<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, 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 September 3, 1999, there were 8,387,796 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, 1999 (unaudited) and January 31, 1999 3
(b) Consolidated Statements of Operations for the Three Months Ended July 31, 1999 and 1998
(unaudited) 4
(c) Consolidated Statements of Operations for the Six Months Ended July 31, 1999 and 1998
(unaudited) 5
(d) Consolidated Statements of Cash Flows for the Six Months Ended July 31, 1999 and 1998
(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,
1999 1999*
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 242,000 $ 309,000
Accounts receivable - net 6,851,000 5,233,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 1,424,000 1,058,000
Inventory 264,000 298,000
Other current assets 415,000 252,000
------------ ------------
TOTAL CURRENT ASSETS 9,196,000 7,150,000
PROPERTY, PLANT AND EQUIPMENT 5,539,000 5,207,000
Less: accumulated depreciation (4,172,000) (3,948,000)
------------ ------------
1,367,000 1,259,000
OTHER ASSETS 959,000 1,155,000
------------ ------------
TOTAL ASSETS $ 11,522,000 $ 9,564,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,736,000 $ 1,506,000
Accrued liabilities 1,303,000 1,290,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,272,000 673,000
Current portion of long-term debt 165,000 174,000
------------ ------------
TOTAL CURRENT LIABILITIES 5,476,000 3,643,000
OTHER LONG-TERM LIABILITIES 334,000 404,000
LONG-TERM DEBT 1,253,000 716,000
STOCKHOLDERS' EQUITY
Cumulative convertible 2% preferred stock 14,000 14,000
Common stock 169,000 168,000
Additional paid-in capital 7,413,000 7,395,000
(Deficit) retained earnings (3,099,000) (2,751,000)
Less treasury stock (38,000) (25,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,459,000 4,801,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,522,000 $ 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 JULY 31,
-----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CONTRACT REVENUES $ 7,869,000 $ 10,844,000
CONTRACT COSTS 6,723,000 9,256,000
------------ ------------
Gross margin 1,146,000 1,588,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 861,000 652,000
LITIGATION SETTLEMENT 379,000 --
------------ ------------
Income (loss) from operations (94,000) 936,000
OTHER INCOME (EXPENSE):
Interest expense (39,000) (34,000)
Interest income 2,000 2,000
Other income 1,000 --
------------ ------------
(36,000) (32,000)
------------ ------------
Income (loss) before income taxes, minority interest and
discontinued operations (130,000) 904,000
INCOME TAX PROVISION -- (20,000)
MINORITY INTEREST -- (226,000)
------------ ------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (130,000) 658,000
DISCONTINUED OPERATIONS:
Litigation settlement -- (200,000)
------------ ------------
NET INCOME (LOSS) $ (130,000) $ 458,000
============ ============
PER SHARE OF COMMON STOCK - BASIC:
Income (loss) before discontinued operations $ (0.02) $ 0.09
Discontinued operations -- (0.03)
------------ ------------
Net (loss) income per share $ (0.02) $ 0.06
============ ============
PER SHARE OF COMMON STOCK - DILUTIVE:
Income (loss) before discontinued operations $ (0.02) $ 0.08
Discontinued operations -- (0.02)
------------ ------------
Net income (loss) per share $ (0.02) $ 0.06
============ ============
AVERAGE COMMON SHARES OUTSTANDING 8,398,000 7,047,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING -- 1,565,000
------------ ------------
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,398,000 8,612,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
-----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CONTRACT REVENUES $ 13,022,000 $ 24,195,000
CONTRACT COSTS 11,108,000 20,858,000
------------ ------------
Gross margin 1,914,000 3,337,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,820,000 1,426,000
LITIGATION SETTLEMENT 379,000 --
------------ ------------
Income (loss) from operations (285,000) 1,911,000
OTHER INCOME (EXPENSE):
Interest expense (68,000) (92,000)
Interest income 4,000 4,000
Other income 1,000 --
------------ ------------
(63,000) (88,000)
------------ ------------
Income (loss) before income taxes, minority interest and
discontinued operations (348,000) 1,823,000
INCOME TAX PROVISION -- (40,000)
MINORITY INTEREST -- (564,000)
------------ ------------
Income (loss) before discontinued operations (348,000) 1,219,000
DISCONTINUED OPERATIONS:
Litigation settlement -- (200,000)
------------ ------------
NET INCOME (LOSS) $ (348,000) $ 1,019,000
============ ============
PER SHARE OF COMMON STOCK - BASIC:
Income (loss) before discontinued operations $ (0.04) $ 0.18
Discontinued operations -- (0.03)
------------ ------------
Net income (loss) per common share $ (0.04) $ 0.15
============ ============
PER SHARE OF COMMON STOCK - DILUTIVE:
Income before discontinued operations $ (0.04) $ 0.15
Discontinued operations -- (0.02)
------------ ------------
Net income per common share $ (0.04) $ 0.13
============ ============
AVERAGE COMMON SHARES OUTSTANDING 8,394,000 6,776,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING -- 1,602,000
------------ ------------
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,394,000 8,378,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (348,000) $ 1,019,000
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO CASH:
Depreciation and amortization 388,000 290,000
Minority interest -- 125,000
Other -- --
CHANGES IN ASSETS AND LIABILITIES
OTHER THAN CASH:
Accounts receivable (1,618,000) (1,194,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (366,000) (308,000)
Inventory 34,000 (34,000)
Other current assets 168,000 234,000
Accounts payable 899,000 (1,181,000)
Billings in excess of costs and estimated earnings
on uncompleted contracts 599,000 339,000
Accrued liabilities 13,000 647,000
Other (12,000) --
-----------
TOTAL ADJUSTMENTS IN ASSETS AND LIABILITIES (283,000) (1,497,000)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (243,000) (63,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (358,000) (247,000)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (358,000) (247,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants 19,000 969,000
Proceeds from debt 619,000 --
Purchase of common stock for treasury (13,000) --
Principal payments on debt (91,000) (1,020,000)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES 534,000 (51,000)
----------- -----------
Net Increase (Decrease) in Cash and Short-Term Investments (67,000) (361,000)
Cash and Short-Term Investments, Beginning of Period 309,000 892,000
----------- -----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 242,000 $ 531,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999
(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 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
ceased operations by January 31, 1999.
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, 1999 were of a normal, recurring
nature. The amounts presented for the three and six months ended July 31, 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 and
Quarterly Report on Form 10-QSB of the Corporation for the quarter ended April
30, 1999 dated June 11, 1999, 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, 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 to the
loss in the current period.
Income taxes paid by the Corporation for the six months ended July 31, 1999 and
1998 totaled approximately $38,000 and $13,000, 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%. As of July 31,
1999, the outstanding balance on the revolving line of credit was $798,000.
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, 1999, the balance guaranteed by the Corporation had been reduced to
zero with the payment of the remaining amounts guaranteed by the Corporation.
The Corporation paid interest costs totaling approximately $63,000 and $48,000
during the six months ended July 31, 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 July 31, 1999. At July 31, 1999, there were 6,000
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.
7
<PAGE> 8
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).
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,
1999 1998
---------------------------------
<S> <C> <C>
NUMERATOR:
Income (loss) from continuing operations $ (348,000) $ 1,219,000
Preferred stock dividends -- (17,000)
----------- -----------
Numerator for basic earnings per share--income available
to common stockholders (348,000) 1,202,000
Effect of dilutive securities:
Preferred stock dividends -- 17,000
----------- -----------
Numerator for diluted earnings per share--income available to
common stock after assumed conversions (348,000) 1,219,000
----------- -----------
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 8,394,000 6,776,000
Effect of dilutive securities:
Employee stock options -- 811,000
Warrants -- 55,000
Convertible preferred stock -- 736,000
----------- -----------
Dilutive potential common shares -- 1,602,000
----------- -----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,394,000 8,378,000
=========== ===========
BASIC EARNINGS PER SHARE $ (0.04) $ 0.18
=========== ===========
DILUTED EARNINGS PER SHARE $ (0.04) $ 0.15
=========== ===========
</TABLE>
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,
1999 1998
---------------------------------
<S> <C> <C>
NUMERATOR:
Income (loss) from continuing operations $ (130,000) $ 658,000
Preferred stock dividends -- (9,000)
----------- -----------
Numerator for basic earnings per share--income available
to common stockholders (130,000) 650,000
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C>
Effect of dilutive securities:
Preferred stock dividends -- 8,000
----------- -----------
Numerator for diluted earnings per share--income available to
common stock after assumed conversions (130,000) 658,000
----------- -----------
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 8,398,000 7,047,000
Effect of dilutive securities:
Employee stock options -- 777,000
Warrants -- 52,000
Convertible preferred stock -- 736,000
----------- -----------
Dilutive potential common shares -- 1,565,000
----------- -----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,398,000 8,612,000
=========== ===========
BASIC EARNINGS PER SHARE $ (0.02) $ 0.09
=========== ===========
DILUTED EARNINGS PER SHARE $ (0.02) $ 0.08
=========== ===========
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1999 AND 1998
The Corporation's contract revenues decreased to $7.9 million during the three
months ended July 31, 1999 ("Fiscal 2000") compared to $10.8 million in the
three months ended July 31, 1998 ("Fiscal 1999"). The decrease in revenues was
due to the Corporation entering the prior fiscal quarter with a greater backlog
of contracts and the $2.5 million contribution to revenue that the $12 million
Keystone contract, for the abatement of a building in Harrisburg, Pennsylvania,
made in the second quarter of fiscal 1999.
The Corporation's gross margin decreased to $1.1 million in the second quarter
of fiscal 2000 compared to $1.6 million in the second quarter of fiscal 1999.
The decrease in gross margin was attributable to the aforementioned decrease in
contract revenue. The gross margin as a percentage of revenue increased as,
traditionally, larger contracts are bid at lower margins.
Selling, general and administrative expenses increased to $0.86 million in the
three months ended July 31, 1999 compared to $0.65 million in the three months
ended July 31, 1998. During the current fiscal quarter, the Corporation operated
two additional branch offices.
In June 1999, the Corporation reached a settlement with the Mason Tenders
District Council Welfare Fund whereby the Corporation agreed to pay $500,000 to
resolve all claims concerning contributions owed for the period January 1, 1995
through May 31, 1996 and related claims for interest, statutory damages, costs
and attorneys' fees. The initial payment of $200,000 was made in June 1999 with
the remainder of $100,000 due by December 28, 1999 and $200,000 by June 28,
2000. This resulted in a $379,000 charge in the second quarter of Fiscal 2000
which was net of amounts previously accrued and recoveries from third parties.
As a result of the factors described above, the Corporation reported net loss
from operations of $0.1 million in the current three month period compared to
income from operations of $0.9 million for the same three months of the prior
fiscal year.
The Corporation's interest expense increased to $39,000 for the three months
ended July 31, 1999 from $34,000 for the three months ended July 31, 1998.
During the three months ended July 31, 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.
The loss from continuing operations for the three month period ending July 31,
1999 was $130,000 as compared to income of $658,000 for the same three months of
the prior quarter.
The $200,000 loss from discontinued operations in the prior quarter relates to
the agreement in principal reached June 8, 1998 with the plaintiffs in the
purported 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, 1999 AND 1998
The Corporation's contract revenues decreased to $13.0 million for the six
months ended July 31, 1999 compared to $24.2 million for the six months ended
July 31, 1998.
The decrease in revenues was due to the Corporation entering the prior fiscal
year with a greater backlog of contracts and the $9.7 million contribution to
revenue that the $12 million Keystone contract made in the prior period.
10
<PAGE> 11
The gross margin reported by the Corporation in the six months ended July 31,
1999 decreased to $1.9 million compared to $3.3 million for the six months ended
July 31, 1998. The decrease in gross margin related to the aforementioned
increase in contract revenue. The gross margin as a percentage of revenue
increased as, traditionally, larger contracts are bid at lower margins.
Selling, general and administrative expenses reported by the Corporation for the
six months ended July 31, 1999 increased to $1.8 million as compared to $1.4
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 2000.
In June 1999, the Corporation reached a settlement with the Mason Tenders
District Council Welfare Fund whereby the Corporation agreed to pay $500,000 to
resolve all claims concerning contributions owed for the period January 1, 1995
through May 31, 1996 and related claims for interest, statutory damages, costs
and attorneys' fees. The initial payment of $200,000 was made in June 1999 with
the remainder of $100,000 due by December 28, 1999 and $200,000 by June 28,
2000. This resulted in a $379,000 charge in the second quarter of Fiscal 2000
which was net of amounts previously accrued and recoveries from third parties.
The Corporation reported a loss from operations of $0.3 million in the six
months ended July 31, 1999 as a result of the factors discussed above compared
to income from operations of $1.9 million in the same six month period last
year.
Interest expense decreased to $0.07 million in the current six month period
compared to $0.09 million in the six months ended July 31, 1998 due to a
decrease in the balance of indebtedness as compared to the prior fiscal year.
Interest income totaled $4,000 for both six month periods.
No provisions for federal income taxes were made during the six months ended
July 31, 1999 and 1998 due to the utilization of net operating loss
carryforwards for financial reporting purposes. No state income tax provision
was made in the current six month period due to the loss while a state income
provision of $40,000 was made in the prior six month period.
The loss from continuing operations for the six month period ending July 31,
1999 was $348,000 as compared to income of $1,219,000 for the same six months of
the prior year.
The $200,000 loss from discontinued operations in the prior quarter relates to
the agreement in principal reached June 8, 1998 with the plaintiffs in the
purported 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, 1999
as cash and short-term investments decreased by $0.07 million to $0.24 million
During the six months ended July 31, 1999, the $0.07 million decrease in the
Corporation's liquidity resulted from cash used by operating activities of $0.24
million and cash utilized by investing activities of $0.36 million. These cash
outflows were offset in part by cash provided by financing activities of $0.53
million.
Cash flows used by operations totaled $0.24 million in the six months ended July
31, 1999. Cash outflows included $0.35 million related to the net loss during
the current six months, a $1.6 million increase in receivables and a $0.37
million increase in costs and estimated earnings in excess of billings on
uncompleted contracts. These cash outflows were partially offset by cash inflows
which principally included $0.4 million of depreciation and amortization, a $0.9
million increase in accounts payable, a $0.17 million decrease in other current
assets and a $0.6 million increase in billings in excess of costs and estimated
earnings on uncompleted contracts.
During the six months ended July 31, 1999, cash outflows associated with
investing activities of $0.36 million were due to the purchase of property,
plant and equipment.
11
<PAGE> 12
The Corporation's cash inflows related to financing activities included $0.6
million in net borrowings on the line of credit and $0.02 million from the
exercise of employee stock options partially offset by $0.09 million of
principal repayments of debt and $0.01 million for the purchase of common stock
for the treasury.
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.
The decrease in fiscal 1999 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.
At July 31, 1999, the Corporation's backlog associated with its asbestos
abatement business totaled $14.6 million ($9.0 million on fixed fee contracts
and $5.6 million on time and materials or unit price contracts).
12
<PAGE> 13
PART II-- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In this quarter, the Corporation reached an unexpected settlement with the Mason
Tenders District Council Welfare Fund whereby the Corporation agreed to pay
$500,000, over a period of time, to resolve all claims concerning contributions
allegedly owed to the funds, but specifically for the period January 1, 1995
through May 31, 1996 and related claims for interest, statutory damages, costs
and attorneys' fees. Management and legal counsel maintain that the
Corporation's position would have been sustained if litigated to a final
unappealable decision. However, in view of the costs and vagaries associated
with continued litigation, management concluded that an adverse ruling at the
trial stage of the dispute was not an acceptable risk. The supersedeas bond
necessary to appeal such a decision would have included costs, fees and
penalties and may have reduced the Corporation's capacity to obtain payment and
performance bonds for its ordinary operations. The initial payment of $200,000
was made in June 1999 with the remainder of $100,000 due by December 28, 1999
and $200,000 by June 28, 2000. This settlement resulted in a $379,000 charge in
the second quarter of fiscal 2000, which was net of amounts previously accrued
and recoveries from third parties.
The registrant is subjected to disputes and litigation in the ordinary course of
business. None of these matters, in the opinion of management, is likely to
result in a material effect on the registrant based upon information available
at this time.
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, 1999, the cumulative dividends in
arrears on the Series A Preferred Stock were approximately $7,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ANNUAL MEETING OF STOCKHOLDERS
On September 7, 1999 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 7,500,900 to 7,528,735
Votes Against 51,108 to 78,943
Ernst & Young, LLP was ratified as the Corporation's auditors as follows:
Votes For 4,611,034
Votes Against 2,961,897
Abstained 6,912
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, 1999.
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 13, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JULY 31, 1999 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 242,000
<SECURITIES> 0
<RECEIVABLES> 6,851,000
<ALLOWANCES> 0
<INVENTORY> 264,000
<CURRENT-ASSETS> 9,196,000
<PP&E> 5,539,000
<DEPRECIATION> 4,172,000
<TOTAL-ASSETS> 11,522,000
<CURRENT-LIABILITIES> 5,476,000
<BONDS> 1,253,000
0
14,000
<COMMON> 169,000
<OTHER-SE> 4,276,000
<TOTAL-LIABILITY-AND-EQUITY> 11,522,000
<SALES> 13,022,000
<TOTAL-REVENUES> 13,022,000
<CGS> 11,108,000
<TOTAL-COSTS> 11,108,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,000
<INCOME-PRETAX> (348,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (348,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,000)<F1>
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>The three and six months ended July 31, 1999 included a $379,000 charge related
to the settlement of a litigation.
</FN>
</TABLE>
