FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
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Commission File Number 033-17921
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Air & Water Technologies Corporation
__________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3418759
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(State or other Jurisdiction of Corporation) (I.R.S. Employer
Identification Number)
U.S. Highway 22 West and Station Road, Branchburg, NJ 08876
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(Address of Principal Executive Offices)
Telephone: (908) 685-4600
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 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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of April 30, 1997.
Class A
$.001 Par Value Common Stock 32,019,254
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(Title of Class) (Number of Shares Outstanding)
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AIR & WATER TECHNOLOGIES CORPORATION
------------------------------------
CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 1997 AND OCTOBER 31, 1996
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(in thousands, except share data)
----------------------------------
[CAPTION]
ASSETS 1997 1996
----- ---- ----
(unaudited)
---------
CURRENT ASSETS:
Cash and cash equivalents $ 13,836 $ 12,667
Accounts receivable, net 89,735 100,933
Costs and estimated earnings in excess of
billings on uncompleted contracts 43,262 48,097
Inventories 11,973 11,319
Prepaid expenses and other current assets 11,484 12,027
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Total current assets 170,290 185,043
PROPERTY, PLANT AND EQUIPMENT, net 29,690 35,432
INVESTMENTS IN ENVIRONMENTAL TREATMENT
FACILITIES 21,968 22,062
GOODWILL 244,236 265,860
OTHER ASSETS 23,002 29,873
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Total assets $489,186 $538,270
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings and current
installments of long-term debt $ 11,872 $ 378
Accounts payable 78,949 73,951
Accrued expenses 87,523 76,656
Billings in excess of costs and estimated
earnings on uncompleted contracts 28,160 23,995
Income taxes payable 2,366 2,507
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Total current liabilities 208,870 177,487
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LONG-TERM DEBT 305,097 306,542
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 authorized,
2,500,000 shares; issued 1,200,000 shares;
liquidation value $60,000 12 12
Common stock par value $.001 authorized
100,000,000 shares; issued 32,109,156 and
32,107,906 shares 32 32
Additional paid-in capital 427,036 427,036
Accumulated deficit (450,599) (372,433)
Common stock in treasury, at cost (108) (108)
Cumulative currency translation adjustment (1,154) (298)
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Total stockholders' equity (24,781) 54,241
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Total liabilities and stockholders'
equity $ 489,186 $538,270
======== ========
The accompanying notes are an integral part of these statements.
AIR & WATER TECHNOLOGIES CORPORATION
------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30, 1997 AND 1996
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(in thousands, except per share data)
-----------------------------------
(unaudited)
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Three Months Six Months
Ended April 30 Ended April 30
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
[CAPTION]
SALES $148,275 $167,491 $295,234 $326,697
COST OF SALES 136,596 133,500 259,351 261,924
------- ------- ------- -------
Gross margin 11,679 33,991 35,883 64,773
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 37,561 24,057 62,755 47,047
DEPRECIATION AND AMORTIZATION 6,799 5,147 12,028 10,076
IMPAIRMENT CHARGES 25,000 - 25,000 -
------- ------- ------- -------
Operating income (loss) (57,681) 4,787 (63,900) 7,650
INTEREST EXPENSE (5,985) (5,618) (11,953) (11,232)
INTEREST INCOME 121 334 235 594
OTHER EXPENSE, NET (139) (482) (465) (613)
------- ------- ------- ------
Loss before income taxes (63,684) (979) (76,083) (3,601)
INCOME TAXES 302 326 433 649
------- ------- ------- -------
NET LOSS $(63,986) $ (1,305) $(76,516) $ (4,250)
======= ======= ======= =======
LOSS PER COMMON SHARE
(AFTER PREFERRED STOCK
DIVIDENDS) $ (2.02) $ (.07) $ (2.44) $ (.18)
======= ======= ======= =======
Weighted average number
of shares outstanding 32,019 32,018 32,019 32,018
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
AIR & WATER TECHNOLOGIES CORPORATION
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE SIX MONTH PERIODS ENDED APRIL 30, 1997 AND 1996
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(in thousands)
------------
(unaudited)
---------
1997 1996
[CAPTION]
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (76,516) $ (4,250)
Adjustments to reconcile net loss to net cash
provided by (used for) continuing operations -
Depreciation and amortization 12,028 10,076
Impairment charges and other, net 27,298 395
Changes in assets and liabilities -
(Increase) decrease in assets -
Accounts receivable, net 11,074 4,651
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,835 2,704
Inventories (654) (181)
Prepaid expenses and other current assets
337 (371)
Other assets 6,187 184
Increase (decrease)
in liabilities -
Accounts payable 4,965 (4,949)
Accrued expenses 6,504 (12,722)
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,165 3,077
Income taxes (138) (160)
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Net cash provided by (used for) continuing
operations 85 (1,546)
Net cash provided by discontinued operations
392 485
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Net cash provided by (used for) operating
activities 477 (1,061)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business 373 2,353
Capital expenditures (3,817) (3,739)
Investment in environmental treatment facilities 234 336
Start up costs and other, net (3,389) (4,290)
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Net cash used for investing activities (6,599) (5,340)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable and long-term debt (133) (132)
Net borrowings under credit facilities 10,182 9,000
Cash dividends paid (1,650) (1,650)
Other, net (1,108) (1,066)
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Net cash provided by financing activities 7,291 6,152
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Net increase (decrease) in cash and cash
equivalents 1,169 (249)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,667 11,168
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,836 $ 10,919
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 11,389 $ 10,902
======= =======
The accompanying notes are an integral part of these statements.
AIR & WATER TECHNOLOGIES CORPORATION
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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April 30, 1997
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(unaudited)
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(1) Basis of Presentation:
---------------------
The interim consolidated financial statements and the
following notes should be read in conjunction with the notes
to the consolidated financial statements of Air & Water
Technologies Corporation and its consolidated subsidiaries
(the "Company") as included in its Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended
October 31, 1996. The interim information reflects all
adjustments, including normal recurring accruals, which are,
in the opinion of management, necessary for a fair
presentation of the results for the interim period. Results
for the interim period are not necessarily indicative of
results to be expected for the full year.
(2) Commitments and Contingencies:
-----------------------------
The Company and its subsidiaries are parties to various
legal actions arising in the normal course of their
businesses, some of which involve claims for substantial
sums. The Company believes that the disposition of such
actions, individually or in the aggregate, will not have a
material adverse effect on the consolidated financial
position or results of operations of the Company taken as a
whole.
(3) Reclassifications:
-----------------
Certain reclassifications have been made to conform the 1996
consolidated financial statements to the 1997 presentation.
(4) Recent Developments:
-------------------
These interim financial statements should be read in
conjunction with management's discussion and analysis of
financial condition and results of operations, including a
discussion on the current period charges, revised business
strategy and waivers and amendments related to the Bank
Credit Facility.
ITEM II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following information should be read in conjunction with
the unaudited interim consolidated financial statements and
the notes thereto included in this Quarterly Report and the
audited financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in the Company's Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended
October 31, 1996.
Results of Operations
- ---------------------
Summarized below is certain financial information relating
to the core segments of the Company (in thousands):
[CAPTION]
Three Months Ended Six Months Ended
April 30 April 30
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1997 1996 1997 1996
---- ---- ---- ----
Sales:
Professional Services Group $ 67,139 $ 63,273 $129,727 $127,307
Metcalf & Eddy 41,908 50,964 86,499 98,102
Research - Cottrell 39,644 54,326 79,966 102,975
Other and eliminations (416) (1,072) (958) (1,687)
-------- -------- -------- --------
$148,275 $167,491 $295,234 $326,697
======== ======== ======== ========
Cost of Sales:
Professional Services Group $ 62,830 $ 55,336 $120,789 $112,012
Metcalf & Eddy 38,695 35,442 70,745 69,315
Research - Cottrell 35,487 43,794 68,775 82,284
Other and eliminations (416) (1,072) (958) (1,687)
-------- -------- -------- --------
$136,596 $133,500 $259,351 $261,924
======== ======== ======== ========
Selling, General and Administrative Expenses:
Professional Services Group $ 9,307 $ 3,740 $ 13,128 $ 7,218
Metcalf & Eddy 18,074 10,737 29,126 20,276
Research - Cottrell 8,274 7,770 16,526 16,090
Other and eliminations - - - -
Corporate (unallocated) 1,906 1,810 3,975 3,463
-------- -------- -------- --------
$ 37,561 $ 24,057 $ 62,755 $ 47,047
======== ======== ======== ========
Depreciation and Amortization:
Professional Services Group $ 2,047 $ 2,079 $ 4,093 $ 4,043
Metcalf & Eddy 3,251 1,511 4,963 2,975
Research - Cottrell 1,371 1,443 2,714 2,832
Other and eliminations - - - -
Corporate (unallocated) 130 114 258 226
-------- -------- -------- --------
$ 6,799 $ 5,147 $ 12,028 $ 10,076
======== ======== ======== ========
Impairment Charges:
Research - Cottrell $ 25,000 $ - $ 25,000 $ -
======== ======== ======== ========
Operating Income (Loss):
Professional Services Group $ (7,045) $ 2,118 $ (8,283) $ 4,034
Metcalf & Eddy (18,112) 3,274 (18,335) 5,536
Research - Cottrell (30,488) 1,319 (33,049) 1,769
Other and eliminations - - - -
Corporate (unallocated) (2,036) (1,924) (4,233) (3,689)
-------- -------- -------- --------
$(57,681) $ 4,787 $(63,900) $ 7,650
======== ======== ======== ========
Professional Services Group
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The operating losses sustained during the three and six
month periods ended April 30, 1997 were primarily the result
of additional provisions and asset write-offs which
approximated $9.3 million. These charges were primarily
related to revised estimates of direct project costs of $2.8
million required under the PRASA contract; professional fees
of $5.3 million related to marketing consultants, the U.S.
Department of Justice investigation and certain litigation
matters; and provisions of $1.2 million for revised
collectibility estimates for certain non-current note
receivables.
Excluding the effect of the aforementioned charges, the
operating results were $.5 million and $3.0 million lower
than the three and six month comparable prior periods ended
April 30, 1996 due to a reduction in gross margin rates of
1.9% and 3.0%, or $1.3 million and $3.9 million,
respectively. Additional direct project costs including
certain higher non-recoverable costs resulting from
competitive pricing pressures and timing of certain
contractual incentive clauses for the PRASA project caused
the lower gross margin rates. Partially off-setting the
reduced margin rates in the three month period ended April
30, 1997 was the impact of slightly higher sales volume and
reduced administrative overhead.
The Company's sales have remained comparable to the prior
periods as a result of the privatization market developing
more slowly than anticipated. Although the Company has been
successful in obtaining contract renewals, it continues to
experience delays in negotiating and closing new business
opportunities due to municipal clients' implementation
schedules. Excluding the impact of the aforementioned $9.3
million charges, results are expected to improve moderately
throughout the year and be more comparable to the prior
period results due to new contracts and certain contractual
incentive clauses which are expected to be realized later in
the fiscal year.
Metcalf & Eddy
- --------------
The operating losses sustained during the three and six
month periods ended April 30, 1997 were primarily the result
of $5.4 million of provisions required in order to properly
reflect the Company's revised estimates for the
collectibility of certain receivables based on recent
adverse developments in contract negotiations and collection
efforts, $6.3 million of increases to its reserves for
litigation, professional liability and certain project
contingencies due to revised estimates of the expected
outcome of certain unasserted and asserted claims and
litigation incurred in the normal course of business, $3.4
million of equipment write-offs, a $1.7 million charge
related to a cancellation penalty for a high cost leased
facility (recorded in the first quarter) and other direct
and indirect costs of $2.6 million.
Excluding the effect of the aforementioned charges, the
operating results were $4.0 million and $4.4 million lower
than the three and six month comparable prior periods ended
April 30, 1996 due to lower sales volume and gross margin
rates. The lower sales volume of $9.1 million and $11.6
million during the periods reduced the operating results by
$2.8 million and $3.4 million due to delays in obtaining
task order releases primarily within the hazardous waste
remediation service lines and several contracts which were
awarded to competitors. Delays are increasing due to
funding and administrative issues with certain government
agencies (e.g. Environmental Protection Agency "EPA" and
Department of Defense). The lower gross margin rates
reduced the operating results in both periods by $1.6
million primarily due to favorable pricing adjustments
reflected in the prior periods.
The results are expected to improve moderately during the
second half of this fiscal year, and excluding the
aforementioned charges, be more comparable to the respective
prior year periods due to recent overhead reductions which
may off-set the expected lower sales volume. Full year
sales levels are expected to be approximately 15% below the
comparable prior year period due to continuing delays in
work releases.
Research-Cottrell
- -----------------
The operating losses sustained during the three and six
month periods ended April 30, 1997 were primarily the result
of a $25.0 million impairment charge discussed in the
"Revised Business Strategy" section below, and other
receivable and warranty provisions of $4.0 million related
to its Ecodyne and Custodis operations due to recent adverse
developments on two specific projects. Excluding the effect
of the aforementioned charges, the operating results were
$2.8 million and $5.8 million lower than the three and six
month comparable prior periods ended April 30, 1996
primarily due to lower sales volume and reduced margin rates
to a lesser extent. The lower sales volume of $14.7 million
and $23.0 million during the aforementioned periods reduced
the operating income by $2.9 million and $4.6 million,
respectively. The lower sales volumes were reflected
primarily in the REECO, Ecodyne, Custodis and KVB operations
which approximated 80% of the variance in the three month
period and substantially all of the variance in the six
month period. These operations are experiencing reduced
volume as a result of fewer bid opportunities due to delays
in issuing new air quality standards by the EPA, lack of
enforcement of existing standards and price pressures from
highly competitive markets. The adjusted gross margin rates
have also decreased by .7% and 2.1% ($.3 million and $1.7
million) during the three and six month periods,
respectively, due to price pressures, unfavorable product
line mix and project execution.
Although the results are expected to improve slightly
throughout the year (excluding the effect of the
aforementioned charges), the unfavorable trend compared to
the prior periods related to volume and margin rates is
expected to continue due to the reasons previously stated.
Corporate and Other
- -------------------
The unallocated corporate costs were $.1 million and $.5
million higher than the comparable prior periods due to
increased outside services. In addition, higher average
borrowings resulted in increased interest expense.
Revised Business Strategy
- -------------------------
The Company has recently completed a review of its
operations' three year business plans. These plans included
a detailed analysis of markets, growth opportunities and
forecasted three year operating results, cash flows and
return on capital employed for each business segment.
As a result of this review, management is currently
considering the actions necessary to redeploy its capital to
its core water business (Professional Services Group and
Metcalf & Eddy). This action reflects management's
assessment of the greater market opportunities and growth
potential in these sectors compared to the air pollution
markets. Among other factors contributing to this
conclusion were recent tax law changes which may expand the
duration of operations, maintenance and management contracts
and create additional opportunities within the water and
wastewater treatment markets which are the primary markets
for Professional Services Group and Metcalf & Eddy. These
enhanced opportunities are in contrast to the air sector
where continuing delays in issuing new air quality standards
by the EPA and lack of enforcement of existing standards are
expected to limit the growth opportunities within the air
pollution control markets targeted by Research-Cottrell.
Furthermore, the returns on capital employed within the
Professional Services Group and Metcalf & Eddy segments are
forecasted to be greater than the returns for the Research-
Cottrell segment. From a competitive standpoint, management
also believes that the Company has greater competitive
advantages and market penetration through its Professional
Services Group and Metcalf & Eddy businesses than what has
been achieved by its Research-Cottrell operations.
As a result of the above, management is assessing the impact
of de-emphasizing the Research-Cottrell business segment and
redeploying its capital to its Professional Services Group
and Metcalf & Eddy segments. A financial advisor has been
retained to assist the Company in exploring strategic
alternatives related to this redeployment. The successful
implementation of a redeployment program could include the
divestiture of portions or substantially all of the Research-
Cottrell segment over the next few years, although no such
definitive decision to divest has been made by the Company's
Board of Directors at this time.
Based on the recent downturn in the operating performance of
certain of the Research-Cottrell businesses, the Company
reviewed the expected future cash flows of these businesses
and reassessed their fair value. In connection with this
review, the Company has reflected a $25.0 million impairment
charge including a goodwill writedown of $17.4 million
related to the Ecodyne and KVB businesses during the second
quarter of fiscal 1997. The impairment has been determined
in accordance with Statement of Financial Accounting
Standards No. 121 by taking into consideration the
operations' fair values based on expected future cash flows
discounted at a rate commensurate with the risks involved.
The realizability of goodwill and other long lived assets is
an estimate based on the underlying assets remaining
estimated useful lives, projected operating cash flows and
ultimate disposition assumption (held for use or held for
sale). Although the impairment charge described above
represents management's best estimate at this time, it is
reasonably possible that this estimate will change in the
near term as a consequence of further deterioration in
market conditions and operating results or the divestiture
of all or part of the Research-Cottrell segment. The effect
of the change would be material to the financial statements
since a significant additional charge may be required.
Financial Condition
- -------------------
Net financial debt (debt less cash) increased by $8.9
million during the six month period ended April 30, 1997.
In addition to the preferred stock dividend payment of $1.7
million, the Company utilized $6.6 million of cash for
capital expenditures, investments in environmental treatment
facilities and other investment activities including start
up costs during the period. These cash requirements were
funded principally through borrowings under the Company's
credit facilities discussed below.
The Company maintains a $60 million unsecured revolving
credit facility with Anjou International Company ("Anjou
Credit Facility"), an affiliated company. The borrowings
under the Anjou Credit Facility bear interest at LIBOR plus
.6%. The Company also maintains a Senior Secured Credit
Facility ("Bank Credit Facility") which was increased by $20
million to $70 million as of April 28, 1997. As of April
30, 1997, the Company's outstanding borrowings under the
Anjou Credit Facility totaled $60 million and the Bank
Credit Facility totaled $10 million (unused capacity of
$36.9 million). Outstanding letters of credit totaled $23.1
million on April 30, 1997.
The Bank Credit Facility is primarily designed to finance
working capital requirements and provide for the issuance of
letters of credit, both subject to limitations and secured
by a first security interest in substantially all of the
assets of the Company. Of the total commitment, borrowings
are limited to the lesser of $50 million or the sum of a
percentage of certain eligible receivables, inventories, net
property, plant and equipment and costs and estimated
earnings in excess of billings, and bear interest at LIBOR
(5.7% at April 30, 1997), as defined, plus 1.0% or at a
defined bank rate approximating prime (8.5% at April 30,
1997). The Bank Credit Facility also allows for certain
additional borrowings, including, among other things,
project financing and foreign borrowing facilities, subject
to limitations and contains certain financial and other
restrictive covenants, including, among other things, the
maintenance of certain financial ratios, and restrictions on
the incurrence of additional indebtedness, acquisitions, the
sale of assets, the payment of dividends and the repurchase
of subordinated debt. As a result of the charges previously
noted, and in conjunction with the aforementioned increase
in its Bank Credit Facility, the Company was required to and
did obtain certain waivers as of April 28, 1997 and
amendments to the financial covenants of the Bank Credit
Facility which expires March 31, 1998. The Company will
need to replace this facility at that time.
In addition, the related agreement requires CGE to maintain
its support of the Company, including, a minimum 40%
ownership interest in the Company and its right to designate
its proportionate share of the Company's Board of Directors
as well as the Chief Executive Officer and Chief Financial
Officer.
The businesses of the Company have not historically required
significant ongoing capital expenditures. For the six month
period ended April 30, 1997, and the years ended October 31,
1996 and 1995 total capital expenditures were $3.8 million,
$7.5 million and $7.9 million, respectively. At April 30,
1997, the Company had no material outstanding purchase
commitments for capital expenditures. As of June 11, 1997,
the Company has borrowed an additional $11.0 million during
the third quarter of fiscal 1997 under its credit
facilities. Current cash flow forecasts reflect additional
borrowing requirements of approximately $25 million during
the second half of this fiscal year which in addition to
potential letters of credit requirements would, by year end,
approximate the Company's credit capacity (before
consideration of the impact, if any, of the successful
outcome of the programs described below). The expected cash
usage is primarily due to additional working capital
requirements for anticipated fourth quarter sales growth and
payments required under certain insurance programs.
Management is addressing its forecasted cash requirements
through a series of programs, for which there is no
assurance of success, directed at improving working capital
management by focusing on, among other things, collection of
Metcalf & Eddy past due receivables and unreimbursed costs
on certain significant contracts, including the PRASA
contract, increased emphasis on capital redeployment and
asset divestitures and the restructuring and strengthening
of its current capital structure.
Statement Regarding Forward Looking Disclosures
- -----------------------------------------------
Statements contained in this report, including Management's
Discussion and Analysis, are forward looking statements that
involve a number of risks and uncertainties which may cause
the Company's actual operating results to differ materially
from the projected amounts. Among the factors that could
cause actual results to differ materially are risk factors
listed from time to time in the Company's SEC reports
including:
- the Company's highly competitive marketplace,
- changes in as well as enforcement levels of
federal, state and local environmental legislation
and regulations that change demand for a significant
portion of the Company's services,
- the ability to obtain new contracts (some of
which are significant) from existingand new clients,
- the execution of the expected new projects and
those projects in backlog within the most recent
cost estimates and
- the resolution of existing claims
arising in the ordinary course of business.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In connection with a broad investigation by the U.S.
Department of Justice into alleged illegal payments by
various persons to members of the Houston City Council,
the Company's subsidiary, Professional Services Group
(PSG), received a federal grand jury subpoena on May
31, 1996 requesting documents regarding certain PSG
consultants and representatives that had been retained
by PSG to assist in advising the City of Houston
regarding the benefits that could result from the
privatization of Houston's water and wastewater system.
PSG has cooperated and continues to cooperate with the
Justice Department which has informed the Company that
it is reviewing transactions among PSG and its
consultants. The Company promptly initiated its own
independent investigation into these matters and placed
PSG's chief executive officer, Michael M. Stump, on
administrative leave of absence with pay. Mr. Stump,
who has denied any wrongdoing, resigned from PSG on
December 4, 1996. In the course of its ongoing
investigation, the Company became aware of questionable
financial transactions with third parties and payments
to certain PSG consultants and other individuals, the
nature of which requires further investigation. The
Company has brought these matters to the attention of
the Department of Justice and continues to cooperate
fully with its investigation.
No charges of wrongdoing have been brought against PSG
or any PSG executive or employee by any grand jury or
other government authority. However, since the
government's investigation is still underway and is
conducted largely in secret, no assurance can be given
as to whether the government authorities will
ultimately determine to bring charges or assert claims
resulting from this investigation that could implicate
or reflect adversely upon or otherwise have a material
adverse effect on the financial position or results of
operations of PSG or the Company taken as a whole.
The Company and its subsidiaries are parties to various
other legal actions arising in the normal course of
their businesses, some of which involve claims for
substantial sums. The Company believes that the
disposition of such various actions, individually or in
the aggregate, will not have a material adverse effect
on the consolidated financial position or results of
operations of the Company taken as a whole.
ITEMS 2-5
There are no reportable items under Part II, items 2
through 5.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 11. Computation of per share earnings.
Exhibit 27. Financial Data Supplement
SIGNATURE
---------
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.
AIR & WATER TECHNOLOGIES CORPORATION
------------------------------------
(registrant)
Date June 12, 1997 /s/ Alain Brunais
------------- ------------------
Alain Brunais
Chief Financial Officer