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, 1998
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
P.O. Box 396
Lockport, 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: 2,687,376 shares of Common Stock and
7,438,600 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,
1998 1997
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,185 $ 4,522
Marketable securities 48,696 47,090
Accounts receivable 18,068 16,532
Costs and estimated earnings on
contracts in progress in excess
of related billings 3,214 4,847
Prepaid expenses and other current
assets 618 688
Deferred income taxes 115 0
_______ _______
Total current assets 74,896 73,679
_______ _______
PROPERTY AND EQUIPMENT:
Land 308 308
Buildings and improvements 3,514 3,507
Construction and field equipment 18,230 18,040
Vehicles 5,661 5,596
Office furniture and equipment 1,680 1,671
_______ _______
29,393 29,122
Less accumulated depreciation 15,402 14,763
_______ _______
Total property and equipment,
net 13,991 14,359
_______ _______
INVESTMENT IN BROWNFIELD
REAL ESTATE 8,684 8,631
_______ _______
OTHER ASSETS 2,664 2,603
_______ _______
TOTAL ASSETS $100,235 $99,272
======= =======
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,
1998 1997
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Current $ 5,448 $ 5,392
Retentions 464 643
Note payable - current 0 12
Compensation, income taxes and
other current liabilities 1,030 1,773
Deferred income taxes 0 151
Amounts billed in excess of costs
and estimated earnings on
contracts in progress 4,414 3,065
_______ _______
Total current liabilities 11,356 11,036
_______ _______
DEFERRED INCOME TAXES 2,295 1,863
_______ _______
NOTES PAYABLE 2,000 2,000
_______ _______
STOCKHOLDERS' EQUITY:
Common stock, $.0625 par value;
Authorized 19,200,000 shares,
issued 3,207,328 and
3,161,240 shares 200 198
Class B Common Stock, $.0625 par
value; Authorized 12,800,000
shares, issued 7,438,601 and
7,486,440 shares 465 468
Additional paid-in capital 24,861 24,861
Retained earnings 61,301 61,872
_______ _______
86,827 87,399
Treasury stock (519,952 and
518,240 shares common stock
at cost) (3,740) (3,723)
_______ _______
83,087 83,676
Unrealized gain on marketable
securities, net of taxes 1,592 792
Cumulative translation adjustment (95) (95)
_______ _______
Total stockholders' equity 84,584 84,373
_______ _______
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $100,235 $99,272
======= =======
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, 1998 AND 1997 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
1998 1997
REVENUES $13,269 $15,655
COSTS AND EXPENSES:
Direct and indirect costs 12,006 12,699
Selling, general and administrative 2,390 2,453
_______ _______
14,396 15,152
_______ _______
(LOSS) EARNINGS FROM OPERATIONS (1,127) 503
OTHER:
Interest income 486 510
Interest expense (46) (46)
Realized gain on sale of
marketable securities 182 38
_______ _______
622 502
_______ _______
(LOSS) EARNINGS BEFORE INCOME TAXES (505) 1,005
INCOME TAX (BENEFIT) EXPENSE (266) 291
_______ _______
NET (LOSS) EARNINGS $ (239) $ 714
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 10,647 10,091
======= =======
BASIC AND DILUTED (LOSS)
EARNINGS PER SHARE $ (0.02) $ 0.07
======= =======
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, 1998 AND 1997 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $ 14,714 $ 20,614
Cash payments to subcontractors,
suppliers and employees (14,353) (15,400)
Interest received 486 510
Interest paid (46) (46)
Taxes paid (235) (679)
Tax refunds received 0 6
________ ________
Net cash provided by operating
activities 566 5,005
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments purchased (2,600) (2,851)
Investments sold 2,365 2,201
Capital expenditures (265) (474)
Brownfield acquisition and
remediation costs (53) (935)
Proceeds from sale of fixed assets 0 12
________ ________
Net cash used in investing activities (553) (2,047)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt 0 (89)
Proceeds from exercise of stock options 0 12
Acquisition of treasury stock (17) 0
Dividends paid (333) (323)
________ ________
Net cash used in financing
activities (350) (400)
________ ________
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (337) 2,558
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 4,522 1,472
________ ________
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 4,185 $ 4,030
======== ========
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, 1998 AND 1997 - (UNAUDITED)
(IN THOUSANDS)
_________________________________________________________________
1998 1997
RECONCILIATION OF NET EARNINGS TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net earnings $ (239) $ 714
Adjustments to reconcile:
Depreciation and amortization 637 607
Increase in cash surrender value
of life insurance (50) (40)
Provision for deferred income taxes (224) 167
Gain on sale of marketable
securities (182) (38)
Loss on sale of fixed assets 0 17
Change in assets and liabilities
affecting cash flow:
Accounts receivable (1,536) 5,548
Material and supply inventories 0 3
Costs and estimated earnings on
contracts in progress in excess of
related billings 1,632 (23)
Prepaid expenses and other current
assets 71 156
Other assets (17) 0
Accounts payable (123) (358)
Compensation, income taxes and other
current liabilities (752) (1,165)
Amounts billed in excess of costs and
estimated earnings on contracts in
progress 1,349 (583)
________ ________
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 566 $ 5,005
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997
_________________________________________________________________
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, 1997.
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
Revenues for the quarter were $13.3 million, 15% lower than last
year's first quarter revenues of $15.7 million. Revenues were
lower due to unfavorable competitive conditions. Since the
second half of last year, new contracts being let have been
predominantly for smaller projects of under $5 million. These
contracts attract a greater number of bidders which naturally
heightens competition. These conditions are reflected in the
fact that the company began the year with lower backlog than the
previous year, $60.7 million versus $64.9, and also ended the
quarter with lower backlog, $67.0 million versus $72.0 million
last year. Revenues were also lower due to the continuing delay
in the startup of a large project.
Gross margin for the quarter was 9.5% versus 18.9% in the first
quarter last year. Margin was lower due to the competitive
conditions mentioned above and to margins on several projects
being lower than previously expected.
Selling, general and administrative expenses were slightly lower
at $2,390,000 versus $2,453,000 last year. Lower legal and
accounting expense was largely offset by increased expense of
branch offices and of employee benefit programs.
Interest income was slightly lower at $486,000 versus $510,000 in
last year's first quarter. The decrease was due to lower
balanced invested interest producing investments.
Due to the loss incurred during the quarter, the Company
recognized a tax benefit which was positively impacted by non-
taxable income from municipal securities. The resulting
effective tax rate of approximately 53% compares to last year's
first quarter effective tax rate of approximately 29% which was
also positively impacted by non-taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $566,000 versus
$5,005,000 in the first quarter last year. The difference was
primarily due to lower cash receipts from customers. Cash
receipts were lower due to lower revenues in the fourth quarter
last year versus the fourth quarter of 1996. Lower fourth
quarter revenues generated lower receivables at year end which in
turn resulted in lower cash receipts in the first quarter.
Net cash used in investing activities was $553,000 versus
$2,047,000 in the first quarter last year. The decrease was due
primarily to lower investment in brownfield sites during the
quarter versus the same period last year. Last year the Company
was active at two brownfield sites; this year the Company had
minimal activity at two sites.
<PAGE>
As of March 31, 1998, the Company had working capital of $63.5
million, including $52.9 million in cash, cash equivalents and
marketable securities. Management believes that 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, 1998, the Company had 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:
Exhibit 27 - Financial data schedule.
(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, 1998
<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.
Dated: May 12, 1998
By:/s/ William J. McDermott
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239)
<EPS-PRIMARY> (.02)
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