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, 1997
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: 1,604,425 shares of Common Stock and
4,702,975 shares of Class B Common Stock
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
June 30, December 31,
1997 1996
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,222 $ 1,472
Marketable securities 51,636 48,125
Accounts receivable 18,264 24,635
Costs and estimated earnings on
contracts in progress in excess
of related billings 3,877 3,296
Prepaid expenses and other current
assets 424 705
Deferred income taxes 504 504
_______ _______
Total current assets 78,927 78,737
_______ _______
PROPERTY AND EQUIPMENT:
Land 308 308
Buildings and improvements 3,473 3,413
Construction and field equipment 17,358 15,697
Vehicles 5,423 5,425
Office furniture and equipment 1,651 1,622
_______ _______
28,213 26,465
Less accumulated depreciation 13,480 12,269
_______ _______
Total property and equipment,
net 14,733 14,196
_______ _______
OTHER ASSETS 4,438 4,152
_______ _______
TOTAL ASSETS $98,098 $97,085
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
June 30, December 31,
1997 1996
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Current $ 6,970 $ 7,696
Retentions 516 580
Note payable - current 156 331
Compensation, income taxes and
other current liabilities 1,343 2,187
Amounts billed in excess of costs
and estimated earnings on
contracts in progress 1,694 2,205
_______ _______
Total current liabilities 10,679 12,999
_______ _______
DEFERRED INCOME TAXES 2,629 1,951
_______ _______
NOTES PAYABLE 2,000 2,000
_______ _______
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value;
Authorized 12,000,000 shares,
issued 1,928,325 and
1,927,325 shares 193 193
Class B Common Stock, $.10 par
value; Authorized 8,000,000
shares, issued 4,702,975 shares 470 470
Additional paid-in capital 24,490 24,478
Retained earnings 60,556 58,455
_______ _______
85,709 83,596
Treasury stock (323,900 shares
common stock at cost) (3,723) (3,723)
_______ _______
81,986 79,873
Unrealized gain on marketable
securities, net of taxes 899 357
Cumulative translation adjustment (95) (95)
_______ _______
Total stockholders' equity 82,790 80,135
_______ _______
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $98,098 $97,085
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
_________________________________________________________________
1997 1996
REVENUES $36,669 $32,950
_______ _______
COSTS AND EXPENSES:
Direct and indirect costs 28,417 26,069
Selling, general and administrative 5,178 4,261
_______ _______
33,595 30,330
_______ _______
EARNINGS FROM OPERATIONS 3,074 2,620
_______ _______
OTHER:
Interest income 1,132 1,076
Interest expense (92) (103)
Realized gain on sale of
marketable securities 85 48
_______ _______
1,125 1,021
_______ _______
EARNINGS BEFORE INCOME TAXES 4,199 3,641
INCOME TAXES 1,451 1,173
_______ _______
NET EARNINGS $ 2,748 $ 2,468
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,307 6,237
======= =======
EARNINGS PER SHARE $ 0.43 $ 0.39
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
_________________________________________________________________
1997 1996
REVENUES $21,014 $19,092
_______ _______
COSTS AND EXPENSES:
Direct and indirect costs 15,718 14,495
Selling, general and administrative 2,725 2,175
_______ _______
18,443 16,670
_______ _______
EARNINGS FROM OPERATIONS 2,571 2,422
_______ _______
OTHER:
Interest income 622 539
Interest expense (46) (54)
Realized gain on sale of
marketable securities 47 1
_______ _______
623 486
_______ _______
EARNINGS BEFORE INCOME TAXES 3,194 2,908
INCOME TAXES 1,160 923
_______ _______
NET EARNINGS $ 2,034 $ 1,985
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,307 6,305
======= =======
EARNINGS PER SHARE $ 0.32 $ 0.31
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
_________________________________________________________________
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $ 41,965 $ 34,604
Cash payments to subcontractors,
suppliers and employees (34,047) (32,196)
Interest received 1,132 965
Interest paid (92) (103)
Taxes paid (1,043) (355)
Tax refunds received 6 0
________ ________
Net cash provided by operating
activities 7,921 2,915
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments purchased (8,216) (13,273)
Investments sold 5,636 11,589
Capital expenditures (1,792) (2,288)
Proceeds from sale of fixed assets 12 0
________ ________
Net cash used in investing activities (4,360) (3,972)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (176) (187)
Proceeds from issuance of debt 0 213
Proceeds from exercise of stock options 12 31
Acquisition of treasury stock 0 (709)
Dividends paid (647) (648)
________ ________
Net cash used in financing
activities (811) (1,300)
________ ________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,750 (2,357)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,472 4,226
________ ________
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 4,222 $ 1,869
======== ========
See notes to condensed consolidated financial statements.
(Continued)
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
_________________________________________________________________
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, 1996.
The foregoing condensed consolidated financial statements
include all 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
Second quarter revenue was $21,014,000, 10% higher than last
year's second quarter revenue of $19,092,000. The increase is
due to an improvement in business conditions over last year when
federal budget issues and other factors adversely affected
business. This improvement is also reflected in the Company's
backlog which stood at $69.3 million at the end of the quarter
versus $52.6 million at the same time last year. The Company
expects this favorable trend to continue through the end of this
year.
Gross margin (revenue less direct and indirect costs) for the
quarter was 25.2%, slightly higher than last year's second
quarter gross margin of 24.1%. During the second quarter the
Company took a reserve for a patent infringement suit in which
the Company is a defendant. This reserve was recorded as
additional contract costs (see Part II Item 1). The impact of
this reserve on gross margin was offset by other unrelated
contract and costs adjustments. Gross margin varies from
quarter to quarter dependent upon a number of factors including
seasonal effects and the nature, size and mix of projects
underway during a given quarter. The Company considers quarterly
gross margin in the range of 17 to 27% to be normal for its
operations.
Selling, general and administrative (SG&A) expense was
$2,725,000, a 25% increase over last year's second quarter SG&A
expense of $2,175,000. The increase was due to higher legal
expense, expenses associated with the Company's anniversary
commemoration, and lesser increases in a number of other SG&A
categories. Legal expense was higher due to legal fees and
expenses associated with the patent infringement suit mentioned
above.
Interest income was $622,000 versus $539,000 in the second
quarter last year. Higher interest rates and invested balances
caused the increase.
The effective tax rate rose to 36.3% from 31.7% last year. The
higher rate was due primarily to tax exempt interest being lower
as a percentage of net earnings this year versus the second
quarter last year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7,921,000 versus
$2,915,000 last year. The difference is principally due to
higher cash receipts from customers which were $41,965,000 versus
$34,604,000 last year. Higher revenues, seasonal effects and the
timing of contract payments all contributed to the increase.
<PAGE>
Net cash used in investing activities was $4,360,000 versus
$3,972,000 in the same period last year. The difference can be
ascribed to changes in marketable securities which reflect
routine cash management decisions. Capital expenditures were
down 22% to $1,792,000 from $2,288,000 last year, which offset,
in part, the increase in cash used in investing activities.
Capital expenditures are mainly for field equipment. Lower
capital expenditures reflect lower demand for additional
equipment or for different types of equipment from that currently
in the Company's fleet.
As of June 30, 1997, the Company had working capital of $68.2
million, including $55.9 million in cash, cash equivalents and
marketable securities. The Company expects that its exiting
funds and cash generated by operations will be sufficient to meet
all its working capital and capital investment needs for the
foreseeable future.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
During the quarter a federal District Court jury
returned a $975,000 judgment against the Company in a
patent infringement suit. The Company believes that it
has meritorious bases for challenging the verdict and
intends to do so. The patent suit involved the
Company's operations on a single project in 1993 and
1994. The patent expired in June, 1994 and thus will
have no effect on current or future operations.
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
Item 6 Exhibits and Reports on 8-K
(a) Exhibits: None required.
(b) Reports on Form 8-K.
One report on Form 8-K was filed during the
quarter (13 weeks) ended June 30,1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SEVENSON ENVIRONMENTAL SERVICES, INC.
(Registrant)
Dated: August 14, 1997
/S/ William J. McDermott
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
<PAGE>
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<PERIOD-END> JUN-30-1997
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<RECEIVABLES> 18,264
<ALLOWANCES> (41)
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0
0
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<CGS> 15,718
<TOTAL-COSTS> 15,718
<OTHER-EXPENSES> 2,725
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 3,194
<INCOME-TAX> 1,160
<INCOME-CONTINUING> 2,034
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> .32
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