THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(G) OF REGULATION S-T
November 13, 1995
VIA FEDERAL EXPRESS
- - -------------------
OFIS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
RE: QUARTERLY REPORT ON FORM 10Q OF ENVIRONMENTAL SERVICES OF
AMERICA, INC.
COMMISSION FILE NO. 0-18466
Dear Sir/Madam:
On behalf of Environmental Services of America, Inc. (the "Company") and in
accordance with Section 13 (a) (2) of the Securities Exchange Act of 1934, as
amended, there is enclosed herewith for filing one (1) copy of the Company's
Quarterly Report on Form 10-Q for the quarter ending September 30, 1995, one of
which has been manually signed.
Please acknowledge receipt of the enclosed by stamping the enclosed copy of
this letter and returning the same to the undersigned in the envelope enclosed
for that purpose.
Sincerely,
Kathleen P. LeFevre
Chief Financial Officer
Enclosures:
cc: Joseph Chicco, Esquire - Counsel to Company
Vincent Miniaci, C.P.A. - Accountants to Company
Gary Hershkin, C.P.A. - Accountants to Company
Jon Colin, CEO, President, Director
Joseph T. Jacobsen - EVP & Director
Walter H. Barandiaran - Director
Schneur Z. Genack - Director
NASDAQ, Washington, D.C.
<PAGE>
November 13, 1995
VIA FEDERAL EXPRESS
- - -------------------
National Association of Securities Dealers, Inc.
Attn: NASDAQ Reports Section
1735 K Street, N.W.
Washington, D.C. 20006-1506
RE: QUARTERLY REPORT ON FORM 10Q OF ENVIRONMENTAL SERVICES OF
AMERICA, INC.
Dear Sir/Madam:
On behalf of Environmental Services of America, Inc. (the "Company") and in
accordance with Section 13 (a) (2) of the Securities Exchange Act of 1934, as
amended, there are enclosed herewith for filing three (3) copies of the
Company's Quarterly Report on Form 10-Q for the quarter ending September 30,
1995, one of which has been manually signed.
Please acknowledge receipt of the enclosed by stamping the enclosed copy of
this letter and returning the same to the undersigned in the envelope enclosed
for that purpose.
Sincerely,
Kathleen P. LeFevre
Chief Financial Officer
Enclosures:
cc: Joseph Chicco, Esquire - Counsel to Company
Vincent Miniaci, C.P.A. - Accountants to Company
Jon Colin, CEO, President, Director
Joseph T. Jacobsen - EVP & Director
Walter H. Barandiaran - Director
Schneur Z. Genack - Director
SEC, Alexandria, VA
<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------------------------
[ ]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 0-18466
- - ------------------------------
ENVIRONMENTAL SERVICES OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0377081
--------------------------------- -------------------------------
(I.R.S. Employer incorporation or (State or other jurisdiction of
organization) identification No.)
937 East Hazelwood Avenue, Bldg . 2, Rahway, NJ 07065
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(908) 381-9229
----------------------------------------------------
(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
----- -----
Number of shares outstanding of the issuer's class of common stock, $.02
par value, as of November 10, 1995: 3,806,722
-----------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.
--------------------
Environmental Services of America, Inc. and Subsidiaries Consolidated
Financial Statements For the Nine Months and Three Months Ended
September 30, 1995 (Unaudited).
INDEX TO FINANCIAL STATEMENTS
PAGE #
------
Index to Financial Statements F-1
Consolidated Balance Sheets - September 30, 1995
(Unaudited) and December 31, 1994 F-2 to F-3
Consolidated Statements of Operations - for the nine
months ended September 30, 1995 and 1994 (Unaudited) F-4
Consolidated Statements of Operations - for the three
months ended September 30, 1995 and 1994 (Unaudited) F-5
Consolidated Statements of Cash Flows - for the nine
months ended September 30, 1995 and 1994
(Unaudited) F-6
Notes to Consolidated Financial Statements F-7 to F-8
F-1
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
[CAPTION]
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<TABLE>
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 490,474 $ 600,272
Accounts receivable (net
allowance for doubtful
accounts of $457,605
at September 30, 1995 and
$469,605 at December 31, 1994) 9,664,908 10,821,411
Prepaid expenses and deposits 828,321 771,666
Other current assets 776,107 348,024
----------- -----------
Total current assets 11,759,810 12,541,373
----------- -----------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization 7,387,520 7,319,713
----------- -----------
GOODWILL, net of accumulated
amortization 1,514,105 1,555,719
----------- -----------
OTHER ASSETS:
Deferred permit costs 247,621 290,809
Customer list 121,688 151,838
Other 267,327 453,666
----------- -----------
Total other assets 636,636 896,313
----------- -----------
Total assets $21,298,071 $22,313,118
=========== ===========
</TABLE>
F-2
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
[CAPTION]
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<TABLE>
CURRENT LIABILITIES:
<S> <C> <C>
Current portion of long-term
debt $ 808,852 $ 1,148,149
Notes payable-bank 2,020,000 1,650,000
Accounts payable and accrued
expenses 7,832,725 8,127,843
Income taxes payable -- 140,909
----------- -----------
Total current liabilities 10,661,577 11,066,901
----------- -----------
LONG-TERM DEBT:
Notes payable, net of current
maturities 2,484,736 2,459,052
Other long-term liabilities 273,000 273,000
----------- -----------
2,757,736 2,732,052
----------- -----------
Total liabilities 13,419,313 13,798,953
----------- -----------
STOCKHOLDER'S EQUITY:
Preferred stock, $.01 par value
Series B - 6% cumulative,
convertible, 2,000,000
shares authorized, 10,258
shares issued and
outstanding 103 103
Series C - convertible,
20,000 shares authorized,
3,200 shares issued and
outstanding 32 32
Common stock, $.02 par value-
authorized 10,000,000 shares;
3,801,722 shares issued and
outstanding 76,035 76,035
Paid-in capital in excess of
par 5,819,579 5,819,579
Retained earnings 1,983,009 2,618,416
----------- -----------
Total stockholders' equity 7,878,758 8,514,165
----------- -----------
Total liabilities and
stockholders' equity $21,298,071 $22,313,118
=========== ===========
</TABLE>
F-3
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
[CAPTION]
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1995 1994
------------- -------------
<TABLE>
<S> <C> <C>
Net sales $27,921,598 $22,607,692
Cost of sales 17,969,108 14,260,388
------------- -----------
Gross profit on sales 9,952,490 8,347,304
------------- -----------
Selling, general and
administrative expenses 8,608,636 6,865,698
Depreciation and amortization 1,226,344 937,836
------------- -----------
9,834,980 7,803,534
------------- -----------
Income (loss) from operations 117,510 543,770
============= ===========
Other income (expenses):
Write-off of UCT receivable (644,126) --
NES legal expense (200,000) --
Loss on sale of buildings -- (42,704)
Other net non-operating income 40,853 34,027
Interest expense (408,257) (237,243)
------------- -----------
(1,211,530) (245,920)
============= ===========
Income (loss) before provision
for income taxes (1,094,020) 297,850
Provision for income
taxes (benefit) (458,613) 125,672
------------- -----------
Net income (loss) $ (635,407) $ 172,178
============= ===========
Earnings (loss) per common share $ ( .14) $ .04
============= ===========
Weighted average number of
common shares and equivalent
shares outstanding 4,425,606 4,090,597
============= ===========
</TABLE>
F-4
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
[CAPTION]
For the Three For the Three
Months Ended Months Ended
September 30, September 30,
1995 1994
------------- -------------
<TABLE>
<S> <C> <C>
Net sales $10,055,921 $ 8,978,286
Cost of sales 6,269,512 5,526,277
------------ -----------
Gross profit on sales 3,786,409 3,452,009
------------ -----------
Selling, general and
administrative expenses 2,758,238 2,738,959
Depreciation and amortization 415,888 367,546
------------ -----------
3,174,126 3,106,505
------------ -----------
Income (loss) from operations 612,283 345,504
============ ===========
Other income (expenses):
Write-off of UCT receivable (644,126) --
NES legal expense (200,000) --
Loss on sale of buildings -- (42,704)
Other net non-operating income 8,935 17,075
Interest expense (146,946) (105,077)
------------ -----------
(982,137) (130,706)
------------ -----------
Income (loss) before provision
for income taxes (369,854) 214,798
Provision for income
taxes (benefit) (155,026) 90,044
------------ -----------
Net income (loss) $ (214,828) $ 124,754
============ ===========
Earnings (loss) per
common share $ ( .05) $ .03
============ ===========
Weighted average number of
common shares and equivalent
shares outstanding 4,425,606 4,182,002
============ ===========
</TABLE>
F-5
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
[CAPTION]
For the Nine For the Nine
Months Ended Months Ended
CASH FLOWS FROM OPERATING September 30, September 30,
ACTIVITIES 1995 1994
------------- -------------
<TABLE>
<S> <C> <C>
Net income (loss) $( 635,407) $ 172,178
------------ -----------
Adjustments to reconcile net in-
come to net cash provided by
operating activities:
Depreciation and amortization 1,226,344 937,836
(Increase)/decrease in accounts
receivable 1,156,503 ( 981,890)
(Increase)/decrease in prepaid expenses
and other current assets ( 484,738) 212,579
Increase (decrease) in accounts
payable and accrued expenses ( 295,118) 284,796
(Decrease) in income taxes payable ( 140,909) ( 5,071)
------------ -----------
Total Adjustments 1,462,082 448,250
------------ -----------
Net Cash Provided by Operating
Activities 826,675 620,428
------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property and equipment,
net (1,179,199) ( 984,410)
(Increase)/decrease in other assets 186,339 ( 42,535)
Acquisition of subsidiaries -- (1,119,293)
(Increase) in mortgage receivable -- ( 184,000)
------------- -----------
Net Cash (Used in) Investing
Activities ( 992,860) (2,330,238)
------------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase/(decrease) in bank line of
credit 370,000 ( 150,000)
Issuance of long-term debt 1,360,903 2,355,957
Payments of long-term debt (1,674,516) ( 725,299)
Issuance of Series C preferred stock -- 320,000
Other -- ( 25,000)
------------- -----------
Net Cash Provided by Financing
Activities 56,387 1,775,658
------------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 109,798) 65,848
CASH AND CASH EQUIVALENTS-Beginning 600,272 514,369
------------- -----------
CASH AND CASH EQUIVALENTS-Ending $ 490,474 $ 580,217
============= ===========
SUPPLEMENTAL DISCLOSURE OF CASH
INFORMATION
Cash paid during the period for:
Income taxes $ 160,739 $ 49,457
============= ===========
Interest $ 408,904 $ 221,876
============= ===========
</TABLE>
F-6
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation:
---------------------
In the opinion of the Company, all adjustments (which consist only of
normal recurring accruals) necessary for the fair presentation of the balance
sheet as of September 30, 1995 and the related statements of operations for the
nine and three month periods ended September 30, 1995 and 1994 have been
included in the accompanying condensed consolidated financial statements. The
results of operations for the nine and three month periods ended September 30,
1995 and 1994 are not necessarily indicative of the results to be expected for
the entire year.
The condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 which is incorporated herein by reference.
Earnings or loss per share of common stock is calculated based on the
weighted average number of shares and equivalent shares outstanding during the
period.
Note 2 - Acquisitions:
------------
Effective April 1, 1994, Environmental Services of America-IN, Inc.,
("ENSA-IN") and Environmental Services of America-MO, Inc., ("ENSA-MO"), newly
formed subsidiaries of the Company, acquired substantially all of the assets of
Industrial Fuels and Resources, Inc. and Industrial Fuels and Resources of
Missouri, Inc., respectively, consisting primarily of two treatment, storage,
and disposal facilities located in Indiana and Missouri. The total cost of the
acquisition was $1,336,126 which approximated the fair value of the net assets
acquired. The transaction was accounted for as a purchase and, accordingly, the
financial statements include the operations of ENSA-IN and ENSA-MO beginning
April 1, 1994.
On August 12, 1994, ENSA Environmental, Inc., a newly formed subsidiary of
the Company, acquired certain assets and assumed certain liabilities of Earth
Science Technologies, Inc., an environmental consulting and remediation
business. The total cost of the acquisition was $674,194. The financial
statements include the operations of ENSA Environmental, Inc. beginning August
12, 1994.
F-7
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following summarized pro forma information assumes the
acquisitions had occurred at January 1, 1994 and does not purport to be
indicative of what would have occurred had the acquisitions been made as of that
date:
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
Unaudited Unaudited
------------------ ------------------
<TABLE>
<S> <C> <C>
Net sales $27,921,598 $25,571,403
----------- -----------
Net income (loss) $ (635,407) $ 21,681
----------- -----------
Earnings (loss) per
common share $ ( .14) $ .01
----------- -----------
</TABLE>
Note 3 - New offices:
-----------
In January, 1995, the Company acquired for $262,500 secured indebtedness of
Envirovision, Inc. and subsequently foreclosed upon the collateral securing such
indebtedness, primarily accounts receivable and contracts in process. To
complete certain of the contracts in process, the Company employed a number of
former employees of Envirovision and began consulting, remediation, and
ancillary operations in Congers, New York and Baltimore, Maryland.
Note 4 - UCT receivable write off:
------------------------
The company was informed that one of its customers, United Chemical
Technologies, Inc. ("UCT") had filed for bankruptcy protection under Chapter 11
of the Bankruptcy Code in October, 1995. The amount receivable from UCT is
$664,126, or approximately 6% of total accounts receivable. The future amount
collectible with regard to this receivable, if any, is not presently determin-
able and accordingly, the entire amount has been written off to expense in the
third quarter of 1995.
Note 5 - NES legal expenses:
------------------
Northeast Environmental Services, Inc. ("NES"), a subsidiary of the Company
was charged with illegal possession and shipment of approximately 65 drums of
hazardous waste between June and October, 1992, and falsification of records
relating to the shipments. NES has defended on the grounds that the materials
were identified by the shipper as chemical products and, in fact, consisted of
virgin and in-process material, and not waste. Actual and estimated future
costs related to the indictment totalling $200,000 have been expensed in the
third quarter.
F-8
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Environmental Services of America, Inc. (the "Company"), a Delaware
Corporation, and subsidiaries are engaged in the business of providing for the
identification, remediation, transportation and disposal of hazardous waste and
non-hazardous waste, and providing hydrogeological and environmental consulting
as well as consulting and air quality testing, analysis and monitoring for
private and public entities. The Company's stock is listed on NASDAQ and
trades in the NASDAQ National Market System under the symbol "ENSA".
The services provided by the Company fit generally within three categories:
(i) environmental remediation services; (ii) hazardous waste management
services; and (iii) environmental engineering, air testing, air monitoring and
consulting services. The following is a de scription of the services provided.
* ENVIRONMENTAL REMEDIATION: ENSI, Inc., which maintains offices in New
Jersey and Pennsylvania, provides comprehensive environmental management,
transportation and cleanup services to generators and handlers of hazardous
waste materials primarily in the mid-Atlantic states. Tri-S, Incorporated
("TRI-S"), based in Ellington, Connecticut, performs similar services in
the New England states. Additionally, in August, 1994, the Company began
conducting remedial activities from its office in Louisville, Kentucky. In
January, 1995, the Company added two additional offices in Congers, New
York and Baltimore, Maryland.
* HAZARDOUS WASTE MANAGEMENT SERVICES: The Company's hazardous waste
management services include waste treatment and resource recovery,
transportation, and transfer, storage and disposal coordination. Such
services are provided by the Company's three treatment storage and disposal
("TSD") facilities located in Canastota, New York, South Bend, Indiana and
Scott City, Missouri, all of which are RCRA Part B permitted.
Transportation and disposal coordination are also provided, to a lesser
extent, by other offices of the Company.
* ENVIRONMENTAL ENGINEERING, AIR TESTING, AIR MONITORING, AND CONSULTING
SERVICES: The Company's consulting arm operating as ENSA Environmental,
Inc., ("ENSA-ENV") maintains nine offices located in Pennsylvania, New
York, New Jersey, Vermont, Kentucky, Illinois, West Virginia, and Ohio.
The Company offers specialized environmental professional services
including, hydrogeological and geophysical consulting services, remedial
design engineering, and construction management.
1
<PAGE>
In addition, ENSA Environmental, Inc., performs
air quality testing, monitoring, analysis and consulting services, and
designs and installs continuous emission monitoring systems from its
Pennsylvania and Illinois offices.
Management's discussion and analysis is based upon the unaudited
consolidated financial statements of the Company and its subsidiaries for the
nine month and three month periods ended September 30, 1995 and 1994, and
include the accounts of the Company and its wholly-owned subsidiaries, after
elimination of all significant inter-company balances and transactions.
Effective April 1, 1994, Environmental Services of America-IN, Inc. ("ENSA-
IN") and Environmental Services of America-MO, Inc., ("ENSA-MO") (newly formed
subsidiaries of the Company) acquired substantially all of the assets of
Industrial Fuels and Resources, Inc. and Industrial Fuels and Resources of
Missouri, Inc. respectively ("IFR"). The acquisition was accounted for as a
purchase, and, accordingly, the Company's consolidated statements of operations
include the operating results of ENSA-IN and ENSA-MO beginning April 1, 1994.
Net assets of $1,336,126 were acquired and were recorded at their fair market
value at the effective date of the acquisition.
Effective August 12, 1994, the Company's wholly-owned subsidiary, ENSA-ENV
acquired specific assets and assumed certain liabilities of Earth Science
Technologies, Inc. ("EST"). EST operated five offices providing consulting and,
to a lesser extent, remediation services in the Mid-western United States. The
purchase price was $674,194 which included the forgiveness of loans granted to
EST, issuance of shares of the Company's common stock and acquisition costs.
The transaction was treated as a purchase for financial statement purposes.
Accordingly, the Company's financial statements include the operations of EST
beginning August 12, 1994.
2
<PAGE>
<PAGE>
RESULTS OF OPERATIONS:
The following table presents items in the Consolidated Statements of
Operations for the nine month and three month periods ended September 30, 1995
and 1994 as a percentage of net sales:
Percentage of Percentage of
Net Sales Nine Net Sales Three
Months Ended Months Ended
September 30, September 30,
--------------- ----------------
<TABLE>
<S> <C> <C> <C> <C>
1995 1994 1995 1994
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 64.4 63.1 62.3 61.6
----- ----- ----- -----
Gross profit on
sales 35.6 36.9 37.7 38.4
Selling, general &
ad ministrative
expenses 30.8 30.4 27.5 30.5
Depreciation and
amortization 4.4 4.1 4.1 4.1
----- ----- ----- -----
Income (loss) from
operations 0.4 2.4 6.1 3.8
Net non-operating
(expense) (2.9) -- (8.3) (0.2)
Interest expense (1.5) (1.0) (1.5) (1.2)
------ ------ ------ ------
Income (loss)
before provision
for income taxes (4.0) 1.4 (3.7) 2.4
Provision for
income taxes
(benefit) (1.7) 0.6 (1.6) 1.0
------ ----- ------ -----
Net income (loss) (2.3)% 0.8% (2.1)% 1.4%
====== ===== ====== =====
</TABLE>
Net Sales - The following table sets forth the sources of net sales
---------
attributable to the four service areas of the Company (rounded to the nearest
$000s). The Company provides its services on an integrated basis, and in many
instances, services in one area of its business support or lead to a project
undertaken in another area. In the tables below, revenue derived from a
particular service as part of a multi-faceted project are attributed to the
operating subsidiary which actually performs the service as the general
contractor.
3
<PAGE>
<PAGE>
<TABLE>
% Increase
Nine Nine (Decrease)Nine
Months Ended Months Ended Months Ended
September 30,1995 September 30,1994 September 30,1995
Service Segment Net Sales Net Sales Over 1994
- - --------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Hazardous waste
management $ 9,943,000 35.6% $ 9,187,000 40.6% 8.2%
Environmental
remediation 9,673,000 34.6% 6,936,000 30.7% 39.5%
Environmental
engineering,air
testing and
consulting 8,306,000 29.8% 6,485,000 28.7% 28.1%
---------- ---- ---------- ----
Total $27,922,000 100.0% $22,608,000 100.0% 23.5%
=========== ===== ========== ===== ====
% Increase
Three Three (Decrease)Three
Months Ended Months Ended Months Ended
September 30,1995 September 30,1994 September 30,1995
Service Segment Net sales Net Sales Over 1994
- - --------------- ----------------- ----------------- -----------------
Hazardous waste
management $ 3,680,000 36.6% $ 4,144,000 46.1% (11.2)%
Environmental
remediation 3,804,000 37.8% 2,136,000 23.8% 78.1%
Environmental
engineering, air
testing and
consulting 2,572,000 25.6% 2,699,000 30.1% ( 4.7)%
---------- ---- ---------- ----
Total $10,056,000 100.0% 8,979,000 100.0% 12.0%
=========== ===== ========== ===== =====
</TABLE>
For the nine months ended September 30, 1995, net sales were $27,921,598, a
23.5 percent increase over the same period in 1994. During 1994, the Company
acquired two TSD facilities as well as four consulting and remediation offices
all of which are located in the Midwest. In addition, in January, 1995, the
Company began operating two new remediation and consulting offices in Congers,
New York and Baltimore, Maryland.
Compared to the first nine months of the prior year, the Company's sales
increased $5,313,906; sales generated by the new acquisitions and office start
ups were $9,892,010 and $2,609,213 in 1995 and 1994 respectively.
4
<PAGE>
Hazardous waste management revenues for the third quarter of 1995 were
$3,680,000, an 11.2 percent decline in sales compared to the third quarter of
1994. The decline is significant since one project generated $1,095,765 in
hazardous waste management revenues during the quarter. This project was
substantially complete at September 30, 1995.
During the third quarter of 1995, remediation sales rose 78.1 percent over
the prior year to $3,804,000. The increase in sales was primarily due to the
Company's new offices which accounted for $1,220,000 of remediation sales.
In late 1994, the Company ceased its air testing, consulting, and
monitoring operations in Louisiana and California. Additionally,
the Company consolidated its remaining air service centers in Pennsylvania
and Illinois into its existing consulting operations.
Cost of sales - As a percentage of sales, cost of sales for the nine months
-------------
ended September 30, 1995, was 64.4 percent, as compared to 63.1 percent for the
same period in 1994. The market for environmental services remains extremely
competitive. The Company is constantly striving to maintain its margins in this
tough competitive arena by taking advantage of economies of scale now available,
particularly with the Company's subcontractors and facilities utilized for
ultimate disposal of the waste.
Gross profit on sales - Compared to the prior year, the Company's gross
---------------------
profit on sales rose $1,605,186 to $9,952,490 in the first nine months of 1995.
The increase is primarily attributable to the increase in sales experienced over
the same quarter. The gross profit on sales in the third quarter of 1995 was
$3,786,409 or 37.7 percent of sales compared to $3,452,009 or 38.4 percent of
sales for the third quarter of 1994.
Selling, general and administrative expenses - For the third quarter of
--------------------------------------------
1995, selling, general, and administrative expenses were $2,758,238 as compared
to $2,738,959 for the third quarter of 1994. The Company is vigilant in its
efforts to control costs.
In July, 1995, the Company eliminated approximately twelve administrative
and support personnel, executive management took pay cuts, and the Company
employed other cost cutting measures in an effort to further reduce its
operating expenses. In October, 1995, additional executive pay cuts were
enacted.
5
<PAGE>
Income from operations - For the third quarter of 1995, the Company
----------------------
reported income from operations of $612,283 or 6.1 percent of sales as compared
to $345,504 or 3.8 percent of sales for the third quarter of 1994. The results
are attributable to the Company's increase in sales without a corresponding
increase in selling, general, and administrative expenses.
Other income (expenses) - During the third quarter of 1995, the Company
-----------------------
recorded several transactions of a nonrecurrent nature.
NES legal costs - In connection with the defense of an indictment against
---------------
its wholly owned subsidiary, Northeast Environmental Services, Inc. ("NES") and
its President, the Company has incurred expenses, primarily legal costs, and
will incur additional such expenses in the future which it estimates will total
$200,000.
Write off of UCT receivable - The Company was informed that one of its
---------------------------
customers had filed for chapter 11 bankruptcy protection. Accordingly, the
Company has charged to expense in the third quarter the entire account
receivable from this customer which amounted to $644,126. The Company will use
its best efforts to attempt to recover cash from the receivable; at this time
however, the Company cannot determine how much, if anything, will be recovered.
Interest expense - Interest expense rose $171,014 from $237,243 to $408,257
----------------
in the first nine months of 1995 as compared to 1994. The acquisition of two
TSD facilities in April, 1994, and the $1,400,000 improvement to its New York
TSD facility were the primary factors contributing to the Company's $3,295,000
growth in net property, plant, and equipment over the twenty-one months ended
September 30, 1995. Additional debt was assumed when acquiring these assets.
Provision for income taxes - As a result of the Company's net loss for
--------------------------
1995, the Company recorded a benefit from income taxes. The loss before
provision for income taxes of $1,094,020 for the nine months ended September 30,
1995, can be partially carried back to prior years. Based upon its operating
results to date, the Company can expect to receive a refund of approximately
$150,000 when it files its 1995 Federal income tax return and application for
refund in 1996.
Net income (loss) - For the three months ended September 30, 1995, the
-----------------
Company recorded a net loss of $214,828 ($.05 loss per share) compared to net
income of $124,754 ($.03 income per share) in the third quarter of 1994. The
Company's loss in the quarter was due to the $844,126 of expenses of a
nonrecurrent nature as described above.
6
<PAGE>
<PAGE>
For the nine months ended September 30, 1995, the Company had a net loss of
$635,407 ($.14 loss per share), compared to $172,178 ($.04 income per share) for
the nine months ended September 30, 1994. The loss is primarily attributable to
the $844,126 of third quarter expenses related to the NES legal expenses
described above and the write off of the UCT receivable. Secondarily, sales
generated during the first half of the year 1995 were insufficient to offset
selling, general, and administrative expenses and interest expense.
LIQUIDITY AND CAPITAL RESOURCES:
At September 30, 1995, the Company's current ratio was 1.10 to 1.00,
compared to 1.13 to 1.00 at December 31, 1994.
Accounts receivable at September 30, 1995 was $9,664,908, a decrease of
10.7 percent from December 31, 1994. In the third quarter, the Company wrote
off one receivable for $644,126. This, along with intensified collection
efforts by the Company, contributed to the decline in accounts receivable
outstanding.
The Company has a $5,000,000 credit facility with a commercial bank which
it obtained in June, 1994. The borrowings, which consist of a $2,000,000 term
loan (current balance $1,600,000) and a $3,000,000 line of credit (current
balance $2,320,000), will expire in April, 1996. The Company is discussing its
future borrowing options with its present lender.
To date, the Company has invested $1,677,885 in the improvement of its NES
TSD facility, $448,975 of which was spent in 1995. The Company will expend
another approximately $360,000 in 1996 to complete the building improvements.
Additionally, the Company may be required to invest $428,000 in working capital
at its TSD facilities in Indiana and Missouri for operational needs.
The Company was notified that it had been temporarily suspended from
eligibility for the award of new federal government contracts by the Defense
Logistics Agency ("DLA") pending the resolution of an Ontario County, New York
criminal indictment returned against NES. During the first nine months of 1995,
federal governments contract revenues from the DLA generated $1,138,216 in
sales. On Wednesday, November 8, 1995, the DLA terminated the suspension, and
the Company is now eligible for the award of new government contracts.
The Company believes that it will meet its working capital needs for the
remainder of 1995 through cash generated from operations, additional bank
borrowings and the federal tax refund.
7
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- - ------ -----------------
a. On June 2, 1995, Northeast Environmental Services, Inc. ("NES"), a
subsidiary of the Company, and Robert Miller, its President, were charged with
violation of New York State's Environmental Conservation and Penal Laws in an
indictment filed in the Ontario County Court, Canadaiqua, New York. The charges
stem from NES' transportation, between June and October 1992, of approximately
65 drums of hazardous material from a facility of its customer in Rochester, New
York, to another facility of the customer located in Geneva, New York. The
contents of the drums in question were identified by the customer, an
electroplating job shop, as virgin chemical products and in process materials
(plating material, acids, etc.), and were handled and documented as such by NES.
The indictment charges that NES' activities constituted possession, removal and
disposal of hazardous waste without preparing and filing a Uniform Hazardous
Waste Manifest, and that NES' records describing the shipments were falsified.
Both NES and Mr. Miller have denied any wrongdoing in connection with these
shipments, and both have moved the court to dismiss the charges, which motion is
now before the court.
Pending the resolution of these charges, on October 6, 1995, the
Defense Logistics Agency ("DLA") suspended the Company, NES and Mr. Miller from
future participation in U.S. Government procurement and non-procurement
programs. The Company believes that it will be exonerated in the Ontario County
action, and that the DLA suspension will be of short duration. Revenues from
U.S. Government contracts in the current fiscal year have represented
approximately 4% of the Company's total revenues through September 30, 1995.
Existing U.S. Government contractual commitments are affected by the suspension.
b. In June 1995, ENSR Corporation, an environmental services company,
commenced an action against the Company in the U.S. District Court for the
District of New Jersey (Newark) alleging that the Company's use of "ENSA" as a
trade name infringed upon ENSR's registered trademark "ENSR", and seeking
injunctive relief and unspecified monetary damages. The Company has denied that
its use of "ENSA" violates the plaintiff's trademark, and, alternatively, is
seeking to cancel the "ENSR" mark on the grounds that, prior to the plaintiff's
use and registration of that mark, the Company was using the trade name "ENSI"
in its business. The case is in the discovery stage. Legal expenses related
to this action are being borne by the Company's insurer. The Company has not
made any provision for potential loss in this litigation since it believes
that it has meritorious defenses, and that its insurance coverage is adequate
to cover any loss which might be incurred.
8
<PAGE>
<PAGE>
Item 2 Changes in Securities.
- - ------ ---------------------
None.
Item 3 Defaults Upon Senior Securities.
- - ------ -------------------------------
None.
Item 4 Submission of Matters to a Vote of Security Holders.
- - ------ ---------------------------------------------------
None.
Item 5 Other Information.
- - ------ -----------------
None.
Item 6 Exhibits and Reports on Form 8-K.
- - ------ --------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
9
<PAGE>
<PAGE>
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.
ENVIRONMENTAL SERVICES OF AMERICA, INC.
By Jon Colin
---------------------------------------------------------------
Jon Colin, President and Chief Executive Officer
November 13, 1995
----------------------------------------------------------------
Date
By Kathleen P. LeFevre
---------------------------------------------------------------
Kathleen P. LeFevre, C.P.A. Chief Financial Officer
November 13, 1995
----------------------------------------------------------------
Date
<PAGE>
<PAGE>
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.
ENVIRONMENTAL SERVICES OF AMERICA, INC.
By /s/Jon Colin
----------------------------------------------------------------
Jon Colin, President and Chief Executive Officer
November 13, 1995
---------------------------------------------------------------
Date
By /s/Kathleen P. LeFevre, C.P.A.
---------------------------------------------------------------
Kathleen P. LeFevre, C.P.A. Chief Financial Officer
November 13, 1995
---------------------------------------------------------------
Date
<PAGE>
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