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
June 30, 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 14302-0396
______________________________
(Address of principal executive offices)
(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: 1,606,225 shares of Common Stock and
4,735,975 shares of Class B Common Stock
Page 1 of 12
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30, December 31,
1995 1994
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,680 $ 3,226
Marketable securities 46,934 46,994
Accounts receivable 20,374 25,147
Costs and estimated earnings
on contracts in progress
in excess of related billings 3,996 1,381
Prepaid expenses and other
current assets 935 1,292
Deferred income taxes 0 566
-------- ---------
Total current assets 78,919 78,606
======== =========
PROPERTY AND EQUIPMENT:
Land 199 199
Buildings and improvements 2,524 2,420
Construction and field equipment 11,908 8,436
Vehicles 3,607 3,282
Office furniture and equipment 1,316 1,305
------ ------
19,554 15,642
Less accumulated depreciation 9,331 8,496
------ ------
Total property and equipment, net 10,223 7,146
------ ------
OTHER ASSETS 1,942 1,873
------ ------
TOTAL ASSETS $ 91,084 $ 87,625
======== =========
See notes to condensed consolidated financial statements.
Page 2 of 12
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30, December 31,
1995 1994
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable:
Current $ 8,323 $ 7,702
Retentions 813 739
Compensation, income taxes and
other current liabilities 1,966 1,764
Amounts billed in excess of
costs and estimated earnings
on contracts in progress 7,093 8,271
------ ------
Total current liabilities 18,195 18,476
------ ------
DEFERRED INCOME TAXES 513 909
------ ------
NOTES PAYABLE 2,155 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 24,347 24,336
Retained earnings 48,311 44,651
------ ------
73,320 69,649
Treasury stock (278 shares
common stock at cost) (3,014) (3,014)
------ ------
70,306 66,635
Unrealized gain (loss) on
marketable securities, net of taxes 13 (295)
Cumulative translation adjustment (98) (100)
------ ------
Total stockholders' equity 70,221 66,240
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $91,084 $87,625
======= =======
Page 3 of 12
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SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 - (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
1995 1994
REVENUES $24,980 $15,974
COSTS AND EXPENSES:
Cost of contracts:
Direct costs 18,736 10,374
Indirect costs 131 335
Selling, general and administrative 2,171 1,783
------ ------
21,038 12,492
------ ------
EARNINGS FROM OPERATIONS 3,942 3,482
OTHER:
Interest income 590 481
Interest expense (48) (84)
Realized on sale of marketable
securities 7 331
------ ------
549 728
------ ------
EARNINGS BEFORE INCOME TAXES 4,491 4,210
INCOME TAXES 1,640 1,693
------ ------
NET EARNINGS $ 2,851 $ 2,517
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,341 6,335
======= =======
EARNINGS PER SHARE $ 0.45 $ 0.39
======= =======
See notes to condensed consolidated financial statements.
Page 4 of 12
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SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 - (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
1995 1994
REVENUES $44,842 $25,449
COSTS AND EXPENSES:
Cost of contracts:
Direct costs 33,855 17,479
Indirect costs 872 1,197
Selling, general and administrative 4,198 3,659
------- -------
38,925 22,335
------- -------
EARNINGS FROM OPERATIONS 5,917 3,114
OTHER:
Interest income 1,005 863
Interest expense (104) (128)
Realized on sale of marketable
securities (29) 623
------- -------
872 1,358
EARNINGS BEFORE INCOME TAXES 6,789 4,472
INCOME TAXES 2,480 1,721
------- -------
NET EARNINGS $ 4,309 $ 2,751
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,341 6,329
======= =======
EARNINGS PER SHARE $ 0.68 $ 0.43
======= =======
See notes to condensed consolidated financial statements.
Page 5 of 12
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 - (UNAUDITED)
(IN THOUSANDS)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $45,620 $17,872
Cash payments to subcontractors,
suppliers and employees (37,588) (21,847)
Interest received 1,162 930
Interest paid (104) (128)
Taxes paid (1,411) (1,210)
Tax refunds received 148 31
------ ------
Net cash provided by (used in)
operating activities 7,827 (4,352)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities activity 31 2,824
Capital expenditures (3,933) (356)
Proceeds from sale of property and ------ ------
equipment 12 5
------ ------
Net cash (used in) provided by
investing activities (3,890) 2,473
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt 155 0
Dividends paid (649) 0
Exercise of stock options 11 172
------ ------
Net cash (used in) provided by
financing activities (483) 172
------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,454 (1,707)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,226 26,352
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,680 $24,645
======= =======
See notes to condensed consolidated financial statements.
(Continued)
Page 6 of 12
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 - (UNAUDITED)
(IN THOUSANDS)
1995 1994
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 4,309 $ 2,751
Adjustments to reconcile:
Depreciation and amortization 866 735
Gain/loss on sale of marketable
securities 29 (623)
Increase in cash value of life insurance (80) (60)
Deferred income taxes 450 (47)
Sale of property and equipment 6 6
Change in assets and liabilities affecting
cash flows:
Accounts receivable 4,773 (14,686)
Material and supply inventories 15 0
Costs and estimated earnings on contracts
in progress in excess of related
billings (2,615) (337)
Prepaid and refundable income taxes 84 (206)
Prepaid expenses and other current assets 258 191
Other assets 11 (2)
Accounts payable 695 (120)
Compensation, withholding taxes and other
current liabilities (759) (256)
Amounts billed in excess of costs and
estimated earnings on contracts in
progress (1,178) 7,507
Income taxes 963 795
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 7,827 $(4,352)
======= =======
See notes to condensed consolidated financial statements.
(Concluded)
Page 7 of 12
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
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 8 of 12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Company revenues for the second quarter were a record
$24,980,000, exceeding last year's second quarter revenues of
$15,974,000 by 56% and the previous record for second quarter
revenues of $19,286,000 in 1990 by 29.5%. Strong operating
momentum carried over from the first quarter was the principal
reason for the high level of revenues. When revenues surge, as
they did in the second quarter, the Company's goal is to replace
backlog at a rate equal to or greater than the run-off rate.
Backlog at the beginning and end of the quarter were,
respectively, $62.6 million and $61.6 million. The comparable
figures the prior year's period were $77.0 million and $71.6
million, respectively.
Gross margin (revenues less direct costs) in the quarter was
25.0% versus 35.1% in last year's second quarter. Gross margin
was reduced by the write-down of a receivable due to the
customer's financial condition. Absent that write-down, gross
margin would have been 26.5%. The Company considers gross margin
of 25.0% or 26.5% to be within the Company's normal, sustainable
range. However, as stated in the second quarter last year, the
Company considers gross margin over 30% to be unusual and not
sustainable. The high gross margin in last year's second quarter
was due to the unique coincidence of a number of favorable
factors and developments in that quarter, including higher
margins available on larger, fixed price contracts, favorable
resolution of cost contingencies, high availability and
utilization rates for Company-owned equipment, and a rebound in
industrial services margins.
Second quarter indirect costs were $131,000, down 61% from
$335,000 last year for two principal reasons. First, customarily
the Company slightly over-accrues in direct costs for insurance
expense and adjusts for this by a credit to indirect cost. In
part because project labor cost was higher this year, the
adjusting credit to indirect cost was unusually high. Second,
larger return premiums from the Company's retrospectively rated
liability and workers compensation insurance policies were
received versus the return premiums received last year. Such
return premiums reflect low loss rates under the applicable
policies in prior policy years. The Company is entitled to a
rebate or "return" premium when policy losses fall below certain
levels. Conversely, if policy losses were to exceed certain
levels, the Company would be charged an additional premium. The
Company has consistently received large return premiums over the
last several years. As future return premiums, if any, will be
based on the continuation of the Company's low loss rates, there
can be no assurance that large return premiums will continue.
Partially offsetting the foregoing was an increase in
depreciation expense caused by substantial additions to the
Company's fleet of field equipment.
Page 9 of 12
<PAGE>
Selling, general and administrative expense increased 21.8%
to $2,171,000 from $1,783,000 last year. Increases occurred in
all categories reflecting the Company's increased activity.
Interest income was $590,000 versus $481,000 last year. The
increase was due to higher interest rates and larger invested
balances.
The effective tax rate was 36.5% versus 40.2% last year.
The tax rate was higher last year due to an adjustment for prior
period taxes resulting from an audit.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operations for the six month
period was $7,827,000 versus ($4,352,000) for the same period in
1994. Cash receipts from customers increased 155% from
$17,872,000 to $45,620,000, while cash payments increased only
72%, from $21,847,000 to $37,588,000, resulting in higher net
cash in-flow. The increase in receipts was due to higher
revenues in the last two months of 1994 and in the first quarter
of 1995 relative to the same periods in the prior year.
Disproportionately greater net cash in-flow resulted for two
reasons. First, much of the expense associated with the 1994
receivables was paid in 1994. Second, receivables were generated
earlier in the first six months of 1995 than those generated in
the same period last year, and were collected before the close of
the period. In contrast, last year's first half receivables
generally were generated later in the period and had not yet been
collected at period's end.
Net cash provided by (used in) investing activities was
($3,890,000) versus $2,473,000 in the first six months last year.
The difference was due principally to increased capital
expenditures. During the first six months of 1995 the Company
had capital expenditures of $3,933,000, mostly for field
equipment, versus $356,000 in the same period last year. Also,
in the first six months of last year the Company sold marketable
securities which netted $2,824,000 versus only $31,000 in net
receipts from such sales this year.
As of June 30, 1995, the Company had working capital of
$60.7 million, including $53.6 million in cash, cash equivalents
and marketable securities. The Company believes that its existing
funds and cash generated by operations will be sufficient to meet
all its 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 line of credit for working
capital. As of June 30, 1995, there were no outstanding letters
of credit or borrowings against these lines.
Page 10 of 12
<PAGE>
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
Item 4 Submission of Matters to a Vote of Security
Holders
At the Company's Annual Meeting of Shareholders
held on May 23, 1995, the nominees to the Board of
Directors were re-elected based upon the following
results:
Nominees No. of Votes
Class A
Joseph J. Castiglia 817,782
Robert S. Kelso 817,782
Class B
Arthur A. Elia 47,359,750
Michael A. Elia 47,359,750
Laurence A. Elia 47,359,750
Richard A. Elia 47,359,750
William J. McDermott 47,359,750
Dena M. Armstrong 47,359,750
The proposal to increase the number of shares
available for issuance under the 1989 Incentive
Stock Option Plan from 100,000 to 200,000 shares
was approved; the vote was: For, 47,819,000;
Against, 19,610; Abstain, 2,500.
In addition, Deloitte & Touche was ratified to
continue as auditors based upon the following
votes: For, 48,180,012; Against, 6,600; Abstain,
1,650.
Under applicable state law and the Company's
Restated Certificate of Incorporation and By-laws,
abstentions operate as votes against a proposal
and non-votes have no effect.
Item 5 Other Information
Not Applicable
Page 11 of 12
<PAGE>
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 June 30, 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.
Dated: August 3, 1995
/s/ William J. McDermott
_________________________________
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
Page 12 of 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,680
<SECURITIES> 46,934
<RECEIVABLES> 20,374
<ALLOWANCES> 0
<INVENTORY> 144
<CURRENT-ASSETS> 78,919
<PP&E> 19,554
<DEPRECIATION> 9,331
<TOTAL-ASSETS> 91,084
<CURRENT-LIABILITIES> 18,195
<BONDS> 0
<COMMON> 662
0
0
<OTHER-SE> 69,559
<TOTAL-LIABILITY-AND-EQUITY> 91,084
<SALES> 24,980
<TOTAL-REVENUES> 24,980
<CGS> 18,867
<TOTAL-COSTS> 21,038
<OTHER-EXPENSES> 2,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 4,491
<INCOME-TAX> 1,640
<INCOME-CONTINUING> 2,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,851
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
