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, 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)
_________________________________________________________________
March 31, December 31,
1997 1996
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,030 $ 1,472
Marketable securities 48,732 48,125
Accounts receivable 19,087 24,635
Costs and estimated earnings on
contracts in progress in excess
of related billings 3,319 3,296
Prepaid expenses and other current
assets 546 705
Deferred income taxes 504 504
_______ _______
Total current assets 76,218 78,737
_______ _______
PROPERTY AND EQUIPMENT:
Land 308 308
Buildings and improvements 3,464 3,413
Construction and field equipment 16,062 15,697
Vehicles 5,423 5,425
Office furniture and equipment 1,637 1,622
_______ _______
26,894 26,465
Less accumulated depreciation 12,854 12,269
_______ _______
Total property and equipment,
net 14,040 14,196
_______ _______
OTHER ASSETS 5,121 4,152
_______ _______
TOTAL ASSETS $95,379 $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)
_________________________________________________________________
March 31, December 31,
1997 1996
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Current $ 7,323 $ 7,696
Retentions 595 580
Note payable - current 242 331
Compensation, income taxes and
other current liabilities 1,021 2,187
Amounts billed in excess of costs
and estimated earnings on
contracts in progress 1,622 2,205
_______ _______
Total current liabilities 10,803 12,999
_______ _______
DEFERRED INCOME TAXES 2,071 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 58,846 58,455
_______ _______
83,999 83,596
Treasury stock (323,900 shares
common stock at cost) (3,723) (3,723)
_______ _______
80,276 79,873
Unrealized gain on marketable
securities, net of taxes 324 357
Cumulative translation adjustment (95) (95)
_______ _______
Total stockholders' equity 80,505 80,135
_______ _______
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $95,379 $97,085
======= =======
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, 1997 AND 1996 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
1997 1996
REVENUES $15,655 $13,858
COSTS AND EXPENSES:
Cost of contracts:
Direct costs 11,517 10,599
Indirect costs 1,182 975
Selling, general and administrative 2,453 2,086
_______ _______
15,152 13,660
_______ _______
EARNINGS FROM OPERATIONS 503 198
OTHER:
Interest income 510 537
Interest expense (46) (49)
Realized gain on sale of
marketable securities 38 47
_______ _______
502 535
_______ _______
EARNINGS BEFORE INCOME TAXES 1,005 733
INCOME TAXES 291 250
_______ _______
NET EARNINGS $ 714 $ 483
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 6,307 6,348
======= =======
EARNINGS PER SHARE $ 0.11 $ 0.08
======= =======
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, 1997 AND 1996 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $ 20,614 $ 19,642
Cash payments to subcontractors,
suppliers and employees (16,335) (17,118)
Interest received 510 630
Interest paid (46) (49)
Taxes paid (679) (272)
Tax refunds received 6 26
________ ________
Net cash provided by operating
activities 4,070 2,859
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments purchased (2,851) (10,712)
Investments sold 2,201 7,908
Capital expenditures (474) (1,393)
Proceeds from sale of fixed assets 12 (6)
________ ________
Net cash used in investing activities (1,112) (4,203)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (89) (187)
Proceeds from exercise of stock options 12 0
Acquisition of treasury stock 0 (709)
Dividends paid (323) (325)
________ ________
Net cash used in financing
activities (400) (1,221)
________ ________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,558 (2,565)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,472 4,226
________ ________
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 4,030 $ 1,661
======== ========
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, 1997 AND 1996 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1997 1996
RECONCILIATION OF NET EARNINGS TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net earnings $ 714 $ 483
Adjustments to reconcile:
Depreciation and amortization 607 575
Increase in cash surrender value
of life insurance (40) (40)
Provision for deferred income taxes 167 18
Gain on sale of marketable
securities (38) (306)
Loss on sale of fixed assets 17 6
Change in assets and liabilities
affecting cash flow:
Accounts receivable 5,548 7,084
Material and supply inventories 3 (18)
Costs and estimated earnings on
contracts in progress in excess of
related billings (23) (1,449)
Prepaid expenses and other current
assets 156 149
Other assets (935) (17)
Accounts payable (358) (3,549)
Compensation, payroll taxes and other
current liabilities (1,165) (220)
Amounts billed in excess of costs and
estimated earnings on contracts in
progress (583) 143
________ ________
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 4,070 $ 2,859
======== ========
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, 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
Revenue for the quarter was $15.7 million, a 13% increase over
the first quarter of 1996 when revenue was $13.9 million.
Earnings were also higher at $714,000, a 48% increase over last
year's first quarter earnings of $483,000. Last year's first
quarter revenue and earnings were depressed by the federal budget
impasse of 1995-96 which delayed the award of federal cleanup
contracts and increased competition for privately-funded
projects. After resolution of the impasse, the Company had
greater success in obtaining new contracts and ended 1996 with a
record backlog of $64.9 million. This record backlog led
directly to the improved results for the first quarter.
Backlog at the end of the quarter was $72.0 million versus $52.7
million at the same time last year. Last year, backlog was lower
due to the conditions mentioned above.
Gross margin (revenue less direct cost) percentage for the
quarter was 26.4% versus 23.5% for the first quarter last year.
The gross margin percentage achieved in any given quarter is a
function of the nature, size and mix of projects underway during
that quarter. The Company considers a quarterly gross margin
percentage of between 20% and 30% to be normal for its
operations.
Indirect costs were $1,182,000, or 21% higher than in last year's
first quarter when indirect costs were $975,000. Higher costs
for servicing and maintaining field equipment were principally
responsible for the increase.
Selling, general and administrative expenses were $2,453,000, or
18% higher than last year when those expenses totaled $2,086,000.
Increases occurred in legal and accounting, physical plant,
travel, and estimating expense, offset in part by lower employee
benefit expenses.
Interest income was slightly lower at $510,000 versus $537,000
last year. Higher invested balances were offset by lower
interest rates.
The effective tax rate was 29.0% versus 34.1% last year. The
lower rate reflects a change in handling intra-period allocations
including benefits, credits and other charges.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $4,070,000 versus
$2,859,000 last year. The difference is due to greater cash
receipts and lower payments to subcontractors, suppliers and
employees, offset in part by higher tax payments.
<PAGE>
Net cash used in investing activities was $1,112,000 versus
$4,203,000 last year. The decrease was principally a function of
cash management decisions. Last year the company moved more cash
into investments than this year. The decrease was also due to
lower capital expenditures reflecting a less vigorous program of
field equipment purchases this year versus last.
As of March 31, 1997, the Company had working capital of $65.4
million, including $52.8 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, 1997, the Company has available from a bank an
unused $5 million line of credit 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
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.
<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: May 14, 1996
/S/ William J. McDermott
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,030
<SECURITIES> 48,732
<RECEIVABLES> 19,087
<ALLOWANCES> (41)
<INVENTORY> 85
<CURRENT-ASSETS> 76,218
<PP&E> 26,894
<DEPRECIATION> 12,854
<TOTAL-ASSETS> 95,379
<CURRENT-LIABILITIES> 10,803
<BONDS> 2,242
0
0
<COMMON> 663
<OTHER-SE> 79,842
<TOTAL-LIABILITY-AND-EQUITY> 95,379
<SALES> 15,655
<TOTAL-REVENUES> 15,655
<CGS> 12,699
<TOTAL-COSTS> 12,699
<OTHER-EXPENSES> 2,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 1,005
<INCOME-TAX> 291
<INCOME-CONTINUING> 714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 714
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
