UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2000
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)
2005 West Avenue B, Hope, Arkansas 71801
----------------------------------------
(Address of principal executive offices)
870-777-8821
----------------------------------------------------
(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 July 2, 2000
------------------------------ ---------------------------
Common Shares - $.10 par value 3,655,266
<PAGE> -1-
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDING JULY 2, 2000
<CAPTION>
($ thousands) July 2, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 754 $ 1,330
Accounts receivable, less allowance
for uncollectible accounts of
$386,000 and $337,000 in 2000 and
1999, respectively 4,818 3,891
Inventories 9,029 9,240
Prepaid expenses and other assets 304 335
Deferred income tax asset 412 413
------- -------
Total current assets 15,317 15,209
PROPERTY, PLANT AND EQUIPMENT:
Land 197 197
Buildings 7,834 7,834
Machinery and equipment 12,977 13,042
------- -------
Gross property,plant & equipment 21,008 21,073
Less: Accumulated depreciation 17,041 16,726
------- -------
Net property, plant & equipment 3,967 4,347
Other assets 10 19
------- -------
Total assets $ 19,294 $ 19,575
======== ========
<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 JULY 2, 2000
<CAPTION>
($ Thousands) July 2, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 6,329 $ 7,094
Accrued expenses:
Salaries, wages and benefits 617 634
Other accrued expenses 5,113 5,417
Taxes other than income 53 106
Current maturities of L-T debt:
Current mat. - term notes 601 601
Current mat. - vendor debt 202 192
Current mat. - IRB Loan 300 300
------- -------
Total current maturities 1,103 1,093
------- -------
Total current liabilities 13,215 14,344
------- -------
DEFERRED INCOME TAXES 351 351
LONG-TERM DEBT:
L-T notes payable - revolver 1,690 1,220
L-T notes payable - term notes 1,302 1,603
L-T notes payable - vendors 2,486 2,553
Industrial revenue bond (IRB) 700 700
------- -------
Total long-term debt 6,178 6,076
------- -------
STOCKHOLDERS'(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) (15,923) (16,654)
Accum. other comp.(loss) (471) (486)
------- -------
Total stockholders'(deficit) (450) (1,196)
------- -------
Total liabilities and
stockholders'(deficit) $ 19,294 $ 19,575
======== ========
<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 JULY 2, 2000
(Unaudited)
<CAPTION>
($ Thousands) Six Months Ended Three Months Ended
-------------------- ------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 13,020 $ 15,842 $ 5,566 $ 8,837
Costs and Expenses:
Cost of products sold 10,726 13,149 4,734 7,283
Selling, dist. and admin. 1,274 1,481 575 762
------- ------- ------ ------
Total costs and expenses 12,000 14,630 5,309 8,045
------- ------- ------ ------
Operating income 1,020 1,212 257 792
Non-operating (income)expense:
Interest expense 272 314 121 158
Other non-operating income (27) (54) (13) (52)
------- ------- ------ ------
Total non-operating expense 245 260 108 106
------- ------- ------ ------
Earnings before extraordinary
gain and income taxes 775 952 149 686
Income Taxes 44 16 20 16
------- ------- ------ ------
Earnings before
extraordinary gain 731 936 129 670
------- ------- ------ ------
Extraordinary gain 0 59 0 59
------- ------- ------ ------
Net Income $ 731 $ 995 $ 129 $ 729
======== ======== ======= =======
Weighted Average Common Shares
Outstanding at July 2, 2000:
Basic 3,655 3,655 3,655 3,655
----- ----- ----- -----
Diluted 3,709 3,655 3,709 3,655
----- ----- ----- -----
Earnings per Common Share - Basic
---------------------------------
Earnings before extraordinary
gain per common share $ 0.20 $ 0.25 $ 0.04 $ 0.18
Extraordinary gain
per common share 0.00 0.02 0.00 0.02
Net Income per Common Share $ 0.20 $ 0.27 $ 0.04 $ 0.20
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -4-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONDENSED)
FOR THE PERIOD ENDING JULY 2, 2000
(Unaudited)
<CAPTION>
Six Months Ended Three Months Ended
-------------------- ------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Earnings per Common Share - Diluted
-----------------------------------
Earnings before extraordinary
gain per common share $ 0.20 $ 0.25 $ 0.03 $ 0.18
Extraordinary gain
per common share 0.00 0.02 0.00 0.02
Net Income per Common Share $ 0.20 $ 0.27 $ 0.03 $ 0.20
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -5-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
FOR THE PERIOD ENDING JULY 2, 2000
(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. 31, 1999 3,655 $ 366 $ 15,578 $ (16,654) $ (486)
Net Income - - - 731 -
Foreign currency
translation adj. - - - - 15
------ ----- -------- --------- ------
BALANCE,
July 2, 2000 3,655 $ 366 $ 15,578 $ (15,923) $ (471)
====== ===== ======== ========= ======
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -6-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED JULY 2, 2000
(Unaudited)
<CAPTION>
($ Thousands) Six Months Ended Three Months Ended
-------------------- -------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 731 $ 995 $ 129 $ 729
Other comprehensive income:
Foreign currency
translation adjustment 15 (10) 19 (57)
------- ------- ------- -------
Comprehensive income $ 746 $ 985 $ 148 $ 672
======= ======= ======= =======
<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> -7-
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED JULY 2, 2000
<CAPTION>
($ Thousands) Six Months Ended
----------------------------
July 2, 2000 June 27, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 731 $ 995
Adj. to reconcile net income to net
cash provided by operating activities:
Extraordinary gain -0- (59)
(Gain) on the sale of assets (15) -0-
Depreciation and amortization 316 344
Provision for inventory write-offs 379 312
Changes in assets and liabilities:
Accounts receivable (927) (1,308)
Inventories (gross) (168) (981)
Accounts payable & accrued liabilities (975) 808
------- -------
NET CASH PROVIDED BY/(USED IN) OPERATIONS (659) 111
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (38) (160)
Proceeds from the sale of assets 37 -0-
------- -------
NET CASH (USED IN) INVESTING ACTIVITIES (1) (160)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings-revolving loan agreement 470 724
Payments-term note obligations (301) (300)
Payments-L-T vendor debt obligations (100) (91)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 69 333
------- -------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 15 (10)
------- -------
NET INCREASE IN CASH & CASH EQUIVALENTS (576) 274
------- -------
CASH AND CASH EQUIVALENTS:
Beginning of period 1,330 784
------- -------
CASH AND CASH EQUIVALENTS:
End of period $ 754 $ 1,058
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> -8-
CHAMPION PARTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. The accompanying financial statements for the six and three
months ended July 2, 2000 and 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 31, 1999.
The consolidated balance sheet at December 31, 1999 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
the opinion of management, necessary for a fair presentation of
the results of operations for the interim period. Results of
operations for the six and three months ending July 2, 2000 and
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) July 2, 2000 December 31, 1999
------------------ -----------------
Raw materials $ 3,590 $ 3,130
Work-in-process 3,006 3,536
Finished goods 2,433 2,574
-------- --------
Total Inventories $ 9,029 $ 9,240
======== ========
Included in inventory above were net cores of $3.8 million
(July 2, 2000) and $2.9 million (December 31, 1999).
Note 4. For reporting purposes, product and core returns are offset
against gross sales in arriving at net sales. Total returns
for the three months ending July 2, 2000 were $1,733,000 versus
$1,520,000 during the same period last year. Total returns for
six months ending July 2, 2000 were $4,273,000 versus $4,396,000
for the same period in 1999.
<PAGE> -9-
Note 5. The income tax expense attributable to operations for the six and
three months ended July 2, 2000 differed from the amounts computed
by applying the federal income tax rate of 34% principally as a
result of tax benefits recognized related to the carryforward of
net operating losses.
Note 6. Business Segments - The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 131," Disclosures
About Segments of an Enterprise and Related Information."
Following the provisions of SFAS No. 131, the Company is
reporting two operating business segments in the same format
as reviewed by the Company's senior management. Segment one,
Fuel Systems & C.V. Assemblies, remanufactures and sells
replacement fuel system components (carburetors and diesel
fuel injection components) and constant velocity drive
assemblies for substantially all makes and models of domestic
and foreign automobiles and trucks. Segment two, Electrical
& Mechanical Products, remanufactures and sells replacement
electrical and mechanical products for passenger car,
agricultural and heavy-duty truck original equipment
applications. Management uses operating income as the measure
of profit or loss by business segment. Segment assets include
amounts specifically identified with each operation. Corporate
assets consist primarily of property and equipment.
Business segment information is as follows:
--- Six Months Ended ---
($ Thousands) July 2, 2000 June 27, 1999
-------------- --------------
Revenues:
Fuel Systems & C.V. Assy's $ 9,042 $ 11,417
Elect. & Mech. Products 3,978 4,425
-------- --------
Total Revenues $ 13,020 $ 15,842
======== ========
Depr. & Amort. Expense:
Fuel Systems & C.V. Assy's $ 110 $ 117
Elect. & Mech. Products 170 187
Corporate 36 40
-------- --------
Total depr. & amort. $ 316 $ 344
======== ========
Net Income/(Loss):
Fuel Systems & C.V. Assy's $ 1,786 $ 2,036
Elect .& Mech. Products (286) (297)
Corporate (769) (803)
--------- --------
Earnings B/F extra. gain 731 936
Extraordinary gain -0- 59
-------- --------
Net income $ 731 $ 995
======== ========
<PAGE> -10-
Note 6. (Continued)
--- Six Months Ended ---
($ Thousands) July 2, 2000 June 27, 1999
-------------- --------------
Capital Additions:
Fuel Systems & C.V. Assy's $ 1 $ 14
Elect. & Mech. Products 3 66
Corporate 34 80
-------- --------
Total capital additions $ 38 $ 160
======== ========
Total Assets:
Fuel Systems & C.V. Assy's $ 9,615 $ 9,915
Elect. & Mech. Products 7,908 7,681
Corporate 1,771 1,765
-------- --------
Total assets $ 19,294 $ 19,361
======== ========
<PAGE> -11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 2, 2000 COMPARED TO THREE MONTHS ENDED
JUNE 27, 1999
For the second quarter ending July 2, 2000, net sales were $5,566,000, a
decrease of $3.3 million, or 37.0%, versus net sales of $8,837,000 for
the same period in 1999. This decline in net sales compared to the
second quarter of 1999 primarily reflects a substantial drop in
carburetor net sales, which were down $2.4 million. Second quarter
1999 carburetor sales included unusually large new stocking orders for
stores acquired by the Company's two large retail customers that were
not repeated in 2000. In addition, sales of starters, alternators,
generators and water pumps with agricultural equipment customers were
down $805,000, or 33.3%, from 1999 reflecting soft orders. Automotive
product sales were also under 1999 levels by $168,000, or 32.9%, while
constant velocity assembly sales remained strong again this quarter
exhibiting a 16.3% increase over 1999. Total product and core returns,
which are reflected in reductions to net sales, were 23.0% and 14.4% of
gross sales in the second quarter of 2000 and 1999, respectively.
Higher warranty returns and stock adjustment credits for the quarter
together with the decline in sales account for the increase over
second quarter 1999.
Carburetor net sales were 58.4% and 63.8% of total net sales in the
second quarter of 2000 and 1999, respectively. The significant
percentage point drop versus 1999 reflects a 42.4% decrease in
carburetor sales, while all other product sales declined 27.6%.
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 continue to exhibit a
steady 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 sales demand.
Cost of products sold was $4,734,000, or 85.1% of net sales in the
second quarter of 2000 as compared to $7,283,000, or 82.4% for the
second quarter of 1999. On a dollar basis, the cost of products sold
was lower than 1999 by $2.5 million, or 35%, primarily reflecting a
cut-back in production which included a one week shutdown of both
manufacturing facilities in an attempt to balance production with the
orders decline. Emphasis on tighter materials control and utilization
also helped to lower cost of products sold. However, given the fixed
base of manufacturing cost in place, it is not feasible to reduce
rebuilding costs proportionately with a sales decline without seriously
impeding production capabilities.
Selling, distribution and administrative expenses were $575,000 for the
quarter, compared to $762,000 in the second quarter of 1999. Primarily
contributing to the 24.6% spending decrease were reduced distribution
costs reflecting the lower sales volume, lower selling expenses due to
<PAGE> -12-
termination of commissions to an outside sales representative, and lower
administrative spending at both Divisions combined with the reduction
in Corporate overhead realized by moving the Corporate headquarters to
the Hope Division.
Interest expense was $121,000 for the second quarter of 2000, versus
$158,000 in the same period of 1999. The reduction is due to the lower
overall amount of debt outstanding, principally in lower Letter of
Credit and Industrial Revenue Bond interest cost.
For the second quarter of 2000, net income was $129,000 compared to
$729,000 for the same period in 1999. This $600,000, or 82.3%, decrease
principally reflects the significant decrease in net sales and resultant
loss of gross margins, as noted in the preceding analysis.
SIX MONTHS ENDED JULY 2, 2000 COMPARED TO SIX MONTHS ENDED JUNE 27, 1999
For the six months ended July 2, 2000, net sales were $13,020,000,
reflecting a decrease of $2,822,000 (17.8%) below net sales of
$15,842,000 for the same period in 1999. This net sales decline is
primarily due to a substantial drop of $2.4 million in carburetor net
sales during the second quarter. Carburetor sales in 1999 included
unusually large new stocking orders for stores acquired by the Company's
two large retail customers that were not repeated in 2000. Sales of
starters, alternators, generators and water pumps with agricultural
equipment customers that were strong in the first quarter of 2000,
up $541,000, or 49.7%, declined significantly during the second quarter,
down $805,000, or 33.3%, reflecting extremely soft orders. Automotive
product sales also declined $183,000, or 20.6%, from the 1999 first half
levels. Constant velocity assembly sales have remained strong the entire
six months exhibiting an increase of 12.5% over the first half of 1999.
Total product and core returns, which are reflected in reductions to net
sales, were 24.1% and 21.3% of gross sales in the first six months 2000
and 1999, respectively. The decline in sales accounted for the
percentage increase over 1999.
Carburetor sales were 64.7% and 68.3% of net sales in the first six
months of 2000 and 1999, respectively. The percentage point drop versus
1999 reflects a 22.2% decline in carburetor sales, while all other
product sales declined during the first half 8.4%. 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 continue to exhibit a steady 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 sales demand.
Cost of products sold was $10,726,000, or 82.4%, of net sales in the
first half of 2000 as compared to $13,149,000, or 83.0%, for the first
half of 1999. The decrease in the cost of products sold as a percent
of net sales is primarily attributed to lower direct labor reflecting
a one week shutdown at both manufacturing facilities. Materials were
also favorable due to improved materials utilization, which resulted
in reduced materials spending. Manufacturing overhead expenses, which
are relatively fixed, was essentially level with l999 reflecting
controlled overhead spending at both manufacturing facilities.
<PAGE> -13-
Selling, distribution and administrative expenses were $1,274,000 for
the first six months of 2000, compared to $1,481,000 in the first six
months of 1999. The 14.0% decrease over the same period in 1999
reflects reduced distribution costs due to the lower sales volume,
lower selling expenses due to termination of commissions to an outside
sales representative, and lower administrative spending at both
Divisions combined with the reduction in Corporate overhead realized
by moving the Corporate headquarters to the Hope Division.
Interest expense was $272,000 for the first half of 2000 as compared to
$314,000 in the same period of 1999. This reduction is due to the lower
overall amount of debt outstanding, principally in lower Letter of
Credit and Industrial Revenue Bond interest cost.
Net income before extraordinary gains, was $731,000 for the first six
months of 2000 versus $936,000 for the same period last year. The
$205,000, or 21%, decline from 1999 primarily reflects the significant
decrease in net sales and resultant lower margins for the reasons
mentioned earlier.
There were no extraordinary gains during the first half of 2000. An
extraordinary gain of $59,000 was recorded in the first six months of
1999 resulting from a creditor debt restructuring settlement.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at July 2, 2000 was a positive $2,102,000, compared
to a positive $865,000 at the end of 1999, and a negative $983,000 for
June 27, 1999. The $1,237,000 increase in working capital over the 1999
year-end is principally a result of higher trade accounts receivable
(up $927,000) and gross inventories (up $168,000), combined with a
decrease in accrued liabilities reflecting decreases in accounts payable
(down $765,000) and accrued expenses(down $303,000). Compared with June
1999, the working capital increase primarily resulted from substantially
higher inventories and lower accrued expenses.
Net accounts receivable at July 2, 2000 were $4,818,000, or $927,000
(24%) higher versus the year-end 1999 balance of $3,891,000 primarily
resulting from slow payments by a major customer. Net receivables
decreased $1,191,000 compared to the June 27, 1999 balance of $6,009,000
reflecting the substantially lower sales in the second quarter.
Net inventories of $9,029,000 at July 2, 2000, were lower by $211,000
compared to year-end fiscal 1999 balance. Reductions were achieved in
the work-in-process and finished goods inventory categories which more
than offset a slight increase raw materials inventories. Net inventories
increased by $1,946,000 versus June 1999 reflecting higher parts, raw
core and work-in-process inventories for the ramp-up of carburetor
production in the first quarter at the Hope Facility.
Accounts payable at the end of the second quarter of 2000 were $765,000
lower than year-end 1999, however, they were $937,000 higher than June
1999. The decline from year-end is due to lower raw materials spending,
while the increase over the same period last year reflects higher raw
materials spending for the increased production of carburetors at the
Hope Division.
<PAGE> -14-
Accrued expenses at the end of second quarter were $303,000 lower than
fiscal year-end 1999 balances because of reductions to accruals related
to a legal settlement and a reduction in professional fee accruals.
Compared to June 1999, accrued expenses were lower by $1,396,000 as a
result of a lower worker's compensation accrual due to claims
settlements, and lower sales deduction accruals which are predicated
primarily on carburetor sales which declined from last year.
DEBT
At July 2, 2000 the balance outstanding on the loan facility was
$3,593,000 plus letter of credit accommodations of $1,693,000. This
compares to a loan balance at December 31, 1999 of $3,424,000 and
accommodations of $1,993,000 and a loan balance at June 27, 1999
of $3,927,000 and accommodations of $1,993,000.
SEASONALITY
The Company's business is slightly seasonal in nature, primarily as a
result of the impact of weather conditions on the demand for certain
automotive replacement parts. Historically, the Company's sales and
profits have been slightly higher in the first and fourth quarters of
each year than in the second and third quarters.
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 89.5% of the Company's total sales in first half of 2000. 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> -15-
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.
Accordingly, actual results may differ materially from those set forth
in the forward-looking statements.
___
<PAGE> -16-
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.
CHAMPION PARTS, INC.
(Registrant)
Date: August 17, 2000 By: /s/ Jerry A. Bragiel
--------------------
Jerry A. Bragiel
President, Chief Executive Officer
By: /s/ Richard W. Simmons
----------------------
Richard W. Simmons
Vice President Finance,CFO
and Secretary
<PAGE> -18-
