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 February 28, 2001 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. From the transition period to ----------- ------------ --------------- Commission File Number 0-15587 EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. --------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 52-0991911 ------------------------------------------- ---------------------- (State or Other Jurisdiction of Incorporation I.R.S. Employer ID Number or Organization) 11019 McCormick Road, Hunt Valley, Maryland 21031 ------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (410) 584-7000 ----------------- 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 [_] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares of the Registrant's Common Stock, $.01 par value, outstanding on April 10, 2000, was 6,006,014. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES INDEX

EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The consolidated financial statements included herein for EA Engineering, Science, and Technology, Inc. and its subsidiaries (the "Company") have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In management's opinion, the interim financial data presented include all adjustments considered necessary for a fair presentation. Certain information and footnote disclosures, normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Operating results and cash flows for the interim period are not necessarily indicative of the results that may be expected for the full fiscal year. Accordingly, these consolidated financial statements should be read in conjunction with the Company's August 31, 2000 consolidated financial statements and notes thereto included in the Company's 2000 Annual Report on Form 10-K filed November 15, 2000. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS

The accompanying notes are an integral part of these balance sheets. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these balance sheets. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these statements. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these statements. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying consolidated financial statements present the accounts of EA Engineering, Science, and Technology, Inc. (EA); its wholly-owned subsidiaries, EA International, Inc. and EA Financial, Inc. (EA Financial); and the wholly-owned subsidiaries of EA Financial, EA Global, Inc. and EA de Mexico, S.A. de C.V. The entities are collectively referred to herein as the "Company." All significant intercompany transactions have been eliminated in consolidation. Reclassifications - Certain prior year balances have been reclassified to conform to current year presentation. Note 2. EMPLOYEE STOCK PURCHASE PLAN The Company maintains an Employee Stock Purchase Plan (the "Plan") to provide eligible employees with the opportunity to purchase shares of the Company's Common Stock through voluntary payroll deductions. Under the Plan, eligible employees may purchase shares through monthly payroll deductions at 90% of current market value at the time of purchase. The Company pays all administrative expenses related to employee purchases. During the quarter and six months ended February 28, 2001, 9,311 and 19,122 shares, respectively, were purchased under this Plan. A total of 93,826 shares remain authorized for distribution under the Plan as of February 28, 2001. Note 3. STOCK PURCHASE On November 2, 1999, the Company announced that its Board of Directors authorized management to purchase up to 500,000 shares of its common stock. During the three and six month periods ended February 28, 2001, the Company purchased 54,900 and 105,900 shares, respectively, of common stock under this plan. The Company has purchased these shares, at cost, which are presented as Treasury Stock in the consolidated balance sheet. On December 26, 2000, the Company made the final purchase under this plan, resulting in a total repurchase of shares in the amount of 499,100. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES ITEM 2. Management's Discussion and Analysis of Financial Condition And Results of Operations General The Company's results of operations are significantly affected by the timing of the award of contracts, the timing of performance of contracts, and the extent to which the Company's employees are performing billable tasks as opposed to engaging in preparing contract proposals and other required non-billable activities. Results of operations may also be affected to the extent that the Company chooses not to reduce its professional staff during a period of reduced demand for its services. Due to these factors, quarterly results of operations are not necessarily indicative of the results of operations for longer periods. The Company, in the course of providing its services, routinely subcontracts such services as drilling, certain laboratory analyses, and other specialized services. In addition, the use of teaming partners for the performance of services similar to those of the Company, is included in subcontracts. In accordance with industry practice and contract terms that generally provide for the recovery of overhead costs, these costs are passed directly through to clients and are included in total revenue. Because subcontractor costs and direct charges can change significantly from project to project, the change in total revenue is not necessarily a true indication of business trends. Accordingly, the Company considers net revenue, which is total revenue less subcontractor and other direct project costs, as its primary measure of revenue. On September 18, 2000, the Company announced that it's Board of Directors had retained investment bankers Legg Mason Wood Walker, Inc. and TechKNOWLEDGEy Strategic Group to explore strategic alternatives that may be available to the Company to maximize shareholder value, including but not limited to, the sale of the Company or business combination with another company. The Company continues to explore its strategic alternatives. RESULTS OF OPERATIONS Three Months Ended February 28, 2001 versus Three Months Ended February 29, 2000 Net revenue for the three months ended February 28, 2001 was $8,775,500, a decrease of $3,400, compared to $8,778,900 for the same period in the prior fiscal year. Net revenue remained flat as certain contracts were delayed in 2001, principally in the South Central and West regions. Direct salaries and other operating costs for the three months ended February 28, 2001 increased 4.3% to $7,110,100 or 81.0% of net revenue from $6,817,600 or 77.7% for the three-month period ended February 29, 2000. This increase is primarily attributable to regional spot bonuses given to specific key technical employees and a general cost-of-living salary adjustment. Sales, general and administrative costs for the three months ended February 28, 2001 decreased by 10.3% to $1,625,300 or 18.5% of net revenue, from $1,812,100 or 20.6% of net revenue, for the three-month period ended February 29, 2000. This decrease is the direct result of lower Corporate general and administrative costs due to a 16% decrease in the Corporate headcount, as well as a reduction in office rent expense. The benefit from income taxes was $17,000 for the three months ended February 28, 2001 compared to a provision from income taxes of $38,200 in the second quarter of fiscal 2000. This represents an effective tax rate of 40% in both quarters. As a result of the above factors, the Company had a net loss of $25,600, or 0.3% of net revenue, for the second quarter ended February 28, 2001 compared to net income of $57,400, or 0.7%, in the second quarter of fiscal 2000. Six Months Ended February 28, 2001 versus Six Months Ended February 29, 2000 Net revenue for the six months ended February 28, 2001 was $17,268,600, a decrease of 1.2%, compared to $17,481,000 for the same period in the prior fiscal year. Net revenue remained flat as certain contracts were delayed in 2001, principally in the South Central and West regions. Direct salaries and other operating costs increased 2.6% to $13,796,200 or 79.9% of net revenue from $13,452,800, or 77.0% of net revenue for the six-month periods ended February 28, 2001 and February 29, 2000, respectively. This increase is primarily attributable to regional spot bonuses given to specific key technical employees and a general cost-of-living salary adjustment. Sales, general and administrative costs decreased by 8.1% to $3,171,100, or 18.4% of net revenue, from $3,451,100 or 19.7% of net revenue, for the six-month periods ended February 28, 2001 and February 29, 2000, respectively. This decrease is a direct result of lower Corporate general and administrative costs due to a 16% decrease in the Corporate headcount, as well as a reduction in office rent expense. The provision for income taxes was $52,000 and $191,000 for the six months ended February 28, 2001 and February 29, 2000, respectively. This represents an effective tax rate of 40% in both periods. As a result of the above factors, the Company had net income of $77,700 and net income of $285,700, or 0.5% and 1.6% of net revenue, for the six months ended February 28, 2001 and February 29, 2000, respectively. Liquidity and Capital Resources Cash and cash equivalents decreased by $171,300 for the six months ended February 28, 2001. The decrease was primarily due to the purchase of equipment of $118,600, purchase of treasury stock of $123,300, and cash used in operations of $203,300, attributable primarily to a decrease in billings in excess of cost and estimated earnings on uncompleted contracts, offset by borrowings under the line of credit. The Company's capital expenditures, consisting primarily of purchases of equipment, were approximately $118,600 for the six months ended February 28, 2001. The Company anticipates the level of capital expenditures for the remainder of fiscal year 2001 to remain fairly consistent with the level in the first six months ended February 28, 2001 and to be financed by cash generated from operations. At February 28, 2001, the Company had outstanding long-term debt of $3,766,100. This represents a net increase of $280,000 from the $3,486,100 balance at August 31, 2000. The Company's existing funds, cash from operations, and the available portion of its $7,000,000 revolving line and $1,500,000 equipment line of credit arrangements are expected to be sufficient to meet the Company's present and immediately foreseeable cash needs.* The Company also has access to certain capital equipment financing arrangements through various equipment suppliers. Under the revolving line of credit, the Company is required to comply with covenants, which require certain minimum ratios including debt service coverage, tangible net worth, and liabilities to tangible net worth, and restrict the amount of annual capital expenditures. During the quarter ended February 28, 2001, the Company was either in compliance or recevied an amendement on certain covenants related to these arrangements. While the Company believes that there is sufficient market demand to absorb the additional contracting capacity resulting from its various indefinite delivery/indefinite quantity contracts, there can be no assurance that this demand will, in fact, materialize.* Although the Company has the ability to reduce its professional staff in periods of reduced demand, it may choose not to make full reductions in such periods, with resulting adverse effects on operations. Forward-Looking Statements The foregoing contains "forward-looking information" within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by an asterisk (*) or by such forward-looking terminology as "may," "will," "believe," "anticipate," "expect," or similar words or variations thereof. Such forward-looking statements involve significant risks and uncertainties, including, among other things, risks associated with (1) substantial reliance on government contracts, public budgetary restrictions and uncertainties, discrepancies between awarded contract amounts and actual revenues, and cancellation of contracts at the option of the government, (2) timing and award of contracts, (3) timing and performance of contracts, and (4) successful bidding of government and non-government contracts in a very competitive environment. IN EACH CASE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS. Important factors that the Company believes may cause actual results to differ materially from such forward-looking statements are discussed throughout this Report and in the Company's other filings with the Securities and Exchange Commission. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes indicate that any such results or events (expressed or implied) will not be realized. EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 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. EA Engineering, Science, and Technology, Inc. & Subsidiaries -------------------------------- (Registrant) April 10, 2001 By: /s/ Loren D. Jensen -------------- -------------------------------- (Signature) Loren D. Jensen -------------------------------- Chairman of the Board, President and CEO -------------------------------- (Title) April 10, 2001 By: /s/ Barbara L. Posner -------------- -------------------------------- (Signature) Barbara L. Posner -------------------------------- Chief Operating Officer and Chief Financial Officer -------------------------------- (Title)

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