<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[/X/] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 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. 0-23900
IDM ENVIRONMENTAL CORP.
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(Exact Name of Registrant as Specified in Its Charter)
NEW JERSEY 22-2194790
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
396 WHITEHEAD AVENUE, SOUTH RIVER, NEW JERSEY 08882
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(Address of principal executive offices)
(908) 390-9550
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(Registrant's Telephone Number, Including Area Code)
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(Former name, former address and formal fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 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
-----
As of May 1, 1996, 6,797,966 shares of Common Stock of the issuer were
outstanding.
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IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
INDEX
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PAGE
NUMBER
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 . . . . . . 1
Consolidated Statements of Operations - For the three months ended March 31,
1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - For the three months ended March 31,
1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 104,041 $ 83,286
Accounts receivable, net of allowance for doubtful accounts of $200,000 8,013,236 6,616,130
Notes receivable - current 1,528,479 1,596,559
Inventory 1,482,517 1,482,517
Costs and estimated earnings in excess of billings 3,430,080 3,634,052
Prepaid expenses 471,761 710,706
Bonding deposits 833,163 883,163
Deferred income taxes 442,600 652,600
Recoverable income taxes 1,095,167 1,114,442
Due from officers 670,580 548,488
Other current assets 55,333 55,238
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Total Current Assets 18,126,957 17,377,181
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Notes Receivable - long term 1,596,559 1,596,559
Deferred Issuance Costs, net 207,881 506,586
Property, Plant and Equipment, net 2,859,112 2,547,406
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$22,790,509 $22,027,732
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 322,184 $ 327,974
Accounts payable and accrued expenses 5,694,292 5,836,510
Billings in excess of costs and estimated earnings 1,272,245 919,575
Income taxes payable - -
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Total Current Liabilities 7,288,721 7,084,059
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Long-Term Debt 2,032,385 4,004,142
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Commitments and Contingencies
Stockholders' Equity:
Common stock, authorized 20,000,000 shares $.001 par value, issued
and outstanding 6,797,359 in 1996 and 6,200,079 in 1995 6,797 6,200
Additional paid-in capital 15,376,585 13,693,895
Retained earnings (deficit) (1,913,979) (2,760,564)
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13,469,403 10,939,531
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$22,790,509 $22,027,732
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</TABLE>
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The accompanying notes are an integral part of theses financial statements
1
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IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
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1996 1995
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<S> <C> <C>
Revenue:
Sale of equipment - $ 513,791
Contract income 7,416,798 5,433,198
Sale of scrap 65,047 62,240
Miscellaneous - -
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7,481,845 6,009,229
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Cost of Sales:
Cost of equipment sales - 220,287
Direct job costs 4,564,141 5,542,172
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4,564,141 5,762,459
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Gross Profit 2,917,704 246,770
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Operating Expenses:
General and administrative expenses 1,652,783 1,903,651
Depreciation and amortization 211,161 96,627
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1,863,944 2,000,278
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Income (Loss) from Operations 1,053,760 (1,753,508)
Other Income (Expense):
Interest income(expense) 2,825 96,946
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Income (Loss) before Provision (Credit) for Income Taxes 1,056,585 (1,656,562)
Provision (Credit) for Income Taxes 210,000 (660,000)
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Net Income (Loss) $ 846,585 $ (996,562)
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Earnings (Loss) per Share:
Primary earnings (loss) per sha $0.13 $(0.14)
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Fully diluted earnings (loss) per $0.13 $(0.14)
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Primary common shares outstanding 6,640,934 6,979,430
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Fully diluted common shares outstanding 6,640,934 6,979,430
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</TABLE>
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The accompanying notes are an integral part of theses financial statements
2
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IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED
MARCH 31,
1996 1995
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Cash Flows from Operating Activities:
Net income (loss) $ 846,585 $(996,562)
Adjustments to reconcile net income (loss)
to net cash (used in) operating ctivities:
Deferred Taxes 210,000 -
Depreciation and amortization 211,161 96,627
Decrease (Increase) In:
Accounts receivable (1,397,106) (2,967,115)
Inventory - (347)
Notes receivable 68,080 -
Costs and estimated earnings in excess
of billings 203,972 1,298,053
Prepaid expenses and other current assets 238,945 161,158
Bonding deposits 50,000 215,304
Recoverable income taxes 19,275 (155,963)
Due from officers (122,092)
Other current assets (95)
Increase (Decrease) In:
Accounts payable and accrued expenses (113,318) (1,877,132)
Billings in excess of costs and estimated
earnings 352,670 239,680
Income taxes payable - (477,600)
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Net cash (used in) operating activities 568,077 (4,463,897)
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Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (476,101) (299,886)
Increase (decrease) of officers loans - (50,872)
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Net cash (used in) investing activities (476,101) (350,758)
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Cash Flows from Financing Activities:
Principal payments and current maturities of
long-term debt (85,880) (39,806)
Issuance of common stock upon exercise of
stock options 14,659
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Net cash provided by financing activities (71,221) (39,806)
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Increase (Decrease) in Cash and Cash Equivalents 20,755 (4,854,461)
Cash and Cash Equivalents, beginning of period 83,286 5,068,325
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Cash and Cash Equivalents, end of year $ 104,041 $ 213,864
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Supplementary Disclosures of Cash Flow
Information:
Cash paid during the year for:
Interest expense $ 8,909 $ 3,239
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Income taxes - -
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Supplemental Disclosure of Noncash Investing and
Financing Activities:
Property, plant and equipment financing - $ 15,456
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Conversion of convertible promissory notes to
common stock $ 1,668,628
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The accompanying notes are an integral part of theses financial statements
3
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IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim consolidated financial statements are prepared pursuant to
the requirements for reporting on Form 10-Q. These statements include
the accounts of IDM Environmental Corp. and its majority owned
subsidiary companies. The December 31, 1995 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in the
Company's Form 10-KSB for the year ended December 31, 1995. In the
opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement
of the results for the interim periods presented. The current period
results of operations are not necessarily indicative of results which
ultimately will be reported for the full year ending December 31, 1996.
2. On April 1, 1996, Frank Falco, the Chairman of the Board of Directors
and Chief Operating Officer of the Company, surrendered 92,214 shares of
his common stock in repayment of his officer's loan in the amount of
$670,580.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in this
report.
FIRST QUARTER OF 1996 COMPARED WITH FIRST QUARTER OF 1995
The Company's total revenues increased by approximately 24.5% from
$6,009,000 for the quarter ended March 31, 1995 to $7,482,000 for the quarter
ended March 31, 1996. Contract service income increased during the quarter by
36.5% from $5,433,000 in 1995 to $7,417,000 in 1996. The increase in
contract service income and total revenues is attributable to the Company's
successfully bidding on and performing a larger number of larger dollar
volume contracts. Surplus equipment and scrap sales revenues decreased by
88.7% from $576,000 in 1995 to $65,000 in 1996. The decrease in surplus
equipment and scrap sales revenues was attributable to the sale in a single
transaction of $4,000,000 worth of surplus equipment to UPE in the third
quarter of 1995.
Direct job costs decreased by approximately 17.6% from $5,542,000 for the
quarter ended March 31, 1995 to $4,564,000 for the same period in 1996. The
primary elements of such decrease in job costs were job salaries and material
and supplies. The decrease in job costs was attributable to the fact that
the first quarter of 1995 included an adjustment for $1.3 million in
additional shipping costs for the FFC Jordan Fertilizer Company contract.
Cost of equipment sales decreased from $220,000 in 1995 to $0 in 1996. The
decrease in cost of equipment sales was attributable to the UPE sale
mentioned previously.
While total revenues increased by 24.5% for the quarter, general and
administrative expenses decreased from $1,904,000 during the quarter ended
March 31, 1995 to $1,653,000 during the same period in 1996. The decrease
in general and
5
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administrative expense was primarily attributable to two
refunds of insurance premiums totaling $90,000 as a result of audits on prior
years premiums. Also, advertising and travel and entertainment expenses were
$19,000 and $72,000 less then for the same period in the prior year.
In addition to its operating income and expenses, the Company reported net
interest income of $3,000 for the quarter ended March 31, 1996 as compared to
net interest income of $97,000 for the same period in 1995. The decrease in
net interest income/expense was attributable to $31,000 in interest expense
which accrued on $1,750,000 of indebtedness which remained outstanding during
the quarter out of the $5,000,000 of convertible notes issued in the third
quarter of 1995 and an increase in interest expense due to the additional
$450,000 in equipment financing compared to the same period last year.
As a result of the foregoing, the Company reported income before taxes of
$1,057,000 and net income of $847,000 for the quarter ended March 31, 1996
as compared to a loss before taxes of $1,656,000 and a net loss of $997,000
for the same quarter in 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.
At March 31, 1996, the Company had a backlog totaling approximately $50
million compared to a backlog of approximately $47 million at March 31, 1995.
The largest component of the Company's backlog at March 31, 1996 was $25
million for a paper plant relocation to the People's Republic of China.
In addition to its existing backlog, the Company is presently bidding on, and
intends to bid on numerous projects to replace revenues from projects which
will be completed during 1996 and to increase the total dollar volume of
projects under contract. Management anticipates that the Company's efforts
to bid on and secure new contracts will focus on projects which can be
readily serviced from the three regional offices opened by the Company during
1994 and 1995. In addition, the Company has submitted proposals on several
large international plant relocation projects. The Company's regional
offices, particularly the Oak Ridge, Tennessee and Los Alamos, New Mexico
offices are
6
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strategically located in areas having a high concentration of prospective
public and private remediation sites. While bidding to perform services at
such sites is expected to be highly competitive, management believes that the
Company's existing presence on projects at these locations combined with its
proven expertise and resources will enhance the Company's chances of
successfully bidding on substantial new projects.
The Company had working capital of $ 10,838,000, including cash and cash
equivalents balances of $104,000 at March 31, 1996. This compares to working
capital of $10,293,000 and a cash balance of $83,000 at December 31, 1995.
The increase in working capital and cash is attributable to the income for
the quarter.
Approximately $833,000 of the Company's working capital at March 31, 1996
consisted of cash performance bonds and related refundable deposits which the
Company had posted in connection with the performance of various projects
which are expected to be completed within twelve months, at which time such
deposits are expected to be released to the Company.
Additionally, $1,483,000 of the Company's working capital at March 31, 1996
consisted of surplus equipment inventory. Such inventory level compares to
the same amount at December 31, 1995.
At March 31, 1996, the Company's only long term debt other than the
convertible notes was $605,000 in installment debt secured by job equipment.
Other than funding the Company's bonding and other job costs the Company does
not anticipate any substantial demands on the liquidity or capital resources
of the Company during the following twelve months.
Management believes that the Company's working capital is sufficient to meet
the Company's anticipated needs for at least the following twelve months,
including the performance of all existing contracts of the Company. However,
as the Company is presently pursuing bids on multiple large projects, the
Company may be required to seek new bank lines of credit or other financing
in order to facilitate the performance of jobs if the volume and size of
projects being
7
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performed by the Company increases substantially. While the Company is
conducting ongoing discussions with various potential lenders with a view to
establishing available bank lines of credit if and when needed to support
future growth, the Company presently has no commitments from any bank or
other lender to provide financing if such financing becomes necessary to
support growth.
8
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
IDM ENVIRONMENTAL CORP.
Dated: May 13, 1996 By: /S/ Joel Freedman
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Joel Freedman, President
Dated: May 13, 1996 By: /S/ Michael B. Killeen
-----------------------------
Michael B. Killeen, Principal
Financial and Accounting Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 104,041
<SECURITIES> 0
<RECEIVABLES> 10,938,274
<ALLOWANCES> 200,000
<INVENTORY> 1,482,517
<CURRENT-ASSETS> 18,126,957
<PP&E> 2,859,112
<DEPRECIATION> 211,161
<TOTAL-ASSETS> 22,790,509
<CURRENT-LIABILITIES> 7,288,721
<BONDS> 2,032,385
0
0
<COMMON> 6,797
<OTHER-SE> 13,462,606
<TOTAL-LIABILITY-AND-EQUITY> 22,790,509
<SALES> 7,481,845
<TOTAL-REVENUES> 7,484,670
<CGS> 4,564,141
<TOTAL-COSTS> 6,428,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,056,585
<INCOME-TAX> 210,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 846,585
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
