FlagshipPDG Announces Fourth Quarter and Annual Results for Period Ended January 31, 2009

Fri May 15, 2009 12:27pm EDT

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

  PITTSBURGH, PA, May 15 (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 fourth
fiscal quarter and twelve months ended January 31, 2009.

    Revenues for the fourth quarter of fiscal 2009 were $14.6 million, down
34.0% from the $22.1 million reported in the fourth quarter of fiscal
2008. The decrease was due to reduced discretionary customer spending
resulting from the overall economic conditions. Revenues from asbestos and
non-asbestos projects were down from prior year quarter levels by 21.7%
and 33.3% respectively. In addition, $2.2 million in claim adjustments for
contracts performed in prior years negatively impacted the revenues for
the current fiscal quarter. Other direct and SG&A costs decreased $1.1
million from the fourth quarter of fiscal 2008 largely due to lower
personnel and related costs as a result of cost cutting measures. The
Company reported a net loss of $(3.6) million, or $(0.17) per diluted
share in the fourth quarter of fiscal 2009, compared with a net loss of
$(728,000), or $(0.04) per diluted share in the fourth quarter of fiscal
2008. The total negative impact on fourth quarter results from contract
claims and contract adjustments was $3.0 million. EBITDA (earnings before
interest, taxes, depreciation and amortization) was a negative $(2.6)
million for the current quarter versus a positive EBITDA of $208,000 for
the comparable period in fiscal 2008. In the fourth quarter of fiscal
2009, FlagshipPDG recorded non-cash accounting costs of $284,000 related
to its July 2005 private placement as compared to $238,000 for the
comparable period last year.

    For the twelve months ended January 31, 2009 revenues were $83.7 million,
a decrease of $13.4 million or 13.8% from the $97.1 million reported for
the twelve months ended January 31, 2008 reflecting economic conditions
in the last half of fiscal 2009. Other direct and SG&A costs decreased
$1.2 million from the twelve 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. The Company reported
a net loss of $(5.2) million, or $(0.25) per diluted share for the twelve
months ended January 31, 2009, compared with a net loss of $(909,000), or
$(0.04) per diluted share for the twelve months ended January 31, 2008.
Earnings for the current twelve-month period were adversely impacted by
lower than anticipated revenues and the $3 million impact for contract
claim adjustments and bad debts discussed above. EBITDA was a negative
$(1.8) million for the twelve months of fiscal 2009 versus a positive
EBITDA of $3.0 million for the comparable period in fiscal 2008. For the
twelve months ended January 31, 2009, FlagshipPDG recorded non-cash
accounting costs of $1.1 million related to its July 2005 private
placement as compared to $896,000 for the comparable period last year.

    On May 14, 2009, we entered into an amendment to our existing Loan
Agreement that waived our non-compliance with certain financial covenants
as of January 31, 2009 and made certain revisions to the financial
covenants for the period ended January 31, 2010. The amendment also
extended the maturity date of the underlying loan to August 3, 2010, and
sets the interest rate at prime plus 0.75% with a floor from the prime
rate at 4.25%.

    On May 14, 2009, we and our sole remaining preferred shareholder entered
into an exchange agreement pursuant to which the Series C Convertible
Preferred Stock was surrendered and exchanged for a subordinated secured
promissory note. The principal amount of the subordinated note is
$4,993,226, bears interest at an annual rate of 8% and is due on August
31, 2010. A monthly payment of principal and interest of $50,000 will be
made with the remainder of the amount due on August 31, 2010. Due to the
execution of the exchange agreement, $4.4 million of the Series C
Preferred Stock has been classified as a long-term liability and $0.1
million has been classified as a current liability as of January 31, 2009.

     "We are obviously disappointed with the financial performance for the
year but the economy has had a dramatic impact on our revenue levels. In
addition, during the year a number of claims on contracts completed in
prior years were settled or written down to clean-up the balance sheet,
generate cash, and stop the legal expenses and management distraction. The
combination of the claim write-down, settlement, and increased bad debt
expense resulted in a negative impact of nearly $3 million to the bottom
line. In light of the realities of the economic conditions we have taken
the necessary steps to rationalize our fixed costs to achievable revenue
levels, resulting in a reduction to our annual infrastructure costs of
nearly $5 million. Most importantly, the amendments to our banking and
preferred agreements will allow us additional time to execute on our
business plans. While we continue to monitor customer spending levels, we
anticipate that federal economic stimulus dollars will have a positive
impact on our top line through increased spending on projects for schools,
public housing, DOE site clean-up and federal buildings," said John C.
Regan, chairman and chief executive officer of FlagshipPDG.

    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
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (UNAUDITED)

                                                For the Three Months Ended
                                                        January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------

Contract Revenues                               $ 14,615,000  $ 22,130,000

Direct Job Costs                                  12,224,000    15,749,000
                                                ------------  ------------

Field Margin                                       2,391,000     6,381,000

Other Direct Costs                                 2,115,000     2,769,000
                                                ------------  ------------

Gross Margin                                         276,000     3,612,000

Gain (Loss) on Sale of Fixed Assets                    2,000         9,000
Non-Cash Impairment Charge for Operating Lease             -        52,000
Selling, General and Administrative Expenses       3,343,000     3,831,000
                                                ------------  ------------

(Loss) from Operations                            (3,065,000)     (262,000)

Other Income (Expense):
  Interest Expense                                  (209,000)     (269,000)
  Non-Cash Interest Expense for Preferred
   Dividends and Accretion of Discount              (284,000)     (238,000)
  Interest and Other Income                            7,000        15,000
                                                ------------  ------------
                                                    (486,000)     (492,000)
                                                ------------  ------------

(Loss) Before Income Taxes                        (3,551,000)     (754,000)
                                                ------------  ------------

Income Tax (Benefit) Provision                        77,000       (26,000)
                                                ------------  ------------

Net (Loss)                                      $ (3,628,000) $   (728,000)
                                                ============  ============

(Loss) Per Common Share - Basic:                $      (0.17) $      (0.04)
                                                ============  ============

(Loss) Per Common Share - Diluted:              $      (0.17) $      (0.04)
                                                ============  ============

Average Common Shares Outstanding                 20,868,000    20,814,000

Average Dilutive Common Stock Equivalents
 Outstanding                                               -             -
                                                ------------  ------------

Average Common Shares and Dilutive Common Stock
 Equivalents Outstanding                          20,868,000    20,814,000
                                                ============  ============

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

                                                   For the Three Months
                                                      Ended January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------

Net (Loss)                                        (3,628,000)     (728,000)

Interest Expense                                     209,000       269,000
Non-Cash Interest Expense for Preferred
 Dividends and Accretion of Discount                 284,000       238,000
Income Tax (Benefit) Provision                        77,000       (26,000)
Depreciation and Amortization                        438,000       455,000
                                                ------------  ------------

EBITDA                                          $ (2,620,000) $    208,000
                                                ============  ============

                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS

                                                  For the Twelve Months
                                                    Ended January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------

Contract Revenues                               $ 83,671,000  $ 97,084,000

Direct Job Costs                                  64,359,000    71,998,000
                                                ------------  ------------

Field Margin                                      19,312,000    25,086,000

Other Direct Costs                                 9,385,000    10,998,000
                                                ------------  ------------

Gross Margin                                       9,927,000    14,088,000

Gain (Loss) on Sale of Fixed Assets                   (4,000)        9,000
Non-Cash Impairment Charge for Operating Lease             -        52,000
Selling, General and Administrative Expenses      13,598,000    13,230,000
                                                ------------  ------------

Income (Loss) from Operations                     (3,675,000)      815,000

Other Income (Expense):
  Interest Expense                                  (845,000)   (1,152,000)
  Non-Cash Interest Expense for Preferred
   Dividends and Accretion of Discount            (1,063,000)     (896,000)
  Interest and Other Income                           68,000       330,000
                                                ------------  ------------
                                                  (1,840,000)   (1,718,000)
                                                ------------  ------------

(Loss) Before Income Taxes                        (5,515,000)     (903,000)
                                                ------------  ------------

Income Tax (Benefit) Provision                      (354,000)        6,000
                                                ------------  ------------

Net (Loss)                                      $ (5,161,000) $   (909,000)
                                                ============  ============

(Loss) Per Common Share - Basic:                $      (0.25) $      (0.04)
                                                ============  ============

(Loss) Per Common Share - Diluted:              $      (0.25) $      (0.04)
                                                ============  ============

Average Common Shares Outstanding                 20,833,000    20,664,000

Average Dilutive Common Stock Equivalents
 Outstanding                                               -             -
                                                ------------  ------------

Average Common Shares and Dilutive Common Stock
 Equivalents Outstanding                          20,833,000    20,664,000
                                                ============  ============

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

                                                  For the Twelve Months
                                                     Ended January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------

Net (Loss)                                        (5,161,000)     (909,000)

Interest Expense                                     845,000     1,152,000
Non-Cash Interest Expense for Preferred
 Dividends and Accretion of Discount               1,063,000       896,000
Income Tax (Benefit) Provision                      (354,000)        6,000
Depreciation and Amortization                      1,791,000     1,858,000
                                                ------------  ------------

EBITDA                                          $ (1,816,000) $  3,003,000
                                                ============  ============

                 PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS

                                                        January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------
ASSETS

 Current Assets
  Cash and cash equivalents                     $    314,000  $     90,000
  Contracts receivable, net                       20,677,000    22,154,000
  Costs and estimated earnings in
   excess of billings on
   uncompleted contracts                           3,180,000     3,325,000
  Inventories                                        616,000       689,000
  Income taxes receivable                            355,000             -
  Deferred income tax asset                          983,000     1,111,000
  Other current assets                               344,000        94,000
                                                ------------  ------------

 Total Current Assets                             26,469,000    27,463,000

 Property, Plant and Equipment                    12,431,000    12,201,000
 Less: accumulated depreciation                  (10,786,000)   (9,859,000)
                                                ------------  ------------

                                                   1,645,000     2,342,000

 Intangible Assets, net                            4,026,000     4,718,000
 Goodwill                                          2,489,000     2,614,000
 Deferred Income Tax Asset                         2,948,000     2,804,000
 Contracts Receivable, Non
  Current                                          1,820,000       677,000
 Costs in excess of billings on
  uncompleted contracts, Non
  Current                                          1,630,000     3,327,000
 Other Assets                                        345,000       300,000
                                                ------------  ------------

 Total Assets                                   $ 41,372,000  $ 44,245,000
                                                ============  ============

LIABILITIES AND STOCKHOLDERS'
 EQUITY

 Current Liabilities
  Accounts payable                              $  9,411,000  $  9,729,000
  Billings in excess of costs and
   estimated earnings on
   uncompleted contracts                           1,125,000     1,832,000
  Accrued income taxes                                44,000       255,000
  Accrued liabilities                              2,742,000     4,921,000
  Current portion of long-term
   debt                                              303,000       412,000
  Mandatorily redeemable
   cumulative convertible Series C
   preferred stock                                   137,000             -
                                                ------------  ------------

 Total Current Liabilities                        13,762,000    17,149,000

 Long-Term Debt                                   15,045,000    10,679,000

 Mandatorily redeemable
  cumulative convertible Series C
  preferred stock                                  4,372,000     3,446,000
                                                ------------  ------------

 Total Liabilities                                33,179,000    31,274,000

 Stockholders' Equity
  Common stock                                       418,000       418,000
  Common stock warrants                            1,628,000     1,628,000
  Paid-in capital                                 20,111,000    19,728,000
  Accumulated deficit                            (13,926,000)   (8,765,000)
  Less treasury stock, at cost                       (38,000)      (38,000)
                                                ------------  ------------

 Total Stockholders' Equity                        8,193,000    12,971,000
                                                ------------  ------------

 Total Liabilities and
  Stockholders' Equity                          $ 41,372,000  $ 44,245,000
                                                ============  ============

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

                                                  For the Twelve Months
                                                    Ended January 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------
Cash Flows From Operating Activities:
Net (loss)                                      $ (5,161,000) $   (909,000)
Adjustments to Reconcile Net Income to Cash
 Provided by (Used in) Operating Activities:
  Depreciation and Amortization                    1,791,000     1,858,000
  Deferred Income Taxes                              (16,000)     (435,000)
  Interest expense for Series C preferred stock
   dividend and accretion of discount              1,063,000       896,000
  Stock based compensation                           381,000       345,000
  Loss (Gain) on sale of fixed assets                  4,000        (9,000)
  Provision for receivable allowance               1,632,000         4,000
  Impairment charge for operating lease                    -        52,000
                                                ------------  ------------
                                                    (306,000)    1,802,000
Changes in Operating Assets and Liabilities:
  Contracts receivable                            (1,298,000)   (1,078,000)
  Costs and Estimated Earnings in Excess of
   Billings on uncompleted contracts               1,842,000    (1,045,000)
  Inventories                                         73,000      (136,000)
  Accrued income taxes                              (211,000)      526,000
  Other current assets                               708,000     1,423,000
  Accounts payable                                  (318,000)    2,326,000
  Billings in excess of costs and estimated
   earnings on uncompleted contracts                (707,000)   (1,589,000)
  Accrued liabilities                             (1,954,000)      899,000
                                                ------------  ------------
Total Changes                                     (1,865,000)    1,326,000
                                                ------------  ------------
Net Cash Provided by (Used in) Operating
 Activities                                       (2,171,000)    3,128,000

Cash Flows From Investing Activities:
  Purchase of property, plant and equipment         (283,000)     (674,000)
  Proceeds from sale of fixed assets                   9,000        27,000
  Payment of accrued earnout liability              (100,000)            -
  Changes in other assets                           (139,000)     (105,000)
                                                ------------  ------------
Net Cash Used in Investing Activities               (513,000)     (752,000)

Cash Flows From Financing Activities:
  Proceeds from debt                               4,619,000             -
  Proceeds from exercise of stock options              2,000       145,000
  Payment of premium financing liability          (1,313,000)     (983,000)
  Principal payments on debt                        (400,000)   (1,606,000)
                                                ------------  ------------
Net Cash Provided by (Used in) Financing
 Activities                                        2,908,000    (2,444,000)
                                                ------------  ------------

Net increase (decrease) in cash and cash
 equivalents                                         224,000       (68,000)
Cash and cash equivalents, beginning of year          90,000       158,000
                                                ------------  ------------
Cash and Cash Equivalents, End of Year          $    314,000  $     90,000
                                                ============  ============

Supplementary disclosure of non-cash Investing
 and Financing Activity:
 (Decrease) in goodwill and accrued liabilities
  for earnout liability                         $   (125,000) $    (37,000)
                                                ============  ============
  Financing of annual insurance premium         $  1,313,000  $    983,000
                                                ============  ============
  Non-cash purchase of fixed assets financed
   through capital leases                       $     38,000  $    214,000
                                                ============  ============


    


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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