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 MARCH 31, 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, RAHAWAY, 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 May 10, 1995: 3,801,722
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS.
Environmental Services of America, Inc. and Subsidiaries Consolidated
Financial Statements For the Three Months Ended March 31, 1995
(Unaudited).
INDEX TO FINANCIAL STATEMENTS
PAGE #
Index to Financial Statements F-1
Consolidated Balance Sheets - March 31, 1995
(Unaudited) and December 31, 1994 F-2 to F-3
Consolidated Statements of Operations - for the three
months ended March 31, 1995 and 1994 (Unaudited) F-4
Consolidated Statements of Cash Flows - for the three
months ended March 31, 1995 and 1994 (Unaudited) F-5
Notes to Consolidated Financial Statements F-6 to F-7
F-1
<PAGE>
<TABLE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31,
1995 1994
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 166,997 $ 600,272
Accounts receivable (net of allow-
ance for doubtful accounts of
$461,313 at March 31, 1995
and $469,605 at December 31, 1994) 10,053,138 10,821,411
Prepaid expenses, taxes and deposits 668,442 771,666
Other current assets 371,224 384,024
Total current assets 11,259,801 12,541,373
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization 7,418,701 7,319,713
GOODWILL, net of accumulated
amortization 1,541,858 1,555,719
OTHER ASSETS:
Deferred permit costs 276,413 290,809
Customer list 141,788 151,838
Other 269,446 453,666
Total other assets 687,647 896,313
Total assets $20,907,997 $22,313,118
</TABLE>
See accompanying notes
F-2
<PAGE>
<TABLE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
1995 1994
CURRENT LIABILITIES: (Unaudited)
<S> <C> <C>
Current portion of long-term debt $ 1,087,302 $ 1,148,149
Notes payable - bank 1,750,000 1,650,000
Accounts payable and accrued expenses 7,023,412 8,127,843
Income taxes accrued 16,393 140,909
Total current liabilities 9,877,107 11,066,901
LONG-TERM DEBT:
Notes payable, net of current
maturities 2,372,401 2,459,052
Other long-term liabilities 273,000 273,000
2,645,401 2,732,052
Total liabilities 12,522,508 13,798,953
STOCKHOLDERS' 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 2,489,740 2,618,416
Total stockholders' equity 8,385,489 8,514,165
Total liabilities and
stockholders' equity $22,907,997 $22,313,118
</TABLE>
See accompanying notes
F-3
<PAGE>
<TABLE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, March 31,
1995 1994
<S> <C> <C>
Net sales $ 9,334,748 $ 5,767,853
Cost of sales 6,121,615 3,788,682
Gross profit on sales 3,213,133 1,979,171
Selling, general and administrative
expenses 2,933,411 1,841,062
Depreciation and amortization 391,452 261,671
3,324,863 2,102,733
Loss from operations (111,730) (123,562)
Other income (expenses):
Net non-operating income 12,756 2,742
Interest income (122,604) (34,168)
(109,848) (31,426)
Loss before provision for
income tax benefit (221,578) (154,988)
Provision for income tax benefit (92,902) (64,971)
Net loss $ (128,676) $ (90,017)
Loss per common share $ (.03) $ (.02)
Weighted average number of common
shares and equivalent shares
outstanding 4,425,606 3,916,245
</TABLE>
See accompanying notes
F-4
<PAGE>
<TABLE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
<S> <C> <C>
Net (loss) $ (128,676) $ (90,017)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 391,452 261,671
Decrease in accounts receivable 768,273 424,720
(Increase) in prepaid expenses,
deposits and other current assets 72,333 (57,906)
(Decrease) in accounts payable
and accrued expenses (1,104,431) (440,261)
(Decrease) in income taxes payable (124,516) (5,071)
Total Adjustments 3,111 183,153
Net Cash Provided by (Used in)
Operating Activities (125,565) 93,136
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (444,432) (216,539)
(Increase) decrease in other assets 184,220 (195,527)
Net Cash (Used In) Investing Activities (260,212) (412,066)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable - bank 100,000 600,000
Issuance of long-term debt 206,398 --
Payments of long-term debt (353,896) (78,940)
Net Cash Provided by (Used in)
Financing Activities (47,498) 521,060
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (433,275) 202,130
CASH AND CASH EQUIVALENTS - Beginning 600,272 514,369
CASH AND CASH EQUIVALENTS - Ending $ 166,997 $ 716,499
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Income taxes $ 75,989 $ 10,649
Interest $ 122,005 $ 30,893
</TABLE>
See accompanying notes
F-5
<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 March 31, 1995 and the related statements of operations
for the three month periods ended March 31, 1995 and 1994 have been included
in the accompanying condensed consolidated financial statements. The results
of operations for the three month periods ended March 31, 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.
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, which operated two treatment, storage, and
disposal facilities. 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-6
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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:
For the Three For the Three
Months Ended Months Ended
March 31, 1995 March 31, 1994
(Unaudited) (Unaudited)
Net sales $ 9,334,748 $ 7,544,596
Net loss $ (128,676) $ (197,888)
Loss per common share $ (.03) $ (.05)
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.
F-7
<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 remedial engineering and environmental
consulting as well as 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 description 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. 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
three month periods ended March 31, 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.
1
<PAGE>
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 Midwestern 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.
Results of Operations:
The following table presents items in the Consolidated Statements of
Operations for the three month periods ended March 31, 1995 and 1994 as a
percentage of net sales:
Percentage of Net Sales
Three Months Ended
March 31,
1995 1994
Net sales 100.0% 100.0%
Cost of sales 65.6 65.7
Gross profit on sales 34.4 34.3
Selling, general &
administrative expenses 31.4 31.9
Depreciation & amortization 4.1 4.5
Loss from operations (1.1) (2.1)
Net non-operating income -- --
Interest expense (1.3) (0.6)
Loss before provision
for income taxes (2.4) (2.7)
Income tax benefit (1.0) (1.1)
Net loss (1.4)% (1.6)%
2
<PAGE>
NET SALES - The following table sets forth the sources of net sales
attributable to the three 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.
<TABLE>
<CAPTION>
% Increase
(Decrease)
Three Three Three Months
Months Ended Months Ended Ended Ended
March 31, 1995 March 31, 1994 March 31,1994
Service Segment Net Sales Net Sales Over 1994
<S> <C> <C> <C> <C> <C>
Hazardous waste
management $3,274,000 35.1% $1,521,000 26.4% 115.3%
Environmental
remediation 3,196,000 34.2% 2,455,000 42.6% 30.2%
Environmental
engineering,
air testing,
consulting &
monitoring 2,865,000 30.7% 1,792,000 31.0% 59.9%
Total $9,335,000 100.0% $5,768,000 100.0% 61.8%
</TABLE>
For the three months ended March 31, 1995, net sales were $9,334,748, a
61.8 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.
The new acquisitions and office start-ups generated sales of $3,205,794,
which represents approximately 90 percent of the increase in the Company's
sales.
In late 1994, the Company ceased its air testing, consulting, and
monitoring operations in Louisiana and California. Additionally, in
Pennsylvania and Illinois the Company consolidated its remaining air service
centers into its existing consulting operations.
COST OF SALES - As a percentage of sales, cost of sales was 65.6 percent,
which is directly proportional to the percentage of sales of 65.7 percent
experienced in the same quarter of the previous year. The market for
environmental services remains extremely competitive. The Company was able 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.
3
<PAGE>
GROSS PROFIT ON SALES - The Company's gross profit on sales rose
$1,233,962 to $3,213,133 in the first quarter of 1995 as compared to the first
quarter of 1994. As discussed above, the increase is directly attributable to
the increase in sales experienced in the first quarter of 1995.
SELLING, GENERAL AND ADMINISTRATION EXPENSES - For the three months ended
March 31, 1995, selling, general, and administrative expenses were $2,933,411,
an increase of $1,092,349 or 59 percent over the same period in 1994. The new
offices and acquisitions of the Company added $968,809 of selling, general, and
administrative expenses.
DEPRECIATION AND AMORTIZATION EXPENSES - Depreciation and amortization
expense rose $129,781 to $391,452 in the first quarter of 1995, as compared to
the first quarter of 1994. The increase is attributable to $99,227 in expenses
related to new acquisitions and operations which became part of the Company
after March 31, 1994.
INTEREST EXPENSE - Interest expense rose 259 percent from $34,168 in the
first quarter of 1994 to $122,604 in the first quarter of 1995. The acquisition
of two TSD facilities in April, 1994, and the $1,400,000 improvement of its New
York TSD facility, were the primary factors contributing to the Company's
$3,352,000 growth in net property, plant, and equipment over the one year period
ended March 31, 1995. Additional debt was assumed when acquiring these assets.
NET LOSS - For the three months ended March 31, 1995, the net loss was
$128,676 ($.03 loss per share) compared to a loss of $90,017 ($.02 loss per
share) for the first quarter of 1994. The Company has, for the past three years,
reported a net loss for the first quarter. Annual operating results for 1993
and 1994 were, of course, profitable. Management believes that the first
quarter of 1995 is not representative of operational expectations for the year
1995.
Liquidity and Capital Resources:
At March 31, 1995, the Company's current ratio was 1.14 to 1.00, compared
to 1.13 to 1.00 at December 31, 1994.
Accounts receivable at March 31, 1995 was $10,053,138, a decrease of 7
percent from December 31, 1994. The decrease in receivables is due to sales
declines. In the first quarter of 1995, sales were $9,334,748, compared to
sales of $10,176,521 in the fourth quarter of 1994.
In June, 1994, the Company obtained new bank financing whereby a credit
facility of $5,000,000 was provided to the Company in the form of a $2,000,000
term loan and $3,000,000 line of credit. The proceeds from the $2,000,000 term
loan were used to reduce the Company's outstanding line of credit. At March 31,
1995 and December 31, 1994 $1,750,000 and $1,650,000, respectively, were
outstanding on the line of credit; as of May 10, 1995, $2,000,000 was
outstanding.
Management estimates that during 1995, the Company may be required to
invest $428,000 in working capital at its TSD facilities in Indiana and Missouri
for operational needs. Additionally, during 1995 the Company will expend
another $400,000 for the remaining improvements at its New York TSD facility.
4
<PAGE>
The Company is seeking increases in its bank financing during 1995 to
increase its available working capital. The Company believes that additional
bank financing and net cash generated from operations will satisfy its cash
needs through fiscal year 1995.
5
<PAGE>
PART II - OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS.
None.
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.
6
<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, President and Chief Executive Officer
May 12, 1995
Date
By
Kathleen P. LeFevre, C.P.A. Chief Financial Officer
May 12, 1995
Date
<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
May 12, 1995
Date
By /s/Kathleen P. LeFevre, C.P.A.
Kathleen P. LeFevre, C.P.A. Chief Financial Officer
May 12, 1995
Date
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 166,997
<SECURITIES> 0
<RECEIVABLES> 10,053,138
<ALLOWANCES> 461,313
<INVENTORY> 0
<CURRENT-ASSETS> 11,259,801
<PP&E> 7,418,701
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,907,997
<CURRENT-LIABILITIES> 9,877,107
<BONDS> 0
<COMMON> 76,035
135
0
<OTHER-SE> 8,309,319
<TOTAL-LIABILITY-AND-EQUITY> 22,313,118
<SALES> 0
<TOTAL-REVENUES> 9,334,748
<CGS> 0
<TOTAL-COSTS> 6,121,615
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (122,604)
<INCOME-PRETAX> (221,578)
<INCOME-TAX> (92,902)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,676)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
