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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to _________________
Commission file number 1-9654
OHM CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-1503050
(State of Incorporation) (I.R.S. Employer Identification Number)
16406 U.S. Route 224 East, Findlay, OH 45840
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 423-3529
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
8% Convertible Subordinated Debentures due October 1, 2006
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 15, 1996, was $193,706,203.
The number of shares of common stock outstanding on March 15, 1996, was
26,718,097 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held May 9, 1996 are incorporated by reference into Part
III.
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OHM CORPORATION
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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ITEM 1. Business 1
ITEM 2. Properties 10
ITEM 3. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of Security Holders 11
EXECUTIVE OFFICERS OF THE REGISTRANT 11
PART II
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ITEM 5. Market for the Registrant's Common Stock and Related Shareholder Matters 14
ITEM 6. Selected Financial Data 15
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
ITEM 8. Financial Statements and Supplementary Data 23
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 40
PART III
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ITEM 10. Directors and Executive Officers of the Registrant 41
ITEM 11. Executive Compensation 41
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 41
ITEM 13. Certain Relationships and Related Transactions 41
PART IV
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ITEM 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K 41
SIGNATURES 47
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PART I
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ITEM 1. BUSINESS
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OVERVIEW
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OHM Corporation, an Ohio corporation, and its predecessors (the
"Company"), is one of the largest providers of technology-based, on- site
hazardous waste remediation services in the United States. The Company has
been in the environmental services business since 1969. The Company has
successfully completed approximately 30,000 projects involving contaminated
groundwater, soil and facilities.
The Company provides a wide range of environmental services, primarily
to government agencies and to large chemical, petroleum, transportation and
industrial companies. The Company has worked for the United States
Environmental Protection Agency ("EPA"), the Department of Defense ("DOD")
(including the U.S. Army Corps of Engineers ("USACE") and the U.S. Departments
of the Air Force, Army and Navy), the Department of Energy ("DOE"), a number of
state and local governments and a majority of the Fortune 100 industrial and
service companies. In addition to its technology-based, on-site remediation
services, the Company also offers a broad range of other services, including
site assessment, engineering, remedial design and analytical testing. Service
is provided through 30 regional offices, one fixed laboratory at its
headquarters in Findlay, Ohio, eight mobile laboratories, and more than 3,000
pieces of mobile treatment and related field equipment.
Since the disposition by the Company in early 1993 of its interest in
OHM Resource Recovery Corp., the operator of a hazardous waste treatment and
disposal facility, the Company does not own or operate any hazardous waste
disposal sites or other off-site waste treatment or disposal facilities. The
Company generally coordinates through licensed subcontractors the
transportation and disposal of any hazardous waste which is not remediated
on-site.
Pursuant to the terms and conditions of an Agreement and Plan of
Reorganization, the Company acquired, on May 30, 1995, through its wholly-owned
subsidiary, OHM Remediation Services Corp. ("OHMR"), substantially all of the
assets and certain liabilities of the environmental remediation services
business of Rust International Inc. ("Rust"), a majority-owned subsidiary of
WMX Technologies, Inc. ("WMX"). To accomplish the acquisition, Rust
transferred prior to the consummation of the transaction certain specified
assets and liabilities relating to its environmental remediation services
business to a wholly-owned subsidiary of Rust. The subsidiary was then merged
into OHMR and the subsidiary's common stock held by Rust was converted into
9,668,000 shares of common stock, par value $0.10 per share ("Common Stock"),
of the Company (the "Acquisition").
In connection with the Acquisition, the Company and WMX entered into a
Guarantee Agreement whereby in exchange for a warrant exercisable for five
years, to purchase 700,000 shares of Common Stock at a price per share of
$15.00, WMX agreed, until May 30, 2000, to guarantee indebtedness of the
Company in an amount not to exceed $62,000,000 which will increase
proportionately up to $75,000,000 upon issuance of shares under the warrants.
In addition, the Company entered into a Standstill and Non-competition
Agreement (the "Standstill Agreement") with WMX and its affiliates. As
contemplated by the Standstill Agreement, three designees of WMX were elected
to the Board of Directors of the Company.
The Company also has an approximately 40% interest in NSC, a provider
of asbestos abatement services.
OHM'S ENVIRONMENTAL REMEDIATION SERVICES
The Company assists its clients by providing comprehensive on-site
treatment of toxic materials and hazardous wastes. By applying a broad range
of biological, chemical, physical, soil vapor extraction and thermal treatment
technologies, the Company performs on-site treatment and remediation services
for the control, detoxification, decontamination, and volume reduction of
hazardous and toxic material. Accordingly, the Company has designed a wide
range of modular mobile treatment equipment, which can be used on-site, either
independently or in a system, for removing, detoxifying, reducing the volume
of, or stabilizing contaminants. This equipment includes thermal destruction
units, dewatering presses, filters, separators, ion exchangers, stripping
systems and mobile process equipment which apply various physical, chemical and
biological technologies to remediate contaminants. Since 1970, the Company has
completed over 30,000 projects throughout the United
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States, cleaning up hazardous wastes, removing toxic chemicals from groundwater
and cleaning facilities of contaminants.
The Company endeavors to offer clients an increasingly broad array of
on-site treatment services, either on a planned or emergency basis, from its 30
regional offices located throughout the country. On-site environmental
remediation services provided by the Company include:
* Treatment, stabilization or removal of contaminants;
* Decontamination of industrial facilities;
* Assessment, characterization and treatment of contaminated soil
and/or groundwater;
* Surface impoundment restoration, including volume reduction,
stabilization and closure of contaminated lagoons;
* Management of underground and above ground storage tanks;
* Design, engineering, fabrication, installation and operation of
on-site treatment equipment; and
* Emergency response to virtually any kind of industrial or
transportation-related accident involving hazardous waste or
materials.
The Company undertakes these projects on both a planned basis, which
is scheduled in advance, and an emergency basis, which is performed in direct
response to spills, fires and industrial accidents. The Company places its
emphasis upon planned work because of its more predictable resource
requirements, and because of its larger potential market. In 1995, planned
projects accounted for approximately 98% of the Company's revenue.
The Company believes that professional project management and cost
accounting systems are key factors in ensuring that projects are accurately and
successfully completed on time and within prescribed cost estimates. The
Company's project management structure combines the various functional areas
performing work at the project, including technical, engineering,
administrative and accounting specialists, into a coordinated team, reporting
directly to the project manager. The project manager's responsibility for
scheduling and project completion allows technical and operations specialists
to operate efficiently with fewer distractions.
The Company also believes that professional project management is a
critical element in limiting the significant risks and potential liabilities
involved in environmental remediation projects due to the presence of hazardous
and toxic substances. The Company has adopted a number of risk management
policies and practices including special employee training and health
monitoring programs. The Company's health and safety staff establish a safety
plan for each project prior to the initiation of work, monitor compliance with
the plan and administer the Company's medical monitoring program to staff
involved. The Company believes that it has an excellent overall health and
safety record.
TREATMENT TECHNOLOGIES
Designing, developing and implementing solutions to environmental
hazards requires an interdisciplinary approach combining practical field
experience with remediation processes and technical skills in fields such as
chemistry, microbiology, hydrogeology, fluid mechanics, thermodynamics, and
geotechnical, biochemical and process engineering. The Company employs
scientific and engineering professionals in the environmental services field
who enhance the Company's ability to effectively participate in larger, more
technically complex remediation projects.
The Company has significant experience in the commercialization and
practical field application of new and existing technologies for the treatment
of hazardous wastes, with emphasis on the further development and application
of existing technologies. To provide direct support for its efforts to place
innovative technology in the field, in 1973, the Company built its own
equipment fabrication facility; in 1978, the Company built a laboratory
dedicated to developing commercial applications of biological treatment of
hazardous wastes; and in 1993, the Company built a treatability laboratory to
support testing and enhancement of a broad range of
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innovative technology applications. In 1986, the Company formally organized
its technology application efforts through the creation of its Technology
Assessment and Commercialization ("TAC") group. The TAC group studies emerging
technologies in the laboratory and, through pilot scale studies, provides
scientific and engineering support for full-scale commercial remediation. The
Company also provides technology development services under contract to its
clients.
The following represent the principal technologies used by the Company
for remediation projects:
* BIOLOGICAL REMEDIATION: The Company's biological treatability
laboratory designs and tests bioremediation techniques for treating
hazardous waste. Biological treatment technologies generally
utilize enhanced microbiological activity to decompose and detoxify
contaminants, often using a site's natural flora to remediate a
problem. The Company's biological laboratories can "feed" the
microorganisms, that destroy the pollutant, so that they grow at a
faster rate than would occur in nature. The Company has developed
considerable expertise in transferring innovative bioremediation
techniques from the laboratory to the field, having performed more
than 100 full-scale bioremediation projects since 1976, and is
considered one of the country's most experienced providers of this
emerging technology. The Company utilizes the following biological
treatment technologies:
Anaerobic Digestion Vessel -- degradation of organic contaminants
in the absence of air.
Trickling Filters -- secondary treatment on large-scale treatment
applications to enhance the oxygenation process.
Activated Sludge Reactor -- treatment utilizing holding tanks to
enhance biological degradation.
Submerged Fixed Reactor Vessel -- combines a trickling filter and
an activated sludge reactor for more efficient degradation of
contaminants.
Aeration Lagoons -- secondary or tertiary treatment to remove
carbon, nitrogen or phosphorous.
* CHEMICAL TREATMENT: The Company's mobile chemical treatment
equipment utilizes the following technologies:
Carbon Adsorption -- passage of a liquid or vapor discharge
stream through a bed of activated carbon which adsorbs certain
contaminants.
Oxidation/Reduction -- conversion of complex components of the
wastestream into simpler, less toxic materials through addition
of oxidizing or reducing agents such as ozone, hydrogen peroxide
and sodium bisulfate.
Clarification/Flocculation -- addition of chemicals which bond
with dissolved metals to form insoluble products which separate
through settling techniques.
Ion-Exchange -- ion-exchange resins used for the selective
removal of heavy metals and hazardous ions.
Ultraviolet Treatment -- use of ultraviolet light to kill
pathogens and weaken strong bonds associated with some organic
chemicals.
* PHYSICAL TREATMENT: The Company's physical treatment technologies
generally involve removal of contaminants through osmosis,
settlement or filtration. The Company's mobile physical treatment
equipment utilizes the following technologies:
Heated Volatile Stripping -- removal of contaminants with low
boiling points by passage of air under pressure through the
wastestream.
Fume Scrubbing -- passage of a vaporized stream through an
aerosol spray to remove contaminant particles from the vapor
stream.
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Immiscible Fraction Separation -- removal of a component of a
wastestream which is immiscible in water through settling
techniques.
Mixed Media Filtration -- removal of suspended particles by
passage through selected filter media.
* SOIL VAPOR EXTRACTION AND SOIL FLUSHING: The Company has applied
several innovative technologies, known generally as soil vapor
extraction and soil flushing, based on a patent granted in 1984 for
a portable method of soil decontamination above or below the
groundwater table. The technologies generally involve the use of a
system of pressurized injection and vacuum extraction wells to
induce a pressure gradient and a fluid flow to extract contaminants
and treat them in-situ or in an aboveground system. The
technologies can be used to remove contaminants in soils and
groundwater, in-situ or ex-situ, and can be combined with
bioremediation to treat mixtures of volatile and non-volatile
contaminants.
* THERMAL TREATMENT: The Company's thermal treatment technologies
include infrared incineration, rotary kiln technology and thermal
desorption. Infrared incineration uses electric powered resistance
heaters as a source of radiant heat for removal and destruction of
hazardous organic contaminants. Rotary kiln incineration is the
traditional incineration process for destroying organic hazardous
waste constituents in a refractory lined rotating kiln. Thermal
desorption is a thermal treatment technology which uses heat to
remove volatile compounds from a waste without oxidation of the
compounds. The Company has established a thermal treatment
engineering group to assess, develop and commercialize thermal
technologies for on-site remediation. The Company provides thermal
treatment services through seven thermal treatment units which can
be moved directly onto a project site involving PCBs or other toxic
organics. The Company has successfully completed eleven large-scale
on-site thermal treatment projects.
FOCUS ON LARGER PROJECTS AND GOVERNMENT CONTRACTS
Recently, the Company has pursued larger projects and term contracts
as a method to achieve more predictable revenue, more consistent utilization of
equipment and personnel, and greater leverage of sales and marketing costs.
Historically, the Company relied most heavily on private sector remediation
projects in the Northeast and Midwest that typically involved planned cleanups
of sites that were contaminated in the normal course of manufacturing activity
and emergency cleanups of oil or chemical spills. Contract values typically
were less than $1 million in size and less than one year in duration. The
Company now targets more complex, multi-million dollar, multi-year private
sector and government site-specific and term contracts. As a result of its
shift in project focus, since the beginning of 1991 the Company has been
awarded a large number of multi-million dollar government term contracts which,
in some cases, may require several years to complete. Although the Company
still performs private sector remediation projects, the Company currently
derives a majority of its revenue from government term contracts and these
larger projects. Larger site-specific projects impose heightened risks of loss
in the event that actual costs are higher than those estimated at the time of
bid due to unanticipated problems, inefficient project management, or disputes
over the terms and specifications of the contracted performance.
Since the beginning of 1991, the Company has been awarded 28
government term contracts, and several large projects, including those acquired
by the Company in connection with the Acquisition, with potential values
ranging from $10 million to $250 million and terms ranging from one to ten
years. Such government term contracts typically are performed by completing
remediation work under delivery orders, issued by the contracting government
entity, for a large number of small-to-medium-sized projects throughout the
geographic area covered by the contract. Such government term contracts do not
represent commitments with respect to the amount, if any, that will actually be
expended pursuant to such contracts, may generally be canceled, delayed or
modified at the sole option of the government, and are subject to annual
funding limitations and public sector budget constraints. Accordingly, such
government contracts represent the potential dollar value that may be expended
under such contracts; therefore, no assurance can be provided that such
amounts, if any, will be actually spent on any projects, or of the timing
thereof.
For the fiscal year ended December 31, 1995, 76% of the Company's
revenue was derived from federal, state and local government contracts. The
Company expects that the percentage of its revenue attributable to such
government clients will continue to represent a significant portion of its
revenue. In addition to its dependence on government contracts, the Company
also faces the risks associated with such contracting, which
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could include substantial civil and criminal fines and penalties. As a result
of its government contracting business, the Company is, has been and may in the
future be subject to audits and investigations by government agencies. In
addition to potential damage to the Company's business reputation, the failure
by the Company to comply with the terms of any of its government contracts
could also result in the Company's suspension or debarment from future
government contracts for a significant period of time. The fines and penalties
which could result from noncompliance with appropriate standards and
regulations, or the Company's suspension or debarment, could have a material
adverse effect on the Company's business, particularly in light of the
increasing importance to the Company of work for various government agencies.
See "Legal Proceedings."
ENVIRONMENTAL CONTRACTOR RISKS
Although the Company believes that it generally benefits from
increased environmental regulations, and from enforcement of those regulations,
increased regulation and enforcement also create significant risks for the
Company. The assessment, remediation, analysis, handling and management of
hazardous or radioactive substances necessarily involve significant risks,
including the possibility of damages or injuries caused by the escape of
hazardous materials into the environment, and the possibility of fines,
penalties or other regulatory action. These risks include potentially large
civil and criminal liabilities for violation of environmental laws and
regulations, and liabilities to customers and to third parties, including
governmental agencies, for damages arising from performing services for
clients, which could have a material adverse effect on the Company.
Potential Liabilities Arising Out of Environmental Laws and
Regulations. All facets of the Company's business are conducted in the context
of a developing and changing statutory and regulatory framework. The Company's
operations and services are affected by and subject to regulation by a number
of federal agencies, including the EPA, the Occupational Safety and Health
Administration ("OSHA"), and in limited occasions, the Nuclear Regulatory
Commission, as well as applicable state and local regulatory agencies. For a
description of certain applicable laws and regulations, see "Regulation."
Potential Liabilities Involving Clients and Third Parties. In
performing services for its clients, the Company could potentially be liable
for breach of contract, personal injury, property damage and negligence,
including claims for lack of timely performance and/or for failure to deliver
the service promised (including improper or negligent performance or design,
failure to meet specifications and breaches of express or implied warranties).
The damages available to a client, should it prevail in its claims, are
potentially large and could include consequential damages.
Environmental contractors, in connection with work performed for
clients, also potentially face liabilities to third parties from various
claims, including claims for property damage or personal injury stemming from a
release of hazardous substances or otherwise. Claims for damage to third
parties could arise in a number of ways, including through a sudden and
accidental release or discharge of contaminants or pollutants during the
performance of services, through the inability--despite reasonable care--of a
remedial plan to contain or correct an ongoing seepage or release of
pollutants, through the inadvertent exacerbation of an existing contamination
problem, or through reliance on reports prepared by the Company. Personal
injury claims could arise contemporaneously with performance of the work or
long after completion of the project as a result of alleged exposure to toxic
substances. In addition, increasing numbers of claimants assert that companies
performing environmental remediation should be held strictly liable (i.e.,
liable for damages regardless of whether its services were performed using
reasonable care) on the grounds that such services involved "abnormally
dangerous activities."
Clients frequently attempt to shift various liabilities arising out of
remediation of their own environmental problems to contractors through
contractual indemnities. Such provisions seek to require the Company to assume
liabilities for damage or injury to third parties and property and for
environmental fines and penalties. The Company has adopted risk management
policies designed to address these problems, but cannot assure their adequacy.
In addition, the Company generally coordinates through subcontractors the
transportation of any hazardous waste which is not remediated on-site to a
licensed hazardous waste disposal or incineration facility.
Moreover, during the past several years, the EPA and other
governmental agencies have constricted significantly the circumstances under
which they will indemnify contractors against liabilities incurred in
connection with remediation projects undertaken by contractors under contract
with such governmental agencies.
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DEPENDENCE ON ENVIRONMENTAL REGULATION
Much of the Company's business is generated either directly or
indirectly as a result of federal and state laws, regulations and programs
related to environmental issues. Accordingly, a reduction in the number or
scope of these laws, regulations and programs, or changes in government
policies regarding the funding, implementation or enforcement of such laws,
regulations and programs, could have a material adverse effect on the
Company's business. See "Regulation."
MARKETS AND CUSTOMERS
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The Company provides its services to a broad base of clients in both
the private and government sectors. Its private sector clients include large
chemical, petroleum, manufacturing, transportation, real estate, electronics,
automotive, aerospace and other industrial companies, as well as engineering
and consulting firms. The Company has worked for a majority of the Fortune 100
industrial companies. Historically, the majority of the Company's private
sector revenue was derived from projects with values typically less than $1
million in size and less than one year in duration. Revenue from industrial
clients for 1995 was $108.9 million and constituted 24% of the Company's
revenue.
In the government sector, the market for the Company's services
primarily consists of federal government agencies. The Company has been a
prime contractor to the EPA since 1984 under Emergency Response Cleanup
Services ("ERCS") contracts administered under the Superfund Removal Program.
In addition, through site specific and term contracts, the Company provides its
services to the DOD, including USACE, the U.S. Departments of the Navy, Air
Force and Army, at DOE facilities and to state and local governments. Revenue
from government agencies in 1995 aggregated $349 million and accounted for 76%
of revenue, of which the Department of the Navy and the USACE accounted for
approximately $154.2 million or 34% and $95.9 million or 21% of revenue,
respectively.
SEASONALITY AND FLUCTUATION IN QUARTERLY RESULTS
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The timing of the Company's revenue is dependent on its backlog,
contract awards and the performance requirements of each contract. The
Company's revenue is also affected by the timing of its clients' planned
remediation activities which generally increase during the third and fourth
quarters. Because of this change in demand, the Company's quarterly revenue
can fluctuate, and revenue for the first and second quarters of each year has
historically been lower than for the third and fourth quarters. Although the
Company believes that the historical trend in quarterly revenue for the third
and fourth quarters of each year are generally higher than the first and
second quarters, there can be no assurance that this will occur in future
periods. Accordingly, quarterly or interim results should not be considered
indicative of results to be expected for any quarter or for the full year.
COMPETITION
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The environmental services industry is highly competitive with
numerous companies of various size, geographic presence and capabilities
participating. The Company believes that it has approximately a dozen
principal competitors in the environmental remediation sector of the
environmental services industry and numerous smaller competitors. The Company
believes that the principal competitive factors in its business are operational
experience, technical proficiency, breadth of services offered, local presence
and price. In certain aspects of the Company's environmental remediation
business, substantial capital investment is required for equipment. Certain of
the Company's competitors have greater financial resources, which could allow
for greater investment in equipment and provide better access to bonding and
insurance markets to provide the financial assurance instruments which are
often required by clients. Additionally, the relatively recent entry of
several aerospace and defense contractors, as well as large construction and
engineering firms, into the environmental services industry has increased the
level of competition. The Company believes that the demand for environmental
services is still developing and expanding and, as a result, many small and
large firms will continue to be attracted to the industry.
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INSURANCE
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The Company's liability insurance program in effect from November 1,
1995 through October 31, 1996 includes primary commercial general liability
coverage in the amount of $1,000,000 per occurrence/$2,000,000 aggregate;
primary automobile liability coverage in the amount of $1,000,000 combined
single limit each occurrence; workers' compensation as statutorily required and
employer's liability coverage in the amount of $1,000,000. These three primary
programs have deductibles equal to $1,000,000 per occurrence for the general
liability coverage; $500,000 per occurrence for the automobile liability; a
retention of $500,000 per occurrence for workers' compensation and a deductible
of $500,000 per occurrence for employer's liability. Certain states do not
permit workers' compensation policies with deductibles, therefore, in those
certain states, the Company's wholly-owned insurance captive reinsures such
policies and indemnifies the insurance carrier against all losses and costs of
defense up to a self-insured retention of $500,000 per occurrence. Prior to
November 1, 1994, these primary liability programs were provided on similar
terms with the deductible portions being fully reinsured through the Company's
wholly owned insurance captive (except for the workers' compensation policy
with a self-insured retention $500,000 per occurrence). The Company supports
the indemnity commitment of the Company's wholly owned insurance captive with
letters of credit provided under the Company's Revolving Credit Facility. The
Company has issued $8,030,000 in letters of credit to support the Company's
wholly owned insurance captive's existing or anticipated obligations to
indemnify the insurance carrier, which amount is adjusted from time to time.
From a risk management perspective, the deductible amounts under the Company's
primary insurance policies and all policies reinsured by the Company's wholly
owned insurance captive are, in effect, self-insurance. In addition to these
primary insurance coverages, the Company has $50,000,000 of excess liability
policies insuring claims in excess of the primary limits described above. The
Company also has other insurance policies with various self-insured retentions,
including property coverage with a blanket limit of $120,000,000; consultants'
environmental liability coverage in the amount of $20,000,000 per claim and in
the aggregate, which amounts include environmental impairment liability
coverage with respect to the Company's fixed base laboratory facility.
Although the Company believes its insurance program to be appropriate
for the management of its risks, its insurance policies may not fully cover
risks arising from the Company's operations. The exclusion of certain
pollution and other liabilities from some insurance policies, or losses in
excess of the coverage, may cause all or a portion of one or more losses not to
be covered by such insurance. Further, the cost and limited availability of
insurance have resulted in the Company's use of deductible programs and
self-insurance through its wholly owned insurance captive, thus exposing the
Company to additional liabilities.
EMPLOYEES
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The Company had approximately 3,000 employees at December 31, 1995.
The Company is not party to collective bargaining agreements. The Company
considers relations with its employees to be satisfactory.
PATENTS
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The Company currently owns two patents covering certain design
features of equipment employed in its on-site remediation business. The first
relates to a filtration system developed and used by the Company to remove
pollutants from flowing creeks and streams and the second, known as a Portable
Method for Decontaminating Earth, relates to a decontamination system used by
the Company to remove contaminants from the soil through a process, commonly
known as soil vapor extraction. The Company utilizes X*TRAX(R) and LT*X(R) to
perform thermal desorption services. The X*TRAX(R) and LT*X(R) systems are
waste treatment processes that thermally separate organic contaminants from
soils or solids with subsequent treatment of the organic vapor stream.
Although the Company considers its patents to be important, they are not a
material factor in its business.
REGULATION
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The environmental services business, including the remediation
services segment of the industry, has benefited from extensive federal and
state regulation of environmental matters. On the other hand, the Company's
environmental services are also subject to extensive federal and state
legislation as well as regulation by the EPA, the OSHA and applicable state and
local regulatory agencies. All facets of the Company's business are conducted
in the context of a rapidly developing and changing statutory and regulatory
framework and an aggressive enforcement and regulatory posture. The full
impact of these laws and regulations, and the
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enforcement thereof, on the Company's business is difficult to predict,
principally due to the complexity of the relatively new legislation, new and
changing regulations, and the impact of political and economic pressures. The
assessment, remediation, analysis, handling and management of hazardous
substances necessarily involve significant risks, including the possibility of
damages or injuries caused by the escape of hazardous materials into the
environment, and the possibility of fines, penalties or other regulatory
action.
The Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA") addresses cleanup of sites at which there has been a
release or threatened release of hazardous substances or contaminants,
including certain radioactive substances, into the environment. CERCLA assigns
liability for costs of cleanup of such sites and for damage to natural
resources to any person who, currently or at the time of disposal of a
hazardous substance, owned or operated any facility at which hazardous
substances were disposed of; and to any person who by agreement or otherwise
arranged for disposal or treatment, or arranged with a transporter for
transport for disposal or treatment of hazardous substances owned or possessed
by such person for disposal or treatment by others; and to any person who
accepted hazardous substances for transport to disposal or treatment facilities
or sites selected by such persons from which there is a release or threatened
release of hazardous substances. CERCLA authorizes the federal government both
to clean up these sites itself and to order persons responsible for the
situation to do so. In addition, under the authority of Superfund and its
implementing regulations, detailed requirements apply to the manner and degree
of remediation of facilities and sites where hazardous substances have been or
are threatened to be released into the environment. CERCLA created the
Superfund to be used by the federal government to pay for the cleanup efforts.
Where the federal government expends money for remedial activities, it may seek
reimbursement from the "potentially responsible parties." CERCLA imposes
strict, joint and several retroactive liability upon such parties.
Increasingly, there are efforts to expand the reach of CERCLA to make
environmental contractors responsible for cleanup costs by claiming that
environmental contractors are owners or operators of hazardous waste facilities
or that they arranged for treatment, transportation or disposal of hazardous
substances. Several recent court decisions have accepted these claims. Should
the Company be held responsible under CERCLA for damages caused while
performing services or otherwise, it may be forced to bear such liability by
itself, notwithstanding the potential availability of contribution or indemnity
from other parties.
Certain taxing authority under CERCLA expired December 31, 1995. A
portion of the taxing authority under CERCLA was extended to September 1996.
Congress is currently considering legislation that could extend CERCLA's taxing
authority into the 1997 fiscal year. The Company cannot predict the impact
upon the Company of the failure, to-date, of Congress to reauthorize CERCLA, or
of the many legislative and regulatory changes currently proposed. Delays in
the reauthorization of CERCLA may adversely impact the environmental industry
in which the Company participates. Failure of Congress to reauthorize CERCLA,
or substantial changes in or uncertainty concerning the detail of the
legislation, such as proposed changes to CERCLA's liability provisions, cleanup
standards and remedy selection, including, but not limited to, proposed changes
that would alter CERCLA's preference for permanent treatment remedies such as
incineration in favor of confinement and containment, may result in project
delays and/or the failure of clients to initiate or proceed with projects.
Additionally, reductions in current and future environmental restoration
budgets may adversely affect future government contracting opportunities and
funding of the Company's backlog. The Company believes that it generally has
benefitted from increased environmental regulations affecting business, and
from more stringent enforcement of those regulations. The ultimate impact of
the proposed changes will depend upon a number of factors, including the
overall strength of the economy and customers' views on the cost effectiveness
of remedies available under the changed regulations.
The Resource Conservation and Recovery Act of 1976, as amended in 1984
("RCRA"), is the principal federal statute governing hazardous waste
generation, treatment, storage and disposal. RCRA, or EPA-approved state
programs at least as stringent, govern waste handling activities involving
wastes classified as "hazardous." Under RCRA, liability and stringent operating
requirements are imposed on a person who is either a "generator" or
"transporter" of hazardous wastes, or an "owner" or "operator" of a hazardous
waste treatment, storage or disposal facility. The EPA has issued regulations
under RCRA for hazardous waste generators, transporters and owners and
operators of hazardous waste treatment, storage or disposal facilities. These
regulations impose detailed operating, inspection, training, emergency
preparedness and response standards, and requirements for closure, continuing
financial responsibility, manifesting, recordkeeping and reporting. The
Company's clients remain responsible by law for the generation or
transportation of hazardous wastes or ownership or operation of hazardous waste
treatment, storage or disposal facilities. Although the Company does not
believe its conduct in performing environmental remediation services would
cause it to be considered liable as an owner or operator of a hazardous waste
treatment, storage or disposal facility, or a generator or transporter of
hazardous wastes
8
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under RCRA, RCRA and similar state statutes regulate the Company's practices
for the treatment, transportation and other handling of hazardous materials,
and substantial fines and penalties may be imposed for any violation of such
statutes and the regulations thereunder.
The Company's services are also utilized by its clients in complying
with, and the Company's operations are subject to regulation under, among
others, the following federal laws: the Toxic Substances Control Act, the
Clean Water Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act and the Hazardous Materials Transportation Act. In addition, many
states have passed Superfund-type legislation and other statutes, regulations
and policies to cover more detailed aspects of hazardous materials management.
The Company, through its on-site treatment capabilities and the use of
subcontractors, attempts to minimize its transportation of hazardous substances
and wastes. However, there are occasions, especially in connection with its
emergency response activities, when the Company does transport hazardous
substances and wastes. Such transportation activities are closely regulated by
the United States Department of Transportation, the Interstate Commerce
Commission, and transportation regulatory bodies in each state. The applicable
regulations include licensing requirements, truck safety requirements, weight
limitations and, in some areas, rate limitations and operating conditions.
BACKLOG AND POTENTIAL VALUE OF TERM CONTRACTS
- --------------------------------------------------------------------------------
The following table lists at the dates indicated (i) the Company's
backlog, defined as the unearned portion of the Company's existing contracts
and unfilled orders, and (ii) the Company's term contracts, defined as the
potential value of government term contracts (in thousands):
December 31,
--------------------------------------
1995 1994 1993
----------- ----------- ----------
Backlog . . . . . . . . . . . . . . . . . . . $ 445,000 $ 255,000 $ 201,000
Term contracts . . . . . . . . . . . . . . . 1,531,000 1,498,000 652,000
--------- --------- ---------
Total contract backlog . . . . . . . . . $1,976,000 $1,753,000 $ 853,000
========== ========== =========
Backlog. The Company received more new contract awards from clients
and delivery orders issued under the Company's term contracts during 1995 than
were recorded as revenue, which resulted in the increase in backlog at December
31, 1995. In accordance with industry practice, substantially all of the
Company's contracts in backlog may be terminated at the convenience of the
client. In addition, the amount of the Company's backlog is subject to changes
in the scope of services to be provided under any given contract. The Company
has not historically experienced any material contract terminations and
generally experiences favorable changes in contract scope. The Company
estimates that approximately 80% of the backlog at December 31, 1995 will be
realized within the next year.
Term Contracts. Term contracts typically are performed by completing
remediation work under delivery orders, issued by the contracting government
entity, for a large number of small-to-medium-sized projects throughout the
geographic area covered by the contract. The Company's government term
contracts generally may be canceled, delayed or modified at the sole option of
the government, and typically are subject to annual funding limitations and
public sector budget constraints. Accordingly, such government contracts
represent the potential dollar value that may be expended under such contracts,
but there is no assurance that such amounts, if any, will be actually spent on
any projects, or of the timing thereof.
EQUITY INVESTMENT
- --------------------------------------------------------------------------------
NSC Corporation ("NSC"). NSC is a leading provider of asbestos
abatement services to a broad range of commercial and industrial clients and
government agencies throughout the United States. In May 1993, the Company's
investment in NSC was reduced from 70% to 40% as a result of NSC's purchase of
the asbestos abatement division of The Brand Companies, Inc. ("Brand") in
exchange for its industrial cleaning and maintenance business and the issuance
of 4,010,000 shares of NSC common stock. The Company accounts for NSC on the
equity method. Rust owns another 40% of NSC, and the remaining 20% is publicly
held.
NSC provides services to abate, primarily through removal, the hazards
associated with asbestos insulation and materials containing asbestos in large
commercial and public buildings, and in connection with large industrial
facility decontamination and decommissioning projects. An asbestos abatement
program is
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focused on meeting the needs of the building owner or operator to properly
manage the financial, regulatory and health-related risks associated with an
asbestos program. NSC's removal services are a coordination of several
processes: bidding and contracting, project management, health and safety
programs and the actual asbestos removal. NSC also provides fireproofing
services following the removal of asbestos from buildings.
Although some of NSC's contracts are directly entered into with its
clients without a formal bidding process, NSC receives a significant portion of
its asbestos abatement contracts through a bidding process. Substantially all
of NSC's projects are contracted on a fixed price basis, while the remainder
are contracted either on a time and materials or a unit price basis. NSC
workers remove asbestos in accordance with applicable EPA and OSHA regulations
and applicable state and local regulations.
The market for asbestos abatement services is highly competitive. NSC
competes with large asbestos abatement firms, several of which provide services
on a regional basis. NSC also competes, to a lesser extent, with smaller local
and regional firms. Competitive factors in the commercial asbestos abatement
industry include experience and reputation, the ability to offer safe and high
quality services at competitive prices, and access to significant financial
resources, including adequate insurance and bonding capability.
NSC's Board of Directors declared and NSC paid a cash dividend of
$602,000 to the Company for each of the years ended December 31, 1995 and 1994.
While NSC's Board of Directors has not established a policy concerning payment
of regular dividends, it has stated its intention to review annually the
feasibility of declaring additional dividends depending upon the results of
NSC's operations and the financial condition and cash needs of NSC.
ITEM 2. PROPERTIES
- --------------------------------------------------------------------------------
The Company currently owns property in five states and leases property
in 23 states and the District of Columbia. The property owned by the Company
includes approximately 26 acres in Findlay, Ohio, upon which are located the
Company's 31,200 square foot corporate headquarters, a 39,600 square foot
laboratory and technical facility, a 20,000 square foot support services
facility, as well as its fabrication, maintenance and remediation service
center and training facilities. The Company also owns remediation service
centers in Covington, Georgia (approximately ten acres of land and an 8,200
square foot building), Clermont, Florida (approximately five acres of land and
a 6,500 square foot building) and Baton Rouge, Louisiana (approximately ten
acres of land and a 52,500 square foot building).
The Company operates other offices and remediation service centers in
the following states: California, Colorado, the District of Columbia, Florida,
Georgia, Hawaii, Illinois, Iowa, Massachusetts, Minnesota, Missouri, New
Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Virginia and
Washington. All of these offices and service center facilities are leased.
Under these leases, the Company is required to pay base rentals, real estate
taxes, utilities and other operating expenses. Annual rental payments for the
remediation service centers and office properties are approximately $3,700,000.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The Company's accounts receivable at December 31, 1995 include a claim
receivable aggregating approximately $25,833,000 in direct and other costs
relating to a major remediation project which was performed by the Company for
Citgo Petroleum Corporation ("Citgo") at its Lake Charles, Louisiana refinery
during 1993 and 1994. This claim receivable represents direct and other costs
to date for activities which the Company's management believed exceeded the
scope of the existing contract due to deficient project specifications provided
by Citgo and Oxy USA, Inc. ("Oxy") as well as differing site conditions. In
addition, at December 31, 1995, the Company has recorded in its financial
statements approximately $5,381,000 of accounts receivable that are in dispute
for work performed under the terms of the Company's base contract with Citgo.
In April 1994, Citgo filed an action in the U.S. District Court for the Western
District of Louisiana seeking a declaratory judgment that the Company is not
entitled to additional compensation under the contract and certain other
relief. The Company's answer to the declaratory judgment action was filed in
July 1994, together with counterclaims against Citgo for negligent
misrepresentation, breach of contract and quantum meruit seeking damages in
excess of $35,000,000. In August 1994, Citgo amended its complaint seeking
damages under the contract for production shortfalls, which Citgo has asserted
in answer to the Company's interrogatories to be approximately $27,600,000.
The Company believes that such assertion of damages is totally without merit
since the contract expressly provides that Citgo's sole remedy for production
shortfalls by the Company are liquidated damages not to
10
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exceed $500,000. In January 1995, Citgo filed a third party complaint against
Occidental Oil and Gas Corporation and Oxy in such litigation because of their
prior involvement with the Citgo site and preparation of the contract
specifications. Additionally, in July 1995, the Company also filed a third
party complaint against Oxy for negligent misrepresentation as a result of its
involvement with the development of sampling and analytical data relied upon by
the Company in preparation of its bid and cost estimates for work at the site.
During the fourth quarter of 1994, the Company recorded a $25,000,000
pre-tax charge, $15,000,000 after-tax or $0.96 per share, to establish a
reserve for accounts receivable, primarily where such accounts are in
litigation. Management believes that it has established adequate reserves
should the resolution of such accounts receivable be lower than the amounts
recorded and such resolution should not have a material adverse impact upon the
Company's consolidated results of future operations or financial condition.
See "Note 15 to the Consolidated Financial Statements."
The Company was named in April 1994 as one of 33 third party
defendants in a case titled UNITED STATES OF AMERICA V. AMERICAN CYANAMID
COMPANY, INC., ET AL., pending in the United States District Court for the
Southern District of West Virginia. This litigation (the "Cost Recovery
Litigation") arises out of claims made against several potentially responsible
parties ("PRPs") by the EPA for amounts in excess of $24,000,000 for response
costs arising out of releases and threatened releases of hazardous waste at the
Fike Chemical, Inc. Superfund site ("Fike") in Nitro, West Virginia (the
"Site"). The Company was retained as a response action contractor for the site
under contracts with the USACE and the EPA. The third party complaint alleges
that the Company was an operator of the Site during the remediation and that
the Company caused releases or threatened releases of hazardous substances at
the Site as a result of allegedly negligent conduct, grossly negligent conduct
or intentional misconduct. The third party complaint seeks to recover clean-up
costs from the Company and the other third party defendants. The Company has
submitted claims for indemnification related to the lawsuit under its contract
with the USACE and the EPA, has notified its contractors pollution liability
insurance carrier and has impleaded the United States. The PRP's also filed a
suit against the Company on behalf of the United States under the QUI TAM
provisions of the False Claims Act (the "QUI TAM suit") and caused the United
States to conduct an investigation of the accuracy of the Company's billings to
the EPA. The Company cooperated fully with the investigation and has been
informed that the government will not be proceeding criminally against the
Company and will not intervene in the QUI TAM suit. The Company has reached an
agreement in principle disposing of any civil liability relating to the QUI TAM
suit and the government investigation with respect to Fike. The Company has
also reached an agreement in principle disposing of the Cost Recovery
Litigation without any costs to the Company.
In addition to the above, the Company is subject to a number of claims
and lawsuits in the ordinary course of its business. In the opinion of
management, the outcome of these actions, which are not clearly determinable at
the present time, are either adequately covered by insurance, or if not
insured, will not, in the aggregate, have a material adverse impact upon the
Company's consolidated financial position or the results of future operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The executive officers of the Company are listed below:
Name Age Positions
---- --- ---------
James L. Kirk 46 Chairman of the Board, President and Chief Executive Officer
Joseph R. Kirk 44 Executive Vice President and a Director
Pamela K.M. Beall 39 Vice President, Treasurer and Assistant Secretary
Robert J. Blackwell 39 Vice President, Marketing and Strategic Planning
11
14
Fred H. Halvorsen 54 Vice President, Health and Safety
Kris E. Hansel 38 Vice President and Controller
Harold W. Ingalls 48 Vice President and Chief Financial Officer
Phillip V. Petrocelli 37 Vice President, Western Operations
John J. Ray III 37 Vice President, General Counsel and Secretary
Philip O. Strawbridge 41 Vice President, Chief Administrative Officer
Michael A. Szomjassy 45 Vice President, Eastern Operations
- -----------------------------------------------------------------------------------------
James L. Kirk - Chairman of the Board, President and Chief Executive Officer.
Mr. Kirk was elected President and Chief Executive Officer of the Company in
July 1986, and was elected Chairman of the Board in January 1987. Mr. Kirk has
been Chairman of the Board and Chief Executive Officer of OHMR since April
1985. Mr. Kirk is a founder of OHMR and has served in various capacities as an
officer and director of OHMR.
Joseph R. Kirk - Executive Vice President and Director. Mr. Kirk assumed his
current position in July 1986 and previously served as Vice Chairman of OHMR.
He is a founder of OHMR and has served in various capacities as an officer and
director of OHMR.
Pamela K.M. Beall - Vice President, Treasurer and Assistant Secretary. Ms.
Beall joined the Company in June 1985 as Director of Finance of OHMR, became
Treasurer and Assistant Secretary of OHMR in September 1985, and became
Treasurer and Assistant Secretary of the Company in January 1986. Ms. Beall
assumed her current position in August 1994. Prior to joining the Company, Ms.
Beall was General Manager, Treasury Services for USX Corporation and previous
to that with Marathon Oil Company.
Robert J. Blackwell - Vice President, Marketing and Strategic Planning. Mr.
Blackwell joined the Company in July 1993 as Vice President, Government
Business Development of OHMR, and has served as Senior Vice President,
Marketing of OHMR since October 1995. Prior to joining the Company, Mr.
Blackwell was Vice President for Federal Marketing and Legislative Affairs,
from January 1993 to July 1993, and Director of Marketing and Federal
Relations, from January 1989 to December 1992, of Ebasco Services Incorporated.
Mr. Blackwell also serves as a director of NSC.
Fred H. Halvorsen - Vice President, Health and Safety. Dr. Halvorsen joined
the Company in July 1984 as Director of Health and Safety of OHMR and assumed
his current position in May 1987.
Kris E. Hansel - Vice President and Controller. Mr. Hansel joined the Company
as General Accounting Manager in November 1988 of OHMR, became Assistant
Controller in October 1991 of the Company, and became Controller in October
1992. Mr. Hansel assumed his current position in August 1994. Prior to
joining the Company, Mr. Hansel was General Accounting Manager of
WearEver-ProctorSilex, Inc.
Harold W. Ingalls - Vice President and Chief Financial Officer. Mr. Ingalls
joined the Company in April 1995. Prior to joining the Company, Mr. Ingalls was
Vice President of Rust International, Inc. from January 1993 to March 1995 and
Chief Financial Officer and Treasurer of Rust from November 1993 to March 1995.
Prior to 1993, Mr. Ingalls served in various capacities with WMX and its
affiliates. Effective April 1, 1996, Mr. Ingalls will resign as an officer of
the Company.
Phillip V. Petrocelli - Vice President, Western Operations. Mr. Petrocelli
joined the Company in August 1993 as Vice President, Western Region of OHMR,
and since October 1995 has served as Senior Vice President, Western Operations
of OHMR. Mr. Petrocelli assumed his current position with the Company in May
1995. Prior to joining the Company, Mr. Petrocelli was Regional Director and
previous to that was Acting Vice President - Analytical Labs, with IT
Corporation.
12
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John J. Ray III - Vice President, General Counsel and Secretary. Mr. Ray
joined the Company in November 1995. Prior to joining the Company, Mr. Ray was
Group Vice President and General Counsel of Waste Management, Inc., a
subsidiary of WMX, from September 1991 to October 1995. Mr. Ray is also a
director of NSC.
Philip O. Strawbridge - Vice President, Chief Administrative Officer. Mr.
Strawbridge joined the Company in February 1996. Prior to joining the Company,
Mr. Strawbridge was Senior Director of Government Contracts and Compliance with
Fluor Daniel, Inc.
Michael A. Szomjassy - Vice President, Eastern Operations. Mr. Szomjassy
joined the Company in November 1989 as Vice President, Southeast Region of OHMR
and since October 1995 has served as Senior Vice President, Eastern Operations
of OHMR. Prior to joining OHM, Mr. Szomjassy was Regional Manager,
Remediation Services of Ebasco Services, Inc.
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PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
- --------------------------------------------------------------------------------
The Company's common stock is traded on The New York Stock Exchange
under the symbol "OHM." The table sets forth by quarter, for the last two
fiscal years, the high and low sales prices of the Company's common stock on
The New York Stock Exchange Composite Tape as reported by The Wall Street
Journal (Midwest Edition):
Market Price
----------------------------------
1995 High Low
---- ---- ---
First 10 1/8 6 7/8
Second 12 1/8 10 1/8
Third 14 3/8 8 3/4
Fourth 9 7 1/8
1994
----
First 17 1/4 11 3/8
Second 18 1/2 10 5/8
Third 13 1/2 11
Fourth 11 3/8 6 7/8
NOTE:
(1) As of December 31, 1995, the Company has approximately 975
shareholders of record.
(2) The Company has not declared any cash dividends on its common stock
and has bank covenants that restrict the amount of cash dividends
that can be paid in the future. See "Note 7 to the Consolidated
Financial Statements."
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ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
(a) The Five Year Summary of Results of Operations for each of the five
years ended December 31 is set forth below:
Years Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In Thousands, Except Per Share Data)
Revenue $ 457,925 $ 323,381 $ 242,401 $ 221,370 $ 189,137
Cost of services 393,149 296,159 202,341 185,707 163,540
--------- --------- -------- -------- --------
Gross Profit 64,776 27,222 40,060 35,663 25,597
Selling, general and
administrative expenses 45,223 32,281 27,110 30,845 25,204
--------- --------- -------- -------- --------
Operating Income (Loss) 19,553 (5,059) 12,950 4,818 393
--------- --------- -------- -------- --------
Other (Income) Expenses:
Investment income (849) (28) (28) (31) (30)
Interest expense 10,413 9,177 7,748 7,106 7,423
Equity in net (earnings) loss of
affiliates' continuing operations (287) (1,032) (1,600) 1,121 2,443
Miscellaneous (income) expense (72) 898 341 966 789
--------- --------- -------- -------- --------
9,205 9,015 6,461 9,162 10,625
Income (Loss) From Continuing
Operations Before Income Taxes (Benefit) 10,348 (14,074) 6,489 (4,344) (10,232)
Income taxes (benefit) 3,541 (6,458) 2,082 (1,230) (3,369)
--------- --------- -------- -------- --------
Income (Loss) From Continuing Operations 6,807 (7,616) 4,407 (3,114) (6,863)
Discontinued Operations of Affiliate,
Net of Income Taxes (Benefit):
Income from operations -- -- -- 122 --
Provision for loss on disposition -- -- -- (420) --
--------- --------- -------- -------- --------
Income (Loss) Before Cumulative
Effect of Accounting Change 6,807 (7,616) 4,407 (3,412) (6,863)
Cumulative effect of accounting change -- -- -- (857) --
------------------------- ------------- ------------ -------------
Net Income (Loss) $ 6,807 $ (7,616) $ 4,407 $ (4,269) $ (6,863)
========== ========= ========= ========== ==========
Net Income (Loss) Per Share:
Continuing operations $ 0.30 $ (0.49) $ 0.35 $ (0.26) $ (0.57)
Discontinued operations:
From operations -- -- -- 0.01 --
From disposition -- -- -- (0.03) --
--------- --------- -------- -------- --------
Income (Loss) Per Share Before Effect
of Cumulative Accounting Change 0.30 (0.49) 0.35 (0.28) (0.57)
Cumulative effect of accounting change -- -- -- (0.07) --
--------- --------- -------- -------- --------
Net Income (Loss) Per Share $ 0.30 $ (0.49) $ 0.35 $ (0.35) $ (0.57)
=========== ========== ========== =========== ==========
Weighted Average Number Of
Common And Common Equivalent
Shares Outstanding 22,525 15,582 12,506 12,051 12,042
=========== ========== ========== =========== ==========
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NOTES:
(1) The results of operations for the year ended December 31, 1992 reflect
the accounting for discontinued operations of certain business units.
(2) The cumulative effect of accounting change of $857,000 or $0.07 per
share for the year ended December 31, 1992 is for adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
(3) Special and nonrecurring charges include: (i) for the year ended
December 31, 1995, the Company recorded $2,312,000 charge (net of
income tax benefit of $1,542,000) for integration costs related to the
acquisition of the hazardous and nuclear waste remediation service
business (the "Division") of Rust International Inc. ("Rust"); (ii)
for the year ended December 31, 1994, the Company recorded a special
charge of $15,000,000 (net of income tax benefit of $10,000,000) to
establish a reserve for accounts receivable, primarily where such
accounts are in litigation; (iii) for the year ended December 31,
1992, special charges of $2,550,000 (net of income tax benefit of
$1,600,000) recorded by the Company, and $2,162,000 recorded by NSC,
both of which relate to the restructuring of the Company and NSC's
asbestos abatement operations in anticipation of NSC's acquisition of
the asbestos abatement division of The Brand Companies, Inc.
(completed on May 4, 1993), and which include provisions for legal and
insurance reserves, and for certain other matters; and (iv) for the
year ended December 31, 1991, charges of $3,950,000 for equity losses
in Concord Resources Group, Inc.
(4) On May 30, 1995, the Company completed the acquisition of
substantially all of the assets and certain liabilities of the
Division in exchange for 9,668,000 shares of common stock of the
Company, or approximately 37% of the outstanding shares of the
Company's common stock. The acquisition of the Division has been
accounted for using the purchase method and, accordingly, the acquired
assets and assumed liabilities, including goodwill, have been recorded
at their estimated fair values as of May 30, 1995. The Company's
consolidated financial statements for the year ended December 31,
1995, include the results of operations for the Division since May 30,
1995. See "Note 2 to the Consolidated Financial Statements."
(b) The Five Year Summary of Financial Position as of December 31 is set
forth below (In Thousands):
December 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Working capital $129,156 $116,464 $ 69,985 $ 56,148 $ 43,919
Total assets 376,506 272,546 215,357 185,415 168,986
Long-term debt 104,111 127,279 71,113 101,085 81,500
Shareholders' equity 160,492 76,920 82,743 43,833 48,253
NOTE:
(1) The Company has not declared any cash dividends on its common stock
and is restricted by bank covenants from the payment of cash dividends
in the future. See "Note 7 to the Consolidated Financial Statements."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(a) RESULTS OF OPERATIONS
GENERAL
The Company provides a broad range of environmental and hazardous
waste remediation services to its clients located primarily in the United
States. The timing of the Company's revenue is dependent on its backlog,
contract awards and the performance requirements of each contract. The
Company's revenue is also affected by the timing of its clients' planned
remediation activities which generally increase during the third and
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19
fourth quarters. Because of this change in demand, the Company's quarterly
revenue can fluctuate, and revenue for the first and second quarters of each
year have historically been lower than for the third and fourth quarters,
although there can be no assurance that this will occur in future years.
Accordingly, quarterly or other interim results should not be considered
indicative of results to be expected for any quarter or full fiscal year.
On May 30, 1995, the Company completed the acquisition of
substantially all of the assets and certain liabilities of the hazardous and
nuclear waste remediation service business (the "Division") of Rust
International Inc. ("Rust") in exchange for 9,668,000 shares of common stock
of the Company, or approximately 37% of the outstanding shares of the Company's
common stock. In exchange for a warrant to purchase up to 700,000 shares of
the Company's common stock at an exercise price of $15.00 per share during the
five years following the closing date, Rust's parent company, WMX Technologies,
Inc. ("WMX"), will provide the Company with a credit enhancement in the form of
guarantees, issued from time to time upon request of the Company, of up to
$62,000,000 of the Company's indebtedness, which will increase proportionately
up to $75,000,000 upon issuance of shares under the warrant. The acquisition
of the Division has been accounted for using the purchase method and,
accordingly, the acquired assets and assumed liabilities, including goodwill,
have been recorded at their estimated fair values as of May 30, 1995. See
"Note 2 to the Consolidated Financial Statements." The Company's consolidated
financial statements for the year ended December 31, 1995, include the results
of operation for the Division since May 30, 1995.
During the second quarter of 1995, the Company recorded a $3,854,000
pre-tax, $2,312,000 after-tax or $0.10 per share, charge to expense for
integration costs related to the acquisition of the Division. The charge was
recorded as a selling, general and administrative expense and was primarily for
severance and relocation costs for certain of the Company's personnel and the
closing of certain of the Company's offices as a result of combining the
operations of the Division and the Company.
During the fourth quarter of 1994, certain developments within and
external to the Company caused management to revaluate certain accounts
receivable recorded during 1994. As a result, the Company recorded a
$25,000,000 pre-tax charge against revenue, $15,000,000 after-tax or $0.96 per
share, to establish a reserve for accounts receivable, primarily where such
accounts are in litigation, including projects performed by the Company for
Citgo Petroleum Company ("Citgo") and Occidental Chemical Corporation
("Occidental"). See "Note 15 to the Consolidated Financial Statements."
The following table sets forth, for the periods indicated, the
percentage relationship that items in the statement of operations bear to
revenue:
Year Ended December 31,
------------------------------
1995 1994 1993
---- ---- ----
Revenue 100% 100% 100%
Cost of services 86 92 84
--- --- ---
Gross profit 14 8 16
Selling, general and administrative expenses 10 10 11
--- --- ---
Operating income (loss) 4 (2) 5
Net interest expense 2 2 3
Equity in net earnings of affiliate -- -- (1)
---- ---- ---
Income (loss) before income taxes (benefit) 2 (4) 3
Income taxes (benefit) 1 (2) 1
---- --- ---
Income (loss) from continuing operations 1% (2)% 2%
==== ==== ====
TWELVE MONTHS ENDED DECEMBER 31, 1995 VS. TWELVE MONTHS ENDED
DECEMBER 31, 1994
Revenue. The following table sets forth the Company's revenue by
client type for the twelve months ended December 31, 1995 and 1994 (in
thousands, except percentages):
1995 1994
---- ----
Federal, State, and Local Government $349,052 76% $208,610 65%
Industrial 108,873 24% 114,771 35%
-------- --- -------- ---
Total Revenue $457,925 100% $323,381 100%
======== === ======== ===
17
20
Total revenue for the year ended December 31, 1995, increased 42% to
$457,925,000 from $323,381,000 in 1994. Such improvement resulted primarily
from increased revenue from federal government agencies and the acquisition of
the Division.
During 1995, the Company experienced a $140,442,000 or a 67% increase
in revenue from government agencies. This improvement resulted primarily from
an increase in revenue from the Company's term contracts with the United States
Navy ("Navy"), the United States Army Corps of Engineers ("USACE") and the
United States Air Force ("Air Force"), as well as increased revenue from other
federal government agencies. Such increases were partially offset by a
decrease in revenue from state and local governments for the year ended
December 31, 1995 when compared to 1994. The Company expects to continue to
receive funding under its federal contracts into the foreseeable future and
continues to experience a significant amount of proposal activity for new
contracts with the various Department of Defense agencies, as well as the
Department of Energy. However, reductions by Congress in future environmental
remediation budgets of government agencies may have a material adverse impact
upon future revenue from such agencies and the funding of the Company's
government term contracts included in contract backlog.
The Company experienced a $5,898,000 or 5% decrease in revenue from
industrial clients for the year ended December 31, 1995 as compared to 1994.
Such revenue would have decreased further if not for the Company's acquisition
of the Division during May 1995. The Company believes that revenue from the
industrial sector has been negatively impacted due to anticipated changes in
the Superfund law pending its reauthorization as well as current economic
conditions in certain industry and geographic sectors. Although the Company
cannot predict the impact upon the environmental industry of the failure of
Congress to reauthorize the Superfund law, further delays in Superfund
reauthorization may have a material impact upon the demand for the Company's
services in the form of project delays as clients and potential clients wait
for and anticipate changes in these regulations. In addition, demand for the
Company's services from the industrial sector will also remain dependant on
general economic conditions. Industrial sector revenue was negatively impacted
for the year ended December 31, 1994 by the previously discussed $25,000,000
accounts receivable reserve which was primarily related to industrial clients.
Industrial sector revenue as a percentage of total revenue decreased to 24% for
1995 from 35% in 1994.
During 1995, the Company's government revenue as a percent of total
revenue increased to 76% from 65% in 1994. The Company believes that the
government sector will continue to be its primary source of revenue for the
foreseeable future in light of the factors discussed above.
Cost of Services and Gross Profit. Cost of services for the year
ended December 31, 1995 increased 33% to $393,149,000 from $296,159,000 in 1994
primarily due to increased revenue. Cost of services as a percentage of
revenue decreased to 86% for the year ended December 31, 1995 from 92% for
1994. Such decrease is primarily due to the aforementioned charge for accounts
receivable recorded during the fourth quarter of 1994. Cost of services as a
percentage of revenue for 1994 would have been 85% without the accounts
receivable charge.
Gross profit increased 138% to $64,776,000 in 1995 from $27,222,000 in
1994. The increase in gross profit is primarily due to the increase in revenue
and the accounts receivable charge recorded in 1994. The Company has
experienced a slight decrease in the overall gross margin it has received on
its government projects than it has historically experienced. Such decrease is
due to the nature of the projects that have been awarded to the Company under
its term contracts which has required an increase in the use of subcontracted
services and materials over levels historically experienced. Under the terms
of such contracts, the Company receives minimal markups on such subcontracted
services and materials.
In addition, cost of services and gross profit have been negatively
impacted by the acquisition of the Division. The Company has incurred
additional indirect cost of services for the Division's offices and employees,
while revenue from the Division's projects were significantly lower than
expected.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SGA") expenses for the year ended December 31, 1995 increased
40% to $45,223,000 from $32,281,000 in 1994. SGA expenses for the year ended
December 31, 1995 include a charge of $3,854,000 for integration costs related
to the acquisition of the Division. The charge was primarily for severance and
relocation costs for certain of the Company's personnel and the closing of
certain of the Company's offices as a result of combining the operations of the
18
21
Company and the Division. Without such charge, SGA expenses increased 28%
primarily as a result of the acquisition of the Division and the growth in
revenue.
Operating Income (Loss). Operating income (loss) for 1995 increased
$24,612,000 to $19,553,000 from $(5,059,000) in 1994, due primarily to the
recording of the accounts receivable reserve in 1994 and other factors
discussed above.
Other (Income) Expenses. Other (income) expenses, excluding the
Company's equity in net earnings of affiliate, decreased $555,000 to $9,492,000
for 1995 compared to $10,047,000 in 1994. Interest expense increased 14% to
$10,413,000 for the year ended December 31, 1995 from $9,177,000 in 1994. The
increase in interest expense was offset by interest earned on certain
outstanding receivables guaranteed by Rust pursuant to the agreement for the
acquisition of the Division and a decrease in losses recorded for disposition
of offices and equipment during 1995 when compared to 1994. Such receivables
guaranteed by Rust were paid to the Company on September 30, 1995. The
increase in interest expense was primarily due to additional borrowing under
the Company's credit facility during the first half of 1995 as a result of the
increased working capital requirements of certain large remediation projects
and government contracts.
Equity in Net Earnings (Loss) of Affiliate. The Company's equity
interest in NSC's net earnings from continuing operations decreased $745,000 to
$287,000 in 1995 from $1,032,000 in 1994. Such decrease in earnings is
primarily a result of losses recorded by NSC on claims settled in the third
quarter of 1995 with certain of its clients. In addition, the asbestos
abatement industry in general continues to experience competitive pressures in
the marketplace which have negatively impacted the gross margin on NSC's
projects.
Net Income (Loss). Net income for the year ended December 31, 1995
was $6,807,000 or $0.30 per share compared to a net loss of $(7,616,000) or
$(0.49) per share in 1994. The improvement in net income is primarily due to
the reserve recorded for accounts receivable during 1994 and other factors
discussed above.
TWELVE MONTHS ENDED DECEMBER 31, 1994 VS. TWELVE MONTHS ENDED
DECEMBER 31, 1993
Revenue. The following table sets forth the Company's revenue by
client type for the twelve months ended December 31, 1994 and 1993 (in
thousands, except percentages):
1994 1993
---- ----
Federal, State, and Local Government $208,610 65% $113,346 47%
Industrial 114,771 35 129,055 53
-------- --- -------- ---
Total Revenue $323,381 100% $242,401 100%
======== === ======== ===
Total revenue increased by $80,980,000 to $323,381,000 for the year
ended December 31, 1994 from $242,401,000 for 1993. Such improvement resulted
primarily from increased revenue from the Company's contracts with the USACE,
the Navy, the Environmental Protection Agency ("EPA") and certain state and
local governments. Revenue from government agencies increased $95,264,000 or
84% during 1994. The Company also experienced a significant increase in
revenue from its USACE thermal incineration project in Holbrook, Massachusetts.
The Company experienced a $14,284,000 or 11% decrease in revenue from
industrial clients for the year ended December 31, 1994 as compared to 1993.
Industrial revenue was negatively impacted by the previously discussed
$25,000,000 accounts receivable reserve which was primarily related to
industrial clients. The Company's industrial sector revenue remains sluggish,
which the Company believes is due to anticipated changes in the Superfund law
which may result from its pending re-authorization and current economic
conditions in certain industry and geographic sectors. Industrial sector
revenue as a percentage of total revenue decreased to 35% for 1994 from 53% in
1993.
Cost of Services and Gross Profit. Cost of services for the year
ended December 31, 1994 increased 46% to $296,159,000 from $202,341,000 in
1993. As a percentage of revenue, cost of services increased to 92% in 1994
from 84% in 1993. The increase in cost of services as a percentage revenue was
primarily due to the aforementioned charge for accounts receivable. Gross
profit decreased 32% to $27,222,000 in 1994 from $40,060,000 in 1993. Gross
profit decreased primarily as a result of the recording of the accounts
receivable reserve and other factors discussed above.
19
22
Selling, General and Administrative Expenses. Expenses for the year
ended December 31, 1994 increased 19% to $32,281,000 from $27,110,000 in 1993.
The increase in SGA expenses was due primarily to the increase in revenue and
the expansion of the Company's Northeast and Western operations as a result of
the award of certain significant term contracts from the Department of Defense.
SGA expenses as a percent of revenue was 10% and 11% for the years ended
December 31, 1994 and 1993, respectively.
Operating Income (Loss). Operating income (loss) for 1994 decreased
$18,009,000 to $(5,059,000) from $12,950,000 in 1993, due primarily to the
recording of the accounts receivable reserve and the factors discussed above.
Other (Income) Expenses. Other (income) expenses, excluding the
Company's equity in net earnings of affiliate, increased $1,986,000 to
$10,047,000 for 1994 compared to $8,061,000 in 1993. Such increase was
primarily due to a $1,429,000 increase in interest expense. Such increase was
due to additional borrowing as a result of the increased working capital
requirements, including accounts receivable, of certain of the Company's large
remediation projects and its government contracts. In addition, the Company
experienced an increase in the interest rates charged under its revolving
credit facility. Miscellaneous expense increased $557,000 to $898,000 for 1994
compared to $341,000 in 1993 and was primarily due to losses incurred on the
disposal of certain of the Company's equipment and offices.
Equity in Net Earnings (Loss) of Affiliate. The Company's equity
interest in NSC's net earnings from continuing operations decreased $568,000 to
$1,032,000 in 1994 from $1,600,000 in 1993. NSC'S financial results for 1994
were negatively impacted by significant losses from its New York City
operations, which were closed in early 1994. The asbestos abatement industry
continues to experience competitive pressures in the marketplace which have
negatively impacted the gross margin on NSC's projects.
Net Income (Loss). The net loss for the year ended December 31, 1994
was $(7,616,000) or $(0.49) per share compared to net income of $4,407,000 or
$0.35 per share in 1993. Excluding the charge to establish the accounts
receivable reserve discussed above, net income for the year ended December 31,
1994 would have been $7,384,000 or $0.47 per share.
CONTRACT BACKLOG
The following table lists at the dates indicated (i) the Company's
backlog, defined as the unearned portion of the Company's existing contracts
and unfilled orders, and (ii) the Company's term contracts, defined as the
potential value of government term contracts (in thousands):
December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
Backlog $ 445,000 $ 255,000 $ 201,000
Term contracts 1,531,000 1,498,000 652,000
--------- ---------- ----------
Total contract backlog $1,976,000 $1,753,000 $ 853,000
========== ========== ==========
Backlog. In accordance with industry practice, substantially all of
the Company's contracts in backlog may be terminated at the convenience of the
client. In addition, the amount of the Company's backlog is subject to changes
in the scope of services to be provided under any given contract. The Company
has not historically experienced any material contract terminations and
generally experiences favorable changes in contract scope. The Company
estimates that approximately 80% of the backlog at December 31, 1995 will be
realized within the next year.
Term Contracts. Term contracts are typically performed under delivery
orders, issued by the contracting government entity, for a large number of
small- to medium-sized remediation projects throughout the geographic area
covered by the contract. The Company's government term contracts generally may
be canceled, delayed or modified at the sole option of the government, and
typically are subject to annual funding limitations and public sector budget
constraints. Accordingly, such government contracts represent the potential
dollar value that may be expended under such contracts, but there is no
assurance that such amounts, if any, will be actually spent on any projects or
of the timing thereof. In addition, further reductions by Congress in future
environmental remediation budgets of government agencies may adversely impact
future revenue from such agencies and the funding of the Company's government
term contracts included in contract backlog.
20
23
(b) LIQUIDITY AND CAPITAL RESOURCES
On May 31, 1995, the Company entered into a $150,000,000 revolving
credit agreement with a group of banks (the "Bank Group") to provide letters of
credit and cash borrowings. The agreement has a five year term and is
scheduled to expire on May 30, 2000. WMX has issued a guarantee of up to
$62,000,000 outstanding under the credit agreement in favor of the Bank Group.
See "Note 2 to the Consolidated Financial Statements." Under the terms of the
agreement the entire credit facility can be used for either cash borrowings or
letters of credit. Cash borrowings bear interest at either the prime rate plus
a percentage up to 0.625% or, at the Company's option, the Eurodollar market
rate plus a percentage ranging from 0.325% to 1.625%. The percentage over the
prime rate or the Eurodollar market rate is based on the aggregate amount
borrowed under the facility, the presence of the guarantee, and the Company's
financial performance as measured by an interest coverage ratio and a total
funded debt ratio. The agreement provides the participating banks with a
security interest in the Company's equipment, inventories, accounts
receivables, general intangibles and in the Company's investment in the common
stock of NSC as well as the Company's other subsidiaries. The agreement also
imposes, among other covenants, a minimum tangible net worth covenant, a
restriction on all of the Company's retained earnings including the declaration
and payment of cash dividends and a restriction on the ratio of total funded
debt to earnings before income taxes, depreciation and amortization. The
amounts outstanding for cash borrowing under the revolving credit facility at
December 31, 1995 and 1994 were $42,100,000 and $57,700,000, respectively, and
aggregate letters of credit outstanding at December 31, 1995 and 1994 were
$14,655,000 and $34,771,000, respectively.
Capital expenditures for the years ended December 31, 1995, 1994, and
1993 were $14,276,000, $13,354,000, and $15,783,000, respectively. The
Company's capital expenditures are primarily related to the purchase of heavy
equipment and the fabrication of custom equipment by the Company for the
execution of remediation projects. Capital expenditures for fiscal year 1996
are expected to range between $12,000,000 and $15,000,000. The Company's
long-term capital expenditure requirements are dependent upon the type and size
of future remediation projects awarded to the Company.
During 1995, the Company derived 76% of its revenue from government
agencies compared to 65% during the same period in 1994. Revenue from
government agencies historically has required greater working capital, the
major component of which is accounts receivable, than revenue from industrial
sector clients. In addition, the Company is bidding on a number of large,
long-term contract opportunities which, if awarded to the Company, would also
increase working capital needs and capital expenditures. The Company believes
it will be able to finance its increased working capital needs and capital
expenditures in the short term through a combination of cash flows from
operations, borrowing under its Revolving Credit Facility, proceeds from
permitted asset sales and other external sources. In addition, under the terms
of its recently completed acquisition of Rust's hazardous and nuclear waste
remediation business, Rust's parent company, WMX, has provided the Company with
a credit guarantee of up to $62,000,000 of the Company's indebtedness
outstanding until May 30, 2000. See "Note 2 to the Consolidated Financial
Statements." Such credit guarantee has allowed the Company to expand its
borrowing capacity and lower its cost of capital under its new credit facility
entered into on May 31, 1995.
The Company's identified long-term capital needs consist of payments
due upon the maturity of the Company's Revolving Credit Facility in 2000 and
sinking fund payments commencing in 1996 of 7.5% of the principal amount as
well as payments due upon maturity of its Convertible Debentures in 2006. The
Company purchased and retired $5,000,000 of the outstanding Convertible
Debentures during October 1995, sufficient to meet its first annual sinking
fund obligation due October 1, 1996. The Company believes that it will be able
to refinance the remaining indebtedness as necessary. See "Note 7 to the
Consolidated Financial Statements."
(c) INFLATION
Historically, inflation has not been a significant factor to the
Company or to the cost of its operations.
(d) RECENTLY ENACTED PRONOUNCEMENTS AND DEFERRED TAX ASSET
In March 1995, the FASB issued Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS No. 121") which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets'
21
24
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed. The Company will adopt SFAS No. 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material to the Company's financial
position or results of future operations.
The Company has recorded a valuation allowance for its deferred tax
assets to the extent that the Company believes such deferred tax assets may not
be realized. With respect to deferred tax assets for which a valuation
allowance has not been established, the Company believes it will realize the
benefit of these assets through the reversal of taxable temporary differences
and future income. The Company believes that future taxable income of
approximately $46,256,000 necessary to realize the deferred tax assets is
reasonably assured because of its substantial backlog and term contracts from
which the Company has historically realized sufficient margin to produce
consolidated net income. The principal uncertainty of realization of the
deferred tax assets is the Company's ability to convert its backlog to revenue
and margin. See "Contract Backlog" and "Environmental Matters and Government
Contracting" in other sections of Management's Discussion and Analysis of
Financial Condition and Results of Operations. The Company intends to evaluate
the realizability of its deferred tax assets quarterly by assessing the need
for an additional valuation allowance.
(e) ENVIRONMENTAL MATTERS AND GOVERNMENT CONTRACTING
Although the Company believes that it generally benefits from
increased environmental regulations and from enforcement of those regulations,
increased regulation and enforcement also create significant risks for the
Company. The assessment, remediation, analysis, handling and management of
hazardous substances necessarily involve significant risks, including the
possibility of damages or injuries caused by the escape of hazardous materials
into the environment, and the possibility of fines, penalties or other
regulatory action. These risks include potentially large civil and criminal
liabilities for violations of environmental laws and regulations, and
liabilities to customers and to third parties for damages arising from
performing services for clients, which could have a material adverse effect on
the Company.
The Company does not believe there are currently any material
environmental liabilities which should be recorded or disclosed in its
financial statements. The Company anticipates that its compliance with various
laws and regulations relating to the protection of the environment will not
have a material effect on its capital expenditures, future earnings or
competitive position.
Because of its dependence on government contracts, the Company also
faces the risks associated with such contracting, which could include civil and
criminal fines and penalties. As a result of its government contracting
business, the Company has been, is, and may in the future be subject to audits
and investigations by government agencies. See "Note 15 to the Consolidated
Financial Statements." The fines and penalties which could result from
noncompliance with the Company's government contracts or appropriate standards
and regulations, or the Company's suspension or debarment from future
government contracting, could have a material adverse effect on the Company's
business.
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25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
The Consolidated Financial Statements and supplementary quarterly
financial data of the Company and its subsidiaries for the years ended December
31, 1995, 1994 and 1993, are set forth on pages 23 through 40.
OHM CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31,
-------------------
ASSETS 1995 1994
---- ----
Current Assets:
Cash and cash equivalents $ 11,205 $ 4,930
Accounts receivable 100,291 86,663
Costs and estimated earnings on contracts in process in excess of billings 77,156 65,437
Materials and supply inventory, at cost 11,831 10,099
Receivable from affiliated company 15,000 --
Prepaid expenses and other assets 7,621 7,252
Deferred income taxes 16,600 6,744
Refundable income taxes 401 205
-------- --------
240,105 181,330
-------- --------
Property and Equipment, net 81,107 57,240
-------- --------
Other Noncurrent Assets:
Investment in affiliated company 23,038 23,352
Intangible assets relating to acquired businesses, net 21,613 370
Deferred debt issuance and financing costs 1,779 2,381
Deferred income taxes 1,440 336
Other assets 7,424 7,537
-------- --------
55,294 33,976
-------- --------
Total Assets $376,506 $272,546
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 65,233 $ 47,936
Billings on contracts in process in excess of costs and estimated earnings 1,387 40
Accrued compensation and related taxes 6,174 3,874
Federal, state and local taxes 200 102
Other accrued liabilities 33,538 9,652
Current portion of non-current liabilities 4,417 3,262
-------- --------
110,949 64,866
-------- --------
Non-current Liabilities:
Long-term debt 104,111 127,279
Capital leases 53 92
Pension agreement 901 906
-------- --------
105,065 128,277
-------- --------
Deferred Income Taxes -- 2,483
-------- --------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $10.00 par value, 2,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.10 par value, 50,000,000 shares authorized;
Shares issued: 1995 - 26,647,077; 1994 - 15,848,089 2,664 1,584
Additional paid-in capital 136,428 63,294
Retained earnings 21,400 14,598
-------- --------
160,492 79,476
Less treasury stock, 1994 - 211,624, at cost -- (2,556)
-------- --------
160,492 76,920
-------- --------
Total Liabilities and Shareholders' Equity $376,506 $272,546
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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26
OHM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Years Ended December 31,
--------------------------------
1995 1994 1993
---- ---- ----
Revenue $457,925 $323,381 $242,401
Cost of services 393,149 296,159 202,341
-------- -------- --------
Gross Profit 64,776 27,222 40,060
Selling, general and administrative expenses 45,223 32,281 27,110
-------- -------- --------
Operating Income (Loss) 19,553 (5,059) 12,950
-------- -------- --------
Other (Income) Expenses:
Investment income (849) (28) (28)
Interest expense 10,413 9,177 7,748
Equity in net earnings of affiliate (287) (1,032) (1,600)
Miscellaneous (income) expenses (72) 898 341
-------- -------- --------
9,205 9,015 6,461
-------- -------- --------
Income (Loss)
Before Income Taxes (Benefit) 10,348 (14,074) 6,489
Income taxes (benefit) 3,541 (6,458) 2,082
-------- -------- --------
Net Income (Loss) $ 6,807 $ (7,616) $ 4,407
======== ======== ========
Net Income (Loss) Per Share: $ 0.30 $ (0.49) $ 0.35
======== ======== ========
Weighted average number of common and common
equivalent shares outstanding 22,525 15,582 12,506
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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27
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Common Stock
-------------------------- Additional Cumulative
Number of Paid-In Retained Translation Treasury
Shares Amount Capital Earnings Adjustments Stock
-------------- ------ ------- -------- ----------- -----
BALANCE AT JANUARY 1, 1993 12,398,089 $ 1,239 $ 28,948 $ 17,865 $ (22) $ (4,197)
Proceeds from sale of 3,365,000 shares
of common stock, less issuance
expenses of $705,000 3,365,000 337 33,921
Stock options exercised, 30,480
shares reissued from treasury (95) 368
Deferred translation adjustments (28)
Net income 4,407
---------- -------- -------- --------- -------- -----------
BALANCE AT DECEMBER 31, 1993 15,763,089 1,576 62,774 22,272 (50) (3,829)
Proceeds from sale of 85,000 shares
of common stock, less issuance
expenses of $86,000 85,000 8 789
Stock options exercised, 105,425
shares reissued from treasury (269) 1,273
Deferred translation adjustments (8)
Net loss (7,616)
---------- -------- -------- --------- -------- -----------
BALANCE AT DECEMBER 31, 1994 15,848,089 1,584 63,294 14,656 (58) (2,556)
Proceeds from sale of 1,000,000
shares of common stock, less
issuance expenses of $25,000 1,000,000 100 9,875
Shares issued for the acquisition
of the Division, less issuance
expenses of $3,143,000 9,668,000 967 61,149
Issuance of common stock warrants 1,372
Stock options exercised, 211,624
shares reissued from treasury (861) 2,556
Shares issued for stock options 37,921 4 776
Shares issued for 401k plan funding 93,067 9 823
Deferred translation adjustments (5)
Net income 6,807
---------- -------- -------- --------- -------- -----------
BALANCE AT DECEMBER 31, 1995 26,647,077 $ 2,664 $136,428 $ 21,463 $ (63) $ --
========== ======== ======== ========= ======== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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28
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Years Ended December 31,
----------------------------------
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 6,807 $ (7,616) $ 4,407
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 10,652 7,395 7,073
Amortization of other noncurrent assets 2,916 2,418 1,698
Deferred income taxes 1,509 (7,801) 1,456
Loss on sale of property and equipment 423 764 55
Equity in net earnings of affiliate, net of dividends received 314 (430) 3,212
Deferred translation adjustments and other 93 90 255
Changes in current assets and liabilities:
Accounts receivable 10,049 (22,279) (17,379)
Costs and estimated earnings on contracts in
process in excess of billings (10,278) (19,693) (24,742)
Materials and supply inventory (1,732) (3,216) (426)
Prepaid expenses and other assets (206) (1,704) (85)
Refundable income taxes and other (196) (114) 1,079
Accounts payable 3,907 5,263 20,549
Billings on contracts in process in excess
of costs and estimated earnings (1,019) (669) (439)
Accrued compensation and related taxes 476 715 227
Federal, state and local income taxes 98 (195) (410)
Other accrued liabilities (4,416) 795 (5,432)
---------- -------- --------
Net cash flows provided by (used in) operating activities 19,397 (46,277) (8,902)
---------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment (14,276) (13,354) (15,783)
Proceeds from sale of property and equipment 3,813 1,847 126
Cash acquired from purchase of business, net of acquisition costs 13,527 -- --
Increase in receivable from affiliated company (6,695) -- --
Increase in other noncurrent assets (589) (1,835) (6,163)
Proceeds from affiliated companies, net -- -- 14,850
Investment in discontinued operations, net -- -- (146)
Proceeds from sale of discontinued operations -- -- 14,613
---------- -------- --------
Net cash provided by (used in) investing activities (4,220) (13,342) 7,497
---------- -------- --------
Cash flows from financing activities:
Increase in long-term debt 2,209 8,900 5,663
Payments on long-term debt and capital leases (8,691) (1,782) (212)
Proceeds from borrowing under revolving credit agreement 159,900 147,200 99,500
Payments on revolving credit agreement (175,500) (96,500) (135,500)
Proceeds from public offering of common stock -- 797 34,258
Proceeds from private placement of common stock 9,975 -- --
Common Stock issued for 401k funding and stock options 1,612 -- --
Payments on pension agreement (102) (109) (105)
Reissuance of treasury stock 1,695 1,004 273
---------- -------- --------
Net cash (used in) provided by financing activities (8,902) 59,510 3,877
---------- -------- --------
Net increase (decrease) in cash and cash equivalents 6,275 (109) 2,472
Cash and cash equivalents at beginning of year 4,930 5,039 2,567
---------- -------- --------
Cash and cash equivalents at end of year $ 11,205 $ 4,930 $ 5,039
========== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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29
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION. The
accompanying consolidated financial statements include the accounts of OHM
Corporation (the "Company") and its subsidiaries. The Company also includes
its proportionate share of joint ventures, in which the Company's ownership is
less than 50%, which were entered into for the purpose of performing large
remediation projects. The Company's investment in 40% of the outstanding
common stock of NSC Corporation ("NSC") is carried on the equity basis. All
material intercompany transactions and balances among the consolidated group
have been eliminated in consolidation.
USE OF ESTIMATES. The preparation of the accompanying consolidated
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and the
accompanying notes. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES. The Company provides a broad range of
environmental and hazardous waste remediation services to its clients located
primarily in the United States. The assessment, remediation, analysis,
handling and management of hazardous substances necessarily involve significant
risks, including the possibility of damages or injuries caused by the escape of
hazardous material into the environment, and the possibility of fines,
penalties or other regulatory action. These risks include potentially large
civil and criminal liabilities for violations or environmental laws and
regulations, and liability to customers and to third parties for damages
arising from performing services for clients, which could have a material
adverse effect on the Company. Although the Company believes that it generally
benefits from increased environmental regulations, and from enforcement of
those regulations, increase regulation and enforcement also create significant
risks for the Company.
The Company does not believe there are currently any material
environmental liabilities which should be recorded or disclosed in its
financial statements. The Company anticipates that its compliance with various
laws and regulations relating to the protection of the environment will not
have a material effect on its capital expenditures, future earnings or
competitive position.
The Company's revenue from government agencies accounted for 76%, 65%
and 47% of revenue for the years ended December 31, 1995, 1994 and 1993,
respectively. Because of its dependence on government contracts, the Company
also faces the risks associated with such contracting, which could include
civil and criminal fines and penalties. As a result of its government
contracting business, the Company has been, is and may in the future be subject
to audits and investigations by government agencies. The fines and penalties
which could result from noncompliance with the Company's government contracts
or appropriate standards and regulations, or the Company's suspension or
debarment from future government contracting, could have a material adverse
effect on the Company's business. The dependence on government contracts will
also continue to subject the Company to significant financial risk and an
uncertain business environment caused by the strain of the federal budget
deficit and the lengthy budget negotiations each year.
In addition to the above, there are other risks and uncertainties that
involve the use of estimates in the preparation of the Company's consolidated
financial statements. See "Note 2 - Acquisition" and "Note 15 - Litigation and
Contingencies."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. In March 1995, the
FASB issued Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS No. 121"), which requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed. The
Company will adopt SFAS No. 121 in the first quarter of 1996 and, based on
current circumstances, does not believe the effect of adoption will be material
to the Company's financial position or results of future operations.
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STOCK BASED COMPENSATION. The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to the fair
value of the shares at the date of grant. The Company accounts for stock
compensation arrangements in accordance with APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and accordingly, recognizes no compensation
expense for the stock compensation arrangements. The Company has no intention
of changing this accounting practice.
REVENUE AND COST RECOGNITION. The Company primarily derives its
revenue from providing environmental services under cost plus fee, time and
materials, fixed price and unit price contracts. The Company records revenue
and related income from its fixed and unit price contracts in process using the
percentage-of-completion method of accounting. Provisions for estimated losses
on uncompleted contracts are made in the period in which such losses are
determined. Changes in project performance, project conditions, and estimated
profitability may result in revisions to costs and income and are recognized in
the period in which the revisions are determined. An amount equal to contract
costs attributable to claims is included in revenue when realization is
probable and the amount can be reliably estimated. Revenue from time and
materials and cost plus fee type contracts is recorded based on performance and
efforts expended. Contract costs include all direct labor, material, per diem,
subcontract and other direct and indirect project costs related to contract
performance. Revenue derived from non-contract activities is recorded when the
services are performed.
PROPERTY AND EQUIPMENT. Property and equipment are carried at cost
and include expenditures which substantially increase the useful lives of the
assets. Maintenance, repairs and minor renewals are expended as incurred.
Depreciation and amortization, including amortization of assets under capital
leases, are provided on a specific item basis net of salvage value over the
estimated useful lives of the respective assets, using primarily the
straight-line method.
CAPITALIZED INTEREST. Interest expense incurred on capital
expenditures for assets constructed by the Company is capitalized and is
included in the cost of such assets. Total interest expense incurred by the
Company was $11,205,000, $10,127,000 and $8,447,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Total interest capitalized was
$792,000, $950,000 and $699,000 for the years ended December 31, 1995, 1994 and
1993, respectively.
INTANGIBLE ASSETS. Intangible assets consist principally of goodwill
and other intangible assets resulting primarily from acquisitions accounted for
using the purchase method of accounting. Goodwill is amortized using the
straight-line method over forty years. Other intangible assets relating to
acquired businesses consist principally of proprietary processes, and other
deferred costs, and are amortized on a straight-line basis over nine to ten
years. The accumulated amortization of intangible assets, including goodwill,
relating to acquired businesses was $1,159,000 and $919,000 at December 31,
1995 and 1994, respectively.
INCOME TAXES. The Company accounts for income taxes under the
liability method pursuant to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Under the liability method, deferred tax
assets and liabilities are determined based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse.
STATEMENT OF CASH FLOWS. The Company considers all short-term
deposits and highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents. Cash paid for income taxes for
the years ended December 31, 1995, 1994 and 1993 was $986,000, $550,000 and
$381,000, respectively. Cash paid for interest was $10,937,000, $9,171,000 and
$7,940,000 for each of the years ended December 31, 1995, 1994 and 1993,
respectively.
With respect to non-cash investing and financing activities, the
Company acquired $29,000, $91,000 and $2,019,000 of fixed assets under
financial obligations for the years ended December 31, 1995, 1994 and 1993,
respectively. In addition, the Company issued 9,668,000 shares of its common
stock for an acquisition. See "Note 2 - Acquisition."
NET INCOME (LOSS) PER SHARE. Net income (loss) per share amounts are
based on the weighted average common and common equivalent shares outstanding
during the respective periods. Shares of common stock issuable upon conversion
of the 8% Convertible Subordinated Debentures due 2006 are not considered to be
common stock equivalents and were antidilutive in each of the years presented;
therefore, they were excluded from the calculation of net income per share.
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RECLASSIFICATION. Certain amounts presented for the years ended
December 31, 1994 and 1993 have been reclassified to conform to the 1995
presentation.
NOTE 2 - ACQUISITION
On May 30, 1995, the Company completed the acquisition of
substantially all of the assets and certain liabilities of the hazardous and
nuclear waste remediation service business (the "Division") of Rust
International Inc. ("Rust") in exchange for 9,668,000 shares of common stock of
the Company, or approximately 37% of the outstanding shares of the Company's
common stock. Such shares issued to Rust are subject to a number of
restrictions set forth in a Standstill and Non-competition Agreement that was
entered into pursuant to the Agreement and Plan of Reorganization dated
December 5, 1994, as amended (the "Reorganization Agreement"), among the
Company, Rust and certain of their subsidiaries. In addition to the net assets
of the Division, the Company received $16,636,000 in cash pursuant to
provisions of the Reorganization Agreement that provided for an adjustment
based on the average per share price of the Company's common stock for a 20
trading day period prior to closing. Also, under terms of the Reorganization
Agreement, as amended on March 22, 1996, the Company received an additional
$15,000,000 on March 25, 1996. For purposes of calculating the consideration
given by the Company for the Division, such 20 trading day average per share
price of $11.25 was used, adjusted to reflect a 40% discount for the restricted
nature of the common stock issued. Consideration for the Division aggregated
$65,259,000.
In exchange for a warrant to purchase up to 700,000 shares of the
Company's common stock at an exercise price of $15.00 per share during the five
years following the closing date, Rust's parent company, WMX Technologies, Inc.
("WMX"), will provide the Company with a credit enhancement in the form of
guarantees, issued from time to time upon request of the Company, of up to
$62,000,000 of the Company's indebtedness, which will increase proportionately
up to $75,000,000 upon issuance of shares under the warrant.
The acquisition of the Division has been accounted for using the
purchase method and, accordingly, the acquired assets and assumed liabilities,
including goodwill of $21,483,000, have been recorded at their estimated fair
values as of May 30, 1995. The acquired operations of the Division included
contracts in process for which the Company recognizes revenue using the
percentage of completion method of accounting. The valuation of the contracts
in process require estimates relating to the costs to complete certain large
contracts in process which require provisions for losses. The Company has
estimated the fair value of contracts acquired at amounts which will allow the
Company to achieve reasonable operating margins on the effort it expends to
complete these contracts. Due to pending events related to certain contracts,
such as legal proceedings and contract negotiations, the Company will finalize
the purchase accounting adjustments during the second quarter of 1996.
Accordingly, the purchase accounting adjustments to reflect the fair value of
assets acquired and liabilities assumed have not been finalized and the
accompanying consolidated financial statements have been prepared on the basis
of preliminary estimates of such adjustments. The Company's consolidated
financial statements for the year ended December 31, 1995, include the results
of operations for the Division since May 30, 1995. The following table sets
forth the unaudited combined pro forma results of operations for the year ended
December 31, 1995 and 1994, giving effect to the acquisition of the Division as
if such acquisition had occurred on January 1, 1994.
Pro Forma
Year Ended December 31,
-----------------------
1995 1994
---- ----
(In Thousands, Except Per Share Data)
Revenue $520,465 $554,289
Net income (loss) 8,142 (1,640)
Net income (loss) per share $ 0.31 $ (0.06)
The combined pro forma results of operations for the year ended
December 31, 1995 and 1994 are based upon certain assumptions and estimates
which the Company believes are reasonable. The combined pro forma results of
operations may not be indicative of the operating results that actually would
have been reported had the transaction been consummated on January 1, 1994, nor
are they necessarily indicative of results which will be reported in the
future.
The estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition are as
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follows (in thousands):
Current assets $65,207
Property and equipment 24,450
Goodwill 21,483
Current liabilities 45,881
NOTE 3 - ACCOUNTS RECEIVABLE AND COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN
PROCESS
Accounts receivable are summarized as follows: December 31,
--------------------
1995 1994
---- ----
(In Thousands)
Accounts billed and due currently $ 65,377 $ 49,560
Unbilled receivables 54,295 56,334
Retained 6,530 6,832
-------- --------
126,202 112,726
Allowance for uncollectible accounts (25,911) (26,063)
-------- --------
$100,291 $ 86,663
======== ========
The consolidated balance sheets include the following amounts:
December 31,
--------------------
1995 1994
---- ----
(In Thousands)
Costs incurred on contracts in process $342,093 $ 203,742
Estimated earnings 70,600 42,032
-------- ---------
412,693 245,774
Less billings to date (336,924) (180,377)
-------- ---------
$ 75,769 $ 65,397
======== =========
Costs and estimated earnings on contracts in process in excess of billings $ 77,156 $ 65,437
Billings on contracts in process in excess of costs and estimated earnings (1,387) (40)
-------- ---------
$ 75,769 $ 65,397
======== =========
Unbilled receivables and costs and estimated earnings on contracts in
process typically represent: (i) amounts earned under the Company's contracts
but not yet billable to clients according to contract terms, which usually
consider passage of time, achievement of certain project milestones or
completion of the project; and (ii) amounts equal to contract costs
attributable to claims included in revenue. In addition, unbilled receivables
and costs and estimated earnings on contracts in process include amounts
relating to contracts with federal government agencies which require services
performed by the Company's subcontractors to be paid prior to billing.
The Company provides a broad range of environmental and hazardous
waste remediation services to industrial, federal government agencies, and
state and local government agencies located primarily in the United States and
Canada. The Company's industrial, federal government, and state and local
government clients constituted 32%, 63%, and 5%, respectively, of total
accounts receivable and costs and estimated earnings on contracts in process at
December 31, 1995.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows: December 31,
--------------------
1995 1994
---- ----
(In Thousands)
Land $ 374 $ 257
Buildings and improvements 17,681 17,179
Machinery and equipment 91,997 74,270
Construction in progress 14,937 4,190
-------- --------
124,989 95,896
Less accumulated depreciation and amortization (43,882) (38,656)
-------- --------
$ 81,107 $ 57,240
======== ========
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NOTE 5 - INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANY
On May 4, 1993, NSC, then a 70% owned subsidiary, acquired all the
assets and certain liabilities of the asbestos abatement division of The Brand
Companies, Inc. ("Brand") in exchange for 4,010,000 shares of NSC's common
stock and the common stock of NSCIS, NSC's industrial maintenance subsidiary.
As a result of this transaction the Company's ownership interest in NSC was
reduced to 40%.
The combined summarized financial information for NSC is set forth
below:
December 31,
--------------------
1995 1994
---- ----
(In Thousands)
Current assets $ 41,805 $ 40,648
Noncurrent assets 45,356 47,639
Total assets 87,161 88,287
Current liabilities 24,466 18,505
Noncurrent liabilities 5,414 11,720
Years Ended December 31,
-----------------------------------
1995 1994 1993
---- ---- ----
(In Thousands)
Revenue $124,529 $132,218 $110,254
Gross profit 19,447 21,716 20,901
Operating income 2,028 5,101 6,356
Net income 715 2,566 3,373
Company's interest in net income 287 1,032 1,600
The Company's accumulated equity in the undistributed earnings of NSC
included in consolidated retained earnings was $5,854,000 at December 31, 1995.
The Company received cash dividends from NSC aggregating $602,000 for each of
the years ended December 31, 1995 and 1994.
NOTE 6 - OTHER ACCRUED LIABILITIES
Other accrued liabilities are summarized as follows:
December 31,
--------------------
1995 1994
---- ----
(In Thousands)
Reserve for loss projects $ 19,357 $ --
Reserve for self-insurance 3,555 3,227
Accrued insurance 2,503 2,041
Other 8,123 4,384
-------- ----------
$ 33,538 $ 9,652
======== ==========
The reserve for loss projects is related to certain contracts in
process of the acquired Division. See "Note 2 - Acquisition."
NOTE 7 - LONG-TERM DEBT
The long-term debt of the Company is summarized below:
December 31,
--------------------
1995 1994
---- ----
(In Thousands)
8% Convertible Subordinated Debentures due October 1, 2006 $ 52,500 $ 57,500
Revolving credit facility 42,100 57,700
Notes payable to financial institutions 11,704 14,732
Notes payable 2,170 560
-------- --------
108,474 130,492
Less current portion (4,363) (3,213)
-------- --------
$104,111 $127,279
======== ========
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The convertible subordinated debentures are convertible into 41.67
shares of common stock per $1,000 unit with interest payable semiannually on
April 1 and October 1, and are redeemable at the option of the Company. The
convertible subordinated debentures require annual mandatory sinking fund
payments of 7.5% of the principal amount which commence on October 1, 1996, and
continue through October 1, 2005. The Company purchased and retired $5,000,000
of the outstanding debentures during October of 1995, sufficient to meet the
first annual sinking fund obligation due October 1, 1996 which resulted in a
gain of $222,000 and has been included in miscellaneous income in the Company's
statement of operations for the year ended December 31, 1995. The fair value
of the convertible subordinated debentures, based on a quoted market price,
approximates $45,413,000 at December 31, 1995. The amortization of debt
issuance costs related to the convertible subordinated debentures was $108,000
for each of the years ended December 31, 1995, 1994, and 1993.
On May 31, 1995, the Company entered into a $150,000,000 revolving
credit agreement with a group of banks (the"Bank Group") to provide letters of
credit and cash borrowings. The agreement has a five year term and is
scheduled to expire on May 30, 2000. WMX has issued a guarantee of up to
$62,000,000 outstanding under the credit agreement in favor of the Bank Group.
See "Note 2 - Acquisition." Under the terms of the agreement the entire credit
facility can be used for either cash borrowings or letters of credit subject to
certain covenants. Cash borrowings bear interest at either the prime rate plus
a percentage up to 0.625% or, at the Company's option, the Eurodollar market
rate plus a percentage ranging from 0.325% to 1.625%. The percentage over the
prime rate or the Eurodollar market is based on the aggregate amount borrowed
under the facility, the presence of the WMX guarantee, and the Company's
financial performance as measured by an interest coverage ratio and a total
funded debt ratio. At December 31, 1995, the average interest rate for cash
borrowings under the agreement was 6.3%. The arrangement provides the
participating banks and WMX with a security interest in the Company's
equipment, inventories, accounts receivables, general intangibles and in the
Company's investment in the common stock of NSC as well as the Company's other
subsidiaries. The agreement also imposes, among other covenants, a minimum
tangible net worth covenant, a restriction on all of the Company's retained
earnings including the declaration and payment of cash dividends and a
restriction on the ratio of total funded debt to earnings before income taxes,
depreciation and amortization. The Company had $14,655,000 and $34,771,000 of
letters of credit outstanding under its revolving credit facility at December
31, 1995 and 1994, respectively.
Notes payable to financial institutions consist of: (i) a $4,702,000
note payable bearing interest at 7.24% payable in equal monthly installments of
$146,000 with the final payment due in December 1998, (ii) a $1,108,000 note
payable bearing interest at 9.25% payable in equal monthly installments of
$35,000 with the final payment due in December 1998, (iii) a $4,956,000 note
payable bearing interest at 8.58% payable in quarterly installments of $356,000
with the final payment of $957,000 due in August 1999, and (iv) a $938,000 note
payable bearing interest at 8.72% payable in equal monthly installments of
$43,000 with the final payment due in January 1998. Each of the above
agreements provides the respective financial institution with a security
interest in the equipment financed with the proceeds from such notes.
Notes payable include: (i) a $330,000 interest bearing note at a rate
of 8.75% payable in monthly installments of $14,000 with a final payment of
$320,000 due in January 1996, (ii) a $58,000 interest bearing note at a rate of
9% payable in monthly installments of $4,000 with a final payment of $50,000
due in February 1996, (iii) a $1,173,000 interest bearing note at a rate of
9.50% payable in equal monthly installments of $48,000, due in April 1998, (iv)
a $346,000 interest bearing note at a rate of 9.22% payable in equal monthly
installments of $13,000 due in June 1998, (v) a $263,000 interest bearing note
a rate of 7.50% payable in equal monthly installments of $8,000 due in December
1998.
The aggregate maturity of long-term debt for the five years ending
December 31 is: 1996, $4,363,000; 1997, $8,630,000; 1998, $7,921,000; 1999,
$5,899,000; 2000, $46,413,000; 2001 and thereafter, $35,248,000.
NOTE 8 - LEASES
Future minimum lease payments under noncancelable operating leases
total $8,169,000, $4,962,000, $4,423,000, $3,473,000 and $2,339,000 for the
years ended December 31, 1996, 1997, 1998, 1999 and 2000, respectively. Lease
payments under noncancelable operating leases subsequent to the year ended
December 31, 2000 aggregate $4,246,000.
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Rental expense under operating leases totaled $8,858,000, $5,906,000
and $4,235,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 9 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets as of December 31, 1995 and 1994 are as follows:
December 31,
--------------------
1995 1994
---- ----
Long-term deferred tax liabilities: (In Thousands)
Property and equipment $ 8,043 $ 5,256
Intangible assets 2,003 1,768
Investments 2,729 2,821
------- -------
Total long-term deferred tax liabilities 12,775 9,845
Long-term deferred tax assets:
Net operating loss ("NOL") carryforwards 3,767 3,156
Intangible assets 2,248 --
Research and development tax credits 4,116 1,433
Other tax credit carryforwards 2,410 2,068
Other, net 2,777 1,584
------- -------
Total long-term deferred tax assets 15,318 8,241
Valuation allowance for long-term deferred tax assets (1,303) (879)
------- -------
Total long-term deferred tax assets - net of valuation allowance 14,015 7,362
------- -------
Net long-term deferred tax liabilities - domestic operations $ 2,483
=======
Net long-term deferred tax assets - domestic operations 1,240
Foreign tax NOLs 220 $ 366
Valuation allowance for foreign deferred tax assets (20) (30)
------- -------
Total net long-term deferred tax assets $ 1,440 $ 336
======= =======
Current deferred tax liabilities:
Revenue recognition $ 1,520 $ 2,544
Prepaid expenses 1,216 1,079
Tax reserves 445 526
------- -------
Total current deferred tax liabilities 3,181 4,149
Current deferred tax assets:
Bad debt reserves 9,863 10,049
Project accruals 7,214 --
NOL carryforwards 1,950 1,928
Other, net 1,579 155
------- -------
Total current deferred tax assets 20,606 12,132
Valuation allowance for current deferred tax assets (825) (1,239)
------- -------
Total current deferred tax assets - net of valuation allowance 19,781 10,893
------- -------
Net current deferred tax assets $16,600 $ 6,744
======= =======
The net long-term deferred tax assets of $200,000 and $336,000 at
December 31, 1995 and 1994, respectively, are attributable to the foreign
operations of the Company and cannot be offset with the net long term deferred
tax liabilities resulting from the Company's domestic operations.
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The provisions for income taxes (benefit) consist of the following:
Years Ended December 31,
-----------------------------------
1995 1994 1993
---- ---- ----
Current: (In Thousands)
Federal $ -- $ 244 $ 199
State 58 -- 75
------ ------- -------
58 244 274
Benefit of loss carryforwards -- (5,380) (3,816)
Deferred:
Federal 3,036 (1,161) 5,189
State 447 (161) 435
------ ------- -------
3,483 (1,322) 5,624
------ ------- -------
$3,541 $(6,458) $ 2,082
====== ======= =======
The reasons for differences between the provisions for income taxes
and the amount computed by applying the statutory federal income tax rate to
income (loss) from operations before income taxes are as follows:
Years Ended December 31,
-----------------------------
1995 1994 1993
---- ---- ----
Federal statutory rate 34.0% 34.0% 34.0%
Add (deduct):
State income taxes, net of federal benefit 3.2 3.7 3.0
Research and development tax credits (4.5) 3.6 --
Equity in net earnings of affiliates (0.8) 2.0 (6.4)
Other, net 2.3 2.6 1.5
---- ---- ----
34.2% 45.9% 32.1%
==== ==== ====
Net operating loss, capital loss and tax credit carryforward amounts
and their respective expiration dates for income tax purposes are as follows
(in thousands):
Amount Expiration Date
------- ---------------------
Net operating loss $14,658 1996 through 2008
State net operating losses in excess of federal 15,817 1997 through 2007
Research and development tax credits 4,116 2002 through 2010
Alternative minimum tax credits 1,103 Indefinite
Miscellaneous credits 700 1997 through 2005
Foreign tax net operating loss 563 1997 through 1998
The valuation allowance for deferred tax assets is $2,148,000 at
December 31, 1995 and 1994.
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company has a policy whereby transactions with directors,
executive officers and related parties require the approval of a disinterested
majority of the Board of Directors.
Prior to NSC's acquisition of the asbestos abatement division of Brand
in May 1993, the Company had an intercompany loan and management services
arrangement with NSC. Under the intercompany loan arrangement, the Company
would borrow from NSC its excess cash and advance to NSC funds for working
capital requirements and expansion of NSC's business. The Company charged NSC
net interest expense of $275,000 for the year ended December 31, 1993. In
addition, the Company and its subsidiaries furnished to NSC management services
for financial, administrative, legal and certain other staff functions. The
Company charged NSC $149,000 for the year ended December 31, 1993, for such
services. The Company believes the charges for such services have been made on
a reasonable basis and approximate what it would have cost NSC to obtain such
services on its own. Upon completion of the Brand asbestos abatement division
acquisition, such intercompany loan and management services agreements were
terminated.
The Company has been reimbursed by NSC for certain third party charges
paid on NSC's behalf, such as letter of credit fees, insurance and bonding
costs and legal fees. The costs charged to NSC for general liability and other
insurance coverages were $227,000, $363,000 and $93,000 for the years ended
December 31, 1995, 1994
34
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and 1993, respectively. In addition, prior to NSC's acquisition of Brand's
asbestos abatement division, NSC employees were eligible to participate in
OHM's group insurance and other employee benefit plans. The costs charged to
NSC for such employee benefits were $242,000 for the year ended December 31,
1993.
In the normal course of business, NSC has provided the Company with
subcontract services on certain of its projects for asbestos abatement and
industrial maintenance services. The costs for such services were $212,000,
$1,377,000 and $3,469,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
In the normal course of business, the Company has provided to WMX and
its affiliates certain subcontractor services on remediation and construction
projects, the cost of these services, in the aggregate, were $10,242,000 for
the year ended December 31, 1995. The Company has purchased from WMX and its
affiliates, hazardous waste disposal services, the cost of these services, in
the aggregate, were $6,636,000 for the year ended December 31, 1995. At
December 31, 1995, the Company has $3,871,000 of accounts receivable and
$806,000 of accounts payable recorded related to such activities. In addition
to the above, the Company's financial statements at December 31, 1995 include a
receivable from WMX for $15,000,000, which is related to final payments due
under terms of the Reorganization Agreement, as amended March 22, 1996. Such
amount was paid to the Company on March 25, 1996.
The Company rents certain buildings from The KDC Company and Findlay
Machine and Tool, Inc. Rental expenses for these facilities totaled $94,000,
$38,000 and $33,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The principal shareholders of the company are certain officers
and directors of the Company.
The Company has purchased general contractor services and equipment
from Alvada Construction, Inc. which totaled $226,000, $24,000 and $166,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. The principal
shareholder of the company is directly related to certain officers and
directors of the Company.
In the normal course of business, the Company has purchased
subcontractor services on certain of its projects from Kirk Brothers Co., Inc.
which totaled $615,000 and $2,055,000 for the years ended December 31, 1995 and
1994, respectively. The principal shareholders of the company are directly
related to certain officers and directors of the Company.
NOTE 11 - AGREEMENT WITH FORMER SHAREHOLDER
During 1985, the Company executed a pension agreement with a former
officer, directly related to certain directors of the Company, for an annual
pension commencing on June 1, 1990, of $96,000, subject to cost of living
adjustments, for the remainder of his life and that of his spouse if she
survives him. The Company made pension payments totaling $102,000, $109,000
and $105,000 pursuant to this agreement during the years ended December 31,
1995, 1994 and 1993, respectively.
NOTE 12 - CAPITAL STOCK
The Company has authorized 2,000,000 shares of preferred stock at a
$10.00 par value. No shares of preferred stock had been issued at December 31,
1995. The rights and preferences of the preferred stock will be fixed by the
Board of Directors at the time such shares are issued. The preferred stock,
when issued, will have dividend and liquidation preferences over those of the
common shareholders.
In December 1993, the Company completed a public offering of 3,365,000
shares of common stock at $11.00 per share. Total net proceeds to the Company
from such offering were $34,963,000, less issuance expenses of $705,000, and
were used to reduce the outstanding amounts under the Company's revolving
credit agreement. If the offering had occurred at the beginning of 1993, pro
forma income per share would have been $0.37. This pro forma per share data is
unaudited and not necessarily indicative of the results that would have been
obtained had this event actually occurred at the assumed date. In January
1994, the Company issued an additional 85,000 shares of common stock at $11.00
per share which resulted in $883,000 of net proceeds, less issuance expenses of
$86,000, to the Company.
On March 28, 1995, the Company sold to H. Wayne Huizenga and an
affiliated family foundation 1,000,000 shares of its common stock and options
for an aggregate purchase price of $10,000,000, less issuance
35
38
expenses of $25,000. The options are exercisable over five years for the
purchase of 620,000 shares of common stock upon payment of $10.00 per share and
380,000 shares of common stock upon payment of $12.00 per share.
On May 30, 1995, the Company issued 9,668,000 shares of common stock
in exchange for substantially all of the assets and certain liabilities of the
hazardous and nuclear waste remediation service business of Rust. In addition,
the Company issued a warrant to purchase up to 700,000 shares of common stock
at an exercise price of $15.00 per share to Rust's parent company, WMX, in
exchange for a $62,000,000 guarantee of the Company's indebtedness by WMX. The
warrant is exercisable until May 30, 2000. See "Note 2 - Acquisition."
NOTE 13 - STOCK OPTION PLAN
In 1986, the Company adopted and the shareholders approved the 1986
Stock Option Plan (the "1986 Plan") which provides for the granting of stock
options to directors, officers and key employees at prices not less than the
fair market value of the Company's common stock on the date of grant. A total
of 1,850,000 shares of the Company's common stock had been reserved for
issuance upon the exercise of options granted under the 1986 Plan at December
31, 1993. The total amount of shares reserved for issuance was subsequently
increased to 2,850,000 by vote of the shareholders at the 1994 Annual Meeting.
Substantially all options presently issued under the 1986 Plan are exercisable
in cumulative annual installments ranging up to 20 percent commencing on the
date of grant and expiring ten years thereafter. The number of shares
available for grants of additional options under the 1986 Plan were 254,844 and
752,859 at December 31, 1995 and 1994, respectively.
On August 6, 1992, the Company's Board of Directors approved a stock
option plan for the Board of Directors (the "Directors' Plan"), which was
subsequently approved by the Company's shareholders at the 1993 Annual Meeting.
The Directors' Stock Option Plan provides for the immediate grant to each
non-employee director a stock option for 15,000 shares of the Company's common
stock, less the number of shares held by any such director under the 1986 Stock
Option Plan. Additionally, the Directors' Plan provides for additional grants
of stock options for 5,000 shares of the Company's common stock, at prices not
less than the fair value, to each non-employee director annually. Options
granted under the Directors' Plan may not be exercised for a period of six
months following the date of grant and terminate ten years after the date of
grant or eighteen months after the holder ceases to be a member of the Board of
Directors, whichever occurs earlier. The total number of shares available for
grants of additional options under the Directors' Plan at December 31, 1995 and
1994 was 850,000 and 915,000, respectively.
The following is a summary of the stock option activity:
Number Price Range
1986 PLAN of Shares Per Share
----------- ----------------------
Outstanding at January 1, 1993 1,258,200 $ 6.38 - $ 7.75
Granted 597,950 8.25 - 11.88
Exercised (30,480) 7.63 - 10.25
Cancelled (339,870) 7.63 - 10.25
----------- ---------------
Outstanding at December 31, 1993 1,485,800 6.38 - 11.88
Granted 477,350 9.75 - 16.25
Exercised (105,425) 7.00 - 11.88
Cancelled (92,375) 7.00 - 11.88
----------- ---------------
Outstanding at December 31, 1994 1,765,350 6.38 - 16.25
Granted 632,750 7.13 - 12.50
Exercised (249,545) 6.38 - 10.88
Cancelled (134,735) 7.63 - 16.25
----------- ---------------
Outstanding at December 31, 1995 2,013,820 6.38 - 16.25
----------- ---------------
Exercisable at December 31, 1995 935,105 $ 6.38 - $16.25
========== ===============
DIRECTORS' PLAN
Outstanding at January 1, 1993 35,000 $ 7.63 - $ 7.63
Granted 25,000 8.25 - 8.25
----------- ---------------
Outstanding at December 31, 1993 60,000 7.63 - 8.25
Granted 25,000 15.63 - 15.63
----------- ---------------
Outstanding at December 31, 1994 85,000 7.63 - 15.63
Granted 65,000 11.75 - 12.00
----------- ---------------
Outstanding at December 31, 1995 150,000 7.63 - 15.63
----------- ---------------
Exercisable at December 31, 1995 150,000 $ 7.63 - $15.63
========== ===============
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NOTE 14 - RETIREMENT AND PROFIT-SHARING PLANS
The Company has a Retirement Savings Plan (the "Plan") which allows
each of its eligible employees to make contributions, up to a certain limit, to
the Plan on a tax-deferred basis under Section 401(k) of the Internal Revenue
Code of 1986, as amended. Eligible employees are those who are employed
full-time, are over twenty-one years of age, and have one year of service with
the Company. The Company may, at its discretion, make matching contributions
and profit sharing contributions to the Plan out of its profits for the plan
year. The Company made matching contributions of $1,643,000, $1,225,000 and
$743,000 to the Plan for the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 15 - LITIGATION AND CONTINGENCIES
The Company's accounts receivable at December 31, 1995 include a claim
receivable aggregating approximately $25,833,000 in direct and other costs
relating to a major remediation project which was performed by the Company for
Citgo Petroleum Corporation ("Citgo") at its Lake Charles, Louisiana refinery
during 1993 and 1994. This claim receivable represents direct and other costs
to date for activities which the Company's management believed exceeded the
scope of the existing contract due to deficient project specifications provided
by Citgo and Oxy USA, Inc. ("Oxy") as well as differing site conditions. In
addition, at December 31, 1995, the Company has recorded in its financial
statements approximately $5,381,000 of accounts receivable that are in dispute
for work performed under the terms of the Company's base contract with Citgo.
In April 1994, Citgo filed an action in the U.S. District Court for the Western
District of Louisiana seeking a declaratory judgment that the Company is not
entitled to additional compensation under the contract and certain other
relief. The Company's answer to the declaratory judgment action was filed in
July 1994, together with counterclaims against Citgo for negligent
misrepresentation, breach of contract and quantum meruit seeking damages in
excess of $35,000,000. In August 1994, Citgo amended its complaint seeking
damages under the contract for production shortfalls, which Citgo has asserted
in answer to the Company's interrogatories to be approximately $27,600,000.
The Company believes that such assertion of damages is totally without merit
since the contract expressly provides that Citgo's sole remedy for production
shortfalls by the Company are liquidated damages not to exceed $500,000. In
January 1995, Citgo filed a third party complaint against Occidental Oil and
Gas Corporation and Oxy in such litigation because of their prior involvement
with the Citgo site and preparation of the contract specifications.
Additionally, in July 1995, the Company also filed a third party complaint
against Oxy for negligent misrepresentation as a result of its involvement with
the development of sampling and analytical data relied upon by the Company in
preparation of its bid and cost estimates for work at the site.
The Company has also become involved in litigation with Occidental
Chemical Corporation ("Occidental") relating to a separate project performed in
1993 and 1994 for Occidental. The Company's accounts receivable at December
31, 1995 include a claim receivable of $8,501,000 in direct and other costs
relating to this project. The litigation arises from an October 1993 contract
between the Company and Occidental for work at a contaminated site in North
Tonawanda, New York. The Company's work was substantially delayed and its costs
of performance were substantially increased as a result of conditions at the
site which the Company's management believes were materially different than as
represented by Occidental. The Company believes that Occidental has implicitly
acknowledged the existence of differing conditions at the site through its
previous execution and partial payment of a change order relating to the
Company's position. In October 1994, Occidental issued a deductive change
order deleting substantially all remaining work from the contract. On December
30, 1994, while the Company was in the process of developing a comprehensive
request for equitable adjustment, Occidental filed suit against the Company in
U.S. District Court for the Western District of New York alleging damages in
excess of $50,000, the jurisdictional minimum. On March 3, 1995, Occidental
filed an amended complaint seeking $8,806,000 in damages primarily for alleged
costs incurred as a result of project delays and added volumes of incinerated
wastes. On April 6, 1995, the Company filed its answer and counterclaim
denying any liability to Occidental and seeking an amount in excess of
$9,200,000 for damages arising from Occidental's breach of contract,
misrepresentation and failure to pay outstanding contract amounts.
Management believes that it has established adequate reserves should
the resolution of the above accounts receivable be lower than the amounts
recorded and such resolution should not have a material adverse impact upon the
Company's consolidated results of future operations or financial condition.
See "Note 3 - Accounts Receivable and Costs and Estimated Earnings on Contracts
in Process."
The Company was named in April 1994 as one of 33 third party
defendants in a case titled UNITED STATES OF AMERICA V. AMERICAN CYANAMID
COMPANY, INC., ET AL., pending in the United States District Court for the
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Southern District of West Virginia. This litigation (the "Cost Recovery
Litigation") arises out of claims made against several potentially responsible
parties ("PRPs") by the Environmental Protection Agency ("EPA") for amounts in
excess of $24,000,000 for response costs arising out of releases and threatened
releases of hazardous waste at the Fike Chemical, Inc. Superfund site ("Fike")
in Nitro, West Virginia (the "Site"). The Company was retained as a response
action contractor for the site under contracts with the United States Army
Corps of Engineers ("USACE") and the EPA. The third party complaint alleges
that the Company was an operator of the Site during the remediation and that
the Company caused releases or threatened releases of hazardous substances at
the Site as a result of allegedly negligent conduct, grossly negligent conduct
or intentional misconduct. The third party complaint seeks to recover clean-up
costs from the Company and the other third party defendants. The Company has
submitted claims for indemnification related to the lawsuit under its contract
with the USACE and the EPA, has notified its contractors pollution liability
insurance carrier and has impleaded the United States. The PRPs also filed a
suit against the Company on behalf of the United States under the qui tam
provisions of the False Claims Act (the "qui tam suit") and caused the United
States to conduct an investigation of the accuracy of the Company's billings to
the EPA. The Company cooperated fully with the investigation and has been
informed that the government will not be proceeding criminally against the
Company and will not intervene in the qui tam suit. The Company has reached an
agreement in principle disposing of any civil liability relating to the qui tam
suit and the government investigation with respect to Fike. Such agreement in
principle was fully reserved in the Company's financial statements at December
31, 1995. The Company has also reached an agreement in principle disposing of
the Cost Recovery Litigation without any costs to the Company.
In addition to the above, the Company is subject to a number of claims
and lawsuits in the ordinary course of its business. In the opinion of
management, the outcome of these actions, which are not clearly determinable at
the present time, are either adequately covered by insurance, or if not
insured, will not, in the aggregate, have a material adverse impact upon the
Company's consolidated financial position or the results of future operations.
NOTE 16 - MAJOR CUSTOMERS
Revenue from federal government agencies accounted for 71%, 55% and
40% of total revenue from continuing operations for the years ended December
31, 1995, 1994 and 1993, respectively. Revenue from state and local government
agencies accounted for 5%, 10% and 7% of total revenue from continuing
operations for the years ended December 31, 1995, 1994 and 1993, respectively.
There were no industrial customers which accounted for more than 10% of total
revenue for the years ended December 31, 1995, 1994 and 1993.
NOTE 17 - SPECIAL CHARGES
The Company's consolidated statement of operations for the year ended
December 31, 1995 includes a $2,312,000 (net of $1,542,000 income tax benefit)
or $0.10 per share, charge for integration costs related to the acquisition of
the Division. The charge was recorded as a selling, general and administrative
expense and was primarily for severance and relocation costs for certain of the
Company's personnel and the closing of certain of the Company's offices as a
result of combining the operations of the Division and the Company.
The Company's consolidated statement of operations for the year ended
December 31, 1994 included a special charge of $15,000,000 (net of $10,000,000
income tax benefit) or $0.96 per share, to establish a reserve for accounts
receivable, primarily where such accounts are in litigation. Such charge was
recorded as a reduction of revenue.
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NOTE 18 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth the Company's condensed consolidated
statements of operations by quarter for 1995 and 1994.
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1995 (In Thousands, Except Per Share Data)
- ----
Revenue $ 80,217 $99,501 $135,886 $142,321
Gross profit 12,910 16,144 19,071 16,651
Selling, general and administrative expenses (1) 7,681 13,285 12,348 11,909
Operating income 5,229 2,859 6,723 4,742
Net income $ 1,287 $ 234 $ 3,187 $ 2,099
======== ======= ======== ========
Net income per share $ 0.08 $ 0.01 $ 0.12 $ 0.08
======== ======= ======== ========
1994
- ----
Revenue (2) $75,031 $94,686 $ 91,308 $ 62,356
Gross profit (loss) 10,384 13,691 15,033 (11,886)
Selling, general and administrative expenses 7,287 8,316 8,419 8,259
Operating income (loss) 3,097 5,375 6,614 (20,145)
Net income (loss) $ 805 $ 2,069 $ 2,615 $(13,105)
======== ======= ======== ========
Net income (loss) per share $ 0.05 $ 0.13 $ 0.16 $ (0.84)
======== ======= ======== ========
NOTES:
(1) During the second quarter of 1995, the Company recorded a $3,854,000
pre-tax, $2,312,000 after-tax or $0.10 per share, charge to expense
for integration costs related to the acquisition of the Division. The
charge was recorded in selling, general and administrative expenses
and was primarily for severance and relocation costs for certain of
the Company's personnel and the closing of certain of the Company's
offices as a result of combining the operations of the Division and
the Company.
(2) During the fourth quarter of 1994, the Company recorded a $25,000,000
pre-tax charge against revenue, $15,000,000 after-tax or $0.96 per
share, to establish a reserve for accounts receivable, primarily where
such accounts are in litigation.
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REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
OHM Corporation
We have audited the accompanying consolidated balance sheets of OHM
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of OHM Corporation and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Columbus, Ohio
February 13, 1996,
except for Notes 2 and 10, as to which the date is
March 25, 1996
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
- --------------------------------------------------------------------------------
Not applicable.
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PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required by this item, in addition to that set forth above in
Part I under the caption "Executive Officers of the Registrant," is set forth
in the section entitled "Election of Directors" contained on pages 2 through 4
of the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission (the "Proxy Statement") in connection with the Company's
1996 Annual Meeting of Shareholders, and such information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required by this item is contained on pages 7 through
11 of the Proxy Statement under the caption "Executive Compensation and Other
Information," and such information is incorporated herein by reference except
that the information included under the headings "Board Compensation Committee
Report" and "Performance Graph" is not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The information required by this item is contained on pages 5 and 6 of
the Proxy Statement under the caption "Voting Securities and Principal Holders
Thereof," and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information required by this item is contained on pages 14 through
16 of the Proxy Statement under the caption "Certain Relationships and Related
Transactions," and such information is incorporated herein by reference.
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a)(1) The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8:
Consolidated Balance Sheets
-As of December 31, 1995 and 1994
Consolidated Statements of Operations
-For the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity
-For the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows
-For the Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a)(2) The following consolidated financial statement schedule of the Company
and its subsidiaries is included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
-- For the Years Ended December 31, 1995, 1994 and
1993
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All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
(a)(3) Exhibits
The following Exhibits are included in this Annual Report on Form
10-K:
Exhibit Exhibit
Number Description
- ------- -----------
2.1 Agreement of Merger dated as of May 6, 1994 by and between OHM Corporation, a Delaware corporation and the Registrant
[incorporated by reference to Exhibit 2(a) to Registrant's Annual Report on Form 10-K for the year ended December 31,
1994].
2.2 Agreement and Plan of Reorganization among OHM Corporation, Rust Remedial Services, Inc., Enclean Environmental
Services Group, Inc., Rust Environmental, Inc., and Rust International Inc. dated December 5, 1994 [incorporated by
reference to Appendix B to Registrant's Proxy Statement for its Annual Meeting of Shareholders to be held May 11,
1995].
2.3 Amendment dated as of May 4, 1995 to the Agreement and Plan of Reorganization dated as of December 5, 1994 by and
among OHM Corporation, Rust Remedial Services Inc., Enclean Environmental Services Group, Inc., Rust Environmental,
Inc., and Rust International Inc. [incorporated by reference to Exhibit 2 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995].
2.4 Amendment No. 2 dated as of July 27, 1995 to the Agreement and Plan of Reorganization dated as of December 5, 1994 by
and among OHM Corporation, Rust Remedial Services Inc., Enclean Environmental Services Group, Inc., Rust Environmental,
Inc., and Rust International Inc. [incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 31, 1995].
2.5 Amendment No. 3, Settlement and Release Agreement dated as of March 22, 1996 to the Agreement and Plan of
Reorganization dated December 5, 1994 by and among OHM Corporation, OHM Remediation Services Corp., Rust Remedial
Services Inc., Rust International Inc. and WMX Technologies, Inc.
2.6 Standstill and Non-Competition Agreement by and among the Registrant, WMX Technologies, Inc., and Rust International
Inc., dated May 30, 1995 [incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995].
2.7 Warrant Agreement by and between WMX Technologies, Inc., and the Registrant dated May 30, 1995 [incorporated by
reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
2.8 Stock Purchase Agreement by and between the Huizenga Family Foundation, Inc. and OHM Corporation dated as of March 28,
1995 [incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995].
2.9 Stock Purchase Agreement by and between H. Wayne Huizenga and OHM Corporation dated as of March 28, 1995 [incorporated
by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
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45
3.1 Amended and Restated Articles of Incorporation of the Registrant dated May 19, 1994 [incorporated by reference to
Exhibit 3(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994].
3.2 Regulations of the Registrant [incorporated by reference to Exhibit 3(ii) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
4.1 Indenture dated as of October 1, 1986 between Registrant and United States Trust Company of New York, Trustee, relating
to the Registrant's 8% Convertible Subordinated Debentures due October 1, 2006 [incorporated by reference to Exhibit
4(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1986].
4.2 Specimen Debenture Certificate [incorporated by reference to Exhibit 4(b) to Registrant's Amendment No. 1 to
Registration Statement on Form S-1, No. 33-8296].
4.3 First Supplemental Indenture dated as of May 20, 1994 by and among the Registrant and United States Trust Company of
New York [incorporated by reference to Exhibit 4(c) to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
4.4 Specimen Common Stock Certificate [incorporated by reference to Exhibit 4(d) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994].
10.1* OHM Corporation 1986 Stock Option Plan, as amended and restated as of May 10, 1994 [incorporated by reference to
Appendix 2 to Registrant's Proxy Statement for its Annual Meeting held May 10, 1994].
10.2* OHM Corporation Nonqualified Stock Option Plan for Directors [incorporated by reference to Exhibit 10(c) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992].
10.3* OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994 [incorporated by reference to
Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994].
10.4* Amendment No. 1 to OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994 [incorporated
by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.5* Amendment No. 2 to OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994.
10.6* OHM Corporation Retirement Savings Plan Trust Agreement between Registrant and National City Bank, as Trustee, as
amended and restated effective July 1, 1994 [incorporated by reference to Exhibit 10(d) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994].
10.7* OHM Corporation Directors' Deferred Fee Plan [incorporated by reference to Exhibit 10(e) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
10.8* Amendment No. 1 to OHM Corporation Directors' Deferred Fee Plan [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
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46
10.9* Form of Amended and Restated Indemnification Agreements entered into between Registrant and its Directors and Executive
Officers.
10.10* Form of Employment Agreements providing certain severance benefits in the event of a change of control entered into
between Registrant and certain of its executive officers.
10.11 Revolving Credit Agreement dated as of May 31, 1995 among OHM Corporation and OHM Remediation Services Corp., and the
banks named therein, Citicorp USA, Inc., as Administrative Agent and Bank of America Illinois, as Issuing and Paying
Agent and Co-Agent [incorporated by reference to Exhibit 10(e) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995].
10.12 Amendment No. 1 dated as of October 16, 1995 to the Revolving Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks named therein, Citicorp USA, Inc., as Administrative
Agent and Bank of America Illinois, as Issuing and Paying Agent and Co-Agent [incorporated by reference to Exhibit
10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 31, 1995].
10.13 Security Agreement dated as of May 11, 1993, among OHM Corporation, OHM Remediation Services Corp. and Continental Bank
N.A., as Administrative Agent [incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993].
10.14 First Amendment dated as of May 4, 1994 to Security Agreement dated as of May 11, 1993 by and between the Registrant,
OHM Remediation Services Corp., and Bank of America Illinois as Issuing and Paying Agent.
10.15 Second Amendment dated as of May 31, 1995 to Security Agreement dated as of May 11, 1993 by and between the Registrant,
OHM Remediation Services Corp., and Bank of America Illinois as Issuing and Paying Agent [incorporated by reference to
Exhibit 10(g) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.16 Pledge Agreement dated as of May 11, 1993, executed by the Registrant in favor of Continental Bank N.A., as
Administrative Agent [incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993].
10.17 First Amendment dated as of May 31, 1995 to Pledge Agreement dated as of May 11, 1993 by and between the Registrant and
Bank of America Illinois as Issuing and Paying Agent [incorporated by reference to Exhibit 10(f) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.18 Intercreditor Agreement dated May 31, 1995 by and among Citicorp USA, Inc., as administrative agent, Bank of America
Illinois, as issuing and paying agent and WMX Technologies, Inc. [incorporated by reference to Exhibit 10(h) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.19 Guarantee Agreement by and among the Registrant and WMX Technologies, Inc., dated May 30, 1995 [incorporated by
reference to Exhibit 10(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
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47
10.20 Reimbursement Agreement dated as of May 31, 1995 among WMX Technologies, Inc., OHM Corporation, and OHM Remediation
Services Corp. [incorporated by reference to Exhibit 10(j) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995].
10.21 Security Agreement dated as of May 31, 1995 by and between the Registrant, OHM Remediation Services Corp., and WMX
Technologies, Inc. [incorporated by reference to Exhibit 10(k) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995].
10.22 Pledge Agreement dated as of May 31, 1995 by and between the Registrant and WMX Technologies, Inc. [incorporated by
reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.23 Master Loan and Security Agreement dated May 11, 1993, between OHM Remediation Services Corp. and BOT Financial
Corporation [incorporated by reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993].
10.24 Amendment No. 1 to Master Loan and Security Agreement dated as of January 19, 1995 between BOT Financial Corporation
and OHM Remediation Services Corp. [incorporated by reference to Exhibit 10(g) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995].
10.25 Promissory Note dated December 23, 1993 executed by OHM Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993].
10.26 Promissory Note dated December 28, 1994 executed by OHM Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
10.27 Loan and Security Agreement dated as of August 1, 1994 by and between OHM Remediation Services Corp. and Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(b) to Registrant's Quarterly Report
on Form 10- Q for the quarter ended September 30, 1994].
10.28 Promissory Note dated August 31, 1994 executed by OHM Remediation Services Corp. in favor of Internationale Nederlanden
Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(c) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994].
10.29 Continuing Corporate Guaranty dated as of August 1, 1994 executed by OHM Corporation in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(d) to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994].
10.30 Purchase Agreement dated as of December 15, 1992, among OHM Corporation, NSC Corporation, NSC Industrial Services
Corp., Waste Management, Inc., and The Brand Companies, Inc. [incorporated by reference to Exhibit 10(j) to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1992].
10.31 Stock Purchase Agreement dated December 17, 1992, among OHM Corporation and Chemical Waste Management, Inc.
[incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December
31, 1992].
10.32* OHM Corporation 1996 Management Incentive Plan.
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
45
48
10.33* OHM Corporation Executive Retirement Plan, dated as of January 1, 1996.
11 Statement Re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney of certain directors of the Company.
27 Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the three months ended
December 31, 1995.
(c) The response to this portion of Item 14 is included as Exhibits to
this report.
(d) The following consolidated financial statements of NSC Corporation and
its subsidiaries, which are consolidated under the equity method of accounting
in the Company's financial statements, are included in this Annual Report on
Form 10-K pursuant to the requirements of Rule 3-09 of Regulation S-X:
Consolidated Balance Sheets
-December 31, 1995 and 1994
Consolidated Statements of Operations
-Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity
-Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows
-Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
-Years Ended December 31, 1995, 1994 and 1993
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
46
49
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.
OHM CORPORATION
By: /s/ JAMES L. KIRK
------------------------------------
James L. Kirk-Chairman of the Board,
President and Chief Executive Officer
March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on March 29, 1996.
/s/ JAMES L. KIRK
- --------------------------------------------
James L. Kirk-Chairman of the Board, President and
Chief Executive Officer
/s/ HAROLD W. INGALLS
- --------------------------------------------
Harold W. Ingalls-Vice President, Finance and Chief
Financial Officer (Principal Financial Officer)
/s/ KRIS E. HANSEL
- --------------------------------------------
Kris E. Hansel-Vice President and Controller (Principal Accounting Officer)
* VICTOR J. BARNHART
- --------------------------------------------
Victor J. Barnhart-Director
* HERBERT A. GETZ
- --------------------------------------------
Herbert A. Getz-Director
* IVAN W. GORR
- --------------------------------------------
Ivan W. Gorr-Director
* CHARLES D. HOLLISTER
- --------------------------------------------
Charles D. Hollister-Director
* JOSEPH R. KIRK
- --------------------------------------------
Joseph R. Kirk-Director
* JAMES E. KOENIG
- --------------------------------------------
James E. Koenig-Director
* RICHARD W. POGUE
- --------------------------------------------
Richard W. Pogue-Director
* CHARLES W. SCHMIDT
- --------------------------------------------
Charles W. Schmidt-Director
* The undersigned, by signing his name hereto does sign and execute this report
pursuant to Powers of Attorney executed on behalf of the above-named
directors and contemporaneously herewith filed with the Securities and
Exchange Commission.
/s/ JOHN J. RAY, III March 29, 1996
- --------------------------------------------
John J. Ray, III, Attorney-in-Fact
47
50
Commission File Number 1-9654
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-K
ANNUAL REPORT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995
_________________________
OHM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
_________________________
FINANCIAL
STATEMENT
SCHEDULES
_________________________
51
OHM CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
- -------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------------------------
Additions
--------------------------
Description Balance at Charged to Charged to (2) Balance at
Beginning Costs and Other Deductions End
of Period Expenses Accounts(1) Describe of Period
- -------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1995
----------------------------
Allowance for Uncollectible Accounts $26,063 $ 2,931 $2,628 $5,711 $25,911
Year ended December 31, 1994 $ 2,776 $25,522 -- $2,235 $26,063
----------------------------
Allowance for Uncollectible Accounts
Year ended December 31, 1993
----------------------------
Allowance for Uncollectible Accounts $ 1,601 $ 1,210 -- $ 35 $ 2,776
(1) Adjustments made as a result of the acquisition of the environment
remediation services business of Rust International, Inc.
(2) Uncollectible accounts charged against the valuation reserve.
S-1
52
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per-Share Data)
December 31,
--------------------------
1995 1994
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 4,158 $ 8,818
Accounts receivable, net ............................................... 27,125 23,188
Costs and estimated earnings on contracts
in process in excess of billings ..................................... 7,894 5,537
Inventories ............................................................ 1,041 1,735
Prepaid expenses and other current assets .............................. 1,495 1,245
Refundable income taxes ................................................ 92 125
------------ ---------
41,805 40,648
Property and equipment:
Land ................................................................... 998 998
Buildings and improvements ............................................. 5,588 5,591
Machinery and equipment ................................................ 8,813 12,137
------------ --------
15,399 18,726
Less accumulated depeciation ........................................... (6,915) (9,063)
------------ ---------
8,484 9,663
Other noncurrent assets:
Goodwill, net of accumulated amortization of $5,787 and $4,721 in 1995
and 1994, repectively ................................................ 36,872 37,938
Other assets ......................................................... - 38
------------ ---------
36,872 37,976
------------ ---------
Total Assets $ 87,161 $ 88,287
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 3,063 $ 2,901
Billings in excess of costs and estimated
earnings on contracts in process ..................................... 3,932 4,987
Accrued compensation and related costs ................................. 1,166 1,599
Federal, state and local taxes ......................................... 250 477
Other accrued liabilities .............................................. 3,511 2,263
Contingent liabilities ................................................. 6,694 3,075
Current portion of long-term debt ...................................... 5,850 3,203
------------ --------
24,466 18,505
Noncurrent liabilities:
Long-term debt ......................................................... - 7,385
Payable to affiliate ................................................... 1,571 -
Deferred income taxes .................................................. 3,843 4,335
Stockholders' equity:
Preferred stock $.01 par value, 10,000,000 shares authorized,
none issued and outstanding .......................................... - -
Common stock $.01 par value, 20,000,000 shares authorized; 9,971,175
shares issued and outstanding in both 1995 and 1994 .................. 100 100
Additional paid-in capital ............................................. 56,079 56,079
Retained earnings ...................................................... 1,102 1,883
------------ ---------
57,281 58,062
------------ ---------
Total Liabilities and Stockholders' Equity $ 87,161 $ 88,287
============ =========
The accompanying notes are an integral part of these consolidated financial
statements.
S-2
53
NSC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per-Share Data)
Years Ended December 31,
------------------------------------
1995 1994 1993
------- ---- -----
Gross revenues ............................. $124,529 $132,218 $110,254
Less direct subcontract costs .............. 24,426 23,672 23,751
-------- -------- --------
Net Revenues ............................. 100,103 108,546 86,503
Costs of services .......................... 80,656 86,830 65,602
-------- -------- --------
Gross Profit ............................. 19,447 21,716 20,901
Selling, general and administrative expenses 16,353 15,548 13,687
Goodwill amortization ...................... 1,066 1,067 858
-------- -------- --------
Operating Income ......................... 2,028 5,101 6,356
-------- -------- --------
Other:
Interest expense ......................... 587 804 807
(227) (386) (397)
-------- -------- --------
360 418 410
-------- -------- --------
Income Before Income Taxes ............... 1,668 4,683 5,946
Income taxes ............................... 953 2,117 2,573
-------- -------- --------
Net Income ............................... $ 715 $ 2,566 $ 3,373
======== ======== ========
Net income per share ....................... $ 0.07 $ 0.26 $ 0.40
======== ======== ========
Weighted-average number of common and
common-equivalent shares outstanding ....... 9,971 9,971 8,504
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
S-3
54
NSC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Per-Share Data)
Common Stock
-------------------- Additional Total
Number of Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
--------- -------- ------- -------- -----------
Balance at January 1, 1993 ............. 5,735 57 30,084 9,405 39,546
Net income.............................. - - - 3,373 3,373
Cash dividend declared ($1.20 per share) - - - (11,965) (11,965)
Issuance of common stock for acquisition 4,082 41 25,373 - 25,414
Stock options exercised ................ 154 2 622 - 624
------ ------ ------ ------ ------
Balance at December 31, 1993 ........... 9,971 100 56,079 813 56,992
Net income ............................. - - - 2,566 2,566
Cash dividend declared ($0.15 per share) - - - (1,496) (1,496)
------ ------ ------ ------ ------
Balance at December 31, 1994 ........... 9,971 $ 100 $ 56,079 $ 1,883 $ 58,062
------ ------ ------ ------ ------
Net income ............................. - - - 715 715
Cash dividend declared ($0.15 per share) - - - (1,496) (1,496)
------ ------ ------ ------ ------
Balance at December 31, 1995 ........... 9,971 $ 100 $ 56,079 $ 1,102 $ 57,281
====== ====== ====== ====== ======
S-4
55
NSC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Years Ended December 31,
----------------------------------
1995 1994 1993
--------- ------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 715 $ 2,566 $ 3,373
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .......................................... 1,830 2,160 2,132
Goodwill amortization ................................. 1,066 1,067 858
Deferred income taxes ................................. (1,034) 1,072 3,457
Gain on disposition of property and equipment ......... (36) (123) (5)
Changes in assets and liabilities, net of effects of
acquired business:
Accounts receivable, net .................................. (984) 2,943 15,912
Costs and estimated earnings on contracts
in process in excess of billings ........................ (2,283) (1,048) 188
Other current assets ...................................... 487 3,884 (2,964)
Accounts payable .......................................... (176) (1,677) (749)
Billings in excess of costs and estimated
earnings on contracts in process ........................ (1,559) (471) 3,827
Other current liabilities ................................. 4,125 (2,197) (1,284)
Other ..................................................... 38 14 6
------ ------ ------
Net cash provided by operating activities 2,189 8,190 24,751
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ....................... (759) (814) (891)
Proceeds from sale of property and equipment .............. 144 350 49
Purchase of Brand, net of cash acquired ................... - - (767)
Net investment in and advances to discontinued operations - - (4,228)
------ ------ ------
Net cash used in investing activities (615) (464) (5,837)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to and from OHM Corporation ........................... - - (14,850)
Proceeds from issuance of long-term debt .................. - - 15,000
Payments on long-term debt ................................ (4,738) (3,187) (2,223)
Proceeds from issuance of common stock upon exercise of
stock options ........................................... - - 624
Cash dividend paid ........................................ (1,496) (1,496) (11,965)
------ ------ ------
Net cash used in financing activities (6,234) (4,683) (13,414)
------ ------ ------
Net increase (decrease) in cash and cash equivalents .. (4,660) 3,043 5,500
Cash and cash equivalents at beginning of periods ......... 8,818 5,775 275
------ ------ ------
Cash and cash equivalents at end of periods ............... $ 4,158 $ 8,818 $ 5,775
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
S-5
56
NSC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION The accompanying consolidated financial
statements include the accounts of NSC Corporation (the "Company") and its
wholly-owned subsidiaries, National Surface Cleaning, Inc. ("NSC"), National
Service Cleaning Corp. ("NSCC") and since September 4, 1995 Olshan Demolishing
Management, Inc. ("ODMI") - see Note 8 - "Transactions with Affiliates". All
intercompany transactions have been eliminated in consolidation. The Company
is a Delaware corporation and was a seventy percent-owned subsidiary of OHM
Corporation ("OHM") through May 3, 1993. On May 4, 1993 pursuant to a Purchase
Agreement among the Company, Industrial, OHM, The Brand Companies, Inc.
("Brand") and Waste Management, Inc. ("WMI"), now known as WMX Technologies,
Inc., the Company acquired the asbestos-abatement division of Brand (the
"Division") in exchange for 4,010,000 shares of the Company's common stock and
all the common stock of Industrial. As of December 31, 1995 and 1994, OHM and
Rust International Inc. (a successor company to Brand and hereinafter referred
to as "Rust") each owned approximately forty percent of the Company's common
stock.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates, and
such differences may be material.
REVENUE AND COST RECOGNITION The Company primarily derives its revenues from
providing asbestos-abatement, demolition and dismantling and other specialty
contracting services under fixed-price, time and materials, unit price
contracts and sale of scrap metals. The Company recognizes revenues and
related income from its fixed- and unit-price contracts in process using the
percentage-of-completion method of accounting. The Company determines the
percentage-of-completion of its contracts by comparing costs incurred to date
to total estimated costs. Revenues from time and material-type contracts are
recorded based on cost incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Revenues are recognized for amounts under pending claims when
management believes it is probable the claim will result in additional contract
revenues and the amount can be reliably estimated. Contract costs include all
direct labor, material, per diem, subcontract and other direct and indirect
costs related to the contract performance. Selling, general and administrative
expenses are charged to expense as incurred. The asset, "costs and estimated
earnings on contracts in process in excess of billings," represents revenues
recognized in excess of amounts billed. The liability, "billings on contracts
in process in excess of costs and estimated earnings," represents billings in
excess of revenues recognized.
DIRECT SUBCONTRACT COSTS The Company incurs a substantial amount of direct
subcontract costs which are passed through to its clients. These costs result
from the use of subcontractors on projects for labor, transportation and
disposal of asbestos materials, analytical and restoration services, and other
removal-related services.
INVENTORIES Inventories primarily consist of operating supplies and are stated
at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight-line method. During 1995, the Company removed from
its books fully depreciated assets with a total cost of $3,334,000.
GOODWILL Goodwill is amortized over a 40-year life and is reviewed on an
ongoing basis by the Company's management based on several factors, including
the Company's projection of undiscounted operating cash flows. If an
impairment of the carrying value were to be indicated by this review, the
Company would adjust the carrying value of goodwill to its estimated fair
value.
LONG-LIVED ASSETS In 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (FAS 121). The Company
S-6
57
intends to adopt the provisions of FAS 121 in the first quarter of 1996, and
does not expect the effect of the adoption to be material to its financial
statements.
INCOME TAXES The Company provides for income taxes based upon earnings
reported for financial statement purposes. Deferred tax assets and liabilities
are determined based on temporary differences between financial reporting and
tax basis of assets and liabilities.
STOCK COMPENSATION The Company accounts for its stock compensation
arrangements under the provisions of APB 25, "Accounting For Stock Issued To
Employees", and intends to continue to do so.
CASH EQUIVALENTS AND CASH FLOW INFORMATION The Company considers all
investments having a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost which approximates fair
market value. Cash paid for income taxes was $1,702,000, $263,000 and
$1,063,000 for 1995, 1994, and 1993, respectively. Cash paid for interest was
$587,000, $802,000 and $945,000 for 1995, 1994 and 1993, respectively. The
effects of the Company's non-cash transactions with ODMI are described in Note
8., Transactions with Affiliates.
NET INCOME PER SHARE The net income per share amounts for 1995, 1994 and 1993
have been computed by dividing net income by the weighted-average number of
common and common-equivalent shares outstanding, if dilutive, during the
respective periods.
RECLASSIFICATIONS Certain reclassifications have been made to prior year
financial statements to conform with the current year presentation.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
DECEMBER 31,
--------------------------------
1995 1994
----------- ----------
(IN THOUSANDS)
Accounts billed and due currently . . . . . . . . . . . . . . . . . . . . $24,479 $20,381
Retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,195 3,589
--------- ---------
27,674 23,970
Allowance for uncollectible accounts . . . . . . . . . . . . . . . . . . . (549) (782)
---------- -------
$27,125 $23,188
========== ========
The retained receivables at December 31, 1995 are expected to be collected
within one year.
S-7
58
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROCESS
The consolidated balance sheets include the following amounts:
DECEMBER 31,
------------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
Costs incurred on contracts in process . . . . . . . . . . . . . . . . . . $ 98,882 $ 85,822
Estimated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,481 17,138
-------- --------
118,363 102,960
Less billing to date . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,401 102,410
-------- --------
$ 3,962 $ 550
========= ========
Costs and estimated earnings on contracts in
process in excess of billings . . . . . . . . . . . . . . . . . . $ 7,894 $ 5,537
Billings on contracts in process in excess of
costs and estimated earnings . . . . . . . . . . . . . . . . . . . (3,932) (4,987)
-------- --------
$ 3,962 $ 550
======== ========
Costs and estimated earnings on contracts in process in excess of billings
included reserves for contract revenue adjustments of $442,000 and $530,000 at
December 31, 1995 and 1994, respectively. The Company recognizes revenue from
its fixed and unit price contracts in process using the percentage of
completion method of accounting, which requires the use of estimates. Such
estimates are subject to changes throughout the duration of the contract, due
to factors such as technical problems, disputes, weather, delays caused by
external sources and fluctuations in the prices of materials.
NOTE 4 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 1995
and 1994 are as follows:
DECEMBER 31,
-------------------------
1995 1994
----------- ---------
(IN THOUSANDS)
Deferred tax assets:
AMT credit carryforward . . . . . . . . . . . . . . . . . . . . . . . . . $ --- $ 573
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,840 533
Allowance for uncollectible accounts . . . . . . . . . . . . . . . . . . . 219 313
------ ------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . 2,059 1,419
Deferred tax liabilities:
Tax over book depreciation . . . . . . . . . . . . . . . . . . . . . . . . 932 1,041
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,542 3,391
Contract revenue recognition . . . . . . . . . . . . . . . . . . . . . . . 515 574
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . 597 498
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 476
------ -------
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . 5,586 5,980
------ -------
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . $3,527 $4,561
====== =======
S-8
59
Significant components of the provision for income taxes (benefit) are as
follows:
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . $1,404 $ 768 $ (685)
State . . . . . . . . . . . . . . . . . . . . . . 583 277 (199)
------ ------ ------
Total current taxes (benefit) . . . . . . . . . . . 1,987 1,045 (884)
------ ------ ------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . (664) 831 2,678
State . . . . . . . . . . . . . . . . . . . . . . . (370) 241 779
------ ------ ------
Total deferred taxes (benefit). . . . . . . . . . . (1,034) 1,072 3,457
------ ------ ------
Total income tax provision . . . . . . . . . . $ 953 $2,117 $2,573
====== ====== =======
The reasons for differences between income taxes attributable to continuing
operations and the amount computed by applying the federal statutory tax rate
(34% is the statutory tax rate for companies that have less than $10 million of
taxable income) to income from continuing operations before income taxes are:
YEARS ENDED DECEMBER 31,
----------------------------
LIABILITY METHOD
----------------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
Federal statutory rate . . . . . . . . . . . . . . . . . . 34.0% 34.0% 34.0%
Add (deduct):
State income taxes, net of federal tax benefit 8.2 7.1 6.5
Goodwill amortization . . . . . . . . . . . . 10.9 3.9 3.0
Other . . . . . . . . . . . . . . . . . . . . 4.0 0.2 (0.2)
------ ------ ------
57.1% 45.2% 43.3%
====== ====== ======
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
------------------
1995 1994
---- ----
(IN THOUSANDS)
7.36% notes, due 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . $ --- $ 207
8.21% notes, due 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . --- 431
Variable-rate revolving credit facility . . . . . . . . . . . . . . . . . 5,850 9,950
------ -------
5,850 10,588
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,850 3,203
------ --------
$ --- $ 7,385
========= ========
The Company has a $25,000,000 revolving credit facility (the "Facility") with
two banks that expires on June 5, 1996. Under the terms of the Facility, the
Company as of December 31, 1995 has outstanding $5,850,000 on a term loan basis
and may borrow up to $8,000,000 on a revolving basis; the remaining unused
balance is available for letters of credit. Amounts outstanding under the
Facility bear interest at 150 to 225 basis points above LIBOR and are secured
by substantially all the Company's assets. Subsequent to December 31, 1995 the
Company repaid the full amount outstanding under the Facility.
In connection with the acquisition of the Division, Rust (successor to Brand)
has provided the Company with a $25 million revolving credit facility. Under
this revolving credit agreement, Rust will make available revolving
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loans to the Company until May 3, 1996 in amounts not to exceed $25 million.
Such loans will be subordinate to the senior bank financing described above, be
unsecured, bear interest at the prime rate as announced by a certain bank plus
1% and be utilized for working capital purposes. Interest on such loans will
be payable on a quarterly basis, and the aggregate principal amount of such
loans will mature on June 6, 1996. No amounts were outstanding under this
revolving credit agreement at December 31, 1995 or 1994.
NOTE 6 - CAPITAL STOCK
The Company's Certificate of Incorporation authorizes the Board of Directors to
issue up to 10,000,000 shares of preferred stock, $0.01 par value, without any
further vote or action by the stockholders. As of December 31, 1995 no
preferred stock has been issued.
Pursuant to an agreement among the Company, Rust and OHM dated May 4, 1993 each
of Rust and OHM has the right to demand registration, at their own expense, of
all or a portion of the common stock of the Company held by it. In the event
either Rust or OHM demands such registration, the other entity has the right to
participate. This agreement is subject to certain conditions and limitations,
including limitations as to the frequency of exercise and Rust's and OHM's
right to participate in other registrations of the Company.
NOTE 7 - STOCK OPTION PLAN
The Company has a stock option plan (the "1990 Plan") which provides for the
granting of options to acquire up to 860,000 shares of the Company's common
stock. The options are issuable to directors, officers and key employees at an
exercise price not less than the fair market value of the Company's common
stock on the date of grant. The stock options granted under the 1990 Plan are
exercisable in either cumulative annual installments ranging up to 25% or
immediately commencing on the date of grant, and expire ten years thereafter.
At December 31, 1995 656,750 shares were available for grants of additional
stock options under the 1990 Plan.
The following summarizes stock option activity during 1995, 1994 and 1993:
1990 PLAN
----------------------------------
NUMBER OF OPTION PRICE
OPTIONS RANGE PER SHARE
------------- -------------------
Outstanding at January 1, 1993 . . . . . . . . . . . . . . . 711,420 $4.00 - $9.00
Granted . . . . . . . . . . . . . . . . . . . . . . 10,000 4.50
Exercised . . . . . . . . . . . . . . . . . . . . . (156,000) 4.00
Canceled . . . . . . . . . . . . . . . . . . . . . . (116,000) 4.00 - 9.00
---------
Outstanding at December 31, 1993 . . . . . . . . . . . . . . 449,420 4.00 - 8.75
Canceled . . . . . . . . . . . . . . . . . . . . . . (224,100) 4.00 - 8.75
---------
Outstanding at December 31, 1994 . . . . . . . . . . . . . . 225,320 4.00 - 8.50
Canceled . . . . . . . . . . . . . . . . . . . . . . (178,070) 4.00 - 6.00
---------
Outstanding at December 31, 1995 . . . . . . . . . . . . . . 47,250 4.00 - 8.50
---------
Exercisable at December 31, 1995 . . . . . . . . . . . . . 47,250 4.00 - 8.50
=========
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NOTE 8 - TRANSACTIONS WITH AFFILIATES
In April 1995, the Company entered into an Interim Management Agreement and
Operating Agreement (the "Agreements") with Rust under which the Company,
through ODMI, assumed the management of Olshan Demolishing Company ("ODC"), a
Rust subsidiary specializing in demolition and dismantling, primarily in the
industrial market. In connection with the Interim Management Agreement, Rust
paid the Company a one-time, non-refundable fee of $500,000, and in September
1995, the Company assumed the management of the operations of ODC.
The term of the Operating Agreement extends through April 2005, although the
occurrence of certain conditions or events could trigger early termination.
Pursuant to the provisions of the Operating Agreement, Rust provided the
Company a non-interest bearing working capital loan, payable upon termination
of the Operating Agreement, of approximately $1,571,000, of a possible maximum
$5,500,000, by transferring to the Company current assets of $3,062,000 and
current liabilities of $1,491,000.
The results of operations of ODMI since September 1995 are consolidated with
the Company's results of operations. In exchange for the right to operate ODC,
the Company is required to pay Rust an annual fee based on operating profit, if
any, which amounted to $163,000 in 1995. In the event that ODC incurs
operating losses, Rust would be required to reimburse the Company for a portion
of these losses.
The Company has, from time to time, provided asbestos-abatement and related
services to affiliates of OHM on a subcontract basis. Revenues recognized from
these affiliates for such services were $212,000, $1,377,000 and $3,469,000 for
1995, 1994 and 1993, respectively.
In addition, the Company has, from time to time, provided asbestos-abatement
and related services to Rust and certain of its affiliates on a subcontract
basis. Revenues recognized for such services were $302,000, $4,509,000 and
$1,751,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
Also, Rust and certain of its affiliates provided scaffolding, disposal,
demolition and other related services to the Company on a subcontract basis.
The cost for such services provided by Rust and its affiliates was $1,719,000,
$940,000 and $2,763,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. During 1995, Rust rented demolishing equipment to the Company
for which it was charged $209,000 for the year ended December 31, 1995.
NOTE 9 - EMPLOYEE BENEFIT PLANS
Effective October 1, 1992 the Company adopted the NSC Corporation Retirement
Savings Plan (the "Plan"). The Plan allows eligible employees to make
contributions, up to a certain limit, to a trust on a tax-deferred basis under
Section 401(k) of the Internal Revenue Code. The Company may, at its
discretion, make profit-sharing contributions to the Plan out of its profits
for the plan years. The Company made matching contributions of $89,000, $0 and
$21,000 for 1995, 1994 and 1993 respectively.
The Company's subsidiary, NSC, has certain union employees which are covered by
union-sponsored, collectively bargained, multi-employer retirement plans.
Contributions to the plans were $1,575,000, $2,379,000 and $1,500,000 for 1995,
1994 and 1993, respectively.
NOTE 10 - LITIGATION, COMMITMENTS AND CONTINGENCIES
The nature and scope of the Company's business bring it into regular contact
with the general public, a variety of businesses and government agencies. Such
activities inherently subject the Company to the hazards of litigation, which
are defended in the normal course of business.
The Company effectively self insures its auto, commercial general liability and
workers' compensation risks up to $500,000 per occurrence since November 1,
1995. For claims that may exceed the self-insured amounts, the Company has
obtained commercial/excess umbrella and excess workers' compensation stop loss
coverages on a fully-insured basis. Factors affecting the ultimate resolution
of these claims against the Company, particularly those claims related to
personal injuries, are to some degree outside the control of the Company and
include, among other items, determination of the extent of an injury or
disability, the amount of ongoing medical expenses that are
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necessary to treat the injury or disability, and the uncertainty associated
with damages that may be awarded in the event of a jury trial.
In connection with the claims described in the preceding paragraphs, the
Company has recorded an accrual of $6,694,000 at December 31, 1995 ($3,075,000
at December 31, 1994) which represents its estimate of loss associated with the
resolution of these claims; however, the ultimate outcome of these claims
cannot presently be determined.
The Company is currently cooperating in a grand jury investigation currently
being conducted by the Department of Justice, Environmental Crimes Section,
relating to operational activities involving a subsidiary of the Company as a
subcontractor of the Weldon Springs Site Remedial Action Project. The Company
cannot speculate what effects, if any, the results of such investigation will
have on the Company.
The Company occupies office space and utilizes equipment in various locations
under operating leases. Rental expense under operating leases amounted to
$866,000, $830,000 and $455,000 for 1995, 1994 and 1993, respectively. The
lease agreements generally contain renewal provisions and escalation clauses.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1995 are: 1996, $728,000; 1997, $514,000; 1998, $310,000; 1999,
$117,000 and 2000, $86,000.
The Company had $8,000,000 and $19,017,000 letters of credit outstanding at
December 31, 1995 and 1994, respectively. These letters of credit were issued
primarily in support of the Company's insurance programs.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheet for accounts receivable and accounts payable approximate their
fair value.
Long- and short-term debt: The carrying amounts of the Company's borrowings
under its short-term revolving credit arrangements approximate their fair
value. The fair value of the Company's long-term debt is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1995 are as follows:
CARRYING FAIR
AMOUNT VALUE
-------------------------
(IN THOUSANDS)
Cash and cash equivalents . . . . . . . . . . . . $4,158 $4,158
Accounts receivable . . . . . . . . . . . . . . . 27,125 27,125
Accounts payable . . . . . . . . . . . . . . . . . (3,063) (3,063)
Short-term debt . . . . . . . . . . . . . . . . . (5,850) (5,850)
Long-term debt . . . . . . . . . . . . . . . . . . (1,571) (803)
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NOTE 12 - INDUSTRY SEGMENT DATA
The Company operates in two principal industries - asbestos-abatement services
and beginning in September 1995, demolition and dismantling services. The
Company's asbestos-abatement divisions provide asbestos removal, insulation and
restoration primarily to private sector clients at commercial properties, while
the Company's demolition and dismantling division provides industrial
dismantling and commercial demolition for public and private sector customers.
Intersegment sales are generally priced on a basis comparable to sales to
unaffiliated companies.
DECEMBER 31,
------------------
1995
----
(IN THOUSANDS)
Revenue
Asbestos-Abatement . . . . . . . . . . . $116,940
Demolition and Dismantling . . . . . . . 7,589
Intersegment . . . . . . . . . . . . . . $1,709
--------
126,238
Elimination - intersegment sales . . . . (1,709)
--------
Total revenue . . . . . . . . . . $124,529
========
Operating profit
Asbestos-Abatement . . . . . . . . . . . $ 6,932
Demolition and Dismantling . . . . . . . 827
--------
Total operating profit . . . . . . 7,759
Corporate expenses . . . . . . . . . . . . . (5,731)
Interest expense . . . . . . . . . . . . . . (587)
Other . . . . . . . . . . . . . . . . . . . 227
--------
Income before income taxes . . . . $ 1,668
========
Identifiable assets
Asbestos-Abatement . . . . . . . . . . . $ 74,958
Demolition and Dismantling . . . . . . . 7,370
--------
82,328
Corporate assets . . . . . . . . . . . . 4,833
--------
Total assets . . . . . . . . . . $ 87,161
========
NOTE 13 - ACQUISITION OF THE DIVISION
On December 23, 1992 the Company entered into a Purchase Agreement among the
Company, Industrial, OHM, Brand and WMI, pursuant to which the Company
purchased, on May 4, 1993 the Division in exchange for 4,010,000 shares of the
Company's common stock and the capital stock of Industrial. The acquisition of
the Division has been accounted for using the purchase method and,
accordingly, the acquired assets and assumed liabilities have been recorded at
their estimated fair values as of May 4, 1993. Pursuant to the Purchase
Agreement, Brand guaranteed to the Company that, except for certain contracts,
the contracts assumed by the Company from Brand to provide asbestos-abatement
and other related services would yield certain minimum gross margins depending
on the type of contract. Gross margin is defined as revenues derived from
these contracts less certain specified costs of performing such contracts
divided by such revenues. Brand paid the Company $3,775,000 pursuant to this
provision of the Purchase Agreement for the year ended December 31, 1993. In
addition, pursuant to the Purchase Agreement, Brand guaranteed the collection
of the full amount of all the Division's billed and unbilled accounts
receivables which were acquired by the Company. Pursuant to this provision of
the Purchase Agreement, Brand paid the Company $7,620,000 during the year ended
December 31, 1993. As a condition of the Purchase Agreement, on May 4, 1993
the Company entered into a $50,000,000 revolving credit facility, repaid all of
its indebtedness to OHM, and terminated the Cash Management Agreement and
Management Services Agreement with OHM. In 1995 the Company elected to reduce
this revolving credit facility to $25,000,000.
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NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is an analysis of certain items in the consolidated statements of
operations by quarter for 1995 and 1994:
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER
- ---- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Gross revenues . . . . . . . . . . . . . . . . . . . . $29,545 $31,965 $29,452 $33,567
Net revenues . . . . . . . . . . . . . . . . . . . . . 24,619 25,813 23,225 26,446
Gross profit . . . . . . . . . . . . . . . . . . . . . 4,700 5,203 4,562 4,982
Operating income . . . . . . . . . . . . . . . . . . . 548 1,075 123 282
Net income . . . . . . . . . . . . . . . . . . . . . . 220 493 2 0
Net income per share . . . . . . . . . . . . . . . . . 0.02 0.05 0.00 0.00
======= ======= ======= =======
FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER
- ---- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Gross revenues . . . . . . . . . . . . . . . . . . . . $34,203 $35,150 $32,076 $30,789
Net revenues . . . . . . . . . . . . . . . . . . . . . 27,638 29,252 26,579 25,077
Gross profit . . . . . . . . . . . . . . . . . . . . . 4,518 5,382 6,075 5,741
Operating income . . . . . . . . . . . . . . . . . . . 379 1,494 1,764 1,464
Net income . . . . . . . . . . . . . . . . . . . . . . 168 731 892 775
Net income per share . . . . . . . . . . . . . . . . . 0.02 0.07 0.09 0.08
======= ======= ======= =======
The Company's results of operations for the fourth quarter of 1995 reflect
additional provisions for workers' compensation losses in connection with the
unfavorable resolution of two significant claims.
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
NSC Corporation
We have audited the accompanying consolidated balance sheets of NSC Corporation
and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedule listed in the Index
at Item 14 (a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NSC
Corporation and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 2, 1996
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66
NSC CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------------------------
Balance at Charged to
Beginning Costs and Deductions Balance at
Description of Period Expenses (2) Describe (1) End of Period
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
Deducted from assets accounts:
Allowance for uncollectible accounts $ 782 $ 0 $ 233 $ 549
Reserve for contract revenue adjustments 530 401 489 442
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
Deducted from assets accounts:
Allowance for uncollectible accounts $ 1,165 $ 390 $ 773 $ 782
Reserve for contract revenue adjustments 1,546 332 1,348 530
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
Deducted from assets accounts:
Allowance for uncollectible accounts $ 700 $ 500 $ 35 $ 1,165
Reserve for contract revenue adjustments 700 2,831 (3) 1,985 (4) 1,546
- ----------------------------------------------------------------------------------------------------------------
(1) Uncollectible accounts written off and adjustments to unbilled revenues
on contracts in process.
(2) Reduction of revenues on contracts in process and amounts charged to bad
debt expense.
(3) Approximately $2,000,000 represents reserves for contract revenue
adjustments established in conjunction with the Company's acquisition of
the asbestos division of Brand. Goodwill was increased by $2,000,000 as
a result of such reserves.
(4) Approximately $1,239,000 represents charges against the reserves
described in Note 3 above.
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Commission File Number 1-9654
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-K
ANNUAL REPORT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995
_________________________
OHM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
_________________________
EXHIBITS
_________________________
68
EXHIBIT INDEX
The following Exhibits are included in this Annual Report on Form 10-K:
Exhibit Exhibit
Number Description
- ------- -----------
2.1 Agreement of Merger dated as of May 6, 1994 by and between OHM Corporation, a Delaware corporation and the
Registrant [incorporated by reference to Exhibit 2(a) to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
2.2 Agreement and Plan of Reorganization among OHM Corporation, Rust Remedial Services, Inc., Enclean Environmental
Services Group, Inc., Rust Environmental, Inc., and Rust International Inc. dated December 5, 1994 [incorporated by
reference to Appendix B to Registrant's Proxy Statement for its Annual Meeting of Shareholders to be held May 11,
1995].
2.3 Amendment dated as of May 4, 1995 to the Agreement and Plan of Reorganization dated as of December 5, 1994 by and
among OHM Corporation, Rust Remedial Services Inc., Enclean Environmental Services Group, Inc., Rust Environmental,
Inc., and Rust International Inc. [incorporated by reference to Exhibit 2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995].
2.4 Amendment No. 2 dated as of July 27, 1995 to the Agreement and Plan of Reorganization dated as of December 5, 1994
by and among OHM Corporation, Rust Remedial Services Inc., Enclean Environmental Services Group, Inc., Rust
Environmental, Inc., and Rust International Inc. [incorporated by reference to Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 31, 1995].
2.5 Amendment No. 3, Settlement and Release Agreement dated as of March 22, 1996 to the Agreement and Plan of
Reorganization dated December 5, 1994 by and among OHM Corporation, OHM Remediation Services Corp., Rust Remedial
Services Inc., Rust International Inc. and WMX Technologies, Inc.
2.6 Standstill and Non-Competition Agreement by and among the Registrant, WMX Technologies, Inc., and Rust
International Inc., dated May 30, 1995 [incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
2.7 Warrant Agreement by and between WMX Technologies, Inc., and the Registrant dated May 30, 1995 [incorporated by
reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
2.8 Stock Purchase Agreement by and between the Huizenga Family Foundation, Inc. and OHM Corporation dated as of March
28, 1995 [incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
69
2.9 Stock Purchase Agreement by and between H. Wayne Huizenga and OHM Corporation dated as of March 28, 1995
[incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995].
3.1 Amended and Restated Articles of Incorporation of the Registrant dated May 19, 1994 [incorporated by reference to
Exhibit 3(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994].
3.2 Regulations of the Registrant [incorporated by reference to Exhibit 3(ii) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994].
4.1 Indenture dated as of October 1, 1986 between Registrant and United States Trust Company of New York, Trustee,
relating to the Registrant's 8% Convertible Subordinated Debentures due October 1, 2006 [incorporated by reference
to Exhibit 4(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1986].
4.2 Specimen Debenture Certificate [incorporated by reference to Exhibit 4(b) to Registrant's Amendment No. 1 to
Registration Statement on Form S-1, No. 33-8296].
4.3 First Supplemental Indenture dated as of May 20, 1994 by and among the Registrant and United States Trust Company
of New York [incorporated by reference to Exhibit 4(c) to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994].
4.4 Specimen Common Stock Certificate [incorporated by reference to Exhibit 4(d) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994].
10.1* OHM Corporation 1986 Stock Option Plan, as amended and restated as of May 10, 1994 [incorporated by reference to
Appendix 2 to Registrant's Proxy Statement for its Annual Meeting held May 10, 1994].
10.2* OHM Corporation Nonqualified Stock Option Plan for Directors [incorporated by reference to Exhibit 10(c) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992].
10.3* OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994 [incorporated by reference
to Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994].
10.4* Amendment No. 1 to OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994
[incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995].
10.5* Amendment No. 2 to OHM Corporation Retirement Savings Plan, as amended and restated as of January 1, 1994.
10.6* OHM Corporation Retirement Savings Plan Trust Agreement between Registrant and National City Bank, as Trustee, as
amended and restated effective July 1, 1994 [incorporated by reference to Exhibit 10(d) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
10.7* OHM Corporation Directors' Deferred Fee Plan [incorporated by reference to Exhibit 10(e) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
70
10.8* Amendment No. 1 to OHM Corporation Directors' Deferred Fee Plan [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.9* Form of Amended and Restated Indemnification Agreements entered into between Registrant and its Directors and
Executive Officers.
10.10* Form of Employment Agreements providing certain severance benefits in the event of a change of control entered into
between Registrant and certain of its executive officers.
10.11 Revolving Credit Agreement dated as of May 31, 1995 among OHM Corporation and OHM Remediation Services Corp., and
the banks named therein, Citicorp USA, Inc., as Administrative Agent and Bank of America Illinois, as Issuing and
Paying Agent and Co- Agent [incorporated by reference to Exhibit 10(e) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995].
10.12 Amendment No. 1 dated as of October 16, 1995 to the Revolving Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks named therein, Citicorp USA, Inc., as Administrative
Agent and Bank of America Illinois, as Issuing and Paying Agent and Co-Agent [incorporated by reference to Exhibit
10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 31, 1995].
10.13 Security Agreement dated as of May 11, 1993, among OHM Corporation, OHM Remediation Services Corp. and Continental
Bank N.A., as Administrative Agent [incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993].
10.14 First Amendment dated as of May 4, 1994 to Security Agreement dated as of May 11, 1993 by and between the
Registrant, OHM Remediation Services Corp., and Bank of America Illinois as Issuing and Paying Agent.
10.15 Second Amendment dated as of May 31, 1995 to Security Agreement dated as of May 11, 1993 by and between the
Registrant, OHM Remediation Services Corp., and Bank of America Illinois as Issuing and Paying Agent [incorporated
by reference to Exhibit 10(g) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995].
10.16 Pledge Agreement dated as of May 11, 1993, executed by the Registrant in favor of Continental Bank N.A., as
Administrative Agent [incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993].
10.17 First Amendment dated as of May 31, 1995 to Pledge Agreement dated as of May 11, 1993 by and between the Registrant
and Bank of America Illinois as Issuing and Paying Agent [incorporated by reference to Exhibit 10(f) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.18 Intercreditor Agreement dated May 31, 1995 by and among Citicorp USA, Inc., as administrative agent, Bank of
America Illinois, as issuing and paying agent and WMX Technologies, Inc. [incorporated by reference to Exhibit
10(h) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
71
10.19 Guarantee Agreement by and among the Registrant and WMX Technologies, Inc., dated May 30, 1995 [incorporated by
reference to Exhibit 10(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.20 Reimbursement Agreement dated as of May 31, 1995 among WMX Technologies, Inc., OHM Corporation, and OHM Remediation
Services Corp. [incorporated by reference to Exhibit 10(j) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995].
10.21 Security Agreement dated as of May 31, 1995 by and between the Registrant, OHM Remediation Services Corp., and WMX
Technologies, Inc. [incorporated by reference to Exhibit 10(k) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995].
10.22 Pledge Agreement dated as of May 31, 1995 by and between the Registrant and WMX Technologies, Inc. [incorporated by
reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.23 Master Loan and Security Agreement dated May 11, 1993, between OHM Remediation Services Corp. and BOT Financial
Corporation [incorporated by reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993].
10.24 Amendment No. 1 to Master Loan and Security Agreement dated as of January 19, 1995 between BOT Financial
Corporation and OHM Remediation Services Corp. [incorporated by reference to Exhibit 10(g) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995].
10.25 Promissory Note dated December 23, 1993 executed by OHM Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993].
10.26 Promissory Note dated December 28, 1994 executed by OHM Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994].
10.27 Loan and Security Agreement dated as of August 1, 1994 by and between OHM Remediation Services Corp. and
Internationale Nederlanden Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(b) to
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994].
10.28 Promissory Note dated August 31, 1994 executed by OHM Remediation Services Corp. in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(c) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.29 Continuing Corporate Guaranty dated as of August 1, 1994 executed by OHM Corporation in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by reference to Exhibit 10(d) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.30 Purchase Agreement dated as of December 15, 1992, among OHM Corporation, NSC Corporation, NSC Industrial Services
Corp., Waste Management, Inc., and The Brand
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
72
Companies, Inc. [incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992].
10.31 Stock Purchase Agreement dated December 17, 1992, among OHM Corporation and Chemical Waste Management, Inc.
[incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992].
10.32* OHM Corporation 1996 Management Incentive Plan.
10.33* OHM Corporation Executive Retirement Plan, dated as of January 1, 1996.
11 Statement Re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney of certain directors of the Company.
27 Financial Data Schedule.
__________________________
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.