FlagshipPDG Announces Second Quarter Results

Fri Sep 12, 2008 8:00am EDT

* Reuters is not responsible for the content in this press release.

  PITTSBURGH, PA, Sep 12 (MARKET WIRE) -- 
PDG Environmental, Inc. (dba FlagshipPDG) (OTCBB: PDGE), a leading
provider of environmental remediation, disaster response and
reconstruction services, today reported financial results for the second
fiscal quarter and six months ended July 31, 2008.

    Revenues for the second quarter of fiscal 2009 were $23.2 million, down
12.9% from the $26.6 million reported in the second quarter of fiscal
2008. Field margin for the second quarter of fiscal 2009 was $5.5 million
or approximately 23.7% of revenue as compared to field margin of $6.8
million or approximately 25.6% of revenue in the prior year fiscal
quarter. The drop in the field margin percentage is largely attributable
to projected increased costs of approximately $0.7 million for a $4.0
million contract scheduled to be completed in the third quarter of fiscal
2009. The company reported a net after-tax loss of $(0.7) million, or
$(0.04) per diluted share in the second quarter of fiscal 2009, compared
with net income of $0.5 million, or $0.02 per diluted share in the second
quarter of fiscal 2008. Earnings for the period were adversely impacted
by the contract adjustment mentioned above and an increase in bad debt
expense of $0.45 million due to claim settlements and higher receivable
levels. Claim settlements generated $0.4 million of positive cash flow
for the company. EBITDA (earnings before interest, taxes, depreciation
and amortization) was a negative $(0.1) million for the current quarter
versus a positive EBITDA of $1.7 million for the comparable period in
fiscal 2008. Other direct and SG&A costs increased $0.3 million from the
second quarter of fiscal 2008 largely due to increased bad debt expense
offset by lower personnel costs. In the second quarter of fiscal 2009,
FlagshipPDG recorded non-cash accounting costs of $0.3 million related to
its July 2005 private placement as compared to $0.2 million the
comparable period last year.

    For the six moths ended July 31, 2008 revenues were $40.9 million, a
decrease of $7.4 million or 15.3% from the $48.3 million reported for the
six months ended July 31, 2007. Field margins were $10.2 million or 24.9%
of revenues in fiscal 2009 as compared to $13.3 million or 27.5% in fiscal
2008. The drop in the field margin percentage is largely attributable to
projected increased costs of approximately $0.7 million for the contract
noted above. The company reported a net after-tax loss of $(1.9) million,
or $(0.09) per diluted share for the six months ended July 31, 2008,
compared with net income of $0.8 million, or $0.04 per diluted share for
the six months ended July 31, 2007. Earnings for the period were adversely
impacted by the lower than anticipated revenues generated in the first
quarter of fiscal 2009, the contract adjustment mentioned above, and an
increase in bad debt expense of $0.45 million noted above. EBITDA
(earnings before interest, taxes, depreciation and amortization) was a
negative $(0.9) million for the first six months of fiscal 2009 versus a
positive EBITDA of $3.0 million for the comparable period in fiscal 2008.
Other direct and SG&A costs increased $0.6 million from the first six
months of fiscal 2008 due to increased bad debt expense, marketing and
re-branding costs incurred in the first quarter of this fiscal year, and
non-cash stock option expense. For the six months ended July 31, 2008,
FlagshipPDG recorded non-cash accounting costs of $0.5 million related to
its July 2005 private placement as compared to $0.4 million the comparable
period last year.

    "The second quarter profitability was impacted by the settlement of older
claims as well as a contract cost adjustment on a large asbestos abatement
contract. Excluding those items we would have achieved a field margin
percentage at our expected levels of approximately 27%. While the second
quarter revenues have increased over 31% from the first quarter, we are
still seeing softness in the top line due largely to less planned
reconstruction work throughout the country. During the quarter ended July
31, 2008, we responded to the floods in the mid-west and also Hurricane
Dolly in Southeast Texas. We are currently responding to damage caused by
Hurricane Gustav in Louisiana and are mobilizing for Hurricane Ike. At
July 31, 2008, the backlog has decreased a bit from previous quarter
levels but still remains strong at about $47 million and we expect that
the active hurricane season will have a positive impact on the backlog
and revenue levels going forward. We have and will continue to trim
overhead costs where appropriate with our goal continuing to be to turn
the corner on profitability," said John C. Regan, chairman and chief
executive officer of FlagshipPDG.

    Conference Call

    FlagshipPDG will host a conference call on September 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, September 12, 2008
Time: 11:00 a.m. (EDT)
Dial-in Number: 1-800-762-8779
International Dial-in Number: 1-480-248-5081

    
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 September 19, 2008, by dialing 1-800-406-7325 or 1-303-590-3030
for international callers and entering the replay access code 3915885.

    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 FlagshipPDG

    FlagshipPDG, 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, FlagshipPDG 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
                                                          July 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Contract Revenues                               $ 23,207,000  $ 26,638,000

Job Costs                                         17,710,000    19,815,000
                                                ------------  ------------

Field Margin                                       5,497,000     6,823,000

Other Direct Costs                                 2,443,000     2,782,000
                                                ------------  ------------

Gross Margin                                       3,054,000     4,041,000

Selling General & Administrative expenses          3,614,000     2,991,000
Loss on Sale of Fixed Assets                           4,000             -
                                                ------------  ------------

Income (Loss) From Operations                       (564,000)    1,050,000

Other Income (Expense):
   Interest Expense                                 (202,000)     (309,000)
   Non-cash interest expense for preferred
    dividends and accretion of discount             (260,000)     (219,000)
   Interest and other income, net                     16,000       147,000
                                                ------------  ------------
                                                    (446,000)     (381,000)

Income (Loss) Before Income Taxes                 (1,010,000)      669,000

Income Tax (Benefit) Provision                      (278,000)      164,000
                                                ------------  ------------

Net Income (Loss)                               $   (732,000) $    505,000
                                                ============  ============

Per share of common stock:
   Basic                                        $      (0.04) $       0.02
                                                ============  ============

   Dilutive                                     $      (0.04) $       0.02
                                                ============  ============

Earnings per share calculation:
   Average common share equivalents outstanding   20,823,000    20,588,000

   Average dilutive common share equivalents
    outstanding                                            -       759,000
                                                ------------  ------------

   Average common share and dilutive common
    equivalents outstanding                       20,823,000    21,347,000
                                                ============  ============

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

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

Net Income (Loss)                               $   (732,000) $    505,000

Income Tax Provision (Benefit)                      (278,000)      164,000

Interest Expense                                     202,000       309,000

Non-cash interest expense for preferred
 dividends and accretion of discount                 260,000       219,000

Depreciation and Amortization                        444,000       473,000
                                                ------------  ------------

EBITDA                                              (104,000)    1,670,000
                                                ============  ============

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

                                                 For the Six Months Ended
                                                         July 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Contract Revenues                               $ 40,922,000  $ 48,338,000

Job Costs                                         30,712,000    35,049,000
                                                ------------  ------------

Field Margin                                      10,210,000    13,289,000

Other Direct Costs                                 4,923,000     5,555,000
                                                ------------  ------------

Gross Margin                                       5,287,000     7,734,000

Selling General & Administrative expenses          7,075,000     5,805,000
Loss on Sale of Fixed Assets                           6,000             -
                                                ------------  ------------

Income (Loss) From Operations                     (1,794,000)    1,929,000

Other Income (Expense):
   Interest Expense                                 (405,000)     (580,000)
   Non-cash interest expense for preferred
    dividends and accretion of discount             (508,000)     (429,000)
   Interest and other income, net                     37,000       152,000
                                                ------------  ------------
                                                    (876,000)     (857,000)

Income (Loss) Before Income Taxes                 (2,670,000)    1,072,000

Income Tax (Benefit) Provision                      (795,000)      253,000
                                                ------------  ------------

Net Income (Loss)                               $ (1,875,000) $    819,000
                                                ============  ============

Per share of common stock:
   Basic                                        $      (0.09) $       0.04
                                                ============  ============

   Dilutive                                     $      (0.09) $       0.04
                                                ============  ============

Earnings per share calculation:
   Average common share equivalents outstanding   20,819,000    20,546,000

   Average dilutive common share equivalents
    outstanding                                            -       585,000
                                                ------------  ------------

   Average common share and dilutive common
    equivalents outstanding                       20,819,000    21,131,000
                                                ============  ============

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

                                                 For the Six Months Ended
                                                         July 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Net Income (Loss)                               $ (1,875,000) $    819,000

Income Tax Provision (Benefit)                      (795,000)      253,000

Interest Expense                                     405,000       580,000

Non-cash interest expense for preferred
 dividends and accretion of discount                 508,000       429,000

Depreciation and Amortization                        894,000       934,000
                                                ------------  ------------

EBITDA                                              (863,000)    3,015,000
                                                ============  ============

                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS

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

   Current Assets
       Cash and cash equivalents                $     14,000  $     90,000
       Contracts receivable, net                  23,102,000    22,154,000
       Costs and estimated earnings in excess
        of billings on uncompleted contracts       4,404,000     3,325,000
       Inventories                                   650,000       689,000
       Deferred income tax asset                   1,124,000     1,111,000
       Other current assets                          667,000        94,000
                                                ------------  ------------

   Total Current Assets                           29,961,000    27,463,000

   Property, Plant and Equipment                  12,342,000    12,201,000
   Less: accumulated depreciation                (10,341,000)   (9,859,000)
                                                ------------  ------------

                                                   2,001,000     2,342,000

   Goodwill                                        2,614,000     2,614,000
   Deferred Income Tax Asset                       3,631,000     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                     4,632,000     5,018,000
                                                ------------  ------------

   Total Assets                                 $ 46,843,000  $ 44,245,000
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

   Current Liabilities
       Accounts payable                         $ 11,241,000  $  9,729,000
       Billings in excess of costs and estimated
        earnings on uncompleted contracts          2,074,000     1,832,000
       Accrued income taxes                          218,000       255,000
       Current portion of long-term debt             388,000       412,000
       Accrued liabilities                         6,104,000     4,921,000
       Mandatorily Redeemable Cumulative
        Convertible Series C Preferred Stock       3,954,000             -
                                                ------------  ------------

   Total Current Liabilities                      23,979,000    17,149,000

   Long-Term Debt                                 11,537,000    10,679,000

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

   Total Liabilities                              35,516,000    31,274,000

   Stockholders' Equity
       Common stock                                  418,000       418,000
       Common stock warrants                       1,628,000     1,628,000
       Additional paid-in capital                 19,959,000    19,728,000
       Retained Earnings (deficit)               (10,640,000)   (8,765,000)
       Less treasury stock, at cost                  (38,000)      (38,000)

   Total Stockholders' Equity                     11,327,000    12,971,000
                                                ------------  ------------

   Total Liabilities and Stockholders' Equity   $ 46,843,000  $ 44,245,000
                                                ============  ============

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

                                                 For the Six Months Ended
                                                         July 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Cash Flows From Operating Activities:

   Net Income (loss)                            $ (1,875,000) $    819,000
       Adjustments to Reconcile Net Income
        (Loss) to Cash:
         Depreciation  and amortization              894,000       934,000
         (Benefit) Provision for deferred
          income taxes                              (840,000)      111,000
         Interest expense for Series C
          preferred stock accretion of discount      508,000       429,000
         Loss on sale of fixed assets                  6,000             -
         Stock based compensation                    229,000       149,000
         Provision for uncollectable accounts        450,000       (39,000)
                                                ------------  ------------
                                                    (628,000)    2,403,000
       Changes in Assets and Liabilities Other
        than Cash:
         Contracts receivable                     (1,398,000)   (6,812,000)
         Costs and Estimated Earnings in Excess
          of Billings on uncompleted contracts    (1,079,000)      145,000
         Inventories                                 39,000      (116,000)
         Prepaid/accrued income taxes                (37,000)      306,000
         Other current assets                        740,000       878,000
         Accounts payable                          1,512,000     1,689,000
         Billings in excess of costs and estimated
          earnings on uncompleted contracts          242,000       972,000
         Accrued liabilities                         629,000       795,000
                                                ------------  ------------
       Total Changes in Assets and Liabilities
        Other than Cash                              648,000    (2,143,000)
                                                ------------  ------------
         Net Cash Provided by Operating
          Activities                                  20,000       260,000

Cash Flows From Investing Activities:
       Purchase of property, plant and equipment    (153,000)     (365,000)
       Proceeds from sale of fixed assets              4,000
       Change in other assets                          3,000       (58,000)
                                                ------------  ------------
         Net Cash Used in Investing Activities      (146,000)     (423,000)

Cash Flows From Financing Activities:
       Proceeds from debt                          1,005,000       960,000
       Proceeds from exercise of stock options
        and warrants                                   2,000        69,000
       Payment of premium financing liability       (759,000)     (572,000)
       Principal payments on debt                   (198,000)     (185,000)
                                                ------------  ------------
         Net Cash Provided by Financing
          Activities                                  50,000       272,000
                                                ------------  ------------
   Change in cash and cash equivalents               (76,000)      109,000
   Cash and cash equivalents, beginning of
    period                                            90,000       158,000
                                                ------------  ------------

   Cash and Cash Equivalents, end of period     $     14,000  $    267,000
                                                ============  ============

       Supplementary disclosure of non-cash
        Investing and Financing Activity:
         Change in goodwill and accrued
          liabilities for earnout liability                -       (32,000)
         Financing of annual insurance premium  $  1,313,000  $    983,000
         Non-Cash purchase of fixed assets
          financed through capital lease        $     27,000  $    176,000

    


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

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