UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 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 its Charter)
Virginia 54-0952207
(State of Incorporation) (IRS Employer Identification No.)
22 Northeast Drive, Hershey, PA 17033-2732
(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 February 13, 1996.
NUCLEAR SUPPORT SERVICES, INC.
PART I ITEM 1
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of
December 31, 1995 and September 30, 1995
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended December 31, 1995 and 1994
Unaudited Consolidated Statements of Cash Flows for
the Three Month Periods Ended December 31, 1995 and 1994
Notes to Unaudited Consolidated Financial Statements
PART I ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II ITEM 6
Exhibits and Reports on Form 8-K
<TABLE>
PART 1 ITEM 1 FINANCIAL STATEMENTS
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Assets
(Unaudited)
<CAPTION>
December 31, 1995 September 30, 1995
<S> <C> <C>
Current assets
Cash $952,114 $1,849,267
Accounts receivable:
Billed 17,949,348 19,990,695
Unbilled 184,124 333,723
Other 458,676 939,755
Total accounts receivable 18,592,148 21,264,173
Inventory 1,175,877 1,206,417
Recoverable taxes 106,000 106,000
Deferred income tax benefit 2,078,000 2,078,000
Other prepaid expenses
and current assets 1,357,470 1,574,447
Costs and estimated
earnings in excess
of billings on
uncompleted contracts 1,339,871 2,760,439
Total current assets 25,601,480 30,838,743
Property and equipment
Land 964,100 964,100
Buildings and improvements 1,944,675 1,986,786
Machinery and equipment 7,731,951 7,688,132
Furniture and fixtures 2,173,200 2,173,200
Vehicles 689,284 689,284
Total property and equipment 13,503,210 13,501,502
Less accumulated depreciation 7,139,316 6,828,442
Net property and equipment 6,363,894 6,673,060
Deferred income taxes 419,000 419,000
Excess of cost over net assets of
businesses acquired, net of
amortization of $551,354 and
$521,482, respectively 1,109,177 1,127,663
Other assets 72,370 330,799
Total assets $33,565,921 $39,389,265
</TABLE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<CAPTION>
December 31, 1995 September 30, 1995
<S> <C> <C>
Current liabilities:
Notes payable $3,608,345 $3,540,512
Note payable to bank 6,981,513 9,440,147
Current portion of long-term debt1,402,524 1,402,524
Accounts payable 896,994 3,193,796
Accrued expenses 3,942,737 5,047,114
Billings in excess of costs and
estimated earnings on
uncompleted contracts 1,444,371 779,721
Total current liabilities 18,276,484 23,403,814
Liabilities subject to
compromise under
reorganization proceedings 7,278,556 8,145,734
Long-term debt, less current
portion 4,184,000 4,184,000
Total liabilities 29,739,040 35,733,548
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 4,978,322 4,807,158
Treasury stock, at cost:
307,052 shares (4,630,137) (4,630,137)
Total shareholders' equity 3,826,881 3,655,717
Total liabilities and
shareholders' equity $33,565,921 $39,389,265
</TABLE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended December 31,
1995 1994
<S> <C> <C>
Revenues from services $21,056,009 $18,576,715
Cost of services 17,891,289 15,792,241
Gross margin 3,164,720 2,784,474
General and administrative
expenses 2,201,624 2,669,922
Income from continuing operations 963,096 114,552
Interest expense (409,593) (373,100)
Other income, net 37,675 25,262
Total other expense, net (371,918) (347,838)
Income (loss) before
reorganization costs
and income taxes 591,178 (233,286)
Reorganization costs (67,270) 0
Income (loss) from
continuing operations
before income taxes 523,908 (233,286)
Income tax expense (benefit) 209,563 (93,315)
Income (loss) from
continuing operations 314,345 (139,971)
Loss from operations of
discontinued subsidiary (143,181) (199,656)
Net earnings (loss) 171,164 (339,627)
Earnings per share
(Based upon 2,169,190
and 2,169,190
weighted average common and common
equivalent shares, respectively) $.08 (.16)
</TABLE>
<TABLE>
NUCLEAR SUPPORT SERVICES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net earnings (loss) $171,164 ($339,627)
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 329,360 374,867
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
Decrease in accounts receivable 2,672,025 2,208,717
Decrease (increase) in inventory 30,540 (67,859)
Decrease in costs and estimated
earnings in excess of billings
on uncompleted contracts 1,420,56 814,927
Decrease in other assets 475,406 1,693,407
Decrease in accounts payable
and accrued expenses (6,640,352) (4,236,772)
Increase in billings in
excess of costs
and estimated earnings on
uncompleted contracts 664,650 386,569
Net cash provided (used) by
operating activities (876,639) 34,229
Cash flows from
investing activities:
Net purchase of property
and equipment (1,708) (119,623)
Net cash used by investing
activities (1,708) (119,623)
Cash flows from financing activities:
Net borrowings (payments) on notes
payable 0 (540,272)
Principal payments on
long-term debt (18,806) (193,808)
Net cash (used by)
financing activities (18,806) (734,080)
Net (decrease) in cash (897,153) (819,474)
Cash at beginning of period 1,849,267 1,910,947
Cash at end of period $952,114 $1,091,473
</TABLE>
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 December 31, 1995 and September 30,
1995, and the results of operations for the three month
period ended December 31, 1995 and 1994.
(2) Company Debt
At December 31, 1995, the Company had borrowed
approximately $8,477,000 on its revolving credit line of
$18,000,000 and $0 outstanding principal balance on its
debtor-in-possession revolving credit agreement and had an
outstanding principal balance of $5,586,524 on its long term
secured loan obligation. The Company is in compliance with
the covenants under its debtor-in-possession financing
arrangement.
<TABLE>
(3) Supplementary Statements of Cash Flows Information
<CAPTION>
December 31, 1995 December 31, 1994
<S> <C> <C>
Cash paid during the
three month period for:
Interest $483,198 $225,056
Income taxes $10,457 $9,209
</TABLE>
PART 1, 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 lines
of credit and term debt.
As a result of losses recognized during fiscal year 1995, the
Company, as reported, was not in compliance with certain debt
covenants under its lending arrangement. At the end of August
1995, the participating lender and, in turn, the agent lender,
under the Company's financing agreement refused to continue
funding the Company's working capital line of credit. This
resulted in a cessation of cash flow necessary to fund
operations. In the first week of September 1995, the Company and
its subsidiaries filed voluntary bankruptcy petitions under
Chapter 11 reorganization in the U.S. Bankruptcy Court for the
Middle District of Pennsylvania in Harrisburg which are jointly
administered at Case Number 1-95-1767. This action became
necessary for the Company to gain access to its own cash for
continued operations. Subsequently, the Company was able to
obtain a $3,500,000 debtor-in-possession revolving line of credit
and to continue operations.
At December 31, 1995, the Company had borrowed approximately
$8,477,000 on its revolving credit line of $18,000,000; had an
outstanding principal balance of $5,586,524 on its long term
secured term loan obligation; had a zero balance outstanding on
its debtor-in-possession revolving credit agreement and had
approximately $1,495,000 of cash collateral on hand. The Notes
Payable to Bank of $6,982,000 on the consolidated balance sheet
is the revolving credit loan net of cash collateral. The Company
is in compliance with the covenants under its debtor-in-
possession financing arrangement.
At December 31, 1995, the Company had working capital of
approximately $7,325,000 compared to working capital of
$7,435,000 as of September 30, 1995. The minimal decrease in
working capital was due primarily to the collection of accounts
receivable offset by the paydown of the debtor-in-possession
revolving credit balance and current liabilities.
The Company anticipates that current working capital as of
December 31, 1995, cash provided by operations and available bank
credit will be sufficient to meet cash needs through April, 1996.
It also anticipates that improved operating results in 1996 and
completion of current negotiations with lenders will result in
obtaining a multi-year financing arrangement sufficient to allow
the Company to emerge from bankruptcy and to meet the Company's
cash needs in both the near and long term.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995
COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 1994
During 1995, the Company determined that the valve repair
business as then currently conducted by its Henze subsidiary, did
not fit the Company's future strategy. Steps have been taken to
divest of this activity and it is identified in the financial
statements as a discontinued operation. As a result, the line
items on the Company's Consolidated Statement of Operations for
the three months ended December 31, 1995 and 1994, from "Revenues
from services" through "Income (loss) from continuing operations"
(inclusive) are presented absent the effects of Henze's
operations (which are identified as discontinued operations and
presented as a separate line item on a net basis). Results from
continuing and discontinued operations are then combined to
produce net earnings. Results of operations for the three months
ended December 31, 1994 are restated accordingly. Management's
discussion and analysis focuses on the results and comparison of
continuing operations.
Revenues for this first quarter increased Two Million Four
Hundred Seventy-Nine Thousand ($2,479,000) or thirteen percent
(13%) to Twenty-One Million Fifty-Six Thousand ($21,056,000)
compared to the same period last year. The power generation
market produced revenues of Ten Million Nine Hundred Twenty-Two
Thousand ($10,922,000) or fifty-two percent (52%) of total
revenues compared to Ten Million Seven Hundred Eight Thousand
($10,708,000) or fifty-eight percent (58%) of total revenues in
the first quarter of 1995. The petro-chemical business accounted
for seventeen percent (17%) of 1996 first quarter revenues, the
same percentage share as in the first quarter of fiscal year
1995. The pulp and paper market accounted for seventeen percent
(17%) of first quarter 1996 revenues compared to twelve percent
(12%) for 1995 on the strength of several large turn-key
projects. The revenue contribution of all other businesses
collectively was fourteen percent (14%) compared to thirteen
percent (13%) for the same period last year. The first fiscal
quarter has historically been dominated by the power generation
market and the increase in the contribution rates of other
markets reflect the impact of the Company's diversification
strategy.
The consolidated gross margin for the period increased
approximately $400,000 or fourteen percent (14%) to Three Million
One Hundred Sixty-Five Thousand ($3,165,000) compared to the same
period last year. Margin contribution from the power generation
market increased to One Million Seven Hundred Forty-Five Thousand
($1,745,000) compared to One Million Three Hundred Thirty-Two
Thousand ($1,332,000) for the same period last year. This
performance is attributable to several contract services projects
with improved margins completed in the quarter. The margin
contribution from all other businesses combined was flat at
approximately One Million Four Hundred Thousand ($1,400,000)
compared to the same period last year.
General and administrative expenses for the quarter decreased
Four Hundred Sixty-Eight Thousand ($468,000) to Two Million Two
Hundred Two Thousand ($2,202,000) compared to the same period
last year. This decrease is mainly attributable to the Company's
restructuring efforts which began in the second quarter of fiscal
year 1995.
Income from operations was Nine Hundred Sixty-Three Thousand
($963,000) compared to One Hundred Fifteen Thousand ($115,000)
for the same period last year. The increase is attributable in
approximately equal measure to the Company's increase in revenues
and gross margin, and the reduction in overall general and
administrative expenses.
Restructuring expenses of Sixty-Seven Thousand ($67,000) were
incurred in the period. Interest expense was Four Hundred Ten
Thousand ($410,000) compared to Three Hundred Seventy-Three
Thousand ($373,000) for the same period in fiscal year 1995 due
to an interest rate increases on funds loaned to the Company.
Income taxes of Two Hundred Ten Thousand ($210,000) were accrued
for the period compared to a tax benefit of Ninety-Three Thousand
($93,000) for the same period in fiscal year 1995 as a result of
improvement in income from operations.
The net income from continuing operations for the first quarter
of fiscal year 1996 was Three Hundred Fourteen Thousand
($314,000) or $.14/share compared to a loss of One Hundred Forty
Thousand ($140,000) or ($.06)/share for the same period last
year. Losses attributable to discontinued operations were One
Hundred Forty-Three Thousand ($143,000) for the first fiscal
quarter of the current year compared to Two Hundred Thousand
($200,000) for the same period in fiscal year 1995. Combining
continuing and discontinued operations, the Company posted an
aggregate net income of One Hundred Seventy-One Thousand $171,000
or $.08/share compared to a loss of Three Hundred Forty Thousand
($340,000) or ($.16)/share for the comparable period last year.
This increase corresponds to the increases in revenue and gross
margin, the reduction of general and administrative expenses and
accrual of income taxes as opposed to a tax benefit in the same
period last year.
CURRENT TRENDS
On January 31, 1996, the Company filed its Reorganization Plan
and accompanying Joint Disclosure Statement. The Plan
anticipates full payment to the Companies creditors and includes
changes which simplify the corporate structure, making it more
cost effective. It also includes the divestiture of the
commercial nuclear power staff augmentation business of NSS
Numanco, Inc. and the asset sale of Henze Services, Inc. The
resulting organization will include Cannon Sline and IceSolv
reporting to a newly formed parent yet to be named. Our new
company will bear all the strengths of Nuclear Support Services,
Inc. but will shed the weaknesses brought about by the changing
nuclear power industry, the stigma of a name associated with the
nuclear market and the lower margins. A Letter of Intent to sell
the commercial nuclear power staff augmentation business of NSS
Numanco has been executed and petitions to approve the sale have
been filed with the Bankruptcy Court. Negotiations with
prospective buyers of the assets of Henze are ongoing, but a
definitive agreement has not yet been reached.
The remaining operating companies will be stronger and more
efficient. Cannon and Sline will be legally merged. IceSolv's
expanded role will result in an economy of scale needed to allow
the business to grow. While each of the operating companies
retain their core competency, each have the capability to provide
the total range of services provided by the other.
Administratively, all subsidiaries will be operating on the same
data processing system and internal controls. This will provide
real time reporting, affording operations management the tools to
react quickly to changing conditions.
The seasonality of our new company should shift from a bar bell
to a traditional bell curve with the slowest period expected to
be in the first calendar quarter and the peak of our season
expected to be late summer. This shift in business seasonality
warrants the change of our fiscal year to a March 31 ending.
Management is taking the necessary steps to affect this change
under the Plan of Reorganization.
An implementation date of the Plan of Reorganization of April 1,
1996 is anticipated subject to certain contingencies including
the successful sale of assets, negotiation of a replacement
credit facility and ultimate approval of the Plan by the court.
The Company expects substantial costs associated with the outside
professional support required by the bankruptcy proceeding in the
second quarter of 1996. It is anticipated that these costs will
further depress net earning in the period which is normally the
lowest of the Company's business cycle.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Three Month Period
Ended December 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities and 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.
February 13, 1996 /s/ Ralph A. Trallo
Ralph A. Trallo
President
Chief Executive Officer
Director
February 13, 1996 /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 10Q FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 952,114
<SECURITIES> 0
<RECEIVABLES> 19,178,742
<ALLOWANCES> (586,594)
<INVENTORY> 1,175,877
<CURRENT-ASSETS> 25,601,480
<PP&E> 13,503,210
<DEPRECIATION> 7,139,316
<TOTAL-ASSETS> 33,565,921
<CURRENT-LIABILITIES> 18,276,484
<BONDS> 4,184,000
0
0
<COMMON> 6,190
<OTHER-SE> 3,820,691
<TOTAL-LIABILITY-AND-EQUITY> 33,565,921
<SALES> 0
<TOTAL-REVENUES> 21,056,009
<CGS> 17,891,289
<TOTAL-COSTS> 2,201624
<OTHER-EXPENSES> 29,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 409,593
<INCOME-PRETAX> 523,908
<INCOME-TAX> 209,563
<INCOME-CONTINUING> 314,345
<DISCONTINUED> (143,181)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 171,164
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
