SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file No. 0-19761
OP-TECH Environmental Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 91-1528142
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
6392 Deere Road, Syracuse, NY 13206
(Address of principal executive office) (Zip Code)
(315) 463-1643
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 or No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 4,850,058
INDEX
OP-TECH Environmental Services, Inc. and Subsidiaries
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
- March 31, 1996 and December 31, 1995 (Audited). . . . . . . . . .3
Condensed Consolidated Statements of Operation
-Three months ended March 31, 1996 and March 31, 1995 . . . . . . .5
Condensed Consolidated Statements of Cash Flows
-Three months ended March 31, 1996 and March 31, 1995 . . . . . . .6
Notes to Condensed Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . .8
Part II. OTHER INFORMATION. . . . . . . . . . . . . . . . . .. . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . .. . . 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item No. 1 Financial Statements
OP-TECH ENVIRONMENTAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principals
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, quarterly
results include all adjustments (consisting of only normal recurring
adjustments) that the Company considers necessary for a fair presentation of
such information fir interim periods.
The unaudited consolidated condensed financial statements include the
accounts of the Company and its subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.
2. The timing of revenues is dependent on the Company's backlog, contract
awards, and the performance requirements of each contract. The Company's
revenues are also affected by the timing of its clients planned remediation
work as well as the timing of unplanned emergency spills. Historically,
planned remediation work generally increases during the third and fourth
quarters. Although the Company believes that the historical trend in
quarterly revenues for the third and fourth quarters of each year are
generally higher than the first and second quarters, there can be no assurance
that this will occur in future periods. Accordingly, quarterly or other
interim results should not be considered indicative of results to be expected
for any quarter or for the full year.
3. The Company has made a provision for New York State Franchise income
taxes of $367 and $4,796 as of March 31, 1996 and 1995 respectively. No
provision for federal income taxes has been made due to the Company's
available net operating loss carryforwards.
<PAGE>
PART I - FINANCIAL INFORMATION
Item No. 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources
At March 31, 1996, the Company had cash and cash equivalents of $14,223 as
compared to $12,647 at December 31, 1995.
At March 31, 1996, the Company had a working capital deficit of $1,350,884
compared to a deficit of $742,556 at December 31, 1995. The increase in the
working capital deficit is attributable to lower accounts receivable as well as
a long-term note to an affiliated party becoming current during the first
quarter of 1996. The Company had a current ratio of .46 to 1 at March 31,
1996 and .68 to 1 at December 31, 1995. The ratio of long-term debt (exclusive
of current maturities) to equity at March 31, 1996 was 3.74 to 1 compared to
2.55 to 1 at December 31, 1995.
The Company generated cash from operations of $14,406 for the three month
period ended March 31, 1996 compared to cash provided by operations of $31,185
during the three month period ended March 31, 1995.
The Company has available a collateralized borrowing facility that provides for
borrowing up to $1,000,000 on a revolving basis. Additionally, at March 31,
1996, the Company has an unsecured line of credit with an affiliated party with
maximum borrowings of $500,000 due on March 31, 1997. Borrowings against the
collateralized and unsecured lines of credit aggregated $907,000 and $245,000
respectively at March 31, 1996.
The Company's $1,000,000 collateralized line of credit with a bank expires on
May 31, 1996. The Company expects to satisfy its liquidity requirements during
the next twelve months which are expected to consist of working capital
requirements, principal and interest payments on debt and some small capital
expenditures. In order for the Company to achieve these cash requirements, it
will be necessary for the bank to renew the line of credit in May 1996.
Although there can be no guarantees of its renewal, management believes that
the bank will renew this credit facility at the same availability.
Results of Operations
Billings:
The Company's project billings for the first quarter of 1996 have decreased 58%
to $908,678 from $2,164,523 during the first quarter of 1995. The Company's
decrease in revenues during the first quarter of 1996 is attributable to a lower
volume of emergency spill response activity. Emergency spill response billings
during the first quarter of 1996 amounted to approximately $84,000 versus
$612,000 for the same quarter in 1995. The environmental services market
continues to be slow. As a result of a general downturn in this market,
management has taken specific steps to reduce overhead through Company wide
staff reductions, salary cuts and minimized non-production expenses. These cost
saving measures initiated in February are expected to have a positive impact on
the results of operations currently and in the future.
Project Costs and Gross Profit:
Three Months Ended March 31, 1996
Project costs for the three months ended March 31, 1996 decreased 63% to
$519,326 from $1,397,026 for the same period in 1995 primarily due to decreased
revenues. Project costs as a percentage of revenues was 57% and 65% for the
three months ended March 31, 1996 and 1995 respectively.
The gross profit margin for the three months ended March 31, 1996 was 43%
versus 35% for the same period in 1995. The Company's gross profit margin
fluctuates with the mix of work during a given quarter. Typically, projects
which are labor and equipment intensive generate a higher gross profit margin
than projects that consist primarily of costs that are passed through to
clients with a minimal amount of markup such as disposal costs, equipment
rentals and subcontract costs.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses (SG&A) for the three months ended
March 31, 1996 increased 7% to $677,913 from $634,584 for the same period in
1995. This increase is attributable to a lower utilization of the operations
staff and Company owned equipment as a result of a decrease in available work.
Net Loss:
The net (loss) for the three months ended March 31, 1996 was ($377,371) or
($.08) per share compared to net income of $41,534 or $.01 per share for the
same period in 1995.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
None
Item 7. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OP-TECH Environmental Services, Inc.
(Registrant)
Date: /s/ John R. Loveland
5/14/96 John R. Loveland, Chief Executive Officer
Date: /s/ Joseph M. McNulty
5/14/96 Joseph M. McNulty, Treasurer
<PAGE>
<TABLE>
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED)
March 31, December 31, $
1996 1995 Change
<S> <C> <C> <C> -----------
Assets
Cash and Cash equivalents $14,223 $12,647 1,576
Accounts Receivable, Net
Unaffiliated Parties 833,475 1,064,689
Affiliated Parties 47,803 196,270
881,278 1,260,959 (379,681)
Costs on Uncompleted Projects Applicable
to Future Billings 119,898 102,199 17,699
Prepaid Expenses and Other Assets 133,730 171,843 (38,113)
Total Current Assets 1,149,129 1,547,648
Property and Equipment
Land and Improvements 1,143,082 1,117,761
Building 833,833 833,833
Furniture and Fixtures 35,033 34,334
Office Machines 121,071 120,567
Utility Vehicles 165,837 164,600
Field Equipment 2,589,164 2,586,632
Aqueous Treatment System 332,909 329,176
5,220,929 5,186,903 34,026
Less Accumulated Depreciation (1,544,946) (1,421,886) 0
3,675,983 3,765,017
Other Assets and Deferred Charges
Covenant not to Compete 185,972 193,862 (7,890)
Other 18,477 21,020 (2,543)
204,449 214,882
Total Assets $5,029,561 $5,527,547
<FN>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED)
March 31, December 31,
1996 1995
Liabilities and Shareholders' Equity
<S> <C> <C> <C>
Current Liabilities
Notes Payable
To Banks $907,000 $780,000 127,000
Unsecured Note to Affiliate 245,000 0 245,000
1,152,000 780,000 372,000
Accounts Payable
Unaffiliated Parties 556,813 661,764
Affiliated Parties 34,367 10,242
591,180 672,006 (80,826)
Billings in Excess of Costs and Estimated Profit
on Uncompleted Contracts 139,080 149,202 (10,122)
Accrued Expenses and Other Liabilities 222,050 272,913 (50,863)
Current Portion of Long Term Debt and Obligations
Under Capital Leases 395,703 416,083 (20,380)
Total Current Liabilities 2,500,013 2,290,204
Long Term Debt and Obligations Under Capital Leases
Less Current Portion 1,996,035 2,081,459 (85,424)
Long-term notes payable - affiliate 0 245,000 (245,000)
Shareholders' Equity
Common Stock, Par Value $.01 Per Share
Authorized 7,500,000; 4,850,058 Shares
Outstanding as of March 31, 1996 and
December 31, 1995 respectively 48,500 48,500
Additional Paid in Capital 4,485,157 4,485,157
Retained Earnings (Deficit) (4,000,144) (3,622,773)
Total Shareholders' Equity 533,513 910,884 0
Commitments and Contingencies
Total Liabilities and
Shareholders' Equity $5,029,561 $5,527,547
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE> 4
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1996 1995
<S> <C> <C>
Revenues:
Project Billings and Services $908,678 $2,164,523
Project Costs 519,326 1,397,026
Gross Margin 389,352 767,497
Selling, General and Administrative Expenses 677,546 634,584
Operating (Loss) Income (288,194) 132,913
Other Income and Expense
Interest Expense 88,429 85,802
Other Expense, Net 381 781
88,810 86,583
(Loss) Income Before Income Taxes (377,004) 46,330
State Income Taxes 367 4,796
Net (Loss) Income ($377,371) $41,534
Net (Loss) Income per share ($0.08) $0.01
Weighted Average Shares Outstanding 4,848,589 4,846,096
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
-5-
<TABLE>
<CAPTION>
<S> <C> <C>
AVERAGE SHARES OUTSTANDING
PERIOD # DAYS SHARES
1/1/95-2/28/95 60 290,765,760 4,846,096
3/3/94-3/31/94 31 150,228,976 4,846,096
----------------------------------------- ------------
91 440,994,736 9,692,192
91
AVERAGE SHARES O/S 4,846,096
</TABLE>
