologies, Inc. as of February 28, 1998 and
February 28, 1997, and for the three years in the period ended February 28,
1998, which report is included and incorporated by reference in the Company's
1998 Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF THE REGISTRANT AT FEBRUARY 28, 1998 AND
FEBRUARY 28, 1997 AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT
FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 1998 AND FEBRUARY 28, 1997 AND
FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENT IN THE FORM 10-K FOR THE TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 4,594,000
<SECURITIES> 3,519,000
<RECEIVABLES> 11,423,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,959,000
<PP&E> 5,344,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,221,000
<CURRENT-LIABILITIES> 10,593,000
<BONDS> 0
0
0
<COMMON> 40,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,221,000
<SALES> 0
<TOTAL-REVENUES> 59,546,000
<CGS> 0
<TOTAL-COSTS> 57,736,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,247,000
<INCOME-TAX> 877,000
<INCOME-CONTINUING> 1,370,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,370,000
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE REGISTRANT AT FEBRUARY 29, 1996 AND FEBRUARY
28, 1995 AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE REGISTRANT FOR THE
TWELVE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995 AND 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS IN THE FORM 10-K FOR
THE TWELVE MONTH PERIOD ENDED FEBRUARY 29, 1996.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 3,318,000
<SECURITIES> 2,752,000
<RECEIVABLES> 15,655,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,731,000
<PP&E> 5,690,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,614,000
<CURRENT-LIABILITIES> 12,556,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,000
<TOTAL-LIABILITY-AND-EQUITY> 37,614,000
<SALES> 0
<TOTAL-REVENUES> 69,825,000
<CGS> 0
<TOTAL-COSTS> 68,565,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310,000
<INCOME-PRETAX> 1,283,000
<INCOME-TAX> 485,000
<INCOME-CONTINUING> 798,000
<DISCONTINUED> (99,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 699,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF THE REGISTRANT AT FEBRUARY 28, 1997 AND
FEBRUARY 29, 1996 AND CONSOLIDATED STATEMENT 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>
<RESTATED>
<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> 58,775,000
<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> .13
</TABLE>
