SOURCE: Flagship PDG

December 12, 2008 08:30 ET

Flagship PDG Announces Third Quarter Results

PITTSBURGH, PA--(Marketwire - December 12, 2008) - PDG Environmental, Inc. (dba Flagship PDG) (OTCBB: PDGE), a leading provider of environmental remediation, disaster response and reconstruction services, today reported financial results for the third fiscal quarter and nine months ended October 31, 2008.

Revenues for the third quarter of fiscal 2009 were $28.1 million, up 5.6% from the $26.6 million reported in the third quarter of fiscal 2008. The increase was primarily due to an increase of $1.7 million in non-asbestos project related revenues as compared to the prior year quarter driven by emergency response revenues generated from the hurricanes in Louisiana and Texas in September. The results for the three months ended October 31, 2008, were impacted by negative contract adjustments of approximately $700,000 on two large asbestos abatement projects recently completed. The company reported a pre-tax profit of $705,000 and net after-tax profit of $342,000, or $0.02 per diluted share in the third quarter of fiscal 2009, compared with a net loss of $(1.0) million, or $(0.05) per diluted share in the third quarter of fiscal 2008. EBITDA (earnings before interest, taxes, depreciation and amortization) was a positive $1.7 million for the current quarter versus a negative EBITDA of $(221,000) for the comparable period in fiscal 2008. Other direct and SG&A costs decreased $740,000 from the third quarter of fiscal 2008 largely due to lower personnel and related costs as well as lower legal costs. In the third quarter of fiscal 2009, Flagship PDG recorded non-cash accounting costs of $271,000 related to its July 2005 private placement as compared to $229,000 for the comparable period last year.

For the nine moths ended October 31, 2008 revenues were $69.1 million, a decrease of $5.9 million or 7.9% from the $75.0 million reported for the nine months ended October 31, 2007. The company reported a net after-tax loss of $(1.5) million, or $(0.07) per diluted share for the nine months ended October 31, 2008, compared with a net loss of $(181,000), or $(0.01) per diluted share for the nine months ended October 31, 2007. Earnings for the current nine-month period were adversely impacted by lower than anticipated revenues generated in the first quarter of fiscal 2009, the contract adjustments mentioned above, and an increase in bad debt expense of $550,000 largely driven by claim settlements in the second quarter of fiscal 2009. EBITDA was a positive $804,000 for the first nine months of fiscal 2009 versus a positive EBITDA of $2.8 million for the comparable period in fiscal 2008. Other direct and SG&A costs decreased $103,000 from the first nine months of fiscal 2008 due to lower personnel and related costs offset by increases in bad debt expense, marketing and re-branding costs, and non-cash stock option expense. For the nine months ended October 31, 2008, Flagship PDG recorded non-cash accounting costs of $779,000 related to its July 2005 private placement as compared to $658,000 for the comparable period last year.

"Third quarter results were positively impacted by our response to the hurricanes in Louisiana and Texas but adversely impacted by contract adjustments on two large asbestos contracts recently completed. Excluding the impact of the contract adjustments, we would have achieved a field margin percentage at our expected levels of approximately 27%. With the emergency response work for the hurricanes complete, the reconstruction work has now begun and we anticipate this work continuing into early next year. At October 31, 2008, the backlog has decreased from previous quarter levels but still remains relatively strong at about $41.9 million. We have and will continue to cut our fixed overhead costs where appropriate as we continue to focus on bottom line profitability," said John C. Regan, chairman and chief executive officer of Flagship PDG.

Conference Call

Flagship PDG will host a conference call on December 12, 2008 at 11:00 a.m. Eastern. During the call, John C. Regan, Chairman and Chief Executive Officer, and Nick Battaglia, Chief Financial Officer, will discuss the Company's quarterly performance and financial results.

Conference Call Details
Date: Friday, December 12, 2008
Time: 11:00 a.m. (EST)
Dial-in Number: 1-800-762-8779
International Dial-in Number: 1-480-629-9041

It is recommended that participants phone-in approximately 5 to 10 minutes prior to the start of the 11:00 a.m. call. A telephonic replay of the conference call may be accessed approximately two hours after the call through December 19, 2008, by dialing 1-800-406-7325 or 1-303-590-3030 for international callers and entering the replay access code 3949986.

The company makes use of EBITDA (earnings before interest, taxes, depreciation and amortization) as a financial measure which it believes is a useful performance indicator. EBITDA is not a recognized term under generally accepted accounting principles, or "GAAP," and should not be considered as an alternative to net income/(loss) or net cash provided by operating activities, which are GAAP measures. A reconciliation of EBITDA to net income/(loss) appears at the end of this release as actual results for the quarter.

About Flagship PDG

Flagship PDG, headquartered in Pittsburgh, PA, is a leading provider of specialty contracting services including asbestos abatement, mold remediation, emergency response, demolition and reconstruction to commercial, industrial and governmental clients nationwide. With over twenty years' experience, Flagship PDG has offices nationwide capable of responding to customer requirements coast to coast. For additional information, please visit http://www.FlagshipPDG.com.

Safe Harbor Statement under Private Securities Act of 1995: The statements contained in this release, which are not historical facts, may be deemed to contain forward-looking statements, including, but not limited to, deployment of new services, growth of customer base, and growth of service area, among other items. Actual results may differ materially from those anticipated in any forward-looking statement with regard to magnitude, timing or other factors. Deviation may result from risk and uncertainties, including, without limitation, the company's dependence on first parties, market conditions for the sale of services, availability of capital, operational risks on contracts, and other risks and uncertainties. The company disclaims any obligation to update information contained in any forward-looking statement.

                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  STATEMENTS OF CONSOLIDATED OPERATIONS
                                (UNAUDITED)

                                                For the Three Months Ended
                                                        October 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------


Contract Revenues                               $ 28,134,000  $ 26,616,000

Job Costs                                         21,422,000    21,200,000
                                                ------------  ------------

Field Margin                                       6,712,000     5,416,000

Other Direct Costs                                 2,348,000     2,674,000
                                                ------------  ------------

Gross Margin                                       4,364,000     2,742,000

Selling General & Administrative expenses          3,180,000     3,594,000
                                                ------------  ------------

Income (Loss) From Operations                      1,184,000      (852,000)

Other Income (Expense):
   Interest Expense                                 (232,000)     (303,000)
   Non-cash interest expense for preferred
    dividends and accretion of discount             (271,000)     (229,000)
   Interest and other income, net                     24,000       163,000
                                                ------------  ------------
                                                    (479,000)     (369,000)

Income (Loss) Before Income Taxes                    705,000    (1,221,000)

Income Tax (Benefit) Provision                       363,000      (221,000)
                                                ------------  ------------

Net Income (Loss)                               $    342,000  $ (1,000,000)
                                                ============  ============

Per share of common stock:
   Basic                                        $       0.02  $      (0.05)
                                                ============  ============

   Diluted                                      $       0.02  $      (0.05)
                                                ============  ============

Earnings per share calculation:
   Average common share equivalents outstanding   20,826,000    20,749,000

   Average dilutive common share equivalents
    outstanding                                       30,000             -
                                                ------------  ------------

   Average common share and dilutive common
    equivalents outstanding                       20,856,000    20,749,000
                                                ============  ============



                     PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
        RECONCILIATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
                            AND AMORTIZATION ("EBITDA")
                                    (UNAUDITED)

                                                 For the Three Months Ended
                                                        October 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------
Net Income (Loss)                               $    342,000  $ (1,000,000)

Income Tax Provision (Benefit)                       363,000      (221,000)

Interest Expense                                     232,000       303,000

Non-cash interest expense for preferred
 dividends and accretion of discount                 271,000       229,000

Depreciation and Amortization                        459,000       468,000
                                                ------------  ------------

EBITDA                                             1,667,000      (221,000)
                                                ============  ============


                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  STATEMENTS OF CONSOLIDATED OPERATIONS
                                (UNAUDITED)

                                                For the Nine Months Ended
                                                        October 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Contract Revenues                               $ 69,056,000  $ 74,954,000

Job Costs                                         52,135,000    56,249,000
                                                ------------  ------------

Field Margin                                      16,921,000    18,705,000

Other Direct Costs                                 7,270,000     8,229,000
                                                ------------  ------------

Gross Margin                                       9,651,000    10,476,000

Selling General & Administrative expenses         10,255,000     9,399,000
Loss on Sale of Fixed Assets                           6,000             -
                                                ------------  ------------

Income (Loss) From Operations                       (610,000)    1,077,000

Other Income (Expense):
   Interest Expense                                 (636,000)     (883,000)
   Non-cash interest expense for preferred
    dividends and accretion of discount             (779,000)     (658,000)
   Interest and other income, net                     61,000       315,000
                                                ------------  ------------
                                                  (1,354,000)   (1,226,000)

Income (Loss) Before Income Taxes                 (1,964,000)     (149,000)

Income Tax (Benefit) Provision                      (431,000)       32,000
                                                ------------  ------------

Net Income (Loss)                               $ (1,533,000) $   (181,000)
                                                ============  ============

Per share of common stock:
   Basic                                        $      (0.07) $      (0.01)
                                                ============  ============

   Diluted                                      $      (0.07) $      (0.01)
                                                ============  ============

Earnings per share calculation:
   Average common share equivalents outstanding   20,821,000    20,614,000

   Average dilutive common share equivalents
    outstanding                                            -             -
                                                ------------  ------------

   Average common share and dilutive common
    equivalents outstanding                       20,821,000    20,614,000
                                                ============  ============


                  PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
      RECONCILIATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
                        AND AMORTIZATION ("EBITDA")
                               (UNAUDITED)


                                                 For the Nine Months Ended
                                                        October 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Net Income (Loss)                               $ (1,533,000) $   (181,000)

Income Tax Provision (Benefit)                      (431,000)       32,000

Interest Expense                                     636,000       883,000

Non-cash interest expense for preferred
 dividends and accretion of discount                 779,000       658,000

Depreciation and Amortization                      1,353,000     1,403,000
                                                ------------  ------------

EBITDA                                               804,000     2,795,000
                                                ============  ============


                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS



                                                October 31,   January 31,
                                                    2008          2008
                                                ------------  ------------
ASSETS                                          (Unaudited)

   Current Assets
       Cash and cash equivalents                $     74,000  $     90,000
       Contracts receivable, net                  29,032,000    22,154,000
       Costs and estimated earnings in excess
        of billings on uncompleted contracts       5,120,000     3,325,000
       Inventories                                   635,000       689,000
       Deferred income tax asset                   1,257,000     1,111,000
       Other current assets                          390,000        94,000
                                                ------------  ------------

   Total Current Assets                           36,508,000    27,463,000

   Property, Plant and Equipment                  12,464,000    12,201,000
   Less: accumulated depreciation                (10,606,000)   (9,859,000)
                                                ------------  ------------

                                                   1,858,000     2,342,000

   Goodwill                                        2,489,000     2,614,000
   Deferred Income Tax Asset                       3,049,000     2,804,000
   Contracts Receivable, Non Current                 677,000       677,000
   Costs in excess of billings, Non Current        3,327,000     3,327,000
   Intangible and Other Assets                     4,548,000     5,018,000
                                                ------------  ------------

   Total Assets                                 $ 52,456,000  $ 44,245,000
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

   Current Liabilities
       Accounts payable                         $ 12,567,000  $  9,729,000
       Billings in excess of costs and
        estimated earnings on uncompleted
        contracts                                  3,152,000     1,832,000
       Accrued income taxes                            6,000       255,000
       Current portion of long-term debt             353,000       412,000
       Accrued liabilities                         4,391,000     4,921,000
       Mandatorily Redeemable Cumulative
        Convertible Series C Preferred Stock       4,225,000             -
                                                ------------  ------------

   Total Current Liabilities                      24,694,000    17,149,000

   Long-Term Debt                                 16,010,000    10,679,000

   Mandatorily Redeemable Cumulative
    Convertible Series C Preferred Stock                   -     3,446,000


   Total Liabilities                              40,704,000    31,274,000

   Stockholders' Equity
       Common stock                                  418,000       418,000
       Common stock warrants                       1,628,000     1,628,000
       Additional paid-in capital                 20,042,000    19,728,000
       Retained Earnings (deficit)               (10,298,000)   (8,765,000)
       Less treasury stock, at cost                  (38,000)      (38,000)

   Total Stockholders' Equity                     11,752,000    12,971,000
                                                ------------  ------------

   Total Liabilities and Stockholders' Equity   $ 52,456,000  $ 44,245,000
                                                ============  ============

                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  STATEMENTS OF CONSOLIDATED CASH FLOWS
                                (UNAUDITED)

                                                For the Nine Months Ended
                                                        October 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Cash Flows From Operating Activities:

   Net Income (loss)                            $ (1,533,000) $   (181,000)
       Adjustments to Reconcile Net Income
        (Loss) to Cash:
         Depreciation  and amortization            1,353,000     1,403,000
         Deferred income tax benefit                (391,000)     (177,000)
         Interest expense for Series C
          preferred stock accretion of discount      779,000       657,000
         Loss on sale of fixed assets                  6,000             -
         Stock based compensation                    312,000       224,000
         Provision for receivable allowance        1,307,000        11,000
                                                ------------  ------------
                                                   1,833,000     1,937,000
       Changes in Assets and Liabilities Other
        than Cash:
         Contracts receivable                     (8,185,000)   (4,004,000)
         Costs and Estimated Earnings in Excess
          of Billings on uncompleted contracts    (1,795,000)   (1,146,000)
          Inventories                                 54,000      (107,000)
         Prepaid/accrued income taxes               (249,000)      373,000
         Other current assets                      1,017,000     1,113,000
         Accounts payable                          2,838,000     2,676,000
         Billings in excess of costs and
          estimated earnings on uncompleted
          contracts                                1,320,000    (1,586,000)
         Accrued liabilities                        (528,000)    1,612,000
                                                ------------  ------------
       Total Changes in Assets and Liabilities
        Other than Cash                           (5,528,000)   (1,069,000)
                                                ------------  ------------
         Net Cash Provided by (Used in)
          Operating Activities                    (3,695,000)      868,000

Cash Flows From Investing Activities:
       Purchase of property, plant and
        equipment                                   (275,000)     (528,000)
       Proceeds from sale of fixed assets              4,000             -
       Payment of accrued earnout liability         (100,000)            -
       Change in other assets                       (107,000)      (66,000)
                                                ------------  ------------
         Net Cash Used in Investing Activities      (478,000)     (594,000)

Cash Flows From Financing Activities:
       Proceeds from debt                          5,549,000       730,000
       Proceeds from exercise of stock options
        and warrants                                   2,000       145,000
       Payment of premium financing liability     (1,090,000)     (882,000)
       Principal payments on debt                   (304,000)     (282,000)
                                                ------------  ------------
         Net Cash Provided by (Used in)
          Financing Activities                     4,157,000      (289,000)
                                                ------------  ------------
   Change in cash and cash equivalents               (16,000)      (15,000)
   Cash and cash equivalents, beginning of
    period                                            90,000       158,000
                                                ------------  ------------

   Cash and Cash Equivalents, end of period     $     74,000  $    143,000
                                                ============  ============

       Supplementary disclosure of non-cash
        Investing and Financing Activity:
         Change in goodwill and accrued
          liabilities for earnout liability         (126,000)      (32,000)
         Financing of annual insurance premium  $  1,313,000  $    983,000
         Non-Cash purchase of fixed assets
          financed through capital lease        $     27,000  $    197,000

Contact Information

  • Investor Contact
    Alliance Advisors, LLC.
    Mark McPartland / Chris Camarra
    212-398-3487
    Email Contact

    Company Contact:
    John C. Regan
    Chairman & CEO
    Nick Battaglia
    CFO
    412-243-3200

    George Westinghouse Technology Center
    Building 801 - 1386 Beulah Road
    Pittsburgh, Pennsylvania 15235
    (800) 972-7341