<PAGE> 1
(conformed)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998 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 0-13667
PDG ENVIRONMENTAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2677298
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
300 OXFORD DRIVE, MONROEVILLE, PENNSYLVANIA 15146
(Address of principal executive offices) (Zip Code)
412-856-2200
(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
------ -------
As of September 3, 1998, there were 7,463,572 shares of the registrant's common
stock outstanding.
<PAGE> 2
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements
(a) Condensed Consolidated Balance Sheets as of July 31, 1998 (unaudited) and January
31, 1998 3
(b) Consolidated Statements of Operations for the Three Months Ended July 31, 1998
and 1997 (unaudited) 4
(c) Consolidated Statements of Operations for the Six Months Ended July 31, 1998 and
1997 (unaudited) 5
(d) Consolidated Statements of Cash Flows for the Six Months Ended July 31, 1998 and
1997 (unaudited) 6
(e) Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998*
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 531,000 $ 892,000
Accounts receivable - net 7,945,000 6,751,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 1,033,000 725,000
Inventory 236,000 202,000
Other current assets 503,000 426,000
------------ ------------
TOTAL CURRENT ASSETS 10,248,000 8,996,000
PROPERTY, PLANT AND EQUIPMENT 4,758,000 4,527,000
Less: accumulated depreciation (3,722,000) (3,558,000)
------------ ------------
1,036,000 969,000
OTHER ASSETS 432,000 372,000
------------ ------------
TOTAL ASSETS $ 11,716,000 $ 10,337,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,876,000 $ 3,746,000
Accrued liabilities 2,063,000 1,416,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,181,000 842,000
Current portion of long-term debt 187,000 198,000
------------ ------------
TOTAL CURRENT LIABILITIES 6,307,000 6,202,000
OTHER LONG-TERM LIABILITIES 140,000 140,000
LONG-TERM DEBT 619,000 1,628,000
MINORITY INTEREST 227,000 102,000
Stockholders' Equity
Cumulative convertible 2% preferred stock 400,000 400,000
Common stock 149,000 130,000
Additional paid-in capital 5,691,000 4,571,000
Deficit (1,817,000) (2,836,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,423,000 2,265,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,716,000 $ 10,337,000
============ ============
*Derived from audited financial statements.
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 4
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JULY 31,
-----------------------------
1998 1997
------------- -----------
<S> <C> <C>
CONTRACT REVENUES $ 10,844,000 $ 5,310,000
CONTRACT COSTS 9,256,000 4,409,000
------------ -----------
Gross margin 1,588,000 901,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 652,000 591,000
------------ -----------
Income from operations 936,000 310,000
OTHER INCOME (EXPENSE):
Interest expense (34,000) (54,000)
Interest income 2,000 6,000
Other income - 9,000
------------ -----------
(32,000) (39,000)
------------ -----------
Income before income taxes, minority interest and
discontinued operations 904,000 271,000
INCOME TAX PROVISION (20,000) (5,000)
MINORITY INTEREST (226,000) -
------------ -----------
INCOME BEFORE DISCONTINUED OPERATIONS 658,000 266,000
DISCONTINUED OPERATIONS:
Litigation settlement (200,000) -
------------ -----------
NET INCOME $ 458,000 $ 266,000
============ ===========
PER SHARE OF COMMON STOCK - BASIC:
Income before discontinued operations $ 0.09 $ 0.04
Discontinued operations (0.03) -
------------ -----------
Net income per share $ 0.06 $ 0.04
============ ===========
PER SHARE OF COMMON STOCK - DILUTIVE:
Income before discontinued operations $ 0.08 $ 0.04
Discontinued operations (0.02) -
------------ -----------
Net income per share $ 0.06 $ 0.04
============ ===========
AVERAGE COMMON SHARES OUTSTANDING 7,047,000 5,941,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING 1,565,000 1,081,000
------------ -----------
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,612,000 7,022,000
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 5
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
---------------------------------
1998 1997
--------------- ------------
<S> <C> <C>
CONTRACT REVENUES $ 24,195,000 $ 9,799,000
CONTRACT COSTS 20,858,000 8,069,000
------------ -----------
Gross margin 3,337,000 1,730,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,426,000 1,218,000
------------ -----------
Income from operations 1,911,000 512,000
OTHER INCOME (EXPENSE):
Interest expense (92,000) (107,000)
Interest income 4,000 9,000
Other income - 20,000
------------ -----------
(88,000) (78,000)
------------ -----------
Income before income taxes, minority interest and
discontinued operations 1,823,000 434,000
INCOME TAX PROVISION (40,000) (10,000)
MINORITY INTEREST (564,000) -
------------ -----------
Income before discontinued operations 1,219,000 424,000
DISCONTINUED OPERATIONS:
Litigation settlement (200,000) -
------------ -----------
NET INCOME $ 1,019,000 $ 424,000
============ ===========
PER SHARE OF COMMON STOCK - BASIC:
Income before discontinued operations $ 0.18 $ 0.07
Discontinued operations (0.03) -
------------ -----------
Net income per common share $ 0.15 $ 0.07
============ ===========
PER SHARE OF COMMON STOCK - DILUTIVE:
Income before discontinued operations $ 0.15 $ 0.06
Discontinued operations (0.02) -
------------ -----------
Net income per common share $ 0.13 $ 0.06
============ ===========
AVERAGE COMMON SHARES OUTSTANDING 6,776,000 5,932,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING 1,602,000 1,042,000
------------ -----------
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,378,000 6,974,000
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
--------------------------
1998 1997
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,019,000 $ 424,000
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO CASH:
Depreciation and amortization 290,000 171,000
Minority interest 125,000 -
Other - 1,000
CHANGES IN ASSETS AND LIABILITIES
OTHER THAN CASH:
Accounts receivable (1,194,000) (649,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (308,000) (248,000)
Inventory (34,000) 13,000
Other current assets 234,000 155,000
Accounts payable (1,181,000) 105,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 339,000 345,000
Accrued liabilities 647,000 308,000
Other - (18,000)
----------- ---------
TOTAL ADJUSTMENTS IN ASSETS AND LIABILITIES (1,497,000) 11,000
----------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (63,000) 607,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (247,000) (233,000)
Proceeds from the sale of property, plant and equipment - 1,000
----------- ---------
NET CASH USED BY INVESTING ACTIVITIES (247,000) 232,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants 969,000 29,000
Proceeds from debt - 400,000
Principal payments on debt (1,020,000) (441,000)
----------- ---------
NET CASH USED BY FINANCING ACTIVITIES (51,000) (12,000)
----------- ---------
Net Increase (Decrease) in Cash and Short-Term Investments (361,000) 363,000
Cash and Short-Term Investments, Beginning of Period 892,000 429,000
----------- ---------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 531,000 $ 792,000
=========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE> 7
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include PDG Environmental, Inc. (the
"Corporation") and its wholly-owned subsidiaries. Additionally, the results of
PDG/Philip, L.P. (the "Venture") in which the Corporation holds a 60% interest,
are consolidated since the Corporation is the majority owner of the Venture and
exercises day-to-day operating control.
The accompanying financial statements of the Corporation are unaudited and
prepared in accordance with generally accepted accounting principles which
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates. In the opinion of management, the financial
statements include all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows. All adjustments made
during the three and six months ended July 31, 1998 were of a normal, recurring
nature. The amounts presented for the three and six months ended July 31, 1998
are not necessarily indicative of results of operations for a full year.
Additional information is contained in the Annual Report on Form 10-KSB of the
Corporation for the year ended January 31, 1998 dated March 26, 1998 and
Quarterly Report on Form 10-QSB of the Corporation for the quarter ended April
30, 1998 dated June 12, 1998, and should be read in conjunction with this
quarterly report.
The Corporation does not have any items which would require adjustments to
arrive at comprehensive income.
NOTE 2 - FEDERAL INCOME TAXES
No federal income taxes have been provided for the three and six months ended
July 31, 1998 due to the existence of unused net operating loss carryforwards.
The Company has recorded a provision for state income taxes.
Income taxes paid by the Corporation for the six months ended July 31, 1998 and
1997 totaled approximately $13,000 and $6,000, respectively.
NOTE 3 - DEBT
On August 25, 1997, the Corporation closed on a new $2 million credit facility
consisting of a 5-year $0.5 million equipment note and a 3-year revolving line
of credit with a maximum advance of $1.5 million. Both the equipment note and
the line of credit have an interest rate of prime plus 3.5%.
The proceeds of the new financing fully satisfied the remaining outstanding
balance on the Drummond line of credit and provide working capital for the
Corporation. As of July 31, 1998, the outstanding balance on the revolving line
of credit was zero.
During fiscal 1996, the registrant entered into two agreements guaranteeing a
former subsidiary, PDG Remediation ("PDGR") now ICHOR Corporation's ("ICHOR")
accounts receivable financed by Sirrom Environmental Funding, LLC ("Sirrom"). At
July 31, 1998, the balance guaranteed by the Corporation under the two
agreements was approximately $115,000. It is expected that the remaining
outstanding receivables covered by the guarantee will be paid by ICHOR's
customer during the remainder of Fiscal 1999, eliminating the registrant's
remaining guarantee.
The Corporation paid interest costs totaling approximately $48,000 and $54,000
during the six months ended July 31, 1998 and 1997, respectively.
7
<PAGE> 8
NOTE 4 - PREFERRED STOCK
Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock
were approximately $166,000 at July 31, 1998. At July 31, 1998, there were
167,338 shares of Series A Preferred Stock outstanding. The Series A Preferred
Stock is convertible into four shares of the Corporation's common stock at the
option of the preferred stockholder.
The conversion rate on the Series A Preferred Stock is also subject to
adjustment as a result of certain changes in the Corporation's capital structure
or distributions to common stockholders (except for cash dividends permissible
under law).
In September 1998, 64,684 shares of Series A Preferred Stock were converted into
284,351 shares of common stock.
NOTE 5 - NET EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share from continuing operations:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
1998 1997
-----------------------------
<S> <C> <C>
NUMERATOR:
Income from continuing operations $ 1,219,000 $ 424,000
Preferred stock dividends (17,000) (19,000)
----------- -----------
Numerator for basic earnings per share--income available
to common stockholders 1,202,000 405,000
Effect of dilutive securities:
Preferred stock dividends 17,000 19,000
----------- -----------
Numerator for diluted earnings per share--income available to
common stock after assumed conversions 1,219,000 424,000
----------- -----------
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 6,776,000 5,932,000
Effect of dilutive securities:
Employee stock options 811,000 179,000
Warrants 55,000 66,000
Convertible preferred stock 736,000 797,000
----------- -----------
Dilutive potential common shares 1,602,000 1,042,000
----------- -----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,378,000 6,974,000
=========== ===========
BASIC EARNINGS PER SHARE $ 0.18 $ 0.07
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.15 $ 0.06
=========== ===========
</TABLE>
8
<PAGE> 9
The following table sets forth the computation of basic and diluted earnings per
share from continuing operations:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JULY 31,
1998 1997
---------------------------
NUMERATOR:
<S> <C> <C>
Net Income $ 658,000 $ 266,000
Preferred stock dividends (8,000) (9,000)
----------- -----------
Numerator for basic earnings per share--income available
to common stockholders 650,000 257,000
Effect of dilutive securities:
Preferred stock dividends 8,000 9,000
----------- -----------
Numerator for diluted earnings per share--income available to
common stock after assumed conversions 658,000 266,000
----------- -----------
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 7,047,000 5,941,000
Effect of dilutive securities:
Employee stock options 777,000 211,000
Warrants 52,000 73,000
Convertible preferred stock 736,000 797,000
----------- -----------
Dilutive potential common shares 1,565,000 1,081,000
----------- -----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,612,000 7,022,000
=========== ===========
BASIC EARNINGS PER SHARE $ 0.09 $ 0.04
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.08 $ 0.04
=========== ===========
</TABLE>
NOTE 6 - LITIGATION SETTLEMENT
As discussed in further detail in Item 3. Legal Proceedings contained in the
Corporation's Annual Report on Form 10-KSB for the year ended January 31, 1998,
the Corporation, PDGR, certain of PDGR's officers and directors and the
underwriters of PDGR's initial public offering have been named as defendants in
a purported class action lawsuit involving the purchase by all persons and
entities of PDGR's common stock from February 9, 1995, through May 23, 1995. The
action alleges that the defendants violated certain federal securities laws.
On June 8, 1998 an agreement in principle to settle the litigation was reached
with the plaintiffs' attorneys. Approval by both the Court and members of the
class is still required. If approved, the Defendants, PDG Environmental and
ICHOR (formerly PDG Remediation), will pay a total of $432,500 to settle the
lawsuit. PDG Environmental's share of the settlement will be $173,000.
Additionally, the Corporation incurred $27,000 of legal expenses in relation to
the litigation. The $200,000 expense is reflected in the financial statements as
a discontinued operations item as it relates to ICHOR which was accounted for as
a discontinued operation.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1998 AND 1997
The Corporation's contract revenues increased by approximately 104% to $10.8
million during the three months ended July 31, 1998 ("Fiscal 1999") compared to
$5.3 million in the three months ended July 31, 1997 ("Fiscal 1998"). The
increase in revenues was due to the Corporation entering the current fiscal year
with a greater backlog of contracts and the significant contribution to revenue
that the $12 million Keystone contract made in the current quarter.
The Corporation's gross margin increased to $1.6 million in the second quarter
of fiscal 1999 compared to $0.9 million in the second quarter of fiscal 1998.
The increase in gross margin was attributable to the aforementioned increase in
contract revenue. The gross margin as a percentage of revenue decreased as,
traditionally, larger contracts are bid at lower margins.
Selling, general and administrative expenses increased to $0.65 million in the
three months ended July 31, 1998 compared to $0.59 million in the three months
ended July 31, 1997. The increase is primarily attributable to the addition of a
new branch office and the personnel necessary to support a higher level of
activity.
As a result of the factors described above, the Corporation reported income from
operations of $0.9 million in the current three month period compared to income
from operations of $0.3 million for the same three months of the prior fiscal
year.
The Corporation's interest expense decreased to $34,000 for the three months
ended July 31, 1998 from $54,000 for the three months ended July 31, 1997. The
Corporation's interest expense decreased due to a significant decrease in the
balance of indebtedness as compared to the prior fiscal quarter. There were no
outstanding borrowings on the line of credit as of July 31, 1998 as compared to
$1.5 million at July 31, 1997.
During the three months ended July 31, 1998 and 1997, the Corporation made no
provision for federal income taxes due to the utilization of net operating loss
carryforwards for financial reporting purposes. The Corporation recorded state
income tax provisions of $20,000 and $5,000 during the three months ended July
31, 1998 and 1997, respectively.
Income from continuing operations for the three month period ending July 31,
1998 was $658,000 as compared to $266,000 for the same three months of the prior
quarter.
The $200,000 loss from discontinued operations relates to the agreement in
principal reached June 8, 1998 with the plaintiffs in the proported class
action. The Corporation's share of the settlement is $173,000. Additionally, the
Corporation incurred $27,000 of legal expenses in relation to the litigation.
SIX MONTHS ENDED JULY 31, 1998 AND 1997
The Corporation's contract revenues increased by approximately 147% to $24.2
million for the six months ended July 31, 1998 compared to $9.8 million for the
six months ended July 31, 1998.
The increase in revenues was due to the Corporation entering the current fiscal
year with a greater backlog of contracts and the significant contribution to
revenue that the $12 million Keystone contract made in the current period.
The gross margin reported by the Corporation in the six months ended July 31,
1998 increased to $3.3 million compared to $1.7 million for the six months ended
July 31, 1997. The increase in gross margin related to the aforementioned
increase in contract revenue. The gross margin as a percentage of revenue
decreased as, traditionally, larger contracts are bid at lower margins.
10
<PAGE> 11
Selling, general and administrative expenses reported by the Corporation for the
six months ended July 31, 1998 increased to $1.4 million as compared to $1.2
million for the same six month period of the prior fiscal year. The increase is
primarily attributable to the addition of two new branch offices in Fiscal 1999
and the personnel necessary to support a higher level of activity.
The Corporation reported income from operations of $1.9 million in the six
months ended July 31, 1998 as a result of the factors discussed above compared
to an increase from operations of $0.5 million in the same six month period last
year.
Interest expense decreased to $0.09 million in the current six month period
compared to $0.11 million in the six months ended July 31, 1997 due to a
significant decrease in the balance of indebtedness as compared to the prior
fiscal year.
Interest income totaled $4,000 for the current six month period versus $9,000 in
the same six month period of the prior fiscal year due to higher invested cash
balances. Other income in the prior six month period was primarily generated
from rental of equipment.
No provisions for federal income taxes were made during the six months ended
July 31, 1998 and 1997 due to the utilization of net operating loss
carryforwards for financial reporting purposes. State income tax provisions of
$40,000 and $10,000 were made for the six-month periods ending July 31, 1998 and
1997, respectively.
Income from continuing operations for the six month period ending July 31, 1998
was $1,219,000 as compared to $424,000 for the same three months of the prior
quarter.
The $200,000 loss from discontinued operations relates to the agreement in
principal reached June 8, 1998 with the plaintiffs in the proported class
action. The Corporation's share of the settlement is $173,000. Additionally, the
Corporation incurred $27,000 of legal expenses in relation to the litigation.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity decreased during the six months ended July 31, 1998
as cash and short-term investments decreased by $0.36 million to $0.53 million
compared to an increase in cash and short-term investments of $0.36 million in
the six months ended July 31, 1997.
The decrease in fiscal 1998 was due to a $0.06 million cash outflow from
operating activities, a $0.25 million outflow related to investing activities
and a $0.05 million outflow associated with financing activities.
Cash outflows from operating activities of $0.06 million in the six months ended
July 31, 1998 included a $1.2 million increase in accounts receivable, a $0.3
million increase in costs and estimated earnings in excess of billings on
uncompleted contracts related to the timing of certain contract activity and a
$1.2 million decrease in accounts payable. The aforementioned cash outflows from
operating activities were offset, in part, by net income of $1 million generated
during the six month period, a $0.2 million decrease in other current assets, a
$0.6 million increase in accrued liabilities due to the timing of payments, a
$0.3 million decrease in billings in excess of costs and estimated earnings on
uncompleted contracts and $0.3 million of depreciation and amortization.
Cash outflows associated with financing activities during the six months
included $0.97 million of proceeds from the exercise of stock options and
warrants which was offset by $1 million of principal payments and reduction of
the outstanding balance on the line of credit.
The Corporation's cash outflows from investing activities of $0.25 million in
the six months ended July 31, 1998 was attributable to the purchase of property,
plant and equipment.
The Corporation's liquidity increased during the six months ended July 31, 1997
as cash and short-term investments increased by $0.36 million to $0.79 million
11
<PAGE> 12
During the six months ended July 31, 1997, the $0.36 million increase in the
Corporation's liquidity resulted from cash used by operating activities of $0.6
million. This cash inflow was offset in part by cash utilized by investing
activities of $0.23 million and cash utilized by financing activities of $0.01
million.
The Corporation's cash inflows of $0.6 million from operating activities
principally included net income of $0.42 million generated during the period,
depreciation and amortization of $0.17 million, a $0.16 million decrease in
other assets, a $0.1 million increase in accounts payable, a $0.35 million
increase in billing in excess of costs and estimated earnings on uncompleted
costs and a $0.31 million increase in accrued liabilities. These cash inflows
were partially offset by a $0.65 million increase in accounts receivable
reflecting the related increase in revenues and a $0.25 million increase in
costs and estimated earnings in excess of billings on uncompleted contracts.
During the six months ended July 31, 1997, cash outflows associated with
investing activities of $0.23 million were due to the purchase of property,
plant and equipment.
The Corporation's cash outflows related to financing activities included $0.44
million of debt repayments offset by $0.4 million in proceeds of new debt
(primarily the $0.375 million received from the refinancing of a $289,000 term
loan) and $0.03 million from the exercise of employee stock options.
At July 31, 1998, the Corporation's backlog associated with its asbestos
abatement business totaled $15.1 million ($6.6 million on fixed fee contracts
and $8.5 million on time and materials or unit price contracts).
12
<PAGE> 13
PART II-- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the action captioned Klein v. PDG Remediation, Inc., described
-------------------------------
in the Corporation's Form 10-KSB for the year ended January 31, 1998.
On June 8, 1998 an agreement in principle to settle the class action litigation
was reached with the plaintiffs' attorneys. Approval by both the Court and
members of the class is still required. If approved, the Defendants, PDG
Environmental and ICHOR (formerly PDG Remediation), will pay a total of $432,500
to settle the lawsuit. PDG Environmental's share of the settlement will be
$173,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The registrant is currently in arrears with respect to the payment of dividends
on its Series A Preferred Stock. At July 31, 1998, the cumulative dividends in
arrears on the Series A Preferred Stock were approximately $166,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ANNUAL MEETING OF STOCKHOLDERS
On July 15, 1998 the Annual Meeting of the Stockholders of PDG Environmental,
Inc. was held in Pittsburgh, PA. At the meeting all of management's nominees
were elected directors of the Corporation with the following vote:
Votes For 6,625,252 to 6,634,324
Votes Against 19,636 to 28,708
Ernst & Young, LLP was reelected as the Corporation's auditors as follows:
Votes For 6,807,831
Votes Against 4,433
Abstained 124,763
The Amendment to the Corporation's Incentive Stock Option Plan was approved
as follows:
Votes For 6,463,179
Votes Against 255,788
Abstained 156,149
Not Voting 61,912
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT INDEX
EXHIBIT NO. AND DESCRIPTION
PAGES OF SEQUENTIAL
NUMBERING SYSTEM
27 Financial Data Schedule
(b) The registrant did not file any current reports on Form 8-K during
the three months ended July 31, 1998.
13
<PAGE> 14
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.
PDG ENVIRONMENTAL, INC.
By /s/JOHN C. REGAN
----------------------------------
John C. Regan
Chairman and Chief Executive Officer
Date: September 11, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 531,000
<SECURITIES> 0
<RECEIVABLES> 7,945,000
<ALLOWANCES> 0
<INVENTORY> 236,000
<CURRENT-ASSETS> 10,248,000
<PP&E> 4,758,000
<DEPRECIATION> 3,722,000
<TOTAL-ASSETS> 11,716,000
<CURRENT-LIABILITIES> 6,307,000
<BONDS> 619,000
0
400,000
<COMMON> 149,000
<OTHER-SE> 3,874,000
<TOTAL-LIABILITY-AND-EQUITY> 11,716,000
<SALES> 24,195,000
<TOTAL-REVENUES> 24,195,000
<CGS> 20,858,000
<TOTAL-COSTS> 20,858,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,000
<INCOME-PRETAX> 1,259,000
<INCOME-TAX> 40,000
<INCOME-CONTINUING> 1,219,000
<DISCONTINUED> 200,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,019,000
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.13
</TABLE>
