10-Q 1 e10-q.txt GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended ....... May 31, 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. --------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-3051642 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 320 Needham Street, Newton Upper Falls, Massachusetts 02464 ----------------------------------------------------------- (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 ---- ----- 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 ----------------- 1 2 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 2 3 PART 1: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements. 3 4 GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME THREE MONTHS ENDED MAY 31, 2000 1999 (UNAUDITED) (UNAUDITED) ----------- ----------- Revenues $17,679,000 $15,533,000 Subcontractor costs and other direct expenses 6,350,000 4,849,000 ----------- ----------- 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 ----------- ----------- Income (loss) from operations, before other income and taxes 255,000 (85,000) ----------- ----------- Other income (expense) Interest income 102,000 63,000 Equity in net income of joint venture -- 12,000 Interest expense -- (6,000) ----------- ----------- Total other income, net 102,000 69,000 ----------- ----------- Income (loss) from operations before provision for income taxes 357,000 (16,000) Provision (benefits) for income taxes 143,000 (7,000) ----------- ----------- Net income (loss) $ 214,000 $ (9,000) Other comprehensive income-change in unrealized losses on securities (3,000) (20,000) ----------- ----------- Comprehensive income (loss) $ 211,000 $ (29,000) =========== =========== Basic earnings (loss) per share: Earnings (loss) per share $ 0.06 $ (0.00) ----------- ----------- Basic weighted average shares 3,676,000 3,612,000 ----------- ----------- Diluted earnings (loss) per share: Earnings (loss) per share $ 0.06 $ (0.00) ----------- ----------- Diluted weighted average shares 3,827,000 3,612,000 ----------- ----------- The accompanying notes are an integral part of these consolidated financial statements. 4 5 GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements 5 6 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. 6 7 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. 7 8 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. 8 9 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. 9 10 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. 10 11 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 ---------------------------------------- JOSEPH P. HEHIR, Chief Financial Officer and Treasurer (Chief Accounting Officer) 11

GZA GEOENVIRONMENTAL TECHNOLOGIES INC 10-Q