<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended MARCH 31, 1999
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 Number 1-13852
CET ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0285964
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
7670 SOUTH VAUGHN COURT, ENGLEWOOD, COLORADO 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 708-1360
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 11, 1999, 6.3 million shares of common stock, no par value per
share, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CET ENVIRONMENTAL SERVICES, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash ........................................................ $ 480 $ 25
Accounts receivable, less allowance for doubtful accounts
of $722 in 1999 and 1998 .............................. 7,924 11,781
Contracts in process, less allowance for doubtful accounts
of $284 in 1999 and 1998 .............................. 8,932 10,154
Prepaid expenses and other current assets ................... 2,886 4,710
----------- ------------
Total Current Assets ............................ 20,222 26,670
EQUIPMENT AND IMPROVEMENTS, NET ......................................... 3,630 3,480
OTHER ASSETS ............................................................ 60 52
----------- ------------
$23,912 $30,202
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Cash overdraft ................................................... $ 923 $ 1,937
Accounts payable ................................................. 5,441 11,383
Accrued expenses ................................................. 2,431 3,249
Current portion of long-term debt and capital lease
obligations ................................................ 977 1,067
Line of credit ................................................... 4,159 1,040
Other current liabilities ........................................ 216 159
----------- ------------
Total current liabilities ............................ 14,147 18,835
DEFERRED INCOME TAXES ........................................................ - -
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS ................................. 230 251
COMMITMENTS AND CONTINGENT LIABILITIES ....................................... - -
STOCKHOLDERS' EQUITY
Common stock (no par value) - authorized 20.0 million shares;
issued and outstanding 6.3 million and 6.1 million shares
in 1999 and 1998, respectively.............................. 8,671 8,540
4% convertible Preferred Stock (no par value) - authorized 5.0
million shares; -0- and 1,710 shares issued and outstanding
in 1999 and 1998, respectively.............................. - 1,589
Paid-in capital .................................................. 105 574
Retained earnings ................................................ 759 413
----------- ------------
Total stockholders' equity ........................... 9,535 11,116
----------- ------------
$23,912 $30,202
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
PROJECT REVENUE ............................................ $ 12,945 $ 11,455
PROJECT COSTS
Direct ......................................... 9,524 9,039
Indirect ....................................... 1,765 1,781
----------- -----------
11,289 10,820
Gross profit ....................... 1,656 635
OPERATING EXPENSES
Selling ........................................ 308 447
General and administrative ..................... 678 664
----------- -----------
986 1,111
----------- -----------
Operating income (loss) ........... 670 (476)
OTHER INCOME (EXPENSE), NET ................................ (104) (186)
----------- -----------
Income (loss) before income taxes .. 566 (662)
Provision for income taxes ......... 215 4
----------- -----------
NET INCOME (LOSS) .......................................... $ 351 $ (666)
----------- -----------
----------- -----------
Earnings (loss) per common share ........................... $ 0.06 $ (0.11)
----------- -----------
----------- -----------
Earnings (loss) per common share - assuming dilution ....... $ 0.06 $ (0.11)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
MARCH 31, MARCH 31,
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................................. $ 351 $ (666)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ......................................... 263 388
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable ................ 3,857 (1,587)
Decrease (Increase) in contracts in process ............... 1.223 4,972
Decrease (Increase) in prepaid expenses and other assets .. 545 (808)
(Decrease) Increase in accounts payable and
accrued expenses .................................... (6,760) (3,007)
Other ..................................................... 58 (2)
--------- ----------
Net cash provided by (used in) operating activities ....... (463) (710)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment ............................................................. (413) (222)
Purchase of subsidiary ............................................................ - (513)
Proceeds from sale of subsidiary .................................................. 1,250 -
--------- ----------
Net cash provided by (used in) operating activities ....... 837 (735)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of subordinated and long-term debt ......................... - 1,066
Payments on long-term debt and capital lease obligations .......................... (111) (321)
Proceeds from exercise of Employee Stock Options .................................. - 17
Preferred Stock dividends ......................................................... (5) -
Preferred Stock redemption ........................................................ (1,928) -
Net borrowings on line of credit .................................................. 3,119 150
Proceeds from loans from shareholders ............................................. - 500
Payments on loan to related party ................................................. 20 -
Bank overdraft .................................................................... (1,014) -
--------- ----------
Net cash provided by (used in) financing activities ................... 81 1,412
--------- ----------
INCREASE (DECREASE) IN CASH ....................................................... 455 (33)
Cash at the beginning period ...................................................... 25 343
--------- ----------
Cash at end of period ............................................................. $ 480 $ 310
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1. BASIS OF PRESENTATION. The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for condensed interim financial statements 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, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating
results for the quarter ended March 31, 1999 are not necessarily
indicative of results that may be expected for the year ending
December 31, 1999. For further information, refer to the audited
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
NOTE 2. EARNINGS PER SHARE. The Financial Accounting Standards Board
recently issued Statement of Financial Accounting Standards No.
128, EARNINGS PER SHARE ("SFAS 128"). SFAS 128 requires the
presentation of basic earnings per share ("EPS") and, for
companies with potentially dilutive securities such as
convertible debt, options and warrants, diluted EPS.
The following table sets forth the computation of basic and
diluted earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
----------------------
March 31, March 31,
1999 1998
---------- -----------
<S> <C> <C>
Numerator
Net income (loss) $ 351 $ (666)
Preferred Stock dividends (5) --
---------- -----------
Numerator for basic earnings per share -
income available to common stockholders 346 (666)
Effect of dilutive securities:
Preferred Stock dividends -- --
---------- -----------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions $ 346 $ (666)
---------- -----------
---------- -----------
Denominator:
Denominator for basic earnings per share -
weighted average shares outstanding 6,276 5,809
Effect of dilutive securities:
Warrants -- --
Convertible Preferred Stock -- --
Stock options -- --
---------- -----------
Dilutive potential common shares -- --
Denominator for diluted earnings per share -
adjusted weighted average share and
assumed conversion 6,276 5,809
---------- -----------
---------- -----------
Basic earnings per share $ 0.06 $ (0.11)
---------- -----------
---------- -----------
Diluted earnings per share $ 0.06 $ (0.11)
---------- -----------
---------- -----------
</TABLE>
5
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS - CONTINUED
NOTE 3. SALE OF SUBSIDIARY. Effective December 1, 1998, the Company sold
all of the outstanding shares of its subsidiary, Water Quality
Management Corporation ("WQM") for a sale price of $12.5 million
plus an adjustment for net working capital of WQM at November 30,
1998. The Company received $11.3 million at the date of sale and in
the first quarter of 1999 received an additional 1.2 million. As of
March 31, 1999, the Company has included in other receivables
remaining amounts due on the sale of WQM.
NOTE 4. LINE OF CREDIT AND LONG TERM DEBT. On May 30, 1997, the Company
entered into a financing agreement (the "Agreement") with the
National Bank of Canada. The agreement provides for a line of
credit (the "Credit Facility"), a term loan, and a $0.5 million
stand-by letter of credit which in total shall not exceed the
lesser of $7.5 million or a percentage of eligible receivables
(as defined in the loan agreement). Interest is payable under the
Agreement at the Bank's Reference Rate plus .25% (8.75% as of
March 31, 1999). The Agreement has an expiration date of May 30,
1999 upon which amounts outstanding under the Credit Facility and
term loan shall become due and payable. The Company is in the
process of finalizing a new financing agreement. At March 31,
1999, $4.9 million was outstanding under this Agreement. In
addition, the Agreement contains certain financial covenants, as
defined in the debt agreement, which must be maintained by the
Company. As of March 31, 1999, management believes the Company is
in compliance with these covenants.
NOTE 5. STOCKHOLDERS' EQUITY. In July 1998, the Company completed a
private placement of 2,000 shares of 4% convertible Preferred
Stock (the "Preferred Stock") providing net proceeds of
approximately $1.9 million. The Preferred Stock is convertible
into shares of common stock based on the stated value of $1,000
per share of Preferred Stock divided by conversion price on the
conversion date. The conversion price is equal to 85% of the
lowest closing price of the common stock during the six days
immediately preceding the conversion date, not to exceed $3.35. A
total of 290 shares of Preferred Stock were converted into
317,786 shares of common stock in 1998 and a total of 140 shares
of Preferred Stock were converted into 155,017 shares of common
stock in 1999. Additionally, in January 1999, the Company
redeemed the remaining shares of Preferred Stock for
approximately $1.9 million. Warrants totaling 35,000 issued to
the placement agent in the offering remain outstanding.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
PROJECT REVENUE. Project revenues increased $1.5 million or 13.0%
from $11.5 million in the quarter ended March 31, 1998 to $13.0 million in
the quarter ended March 31, 1999. The increase results primarily from an
increase of $3.7 million in revenue provided by EPA contracts (including an
additional award fee of approximately $0.7 million) offset by a decrease in
revenue of $2.0 million resulting from the sale of WQM in December 1998. See
also Note 3 of the Company's Condensed Financial Statements. The Company's
goal is to achieve a relatively equal distribution of revenues from
government contracts and commercial contracts.
DIRECT COSTS. Direct costs increased $0.5 million or 5.4% from
$9.0 million or 79% of project revenue in the quarter ended March 31, 1998 to
$9.5 million or 74% of project revenue in the quarter ended March 31, 1999.
Excluding the recognition of the additional $0.7 million EPA award fee in the
quarter ended March 31, 1999, direct costs represent 78% of project revenue.
Therefore, the increase in direct costs is directly attributable to the
increase in project revenue discussed above.
INDIRECT COSTS. Indirect costs decreased slightly from 15% of
project revenue in 1998 to 14% of project revenue in 1999. The improvement is
attributable primarily to the Company's continued focus on greater project
profitability and cost control while maintaining quality service to its
customers.
GROSS PROFIT. Gross profit increased $1.0 million from $0.6
million or a gross margin of 6% in the quarter ended March 31, 1998 to $1.6
million or a gross margin of 13% in the quarter ended March 31, 1999. Under
the terms of certain of its contracts, the Company earns an award fee based
on meeting certain performance standards. The Company estimates the amount of
this award fee as part of its normal revenue recognition process. The Company
was notified by the EPA that its performance was higher than expected and
that an additional award fee of $0.7 million was granted to the Company. The
receipt of this additional award fee, combined with the focus on cost
controls described above, are the primary reasons for the improved gross
profit.
OPERATING INCOME (LOSS). Operating income increased $1.2 million
from an operating loss of $0.5 million in the quarter ended March 31, 1998 to
an operating income of $0.7 million in the quarter ended March 31, 1999. The
improvement is due primarily to the improvement of $1.0 million in gross
profit described above.
NET INCOME (LOSS). Net income improved $1.1 million from a net
loss of $0.7 million in the quarter ended March 31, 1998 to a net income of
$0.4 million in the quarter ended March 31, 1999. The improvement results
from enhanced gross profits and the Company's cost control efforts described
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position continues to improve during 1999
with the Company's focus on overall operational improvement. This improvement
is evidenced by an improvement of the Company's debt to equity ratio from
1.71 at December 31, 1998 to 1.51 at March 31, 1999. In addition, the
Company's combined receivables decreased $5.1 million from $21.9 million as
of December 31, 1998 to $16.8 million as of March 31, 1999. The transition in
the Company's financial position in 1999 is primarily the result of the
Company's reduction in current liabilities along with its continued reduction
in its outstanding receivables.
The Company's working capital declined $1.7 million from $7.8
million as of December 31, 1998 to $6.1 million as of March 31, 1999. The
change in working capital results from a decrease in current assets of $6.4
million compared to a decrease in current liabilities of $4.7 million. The
decrease in current assets results from a reduction in combined receivables
of $5.1 million and a decrease in other current assets of $1.8 million due
primarily to the collection of $1.3 million on the sale of business. The
decrease in current liabilities results
7
<PAGE>
primarily from additional borrowings on the line of credit of $3.1 million
offset by a reduction of accounts payable and accrued liabilities of $6.8
million.
The Company's cash and cash equivalents increased $0.5 million
from $0.03 million as of December 31, 1998 to $0.5 million as of March 31,
1999. The increase in cash and cash equivalents is due primarily to cash
provided by investing activities of $0.8 million offset by cash used in
operating activities of $0.4 million and cash provided by financing
activities of $0.1 million. Cash provided by investing activities of $0.8
million is primarily the result of the receipt of $1.2 million additional
proceeds on the sale of WQM in the quarter ended March 31, 1999. Cash used in
operating activities of $0.4 million results from a decrease of $6.8 million
in accounts payable and accrued expenses offset by a combined reduction in
receivables of $5.1 million. Cash provided by financing activities of $0.1
million results from a payment of $1.9 million for the redemption of the
Company's Preferred Stock (see also Note 5 to the Company's Condensed
Financial Statements) and a reduction of $1.0 million in the Company's cash
overdraft offset by $3.1 million net borrowings on the Company's line of
credit.
DEBT. As of March 31, 1999, the Company's debt obligations
include a financing agreement with National Bank of Canada which provides for
a Credit Facility, term loan, and $0.5 million letter of credit which in
total shall not exceed the lesser of $7.5 million or a percentage of eligible
receivables. The Agreement has an expiration date of May 30, 1999 upon which
amounts outstanding under the Credit Facility and term loans become
immediately due and payable. See also Note 4 to the Company's Condensed
Financial Statements. Management of the Company is currently negotiating the
terms of its debt obligations to extend the Agreement with National Bank of
Canada.
Management believes that it will be successful in negotiating the
terms of its financing agreement with National Bank of Canada. Additionally,
management believes that future cash flow from operations and funds available
under its line of credit will be sufficient to fund the Company's immediate
needs for working capital. However, there can be no assurance that the terms
of the Agreement will be successfully negotiated or that the Company's future
cash flow from operations and its Credit Facility will be sufficient to cover
current or future obligations.
CAPITAL COMMITMENTS. As of March 31, 1999, the Company did not
have any material commitments for capital expenditures. The Company has
entered into leases for its existing facilities with such leases expiring at
various dates through 2004. During the quarter ended March 31, 1999, capital
expenditures totaled approximately $0.4 million. Management anticipates an
increase in capital expenditures and will fund these expenditures from
working capital, term loans and equipment leases.
YEAR 2000 COMPLIANCE
The Company has assessed the Year 2000 compliance problem and has
determined that it has potential for exposure regarding Year 2000 compliance
in three areas of its internal and external business activities. These areas
include (1) its own internal hardware, software systems, and the
telecommunications systems which are utilized to process and provide the
Company's accounting, operational information, and communications, (2) the
vulnerability of the Company to the failure of other companies to be Year
2000 compliant, and (3) the Year 2000 Compliance efforts of the Environmental
Protection Agency (EPA), a significant client of the Company, on its daily
tracking & billing system. The following discusses management's assessment
and solutions of those risks and the steps that are being taken to minimize
them.
INTERNAL HARDWARE, SOFTWARE AND TELECOMMUNICATIONS. During the
past 9 months, the Company has been and is replacing or adding new equipment
to its inventory of network and systems computers. The Company has committed
approximately $350,000 for this hardware/software replacement, which has been
financed with its cash resources and with lease financing. The hardware
includes the Company's organization-wide network systems and servers,
telephone systems, and personal computer equipment. The Company will test
Year 2000 compliance on this new hardware/software as it is accepted. In
addition, the Company has contracted for the replacement of its
organization-wide accounting, costing, and management information computer
software. This new software will operate the Company's accounting and
operational information systems and will be functional for use by all of its
regional locations. The Vendor has warranted that the software is Year 2000
compliant. System design is
8
<PAGE>
substantially complete, customization of the software is scheduled, and the
staff training will begin 2nd quarter 1999. It is estimated that the system
will be installed and functional in the 3rd quarter 1999. The cost of this
system is expected to be approximately $250,000 including software, hardware
and implementation, and training expenses. The primary purpose of acquiring
this system is to provide improved functionality in the area of consolidated
financial reporting, financial project controls, Year 2000 compliance, timely
cost capturing, and management reporting. In addition, the Company has
reviewed its telecommunications systems, analyzed various options, and
purchased a new central telecommunication system that will provide increased
functionality associated with multiple office communication requirements. The
new system is Year 2000 compliant, and installation is scheduled to be
complete by June 1, 1999. The estimated costs associated with a new
telecommunications system are $33,000.
In addition to the above activities, the Company is in the final
process of completing a full inventory and assessment of its computer
hardware, software, and equipment with embedded devices. It is anticipated
that this process will be completed by September 1999. Management intends to
identify any remaining remedial efforts that may be required to ensure its
internal hardware and software systems are Year 2000 complaint.
YEAR 2000 COMPLIANCE OF OTHER COMPANIES. Although the Company
expects its internal systems to be Year 2000 compliant, the failure of any of
its significant vendors or clients to correct a material Year 2000 problem
could result in an interruption in certain normal business activities and
operations. To date, the Company has received various inquires from its
clients and significant vendors to provide information on Year 2000
compliance or to inform the Company of their Year 2000 compliance. The
Company has been responding to these requests and notices. Management is not
aware of any claims by any client to provide remedial services under any
warranty agreement (stated or implied) for systems it may have provided, nor
is it aware of any system that may have been provided that may be in
violation of any Year 2000 compliance. To the extent any such claims may be
made, the Company intends to address these issues on a case by case basis.
The Year 2000 problem is not limited to computer hardware and
software. It can affect a multitude of other day-to-day business activities.
Any type of equipment with a microchip that stores and processes dates can be
affected. The company is diligently identifying and addressing these issues
so that its ability to conduct business as usual is not compromised as it
moves into the 21st century. The Company is identifying mission-critical
business functions that rely upon date-sensitive equipment, software, or
hardware. The Company is requesting Year 2000 verification in these areas by
performance testing or certifications that use various types of testing for
compliance, i.e., century byte, hardware clock rollover, hardware clock leap
year, BIOS rollover, BIOS leap year, power-on rollover, and power-on leap
year. Due to the general uncertainty inherent in the Year 2000 problem, the
Company at this time is unable to completely determine if any adverse impact
will be experienced by the Company from other companies' Year 2000 failures.
EPA YEAR 2000 COMPLIANCE. The Company has been working with the
EPA on their efforts to bring their daily tracking & billing system (RCMS) to
Year 2000 compliance. The EPA has been developing a windows-based RCMS, Year
2000 Compliant system to be issued to its Contractors by July 1999. Their
efforts are currently in the design testing stage. The Company expects some
amount of problems that are inherent to conforming to a new windows-based
system. Given the current assurances from the EPA of their compliance, the
Company is only anticipating the normal conversion problems. (i.e., DOS-based
vs. Windows-based interaction).
While the Company may be vulnerable to other companies' Year 2000
compliance failures, the Company is well positioned to minimize the Year 2000
impact. The Company believes that with the implementation of its new
hardware, software, up-grades to our office equipment, and completion of its
assessment of vendors and clients, the possibility of significant
interruptions of normal operations has been greatly reduced.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
(A) Redemption of Preferred Stock
In July 1998, the Company completed a private placement of 2,000
shares of 4% Convertible Preferred Stock providing net proceeds of
approximately $1.9 million. Through January 1999, a total of 430
shares of Preferred Stock was converted into 0.4 million shares of
the Company's common stock. In January 1999, the Company redeemed
the remaining shares of Preferred Stock for approximately $1.9
million.
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 AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule Filed herewith electronically
(b) REPORTS ON FORM 8-K
None.
10
<PAGE>
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.
CET ENVIRONMENTAL SERVICES, INC.
Dated: May 14, 1999 By: /s/ Steven H. Davis
------------------------------------------
Steven H. Davis, President (principal
financial and accounting officer), Chief
Executive Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF THE COMPANY AS OF AND FOR THE QUARTER ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 480
<SECURITIES> 0
<RECEIVABLES> 19,982
<ALLOWANCES> 1,006
<INVENTORY> 314
<CURRENT-ASSETS> 20,222
<PP&E> 6,777
<DEPRECIATION> 3,147
<TOTAL-ASSETS> 23,912
<CURRENT-LIABILITIES> 14,147
<BONDS> 230
0
0
<COMMON> 8,671
<OTHER-SE> 864
<TOTAL-LIABILITY-AND-EQUITY> 23,912
<SALES> 0
<TOTAL-REVENUES> 12,945
<CGS> 11,289
<TOTAL-COSTS> 11,289
<OTHER-EXPENSES> 986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 566
<INCOME-TAX> 215
<INCOME-CONTINUING> 351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 351
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
