|6 Months Ended|
Jun. 30, 2020
3. COVID-19 Impact
The spread of COVID-19 continues to result in significant volatility in the U.S. and international markets. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. As previously reported, the COVID-19 pandemic did not result in a material impact to the Company’s first quarter 2020 results of operations; however, the Company’s second quarter results of operations were impacted by the shutdown of a number of projects and the delays of certain waste shipments which began in late March 2020 that continued into the second quarter of 2020. As states began to lift stay-at-home orders, along with certain other restrictions since the start of the pandemic, in the latter part of the second quarter of 2020, the Company was able to restart on a number, but not all, of the projects that were previously shutdown. Despite these project shutdowns, revenues within our Services Segment in the second quarter of 2020 exceeded the corresponding period of 2019 by approximately $7,166,000. The Company continues to experience some delays in waste shipments from certain customers within our Treatment Segment due to the planning time that is required by these customers to restart waste shipments as they return to work on-site. These continued project shutdowns and waste shipment delays may impact the Company’s results of operations for the third quarter of 2020 and potentially the remainder of fiscal year 2020.
At this time, the Company believes it has sufficient liquidity on hand to continue business operations during the next twelve months. At June 30, 2020, the Company had cash on hand of approximately $5,630,000 and borrowing availability under our revolving credit facility of $12,330,000 based on a percentage of eligible receivables and subject to certain reserves. The Company’s cash at June 30, 2020 included proceeds received from a loan in the amount of approximately $5,666,000 (“PPP Loan”) in April 2020 under the Paycheck Protection Program (“PPP”) that was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law, amending the CARES Act (see “Note 9 – Long Term Debt –PPP Loan” for further detail of this loan. Additionally, see “Note 16 – Subsequent Event – PPP Loan” for the discussion of the repayment of approximately $327,000 of the PPP Loan the Company made on July 9, 2020). The Company continues to assess reducing operating costs during this volatile time, which include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed.
The Company is closely monitoring our customers’ payment performance. However, as a significant portion of our revenues is derived from government related contracts, the Company does not expect its accounts receivable collections to be materially impacted due to COVID-19.
The situation surrounding COVID-19 continues to remain fluid. The potential for a material impact on the Company’s business increases the longer COVID-19 impacts the level of economic activities in the United States and globally as our customers may continue to delay waste shipments and project work may shut down again. For this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity which may impact our ability to meet our financial covenant requirements under our credit facility. Given the current economic environment and the market volatility from COVID-19, the Company considered whether these events or changes in circumstances triggered the need for an interim impairment analysis of our long-lived assets and intangible assets. Based on the Company’s assessment of the impact of these conditions on our business, the Company determined there was no triggering event as of June 30, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, the Company will continue to assess the need to perform interim impairment tests of our long-lived assets and intangible assets.
The CARES Act, as amended, among other things, includes modifications to net operating loss carryforwards, corporate alternative minimum tax (“AMT”) provisions, net interest expense deduction, and deferment of social security tax payments. The Company elected to defer payment of its shares of social security taxes starting in April 2020 (see “Note 15 – Deferral of Employment Tax Deposits”). The Company continues to evaluate the provisions of the CARES Act, as amended, and how certain other elections may impact our financial position, results of operations, and disclosures, if elected.