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Previous: NEW HAMPSHIRE THRIFT BANCSHARES INC, 10-Q, EX-27, 2000-11-14 |
Next: TC X CALIBUR INC, 10QSB, 2000-11-14 |
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 September 30, 2000 |
Commission File Number 0-17536 |
SEVENSON ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
|
New York |
16-1091535 |
2749 Lockport Road
PO 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:
2,493,714 shares of Common Stock and 7,996,131 shares of Class B Common Stock
|
PART I |
FINANCIAL INFORMATION |
|
ITEM 1 |
FINANCIAL STATEMENTS |
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
September 30, |
December 31, |
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash equivalents |
$ 9,562 |
$ 11,053 |
|
|
Marketable securities |
46,834 |
40,872 |
|
|
Accounts receivable |
45,259 |
39,882 |
|
|
Costs and estimated earnings on contracts in progress |
|
|
|
|
Prepaid expenses and other current assets |
744 |
878 |
|
|
Total current assets |
103,840 |
93,730 |
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT: |
|
|
|
|
Land |
323 |
323 |
|
|
Buildings and improvements |
3,549 |
3,549 |
|
|
Construction and field equipment |
26,215 |
24,556 |
|
|
Vehicles |
5,981 |
5,868 |
|
|
Office furniture and equipment |
2,165 |
2,084 |
|
|
|
38,233 |
36,380 |
|
|
Less accumulated depreciation |
21,439 |
19,120 |
|
|
Total property and equipment, net |
16,794 |
17,260 |
|
|
|
|
|
|
|
INVESTMENT IN BROWNFIELD REAL ESTATE |
9,655 |
8,866 |
|
|
|
|
|
|
|
OTHER ASSETS |
4,288 |
7,471 |
|
|
|
|
|
|
|
TOTAL ASSETS |
$134,577 |
$127,327 |
|
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
September 30, |
December 31, |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
Accounts payable: |
|
|
|
|
Current |
$ 8,908 |
$ 11,888 |
|
|
Retentions |
600 |
676 |
|
|
Note payable - current |
1,370 |
1,393 |
|
|
Compensation, income taxes and other current liabilities |
3,089 |
1,867 |
|
|
Deferred income taxes |
0 |
141 |
|
|
Amounts billed in excess of costs and estimated earnings |
|
|
|
|
Total current liabilities |
27,798 |
29,014 |
|
|
|
|
|
|
|
DEFERRED INCOME TAXES |
2,663 |
2,443 |
|
|
|
|
|
|
|
NOTES PAYABLE |
2,097 |
2,592 |
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY: |
|
|
|
|
Common stock, $.01 par value; Authorized 12,000,000 |
25 |
33 |
|
|
Class B Common Stock, $.01 par value, Authorized |
80 |
74 |
|
|
Preferred Stock, $.01 par value; Authorized 1,000,000 |
|
|
|
|
Additional paid-in capital |
35,922 |
25,420 |
|
|
Retained earnings |
65,046 |
75,499 |
|
|
|
101,073 |
101,026 |
|
|
Treasury stock (0 and 1,111,451 shares common stock |
|
|
|
|
|
101,073 |
92,463 |
|
|
Accumulated other comprehensive income: |
|
|
|
|
Unrealized gain on marketable securities, net of tax |
946 |
815 |
|
|
Total accumulated other comprehensive income |
946 |
815 |
|
|
|
|
|
|
|
Total stockholders' equity |
102,019 |
93,278 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$134,577 |
$127,327 |
|
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
2000 |
1999 |
|
REVENUES |
$ 39,033 |
$ 42,909 |
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
Direct and indirect costs |
29,524 |
35,603 |
|
Selling, general and administrative |
2,545 |
2,588 |
|
|
32,069 |
38,191 |
|
|
|
|
|
EARNINGS FROM OPERATIONS |
6,964 |
4,718 |
|
|
|
|
|
OTHER: |
|
|
|
Interest income |
713 |
524 |
|
Interest expense |
(48) |
(54) |
|
Realized gain on sale of marketable securities |
432 |
202 |
|
Equity in net loss of subsidiary |
(170) |
(361) |
|
Gain on sale of investment |
300 |
0 |
|
Other income |
191 |
195 |
|
|
1,418 |
506 |
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES |
8,382 |
5,224 |
|
|
|
|
|
INCOME TAX EXPENSE |
3,254 |
2,031 |
|
|
|
|
|
NET EARNINGS |
$ 5,128 |
$ 3,193 |
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES |
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS PER SHARE |
$ 0.49 |
$ 0.30 |
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
NINE -MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
2000 |
1999 |
|
REVENUES |
$ 90,069 |
$ 88,696 |
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
Direct and indirect costs |
68,605 |
71,835 |
|
Selling, general and administrative |
8,091 |
8,000 |
|
|
76,696 |
79,835 |
|
|
|
|
|
EARNINGS FROM OPERATIONS |
13,373 |
8,861 |
|
|
|
|
|
OTHER: |
|
|
|
Interest income |
2,050 |
1,647 |
|
Interest expense |
(140) |
(139) |
|
Realized gain on sale of marketable securities |
638 |
55 |
|
Equity in net loss of subsidiary |
(1,418) |
(732) |
|
Gain on sale of investment |
300 |
0 |
|
Other income |
661 |
585 |
|
|
2,091 |
1,416 |
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES |
15,464 |
10,277 |
|
|
|
|
|
INCOME TAX EXPENSE |
5,922 |
3,668 |
|
|
|
|
|
NET EARNINGS |
$ 9,542 |
$ 6,609 |
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES |
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS PER SHARE |
$ 0.91 |
$ 0.63 |
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
2000 |
1999 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Cash receipts from customers |
$ 84,646 |
$ 62,315 |
|
Cash payments to subcontractors, suppliers and employees |
(77,213) |
(68,262) |
|
Interest received |
2,050 |
1,647 |
|
Interest paid |
(140) |
(139) |
|
Taxes paid |
(5,098) |
(1,624) |
|
Tax refunds received |
0 |
15 |
|
Net cash provided by (used in) operating activities |
4,245 |
(6,048) |
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Investments purchased |
(16,920) |
(25,135) |
|
Investments sold |
16,091 |
25,657 |
|
Capital expenditures |
(2,204) |
(5,311) |
|
Acquisition and remediation costs |
(818) |
1,957 |
|
Proceeds from sale of fixed assets |
22 |
19 |
|
Net rental income from Brownfields property |
661 |
585 |
|
Gain on sale of investment |
300 |
0 |
|
Equity in net loss of subsidiary |
(1,418) |
(732) |
|
Net cash used in investing activities |
(4,286) |
(2,960) |
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Principal payments of debt |
(1,055) |
(272) |
|
Acquisition of treasury stock |
0 |
(76) |
|
Dividends paid |
(932) |
(930) |
|
Debt proceeds |
537 |
826 |
|
Net cash used in financing activities |
(1,450) |
(452) |
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(1,491) |
(9,460) |
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF |
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ 9,562 |
$ 1,392 |
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 - (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
_______________________________________________________________________
|
|
2000 |
1999 |
|
|
RECONCILIATION OF NET EARNINGS TO NET CASH |
|
|
|
|
Net earnings |
$ 9,542 |
$ 6,609 |
|
|
Adjustments to reconcile net earnings to net cash provided |
|
|
|
|
Depreciation and amortization |
2,671 |
2,185 |
|
|
Increase in cash surrender value of life insurance |
(225) |
(180) |
|
|
Provision for deferred income taxes |
(5,208) |
(43) |
|
|
(Gain) loss on sale of marketable securities |
(638) |
(55) |
|
|
(Gain) loss on sale of fixed assets |
(22) |
8 |
|
|
Change in assets and liabilities affecting cash flow: |
|
|
|
|
Accounts receivable |
(5,787) |
(31,925) |
|
|
Material and supply inventories |
2 |
(22) |
|
|
Costs and estimated earnings on contracts in progress in |
|
|
|
|
Prepaid expenses and other current assets |
131 |
11 |
|
|
Other assets |
448 |
12 |
|
|
Accounts payable |
(3,055) |
8,393 |
|
|
Compensation, income taxes and other current liabilities |
6,000 |
3,276 |
|
|
Amounts billed in excess of costs and estimated earnings |
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED BY) OPERATING |
|
|
|
See notes to condensed consolidated financial statements.
SEVENSON ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NINE MONTH PERIODS ENDED SEPTEMBER 30, 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. Certain reclassifications of 1999 balances have been made to conform with classifications used in 2000. |
|
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. |
|
3. |
STOCK DIVIDEND The Board of Directors announced on August 8, 2000, the declaration of a 10% stock dividend payable on August 29, 2000 to shareholders of record on August 22, 2000. The basic and diluted weighted average number of shares outstanding and earnings per share information for prior reporting periods have been restated to reflect the effects of the stock dividend. |
|
4. |
TREASURY STOCK On August 8, 2000, the Board of Directors canceled the 1,111,451 shares of $.01 par value common stock held in treasury. |
|
5. |
GAIN ON SALE OF INVESTMENT The Company disposed of its investment in Powerize.com ("Powerize") on August 1, 2000. For its investment in Powerize.com, the Company received from Hoover's, Inc. ("Hoover's") approximately $1 million in cash, 315,490 shares of Hoover's stock, and an agreement from Hoover's to pay off the outstanding note receivable ($1,500,000 at September 30, 2000) Powerize owes the Company. The transaction resulted in the Company recording a gain of approximately $300,000 on sale of this investment. |
|
ITEM 2 - |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS
Third quarter revenues were $39,033,000, down 9% from last year's record third quarter revenues of $42,909,000. Revenues were down due to slightly lower backlog at the beginning of the quarter, $111 million versus $115 million at the beginning of last year's third quarter, and because last year's third quarter revenues were boosted by a large project which had no counterpart this year.
Backlog at the end of the third quarter was $103 million compared to a record $109 million a year earlier and $98 million two years earlier. During the third quarter, the Company received new contracts and additions to existing contracts ("new backlog") totaling $31 million compared to $37 million and $55 million in the third quarter of 1999 and 1998 respectively. During the nine months ended September 30th, the Company added $81 million in new backlog compared to $107 million and $101 million in the same 9 months of 1999 and 1998 respectively. The decline in new backlog in 2000 compared to 1999 and 1998 was due to fewer and smaller-sized new contract opportunities. The Company does not believe that this decline is indicative of anything more than the random timing of the emergence of projects which is typical of the Company's contracting business.
Third quarter earnings from operations were $6,964,000 compared to $4,718,000 in the third quarter last year, a 48% increase. Earnings were up due to higher gross margin. Gross margin was 24.4% versus 17% last year. Gross margin varies, often widely, from quarter to quarter dependent upon numerous factors including seasonal effects and the nature, size and mix of projects underway during any given quarter. The Company considers gross margin in the range of 17% to 27% to be normal. Gross margin in the third quarter was in the upper part of this range due to project cost controls and generally favorable project conditions. Gross margin for the nine months ended September 30th was 23.8% compared to 19.0% for the same nine months of 1999. Gross margin was higher in 2000 for the same reasons mentioned for the third quarter and additionally because of the favorable resolution of contract issues and cost contingencies on several projects in the second quarter. A further condition which has been beneficial to gross margin is a moderate competitive environment.
Third quarter selling, general and administrative expense was $2,545,000, down slightly from last year's third quarter SG&A expense of $2,588,000.
Third quarter interest income was $713,000 compared to $524,000 last year. The increase was due to higher interest rates and higher invested balances. A gain of $432,000 was realized on sale of marketable securities compared to $202,000 last year.
The Company recognized a net loss of $170,000, down from a loss of $361,000 last year, on its investment in Powerize.com, Inc., an internet-based information service provider. During the quarter Powerize.com merged with Hoover's, Inc. (Nasdaq: HOOV); the Company recognized a gain of $300,000 on its disposition of its investment in Powerize.com.
A Company-owned Brownfield site produced net rental income of $191,000.
The quarter's effective tax rate was 38.8%, the same rate as last year's third quarter.
For the nine months ended September 30th, the Company had revenues of $25 million from federal government contracts which were awarded based on competition restricted to "small business" firms. To qualify as a "small business" a firm must have averaged fewer than 500 employees over the latest 12 month period. For the 12 months ended September 30th, the Company averaged over 470 employees. At the Company's current level of activity, the Company expects its "small business" status to continue.
In 2001, the Company plans to adopt Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives Instruments and Hedging Activities." This standard will require the Company to recognize all derivative financial instruments on its balance sheet at fair value with changes in fair value recorded to the statement of operations or comprehensive income, depending on the nature of the investment. The Company does not expect the adoption of the standard to have a material effect on the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30th, operating activities produced net cash of $4,245,000 compared to net cash used in operating activities of $6,048,000 for the same nine months last year. Last year cash payments to subcontractors, suppliers and employees exceeded cash receipts from customers resulting in negative operating cash flow of $5,947,000. This year operating cash flow was a positive $7,433,000. Higher taxes paid ($5,098,000 this year versus $1,624,000 last year) offset operating cash flow to reduce the difference between this year's and last year's net cash produced by operating activities. Last year's payments to subcontractor's, etc., exceeded cash receipts form customers because of the timing of project activities and payment terms for projects in progress at that time.
Net cash used in investing activities was $4,286,000 compared to $2,960,000 in the first nine months last year. The difference was due to changes in the timing of the purchase and sale of investments, lower capital expenditures, and the sale last year of a Brownfield-related parcel of real property. In last year's period, the Company made greater capital expenditures ($5,311,000 compared to $2,204,000 this year) to replace older equipment and to expand the Company's inventory of water treatment and sediments handling equipment to meet then current needs.
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, June 15, 2000 and August 29, 2000. Total dividends paid amounted to $932,000. The Company also paid a 10% stock dividend on August 29, 2000.
The Board of Directors has authorized the repurchase of up to $1,2000,000 shares of which 1,111,451 had been repurchased through September 30, 2000. The Company did not repurchase any shares during the first nine months of 2000.
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 September 30, 2000, the Company's investment in Brownfield sites was $9.7 million. The Company is not actively seeking new Brownfield sites to acquire and does not expect to be making further investments in Brownfield sites beyond the continuing cleanup costs of the one site.
Beginning in 1999 the Company invested in, and made advances to, Powerize.com, Inc., totaling $7.2 million. Powerize was a closely-held, emerging internet information services provider. On July 12, 2000, Powerize agreed to be acquired by Hoover's, Inc. (Nasdaq: HOOV) for cash and stock. That transaction closed on August 1, 2000. In exchange for its investment in, and advances to, Powerize, the Company received approximately $1 million in cash, 315,490 Hoover's common shares, and a promissory note for $1.5 million guaranteed by Hoover's. The Company recognized a gain of $300,000 on its disposition of its investment in Powerize.com.
On September 30, 2000, the Company had working capital of $76.0 million versus $60.3 million a year earlier. Working capital included $56.4 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.
FORWARD-LOOKING STATEMENTS
Certain statements and information included herein constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes", "expects," "anticipates," "hopes," or words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. You are urged to review the Company's Annual Report on Form 10-K for the year ended December 31, 1999, as well as all reports filed by the Company subsequent to the Form 10-K with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
PART II - OTHER INFORMATION
|
Item 1 |
Legal Proceedings |
|
|
Item 2 |
Changes in Securities |
|
|
Item 3 |
Defaults Upon Senior Securities |
|
|
Item 4 |
Submission of Matters to a Vote of Security Holders |
|
|
Item 5 |
Other Information |
|
|
Item 6 |
Exhibits and Reports on 8-K |
|
|
|
No reports on Form 8-K have been filed during the quarter (13 weeks) ended September 30, 2000. |
|
SIGNATURE
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 hereunder duly authorized.
|
|
SEVENSON ENVIRONMENTAL SERVICES, INC. William J. McDermott |
|
|