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
March 31, 2000 Number 0-17536
SEVENSON ENVIRONMENTAL SERVICES, INC.
_____________________________________________________
(Exact name of registrant as specified in its charter)
New York 16-1091535
_______________________________ ________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2749 Lockport Road
P.O. 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: 2,142,019 shares of
Common Stock and 7,394,210 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,
2000 1999
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,487 $ 11,053
Marketable securities 40,780 40,872
Accounts receivable 29,230 39,882
Costs and estimated earnings on
contracts in progress in excess
of related billings 1,138 1,045
Prepaid expenses and other current
assets 624 878
_______ _______
Total current assets 88,259 93,730
_______ _______
PROPERTY AND EQUIPMENT:
Land 323 323
Buildings and improvement 3,549 3,549
Construction and field equipment 24,915 24,556
Vehicles 5,878 5,868
Office furniture and equipment 2,129 2,084
_______ _______
36,794 36,380
Less accumulated depreciation 19,980 19,120
_______ _______
Total property and
equipment, net 16,814 17,260
_______ _______
INVESTMENT IN BROWNFIELD REAL ESTATE 8,896 8,866
_______ _______
OTHER ASSETS 7,449 7,471
_______ _______
TOTAL ASSETS $121,418 $127,327
======== ========
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,
2000 1999
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Current $ 5,230 $ 11,888
Retentions 791 676
Note payable - current 1,065 1,393
Compensation, income taxes and
other current liabilities 925 1,867
Deferred income taxes 0 141
Amounts billed in excess of costs and
estimated earnings on contracts in progress 13,937 13,049
________ ________
Total current liabilities 21,948 29,014
________ ________
DEFERRED INCOME TAXES 2,687 2,443
________ ________
NOTES PAYABLE 2,592 2,592
________ ________
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; Authorized
12,000,000 shares, issued 3,253,470 shares 33 33
Class B Common Stock, $.01 par value,
Authorized 8,000,000 shares,
issued 7,394,210 shares 74 74
Preferred Stock, $.01 par value; Authorized
1,000,000 shares, outstanding - none 0 0
Additional paid-in capital 25,420 25,420
Retained earnings 76,179 75,499
________ ________
101,706 101,026
Treasury stock (1,111,451 shares
common stock at cost) (8,563) (8,563)
________ ________
93,143 92,463
Accumulated other comprehensive income:
Unrealized gain on marketable
securities, net of tax 1,048 815
________ ________
Total accumulated other
comprehensive income 1,048 815
________ ________
Total stockholders' equity 94,191 93,278
________ ________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,418 $127,327
======== ========
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, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
2000 1999
____ ____
REVENUES $21,080 $18,108
COSTS AND EXPENSES:
Direct and indirect costs 17,208 14,469
Selling, general and administrative 2,645 2,643
_______ _______
19,853 17,112
_______ _______
EARNINGS FROM OPERATIONS 1,227 996
OTHER:
Interest income 631 572
Interest expense (46) (54)
Realized gain (loss) on sale of marketable
securities 29 (262)
Equity in net loss of subsidiary (535) 0
Other income 231 0
_______ _______
310 256
_______ _______
EARNINGS BEFORE INCOME TAXES 1,537 1,252
INCOME TAX EXPENSE 546 456
_______ _______
NET EARNINGS $ 991 $ 796
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,536 9,546
======= =======
BASIC AND DILUTED EARNINGS PER SHARE $ 0.10 $ 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, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
2000 1999
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers $32,120 $13,537
Cash payments to subcontractors,
suppliers and employees (25,991) (15,263)
Interest received 631 572
Interest paid (46) (54)
Taxes paid (634) (148)
Tax refunds received 0 15
_______ ______
Net cash provided by (used in)
operating activities 6,080 (1,341)
_______ ______
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments purchased (4,075) (556)
Investments sold 4,322 6,255
Capital expenditures (438) (566)
Acquisition and remediation costs (58) (151)
Proceeds from sale of fixed assets 10 11
Net rental income from BROWNFIELD property 231 0
_______ ______
Net cash (used in) provided by investing
activities 8 4,993
_______ ______
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (328) (30)
Dividends paid (310) (309)
_______ ______
Net cash used in financing activities (638) (339)
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,434 3,313
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 11,053 10,852
_______ _______
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,487 $14,165
======= =======
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, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________
2000 1999
____ ____
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY (USED BY) OPERATING ACTIVITIES:
Net earnings $ 991 $ 796
Adjustments to reconcile net earnings to
net cash provided by (used by)
operating activities:
Depreciation and amortization 871 647
Increase in cash surrender value of
life insurance (75) (60)
Provision for deferred income taxes (4,569) 20
Loss (gain) on sale of marketable
securities (29) 262
Loss on sale of fixed assets 3 16
Change in assets and liabilities affecting
cash flow:
Accounts receivable 10,242 (3,044)
Material and supply inventories 0 1
Costs and estimated earnings on contracts
in progress in excess of related billing (93) (1,250)
Prepaid expenses and other current assets 254 45
Other assets 304 (57)
Accounts payable (6,542) 1,316
Compensation, income taxes and other
current liabilities 3,835 260
Amounts billed in excess of costs and
estimated earnings on contracts in
progress 888 (293)
_______ ______
NET CASH PROVIDED BY (USED BY) OPERATING
ACTIVITIES $ 6,080 $(1,341)
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
THREE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
_________________________________________________________________
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, 1999.
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. LOAN TO SUBSIDIARY
The Company loaned its internet-based information service
provider subsidiary approximately $1.5 million in March 2000.
The principal of the loan is to be repaid in July 2000 with
interest accruing at the prime rate.
3. 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
First quarter revenues were $21,080,000, up 16% over first quarter
revenues last year of $18,108,000. Revenues increased due to
higher backlog at the beginning of the quarter, $112 million,
compared to backlog a year earlier of $91 million. Backlog grew
throughout 1999 leading to record backlog at the start of 2000.
Strong private and public sector demand and an improved
competitive environment were responsible for the growth.
Backlog at the end of the quarter was $100 million, down from $125
million at the same point a year earlier. During the quarter the
Company received new contracts or additions to existing ones
totaling $8 million compared to the record $52 million received
during the first quarter of 1999. While the prior year's first
quarter established a record for new backlog, still the $8 million
in new backlog added in the first quarter was the Company's
poorest first quarter performance since 1992. This poor
performance was due to fewer bid opportunities. The Company
believes that the decrease in bid opportunities experienced in the
first quarter did not represent a fundamental change in the market
for its services, but rather a matter of the timing of projects
coming out to bid. The Company believes that bid opportunities
will increase as upcoming projects emerge from the planning and
design pipeline.
First quarter earnings from operations were $1,227,000 compared to
$996,000 in the first quarter last year, a 23% increase. Earnings
were up due to the increase in revenues. Gross margin was lower
at 18.4% versus 20.1% the prior year's first quarter, but within
the range considered normal by the Company. Selling, general and
administrative expenses were virtually the same as last year's.
Interest income was $631,000 compared to $572,000 last year. A
gain of $29,000 was realized on the sale of marketable securities
versus a loss of $262,000 last year. The Company recognized a net
loss of $535,000 on an investment in Powerize.com, Inc., an
emerging internet-based information service provider. A Company-
owned Brownfield site produced net rental income of $231,000.
The effective tax rate was 35.5% compared to 36.4% for last year's
first quarter. The lower rate was due to an increase in interest
earned on Treasury Notes which is exempt from state taxes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $6,080,000 compared
to net cash used of $1,341,000 in the prior year's first quarter.
The difference was due to higher cash receipts from customers
<PAGE>
which resulted from substantially higher accounts receivable at
the beginning of the quarter, $39,882,000 compared to $13,439,000
a year earlier. Accounts receivable were higher due to the
increase in revenues in 1999 over 1998 ($127 million versus $85
million).
Net cash used in investing activities was $8,000 compared to net
cash provided of $4,993,000 in the prior year's first quarter.
The difference was due principally to differences in the timing of
the sale and purchase of investments. Capital expenditures were
not significantly different at $438,000 compared to $566,000 last
year.
The Company paid a regular quarterly dividend of 3.5 cents per
share of Common Stock and 3.18 cents per share of Class B Common
Stock on March 10, 2000. Total dividends paid were $310,000.
The Board of Directors has authorized the repurchase of up to
1,200,000 shares of which 1,111,451 had been repurchased through
March 31, 2000. The Company did not repurchase any shares during
the first quarter.
In 1995 the Board of Directors authorized the Company to pursue
the business strategy of acquiring, cleaning up and disposing of
"Brownfield" sites, real property that is unmarketable or of
substantially reduced value due to the presence of contamination.
In 1996 the Company acquired interests in, and commenced the
cleanup process at, two Brownfield sites. In 1997 the cleanup and
sale of one of these sites were completed and the Company acquired
interests in one additional site. Since 1997 no new sites have
been purchased. In 1998, the Company purchased the interest of
another party in one of the sites. During 1999, the Company sold
a parcel of non-Brownfield property which had been acquired as
part of the acquisition of an adjacent Brownfield site; the
Company retains the Brownfield site itself. As of March 31, 2000,
the Company's investment in Brownfield sites was $8.9 million.
The Company will invest further funds in the cleanup of one of the
remaining sites (cleanup at the other site is complete) and
intends to make further investments in the Brownfield
redevelopment business. The Company's ultimate total investment
in this business will depend upon the Company's success in finding
and acquiring suitable Brownfields sites.
Since 1999 the Company has invested in, and made advances to,
Powerize.com, Inc., totaling $6.7 million. Powerize is a closely-
held, emerging internet information services provider. The
Company expects to make further investments in or advances to
Powerize.
On March 31, 2000, the Company had working capital of $66.3
million versus $62.7 million a year earlier. Working capital
included $57.3 million in cash, cash equivalents and marketable
securities. The Company expects that existing funds and cash
generated by operations will be sufficient to meet all working
capital and capital investment needs for the foreseeable future.
<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
---------------------------------------------------
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, 2000.
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 10, 2000
/s/ William J. McDermott
William J. McDermott
Vice President, Secretary and
Chief Financial Officer
<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,487
<SECURITIES> 40,780
<RECEIVABLES> 29,230
<ALLOWANCES> 40
<INVENTORY> 94
<CURRENT-ASSETS> 88,259
<PP&E> 36,794
<DEPRECIATION> 19,980
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<CURRENT-LIABILITIES> 21,948
<BONDS> 0
0
0
<COMMON> 107
<OTHER-SE> 94,084
<TOTAL-LIABILITY-AND-EQUITY> 121,418
<SALES> 21,080
<TOTAL-REVENUES> 21,080
<CGS> 17,208
<TOTAL-COSTS> 17,208
<OTHER-EXPENSES> 2,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 1,537
<INCOME-TAX> 546
<INCOME-CONTINUING> 991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 991
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
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