PDG Environmental Announces Third Quarter Results
PITTSBURGH--(BUSINESS WIRE)--PDG Environmental, Inc. (OTC BB: PDGE - News), a leading provider of environmental remediation and specialty contracting services, today reported financial results for the third quarter and nine months ended October 31, 2006.
Revenues were $19.8 million as compared to $26.2 million in the third quarter last year, primarily due to the absence of hurricane response business during the fiscal 2007 third quarter. As a result of the revenue reduction, field margin declined to $5.0 million from $6.5 million last year. Excluding a $0.47 million write-down of a contract claim, which reduced contract revenue and field margin, field margin increased to 27% from 25% last year. Higher overhead costs associated with new offices and the Flagship operation caused other direct costs and SG&A expenses to increase in aggregate to $5.9 million from $4.8 million last year.
Pre-tax loss for the fiscal 2007 third quarter was $1.6 million compared to pre-tax income of $1.3 million last year. Included in the fiscal 2007 third quarter pre-tax loss of $1.6 million is $1.0 million in other items, including a revenue and field margin reduction of $0.47 million to reflect the write-down of a contract claim in the Seattle office, a $0.15 million non-recurring charge related to the employee fraud, a bad debt provision of $0.10 million, a $0.11 million non-cash goodwill impairment charge and $0.19 million in non-cash accounting costs related to the company's July 2005 private placement. The after-tax loss was $0.10 per fully diluted share versus a profit of $0.05 per fully diluted share in the prior year's quarter. Average common share equivalents outstanding decreased to 20.4 million from 23.9 million as the inclusion of additional shares in the current quarter would have been anti dilutive.
During the quarter, the company completed its investigation of fraudulent activities at its Seattle office, a development that was uncovered through its internal control procedures and disclosed in a press release dated November 2. At that time, management anticipated recording an extraordinary charge to fiscal 2007 third quarter earnings in the range of $1.0 million to $1.5 million. However, in analyzing the financial impact of the suspected fraud, it was determined that the appropriate accounting treatment was to amend and restate the fourth quarter and fiscal year end January 31, 2006 as well as the first and second quarters of fiscal 2007. A table displaying the adjustments made to contract revenues and contract costs, and the quarterly non-recurring charges associated with the investigation, which total to $1.42 million, is appended to this release.
For the nine months ended October 31, 2006 revenues rose to $58.6 million, up 3.8% versus the $56.5 million recorded during the same period of the prior fiscal year. Field margin increased to $15.5 million from $14.9 million for the same period last year. Other direct costs and SG&A expenses were $18.3 million compared to $11.9 million last year reflecting increased overhead primarily related to three new offices and the Flagship acquisition. As a result of the increased overhead and other charges of $3.7 million, the company reported a pre-tax loss of $6.2 million versus pre-tax income of $2.5 million in the same period of the prior fiscal year. Other items in the current year included a revenue and field margin reduction of $0.47 million to reflect the write-down of a contract claim in the Seattle office, a $0.88 million non-recurring charge related to the employee fraud, a bad debt provision of $0.14 million, a $0.11 million non-cash goodwill impairment charge, $0.2 million of non cash expense for stock options and $1.87 million non-cash dividend and accretion expense related to the July 2005 private placement. Net loss was $0.28 per fully diluted share versus net income of $0.10 per fully diluted share in the prior year. Average common share equivalents outstanding decreased to 19.5 million from 19.6 million as the inclusion of additional shares in the current quarter would have been anti dilutive.
"The absence of hurricanes and other disaster related weather in the third quarter - while good news for property owners - significantly impacted revenues in the third quarter. Revenues were also adversely impacted by the delayed start on a major contract in Los Angeles from September to late December," said John C. Regan, chairman and chief executive officer of PDG Environmental. "In light of revenue softness, we continue to evaluate our overhead costs in order to right size our infrastructure to each region's market realities; this quarter, we reduced other direct costs and SG&A expenses by $0.5 million on a sequential basis. At the same time, we are continuing to advance our diversification strategy to put the company on a growth path that is independent of particular areas of business. Having been awarded contracts in excess of $22 million over the past two months, and with the fraud investigation behind us, we look forward to a much improved fiscal 2008."
Conference Call
PDG Environmental will also host a conference call on January 17, 2007 at 11:00 a.m. Eastern. During the call, John C. Regan, chairman and chief executive officer, and Todd Fortier, chief financial officer, will discuss the Company's quarterly performance and financial results. The telephone number for the conference call is (888) 804-7108.
Investors will be able to access an encore recording of the conference call for one week by calling (800) 642-1687, conference ID# 6279140. The encore recording will be available two hours after the conference call has concluded
About PDG Environmental
PDG Environmental, Inc., headquartered in Pittsburgh, PA, is a leading provider of specialty contracting services including asbestos abatement, mold remediation, emergency response, demolition and reconstruction to commercial, industrial and governmental clients nationwide. With over twenty years experience, PDG Environmental has 13 offices capable of responding to customer requirements coast to coast. For additional information, please visit www.pdge.com.
Safe Harbor Statement under Private Securities Act of 1995: The statements contained in this release, which are not historical facts, may be deemed to contain forward-looking statements, including, but not limited to, deployment of new services, growth of customer base, and growth of service area, among other items. Actual results may differ materially from those anticipated in any forward-looking statement with regard to magnitude, timing or other factors. Deviation may result from risk and uncertainties, including, without limitation, the company's dependence on third parties, market conditions for the sale of services, availability of capital, operational risks on contracts, and other risks and uncertainties. The company disclaims any obligation to update information contained in any forward-looking statement.
FINANCIAL INFORMATION
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
October 31 2007 ----------- |
January 31 2006 ------------ |
| Assets | (unaudited) | |
| Current Assets | ||
| Cash and cash equivalents | $ 135,000 | $ 230,000 |
| Contracts receivable | 23,381,000 | 23,903,000 |
| Costs and estimated earnings in excess of billings on uncompleted contracts |
5,546,000 |
5,174,000 |
| Inventories | 631,000 | 596,000 |
| Prepaid income taxes | 225,000 |
734,000 |
| Deferred income tax asset | 1,156,000 | 470,000 |
| Other current assets | 419,000 ----------- |
131,000 ----------- |
| Total Current Assets | 31,493,000 ----------- |
31,238,000 ----------- |
| Property, Plant and Equipment |
10,601,000 | 10,137,000 |
| Less: accumulated depreciation | (8,258,000) ----------- |
(7,838,000) ----------- |
| 2,343,000 ----------- |
2,299,000 ----------- |
|
| Goodwill | 2,770,000 | 2,316,000 |
| Deferred Income Tax Asset | 425,000 | 216,000 |
| Intangible and Other Assets | 5,876,000 ----------- |
6,423,000 ----------- |
| Total Assets | $42,907,000 =========== |
$42,492,000 =========== |
Liabilities and Stockholders' Equity
| Current Liabilities |
||
| Accounts payable | $ 7,022,000 | $ 6,488,000 |
| Billings in excess of costs and estimated earnings on uncompleted contracts |
1,981,000 |
2,044,000 |
| Current portion of long-term debt | 181,000 | 513,000 |
| Accrued liabilities | 4,715,000 ----------- |
4,494,000 ----------- |
| Total Current Liabilities |
13,899,000 | 13,539,000 |
| Long-Term Debt | 11,570,000 |
9,059,000 |
| Series C Redeemable Convertible Preferred Stock | 2,347,000 ----------- |
2,803,000 ----------- |
| Total Liabilities | 27,816,000 ----------- |
25,401,000 ----------- |
| Stockholders' Equity Common stock |
410,000 |
345,000 |
| Common stock warrants | 1,628,000 | 1,881,000 |
| Additional paid-in capital | 19,160,000 | 15,582,000 |
| Retained earnings (deficit) | (6,069,000) | (679,000) |
| Less treasury stock, at cost | (38,000) ----------- |
(38,000) ----------- |
| Total Stockholders' Equity | 15,091,000 ----------- |
17,091,000 ----------- |
| Total Liabilities and Stockholders' Equity | $42,907,000 =========== |
$42,892,000 =========== |
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
For the Three Months
Ended October 31,
|
2006 ----------- |
2005 ------------ |
| Contract revenues | $19,783,000 | $26,186,000 |
Job costs |
14,790,000 ----------- |
19,689,000 ----------- |
| Field margin | 4,993,000 | 6,497,000 |
| Other Direct Costs | 2,982,000 ----------- |
2,382,000 ----------- |
| Gross margin | 2,011,000 |
4,115,000 |
| Selling, general and administrative expenses | 2,932,000 |
2,436,000 |
| (Gain) loss on Sale of Fixed Assets |
|
(10,000) ----------- |
| Income (loss) from operations | (933,000) | 1,689,000 |
| Other income (expense): Interest expense |
(246,000) |
(114,000) |
| Non-cash interest expense for preferred dividends and accretion of discount |
(195,000) |
(242,000) |
| Non-recurring charge for employee fraud | (150,000) | - |
| Non-cash impairment charge for goodwill | (111,000) | - |
| Interest and other income | 3,000 ----------- |
3,000 ----------- |
| (699,000) ----------- |
(353,000) ----------- |
|
| Income (loss) before income taxes | (1,632,000) | 1,336,000 |
| Income tax provision (benefit) | 365,000 ----------- |
331,000 ----------- |
| Net income (loss) | $(1,997,000) =========== |
$ 1,005,000 =========== |
| Per share of common stock: Basic: |
$ (0.10) =========== |
$ 0.07 =========== |
| Dilutive | $ (0.10) ============ |
$ 0.05 ============ |
| Average common share equivalents outstanding | 20,445,000 | 15,100,000 |
| Average dilutive common share equivalents outstanding |
- ------------ |
8,836,000 ------------ |
| Average common shares and dilutive common equivalents outstanding for earnings per share calculation |
20,445,000 =========== |
23,936,000 =========== |
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS BEFORE INTEREST, DEPRECIATION AND
AMORTIZATION ("EBITDA") (UNAUDITED)
For the Three Months
Ended October 31,
2006 ------------ |
2005 ------------ |
|
| Net Income (Loss) | (1,997,000) | 1,005,000 |
Income Taxes (Benefit) |
365,000 | 331,000 |
Interest expense |
246,000 | 115,000 |
Non-cash interest expense for preferred |
195,000 |
242,000 |
Depreciation and Amortization |
541,000 ------------ |
314,000 ------------ |
| EBITDA | $ (650,000) =========== |
$2,007,000 =========== |
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
For the Nine Months
Ended October 31,
|
2006 ------------ |
2005 ------------ |
| Contract revenues | $58,579,000 | $56,457,000 |
Job costs |
43,046,000 ----------- |
41,529,000 ----------- |
| Field margin | 15,533,000 | 14,928,000 |
| Other Direct Costs |
9,082,000 ----------- |
6,029,000 ----------- |
| Gross margin |
6,451,000 |
8,899,000 |
| Selling, general and administrative expenses |
9,188,000 |
5,837,000 |
| (Gain) Loss on Sale of Fixed Assets |
|
(10,000) ----------- |
| Income (loss) from operations | (2,754,000) | 3,072,000 |
| Other income (expense): Interest expense |
(716,000) |
(310,000) |
| Non-cash interest expense for preferred dividends and accretion of discount |
(1,870,000) |
( 322,000) |
| Gain on sale of equity investment | - |
48,000 |
| Equity in income of equity investment | - |
4,000 |
| Non-recurring charge for employee fraud | (748,000) | - |
| Non-cash impairment charge for goodwill | (111,000) | - |
| Interest and other income | 16,000 ----------- |
22,000 ----------- |
(3,429,000) ------------ |
(558,000) ------------ |
|
| Income (loss) before income taxes | (6,183,000) |
2,514,000 |
| Income tax provision (benefit) | (793,000) ------------ |
809,000 ------------ |
| Net income (loss) | |
$ 1,705,000 ============ |
| Per share of common stock: Basic |
$ (0.28) ============ |
$ 0.12 ============ |
| Dilutive | $ (0.28) ============ |
$ 0.10 ============ |
| Average common share equivalents outstanding | 19,543,000 | 13,911,000 |
| Average dilutive common share equivalents outstanding |
- ------------ |
5,734,000 ------------ |
| Average common shares and dilutive common equivalents outstanding for earnings per share calculation | 19,543,000 =========== |
19,645,000 =========== |
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS BEFORE INTEREST, DEPRECIATION AND
AMORTIZATION ("EBITDA") (UNAUDITED)
For the Nine Months
Ended October 31,
2006 ------------ |
2005 ------------ |
|
| Net Income (Loss) | (5,390,000) | 1,705,000 |
Income Taxes (Benefit) |
(793,000) | 809,000 |
Interest expense |
716,000 | 310,000 |
Non-cash interest expense for preferred |
1,870,000 |
322,000 |
Depreciation and Amortization |
1,395,000 ------------ |
666,000 ------------ |
| EBITDA | $(2,202,000) =========== |
$3,812,000 =========== |
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
EFFECT OF FRAUDULENT ACTIVITY BY QUARTER
Fiscal 2006 Fourth Quarter |
Fiscal 2007 First Quarter |
Fiscal 2007 Second Quarter |
Fiscal 2007 Third Quarter |
Total |
|
| Contract Revenues |
$(538,000) |
$(407,000) |
$(316,000) |
$ (67,000) |
$(1,328,000) |
Contract Costs |
(234,000) |
(347,000) |
(251,000) |
(63,000) |
(895,000) |
Gross margin |
(304,000) | (60,000) |
(65,000) | (4,000) | (433,000) |
Non-recurring |
(234,000) |
(347,000) |
(251,000) |
(150,000) |
(982,000) |
Pre tax |
$(538,000) |
$(407,000) |
$(316,000) |
$(154,000) |
$(1,415,000) |
Contact:
PDG Environmental, Inc.
John C. Regan, (412) 243-3200
Chairman & CEO
or
Investors:
Lippert / Heilshorn & Associates, Inc.
Jody Burfening / Chris Witty, (212) 838-3777
cwitty@lhai.com
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Source: PDG Environmental, Inc.
