EA cuts 125, 18% of U.S. force Environmental firm blames slower sales and rising losses

March 26, 1997|By Mark Guidera | Mark Guidera,SUN STAFF

EA Engineering Science & Technology Inc., a Hunt Valley-based environmental consulting firm, yesterday laid off 125 employees nationwide -- 18 percent of its staff -- as a result of a slowdown in sales and a dramatic increase in losses during the past two quarters.

"This is a sad day and a great disappointment," said Donald A. Deieso, the company's president and chief executive officer, who started at EA Engineering March 1.

"But this is unfortunately one of those measures you have to take for the enterprise to succeed and grow."

Employees let go ranged from entry-level workers to senior-level executives.

Also, the new chief said, no bonuses will paid to senior executives for the past quarter.

"I was careful and determined that the reductions would affect all levels of the company," Deieso said.

"I hope it is a clear signal that we are going to be purposeful in restoring the company to profitability and moving to the next stage of growth."

Of the workers let go, 49 were employed either in the company's Hunt Valley headquarters or in a nearby operation in the Loveton Business Center.

Yesterday's layoffs were the second by the company in two months.

In February, the company laid off 25 employees nationwide. Deieso said he did not expect further job cuts this year.

EA Engineering plans to take a $3 million charge in the third quarter to pay for severance and other expenses associated with the layoffs, as well as costs to reduce some office space around the country.

But Deieso said he estimates the layoffs should save the company about $8 million annually in salaries, medical benefits and other employee costs.

Deieso, formerly with EA Engineering competitor Metcalf & Eddy Inc., attributed the company's slowed revenues and increased losses during the past two quarters to an industrywide slowdown.

The sluggish business atmosphere, he said, is the result of a decrease in contracts from the federal and state governments for environmental remediation work. Such contracts have been a significant source of revenue for EA Engineering for many years.

Less enforcement

Deieso said the company also has been hurt by a decrease in federal environmental enforcement actions and by the fact that much of the major environmental remediation work in the United States is completed or nearing completion.

The company reported net revenues of $11.5 million for the quarter that ended Feb. 28, a 20 percent decrease from the $14.5 million reported during the same period last year.

Meanwhile, EA Engineering's loss in the most recent quarter nearly tripled to $2.4 million from $831,000 reported during the same period last year.

For the six months that ended Feb. 28, the company reported net revenues of $26.5 million, down 17 percent from the $31.9 million during the same period last year.

Losses in the six-month period jumped eight times, to $2.3 million from $295,000 reported last year.

Deieso said he is taking several other measures to restore the company to profitability. The last time EA Engineering reported a profit was in August 1995, when it booked an annual profit of $2.2 million.

The new CEO said he plans to focus the company on seeking more work overseas, particularly Southeast Asia, Latin America and Eastern Europe.

"The international market for environmental consulting is very ebullient right now," Deieso said. "Many of these developing countries are just now getting their environmental infrastructures in place.

"The company needs to position itself quickly and smartly for this market."

Deieso said he also plans to further diversify the company by targeting work in the U.S. water and waste-water treatment industry, where some treatment systems are in need of upgrading and replacement.

He also plans to restructure the company's 22 offices nationwide under a regional branch office system. Twelve branch managers will be named and will report directly to the president rather than through several layers of senior managers, Deieso said.

"I look at these branches as powerful units that we'll invest a lot of time in supporting," he said. "It's from these branches where our growth will come."

Shares in closely held EA Engineering closed at $1.75 yesterday, up 62.5 cents.

Pub Date: 3/26/97

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