10-Q 1 j8527101e10-q.txt FORM 10-Q 1 (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, 2000 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.) 300 OXFORD DRIVE, MONROEVILLE, PENNSYLVANIA 15146 (Address of principal executive offices) (Zip Code) 412-856-2200 (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 _X_ No ____ As of December 9, 2000, there were 8,782,644 shares of the registrant's common stock outstanding. 2 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, 2000 (unaudited) and January 31, 2000 3 (b) Consolidated Statements of Operations for the Three Months Ended October 31, 2000 and 1999 (unaudited) 4 (c) Consolidated Statements of Operations for the Nine Months Ended October 31, 2000 and 1999 (unaudited) 5 (d) Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2000 and 1999 (unaudited) 6 (e) Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 3. Defaults Upon Senior Securities 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15

2 3 PART I. FINANCIAL INFORMATION PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

OCTOBER 31, JANUARY 31, 2000 2000* ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and short-term investments $ 128,000 $ 282,000 Accounts receivable - net 6,592,000 6,101,000 Costs and estimated earnings in excess of billings on uncompleted contracts 3,121,000 1,055,000 Inventory 454,000 291,000 Other current assets 423,000 329,000 ------------ ------------ TOTAL CURRENT ASSETS 10,718,000 8,058,000 PROPERTY, PLANT AND EQUIPMENT 6,465,000 5,845,000 Less: accumulated depreciation (4,972,000) (4,462,000) ------------ ------------ 1,493,000 1,383,000 OTHER ASSETS 1,212,000 912,000 ------------ ------------ TOTAL ASSETS $ 13,423,000 $ 10,353,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,348,000 $ 2,263,000 Accrued liabilities 1,864,000 1,299,000 Billings in excess of costs and estimated earnings on uncompleted contracts 1,007,000 1,015,000 Current portion of long-term debt 174,000 173,000 ------------ ------------ TOTAL CURRENT LIABILITIES 5,393,000 4,750,000 OTHER LONG-TERM LIABILITIES 364,000 166,000 LONG-TERM DEBT 2,623,000 376,000 STOCKHOLDERS' EQUITY Cumulative convertible 2% preferred stock 14,000 14,000 Common stock 177,000 169,000 Additional paid-in capital 7,767,000 7,421,000 Less treasury stock (38,000) (38,000) (Deficit) retained earnings (2,877,000) (2,505,000) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 5,043,000 5,061,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,423,000 $ 10,353,000 ============ ============

*Derived from audited financial statements. See accompanying notes to consolidated financial statements. 3 4 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED OCTOBER 31, ---------------------------------- 2000 1999 ----------- ----------- CONTRACT REVENUES $ 9,230,000 $ 7,496,000 CONTRACT COSTS 8,162,000 6,055,000 ----------- ----------- Gross margin 1,068,000 1,441,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,202,000 1,094,000 ----------- ----------- Income (loss) from operations (134,000) 347,000 OTHER INCOME (EXPENSE): Interest expense (75,000) (41,000) Interest income 4,000 4,000 Write off of deferred acquisition and financing costs (205,000) -- Other income -- 1,000 ----------- ----------- (276,000) (36,000) ----------- ----------- Income (loss) before income taxes (410,000) 311,000 INCOME TAX PROVISION -- -- ----------- ----------- NET INCOME (LOSS) $ (410,000) $ 311,000 =========== =========== PER SHARE OF COMMON STOCK - BASIC: $ (0.05) $ 0.04 =========== =========== PER SHARE OF COMMON SHARE - DILUTIVE $ (0.05) $ 0.04 =========== =========== AVERAGE COMMON SHARES OUTSTANDING 8,783,000 8,388,000 AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING -- 209,000 ----------- ----------- AVERAGE COMMON SHARES AND DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING FOR EARNINGS PER SHARES CALCULATION 8,783,000 8,597,000 =========== ===========

See accompanying notes to consolidated financial statements. 4 5 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

FOR THE NINE MONTHS ENDED OCTOBER 31, ----------------------------------- 2000 1999 ------------ ------------ CONTRACT REVENUES $ 26,067,000 $ 20,517,000 CONTRACT COSTS 22,657,000 17,162,000 ------------ ------------ Gross margin 3,410,000 3,355,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,165,000 2,914,000 LITIGATION SETTLEMENT EXPENSE -- 379,000 ------------ ------------ Income from operations 245,000 62,000 OTHER INCOME (EXPENSE): Interest expense (175,000) (109,000) Write off of deferred acquisition and financing costs (205,000) -- Interest income 14,000 8,000 Other income 27,000 2,000 ------------ ------------ (339,000) (99,000) ------------ ------------ Loss before income taxes (94,000) (37,000) INCOME TAX PROVISION (24,000) -- ------------ ------------ NET LOSS $ (118,000) $ (37,000) ============ ============ PER SHARE OF COMMON STOCK - BASIC: $ (0.01) $ 0.00 ============ ============ PER SHARE OF COMMON STOCK - DILUTIVE: $ (0.01) $ 0.00 ============ ============ AVERAGE COMMON SHARES OUTSTANDING 8,713,000 8,392,000 AVERAGE DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING -- -- ------------ ------------ AVERAGE COMMON SHARES AND DILUTIVE COMMON STOCK EQUIVALENTS OUTSTANDING FOR EARNINGS PER SHARE CALCULATION 8,713,000 8,392,000 ============ ============

See accompanying notes to consolidated financial statements. 5 6 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED OCTOBER 31, ---------------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (118,000) $ (37,000) ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization 914,000 615,000 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 (509,000) (524,000) Costs and estimated earnings in excess of billings on uncompleted contracts (2,066,000) 194,000 Inventory (125,000) 14,000 Other current assets 288,000 268,000 Accounts payable (280,000) (104,000) Billings in excess of costs and estimated earnings on uncompleted contracts (8,000) 652,000 Accrued liabilities 353,000 231,000 Other (107,000) (17,000) ----------- ----------- TOTAL ADJUSTMENTS IN ASSETS AND LIABILITIES (2,454,000) 714,000 ----------- ----------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,418,000) 1,292,000 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (411,000) (555,000) Acquisition of businesses (573,000) -- Proceeds from the sale of property, plant and equipment -- 4,000 ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (984,000) (551,000) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options and warrants -- 19,000 Proceeds from debt 4,263,000 -- Purchase of common stock for treasury -- (13,000) Principal payments on debt (2,015,000) (308,000) ----------- ----------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,248,000 (302,000) ----------- ----------- Net Increase (Decrease) in Cash and Short-Term Investments (154,000) 439,000 Cash and Short-Term Investments, Beginning of Period 282,000 309,000 ----------- ----------- CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 128,000 $ 748,000 =========== ===========

See accompanying notes to consolidated financial statements. 6 7 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The consolidated financial statements include PDG Environmental, Inc. (the "Corporation") and its wholly-owned subsidiaries. The accompanying financial statements of the Corporation are unaudited and prepared in accordance with generally accepted accounting principles which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, the financial statements 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, 2000 were of a normal, recurring nature. The amounts presented for the three and nine months ended October 31, 2000 are not necessarily indicative of results of operations for a full year. Additional information is contained in the Annual Report on Form 10-KSB of the Corporation for the year ended January 31, 2000 dated May, 11, 2000 and Quarterly Reports on Form 10-Q of the Corporation for the quarter ended April 30, 2000 dated June 13, 2000 and for the quarter ended July 31, 2000 dated September 13, 2000, and should be read in conjunction with this quarterly report. The Corporation does not have any items which would require adjustments to arrive at comprehensive income. NOTE 2 - FEDERAL INCOME TAXES No federal income taxes have been provided for the three and nine months ended October 31, 2000 due to the existence of unused net operating loss carryforwards. The Corporation has recorded a provision for state income taxes during the current nine-month period. No state income taxes were provided during the previous nine-month period. Income taxes paid by the Corporation for the nine months ended October 31, 2000 and 1999 totaled approximately $69,000 and $85,000, 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. At October 31, 2000, borrowings on the revolving line of credit were $1,400,000. The Corporation paid interest costs totaling approximately $181,000 and $108,000 during the nine months ended October 31, 2000 and 1999, respectively. 7 8 NOTE 4 - PREFERRED STOCK Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock were approximately $9,000 at October 31, 2000. At October 31, 2000, there were 6,000 shares of Series A Preferred Stock outstanding. The 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 and March 6, 2000 Board of Directors meeting, the issuance of one third of the shares (280,071 and 259,696 common shares, respectively) covered by the aforementioned right was approved. At October 31, 2000, there were 280,071 common stock rights outstanding. 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, ---------------------------------- 2000 1999 ----------- ----------- NUMERATOR: Loss $ (118,000) $ (37,000) Preferred stock dividends (1,000) (1,000) ----------- ----------- Numerator for basic earnings per share--loss to common stockholders (119,000) (38,000) Effect of dilutive securities: Preferred stock dividends 1,000 1,000 ----------- ----------- Numerator for diluted earnings per share--loss to common stock after assumed conversions (118,000) (37,000) =========== =========== DENOMINATOR: Denominator for basic earnings per share--weighted average shares 8,713,000 8,392,000 Effect of dilutive securities -- -- ----------- ----------- Denominator for diluted earnings per share--adjusted weighted-average shares and assumed conversions 8,713,000 8,392,000 =========== =========== BASIC EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00 =========== =========== DILUTED EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00 =========== ===========

8 9 The following table sets forth the computation of basic and diluted earnings per share from continuing operations:

FOR THE THREE MONTHS ENDED OCTOBER 31, --------------------------------- 2000 1999 ----------- ---------- NUMERATOR: Net Income (loss) $ (410,000) $ 311,000 Preferred stock dividends -- -- ----------- ---------- Numerator for basic earnings per share--income (loss) available to common stockholders (410,000) 311,000 Effect of dilutive securities: Preferred stock dividends -- -- ----------- ---------- Numerator for diluted earnings per share--income (loss) available to common stock after assumed conversions (410,000) 311,000 =========== ========== DENOMINATOR: Denominator for basic earnings per share--weighted average shares 8,783,000 8,388,000 Effect of dilutive securities: Employee stock options -- 181,000 Warrants -- 1,000 Convertible preferred stock -- 27,000 ----------- ---------- Dilutive potential common shares -- 209,000 ----------- ---------- Denominator for diluted earnings per share--adjusted weighted-average shares and assumed conversions 8,783,000 8,597,000 =========== ========== BASIC EARNINGS (LOSS) PER SHARE $ (0.05) $ 0.04 =========== ========== DILUTED EARNINGS (LOSS) PER SHARE $ (0.05) $ 0.04 =========== ==========

NOTE 6 - ACQUISITION Effective April 3, 2000, the Corporation entered into an agreement ("the Agreement") with Lincoln Cristi, Inc. ("Lincoln") and the majority owners of Lincoln for the purchase of selected assets and assumption of the contracts of Lincoln. Lincoln owned and operated a business that conducted asbestos abatement in the Northwestern United States. As consideration for the purchase, the Corporation paid Lincoln and the owners of Lincoln a combination of cash and the Corporation's Common Stock and entered into an employment agreement with the former majority owners of Lincoln that provides for a performance bonus in addition to annual salary. The performance bonus is for a minimum of one year and a maximum of three years, depending upon the continued employment of the two majority owners of Lincoln. 9 10 The goodwill associated with the acquisition is being amortized on a straight-line basis over 15 years, the covenant not to compete and customer lists is being amortized on a straight-line basis over 5 years, and the performance bonus is being amortized over the 3-year life of the bonus. Additionally, in April 2000, the Corporation acquired the fixed assets of an asbestos abatement company operating in the metropolitan Chicago area and an insulation company operating in the Houston area. NOTE 7 - SUBSEQUENT EVENT 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 an asbestos abatement and demolition company in California. The increase in the line is subject to the closing of that transaction. Additionally, Sky Bank increased the commitment for future equipment financing by $0.3 million to $0.6 million. Based upon the aforementioned modification to the new credit facility, the debt covenants require annual maintenance of a tangible net worth of $5 million, a leverage ratio (total liabilities to net worth) of no greater than 2 to 1 and a debt service coverage ratio of at least 1.3 to 1. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999 The Corporation's contract revenues increased by approximately 23% to $9.2 million during the three months ended October 31, 2000 ("Fiscal 2001") compared to $7.5 million in the three months ended October 31, 2000 ("Fiscal 2000"). The increase in revenues was partly due to the addition of two new branch offices in April 2000. The Corporation's gross margin decreased to $1.1 million in the third quarter of Fiscal 2001 compared to $1.4 million in the third quarter of fiscal 2000. The decrease in gross margin in Fiscal 2001 was primarily attributable to a large volume of work at one office being performed at a relatively low margin level and negative contract adjustments. Selling, general and administrative expenses increased to $1.2 million in the three months ended October 31, 2000 compared to $1.1 million in the three months ended October 31, 1999. The increase is primarily attributable to the Corporation operating two additional branch offices in the current quarter. As a result of the factors described above, the Corporation reported a loss from operations of $0.13 million in the current three month period compared to income of $0.35 million for the same three months of the prior fiscal year. The Corporation's interest expense increased to $75,000 for the three months ended October 31, 2000 from $41,000 for the three months ended October 31, 1999 due to increased borrowings to support the increased level of revenues. During the current quarter, the Company terminated negotiations with Metalclad 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 three months ended October 31, 2000 and 1999, the Corporation made no provision for federal income taxes due to the utilization of net operating loss carryforwards for financial reporting purposes. No state income tax provision was made in the current quarter due to the loss, while no state income tax provision was made for the three months ended October 31, 1999 due to the year-to-date loss. NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999 The Corporation's contract revenues increased to $26.1 million for the nine months ended October 31, 2000 compared to $20.5 million for the nine months ended October 31, 1999. The gross margin reported by the Corporation in the nine months ended October 31, 2000 increased slightly to $3.41 million compared to $3.36 million for the nine months ended October 31, 1999. The decrease in gross margin as a percentage of revenue was due to a large volume of work at one office being performed at a relatively low margin level and negative contract adjustments. Selling, general and administrative expenses reported by the Corporation for the nine months ended October 31, 2000 increased to $3.2 million as compared to $2.9 million in the same nine month period of the prior fiscal year. The increase is primarily attributable to the addition of two branch offices in Fiscal 2001. In June 1999, the Corporation reached a settlement with the Mason Tenders District Council Welfare Fund whereby the Corporation agreed to pay $500,000 to resolve all claims concerning contributions owed for the period January 1, 1995 through May 31, 1996 and related claims for interest, statutory damages, costs and attorneys' fees. The final payment of the $500,000 was made in June 2000. This resulted in a $379,000 charge in the second quarter of Fiscal 2000 which was net of amounts previously accrued and recoveries from third parties. 11 12 The Corporation reported income from operations of $0.25 million in the nine months ended October 31, 2000 as a result of the factors discussed above compared to income from operations of $0.06 million in the same nine-month period last year. Interest expense increased to $0.18 million in the current nine month period compared to $0.11 million in the nine months ended October 31, 1999 due to increased borrowings to support the higher level of revenues. During the current year, the Company terminated negotiations with Metalclad Corporation for the acquisition of its Metalclad Insulation subsidiary 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. Interest income totaled $14,000 for the current nine month period versus $8,000 in the same nine-month period of the prior fiscal year due to higher invested cash balances. No provision for federal income taxes was made during the nine months ended October 31, 2000 and 1999 due to the utilization of net operating loss carryforwards for financial reporting purposes. A $0.02 million state income tax provision was made in the current nine-month period to reflect payment of capital stock and franchise taxes which are not directly calculated from net income. No state income tax provision was made in the prior nine-month period due to the loss. LIQUIDITY AND CAPITAL RESOURCES The Corporation's cash liquidity decreased during the nine months ended October 31, 2000 as cash and short-term investments decreased by $0.15 million to $0.13 million. The decrease in cash during the nine-month period was principally attributable to cash outflows associated with investing activities of $1.0 million and operating activities of $2.5 million. These cash outflows were partially offset by cash inflows from financing activities of $2.2 million. 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 primarily due to higher levels of revenues, a $2.1 million increase in costs and estimated earnings in excess of contract costs 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. The Corporation's outflows from investing activities of $1.0 million in the nine months ended October 31, 1999 was attributable to $0.41 million for the purchase of property, plant and equipment and $0.57 million to purchase the businesses acquired. The cash flows from financing activities of $2.2 million included proceeds of debt of $4.3 million consisting of $1.4 million from the new term loans received in the third quarter, $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. The Corporation's cash liquidity increased during the nine months ended October 31, 1999 as cash and short-term investments increased by $0.4 million to $0.75 million. The increase in cash during the current nine month period is principally attributable to cash inflows from operating activities of $1.3 million. These cash inflows were partially offset by cash outflows from investing activities of $0.55 million and financing activities of $0.3 million. 12 13 Cash inflows provided by operating activities of $1.3 million in the nine months ended October 31, 1999 included a $0.3 million reduction in other current assets, a $0.2 million decrease in costs and estimated earnings in excess of billings on uncompleted contracts, a $0.2 million increase in accrued liabilities, a $0.65 million increase in billings in excess of costs and estimated earnings on uncompleted contracts and $0.6 million of depreciation and amortization. The aforementioned cash inflows from operating activities were partially offset by a $0.5 million increase in accounts receivable and a $0.1 million decrease in accounts payable. Cash outflows associated with financing activities during the current nine months included $0.02 million of proceeds from the exercise of stock options and warrants offset by $0.3 million of principal payments and reduction of the outstanding balance of the line of credit and $0.01 million for the purchase of common stock for the treasury. The Corporation's investing activities of $0.55 million in the nine months ended October 31, 1999 were for the purchase of property, plant and equipment. At October 31, 2000, the Corporation's backlog associated with its asbestos abatement and demolition business totaled $13.7 million ($7.3 million on fixed fee contracts and $6.4 million of expected revenues on time and materials or unit price contracts). 13 14 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, 2000, the cumulative dividends in arrears on the Series A Preferred Stock were approximately $9,000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT INDEX EXHIBIT NO. AND DESCRIPTION PAGES OF SEQUENTIAL NUMBERING SYSTEM 27 Financial Data Schedule (b) The Registrant did not file reports on Form 8-K during the three months ended October 31, 2000. 14 15 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 Date: December 14, 2000 15