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 March 31, 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 April 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
March 31, 1995 and September 30, 1994 3
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended March 31, 1995 and 1994 5
Unaudited Consolidated Statements of Operations for
the Six Month Periods Ended March 31, 1995 and 1994 6
Unaudited Consolidated Statements of Cash Flows for
the Six Month Periods Ended March 31, 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 4
Submission of Matters to a Vote of Security Holders 12
PART II ITEM 6
Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
PART 1 ITEM 1 FINANCIAL STATEMENTS
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Assets
(Unaudited)
<TABLE>
<CAPTION> March 31,1995 September 30,1994
<S> <C> <C>
Current assets
Cash $363,802 1,910,947
Accounts receivable:
Billed 15,753,665 14,803,818
Unbilled 567,371 1,069,313
Other 878,923 464,381
Total accounts receivable 17,199,959 16,337,512
Inventory 1,199,942 1,635,151
Advances to employees 101,692 152,329
Recoverable taxes 121,500 121,500
Deferred income tax benefit 2,678,129 822,000
Prepaid Insurance 772,440 2,814,168
Other prepaid expenses 751,678 548,577
Costs and estimated earnings
in excess of billings
on uncompleted contracts 1,489,639 1,361,263
Other current assets 206,568 314,596
Total current assets 24,885,349 26,018,043
Property and equipment
Land 964,100 964,100
Buildings and improvements 1,940,387 2,111,339
Machinery and equipment 7,212,644 7,481,577
Furniture and fixtures 1,946,106 2,137,291
Vehicles 672,069 390,635
Total property and equipment 12,735,306 13,084,942
Less accumulated depreciation 6,189,455 5,571,929
Net property and equipment 6,545,851 7,513,013
Deferred income taxes 478,000 478,000
Excess of cost over net assets of
businesses acquired,
net of amortization of $495,896
and $521,482, respectively 1,164,635 1,201,607
Other assets 340,395 278,704
Total assets $33,414,230 35,489,367
</TABLE>
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION> March 31, 1995 September 30,1994
<S> <C> <C>
Current liabilities:
Notes payable $1,572,895 2,754,103
Note payable to bank 10,598,070 0
Current portion of
long-term debt 1,389,495 1,236,125
Accounts payable 4,000,071 4,092,378
Accrued payroll and employee
benefits 4,251,111 2,930,327
Billings in excess of costs and
estimated earnings on
uncompleted contracts 857,220 368,581
Other accrued expenses 2,149,274 2,893,431
Total current liabilities 24,818,136 14,274,945
Note payable to bank 0 9,140,523
Long-term debt, less
current portion 4,875,595 5,569,206
Total liabilities 29,693,731 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 4,871,940 7,656,134
Treasury stock, at cost:
307,052 shares (4,630,137) (4,630,137)
Total shareholders' equity 3,720,499 6,504,693
Total liabilities and
shareholders' equity $33,414,230 35,489,367
</TABLE>
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION> Three Months Ended March 31,
1995 1994
<S> <C> <C>
Revenues from services $22,264,860 22,150,142
Cost of services 19,625,829 18,324,365
Gross margin 2,639,031 3,825,777
General and administrative expenses 5,548,479 3,838,500
Restructuring expenses 448,990 0
Income (loss) from operations (3,358,438) (12,723)
Interest expense (442,637) (357,794)
Loss on disposal of property
and equipment (397,520) 0
Other income, net 124,318 46,743
Total other expense, net (715,839) (311,051)
Loss before income taxes (4,074,277) (323,774)
Income tax benefit (1,629,711) (327,000)
Net earnings (loss) $(2,444,566) 3,226
Earnings (loss) per share
(Based upon 2,169,190 and 2,218,176
weighted average common and common
equivalent shares, respectively) $(1.13) .00
</TABLE>
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION> Six Months Ended March 31,
1995 1994
<S> <C> <C>
Revenues from services $44,588,585 48,658,853
Cost of services 38,363,590 40,250,504
Gross margin 6,224,995 8,408,349
General and administrative expenses 9,174,020 7,739,541
Restructuring expenses 448,990 0
Income (loss) from operations (3,398,015) 668,808
Interest expense (877,221) (602,781)
Loss on disposal of
property and equipment (397,520) 0
Other income, net 32,433 87,273
Total other expense, net (1,242,308) (515,508)
Earnings (loss) before
income taxes (4,640,323) 153,300
Income tax benefit (1,856,129) (136,000)
Net earnings (loss) $(2,784,194) 289,300
Earnings (loss) per share
(Based upon 2,169,190 and 2,186,617
weighted average common and common
equivalent shares, respectively) $(1.28) .13
</TABLE>
<PAGE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION> Six Months Ended March 31,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net earnings (loss) $(2,784,194) 289,300
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 760,727 723,545
Loss disposal of property
and equipment 397,520 0
Deferred income taxes (1,856,129) 0
Change in assets and liabilities
net of effects from purchases and
sales of subsidiaries:
Increase (decrease) in
accounts receivable (862,447) 1,483,985
Increase (decrease) in inventory 435,209 (334,224)
Increase (decrease) in costs and
estimated earnings in excess of
billings on
uncompleted contracts (128,376) 151,776
Decrease in other assets 1,935,601 438,208
Increase (decrease) in
accounts payable and
accrued expenses 484,320 (221,572)
Increase (decrease) in billings
in excess of costs and estimated
earnings on uncompleted contracts 488,639 (1,776,086)
Net cash provided (used)
by operating activities (1,129,130) 754,932
Cash flows from investing activities:
Acquisition of businesses,
net of cash acquired 0 (7,376,408)
Net purchase of property
and equipment (154,113) (202,290)
Net cash used by investing
activities (154,113) (7,578,698)
Cash flows from financing activities:
Net borrowings on notes payable 276,339 174,319
Principal payments on
long-term debt (540,241) (166,108)
Proceeds from long-term debt 0 6,868,000
Net cash provided (used) by
financing activities (263,902) 6,876,211
Net increase (decrease)
in cash (1,547,145) 52,445
Cash at beginning of period 1,910,947 232,018
Cash at end of period $363,802 284,463
</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 Financial Statements, when read in
conjunction with the 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
March 31, 1995 and September 30, 1994, and the results of
operations for the three and six month periods ended March
31, 1995 and 1994.
(2) Acquisitions
In November 1993 (effective for all financial purposes
October 1, 1993), NSSI acquired two companies, Oliver B.
Cannon & Son, Inc. and Sline Industrial Painters, Inc.
(marketed together as Cannon Sline). Cannon Sline provides
surface preparation and specialty coatings services to power
generation, pulp and paper, petro-chemical and other general
industries throughout the United States.
(3) Company Debt
The Company maintains an $18,000,000 revolving credit
line and has an outstanding principal balance of
approximately $6,200,000 on its term debt obligation. The
term loan was primarily used to finance the acquisition of
Cannon Sline. 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 March 31, 1995.
(4) Supplementary Statements of Cash Flows Information
<TABLE>
<CAPTION> March 31, 1995 March 31, 1994
<S> <C> <C>
Cash paid during the
three month periods for:
Interest $729,276 567,143
Income taxes $45,329 146,491
</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 March 31, 1995 was approximately
$67,000 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 (see comments on restructuring
under Current Trends and Effects). At March 31, 1995, the
Company had borrowed approximately $10,600,000 on its
revolving credit line and had an outstanding principal
balance of $6,164,000 on its term debt obligation.
Company 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
second quarter on March 31, 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.
Company management is, however, working with its lenders in
connection with its restructuring and consolidation efforts
noted herein. Management believes the Company's lenders are
generally supportive of these restructuring efforts in
stabilizing the business and expects to present its plan to
these lenders in June. Lenders' representatives have
indicated a willingness to discuss new lending covenants
after review of management's presentation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1994
Consolidated revenues remained even at $22,265,000 compared
to $22,150,000 for the same period last year. Cannon Sline
revenues were substantially unchanged for the period. NSS
Numanco's revenues declined 9% when compared to the same
quarter last year. Henze's revenues were approximately 34%
above the same period last year at $3,724,000. IceSolv's
revenues increased 34% but were not material.
The consolidated gross margin for the second three months of
fiscal 1995 decreased $1,187,000 to 12% of revenue as
compared to 17% for the same period last year. This
decrease was primarily attributable to a drop in Henze's
margin performance and a write-down of Henze's inventory
(see Current Trends and Effects). Margins for the other
companies remained substantially unchanged.
General and administrative expenses excluding one-time
charges of $2,105,000 for the three month period ended March
31, 1995 decreased to $3,443,000 from $3,839,000 for the
same period last year. As a percentage of revenues, these
costs decreased by 2% when compared to the same quarter last
year. Total general and administrative expenses for the
period were $5,548,000 which reflects the one-time effect of
adjustments taken to streamline the business. In addition,
charges of $449,000 and $398,000 were incurred in
restructuring the Company and disposal of fixed assets,
respectively.
Interest expense for the quarter increased from $358,000 for
the 1994 second quarter to $443,000 for the current quarter.
This increase was attributable to higher interest rates for
the credit facility.
The Company recorded a loss before taxes of $4,074,000
compared to $324,000 for the same period last year resulting
in an income tax benefit of $1,630,000 for the 1995 quarter.
The effective tax rate for the fiscal 1995 three month
period was 40%.
The net loss of $2,445,000 or $1.13 per share for the 1995
second fiscal quarter compared to net earnings of $3,226 or
$.00 per share for the second quarter of fiscal year 1994
resulted primarily from the Company's restructuring
initiatives.
SIX MONTHS ENDED MARCH 31, 1995 COMPARED TO SIX MONTHS ENDED
MARCH 31, 1994
Consolidated revenues decreased 9% to $44,589,000 compared
to $48,659,000 for the same period last year. Cannon Sline
revenues were substantially unchanged. NSS Numanco's
revenues declined 24% when compared to the same period last
year. This decline was primarily due to less work
availability in the prior quarter as reported in December.
Henze's revenues were approximately 24% above the same
period last year at $7,471,000. IceSolv's revenues
increased 71% but were not material.
The consolidated gross margin for the first six months of
fiscal year 1995 decreased $2,183,000 to 14% of revenue as
compared to 17% for the same period last year. This
decrease was primarily attributable to a drop in Henze's
margin performance and an inventory write-off. Margins for
the other companies remained substantially unchanged.
General and administrative expenses attributable to
operations for the six month period ended March 31, 1995
decreased to $7,037,000 from $7,740,000 for the same period
last year. As a percentage of revenues, these costs were
unchanged when compared to the same period last year. Total
general and administrative expenses for the period were
$9,174,000 which reflect the one-time effect of adjustments
taken to streamline the business. In addition, charges of
$449,000 and $398,000 were incurred in restructuring the
Company and adjustments to fixed assets, respectively.
Interest expense increased from $603,000 for the six month
period last year to $877,000 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 $4,640,000
compared to a profit of $153,000 for the same period last
year. The loss resulted in an income tax benefit of
$1,856,000 for the year to date period. The effective tax
rate for the fiscal 1995 six month period was 40%.
The net loss of $2,784,000 or $1.28 per share for the first
six months of fiscal year 1995 compared to net earnings of
$289,000 or $.13 per share for the same period last year
resulted primarily from the Company's restructuring
initiatives.
Current Trends and Effects
Company management has determined, after extensive review of
current operations, to down-size the Company. The aim is to
consolidate operations for economy of scale and to
strengthen profitable business lines in order to restore the
Company to profitability. As a result of management's
restructuring determinations, the Company recognized
restructuring and other related, one-time charges of
approximately $3,400,000 in the second quarter of fiscal
year 1995. Approximately $1,200,000 of these charges
related to severance pay, building lease terminations,
relocation costs and professional fees paid to outside
consultants. An additional $1,700,000 relates to write-offs
associated with computer hardware and software, insurance
premium adjustments and accounts receivable. The remaining
$500,000 of additional write-off relates to an inventory
adjustment at Henze.
As indicated above, management has been working with the
Company's lenders' representatives in formulating its
restructuring efforts and believes that these charges,
although painful, are appropriate at this time. Management
further believes that its consolidation efforts and its
commitment to strengthening its more profitable lines of
business will set the Company's path on a return to
profitability. In keeping with this approach and with the
consent of its lenders, the Company's Cannon Sline
operations acquired all of the fixed assets of the
Construction Services Division of Master Builders, Inc. on
April 28, 1995. This acquisition will supply Cannon Sline
with additional equipment and an opportunity to expand its
operations in the coatings application markets.
As to specific operations, both NSS Numanco and Cannon Sline
remained profitable for this second quarter. While IceSolv
was not profitable for the quarter, it continues to show
improvement. Henze's losses continued this quarter.
Management is increasing 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 continued
weakness at Henze, management does not expect the Company to
be profitable on a consolidated basis for the year.
PART II ITEM 4 SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on
February 15, 1995. The following actions were taken:
1) The following directors were re-elected to serve on the
Board of Directors of the Company until the next Annual
Meeting. Tabulated voting results were as follows:
Heath L. Allen (For 1,824,765; Against 39,120)
Dale L. Ferguson (For 1,833,369; Against 30,516)
Robert A. Hess (For 1,832,669; Against 31,216)
Donald E. Lyons (For 1,824,165; Against 39,720)
Thomas P. McShane (For 1,605,549; Against 258,336)
Wm. Lawrence Petcovic(For 1,802,965; Against 60,920)
Joe C. Quick (For 1,823,865; Against 40,020)
Ralph A. Trallo (For 1,825,080; Against 38,805)
2) KPMG Peat Marwick LLP was approved as the independent
auditing firm for the Company for the fiscal year ending
September 30, 1995. Tabulated voting results were: For
1,811,511; Against 10,712; Abstain 41,662.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Six Month
Period Ended March 31, 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.
May 15, 1995 /s/ Ralph A. Trallo
Ralph A. Trallo
President
Chief Operating Officer
Director
May 15, 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 1O-Q FOR THE PERIOD ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 363,802
<SECURITIES> 265,789
<RECEIVABLES> 17,889,509
<ALLOWANCES> 689,550
<INVENTORY> 1,199,942
<CURRENT-ASSETS> 24,885,349
<PP&E> 12,735,306
<DEPRECIATION> 6,189,455
<TOTAL-ASSETS> 33,414,230
<CURRENT-LIABILITIES> 24,818,136
<BONDS> 4,875,595
<COMMON> 6,190
0
0
<OTHER-SE> 3,714,309
<TOTAL-LIABILITY-AND-EQUITY> 33,414,230
<SALES> 44,588,585
<TOTAL-REVENUES> 44,588,585
<CGS> 38,363,590
<TOTAL-COSTS> 9,266,010
<OTHER-EXPENSES> 365,087
<LOSS-PROVISION> 357,000
<INTEREST-EXPENSE> 877,221
<INCOME-PRETAX> (4,640,323)
<INCOME-TAX> (1,856,129)
<INCOME-CONTINUING> (4,640,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,784,194)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
