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, 1996
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: 1,583,575 shares of Common Stock and
4,720,025 shares of Class B Common Stock
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC.
Financial Statements For the Three Month
Periods Ended March 31, 1996 and 1995
and Independent Accountants' Report
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
Sevenson Environmental Services, Inc.
Niagara Falls, New York
We have reviewed the accompanying condensed consolidated balance
sheet of Sevenson Environmental Services, Inc. and subsidiaries
as of March 31, 1996 and the related condensed consolidated
statements of earnings and cash flows for the three-month periods
ended March 31, 1996 and 1995. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Sevenson
Environmental Services, Inc. and subsidiaries as of December 31,
1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 9, 1996, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
December 31, 1995 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
April 24, 1996
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
_________________________________________________________________
March 31, December 31,
1996 1995
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,660 $ 4,226
Marketable securities 47,630 44,474
Accounts receivable 19,398 26,575
Costs and estimated earnings on
contracts in progress in excess
of related billings 4,005 2,556
Prepaid expenses and other current
assets 715 846
Deferred income taxes 369 369
_______ _______
Total current assets 73,777 79,046
_______ _______
PROPERTY AND EQUIPMENT:
Land 308 308
Buildings and improvements 3,004 2,878
Construction and field equipment 14,611 14,197
Vehicles 4,320 3,731
Office furniture and equipment 1,502 1,393
_______ _______
23,745 22,507
Less accumulated depreciation (10,799) (10,379)
_______ _______
Total property and equipment,
net 12,946 12,128
_______ _______
OTHER ASSETS 2,143 2,107
_______ _______
TOTAL ASSETS $88,866 $93,281
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
_________________________________________________________________
March 31, December 31,
1996 1995
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable:
Current $ 5,644 $ 8,578
Retentions 326 940
Note payable - current 562 749
Compensation, income taxes and
other current liabilities 483 703
Amounts billed in excess of costs
and estimated earnings on
contracts in progress 3,442 3,299
________ ________
Total current liabilities 10,457 14,269
________ ________
DEFERRED INCOME TAXES 1,279 1,297
________ ________
NOTES PAYABLE 2,000 2,000
________ ________
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value:
Authorized 12,000,000 shares,
issued 1,907,875 and 1,908,975
shares 191 191
Class B Common Stock, $.10 par
value:
Authorized 8,000,000 shares,
outstanding 4,720,025 and
4,718,925 shares 472 472
Additional paid-in capital 24,445 24,445
Retained earnings 53,626 53,468
________ ________
78,734 78,576
Treasury stock (323,900 and 278,500
shares common stock at cost) (3,723) (3,014)
________ ________
75,011 75,562
Unrealized gain on marketable
securities, net of taxes 214 248
Cumulative translation adjustment (95) (95)
________ ________
Total stockholders' equity 75,130 75,715
________ ________
TOTAL LIABILITIES AND STOCKHOLDERS' $ 88,866 $ 93,281
EQUITY ======== ========
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
_________________________________________________________________
1996 1995
REVENUES $13,858 $19,862
COSTS AND EXPENSES:
Cost of contracts:
Direct costs 10,599 15,119
Indirect costs 975 741
Selling, general and administrative 2,086 2,027
_______ _______
13,660 17,887
_______ _______
EARNINGS FROM OPERATIONS 198 1,975
OTHER:
Interest income 537 415
Interest expense (49) (56)
Realized gain (loss) on sale of
marketable securities 47 (36)
_______ _______
535 323
_______ _______
EARNINGS BEFORE INCOME TAXES 733 2,298
INCOME TAXES 250 840
_______ _______
NET EARNINGS $ 483 $ 1,458
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,348 6,341
======= =======
EARNINGS PER SHARE $ 0.08 $ 0.23
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $ 19,642 $ 20,117
Cash payments to subcontractors,
suppliers and employees (17,118) (17,842)
Interest received 630 477
Interest paid (49) (56)
Taxes paid (272) (22)
Tax refunds received 26 0
________ ________
Net cash provided by operating
activities 2,859 2,674
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities activity (2,804) 600
Capital expenditures (1,393) (392)
Proceeds from sale of property and
equipment (6) (6)
________ ________
Net cash (used in) provided by (4,203) 202
investing activities ________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (187) 0
Dividends paid (325) 0
Acquisition of treasury stock (709) 0
________ ________
Net cash (used in) financing (1,221) 0
activities ________ ________
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (2,565) 2,876
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 4,226 3,226
________ ________
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,661 $ 6,102
======== ========
See notes to condensed consolidated financial statements.
(Continued)
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1996 1995
RECONCILIATION OF NET EARNINGS TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net earnings $ 483 $ 1,458
Adjustments to reconcile:
Depreciation and amortization 575 391
Gain (loss) on sale of marketable
securities (306) 36
Increase in cash value of life
insurance (40) (40)
Deferred income taxes 18 418
Sale of property and equipment 6 (6)
Change in assets and liabilities
affecting cash flows:
Accounts receivable 7,084 813
Material and supply inventories (18) 3
Costs and estimated earnings on
contracts in progress in excess of
related billings (1,449) (617)
Prepaid expenses and other current
assets 149 210
Other assets (17) 6
Accounts payable (3,549) (697)
Compensation, income taxes and other
current liabilities (242) (116)
Amounts billed in excess of costs and
estimated earnings on contracts in
progress 143 160
Income taxes 22 655
_______ _______
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 2,859 $ 2,674
======== ========
See notes to condensed consolidated financial statements.
(Concluded)
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
_________________________________________________________________
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, 1995.
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>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The combined effect of lower contract backlog at the
beginning of the quarter ($43.6 million versus $58.4 million at
the beginning of the prior year's first quarter) and severe
winter weather which impeded operations, caused first quarter
revenue to decrease 30% to $13,858,000 from $19,862,000 in last
year's first quarter. Last year's first quarter revenue was a
record for the first quarter, reflecting a record high backlog at
the beginning of that quarter and the unusually mild winter of
1994-95. This year backlog was lower at the beginning of the
quarter due to difficulties the Company experienced in acquiring
new contracts during the third and fourth quarters of last year.
These difficulties were due to the government's suspension of
awards of new Superfund contracts during the budget impasse,
Congress' continuing failure to reauthorize Superfund, and delays
in the letting of private sector projects.
Contract backlog at the end of the quarter was $52.7 million
versus $62.6 million at the same time last year. Backlog was
lower due to the continuing effect of the conditions mentioned
above and to increased competition brought on by those
conditions.
Gross margin (revenue less direct costs) percentage for the
quarter was 23.5% versus 23.9% in last year's first quarter. The
gross margin achieved in a quarter varies dependent upon the
nature, size and mix of projects underway during the quarter.
The Company considers quarterly gross margin in the range of
between 20 and 30% to be normal for its operations.
Indirect costs were $975,000, a 32% increase over last
year's indirect costs of $741,000. The increase was principally
due to the Company's 1995 purchase of $6.9 million in equipment.
Selling, general and administrative expense for the quarter
was $2,086,000 versus $2,027,000 last year. Increases in
marketing and estimating expense were offset by lower branch
office and travel expense.
Interest income increased 29% to $537,000 from last year's
reported interest income of $415,000, which reflected a one-time
downward adjustment of $215,000 to reflect bond premium
amortization not previously recognized. Without that adjustment,
interest income for the quarter would have been down 15%. Lower
interest income reflected both lower invested balances and lower
interest rates.
The effective tax rate was 34.1% versus 36.5% last year.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $2,859,000
versus $2,674,000 in last year's first quarter. Net cash
receipts and payments were essentially the same in both periods.
The increase in net cash provided by operating activities was due
principally to differences in net tax payments.
Net cash used in investing activities was $4,203,000 versus
net cash provided by investing activities of $202,000 last year.
The difference is primarily due to an increase in marketable
securities reflecting cash management decisions. Cash was also
used for capital expenditures, which were up $1 million from the
first quarter last year. The Company continues to invest in
equipment to meet current and anticipated needs.
During the quarter the Company repurchased 45,400 shares
under its previously announced stock buy-back program.
As of March 31, 1996, the Company had working capital of
$63.3 million including $49.3 million 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.
As of March 31, 1996, the Company has available from a bank
an unused $20 million line for stand-by letters of credit
secured by marketable securities and an unused $5 million
unsecured working capital line of credit.
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
Not Applicable
Item 5 Other Information
Not Applicable
<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
March 31, 1996.
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 14, 1996
_____________________________________
(Signature)
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,660
<SECURITIES> 47,630
<RECEIVABLES> 19,398
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,777
<PP&E> 23,745
<DEPRECIATION> 10,799
<TOTAL-ASSETS> 88,866
<CURRENT-LIABILITIES> 10,457
<BONDS> 0
0
0
<COMMON> 663
<OTHER-SE> 78,071
<TOTAL-LIABILITY-AND-EQUITY> 88,866
<SALES> 13,858
<TOTAL-REVENUES> 13,858
<CGS> 11,574
<TOTAL-COSTS> 13,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (49)
<INCOME-PRETAX> 733
<INCOME-TAX> 250
<INCOME-CONTINUING> 483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 483
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
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