<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 APRIL 30, 1999 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 June 8, 1999, there were 8,407,196 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 April 30, 1999 (unaudited) and
January 31, 1999 3
(b) Consolidated Statements of Operations for the Three Months Ended April 30, 1999
and 1998 (unaudited) 4
(c) Consolidated Statements of Cash Flows for the Three Months Ended April 30, 1999
and 1998 (unaudited) 5
(d) Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999*
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 55,000 $ 309,000
Accounts receivable - net 5,374,000 5,233,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 1,245,000 1,058,000
Inventory 242,000 298,000
Other current assets 485,000 252,000
----------- -----------
TOTAL CURRENT ASSETS 7,401,000 7,150,000
PROPERTY, PLANT AND EQUIPMENT 5,311,000 5,207,000
Less: accumulated depreciation (4,059,000) (3,948,000)
----------- -----------
1,252,000 1,259,000
OTHER ASSETS 1,051,000 1,155,000
----------- -----------
TOTAL ASSETS $ 9,704,000 $ 9,564,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,652,000 $ 1,506,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 836,000 673,000
Current portion of long-term debt 168,000 174,000
Accrued liabilities 896,000 1,290,000
----------- -----------
TOTAL CURRENT LIABILITIES 3,552,000 3,643,000
OTHER LONG-TERM LIABILITIES 404,000 404,000
LONG-TERM DEBT 1,150,000 716,000
MINORITY INTEREST -- --
Stockholders' Equity
Cumulative convertible 2% preferred stock 14,000 14,000
Common stock 169,000 168,000
Additional paid-in capital 7,409,000 7,395,000
(Deficit) retained earnings (2,969,000) (2,751,000)
Less treasury stock (25,000) (25,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,598,000 4,801,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,704,000 $ 9,564,000
=========== ===========
</TABLE>
*Derived from audited financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED APRIL 30,
-----------------------------
1999 1998
---------- -----------
<S> <C> <C>
CONTRACT REVENUES $5,153,000 $13,351,000
CONTRACT COSTS 4,385,000 11,602,000
---------- -----------
Gross margin 768,000 1,749,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 959,000 774,000
---------- -----------
Income (loss) from operations (191,000) 975,000
OTHER INCOME (EXPENSE):
Interest expense (29,000) (57,000)
Interest income 2,000 2,000
---------- -----------
(27,000) (55,000)
---------- -----------
Income (loss) before income taxes and minority interest (218,000) 920,000
INCOME TAX PROVISION -- (20,000)
MINORITY INTEREST -- (339,000)
---------- -----------
NET INCOME (LOSS) $ (218,000) $ 561,000
========== ===========
PER SHARE OF COMMON STOCK:
BASIC $ (0.03) $ 0.09
========== ===========
DILUTIVE $ (0.03) $ 0.07
========== ===========
AVERAGE COMMON SHARES EQUIVALENTS OUTSTANDING 8,391,000 6,497,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS
OUTSTANDING -- 1,948,000
---------- -----------
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,391,000 8,445,000
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED APRIL 30,
----------------------------
1999 1998
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(218,000) $ 561,000
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO CASH:
Depreciation and amortization 223,000 162,000
Minority Interest -- 339,000
Other -- (1,000)
CHANGES IN ASSETS AND LIABILITIES
OTHER THAN CASH:
Accounts receivable (141,000) (3,071,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (187,000) 75,000
Inventory 56,000 1,000
Other current assets 51,000 91,000
Accounts payable (138,000) 1,085,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 163,000 548,000
Accrued liabilities (394,000) 439,000
--------- -----------
(590,000) (832,000)
--------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (585,000) 229,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (112,000) (109,000)
--------- -----------
NET CASH USED BY INVESTING ACTIVITIES (112,000) (109,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 475,000 --
Principal payments on debt (47,000) (495,000)
Proceeds from Exercise of Stock Options & Warrants 15,000 52,000
--------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 443,000 (443,000)
--------- -----------
Net Increase (Decrease) in Cash and Short-Term Investments (254,000) (323,000)
Cash and Short-Term Investments, Beginning of Period 309,000 892,000
--------- -----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 55,000 $ 569,000
========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 1999
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include PDG Environmental, Inc.'s (the
"Corporation") and its wholly-owned subsidiaries. Additionally, the results of
PDG/Philip, LP (the "Venture"), in which the Corporation held a 60% interest,
are consolidated into the fiscal 1999 amounts, since the Corporation was the
majority owner of the Venture and exercised day-to-day operating control. The
contract was completed in the second quarter of fiscal 1999, and the Venture was
dissolved by January 31, 1999.
The accompanying consolidated financial statements of the Corporation are
unaudited. However, in the opinion of management, they include all adjustments
necessary for a fair presentation of financial position, results of operations
and cash flows. All adjustments made during the three months ended April 30,
1999 were of a normal, recurring nature. The amounts presented for the three
months ended April 30, 1999 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, 1999
dated April 1, 1999, which should be read in conjunction with this quarterly
report.
NOTE 2 - FEDERAL INCOME TAXES
No federal income tax has been provided for the three months ended April 30,
1999 due to the loss in the current period and the existence of unused net
operating loss carryforwards. No state income taxes were provided due the loss
in the current period.
Income taxes paid by the Corporation for the three months ended April 30, 1999
and 1998 totaled approximately $35,000 and $13,000, respectively.
NOTE 3 - LINE OF CREDIT
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%. As of April 30,
1999, the outstanding balance on the new revolving line of credit was $654,000.
During fiscal 1996, the registrant entered into two agreements guaranteeing
ICHOR Corporation's ("ICHOR") accounts receivable financed by Sirrom
Environmental Funding, LLC ("Sirrom"). At April 30, 1999, the balance guaranteed
by the Corporation under the two agreements was approximately $130,000. It is
expected that the remaining outstanding receivables covered by the guarantee
will be paid by ICHOR's customer during the first half of Fiscal 2000,
eliminating the registrant's remaining guarantee.
The Corporation paid interest costs totaling approximately $29,000 and $36,000
during the three months ended April 30, 1999 and 1998, respectively.
NOTE 4 - PREFERRED STOCK
Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock
were approximately $7,000 at April 30, 1999. At April 30, 1999, there were 6,000
shares of Series A Preferred Stock outstanding. Each share of 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).
6
<PAGE> 7
NOTE 5 - NET EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED APRIL 30,
1999 1998
-----------------------------
<S> <C> <C>
NUMERATOR:
Net Income (loss) $ (218,000) $ 561,000
Preferred stock dividends -- (8,000)
---------- ----------
Numerator for basic earnings per share--income available
to common stockholders (218,000) 553,000
Effect of dilutive securities:
Preferred stock dividends -- 8,000
---------- ----------
Numerator for diluted earnings per share--income available to
common stock after assumed conversions (218,000) 561,000
---------- ----------
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 8,391,000 6,497,000
Effect of dilutive securities:
Employee stock options -- 860,000
Warrants -- 356,000
Convertible preferred stock -- 732,000
---------- ----------
Dilutive potential common shares -- 1,948,000
---------- ----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,391,000 8,445,000
========== ==========
BASIC EARNINGS PER SHARE $ (0.03) $ 0.09
========== ==========
DILUTED EARNINGS PER SHARE $ (0.03) $ 0.07
========== ==========
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
During the three months ended April 30, 1999 ("Fiscal 2000"), the Corporation's
contract revenues decreased to $5.2 million compared to $13.4 million in the
three months ended April 30, 1998 ("Fiscal 1999"). The decrease was due to the
Corporation entering the prior fiscal year with a greater backlog of contracts
and a $7.2 million contribution to revenue that the $12 million Keystone
contract made in the first quarter of the prior year.
The Corporation's gross margin decreased to $0.8 million in the first quarter of
fiscal 2000 compared to $1.7 million in the first quarter of fiscal 1999. The
decrease in gross margin in total is due to decreased levels of revenues. The
contract margin as a percentage of revenue increased as, traditionally, larger
contracts are bid at lower margins.
Selling, general and administrative expenses increased to $0.96 million in the
three months ended April 30, 1999 compared to $0.77 million in the same quarter
of the previous fiscal year. During the current fiscal quarter, the Corporation
had two additional branch offices. Additionally, the Company incurred $0.06
million in the current fiscal quarter for the amortization of intangibles which
were not in existence during the prior year's fiscal first quarter. These
intangibles are related to the acquisition in November, 1998 of operations
located in St. Louis and Chicago.
The Corporation reported a loss from operations of $0.2 million for the three
months ended April 30, 1999 compared to income from operations of $1.0 million
for the three months ended April 30, 1998 as a direct result of the factors
discussed above.
Interest expense decreased to $0.03 million in the current quarter as compared
to $0.06 million in the same quarter of a year ago.
During the quarter ended April 30, 1999 and 1998, the Corporation made no
provision for federal income taxes due to the utilization of net operating loss
carryforwards for financial reporting purposes. No state income tax provision
was made in the current quarter due to the loss while a state income tax
provision of $20,000 was made in the prior fiscal quarter.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended April 30, 1999, the Corporation's cash decreased
by $0.25 million to $0.06 million.
Cash flows used by operating activities totaled $0.6 million in the three months
ended April 30, 1999. Cash outflows included $0.2 million related to net loss
during the current three months, a $0.1 million increase in accounts
receivables, a $0.2 million increase in costs and estimated earnings in excess
of billings on uncompleted contracts and a $0.1 million decrease in accounts
payable and a $0.4 million decrease in accrued liabilities related to the timing
of payments. These cash outflows were partially offset by cash inflows which
principally included a $0.2 million of depreciation and amortization and a $0.2
million increase in billings in excess of costs and estimated earnings on
uncompleted contracts.
The decrease in cash and short term investments during the first quarter of
fiscal 2000 is attributable to cash outflows from operations of $0.6 million.
The cash outflows relative to investing activities were for the purchase of
property, plant and equipment ($0.1 million), and the cash outflows relating to
financing activities were for the repayment of debt ($0.05 million). These
outflows were partially offset by $0.5 million of net borrowings of the line of
credit and $0.02 million from the exercise of stock options.
8
<PAGE> 9
During the three months ended April 30, 1998, the Corporation's cash decreased
by $0.32 million to $0.57 million compared to an increase in cash and short-term
investments of $0.34 million in the three months ended April 30, 1997.
Cash generated from operating activities totaled $0.2 million in the three
months ended April 30, 1998. Cash inflows included $0.6 million related to net
income generated during the current three months, $0.1 million due to a decrease
in other current assets, a $1.1 million increase in accounts payable, primarily
associated with the Keystone project, a $0.5 million increase in billings in
excess of costs and estimated earnings on uncompleted contracts, a $0.4 million
increase in accrued liabilities related to the timing of payments, $0.2 million
of depreciation and amortization and a $0.3 million increase in minority
interest relating to the Keystone contract. These cash inflows were partially
offset by cash outflows of $3.1 million due to an increase in accounts
receivable related primarily to the Keystone project.
The decrease in cash and short term investments during the first quarter of
fiscal 1999 is attributable to cash inflows from operations of $0.2 million,
offset by cash outflows of $0.1 million for the purchase of property, plant and
equipment, and $0.4 million for the repayment of debt partially offset by the
proceeds from the exercise of stock options and warrants.
At April 30, 1999, the Corporation's backlog associated with its asbestos
abatement business totaled $15.9 million ($9.4 million on fixed fee contracts
and $6.5 million on time and materials or unit price contracts).
9
<PAGE> 10
PART II-- OTHER INFORMATION
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 April 30, 1999, the cumulative dividends in
arrears on the Series A Preferred Stock were approximately $7,000.
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) Reports on Form 8-K
The registrant did not file any current reports on Form 8-K during the three
months ended April 30, 1999.
10
<PAGE> 11
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: June 11, 1999
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1999 AND CONSOLIDATED STATEMENT OF
OPERATION FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> APR-30-1999
<CASH> 55,000
<SECURITIES> 0
<RECEIVABLES> 5,374,000
<ALLOWANCES> 0
<INVENTORY> 242,000
<CURRENT-ASSETS> 7,401,000
<PP&E> 5,311,000
<DEPRECIATION> 4,059,000
<TOTAL-ASSETS> 9,704,000
<CURRENT-LIABILITIES> 3,552,000
<BONDS> 1,150,000
0
14,000
<COMMON> 169,000
<OTHER-SE> 4,415,000
<TOTAL-LIABILITY-AND-EQUITY> 9,704,000
<SALES> 5,153,000
<TOTAL-REVENUES> 5,153,000
<CGS> 4,385,000
<TOTAL-COSTS> 4,385,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,000
<INCOME-PRETAX> (218,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (218,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218,000)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
