-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KoBVsyT334XTsu0d0ujKXhhyHTTbCp9rL+7cWTNm3MC2HAxG7J2WSNzKsZqrARpg 7dkRDBEUISX8PwESDlF0Vw== 0000890566-97-001065.txt : 19970512 0000890566-97-001065.hdr.sgml : 19970512 ACCESSION NUMBER: 0000890566-97-001065 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TANKNOLOGY ENVIRONMENTAL INC /TX/ CENTRAL INDEX KEY: 0000867888 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 760284783 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18899 FILM NUMBER: 97599889 BUSINESS ADDRESS: STREET 1: 5225 HOLLISTER CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7136908265 MAIL ADDRESS: STREET 1: 5225 HOLLISTER CITY: HOUSTON STATE: TX ZIP: 77040 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q (mark one) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1997, or [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file No. 0-18899 TANKNOLOGY ENVIRONMENTAL, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0284783 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10235 W. LITTLE YORK, SUITE 405 HOUSTON, TEXAS 77040 (Address of principal executive office) Registrant's telephone number, including area code: (281) 892-7160 5225 HOLLISTER STREET, HOUSTON, TEXAS 77040 (713) 690-8265 (Former address and telephone number of principal executive office) Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than 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 [_] The number of shares of Common Stock, par value $0.01 per share, outstanding as of May 1, 1997 was 14,244,012. Page 1 Index to Exhibits appears on page 11 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES INDEX PAGE(S) PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet as of March 31, 1997 (unaudited) and December 31, 1996 ........... 3 Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 1997 and 1996 (unaudited) ..... 4 Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1997 and 1996 (unaudited) ................................................ 5 Notes to Consolidated Financial Statements (unaudited) ..... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................ 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings .......................................... 11 Item 4. Submission of Matters to a Vote of Security Holders ........ 11 Item 6. Exhibits and Reports on Form 8-K ........................... 11 PART III. SIGNATURES ....................................................... 12 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) March 31, December 31, 1997 1996 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents .................... $ 18,798,798 $ 11,421,710 Short-term investments ....................... 10,120,201 18,425,979 Accounts receivable, net ..................... 404,179 420,556 Note receivable .............................. 74,047 91,349 Inventories, net ............................. 86,158 60,317 Deferred tax asset ........................... 398,446 447,202 Other current assets ......................... 625,602 735,716 ------------ ------------ Total current assets ...................... 30,507,431 31,602,829 PROPERTY AND EQUIPMENT, NET .................... 4,685,207 5,547,864 INTANGIBLE ASSETS, LESS ACCUMULATED AMORTIZATION ................................. 2,443,274 2,494,873 DEFERRED TAX ASSET ............................. 1,566,365 1,450,248 NET ASSETS OF DISCONTINUED OPERATIONS AND OTHER ASSETS ............................. 2,765,588 1,938,080 ------------ ------------ Total assets ................................. $ 41,967,865 $ 43,033,894 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ............................. $ 296,692 $ 333,676 Accrued liabilities .......................... 1,368,563 2,267,245 ------------ ------------ Total current liabilities ................. 1,665,255 2,600,921 COMMITMENTS AND CONTINGENCIES (See Note 5) SHAREHOLDERS' EQUITY: Preferred stock, $.10 par value; 10,000,000 shares authorized; no shares issued and outstanding ............. -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 15,199,237 and 15,192,237 shares issued at March 31, 1997 and December 31, 1996, respectively ........... 151,992 151,922 Additional paid-in capital ................... 33,123,377 33,109,657 Retained earnings ............................ 11,214,912 11,359,065 Treasury stock at cost, 955,225 shares, at March 31, 1997 and December 31, 1996 ......................... (4,187,671) (4,187,671) ------------ ------------ Total shareholders' equity ................... 40,302,610 40,432,973 ------------ ------------ Total liabilities and shareholders' equity ... $ 41,967,865 $ 43,033,894 ============ ============ The accompanying notes are an integral part of the condensed consolidated financial statements. 3 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) Three Months Ended March 31, ----------------------------- 1997 1996* ------------ ------------ REVENUES ...................................... $ 607,625 $ 516,738 COST OF SERVICES .............................. 549,341 317,646 ------------ ------------ Gross profit ............................. 58,284 199,092 SELLING, GENERAL & ADMINISTRATIVE EXPENSES .... 658,353 577,409 ------------ ------------ Loss from operations ..................... (600,069) (378,317) OTHER INCOME .................................. 382,171 256,014 ------------ ------------ Loss from continuing operations before income taxes ................. (217,898) (122,303) INCOME TAX BENEFIT ............................ (73,745) (47,539) ------------ ------------ Loss from continuing operations .......... (144,153) (74,764) LOSS FROM DISCONTINUED OPERATIONS, NET ........ -- (268,356) ------------ ------------ Net income (loss) ........................ $ (144,153) $ (343,120) ============ ============ Loss per share from continuing operations ..... $ (0.01) $ 0.00 Loss per share from discontinued operations ... 0.00 (0.02) ------------ ------------ NET EARNINGS (LOSS) PER SHARE ................. $ (0.01) $ (0.02) ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .............................. 14,244,012 14,237,012 ============ ============ - ------------ *Reclassified The accompanying notes are an integral part of the condensed consolidated financial statements. 4 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three Months Ended March 31, --------------------------- 1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .............................. $ (144,153) $ (343,120) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization .............. 176,467 778,803 Net amortization of premiums and discounts on short-term investments ...... (151,356) (39,500) Loss (gain) on disposal of assets .......... 5,327 (9,004) Deferred income taxes ...................... (67,361) (88,557) Deferred income ............................ -- (5,040) Common stock issued as compensation to directors ............................. 13,790 12,740 Change in assets and liabilities: Decrease in accounts and note receivable, net ........................ 33,679 1,369,483 (Increase) decrease in inventories, net .. (25,841) 36,699 Increase in income tax receivable ........ -- (144,998) Decrease in other current assets ......... 110,114 51,706 Increase in net assets of discontinued operations ............................. (827,507) (533,595) Decrease in accounts payable and accrued liabilities ............................ (935,666) (5,884) ------------ ------------ Total adjustments .................... (1,668,354) 1,422,853 ------------ ------------ Net cash (used in) provided by operating activities ............... (1,812,507) 1,079,733 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ........................... (186,767) (637,178) Proceeds from the sale of assets ............... 919,228 22,000 Purchase of short-term investments ............. (8,658,261) (1,579,287) Proceeds from maturities of short- term investments ............................. 17,115,395 3,133,194 Increase in intangible assets .................. -- (3,158) ------------ ------------ Net cash provided by investing activities ......................... 9,189,595 935,571 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable ............ -- (28,939) ------------ ------------ Net cash used in financing activities ......................... -- (28,939) ------------ ------------ Net increase in cash and cash equivalents ........................ 7,377,088 1,986,365 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . 11,421,710 14,967,107 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ....... $ 18,798,798 $ 16,953,472 ============ ============ The accompanying notes are an integral part of the condensed consolidated financial statements. 5 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The unaudited condensed consolidated financial statements include the accounts of Tanknology Environmental, Inc. and its wholly owned subsidiaries (the "Company"). The unaudited condensed consolidated financial statements have been prepared consistent with the accounting policies reflected in the audited consolidated financial statements included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 31, 1997, and should be read in conjunction therewith. In management's opinion, the unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the Company's consolidated financial position at March 31, 1997, the consolidated results of its operations for the three-month periods ended March 31, 1997 and 1996, and its consolidated cash flows for the three-month periods ended March 31, 1997 and 1996. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company include the accounts of Tanknology Environmental, Inc. and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Prior year amounts in the condensed consolidated statement of operations and related notes thereto have been reclassified to reflect the Company's discontinued operations consisting of Mankoff, Inc. ("Mankoff"), Engineered Systems, Inc. ("ESI"), Tanknology Corporation International ("TCI"), Tanknology Canada (1988), Inc., ("TCS"), and USTMAN Industries, Inc. ("USTMAN"), as discussed in Note 2. All amounts related to the statement of operations are from continuing operations unless otherwise indicated. The Company is a holding company whose only current continuing business is wastewater processing and waste oil recycling in the Central Eastern United States. The Company's discontinued subsidiary, ESI, develops and manufactures automated fuel systems and related products principally for large international oil companies. SHORT-TERM INVESTMENTS Short-term investments are those with maturities greater than three months when purchased. The Company has classified all short-term investments as available-for-sale. When purchased, securities are recorded at cost and adjusted for unrealized holding gains and losses due to market fluctuations. Gains and losses are recorded upon the sales of short-term investments based upon the specific identification method. Unrealized gains and losses were not material for any period presented. INCOME TAXES The Company utilizes the liability method for deferred income taxes. The liability approach requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events recognized in the Company's financial statements or tax returns. All expected future events other than changes in the law or tax rates, are considered in estimating future tax consequences. The provision for income taxes includes federal, state, and local income taxes currently payable and those deferred because of temporary differences between the financial statements and tax bases of assets and liabilities. 6 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED EARNINGS PER COMMON SHARE Primary earnings per share is based on the weighted average number of shares outstanding during the period after consideration of the dilutive effect of stock options or warrants reflected under the treasury stock method. Fully diluted earnings per share are not presented because such amounts would be the same as amounts computed for primary earnings per share. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, entitled "EARNINGS PER SHARE" ("SFAS No. 128"), in 1997. The Company is required to adopt the provisions of SFAS No. 128 for its year ended December 31, 1997. Initial adoption of this standard is not expected to have a material impact on the Company's financial statements. 2. DISCONTINUED OPERATIONS: During 1995, the Board of Directors of the Company elected to discontinue operations at its ESI subsidiary and put the assets of the business up for sale. ESI's operations were discontinued as of December 31, 1995; however, as of March 31, 1997, ESI has not been sold or closed. ESI's revenues were $3,322,000 for the year ended December 31, 1996. During 1995, a provision for estimated loss on disposition of ESI of $3,715,000, including write-off of goodwill and estimated losses through the expected date of sale, has been recorded net of an income tax benefit of $1,914,000. During 1996, an additional provision for estimated loss on disposition of ESI of $660,000 has been recorded, net of an income tax benefit of $340,000. The amounts the Company will ultimately realize could differ materially from the amounts assumed in arriving at the estimated loss from discontinued operations. The remaining net assets of ESI principally consist of accounts receivable, contracts in progress, inventories, and property, plant and equipment offset by accrued liabilities, including estimated losses through the revised expected date of sale. The Company will fulfill all contract obligations of ESI and liquidate its assets unless a buyer of the business assumes performance of its contracts in the near future. ESI's revenues were $474,000 and $578,000 for the three months ended March 31, 1997 and 1996, respectively. Operating losses for ESI totaled $717,000 and $838,000 for the quarters ended March 31, 1997 and 1996, respectively. As a result of the utilization of a portion of the reserve for disposition for these losses, net assets of discontinued operations increased during the March 31, 1997 quarter. On October 25, 1996, the Company disposed of certain assets and liabilities, which consisted of the stock of its wholly owned subsidiaries, Tanknology Corporation International, including its cathodic protection division d/b/a Tanknology Cathodic Protection, USTMAN Industries, Inc., and Tanknology Canada (1988), Inc., collectively known as the "Tank Testing Group" to NDE Environmental Corporation ("NDE"), a Delaware corporation, an unrelated third party. The disposition of the Tank Testing Group was made pursuant to a Stock Purchase Agreement (the "Agreement") between the Company and NDE dated October 7, 1996. The terms of the Agreement were determined by arm's-length negotiation between the Company and NDE. The Company disposed of the Tank Testing Group in consideration of the receipt of $12 million in cash. The Agreement calls for adjustments to the purchase price of up to $1 million for any working capital deficiencies and of up to $1.25 million for liabilities relating to services performed by the Tank Testing Group prior to October 25, 1996. Management does not believe any material working capital deficiencies exist; however, a liability totaling $1.25 million has been accrued for potential liabilities. Revenues for the Tank Testing Group were $18,926,000 for the year ended December 31, 1996. 7 TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 3. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS: Additional information regarding certain balance sheet accounts at March 31, 1997 and December 31, 1996 is presented below: March 31, December 31, 1997 1996 ----------- ---------- (unaudited) Other current assets: Interest receivable ....................... $ 36,287 $ 31,016 Prepaid insurance ......................... 50,121 127,497 Other ..................................... 539,194 577,203 ----------- ---------- Total other current assets ......... $ 625,602 $ 735,716 =========== ========== Accrued liabilities: Compensation .............................. $ 106,872 $ 322,771 State, federal, and foreign income taxes .. (54,011) 634,590 Warranty and claims reserves .............. 1,250,000 1,250,000 Other taxes ............................... 60,091 57,460 Other ..................................... 5,611 2,424 ----------- ---------- Total accrued liabilities .......... $ 1,368,563 $2,267,245 =========== ========== 4. COMMON STOCK AND STOCK OPTIONS: On January 1, 1997, the Company issued 7,000 shares of Restricted Stock with a market value of $13,790 to seven directors of the Company, in accordance with its 1991 Nonemployee Director Plan. 5. COMMITMENTS AND CONTINGENCIES: The Company is involved in litigation and routine claims from time to time. Certain of the Company's litigation and claims are covered by insurance with a maximum deductible of $50,000. In addition, the Company is contingently liable for up to $1.25 million for liabilities relating to services performed by the Tank Testing Group prior to October 25, 1996. The Company has recorded a liability for the $1.25 million contingency as of December 31, 1996. In Management's opinion, the litigation and claims in which the Company is currently involved are not material to the Company's consolidated financial position, results of operations or liquidity. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL On October 25, 1996, the Company sold the assets and liabilities of its three subsidiaries involved in underground storage tank services to NDE Environmental, Inc. ("NDE"). The subsidiaries that were sold, ("the Tank Testing Group"), consist of Tanknology Corporation International including its cathodic protection division d/b/a Tanknology Cathodic Protection, USTMAN Industries, Inc., and Tanknology Canada (1988), Inc. The Company disposed of the Tank Testing Group in consideration of the receipt of $12,000,000 in cash. The Tank Testing Group had revenues of $4,837,000 for the three months ended March 31, 1996. Pursuant to the agreement to sell the Tank Testing Group, at the annual meeting of shareholders on April 24, 1997, the Company's shareholders elected to change the name of the Company to TEI, Inc. After the sale of the Tank Testing Group, the Company's continuing operations consist of Energy Recovery Resources ("ERRI"), a wastewater and waste oil treatment company located in Charlotte, North Carolina. The Company also owns Engineered Systems, Inc. ("ESI"), based in Tempe, Arizona. ESI is a provider of fuel system products. The Company elected to discontinue ESI in December 1995 and is in the process of disposing of ESI. Following the sale of the Tank Testing Group, the Company has approximately $29 million in cash, cash equivalents, and marketable securities. At this time, the Company intends to continue operating ERRI and has no immediate plan for reinvesting these funds into any specific operating entity; however, management intends to evaluate various strategies. All excess cash is invested in short-term, interest-bearing, investment-grade securities, with a minimum criteria of single "A". THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Revenues from wastewater treatment and waste oil recycling services at the Company's ERRI division increased by 17.6% from $517,000 during the three months ended March 31, 1996 to $608,000 during the quarter ended March 31, 1997. Such revenue improvement is mainly due to a greater volume of wastewater processed during the first quarter of 1997 versus 1996. Gross profit declined by $141,000 to $58,000 during the first three months of 1997 from $199,000 during the prior-year period. When measured as a percentage of sales, the gross margin declined to 9.6% during the 1997 quarter from 38.5% during 1996. During the first quarter of 1997, all processing operations were conducted from the Company's newly constructed treatment facility in the Charlotte, North Carolina area. The new facility is larger, has greater processing capabilities, and has higher associated fixed operating costs such as depreciation and personnel than the old plant in which the Company operated during the first quarter of 1996. Additionally, during the first quarter of 1997, processing operations in the new facility were not as efficient as that of the old facility due to the new equipment and processing techniques employed and the learning curve involved with its operations. Management believes that such operating costs will decline as a percentage of sales as revenues increase. Selling, general and administrative expenses increased $81,000 to $658,000 during the first three months of 1997 from $577,000 during the comparable period in 1996, principally due to depreciation and the addition of management and supervisory personnel at the new wastewater treatment processing plant at ERRI. Other income and expense, consisting mainly of interest earned on the Company's investments, and gains and losses on the disposition of fixed assets, grew from $256,000 during the first three months of 1996 to $382,000 during the comparable current-year period. This is primarily due to an increase in the amount invested as a result of the Company's sale of the Tank Testing Group during the fourth quarter of 1996. During 1996, the Company sold the Tank Testing Group to an independent third party. The Tank Testing Group recorded a net operating loss of $268,000 during the first quarter of 1996. Such loss is classified as a loss from discontinued operations during the January to March 1996 period. The Company has 9 reported no income or loss during the first three months of 1997 or 1996 from its other discontinued operation, ESI, as estimated losses through the expected date of sale were previously accrued. During the three months ended March 31, 1997, the Company recorded a net loss of $144,000 compared to a loss of $343,000 during the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company had cash, cash equivalents, and short-term investments of $28,919,000 and had no significant cash commitments of such funds in excess of requirements to operate the Company's continuing operations. These funds are being invested pending any decision by the Company's Board of Directors regarding the Company's future direction. For the three months ended March 31, 1997, net cash used in operations totaled $1,813,000 versus net cash provided by operations of $1,080,000 during the same period in 1996. Current year cash used in operations is the result of a net loss of $144,000, non-cash expenses of $23,000, and working capital changes totaling $1,646,000. Working capital changes during the January to March 1997 period include the reduction of accounts payable and accrued liabilities of $936,000, primarily related to the payment of accrued income taxes and compensation expenses. Working capital changes also include an increase in the net assets of ESI of $828,000, principally due to a decrease in the reserve for disposition caused by ESI's operating losses during the quarter. Capital expenditures for the first quarter of 1997 were $187,000, mainly for the purchase of machinery and processing equipment at ERRI. During the first three months of 1997, the Company sold its former headquarters building and related fixed assets in Houston receiving cash of approximately $919,000. SEASONALITY The Company experiences no noticeable seasonal variations in its continuing business. FACTORS THAT MAY AFFECT FUTURE RESULTS The Company is evaluating strategic and financial alternatives for maximizing shareholder value. This may include, but is not limited to, an acquisition or merger with another company that may or may not be in a business complementary to that of the Company, a "going private" transaction in which current directors and/or management would acquire the outstanding publicly-held shares of the Company, or some combination of the above alternatives. The Company has not necessarily determined to pursue any of the above alternatives at this time, nor are the Company's alternatives limited to the above items. FORWARD-LOOKING STATEMENT The statements contained in this Form 10-Q for the quarter ended March 31, 1997 that are not historical facts, including, but not limited to, statements found in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in the Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: general economic conditions, competition, government regulation, and possible future litigation, as well as the risks and uncertainties discussed in this Form 10-Q, including without limitation, the portions referenced above, and the uncertainties set forth from time to time in the Company's other public reports and filings and public statements. ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, entitled "EARNINGS PER SHARE" ("SFAS No. 128"), in 1997. The Company is required to adopt the provisions of SFAS No. 128 for its year ended December 31, 1997. Initial adoption of this standard is not expected to have a material impact on the Company's financial statements. 10 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in litigation and routine claims from time to time. Certain of the Company's litigation and claims are covered by insurance with a maximum deductible of $50,000. In addition, the Company is contingently liable for up to $1.25 million for liabilities relating to services performed by the Tank Testing Group prior to October 25, 1996. The Company has recorded a liability for the $1.25 million contingency as of December 31, 1996. In Management's opinion, the total estimated litigation liability and related insurance claims are not material to the Company's consolidated financial position, results of operations, or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of shareholders on April 24, 1997. At such meeting, the shareholders elected directors of the Company and voted to amend the Articles of Incorporation to change the name of the Company to "TEI, Inc." No other matters were voted on at the meeting. The tabulation for the director nominees is as follows: Nominee For Against Abstained Non votes ------------------ ----------- ---------- ----------- ----------- Donald R. Campbell 12,137,982 0 138,351 0 T. Craig Benson 12,124,652 0 151,681 0 The tabulation for the name change is as follows: For Against Abstained Non votes ----------- -------------- ---------- ----------- ----------- TEI, Inc. 12,165,244 91,374 19,715 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 11.1A Computation of Earnings Per Common Share for the Three Months Ended March 31, 1997 and 1996. Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the three-month period ended March 31, 1997. 11 PART III. 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. TANKNOLOGY ENVIRONMENTAL, INC. By /s/ RICK BERRY Rick Berry Executive Vice President, Chief Financial Officer, Secretary and Treasurer Date May 9, 1997 By /s/ DONALD R. CAMPBELL Donald R. Campbell President, Chief Executive Officer and Chief Operating Officer Date May 9, 1997 12 EX-11.1 2 Exhibit 11.1A TANKNOLOGY ENVIRONMENTAL, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE for the Three Months Ended March 31, 1997 and 1996 (unaudited) 1997 1996 ------------ ------------ Computation of earnings per common share for the three months ended March 31: Net income (loss) applicable to common stock . $ (144,153) $ (343,119) ============ ============ Weighted average number of common shares outstanding .............................. 14,244,012 14,237,012 Common shares issuable under employee stock option plan ........................ -- -- Less shares assumed repurchased with proceeds -- -- ------------ ------------ Weighted average common shares outstanding 14,244,012 14,237,012 ============ ============ Net earnings (loss) per common share . $ (0.01) $ (0.02) ============ ============ EX-27 3
5 3-MOS DEC-31-1997 MAR-31-1997 18,798,798 10,120,201 529,253 51,027 86,158 30,507,431 5,178,265 493,058 41,967,865 1,665,255 0 0 0 151,992 0 41,967,865 0 607,625 549,341 1,207,694 (23,254) 0 (358,917) (217,898) (73,745) (144,153) 0 0 0 (144,153) (0.01) (0.01)
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