Key points from the 10-Q
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. Accordingly, ESI has been
accounted for as a discontinued operation.
At June 30, 1997, the Company had approximately $28 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 rating of single "A".
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Revenues from wastewater treatment and waste oil recycling services at the Company's ERRI division increased by 17.2% from $588,000 during the three
months ended June 30, 1996 to $689,000 during the quarter ended June 30, 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 $79,000 to $149,000 during the second three months of 1997 from $228,000 during the prior-year period. When measured as a
percentage of sales, the gross margin declined to 21.6% during the 1997 quarter from 38.8% during 1996. During the second 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 second quarter of 1996. Additionally, during the second 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. |
