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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For The Fiscal Year Ended February 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from___________ to ___________
Commission File Number: 1-10583
ATC ENVIRONMENTAL INC.
(Exact name of Registrant as specified in its charter)
Delaware 46-0399408
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
104 East 25th Street, 10th Floor
New York, New York 10010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 353-8280
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Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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(Title of Class)
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of May 28, 1996, was approximately $94,688,000
representing approximately 6,060,000 shares of Common Stock at $15.625
per share, the last reported sales price for the Registrant's Common
Stock on such date.
The number of shares outstanding of the Registrant's Common Stock as of
May 28, 1996 was 7,784,269.
Item 1. Business
Overview
ATC Environmental Inc. ("ATC" or the "Company") is a
national environmental consulting and engineering firm that
provides specialized technical and project management products
and services to a large, diverse client base of businesses and
federal, state and local governments. Since entering the
environmental consulting and engineering business in 1982, ATC
has completed several acquisitions and expanded its internal
operations, enabling it to increase its market penetration and
the variety of products and services it offers. The Company
operates a network of branch offices located throughout the
United States, supported by in-house testing laboratories.
The public's concern regarding exposure to contaminants
stimulated the push for environmental regulations in the 1970'a
and 1980's. Today, the public's continuing demand for
responsible action regarding human health and safety and the
potential adverse impact of environmental liabilities drive the
market for environmental consulting and engineering services.
Independent industry estimates of the consulting and engineering
services sector of the environmental market for 1994 ranged from
$13 to $15 billion, with annual growth projected at 5% to 8%
through the next three to four years.
ATC has focused on five areas of specialization: (i)
industrial hygiene consulting, including asbestos management,
classical industrial hygiene and indoor air quality; (ii)
environmental management, including environmental audits, site
assessments, remedial action planning and design, and soil and
groundwater remediation management; (iii) lead-based paint risk
management; (iv) health and safety consulting, including health
and safety training, hazardous materials site safety planning and
industrial safety consulting; and (v) management information
systems for comprehensive environmental risk assessment and
management. These areas of specialization contributed
approximately 59.1%, 27.2%, 7.9%, 5.7% and less than 1.0%,
respectively, of the Company's revenues in fiscal 1996.
The Company believes that certain sectors of the
environmental consulting and engineering market will experience
significant growth over the next several years with demand for
products and services growing even in the absence of increased
governmental regulations. Independent industry sources project
annual growth rates of 10%, 13%, 15% and 20% for lead-based paint
management, occupational safety and industrial hygiene services,
indoor air quality consulting and environmental software,
respectively.
The Company has experienced substantial increases in
revenues and net income over the past three fiscal years. ATC's
revenues were $26,664,385, $36,271,557 and $44,964,897
respectively, in its 1994, 1995 and 1996 fiscal years,
representing a compounded annual growth rate of 29.9% over such
periods. Furthermore, ATC's net income was $1,867,048,
$3,256,520 and $3,865,998 , respectively, in such fiscal years,
representing a compounded annual growth rate of 43.9% over such
periods.
ATC attributes these positive operating results to its
integrated strategy which includes: (i) an aggressive, but
disciplined, acquisition program; (ii) the enhancement of
operations through the integration of acquired businesses with
the Company's existing operations; (iii) a focus on certain
higher growth sectors of the environmental consulting and
engineering services market, and certain higher margin services
such as policy development and decision support; (iv) an emphasis
on basic business management issues, such as employee
utilization, credit and collections management, and regional
profit center accountability; and (v) the development of a
national presence in a market typified by local and regional
firms. The Company intends to employ this strategy as it seeks to
further penetrate the markets for its core services and expand
its range of products and services through strategic acquisitions
and internal growth.
Recent Developments
American Testing and Engineering Corporation - Effective May
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24, 1996, ATC purchased certain assets and assumed certain
liabilities of American Testing and Engineering Corporation
("ATEC"), a national environmental consulting firm. ATEC
provides environmental consulting and engineering services
including risk assessments, compliance audits, environmental
remediation consulting, geotechnical, materials testing,
industrial hygiene and analytical services through a large
network of branch and regional offices. For its year ended
December 31, 1995, ATEC had revenues of $85,020,000 and a net
loss of ($1,820,000). However, the acquisition is expected to be
immediately accretive to earnings due to cost savings and expense
reductions principally resulting from the integration of branches
operating in similar locations and reduced corporate
administration costs. See "Item 7."
3D Information Services, Inc. - Effective May 28, 1996, ATC
purchased certain assets and assumed certain specified
liabilities of 3D Information Services, Inc. ("3D"), a New Jersey
based information services company providing technical
information system consulting services in all phases of
information system design, development, maintenance and
management in client server and mainframe based environments. 3D
provides analysis and design services and system programming
services to help clients in building new computer systems and
modifying existing computer systems. 3D also provides support to
clients in maintaining computer systems and in areas such as help
desk management and other system support services. Employees of
3D typically work full-time at a client's work site. Its clients
include major companies in the telecommunications, financial
services and pharmaceutical industries. 3D reported revenues and
net income of approximately $10,360,000 and $85,288,
respectively, for its year ended December 31, 1995. See
"Item 7."
The Environmental Consulting and Engineering Services Industry
According to The Environmental Business Journal ("EBJ"), the
size of the environmental consulting and engineering services
market for 1996 is estimated to be at approximately $16 billion,
with annual growth projected at approximately 3% through the year
2000. The environmental consulting and engineering services
market is fragmented, with over 3,000 environmental consulting
and engineering companies in the United States with over $3
million in sales, of which only 40 have over $100 million in
annual sales. Many of these companies are small to mid-sized
private firms with specific service specialties and geographic
areas of expertise.
The Company believes that for the next few years growth in
demand from private sector clients and in certain niche service
areas will exceed the average growth rate of the overall
industry. These niche service areas include lead-based paint
management and indoor air quality consulting services, which the
independent marketing firm, Richard K. Miller & Associates, Inc.
("RKM&A"), estimates to increase 10% and 15%, respectively. RKM&A
estimates that the occupational safety and industrial hygiene
sectors of the market will grow at an average annual rate of 13%
and that environmental software services will increase 20%
annually. The Company believes risk analysis services will also
emerge in response to a desire for closer matching of limited
clean up funds with the problems that pose the greatest hazard.
While the initial growth in environmental consulting and
engineering services has been stimulated by regulatory compliance
concerns, the Company believes that recent and future growth
will, in large part, be driven by private litigation, asset
preservation and productivity considerations. As companies have
become increasingly sensitive to the potential adverse
consequences of environmental problems and the potential impact
of environmental liabilities, they have taken an active approach
to managing environmental health and safety risks and
liabilities, whether or not the subject of regulations. This
trend is currently being observed in such areas as real estate
transactional investigations and indoor air quality initiatives.
Concerns over environmental risks have made environmental
investigations an integral component of the due diligence process
for commercial transactions. Financial institutions frequently
require environmental assessments prior to loan originations and
foreclosure activities, while insurance companies increasingly
require environmental assessments before issuing environmental
insurance liability policies. Another industry segment that is
experiencing growth even in the absence of extensive regulation
is indoor air quality. Indoor air quality is viewed as an
important environmental concern which may significantly impact
worker productivity. Published estimates of productivity losses
as a result of poor indoor air quality range from $40 to $50
billion per year in the United States.
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Many governmental agencies and businesses are looking at
risk-based analysis as the new model for decision-making instead
of rote application of rigid rules. This trend presents new
service opportunities for the environmental consulting and
engineering services industry in several areas from which the
Company is positioned to benefit. The absence of adequate funding
to immediately address the full cost of clean ups requires the
employment of risk assessment and planning techniques that direct
funding toward the problems presenting the greatest degrees of
risk. In addition, RKM&A sees a trend toward "outsourcing" of
environmental functions by corporations. Under outsourcing
contracts, environmental consulting firms function as all or part
of the environmental departments of large corporations. The
Company views outsourcing as a significant future growth
opportunity.
Information Technology Consulting Industry
The increased use of technology has led to a dramatic rise
in demand for information technology consulting, project support,
software development, and other computer-related services. As
technology needs become increasingly complex, corporations have
sought comprehensive information technology solutions that
involve not only the staffing of qualified technical personnel,
but also the management of underlying projects and the mastery of
leading-edge technologies. With the rapid pace of technological
developments, corporations are finding it increasingly difficult
to maintain on staff technical personnel with the up-to-date
technical and implementation skills needed to perform mission
critical computer-related functions. Furthermore, many
corporations find the costs of maintaining an internal
information technology staff to be excessive and are seeking
means of improving the effectiveness of their information
technology expenditures.
As a result, many corporations have outsourced departments
that have traditionally supplied such technical services to
information technology consulting firms or have otherwise
utilized information technology consulting firms to meet their
demands for highly skilled computer personnel and to implement
leading-edge technical solutions. According to an industry
survey, the commercial information technology consulting services
industry was estimated to have revenues in 1995 of over $16
billion. One survey of information technology professional
service firms, providing staffing services similar to 3D, showed
growth of approximately 25% over each of the past two years.
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Strategy
The Company's integrated strategy focuses on increasing
revenues through acquisitions and internal growth by promoting
its core services and introducing new and innovative services
while continuing to achieve profitability in existing and
acquired operations through the implementation of rigorous
financial and operational controls. Through strategic
acquisitions, the Company has been able to increase the variety
of services that it offers and develop a nationwide network of
offices and facilities capable of servicing national accounts.
ATC's acquisition strategy includes identifying target
companies in specific geographical areas in which ATC does not
have a strong presence or target companies with new, transferable
technologies or exploitable areas of expertise. The
environmental consulting and engineering services market is
fragmented, with over 3,000 environmental consulting and
engineering companies in the United States, of which only 40 have
over $100 million in annual sales. There are many specific
service specialties, many small-sized companies and thus, many
potential acquisitions candidates. Acquisitions can lead to bi-
directional technology transfers with the acquired company's
services offered to ATC's existing client base and ATC's core
services offered to clients of the acquired company.
Furthermore, when acquisitions are located close to existing ATC
branches, economic consolidations are frequently possible.
In recent years, the Company has, through the acquisitions
of Dennison Environmental, Inc. ("Dennison") and Con-Test, Inc.
("Con-Test"), entered two of the fastest growing sectors of the
environmental consulting and engineering services industry, lead-
based paint risk management and management information systems
and services. The Company believes that in many cases, like
Dennison and Con-Test, opportunities exist to improve the
historical operating results of acquired companies by: (i)
reducing general and administrative costs through consolidating
facilities, reducing administrative personnel costs, improving
purchasing power and taking advantage of other economies of
scale; (ii) reducing costs of sales by decreasing reliance on
subcontractors; and (iii) improving financial and operational
control systems.
The Company believes that its positive operating results in
recent years are due, at least in part, to its disciplined
approach to the management of basic business fundamentals. ATC's
professional administrative staff monitors and oversees the
financial and administrative functions of the business. ATC
strives to manage profit center accountability through a
combination of goals and incentives and performance monitoring.
Services and Products
The Company provides a range of specialized environmental
consulting and engineering services, including asbestos
management, classical industrial hygiene, lead-based paint risk
management, health and safety training, environmental audits,
remedial action planning, design and management, and
comprehensive environmental risk assessment and management. The
Company's services are offered individually or together as part
of the Company's full service approach to environmental
consulting. During fiscal 1996, ATC provided services to over
3,900 clients ranging from small site investigations to large
comprehensive assessment and remediation management projects.
Industrial Hygiene
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The Company offers a variety of industrial hygiene services
which include asbestos management, classical industrial hygiene
investigations and analyses, indoor air quality services and
laboratory services.
Asbestos Management. ATC provides comprehensive asbestos
testing and consulting services. These services may begin with a
survey of facilities to determine the condition, type, quantity
and location of asbestos. After gathering field samples, the
Company utilizes polarized light microscopy, phase contrast
microscopy and transmission electron microscopy to analyze
asbestos fibers. Other services include risk assessment,
remediation design for asbestos abatement, industrial hygiene
services before, during and after the asbestos removal process,
development of operations and maintenance training programs for
facilities personnel, development of operations and maintenance
programs for custodial and maintenance personnel, and providing
asbestos awareness seminars for client personnel.
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ATC's services are designed to enable building owners and
operators to comply with federal, state and local regulations for
asbestos control, by providing a comprehensive approach for
controlling or removing asbestos. ATC's technical personnel
include registered architects, professional engineers, certified
industrial hygienists, certified safety professionals and
asbestos specialists, with extensive experience managing
hazardous material. Such personnel are licensed and certified by
federal, state and local agencies.
Classical Industrial Hygiene. ATC evaluates potential
health hazards in occupational settings, including physical
hazards and hazards arising from exposure to chemical or
biological substances. Potential hazards include solvents,
corrosive chemicals, gases, toxic dusts, radiation, lasers,
noise, lighting, heat, bacteria and molds. Evaluations determine
the extent of exposure to potentially hazardous substances and
methods to control and minimize associated risks. Field
measurements are evaluated to determine compliance with
governmental regulations and other standards. After corrective
measures are designed and implemented, ATC provides follow-up
monitoring designed to ensure that workplace exposures have been
minimized.
Indoor Air Quality. Healthy indoor air quality is
recognized as an essential factor in promoting comfort and
welfare. ATC provides investigations designed to identify: (i)
sources of indoor air pollution; (ii) route of exposure to
individuals; (iii) route of entry into the body; and (iv)
possible effects on occupants. The investigatory process
typically includes interviews of occupants and air monitoring of
indoor and outdoor ambient environments to evaluate exposures,
symptoms and concerns. A thorough building system investigation
evaluates mechanical and ventilation systems which may impact
habitable space. An inventory of chemicals, air contaminants,
office equipment, plants, water sources and other potentially
harmful sub-chemicals, air contaminants, office equipment,
plants, water sources and other potentially harmful substances,
process equipment and maintenance practices may also be part of
the evaluation. After completing a facility evaluation, ATC
recommends solutions that are customized to the specific facility
and problem.
Laboratory Services. ATC maintains analytical testing
laboratories which provide analyses of a wide spectrum of
materials, including suspected asbestos-containing materials,
suspected lead-based paint substances, industrial and municipal
waste water, air and certain hazardous wastes. These
laboratories support ATC's consulting and remediation management
services, and also operate independently. ATC's operations
incorporate chain-of-custody and quality assurance procedures and
professionally recognized laboratory practices.
Environmental Management
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ATC's environmental management services range from real
property investigations for environmental contamination, to turn-
key remediation. These services can include soil and ground
water analysis, installation of monitoring wells, recovery system
design, regulatory permitting, contractor selection and
remediation oversight. Financial institutions, as well as
certain states, mandate pre-purchase or pre-loan real property
environmental assessments prior to property transfer, closure or
sale. An environmental audit by ATC can help to detect the
presence of pollutants and, in some cases, to determine costs for
clean up.
Groundwater Assessments. At sites where the quality of
groundwater is in question, due to a confirmed or suspected spill
or release of hazardous substances, ATC performs assessments to
identify the depth to static water, define pressure zones or
confining conditions, determine gradient and sample groundwater.
Once analytical results are known and soil and groundwater
conditions established, ATC's hydrologists, geologists and
engineers analyze the data through the use of predictive tools
such as groundwater models to determine the movement and ultimate
destination of the contaminants.
Site Assessments and Characterizations. Site assessment and
characterization investigations involve defining the important
physical and chemical parameters of a contaminated site. A site
assessment provides a baseline for understanding subsurface
conditions and is necessary before any clean up can be designed
or implemented.
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Groundwater and Soil Remediation Management. ATC's services
include the management and oversight of clean up projects through
the use of a variety of diverse traditional and innovative
technologies including bioremediation, land farming, soil
venting, air sparging, pump and treat, and thermal oxidation
systems. ATC's management services can include testing,
scheduling, coordination, documentation and approval of progress
payments, and interaction with regulatory agencies throughout the
life of the project.
Lead Risk Management
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Lead in paint, drinking water and soil is a major
environmental problem facing the United States. Lead has no
known useful function in the human body and is known to be toxic
to virtually all organs in the body, even at relatively low
doses. In children, excessive exposure to lead can result in
brain damage leading to learning disabilities and, in some cases,
retardation. Adult exposures to excessive amounts of lead can
cause reproductive, hematological and nervous system disorders.
As the first state-accredited lead risk management training
institute in the nation, ATC was one of the first companies to
provide national lead risk management services. Furthermore, ATC
co-authored and edited the first comprehensive textbook on lead
risk management. ATC is a co-founder of the National Lead
Abatement Council, the first trade organization representing
contractors, inspectors, vendors, attorneys and public officials
engaged in managing lead risks. ATC maintains a high degree of
visibility and credibility in the lead services arena through
participation in professional and consensus standard setting
organizations and through publishing articles in trade
publications.
Until recently, lead risk management services were sought
primarily to establish compliance with lead poisoning prevention
regulations. However, the market is now expanding as clients
increasingly seek voluntary risk reduction programs and defend
against a proliferation of lead poisoning lawsuits.
Federal law requires lead paint testing of all federally
assisted public housing authority projects nationwide, and the
full lead paint abatement of these projects. ATC has provided
lead paint testing and abatement project management services to
numerous public housing authorities throughout the United States.
As this work proceeds, ATC is also pursuing opportunities created
by two new federally funded programs. The first program
authorized approximately $25 million of federal grants to public
housing authorities to conduct specialized lead hazard risk
assessments and develop property management programs to maintain
"lead-safe" dwellings until such time that lead paint can be
abated. The second program authorized approximately $279 million
of federal grants to state and local regulatory agencies to
conduct innovative lead paint inspection and abatement. ATC has
identified and is aggressively marketing the grantee agencies.
Additional opportunities are presented by federal
regulations under Title X of the Housing and Community
Development Act of 1992 which, among other things: (i)
established a national requirement for training and certification
of all lead contractor workers and supervisors, inspectors, risk
assessors, project designers and other individuals involved in
lead paint activities; and (ii) established new disclosure
requirements applicable to all property transactions affecting
residential properties built prior to 1978.
ATC's lead management services are broadly categorized as:
(i) corporate lead risk management services; (ii) steel structure
and industrial compliance services; and (iii) residential lead
paint testing and project management services.
Corporate Lead Risk Management Services. ATC provides
corporate lead risk management programs, primarily to insurance
companies, lending institutions, law firms and large real estate
managers. ATC's services enable corporations to effectively
address lead-related liabilities by advising these institutions
in their development and implementation of lead risk management
policies and procedures.
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Policy development typically entails an examination of a
client's real estate with respect to potential lead liabilities.
Working closely with corporate legal and technical divisions, ATC
recommends policies and procedures to ensure lead-safe management
of properties and compliance with applicable lead poisoning
prevention regulations. ATC also designs and implements special
studies or demonstration programs to provide empirical data for
validating the efficacy of property management guidelines. ATC's
policy recommendations include provisions for clients to
anticipate, guard against, and effectively respond to lead
poisoning complaints, regulatory violations and lawsuits.
The Company's corporate lead risk management services
include designing and implementing compliance training seminars
and workshops tailored to the needs of the different program
participants. ATC's corporate training programs are periodically
revised to reflect changes in accepted work practices.
ATC offers lead paint litigation support services
exclusively in support of property owners, managers, lending
institutions and insurers. These services include case
consultation, regulatory analysis, document and deposition
review, expert testimony, as well as site investigation and
testing services.
Steel Structure and Industrial Compliance Services.
Nationwide, hundreds of thousands of petroleum storage tanks,
water tanks, transportation bridges and other major structures
are made of steel and painted with coats of lead-based paints and
leaded primers. These structures require periodic maintenance,
including full removal of the leaded paints and primers followed
by re-painting to prevent them from corroding.
ATC provides comprehensive environmental monitoring of
surface preparation activities that include the removal of lead
and associated coatings from steel structures. ATC employs
trained engineers and has the expertise to prepare abatement
specifications and guide agencies, engineers and contractors
through lead removal activities in accordance with all federal,
state and local regulations. ATC prepares and has submitted
numerous environmental monitoring and sampling protocols to
assist in protecting the public community, workers and the
environment from potential contamination resulting from lead
removal activities.
Residential Services. ATC provides residential property
owners and managers with services for the analysis of lead in
paint, soil, air and drinking water. Consultation services
include surveys to identify lead problems, to design safe and
responsible procedures for the removal of lead paint and to
control lead dust and contaminated debris while reducing clean up
costs. ATC provides the necessary detailed specifications where
exterior and internal surfaces coated with lead paint must be
abated. ATC also designs worker health and safety plans for lead
removal activities, and provides construction monitoring of lead
projects to prevent occupant, worker and third-party exposure to
lead dust.
Health and Safety
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The Company has established several health and safety
training and advisory programs.
Education and Training. ATC operates training schools under
the name The Environmental Institute, as well as under ATC
Environmental Inc. The Company develops and presents public and
private training courses each year for those involved in
environmental, asbestos, lead, hazardous materials and safety and
health issues. "Right-to-Know" programs in accordance with
mandates by the federal Occupational Safety and Health
Administration ("OSHA"), the federal Environmental Protection
Agency ("EPA") and some state regulations are designed to
communicate information regarding the hazards of chemicals to
workers and communities. Instructors present practical,
comprehensive courses, many of which feature "hands-on" training.
ATC routinely customizes courses to meet specific client needs.
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Health and Safety Consulting. ATC occupational health and
safety programs enable employers and property owners to meet or
exceed the requirements established by federal, state or local
regulations, particularly OSHA regulations. A review of work
practices can result in the recognition, evaluation and design of
proper safe work policies and procedures to minimize or eliminate
work-related injuries and illnesses.
Site Safety, Health and Emergency Response Plan. ATC offers
a full range of technical support services for site-specific
safety and health programs required for hazardous waste
operations. Employers that are subject to OSHA standards for
hazardous waste operations utilize ATC to provide assistance in
many areas.
Management Information Systems and Risk Management
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The assessment of environmental liability involves the
identification of the liability, the development of an optimal
response and the qualification of the cost of the response. An
environmental hazard situation usually does not have only one
possible response alternative, but rather a variety of
alternatives. ATC offers a variety of products and services to
assist in the management of these hazard situations.
Comprehensive Environmental Management System. ATC has
developed various environmental facilities management software
modules. These modules are marketed to current and prospective
clients and are also used in ATC's branch locations. The modules
are designed to function as the prime environmental database for
a company's facilities. This software can be used to keep track
of scheduled environmental responses and to maintain training for
personnel whose jobs involve environmental response or exposure
to environmental hazards. The modules can also be used to
establish audit trails of environmental responses to emergencies
for regulatory agencies, ease the burden of environmental
compliance reporting and manage the client's exposure to
liabilities.
There are seven different modules that are currently
available: asbestos, lead paint, storage tanks, hazardous
materials, hazardous waste, training/certification and
environmental compliance. Each of these modules is presently
available for MS DOS(TM). The Asbestos module is currently
available for use under MS Windows(TM) or MS Windows 95(TM)
environments.
Risk Modeling/Risk Assessment. ATC provides decision
support by quantitatively analyzing the risk associated with the
outcomes of differing environmental responses. ATC can also
provide computerized modeling to simulate complex, uncertain
decision scenarios by combining experience in proven risk and
economic risk analysis with its core expertise in a wide range of
environmental hazard areas.
Custom System Design and Implementation. ATC offers
customized design and implementation services in conjunction with
object based development tools in a client/server architecture to
develop custom computer systems.
Information Technology Consulting Services
ATC's information technology consulting services encompass
all phases of information system design, development, maintenance
and management in client server and mainframe-based environments.
The Company provides analysis and design services and system
programming services to help clients in building new computer
systems and modifying existing computer systems. The Company also
provides support to clients in maintaining computer systems and
in areas such as help desk management and other system support
services. The Company's information technology services fall into
the following broad categories:
General Information Technology Consulting Services. The
Company's general information technology consulting services are
designed to provided highly-trained technical personnel to meet
the clients' specific information technology needs. Such
personnel typically provide services in the areas of design,
programming, testing, implementation, maintenance, support, data
conversions and the evaluation of networks, databases and
operating systems.
Advanced Technology Consulting Services. The Company
provides leading-edge technology design and implementation
services to its clients in the areas of information engineering
methodology, computer-aided software engineering, application re-
engineering, object-oriented services and web site development.
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Outsourcing Services. The Company intends to develop
outsourcing services to provide staffing and management of all
aspects of an information technology project or service within
guidelines established by the Company and the client. The
Company's outsourcing services offerings include help desk
support, remote network administration and Internet site
development, hosting, maintenance and support.
The Company's services generally involve the provision of
programmers, systems analysts, and technical support staff to
clients on a contract basis for projects lasting from a few
months to periods exceeding one year. The Company's information
technology consultants typically work full-time at a client's
work site. Typically about 85% of the Company's information staff
are directly involved in providing client-site services on a
fee/hour basis. The remaining staff are primarily involved in
managing and selling information technology services and in
recruiting new staff to meet the demand for services.
Clients and Marketing
Environmental Engineering and Consulting Services. The
Company provides its environmental engineering consulting
services to Fortune 500 companies, small companies, real estate
property owners and managers and federal, state and local
governments. The Company relies on referrals from existing and
former clients, architects and engineers for a large portion of
its contract leads. The Company's contracts are obtained by its
sales force through a bidding process and other forms of
engagement.
Consistent with trends towards focusing on litigation,
liability and cost control management, there is an increasing
tendency for companies to obtain a greater share of their
environmental consulting and engineering services from a smaller
number of larger providers. This trend is evidenced by findings
reported in EBJ that revenues for the largest environmental
consulting firms grew at almost twice the industry average during
1994. RKM&A attributes this trend to such issues as the greater
insurance protection and indemnity coverage that larger firms can
provide. The Company believes that this trend presents a
significant opportunity for firms, such as ATC, that have the
technical skills, branch office locations, team mobilization
capabilities and financial resources to both perform the services
and provide the insurance and indemnity protection demanded by
large corporate and government clients.
To take advantage of this trend, ATC's overall marketing
strategy is a combined national and regional approach. National
efforts are directed by senior professionals of the Company,
while regional efforts are typically directed either by a
regional or branch manager, or by a sales and marketing
professional. The Company's regional sales and marketing
departments generate leads, act as proposal administrators,
perform technical writing and generally support the Company's
sales efforts.
ATC presently markets its environmental consulting and
engineering services through its network of branch offices
located in thirty states. Direct marketing is accomplished by
technical sales representatives, technical and management
personnel who call on prospective clients. ATC also relies on
telemarketing, direct mail solicitation, national trade
advertising and submission of competitive bids for potential
governmental projects listed in industry publications. In
addition, ATC markets its services through its environmental
seminars and training courses for existing and potential clients.
Information Technology Consulting Services. The Company
provides its information technology consulting services to
Fortune 500 and other clients, including major companies in the
telecommunications, financial services and pharmaceutical
industries. A significant majority of the Company's information
technology services revenue is derived from its existing client
base. The Company obtains new clients through personal sales
presentations, telephone marketing calls, direct mail
solicitation, referrals from other clients and advertising in a
variety of local media.
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<PAGE>
Competition
The environmental engineering and information technology
consulting industries in which the Company operates are subject
to intense competition. In addition to the thousands of small
environmental consulting and testing firms operating nationally,
ATC competes with several national environmental engineering and
consulting firms including Law Engineering, Inc., The Earth
Technology Corporation (a subsidiary of Tyco International,
Inc.), Dames & Moore, Inc. and Professional Service Industries,
Inc. In the information technology consulting market, ATC
competes with many small and medium-sized information technology
firms as well as large temporary staffing companies, including
The Olsten Corporation, Corestaff, Inc. and Accustaff
Incorporated among others and large systems consulting firms.
Many of ATC's present and future competitors may have greater
financial, technical and personnel resources than ATC. It is not
possible to predict the extent of competition which ATC will
encounter in the near future as the environmental engineering and
information technology consulting services industries continue to
mature and consolidate. Historically, competition has been based
primarily on the quality, timeliness and costs of services. The
ability of ATC to compete successfully will depend upon its
marketing efforts, its ability to accurately estimate costs, the
quality of the work it performs, its ability to hire and train
qualified personnel and the availability of insurance.
Environmental Regulation
Most environmental laws and regulations are promulgated by
Congress and departments and agencies of the federal government.
Many of the federal regulations contemplate enforcement by state
agencies and adoption by the states of similar regulations which
must meet the minimum federal requirements. In areas of
environmental law where federal regulation is silent, the states
may adopt their own environmental laws. Local governments such
as countries and municipalities may also enact and enforce
environmental laws that address local concerns.
Additionally, in its operations, ATC and its employees are
subject to various regulatory, certification and licensing
requirements.
Those federal agencies whose regulations, guidelines or
standards have the greatest potential impact on ATC are:
The United States Department of Labor - Occupational Safety
and Health Administration, which requires particular work
practices, sets limits for worker exposure on the job, requires
employers to provide employees with personal protective devices
such as respirators, and requires employers to maintain records
for periods of up to 30 years;
The United States Environmental Protection Agency, which,
through its National Emissions Standards for Hazardous Air
Pollutants, requires that it be notified of asbestos removal or
disturbance during renovation and demolition projects and
requires specific work practices at such projects, and which
through other statutes and regulations regulates a very broad
spectrum of industrial and commercial activities, including the
disposal of hazardous waste;
The United States Department of Housing and Urban
Development ("HUD"), which sets the standards for the testing and
remediation of lead-based paint in publicly funded housing, and
which provides funding for housing rehabilitation including lead-
based paint remediation; and
The United States Department of Transportation, which
regulates packaging and transportation of hazardous waste by all
who transport or cause the transport of hazardous waste.
The EPA, OSHA and HUD have each published regulations and
guidelines to safeguard employees and public occupants from
certain environmental exposures. Federal regulations specify
work practices for removal of asbestos and lead containing
materials from buildings. Federal law also presently requires
employers to inform workers, and in some places the general
public, of the dangers connected with hazardous chemicals in the
11
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<PAGE>
workplace. These "Right-to Know" laws usually require employers
to list all hazardous chemicals in the workplace, to instruct
workers about safe work practices, and to train workers on how to
respond in the case of exposure to or release of the hazardous
chemical. OSHA's Hazardous Communication Standard requires all
employers to provide information and training regarding hazardous
chemicals in the workplace.
Most states and local governments have adopted licensing and
certification requirements for workers engaged in the
environmental industry, which require workers to attend training
classes. ATC is currently accredited by the National Voluntary
Laboratory Program and expects to continue to participate in all
future National Institute of Standards and Technology programs.
In addition, ATC maintains various licenses and certifications
pertaining to its laboratories and certain field testing
equipment. ATC has not experienced, and does not contemplate,
any material difficulties in complying with regulatory and
licensing provisions applicable to its business. ATC has
received citations from governmental authorities, none of which
have had a material adverse effect on the Company's business
operations.
Insurance
ATC has secured a "claims made" professional liability
insurance policy covering a two year term, including contractor's
pollution liability coverage, for claims with a two year per
claim and aggregate limit of $10,000,000 and a deductible of
$250,000. Increased limits have also been obtained on a
specific endorsement basis to meet the needs of particular
clients or contracts. A "claims made" policy only insures
against claims filed during the period in which the policy is in
effect. This policy covers both errors and omissions. ATC also
carries general liability insurance in the amount of $1,000,000,
with a $9,000,000 umbrella. ATC also recently added
products/completed operations to its insurance coverage. ATC's
policy has been renewed in each of the last several years that
the policy has been in effect. The relatively low dollar amount
of the policy limit currently offered, the possible future
unavailability or modification of this insurance or any
significant increase in insurance rates could have a materially
adverse effect on ATC's operations. Further, because customers
may require that ATC maintain liability insurance, the possible
future unavailability of such insurance could adversely affect
ATC's ability to compete effectively.
Personnel
As of June 14, 1996, ATC employed 2,149 employees, 1,589 of
which are full-time employees and 560 are employed on a part time
basis. ATC's employees consist of 1,760 technical and
professional personnel, 38 sales and marketing persons and 351
administrative employees inclusive of executive officers. The
backgrounds of ATC's technical and professional staff include,
among other disciplines, environmental engineering, information
technology, industrial hygiene and hydrogeology, chemistry,
biology and geology. In addition to the part time employees, ATC
from time-to-time hires additional personnel on a temporary
basis.
ATC believes that it has been able to establish and maintain
a stable work force of experienced personnel by paying
competitive wages and by providing standard benefits. ATC also
pays the costs as they arise to have its workers certified for
its asbestos and environmental requirements, including tuition at
a certified training program and fees for certification, testing
and licensing. ATC believes that its own training school has
helped to ensure the availability of a trained work force.
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<PAGE>
Item 2. Properties
----------
ATC leases office space, laboratory facilities, temporary
housing facilities and storage space under operating lease
agreements which expire at varying dates. Although ATC's
utilization of these leased facilities is near maximum capacity
at all locations, there is no location at which ATC foresees any
material difficulty in leasing adequate supplementary facilities,
if necessary, under terms similar to those enjoyed under current
leases. The following leases could be considered material leases:
ATC's principal executive, administrative, operations and
laboratory facilities, aggregating approximately 40,000 square
feet are located at 104 East 25th Street, New York, NY 10010 at a
base rate of $340,000 per annum with a term ending on September
30, 2001. ATC has an eight year lease for office and laboratory
premises aggregating 7,500 square feet at 39 Spruce Street, East
Longmeadow, Massachusetts 01028 at a base rate of approximately
$80,000 per annum. ATC and its Hygeia subsidiary have three
separate lease and sublease agreements (aggregated for the
purpose of determining material leases) covering the premises
housing its consulting and laboratory operations at 600 West
Cummings Park, Woburn, Massachusetts, comprising approximately
13,400 square feet at an annual aggregate base rent of
approximately $140,000. Although each separate lease of this
group has a different term, the terms generally run through the
summer of 1997. ATC has a material lease in California and has
committed to enter into a second lease. The first is for
approximately 9700 square feet of office space at 50 East
Foothill Boulevard, Arcadia, California 91006. This lease runs
through March, 1997, at an annual base rental of $105,600. The
second lease is for approximately 8,600 square feet in Tustin,
California at an annual rate of $108,576. ATC entered into three
material leases with the Mann Realty Company in connection with
its acquisition of the operations of ATEC. These leases are for
premises in Indianapolis, Indiana, Dallas, Texas and Atlanta,
Georgia, covering 28,500 square feet, 12,150 square feet and
18,700 square feet, respectively, at annual rents of $170,712,
$100,800 and $178,776, respectively. The terms of these three
leases are ten years with an option to terminate after four years
upon the occurrence of certain specified business conditions.
In its business, ATC utilizes various laboratory, field and
computer equipment which are owned or leased. ATC also rents
equipment on a project-by-project basis.
Item 3. Legal Proceedings
-----------------
First Fidelity Bank, NA., et al v. Hill International, Inc.
et al, Superior Court of New Jersey, Law Division, Burlington
County, Docket No. Bur-L-03400-95, filed December 19, 1995. On
December 19, 1995, a second amended complaint was filed in the
above-entitled action which joined the Company as a defendant and
included a count against the Company seeking recovery of certain
assets purchased from Hill International, Inc. ("Hill") on the
grounds that plaintiff banks hold security interests in the
assets and that Hill is in default under the security agreement
creating such alleged security interests. The plaintiffs in this
action are First Fidelity Bank, N.A. and United Jersey Bank, N.A.
The primary defendants are Hill International, Inc. and certain
of its subsidiaries, and Irvin Richter, David Richter, Janice
Richter and William Doyle. Irvin Richter and David Richter are
officers and stockholders of Hill. In April 1996, ATC filed a
cross-claim against Hill, Irvin Richter and David Richter
alleging breach of contract, fraud, among other allegations and
seeking unspecified damages, including punitive damages and
equitable relief. The cross-defendants have not yet answered
ATC's allegations as of June 18, 1996; however, Hill has filed a
demand for arbitration seeking the payment from ATC of the
remaining approximately $1.3 million in consideration that Hill
has yet to receive from its sale of assets to ATC. Of this
amount, ATC paid $730,625 to the Court in May 1996. ATC disputes
Hill's claim on breach of contract and other grounds. These
related cases are in their early stages with discovery yet to
take place. In the Company's opinion, the outcome of this matter
will not have a significant effect on the Company's financial
position or future results of operations.
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Item 11. Executive Compensation.
-----------------------
Summary Compensation Table - The following table provides
information with respect to the compensation of ATC's Chief
Executive Officer (CEO) and its executive officers, other than
the CEO, who where serving as executive officers at the end of
fiscal 1996 whose total annual salary and bonus, if any, exceeded
$100,000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards Payouts
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Re- Secur- ALL
Name and Year Annual stricted ities Other
Principal Ended Compen- Stock Under- LTIP Compen-
Position February Salary Bonus sation Award(s) lying Payouts sation
28(29) ($) ($) ($) ($) Options ($) ($)
- ----------------------- ------- ------- ------- ------- ------- ------- ------- -------
1996 225,000 141,774 -0- -0- -0- -0- -0-
Morry F. Rubin, 1995 225,000 132,500 -0- -0- -0- -0- -0-
President and 1994 120,000 62,500 -0- -0- -0- -0- -0-
Chief Executive Officer
1996 225,000 141,774 -0- -0- -0- -0- -0-
George Rubin, 1995 225,000 132,500 -0- -0- -0- -0- -0-
Chairman of the Board 1994 144,231 62,500 -0- -0- -0- -0- -0-
and Secretary
1996 142,308 -0- 6,000(1) -0- 30,000 -0- -0-
Christopher P. Vincze 1995 105,385 86,500 5,550(1) -0- 17,500 -0- -0-
Senior Vice President 1994 96,682 98,000 4,200(1) -0- 2,500 -0- -0-
1996 142,308 -0- -0- -0- 30,000 -0- -0-
Nicholas J. Malino 1995 105,385 86,500 -0- -0- 37,500 -0- -0-
Senior Vice President 1994 96,154 98,000 -0- -0- 2,000 -0- -0-
</TABLE>
____________
(1) Represents compensation relating to a car allowance.
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Options Grants Table - The following table provides
information with respect to individual grants of stock options by
ATC during fiscal 1996 to each of the executive officers named in
the preceding summary compensation table.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realized Value
at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term (2)
<C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
% of
Number Total
of Options
Securities Granted
Underlying to
Options Employees Exercise
Granted in Fiscal Price Expiration
Name (#) Year (1) ($/SH) Date 5% ($) 10% ($)
- ---------------- ---------- --------- -------- ---------- ------- -------
Morry F. Rubin -0- -0- N/A N/A -0- -0-
George Rubin -0- -0- N/A N/A -0- -0-
Christopher P. Vincze 20,000 12.1% 13.43 7-12-2000 (3) 74,209 163,983
10,000 6.1% 11.50 12-11-2000 (3) 31,772 70,209
20,000 12.1% 13.43 7-12-2000 (3) 74,209 163,983
Nicholas J. Malino 10,000 6.1% 11.50 12-11-2000 (3) 31,772 70,209
</TABLE>
N/A - not applicable
____________
(1) The `% of Total Options Granted to Employees in Fiscal Year'
is based upon options granted by ATC employees only and
excludes options granted to non-employees and ATC options
issued to replace previously outstanding Aurora options and
warrants resulting from the Aurora merger.
(2) The potential realizable value of each grant of options
assumes that the market price of ATC's Common Stock
appreciates in value from the date of grant to the end of
the option term at annualized rates of 5% and 10%,
respectively, after subtracting out the applicable exercise
price.
(3) The options granted to Messrs. Vincze and Malino become
exercisable over a period of five years with one-fifth
vesting at the date of grant and an additional one-fifth
vesting on each of the four subsequent anniversaries of the
date of grant and expire within five years of the date of
grant.
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Aggregated Option Exercises and Fiscal Year-End Option Table
The following table provides information with respect to each
exercise of stock options during fiscal 1996 by each of the
executive officers named in the preceding summary compensation
table and the fiscal year-end value of unexercised options.
AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR - END OPTION VALUES
<TABLE>
<C> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options
FY-End (#) at FY-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Exercise Realized (1) Unexercisable Unexercisable
Name (#) ($) (1) (1)
Morry F. Rubin -0- -0- 80,000 / -0- 1,348,038 / -0-
George Rubin -0- -0- 490,500 / -0- 5,146,625 / -0-
Christopher -0- -0- 38,000 / 29,500 192,468 / 85,812
P. Vincze
Nicholas J. -0- -0- 47,300 / 22,200 60,350 / 88,775
Malino
</TABLE>
____________
(1) The aggregate dollar values in column (c) and (e) are
calculated by determining the difference between the fair
market value of the Common Stock underlying the options and
the exercise price of the options at exercise or fiscal year
end, respectively. ATC's last sale price at the close of
business on February 29, 1996 was $12 1/4. Stock options
and warrants of Aurora converted into ATC options and
warrants pursuant to the terms of the Merger Agreement are
included above.
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Board of Directors Report on Executive Compensation
The Board of Directors of ATC is composed of five members,
namely, George Rubin, Chairman of the Board, Morry F. Rubin,
Chief Executive Officer ("CEO"), Richard L. Pruitt, Vice
President, Principal Accounting Officer, Julia S. Heckman,
Managing Director with Rodman & Renshaw, Inc.'s investment
banking group and Richard S. Greenberg, Director of the
Environmental Management Consulting Services Group at Coopers &
Lybrand LLP. The Board is responsible for reviewing and
determining the annual salary, bonuses, stock option grants and
other compensation of the executive officers of ATC.
This report describes the policies and rationales of the
Board in establishing the principal components of executive
compensation in fiscal 1996. The Board's review and
determination of executive compensation includes consideration of
the following factors: (a) compensation surveys of similar size
companies, (b) past and future performance contributions of each
executive officer and (c) the performance of ATC, both separately
and relative to similar size companies.
Under the direction of the Board, ATC has developed a
compensation strategy designed to compensate its executives on a
performance basis. The strategy is intended to (a) reward
executives for long-term strategic management and the enhancement
of Stockholder value, (b) facilitate ATC's short and long-term
planning process and (c) attract and retain key executives
critical to the long-term success of ATC.
Compensation for the CEO and other Named Executives consists
of a fixed base salary and variable components, including both
short-term and long-term incentive compensation in the form of
bonuses and stock option grants. In evaluating the performance
and setting the incentive compensation of executive management
the Board considered the factors described above and that ATC
completed various acquisitions and experienced growth in revenues
and earnings during the past three fiscal years.
Based on the foregoing, the Board believes that ATC's
executive management is dedicated to its corporate objectives of
achieving significant improvements in long-term financial and
operating performance. The executive compensation program
outlined below is designed to implement this strategy by
rewarding management for achieving these objectives.
Base Salary. ATC's base salary is designed to recognize the
sustained and cumulative effect on long-term results that its
executives have demonstrated. The base salary is a remuneration
for services provided and is generally fixed at levels which are
competitive with amounts paid to executives at comparable
companies.
Short-Term Incentives. Short-term incentives in the form of
bonuses are paid to each of the Executives named in the summary
compensation table to recognize performance that is related to
the achievement of key financial and operating objectives that
have been established for a fiscal year. Since short-term
incentives should generally reflect one year contributions, the
size of the payments may vary considerably from year to year,
depending on the performance of ATC, the executive, his
individual activities and terms of any employment contracts.
Long-Term Incentives. The Board recognizes that long-term
incentive compensation is a substantial component of the total
pay package linking executive pay and corporate performance. At
ATC, long-term incentive compensation in the form of equity based
compensation is intended to link the interests of its executives
with the interests of ATC's Stockholders by rewarding executives
with stock options for both past and anticipated achievements of
the Executive.
Chief Executive Officer's Fiscal 1996 Compensation . As
more specifically set forth in the Summary Compensation Table,
during fiscal 1996, Mr. Morry F. Rubin earned an annual salary of
$225,000 and an annual bonus equal to 2-1/2 % of ATC's
consolidated pre-tax profits.
In determining Mr. Rubin's 1996 compensation, the Board
17
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<PAGE>
considered the factors applied to the compensation of all
executive officers as discussed above. The Board decided that,
based on these criteria, ATC's performance based on the creation
of Stockholder value, cash flow, and net income and that his
annual compensation is generally less than that paid to CEO's of
similar companies.
The foregoing report has been approved by all members of the
Board.
George Rubin - Chairman
Morry F. Rubin
Richard L. Pruitt
Julia s. Heckman
Richard S. Greenberg
18
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<PAGE>
Comparative Performance by ATC
ATC is presenting a chart comparing the cumulative total
stockholder return on its Common Stock with the cumulative
Stockholder return of (1) a broad equity market index, and (2) a
published industry index or peer group for the past five years.
such chart compares the performance of ATC's Common Stock with
(1) the NASDAQ Stock Market Index and (2) a group of public
companies each of whom are listed in the peer group sanitary and
other services and assumes an investment of $100 in ATC's Common
Stock and on March 1, 1991 an investment of $100 in each of the
stocks comprising the NASDAQ Stock Market Index and the stocks of
the peer group sanitary and other services.
19
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<PAGE>
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
ATC ENVIRONMENTAL INC.
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
PRODUCED ON MAY 23, 1996 INCLUDING DATA TO FEBRUARY 29, 1996
20
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<PAGE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors of ATC is composed of five members,
namely, George Rubin, Chairman of the Board, Morry F. Rubin,
ATC's Chief Executive Officer ("CEO"), Richard L. Pruitt, Vice
President, Principal Accounting Officer, Julia S. Heckman,
Managing Director with Rodman and Renshaw, Inc.'s. Investment
Banking Group and Richard S. Greenberg Esq., a director of the
Environmental Management Group at Coopers & Lybrand. The Board
of Directors has recently appointed an Audit Committee and a
Compensation Committee consisting of three directors including
Morry F. Rubin and Richard S. Greenberg and Julia S. Heckman.
The Audit Committee will be responsible, among other things, for
approving any transactions between the Company and any of its
directors, officers or affiliates. Since August 1995, the
Compensation Committee is responsible for setting compensation of
the executive officers of the Company and for granting any
further options to purchase Common Stock. Prior to August 1995,
the Board had sole responsibility for reviewing and determining
the annual salary, bonuses, stock option grants and other
compensation of the executive officers of ATC.
George Rubin and Morry F. Rubin are officers and/or
directors of ATC's subsidiaries. Morry F. Rubin, George Rubin
and Richard L. Pruitt each receive all of their respective cash
compensation through ATC. However, derivative securities such as
options or warrants have in the past been granted to each of the
aforesaid persons by Aurora, although none were granted during
fiscal 1996.
George Rubin is one of two directors of National Diversified
Services, Inc. ("National"). During National's fiscal year ended
December 31, 1995, no cash compensation was paid to any officer
of ATC. During ATC's past fiscal year, Aurora, ATC and their
subsidiaries had no business relationship with National.
Employment Contracts and other Compensating Arrangements
George Rubin, Morry Rubin, Nicholas Malino and Christopher
P. Vincze receive annual salaries of approximately $225,000,
$225,000, $170,000 and $170,000, respectively. Salaries of all
executive officers of ATC (8 persons), currently aggregate
approximately $1,083,000. ATC has no employment contracts with
its executive officers. All salaries and bonuses are at the
discretion of the Board of Directors, however, ATC's Board of
Directors has agreed to pay bonuses to each of George Rubin and
Morry F. Rubin of 2-1/2% of pre-tax profits based upon fiscal
1997 operating results and to Christopher Vincze and Nicholas
Malino based upon operating income exclusive of ATC's subsidiary,
ATC InSys Technology, Inc. as described below. The bonuses to be
paid to such officers for fiscal 1997 are not pursuant to any
written agreements.
During fiscal 1990, ATC approved an employee savings plan
which allows voluntary contributions by eligible employees into
designated investment funds. ATC may, at the discretion of its
Board of directors, make additional contributions on behalf of
the Plan's participants. No contributions were made by the
Company in fiscal years 1994, 1995, and 1996.
ATC has no other annuity, pension or retirement benefits for
its employees. ATC provides life, dental and health insurance,
which is available to all full-time employees. ATC has not
afforded any of its officers or directors any personal benefits,
the value of which exceeds 10% of his salary, which are not
directly related to job performance or provided generally to all
salaried employees. During fiscal 1996, ATC granted options to
purchase 7,500 shares to each of Julia S. Heckman and Richard S.
Greenberg, Esq., ATC's two outside directors. No other
compensation was paid to ATC's directors during fiscal 1996 for
serving in the capacity of director and there are no current
arrangements for future compensation of directors. Depending
upon the number of meetings and the time required for ATC's
operations, ATC may decide to compensate its directors in the
future.
ATC Stock Option Plans
On January 12, 1988, the board of directors of ATC adopted a
Stock Option Plan (the "1988 Plan") which was ratified by
Stockholders on January 12, 1988. The Plan covers 200,000 shares
of Common Stock and is intended to strengthen ATC's ability to
attract and retain in its employ experienced persons and to
attract other persons to become associated with, and/or to
maintain their association with, ATC and its subsidiaries in
various capacities (e.g. consultants, salespersons) other than
21
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<PAGE>
that of an employee, by affording such employees and other
persons an opportunity to hold a proprietary interest in ATC.
The Plan authorizes the issuance of the options covered thereby
as either "Incentive Stock Options" within the meaning of the
Internal Revenue Code of 1986, as amended, or as "Non-Statutory
Options". While any person is eligible to receive Non-Statutory
options, only employees are eligible to receive an Incentive
Option under the provisions of applicable law. The Plan also
provided that no options may be granted after January 11, 1998.
The Plan is administered by ATC's Board of Directors, which
has the authority to determine the persons to whom options shall
be granted, whether any particular option shall be an Incentive
Option or a Non-Statutory Option, the number of shares to be
covered by each option, the time or times at which options will
be granted or may be exercised and the other terms and provisions
of the options except that the Plan prohibits the exercise of an
Incentive Stock Option unless the Optionee has been continuously
employed by ATC from the date of grant to the date of exercise.
Accordingly, Incentive Stock Options terminate upon termination
of the Optionee's employment with ATC for any reason whatsoever.
The Plan also provides that: (i) the exercise price of options
granted thereunder shall not be less than 100% (or in the case of
an Incentive Option, 110% if the optionee owns 10% or more of the
outstanding voting securities of ATC) of the fair market value of
such shares on the date of grant, as determined by the Board, and
(ii) no option by its terms may be exercised more than ten years
(five years in the case of an Incentive Option, where the
optionee owns 10% or more of the outstanding voting securities of
ATC) after the date of grant. Any options which are canceled or
not exercised within the option period become available for
future grants.
On July 16, 1993, ATC adopted the 1993 Incentive and Non-
Qualified Stock Option Plan covering 200,000 shares (the "1993
Plan"). On December 14, 1995 the 1993 Plan was amended to
increase the number of shares covered to 500,000 shares. The
1993 Plan provides no options may be granted after July 15, 2003.
The 1993 Plan is similar in all respects to the 1988 Stock Option
Plan described above.
On June 29, 1995 ATC adopted a new stock option plan (the
"1995 Plan") to replace Aurora's 1987 Stock Option Plan, except
that the shares covered by the new plan are limited to 81,750.
These options were granted to Morry Rubin in replacement of
Aurora's options previously held at an exercise price of $5.32
per share and expire January 2004.
As of February 29, 1996, ATC has options outstanding to
purchase 584,720 shares (under the 1988, 1993 and 1995 Plans) at
exercise prices ranging from $1.875 per share to $17.00 per
share. As of February 29, 1996, options to purchase 307,950
shares of ATC's Common Stock are currently exercisable.
22
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<PAGE>
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) (1) Financial Statements
A list of the financial statements filed as a part of this
Annual Report is set forth in Item 8, and appears on Page F-1
herein; which list is incorporated herein by reference.
(a) (2) Financial Statement Schedules
No financial statement schedules are in this Annual Report
because the information required is contained in the financial
statements incorporated by reference in (a) (1) above.
(a) (3) Exhibits
A list of exhibits required by Item 601 of Regulation S-K
and an index thereto appears on the following page of this Annual
Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended February 29, 1996. However, an amendment to a Form 8-K
dated November 10, 1995 was filed during the quarter ended
February 29, 1996.
23
PAGE
<PAGE>
EXHIBIT INDEX
- ----------------------------------------------------------------------
Exhibit
2 Agreement and Plan of Merger to reincorporate in Delaware
(contained in Exhibits 3(b) and 3(c)(1))
2(a) Agreement and Plan of Merger between ATC Environmental
Inc. and Aurora Environmental Inc. (6)
3(a) Certificate of Incorporation of Registrant(1)
3(b) Certificate of Ownership and Merger of Registrant(Delaware)(1)
3(c) By-Laws(1)
3(d) Certificate of Merger(Aurora Environmental Inc. Merging
with and into ATC Environmental Inc.)(9)
10 Employee Savings(401(k))Plan(2)
10(a) New York City Lease(3)
10(b) Form of Indemnity Agreement(10)
10(c) Asset Purchase Agreement between ATC
Environmental Inc., a Delaware corporation, and Hill
International Inc., a Delaware corporation, executed on
November 10, 1995(5)
10(d) Six-Month Promissory Note executed and delivered
by ATC Environmental Inc. on November 10, 1995, payable to
Hill International, Inc. in the amount of $300,000(5)
10(e) Irrevocable Letter of Credit executed by
Atlantic Bank of New York on November 8, 1995, and
delivered by ATC Environmental Inc. on November 10, 1995,
payable on or after May 1, 1996, to Hill International,
Inc. in the amount of $730,625.00(5)
10(f) Bill of Sale delivered on November 10, 1995,
conveying assets referenced in assets purchase agreement
from Hill International, Inc. to ATC environmental Inc.(5)
10(g) Non-Competition Agreement of Irvin E. Richter to
ATC Environmental Inc. Delivered on November 10, 1995(5)
10(h) Non-Competition Agreement of David L. Richter to
ATC Environmental Inc. Delivered on November 10, 1995(5)
10(i) Agreement for Sale and Purchase of Business
Assets on May 24, 1996, among ATC Environmental, American
Testing and Engineering Corporation d/b/a ATEC Associates,
Inc. and Gerald D. Mann.(11)
10(j) Assumption of Liabilities Agreement on May 24,
1996, among ATC Environmental Inc., American Testing and
Engineering Corporation and Gerald D. Mann.(11)
10(k) Master Equipment Lease Agreement on May 24,
1996, between ATC Environmental Inc. and American Testing
and Engineering Corporation.(11)
10(l) Master Sublease Agreement on May 24, 1996,
between ATC Environmental Inc. and American Testing and
Engineering Corporation covering premises leases at
Indianapolis, IN, Atlanta, GA and Dallas, TX.(11)
24
PAGE
<PAGE>
10(m) Non-Competition Agreement on May 24, 1996, between ATC
Environmental Inc. and American Testing and Engineering
Corporation.(11)
10(n) Mann Non-Competition Agreement on May 24, 1996,
between ATC Environmental Inc. and Gerald D. Mann.(11)
10(o) WATEC Non-Competition Agreement on May 24, 1996,
between ATC Environmental Inc. and Waste Abatement
Technology, LLP.(11)
10(p) Security Agreement on May 24, 1996, among ATC
Environmental Inc., American Testing and Engineering
Corporation and Gerald D. Mann.(11)
10(q) $500,000 Letter of Credit on May 24, 1996, from
Chemical Bank, N.A. against the account of ATC
Environmental Inc. in favor of American Testing and
Engineering Corporation.(11)
10(r) Agreement for Sale and Purchase of Business
Assets on May 28, 1996, among ATC In Sys Technology Inc.,
3D Information Services Inc. and Ciro De Saro.(11)
10(s) Assumption of Liabilities Agreements on May 28,
1996, between ATC In Sys Technology Inc., 3D Information
Services Inc. and Ciro De Saro.(11)
10(t) Stockholders Non-Competition Agreement on May
28, 1996, between ATC In Sys Technology Inc. and the
stockholders of 3D Information Services Inc.(11)
10(u) Three-year, $2,500,000 Promissory Note on May
29, 1996, from ATC Environmental Inc. to 3D Information
Services Inc.(11)
11 Statements re: Computation of per share earnings(*)
21 Subsidiaries of Registrant(4)
23 Independent Auditors' Consent-Deloitte & Touche LLP(*)
27 Financial Data Schedule(*)
99 1988 Stock Option Plan(7)
99(a) 1993 Stock Option Plan(8)
___________________________
* Previously filed.
25
PAGE
<PAGE>
EXHIBIT INDEX (continued)
- ----------------------------------------------------------------------
(1) Reference is made to the Registrant's Registration
Statement File No. 33-19889 on Form S-1, which is
incorporated by reference and contains exhibits 2, 3(a),
3(b) and 3(c).
(2) Reference is made to the Registrant's Form 10-K for
the fiscal year ended February 28, 1990 which is
incorporated by reference and contains Exhibit 10.
(3) Reference is made to the Registrant's Form 10-K for the
fiscal year ended February 29, 1992 which is incorporated
by reference and contains exhibit 10(a).
(4) During the fiscal year ended February 29, 1996, ATC had
four wholly-owned subsidiaries, namely, Hygeia ProScience
Laboratories Inc. ("Hygeia"), ATC Management Inc.
("Management Co."), ATC New England Corp. ("ATC New
England") and ATC Blattert Inc. ("Blattert"). Hygeia,
Management Co., ATC New England and Blattert are formed
under the laws of the States of Delaware, South Dakota,
Delaware and South Dakota, respectively. Hygeia does
business under the name Hygeia ProScience, Inc. Management
Co. does business under the name ATC Management Inc. ATC
New England does business under its own name and Con-Test.
Blattert does business under ATC Blattert Inc., Blattert &
Associates Inc. and Microbial Environmental Services, Inc.
(5) Reference is made to the Registrant's Form 8-K dated
November 10, 1995, which is incorporated by reference and
contains Exhibits 10(c), 10(d), 10(e), 10(f), 10(g) and
10(h).
(6) Reference is made to the Registrant's Form S-4
Registration Statement, file No. 33-88380 which is
incorporated by reference and contains Exhibit 2(a).
(7) Reference is made to the Registrant's Form S-8
Registration Statement, file No. 33-55592 which is
incorporated by reference and contains Exhibit 99.
(8) Reference is made to the Registrant's Form S-8
Registration Statement, File No. 33-77578 which is
incorporated by reference and contains Exhibit 99(a).
(9) Reference is made to the Registrant's Form 10-Q for the
quarter ended May 31, 1995, which is incorporated by
reference and contains Exhibit 3(d).
(10) Reference is made to the Registrant's Form 10-K for
its fiscal year ended February 28, 1995, which is
incorporated by reference and contains Exhibit 10(b).
(11) Reference is made to the Registrant's Form 8-K dated
May 24, 1996, as amended, which is incorporated by
reference and contains Exhibits 10(i) - 10(u).
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.
ATC ENVIRONMENTAL, INC.
------------------------
(Registrant)
Dated: June 21, 1996 /s/ Richard L. Pruitt
-------------------------------
RICHARD L. PRUITT,
Vice President and
Principal Accounting Officer
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