<PAGE> 1
(conformed)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000
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 December 9, 2000, there were 8,782,644 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>
Item 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements
(a) Condensed Consolidated Balance Sheets as of October 31, 2000 (unaudited) and January 31, 2000 3
(b) Consolidated Statements of Operations for the Three Months Ended October 31, 2000 and 1999 (unaudited) 4
(c) Consolidated Statements of Operations for the Nine Months Ended October 31, 2000 and 1999 (unaudited) 5
(d) Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2000 and 1999 (unaudited) 6
(e) Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 3. Defaults Upon Senior Securities 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000*
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 128,000 $ 282,000
Accounts receivable - net 6,592,000 6,101,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 3,121,000 1,055,000
Inventory 454,000 291,000
Other current assets 423,000 329,000
------------ ------------
TOTAL CURRENT ASSETS 10,718,000 8,058,000
PROPERTY, PLANT AND EQUIPMENT 6,465,000 5,845,000
Less: accumulated depreciation (4,972,000) (4,462,000)
------------ ------------
1,493,000 1,383,000
OTHER ASSETS 1,212,000 912,000
------------ ------------
TOTAL ASSETS $ 13,423,000 $ 10,353,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,348,000 $ 2,263,000
Accrued liabilities 1,864,000 1,299,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,007,000 1,015,000
Current portion of long-term debt 174,000 173,000
------------ ------------
TOTAL CURRENT LIABILITIES 5,393,000 4,750,000
OTHER LONG-TERM LIABILITIES 364,000 166,000
LONG-TERM DEBT 2,623,000 376,000
STOCKHOLDERS' EQUITY
Cumulative convertible 2% preferred stock 14,000 14,000
Common stock 177,000 169,000
Additional paid-in capital 7,767,000 7,421,000
Less treasury stock (38,000) (38,000)
(Deficit) retained earnings (2,877,000) (2,505,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 5,043,000 5,061,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,423,000 $ 10,353,000
============ ============
</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 OCTOBER 31,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CONTRACT REVENUES $ 9,230,000 $ 7,496,000
CONTRACT COSTS 8,162,000 6,055,000
----------- -----------
Gross margin 1,068,000 1,441,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,202,000 1,094,000
----------- -----------
Income (loss) from operations (134,000) 347,000
OTHER INCOME (EXPENSE):
Interest expense (75,000) (41,000)
Interest income 4,000 4,000
Write off of deferred acquisition and financing costs (205,000) --
Other income -- 1,000
----------- -----------
(276,000) (36,000)
----------- -----------
Income (loss) before income taxes (410,000) 311,000
INCOME TAX PROVISION -- --
----------- -----------
NET INCOME (LOSS) $ (410,000) $ 311,000
=========== ===========
PER SHARE OF COMMON STOCK - BASIC: $ (0.05) $ 0.04
=========== ===========
PER SHARE OF COMMON SHARE - DILUTIVE $ (0.05) $ 0.04
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 8,783,000 8,388,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS
OUTSTANDING -- 209,000
----------- -----------
AVERAGE COMMON SHARES AND DILUTIVE COMMON STOCK
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARES CALCULATION 8,783,000 8,597,000
=========== ===========
</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 NINE MONTHS
ENDED OCTOBER 31,
-----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CONTRACT REVENUES $ 26,067,000 $ 20,517,000
CONTRACT COSTS 22,657,000 17,162,000
------------ ------------
Gross margin 3,410,000 3,355,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,165,000 2,914,000
LITIGATION SETTLEMENT EXPENSE -- 379,000
------------ ------------
Income from operations 245,000 62,000
OTHER INCOME (EXPENSE):
Interest expense (175,000) (109,000)
Write off of deferred acquisition and financing costs (205,000) --
Interest income 14,000 8,000
Other income 27,000 2,000
------------ ------------
(339,000) (99,000)
------------ ------------
Loss before income taxes (94,000) (37,000)
INCOME TAX PROVISION (24,000) --
------------ ------------
NET LOSS $ (118,000) $ (37,000)
============ ============
PER SHARE OF COMMON STOCK - BASIC: $ (0.01) $ 0.00
============ ============
PER SHARE OF COMMON STOCK - DILUTIVE: $ (0.01) $ 0.00
============ ============
AVERAGE COMMON SHARES OUTSTANDING 8,713,000 8,392,000
AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS
OUTSTANDING -- --
------------ ------------
AVERAGE COMMON SHARES AND DILUTIVE COMMON STOCK
EQUIVALENTS OUTSTANDING FOR EARNINGS PER
SHARE CALCULATION 8,713,000 8,392,000
============ ============
</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 NINE MONTHS
ENDED OCTOBER 31,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (118,000) $ (37,000)
ADJUSTMENTS TO RECONCILE NET
INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 914,000 615,000
Write off of deferred acquisition and financing costs 205,000 --
Write off of bad debt 35,000 --
CHANGES IN ASSETS AND LIABILITIES
OTHER THAN CASH:
Accounts receivable (509,000) (524,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (2,066,000) 194,000
Inventory (125,000) 14,000
Other current assets 288,000 268,000
Accounts payable (280,000) (104,000)
Billings in excess of costs and estimated earnings
on uncompleted contracts (8,000) 652,000
Accrued liabilities 353,000 231,000
Other (107,000) (17,000)
----------- -----------
TOTAL ADJUSTMENTS IN ASSETS AND LIABILITIES (2,454,000) 714,000
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,418,000) 1,292,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (411,000) (555,000)
Acquisition of businesses (573,000) --
Proceeds from the sale of property, plant and equipment -- 4,000
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (984,000) (551,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants -- 19,000
Proceeds from debt 4,263,000 --
Purchase of common stock for treasury -- (13,000)
Principal payments on debt (2,015,000) (308,000)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,248,000 (302,000)
----------- -----------
Net Increase (Decrease) in Cash and Short-Term Investments (154,000) 439,000
Cash and Short-Term Investments, Beginning of Period 282,000 309,000
----------- -----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 128,000 $ 748,000
=========== ===========
</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 NINE MONTHS ENDED OCTOBER 31, 2000
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include PDG Environmental, Inc. (the
"Corporation") and its wholly-owned subsidiaries.
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 nine months ended October 31, 2000 were of a normal,
recurring nature. The amounts presented for the three and nine months ended
October 31, 2000 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, 2000 dated May, 11,
2000 and Quarterly Reports on Form 10-Q of the Corporation for the quarter ended
April 30, 2000 dated June 13, 2000 and for the quarter ended July 31, 2000 dated
September 13, 2000, 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 nine months ended
October 31, 2000 due to the existence of unused net operating loss
carryforwards. The Corporation has recorded a provision for state income taxes
during the current nine-month period. No state income taxes were provided during
the previous nine-month period.
Income taxes paid by the Corporation for the nine months ended October 31, 2000
and 1999 totaled approximately $69,000 and $85,000, respectively.
NOTE 3 - DEBT
On August 3, 2000, the Corporation closed on a new $4.7 million credit facility
with Sky Bank, an Ohio banking association, consisting of a 3-year $3 million
revolving line of credit, a 5-year $1 million equipment note, a 15-year $0.4
million mortgage and a 5-year $0.3 million commitment for future equipment
financing. The new financing repaid all of the Company's existing debt.
The line of credit, equipment note and commitment for future equipment financing
are at an interest rate of prime plus 1% with financial covenant incentives
which may reduce the interest rate to either prime plus 1/2% or prime. The
mortgage is at an interest rate of 9.15% fixed for three years and is then
adjusted to 2.75% above the 3-year Treasury Index every three years. The Chief
Executive Officer of the Corporation provided a limited personal guarantee for
the credit facility.
At October 31, 2000, borrowings on the revolving line of credit were $1,400,000.
The Corporation paid interest costs totaling approximately $181,000 and $108,000
during the nine months ended October 31, 2000 and 1999, respectively.
7
<PAGE> 8
NOTE 4 - PREFERRED STOCK
Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock
were approximately $9,000 at October 31, 2000. At October 31, 2000, 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.
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).
At the Corporation's Annual Meeting of Stockholders held on July 23, 1993, the
following matters were approved by a majority of the Corporation's preferred and
common stockholders which affected the Corporation's Series A Preferred stock
and common stock: a reduction in the Series A Preferred Stock dividend rate from
9% to 2% and the cancellation of the accrued but unpaid dividends and the
special voting rights associated with such preferred stock in the event of a
certain accumulation of accrued but unpaid dividends thereon; and a
recapitalization of the Corporation in order to effect a one for two reverse
stock split (the "Recapitalization"). In exchange for the forfeiture of the
accrued but undeclared and unpaid dividends, the holders of the Series A
Preferred Stock were granted a common stock right which, if and when declared by
the Board of Directors, grant to the holders of such common stock rights shares
of the common stock of the Corporation. At the May 23, 1995 and March 6, 2000
Board of Directors meeting, the issuance of one third of the shares (280,071 and
259,696 common shares, respectively) covered by the aforementioned right was
approved. At October 31, 2000, there were 280,071 common stock rights
outstanding. The Recapitalization was contingent upon the Corporation's listing
on the American Stock Exchange. The Corporation made a decision not to pursue
such a listing; therefore, the Recapitalization was indefinitely postponed.
NOTE 5 - NET EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
OCTOBER 31,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
NUMERATOR:
Loss $ (118,000) $ (37,000)
Preferred stock dividends (1,000) (1,000)
----------- -----------
Numerator for basic earnings per share--loss
to common stockholders (119,000) (38,000)
Effect of dilutive securities:
Preferred stock dividends 1,000 1,000
----------- -----------
Numerator for diluted earnings per share--loss
to common stock after assumed conversions (118,000) (37,000)
=========== ===========
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 8,713,000 8,392,000
Effect of dilutive securities -- --
----------- -----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,713,000 8,392,000
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00
=========== ===========
</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 OCTOBER 31,
---------------------------------
2000 1999
----------- ----------
<S> <C> <C>
NUMERATOR:
Net Income (loss) $ (410,000) $ 311,000
Preferred stock dividends -- --
----------- ----------
Numerator for basic earnings per share--income (loss)
available to common stockholders (410,000) 311,000
Effect of dilutive securities:
Preferred stock dividends -- --
----------- ----------
Numerator for diluted earnings per share--income (loss)
available to common stock after assumed conversions (410,000) 311,000
=========== ==========
DENOMINATOR:
Denominator for basic earnings per share--weighted average
shares 8,783,000 8,388,000
Effect of dilutive securities:
Employee stock options -- 181,000
Warrants -- 1,000
Convertible preferred stock -- 27,000
----------- ----------
Dilutive potential common shares -- 209,000
----------- ----------
Denominator for diluted earnings per share--adjusted
weighted-average shares and assumed conversions 8,783,000 8,597,000
=========== ==========
BASIC EARNINGS (LOSS) PER SHARE $ (0.05) $ 0.04
=========== ==========
DILUTED EARNINGS (LOSS) PER SHARE $ (0.05) $ 0.04
=========== ==========
</TABLE>
NOTE 6 - ACQUISITION
Effective April 3, 2000, the Corporation entered into an agreement ("the
Agreement") with Lincoln Cristi, Inc. ("Lincoln") and the majority owners of
Lincoln for the purchase of selected assets and assumption of the contracts of
Lincoln. Lincoln owned and operated a business that conducted asbestos abatement
in the Northwestern United States. As consideration for the purchase, the
Corporation paid Lincoln and the owners of Lincoln a combination of cash and the
Corporation's Common Stock and entered into an employment agreement with the
former majority owners of Lincoln that provides for a performance bonus in
addition to annual salary. The performance bonus is for a minimum of one year
and a maximum of three years, depending upon the continued employment of the two
majority owners of Lincoln.
9
<PAGE> 10
The goodwill associated with the acquisition is being amortized on a
straight-line basis over 15 years, the covenant not to compete and customer
lists is being amortized on a straight-line basis over 5 years, and the
performance bonus is being amortized over the 3-year life of the bonus.
Additionally, in April 2000, the Corporation acquired the fixed assets of an
asbestos abatement company operating in the metropolitan Chicago area and an
insulation company operating in the Houston area.
NOTE 7 - SUBSEQUENT EVENT
In November 2000, Sky Bank approved a $1.5 million increase in the line of
credit to $4.5 million to fund the proposed acquisition of an asbestos abatement
and demolition company in California. The increase in the line is subject to the
closing of that transaction.
Additionally, Sky Bank increased the commitment for future equipment financing
by $0.3 million to $0.6 million.
Based upon the aforementioned modification to the new credit facility, the debt
covenants require annual maintenance of a tangible net worth of $5 million, a
leverage ratio (total liabilities to net worth) of no greater than 2 to 1 and a
debt service coverage ratio of at least 1.3 to 1.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
The Corporation's contract revenues increased by approximately 23% to $9.2
million during the three months ended October 31, 2000 ("Fiscal 2001") compared
to $7.5 million in the three months ended October 31, 2000 ("Fiscal 2000"). The
increase in revenues was partly due to the addition of two new branch offices in
April 2000.
The Corporation's gross margin decreased to $1.1 million in the third quarter of
Fiscal 2001 compared to $1.4 million in the third quarter of fiscal 2000. The
decrease in gross margin in Fiscal 2001 was primarily attributable to a large
volume of work at one office being performed at a relatively low margin level
and negative contract adjustments.
Selling, general and administrative expenses increased to $1.2 million in the
three months ended October 31, 2000 compared to $1.1 million in the three months
ended October 31, 1999. The increase is primarily attributable to the
Corporation operating two additional branch offices in the current quarter.
As a result of the factors described above, the Corporation reported a loss from
operations of $0.13 million in the current three month period compared to income
of $0.35 million for the same three months of the prior fiscal year.
The Corporation's interest expense increased to $75,000 for the three months
ended October 31, 2000 from $41,000 for the three months ended October 31, 1999
due to increased borrowings to support the increased level of revenues.
During the current quarter, the Company terminated negotiations with Metalclad
Corporation for the acquisition of its Metalclad Insulation subsidiary business
which resulted in the write off of $163,000 of deferred acquisition costs.
Additionally, the Company wrote off $42,000 of deferred financing costs relating
to debt that was refinanced in August 2000.
During the three months ended October 31, 2000 and 1999, 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 no state income tax
provision was made for the three months ended October 31, 1999 due to the
year-to-date loss.
NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
The Corporation's contract revenues increased to $26.1 million for the nine
months ended October 31, 2000 compared to $20.5 million for the nine months
ended October 31, 1999.
The gross margin reported by the Corporation in the nine months ended October
31, 2000 increased slightly to $3.41 million compared to $3.36 million for the
nine months ended October 31, 1999. The decrease in gross margin as a percentage
of revenue was due to a large volume of work at one office being performed at a
relatively low margin level and negative contract adjustments.
Selling, general and administrative expenses reported by the Corporation for the
nine months ended October 31, 2000 increased to $3.2 million as compared to $2.9
million in the same nine month period of the prior fiscal year. The increase is
primarily attributable to the addition of two branch offices in Fiscal 2001.
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 final payment of the $500,000 was made in June 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.
11
<PAGE> 12
The Corporation reported income from operations of $0.25 million in the nine
months ended October 31, 2000 as a result of the factors discussed above
compared to income from operations of $0.06 million in the same nine-month
period last year.
Interest expense increased to $0.18 million in the current nine month period
compared to $0.11 million in the nine months ended October 31, 1999 due to
increased borrowings to support the higher level of revenues.
During the current year, the Company terminated negotiations with Metalclad
Corporation for the acquisition of its Metalclad Insulation subsidiary which
resulted in the write off of $163,000 of deferred acquisition costs.
Additionally, the Company wrote off $42,000 of deferred financing costs relating
to debt that was refinanced in August 2000.
Interest income totaled $14,000 for the current nine month period versus $8,000
in the same nine-month period of the prior fiscal year due to higher invested
cash balances.
No provision for federal income taxes was made during the nine months ended
October 31, 2000 and 1999 due to the utilization of net operating loss
carryforwards for financial reporting purposes. A $0.02 million state income tax
provision was made in the current nine-month period to reflect payment of
capital stock and franchise taxes which are not directly calculated from net
income. No state income tax provision was made in the prior nine-month period
due to the loss.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's cash liquidity decreased during the nine months ended October
31, 2000 as cash and short-term investments decreased by $0.15 million to $0.13
million.
The decrease in cash during the nine-month period was principally attributable
to cash outflows associated with investing activities of $1.0 million and
operating activities of $2.5 million. These cash outflows were partially offset
by cash inflows from financing activities of $2.2 million.
Cash outflows from operating activities of $2.5 million in the nine months ended
October 31, 2000 included a $0.5 million increase in accounts receivable
primarily due to higher levels of revenues, a $2.1 million increase in costs and
estimated earnings in excess of contract costs on uncompleted contracts due to a
series of unbilled contracts at one office, a $0.13 million increase in
inventory, a $0.3 million decrease in accounts payable and the $0.12 million net
loss. The aforementioned cash outflows from operating activities were partially
offset by $0.9 million of depreciation and amortization, the $0.2 million write
off of deferred acquisition and financing costs, a $0.3 million decrease in
other current assets and a $0.35 million increase in accrued liabilities.
The Corporation's outflows from investing activities of $1.0 million in the nine
months ended October 31, 1999 was attributable to $0.41 million for the purchase
of property, plant and equipment and $0.57 million to purchase the businesses
acquired.
The cash flows from financing activities of $2.2 million included proceeds of
debt of $4.3 million consisting of $1.4 million from the new term loans received
in the third quarter, $1.4 million of borrowings on the new line of credit and
$1.5 million of borrowings on the line of credit that was refinanced in August
2000. These inflows were partially offset by principal payments of $2.0 million
consisting of a $0.24 million payoff of the mortgage that was refinanced, a
$0.21 million payoff of the term loan that was refinanced, a $1.5 million payoff
of the line of credit that was refinanced and $0.08 million of scheduled
principal payments on term debt.
The Corporation's cash liquidity increased during the nine months ended October
31, 1999 as cash and short-term investments increased by $0.4 million to $0.75
million.
The increase in cash during the current nine month period is principally
attributable to cash inflows from operating activities of $1.3 million. These
cash inflows were partially offset by cash outflows from investing activities of
$0.55 million and financing activities of $0.3 million.
12
<PAGE> 13
Cash inflows provided by operating activities of $1.3 million in the nine months
ended October 31, 1999 included a $0.3 million reduction in other current
assets, a $0.2 million decrease in costs and estimated earnings in excess of
billings on uncompleted contracts, a $0.2 million increase in accrued
liabilities, a $0.65 million increase in billings in excess of costs and
estimated earnings on uncompleted contracts and $0.6 million of depreciation and
amortization. The aforementioned cash inflows from operating activities were
partially offset by a $0.5 million increase in accounts receivable and a $0.1
million decrease in accounts payable.
Cash outflows associated with financing activities during the current nine
months included $0.02 million of proceeds from the exercise of stock options and
warrants offset by $0.3 million of principal payments and reduction of the
outstanding balance of the line of credit and $0.01 million for the purchase of
common stock for the treasury.
The Corporation's investing activities of $0.55 million in the nine months ended
October 31, 1999 were for the purchase of property, plant and equipment.
At October 31, 2000, the Corporation's backlog associated with its asbestos
abatement and demolition business totaled $13.7 million ($7.3 million on fixed
fee contracts and $6.4 million of expected revenues on time and materials or
unit price contracts).
13
<PAGE> 14
PART II-- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is subject to dispute 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 October 31, 2000, the cumulative dividends
in arrears on the Series A Preferred Stock were approximately $9,000.
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) The Registrant did not file reports on Form 8-K during the three months
ended October 31, 2000.
14
<PAGE> 15
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
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John C. Regan
Chairman and Chief Executive Officer
Date: December 14, 2000
15
