10-Q 1 j9190501e10-q.txt PDG ENVIRONMENTAL, INC. 10-Q/QUARTER END 10-31-01 (conformed) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2001 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 0-13667 PDG ENVIRONMENTAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 22-2677298 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 1386 BEULAH DRIVE, BUILDING 801 PITTSBURGH, PENNSYLVANIA 15235 (Address of principal executive offices) (Zip Code) 412-243-3200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 No X --- As of December 10, 2001, there were 9,342,330 shares of the registrant's common stock outstanding. PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES INDEX
PART I. FINANCIAL INFORMATION PAGE Item 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements (a) Condensed Consolidated Balance Sheets as of October 31, 2001 (unaudited) and 3 January 31, 2001 (b) Consolidated Statements of Operations for the Three Months Ended October 31, 2001 and 2000 (unaudited) 4 (c) Consolidated Statements of Operations for the Nine Months Ended October 31, 2001 and 2000 (unaudited) 5 (d) Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2001 and 2000 (unaudited) 6 (e) Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 3. Defaults Upon Senior Securities 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
2 PART I. FINANCIAL INFORMATION PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 31, JANUARY 31, 2001 2001* ------------ ------------ (UNAUDITED) ASSETS CURRENT ASSETS Cash and short-term investments $ 9,000 $ 214,000 Accounts receivable - net 10,809,000 7,278,000 Costs and estimated earnings in excess of billings on uncompleted contracts 2,715,000 2,546,000 Inventory 540,000 468,000 Other current assets 454,000 301,000 ------------ ------------ TOTAL CURRENT ASSETS 14,527,000 10,807,000 PROPERTY, PLANT AND EQUIPMENT 7,876,000 6,670,000 Less: accumulated depreciation (5,737,000) (5,140,000) ------------ ------------ 2,139,000 1,530,000 OTHER ASSETS 2,573,000 1,072,000 ------------ ------------ TOTAL ASSETS $ 19,239,000 $ 13,409,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,152,000 $ 1,923,000 Billings in excess of costs and estimated earnings on uncompleted contracts 1,690,000 910,000 Current portion of long-term debt 596,000 177,000 Accrued liabilities 1,975,000 1,913,000 ------------ ------------ TOTAL CURRENT LIABILITIES 8,413,000 4,923,000 OTHER LONG-TERM LIABILITIES 1,080,000 210,000 LONG-TERM DEBT 5,388,000 2,942,000 STOCKHOLDERS' EQUITY Cumulative convertible 2% preferred stock 14,000 14,000 Common stock 188,000 177,000 Additional paid-in capital 8,100,000 7,767,000 (Deficit) retained earnings (3,906,000) (2,586,000) Less treasury stock (38,000) (38,000) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 4,358,000 5,334,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,239,000 $ 13,409,000 ============ ============
*Derived from audited financial statements. See accompanying notes to consolidated financial statements. 3 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED OCTOBER 31, ------------------------------ 2001 2000 ------------ ------------ CONTRACT REVENUE $ 12,184,000 $ 9,230,000 CONTRACT COSTS 10,546,000 8,162,000 ------------ ------------ Gross margin 1,638,000 1,068,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,442,000 1,202,000 ------------ ------------ Income (loss) from operations 196,000 (134,000) OTHER INCOME (EXPENSE): Interest expense (119,000) (75,000) Interest income 1,000 4,000 Write off of deferred acquisition and financing costs - (205,000) Other income 12,000 - ------------ ------------ (106,000) (276,000) ------------ ------------ Income (loss) before income taxes 90,000 (410,000) INCOME TAX PROVISION - - ------------ ------------ NET INCOME (LOSS) $ 90,000 $ (410,000) ============ ============ PER SHARE OF COMMON STOCK: BASIC $ 0.01 $ (0.05) ============ ============ DILUTIVE $ 0.01 $ (0.05) ============ ============ AVERAGE COMMON SHARES OUTSTANDING 9,342,000 8,783,000 AVERAGE DILUTIVE COMMON SHARE EQUILIVANTS OUTSTANDING 330,000 - ------------ ------------ AVERAGE COMMON SHARES AND DILUTIVE COMMON EQUILIVANTS OUTSTANDING FOR EARNINGS PER SHARE CALCULATION 9,672,000 8,783,000 ============ ============
See accompanying notes to consolidated financial statements. 4 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED OCTOBER 31, ------------------------------ 2001 2000 ------------ ------------ CONTRACT REVENUE $ 28,725,000 $ 26,067,000 CONTRACT COSTS 25,755,000 22,657,000 ------------ ------------ Gross margin 2,970,000 3,410,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,911,000 3,165,000 ------------ ------------ Income (loss) from operations (941,000) 245,000 OTHER INCOME (EXPENSE): Interest expense (305,000) (175,000) Interest income 2,000 14,000 Write off of deferred acquisition and financing costs - (205,000) Other income 20,000 27,000 ------------ ------------ (283,000) (339,000) ------------ ------------ Income (loss) before income taxes (1,224,000) (94,000) INCOME TAX PROVISION - (24,000) ------------ ------------ NET INCOME (LOSS) $ (1,224,000) $ (118,000) ============ ============ PER SHARE OF COMMON STOCK: BASIC $ (0.13) $ (0.01) ============ ============ DILUTIVE $ (0.13) $ (0.01) ============ ============ AVERAGE COMMON SHARES OUTSTANDING 9,181,000 8,713,000 AVERAGE DILUTIVE COMMON SHARE EQUILIVANTS OUTSTANDING - - ------------ ------------ AVERAGE COMMON SHARES AND DILUTIVE COMMON EQUILIVANTS OUTSTANDING FOR EARNINGS PER SHARE CALCULATION 9,181,000 8,713,000 ============ ============
See accompanying notes to consolidated financial statements. 5 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED OCTOBER 31, ---------------------------- 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,224,000) $ (118,000) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH: Depreciation and amortization 1,146,000 914,000 Write off of deferred acquisition and financing costs - 205,000 Write off of bad debt - 35,000 CHANGES IN ASSETS AND LIABILITIES OTHER THAN CASH: Accounts receivable (3,531,000) (509,000) Costs and estimated earnings in excess of billings on uncompleted contracts (169,000) (2,066,000) Inventory (72,000) (125,000) Other current assets 119,000 288,000 Accounts payable 1,957,000 (280,000) Billings in excess of costs and estimated earnings on uncompleted contracts 780,000 (8,000) Accrued liabilities (153,000) 353,000 Other - (107,000) ----------- ----------- (1,069,000) (2,454,000) ----------- ----------- NET CASH USED BY OPERATING ACTIVITIES (1,147,000) (1,418,000) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (695,000) (411,000) Acquisition of businesses (891,000) (573,000) Increase in other assets (31,000) - ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (1,617,000) (984,000) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt 2,834,000 4,263,000 Principal payments on debt (275,000) (2,015,000) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 2,559,000 2,248,000 ----------- ----------- Net Decrease in Cash and Short-Term Investments (205,000) (154,000) Cash and Short-Term Investments, Beginning of Period 214,000 282,000 ----------- ----------- CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 9,000 $ 128,000 =========== ===========
See accompanying notes to consolidated financial statements. 6 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The consolidated financial statements include PDG Environmental, Inc.'s (the "Corporation") and its wholly-owned subsidiaries. The accompanying consolidated financial statements of the Corporation are unaudited. However, in the opinion of management, they include all adjustments necessary for a fair presentation of financial position, results of operations and cash flows. All adjustments made during the three and nine months ended October 31, 2001 were of a normal, recurring nature. The amounts presented for the three and nine months ended October 31, 2001 are not necessarily indicative of results of operations for a full year. Additional information is contained in the Annual Report on Form 10-K of the Corporation for the year ended January 31, 2001 dated March 30, 2001 and the Quarterly Reports on Form 10-Q for the Corporation for the quarter ended April 30, 2001 dated June 14, 2001 and for the quarter ended July 31, 2001 dated September 14, 2001, and should be read in conjunction with this quarterly report. NOTE 2 - FEDERAL INCOME TAXES No federal income tax has been provided for the nine months ended October 31, 2001 due to the loss in the current period and the existence of unused net operating loss carryforwards. No state income taxes were provided due to the loss in the current period. Income taxes paid by the Corporation for the nine months ended October 31, 2001 and 2000 totaled approximately $78,000 and $69,000, respectively. NOTE 3 - DEBT On August 3, 2000, the Corporation closed on a new $4.7 million credit facility with Sky Bank, an Ohio banking association, consisting of a 3-year $3 million revolving line of credit, a 5-year $1 million equipment note, a 15-year $0.4 million mortgage and a 5-year $0.3 million commitment for future equipment financing. The new financing repaid all of the Company's existing debt. The line of credit, equipment note and commitment for future equipment financing are at an interest rate of prime plus 1% with financial covenant incentives which may reduce the interest rate to either prime plus 1/2% or prime. The mortgage is at an interest rate of 9.15% fixed for three years and is then adjusted to 2.75% above the 3-year Treasury Index every three years. The Chief Executive Officer of the Corporation provided a limited personal guarantee for the credit facility. In November 2000, Sky Bank approved a $1.5 million increase in the line of credit to $4.5 million to fund the proposed acquisition of Tri-State Restorations, an asbestos abatement and demolition company in California. (See Note 6 for further discussion of the acquisition). Additionally, Sky Bank increased the commitment for future equipment financing by $0.3 million to $0.6 million. In April 2001 and June 2001, the Company borrowed $273,000 and $283,000, respectively, against the commitment for future equipment financing to fund the fixed asset portion of the Tri-State Restoration acquisition and to fund other equipment purchases. In August 2001 the remaining $44,000 was borrowed against the commitment for future equipment financing to fund equipment purchases. On October 31, 2001, the balance on the line of credit was $3,800,000 with an unused availability of $700,000. The Corporation paid interest costs totaling approximately $293,000 and $181,000 during the nine months ended October 31, 2001 and 2000, respectively. 7 NOTE 4 - PREFERRED STOCK Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock were approximately $10,000 at October 31, 2001. At October 31, 2001, there were 6,000 shares of Series A Preferred Stock outstanding. Each share of Series A Preferred Stock is convertible into four shares of the Corporation's common stock at the option of the preferred stockholder. The conversion rate on the Series A Preferred Stock is also subject to adjustment as a result of certain changes in the Corporation's capital structure or distributions to common stockholders (except for cash dividends permissible under law). At the Corporation's Annual Meeting of Stockholders held on July 23, 1993, the following matters were approved by a majority of the Corporation's preferred and common stockholders which affected the Corporation's Series A Preferred stock and common stock: a reduction in the Series A Preferred Stock dividend rate from 9% to 2% and the cancellation of the accrued but unpaid dividends and the special voting rights associated with such preferred stock in the event of a certain accumulation of accrued but unpaid dividends thereon; and a recapitalization of the Corporation in order to effect a one for two reverse stock split (the "Recapitalization"). In exchange for the forfeiture of the accrued but undeclared and unpaid dividends, the holders of the Series A Preferred Stock were granted a common stock right which, if and when declared by the Board of Directors, grant to the holders of such common stock rights shares of the common stock of the Corporation. At the May 23, 1995, March 6, 2000 and March 21, 2001 Board of Directors meeting, the issuance of one third of the shares (280,071, 259,696 and 259,696 common shares, respectively) covered by the aforementioned right was approved. The Recapitalization was contingent upon the Corporation's listing on the American Stock Exchange. The Corporation made a decision not to pursue such a listing; therefore, the Recapitalization was indefinitely postponed. NOTE 5 - NET EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share:
FOR THE NINE MONTHS ENDED OCTOBER 31, ---------------------------- 2001 2000 ----------- ----------- NUMERATOR: Net Income (loss) $(1,224,000) $ (118,000) Preferred stock dividends (1,000) (1,000) ----------- ----------- Numerator for basic earnings per share--income available to common stockholders (1,225,000) (119,000) Effect of dilutive securities: Preferred stock dividends 1,000 1,000 ----------- ----------- Numerator for diluted earnings per share--income (loss) available to common stock after assumed conversions $(1,224,000) $ (118,000) =========== =========== DENOMINATOR: Denominator for basic earnings per share--weighted average shares 9,181,000 8,713,000 Effect of dilutive securities - - ----------- ----------- Denominator for diluted earnings per share--adjusted weighted-average shares and assumed conversions 9,181,000 8,713,000 =========== =========== BASIC EARNINGS (LOSS) PER SHARE $ (0.13) $ (0.01) =========== =========== DILUTED EARNINGS (LOSS) PER SHARE $ (0.13) $ (0.01) =========== ===========
8 The following table sets forth the computation of basic and diluted earnings (loss) per share:
FOR THE THREE MONTHS ENDED OCTOBER 31, ---------------------------- 2001 2000 ----------- ----------- NUMERATOR: Net Income (loss) $ 90,000 $ (410,000) Preferred stock dividends - - ----------- ----------- Numerator for basic earnings per share--income available to common stockholders 90,000 (410,000) Effect of dilutive securities: Preferred stock dividends - - ----------- ----------- Numerator for diluted earnings per share--income (loss) available to common stock after assumed conversions $ 90,000 $ (410,000) =========== =========== DENOMINATOR: Denominator for basic earnings per share--weighted average shares 9,342,000 8,783,000 Effect of dilutive securities: Warrants 28,000 - Employee stock options 302,000 - ----------- ----------- 330,000 - ----------- ----------- Denominator for diluted earnings per share--adjusted weighted-average shares and assumed conversions 9,672,000 8,783,000 =========== =========== BASIC EARNINGS PER SHARE $ 0.01 $ (0.05) =========== =========== DILUTED EARNINGS PER SHARE $ 0.01 $ (0.05) =========== ===========
NOTE 6 - ACQUISITION Effective May 31, 2001, PDG Environmental, Inc. and subsidiaries (the "Corporation") entered into an agreement (the "Agreement") with Tri-State Restorations, Inc. ("Tri-State") and Timothy Vitta and Thomas Stevens (collectively "the Principals") for the purchase of selected assets and assumption of contracts of Tri-State. Tri-State owned and operated a business which conducted environmental remediation, demolition and asbestos abatement. As consideration for the purchase, the Corporation paid Tri-State $541,000 in cash, $150,000 in the form of a subordinated note at 6 1/2% interest due May 31, 2002 and 300,000 shares of the Corporation's common stock and entered into an employment agreement with the Principals that provides for additional compensation in addition to an annual salary. Tri-State's revenues for the years ended December 31, 2000 and 1999 were $11,665,000 and $9,588,000, respectively. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED OCTOBER 31, 2001 AND 2000 During the three months ended October 31, 2001 ("Fiscal 2002"), the Corporation's contract revenues increased to $12.2 million compared to $9.2 million in the three months ended October 31, 2000 ("Fiscal 2001") due to $3.3 million of revenues from the Tri-State operation acquired effective June 1, 2001. The Corporation's gross margin increased to $1.6 million in the third quarter of fiscal 2002 compared to $1.1 million in the third quarter of fiscal 2001. The increase in gross margin is due to a number of larger projects in the current year compared to a large volume of work at one office being performed at a relatively low margin level and negative contract adjustments in the prior year fiscal quarter. Selling, general and administrative expenses increased to $1.4 million in the current fiscal quarter as compared to $1.2 million in the three months ended October 31, 2000. This increase was due to the addition of three branch offices since the prior year fiscal quarters including the previously discussed Tri-State operation acquired effective June 1, 2001. The Corporation reported income from operations of $0.2 million for the three months ended October 31, 2001 compared to loss from operations of $0.13 million for the three months ended October 31, 2000 as a direct result of the factors discussed above. Interest expense increased to $0.12 million in the current quarter as compared to $0.075 million in the same quarter of a year ago due to a higher level of borrowings to support increased revenues and borrowings required to finance the acquisition of Tri-State. During the prior year quarter, the Company terminated negotiations with Medalclad Corporation for the acquisition of its Metalclad Insulation subsidiary business which resulted in the write off of $163,000 of deferred acquisition costs. Additionally, the Company wrote off $42,000 of deferred financing costs relating to debt that was refinanced in August 2000. During the quarters ended October 31, 2001 and 2000, the Corporation made no provision for federal income taxes due to the loss in the current fiscal year and due to the utilization of net operating loss carryforwards for financial reporting purposes, respectively. No state income tax provision was made in the current quarter due to the year to date loss while no state income tax provision was made in the prior fiscal quarter due to the loss. NINE MONTHS ENDED OCTOBER 31, 2001 AND 2000 During the nine months ended October 31, 2001, the Corporation's contract revenues increased to $28.7 million compared to $26.1 million in the nine months ended October 31, 2000. The current nine month period included $5.0 million of revenues from the Tri-State operation acquired effective June 1, 2001. The Corporation's gross margin decreased to $3.0 million in the nine months of fiscal 2002 compared to $3.4 million in the nine months of fiscal 2001. The decrease in gross margin is due to labor shortages and operational problems at three of the Corporation's locations during the second and third quarters of Fiscal 2002. Selling, general and administrative expenses increased to $3.9 million in the current fiscal year as compared to $3.2 million in nine months ended October 31, 2000. This increase was due to the addition of five branch offices since the beginning of Fiscal 2001. The Corporation reported a loss from operations of $0.94 million for the nine months ended October 31, 2001 compared to income from operations of $0.25 million for the nine months ended October 31, 2000 as a direct result of the factors discussed above. 10 Interest expense increased to $0.31 million in the current year as compared to $0.18 million in the same period of a year ago due to a higher level of borrowings to support increased revenues and borrowings required to finance the acquisition of Tri-State. During the prior year, the Company terminated negotiations with Medalclad Corporation for the acquisition of its Metalclad Insulation subsidiary business which resulted in the write off of $163,000 of deferred acquisition costs. Additionally, the Company wrote off $42,000 of deferred financing costs relating to debt that was refinanced in August 2000. During the nine months ended October 31, 2001 and 2000, the Corporation made no provision for federal income taxes due to the loss in the period and due to the utilization of net operating loss carryforwards for financial reporting purposes, respectively. No state income tax provision was made in the current period due to the loss while a state income tax provision of $24,000 was made in the prior fiscal period. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended October 31, 2001, the Corporation's cash decreased by $0.21 million to $0.01 million. The decrease in cash and short term investments during the half of fiscal 2002 is attributable to cash outflows from operations of $1.15 million, cash outflows for investing activities of $1.6 million which included $0.6 million relative to the purchase of selected assets of the former Tri-State operation, $0.29 million of payments to the former owners of businesses acquired in prior years and $0.7 million for the purchase of property, plant and equipment. These cash outflows were partially offset by net cash inflows of $2.56 million from funding activities which included proceeds from debt of $2.84 million, consisting of $2.05 million from the utilization of the Corporation's line of credit and $0.84 million from borrowings to finance new equipment purchases. These cash nflows were partially offset by $0.28 million of principal payments on debt. Cash used by operating activities totaled $1.15 million in the nine months ended October 31, 2001. Cash outflows included $1.2 million from the current period loss, a $3.53 million increase in accounts receivables, including a $2.0 million increase to fund the accounts receivable of the former Tri-State operation, a $0.17 million increase in costs and estimated earnings in excess of billings on uncompleted contracts, a $0.07 increase in inventory and a $0.15 million decrease in accrued liabilities. These cash outflows were partially offset by cash inflows including a $0.12 million decrease in other assets, a $1.96 million increase in accounts payable, a $0.78 million increase in billings in excess of costs and estimated earnings on uncompleted contracts and $1.15 million of depreciation and amortization. At October 31, 2001, the Corporation's backlog totaled $35.5 million ($27.6 million on fixed fee contracts and $7.9 million on time and materials or unit price contracts). During the nine months ended October 31, 2000, the Corporation's cash decreased by $0.15 million to $0.13 million. The decrease in fiscal 2000 was due to a $2.5 million cash outflow from operating activities and a $1.0 million outflow relating to investing activities, which was partially offset by a $2.2 million inflow associated with financing activities. Cash outflows from operating activities of $2.5 million in the nine months ended October 31, 2000 included a $0.5 million increase in accounts receivable, a $2.1 million increase in costs and estimated earnings in excess of billings on uncompleted contracts due to a series of unbilled contracts at one office, a $0.13 million increase in inventory, a $0.3 million decrease in accounts payable and the $0.12 million net loss. The aforementioned cash outflows from operating activities were partially offset, by $0.9 million of depreciation and amortization, the $0.2 million write off of deferred acquisition and financing costs, a $0.3 million decrease in other current assets and a $0.35 million increase in accrued liabilities. 11 The Corporation's cash outflows from investing activities of $1.0 million in the nine months ended October 31, 2000 was attributed to $0.41 million for the purchase of property, plant and equipment and $0.57 million to purchase the businesses acquired. Cash inflows associated with financing activities of $2.2 million during the nine months included proceeds of debt of $4.3 million consisting of $1.4 million from the new term loans received in the third, $1.4 million of borrowings on the new line of credit and $1.5 million of borrowings on the line of credit that was refinanced in August 2000. These inflows were partially offset by principal payments of $2.0 million consisting of a $0.24 million payoff of the mortgage that was refinanced, a $0.21 million payoff of the term loan that was refinanced, a $1.5 million payoff of the line of credit that was refinanced and $0.08 million of scheduled principal payments on term debt. 12 PART II-- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is subject to dispute and litigation in the ordinary course of business. None of these matters, in the opinion of management, is likely to result in a material effect on the Registrant based upon information available at this time. ITEM 3. DEFAULTS UPON SENIOR SECURITIES The Registrant is currently in arrears with respect to the payment of dividends on its Series A Preferred Stock. At October 31, 2001, the cumulative dividends in arrears on the Series A Preferred Stock were approximately $10,000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT INDEX EXHIBIT NO. AND DESCRIPTION PAGES OF SEQUENTIAL NUMBERING SYSTEM (b) Reports on Form 8-K The registrant filed the following Current Reports on Form 8-K during the three months ended October 31, 2001. Filing on Form 8-K/A on October 2, 2001 with the audited December 31, 2000 and 1999 financial statements of Tri-State Restorations, Inc. and related pro formas. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PDG ENVIRONMENTAL, INC. By /s/ John C. Regan ----------------------------------------- John C. Regan Chairman and Chief Executive Officer December 14, 2001 14