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 September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number
1-9812
TENERA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3213541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Bush Street, Suite 850, San Francisco, California 94104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 445-3200
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
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 .
--------- ----------
The number of shares outstanding on September 30, 2002, was 9,984,259.
TABLE OF CONTENTS
PAGE
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) ............................................. 1
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ..... 14
Item 3. Quantitative and Qualitative Disclosures of Market Risk.................................... 18
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ......................................................................... *
Item 2. Changes in Securities ..................................................................... *
Item 3. Defaults Upon Senior Securities ........................................................... *
Item 4. Submission of Matters to a Vote of Security Holders ....................................... *
Item 5. Other Information ......................................................................... *
Item 6. Exhibits and Reports on Form 8-K .......................................................... 19
______________________________
* None.
i
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
TENERA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- ------------------------------
2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------
Revenue .................................. $ 3,182 $ 4,441 $10,803 $15,615
Direct Costs ............................. 2,938 3,549 9,872 12,185
General and Administrative Expenses ...... 1,449 1,719 4,693 5,975
Impairment Loss .......................... 350 -- 350 --
Other Expense............................. -- -- 2 --
------------ ------------- ------------ -------------
Operating Loss ......................... (1,555) (827) (4,114) (2,545)
Interest (Expense) Income, Net ........... (26) (18) (65) 16
------------ ------------- ------------ -------------
Net Loss Before
Income Tax Expense (Benefit)............ (1,581) (845) (4,179) (2,529)
Income Tax Provision (Benefit) ........... 3 (245) (156) (734)
------------ ------------- ------------ -------------
Net Loss ................................. $ (1,584) $ (600) $ (4,023) $ (1,795)
============ ============= ============ =============
Net Loss per Share-- Basic ............... $ (0.16) $ (0.06) $ (0.40) $ (0.18)
============ ============= ============ =============
Net Loss per Share-- Diluted ............. $ (0.16) $ (0.06) $ (0.40) $ (0.18)
============ ============= ============ =============
Weighted Average
Number of Shares Outstanding-- Basic...... 9,984 9,984 9,984 9,984
============ ============= ============ =============
Weighted Average
Number of Shares Outstanding-- Diluted.... 9,984 9,984 9,984 9,984
============ ============= ============ =============
------------------------------------------------------------------------------------------------------------------
See accompanying notes.
1
TENERA, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
----------------------------------------------------------------------------------------------------------------
September 30, December 31,
2002 2001
----------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 1,300 $ 1,286
Trade receivables, less allowance of $539 (2001 - $547)
Billed ................................................................ 925 1,533
Unbilled .............................................................. 984 1,259
Income tax receivable ................................................... -- 884
Other current assets .................................................... 329 238
------------- ------------
Total Current Assets ................................................ 3,538 5,200
Property and Equipment, Net ............................................... 311 546
Other Assets .............................................................. 635 1,232
------------- ------------
Total Assets ..................................................... $ 4,484 $ 6,978
============= ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)EQUITY
Current Liabilities
Accounts payable ........................................................ $ 1,039 $ 1,136
Accrued compensation and related expenses ............................... 1,725 1,751
Deferred revenue ........................................................ 288 226
Convertible debt and accrued interest ................................... 1,575 --
------------- ------------
Total Current Liabilities ........................................... 4,627 3,113
Commitments and Contingencies
Stockholders' (Deficit)Equity
Common Stock, $0.01 par value, 25,000,000 authorized, 10,417,345 issued . 104 104
Paid in capital, in excess of par ....................................... 5,692 5,677
Accumulated deficit...................................................... (5,446) (1,423)
Treasury stock-- 433,086 shares (2001 - 433,086 shares).................. (493) (493)
------------- ------------
Total Stockholders' (Deficit)Equity ............................... (143) 3,865
------------- ------------
Total Liabilities and Stockholders' (Deficit)Equity .............. $ 4,484 $ 6,978
============= ============
----------------------------------------------------------------------------------------------------------------
See accompanying notes.
2
TENERA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)EQUITY
(Unaudited)
(In thousands)
-------------------------------------------------------------------------------------------------------------
Common Stock Paid-In
Capital in Accumulated Treasury
------------------------ Excess Deficit Stock Total
of Par
Shares Amount
-------------------------------------------------------------------------------------------------------------
December 31, 2001 ...... 9,984 $ 104 $ 5,677 $ (1,423) $ (493) $ 3,865
Net Loss ............... -- -- -- (1,140) -- (1,140)
----------- ------------ ------------ ----------------- ----------- -------------
March 31, 2002 ......... 9,984 $ 104 $ 5,677 $ (2,563) $ (493) $ 2,725
Fair Value of Stock
Compensation to Consultant -- -- 15 -- -- 15
Net Loss ............... -- -- -- (1,299) -- (1,299)
----------- ------------ ------------ ----------------- ----------- -------------
June 30, 2002 .......... 9,984 $ 104 $ 5,692 $ (3,862) $ (493) $ 1,441
Fair Value of Stock
Compensation to Consultant -- -- -- -- -- --
----------- ------------ ------------ ----------------- ----------- -------------
Net Loss ............... -- -- -- (1,584) -- (1,584)
----------- ------------ ------------ ----------------- ----------- -------------
September 30, 2002 ..... 9,984 $ 104 $ 5,692 $ (5,4 46) $ (493) $ (143)
=========== ============ ============ ================= =========== =============
-------------------------------------------------------------------------------------------------------------
See accompanying notes.
3
TENERA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
----------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
2002 2001
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................................................ $ (4,023) $ (1,795)
Adjustments to reconcile net losses to cash provided (used) by operating
activities:
Depreciation and amortization.......................................... 669 538
Impairment Loss........................................................ 350 --
Net loss on disposal of assets ........................................ 2 --
Stock compensation to consultant ...................................... 15 --
Changes in assets and liabilities:
Trade receivables, net of allowance ................................. 883 2,093
Income tax receivable ............................................... 884 --
Other current assets ................................................ (156) (491)
Other assets ........................................................ (104) (675)
Accounts payable .................................................... (97) (1,207)
Accrued compensation and related expenses ........................... (26) 67
Deferred revenue .................................................... 62 (2)
Accrued interest expense ............................................ 75 --
------------- ------------
Net Cash Used By Operating Activities ............................. (1,466) (1,472)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ................................... (21) (146)
Proceeds from sale of assets ............................................ 1 --
------------- ------------
Net Cash Used in Investing Activities ............................. (20) (146)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of convertible debentures.......................................... 1,500 --
Issuance of equity in subsidiary ........................................ -- 2
------------- ------------
Net Cash Provided by Financing Activities ........................ 1,500 2
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 14 (1,616)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 1,286 2,487
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 1,300 $ 871
============= ============
----------------------------------------------------------------------------------------------------------------
See accompanying notes.
4
TENERA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
(Unaudited)
Note 1. Organization
TENERA, Inc. (including its subsidiaries, "TENERA", or the "Company")
provides a broad range of professional and technical services, and web-based
e-Learning solutions. The Company's professional and technical services are
designed to solve complex management, engineering, environmental, health and
safety challenges associated with the management of federal government
properties, energy assets, and petrochemical and manufacturing concerns.
TENERA's web-based e-Learning products and services, provided through the
Company's GoTrain Corp. subsidiary ("GoTrain"), are designed to provide a suite
of on-line, interactive, environmental, safety and health ("ES&H")compliance and
regulatory-driven training applications for use by clients' employees.
The Company is principally organized into two operating segments:
Professional and Technical Services and e-Learning (see Note 6 to Consolidated
Financial Statements).
Note 2. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying consolidated interim financial
statements include the accounts of the Company and its subsidiaries and are
unaudited. All intercompany accounts and transactions have been eliminated. In
the opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position at September 30,
2002, and the results of operations and cash flows for the three and nine month
periods ended September 30, 2002 and 2001, have been made. For further
information, refer to the financial statements and notes thereto contained in
TENERA, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001,
filed with the Securities and Exchange Commission ("SEC").
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
these estimates.
Cash and Cash Equivalents. As of September 30, 2002, the Company's cash
and cash equivalents included money market accounts and commercial paper issued
by companies with strong credit ratings. Cash and cash equivalents at December
31, 2001 consist of deposited cash and money market accounts at a banking
institution. Cash equivalents are carried at cost, which approximates fair
value. The Company includes in cash and cash equivalents, all short-term, highly
liquid investments, which mature within three months of acquisition.
Concentrations of Credit Risk and Credit Risk Evaluations. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and accounts receivable.
Cash and cash equivalents consist principally of money market accounts. Cash and
cash equivalents are held with a domestic financial institution with high credit
standing. The Company has not experienced any significant losses on its cash and
cash equivalents. The Company conducts business with companies in various
industries primarily in the United States, and provides services directly and
indirectly for federal government agencies. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral.
Allowances are maintained for potential credit issues, and such losses to date
have been within management's expectations. At September 30, 2002, three clients
accounted for 33%, 17%, and 11% of the Company's trade receivables. At December
31, 2001, three clients accounted for 42%, 13%, and 10% of the Company's trade
receivables. During the first nine months of 2002 and 2001, one client accounted
for 66% and 73%, respectively, of total Company revenue. All the above
concentrations relate to Professional and Technical Services Segment clients.
5
Property and Equipment. Property and equipment are stated at cost
($3,367,000 and $3,411,000 at September 30, 2002 and 2001, respectively), net of
accumulated depreciation ($3,056,000 and $2,781,000 at September 30, 2002 and
2001, respectively). Depreciation is calculated using the straight-line method
over the estimated useful lives, which range from three to five years.
Other Assets and Impairment. Included in this asset category are the costs of
internal-use e-Learning operating system software, both acquired and developed
by the Company, and certain costs related to the development of the Company's
e-Learning training courses used in its internet-based application service
provider business. These costs have been capitalized in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". Under the Company's business model
through the second quarter of 2002, a limited license was granted to our clients
to access the Company's training system via the internet. The proprietary
software resides on the Company's computers and prior to the third quarter of
2002, clients had no other rights to the software. All training and maintenance
costs are expensed as incurred. For the nine month period ended September 30,
2002, the Company capitalized $104,000 of developed software costs, compared to
$675,000 for the same period in 2001. At September 30, 2002 and December 31,
2001, the Company had $635,000 and $1,232,000, respectively, of capitalized
software costs, net of accumulated amortization of $691,000 and $340,000,
respectively, and, at September 30, 2002, net of the $350,000 impairment charge
discussed below. The estimated remaining useful life of costs capitalized is 27
months For the first nine months of 2002 and 2001, the amortization of
capitalized software costs on the Company's books totaled $352,000 and $177,000,
respectively.
In the third quarter of 2002, the Company modified its business model in
response to changes in the e-Learning marketplace. In addition to hosting
training courses on its internal e-Learning operating system, the Company began
offering content only and perpetual licenses to distributors and clients,
whereby courses can be run on third-party operating systems. Because of this
change under EITF 00-3, "Application of AICPA Statement of Position 97-2 to
Arrangements That Include the Right to Use Software Stored on Another Entity's
Hardware", any new development costs must be accounted for under the guidelines
of FASB Statement 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Generally, under FASB Statement 86, software
development costs subsequent to our decision to allow our products to be
licensed and run on third-party operating systems will be expensed as incurred.
For the quarter ended September 30, 2002, the Company expensed $90,000 of
software development costs.
Due to historical and projected losses in its e-Learning Segment, the
Company reassessed the carrying values of its long-lived assets , including
capitalized software development costs, in accordance with FASB Statement 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ( see "Recent
Accounting Pronouncements"). Based on a variety of factors, including actual
revenues and/or usage attributable to individual library courses and the
identification of software no longer to be used or supported by the Company,
certain software with a carrying value of approximately $350,000 was determined
to have little or no remaining utility or value. Accordingly, as of September
30, 2002, the Company has recorded an impairment charge to fully write-off the
carrying value of these capitalized software costs.
In accordance with the provisions of FASB Statement 144, the Company the
Company has estimated the sum of undiscounted net operating cash flows of its
business segments over the expected useful lives of the remaining long-lived
assets and determined that they exceeded the net carrying value of these assets.
Accordingly, no further asset impairment is evident at September 30, 2002. Given
the history of losses, the Company will perform an assessment of potential
long-lived asset impairment each quarter.
Revenue. The Company's Professional and Technical Services Segment
primarily offers its services to the United States electric power industry and
the Department of Energy ("DOE"). Revenue from time-and-material and cost plus
fixed-fee contracts is recognized when service is performed and costs are
incurred. Revenue from fixed-price contracts is recognized on the basis of
percentage of work completed (measured by costs incurred relative to total
estimated project costs) under compliance with Statement of Position 81-1,
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts".
The Company's e-Learning Segment's nonrefundable upfront
subscription/license fees are recognized ratably over the contractual term,
which is typically one year. License and subscription revenue recognition
6
commences when delivery of initial access to the Company's learning management
system and course(s) occurs in accordance with Staff Accounting Bulletin 101
(SAB 101). In addition, usage fee revenue is recognized on an actual usage
basis.
For perpetual license sales of courses to distributors and clients,
whereby the Company may not be the application service provider, the Company
must recognize revenue in accordance with Statement of Position (SOP) 97-2, as
amended by SOP 98-4 and SOP 98-9. As noted above, prior to the change in the
business model, the Company capitalized costs related to the development of the
e-Learning training sourses under SOP 98-1. In accordance with that statement,
before revenue can be recognized from any non-hosted sales of e-Learning
training courses for which the development costs have been capitalized, the
carrying value of the training course capitalized costs must be reduced to zero
by the value of the sales. At September 30, 2002, the remaining net capitalized
costs of the e-Learning courses was $159,000. There were no revenues of this
type recorded in the first nine months of 2002 and until the $159,000 is fully
amortized or recovered by the application of sales, no sales revenue can
recorded from non-hosted sales.
Reserves are maintained for potential sales adjustments and credit losses;
such losses to date have been within management's expectations. Actual revenue
and cost of contracts in progress may differ from management estimates and such
differences could be material to the financial statements.
Income Taxes. The Company uses the liability method to account for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities. Deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
The Company recorded a tax expense of $3,000 in the third quarter of 2002,
reflecting unaccrued state taxes paid for the 2001 tax year in conjunction with
the filing of 2001 tax returns. For the nine month period ended September 30,
2002, the net tax benefit of $156,000 reflects federal tax refunds received for
years 1999 and 1998 due to enactment in 2002 of the Economic Growth and Tax
Relief Reconciliation Act, partially offset by minimum taxes due in certain
states related to 2001 activity.
Accounting for Stock-Based Compensation. Under the provisions of the
TENERA 1992 Option Plan, 1,500,000 shares of TENERA common stock are reserved
for issuance upon the exercise of options granted to key employees and
consultants. TENERA's 1993 Outside Directors Compensation and Option Plan
reserves 500,000 shares for issuance upon exercise of options granted to
non-employee directors. The employee stock options generally vest over a three
year period and expire six years from date of grant. The outside director
options vest over a one year period and expire ten years from date of grant.
In April 2002, GoTrain adopted the GoTrain Corp. 2002 Stock Option and
Stock Plan ("GoTrain Plan") to provide additional incentive to GoTrain
employees, directors, and consultants. Under the provisions of the GoTrain Plan,
2,500,000 shares of GoTrain Corp. common stock ("Subsidiary Stock") are reserved
for issuance upon exercise of Subsidiary Stock options and Subsidiary Stock
purchase rights granted. The Subsidary Stock options generally vest over a five
year period and expire ten years from date of grant. Concurrent with
implementation of the GoTrain Plan, GoTrain's board of directors granted
Subsidary Stock options to employees and directors to acquire 1,156,250 shares
of Subsidiary Stock.
TENERA and GoTrain account for their respective employee and director
stock options in accordance with Accounting Principles Board Opinion No. 25
("APB 25"). All of the TENERA stock options have been granted at an exercise
price equal to the market price of the underlying stock on the date of grant.
Therefore, no compensation expense has been recognized for TENERA stock options.
GoTrain management believes the exercise price per share approximated the fair
value per share of Subsidiary Stock on the date of the grant, and accordingly,
no compensation expense was recorded.
During the second quarter of 2002, GoTrain also granted 250,000 Subsidiary
Stock options to a former officer of, and now consultant to, GoTrain at an
exercise price of $.36 per share. These Subsidiary Stock options were granted in
exchange for services through April 16, 2004 and cliff vest on that date. The
Subsidiary Stock options were revalued at September 30, 2002 under the guidance
of Statement of Financial Standards No. 123 ("FAS 123") using a Black-Scholes
option pricing model with the following assumptions: market price of $.17 per
7
share, risk-free interest rate of 3.5%, dividend yield of 0%, volatility factor
of .8, and a 10 year contractual term. Under FAS 123, these options will be
revalued at the end of each reporting period and stock compensation expense will
be recognized ratably over the vesting term. In the quarter and nine month
period ended September 30, 2002, $700 and $7,000, respectively, of stock
compensation expense was recognized and charged to general and administrative
expenses.
Additionally, as part of the consulting arrangement entered into with the
same former GoTrain officer mentioned above, this consultant was allowed to
retain 45,000 vested TENERA stock options under the same terms as originally
granted, rather than be subject to the forfeiture provisions of the plan related
to employee terminations. The 45,000 TENERA stock options are comprised of two
grants: 25,000 options expiring March 2005 with an exercise price of $1.36 and
20,000 options expiring April 2006 with an exercise price of $1.26. Because the
terms of the grants were modified upon the change from employee to consultant,
the modified stock options were accounted for as new grants and the fair value
method (FAS 123) was used to determine the values. The valuations of the 25,000
and 20,000 option grants were calculated using the Black-Scholes option pricing
model with the following assumptions: market price of $.49 per share for both
grants, risk-free interest rate of 3.0% and 3.5%, respectively, dividend yield
of 0% for both grants, volatility factor of .8 for both grants, and 3 years and
4 years contractual terms, respectively. The combined value of these modified
grants was $8,000 and was charged to TENERA's general and administrative
expenses in the quarter ended June 30, 2002. Because these options were fully
vested at the time of the employee's termination, they are not subject to
revaluation and therefore, no adjustments were made in the third quarter of
2002.
Per Share Computation. Basic earnings per share is computed by dividing
net earnings by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
by adding other common stock equivalents, including stock options, warrants and
convertible preferred stock, in the weighted average number of common shares
outstanding for a period, if dilutive. The determination of fully diluted
earnings per share excludes the impact of 1,664,000 additional shares of TENERA
common stock, issuable upon the exercise of outstanding stock options, because
they are antidilutive. Also excluded from the computation of fully diluted
earnings per share as antidilutive are the potential impact of the conversion of
GoTrain convertible debentures (see Note 5 to Consolidated Financial Statements)
and GoTrain Subsidiary Stock options of 3,333,000 shares and 1,406,250 shares,
respectively, to GoTrain common stock.
8
The following table sets forth the computation of basic and diluted
earnings per share as required by Financial Accounting Standards Board Statement
No. 128:
(In thousands, except for per share amounts)
-------------------------------------------------------------------------------------------------------------------
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------------- --------------------------------
2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------------
Numerator:
Net loss .............................. $ (1,584) $ (600) $ (4,023) $ (1,795)
============= ============== ============= ==============
Denominator:
Denominator for basic earnings per
share-- weighted-average shares
outstanding............................ 9,984 9,984 9,984 9,984
Effect of dilutive securities:
Employee & Director stock options
(Treasury stock method) ............. -- -- -- --
------------- -------------- ------------- --------------
Denominator for diluted earnings per
share--weighted-average common and
common equivalent shares ............... 9,984 9,984 9,984 9,984
============= ============== ============= ==============
Basic loss per share .................... $ (0.16) $ (0.06) $ (0.40) $ (0.18)
============= ============== ============= ==============
Diluted loss per share .................. $ (0.16) $ (0.06) $ (0.40) $ (0.18)
============= ============== ============= ==============
-------------------------------------------------------------------------------------------------------------------
Comprehensive Income. The Company does not have any components of
comprehensive income. Therefore, comprehensive income is equal to net earnings
reported for all periods presented.
Disclosures about Segments of an Enterprise. The Company has two
reportable operating segments, which are: Professional and Technical Services
and e-Learning (see Note 6 to Consolidated Financial Statements).
Recent Accounting Pronouncements. In October 2001, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS
144"), which supersedes FAS No. 121, and Accounting Principles Board No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions". FAS 144 also amends Accounting Research Bulletin No.
51, "Consolidated Financial Statements". FAS 144 requires that long-lived assets
that are disposed of by sale be measured at the lower of book value or fair
value less cost to sell. The statement also significantly changes the criteria
required to classify an asset as held-for-sale. Additionally, FAS 144 expands
the scope of discontinued operations to include all components of an entity with
operations that (1) can be distinguished from the rest of the entity and (2)
will be eliminated from the ongoing operations of the entity in a disposal
transaction. The Company adopted FAS 144 for its fiscal year on January 1, 2002.
The company recorded an impairment loss of $350,000 in the quarter ended
September 30, 2002 (see Note 2 to Consolidated Financial Statements). The
Company will continue to assess the impact of FAS 144 on the carrying value of
its long-lived assets.
9
Note 3. Commitments and Contingencies
Leases. The Company occupies facilities under noncancelable operating
leases expiring at various dates through 2005. The leases call for proportionate
increases due to property taxes and certain other expenses. Rent expense
amounted to $541,000 for the nine month period ended September 30, 2002
($536,000 for the same period in 2001).
As of September 30, 2002, minimum rental commitments under operating
leases, principally for real property, are as follows (in thousands):
(Year Ending December 31)
----------------------------------------------------------------------------------------------------------------
2002 ......................................................................................... $ 216
2003 ......................................................................................... 721
2004 ......................................................................................... 468
2005 ......................................................................................... 382
2006 and Thereafter .......................................................................... --
------------
Total Minimum Payments Required .............................................................. $ 1,787
============
----------------------------------------------------------------------------------------------------------------
Note 4. Long-Term Obligations
In June 2001, GoTrain entered into a five-year agreement with SmartForce
to co-develop and distribute ES&H and regulatory content via the SmartForce
internet platform. Under the agreement, GoTrain retains the ownership of its
proprietary content and GoTrain shares in the revenue of any GoTrain content
sold by SmartForce. As part of the agreement, GoTrain was required to make an
initial payment of $50,000 to SmartForce at inception and quarterly payments of
$68,500 commencing September 30, 2001 (due sixty days thereafter), for platform
license and maintenance, and integration of existing GoTrain content. The
Company has paid $68,500 to SmartForce under the agreement in 2002. As of
September 30, 2002, the Company owes SmartForce $206,000 and SmartForce owes the
Company $268,000 for royalties and implementation fees under the agreement.
In June 2002, SmartForce announced that it had entered into an agreement
to merge with SkillSoft, another e-Learning company, which was completed in
September 2002.
As of September 30, 2002, minimum net payments are as follows (in
thousands):
(Year Ending December 31)
----------------------------------------------------------------------------------------------------------------
2002 ......................................................................................... $ 206
2003 ......................................................................................... 274
2004 ......................................................................................... 274
2005 ......................................................................................... 274
2006 and Thereafter .......................................................................... 206
------------
Total Minimum Payments Required .............................................................. $ 1,233
============
----------------------------------------------------------------------------------------------------------------
10
Note 5. Convertible Debt
In March 2002, the Company's GoTrain subsidiary sold subordinated
convertible debentures to private investors for a total principal amount of
$1,500,000 ("Series 1 Debenture" - $1,000,000; "Series 2 Debenture" - $500,000).
Each debenture bears simple interest at the rate of 8% per annum, with
cumulative interest payable only if the debenture is not converted into
convertible preferred stock of GoTrain, pursuant to the debenture terms. The
maturity date of each debenture is July 31, 2003.
The holders of the Series 1 Debenture have the option at any time to
convert some or all of the debenture principal balance into preferred stock of
GoTrain. Otherwise, the debenture will be automatically converted into preferred
stock upon the earlier of July 31, 2003, or in the event of an underwritten
public offering of GoTrain common stock. At full conversion, the holders would
own approximately 22% of GoTrain, subject to potential dilution from Subsidiary
Stock options and Subsidiary Stock purchase rights granted under the GoTrain
Plan.
GoTrain has the option at any time to repay some or all of the Series 2
Debenture at face value or convert some or all of the debenture into preferred
stock. Otherwise, the debenture will automatically convert into preferred stock
under the same terms as the Series 1 Debenture. In the event of full conversion,
the holders of the Series 2 Debenture would own approximately 11% of GoTrain,
subject to potential dilution from Subsidiary Stock options and Subsidiary Stock
purchase rights granted under the GoTrain Plan.
On September 30, 2002, upon full conversion of the Series 1 and Series 2
debentures and the outstanding Subsidiary Stock options, the holders of the
debentures would own approximately 29% of GoTrain.
The Company accrued $75,000 of interest expense in the first nine months
of 2002 related to these debentures.
11
Note 6. Segment Information
Based on the criteria established by Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information ("FAS 131"), the Company operates in two business segments based on
product/service differentiation. In accordance with FAS 131, the Company is
required to describe its reportable segments and provide data that is consistent
with the data made available to the Company's Chief Operating Decision Maker
("CODM") to assess performance and make decisions.
The measure of profit or loss used for each reportable segment is net
earnings (loss) before the effect of income taxes. The accounting policies for
the segments are the same as for the Company taken as a whole. Certain corporate
expenses are allocated to these operating segments and are included for
performance evaluation. Annual employee bonuses, if any, are recorded at the
corporate level. Assets are not allocated to operating segments for reporting to
the Company's CODM and the Company does not prepare segmental balance sheets.
Depreciation and amortization expenses are allocated to the operating segments
based on the fixed assets in the underlying subsidiaries comprising the
segments. There are no intersegment revenues on transactions between reportable
segments.
Information about the operating segments for the three and nine month
periods ended September 30, 2002 and 2001, respectively, and reconciliation to
the Consolidated Statements of Operations, are as follows:
(In thousands)
-----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30,
-------------------------- --------------------------
2002 2001 2002 2001
-------------------------------------------------------------------- ------------ ----------- -----------
REVENUE
Professional and Technical Services.............. $ 2,934 $ 4,173 $ 9,872 $ 14,902
e-Learning ....................................... 248 268 931 713
----------- ----------- ----------- -----------
Total ......................................... $ 3,182 $ 4,441 $ 10,803 $ 15,615
=========== =========== =========== ===========
NET (LOSS) INCOME BEFORE TAX
Professional and Technical Services ............. $ (215) $ (39) $ (495) $ 493
e-Learning ...................................... (1,224) (773) (3,164) (2,731)
Corporate and Other ............................. (142) (33) (520) (291)
----------- ----------- ----------- -----------
Total ......................................... $ (1,581) $ (845) $ (4,179) $ (2,529)
=========== =========== =========== ===========
IMPAIRMENT LOSS
Professional and Technical Services............. $ -- $ -- $ -- $ --
e-Learning ..................................... 350 -- 350 --
----------- ----------- ----------- -----------
Total ...................................... $ 350 $ -- $ 350 $ --
=========== =========== =========== ===========
DEPRECIATION AND AMORTIZATION EXPENSE
Professional and Technical Services ............. $ 12 $ 14 $ 36 $ 46
e-Learning ...................................... 205 170 621 474
Corporate and Other ............................. 3 5 12 18
----------- ----------- ----------- -----------
Total ......................................... $ 220 $ 189 $ 669 $ 538
=========== =========== =========== ===========
-----------------------------------------------------------------------------------------------------------------
12
Revenues outside of the United States have been less than 1% of total
Company revenues in each of the periods ended September 30, 2002 and 2001,
respectively. Therefore, no enterprise-wide geographical data has been provided.
The Company provides services and products to clients throughout the United
States, and the geographical location of the client is not used for
decision-making or performance evaluation.
13
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Forward-Looking Statements
With the exception of historical facts, the statements contained in this
discussion are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor
provisions created by that statute. Certain statements contained in the
following Management's Discussion and Analysis of Results of Operations and
Financial Condition, including, without limitation, statements containing the
words "believes", "anticipates", "estimates", "expects", "future", "intends",
and words of similar import, constitute forward-looking statements that involve
risks and uncertainties. Such risks, uncertainties and changes in condition,
significance, value and effect could cause the Company's actual results to
differ materially from those anticipated events. Such risks and uncertainties
include uncertainty of access to capital; the reliance on major customers and
concentration of revenue from the government sector; the uncertainty of future
profitability; uncertainty regarding competition; reliance on key personnel;
uncertainty regarding industry trends and customer demand; and government
contract audits. Additional risks are detailed in the Company's filings with the
SEC, including its Form 10-K for the year ended December 31, 2001.
Critical Accounting Policies
The Company considers certain accounting policies related to revenue
recognition, allowance for doubtful accounts, and cost capitalization and
impairment to be critical policies due to the estimation processes involved in
each.
Revenue Recognition. A significant portion of the Company's e-Learning
Segment revenue relates to sales of custom training courses, set-up fees, and
subscription licensing arrangements. Revenue is recognized ratably over the term
of the contract and begins when delivery of product occurs. In some cases, the
term of the contract is not a fixed time period and management must estimate the
expected revenue recognition period based upon cancellation provisions in the
contract, as well as experience with similar contracts. Changes in these factors
could have a significant effect on e-Learning revenue recognition.
Additionally, in the third quarter of 2002, the Company began offering
non-hosted e-Learning licensing arrangements to distributors and clients. These
types of sales will be accounted for under SOP 97-2. Prior to this change in the
business model, the Company capitalized costs related to the development of the
e-Learning training sourses under SOP 98-1. In accordance with that statement,
before revenue can be recognized from any non-hosted sales of e-Learning
training courses for which the development costs have been capitalized, the
carrying value of the training course capitalized costs must be reduced to zero
by the value of the sales. At September 30, 2002, the remaining net capitalized
costs of the e-Learning courses was $159,000. There were no revenues of this
type recorded in the first nine months of 2002 and until the $159,000 is fully
amortized or recovered by the application of sales, no sales revenue can
recorded from non-hosted sales. It is unknown when the Company will be able to
recognize revenue from non-hosted license sales.
Furthermore, a portion of the Professional and Technical Services Segment
revenue is derived from fixed-price contracts. Revenue for these contracts is
recognized using the percentage-of-completion method, which relies on estimates
of total expected contract revenue and costs. Recognized revenues are subject to
revisions as the contract progresses to completion. Revisions in revenue
estimates are made in the period in which the facts that give rise to the
revision become known.
Allowance for Doubtful Accounts. The Company is required to estimate the
collectibility of its trade receivables. A considerable amount of judgment is
required in assessing the ultimate realization of these receivables, including
the credit-worthiness of each client. If the financial condition of the
Company's clients were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
Cost Capitalization and Impairment. The Company has significant assets
related to the capitalization of costs of internal-use e-Learning operating
system software and costs related to the development of e-Learning training
14
courses. The determination of related estimated useful lives and whether or not
these assets are impaired involves significant judgments. Changes in strategy
and/or market conditions could significantly impact these judgments and require
adjustments to recorded asset balances.
Approval for Non-Audit Services
The Company currently engages Ernst & Young as its independent auditors.
In addition to the audit services they provide with respect to the Company's
audited consolidated financial statements included in its Annual Reports on Form
10-K and certain filings with the Securities and Exchange Commission, Ernst &
Young has provided the Company in the past and may provide in the future certain
non-audit services, such as tax services (tax compliance and tax related
consultations) and audit related assistance, such as services in connection with
accounting issues and SEC reporting matters. Effective as of July 30, 2002, the
Sarbanes-Oxley Act of 2002 requires that all non-auditing services, other than
in certain circumstances as provided therein, provided to an issuer by the
auditor of the issuer be preapproved by the audit committee of the issuer.
Accordingly, the Company's audit committee has approved the tax services and
audit type assistance services currently being provided to the Company by Ernst
& Young. The Company's audit committee of its board of directors currently
consists of Messrs. Thomas S. Loo, William A. Hasler, and George L. Turin.
TENERA, INC.
Results of Operations
(Unaudited)
------------------------------------------------------------------------------------------------------------------
Percent of Revenue Percent of Revenue
------------------------ -----------------------
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------------ -----------------------
2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------
Revenue ................................................ 100.0% 100.0% 100.0% 100.0%
Direct Costs ........................................... 92.3 79.9 91.4 78.0
General and Administrative Expenses .................... 45.6 38.7 43.4 38.3
Impairment Loss ........................................ 11.0 -- 3.3 --
Other Income ........................................... -- -- * --
--------- --------- --------- ---------
Operating Loss ...................................... (48.9) (18.6) (38.1) (16.3)
Interest (Expense) Income, Net ......................... (0.8) (0.4) (0.6) 0.1
--------- --------- --------- ---------
Net Loss Before Income Tax Expense (Benefit) ........... (49.7)% (19.0)% (38.7)% (16.2)%
========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------
* Less than 0.05%
Results of Operations
Net loss before income tax for the three and nine-month periods ended
September 30, 2002 were $1,581,000 and $4,179,000, respectively, compared to net
loss before income tax benefit of $845,000 and $2,529,000, respectively, for the
same periods in 2001. The increase in loss primarily results from lower
Professional and Technical Services Segment revenue. Specifically, a combination
of a reduced number of federal government projects and lower labor billing rates
for work at the DOE's Rocky Flats site (the "Rocky Flats Contract").
Professional and Technical Services Segment revenue for the three and
nine-month periods ended September 30, 2002 decreased 30% and 34%, respectively,
($1.2 million and $5.0 million, respectively) from the same periods in 2001,
primarily due to a lower allocation of work to the Company at the Rocky Flats
site. For the third quarter and first nine months of 2002, the concentration of
15
revenue from government projects was 76% and 72%, respectively, of total Company
revenue compared to 72% and 75%, respectively, in the same periods in 2001.
Revenue in the e-Learning Segment decreased by $20,000 in the quarter
ended September 30, 2002, as compared to the same period in 2001, mainly due to
a lower amount of custom course sales. However, revenue increased by $218,000 in
the nine month period ended September 30, 2002, primarily as a result of a
greater number of new clients.
Direct costs were lower in the three and nine-month periods ended
September 30, 2002, compared to a year ago, primarily as a result of fewer
Professional and Technical Services Segment projects. Gross margin decreased to
8% and 9%, respectively, in the three and nine month periods ended September 30,
2002 from 20% and 22%, respectively, in the same periods of 2001, mainly due to
client-mandated lowered labor billing rates for the ongoing Rocky Flats Contract
activity, increased integration expenditures related to the SmartForce
e-Learning agreement, and higher employee healthcare costs .
General and administrative costs, in the three and nine month periods
ended September 30, 2002, were lower 16% and 21%, respectively, compared to a
year ago, primarily reflecting furloughing non-essential personnel under a plan
implemented in August 2001. Included in general and administrative expenses for
the nine month period ended September 30, 2002 is $15,000 of stock option
compensation to a former officer of GoTrain, who provided and will provide
e-Learning consulting services (see Note 2 to Consolidated Financial
Statements).
In the third quarter of 2002, the Company recorded an impairment charge of
$350,000 related to the write-off of certain internally developed training
course assets in its e-Learning Segment deemed to be obsolete (see Note 2 to
Consolidated Financial Statements). The Company determined that many of the
library courses it had developed had little or no future utility or economic
benefit based on historical sales and management projections.
Net interest expense in 2002 represents accrued interest on the
convertible debentures sold in March 2002 by the Company's GoTrain subsidiary
(see Note 5 to Consolidated Financial Statements), partially offset by earnings
from the investment of cash balances in money market accounts and short-term
corporate debt instruments. Net interest income in 2001 represents earnings from
the investment of cash balances in money market accounts and short-term
corporate debt instruments and was higher than 2002 due to higher average cash
balances and higher interest rates during 2001.
Contract Backlog
During the third quarter of 2002, the Company received written contracts
and orders having an estimated value of approximately $1.2 million; $.7 million
associated with the Professional and Technical Services Segment, $.5 million in
new e-Learning Segment contracts. The activity in the Professional and Technical
Services Segment primarily reflects additional work with existing commercial
clients and the additional funding of the Rocky Flats Contract . The e-Learning
contract activity reflects expansion of work with existing clients and
partnerships and new orders under the SmartForce agreement (see Note 4 to
Consolidated Financial Statements).
Contracted backlog for current, active projects totaled approximately $6.9
million as of September 30, 2002, down from $13.9 million at December 31, 2001.
The Professional and Technical Services and e-Learning segments account for $4.0
million and $2.9 million, respectively, of the backlog at September 30, 2002.
Liquidity and Capital Resources
Cash and cash equivalents increased by $14,000 during the first nine
months of 2002. The increase was due to the sale of convertible debentures
($1,500,000), mostly offset by cash used by operations ($1,466,000), and net
acquisition of property and equipment ($20,000).
16
Trade receivables, net of sales allowance, decreased by $883,000 from
December 31, 2001, primarily due to lower revenues and increased collections
during the period. The allowance for sales adjustments decreased by $8,000 from
December 31, 2001, related to the closure and settlement of old government
contracts.
Income tax receivable decreased by $884,000 from December 31, 2001 due to
the receipt in March 2002 of a federal tax refund of 1999 taxes paid.
Additionally, the Company received federal tax refunds totaling $174,000 in June
2002 related to years 1999 and 1998 due to enactment in 2002 of the Economic
Growth and Tax Relief Reconciliation Act.
Other current assets increased by $156,000 from the end of 2001,
reflecting increased prepaid expenses associated with insurance renewals.
Other assets increased by $104,000 from December 31, 2001, primarily
relating to training course and operating system development in the e-Learning
Segment (see Note 2 to Consolidated Financial Statements).
Accounts payable decreased by $97,000 since the end of 2001 primarily
resulting from lower direct costs supporting decreased revenues. Accrued
compensation and related expenses decreased by $26,000 during the period,
primarily reflecting accrued vacation taken by employees in the third quarter of
2002 and the reduction in the vacation accrual related to terminated employees.
Deferred revenue increased by $62,000 from December 31, 2001 due to a
higher level of upfront billing in the e-Learning Segment related to library
course subscription fees and custom course fees.
Accrued interest expense increased by $75,000 from December 31, 2001 due
to the sale of convertible debentures in March 2002 (see Note 5 to Consolidated
Financial Statements).
No cash dividend was declared in the first nine months of 2002.
The impact of inflation on project revenue and costs of the Company was
minimal.
At September 30, 2002, the Company had operating lease commitments through
2005 totaling $1,787,000, principally for real property (see Note 3 to
Consolidated Financial Statements). Additionally, the Company has other
long-term obligations through 2006, totaling $1,233,000, related to an agreement
with SmartForce to co-develop and distribute ES&H and regulatory content via the
SmartForce internet platform (see Note 4 to Consolidated Financial Statements).
The table below schedules these contractual obligations:
----------------------------------------------------------------------------------------------------------------
Contractual Obligations Payments Due By Period
---------------------------------------------------------
(In thousands) Total Less Than 1 1 - 3 4 - 5 After 5
Year Years Years Years
----------------------------------------------------------------------------------------------------------------
Operating Lease Obligations ..................... $ 1,787 $ 778 $ 929 $ 80 $ --
Other Long-Term Obligations...................... 1,233 412 548 273 --
-------- -------- -------- -------- --------
Total Contractual Cash Obligations .............. $ 3,020 $ 1,190 $ 1,477 $ 353 $ --
----------------------------------------------------------------------------------------------------------------
In March 2002, the Company's GoTrain subsidiary sold subordinated
convertible debentures to private investors for a total principal amount of
$1,500,000. Each debenture bears simple interest at the rate of 8% per annum,
with cumulative interest payable only if the debenture is not converted into
preferred stock of GoTrain, pursuant to the debenture terms. The maturity date
of each debenture is July 31, 2003. The larger debenture, in the amount of
$1,000,000, can be converted at any time by the holder into convertible
preferred stock of GoTrain. The other debenture, in the amount of $500,000 can
be repaid or converted into preferred stock at any time by GoTrain. Otherwise,
the debentures will automatically convert into preferred stock at the earlier of
the maturity date, or upon an underwritten public offering of GoTrain common
stock. At maximum conversion, the holders would own approximately 33% of
GoTrain, subject to potential dilution from Subsidiary Stock options and
Subsidiary Stock purchase rights granted under the GoTrain Plan. At June 30,
2002, upon full conversion of the debentures and the outstanding Subsidiary
Stock options, the holders of the debentures would own approximately 29% of
GoTrain (see Note 5 to Consolidated Financial Statements).
17
Management believes that cash expected to be generated by operations of
the Company's Professional and Technical Services Segment, coupled with the tax
refunds received in March and June 2002, should be sufficient to enable the
Company to support its Professional and Technical Services Segment operations as
currently structured through the next twelve months. However, there can be no
assurance that the cash generation from the Professional and Technical Services
Segment operations will materialize in quantities or timeframes projected by
management. The reliance on one major customer in this segment for significant
cash receipts, coupled with the likely impact of lowered billing rates for that
customer, discussed under Results of Operations, highlights the uncertainty and
risks associated with achieving the Company's liquidity targets.
The slower than anticipated revenue growth in the e-Learning Segment,
which management believes has resulted from a lengthening of the sales cycle and
lower projected course usage primarily due to a broad-based economic slowdown in
the markets served, has depleted the funds generated from the issuance of the
GoTrain convertible debentures. However, management projects that cash generated
from operations in the fourth quarter of 2002 will be positive and sustainable
into 2003 based upon expected collection of outstanding trade receivables at
September 30, 2002, cash from new sales closed at the end of the third quarter
of 2002, and expected new sales during the fourth quarter of 2002. There can be
no assurance that the cash receipts from the e-Learning Segment will materialize
in quantities or timeframes projected by management.
In order to provide adequate working capital and growth capacity for its
e-Learning Segment, the Company is currently seeking additional private
placement financing for GoTrain. Furthermore, the Company is seeking bank lines
of credit for each of its segment operations to provide additional working
capital support of their respective business activities. There can be no
assurance that such sources of capital will be available in sufficient amounts
or on terms favorable to the Company, or at all. In order to provide GoTrain
interim working capital, TENERA and GoTrain entered into a credit agreement in
October 2002. Under the agreement, TENERA will provide a revolving credit
facility to GoTrain to borrow up to $200,000 to finance its ongoing working
capital and general corporate needs. The credit facility is secured by the trade
receivable assets of GoTrain.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Company has minimal exposure to market and interest risk as the
Company invests its excess cash in short-term instruments which mature within 90
days from the date of purchase. The Company does not have any derivative
instruments.
18
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.0 Statement regarding computation of per share earnings: See Notes
to Consolidated Financial Statements
99.1 (1) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002
(Robert C. McKay - Chief Executive Officer and President)
99.1 (1) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002
(Jeffrey R. Hazarian - Chief Financial Officer and Executive Vice
President)
(b) Reports on Form 8-K
None.
________________________________
(1) Filed herewith
19
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.
Dated: November 14, 2002
TENERA, INC.
By /s/ JEFFREY R. HAZARIAN
-----------------------------------------------------
Jeffrey R. Hazarian
Executive Vice President and Chief Financial Officer
20
CERTIFICATION
I, Robert C. McKay, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TENERA,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: November 14, 2002 /s/ ROBERT C. McKAY
---------------------------------------------
Robert C. McKay
Chief Executive Officer and President
21
CERTIFICATION
I, Jeffrey R. Hazarian, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TENERA,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: November 14, 2002 /s/ JEFFREY R. HAZARIAN
-----------------------------------------------------
Jeffrey R. Hazarian
Executive Vice President and Chief Financial Officer
22
EXHIBIT INDEX
Ex. 99.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002
(Robert C. McKay - Chief Executive Officer and President)
Ex. 99.2 Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of
2002 (Jeffrey R. Hazarian - Chief Financial Officer and
Executive Vice
President)