=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form 10-Q/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
__________________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 1-11596
_______
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1954497
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1940 N.W. 67th Place, Gainesville, FL 32653
(Address of principal executive offices) (Zip Code)
(352)373-4200
(Registrant's telephone number)
N/A
__________________________________________________
(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
____ ____
Indicate the number of shares outstanding of each of the
Issuer's classes of Common Stock, as of the close of the latest
practical date.
Outstanding at November 12, 1998
Class 12,270,093
_____ ________________________________
(excluding 920,000 shares
Common Stock, $.001 Par Value held as treasury stock)
______________________________ ________________________________
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PART I, ITEM 1
The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes the
disclosures which are made are adequate to make the information
presented not misleading. Further, the consolidated financial
statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations as
of and for the periods indicated.
It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
The results of operations for the nine months ended
September 30, 1998, are not necessarily indicative of results to be
expected for the fiscal year ending December 31, 1998.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
ASSETS
Current assets:
Cash and cash equivalents $ 827 $ 314
Restricted cash equivalents
and investments 112 321
Accounts receivable, net of
allowance for doubtful accounts
of $308 and $374, respectively 5,363 5,282
Insurance claim receivable - 1,475
Inventories 124 119
Prepaid expenses 745 567
Other receivables 15 70
Assets of discontinued operations 471 587
_________ ________
Total current assets 7,657 8,735
Property and equipment:
Buildings and land 5,714 5,533
Equipment 8,822 7,689
Vehicles 1,191 1,202
Leasehold improvements 16 16
Office furniture and equipment 968 1,056
Construction in progress 1,351 1,052
_________ ________
18,062 16,548
Less accumulated depreciation (6,284) (5,564)
_________ ________
Net property and equipment 11,778 10,984
Intangibles and other assets:
Permits, net of accumulated
amortization of $1,021 and
$831, respectively 3,688 3,725
Goodwill, net of accumulated
amortization of $706 and
$580, respectively 4,743 4,701
Other assets 540 425
________ ________
Total assets $ 28,406 $ 28,570
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
2
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,852 $ 2,263
Accrued expenses 2,897 3,380
Revolving loan and term note
facility 625 614
Current portion of long-term debt 269 254
Current liabilities of discontinued
operations 628 1,470
_________ _______
Total current liabilities 6,271 7,981
Environmental accruals 405 525
Accrued closure costs 856 831
Long-term debt, less current portion 2,119 3,997
Long term liabilities of discontinued
operations 2,839 3,042
_________ _______
Total long-term liabilities 6,219 8,395
Commitments and contingencies
(see Note 4) - -
Stockholders' equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized,
9,850 and 6,850 shares issued
and outstanding, respectively - -
Common Stock, $.001 par value;
50,000,000 shares authorized,
13,181,107 and 12,540,487
shares issued, including
920,000 shares held as
treasury stock 13 12
Redeemable warrants 140 140
Additional paid-in capital 39,364 35,271
Accumulated deficit (21,831) (21,459)
________ _______
17,686 13,964
Less Common Stock in treasury at
cost; 920,000 shares issued
and outstanding (1,770) (1,770)
________ _______
Total stockholders' equity 15,916 12,194
________ _______
Total liabilities and
stockholders' equity $ 28,406 $ 28,570
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
3
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
_________________ ________________
Amounts in Thousands,
Except for Share Amounts) 1998 1997(1) 1998 1997(1)
___________________________________________________________________
Net revenues $ 8,065 $ 6,921 $22,291 $19,368
Cost of goods sold 5,292 4,630 15,317 13,492
_______ _______ _______ _______
Gross profit 2,773 2,291 6,974 5,876
Selling, general and admin-
istrative expenses 1,708 1,347 4,942 4,072
Depreciation and amortiza-
tion 531 490 1,566 1,487
_______ _______ _______ _______
Income from operations 534 454 466 317
Other income (expense):
Interest income 10 11 27 31
Interest expense (95) (71) (364) (331)
Other 40 118 172 89
_______ _______ _______ ______
Net income from con-
tinuing operations 489 512 301 106
Loss from discontinued
operations - (355) - (1,308)
_______ _______ _______ _______
Net income (loss) 489 157 301 (1,202)
Preferred Stock dividends 498(2) 896(2) 674(2) 1,170(2)
_______ _______ _______ _______
Net income (loss)
applicable to
Common Stock $ (9)(2) $ (739)(2)$ (373)(2) $(2,372)(2)
======== ========= ========== ========
___________________________________
Basic income (loss) per
common share:
Continuing operations $ - $ (.04) $ (.03) $ (.10)
Discontinued operations - (.03) - (.13)
_______ _______ _______ _______
Net income (loss)
per common share $ - $ (.07) $ (.03) $ (.23)
======= ====== ====== =======
Basic weighted average
common shares out-
standing $12,164 11,090 11,947 10,340
======= ======= ======= =======
<FN>
(1) Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis,
Inc. (See Note 2).
(2) Amounts have been restated from that previously reported to
reflect a stock dividend on Preferred Stock which is
convertible at a discount from market value at the date of
issuance (see Note 3).
</FN>
The accompanying notes are an integral part of these
consolidated financial statements.
4
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
(Amounts in Thousands, _________________
Except for Share Amounts) 1998 1997
_______________________________________________________________
Cash flows from operating activities:
Net income from continuing
operations $ 301 $ 106
Adjustments to reconcile net
loss to cash provided by
operations
Depreciation and amortization 1,566 1,487
Provision for bad debt and
other reserves 30 52
Gain on sale of plant, property
and equipment (12) (1)
Changes in assets and liabilities,
net of effects from business
acquisitions:
Accounts receivable (97) (118)
Prepaid expenses, inventories and
other assets 1,112 913
Accounts payable and accrued
expenses (713) (1,748)
______ ______
Net cash provided by continuing
operations 2,187 691
Net cash used by discontinued operations (903) (1,309)
Cash flows from investing activities:
Purchases of property and equipment, net (1,640) (887)
Proceeds from sale of plant, property
and equipment 14 46
Change in restricted cash, net 196 (67)
Net cash used by discontinued operations (4) (41)
Net cash used in investing activities (1,434) (949)
Cash flows from financing activities:
Repayments of revolving loan and term
note facility (2,028) (1,097)
Principal repayments on long-term debt (186) (645)
Proceeds from issuance of stock 2,915 3,380
Net cash used by discontinued operations (52) (6)
______ ______
Net cash provided by financing
activities 649 1,632
Increase in cash and cash equivalents 499 65
Cash and cash equivalents at beginning of
period, including discontinued operations
of $12 and $8, respectively 326 45
______ ______
Cash and cash equivalents at end of
period, including discontinued
operations of ($2) and ($5),
respectively $ 825 $ 110
___________________________________________________________________
Supplemental disclosure:
Interest paid $ 455 $ 530
Non-cash investing and financing activities:
Issuance of Common Stock for services 230 68
Long-term debt incurred for purchase
of property 330 256
Issuance of stock for payment of
dividends 359 314
<FN>
* Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis,
Inc. (see Note 2).
</FN>
5
The accompanying notes are an integral part of
these consolidated financial statements.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the nine months ended September 30, 1998)
Preferred Stock Common Stock
(Amounts in Thousands, ___________________ __________________
Except for Share Amounts) Shares Amount Shares Amount
_________________________________________________________________________
Balance at December 31, 1997 6,850 - 12,540,487 $ 12
Net income - - - -
Preferred Stock dividend - - - -
Issuance of Common Stock for
Preferred Stock dividend - - 175,825 1
Issuance of Preferred Stock 3,000 - - -
Issuance of Common Stock
for acquisition - - 108,207 -
Issuance of stock for cash
and services - - 165,488 -
Exercise of warrants - - 190,100 -
Option Exercise - - 1,000 -
_____ _______ __________ ________
Balance at September 30, 1998 9,850 $ - 13,181,107 $ 13
Common
Additional Stock
Redeemable Paid-In Accumulated Held in
Warrants Capital Deficit Treasury
_______________________________________________________
$ 140 $ 35,271 $ (21,459) $ (1,770)
- - 301 -
- 383 (673) -
- 358 - -
- 2,653 - -
- 207 - -
- 263 - -
- 228 - -
- 1 - -
________ ________ _________ __________
$ 140 $ 39,364 $ (21,831) $ (1,770)
======== ======== ========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
6
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
Reference is made herein to the notes to consolidated
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
1. Summary of Significant Accounting Policies
The Company's accounting policies are as set forth in the
notes to consolidated financial statements referred to above.
Certain amounts in prior years' consolidated financial
statements have been reclassified to conform to current period
financial statement presentations.
The Company considers all highly liquid investments with
initial maturities of three months or less to be cash equivalents.
Cash equivalents at September 30, 1998, included overnight
repurchase agreements in the approximate amount of $638,000.
Basic income (loss) per share is computed by dividing net
income, after deducting Preferred Stock dividends, by the weighted
average number of common shares outstanding during each period.
Diluted income/(loss) per share was not presented since the
effects of potential common shares would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128"). SFAS 128 establishes new
standards for computing and presenting earnings per share ("EPS").
Specifically, SFAS 128 replaces the presentation of primary EPS
with a presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement for all
entities with complex capital structures. SFAS 128 also requires
a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 was adopted effective December 31, 1997.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("FAS 130") and No. 131, "Disclosure about
Segments of an Enterprise and Related Information," ("FAS 131").
FAS 130 establishes standards for reporting and displaying
comprehensive income, its components and accumulated balances. FAS
131 establishes standards for the way that public companies report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public.
Both FAS 130 and FAS 131 are effective for periods beginning after
December 15, 1997, and must be adopted by the Company by December
31, 1998. FAS 130 has no effect on the Company's financial
statements. The Company has not yet adopted FAS 131. However, the
Company has provided, for informational purposes only, additional
segment information in Note 5 in a format similar to that
previously provided in the Form 10-K.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (FAS 133). FAS
133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure
them at fair value. FAS 133 is effective for periods beginning
after June 15, 1999. Historically, the Company has not entered
into derivative contracts. Accordingly, FAS 133 is not expected to
affect the Company's financial statements.
7
2. Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire occurred
at the Company's subsidiary, Perma-Fix of Memphis, Inc. ("PFM"), a
hazardous waste storage, processing and blending facility, located in
Memphis, Tennessee, which resulted in damage to certain hazardous waste
storage tanks located on the facility and caused certain limited
contamination at the facility. Such occurrence was caused by welding
activity performed by employees of an independent contractor at or near
the facility's hazardous waste tank farm contrary to instructions by PFM.
The facility was non-operational from the date of this event until May
1997, at which time it began limited operations. Until the time of the
incident, PFM operated as a permitted "fuel blending" facility and
serviced a separate class of customers who generated specific waste
streams, each identified by its waste code and specific characteristics.
As the Company's only such "fuel blending" facility, PFM was permitted
to and capable of mixing certain hazardous liquid, semi-solid and solid
waste in a vat which suspended the solids in order to pump the mixture
into a tank. The tanks also contained mixing units which kept the solids
suspended until the mixture could be off-loaded into tanker trucks. As
a result of the damage to the tanks and processing equipment and the
related cost to rebuild this operating unit, the Company decided to
discontinue this line of business, which resulted in PFM's inability to
service and retain the existing customer base. The existing customer
base represented principally manufacturing and service companies whose
operations generated certain semi-solid and solid permitted hazardous
wastes, which as a result of permit and processing limitations could not
be served by other Company facilities. The Company continues to pursue
other markets or activities which may be performed at this facility given
the permit limitations, capital requirements and development of a new
line of business and related customer base. Upon evaluation of the above
business decision, and given the loss of both the existing line of
business and its related customer base, the Company reported the Memphis
segment as a discontinued operation, pursuant to Paragraph 13 of APB 30.
The fuel blending activities were discontinued on the date of the
incident, January 27, 1997. All assets involved in the fuel blending
activities that were not damaged beyond repair in the fire have
subsequently been damaged as a result of the decontamination process.
Accordingly, during the fourth quarter of 1997, the Company recorded a
loss on disposal of discontinued operations of $3,053,000, which included
$1,272,000 for impairment of certain assets and $1,781,000 for the
establishment of certain closure liabilities.
The net loss from discontinued PFM operations for the nine months
ended September 30, 1998, was $378,000 and was recorded against the
accrued closure cost estimate on the balance sheet. The net loss for the
nine months ended September 30, 1997, was $1,308,000 and is shown
separately in the Consolidated Statements of Operations. The Company has
restated the 1997 operating results to reflect these discontinued
operations. The results of the discontinued PFM operations do not
reflect management fees charged by the Company, but do include interest
expense of $54,000 and $180,000 during the nine months ended September
30, 1998 and 1997, respectively, specifically identified to such
operations as a result of such operations incurring debt under the
Company's revolving and term loan credit facility. During March 1998,
the Company received a settlement in the amount of $1,475,000 from its
insurance carrier for the business interruption claim which was recorded
as an insurance claim receivable at December 31, 1997. This settlement
was recognized as a gain in 1997 and thereby reduced the net loss
recorded for the discontinued PFM operations in 1997.
Revenues of the discontinued PFM operations were $794,000 for the
nine months ended September 30, 1998, and $1,514,000 for the nine months
ended September 30, 1997. These revenues are not included in revenues
as reported in the Consolidated Statements of Operation.
Net assets and liabilities of the discontinued PFM operations at the
nine months ended September 30, 1998, and December 31, 1997, in thousands
of dollars, consisted of the following:
8
September 30, December 31,
1998 1997
____________ ___________
Assets of discontinued operations:
Cash and cash equivalents $ (2) $ 12
Restricted cash equivalents and investments 218 214
Accounts receivable, net of allowance
for doubtful accounts $101 and $105,
respectively 241 333
Prepaid expenses and other assets 14 28
_________ ___________
$ 471 $ 587
========= ============
Current liabilities of discontinued operations:
Accounts payable $ 225 $ 277
Accrued expenses 134 259
Accrued environmental costs 227 835
Current portion of long-term debt 42 99
________ ___________
$ 628 $ 1,470
========= ===========
Long-term liabilities of discontinued operations:
Long-term debt, less current portion $ 7 $ 17
Accrued environmental and closure costs 2,832 3,025
_________ ___________
$ 2,839 $ 3,042
========= ==========
The accrued environmental and closure costs, as related to PFM,
total $3,059,000 at September 30, 1998, which includes the
Company's current closure cost estimate of approximately $700,000
for the complete cessation of operations and closure of the
facility ("RCRA Closure") based upon guidelines of the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). A
majority of this liability relates to the discontinued fuel
blending and tank farm operations and will be recognized over the
next three years. Also included in this accrual is the Company's
estimate of the cost to complete groundwater remediation at the
site of approximately $916,000, the future operating losses as the
Company discontinues its fuel blending operations and certain other
contingent liabilities.
3. Restatement of 1997 and 1998 Stockholders' Equity
In March 1997, the Securities and Exchange Commission Staff (the
"Staff") announced its position on accounting for Preferred Stock
which is or may be convertible into Common Stock at a discount from
the market rate at the date of issuance. The Staff's position
pursuant to Emergency Issues Task Force ("EITF") D-60 is that a
Preferred Stock dividend should be recorded for the difference
between the conversion price and the quoted market price of Common
Stock as determined at the date of issuance. Pursuant to EITF D-60
and EITF D-42, the Company restated its 1997 consolidated financial
statements to reflect a dividend of approximately $713,000 related
to the fiscal 1997 sales and subsequent exchanges of Convertible
Preferred Stock ($111,000 related to the second quarter of 1997 and
$602,000 related to the third quarter of 1998) and a dividend of
approximately $195,000 (third quarter of 1997) related to the
various warrants issued in conjunction with the Convertible
Preferred Stock, as further discussed in Note 6 (Series 4 Class D,
Series 5 Class E, Series 6 Class F, and Series 7 Class G Preferred
Stock). Pursuant to EITF D-60 and EITF D-42, the Company restated its
1998 consolidated financial statements to reflect a dividend of
approximately $383,000 related to the fiscal 1998 sale of the Series 10
Class J Convertible Preferred Stock (Series 10 Preferred) discussed in
Note 7. The total dividend to be recognized for the Series 10 Preferred
will be approximately $750,000, with the remaining $367,000 to be
recognized in the fourth quarter of 1998. The impact of the restatements
on the basic income (loss) per common share is shown as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
___________________ __________________
1998 1997 1998 1997
____ _____ ____ _______
Basic Income (Loss) Per Common Share
as Originally Reported $ .03 $ .01 $ - $ (.14)
Basic Loss Per Common Share
as Amended $ - $ (.07) $ (.03) $ (.23)
9
4. Long-Term Debt
Long-term debt consists of the following at September 30,
1998, and December 31, 1997 (in thousands):
September 30, December 31,
1998 1997
____________ ___________
Revolving loan facility dated January 15, 1998,
collateralized by eligible accounts receivables,
subject to monthly borrowing base calculation,
variable interest paid monthly at prime rate
plus 1 3/4% $ 52 $ 1,664
Term loan agreement dated January 15, 1998,
payable in monthly principal installments
of $52, balance due in January 2001,
variable interest paid monthly at prime
rate plus 1 3/4%. 2,083 2,500
Mortgage note agreement payable in quarterly
installments of $15, plus accrued interest
at 10%. Balance due October 1998 secured
by real property. - 61
Various capital lease and promissory note
obligations, payable 1998 to 2002, interest
at rates ranging from 8.0% to 15.9%. 878 640
_________ ________
3,013 4,865
Less current portion of revolving loan and
term note facility 625 614
Less current portion of long-term debt 269 254
_________ ________
$ 2,119 $ 3,997
========= ========
On January 15, 1998, the Company, as parent and guarantor, and all direct
and indirect subsidiaries of the Company, as co-borrowers and cross-guarantors,
entered into a Loan and Security Agreement ("Agreement") with Congress Financial
Corporation (Florida) as lender ("Congress"). The Agreement provides for a term
loan in the amount of $2,500,000, which requires principal repayments based on
a four-year level principal amortization over a term of 36 months, with monthly
principal payments of $52,000. Payments commenced on February 1, 1998, with a
final balloon payment in the amount of approximately $573,000 due on January 14,
2001. The Agreement also provides for a revolving loan facility in the amount
of $4,500,000. At any point in time the aggregate available borrowings under
the facility are subject to the maximum credit availability as determined
through a monthly borrowing base calculation, as updated for certain information
on a weekly basis, equal to 80% of eligible accounts receivable accounts of the
Company as defined in the Agreement. The termination date on the revolving loan
facility is also the third anniversary of the closing date. The Company
incurred approximately $237,000 in financing fees relative to the solicitation
and closing of this loan agreement (principally commitment, legal and closing
fees) which are being amortized over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan both bear
interest at a floating rate equal to the prime rate plus 1 3/4%. The Agreement
also provides for a one time rate adjustment of 1/4%, subject to the Company
meeting certain 1998 performance objectives. The loans also contain certain
closing, management and unused line fees payable throughout the term. The
loans are subject to a 3.0% prepayment fee in the first year, 1.5% in the
second and 1.0% in the third year of the Agreement.
As security for the payment and performance of the Agreement, the Company
granted a first security interest in all accounts receivable, inventory, general
intangibles, equipment and other assets of the Company and subsidiaries, as well
as the mortgage on two (2) of the Company's facilities. The Agreement contains
affirmative covenants including, but not limited to, certain financial statement
disclosures and certifications, management reports, maintenance of insurance and
collateral. The Agreement also contains an adjusted net worth financial
covenant, as defined in the Agreement, of $3,000,000.
10
As of September 30, 1998, the borrowings under the Congress revolving loan
facility totaled $52,000, with borrowing availability of approximately
$3,538,000. The balance under the Congress term loan at September 30, 1998,
was $2,083,000.
During June 1998, the Company entered into a master security agreement and
secured promissory note in the amount of approximately $317,000 for the purchase
and financing of certain capital equipment at the Perma-Fix of Florida, Inc.
facility. The term of the promissory note is for sixty (60) months, at a rate
of 11.58% per annum and monthly installments of approximately $7,000.
As further discussed in Note 2, the long-term debt associated with the
discontinued PFM operation is excluded from the above and is recorded in the
Liabilities of Discontinued Operations total. The PFM debt obligations total
$49,000, of which $42,000 is current.
5. Commitments and Contingencies
Hazardous Waste
In connection with the Company's waste management services, the
Company handles both hazardous and non-hazardous waste which it
transports to its own or other facilities for destruction or disposal.
As a result of disposing of hazardous substances, in the event any
cleanup is required, the Company could be a potentially responsible party
for the costs of the cleanup notwithstanding any absence of fault on the
part of the Company.
Legal
In the normal course of conducting its business, the Company is involved
in various litigation. There has been no material changes in legal proceedings
from those disclosed previously in the Company's Form 10-K for year ended
December 31, 1997, except as disclosed below. The Company is not a party to any
litigation or governmental proceeding which its management believes could result
in any judgements or fines against it that would have a material adverse affect
on the Company's financial position, liquidity or results of operations, other
than as disclosed in the Company's Form 10-K.
As previously disclosed in the Form 10-K, the Company received
correspondence dated January 15, 1998 ("PRP Letter"), from the United States
Environmental Protection Agency ("EPA") that it believes that PFM, a wholly
owned subsidiary of the Company, is a potentially responsible party ("PRP"),
as defined under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), regarding the remediation of the W. & R.
Drum, Inc. ("Drum") site in Memphis, Tennessee, ("Drum Site"), primarily as
a result of acts by a predecessor of PFM prior to the time PFM was acquired by
the Company. In addition, the EPA has advised PFM that it has sent PRP letters
to approximately 50 other PRPs as to the Drum Site. The PRP Letter estimated
the remediation costs incurred by the EPA for the Drum Site to be approximately
$1,400,000 as of November 30, 1997. The EPA has orally informed the Company
that such remediation has been substantially completed as of such date, and
that the EPA believes that PFM supplied a substantial amount of the drums at
the Drum Site. During the second quarter of 1998, PFM and certain other PRPs
began negotiating with the EPA regarding a potential settlement of the EPA's
claims regarding the Drum Site and such negotiations are currently continuing.
During the third quarter of 1998, the Company extended an offer of $225,000
($150,000 payable at closing and the balance payable over a twelve month period)
to settle any potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the settlement offer
will be accepted, however, no assurance can be made that the Company's current
settlement offer will be accepted or that the Company will be able to settle
its claims regarding the Drum Site in an amount and manner which the Company
believes is reasonable. If PFM cannot reach a settlement which PFM believes
is reasonable, it will continue to vigorously defend against the EPA's demand
regarding remediation costs of the Drum Site. If PFM is determined to be liable
for a substantial portion of the remediation cost incurred by the EPA at the
Drum Site, such could have a material adverse effect on the Company.
11
Permits
The Company is subject to various regulatory requirements, including the
procurement of requisite licenses and permits at its facilities. These licenses
and permits are subject to periodic renewal without which the Company's
operations would be adversely affected. The Company anticipates that, once a
license or permit is issued with respect to a facility, the license or permit
will be renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
The Company maintains closure cost funds to insure the proper
decommissioning of its RCRA facilities upon cessation of operations.
Additionally, in the course of owning and operating on-site treatment, storage
and disposal facilities, the Company is subject to corrective action proceedings
to restore soil and/or groundwater to its original state. These activities are
governed by federal, state and local regulations and the Company maintains the
appropriate accruals for restoration. The Company has recorded accrued
liabilities for estimated closure costs and identified environmental remediation
costs.
Discontinued Operations
As previously discussed, the Company made the strategic decision in
February 1998 to discontinue its fuel blending operations at the PFM facility.
The Company has, based upon the best estimates available, recognized accrued
environmental and closure costs in the aggregate amount of $3,059,000. This
liability includes principally, the RCRA closure liability, the groundwater
remediation liability, the potential additional site investigation and remedial
activity which may arise as PFM proceeds with its closure activities and the
Company's best estimate of the future operating losses as the Company
discontinues its fuel blending operations and other contingent liabilities.
Insurance
The business of the Company exposes it to various risks, including claims
for causing damage to property or injuries to persons or claims alleging
negligence or professional errors or omissions in the performance of its
services, which claims could be substantial. The Company carries general
liability insurance which provides coverage in the aggregate amount of
$2 million and an additional $6 million excess umbrella policy and carries
$2 million per occurrence and $4 million annual aggregate of errors and
omissions/professional liability insurance coverage, which includes pollution
control coverage.
The Company also carries specific pollution liability insurance for
operations involved in the Waste Management Services segment. The Company
believes that this coverage, combined with its various other insurance
policies, is adequate to insure the Company against the various types of risks
encountered.
6. Business Segment Information
As discussed in Note 1, in June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 131 ("FAS 131")
"Disclosure about Segments of an Enterprise and Related Information." FAS 131
is effective for periods beginning after December 15, 1997, and must be adopted
by the Company by December 31, 1998. The Company has not yet adopted FAS 131.
However, the Company has provided, for informational purposes only, additional
segment information in a format similar to that previously provided in the Form
10-K.
The Company provides services through two business segments. The Waste
Management Services segment, which provides on-and-off-site treatment, storage,
processing and disposal of hazardous and non-hazardous industrial and
commercial, mixed waste, and wastewater through its five treatment, storage and
disposal facilities ("TSD facilities"); Perma-Fix Treatment Services, Inc.
("PFTS"), Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft. Lauderdale, Inc.
("PFFL"), Perma-Fix of Florida, Inc. ("PFF") and PFM. The Company has discon-
tinued all fuel blending activities at its PFM facility, the principal business
segment for this subsidiary prior to the January 1997 fire and explosion. PFM
currently provides, on a limited basis, an off-site waste storage and transfer
facility and continues to explore other new markets for utilization of this
facility. The Company also provides through this segment: (i) on-site waste
12
treatment services to convert certain types of characteristic hazardous wastes
into non-hazardous waste; and (ii) the supply and management of non-hazardous
and hazardous waste to be used by cement plants as a substitute fuel or raw
material source.
The Company also provides services through the Consulting Engineering
Services segment. The Company provides environmental engineering and regulatory
compliance consulting services through Schreiber, Yonley & Associates in St.
Louis, Missouri, and Mintech, Inc. in Tulsa, Oklahoma. These engineering groups
provide oversight management of environmental restoration projects, air and soil
sampling and compliance reporting, surface and subsurface water treatment design
for removal of pollutants, and various compliance and training activities.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on profit or loss from continuing operations.
The Company accounts for inter-company sales as a reduction of "cost of
goods sold" and therefore such inter-company sales are not included in the
consolidated revenue total.
The Company's segments are not dependent upon a single customer, or a few
customers, and the loss of any one or more of which would not have a material
adverse effect on the Company's segment. During the nine months ended September
30, 1998 and 1997, the Company did not make sales to any single customer that in
the aggregate amount represented more than ten percent (10%) of the Company's
segment revenues.
The table below shows certain financial information by the Company's
segments for nine months ended September 30, 1998 and 1997 and excludes the
results of operations of the discontinued operations. Income (loss) from
operations includes revenues less operating costs and expenses. Marketing,
general and administrative expenses of the corporate headquarters have not been
allocated to the segments. Identifiable assets are those used in the operations
of each business segment, including intangible assets and discontinued
operations. Corporate assets are principally cash, cash equivalents and certain
other assets.
Waste Consulting Corporate
Management Engineering and
Dollars in thousands Services Services Other Consolidated
______________________________________________________________________________
1998
Net revenues from
external customers $ 19,102 $ 3,189 $ - $ 22,291
Inter-company revenues 269 395 - 664
Interest income 26 - 1 27
Interest expense 308 39 17 364
Depreciation and
amortization 1,495 59 12 1,566
Income (Loss) from
continuing operations 1,320 91 (1,110) 301
Identifiable assets 11,080 1,845 15,481 28,406
Capital expenditures,
net 1,916 12 42 1,970
1997
Net revenues from
external customers $ 15,776 $ 3,592 $ - $ 19,368
Inter-company revenues 834 361 - 1,195
Interest income 29 - 2 31
Interest expense 278 20 33 331
Depreciation and
amortization 1,385 86 16 1,487
Income (Loss) from
continuing operations 1,055 33 (982) 106
Identifiable assets 16,211 2,225 12,879 31,315
Capital expenditures,
net 1,122 21 - 1,143
13
7. Stock Issuance
On or about June 30, 1998, the Company issued to RBB Bank
Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 3,000
shares of newly-created Series 10 Class J Convertible Preferred
Stock, par value $.001 per share ("Series 10 Preferred"), at a
price of $1,000 per share, for an aggregate sales price of
$3,000,000. The sale to RBB Bank was made in a private placement
under Section 4(2) of the Securities Act of 1933, as amended (the
"Act") and/or Rule 506 of Regulation D under the Act, pursuant to
the terms of a Subscription and Purchase Agreement, dated June 30,
1998 between the Company and RBB Bank ("Subscription Agreement").
The net proceeds of $2,768,000 from this private placement, after
the deduction for certain fees and expenses, was received by the
Company on July 14, 1998, and has been recorded as a Preferred
Stock Receivable at June 30, 1998. The Company also accrued at
June 30, 1998, approximately $115,000 for certain additional
closing, legal and related expenses. The Series 10 Preferred has
a liquidation preference over the Company's Common Stock, par value
$.001 per share ("Common Stock"), equal to $1,000 consideration per
outstanding share of Series 10 Preferred (the "Liquidation Value"),
plus an amount equal to all unpaid and accrued dividends thereon.
The Series 10 Preferred accrues dividends on a cumulative basis at
a rate of four percent (4%) per annum of the Liquidation Value
("Dividend Rate"), and is payable semi-annually within ten (10)
business days after each subsequent June 30 and December 31 (each
a "Dividend Declaration Date"), and shall be payable in cash or
shares of the Company's Common Stock at the Company's option. The
first Dividend Declaration Date shall be December 31, 1998. No
dividends or other distributions may be paid or declared or set
aside for payment on the Company's Common Stock until all accrued
and unpaid dividends on all outstanding shares of Series 10
Preferred have been paid or set aside for payment. Dividends may be
paid, at the option of the Company, in the form of cash or Common
Stock of the Company. If the Company pays dividends in Common
Stock, such is payable in the number of shares of Common Stock
equal to the product of (a) the quotient of (i) the Dividend Rate
divided by (ii) the average of the closing bid quotation of the
Common Stock as reported on the NASDAQ for the five trading days
immediate prior to the date the dividend is declared, times (b) a
fraction, the numerator of which is the number of days elapsed
during the period for which the dividend is to be paid and the
denominator of which is 365.
The holder of the Series 10 Preferred may convert into Common
Stock any or all of the Series 10 Preferred on and after 180 days
after June 30, 1998 (December 28, 1998). The conversion price per
outstanding share of Preferred Stock ("Conversion Price") is
$1.875; except that if the average of the closing bid price per
share of Common Stock quoted on the NASDAQ (or the closing bid
price of the Common Stock as quoted on the national securities
exchange if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange)
for the five (5) trading days immediately prior to the particular
date on which the holder notified the Company of a conversion
("Conversion Date") is less than $2.34, then the Conversion Price
for that particular conversion shall be eighty percent (80 %) of
the average of the closing bid price of the Common Stock on the
NASDAQ (or if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange
then eighty percent (80%) of the average of the closing bid price
of the Common Stock on the national securities exchange) for the
five (5) trading days immediately prior to the particular
Conversion Date. As of June 30, 1998, the closing price of Common
Stock on the NASDAQ was $1.875 per share.
As part of the of the sale of the Series 10 Preferred, the
Company also issued to RBB Bank (a) a warrant entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock at
an exercise price of $2.50 per share of Common Stock expiring three
(3) years after June 30, 1998 and (b) a warrant entitling the
holder to purchase up to an aggregate of 200,000 shares of Common
Stock at an exercise price of $1.875 per share of Common Stock and
expiring three (3) years after June 30, 1998. Collectively, these
warrants are referred to herein as the "RBB Warrants." The Common
Stock issuable upon the conversion of the Series 10 Preferred and
upon the exercise of the RBB Warrants is subject to certain
registration rights pursuant to the Subscription Agreement.
14
The Company utilized the proceeds received on the sale of
Series 10 Preferred for working capital and to reduce the
outstanding balance of its credit facilities, subject to the
Company reborrowing under such credit facilities.
In connection with the placement of Series 10 Preferred to RBB
Bank, the Company paid fees (excluding legal and accounting) of
$210,000 and issued to (a) Liviakis Financial Communications, Inc.
("Liviakis") for assistance with the placement of the Series 10
Preferred, warrants entitling the holder to purchase up to an
aggregate of 1,875,000 shares of Common Stock, subject to certain
anti-dilution provisions, at an exercise price of $1.875 per share
of Common Stock which warrants may be exercised after January 15,
1999, and which expire after four (4) years; (b) Robert B. Prag,
an executive officer of Liviakis for assistance with the placement
of the Series 10 Preferred, warrants entitling the holder to
purchase up to an aggregate of 625,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants may be
exercised after January 15, 1999, and which expire after four (4)
years; (c) JW Genesis Financial Corporation for assistance with the
placement of the Series 10 Preferred, warrants entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants expire after
three (3) years; and (d) Fontenoy Investments for assistance with
the placement of the Series 10 Preferred, warrants entitling the
holder to purchase up to an aggregate of 350,000 shares of Common
Stock, subject to certain anti-dilution provisions, at an exercise
price of $1.875 per share of Common Stock, which warrants expire
after three (3) years. Under the terms of each warrant, the holder
is entitled to certain registration rights with respect to the
shares of Common Stock issuable on the exercise of each warrant.
As further discussed in Note 3, the Securities and Exchange
Commission Staff (the "Staff") announced its position on the
accounting for Preferred Stock which is convertible into Common
Stock at a discount from the market rate at the date of issuance,
in March of 1997. The Staff's position pursuant to EITF D-60
relating to beneficial conversion features is that a Preferred
Stock dividend should be recorded for the difference between the
conversion price and the quoted market price of Common Stock as
determined at the date of issuance. To comply with this position,
the Company recognized a dividend in the third quarter 1998 of
approximately $383,000 as related to the above discussed Series 10
Preferred.
The total dividend to be recognized for the Series 10 Preferred
will be approximately $750,000, with the remaining $367,000 to be
recognized in the fourth quarter of 1998.
8. Subsequent Events
During October 1998, the Company entered into a master
security agreement and secured promissory note in the amount of
approximately $207,000 for the purchase and financing of certain
capital equipment at the Perma-Fix of Florida, Inc., Perma-Fix of
Ft. Lauderdale, Inc. and Perma-Fix of Dayton, Inc. facilities. The
term of the promissory note is for sixty (60) months, at a rate of
10.52% per annum and monthly installments of approximately $4,000.
On October 14, 1998, the Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's Common Stock
from time to time in open market or privately negotiated
transactions, in accordance with SEC Rule 10b-18. The repurchases
will be at prevailing market prices. The Company will utilize its
current working capital and available borrowings to acquire such
shares.
During November 1998, the Company signed a letter of intent
("Letter") with the shareholders of Chemical Conservation
Corporation (Florida), Chemical Conversation of Georgia, Inc.
(Collectively, "Chem-Con") and Chem-Met Services, Inc. ("Chem-Met")
regarding a potential acquisition of Chem-Con and Chem-Met by the
Company (the "Acquisition"). Chem-Con and Chem-Met generate, on a
consolidated basis, approximately $24 million in revenue, resulting
principally from the collection, treatment, and recycling of
industrial and hazardous waste, including waste oils, water and
miscellaneous solid waste. Chem-Met Services, Inc. treats and
stabilizes inorganic wastes, Chemical Conservation Corporation runs
a Part B-permitted transfer station that also serves as the base
for the private trucking fleet, and Chemical Conservation of
15
Georgia, Inc. recycles solvents and treats hazardous waste.
Pursuant to the terms of the Letter, the aggregate purchase price
for the Acquisition is to be approximately $7.4 million, payable in
Common Stock of the Company based upon the closing price of the
Common Stock on the NASDAQ for the five trading days preceding the
closing date. The Company will also enter into a four (4) year
consulting agreement with a certain executive manager of Chem-Con
and Chem-Met in the approximate aggregate amount of $1.3 million.
The Acquisition is subject to the ability of the parties to, among
other things:
* finalize definitive documents satisfactory to all parties;
* qualify the Acquisition as a pooling of interest transaction,
which means that the merged companies will be treated as if
they had always been combined for accounting and financial
reporting purposes;
* resolve certain issues regarding real property used by
Chem-Con and Chem-Met;
* resolve and quantify certain potential environmental
liabilities of Chem-Con and Chem-Met;
* resolve certain tax treatment issues;
* complete due diligence in a satisfactory manner; and
* obtain approval of the Company's shareholders.
No assurance can be made that the Acquisition will occur.
16
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
Forward-Looking Statements
Certain statements contained with this report may be deemed
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (collectively, the
"Private Securities Litigation Reform Act of 1995"). All
statements in this report other than statements of historical fact
are forward-looking statements that are subject to known and
unknown risks, uncertainties and other factors which could cause
actual results and performance of the Company to differ materially
from such statements. The words "believe," "expect," "anticipate,"
"intend," "will," and similar expressions identify forward-looking
statements. In addition, forward-looking statements contained
herein relate to, among other things, (i) anticipated financial
performance, (ii) ability to comply with the Company's general
working capital requirements, (iii) ability to generate sufficient
cash flow from operations to fund all costs of operations and
remediation of certain formerly leased property in Dayton, Ohio,
and the Company's facility in Memphis, Tennessee, (iv) ability to
remediate certain contaminated sites for projected amounts, (v)
"Year 2000" computer issues, (vi) the government's acceptance of
the Company's offer regarding settlement of claims involving the
Drum Site (as defined), (vii) acquisition of Chem-Met and Chem-Con
(as defined), (viii) the Oak Ridge Contracts (as defined), (ix)
anticipated revenues from the Oak Ridge Contracts and completion of
the scope of work with M&EC (as defined), and all other statements
which are not statements of historical fact. While the Company
believes the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance such
expectations will prove to have been correct. There are a variety
of factors which could cause future outcomes to differ materially
from those described in this report, including, but not limited to,
(i) general economic conditions, (ii) inability to maintain
profitability, (iii) material reduction in revenues, (iv) inability
to collect in a timely manner a material amount of receivables, (v)
increased competitive pressures, (vi) the inability to maintain and
obtain required permits and approvals to conduct operations, (vii)
the inability to develop new and existing technologies in the
conduct of operations, (viii) overcapacity in the environmental
industry, (ix) discovery of additional contamination or expanded
contamination at a certain Dayton, Ohio, property formerly leased
by the Company or the Company's facility at Memphis, Tennessee,
which would result in a material increase in remediation
expenditures, (x) changes in federal, state and local laws and
regulations, especially environmental regulations, or
interpretation of such, (xi) potential increases in equipment,
maintenance, operating or labor costs, (xii) management retention
and development, (xiii) the requirement to use internally generated
funds for purposes not presently anticipated, (xiv) inability to
settle on reasonable terms certain claims made by the federal
government against a certain subsidiary of the Company that is a
potentially responsible party for clean up costs incurred by the
government in remediating certain sites owned and operated by
others and (xv) inability or failure to convert the computer
systems of the Company's key suppliers, customers, creditors and
financial services organizations, in order to be "Year 2000"
compliant, (xvi) inability to complete acquisitions of Chem-Met and
Chem-Con because of failure to comply with one or more of the
conditions precedent to the acquisition, (xvii) inability of the
Company and M&EC to finalize the scope of work documents relating
to the Oak Ridge Contracts, (xviii) inability of the Company and
M&EC to design and construct the required processing equipment in
connection with the Oak Ridge Contracts, (xix) the actual volume of
waste to be received under the Oak Ridge Contracts will not meet
the expected totals as presented by the DOE (as defined), (xx) a
determination that the amount of work to be performed by the
Company under the Oak Ridge Contracts is less than anticipated, and
(xxi) the inability of the Company to perform the work assigned to
it under the Oak Ridge Contracts in a profitable manner. The
Company undertakes no obligations to update publicly any forward-
looking statement, whether as a result of new information, future
events or otherwise.
17
Results of Operations
The table below should be used when reviewing management's
discussion and analysis for the three and nine months ended
September 30, 1998 and 1997:
Three Months Ended
September 30
________________________________________
Consolidated 1998 % 1997(1) %
______________ ______ _____ ________ _____
Net Revenues $8,065 100.0 $ 6,921 100.0
Cost of Goods Sold 5,292 65.6 4,630 66.9
______ _____ _______ _____
Gross Profit 2,773 34.4 2,291 33.1
Selling, General &
Administrative 1,708 21.2 1,347 19.5
Depreciation/
Amortization $ 531 6.6 $ 490 7.1
______ _____ _______ _____
Income (Loss)
from Operations $ 534 6.6 $ 454 6.5
====== ===== ======= =====
Loss from discon-
tinued Operations $ - - $ (355) (5.1)
Interest Expense (95) (1.2) (71) (1.0)
Preferred Stock
Dividends (498)(2) (6.2) (896)(2) (12.9)
Nine Months Ended
September 30
________________________________________
1998 % 1997(1) %
_______ _____ ________ _____
$22,291 100.0 $19,368 100.0
15,317 68.7 13,492 69.7
_______ _____ _______ _____
6,974 31.3 5,876 30.3
4,942 22.2 4,072 21.0
$ 1,566 7.0 $ 1,487 7.7
_______ _____ _______ _____
$ 466 2.1 $ 317 1.6
======= ===== ======= =====
$ - - $(1,308) (6.8)
(364) (1.6) (331) (1.7)
(674)(2) (3.0) (1,170)(2) (6.0)
<FN>
(1) Amounts have been restated from that previously reported to
reflect the discontinued operations at PFM (see Note 2).
(2) Amounts have been restated from that previously reported to
reflect a stock dividend on Preferred Stock which is
convertible at a discount from market value at the date of
issuance (see Note 3).
</FN>
Summary Three and Nine Months Ended September 30, 1998 and 1997
The Company provides services through two business segments.
The Waste Management Services segment is engaged in on-and off-site
treatment, storage, disposal and processing of a wide variety of by-
products and industrial, hazardous and mixed hazardous and low level
radioactive wastes. This segment competes for materials and
services with numerous regional and national competitors to provide
comprehensive and cost-effective Waste Management Services to a wide
variety of customers located throughout the continental United
States. The Company operates and maintains facilities and businesses
in the waste by-product brokerage, on-site treatment and
stabilization, and off-site blending, treatment and disposal
industries. The Company's Consulting Engineering segment provides a
wide variety of environmental related consulting and engineering
services to industry and government. Through the Company's wholly-
owned subsidiaries in Tulsa, Oklahoma and St. Louis, Missouri, the
Consulting Engineering segment provides oversight management of
environmental restoration projects, air and soil sampling, compliance
reporting, surface and subsurface water treatment design for removal
of pollutants, and various compliance and training activities.
Consolidated net revenues increased $1,144,000 for the quarter
ended September 30, 1998, as compared to the quarter ended
September 30, 1997. This increase of 16.5% is attributable to the
Waste Management Services segment which experienced an increase in
revenues of $1,278,000, partially offset by a decrease in revenues
from the Consulting Engineering segment. The increase in the Waste
Management Services segment is the result of the growth in the
wastewater and mixed waste markets. The most significant increases
occurred at the PFF facility, which recognized a $783,000 increase
resulting principally from the completion of various mixed waste
contracts, the PFTS facility, which recognized a $260,000 increase
due to the increased processing capacities at this facility, and the
18
PFFL facility, which recognized a $485,000 increase resulting
principally from increased services within the cruise ship industry
and other remedial contracts completed. Consolidated net revenues
increased to $22,291,000 from $19,368,000 for the nine months ended
September 30, 1998, as compared to the same nine months ended in
1997. This increase of $2,923,000, or 15.1%, is attributable to the
Waste Management Services segment which experienced an increase in
revenues of $3,325,000, partially offset by a decrease in revenues
from the Consulting Engineering segment. The most significant
increases occurred at the PFF facility which recognized a $1,422,000
increase resulting principally from the completion of various mixed
waste contracts, the PFTS facility, which recognized an $837,000
increase due to the increased processing capacities at this deep-well
wastewater disposal facility resulting from a recently completed
upgrade, and the PFFL facility, which recognized a $725,000 increase
resulting principally from growth in services within the cruise ship
industry. This increase in the Waste Management Services segment was
partially offset by a reduction of $403,000 in the Consulting
Engineering segment. This Consulting Engineering reduction is
principally a result of the completion of several larger contracts in
1997, which were not duplicated in 1998.
Cost of goods sold for the Company increased $662,000, or 14.3%,
for the quarter ended September 30, 1998, as compared to the quarter
ended September 30, 1997. This consolidated increase in cost of
goods sold reflects principally the increased disposal,
transportation and operating costs corresponding to the 16.5%
increase in revenues, as discussed above. The resulting gross profit
for the quarter ended September 30, 1998, increased $482,000 to
$2,773,000, which as a percentage of revenue is 34.4%, reflecting an
increase over the 1997 percentage of revenue of 33.1%. Cost of goods
sold for the Company increased $1,825,000 or 13.5% for the nine
months ended September 30, 1998, as compared to the nine months ended
September 30, 1997. This consolidated increase in cost of goods sold
reflects principally the increased disposal, transportation and
operating costs, corresponding to the 15.1% increase in revenues, as
discussed above. The resulting gross profit for the nine months
ended September 30, 1998, increased $1,098,000 to $6,974,000, which
as a percentage of revenue is 31.3%, reflecting an increase over the
1997 percentage of revenue of 30.3%.
Selling, general and administrative expenses increased $361,000
or 26.8% for the quarter ended September 30, 1998, as compared to the
quarter ended September 30, 1997. As a percentage of revenue,
selling, general and administrative expense also increased to 21.2%
for the quarter ended September 30, 1998, compared to 19.5% for the
same period in 1997. Selling, general and administrative expenses
increased $870,000, or 21.3%, for the nine months ended September 30,
1998, as compared to the nine months ended September 30, 1997. As a
percentage of revenue, selling, general and administrative expense
also increased to 22.2% for the nine months ended September 30, 1998,
compared to 21.0% for the same period in 1997. The increases for
both the quarter and nine months ended September 30, 1998, reflects
the increased expenses associated with the Company's additional sales
and marketing efforts as it continues to refocus its business
segments into new environmental markets, such as nuclear and mixed
waste and the development of certain on-site wastewater services, and
the additional administrative overhead associated with the Company's
research and development efforts, all of which are expensed in the
current period as incurred.
Depreciation and amortization expense for the quarter ended
September 30, 1998, reflects an increase of $41,000 as compared to
the same quarter ended September 30, 1997. This increase is
attributable to a depreciation increase of $23,000 due to capital
improvements being introduced at the Company's transportation,
storage and disposal ("TSD") facilities to improve efficiencies.
Amortization expense reflects a total increase of $18,000 for the
quarter ended September 30, 1998, as compared to the same quarter
1997 due to the increased amortization, resulting from new
capitalized permitting costs. Depreciation and amortization expense
for the nine months ended September 30, 1998, reflects an increase of
$79,000 as compared to the nine months ended September 30, 1997.
This increase is attributable to a depreciation expense increase of
$49,000 due to the capital improvements being introduced at the
Company's TSD facilities to improve efficiencies. Amortization
expense reflects a total increase of $30,000 for the nine months
ended September 30, 1998, as compared to the nine months ended
September 30, 1997, due to the increased amortization, resulting from
new capitalized permitting costs.
19
Interest expense increased $24,000 for the quarter ended
September 30, 1998, as compared to the corresponding period of 1997,
and by $33,000 from the nine months ended September 30, 1998, as
compared to the corresponding period of 1997. The increase in
interest expense during 1998 reflects the additional interest as
incurred on the Congress Financial Corporation (Florida) ("Congress")
term loan, which as a result of the January 1998 refinancing of the
Heller Financial and Ally Capital Corporation debt obligations was
reloaded to an increased balance of $2.5 million. The Congress
revolving loan balance and related interest expense reflected
increases during the first six months of 1998, over the same period
of 1997, which were partially offset by reduced revolving loan
interest expense in the third quarter of 1998, resulting from the
proceeds of the Series 10 Preferred in conjunction with improved
operating cash flow.
The Preferred Stock dividends decreased $496,000 for the nine
months ended September 30, 1998, as compared to the same period of
1997, to a total of $674,000. This decrease is principally a result
of the $908,000 of Preferred Stock dividends recorded during 1997,
relative to the Series 4 and 5 Preferred Stock issued in 1997, as
compared to approximately $383,000 of Preferred Stock dividends
recorded during the third quarter of 1998, relative to the 1998
issuance of the Series 10 Preferred. Also reflected in 1998 is a
full nine months of dividends for the Series 8 and Series 9
Preferred, as compared to three (3) months in 1997, partially offset
by reduced dividends resulting from the conversion of 1500 shares of
Series 3 Preferred during the period May through August of 1997.
Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire
occurred at the PFM facility, a hazardous waste storage, processing
and blending facility, which resulted in damage to certain hazardous
waste storage tanks located on the facility and caused certain
limited contamination at the facility. Such occurrence was caused by
welding activity performed by employees of an independent contractor
at or near the facility's hazardous waste tank farm contrary to
instructions by PFM. The facility was non-operational from the date
of this event until May 1997, at which time it began limited
operations. Until the time of the incident, PFM operated as a
permitted "fuel blending" facility and serviced a separate class of
customers who generated specific waste streams, identified by its
waste code and specific characteristics. As the Company's only such
"fuel blending" facility, PFM was permitted to and capable of mixing
certain hazardous liquid, semi-solid and solid waste in a vat which
suspended the solids in order to pump the mixture into a tank. The
tanks also contained mixing units which kept the solids suspended
until the mixture could be off-loaded into tanker trucks. As a
result of the damage to the tanks and processing equipment and the
related cost to rebuild this operating unit, the Company decided to
discontinue this line of business, which resulted in PFM's inability
to service and retain the existing customer base. The existing
customer base represented principally manufacturing and service
companies whose operations generated certain semi-solid and solid
permitted hazardous wastes, which as a result of permit and
processing limitations could not be served by other Company
facilities. The Company continues to pursue other markets or
activities which may be performed at this facility given the permit
limitations, capital requirements and development of a new line of
business and related customer base. Upon evaluation of the above
business decision, and given the loss of both the existing line of
business and its related customer base, the Company reported the
Memphis segment as a discontinued operation, pursuant to Paragraph 13
of APB 30.
The fuel blending activities were discontinued on the date of
the incident, January 27, 1997. All assets involved in the fuel
blending activities that were not damaged beyond repair in the fire
have subsequently been damaged as a result of the decontamination
process. Accordingly, during the fourth quarter of 1997, the Company
recorded a loss on disposal of discontinued operations of $3,053,000,
which included $1,272,000 for impairment of certain assets and
$1,781,000 for the establishment of certain closure liabilities.
The net loss from discontinued PFM operations for the nine months
ended September 30, 1998, was $378,000 and was recorded against the accrued
closure cost estimate on the balance sheet. The net loss for the nine
months ended September 30, 1997, was $1,308,000 and is shown separately in
20
the Consolidated Statements of Operations. The Company has restated the
1997 operating results to reflect this discontinued operations. The
results of the discontinued PFM operations do not reflect management
fees charged by the Company, but do include interest expense of
$54,000 and $180,000 during the nine months ended September 30, 1998
and 1997, respectively, specifically identified to such operations as
a result of such operations actual incurred debt under the
Corporation's revolving and term loan credit facility. During March
of 1998, the Company received a settlement in the amount of
$1,475,000 from its insurance carrier for the business interruption
claim. This settlement was recognized as a gain in 1997 and thereby
reducing the net loss recorded for the discontinued PFM operations in
1997. Revenues of the discontinued PFM operations were $794,000 for
the nine months ended September 30, 1998, and $1,514,000 for the nine
months ended September 30, 1997. These revenues are not included in
revenues as reported in the Consolidated Statements of Operation.
Liquidity and Capital Resources of the Company
At September 30, 1998, the Company had cash and cash equivalents
of $825,000, including ($2,000) from discontinued operations. This
cash and cash equivalents total reflects an increase of $499,000 from
December 31, 1997, as a result of net cash provided by continuing
operations of $2,187,000 (including the PFM insurance settlement of
$1,475,000), offset by cash used by discontinued operation of
$903,000, cash used in investing activities of $1,434,000
(principally purchases of equipment, net totaling $1,640,000) and
cash provided by financing activities of $649,000 (principally
proceeds from the issuance of stock partially offset by the repayment
of the Company's credit facilities). Accounts receivable, net of
allowances for continuing operations, totaled $5,363,000, an increase
of $81,000 over the December 31, 1997, balance of $5,282,000, which
principally reflects the impact of increased sales during the third
quarter of 1998.
During fiscal year 1997 and 1998 there were numerous events,
many of which were precipitated by the Company, which served to
increase the Company's liquidity on a short term and long term basis.
During 1997, the Company and certain of its subsidiaries (i) sold non
productive assets in the amount of $245,000. (ii) entered into and
received business interruption insurance proceeds for Ft. Lauderdale
facility in the amount of $231,000, (iii) issued Common Stock
pursuant to certain stock purchase agreements and warrant and option
exercises which yielded $751,000, (iv) issued two (2) Series of
Preferred Stock for $2,850,000, (v) received insurance proceeds of
$422,000 as a result of the fire and explosion at PFM; and (vi)
issued $378,000 of Common Stock for outstanding debts.
As detailed below, during 1998 the Company entered into the Loan
Agreement with Congress, pursuant to which (i) the previous loan
arrangements with Heller Financial Corporation ("Heller") and Ally
Capital Corporation ("Ally") were replaced, (ii) the then existing
loan covenant violations of the Company under the Heller and Ally
loan arrangements were eliminated, and (iii) the Company received
increased lending availability. During 1998, the Company also
received insurance proceeds related to the fire and explosion at PFM
in the amount of $1,475,000, issued the Series 10 Preferred for
$3,000,000, and issued $588,863 of Common Stock for outstanding
debts.
On January 15, 1998, the Company, as parent and guarantor, and all
direct and indirect subsidiaries of the Company, as co-borrowers and cross-
guarantors, entered into a Loan and Security Agreement ("Agreement") with
Congress Financial Corporation (Florida) as lender ("Congress"). The
Agreement provides for a term loan in the amount of $2,500,000, which
requires principal repayments based on a four-year level principal
amortization over a term of 36 months, with monthly principal payments of
$52,000. Payments commenced on February 1, 1998, with a final balloon
payment in the amount of approximately $573,000 due on January 14, 2001.
The Agreement also provides for a revolving loan facility in the amount of
$4,500,000. At any point in time the aggregate available borrowings under
the facility are subject to the maximum credit availability as determined
through a monthly borrowing base calculation, as updated for certain
information on a weekly basis, equal to 80% of eligible accounts receivable
accounts of the Company as defined in the Agreement. The termination date
on the revolving loan facility is also the third anniversary of the closing
21
date. The Company incurred approximately $237,000 in financing fees
relative to the solicitation and closing of this loan agreement
(principally commitment, legal and closing fees) which are being amortized
over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan both bear
interest at a floating rate equal to the prime rate plus 1 3/4%. The
Agreement also provides for a one time rate adjustment of 1/4%, subject to
the company meeting certain 1998 performance objectives. The loans also
contain certain closing, management and unused line fees payable throughout
the term. The loans are subject to a 3.0% prepayment fee in the first
year, 1.5% in the second and 1.0% in the third year of the Agreement.
As security for the payment and performance of the Agreement, the
Company granted a first security interest in all accounts receivable,
inventory, general intangibles, equipment and other assets of the Company
and its subsidiaries, as well as the mortgage on two (2) facilities owned
by subsidiaries of the Company. The Agreement contains affirmative
covenants including, but not limited to, certain financial statement
disclosures and certifications, management reports, maintenance of
insurance and collateral. The Agreement also contains an Adjusted Net
Worth financial covenant, as defined in the Agreement, of $3,000,000. Under
the Agreement, the Company, and its subsidiaries are limited to granting
liens on their equipment, including capitalized leases, (other than liens
on the equipment to which Congress has a security interest) in an amount
not to exceed $2,500,000 in the aggregate at any time outstanding.
The proceeds of the Agreement were utilized to repay in full on
January 15, 1998, the outstanding balance of $3,115,000 under the Heller
Loan and Security Agreement which was comprised of a revolving loan and
term loan, and to repay the outstanding balance of $624,000 under the Ally
Equipment Financing Agreements. The Company had borrowing availability
under the Congress Agreement of approximately $1,500,000 as of the date of
closing, based on 80% of eligible accounts receivable accounts. The
Company recorded the December 31, 1997, Heller and Ally debt balances as
though the Congress transaction had been closed as of December 31, 1997.
As a result of this transaction, and the repayment of the Heller and Ally
debt, the combined monthly debt payments were reduced from approximately
$104,000 per month to $52,000 per month. As of September 30, 1998, the
borrowings under the Congress revolving loan facility totaled $52,000, with
borrowing availability of approximately $3,538,000 based on the amount of
outstanding eligible accounts receivable as of September 30, 1998. The
balance under the Congress term loan at September 30, 1998, was $2,083,000.
At September 30, 1998, the Company had $3,013,000 in aggregate
principal amounts of outstanding debt, related to continuing
operations, as compared to $4,865,000 at December 31, 1997. This
decrease in outstanding debt of $1,852,000 principally reflects the
decreased borrowings under the Company's revolving credit facility
($2,028,000) resulting from cash provided by continuing operations
and cash proceeds from the Series 10 Preferred, and the new equipment
financing at the Perma-Fix of Florida, Inc. facility ($317,000),
partially offset by the scheduled principal repayments on the
Company's other credit agreements.
As of September 30, 1998, the Company had $49,000 in aggregate
principal amounts of outstanding debt related to PFM discontinued
operations, of which $42,000 is classified as current.
As of September 30, 1998, total consolidated accounts payable
for continuing operations of the Company was $1,852,000, a reduction
of $411,000 from the December 31, 1997, balance of $2,263,000.
The Company's net purchases of new capital equipment for
continuing operations for the nine month period ended September 30,
1998, totaled approximately $1,970,000, including $330,000 of
financed purchases. These expenditures were for expansion and
improvements to the operations principally within the Waste
Management segment. These capital expenditures were principally
funded by the $1,475,000 PFM insurance settlement, utilization of the
Company's revolving credit facility, internally generated funds, and
other lease financing. The Company had budgeted capital expenditures
of $1,950,000 for 1998, subsequently increase to a level of
approximately $2,100,000 which includes completion of certain current
projects, as well as other identified capital and permit compliance
22
purchases, excluding environmental contingencies as discussed below.
The Company anticipates funding the remainder of its 1998 capital
expenditures by a combination of lease financing with lenders other
than the equipment financing arrangement discussed above, proceeds
from the Series 10 Preferred Stock, and/or internally generated
funds.
On or about June 30,1998, the Company issued 3,000 shares of
newly created Series 10 Class J Convertible Preferred Stock ("Series
10 Preferred"), as further discussed in Note 6 to Consolidated
Financial Statements and Item 2 "Changes in Securities and Use of
Proceeds." The Company received net proceeds of $2,768,000 (after
deduction of the payment of $210,000 for broker's commission and
certain other closing costs, but prior to the Company's legal fees
and other costs in connection with the sale of the Series 10
Preferred and the registration of the Common Stock issuable upon
conversion of such Preferred Stock) for the sale of the Series 10
Preferred. These net proceeds were received by the Company on July
14, 1998, and have been recorded as a Preferred Stock receivable at
June 30,1998. Each share of Series 10 Preferred sold for $1,000 per
share and has a liquidation value of $1,000 per share. The Company
utilized the proceeds received on the sale of Series 10 Preferred for
working capital and/or to reduce the outstanding balance of its
revolving credit facility, subject to the Company reborrowing under
such credit facility.
With the issuance of the Series 10 Preferred, the Company has
outstanding 9,850 shares of Preferred Stock, with each share having
a liquidation preference of $1,000 ("Liquidation Value"). Annual
dividends on the Preferred Stock ranges from 4% to 6% of the
Liquidation Value, depending upon the Series. Dividends on the
Preferred Stock are cumulative, and are payable, if and when declared
by the Company's Board of Directors, on a semi-annual basis.
Dividends on the outstanding Preferred Stock may be paid at the
option of the Company, if declared by the Board of Directors, in cash
or in the shares of the Company's Common Stock as described under
Note 6 of the Consolidated Financial Statements and Item 2 of Part II
hereof. The accrued dividends for the period from January 1, 1998,
through June 30, 1998, on the then outstanding shares of the
Company's Preferred Stock in the amount of approximately $176,000
were paid in July 1998, by the Company issuing 90,609 shares of the
Company's Common Stock. It is the present intention of the Company
to pay any dividends declared by the Company's Board of Directors on
its outstanding shares of Preferred Stock in Common Stock of the
Company.
As of September 30, 1998, there are certain events, which may
have a material impact on the Company's liquidity on a short-term
basis. The Company's Board of Directors has authorized the
repurchase of up to 500,000 share of the Company's Common Stock from
time to time in the open market or privately negotiated transactions,
in accordance with SEC Rule 106-18, which if such shares were
purchased as of the date of the report would result in the
expenditure of approximately $1.0 million in cash, (ii) extended an
offer of $225,000 (payable $150,000 at closing and $75,000 over a
twelve month period) to settle any potential liability regarding the
Drum Site as discussed below, and (iii) signed a letter of intent
regarding potential acquisitions as further discussed in Note 7 to
the Notes to Consolidated Financial Statements. In conjunction with
this proposed acquisition, the Company would fund certain closing
costs and accrued liabilities in amounts yet to be determined. The
Company anticipates funding these activities from cash provided by
continuing operations and borrowings under the Company's revolving
credit facility.
The working capital position of the Company at September 30,
1998, was $1,386,000, as compared to $754,000 at December 31, 1997,
which reflects an increase of $632,000 during this first nine months
of 1998. This increased working capital position is principally a
result of the Series 10 Preferred equity proceeds received in July
1998 and the cash contributions provided by the continuing
operations, partially offset by the fact that the Company reduced its
current liabilities during the first nine months of 1998 by
approximately $1,710,000. The Company also reduced its long-term
liabilities by $2,176,000, to a balance of $6,219,000 at
September 30, 1998.
23
Environmental Contingencies
The Company is engaged in the Waste Management Services segment
of the pollution control industry. As a participant in the on-site
treatment, storage and disposal market and the off-site treatment and
services market, the Company is subject to rigorous federal, state
and local regulations. These regulations mandate strict compliance
and therefore are a cost and concern to the Company. The Company
makes every reasonable attempt to maintain complete compliance with
these regulations; however, even with a diligent commitment, the
Company, as with many of its competitors, may be required to pay
fines for violations or investigate and potentially remediate its
waste management facilities.
The Company routinely uses third party disposal companies, who
ultimately destroy landfill residual materials generated at its
facilities or at a client's site. The Company, compared to its
competitors, disposes of significantly less hazardous or industrial
by-products from its operations due to rendering material non-
hazardous, discharging treated wastewaters to publicly-owned
treatment works and/or processing wastes into saleable products. In
the past, numerous third party disposal sites have improperly managed
wastes and consequently require remedial action; consequently, any
party utilizing these sites may be liable for some or all of the
remedial costs. Despite the Company's aggressive compliance and
auditing procedures for disposal of wastes, the Company could, in the
future, be notified that it is a potentially responsible party
("PRP") at a remedial action site, which could have a material
adverse effect on the Company.
In addition to budgeted capital expenditures of $2,100,000 for
1998 at the TSD facilities of the Company, which are necessary to
maintain permit compliance and improve operations, the Company has
also budgeted for 1998 an additional $1,045,000 in environmental
expenditures to comply with federal, state and local regulations in
connection with remediation of two locations. One location owned by
PFM and the other location leased by a predecessor of another
subsidiary of the Company. The Company has estimated the
expenditures for 1998 to be approximately $210,000 at the site leased
by a predecessor of a subsidiary of the Company and $835,000 at the
PFM location. Additional funds will be required for the next five to
ten years to properly investigate and remediate these sites. The
Company expects to fund these expenses to remediate these two sites
from funds generated internally.
In addition the Company's subsidiary, PFM, has been notified by
the United States Environmental Protection Agency ("EPA") that it
believes that PFM is a PRP regarding the remediation of a drum
reconditioning facility in Memphis, Tennessee, owned by others ("Drum
Site"), primarily as a result of activities by PFM prior to the date
that the Company acquired PFM in December 1993. The EPA has advised
PFM that it has spent approximately $1.4 million to remediate the
Drum Site, and that the EPA has sent PRP letters to approximately 50
other PRPs regarding the Drum Site in addition to PFM. The EPA has
further advised that it believes that PFM supplied a substantial
amount of drums to the Drum Site. The Company is currently
negotiating with the EPA regarding the possibility of settling the
EPA's claims against PFM as to the Drum Site. During the third
quarter of 1998, the Company extended an offer of $225,000 (payable
$150,000 at closing and the balance over a twelve month period) to
settle any potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the
settlement offer will be accepted, however, no assurance can be made
that the Company's current settlement offer will be accepted or that
the Company will be able to settle its claims regarding the Drum Site
in an amount and manner which the Company believes is reasonable. If
PFM is unable to settle such claims by the EPA and PFM is determined
to be liable for all or a substantial portion of the remediation
costs incurred by the EPA at the Drum Site, such could have a
material adverse effect on the Company.
Year 2000 Issues
The staff of the Securities and Exchange Commission has
indicated that each public company should discuss its "Year 2000"
issues. The Year 2000 problem arises because many computer systems
were designed to identify a year using only two digits, instead of
four digits, in order to converse memory and other resources. For
instance, "1997" would be held in the memory of a computer as "97."
24
When the year changes from 1999 to 2000, a two digit system
would read the year as changing from "99" to "00." For a variety of
reasons, many computer systems are not designed to make such a date
change or are not designed to "understand" or react appropriately to
such a date change. Therefore, as the date changes to the year 2000,
many computer systems could completely stop working or could perform
in an improper and unpredictable manner.
The Company has conducted a review of its computer systems to
identify the systems which it anticipated could be affected by the
Year 2000 issue, and the Company believes that all such systems were
already, or have been converted to be, Year 2000 complaint. Such
conversion, when required, did not entail material expenditures by
the Company. Pursuant to the Company's Year 2000 planning, the
Company has requested information regarding the computer systems of
its key suppliers, customers, creditors, and financial service
organizations and has been informed that they are substantially Year
2000 compliant. There can be no assurance, however, that such key
organizations are actually Year 2000 complaint and that the Year 2000
issue will not adversely affect the Company's financial position or
results of operations. The Company believes that its expenditures in
addressing its Year 2000 issues will not have a material adverse
effect on the Company's financial position or results of operations.
25
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1* Congress Financial, Inc. subordination and consent letter
dated June 25, 1998, is incorporated by reference from
Exhibit 4.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.2* Congress Financial, Inc. subordination and consent letter
dated October 16, 1998, is incorporated by reference from
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.3* Congress Financial Corporation (Florida) consent letter
dated October 26, 1998, is incorporated by reference from
Exhibit 4.3 to the Company's Form 10-Q for the quarter
ended September 30, 1998
10.1* Basic Oak Ridge Agreement between East Tennessee Materials
and Energy Corporation (M&EC) and Bechtel Jacobs Company,
LLC No. 1GB-99446V dated June 23, 1998, is incorporated by
reference from Exhibit 10.1 to the Company's Form 10-Q for
the quarter ended September 30, 1998 (Exhibits to this
contract as listed in the index are omitted, but will be
provided to the Commission upon request.)
10.2* Basic Oak Ridge Agreement between East Tennessee Materials
and Energy Corporation (M&EC) and Bechtel Jacobs Company,
LLC No. 1GB-99447V dated June 23, 1998, is incorporated by
reference from Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended September 30, 1998. (Exhibits to this
contract as listed in the index are omitted, but will be
provided to the Commission upon request.)
10.3* Basic Oak Ridge Agreement between East Tennessee Materials
and Energy Corporation (M&EC) and Bechtel Jacobs Company,
LLC No. 1GB-99448V dated June 23, 1998, is incorporated by
reference from Exhibit 10.3 to the Company's Form 10-Q for
the quarter ended September 30, 1998. (Exhibits to this
contract as listed in the index are omitted, but will be
provided to the Commission upon request.)
10.4* General agreement between East Tennessee Materials and
Energy Corporation (M&EC) and Perma-Fix Environmental
Services, Inc. dated May 27, 1998, is incorporated by
reference from Exhibit 10.4 to the Company's Form 10-Q for
the quarter ended September 30, 1998.
10.5* Appendix B to general agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated November 6, 1998, is
incorporated by reference from Exhibit 10.5 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
27** Financial Data Sheet
99.1* Letter of intent Chem-Con/Chem-Met acquisition dated
November 5, 1998, with letter of intent relating to
Chemical Conservation Corporation (Florida) and Chemical
Conservation of Georgia, Inc. and letter of intent relating
to Chem-Met Services, Inc. attached thereto, is
incorporated by reference from Exhibit 99.1 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
________________________________________________________________
<FN>
* Previously filed with Form 10-Q for the quarter ended
September 30, 1998.
**Filed herewith
</FN>
(b) Report on Form 8-K
A current report on Form 8-K (Item 5 - Other Events), dated
June 30, 1998, was filed on July 17, 1998 of (i) the newly-
created Series 10 Preferred Stock and the RBB Series 10
Warrants to RBB Bank, (ii) the Liviakis Warrant to
Liviakis, (iii) the Prag Warrant to Prag, (iv) the Genesis
Warrant to Genesis, and (v) the Fontenoy Warrant to
Fontenoy.
26
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.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Date: January 12, 1999 By: /s/ Louis F. Centofanti
___________________________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
___________________________________
Richard T. Kelecy
Chief Financial Officer
27
EXHIBIT INDEX
Exhibit Page
No. Description No.
_______ ___________ ____
4.1* Congress Financial, Inc. subordination and
consent letter dated June 25, 1998, is
incorporated by reference from Exhibit 4.1
to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.2* Congress Financial, Inc. subordination and
consent letter dated October 16, 1998, is
incorporated by reference from Exhibit 4.2
to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.3* Congress Financial Corporation (Florida)
consent letter dated October 26, 1998, is
incorporated by reference from Exhibit 4.3
to the Company's Form 10-Q for the quarter
ended September 30, 1998.
10.1* Basic Oak Ridge Agreement between East
Tennessee Materials and Energy Corporation
(M&EC) and Bechtel Jacobs Company, LLC No.
No. 1GB-99446V dated June 23, 1998, is
incorporated by reference from Exhibit 10.1
to the Company's Form 10-Q for the quarter
ended September 30, 1998 (Exhibits to this
contract as listed in the index are omitted,
but will be provided to the Commission upon
request.)
10.2* Basic Oak Ridge Agreement between East
Tennessee Materials and Energy Corporation
(M&EC) and Bechtel Jacobs Company, LLC No.
1GB-99447V dated June 23, 1998, is
incorporated by reference from Exhibit 10.2
to the Company's Form 10-Q for the quarter
ended September 30, 1998. (Exhibits to this
contract as listed in the index are omitted,
but will be provided to the Commission
upon request.)
10.3* Basic Oak Ridge Agreement between East
Tennessee Materials and Energy Corporation
(M&EC) and Bechtel Jacobs Company, LLC No.
No. 1GB-99448V dated June 23, 1998, is
incorporated by reference from Exhibit 10.3
to the Company's Form 10-Q for the quarter
ended September 30, 1998. (Exhibits to this
contract as listed in the index are omitted,
but will be provided to the Commission
upon request.)
10.4* General agreement between East Tennessee
Materials and Energy Corporation (M&EC) and
Perma-Fix Environmental Services, Inc. dated
May 27, 1998, is incorporated by reference
from Exhibit 10.4 to the Company's Form
10-Q for the quarter ended September 30,
1998.
10.5* Appendix B to general agreement between East
Tennessee Materials and Energy Corporation
(M&EC) and Perma-Fix Environmental Services,
Inc., dated November 6, 1998, is incorporated
by reference from Exhibit 10.5 to the Company's
Form 10-Q for the quarter ended September 30,
1998.
27** Financial Data Sheet. 29
99.1* Letter of intent Chem-Con/Chem-Met acquisition
dated November 5, 1998, with letter of intent
relating to Chemical Conservation Corporation
(Florida) and Chemical Conservation of Georgia,
Inc. and letter of intent relating to Chem-Met
Services, Inc. attached thereto, is incor-
porated by reference from Exhibit 99.1 to the
Company's Form 10-Q for the quarter ended
September 30, 1998.
______________
<FN>
* Previously filed with Form 10-Q for the quarter ended
September 30, 1998.
**Filed herewith
</FN>