10-Q 1 b37082gze10-q.txt GZA GEOENVIROMENTAL TECHNOLOGIES 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 .... August 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 September 30, 2000 4,244,644 --------- 1 2 GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE TABLE OF CONTENTS Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements - Consolidated Balance Sheets - August 31, 2000 (unaudited) and February 29, 2000 3 - Consolidated Statements of Operations and Comprehensive Income - (unaudited) Three and Six Months Ended August 31, 2000 and 1999 4 - Consolidated Statements of Cash Flows - (unaudited) Six Months Ended August 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 10 Item 6 Exhibits and Reports on Form 8-K 11 SIGNATURES 12 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

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 AUGUST 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 six months ended August 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 August 31, 2000 increased by approximately $399,000 (3.5%) compared with the corresponding period in the prior fiscal year. The increase reflects a $554,000 (5.1%) increase in demand for services in the Northeast and Great Lakes Regions which were offset by a $154,000 decrease in services as the result of management's decision to close the Atlanta and Dallas offices and discontinue the Information System Division operations. - SALARIES AND RELATED COSTS. Salaries and related costs for the three months ended August 31, 2000 increased by $295,000 (3.7%). The salaries and related costs increase is attributable to a $605,000 (8.2%) increase in annual salary and fringe benefit costs for continuing operations. The increase was offset by approximately $310,000 in decreased salaries and related cost from closed operations. - GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for three months ended August 31, 2000 increased by $61,000 (2.4%) compared with the corresponding period in the prior fiscal year. The increase includes approximately $67,000 in cost attributable to the activities associated with the Board-appointed Special Committee to consider the acquisition of all outstanding shares of GZA by Futureco Environmental, Inc. a privately-held company organized by certain members of GZA's senior management. Additional Special Committee expenses will be incurred in future periods. - In December 2000 the Company plans to relocate and expand its corporate headquarters and its Massachusetts regional office in a new facility in Norwood, Massachusetts, and to relocate its laboratory operations to a new facility in Hopkinton, Massachusetts. The costs of the relocation, most of which are expected to be recorded in the quarter ending February 28, 2001 will include moving expenses of approximately $170,000, and fees of approximately $300,000 for the termination of current leases. In addition, the Company expects to expend approximately $810,000 for leasehold improvements, furniture and fixtures at the two new facilities during the next several months. The Company has executed a seven-year lease for 50,827 square feet of space for its new offices in Norwood, Massachusetts and a five-year lease for approximately 12,000 square feet of space for its new laboratory in Hopkinton, Massachusetts. The Company expects that its total annual expenditure for office rental will increase by approximately $225,000 as a result of the expansion and relocation of its corporate headquarters, its Massachusetts regional office and its laboratory operations. SIX MONTH COMPARISON FOR FISCAL YEARS 2001 AND 2000 - NET REVENUES. The Company's net revenues for the six months ended August 31, 2000 increased by approximately $1,044,000 (4.7%) compared with the corresponding period in the prior fiscal year. The increase reflects a $1,656,000 (8.1%) increase in demand for services in the Northeast and Great Lakes Regions which was offset by a $612,000 decrease in services as the result of management's decision to close the Atlanta and Dallas offices and discontinue the Information Systems Division operations. - SALARIES AND RELATED COSTS. Salaries and related costs for the six months ended August 31, 2000 increased by approximately $565,000 (3.5%) compared with the corresponding period in the prior fiscal year. The increase reflects a $1,287,000 (8.8%) increase in salaries and fringe benefit costs for continuing operations. The increase was offset by a $718,000 decrease in salaries and related cost from closed and discontinued operations. 7 8 - GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the six months ended August 31, 2000 increased by $95,000 (1.8%) compared with the corresponding period in the prior fiscal year. The increase in general and administrative expense is attributable to approximately $135,000 in cost to discontinue GZA's operations of its Dallas Office and approximately $272,000 in costs associated with activities of the Board-appointed Special Committee considering the acquisition of all outstanding shares of GZA by Futureco Environmental, Inc. Additional Special Committee expenses will be incurred 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. LIQUIDITY AND CAPITAL RESOURCES For the six month period ended August 31, 2000, $1,498,000 of net cash was used by operations versus $ 2,725,000 provided by operations for the six month period ended August 31, 1999. The decrease is due to the increase in accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts. Management expects cash flow improvements from operating activities in subsequent quarters. The Company made capital expenditures of approximately $638,000 and $800,000 for the first six months of fiscal 2001 and 2000, respectively. The Company's working capital increased from $18,776,000 at February 29, 2000 to $ 20,170,000 at August 31, 2000. At August 31, 2000, the Company had cash on hand and cash equivalents of $4,880,000 and short-term investments of $3,112,000 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. 8 9 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. 9 10 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. 10 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 2.1 Agreement and Plan of Merger dated as of August 16, 2000 among GZA GeoEnvironmental Technologies, Inc., Future Environmental, Inc., and GeoEnvironmental Acquisitions, Inc. (1) 3.1 Restated Certificate of Incorporation of the Company (2) 3.3 Amended and Restated By-Laws of the Company (3) 27 Financial Data Schedule for the period ended August 31, 2000. (b) REPORTS ON FORM 8-K On August 23, 2000, the Company filed with the Securities and Exchange Commission (the "Commission") a Current Report on Form 8-K which attached, as Exhibit 99 a press release dated August 17, 2000 in which the Company announced that it had executed an Agreement and Plan of Merger with Futureco Environmental, Inc. ("Futureco") and a wholly owned subsidiary of Futureco, pursuant to which Futureco would acquire all the outstanding shares of the Company's common stock that Futureco does not own or have the rights to acquire for cash consideration consisting of $6.40 per share (the "Merger"). On September 19, 2000, the Company filed with the Commission a Rule 13-E Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") with respect to the proposed Merger, and preliminary proxy materials for a special meeting of stockholder (the "Stockholder Meeting") to be held on November 9, 2000 to consider and approve the Merger. On September 23, 2000, the Company announced in a press release that its Board of Directors had postponed the Stockholder Meeting until mid to late December 2000, to accommodate review by the Commission of the preliminary proxy materials and the Schedule 13E-3 filed by the Company with the Commission on September 19, 2000, and to provide sufficient time for stockholder evaluation of the Merger. The Company expects to receive the comments of the Commission staff on the preliminary proxy materials and Schedule 13E-3 on or about October 19, 2000. (1) Incorporated by reference to Appendix A to the Company's Preliminary Proxy Statement filed with the Commission on September 19, 2000. (2) 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. (3) 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. 11 12 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: October 16, 2000 /s/ Joseph P. Hehir ----------------------------------------- JOSEPH P. HEHIR, Chief Financial Officer and Treasurer (Chief Accounting Officer) 12

GZA GEOENVIRONMENTAL TECHNOLOGIES INC 10-Q