<PAGE>
_________________________________________________________________
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
May 7, 1999
NATIONAL ENVIRONMENTAL SERVICE CO.
State of Oklahoma 000-24470 73-1296420
(State of Oklahoma) (Commission File No.) (I.R.S. Employer
Identification No.)
12331 East 60th Street
Tulsa, Oklahoma 74l46
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 250-2227
_________________________________________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 7, 1999, National Environmental Service Co. (hereafter "NESCO")
acquired the assets and assumed certain liabilities of TET Environmental
Services, Inc., Columbia, South Carolina, (hereafter "TET"). TET was a provider
of environmental consulting and services to the fueling systems industry and
other industries in South Carolina. Assets acquired include furniture,
fixtures, equipment, vehicles, contracts, transferable licenses, accounts
receivable, inventory, works in process, leasehold improvements, and cash
operating account. Additionally, NESCO acquired all designs, methods,
inventions, and know-how; all trademarks, trade names, service marks, and
copyrights claimed or used, customer lists, and corporate names used. Certain
assets were excluded from the sale and totaled $57,302. The assets excluded
include two vehicles and miscellaneous office furniture used by the seller's
principal shareholders. NESCO assumed liabilities totaling approximately
$237,000. The exact amount of such liabilities as of April 30, 1999, shall be
determined by an independent audit.
The total purchase price is $2,200,000 which was determined by arm's length
negotiations, with $1,600,000 to be paid at closing and $600,000 to be paid
following collection of accounts receivable acquired and less any adjustments to
the purchase price to be determined by an independent audit of the financial
records of TET. Actual cash paid at closing was $1,365,129 and reflect
adjustments as follows: (i) reductions in the amount of the net book value of
the excluded assets, (ii) reductions for the amount of distributions to
Shareholders since December 31, 1998, and (iii) additions for the net book value
of the excluded liabilities to be retained by TET. An additional $600,000 (less
any adjustments determined in accordance with the agreement) will be paid on the
earlier of (i) 90 days after the date of closing, or (ii) the date on which all
receivables purchased as of the date of closing shall have been collected and
the independent audit of the financial records of TET have been completed. The
cash portion of the purchase price was financed through an increase in the
amount available under NESCO's current credit facility with Bank of Oklahoma,
N.A., and a new secured loan arranged with the bank.
NESCO has agreed to acquire the buildings and real estate occupied by TET.
The shareholders of TET, William Wimberly and Harry D. O'Brian, own and lease
the property to TET. The purchase price is estimated to be $600,000 and will be
determined by an appraisal of the property.
NESCO intends to use the assets acquired to conduct the same business and
services in which they have been used by TET and has hired all of the TET
employees except the two principal shareholders. NESCO's existing Columbia
office will be combined with the TET office.
The current report on Form 8-K filed by the Registrant on May 18, 1999 is
being amended to add pro forma financial information required in connection with
the reported transaction.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
TET Environmental Services, Inc.
Page
Independent Auditors' Report F-1
Balance Sheet, December 31, 1998 F-2
Statements of Income and Retained Earnings, Year ended December 31, 1998 F-3
Statement of Cash Flows, Year ended December 31, 1998 F-4
Notes to Financial Statements F-5
(b) Pro Forma Financial Information. The following unaudited pro forma
information has been included as required by the rules of the Securities and
Exchange Commission and is provided for comparative purposes only. The
unaudited pro forma information presented is based upon and should be read in
conjunction with the respective historical financial statements and related
notes thereto of each of the Registrant and TET Environmental Services, Inc.
The pro forma information presented does not purport to represent the actual
results which would have occurred if the acquisition of TET Environmental
Services, Inc. had been consummated on the dates before the periods indicated,
nor is it indicative of the operating results in any future period.
Page
Introduction P-1
Pro-Forma Condensed Consolidated Balance Sheets -
Unaudited, December 31, 1998 P-2
Pro-Forma Condensed Consolidated Statements of
Income - Unaudited, Year Ended December 31, 1998 P-4
Pro-Forma Condensed Consolidated Balance Sheets -
Unaudited, March 31, 1999 P-5
Pro-Forma Condensed Consolidated Statements of
Income - Unaudited, Three Months Ended March 31, 1999 P-7
Pro-Forma Condensed Consolidated Statements of
Income - Unaudited, Three Months Ended March 31, 1998 P-8
<PAGE>
Notes to Pro Forma Condensed Consolidated Financial
Statements Unaudited P-9
(c) Exhibits.
2.1 Asset Purchase Agreement dated as of May 3, 1999, by and between the
Registrant and TET Environmental Services, Inc. (Schedules and exhibits
included with original filing).
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused his report to be signed on its behalf by the duly
authorized undersigned officer of the Registrant.
National Environmental Service Co.
(Registrant)
Date: July 20, 1999 /s/ Larry G. Johnson
By: _________________________
Larry G. Johnson, Vice President
& Secretary-Treasurer & Chief
Financial Officer (Authorized Officer and
Principal Financial
Officer)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders of
TET Environmental Services, Inc.
We have audited the accompanying balance sheet of TET Environmental Services,
Inc. (the "Company") as of December 31, 1998, and the related statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1998, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
Tulsa, Oklahoma
June 10, 1999
F-1
<PAGE>
TET ENVIRONMENTAL SERVICES, INC.
BALANCE SHEET
December 31, 1998
Assets
Current assets:
Cash $ 44,569
Accounts receivable 665,803
Work in process 171,853
Inventory 14,680
----------
Total current assets 896,905
Fixed assets:
Furniture and fixtures 18,373
Office equipment 73,015
Field equipment 162,492
Vehicles 178,208
Leasehold improvements 12,684
----------
444,772
Less accumulated depreciation (251,135)
----------
Net fixed assets 193,637
----------
Total assets $1,090,542
==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 242,622
Accrued expenses 42,465
Note payable 11,209
----------
Total current liabilities 296,296
Note payable - long-term 23,991
Stockholders' equity:
Common stock, $1 par value; 200 shares authorized
and outstanding 200
Retained earnings 770,055
----------
Total stockholders' equity 770,255
----------
Total liabilities and stockholders' equity $1,090,542
==========
See notes to financial statements.
F-2
<PAGE>
TET ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year ended December 31, 1998
Revenue $2,906,495
Costs and expenses 1,771,932
Selling, general and administrative expenses 664,458
----------
Income from operations 470,105
Interest and other income 5,597
----------
Net income 475,702
Distributions to stockholders (468,084)
Retained earnings, beginning of year 762,437
----------
Retained earnings, end of year $ 770,055
==========
See notes to financial statements.
F-3
<PAGE>
TET ENVIRONMENTAL SERVICES, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1998
Cash Flows from Operating Activities
Net income $ 475,702
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 39,813
Gain on disposal of property (3,251)
Change in assets and liabilities:
Increase in accounts receivable (169,264)
Increase in accounts payable 180,266
Increase in accrued expenses 42,465
---------
Net cash provided by operating activities 565,731
Cash Flows from Investing Activities
Payments for the purchase of fixed assets (52,432)
Proceeds from the sale of fixed assets 22,000
---------
Net cash used in investing activities (30,432)
Cash Flows from Financing Activities
Payments on notes (63,350)
Distributions paid to owners (468,084)
---------
Net cash used in financing activities (531,434)
---------
Net increase in cash 3,865
Cash, beginning of year 40,704
---------
Cash, end of year $ 44,569
=========
Supplemental Information
Cash paid for interest $ 3,707
=========
Summary of non-cash investing and financing activities:
Note payable incurred for purchase of truck $ 36,095
=========
See notes to financial statements.
F-4
<PAGE>
TET ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Year ended December 31, 1998
Note 1 Summary of Significant Accounting Policies
Description of business
TET Environmental Services, Inc. (the "Company") is engaged in the businesses of
providing cathodic protection for underground metal tanks, environmental site
assessments, contaminated soil and water remediation and the installation and
removal of storage tanks. The company is located in Columbia, South Carolina,
and performs most of these services in the South Carolina area.
Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Accounts Receivable and Work in Process
The Company accounts for its construction-type contracts using a cost-to-cost
method. Due to the short-term nature of the Company's contracts, projects are
billed as costs are incurred with no profit recognized until the project is
completed. Accounts receivable consists of unpaid billings for contracts, while
work in process consists of costs incurred on contracts that are not yet billed.
Inventory
Inventory is valued at the lower of cost or market. Cost is determined by the
first-in, first-out ("FIFO") method.
Fixed assets
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
Gains and losses on retirement of property and equipment are recognized in the
period of retirement.
F-5
<PAGE>
Income taxes
The Company is taxed as an S Corporation under the Internal Revenue Code and
applicable state statutes. Under an S Corporation election, the Company's
income flows through to the stockholders to be taxed at the individual level
rather than the corporate level. Accordingly, the Company will have no tax
liability as long as the S Corporation election is in effect.
Concentrations of credit risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited because a large number of
geographically diverse customers make up the Company's customer base, thus
spreading the trade credit risk. The company controls credit risk through
monitoring procedures. The company performs credit evaluations for all new
customers but does not require collateral to support customer receivables.
Note 3 Note Payable
Note payable at December 31, 1998 consists of a bank note due in monthly
installments of $1,129 through November 2001, including interest at a rate of
7.75%. The note is collateralized by a vehicle.
Scheduled maturities of long-term debt as of December 31, 1998 are $11,209,
$12,109, and $11,882 for the years ending December 31, 1999 through December 31,
2001, respectively.
Note 4 Commitments
The Company leases the land and building from the shareholders of the Company on
a month-to-month basis. Total rental expense for 1998 was $53,491.
Note 5 Subsequent Events
On May 7, 1999, the Company's operating assets were acquired by National
Environmental Service Co. ("NESCO"), subject to certain liabilities.
F-6
<PAGE>
UNAUDITED PRO-FORMA CONSOLIDATED
FINANCIAL INFORMATION
National Environmental Service Co.
and
TET Environmental Services, Inc.
The following unaudited consolidated pro-forma balance sheets as of December 31,
1998 and March 31, 1999, and consolidated pro-forma statements of operations for
the year ended December 31, 1998, and the three months ended March 31, 1999 and
1998, give effect to the acquisition of the operating assets and certain
liabilities of TET Environmental Services, Inc. ("TET") by National
Environmental Service Co. ("NESCO").
The acquisition of TET has been accounted for as a purchase under generally
accepted accounting principles. As a result, the Company has allocated the
total cost of the acquisition to the acquired assets and assumed liabilities,
based on their fair values and will include the results of operations of TET in
NESCO's consolidated financial statements from the effective date.
The pro-forma consolidated financial statements do not purport to be indicative
of the results that would actually have been obtained if the combination had
been in effect on the dates indicated, or that may be obtained in the future.
The pro-forma calculations presented are for comparative purposes only. The
consolidated pro-forma statements are based upon the financial statements of
NESCO and TET and should be read in conjunction with those financial statements
and related notes.
P-1
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
SUPPLEMENTARY INFORMATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1998
(Unaudited)
(In Thousands of Dollars except per share amounts)
<TABLE>
<CAPTION>
Historical Pro-Forma
--------------------------------------------
NESCO TET Adjustments Combined
--------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 152 $ 44 $ - $ 196
Accounts receivable:
Trade, net 7,915 666 - 8,581
Costs in excess of billings and estimated
earnings on uncompleted contracts 1,479 172 - 1,651
Materials and supplies 1,061 15 - 1,076
Prepaid expenses 32 - - 32
--------------------------------------------
Total current assets 10,639 897 - 11,536
Property and equipment, net 2,426 194 12 (2) 3,157
525 (5)
Other assets, net of accumulated amortization 107 - 1,147 (2) 1,254
--------------------------------------------
Total assets $13,172 $1,091 $ 1,684 $15,947
============================================
</TABLE>
See notes to consolidated pro forma financial statements.
P-2
<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------------------
NESCO TET Adjustments Combined
--------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 3,541 $ 11 $ (11) (2) $ 3,965
424 (3)
Accounts payable 1,554 242 - 1,796
Accrued income taxes 911 - - 911
Other accrued liabilities 209 43 - 252
--------------------------------------------
Total current liabilities 6,215 296 413 6,875
Long-term obligations 1,007 24 (24) (2) 3,073
2,066 (3)
Deferred income taxes 197 - - 197
Shareholders' equity:
Preferred stock: 1,000,000 shares authorized;
none issued - - - -
Common stock 79 1 (1) (2) 79
Additional paid-in capital 3,948 - - 3,948
Retained earnings 1,966 770 (770) (2) 1,966
Common stock in Treasury, at cost, 316,991
shares (240) - - (240)
--------------------------------------------
Total shareholders' equity 5,753 771 (771) 5,753
--------------------------------------------
Total liabilities and shareholders' equity $13,172 $1,091 $ 1,684 $15,947
============================================
</TABLE>
See notes to consolidated pro forma financial statements.
P-3
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
SUPPLEMENTARY INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
December 31, 1998
(Unaudited)
(In Thousands of Dollars except per share amounts)
<TABLE>
<CAPTION>
Historical Pro-Forma
-----------------------------------------------------
NESCO TET Adjustments Combined
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 18,304 $2,906 $ - $ 21,210
Cost and expenses 11,859 1,772 - 13,631
Selling, general and administrative expenses 3,715 664 (300) (1) 4,103
57 (2)
(33) (5)
-----------------------------------------------------
Income from operations 2,730 470 276 3,476
Other income 42 9 - 51
Interest expense (407) (3) 3 (2) (603)
(196) (3)
-----------------------------------------------------
Income before provision for income taxes 2,365 476 83 2,924
Provision for income taxes 895 - 212 (4) 1,107
-----------------------------------------------------
Net income $ 1,470 $ 476 $ (129) $ 1,817
=====================================================
Basic and diluted net income per share $0.19 $0.23
============ =============
Weighted average shares outstanding--basic 7,793,322 7,793,322
============ =============
Weighted average shares outstanding--diluted 7,804,503 7,804,503
============ =============
</TABLE>
See notes to consolidated pro forma financial statements.
P-4
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
SUPPLEMENTARY INFORMATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1998
(Unaudited)
(In Thousands of Dollars except per share amounts)
<TABLE>
<CAPTION>
Historical Pro-Forma
------------------------------------------
NESCO TET Adjustments Combined
------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 168 $ 172 $ - $ 340
Accounts receivable:
Trade, net 6,941 782 - 7,723
Costs in excess of billings and estimated
earnings on uncompleted contracts 1,956 231 - 2,187
Materials and supplies 1,222 15 - 1,237
Prepaid expenses 60 - - 60
------------------------------------------
Total current assets 10,347 1,200 - 11,547
Property and equipment, net 2,923 170 12 (2) 3,630
525 (5)
Other assets, net of accumulated amortization 625 - 823 (2) 1,448
------------------------------------------
Total assets $13,895 $1,370 $ 1,360 $16,625
==========================================
</TABLE>
See notes to consolidated pro forma financial statements.
P-5
<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------
NESCO TET Adjustments Combined
------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 4,162 $ 9 $ (9) (2) $ 4,586
424 (3)
Accounts payable 1,287 206 - 1,493
Accrued income taxes 728 - - 728
Other accrued liabilities 375 34 - 409
------------------------------------------
Total current liabilities 6,552 249 415 7,216
Long-term obligations 1,120 24 (24) (2) 3,186
2,066 (3)
Deferred income taxes 198 - - 198
Shareholders' equity:
Preferred stock: 1,000,000 shares authorized;
none issued - - - -
Common stock 79 1 (1) (2) 79
Additional paid-in capital 4,006 - - 4,006
Retained earnings 2,597 1,096 (1,096) (2) 2,597
Common stock in Treasury, at cost, 316,991
shares (657) - - (657)
------------------------------------------
Total shareholders' equity 6,025 1,097 (1,097) 6,025
------------------------------------------
Total liabilities and shareholders' equity $13,895 $1,370 $ 1,360 $16,625
==========================================
</TABLE>
See notes to consolidated pro forma financial statements.
P-6
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
SUPPLEMENTARY INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months ended March 31, 1999
(Unaudited)
(In Thousands of Dollars except per share amounts)
<TABLE>
<CAPTION>
Historical (Unaudited) Pro-Forma (Unaudited)
---------------------------------------------------------
NESCO TET Adjustments Combined
---------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 6,490 $981 $ - $ 7,471
Cost and expenses 3,900 457 - 4,357
Selling, general and administrative expenses 1,524 159 (25) (1) 1,664
10 (2)
(4) (5)
Income from operations 1,066 365 19 1,450
Other income 56 7 - 63
Interest expense (104) (1) 1 (2) (152)
(48) (3)
--------------------------------------------------------
Income before provision for income taxes 1,018 371 (28) 1,361
Provision for income taxes 387 - 130 (4) 517
--------------------------------------------------------
Net income $ 631 $371 $ (158) $ 844
=======================================================
Basic and diluted net income per share $0.08 $0.11
=============== ================
Weighted average shares outstanding--basic 7,838,793 7,838,793
=============== ================
Weighted average shares outstanding--diluted 7,878,928 7,878,928
=============== ================
</TABLE>
See notes to consolidated pro forma financial statements.
P-7
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
SUPPLEMENTARY INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months ended March 31, 1998
(Unaudited)
(In Thousands of Dollars except per share amounts)
<TABLE>
<CAPTION>
Historical (Unaudited) Pro-Forma (Unaudited)
----------------------------------------------------
NESCO TET Adjustments Combined
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 3,688 $555 $ - $ 4,243
Cost and expenses 2,781 308 - 3,089
Selling, general and administrative expenses 782 126 (75) (1) 846
14 (2)
(1) (5)
----------------------------------------------------
Income from operations 125 121 62 308
Other income 21 23 - 44
Interest expense (108) (2) 2 (2) (160)
(52) (3)
----------------------------------------------------
Income before provision for income taxes 38 142 12 192
Provision for income taxes 12 - 49 (4) 61
----------------------------------------------------
Net income $ 26 $142 $(37) $ 131
====================================================
Basic and diluted net income per share $0.00 $0.02
=============== =============
Weighted average shares outstanding 6,917,540 6,917,540
=============== =============
Weighted average shares outstanding 6,986,913 6,986,913
=============== =============
</TABLE>
See notes to consolidated pro forma financial statements.
P-8
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Note 1 -- Basis of Presentation
The pro forma combined condensed consolidated financial statements reflect
NESCO's acquisition of certain assets and liabilities of TET. The pro forma
combined condensed consolidated financial statements give effect to the
acquisition as if the acquisition occurred at the reported balance sheet dates
and as of the beginning of the periods presented.
Note 2 -- Pro forma Adjustments
The accompanying pro forma condensed consolidated financial statements reflect
the following adjustments:
(1) To eliminate TET owner compensation and expenses that will not be incurred
by NESCO.
(2) To reflect the allocation of purchase price, goodwill and related
amortization.
(3) To reflect acquisition indebtedness and related interest expense due to
debt used to fund the acquisition, including the building discussed in (5)
below.
(4) Income taxes imputed at NESCO's effective tax rate. TET is an S-
Corporation for which taxable income is reported by the owners on their
individual tax returns. The pro forma tax adjustment reflects income taxes
on TET's pro forma income at NESCO's effective tax rate.
(5) The building occupied by TET was owned by TET's owners and leased from
them. NESCO purchased the building from TET's owners for cash at the
appraised amount of $525,000. This purchase was also funded by
indebtedness. The pro forma adjustment reflects the building purchase,
depreciation, and elimination of rent expense associated with the building.
P-9
