<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1999
Commission file number 1-7807
Champion Parts, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-2088911
------------------------------- ---------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
751 Roosevelt Road, #7-110, Glen Ellyn, IL 60137
-------------------------------------------------
(Address of principal executive offices)
630-942-8317
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 27, 1999
------------------------------ -----------------------------
Common Shares - $.10 par value 3,655,266
<PAGE> -1-
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDING June 27, 1999
<CAPTION>
($ thousands) June 27, 1999 December 27, 1998
------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,058 $ 784
Accounts receivable, less allowance
for uncollectible accounts of
$338,000 and $348,000 in 1999 and
1998, respectively 6,009 4,701
Inventories 7,083 6,414
Prepaid expenses and other assets 394 388
Deferred income tax asset 349 380
------- -------
Total current assets 14,893 12,667
PROPERTY, PLANT AND EQUIPMENT:
Land 197 197
Buildings 7,821 7,821
Machinery and equipment 12,880 12,720
------- -------
20,898 20,738
Less: Accumulated depreciation 16,459 16,125
------- -------
4,439 4,613
Other assets 29 39
------- -------
TOTAL ASSETS $ 19,361 $ 17,319
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -2-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDING June 27, 1999
<CAPTION>
($ Thousands) June 27, 1999 December 27, 1998
------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 5,392 $ 5,297
Accrued expenses:
Salaries, wages and benefits 732 817
Other accrued expenses 6,510 6,211
Taxes other than income 183 170
Current maturities of L-T debt:
Current mat. - term notes 601 601
Current mat. - vendor debt 192 167
Current mat. - IRB Loan 300 300
------- -------
Total current liabilities 13,910 13,563
DEFERRED INCOME TAXES 351 351
LONG-TERM DEBT:
L-T notes payable - revolver 1,423 699
L-T notes payable - term notes 1,903 2,203
L-T notes payable - vendors 2,647 2,361
Industrial revenue bond (IRB) 1,000 1,000
------- -------
Total long-term debt 6,973 6,263
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - No par value;
authorized, 10,000,000 shares:
issued and outstanding, none -0- -0-
Common stock - $.10 par value;
authorized, 50,000,000 shares:
issued and outstanding 3,655,266 366 366
Additional paid-in capital l5,578 15,578
(Accumulated deficit) (17,390) (18,385)
Accum. other comp.(loss) (427) (417)
------- -------
Total Stockholders' (Deficit) (1,873) (2,858)
------- -------
Total Liab. & Stockholders' (Def.) $ 19,361 $ 17,319
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -3-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONDENSED)
FOR THE PERIOD ENDING June 27, 1999
(Unaudited)
<CAPTION>
($ Thousands) Six Months Ended Three Months Ended
-------------------- ------------------
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 15,842 $ 13,743 $ 8,837 $ 6,734
Costs and Expenses:
Cost of products sold 13,149 11,186 7,283 5,493
Selling, dist. and admin. 1,481 1,511 763 741
------- ------- ------ ------
Total costs and expenses 14,630 12,697 8,045 6,234
------- ------- ------ ------
Operating income 1,212 1,046 792 500
Non-operating (income)expense:
Interest expense 314 568 158 320
Other non-operating income (54) (50) (52) (33)
------- ------- ------ ------
Total non-operating expense 260 518 106 287
Earnings before extraordinary
gain and income taxes 952 528 686 213
Income Taxes 16 4 16 4
------- ------- ------ ------
Earnings before
extraordinary gain 936 524 670 209
------- ------- ------ ------
Extraordinary (gain) (59) (20) (59) (20)
------- ------- ------ ------
Net Income $ 995 $ 544 $ 729 $ 229
======== ======== ======= =======
Weighted Average Common Shares
Outstanding at June 27, 1999 3,655 3,655 3,655 3,655
===== ===== ===== =====
Earnings per Common Share -
Basic and Diluted:
Net Income before extraordinary
gain per common share $ 0.25 $ 0.14 $ 0.18 $ 0.05
Extraordinary gain
per common share $ 0.02 $ 0.01 $ 0.02 $ 0.01
Net Income per Common Share $ 0.27 $ 0.15 $ 0.20 $ 0.06
====== ====== ====== ======
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -4-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
FOR THE PERIOD ENDING June 27, 1999
(Unaudited)
<CAPTION>
($ Thousands) Accum.
Additional Other
Common Stock Paid-in (Accum. Compreh.
Shares Amount Capital Deficit) Inc/(Loss)
--------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE,
Dec. 27, 1998 3,655 $ 366 $ 15,578 $ (18,385) $ (417)
Net Income - - - 995 -
Foreign currency
translation adj. - - - - (10)
BALANCE,
June 27, 1999 3,655 $ 366 $ 15,578 $ (17,390) $ (427)
------ ----- -------- --------- -------
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -5-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED June 27, 1999
(Unaudited)
<CAPTION>
($ Thousands) Six Months Ended Three Months Ended
-------------------- -------------------
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 995 $ 544 $ 729 $ 229
Other comprehensive income:
Foreign currency
translation adjustment (10) 120 (57) 93
------- ------- ------- -------
Comprehensive income $ 985 $ 664 $ 672 $ 322
======= ======= ======= =======
<FN>
Components of accumulated other comprehensive income, included in the
Company's consolidated balance sheet, consist of the foreign currency
translation adjustments.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -6-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED June 27, 1999
<CAPTION>
($ Thousands) Three Months Ended
----------------------------
June 27, 1999 June 28, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 995 $ 544
Adjustments to reconcile net
income to net cash provided by
operating activities:
Extraordinary gain (59) (20)
Depreciation and amortization 344 347
Provision for inventory write-offs 312 106
Changes in assets and liabilities:
Accounts receivable (1,308) (452)
Inventories (gross) (981) (419)
Accounts payable and accrued expenses 808 (34)
------- -------
Net cash provided/(used)
in operating activities 111 72
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (160) (31)
Proceeds from the sale of assets -0- 5
------- -------
NET CASH (USED) BY INVESTING ACT. (160) (26)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings - old line of credit -0- (168)
Net borrowings/(payments) - revolver 724 -0-
Payments - vendor note obligations (91) (42)
Principal payments - LT debt (300) -0-
------- -------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 333 (210)
------- -------
EFFECTS OF EXCH. RATE CHGS. ON CASH (10) 120
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 274 (44)
------- -------
CASH AND CASH EQUIVALENTS:
Beginning of year 784 488
------- -------
CASH AND CASH EQUIVALENTS:
End of six months $ 1,058 $ 444
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -7-
CHAMPION PARTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. The accompanying financial statements for the six months
ended June 27, 1999 have been prepared, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
The condensed consolidated financial statements and these notes
should be read in conjunction with the consolidated financial
statements of the Company included in the Company's Annual
Report on Form 10-K for the year ended December 27, 1998.
The consolidated balance sheet at December 27, 1998 has been
derived from the audited financial statements at that date and
condensed.
Note 2. The information furnished herein reflects all adjustments
(consisting only of normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation
of the results of operations for the interim period. Results of
operations for the six months ending June 27, 1999 are not
necessarily indicative of results to be expected for the entire
year.
Note 3. Inventories are valued at the lower of cost (first-in,
first-out method) or market. A summary of the inventories
follows:
($ Thousands) June 27, 1999 December 27, 1998
-------------- -----------------
Raw materials $ 3,420 $ 2,491
Work-in-process 2,175 2,208
Finished goods 1,488 1,715
-------- --------
Total Inventories $ 7,083 $ 6,414
======== ========
Included in inventory above were cores of $3.5 million
(June 27, 1999) and $2.6 million (December 27, 1998).
Note 4. For reporting purposes, product and core returns are offset
against gross sales in arriving at net sales. Net returns
for the six months ending June 27, 1999 were $4,396,000
versus $4,229,000 during the same period in 1998.
<PAGE> -8-
NOTES (CONTINUED)
Note 5. Business Segments - The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 131," Disclosures
About Segments of an Enterprise and Related Information."
Following the provisions of SFAS No. 131, the Company is
reporting two operating business segments in the same format
as reviewed by the Company's senior management. Segment one,
Fuel Systems & C.V. Assemblies, remanufactures and sells
replacement fuel system components (carburetors and diesel
fuel injection components) and constant velocity drive
assemblies for substantially all makes and models of domestic
and foreign automobiles and trucks. Segment two, Electrical
& Mechanical Products, remanufactures and sells replacement
electrical and mechanical products for passenger car,
agricultural and heavy-duty truck original equipment
applications. Management uses operating income as the measure
of profit or loss by business segment. Segment assets include
amounts specifically identified with each operation. Corporate
assets consist primarily of property and equipment. Business
segment information is as follows:
Six Months Ended
--------------------------------
($ Thousands) June 27, 1999 June 28, 1998
-------------- -------------
Revenues:
Fuel Systems & C.V. Assy's $ 11,417 $ 9,855
Elect. & Mech. Products 4,425 3,888
-------- --------
Total Revenues $ 15,842 $ 13,743
======== ========
Depr. & Amort. Expense:
Fuel Systems & C.V. Assy's $ 117 $ 109
Elect. & Mech. Products 187 194
Corporate 40 44
-------- --------
Total depr. & amort. $ 344 $ 347
======== ========
Net Income/(Loss):
Fuel Systems & C.V. Assy's $ 2,036 $ 1,711
Elect .& Mech. Products (297) (262)
Corporate (744) (905)
--------- --------
Total Income $ 995 $ 544
======== ========
Capital Additions:
Fuel Systems & C.V. Assy's $ 14 $ -0-
Elect. & Mech. Products 66 12
Corporate 80 19
-------- --------
Total Capital Additions $ 160 $ 31
======== ========
<PAGE> -9-
NOTES (CONTINUED)
Note 5. Business segments
Total Assets:
Fuel Systems & C.V. Assy's $ 9,915 $ 9,053
Elect. & Mech. Products 7,681 6.974
Corporate 1,765 1,552
-------- --------
Total assets $ 19,361 $ 17,579
======== ========
Note 6. A creditor debt restructuring settlement resulted in $59,000
of extraordinary gain recognized in the second quarter. The
settlement resulted from the creditors' forgiveness of $94,000
of vendor debt, which was netted, with legal fees of $35,000
incurred in relation to the settlement.
<PAGE> -10-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED June 27, 1999 COMPARED TO THREE MONTHS ENDED
JUNE 28, 1998
Net sales for the quarter ended June 27, 1999 were $8,837,000, up
$2,103,000 (31.2%) over net sales of $6,734,000 for the same period in
1998. Gross rebuilding sales increased $1,779,000, or 20.3% over 1998
reflecting a significant increase in carburetor business with existing
customers,increased constant velocity joint sales to an OEM customer,
higher heavy duty and domestic passenger car product sales from new lines
to existing customers, and additional sales from a new agricultural OEM
customer. Total product and core returns, which are reflected in
reductions to net sales, were 14.4% and 21.6% of gross sales in the
second quarter 1999 and 1998, respectively. The lower return percentage
in 1999 is a function of the decrease in product returns as a percent of
gross sales, which resulted in a larger net sales gain than gross sales.
The Company has a customer product return policy to control product and
core returns. It has also established reserves against expected future
declines in core values. However, there can be no assurance that these
reserves will be adequate.
Carburetor sales were 76% and 70% of net sales in the second quarter of
1999 and 1998, respectively. The Company continues to be a significant
supplier of carburetors to the aftermarket. Although new vehicles sold
in the United States and Canada are no longer equipped with carburetors,
the Company continues to sell replacement units for older vehicles, many
of which use carburetors. The Company expects that carburetor sales will
decline in future years. In addition, carburetor margins may be
negatively impacted in the future as customers seek to return product
during periods of declining demand.
Cost of products sold was $7,283,000, or 82.4% of net sales in the second
quarter of 1999 compared to $5,493,000, or 81.6% in the second quarter of
1998. This increase in the cost of products sold as a percent of net
sales is primarily attributed to significantly higher direct labor costs
incurred to meet shipping demand for carburetors together with higher
material costs. Reductions in manufacturing overhead expenses Company
wide helped to partially offset the unfavorable labor variances.
Selling, distribution and administrative expenses were $763,000, or 8.6%
of net sales in the second quarter of 1999, compared to $741,000, or
11.0% of net sales in the second quarter of 1998. The $22,000 increase
over the same period in 1998 entirely reflects higher distribution costs
that are associated with the significant increase in volume over 1998.
Partially offsetting this was lower administrative spending as a result
of Company-wide cost control efforts, and lower professional fees.
<PAGE> -11-
THREE MONTH DISCUSSION (CONTINUED)
Interest expense was $158,000 for the second quarter of 1999 as compared
to $320,000 in the same period of 1998. This reduction is due to lower
interest rates and fees under the new loan facility, as well as reduction
in the amount of debt outstanding.
As a result of the significant increase in net sales and lower operating
expenses, net income before extraordinary gains for 1999 improved
$461,000, or 221% as compared to the second quarter of 1998.
An extraordinary gain of $59,000 was recorded in the second quarter of
1999 reflecting a creditor debt restructuring settlement (See Note 6).
In 1998, a $20,000 extraordinary gain was recorded in the second quarter
as a result of creditor debt restructuring settlements.
SIX MONTHS ENDED JUNE 27, 1999 COMPARED TO SIX MONTHS ENDED
JUNE 28, 1998
For the six months ended June 27, 1999, net sales were $15,842,000,
reflecting a significant increase of $2,099,000 (15.3%) over net sales
of $13,743,000 for the same period in 1998. Gross rebuilding sales
increased $2,402,000, or 13.2%, over 1998 reflecting a signnificant
increase in carburetor business with existing customers, increased
constant velocity joint sales to an OEM customer, higher heavy-duty and
domestic passenger car product sales resulting from new lines to existing
customers, and additional sales from a new agricultural OEM customer.
Total product and core returns, which are reflected in reductions to net
sales, were 21.3% and 23.2% of gross sales in the first six months
1999 and 1998, respectively.
Carburetor sales were 74.3% and 73.6% of net sales in the first six
months of 1999 and 1998, respectively. While overall carburetor sales
are declining in the U.S. market, the Company continues to be a
significant supplier of carburetors in the aftermarket. Although new
vehicles sold in the United States and Canada are no longer equiped with
carburetors, the Company continues to sell replacement units for older
vehicles, many of which use carburetors. The Company expects that
carburetor sales will decline in future years. In addition, carburetor
margins may be negatively impacted in the future as customers seek to
return product during periods of declining demand.
Cost of products sold were $13,149,000, or 83.0% of net sales in the
first six months of 1999 as compared to $11,186,000, or 81.0% for the
first six months of 1998. This increase in the cost of products sold as
a percent of net sales is primarily attributed to higher direct labor
costs incurred to meet shipping demand for carburetors and increased
material costs. Reductions in manufacturing overhead expenses helped
to partially offset the unfavorable variances.
<PAGE> -12-
SIX MONTH DISCUSSION (CONTINUED)
Selling, distribution and administrative expenses were $1,481,000 for
the first six months of 1999 compared to $1,511,000 in the first six
months of 1998. The 2.0% decrease over the same period in 1998 reflects
lower administrative spending as a result of Company-wide cost control
efforts, and lower professional fees.
Interest expense was $314,000 for the first six months of 1999 as
compared to $568,000 in the same period of 1998. This reduction
is due to significantly lower interest and fees under the new loan
facility, as well as reduction in the amount of debt outstanding.
Net income of $936,000 before extraordinary gains for the first six
months of 1999 primarily reflects the significant increase in net sales
and lower operating costs over 1998. The total increase was $412,000,
or 79% higher than the net income of $524,000 before extraordinary gains
in the first six months of 1998.
An extraordinary gain of $59,000 was recorded in the first six months
of 1999 reflecting a creditor debt restructuring settlement (See Note 6).
In 1998, a $20,000 extraordinary gain was recorded in the first six
months.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
Net working capital at June 27, 1999 was a positive $983,000, compared
to a negative $896,000 at the end of 1998, and a negative $6,188,000
for June 28,1998. The improvement in working capital over the first
half 1998 is principally a result of reclassifying the new four-year
loan under long-term debt as compared to current maturities of long-term
debt for the prior facility, which was in default. This improvement
also reflects reclassification of $1.0 million of the Hope facility
$1.3 million Industrial Revenue Bond to long-term debt, since the bond
documents had cross-default provisions. The $300,000 due on December 1,
1999 is reflected in the current maturities of long-term debt. The
improvement over fiscal year-end 1998 is a result of higher receivables
and inventories versus a nominal increase in current liabilities.
Accounts receivable at June 27, 1999, were $6,009,000, or $1,308,000
(28%) higher versus the year-end 1998 balance of $4,701,000. Receivables
were also $1,060,000 higher compared to the June 28, 1998 ending balance.
The increase reflects the high sales volume during the latter part of
second quarter 1999, which will be collected in subsequent months.
At June 27, 1999, net inventories were higher by $669,000, compared to
year-end fiscal 1998, due entirely to increases in parts and raw core
inventories to satisfy the higher demand. Net inventories also increased
by $578,000 in the first quarter of 1999 versus first quarter 1998 for
the same reason.
<PAGE> -13-
LIQUIDITY DISCUSSION (CONTINUED)
Accounts payable at the end of the first six months of 1999 were $95,000
higher than year-end 1998 and $568,000 higher than the first six months
of 1998. Accrued expenses and other payables at the end of June 1999
were $227,000 higher than fiscal year-end 1998. Primarily accounting
for this is an increase in accrued reserves for product returns in future
periods.
DEBT
At June 27,1999 the balance outstanding on the NationsCredit loan
facility was $3,927,000 plus letter of credit accommodations of
$1,993,000. This compares to a loan balance at December 27, 1998
of $3,503,000 and accommodations of $2,193,000.
The Company is continuing discussions with certain other unsecured
creditors with past due balances to restructure approximately $700,000
of associated indebtedness. These balances are proposed to be settled
upon substantially the same terms as the settlement with the unsecured
trade creditors. There is no assurance that any of these creditors will
accept the proposal.
FACTORS WHICH MAY AFFECT FUTURE RESULTS
This quarterly report contains forward-looking statements that are
subject to risks and uncertainties, including but not limited to the
following:
The Company expects the existing over-capacity in the automotive
aftermarket and consolidation within its distribution channels to
cause continued selling price pressure for the foreseeable future.
The present competitive environment is causing change in traditional
aftermarket distribution channels resulting in volume retailers gaining
additional market presence at the expense of traditional wholesalers.
In response, the Company has attempted to diversify its customer base
and currently serves all major segments, including automotive warehouse
distributors and jobbers, original equipment manufacturers of automotive
equipment and large volume automotive retailers. The anticipated decline
in sales from the profitable carburetor product line over the longer
term will impact future results. The Company intends to offset these
impacts through development of niche product markets, new product
development, improvements in its manufacturing processes and cost
containment with a strong focus on capacity utilization. There is no
assurance that the Company's efforts will be successful.
The Company's three largest customers accounted for an aggregate of 76%
of the Company's total sales in first half of 1999. Given the Company's
current financial condition and its manufacturing cost structure, the
loss of a large customer would have a materially adverse impact on the
Company's financial condition and results of operations.
<PAGE> -14-
FACTORS DISCUSSION (CONTINUED)
While the Company has established reserves for potential environmental
liabilities that it believes to be adequate, there can be no assurance
that the reserves will be adequate to cover actual costs incurred or
that the Company will not incur additional environmental liabilities
in the future.
There can be no assurance that the impact of the Year 2000 issue will
not have a materially adverse impact on the Company's results. See
"Year 2000 Compliance" for additional information.
Accordingly, actual results may differ materially from those set forth
in the forward-looking statements.
YEAR 2000 COMPLIANCE
In 1997, the Company initiated a project to address Year 2000 issues
and then develop and implement a Year 2000 readiness plan. The first
phase of the readiness plan was to address its current computer systems
and upgrade them to Year 2000 compliance. The Company elected to embark
on a system and hardware conversion utilizing certified Year 2000
systems technology on a Year 2000 compliant operating platform. The
initial implementation of systems and hardware was completed in the
first Quarter of 1999.
In addition, as a part of the first phase of the readiness plan, the
Company completed an inventory of the software applications currently
running on its personal computers. A plan is being implemented to
upgrade, where necessary, all applications software to be Year 2000
compliant by end of the third quarter of 1999.
The Company has analyzed its products and non-IT systems such as
imbedded chips in production equipment, and found that there are no
material Year 2000 issues.
The second phase of the readiness project is to address Year 2000
issues with significant customers, vendors and service providers,
including electronic commerce. This phase is in an audit and inquiry
phase, and is approximately 75% complete. There can be no assurance
that the systems of other companies and service providers that interact
with the Company will be sufficiently Year 2000 compliant so as to
avoid an adverse impact on the Company's operations, financial condition
and results of operations. Phase two is estimated to be completed at
the end of the third Quarter of 1999. There are no significant costs
associated with this phase.
The third and final phase of this project should be completed before the
end of the third Quarter of 1999. The company expects to resolve all
internal Year 2000 issues and finalize testing of modifications during
this phase. The Company will develop a contingency plan to be completed
by the middle of the fourth quarter to address a worst case scenario for
unresolved Year 2000 issues with customers, vendors and service providers.
<PAGE> -15-
Y2K DISCUSSION (CONTINUED)
The Company does not presently anticipate that the costs to address the
Year 2000 issue will have a material adverse impact on the Company's
financial condition, results of operations or liquidity. Present
estimated costs for remediation are as follows:
Prior Fiscal Years Fiscal 1999
------------------ -----------
Software $ 332,000 $ 200,000
Hardware & Network $ 62,000 $ 15,000
<PAGE> -16-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedules
(b) No Form 8-K report was filed by the Company during
the most recently completed fiscal quarter.
<PAGE> -17-
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.
Date: August 11, 1999 CHAMPION PARTS, INC.
(Registrant)
By: /s/ Jerry A. Bragiel
----------------------------------
Jerry A. Bragiel
President, Chief Executive Officer
and Principal Financial Officer
By: /s/ Richard W. Simmons
-----------------------------------
Richard W. Simmons
Corporate Controller and Secretary
<PAGE> -18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 27, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-27-1999
<CASH> 1058000
<SECURITIES> 0
<RECEIVABLES> 6347000
<ALLOWANCES> 338000
<INVENTORY> 7083000
<CURRENT-ASSETS> 14893000
<PP&E> 20898000
<DEPRECIATION> 16459000
<TOTAL-ASSETS> 19361000
<CURRENT-LIABILITIES> 13910000
<BONDS> 0
0
0
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</TABLE>
