- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED NOVEMBER 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10583 ATC ENVIRONMENTAL INC. (Exact name of Registrant as specified in its charter) DELAWARE 46-0399408 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 104 EAST 25TH STREET, 10TH FLOOR NEW YORK, NEW YORK 10010 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 353-8280 NONE (Former name, former address and former fiscal year if changed since last report) 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 ___ The number of shares issued of the Registrant's Common Stock, as of January 10, 1996 was 7,795,789 shares of Common Stock after giving effect to the cancellation of 33,130 shares as discussed in Note B to the financial statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ATC ENVIRONMENTAL INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 1995 - -------------------------------------------------------------------------------- PAGE ---- PART I -- FINANCIAL INFORMATION: Item 1 -- Financial Statements: Consolidated Balance Sheets -- February 28, 1995 and November 30, 1995 (unaudited)................................................................ F-3 Consolidated Statements of Operations -- Three months and nine months ended November 30, 1994 and 1995 (unaudited).......................................... F-4 Consolidated Statements of Stockholders' Equity -- Nine months ended November 30, 1994 and 1995 (unaudited)........................................................... F-5 Consolidated Statements of Cash Flows -- Nine months ended November 30, 1994 and 1995 (unaudited)........................................................... F-6 Notes to Consolidated Financial Statements (unaudited).............................................................. F-7 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations....................... F-11 PART II -- OTHER INFORMATION: Items 1-6............................................................................................................. F-17 Signatures............................................................................................................ F-18 Exhibit 11 -- Computation of Earnings Per Share -- Three months and nine months ended November 30, 1994 and 1995 (unaudited)............................................ F-19 Exhibit 27 -- Financial Data Schedule -- November 30, 1995 (unaudited)........................................................................................ F-20 F-2 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS FEBRUARY 28, 1995 AND NOVEMBER 30, 1995 (UNAUDITED) - -------------------------------------------------------------------------------- FEBRUARY 28, NOVEMBER 30, 1995 1995 ------------ ------------ (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents............................................................... $ 1,377,862 $ 14,159,789 Trade accounts receivable, less allowance for doubtful accounts ($535,886 at February 28, 1995 and $354,778 at November 30, 1995)............................................ 11,859,991 13,089,323 Costs in excess of billings on uncompleted contracts.................................... 447,000 2,870,633 Prepaid expenses and other current assets............................................... 431,791 856,583 Deferred income taxes (Note D).......................................................... 132,700 339,259 ------------ ------------ Total current assets................................................................ 14,249,344 31,315,587 Property and equipment, net (Note C)...................................................... 3,151,286 3,498,743 Goodwill, net of accumulated amortization (Note B) ($137,470 at February 28, 1995 and $357,038 at November 30, 1995)........................ 7,166,998 10,976,055 Covenants not to compete, net of accumulated amortization (Note B) ($137,021 at February 28, 1995 and $221,904 at November 30, 1995)........................ 317,979 280,596 Other assets.............................................................................. 123,615 281,763 ------------ ------------ $ 25,009,222 $ 46,352,744 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt......................................................................... $ 88,720 $ 1,154,612 Current maturities of long-term debt.................................................... 840,907 484,657 Accounts payable........................................................................ 1,963,484 1,613,753 Income taxes payable.................................................................... 128,250 15,002 Due to related company (Note D)......................................................... 39,969 -- Accrued compensation.................................................................... 2,053,797 1,934,268 Other accrued expenses.................................................................. 1,020,479 1,037,080 ------------ ------------ Total current liabilities............................................................. 6,135,606 6,239,372 Long-term debt, less current maturities................................................... 3,892,766 381,186 Other liabilities......................................................................... 1,087,056 800,430 Deferred income taxes..................................................................... 80,600 80,600 ------------ ------------ Total liabilities..................................................................... 11,196,028 7,501,588 ------------ ------------ Stockholders' Equity (Note D and F): Common stock, par value $.01 per share; authorized 20,000,000 shares; issued and outstanding 5,738,018 shares at February 28, 1995 and 7,794,860 shares at November 30, 1995................................................................................... 57,380 77,949 Additional paid-in capital.............................................................. 7,484,453 29,012,926 Notes receivable -- common stock........................................................ (15,000) (45,000) Retained earnings....................................................................... 6,286,361 9,805,281 ------------ ------------ 13,813,194 38,851,156 ------------ ------------ $ 25,009,222 $ 46,352,744 ------------ ------------ ------------ ------------ See notes to consolidated financial statements. F-3 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 1994 AND 1995 (UNAUDITED) - -------------------------------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED NOVEMBER 30, NOVEMBER 30, ----------------------- ------------------------ 1994 1995 1994 1995 ---------- ----------- ----------- ----------- Revenues...................................................................... $9,228,737 $11,223,139 $26,117,849 $33,687,570 Cost of revenues.............................................................. 4,737,315 5,880,516 13,271,081 17,545,989 ---------- ----------- ----------- ----------- Gross profit............................................................ 4,491,422 5,342,623 12,846,768 16,141,581 Operating expenses: Selling..................................................................... 250,653 392,631 768,558 1,106,824 General and administrative.................................................. 2,849,984 3,083,198 7,778,538 9,435,809 Provision for bad debts..................................................... 46,475 78,300 131,825 197,515 ---------- ----------- ----------- ----------- 3,147,112 3,554,129 8,678,921 10,740,148 ---------- ----------- ----------- ----------- Operating income........................................................ 1,344,310 1,788,494 4,167,847 5,401,433 ---------- ----------- ----------- ----------- Nonoperating expense (income): Interest expense............................................................ 64,325 86,443 194,364 335,910 Interest income............................................................. (8,807) (106,064) (31,023) (153,637) Other....................................................................... (9,251) (3,560) (10,059) 23,240 ---------- ----------- ----------- ----------- 46,267 (23,181) 153,282 205,513 ---------- ----------- ----------- ----------- Income before income taxes.............................................. 1,298,043 1,811,675 4,014,565 5,195,920 Income tax expense (Note D and E)............................................. 502,000 707,000 1,548,000 1,677,000 ---------- ----------- ----------- ----------- Net income.................................................................... $ 796,043 $ 1,104,675 $ 2,466,565 $ 3,518,920 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Earnings per common share and dilutive common equivalent share: Primary (Notes D and E)..................................................... $ 0.13 $ 0.15 $ 0.44 $ 0.52 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Fully diluted (Notes D and E)............................................... $ 0.13 $ 0.15 $ 0.42 $ 0.52 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Weighted average number of shares outstanding: Primary..................................................................... 5,925,496 7,542,528 5,639,584 6,735,948 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Fully diluted............................................................... 6,139,228 7,542,528 5,939,713 6,735,948 ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- See notes to consolidated financial statements. F-4 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED NOVEMBER 30, 1994 AND 1995 (UNAUDITED) - -------------------------------------------------------------------------------- 1994 ------------------------------------------------------------------- NOTES COMMON STOCK ADDITIONAL RECEIVABLE ------------------ PAID-IN - COMMON RETAINED SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL --------- ------- ---------- --------- ---------- ----------- Balance, February 28, 1994................................ 5,303,352 $53,034 $4,610,860 $(34,250) $3,029,841 $ 7,659,485 Sale of common stock at $1.88 to $5.00 per share, upon exercise of stock options and warrants................. 16,380 164 48,958 -- -- 49,122 Sale of common stock at $8.00 per share, upon exercise of Class B warrants.................................... 284,803 2,848 2,275,576 -- -- 2,278,424 Issuance of common stock in connection with Con-Test, Inc. acquisition....................................... 116,526 1,165 491,740 -- -- 492,905 Continuing registration costs applied against additional paid-in capital........................................ -- -- (81,730) -- -- (81,730) Other................................................... -- -- -- 19,250 -- 19,250 Net income.............................................. -- -- -- -- 2,466,565 2,466,565 --------- ------- ---------- --------- ---------- ----------- Balance, November 30, 1994................................ 5,721,061 $57,211 $7,345,404 $(15,000) $5,496,406 $12,884,021 --------- ------- ---------- --------- ---------- ----------- --------- ------- ---------- --------- ---------- ----------- 1995 -------------------------------------------------------------------- NOTES COMMON STOCK ADDITIONAL RECEIVABLE ------------------ PAID-IN - COMMON RETAINED SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL --------- ------- ----------- --------- ---------- ----------- Balance, February 28, 1995................................ 5,738,018 $57,380 $ 7,484,453 $(15,000) $6,286,361 $13,813,194 Issuance of common stock in public offering at $12.00 per share, less expenses (Note F)...................... 1,970,000 19,700 21,608,289 -- -- 21,627,989 Sale of common stock at $1.83 to $10.00 per share, upon exercise of stock options and warrants................. 33,600 336 64,503 -- -- 64,839 Issuance of common stock in connection with asset purchase............................................... 2,920 29 22,471 -- -- 22,500 Net issuance of common stock and adjustments in connection with the merger of Aurora Environmental Inc. into ATC Environmental Inc. (Note D)................... 83,452 835 61,719 (30,000) -- 32,554 Common stock recovered in connection with Con-Test, Inc. acquisition (Note B)................................... (33,130) (331) (139,682) -- -- (140,013) Continuing registration costs applied against additional paid-in capital........................................ -- -- (88,827) -- -- (88,827) Net income.............................................. -- -- -- -- 3,518,920 3,518,920 --------- ------- ----------- --------- ---------- ----------- Balance, November 30, 1995................................ 7,794,860 $77,949 $29,012,926 $(45,000) $9,805,281 $38,851,156 --------- ------- ----------- --------- ---------- ----------- --------- ------- ----------- --------- ---------- ----------- See notes to consolidated financial statements. F-5 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED NOVEMBER 30, 1994 AND 1995 (UNAUDITED) - -------------------------------------------------------------------------------- 1994 1995 ---------- ----------- Cash Flows From Operating Activities: Net income............................................................................................ $2,466,565 $ 3,518,920 Adjustments to reconcile net income to net cash from operating activities: Depreciation and leasehold amortization............................................................. 599,789 543,991 Amortization of goodwill and covenants.............................................................. 104,797 304,450 Provision for bad debts............................................................................. 131,825 197,515 Deferred income taxes............................................................................... -- (206,559) Other liabilities................................................................................... -- (281,522) Gain on disposal of fixed assets.................................................................... -- (12,098) Changes in operating assets and liabilities, net of amounts acquired in acquisitions: Accounts receivable and cost in excess of billings on uncompleted contracts....................... (470,246) (3,712,216) Prepaid expenses and other assets................................................................. (243,935) (550,843) Accounts payable and other liabilities............................................................ (39,117) (1,020,947) Income taxes payable.............................................................................. (1,062,386) (113,248) ---------- ----------- Net cash flows from operating activities........................................................ 1,487,292 (1,332,557) ---------- ----------- Cash Flows From Investing Activities: Purchase of Hill International, Inc. Subsidiaries..................................................... -- (2,517,950) Purchase of BSE Management, Inc....................................................................... (745,324) (207,990) Purchase of Con-Test, Inc............................................................................. (2,243,058) (169,044) Purchase of R.E. Blattert and Associates.............................................................. -- (34,375) Purchase of property and equipment.................................................................... (579,085) (711,031) Proceeds from sale of property and equipment.......................................................... -- 13,681 Other................................................................................................. -- (43,320) ---------- ----------- Net cash flows from investing activities........................................................ (3,567,467) (3,670,029) ---------- ----------- Cash Flows From Financing Activities: Proceeds from issuance of long-term debt and notes payable............................................ 2,225,000 2,585,125 Proceeds from issuance of common stock, net of expenses............................................... 2,327,546 21,755,382 Principal payments on long-term debt and notes payable, including capital lease obligations........... (3,739,965) (6,467,167) Payments for continuing registration costs............................................................ (81,730) (88,827) ---------- ----------- Net cash flows from financing activities........................................................ 730,851 17,784,513 ---------- ----------- Net change in cash and cash equivalents....................................................... (1,349,324) 12,781,927 Cash and Cash Equivalents, Beginning of period.......................................................... 1,394,889 1,377,862 ---------- ----------- Cash and Cash Equivalents, End of period................................................................ $ 45,565 $14,159,789 ---------- ----------- ---------- ----------- Supplemental Disclosures of Cash Flow Information: Cash payments for: Interest............................................................................................ $ 194,364 $ 332,797 ---------- ----------- ---------- ----------- Income taxes........................................................................................ $2,661,440 $ 1,646,957 ---------- ----------- ---------- ----------- See notes to consolidated financial statements. F-6 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- NOTE A -- GENERAL PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of ATC Environmental Inc. and its wholly-owned subsidiaries ("ATC" or the "Company"). In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly, in all material respects, the financial position, the results of operations and the cash flows for the periods presented herein. These results of operations are not necessarily indicative of the results to be expected for the full year due to certain seasonality factors and the effects and timing of large service projects. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes included in the Company's financial statements for the fiscal year ended February 28, 1995, which are included in the Company's Annual Report on Form 10-K. NATURE OF BUSINESS ATC is a national environmental consulting and engineering firm providing assessment, monitoring, training, analytical and management services for environmental projects. These services are provided nation-wide through a network of regional offices. Because the Company conducts its operations in a single industry, segment information is not presented. SIGNIFICANT CUSTOMERS Revenues from two customers comprised approximately 9.0% of total revenues during the nine months ended November 30, 1995 as compared to 21.0% for the nine months ended November 30, 1994. CREDIT FACILITIES During the quarter ended August 31, 1995, the Company extended its credit facilities with Atlantic Bank of New York ("Atlantic") to $5,500,000, which had been borrowed by the Company as of September 1995. All outstanding borrowings were repaid from proceeds of the common stock offering in October 1995. The Company did not renew its agreement with Atlantic and is pursuing a new credit line with another bank. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 On March 1, 1996, the Company intends to adopt Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of." Management anticipates that the adoption of SFAS No. 121 will not have a material effect on the Company's financial statements. EARNINGS PER SHARE DATA Earnings per common share and dilutive common equivalent share have been computed by using the weighted average number of shares outstanding during each period. Outstanding dilutive stock warrants and options are included in the computation of weighted average number of shares. RECLASSIFICATIONS Certain reclassifications have been made to the prior period's financial statements to conform to the current years presentation. F-7 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) - -------------------------------------------------------------------------------- NOTE B -- BUSINESS ACQUISITIONS The following acquisitions have been accounted for as purchases. The acquired company's assets and liabilities are included in the accompanying consolidated balance sheet at fair value at the date of purchase. The acquired company's operations subsequent to acquisition are included in the accompanying consolidated statements of operations. HILL BUSINESSES In November 1995 ATC purchased certain assets and assumed certain liabilities of Kaselaan & D'Angelo Associates, Inc., Hill Environmental, Inc. (formerly the environmental division of Gibbs & Hill, Inc.) and Particle Diagnostics, Inc., wholly owned subsidiaries of Hill International, Inc. (collectively the "Hill Businesses"). The Hill Businesses provide environmental consulting and engineering services, including asbestos management, industrial hygiene and indoor air quality consulting, environmental auditing and permitting, environmental regulatory compliance, water and wastewater engineering, solid waste landfill management and analytical laboratory services. Services were provided from operating facilities located in New York City, Boston and Willingboro, New Jersey. ATC will integrate these locations into existing, or new facilities. The purchase price was comprised of: Amounts Paid to Seller: Cash.......................... $ 2,571,950 Letter of credit, net of imputed interest, due April 30, 1996..................... 700,000 Note payable at 8.75% interest, due April 30, 1996......................... 300,000 Liabilities assumed........... 360,543 Direct expenses related to acquisition.................. 113,775 ------------- $ 4,046,268 ------------- ------------- In addition, the company issued to certain selling shareholders, 50,000 stock options to purchase restricted common stock at $13.25 per share as consideration for non compete agreements. The assets and liabilities of the Hill Businesses are included in the accompanying consolidated balance sheet at fair value at the date of purchase. The initial purchase price allocation is summarized as follows: Costs in excess of billings on uncompleted contracts, net of unrealizable amounts......... $ 620,000 Property and equipment........ 175,000 Covenants not to compete...... 37,500 Other assets.................. 30,572 Goodwill...................... 3,183,196 ------------- $ 4,046,268 ------------- ------------- The company is contingently liable to reimburse up to $150,000 of certain facility lease costs if incurred by Hill International, Inc. In November 1995, First Fidelity Bank, N.A. and United Jersey Bank, N.A., (the "Seller Banks"), filed a lawsuit against Hill International Inc. and certain selling shareholders (the "Sellers"), alleging the transaction constituted a default under Seller's loan agreement with the Seller Banks and the transfer of consideration proceeds by Seller following the sale was unlawful. In December 1995, the Seller Banks named ATC a party to the lawsuit, asserting that the Seller Banks still hold a security interest in the assets purchased. The action filed seeks recovery of the assets sold to ATC. F-8 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) - -------------------------------------------------------------------------------- In the Company's opinion, the 'replevin' action filed, is being used by the Seller Banks to obtain a portion of the sale proceeds direct from ATC. If this were to occur, ATC would in turn seek to cancel the letter of credit and note payable or otherwise recover any amounts paid from Sellers. Additional costs incurred, or expected to be incurred, if any, as a result of this action or the contingent facility lease costs, are expected to be accounted for as additional purchase consideration and would not have a material adverse impact on ATC's financial position or future results of operations. CON-TEST, INC. On October 1, 1994, ATC acquired substantially all of the assets and liabilities of Con-Test, Inc. ("Con-Test"), a Massachusetts based environmental consulting and engineering company having branch offices in the New England states, New York and Pennsylvania. On September 28, 1995, the Company served the seller with a notice of set-off pursuant to the purchase agreement. Under this set-off, ATC recovered 33,130 shares of its Common Stock originally issued to the seller, valued at the closing price of the stock at the date of the claim, equal to the net uncollected receivables acquired in the purchase plus certain other costs incurred by ATC. The effect of this transaction on the financial position of ATC was to reduce the recorded net accounts receivable of $461,136, reduce Common Stock and additional paid in capital by a total of $140,013 and to increase goodwill by $321,123. R.E. BLATTERT & ASSOCIATES On January 13, 1995, ATC acquired substantially all of the assets and liabilities of R.E. Blattert & Associates ("Blattert"), an environmental consulting firm having geologic, environmental engineering and water resource expertise with offices in Indiana and Iowa. The seller has guaranteed the net receivables purchased. In addition, the purchase agreement provides for the seller to receive additional purchase consideration up to a maximum of $850,000 over a four-year period based on achieving agreed upon earnings targets. These contingent payments will be recorded as goodwill if subsequently earned. At November 30, 1995, no additional purchase consideration had been earned. MICROBIAL ENVIRONMENTAL SERVICES, INC. On January 4, 1995, ATC acquired certain operations of Microbial Environmental Services, Inc. ("MES"). ATC agreed to assume service performance obligations under certain contracts and a lease obligation of MES. In consideration, MES assigned accounts receivable to ATC. ATC additionally purchased certain field and laboratory equipment from MES and paid a finder's fee to an unrelated party. NOTE C -- PROPERTY AND EQUIPMENT Property and equipment is comprised of the following: NOVEMBER FEBRUARY 28, 30, 1995 1995 ------------ ----------- Office equipment................................... $ 2,086,889 $ 2,672,326 Laboratory and field equipment..................... 3,007,651 3,217,224 Transportation equipment........................... 223,397 235,584 Leasehold improvements............................. 537,698 608,729 ------------ ----------- 5,855,635 6,733,863 Less accumulated depreciation...................... (2,704,349) (3,235,120) ------------ ----------- $ 3,151,286 $ 3,498,743 ------------ ----------- ------------ ----------- F-9 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) - -------------------------------------------------------------------------------- NOTE D -- MERGER OF ATC AND AURORA ATC and its parent, Aurora Environmental Inc. ("Aurora") were merged pursuant to an agreement (the "Merger Agreement") approved by a majority of shareholders of each company on June 29, 1995, with ATC being the surviving corporation. Under the Merger Agreement, ATC exchanged .545 of a share of ATC Common Stock for each of Aurora's 6,131,104 shares of stock outstanding. ATC's common shares held by Aurora of 3,258,000 were cancelled. Actual common shares outstanding increased by 83,452 shares. The merger has been accounted for in a manner similar to a pooling of interests. Under this method of accounting, recorded assets and liabilities of Aurora were combined with those of ATC and the results of operations of ATC and Aurora were combined as of the effective date of the merger. In addition, the intercompany balance between ATC and Aurora was forgiven. As a result of the merger, ATC will be able to utilize Aurora's net operating loss carryforward, which resulted in a one-time reduction of income tax expense of approximately $350,000 ($0.05 per share) that was reflected in the second quarter's operating results. NOTE E -- PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma information sets forth the results of operations of ATC as if the merger of Aurora and ATC's purchase of Con-Test and the Hill Businesses had occurred on March 1, 1994: PRO FORMA PRO FORMA THREE MONTHS ENDED NINE MONTHS ENDED NOVEMBER 30, NOVEMBER 30, ------------------------ ------------------------ 1994 1995 1994 1995 ----------- ----------- ----------- ----------- Revenues.................... $ 9,228,737 $11,223,139 $26,117,849 $33,687,570 Net income.................. $ 460,590 $ 1,306,717 $ 2,556,976 $ 4,312,677 Earnings per share (fully diluted)................... $ 0.07 $ 0.17 $ 0.39 $ 0.62 Weighted average shares (fully diluted)............ 6,787,815 7,542,528 6,640,103 7,003,329 NOTE F -- COMMON STOCK OFFERING On October 10, 1995, the Company filed a Registration Statement with the Securities and Exchange Commission for the sale of 1,800,000 shares of Common Stock of which 1,700,000 were sold by ATC, while the remaining were sold by an officer/director of ATC. On October 30, 1995, the Company sold an additional 270,000 shares to cover over-allotments under the same terms and conditions as the public offering. The Company utilized a portion of the net proceeds of the public offering to repay the debt outstanding under its credit facilities. As of the date of the offering, $5,500,000 was outstanding under these credit facilities. It is anticipated that a substantial portion of the remaining net proceeds of the offering will be utilized to expand the Company's operations through strategic acquisitions of companies with complementary services, products or technologies, as well as through internal expansion. In addition, the net proceeds of the offering will be available for general working capital purposes. F-10 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- ACQUISITION OF ASSETS OF HILL INTERNATIONAL INC. SUBSIDIARIES On November 10, 1995 ATC purchased certain assets and assumed certain liabilities of the subsidiary companies at Hill International, Inc. that provided environmental consulting and engineering services (collectively the "Hill Businesses"). These services include asbestos management, industrial hygiene and indoor air quality consulting, environmental auditing and permitting, environmental regulatory compliance, water and wastewater engineering, solid waste and landfill management, hazardous waste management and analytical laboratory services. The consideration for this acquisition paid to the Seller consisted of $2,571,950 in cash, $1,000,000 in payment obligations (net of inputed interest) due April 1996 and 50,000 stock options. In addition, the Company assumed liabilities of $360,543 and incurred expenses of $113,775. ATC is also contingently liable for $150,000 of certain facility lease costs and could incur other costs in connection with a dispute between Hill International, Inc. and its banks (See Note B to financial statements). The Hill Businesses operated from facilities located in New York City, Boston and Willingboro, New Jersey. The Boston and New York offices will eventually be integrated with ATC's existing operations, and ATC will benefit from other cost-saving measures taken, including the elimination of certain employees previously with the Hill Businesses. COMMON STOCK OFFERING Effective October 1995, the Company sold 1,970,000 shares of common stock at an offering price of $12.00 per share and received $21,628,000 net of underwriting and other related expenses. The Company used $5,500,000 to repay bank debt and will use the remainder to expand the Company's operations through acquisitions and internal growth and for general working capital purposes. MERGER OF AURORA INTO ATC Effective June 29, 1995, ATC Environmental Inc. ("ATC") and its parent, Aurora Environmental Inc. ("Aurora"), were merged pursuant to an agreement approved by the majority of shareholders of each company, with ATC as the surviving corporation (the "Aurora Merger"). Prior to the Aurora Merger, Aurora was a holding company which owned approximately 57% of ATC's outstanding Common Stock and had substantially no other assets. In connection with the merger, each outstanding share of Aurora Common stock was exchanged for .545 shares of ATC Common Stock. ATC issued 3,341,452 shares of ATC Common Stock in exchange for 6,131,104 shares of Aurora's common stock, and issued options and warrants entitling the holders thereof to purchase up to 604,950 shares of ATC Common Stock upon exercise in replacement of previously outstanding options and warrants to purchase Aurora's common stock. ATC common shares held by Aurora of 3,258,000 were cancelled. Actual common shares outstanding increased by 83,452 shares. As a result of the Aurora Merger, ATC anticipates that it will be able to utilize Aurora's net operating loss carryforward to reduce its taxable income and accordingly recorded a one-time reduction in income tax expense of approximately $350,000 ($.05 per share) in the second quarter of fiscal 1996. FY 1995 ACQUISITIONS Con-Test, Inc. -- Effective October 1, 1994, ATC purchased certain assets and assumed certain liabilities of Con-Test, Inc. ("Con-Test") a Massachusetts-based environmental consulting and engineering company with branch offices in Massachusetts, Connecticut, Vermont, Rhode Island, New York and Pennsylvania. Con-Test's primary services included industrial hygiene, environmental and industrial health and safety, and lead-based paint management. It also maintained an analytical laboratory and had developed F-11 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------- a line of environmental facilities management software used by several industrial firms and federal government agencies. Immediately upon acquiring the assets of Con-Test, the Company instituted several cost-saving measures, including the elimination of certain employees and facilities, to improve Con-Test's operations and integrate it with the existing operations of the Company. Microbial Environment Services, Inc. -- On January 4, 1995, ATC agreed to assume the service performance obligations under certain contracts of Microbial Environmental Services, Inc. ("MES"). MES was engaged in the business of remediation of contaminated soils and water utilizing enhanced naturally occurring biological processes. The services provided by MES also included assessment of contaminated properties, design of bio-remediation systems, management of bio-remediation projects and monitoring of compliance with clean up standards. R.E. Blattert and Associates -- On January 13, 1995, ATC acquired certain assets and assumed certain specified liabilities of R.E. Blattert and Associates ("R.E. Blattert"). R.E. Blattert's main area of expertise was in groundwater resource management. RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED NOVEMBER 30, 1994 Revenues in the three months ended November 30, 1995 increased 21.6% to $11,223,139, compared with $9,228,737 in the three months ended November 30, 1994. This increase was primarily attributable to the positive effect of acquisitions completed during the second half of fiscal 1995 and from the acquisition of the Hill Businesses in November 1995. During the three months ended November 30, 1995, increased revenues from certain existing operations were largely offset by lower revenues due to the completion of certain work for a significant customer. Revenues in the three months ended November 30, 1995 from ATC's branch offices having comparable operations in the three months ended November 30, 1994 increased 10.8% to $8,302,979, compared with $7,496,764 in the three months ended November 30, 1994. If revenues from certain large projects for two significant customers discussed below are eliminated in each period, ATC's revenues from existing branch offices having comparable operations would have increased 16.0% to $7,213,089 in the three months ended November 30, 1995, compared with $6,217,144 in the three months ended November 30, 1994. In the three months ended November 30, 1995, ATC continued to penetrate its existing markets and benefitted from the acquisitions of certain assets of the Hill Businesses, Con-Test, MES and R.E. Blattert. Revenues attributable to operations resulting from these acquisitions totaled $2,920,160, or 26.0% of revenues, for the three months ended November 30, 1995. Revenues in the three months ended November 30, 1995 earned directly from the New York City School Construction Authority (the "NYCSCA") decreased 4.3% to $858,257, compared with $896,754 in the three months ended November 30, 1994. As a percentage of revenues, revenues from the NYCSCA decreased to 7.6% in the three months ended November 30, 1995, compared with 9.7% in the three months ended November 30, 1994. Revenues in the three months ended November 30, 1995 from the Army Corps of Engineers (the "Corps") decreased 39.5% to $231,633, compared with $382,866 in the three months ended November 30, 1994. As a percentage of revenues, revenues from the Corps decreased to 2.0% in the three months ended November 30, 1995, compared with 4.1% in the three months ended November 30, 1994. The Company's revenues from the Corps relate to certain asbestos management services and decreased due to the completion of most phases of the current project during the first nine months of fiscal 1996. Revenues from the Corps are expected to continue at current levels for the remainder of fiscal 1996 and work on this project is F-12 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------- expected to continue through 1999 as part of the federal Base Realignment and Closure project. However, no assurance can be made as to the amount of revenues, if any, that ATC will receive from the Corps in the future once current projects are completed. Gross profit in the three months ended November 30, 1995 increased 12.8% to $5,342,623, compared with $4,491,422 in the three months ended November 30, 1994. Gross margin decreased to 47.6% in the three months ended November 30, 1995, compared with 48.7% in the three months ended November 30, 1994. ATC's gross margin decreased due to higher subcontract and project costs. The gross margin for the quarter ended November 30, 1994 was higher than normal due to the profitability level of several large, high margin projects. Operating expenses in the three months ended November 30, 1995 increased 12.9% to $3,554,129, compared with $3,147,112 in the three months ended November 30, 1994. Operating expenses decreased as a percentage of revenues to 31.7% in the three months ended November 30, 1995, compared with 34.1% in the three months ended November 30, 1994. The decrease in operating expenses as a percentage of revenue is the result of ATC's ability to service its greater revenue levels without corresponding increases in fixed and administrative costs. Employee costs increased only 12.9% to $1,873,895, or 16.7% of revenues, in the three months ended November 30, 1995 compared with $1,659,734, or 18.0% of revenues, in the three months ended November 30, 1994. These increases in total cost were due to employees hired in connection with the expansion of ATC's operations. Other increases in operating expenses resulted from higher facility costs and administrative expenses resulting from the growth in operations and increased employee levels. Additionally, in the three months ended November 30, 1995, amortization of goodwill and intangibles increased to $110,413, compared with $42,695 in the three months ended November 30, 1994 reflecting the additional goodwill amortization resulting from acquisitions. Operating income in the three months ended November 30, 1995 increased 33.0% to $1,788,494, compared with $1,344,310 in the three months ended November 30, 1994. Operating income increased as a percentage of revenues to 15.9% in the three months ended November 30, 1995, compared with 14.6% in the three months ended November 30, 1994. Nonoperating income in the three months ended November 30, 1995 increased to $23,181 compared with nonoperating expenses of $46,267 in the three months ended November 30, 1994. The increase in nonoperating expense (income) is primarily attributable to interest income earned on the net offering proceeds invested in short term investments offset partially by higher interest expenses due to increased borrowings existing prior to the common stock offering. Income tax expense in the three months ended November 30, 1995 was $707,000, compared with $502,000 in the three months ended November 30, 1994. During the three months ended November 30, 1995 and 1994, the Company's effective tax rates were 39.0% and 38.7%, respectively. As a result of the foregoing, net income in the three months ended November 30, 1995 increased 38.8% to $1,104,675, or $0.15 per share on a fully diluted basis, compared with $796,043 or $0.13 per share on a fully diluted basis, in the three months ended November 30, 1994. The fully diluted weighted average number of shares outstanding increased 1,029,767 shares to 7,542,528 shares primarily due to an increase in shares issued from the Common Stock Offering and from shares, options and warrants outstanding as a result of the Aurora merger effective June 29, 1995, the exercise of Class B warrants and the issuance of shares in connection with the acquisition of Con-Test. Net income increased as a percentage of revenues to 9.8% in the three months ended November 30, 1995, compared with 8.6% in the three months ended November 30, 1994. F-13 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------- NINE MONTHS ENDED NOVEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED NOVEMBER 30, 1994 Revenues in the nine months ended November 30, 1995 increased 29.0% to $33,687,570 compared with $26,117,849 in the nine months ended November 30, 1994. This increase was primarily attributable to the positive effect of acquisitions completed during the second half of fiscal 1995 and from the acquisition of the Hill Businesses in November. During the nine months ended November 30, 1995, increased revenues from certain existing operations were offset by lower revenues from a significant customer due to delays in funding for certain projects and the completion of certain work for another significant customer. Revenues in the nine months ended November 30, 1995 from ATC's branch offices having comparable operations in the nine months ended November 30, 1994 increased 4.1% to $25,395,765, compared with $24,385,876 in the nine months ended November 30, 1994. If revenues from certain large projects for two significant customers discussed below are eliminated in each period, ATC's revenues from existing branch offices having comparable operations would have increased 18.3% to $22,352,317 in the nine months ended November 30, 1995, compared with $18,890,467 in the nine months ended November 30, 1994. In the nine months ended November 30, 1995, ATC continued to penetrate its existing markets and benefitted from the acquisitions of certain assets of Con-Test, MES and R.E. Blattert. Revenues attributable to operations resulting from these acquisitions totaled $8,291,805, or 24.6% of revenues, for the nine months ended November 30, 1995. Revenues in the nine months ended November 30, 1995 earned directly from the NYCSCA decreased 24.2% to $2,055,754, compared with $2,711,174 in the nine months ended November 30, 1994. As a percentage of revenues, revenues from the NYCSCA decreased to 6.1% in the nine months ended November 30, 1995, compared with 10.4% in the nine months ended November 30, 1994. During the first quarter of fiscal 1996, delays in the approval of the NYCSCA's program budget and funding requests for the New York City school construction and maintenance program resulted in diminished service levels in asbestos management consulting and testing services and, consequently, lower revenues to ATC under this program. The NYCSCA's construction and maintenance program is ongoing and is expected to continue over a period of years. ATC believes it has established a strong relationship with the NYCSCA and expects to continue to provide asbestos and other industrial hygiene services to the NYCSCA over the next several years; however, no assurance can be made regarding the amount of revenues, if any, that ATC will receive from the NYCSCA in the future once current projects are completed. ATC's revenues under programs such as this one are not predictable and will be dependent upon many factors such as the scope of work necessary at particular sites, budgeting constraints and the timing of projects. Revenues in the nine months ended November 30, 1995 from the Corps decreased 64.5% to $987,694, compared with $2,784,235 in the nine months ended November 30, 1994. As a percentage of revenues, revenues from the Corps decreased to 2.9% in the nine months ended November 30, 1995, compared with 10.7% in the nine months ended November 30, 1994. The Company's revenues from the Corps relates to certain asbestos management services and decreased due to the completion of the larger phases of the project during the nine months ended November 30, 1994. Revenues from the Corps are expected to continue at current levels for the remainder of fiscal 1996 and work on this project is expected to continue through 1999 as part of the federal Base Realignment and Closure project. However, no assurance can be made as to the amount of revenues, if any, that ATC will receive from the Corps in the future once current projects are completed. Gross profit in the nine months ended November 30, 1995 increased 25.6% to $16,141,581, compared with $12,846,768 in the nine months ended November 30, 1994. Gross margin decreased to 47.9% in the nine months ended November 30, 1995, compared with 49.2% in the nine months ended November 30, 1994. ATC's gross margin decreased due to higher subcontract and project costs. The gross margin for the nine months ended November 30, 1994 was higher due to the profitability level of several high margin projects. F-14 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------- Operating expenses in the nine months ended November 30, 1995 increased 23.7% to $10,740,148 compared with $8,678,921 in the nine months ended November 30, 1994. Operating expenses decreased as a percentage of revenues to 31.9% in the nine months ended November 30, 1995, compared with 33.2% in the nine months ended November 30, 1994. The decrease in operating expenses as a percentage of revenue is the result of ATC's ability to service greater revenue levels without corresponding increases in fixed and administrative costs. Employee costs increased 22.4% to $5,474,121, or 16.2% of revenues, in the nine months ended November 30, 1995 compared with $4,473,134, or 17.1% of revenues, in the nine months ended November 30, 1994. These increases in employee costs were due to employees hired in connection with the expansion of ATC's operations. Other increases in operating expenses resulted from higher facility costs, travel and administrative expenses resulting from the growth in operations and increased employee levels. Additionally, in the nine months ended November 30, 1995, amortization of goodwill and intangibles increased to $304,450, compared with $104,797 in the nine months ended November 30, 1994, reflecting the additional goodwill amortization resulting from acquisitions. Operating income in the nine months ended November 30, 1995 increased 29.6% to $5,401,433, compared with $4,167,847 in the nine months ended November 30, 1994. Operating income as a percentage of revenues was 16.0% in the nine months ended November 30, 1995 and 1994. Nonoperating expenses in the nine months ended November 30, 1995 increased 34.1% to $205,513 compared with $153,282 in the nine months ended November 30, 1994. The increase in nonoperating expenses is primarily attributable to higher interest expenses due to increased borrowings offset partially by interest income earned on the net offering proceeds invested in short term investments. Income tax expense in the nine months ended November 30, 1995 was $1,677,000, compared with $1,548,000 in the nine months ended November 30, 1994. The income tax expense reflects a one-time benefit of $350,000 resulting from the merger of Aurora into ATC which will allow ATC to utilize Aurora's net operating loss carryforwards as offsets to its future taxable income. During the nine months ended November 30, 1995, after adjusting for the one-time tax benefit, and the nine months ended November 30, 1994, the Company's effective tax rates were 39.0% and 38.6%, respectively. As a result of the foregoing, net income in the nine months ended November 30, 1995 increased 42.7% to $3,518,920, or $0.52 per share on a fully diluted basis, compared with $2,466,565 or $0.42 per share on a fully diluted basis, in the nine months ended November 30, 1994. Excluding the impact of the one-time tax benefit of $350,000, net income and fully diluted earnings per share would have been $3,168,920 and $0.47, respectively, for the nine months ended November 30, 1995. The fully diluted weighted average number of shares outstanding increased 796,235 shares to 6,735,948 shares primarily due to an increase in shares issued from the Common Stock Offering and from shares, options and warrants outstanding as a result of the Aurora Merger effective June 29, 1995, the exercise of Class B warrants and the issuance of shares in connection with the acquisition of Con-Test. Net income as a percentage of revenues was 10.4% in the nine months ended November 30, 1995, compared with 9.4% in the nine months ended November 30, 1994. LIQUIDITY AND CAPITAL RESOURCES At November 30, 1995, working capital was $25,075,215 compared with working capital of $8,113,738 at February 28, 1995, an increase of $16,961,477. This increase in working capital is primarily a result of the net proceeds of the Common Stock Offering after repayment of outstanding bank debt and ATC's acquisitions of current assets of R.E. Blattert and MES, increases in billed and unbilled receivables and the reduction of current liabilities using long-term borrowings under the Company's revolving credit facility with the Atlantic Bank of New York ("Atlantic"). During the nine months ended November 30, 1995, net cash flows used in operating activities were $1,332,557, primarily due to an increase in billed and unbilled receivables. Net cash flows used in investing activities were $3,670,029, resulting from the acquisitions of the Hill Businesses, Con-Test and R.E. Blattert, F-15 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) - -------------------------------------------------------------------------------- additional contingent purchase obligations in connection with the BSE acquisition and purchases of property and equipment. Net cash flows provided by financing activities were $17,784,513, primarily representing the net offering proceeds of the Common Stock Offering plus the proceeds from a $2,585,125 increase in debt, primarily bank debt under the Company's credit facilities, less payments made on long-term debt and notes payable of $6,467,167. During the nine months ended November 30, 1994, net cash flows provided by operating activities were $1,487,292. Net cash flows used in investing activities were $3,567,467 consisting of the payment to acquire Con-Test plus contingent purchase obligations related to the acquisition of BSE and the purchase of property and equipment. Also during this period, net cash flows from financing activities were $730,851, primarily from issuance of common stock of $2,327,546, most arising from the sale of Class B warrants and proceeds from increased bank debt less principal payments on long-term debt and notes payable of $3,739,965. In fiscal 1995, ATC increased its revolving credit facility with Atlantic to $5,500,000. The Company repaid its outstanding debt under its credit facilities. The credit facilities with Atlantic were not renewed as the Company is negotiating a new credit line. One bank has indicated an interest in extending a $20,000,000 revolving credit facility and the Company is continuing discussions of possible terms and covenants. In October 1995 the Company sold 1,970,000 shares in a common stock offering. The Company utilized a portion of the net proceeds of the offering to repay the debt outstanding under its credit facilities. It is anticipated that a substantial portion of the remaining net proceeds of the offering will be utilized to expand the Company's operations through strategic acquisitions of companies with complementary services, products or technologies, as well as through internal expansion. In addition, the net proceeds of the offering will be available for general working capital purposes. Management believes that as a result of the net proceeds received from the Common Stock Offering and, upon the completion of a new bank credit line agreement, ATC's working capital, and anticipated funds generated internally from operations and the offering will be sufficient to finance ATC's anticipated growth through acquisitions and internal expansion, to make payments as they come due on ATC's completed acquisitions and to meet ATC's short-term and long-term liquidity requirements. ATC may open additional offices in the future at presently undetermined sites based upon potential sales growth and upon a determination of whether or not an office can meet management's profitability objective. In addition, ATC has added regional offices in the recent past as a result of the completion of certain acquisitions and may add additional offices through acquisitions in the future. On March 1, 1996, the Company intends to adopt Statement of Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Management anticipates the adoption of SFAS No. 121 will not have a material effect on the Company's financial statements. F-16 PART II -- OTHER INFORMATION Item 1. LEGAL PROCEEDINGS: FIRST FIDELITY BANK, N.A., ET AL V. HILL INTERNATIONAL, INC. ET AL, Superior Court of New Jersey, Law Division, Burlington County, Docket No. Bur-L-03400-95, filed December 19, 1995. On December 19, 1995, a second amended complaint was filed in the above-entitled action which joined the company as a defendant and included a count against the company seeking recovery of certain assets which the company recently purchased from Hill International, Inc. on the grounds that plaintiff banks hold security interests in the assets and that Hill is in default under the security agreement creating such alleged security interests. The plaintiffs in this action are First Fidelity Bank, N.A. and United Jersey Bank, N.A. The primary defendants are Hill International, Inc. and certain of its subsidiaries, and Irvin Richter, David Richter, Janice Richter and William Doyle. Irvin Richter and David Richter are officers and stockholders of Hill. The company has been involved since its joinder in discussions with the parties in an effort to settle this claim. The company believes that the action will in any case not have a material impact on the company's financial position or income for the reasons stated in Note B to the financial statements hereto. Item 2. CHANGES IN SECURITIES: Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES: Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: On December 14, 1995, ATC held its annual meeting of stockholders at which time the following individuals were re-elected as directors by the votes indicated. NAME VOTES FOR VOTES AGAINST ------------------------------------- ---------- ------------- George Rubin 5,697,705 28,416 Morry T. Rubin 5,697,694 28,207 Richard L. Pruitt 5,697,594 28,203 Richard S. Greenberg, Esq. 5,697,526 30,375 Julia S. Heckman 5,697,634 28,267 In addition, ATC's stockholders approved an amendment to the 1933 Incentive and Non- Qualified Stock Option Plan increasing the number of shares covered by the Plan from 200,000 shares to 500,000 shares by a vote of 5,566,781 in favor, 95,920 against and 32,519 abstaining. Item 5. OTHER INFORMATION: Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: 11 -- Computation of Earnings Per Share Three months and nine months ended November 30, 1995 (Unaudited) 27 -- Financial Data Schedule November 30, 1995 (Unaudited) (b) Reports on Form 8-K: A Form 8-K dated November 10, 1995 - date of earliest event reported - was filed during the three months ended November 30, 1995. F-17 ATC ENVIRONMENTAL INC. 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. ATC ENVIRONMENTAL, INC. -------------------- (Registrant) Dated: January 15, /s/ MORRY F. RUBIN 1996 -------------------- MORRY F. RUBIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Dated: January 15, /s/ RICHARD L. 1996 PRUITT -------------------- RICHARD L. PRUITT, VICE PRESIDENT AND PRINCIPAL ACCOUNTING OFFICER F-18 EXHIBIT 11 ATC ENVIRONMENTAL INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED) - -------------------------------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- -------------------------- NOVEMBER 30, NOVEMBER 30, -------------------------- -------------------------- 1994 1995 1994 1995 ------------ ------------ ------------ ------------ PRIMARY EARNINGS PER SHARE: Weighted average number of shares of common stock outstanding........................................... 5,613,016 6,738,257 5,413,501 6,091,458 Additional shares assuming exercise of dilutive stock options and stock warrants............................ 312,480 804,271 226,083 644,490 ------------ ------------ ------------ ------------ Total average common and common equivalent shares outstanding....................................... 5,925,496 7,542,528 5,639,584 6,735,948 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income............................................... $ 796,043 $ 1,104,675 $ 2,466,565 $ 3,518,920 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Earnings per common and dilutive common equivalent share................................................... $ 0.13 $ 0.15 $ 0.44 $ 0.52 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ FULLY DILUTED EARNINGS PER SHARE: Weighted average number of shares of common stock outstanding........................................... 5,613,016 6,738,527 5,413,501 6,091,458 Additional shares assuming exercise of dilutive stock options and stock warrants............................ 526,212 804,271 526,212 644,490 ------------ ------------ ------------ ------------ Total average common and common equivalent shares outstanding....................................... 6,139,228 7,542,528 5,939,713 6,735,948 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income............................................... $ 796,043 $ 1,104,675 $ 2,466,565 $ 3,518,920 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Earnings per common and dilutive common equivalent share................................................... $ 0.13 $ 0.15 $ 0.42 $ 0.52 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ F-19