SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
_________________________________________________________________
For Quarter Ended Commission File Number 0-17536
March 31, 1995
SEVENSON ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1091535
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
2749 Lockport Road
PO Box 396
Niagara Falls, NY 14302
(Address of principal executive offices)
(Zip Code)
(716) 284-0431
(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 common shares outstanding as of the close of the period
covered by this report: 1,605,225 shares of Common Stock and
4,735,975 shares of Class B Common Stock
Page 1 of 10
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SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
March 31, December 31
1995 1994
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,102 $ 3,226
Marketable securities 46,358 46,994
Accounts receivable 24,334 25,147
Costs and estimated earnings
on contracts in progress in
excess of related billings 1,998 1,381
Prepaid expenses and other
current assets 1,079 1,292
Deferred income taxes 15 566
Total current assets 79,886 78,606
-------- --------
PROPERTY AND EQUIPMENT:
Land 199 199
Buildings and improvements 2,446 2,420
Construction and field equipment 8,643 8,436
Vehicles 3,421 3,282
Office furniture and equipment 1,316 1,305
-------- --------
16,025 15,642
Less accumulated depreciation 8,866 8,496
-------- --------
Total property and
equipment, net 7,159 7,146
-------- --------
OTHER ASSETS 1,907 1,873
-------- --------
TOTAL ASSETS $ 88,952 $ 87,625
======== ========
See notes to condensed consolidated financial statement.
Page 2 of 10
<PAGE>
March 31, December 31,
1995 1994
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Current $ 7,147 $ 7,702
Retentions 597 739
Compensation, income taxes and
other current liabilities 2,301 1,764
Amounts billed in excess of
costs and estimated earnings
on contracts in progress 8,431 8,271
-------- --------
Total current liabilities 18,476 18,476
-------- --------
DEFERRED INCOME TAXES 491 909
-------- --------
NOTES PAYABLE 2,000 2,000
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value:
Authorized 12,000 shares,
issued 1,884 188 188
Class B Common Stock, $.10
par value:
Authorized 8,000 shares,
outstanding 4,736 474 474
Additional paid-in capital 24,336 24,336
Retained earnings 46,109 44,651
-------- --------
71,107 69,649
Treasury stock (278 shares
common stock at cost) (3,014) (3,014)
-------- --------
68,093 66,635
Unrealized loss on marketable
securities, net of taxes (10) (295)
Cumulative translation
adjustment (98) (100)
-------- --------
Total stockholders' equity 67,985 66,240
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 88,952 $ 87,625
======== ========
Page 3 of 10
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SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1994 -
(UNAUDITED) (IN THOUSANDS, EXCEPT PER-SHARE DATA)
1995 1994
REVENUES $ 19,862 $ 9,475
COSTS AND EXPENSES:
Cost of contracts:
Direct costs 15,119 7,105
Indirect costs 741 862
Selling, general and
administrative 2,027 1,876
-------- --------
17,887 9,843
-------- --------
EARNINGS FROM OPERATIONS 1,975 (368)
OTHER:
Interest income 415 382
Interest expense (56) (44)
Realized on sale of marketable
securities (36) 292
-------- --------
323 630
-------- --------
EARNINGS BEFORE INCOME TAXES 2,298 262
INCOME TAXES 840 28
-------- --------
NET EARNINGS $ 1,458 $ 234
======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,341 6,323
======== ========
EARNINGS PER SHARE $ 0.23 $ 0.04
======== ========
See notes to condensed consolidated financial statement.
Page 4 of 10
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1994 -
(UNAUDITED) (IN THOUSANDS)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers 20,117 9,756
Cash payments to subcontractors,
suppliers and employees (17,842) (10,879)
Interest received 477 413
Interest paid (56) (44)
Taxes paid (22) (1,030)
Tax refunds received 0 12
-------- --------
Net cash provided by (used in)
operating activities 2,674 (1,772)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities activity 600 1,106
Capital expenditures (392) (238)
Proceeds from sale of property
and equipment (6) 4
-------- --------
Net cash provided by investing
activities 202 872
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 0 121
-------- --------
Net cash provided by financing
activities 0 121
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,876 (779)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,226 26,352
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 6,102 $ 25,573
======== ========
See notes to condensed consolidated financial statements.
(Continued)
Page 5 of 10
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1994 -
(UNAUDITED) (IN THOUSANDS)
1995 1994
RECONCILIATION OF NET EARNINGS TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net earnings $ 1,458 $ 234
Adjustments to reconcile:
Depreciation and amortization 391 358
Gain/loss on sale of
marketable securities 36 (292)
Increase in cash value of life
insurance (40) (30)
Deferred income taxes 418 (9)
Sale of property and equipment (6) 6
Change in assets and liabilities
affecting cash flows:
Accounts receivable 813 1,480
Material and supply inventories 3 12
Costs and estimated earnings on
contracts in progress in excess
of related billings (617) (1,017)
Prepaid and refundable
income taxes 0 (313)
Prepaid expenses and other
current assets 210 88
Other assets 6 0
Accounts payable (697) (1,053)
Compensation, income taxes and
other current liabilities (116) (411)
Amounts billed in excess of
costs and estimated earnings on
contracts in progress 160 (157)
Income taxes 655 (668)
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 2,674 $ (1,772)
======== ========
See notes to condensed consolidated financial statements.
(Concluded)
Page 6 of 10
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies used in preparing these condensed
consolidated financial statements are the same as those used
in preparing the Company's consolidated financial statements
for the year ended December 31, 1994.
The foregoing condensed consolidated financial statements
include all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management,
necessary for a fair presentation. The interim results are
not necessarily indicative of the results which may be
expected for a full year.
2. CONTINGENCIES
The Company is a defendant or plaintiff in various claims
and lawsuits arising in the normal course of business. The
ultimate outcome of the suits cannot presently be determined
and no provision for loss or gain, if any, that may result
has been made in the accompanying condensed consolidated
financial statements. It is the opinion of management that
there will not be any material adverse effects on the
Company's condensed consolidated financial statements as a
result of these actions.
* * * * * *
Page 7 of 10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The combined effect of record high contract backlog at the
beginning of the quarter ($58 million) and a mild winter which
allowed field operations to proceed with little interference from
weather, caused first quarter revenue to increase 110% to a
record $19,862,000 versus last year's first quarter revenues of
$9,475,000.
Gross margin (revenues less direct costs) for the quarter
was 23.9% versus 25.0 in last year's first quarter. The
difference is considered insignificant. The Company's gross
margin is variable and depends upon the nature, size and mix of
projects underway during a period. The Company considers gross
margin in the range between 20% and 30% to be normal for its
operations.
Indirect costs were $741,000, or 14% lower than indirect
costs in last year's first quarter which were $862,000. The
decrease was due to greater absorption of indirect cost items
(principally insurance and personnel) into direct costs and lower
laboratory, equipment repair and maintenance, and other expenses.
These were offset in part by higher equipment depreciation
expense.
Selling, general and administrative expense increased 8% to
$2,027,000 versus $1,876,000 last year. Personnel and travel
expenses were up reflecting the higher level of activity in the
quarter versus last year.
Interest income increased 8.6% to $415,000 from $382,000
last year. The increase was due to higher interest rates and
invested balances. The increase would have been greater but for
an adjustment taken to reflect bond premium amortization not
previously recognized. Had this adjustment not been made
interest income would have been $215,000, or 65%, higher.
The effective tax rate was 36.5% versus 10.7% last year.
Last year's lower rate reflects the fact that in last year's
first quarter net earnings were made up entirely of gain on sale
of securities and interest income, operations having produced a
loss. Because interest income consisted primarily of tax exempt
interest, the effective tax rate was much lower than the
statutory rate (combined federal and state). This year's mix of
earnings from operations and tax exempt interest income produced
a higher effective tax rate.
Page 8 of 10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations for the quarter was
$2,674,000 versus net cash used of$1,772,000 in the first quarter
last year. Cash receipts during the quarter were higher due to
higher revenues in the quarter and in the preceding quarter.
Also contributing to higher cash receipts were higher interest
receipts and lower taxes paid. In the first quarter last year
taxes paid were higher because of differences in the timing and
amount of estimated tax payments.
Net cash provided by investing activities was $202,000
versus $872,000 last year. The difference is primarily due to a
decrease in the movement of available funds from marketable
securities to cash and cash equivalents. This reflects a lower
need for cash due to the increase in cash provided by operations
and, to some degree, differences in the timing and nature of
investment decisions. Capital expenditures were greater in the
first quarter than in the same quarter last year, reducing the
net cash provided by investing activities. The Company expects
that this year's capital expenditures will be substantially
greater than last year's.
At its March 21, 1995 meeting, the Board of Directors
authorized payment of the Company's regular quarterly dividend of
5 1/2 cents per share of Common Stock and 5 cents per share of
Class B Common Stock payable on April 14, 1995 to stockholders of
record as of April 4, 1995.
As of March 31, 1995, the Company had working capital of
$61.4 million (versus $60.1 million at December 31, 1994)
including $52.5 million (versus $50.2 million at December 31,
1994) in cash, cash equivalents and marketable securities.
Existing funds and cash generated by operations will be
sufficient to meet all working capital and capital investment
needs for the foreseeable future.
The Company has available from a bank a $20 million line of
credit for stand-by letters of credit secured by marketable
securities and a $5 million unsecured working capital line of
credit. As of March 31, 1995, there were no outstanding letters
of credit or borrowing against these lines.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Not Applicable
Item 2 Changes in Securities
Not Applicable
Item 3 Defaults Upon Senior Securities
Not Applicable
Page 9 of 10
<PAGE>
Item 4 Submission of Matters to a Vote of Security
Holders
Not Applicable
Item 5 Other Information
Not Applicable
Item 6 Exhibits and Reports on 8-K
(a) Exhibits: None required.
(b) Reports on Form 8-K: None required.
No reports on Form 8-K have been filed
during the quarter (13 weeks) ended
March 31, 1995.
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 hereunto duly authorized.
SEVENSON ENVIRONMENTAL SERVICES, INC.
(Registrant)
Dated: May 5, 1995
/s/ William J. McDermott
________________________________
(Signature)
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
Page 10 of 10
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 6,102
<SECURITIES> 46,358
<RECEIVABLES> 24,334
<ALLOWANCES> 0
<INVENTORY> 156
<CURRENT-ASSETS> 79,886
<PP&E> 16,025
<DEPRECIATION> 8,866
<TOTAL-ASSETS> 88,952
<CURRENT-LIABILITIES> 18,476
<BONDS> 0
<COMMON> 662
0
0
<OTHER-SE> 67,323
<TOTAL-LIABILITY-AND-EQUITY> 88,952
<SALES> 19,862
<TOTAL-REVENUES> 19,862
<CGS> 15,860
<TOTAL-COSTS> 17,887
<OTHER-EXPENSES> 2,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> 2,298
<INCOME-TAX> 840
<INCOME-CONTINUING> 1,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,458
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
