UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
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 0-12293
NUCLEAR SUPPORT SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
VIRGINIA 54-0952207
(State of Incorporation) (IRS Employer Identification No.)
22 Northeast Drive, Hershey, PA 17033
(Address of Principal Executive Offices) (Zip Code)
(717) 533-6370
(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 ( )
Common Stock, par value $.0025 per share: 2,169,190 shares
outstanding as of July 21, 1995
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
PART I ITEM 1
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION> Page
<S> <C>
Unaudited Consolidated Balance Sheets as of
June 30, 1995 and September 30, 1994 3
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended June 30, 1995 and 1994 5
Unaudited Consolidated Statements of Operations for
the Nine Month Periods Ended June 30, 1995 and 1994 6
Unaudited Consolidated Statements of Cash Flows for
the Nine Month Periods Ended June 30, 1995 and 1994 7
Notes to Unaudited Consolidated Financial Statements 8
PART I ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II ITEM 6
Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
<TABLE>
PART 1 ITEM 1 FINANCIAL STATEMENTS
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Assets
(Unaudited)
<CAPTION>
June 30, 1995 September 30, 1994
<S> <C> <C>
Current assets
Cash $896,504 1,910,947
Accounts receivable:
Billed 15,501,702 14,803,818
Unbilled 359,455 1,069,313
Other 739,821 616,710
Total accounts receivable 16,600,978 16,489,871
Inventory 1,262,166 1,635,151
Recoverable taxes 121,500 121,500
Deferred income tax benefit 2,559,329 822,000
Other prepaid expenses 1,299,808 3,362,745
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,802,895 1,361,263
Other current assets 127,491 314,596
Total current assets 24,670,671 26,018,043
Property and equipment
Land 964,100 964,100
Buildings and improvements 1,940,387 2,111,339
Machinery and equipment 7,514,336 7,481,577
Furniture and fixtures 1,946,106 2,137,291
Vehicles 691,284 390,635
Total property and equipment 13,056,213 13,084,942
Less accumulated depreciation 6,544,119 5,571,929
Net property and equipment 6,512,094 7,513,013
Deferred income taxes 478,000 478,000
Excess of cost over net assets of
businesses acquired,
net of amortization
of $514,382 and $521,482,
respectively 1,146,149 1,201,607
Other assets 372,890 278,704
Total assets $33,179,804 35,489,367
</TABLE>
<PAGE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<CAPTION>
June 30, 1995 September 30, 1994
<S> <C> <C>
Current liabilities:
Notes payable $1,688,369 2,754,103
Note payable to bank 9,302,769 0
Current portion of long-term
debt 1,387,780 1,236,125
Accounts payable 5,517,704 4,092,378
Accrued expenses 5,841,839 5,823,758
Billings in excess of
costs and estimated
earnings on uncompleted
contracts 1,093,703 368,581
Total current liabilities 24,832,164 14,274,945
Note payable to bank 0 9,140,523
Long-term debt, less
current portion 4,525,253 5,569,206
Total liabilities 29,357,417 28,984,674
Shareholders' equity:
Common stock, $.0025 par value,
authorized 10,000,000 shares;
issued 2,476,242 shares,
outstanding 2,169,190 shares 6,190 6,190
Additional paid-in-capital 3,472,506 3,472,506
Retained earnings 4,973,828 7,656,134
Treasury stock, at cost:
307,052 shares (4,630,137) (4,630,137)
Total shareholders' equity 3,822,387 6,504,693
Total liabilities and
shareholders' equity $33,179,804 35,489,367
</TABLE>
<PAGE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended June 30,
1995 1994
<S> <C> <C>
Revenues from services $26,744,016 25,884,529
Cost of services 22,433,224 21,091,667
Gross margin 4,310,792 4,792,862
General and administrative
expenses 3,511,497 3,909,183
Income from operations 799,295 883,679
Interest expense (493,212) (380,052)
Other expense, net (9,082) (37,219)
Total other expense, net (502,294) (417,271)
Earnings before income taxes 297,001 466,408
Income tax expense 195,113 187,000
Net earnings $101,888 279,408
Earnings per share
(Based upon 2,169,190
and 2,192,855 weighted
average common and common
equivalent shares, respectively) $.05 .13
</TABLE>
<PAGE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Nine Months Ended June 30,
1995 1994
<S> <C> <C>
Revenues from services $71,332,601 74,543,382
Cost of services 60,796,814 61,342,171
Gross margin 10,535,787 13,201,211
General and administrative
expenses 12,685,517 11,648,724
Restructuring expenses 448,990 0
Income (loss) from operations (2,598,720) 1,552,487
Interest expense (1,370,433) (982,833)
Loss on disposal of
property and equipment (397,520) 0
Other income, net 23,351 50,054
Total other expense, net (1,744,602) (932,779)
Earnings (loss) before
income taxes (4,343,322) 619,708
Income tax expense (benefit) (1,661,016) 51,000
Net earnings (loss) $(2,682,306) 568,708
Earnings (loss) per share
(Based upon 2,169,190
and 2,188,266 weighted
average common and common
equivalent shares,
respectively) ($1.23) .26
</TABLE>
<PAGE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended June 30,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net earnings (loss) $(2,682,306) 568,708
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 1,133,870 1,088,984
Loss disposal of
property and equipment 397,520 0
Deferred income taxes (1,737,329) 0
Change in assets and
liabilities net of effects
from purchases and sales
of subsidiaries:
(Increase) decrease in accounts
receivable (111,137) 1,131,280
(Increase) decrease in inventory 372,985 (335,168)
Increase in costs and
estimated earnings in excess
of billings on uncompleted
contracts (441,632) (204,590)
Decrease in other assets 2,155,856 801,538
Increase (decrease) in
accounts payable
and accrued expenses 1,443,414 (673,418)
Increase (decrease) in
billings in excess of
costs and estimated earnings
on uncompleted contracts 725,122 (1,590,379)
Net cash provided by
operating activities 1,256,363 787,495
Cash flows from investing
activities:
Net purchase of property
and equipment (475,020) (413,737)
Acquisition of businesses,
net of cash acquired 0 (7,583,604)
Net cash used by investing
activities (475,020) (7,997,341)
Cash flows from financing
activities:
Net payments (borrowings)
on notes payable (903,488) 869,983
Principal payments on
long-term debt (892,298) (316,963)
Proceeds from long-term debt 0 6,736,000
Net cash provided (used) by
financing activities (1,795,786) 7,289,020
Net increase (decrease)
in cash (1,014,443) 79,174
Cash at beginning of period 1,910,947 232,018
Cash at end of period $896,504 311,192
</TABLE>
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) General
The accompanying Unaudited Consolidated Financial
Statements have been prepared in accordance with Form 10-Q
Rules and the Company's accounting policies as described in
its latest Annual Report. In the opinion of management,
these Financial Statements reflect all necessary adjustments
and reclassifications (which include only normal, recurring
items). These Consolidated Financial Statements, when read
in conjunction with the Consolidated Financial Statements
and Notes thereto included in the Company's latest annual
report on Form 10-K, present fairly the financial position
of the Company as of June 30, 1995 and September 30, 1994,
and the results of operations for the three and nine month
periods ended June 30, 1995 and 1994.
(2) Company Debt
The Company maintains an $18,000,000 revolving credit
line and has an outstanding principal balance of
approximately $5,900,000 on its term debt obligation.
Borrowings under this agreement are secured by substantially
all of the assets of the Company. This loan agreement,
among other things, requires the Company to meet various
covenants including minimum levels of working capital and
tangible net worth. The Company was not in compliance with
these covenants on June 30, 1995.
<TABLE>
(3) Supplementary Statements of Cash Flows Information
<CAPTION>
June 30, 1995 June 30, 1994
<S> <C> <C>
Cash paid during the
nine month periods for:
Interest $1,355,143 929,193
Income taxes $126,132 197,418
</TABLE>
PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company's ability to generate cash adequate to meet its
needs depends primarily upon payments for its services and
periodic bank borrowings. These sources of liquidity are
reduced by the payment of direct costs, taxes, purchase of
property and equipment and periodic repayment of the
Company's revolving line of credit and term debt.
Working capital as of June 30, 1995 was approximately
$(161,000) compared to $11,743,000 as of September 30, 1994.
This decrease was due primarily to reclassifying the
revolving credit line to short-term due to covenant
violations and additional charges resulting from new
management's initiatives to consolidate Company operations
for economies of scale and to strengthen the Company's more
profitable business lines. At June 30, 1995, the Company
had borrowed approximately $9,300,000 on its revolving
credit line and had an outstanding principal balance of
$5,900,000 on its term debt obligation.
NSSI management has determined that the Company was out of
compliance with certain of its covenants respecting its
revolving line of credit arrangement as of the close of its
third quarter on June 30, 1995 and remains so. There has
been no declaration of default by the Company's lenders with
respect to these obligations. No formal request has been
made for waiver or forbearance of the present covenants.
The Company's lenders have supported management's
restructuring efforts to stabilize the business. The
Company is currently discussing new covenants with its
lenders and expects to have a revised banking agreement in
place by September 30, 1995.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1994
Consolidated revenues for the three month period ended June
30, 1995 increased 3% to $26,744,000 compared to the same
period last year. NSS Numanco's revenues declined 7% due
to reduced activity in its commercial nuclear power
markets. This reduction was more than offset by an 11%
increase in the aggregate operating revenues of Cannon
Sline, Henze and IceSolv.
The consolidated gross margin for the third quarter of
fiscal year 1995 decreased 10% to $4,311,000 primarily due
to a drop in Henze's margins compared to the same period
last year. Aggregate margins for Cannon Sline, NSS Numanco
and IceSolv were unchanged compared to the same period last
year.
General and administrative expenses for the quarter ended
June 30, 1995 decreased 10% as a result of the effects of
the implementation of management's restructuring plan.
Interest expense for the 1995 fiscal third quarter
increased 30% due to an increase in interest rates for the
Company's credit facility.
The Company earned a profit before taxes of $297,000
compared to $466,000 for the same period last year. The
tax expense for the three month period ended June 30, 1995
was $195,000.
Net income for the quarter ended June 30, 1995 was
$102,000, or $.05 per share, compared to $297,000, or $.13
per share, for the same period last year.
NINE MONTHS ENDED JUNE 30, 1995 COMPARED TO NINE MONTHS
ENDED JUNE 30, 1994
Consolidated revenues decreased 4% to $71,333,000 compared
to $74,543,000 for the same period last year. NSS Numanco's
revenues declined 19% when compared to the same period last
year primarily due to continued contraction of the
commercial nuclear power market (and the Company's efforts
to increase its service offerings in other markets).
Henze's revenues were approximately 24% above the same
period last year at $7,471,000. Cannon Sline revenues were
substantially unchanged. IceSolv's revenues increased 42%,
but were not material.
The consolidated gross margin for the first nine months of
fiscal year 1995 decreased $2,666,000 to 15% of revenue as
compared to 18% for the same period last year. This
decrease was primarily attributable to a drop in Henze's
margin performance and an inventory write-off. NSS
Numanco's margins for the year to date period of fiscal year
1995 were 8% below the comparable period last year. Cannon
Sline's margins remained substantially unchanged. IceSolv's
margins were insignificant to the overall operations.
General and administrative expenses for the nine month
period ended June 30, 1995 were $12,686,000 which included a
second quarter adjustment of $2,138,000 taken to streamline
the business and restructure the corporation, compared to
$11,649,000 for the comparable period last year.
Interest expense increased from $983,000 for the nine month
period last year to $1,370,000 for the 1995 fiscal period.
This increase was attributable to higher interest rates for
the credit facility.
The Company recorded a loss before taxes of $4,343,000 for
the nine month period ended June 30, 1995 compared to a
profit of $620,000 for the same period last year. The loss
resulted in an income tax benefit of $1,661,000 for the year
to date period. The effective tax rate for the fiscal 1995
nine month period was 38%.
The net loss of $2,682,000, or $1.23 per share, for the
first nine months of fiscal year 1995 compared to net
earnings of $569,000, or $.26 per share for the same period
last year, resulted primarily from the Company's
restructuring initiatives implemented during the second
fiscal quarter and poor performance of its Henze operations
earlier in the year.
CURRENT TRENDS AND EFFECTS
Company management has implemented its restructuring plan
to consolidate operations for economy of scale and to
strengthen profitable business lines in order to restore
the Company to profitability.
As to specific operations, NSS Numanco, Cannon Sline and
IceSolv were profitable for this third quarter period.
Henze's losses continued this period. Management is
continuing its efforts to improve Henze's performance while
remaining open to options concerning Henze and its specific
business lines.
Management continues to anticipate a profitable 1995 fiscal
year for its NSS Numanco and Cannon Sline operations. In
light of its restructuring initiatives and the continued
weakness at Henze, the Company does not expect to be
profitable on a consolidated basis for the year ending
September 30, 1995.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Nine Month
Period Ended June 30, 1995
<PAGE>
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.
DATE: NUCLEAR SUPPORT SERVICES,INC.
July 31, 1995 /s/ Ralph A. Trallo
Ralph A. Trallo
President
Chief Operating Officer
Director
July 31, 1995 /s/ Michael J. Olson
Michael J. Olson
Vice President, Finance
Secretary/Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NUCLEAR
SUPPORT SERVICES INC'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 896,504
<SECURITIES> 298,284
<RECEIVABLES> 17,344,911
<ALLOWANCES> 743,933
<INVENTORY> 1,262,166
<CURRENT-ASSETS> 24,670,671
<PP&E> 13,056,213
<DEPRECIATION> 6,544,119
<TOTAL-ASSETS> 33,179,804
<CURRENT-LIABILITIES> 24,832,164
<BONDS> 4,525,253
<COMMON> 6,190
0
0
<OTHER-SE> 3,816,197
<TOTAL-LIABILITY-AND-EQUITY> 33,179,804
<SALES> 71,332,601
<TOTAL-REVENUES> 71,332,601
<CGS> 60,796,814
<TOTAL-COSTS> 12,777,507
<OTHER-EXPENSES> 374,169
<LOSS-PROVISION> 357,000
<INTEREST-EXPENSE> 1,370,433
<INCOME-PRETAX> (4,343,322)
<INCOME-TAX> (1,661,016)
<INCOME-CONTINUING> (4,343,322)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,682,306)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
