x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
For
the quarterly period ended September
30, 2008
|
Or
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
For
the transition period from _______________ to
___________________
|
Delaware
(State
or other jurisdiction
of
incorporation or organization)
|
58-1954497
(IRS
Employer Identification Number)
|
8302
Dunwoody Place, Suite 250, Atlanta, GA
(Address
of principal executive offices)
|
30350
(Zip
Code)
|
Class
|
Outstanding
at November 3, 2008
|
|
Common
Stock, $.001 Par Value
|
53,908,700
shares
of registrant’s
Common
Stock
|
|
|
Page
No.
|
|
PART I
|
FINANCIAL
INFORMATION
|
||
Item
1.
|
Condensed
Financial Statements
|
||
Consolidated
Balance Sheets -
September
30, 2008 (unaudited) and December 31, 2007
|
1
|
||
Consolidated
Statements of Operations -
Three
and Nine Months Ended September 30, 2008 and 2007 (unaudited)
|
3
|
||
Consolidated
Statements of Cash Flows -
Nine
Months Ended September 30, 2008 and 2007 (unaudited)
|
4
|
||
Consolidated
Statement of Stockholders' Equity -
Nine
Months Ended September 30, 2008 (unaudited)
|
5
|
||
Notes
to Consolidated Financial Statements
|
6
|
||
Item
2.
|
Management's
Discussion and Analysis of
Financial
Condition and Results of Operations
|
27
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures
About
Market Risk
|
58
|
|
Item
4.
|
Controls
and Procedures
|
59
|
|
PART II
|
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
60
|
|
Item
1A.
|
Risk
Factors
|
61
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
61
|
|
Item
5.
|
Other
Information
|
62
|
|
Item
6.
|
Exhibits
|
63
|
(Amount
in Thousands, Except for Share Amounts)
|
September 30,
2008
(Unaudited)
|
December 31,
2007
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
91
|
$
|
118
|
|||
Restricted
cash
|
55
|
55
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $184 and $203,
respectively
|
8,541
|
14,961
|
|||||
Unbilled
receivables - current
|
11,286
|
10,433
|
|||||
Inventories
|
321
|
332
|
|||||
Prepaid
and other assets
|
3,318
|
3,206
|
|||||
Current
assets related to discontinued operations
|
177
|
3,505
|
|||||
Total
current assets
|
23,789
|
32,610
|
|||||
Property
and equipment:
|
|||||||
Buildings
and land
|
23,238
|
23,929
|
|||||
Equipment
|
31,397
|
32,240
|
|||||
Vehicles
|
993
|
1,302
|
|||||
Leasehold
improvements
|
11,462
|
11,462
|
|||||
Office
furniture and equipment
|
1,899
|
2,349
|
|||||
Construction-in-progress
|
2,812
|
1,673
|
|||||
71,801
|
72,955
|
||||||
Less
accumulated depreciation and amortization
|
(22,979
|
)
|
(23,161
|
)
|
|||
Net
property and equipment
|
48,822
|
49,794
|
|||||
Net
property and equipment held for sale
|
349
|
349
|
|||||
Property
and equipment related to discontinued operations
|
666
|
3,942
|
|||||
Intangibles
and other long term assets:
|
|||||||
Permits
|
16,991
|
16,826
|
|||||
Goodwill
|
10,822
|
9,046
|
|||||
Unbilled
receivables - non-current
|
3,661
|
3,772
|
|||||
Finite
Risk Sinking Fund
|
10,739
|
6,034
|
|||||
Other
assets
|
2,320
|
2,496
|
|||||
Intangible
and other assets related to discontinued operations
|
—
|
1,179
|
|||||
Total
assets
|
$
|
118,159
|
$
|
126,048
|
(Amount
in Thousands, Except for Share Amounts)
|
September 30,
2008
(Unaudited)
|
December 31,
2007
|
|||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
6,606
|
$
|
5,907
|
|||
Current
environmental accrual
|
228
|
475
|
|||||
Accrued
expenses
|
10,514
|
9,982
|
|||||
Disposal/transportation
accrual
|
6,818
|
6,850
|
|||||
Unearned
revenue
|
1,933
|
4,978
|
|||||
Current
liabilities related to discontinued operations
|
1,356
|
6,220
|
|||||
Current
portion of long-term debt
|
3,875
|
15,352
|
|||||
Total
current liabilities
|
31,330
|
49,764
|
|||||
Environmental
accruals
|
653
|
705
|
|||||
Accrued
closure costs
|
10,679
|
8,901
|
|||||
Other
long-term liabilities
|
441
|
968
|
|||||
Long-term
liabilities related to discontinued operations
|
1,877
|
2,817
|
|||||
Long-term
debt, less current portion
|
11,234
|
2,880
|
|||||
Total
long-term liabilities
|
24,884
|
16,271
|
|||||
Total
liabilities
|
56,214
|
66,035
|
|||||
Commitments
and Contingencies
|
|||||||
Preferred
Stock of subsidiary, $1.00 par value; 1,467,396 shares authorized,
1,284,730 shares issued and outstanding, liquidation value $1.00
per
share
|
1,285
|
1,285
|
|||||
Stockholders'
equity:
|
|||||||
Preferred
Stock, $.001 par value; 2,000,000 shares authorized, no shares issued
and
outstanding
|
¾
|
¾
|
|||||
Common
Stock, $.001 par value; 75,000,000 shares authorized, 53,908,700
and
53,704,516 shares issued and outstanding, respectively
|
54
|
54
|
|||||
Additional
paid-in capital
|
97,129
|
96,409
|
|||||
Stock
subscription receivable
|
¾
|
(25
|
)
|
||||
Accumulated
deficit
|
(36,523
|
)
|
(37,710
|
)
|
|||
Total
stockholders' equity
|
60,660
|
58,728
|
|||||
Total
liabilities and stockholders' equity
|
$
|
118,159
|
$
|
126,048
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
(Amounts in
Thousands, Except for Per Share Amounts)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Net
revenues
|
$
|
15,989
|
$
|
16,306
|
$
|
51,961
|
$
|
48,452
|
|||||
Cost
of goods sold
|
11,884
|
11,693
|
37,536
|
33,564
|
|||||||||
Gross
profit
|
4,105
|
4,613
|
14,425
|
14,888
|
|||||||||
Selling,
general and administrative expenses
|
4,711
|
4,691
|
13,818
|
13,493
|
|||||||||
Asset
impairment recovery
|
(507
|
)
|
¾
|
(507
|
)
|
¾
|
|||||||
(Gain)
loss on disposal of property and equipment
|
(2
|
)
|
(13
|
)
|
139
|
99
|
|||||||
(Loss)
income from operations
|
(97
|
)
|
(65
|
)
|
975
|
1,296
|
|||||||
Other
income (expense):
|
|||||||||||||
Interest
income
|
52
|
71
|
170
|
238
|
|||||||||
Interest
expense
|
(231
|
)
|
(482
|
)
|
(917
|
)
|
(964
|
)
|
|||||
Interest
expense-financing fees
|
(14
|
)
|
(48
|
)
|
(124
|
)
|
(143
|
)
|
|||||
Other
|
¾
|
(40
|
)
|
(5
|
)
|
(55
|
)
|
||||||
(Loss)
income from continuing operations before taxes
|
(290
|
)
|
(564
|
)
|
99
|
372
|
|||||||
Income
tax (benefit) expense
|
(14
|
)
|
(161
|
)
|
3
|
23
|
|||||||
(Loss)
income from continuing operations
|
(276
|
)
|
(403
|
)
|
96
|
349
|
|||||||
Loss
from discontinued operations, net of taxes
|
(159
|
)
|
(1,549
|
)
|
(1,218
|
)
|
(2,163
|
)
|
|||||
Gain
on disposal of discontinued operations, net of taxes
|
94
|
¾
|
2,309
|
¾
|
|||||||||
Net
(loss) income applicable to Common Stockholders
|
$
|
(341
|
)
|
$
|
(1,952
|
)
|
$
|
1,187
|
$
|
(1,814
|
)
|
||
Net
(loss) income per common share - basic
|
|||||||||||||
Continuing
operations
|
$
|
(.01
|
)
|
$
|
(.01
|
)
|
$
|
¾
|
$
|
.01
|
|||
Discontinued
operations
|
¾
|
(.03
|
)
|
(.02
|
)
|
(.04
|
)
|
||||||
Disposal
of discontinued operations
|
¾
|
¾
|
.04
|
¾
|
|||||||||
Net
(loss) income per common share
|
$
|
(.01
|
)
|
$
|
(.04
|
)
|
$
|
.02
|
$
|
(.03
|
)
|
||
Net
(loss) income per common share - diluted
|
|||||||||||||
Continuing
operations
|
$
|
(.01
|
)
|
$
|
(.01
|
)
|
|
¾
|
$
|
.01
|
|||
Discontinued
operations
|
¾
|
(.03
|
)
|
(.02
|
)
|
(.04
|
)
|
||||||
Disposal
of discontinued operations
|
¾
|
¾
|
.04
|
¾
|
|||||||||
Net
(loss) income per common share
|
$
|
(.01
|
)
|
$
|
(.04
|
)
|
$
|
.02
|
$
|
(.03
|
)
|
||
Number
of common shares used in computing net income (loss) per
share:
|
|||||||||||||
Basic
|
53,844
|
52,843
|
53,760
|
52,349
|
|||||||||
Diluted
|
53,844
|
52,843
|
54,149
|
53,673
|
September 30,
|
|||||||
(Amounts
in Thousands)
|
2008
|
2007
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
income (loss)
|
$
|
1,187
|
$
|
(1,814
|
)
|
||
Less:
Income (loss) on discontinued operations (Note 9)
|
1,091
|
(2,163
|
)
|
||||
Income
from continuing operations
|
96
|
349
|
|||||
Adjustments
to reconcile net income (loss) to cash provided by
operations:
|
|||||||
Depreciation
and amortization
|
3,817
|
2,970
|
|||||
Asset
impairment recovery
|
(507
|
)
|
―
|
||||
Provision
for bad debt and other reserves
|
33
|
76
|
|||||
Loss
on disposal of property and equipment
|
139
|
99
|
|||||
Issuance
of common stock for services
|
201
|
165
|
|||||
Share
based compensation
|
335
|
288
|
|||||
Changes
in operating assets and liabilities of continuing operations, net
of
effect from business acquisitions:
|
|||||||
Accounts
receivable
|
6,387
|
2,710
|
|||||
Unbilled
receivables
|
(742
|
)
|
465
|
||||
Prepaid
expenses, inventories, and other assets
|
2,367
|
2,260
|
|||||
Accounts
payable, accrued expenses, and unearned revenue
|
(7,515
|
)
|
(2,958
|
)
|
|||
Cash
provided by continuing operations
|
4,611
|
6,424
|
|||||
Gain
on disposal of discontinued operations (Note 9)
|
(2,309
|
)
|
―
|
||||
Cash
used in discontinued operations
|
(997
|
)
|
(98
|
)
|
|||
Cash
provided by operating activities
|
1,305
|
6,326
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchases
of property and equipment
|
(810
|
)
|
(2,295
|
)
|
|||
Proceeds
from sale of plant, property and equipment
|
31
|
69
|
|||||
Change
in finite risk sinking fund
|
(4,031
|
)
|
(1,443
|
)
|
|||
Cash
used for acquisition consideration, net of cash acquired
|
(14
|
)
|
(2,685
|
)
|
|||
Cash
used in investing activities of continuing operations
|
(4,824
|
)
|
(6,354
|
)
|
|||
Proceeds
from sale of discontinued operations (Note 9)
|
6,620
|
―
|
|||||
Cash
provided by (used in) discontinued operations
|
42
|
(202
|
)
|
||||
Net
cash provided by (used in) investing activities
|
1,838
|
(6,556
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Net
(repayments) borrowing of revolving credit
|
(3,483
|
)
|
5,202
|
||||
Principal
repayments of long term debt
|
(6,658
|
)
|
(7,319
|
)
|
|||
Proceeds
from issuance of long-term debt
|
7,000
|
―
|
|||||
Proceeds
from issuance of stock
|
184
|
399
|
|||||
Repayment
of stock subscription receivable
|
25
|
40
|
|||||
Cash
used in financing activities of continuing operations
|
(2,932
|
)
|
(1,678
|
)
|
|||
Principal
repayment of long-term debt for discontinued operations
|
(238
|
)
|
(216
|
)
|
|||
Cash
used in financing activities
|
(3,170
|
)
|
(1,894
|
)
|
|||
Decrease
in cash
|
(27
|
)
|
(2,124
|
)
|
|||
Cash
at beginning of period
|
118
|
2,221
|
|||||
Cash
at end of period
|
$
|
91
|
$
|
97
|
|||
Supplemental
disclosure:
|
|||||||
Interest
paid
|
$
|
915
|
$
|
697
|
|||
Income
taxes paid
|
29
|
311
|
|||||
Non-cash
investing and financing activities:
|
|||||||
Long-term
debt incurred for purchase of property and equipment
|
20
|
613
|
|||||
Sinking
fund financed
|
674
|
―
|
Common Stock
|
Additional
Paid-In Capital
|
Stock
Subscription
Receivable
|
Accumulated
Deficit
|
Total
Stockholders'
Equity
|
|||||||||||||||
(Amounts in thousands,
except for
share amounts)
|
Shares
|
Amount
|
|||||||||||||||||
Balance
at December 31, 2007
|
53,704,516
|
$
|
54
|
$
|
96,409
|
$
|
(25
|
)
|
$
|
(37,710
|
)
|
$
|
58,728
|
||||||
Net
income
|
¾
|
¾
|
¾
|
¾
|
1,187
|
1,187
|
|||||||||||||
Issuance
of Common Stock for services
|
93,005
|
¾
|
201
|
¾
|
¾
|
201
|
|||||||||||||
Issuance
of Common Stock upon exercise of Options
|
111,179
|
¾
|
184
|
¾
|
¾
|
184
|
|||||||||||||
Share
based compensation
|
¾
|
¾
|
335
|
¾
|
¾
|
335
|
|||||||||||||
Repayment
of stock subscription receivable
|
¾
|
¾
|
¾
|
25
|
¾
|
25
|
|||||||||||||
Balance
at September 30, 2008
|
53,908,700
|
$
|
54
|
$
|
97,129
|
$
|
¾
|
$
|
(36,523
|
)
|
$
|
60,660
|
1.
|
Basis
of Presentation
|
2.
|
Summary
of Significant Accounting
Policies
|
3.
|
Stock
Based Compensation
|
Employee Stock Options Granted
|
|||||||
September 30, 2008
|
September 30, 2007 (4)
|
||||||
Weighted-average
fair value per share
|
$
|
1.17
|
$
|
—
|
|||
Risk
-free interest rate (1)
|
3.28
|
%
|
—
|
||||
Expected
volatility of stock (2)
|
55.54
|
%
|
—
|
||||
Dividend
yield
|
None
|
—
|
|||||
Expected
option life (3)
|
5.1
years
|
—
|
Outside Director Stock Options Granted
|
|||||||
September 30, 2008
|
September 30, 2007
|
||||||
Weighted-average
fair value per share
|
$
|
1.79
|
$
|
2.30
|
|||
Risk
-free interest rate (1)
|
4.04
|
%
|
4.77
|
%
|
|||
Expected
volatility of stock (2)
|
66.53
|
%
|
67.60
|
%
|
|||
Dividend
yield
|
None
|
None
|
|||||
Expected
option life (3)
|
10.0
years
|
10.0
years
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
Stock Options
|
September 30,
|
September 30,
|
|||||||||||
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||||
Employee
Stock Options
|
$
|
106,000
|
$
|
52,000
|
$
|
247,000
|
$
|
190,000
|
|||||
Director
Stock Options
|
45,000
|
75,000
|
88,000
|
98,000
|
|||||||||
Total
|
$
|
151,000
|
$
|
127,000
|
$
|
335,000
|
$
|
288,000
|
4.
|
Capital
Stock And Employee Stock
Plan
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Options
outstanding Janury 1, 2008
|
2,590,026
|
$
|
1.91
|
||||||||||
Granted
|
1,002,000
|
2.29
|
|||||||||||
Exercised
|
(111,179
|
)
|
1.66
|
$
|
95,103
|
||||||||
Forfeited
|
(81,001
|
)
|
1.80
|
||||||||||
Options
outstanding End of Period (1)
|
3,399,846
|
2.03
|
4.6
|
$
|
572,397
|
||||||||
Options
Exercisable at September 30, 2008 (1)
|
2,138,013
|
$
|
1.94
|
4.0
|
$
|
511,727
|
|||||||
Options
Vested and expected to be vested at September 30, 2008
|
3,336,346
|
$
|
2.03
|
4.6
|
$
|
568,341
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Options
outstanding Janury 1, 2007
|
2,816,750
|
$
|
1.86
|
||||||||||
Granted
|
102,000
|
2.95
|
|||||||||||
Exercised
|
(226,084
|
)
|
1.80
|
$
|
238,671
|
||||||||
Forfeited
|
(34,999
|
)
|
1.83
|
||||||||||
Options
outstanding End of Period (1)
|
2,657,667
|
1.91
|
4.8
|
$
|
3,086,524
|
||||||||
Options
Exercisable at September 30, 2007 (1)
|
1,965,000
|
$
|
1.87
|
4.6
|
$
|
2,358,911
|
|||||||
Options
Vested and expected to be vested at September 30, 2007
|
2,613,127
|
$
|
1.91
|
4.8
|
$
|
3,032,631
|
5.
|
Earnings
(Loss) Per Share
|
|
Three Month Ended
|
|
Nine Months Ended
|
|
|||||||||
|
|
September 30,
|
|
September 30,
|
|
||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
|
||||||||
(Amounts in Thousands, Except for Per Share
Amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
||||
(Loss)
earnings per share from continuing operations
|
|||||||||||||
(Loss) income from continuing operations applicable
|
|||||||||||||
to
Common Stockholders
|
$
|
(276
|
)
|
$
|
(403
|
)
|
96
|
$
|
349
|
||||
Basic
(loss) income per share
|
$
|
(.01
|
)
|
$
|
(.01
|
)
|
¾
|
$
|
.01
|
||||
Diluted
(loss) income per share
|
$
|
(.01
|
)
|
$
|
(.01
|
)
|
¾
|
$
|
.01
|
||||
Loss
per share from discontinued operations
|
|||||||||||||
Loss
from discontinued operations
|
$
|
(159
|
)
|
$
|
(1,549
|
)
|
(1,218
|
)
|
$
|
(2,163
|
)
|
||
Basic
loss per share
|
$
|
¾
|
$
|
(.03
|
)
|
(.02
|
)
|
$
|
(.04
|
)
|
|||
Diluted
loss per share
|
$
|
¾
|
$
|
(.03
|
)
|
(.02
|
)
|
$
|
(.04
|
)
|
|||
Income
per share from disposal of discontinued operations
|
|||||||||||||
Gain
on disposal of discontinued operations
|
$
|
94
|
$
|
¾
|
2,309
|
$
|
¾
|
||||||
Basic
income per share
|
$
|
¾
|
$
|
¾
|
.04
|
$
|
¾
|
||||||
Diluted
income per share
|
$
|
¾
|
$
|
¾
|
.04
|
$
|
¾
|
||||||
Weighted
average common shares outstanding – basic
|
53,844
|
52,843
|
53,760
|
52,349
|
|||||||||
Potential
shares exercisable under stock option plans
|
¾
|
¾
|
389
|
771
|
|||||||||
Potential
shares upon exercise of Warrants
|
¾
|
¾
|
¾
|
553
|
|||||||||
Weighted
average shares outstanding – diluted
|
53,844
|
52,843
|
54,149
|
53,673
|
|||||||||
Potential
shares excluded from above weighted average share calculations due
to
their anti-dilutive effect include:
|
|||||||||||||
Upon
exercise of options
|
157
|
217
|
1,172
|
232
|
6.
|
Long
Term Debt
|
(Unaudited)
|
|||||||
September 30,
|
December 31,
|
||||||
(Amounts
in Thousands)
|
2008
|
2007
|
|||||
Revolving
Credit
facility dated December 22, 2000, borrowings based
upon eligible accounts receivable, subject to monthly borrowing base
calculation, variable interest paid monthly at prime rate plus ½% (5.50%
at September 30, 2008), balance due in July 2012.
|
$
|
3,367
|
$
|
6,851
|
|||
Term
Loan
dated December 22, 2000, payable in equal monthly
installments of principal of $83, balance due in July 2012, variable
interest paid monthly at prime rate plus 1% (6.00% at September 30,
2008).
|
6,916
|
4,500
|
|||||
Promissory
Note dated
June 25, 2001, payable in semiannual installments
on
June 30 and December 31 through December 31, 2008, variable interest
accrues at the applicable law rate determined under the IRS Code
Section
(7.0% on September 30, 2008) and is payable in one lump sum at the
end of
installment period.
|
235
|
635
|
|||||
Promissory Note
dated June 25, 2007, payable in monthly installments
of
principal of $160 starting July 2007 and $173 starting July 2008,
variable
interest paid monthly at prime rate plus 1.125% (6.125% at September
30,
2008)
|
1,598
|
3,039
|
|||||
Installment
Agreement in
the Agreement and Plan of Merger with Nuvotec
and PEcoS, dated April 27, 2007, payable in three equal yearly installment
of principal of $833 beginning June 2009. Interest accrues at annual
rate
of 8.25% on outstanding principal balance starting June 2007 and
payable
yearly starting June 2008
|
2,500
|
2,500
|
|||||
Installment
Agreement
dated June 25, 2001, payable in semiannual
installments on June 30 and December 31 through December 31, 2008,
variable interest accrues at the applicable law rate determined under
the
Internal Revenue Code Section (7.0% on September 30, 2008) and is
payable
in one lump sum at the end of installment period.
|
53
|
153
|
|||||
Various
capital lease and promissory note obligations, payable 2008 to 2013,
interest at rates ranging from 5.0% to 12.6%.
|
440
|
1,158
|
|||||
15,109
|
18,836
|
||||||
Less
current portion of long-term debt
|
3,875
|
15,352
|
|||||
Less
long-term debt related to assets held for sale
|
—
|
604
|
|||||
$
|
11,234
|
$
|
2,880
|
7.
|
Commitments
and Contingencies
|
8.
|
Changes
to Plan of Sale and Asset Impairment Charges
(Recovery)
|
9.
|
Discontinued
Operations and
Divestitures
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
(Amounts in Thousands)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Net
revenues
|
$
|
—
|
$
|
5,494
|
$
|
3,195
|
$
|
15,192
|
|||||
Interest
expense
|
$
|
(28
|
)
|
$
|
(49
|
)
|
$
|
(96
|
)
|
$
|
(147
|
)
|
|
Operating
(loss) income from discontinued operations (1)
|
$
|
(159
|
)
|
$
|
(1,549
|
)
|
$
|
(1,218
|
)
|
$
|
(2,163
|
)
|
|
Gain
on disposal of discontinued operations (2)
|
94
|
$
|
—
|
$
|
2,309
|
$
|
—
|
||||||
Income
(loss) from discontinued operations
|
$
|
(65
|
)
|
$
|
(1,549
|
)
|
$
|
1,091
|
$
|
(2,163
|
)
|
September 30,
|
December 31,
|
||||||
(Amounts in Thousands)
|
2008
|
2007
|
|||||
Account
receivable, net (1)
|
$
|
—
|
$
|
2,828
|
|||
Inventories
|
—
|
313
|
|||||
Other
assets
|
22
|
1,533
|
|||||
Property,
plant and equipment, net (2)
|
666
|
3,942
|
|||||
Total
assets held for sale
|
$
|
688
|
$
|
8,616
|
|||
Account
payable
|
$
|
—
|
$
|
1,707
|
|||
Deferred
revenue
|
—
|
7
|
|||||
Accrued
expenses and other liabilities
|
56
|
3,595
|
|||||
Note
payable
|
—
|
604
|
|||||
Environmental
liabilities
|
—
|
428
|
|||||
Total
liabilities held for sale
|
$
|
56
|
$
|
6,341
|
September 30,
|
|
December 31,
|
|
||||
(Amounts in Thousands)
|
|
2008
|
|
2007
|
|
||
Other
assets
|
$
|
155
|
$
|
10
|
|||
Total
assets of discontinued operations
|
$
|
155
|
$
|
10
|
|||
Account
payable
|
$
|
21
|
$
|
144
|
|||
Accrued
expenses and other liabilities
|
1,955
|
1,287
|
|||||
Deferred
revenue
|
—
|
—
|
|||||
Environmental
liabilities
|
1,201
|
1,265
|
|||||
Total
liabilities of discontinued operations
|
$
|
3,177
|
$
|
2,696
|
10.
|
Operating
Segments
|
·
|
from
which we may earn revenue and incur expenses;
|
·
|
whose
operating results are regularly reviewed by the segment president
to make
decisions about resources to be allocated to the segment and assess
its
performance; and
|
·
|
for
which discrete financial information is available.
|
Nuclear
|
Engineering
|
Industrial
|
Segments
Total
|
Corporate (2)
|
Consolidated Total
|
||||||||||||||
Revenue from
external customers
|
$
|
12,519
|
(3)
|
$
|
846
|
$
|
2,624
|
$
|
15,989
|
$
|
—
|
$
|
15,989
|
||||||
Intercompany
revenues
|
802
|
200
|
213
|
1,215
|
¾
|
1,215
|
|||||||||||||
Gross
profit
|
3,168
|
347
|
590
|
4,105
|
¾
|
4,105
|
|||||||||||||
Interest
income
|
¾
|
¾
|
¾
|
¾
|
52
|
52
|
|||||||||||||
Interest
expense
|
72
|
¾
|
4
|
76
|
155
|
231
|
|||||||||||||
Interest
expense-financing fees
|
2
|
¾
|
¾
|
2
|
12
|
14
|
|||||||||||||
Depreciation
and amortization
|
1,073
|
8
|
485
|
1,566
|
13
|
1,579
|
|||||||||||||
Segment
profit (loss)
|
782
|
170
|
309
|
1,261
|
(1,537
|
)
|
(276
|
)
|
|||||||||||
Segment
assets(1)
|
93,044
|
2,110
|
6,021
|
101,175
|
16,984
|
(4)
|
118,159
|
||||||||||||
Expenditures
for segment assets
|
207
|
3
|
3
|
213
|
5
|
218
|
|||||||||||||
Total
long-term debt
|
4,655
|
¾
|
171
|
4,826
|
10,283
|
15,109
|
Nuclear
|
|
Engineering
|
|
Industrial
|
|
Segments
Total
|
|
Corporate (2)
|
|
Consolidated Total
|
|||||||||
Revenue from external
customers
|
$
|
13,211
|
(3)
|
$
|
629
|
$
|
2,466
|
$
|
16,306
|
$
|
¾
|
$
|
16,306
|
||||||
Intercompany
revenues
|
1,036
|
302
|
199
|
$
|
1,537
|
¾
|
1,537
|
||||||||||||
Gross
profit
|
4,035
|
231
|
347
|
$
|
4,613
|
¾
|
4,613
|
||||||||||||
Interest
income
|
¾
|
¾
|
¾
|
¾
|
71
|
71
|
|||||||||||||
Interest
expense
|
240
|
¾
|
6
|
$
|
246
|
236
|
482
|
||||||||||||
Interest
expense-financing fees
|
¾
|
¾
|
¾
|
¾
|
48
|
48
|
|||||||||||||
Depreciation
and amortization
|
1,092
|
10
|
¾
|
$
|
1,102
|
16
|
1,118
|
||||||||||||
Segment
profit (loss)
|
1,319
|
70
|
(279
|
)
|
$
|
1,110
|
(1,513
|
)
|
(403
|
)
|
|||||||||
Segment
assets(1)
|
95,319
|
2,012
|
7,739
|
$
|
105,070
|
25,925
|
(4) |
130,995
|
|||||||||||
Expenditures
for segment assets
|
488
|
¾
|
72
|
$
|
560
|
4
|
564
|
||||||||||||
Total
long-term debt
|
7,665
|
8
|
231
|
$
|
7,904
|
9,952
|
17,856
|
Nuclear
|
|
Engineering
|
|
Industrial
|
|
Segments
Total
|
|
Corporate (2)
|
|
Consolidated Total
|
|||||||||
Revenue from
external customers
|
$
|
41,510
|
(3)
|
$
|
2,537
|
$
|
7,914
|
$
|
51,961
|
$
|
¾
|
$
|
51,961
|
||||||
Intercompany
revenues
|
2,086
|
466
|
457
|
3,009
|
¾
|
3,009
|
|||||||||||||
Gross
profit
|
11,279
|
931
|
2,215
|
14,425
|
¾
|
14,425
|
|||||||||||||
Interest
income
|
2
|
¾
|
¾
|
2
|
168
|
170
|
|||||||||||||
Interest
expense
|
460
|
¾
|
13
|
473
|
444
|
917
|
|||||||||||||
Interest
expense-financing fees
|
3
|
¾
|
¾
|
3
|
121
|
124
|
|||||||||||||
Depreciation
and amortization
|
3,276
|
22
|
485
|
3,783
|
33
|
3,816
|
|||||||||||||
Segment
profit (loss)
|
3,521
|
433
|
609
|
4,563
|
(4,467
|
)
|
96
|
||||||||||||
Segment
assets(1)
|
93,044
|
2,110
|
6,021
|
101,175
|
16,984
|
(4)
|
118,159
|
||||||||||||
Expenditures
for segment assets
|
752
|
12
|
52
|
816
|
14
|
830
|
|||||||||||||
Total
long-term debt
|
4,655
|
¾
|
171
|
4,826
|
10,283
|
15,109
|
Nuclear
|
|
Engineering
|
|
Industrial
|
|
Segments
Total
|
|
Corporate (2)
|
|
Consolidated Total
|
|||||||||
Revenue from
external customers
|
$
|
38,560
|
(3)
|
$
|
1,738
|
$
|
8,154
|
$
|
48,452
|
$
|
¾
|
$
|
48,452
|
||||||
Intercompany
revenues
|
2,328
|
845
|
588
|
3,761
|
¾
|
3,761
|
|||||||||||||
Gross
profit
|
13,105
|
565
|
1,218
|
14,888
|
¾
|
14,888
|
|||||||||||||
Interest
income
|
1
|
¾
|
¾
|
1
|
237
|
238
|
|||||||||||||
Interest
expense
|
462
|
1
|
15
|
478
|
486
|
964
|
|||||||||||||
Interest
expense-financing fees
|
¾
|
¾
|
¾
|
¾
|
143
|
143
|
|||||||||||||
Depreciation
and amortization
|
2,666
|
27
|
225
|
2,918
|
52
|
2,970
|
|||||||||||||
Segment
profit (loss)
|
5,860
|
162
|
(1,097
|
)
|
4,925
|
(4,576
|
)
|
349
|
|||||||||||
Segment
assets(1)
|
95,319
|
2,012
|
7,739
|
$
|
105,070
|
25,925
|
(4)
|
130,995
|
|||||||||||
Expenditures
for segment assets
|
2,337
|
13
|
366
|
2,716
|
17
|
2,733
|
|||||||||||||
Total
long-term debt
|
7,665
|
8
|
231
|
$
|
7,904
|
9,952
|
17,856
|
(1) |
Segment
assets have been adjusted for intercompany accounts to reflect actual
assets for each segment.
|
(2) |
Amounts
reflect the activity for corporate headquarters not included in the
segment information.
|
(3)
|
The
consolidated revenues within the Nuclear Segment include the LATA/Parallax
revenues for the three and nine months ended September 30, 2008 of
$1,443,000 (or 9.0%) and $4,287,000 (or 8.2%), respectively, of our
total
consolidated revenue, and $2,029,000 (or 12.4%) and $7,167,000 (or
14.8%)
for the corresponding period ended September 30, 2007, respectively.
In
addition, the consolidated revenues within the Nuclear Segment include
the
Fluor Hanford revenues of $2,787,000 (or 17.4%) and $6,662,000 (or
12.8%)
for the three and nine months period September 30, 2008, respectively,
of
our total consolidated revenue and $1,538,000 (or 9.4%) and $4,962,000
(or
10.2%) for the corresponding period ended September 30, 2007,
respectively.
|
(4)
|
Amount
includes assets from discontinued operations of $843,000 and $13,287,000
as of September 30, 2008 and 2007,
respectively.
|
11.
|
Income
Taxes
|
12.
|
Related
Party Transaction
|
·
|
ability
to continue and improve operations and achieve profitability on an
annualized basis;
|
·
|
ability
to retain or receive certain permits, licenses, or
patents;
|
·
|
ability
to comply with the Company's general working capital requirements;
|
·
|
ability
to continue to meet our fixed charge coverage ratio in
2008;
|
·
|
ability
to be able to continue to borrow under the Company's revolving line
of
credit;
|
·
|
we
plan to fund any repurchases under the common stock repurchase plan
through our internal cash flow and/or borrowing under our line of
credit;
|
·
|
ability
to generate sufficient cash flow from operations to fund all
operations;
|
·
|
ability
to remediate certain contaminated sites for projected
amounts;
|
·
|
despite
our aggressive compliance and auditing procedures for disposal of
wastes,
we could, in the future, be designated as a Partially Responsible
Party
(“PRP”) at a remedial action site, which could have a material adverse
effect;
|
·
|
ability
to fund budgeted capital expenditures of $3,100,000 during 2008 through
our operations or lease financing or a combination of both;
|
·
|
growth
of our Nuclear Segment;
|
·
|
we
believe that our cash flows from operations and our available liquidity
from our line of credit are sufficient to service the Company’s current
obligations;
|
·
|
we
expect backlog levels to continue to fluctuate in 2008, depending
on the
complexity of waste streams and the timing of receipts and processing
of
materials;
|
·
|
the
high levels of backlog material continue to position the segment
well for
increases in future processing material prospective;
|
·
|
we
anticipate disposal of the legacy waste at PFNWR by March 31,
2009;
|
·
|
our
contract with LATA/Parallax is expected to be completed in 2008 or
extended through some portion of 2009;
|
·
|
we
believe full operations under this subcontract will result in revenues
for
on-site and off-site work of approximately $200.0 million to $250.0
million the five year base period;
|
·
|
revenue
from these Fluor Hanford contracts should increase during fiscal
year 2009
unless DOE budget cuts impact their funding due to the contract objectives
of the engineering firm’s new contract;
|
·
|
our
inability to continue under existing contracts that we have with
the
federal government (directly or indirectly as a subcontractor) could
have
a material adverse effect on our operations and financial
condition;
|
·
|
as
with most contracts relating to the federal government, LATA/Parallax
can
terminate the contract with us at any time for convenience, which
could
have a material adverse effect on our operations;
|
·
|
although
we have seen smaller fluctuation in government receipts between quarters
in recent years, as government spending is contingent upon its annual
budget and allocation of funding, we cannot provide assurance that
we will
not have larger fluctuations in the quarters in the near
future;
|
·
|
we
do not expect any impact or reduction to PFO’s operating capability from
the sale of property at PFO;
|
·
|
we
anticipate spending $164,000 in the remaining three months of 2008
to
remediate the PFMI site, with the remainder over the next six
years;
|
·
|
under
our insurance contracts, we usually accept self-insured retentions,
which
we believe is appropriate for our specific business
risks;
|
·
|
we
believe we maintain insurance coverage adequate for our needs and
which is
similar to, or greater than the coverage maintained by other companies
of
our size in the industry;
|
·
|
in
the event of a failure of AIG, this could materially impact our operations
and our permits which we are required to have in order to operate
our
treatment, storage, and disposal facilities;
|
·
|
we
do not expect future inflationary changes to differ materially from
the
last three years;
|
·
|
except
for Michigan and Pittsburgh facilities, we have no current intention
to
close any of our facilities;
|
·
|
we
do not anticipate making any further working capital adjustments
on the
sale of PFD;
|
·
|
an
increase or decrease in demand for the existing disposal areas could
significantly affect the actual disposal costs either positively
or
negatively;
|
·
|
as
of the date of this report, we estimate receiving approximately $141,000
from the buyer in working capital adjustment from the sale of PFMD
by the
fourth quarter of 2008, subject to finalization;
|
·
|
we
anticipate paying the remaining expenses relating to the sale of
PFMD,
PFTS, and PFD by the fourth quarter of 2008;
|
·
|
irrespective
of the fact no amounts have been deposited into the escrow account,
the
parties have verbally agreed that the former shareholders of Nuvotec
(including Mr. Ferguson, a member of our Board of Director) will
pay to us
$152,250 of the agreed penalty in satisfaction of their obligation
under
the indemnity provision in connection with the settlement with the
EPA,
subject to the execution of a definitive agreement;
|
·
|
if
either buyer is unable to substitute its financial assurance for
ours
pursuant to the regulations, the appropriate regulatory authority
could
take action against the buyer, including, but not limited to action
to
limit or revoke its permit to operate the facility, and could take
action
against our bond including drawing down on our bond to remediate
or close
the facility in question, and would be limited to bringing legal
action
against the buyer for any losses we sustain or suffer as a result;
|
·
|
turmoil
in the financial markets is straining the availability of credit
which
could limit our customers’ ability to obtain adequate financing which
could decrease the demand for our services, thereby negatively impacting
our results of operations;
|
·
|
consumers’
concerns of the recession period extending into 2009 could also reduce
or
halt their spending which could negatively impact our results of
operations;
|
·
|
funding
for certain governmental remediation projects at DOE and DOD sites
could
be cut off or curtailed thereby negatively impacting our results
of
operations and liquidity;
|
·
|
we
anticipate that the material weakness at certain of our Industrial
Segment
will be remediated by December 31, 2008;
|
·
|
the
Company expects SFAS No. 141R will have an impact on its consolidated
financial statements when effective, but the nature and magnitude
of the
specific effects will depend upon the nature, terms and size of
acquisitions it consummates after the effective date;
|
·
|
the
Company does not expect SAB No. 110 to materially impact its operations
or
financial position;
|
·
|
the
Company does not expect the adoption of FSP FAS 142-3 to materially
impact
the Company’s financial position or results of operations;
|
·
|
the
Company does not expect EITF 07-5 to materially impact the Company’s
future consolidated financial statements;
|
·
|
the
Company does not expect SFAS 161 to materially impact the Company’s future
consolidated financial statements;
|
·
|
it
is not expected that the FSP will materially impact the Company’s current
disclosure process;
|
·
|
the
implementation of SFAS No. 162 will not have a material impact on
our
consolidated financial position and results of
operations;
|
·
|
it
is not expected that FSP FAS 133-1 and FIN 45-4 will materially impact
the
Company’s disclosure process; and
|
·
|
we
do not expect standards in SFAS 160 to materially impact the Company’s
future consolidated financial
statements.
|
·
|
general
economic conditions;
|
·
|
material
reduction in revenues;
|
·
|
ability
to meet PNC covenant requirements;
|
·
|
ability
to collect in a timely manner a material amount of receivables;
|
·
|
increased
competitive pressures;
|
·
|
ability
to maintain and obtain required permits and approvals to conduct
operations;
|
·
|
ability
to develop new and existing technologies in the conduct of
operations;
|
·
|
ability
to retain or renew certain required permits;
|
·
|
discovery
of additional contamination or expanded contamination at any of the
sites
or facilities leased or owned by us or our subsidiaries which would
result
in a material increase in remediation expenditures;
|
·
|
changes
in federal, state and local laws and regulations, especially environmental
laws and regulations, or in interpretation of such;
|
·
|
increases
in equipment, maintenance, operating or labor costs;
|
·
|
management
retention and development;
|
·
|
financial
valuation of intangible assets substantially different than
expected;
|
·
|
the
requirement to use internally generated funds for purposes not presently
anticipated;
|
·
|
ability
to continue to be profitable on an annualized basis;
|
·
|
ability
of the Company to maintain the listing of its Common Stock on the
NASDAQ;
|
·
|
terminations
of contracts with federal agencies or subcontracts involving federal
agencies, or reduction in amount of waste delivered to the Company
under
the contracts or subcontracts;
|
·
|
disposal
expense accrual could prove to be inadequate in the event the waste
requires re-treatment; and
|
·
|
DOE
obtaining the necessary funding to fund all work under its
contracts.
|
Three
Months Ending
September 30,
|
Nine Months Ending
September 30,
|
||||||||||||||||||||||||
Consolidated
(amounts in thousands)
|
2008
|
%
|
2007
|
%
|
2008
|
%
|
2007
|
%
|
|||||||||||||||||
Net
revenues
|
$
|
15,989
|
100.0
|
$
|
16,306
|
100.0
|
$
|
51,961
|
100.0
|
$
|
48,452
|
100.0
|
|||||||||||||
Cost
of goods sold
|
11,884
|
74.3
|
11,693
|
71.7
|
37,536
|
72.2
|
33,564
|
69.3
|
|||||||||||||||||
Gross
profit
|
4,105
|
25.7
|
4,613
|
28.3
|
14,425
|
27.8
|
14,888
|
30.7
|
|||||||||||||||||
Selling,
general and administrative
|
4,711
|
29.5
|
4,691
|
28.8
|
13,818
|
26.6
|
13,493
|
27.8
|
|||||||||||||||||
Asset
impairment recovery
|
(507
|
)
|
(3.2
|
)
|
―
|
―
|
(507
|
)
|
(1.0
|
)
|
―
|
―
|
|||||||||||||
(Gain)
loss on disposal of property and equipment
|
(2
|
)
|
―
|
(13
|
)
|
(.1
|
)
|
139
|
.3
|
99
|
.2
|
||||||||||||||
(Loss)
income from operations
|
$
|
(97
|
)
|
(.6
|
)
|
$
|
(65
|
)
|
(.4
|
)
|
$
|
975
|
1.9
|
$
|
1,296
|
2.7
|
|||||||||
Interest
income
|
52
|
.3
|
71
|
.4
|
170
|
.3
|
238
|
.5
|
|||||||||||||||||
Interest
expense
|
(231
|
)
|
(1.4
|
)
|
(482
|
)
|
(3.0
|
)
|
(917
|
)
|
(1.8
|
)
|
(964
|
)
|
(2.0
|
)
|
|||||||||
Interest
expense-financing fees
|
(14
|
)
|
(.1
|
)
|
(48
|
)
|
(.3
|
)
|
(124
|
)
|
(.2
|
)
|
(143
|
)
|
(.3
|
)
|
|||||||||
other
|
―
|
―
|
(40
|
)
|
(.2
|
)
|
(5
|
)
|
―
|
(55
|
)
|
(.1
|
)
|
||||||||||||
(Loss)
income from continuing operations before taxes
|
(290
|
)
|
(1.8
|
)
|
(564
|
)
|
(3.5
|
)
|
99
|
.2
|
372
|
.8
|
|||||||||||||
Income
tax (benefit) expense
|
(14
|
)
|
(.1
|
)
|
(161
|
)
|
(1.0
|
)
|
3
|
―
|
23
|
.1
|
|||||||||||||
(Loss)
income from continuing operations
|
(276
|
)
|
(1.7
|
)
|
(403
|
)
|
(2.5
|
)
|
96
|
.2
|
349
|
.7
|
|||||||||||||
Preferred
Stock dividends
|
―
|
―
|
―
|
―
|
―
|
―
|
―
|
―
|
(In
thousands)
|
2008 (1)
|
%
Revenue
|
2007 (2)
|
%
Revenue
|
Change
|
%
Change
|
|||||||||||||
Nuclear
|
|||||||||||||||||||
Government
waste
|
$
|
4,584
|
28.7
|
$
|
4,543
|
27.9
|
$
|
41
|
0.9
|
||||||||||
Hazardous/Non-hazardous
|
1,084
|
6.8
|
1,069
|
6.6
|
15
|
1.4
|
|||||||||||||
Other
nuclear waste
|
2,621
|
16.4
|
4,032
|
24.7
|
(1,411
|
)
|
(35.0
|
)
|
|||||||||||
LATA/Parallax
|
1,443
|
9.0
|
2,029
|
12.4
|
(586
|
)
|
(28.9
|
)
|
|||||||||||
Fluor
Hanford
|
2,787
|
17.4
|
1,538
|
9.4
|
1,249
|
81.2
|
|||||||||||||
Total
|
12,519
|
78.3
|
13,211
|
81.0
|
(692
|
)
|
(5.2
|
)
|
|||||||||||
Industrial
|
|||||||||||||||||||
Commercial
waste
|
1,249
|
7.8
|
1,314
|
8.1
|
(65
|
)
|
(4.9
|
)
|
|||||||||||
Government
services
|
166
|
1.0
|
383
|
2.3
|
(217
|
)
|
(56.7
|
)
|
|||||||||||
Oil
Sales
|
1,209
|
7.6
|
769
|
4.7
|
440
|
57.2
|
|||||||||||||
Total
|
2,624
|
16.4
|
2,466
|
15.1
|
158
|
6.4
|
|||||||||||||
Engineering
|
846
|
5.3
|
629
|
3.9
|
217
|
34.5
|
|||||||||||||
Total
|
$
|
15,989
|
100.0
|
$
|
16,306
|
100.0
|
$
|
(317
|
)
|
(1.9
|
)
|
(In
thousands)
|
2008
|
%
Revenue
|
2007
|
%
Revenue
|
Change
|
%
Change
|
|||||||||||||
Nuclear
|
|||||||||||||||||||
Government
waste
|
$
|
10,881
|
20.9
|
$
|
8,578
|
17.7
|
$
|
2,303
|
26.8
|
||||||||||
Hazardous/Non-hazardous
|
2,861
|
5.5
|
4,236
|
8.8
|
(1,375
|
)
|
(32.5
|
)
|
|||||||||||
Other
nuclear waste
|
8,395
|
16.2
|
10,042
|
20.7
|
(1,647
|
)
|
(16.4
|
)
|
|||||||||||
LATA/Parallax
|
4,287
|
8.2
|
7,167
|
14.8
|
(2,880
|
)
|
(40.2
|
)
|
|||||||||||
Fluor
Hanford
|
2,261
|
(1) |
4.4
|
3,826
|
(2)
|
7.9
|
(1,565
|
)
|
(40.9
|
)
|
|||||||||
Acquisition
- 6/07 (PFNWR)
|
12,825
|
(1) |
24.7
|
4,711
|
(2)
|
9.7
|
8,114
|
172.2
|
|||||||||||
Total
|
41,510
|
79.9
|
38,560
|
79.6
|
2,950
|
7.7
|
|||||||||||||
Industrial
|
|||||||||||||||||||
Commercial
waste
|
3,880
|
7.5
|
4,403
|
9.1
|
(523
|
)
|
(11.9
|
)
|
|||||||||||
Government
services
|
706
|
1.4
|
1,462
|
3.0
|
(756
|
)
|
(51.7
|
)
|
|||||||||||
Oil
Sales
|
3,328
|
6.4
|
2,289
|
4.7
|
1,039
|
45.4
|
|||||||||||||
Total
|
7,914
|
15.2
|
8,154
|
16.8
|
(240
|
)
|
(2.9
|
)
|
|||||||||||
Engineering
|
2,537
|
4.9
|
1,738
|
3.6
|
799
|
46.0
|
|||||||||||||
Total
|
$
|
51,961
|
100.0
|
$
|
48,452
|
100.0
|
$
|
3,509
|
7.2
|
%
|
%
|
|||||||||||||||
(In
thousands)
|
2008
|
Revenue
|
2007
|
Revenue
|
Change
|
|||||||||||
Nuclear
|
$
|
6,805
|
86.8
|
$
|
7,453
|
76.9
|
$
|
(648
|
)
|
|||||||
Acquisition
- 6/07 (PFNWR)
|
2,546
|
54.4
|
1,723
|
49.0
|
823
|
|||||||||||
Engineering
|
499
|
59.0
|
398
|
63.3
|
101
|
|||||||||||
Industrial
|
2,034
|
77.5
|
2,119
|
85.9
|
(85
|
)
|
||||||||||
Total
|
$
|
11,884
|
74.3
|
$
|
11,693
|
71.7
|
$
|
191
|
%
|
%
|
|||||||||||||||
(In
thousands)
|
2008
|
Revenue
|
2007
|
Revenue
|
Change
|
|||||||||||
Nuclear
|
$
|
22,103
|
77.1
|
$
|
22,899
|
67.7
|
$
|
(796
|
)
|
|||||||
Acquisition
- 6/07 (PFNWR)
|
8,128
|
63.4
|
2,556
|
54.3
|
5,572
|
|||||||||||
Engineering
|
1,606
|
63.3
|
1,173
|
67.5
|
433
|
|||||||||||
Industrial
|
5,699
|
72.0
|
6,936
|
85.1
|
(1,237
|
)
|
||||||||||
Total
|
$
|
37,536
|
72.2
|
$
|
33,564
|
69.3
|
$
|
3,972
|
(In
thousands)
|
2008
|
%
Revenue
|
2007
|
%
Revenue
|
Change
|
|||||||||||
Nuclear
|
$
|
1,031
|
13.2
|
$
|
2,245
|
23.1
|
$
|
(1,214
|
)
|
|||||||
Acquisition
- 06/07 (PFNWR)
|
2,137
|
45.6
|
1,790
|
51.0
|
347
|
|||||||||||
Engineering
|
347
|
41.0
|
231
|
36.7
|
116
|
|||||||||||
Industrial
|
590
|
22.5
|
347
|
14.1
|
243
|
|||||||||||
Total
|
$
|
4,105
|
25.7
|
$
|
4,613
|
28.3
|
$
|
(508
|
)
|
(In
thousands)
|
2008
|
%
Revenue
|
2007
|
%
Revenue
|
Change
|
|||||||||||
Nuclear
|
$
|
6,582
|
22.9
|
$
|
10,949
|
32.3
|
$
|
(4,367
|
)
|
|||||||
Acquisition
- 6/07 (PFNWR)
|
4,697
|
36.6
|
2,156
|
45.8
|
2,541
|
|||||||||||
Engineering
|
931
|
36.7
|
565
|
32.5
|
366
|
|||||||||||
Industrial
|
2,215
|
28.0
|
1,218
|
14.9
|
997
|
|||||||||||
Total
|
$
|
14,425
|
27.8
|
$
|
14,888
|
30.7
|
$
|
(463
|
)
|
%
|
%
|
|||||||||||||||
(In
thousands)
|
2008
|
Revenue
|
2007
|
Revenue
|
Change
|
|||||||||||
Administrative
|
$
|
1,423
|
¾
|
$
|
1,363
|
¾
|
$
|
60
|
||||||||
Nuclear
|
1,538
|
19.6
|
1,880
|
19.4
|
(342
|
)
|
||||||||||
Acquisition
6/07 (PFNWR)
|
772
|
16.5
|
657
|
18.7
|
115
|
|||||||||||
Engineering
|
177
|
20.9
|
161
|
25.6
|
16
|
|||||||||||
Industrial
|
801
|
30.5
|
630
|
25.5
|
171
|
|||||||||||
Total
|
$
|
4,711
|
29.5
|
$
|
4,691
|
28.8
|
$
|
20
|
%
|
%
|
|||||||||||||||
(In
thousands)
|
2008
|
Revenue
|
2007
|
Revenue
|
Change
|
|||||||||||
Administrative
|
$
|
4,077
|
¾
|
$
|
4,167
|
¾
|
$
|
(90
|
)
|
|||||||
Nuclear
|
4,988
|
17.4
|
5,876
|
17.4
|
(888
|
)
|
||||||||||
Acquisition
6/07 (PFNWR)
|
2,150
|
16.8
|
853
|
18.1
|
1,297
|
|||||||||||
Engineering
|
498
|
19.6
|
403
|
23.2
|
95
|
|||||||||||
Industrial
|
2,105
|
26.6
|
2,194
|
26.9
|
(89
|
)
|
||||||||||
Total
|
$
|
13,818
|
26.6
|
$
|
13,493
|
27.8
|
$
|
325
|
Three
Months
|
Nine
Months
|
||||||||||||||||||
(In
thousands)
|
2008
|
2007
|
Change
|
2008
|
2007
|
Change
|
|||||||||||||
PNC
interest
|
$
|
127
|
$
|
220
|
$
|
(93
|
)
|
$
|
348
|
$
|
467
|
$
|
(119
|
)
|
|||||
Other
|
104
|
262
|
(158
|
)
|
569
|
497
|
72
|
||||||||||||
Total
|
$
|
231
|
$
|
482
|
$
|
(251
|
)
|
$
|
917
|
$
|
964
|
$
|
(47
|
)
|
(In
thousands)
|
2008
|
|||
Cash
provided by continuing operations
|
$
|
4,611
|
||
Gain
on disposal of discontinued operations
|
(2,309
|
)
|
||
Cash
used in discontinued operations
|
(997
|
)
|
||
Cash
used in investing activities of continuing operations
|
(4,824
|
)
|
||
Proceeds
from sale of discontinued operations
|
6,620
|
|||
Cash
provided by investing activities of discontinued
operations
|
42
|
|||
Cash
used in financing activities of continuing operations
|
(2,932
|
)
|
||
Principal
repayment of long-term debt for discontinued operations
|
(238
|
)
|
||
Decrease
in cash
|
$
|
(27
|
)
|
Payments
due by period
|
||||||||||||||||
Contractual
Obligations
|
Total
|
2008
|
2009-
2011
|
2012
-
2013
|
After
2013
|
|||||||||||
Long-term
debt
|
$
|
15,109
|
$
|
1,126
|
$
|
6,906
|
$
|
7,077
|
$
|
¾
|
||||||
Interest
on long-term debt (1)
|
3,131
|
2,718
|
413
|
¾
|
—
|
|||||||||||
Interest
on variable rate debt (2)
|
1,962
|
176
|
1,555
|
231
|
¾
|
|||||||||||
Operating
leases
|
2,251
|
284
|
1,669
|
298
|
¾
|
|||||||||||
Finite
risk policy (3)
|
6,087
|
551
|
4,532
|
1,004
|
¾
|
|||||||||||
Pension
withdrawal liability (4)
|
1,129
|
—
|
574
|
483
|
72
|
|||||||||||
Environmental
contingencies (5)
|
2,082
|
277
|
1,103
|
431
|
271
|
|||||||||||
Purchase
obligations (6)
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Total
contractual obligations
|
$
|
31,751
|
$
|
5,132
|
$
|
16,752
|
$
|
9,524
|
$
|
343
|
(1) |
Our
IRS Note and PDC Note agreements call for interest to be paid at
the end
of the term, December 2008. In conjunction with our acquisition
of PFNWR,
which was completed on June 13, 2007, we agreed to pay shareholders
of
Nuvotec that qualified as accredited investors pursuant to Rule
501 of
Regulation D promulgated under the Securities Act of 1933, $2.5
million,
with principal payable in equal installment of $833,333 on June
30, 2009,
June 30, 2010, and June 30, 2011. Interest is accrued on outstanding
principal balance at 8.25% starting in June 2007 and is payable
on June
30, 2008, June 30, 2009, June 30, 2010, and June 30, 2011.
|
(2) |
We
have variable interest rates on our Term Loan and Revolving Credit
of 1%
and 1/2% over the prime rate of interest, respectively, and as
such we
have made certain assumptions in estimating future interest payments
on
this variable interest rate debt. We assume an increase in prime
rate of
1/2% in each of the years 2008 through July 2012. As result of
the
acquisition of our new Perma-Fix Northwest facility on June 13,
2007, we
have entered into a promissory note for a principal amount $4.0
million to
KeyBank National Association which has variable interest rate of
1.125%
over the prime rate, and as such, we also have assumed an increase
in
prime rate of 1/2% through July 2009, when the note is
due.
|
(3) |
Our
finite risk insurance policy provides financial assurance guarantees
to
the states in the event of unforeseen closure of our permitted
facilities.
See Liquidity and Capital Resources – Investing activities earlier in this
Management’s Discussion and Analysis for further discussion on our finite
risk policy.
|
(4) |
The
pension withdrawal liability is the estimated liability to us upon
termination of our union employees at our discontinued operation,
PFMI.
See Discontinued Operations earlier in this section for discussion
on our
discontinued operation.
|
(5) |
The
environmental contingencies and related assumptions are discussed
further
in the Environmental Contingencies section of this Management’s Discussion
and Analysis, and are based on estimated cash flow spending for
these
liabilities. The environmental contingencies noted are for Perma-Fix
of
Michigan, Inc., Perma-Fix of Memphis, Inc., Perma-Fix of South
Georgia,
Inc., and Perma-Fix of Dayton, Inc., which are the financial obligations
of the Company. The environmental liability, as it relates to the
remediation of the EPS site assumed by the Company as a result
of the
original acquisition of the PFD facility, was retained by the Company
upon
the sale of PFD in March 2008.
|
(6) |
We
are not a party to any significant long-term service or supply
contracts
with respect to our processes. We refrain from entering into any
long-term
purchase commitments in the ordinary course of
business.
|
Current
Accrual
|
Long-term
Accrual
|
Total
|
||||||||
PFD
|
$
|
237,000
|
$
|
414,000
|
$
|
651,000
|
||||
PFM
|
105,000
|
210,000
|
315,000
|
|||||||
PFSG
|
123,000
|
443,000
|
566,000
|
|||||||
PFMI
|
440,000
|
110,000
|
550,000
|
|||||||
Total
Liability
|
$
|
905,000
|
$
|
1,177,000
|
$
|
2,082,000
|
(a)
|
Evaluation
of disclosure controls, and procedures.
|
We
maintain disclosure controls and procedures designed to ensure
that
information required to be disclosed in our periodic reports filed
with
the SEC is recorded, processed, summarized and reported within
the time
periods specified in the SEC rules and forms and that such information
is
accumulated and communicated to our management. Based on their
most recent
evaluation, which was completed as of the end of the period covered
by
this Quarterly Report on Form 10-Q, we have evaluated, with the
participation of our Chief Executive Officer and Chief Financial
Officer,
the effectiveness of our disclosure controls and procedures (as
defined in
Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934,
as
amended) and believe that such are not effective, as a result of
the
identified material weakness in our internal control over financial
reporting as set forth below (as defined in Exchange Act Rules
13a-15(f)
and 15d-15(f)):
The
monitoring of pricing, invoicing, and the corresponding inventory
for
transportation and disposal process controls at certain facilities
within
the Company's Industrial Segment were ineffective and were not
being
applied consistently. This weakness could result in sales being
priced and
invoiced at amounts, which were not approved by the customer or
the
appropriate level of management, and inaccurate corresponding
transportation and disposal expense. Although this material weakness
did
not result in an adjustment to the quarterly or annual financial
statements, if not corrected, it has a reasonable possibility that
a
misstatement of the company's annual or interim financial statements
will
not be prevented or detected on a timely basis.
On
September 26, 2008, our Board of Directors approved retaining our
Industrial Segment facilities/operations at PFFL, PFSG, and PFO.
As
previously disclosed, we completed the sale of our PFMD, PFD, and
PFTS
facilities within our Industrial Segment in January 2008, March
2008, and
May 2008, respectively. We are in the process of developing a remediation
plan for the Audit Committee’s review and approval and anticipate that the
material weaknesses as set forth above will be remediated by December
31,
2008.
|
|
(b)
|
Changes
in internal control over financial reporting.
|
No
change in our internal control over financial reporting has occurred
in
the quarter and nine months ended September 30, 2008. However,
the
following factor could impact the result of the Company’s internal control
over the financial reporting for the fiscal year ended December
31,
2008:
The
Company acquired PFNWR facility (f/k/a PEcoS) in June 2007. For
the fiscal
year ending December 31, 2007, PFNWR was not subject to our internal
controls over financial reporting documentation and testing. For
the
fiscal year ending December 31, 2008, PFNWR is in the scope for
our
internal controls over financial reporting and we have implemented
plans
to document and test our internal controls over financial reporting
for
PFNWR prior to December 31, 2008.
|
PERMA-FIX
ENVIRONMENTAL SERVICES, INC.
PART
II – Other Information
|
|
Item
1.
|
Legal
Proceedings
|
There
are no additional material legal proceedings pending against us
and/or our
subsidiaries or material developments as to legal proceedings not
previously reported by us in Item 3 of our Form 10-K/A for the
year ended
December 31, 2007, which is incorporated here in by reference,
except, as
follows:
Perma-Fix
Northwest Richland, Inc. (“PFNWR” - f/k/a Pacific EcoSolutions, Inc –
“PEcoS”)
The
Environmental Protection Agency (“EPA”) has alleged that prior to the date
that we acquired the PEcoS facility in June 2007, the PEcoS facility
was
in violation of certain regulatory provisions relating to the facility’s
handling of certain hazardous waste and Polychlorinated Biphenyl
(“PCB”)
waste. During May 2008, the EPA advised the facility as to these
alleged
violations that a total penalty of $317,500 is appropriate to settle
the
alleged violations. The $317,500 in potential penalty has been
recorded as
a liability in the purchase acquisition of Nuvotec and its wholly
owned
subsidiary, PEcoS. On September 26, 2008, PFNWR entered into a
consent
agreement with the EPA to resolve the allegations and to pay a
penalty
amount of $304,500. Under the consent agreement, PFNWR neither
admits nor
denies the specific EPA allegations. Under the agreements relating
to our
acquisition of Nuvotec and PEcoS, we are required, if certain revenue
targets are met, to pay to the former shareholders of Nuvotec an
earn-out
amount not to exceed $4.4 million over a four year period ending
June 30,
2011, with the first $1 million of the earn-out amount to be placed
into
an escrow account to satisfy certain indemnification obligations
to us of
Nuvotec, PEcoS, and the former shareholders of Nuvotec (including
Mr.
Robert Ferguson, a current member of our Board of Directors) (See
“-
Related Party Transaction” in “Note to Consolidated Financial
Statements”). We may claim reimbursement of the penalty, plus out of
pocket expenses, paid or to be paid by us in connection with this
matter
from the escrow account. As of the date of this report, we have
not been
required to pay any earn-out to the former shareholders of Nuvotec
or
deposit any amount into the escrow account pursuant to the agreement.
Irrespective of the fact no amounts have been deposited into the
escrow
account, the parties have verbally agreed that the former shareholders
of
Nuvotec (including Mr. Ferguson, a member of our Board of Director)
will
pay to us $152,250 of the agreed penalty in satisfaction of their
obligation under the indemnity provision in connection with the
settlement
with the EPA, subject to the execution of a definitive agreement.
Under
the verbal agreement between the Company and the former shareholders
of
Nuvotec, the $152,250 penalty to be paid by the former shareholders
of
Nuvotec will be recouped by the Nuvotec shareholder by adding to
the $4.4
million in earn-out payment, if earned, pursuant to the terms of
the
earn-out, $152,250 at the end thereof.
Notice
of Violation - Perma-Fix Treatment Services, Inc.
(“PFTS”)
In
July
2008, PFTS received a notice of violation (“NOV”) from the Oklahoma
Department of Environmental Quality (“ODEQ”) alleging
that
eight loads of waste materials received by PFTS between January
2007 and
July 2007 were improperly
analyzed to assure that the treatment process rendered the waste
non-hazardous before disposition
in
PFTS’ non-hazardous injection well. The ODEQ alleges
the handling of these waste materials violated
regulations regarding hazardous waste. The ODEQ did not assert any
penalties against PFTS in the NOV and requested PFTS to respond
within 30
days from receipt of the letter. PFTS responded on August
22, 2008 and is currently in settlement discussions with the
ODEQ.
PFTS sold most
all of its assets to a non-affiliated third party on May 30,
2008.
|
Item
1A.
|
Risk
Factors
|
There
has been no material change from the risk factors previously disclosed
in
our Form 10-K/A for the year ended December 31, 2007 exception
the
addition of the risk factor below:
The
failure of American International Group, Inc. (“AIG”) can materially
impact our operations.
During
the third quarter of 2008, it was publicly reported that American
International Group, Inc. (“AIG”), experienced significant financial
difficulties. AIG provides our finite risk insurance policy which
provides
financial assurance to the applicable states for our permitted
facilities
in the event of unforeseen closure. Prior to obtaining or renewing
operating permits, we are required to provide financial assurance
that
guarantees to the state that in the event of closure, our permitted
facilities will be closed in accordance with the regulations. The
policy
provides a maximum of $35 million of financial assurance coverage
of which
the coverage amount totals $32,552,000 at September 30, 2008. AIG
also
provides other operating insurance policies for the Company’s. In the
event of a failure of AIG, this could materially impact our operations
and
our permits which we are required to have in order to operate our
treatment, storage, and disposal facilities. However, we believe
this
potential risk is reduced by the recent financial assistance provided
to
AIG by the federal government.
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
At
the Company’s Annual Meeting of Stockholders on August 5, 2008, the
following matters were voted on and approved by the
stockholders:
1.
Election
of eight directors to serve until the next annual meeting of stockholders
or until their respective successors are duly elected and
qualified.
2.
Approval
to the First Amendment to the Company’s 2003 Outside Directors Stock Plan.
3.
Ratification
of the appointment of BDO Seidman, LLP as the registered auditors
of the
Company for fiscal year 2008.
|
Directors
were elected and votes cast for and against or withheld authority
for each
director are as follows:
|
Directors
|
For
|
Against or Withhold
Authority
|
|||||
Dr.
Louis F. Centofanti
|
35,801,552
|
9,077,895
|
|||||
Jon
Colin
|
35,802,102
|
9,077,345
|
|||||
Robert
L. Ferguson
|
35,802,102
|
9,077,345
|
|||||
Jack
Lahav
|
35,801,652
|
9,077,795
|
|||||
Joe
R. Reeder
|
35,791,148
|
9,088,299
|
|||||
Larry
Shelton
|
35,798,952
|
9,080,495
|
|||||
Dr.
Charles E. Young
|
35,798,502
|
9,080,945
|
|||||
Mark
A. Zwecker
|
35,801,733
|
9,077,714
|
Also,
at the Annual Meeting the Stockholders approved the First Amendment
to the
Company’s Outside Directors Stock Plan and ratified the appointment of
BDO
Seidman, LLP as the registered auditors of the Company for fiscal
year
2008 The votes for, against, abstentions and broker non-votes are
as
follows:
|
For
|
Against
or
Withhold
Authority
|
Abstentions
And
Broker
Non-votes
|
||||||||
Approval
of the First Amendment to the Company’s 2003 Outside Directors Stock
Plan
|
24,551,809
|
2,341,654
|
17,985,984
|
|||||||
Ratification
of the Appointment of BDO Seidman, LLP as the Registered Auditors
|
44,625,301
|
142,875
|
11,271
|
Item
5.
|
Other
Information
As
discussed under “Legal Proceedings” of this Part II, our newly acquired
subsidiary, PEcoS, which we renamed as Perma-Fix Northwest Richland,
Inc.,
settled with the EPA the allegations made by the EPA that prior
to the
time our acquisition of PEcoS, it had violated certain regulatory
requirements regarding its handling of hazardous and PCB waste,
and in
connection with the settlement, PEcoS agreed to pay the EPA a penalty
of
$304,500 pursuant to a consent agreement with the EPA. Under our
agreement
relating to the acquisition of Perma-Fix Northwest, Inc. (f/k/a
Nuvotec
USA,
Inc.) and its wholly owned subsidiary, PEcoS, we agreed, if certain
revenue targets are met, to pay the former shareholders of Nuvotec
(which
includes one of our directors, Robert Ferguson), an earn-out amount
not to
exceed $4.4 million over a four year period ending June 30, 2011,
with the
first $1 million of the earn-out amount to be placed into an escrow
account to satisfy certain indemnification obligations to us of
Nuvotec,
PEcoS, and the former shareholders of Nuvotec (including Mr. Ferguson).
We
may claim reimbursement of the penalty, plus out of pocket expenses,
paid
or to be paid by us in connection with the settlement with the
EPA from
the escrow account. As of the date of this report, we have not
been
required to pay any earn-out to the former shareholders of Nuvotec
or
deposit any amount into the escrow account pursuant to the agreement.
Irrespective of the fact no amounts have been deposited into the
escrow
account, the parties have verbally agreed that the former shareholders
of
Nuvotec (including Mr. Ferguson, a member of our Board of Director)
will
pay to us $152,250 of the agreed penalty in satisfaction of their
obligation under the indemnity provision in connection with the
settlement
with the EPA, subject to the execution of a definitive agreement.
Under
the verbal agreement between the Company and the former shareholders
of
Nuvotec, the $152,250 penalty to be paid by the former shareholders
of
Nuvotec will be recouped by the Nuvotec shareholder by adding to
the $4.4
million in earn-out payment, if earned, pursuant to the terms of
the
earn-out, $152,250 at the end
thereof.
|
Item
6.
|
Exhibits
|
(a)
|
Exhibits
|
|
4.1
|
Amendment
No. 11 to Revolving Credit Term Loan and Agreement, dated as of
July 25,
2008, between the Company and PNC, as incorporated by reference
from
Exhibit 4.1 to the Company’s Form 10-Q filed on August 11, 2008.
|
|
4.2
|
Amendment
No. 12 to Revolving Credit Term Loan and Agreement, dated as of
August 4,
2008, between the Company and PNC, as incorporated by reference
from
Exhibit 99.1 to the Company’s Form 8-K filed on August 8, 2008.
|
|
10.1
|
Consent
Agreement dated September 26, 2008 between Perma-Fix Northwest
Richland,
Inc. and the U.S. Environmental Protection Agency.
|
|
31.1
|
Certification
by Dr. Louis F. Centofanti, Chief Executive Officer of the Company
pursuant to Rule 13a-14(a) or 15d-14(a).
|
|
31.2
|
Certification
by Ben Naccarato, Interim Chief Financial Officer of the Company
pursuant
to Rule 13a-14(a) or 15d-14(a).
|
|
32.1
|
Certification
by Dr. Louis F. Centofanti, Chief Executive Officer of the Company
furnished pursuant to 18 U.S.C. Section 1350.
|
|
32.2
|
Certification
by Ben Naccarato, Interim Chief Financial Officer of the Company
furnished
pursuant to 18 U.S.C. Section 1350.
|
PERMA-FIX
ENVIRONMENTAL SERVICES
|
||
Date:
November 7, 2008
|
By:
|
/s/
Dr. Louis F. Centofanti
|
Dr.
Louis F. Centofanti
|
||
Chairman
of the Board
|
||
Chief
Executive Officer
|
||
Date:
November 7, 2008
|
By:
|
/s/
Ben Naccarato
|
Ben
Naccarato
|
||
Interim
Chief Financial Officer
|