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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ....... May 31, 2000.............................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................ to .............................
Commission file number 0-17882
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-3051642
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Needham Street, Newton Upper Falls, Massachusetts 02464
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(Address of principal executive offices) (Zip Code)
(617) 969-0050
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of Shares of Common Stock outstanding at June 30, 2000 4,205,122
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
- Consolidated Balance Sheets - May 31, 2000 (Unaudited) and
February 29, 2000 3
- Consolidated Statements of Operations and Comprehensive
Income - (unaudited) Three Months Ended May 31, 2000 and
1999 4
- Consolidated Statements of Cash Flows - (unaudited) Three
Months Ended May 31, 2000 and 1999 5
- Notes to Consolidated Financial Statements - (unaudited) 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 29,
2000 2000
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ASSETS (UNAUDITED)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,806,000 $ 5,966,000
Available-for-sale securities 3,237,000 3,829,000
Accounts receivable, net 15,747,000 13,924,000
Costs and estimated earnings in excess of billings on
uncompleted contracts, net 5,890,000 5,669,000
Prepaid expenses and other current assets 244,000 215,000
Deferred income taxes 1,663,000 1,399,000
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Total current assets 30,587,000 31,002,000
Property and equipment, net 6,043,000 5,973,000
Investments in real estate 501,000 501,000
Other assets, net 862,000 883,000
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Total assets $37,993,000 $38,359,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 3,415,000 $ 6,516,000
Accrued payroll and expenses 4,682,000 3,958,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 3,310,000 1,539,000
Income taxes payable 221,000 213,000
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Total current liabilities 11,628,000 12,226,000
Deferred income taxes 511,000 516,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized - 1,000,000 shares; issued and
outstanding - none
Common stock, $.01 par value; authorized - 14,000,000 shares; issued and
outstanding (including treasury shares) - 4,203,122 at
May 31, 2000 and 4,134,999 at February 29, 2000 42,000 41,000
Capital in excess of par value 14,917,000 14,892,000
Accumulated other comprehensive (loss) (54,000) (51,000)
Retained earnings 13,391,000 13,177,000
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Subtotal 28,296,000 28,059,000
Less: Common stock held in treasury, at cost (500,000 shares) (2,442,000) (2,442,000)
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Total liabilities and stockholders' equity $37,993,000 $38,359,000
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MAY 31,
2000 1999
(UNAUDITED) (UNAUDITED)
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Revenues $17,679,000 $15,533,000
Subcontractor costs and other direct expenses 6,350,000 4,849,000
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Net revenues 11,329,000 10,684,000
Costs and expenses:
Salaries and related costs 8,299,000 8,028,000
General and administrative expenses 2,775,000 2,741,000
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Income (loss) from operations,
before other income and taxes 255,000 (85,000)
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Other income (expense)
Interest income 102,000 63,000
Equity in net income of joint venture -- 12,000
Interest expense -- (6,000)
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Total other income, net 102,000 69,000
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Income (loss) from operations before
provision for income taxes 357,000 (16,000)
Provision (benefits) for income taxes 143,000 (7,000)
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Net income (loss) $ 214,000 $ (9,000)
Other comprehensive income-change in
unrealized losses on securities (3,000) (20,000)
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Comprehensive income (loss) $ 211,000 $ (29,000)
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Basic earnings (loss) per share:
Earnings (loss) per share $ 0.06 $ (0.00)
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Basic weighted average shares 3,676,000 3,612,000
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Diluted earnings (loss) per share:
Earnings (loss) per share $ 0.06 $ (0.00)
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Diluted weighted average shares 3,827,000 3,612,000
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The accompanying notes are an integral part of these consolidated financial
statements.
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 214,000 $ (9,000)
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 479,000 407,000
Equity in net income of joint venture -- (12,000)
Benefit for deferred income taxes (269,000) (56,000)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net (1,823,000) 195,000
Decrease in costs and estimated earnings
in excess of billings on uncompleted contracts 1,550,000 1,419,000
Increase in prepaid expenses (29,000) (96,000)
Increase in refundable income taxes -- (263,000)
Decrease in accounts payable, trade (3,101,000) (1,723,000)
Increase in accrued payroll and expenses 724,000 552,000
Increase (decrease) in income taxes payable 8,000 (311,000)
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Net cash provided (used) by operating activities (2,247,000) 103,000
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Cash flows from investing activities:
Decrease in available-for-sale securities 589,000 34,000
Acquisition of property and equipment (533,000) (525,000)
Decrease (increase) in other assets 5,000 (36,000)
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Net cash provided (used) by investing activities 61,000 (527,000)
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Cash flows from financing activities:
Borrowings on the line of credit -- 2,150,000
Payment of line of credit -- (2,050,000)
Proceeds from issuance of common stock, net 26,000 172,000
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Net cash provided by financing activities 26,000 272,000
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Net decrease in cash and cash equivalents (2,160,000) (152,000)
Cash and cash equivalents at beginning of year 5,966,000 894,000
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Cash and cash equivalents at end of period $ 3,806,000 $ 742,000
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2000
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
GZA GeoEnvironmental Technologies, Inc. and Affiliate (the "Company")
have been prepared in accordance with generally accepted accounting
principles for interim financial statements and pursuant to the rules
of the Securities and Exchange Commission for Form 10-Q. Certain
information and footnotes required by generally accepted accounting
principles for complete financial statements are omitted. It is the
opinion of management that the accompanying consolidated financial
statements reflect all adjustments (which are normal and recurring)
considered necessary for fair presentation. For further information
refer to the audited financial statements and footnotes included in
the Company's Form 10-K for the fiscal year ended February 29, 2000,
as filed with the Securities and Exchange Commission on May 26, 2000.
Operating results for the three months ended May 31, 2000 are not
necessarily indicative of the results that may be expected for
succeeding periods or for the year ending February 28, 2001.
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
NOTE 2 - CONTINGENCIES
The Company is a party to several legal actions arising in the
normal course of business. Management believes that the outcomes of
legal actions to which it is a party will not, in the aggregate, have
a material adverse effect on the results of operations or financial
condition of the Company.
The Company's services involve risks of significant liability for
environmental and property damage, personal injury, economic loss, and
costs assessed by regulatory agencies. Claims may potentially be
asserted against the Company under federal and state statutes, common
law, contractual indemnification agreements or otherwise.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH COMPARISON FOR FISCAL YEARS 2001 AND 2000
- NET REVENUES. The Company's net revenues for the three months ended May
31, 2000 increased by approximately $ 645,000 (6.0%) compared with the
corresponding period in the prior fiscal year. Increased volume and
services was offset by management's decision to discontinue operations
for our Information Systems Division, lower prices due to competitive
market conditions and the write-off of approximately $110,000 of
unbillable cost in excess of a lump sum site development contract
amount.
- SALARIES AND RELATED COSTS. Salaries and related costs for the three
months ended May 31, 2000 increased by $271,000 (3.4%) compared with
the corresponding period in the prior fiscal year. The increase in
salaries and related costs is attributable primarily to annual salary
increases and fringe benefit expenses. The increase was offset by
approximately $185,000 in lower salaries and related costs due to the
closing of the Atlanta office in the first quarter of last year and
lower Incentive Compensation Plan expense compared to the comparable
period last year.
- GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the three months ended May 31, 2000 increased by
approximately $34,000 (1.2%) compared with the prior year. The increase
in general and administrative expenses is attributable to approximately
$135,000 in estimated cost to discontinue GZA's operation of its Dallas
office and $241,000 in cost associated with activities of the
Board-appointed Special Committee to consider the acquisition of all
the outstanding shares of GZA by Futureco Environmental, Inc., a
privately-held company organized by certain members of GZA's senior
management. The Special Committee is also evaluating other strategic
alternatives that may be available to the Company. Additional Special
Committee expenses will be expended in future periods.
The increase in expenses was offset by a reduction in bad debt
reserves, lower technical equipment cost and a reduction in general and
administrative expenses of $305,000 in fiscal 2001 from closing the
Atlanta office in the first quarter of fiscal 2000.
Management estimates that costs of administration, salary, severance,
stay bonus payments, office lease cost and client contractual
obligations, generated by the Information Services Division, will
exceed net revenues by approximately $120,000 to $355,000 through the
end of fiscal 2001.
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LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended May 31, 2000, $ 2,247,000 of net cash
was used by operations, whereas for the three month period ended May
31, 1999 $103,000 of net cash was provided by operations. The
$2,350,000 decrease in fiscal 2001 is due primarily to the increase in
accounts receivable and costs and estimated earnings in excess of
billings on uncompleted contracts.
The Company made capital expenditures of approximately $533,000 and
$525,000 for the first three months of fiscal 2001 and 2000,
respectively.
The Company's working capital increased from $18,776,000 at February
29, 2000 to $18,959,000 at May 31, 2000.
At May 31, 2000, the Company had cash on hand and cash equivalents of
$3,806,000 and short-term investments of $3,237,000 compared with
$5,966,000 and $3,829,000 respectively, at February 29, 2000. These
investments consist primarily of tax-exempt municipal bonds, taxable
U.S. Treasury Notes and other bonds and commercial paper. The Company
believes that its cash and cash equivalents and future cash generated
from operations will be sufficient to meet its cash requirements for at
least the next twelve months.
FORWARD LOOKING STATEMENTS
This report may contain projections, estimates, and predictions
relating to anticipated financial performance, potential contract
value, pending claims or litigation, business strategy, plans,
acquisitions, or technological developments and other matters. A number
of risks and uncertainties could materially affect these forward
looking statements, and the Company's results of operations. These
risks and uncertainties include, but are not limited to competition,
market pricing pressures, changes in federal, state, and local
legislation and regulations, ability of the Company to execute projects
within contracted cost estimates, current or future claims made against
the Company, ability of the Company to resolve contract and change
order disputes favorably and availability of qualified personnel to
execute contracts and work plans.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is party to several legal proceedings arising in the normal course
of business. Management believes that the outcome of these actions will not,
individually or in the aggregate, have material adverse effects on the financial
condition of the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3.1 Restated Certificate of Incorporation of the Company (1)
3.3 Amended and Restated By-Laws of the Company (2)
27 Financial Data Schedule for the period ended May 31, 2000.
(B) REPORTS ON FORM 8-K
The Company did not file any report on Form 8-K during the three-month
period ended May 31, 2000.
(1) Incorporated by reference to the similarly numbered exhibit included in
the Company's Form S-1 Registration Statement, File No. 33-29369, filed with the
Commission on June 16, 1989.
(2) Incorporated by reference to the similarly numbered exhibit included in
the Company's Annual Report on Form 10-K for the fiscal year ended February 28,
1995, filed with the Commission on June 12, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
Date: July 17, 2000 /s/ Joseph P. Hehir
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JOSEPH P. HEHIR, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
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