Sells its Analytical Laboratory, Concentrates on Consulting Business

    Second Quarter Highlights:
    --  Corporate restructuring aligns expenses with revenues
    --  Executes a letter of intent to sell EA Laboratories to a national
         laboratory firm
    --  Concentrates on expanding consulting services
    --  Right-sizing results in $3.5 million of annualized savings
    --  Decentralizing of sales/marketing responsibility within branch
         operations
    --  Loren Jensen, Company chairman and founder, reassumes role of CEO
    --  Barbara Posner appointed to dual role of COO and CFO

    BALTIMORE, April 8 /PRNewswire/ -- EA Engineering, Science and Technology,
Inc. (Nasdaq: EACO), an international consulting firm specializing in energy,
the environment, and health and safety, today reported financial results for
the second fiscal quarter ended February 28, 1999.  Excluding the impact of a
one time restructuring charge and the write-off of prior period assets, the
Company reported a net loss of $0.5 million for the second quarter, or $0.08
per diluted share.  The restructuring charges were $2.1 million pre-tax, or
$0.20 per diluted share, reflecting the Company's decision to restructure and
downsize certain functions of the Corporate staff.  The net loss of $0.05 per
diluted share reflects the write-off of certain non-collectible prior period
revenue.  Including these adjustments, EA reported a net loss of
$2.1 million or $0.33 per diluted share for the second quarter of 1999.  This
compares to net income of $0.1 million for the second quarter of 1998, or
$0.02 per diluted share.
    For the first six months of fiscal 1999, the Company reported a net loss
of $0.5 million or $0.08 per diluted share, excluding the impact of the
restructuring charge and the write-off of prior period assets.  Including
these adjustments, the net loss for the first six months of fiscal 1999
totaled $2.1 million or $0.33 per diluted share.  This compares to net income
of $0.4 million for the first six months of fiscal 1998, or $0.06 per diluted
share.
    Net revenues for the second quarter were $8.6 million, compared to
$10.6 million for the comparable period in fiscal 1998.  Net revenues for the
first six months of fiscal 1999 were $17.9 million, compared to $21.3 million
for the comparable period in fiscal 1998.  The revenue decline reflects the
Company's completion of several large contracts with the federal government,
only partially offset by planned new awards in the industrial and municipal
sectors.

    Management Comments
    Commenting on second quarter results, Loren D. Jensen, EA's Chief
Executive Officer said, "In the second quarter, we took a hard look at our
organization to determine if the present structure was helping us to achieve
our Corporate goal of improved, sustained profitability.  Although prior
management instilled some important cultural changes within the organization,
the centralization of sales and marketing at the Corporate level did not
generate the expected results.  Moreover, the overhead structure that was
developed was extremely costly to maintain.  In fact, revenues have been
steadily declining, as multi-year government contracts have reached
completion, without being replaced by new contracts.  As a result, expenses
remained steady in the face of declining revenues, causing earnings erosion
and morale problems within the organization."
    "We therefore decided to rightsize the Company to align expenses more
directly with revenues.  This included restructuring the organization at a
very high level, removing a number of highly compensated executives.  These
actions will save the company approximately $3.5 million on an annualized
basis, without effecting top line growth."
    Dr. Jensen continued, "I want to emphasize that our strategic direction
remains in tact.  We are still on a course to transition the Company to a more
consultative organization, with an emphasis on providing information
technology and management consulting in the areas of energy, the environment
and health and safety.  We are very committed to this goal, and believe this
is possible, given that EA has a new, leaner organization, and a culture that
has already accepted this change.  EA's history of successful integration of
innovative science and environmental engineering gives us optimism in our
future, in the face of a changing industry."
    Barbara Posner, the Company's Chief Operating Officer and Chief Financial
Officer, added, "Historically, EA has always been profitable at the branch
level.  With the new streamlined organizational structure, we expect favorable
performance at the consolidated level going forward.  The restructuring
eliminated an ongoing burden of fixed overhead, which will translate into an
after tax savings of $0.03 per share per month going forward.  By right-sizing
the company, we fully expect the second half of the fiscal year to be
profitable."
    "At the same time, we are very encouraged by the number and variety of new
contracts we have received during the quarter, from both state and local
government agencies as well as from the private sector.  These run the gamut
from add-on contracts from major corporate clients who have the capability to
fund multi-year projects, to smaller private sector projects involving our
information technology expertise."

    Sale of EA Laboratories
    EA also announced that it has executed a letter of intent to sell EA
Laboratories division to Severn Trent Laboratories, Inc. (STL), a Delaware
Corporation, that owns and operates several other laboratories.  EA
Laboratories is a Maryland-based facility with annual revenues of
$6.4 million, approximately 65 employees, and represents a state-of-the-art
laboratory certified in all fifty states, by the EPA and certain other units
of the Defense Department.  EA's analytical capabilities will enhance STL's
growing roster of client services.  EA Laboratories presently services the
internal lab needs of EA as well as other industry organizations.
    Commenting on the sale, Ms. Posner remarked, "We are very pleased to have
reached an agreement with an industry leader who recognizes the intrinsic
value of this high quality facility, and who is capable of providing both the
leadership and business capacity to manage this laboratory organization.  The
sale of this facility will be reflected positively in EA's third quarter
results and is consistent with the return to our historical consulting
business.  Going forward, EA will partner with STL in an arrangement that will
benefit both organizations.  Of note, EA will continue to own and operate its
toxicity testing facilities, that are an integral part of its ecotox
business."
    The transaction is expected to close by April 30, 1999, subject to various
conditions, including receipt of all necessary governmental and third party
consents.  There can be no assurance that the transaction will be consummated.
    EA Engineering, Science, and Technology, Inc., is a publicly held
international management consulting firm specializing in energy, the
environment, and health and safety.  Through its network of more than 20
offices, EA provides scientific, engineering, economic, analytical, and
management solutions to corporate, utility, municipal, and federal government
clients.
    Certain of the statements contained in this news release are
forward-looking statements that involve risks and uncertainties, such as those
related to the Company's contracts and other business risks, including general
economic conditions, the effects of the Company's restructuring, and
industry-wide market factors, as detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
    The Company's results of operations are also affected by significant
competition in the industry, including a very competitive requirement for
successful bidding and solicitation of contracts.  As such, operating results
for the reporting period are not necessarily indicative of the results that
may be expected for any subsequent periods.

        EA Engineering, Science, and Technology, Inc. and Subsidiaries
                        Consolidated Operating Results

                         For the Second Quarter          For the Six Months
                             ended Feb. 28,               ended Feb. 28,
                             1999         1998        1999           1998

    Total revenue       12,433,900    14,418,100   25,981,900    30,611,400
    Less: Subcontractor
      costs              2,065,700     2,597,300    4,341,000     6,085,900
    Less: Other direct
      project costs      1,785,300     1,200,900    3,737,700     3,184,300

    Net Revenue          8,582,900    10,619,900   17,903,200    21,341,200

    Costs and operating
      expenses:
    Direct salaries
      and other
      operating          7,782,900     7,952,900   14,973,200    15,900,600
    Sales, general and
      administrative     2,155,100     2,375,300    4,194,400     4,676,500
    Restructuring        2,132,600             0    2,132,600             0
    Total costs and
      operating
      expenses          12,070,600    10,328,200   21,300,200    20,577,100

    Income from
      operations        (3,487,700)      291,700   (3,397,000)      764,100

    Other income and
      expense:
    Interest income         32,700        31,800       48,300        47,300
    Interest expense       (78,700)      (70,000)    (127,200)     (135,400)
    Other income
      and expense, net     (46,000)      (38,200)     (78,900)      (88,100)

    Income before
      income taxes      (3,533,700)      253,500   (3,475,900)      676,000

    Provision for
      income taxes      (1,421,200)      132,200   (1,398,100)      270,400

    Net income          (2,112,500)      121,300   (2,077,800)      405,600

    Basic earnings
      per share             ($0.33)        $0.02       ($0.33)        $0.07
    Diluted earnings
      per share             ($0.33)        $0.02       ($0.33)        $0.06

    Weighted average
      shares O/S         6,306,200     6,241,400    6,299,200     6,237,400
    Diluted weighted
      shares O/S         6,306,200     6,300,200    6,299,200     6,257,400

Link to this page: