<PAGE>
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 October 1, 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 October 1, 2000
------------------------------ ------------------------------
Common Shares - $.10 par value 3,655,266
<PAGE> -1-
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
CHAMPION PARTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDING OCTOBER 1, 2000
<CAPTION>
($ thousands) October 1, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 997 $ 1,330
Accounts receivable, less allowance
for uncollectible accounts of
$587,000 and $337,000 in 2000 and
1999, respectively 4,433 3,891
Inventories, net of reserves 8,979 9,240
Prepaid expenses and other assets 218 335
Deferred income tax asset 411 413
------- -------
Total current assets 15,038 15,209
PROPERTY, PLANT AND EQUIPMENT:
Land 197 197
Buildings 7,834 7,834
Machinery and equipment 12,993 13,042
------- -------
Gross property,plant & equipment 21,024 21,073
Less: Accumulated depreciation 17,195 16,726
------- -------
Net property, plant & equipment 3,829 4,347
Other assets 5 19
------- -------
Total assets $ 18,872 $ 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 OCTOBER 1, 2000
<CAPTION>
($ Thousands) October 1, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 6,393 $ 7,094
Accrued expenses:
Salaries, wages and benefits 507 634
Other accrued expenses 4,528 5,418
Taxes other than income 26 106
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 12,557 14,345
------- -------
DEFERRED INCOME TAXES 351 351
LONG-TERM DEBT:
L-T notes payable - revolver 2,092 1,220
L-T notes payable - term notes 1,152 1,603
L-T notes payable - vendors 2,435 2,553
Industrial revenue bond (IRB) 700 700
------- -------
Total long-term debt 6,379 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) (15,910) (16,655)
Accum. other comp.(loss) (449) (486)
------- -------
Total stockholders'(deficit) (415) (1,197)
------- -------
Total liabilities and
stockholders'(deficit) $ 18,872 $ 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 OCTOBER 1, 2000
(Unaudited)
<CAPTION>
($ Thousands) Nine Months Ended Three Months Ended
-------------------- ------------------
Oct 1, Sept 26, Oct 1, Sept 26,
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 17,618 $ 21,737 $ 4,597 $ 5,895
Costs and Expenses:
Cost of products sold 14,611 18,218 3,883 5,068
Selling, dist. and admin. 1,830 2,158 557 678
------- ------- ------ ------
Total costs and expenses 16,441 20,376 4,440 5,076
------- ------- ------ ------
Operating income 1,177 1,361 157 149
Non-operating (income)expense:
Interest expense 404 464 132 150
Other non-operating income (17) (78) 10 (24)
------- ------- ------ ------
Total non-operating expense 387 386 142 126
------- ------- ------ ------
Earnings before extraordinary
gain and income taxes 790 975 15 23
Income Taxes 45 31 1 15
------- ------- ------ ------
Earnings before
extraordinary gain 745 944 14 8
------- ------- ------ ------
Extraordinary gain 0 59 0 0
------- ------- ------ ------
Net Income $ 745 $ 1,003 $ 14 $ 8
======== ======== ======= =======
Weighted Avg. Common Shares
Outstanding at Oct. 1, 2000:
Basic 3,655 3,655 3,655 3,655
----- ----- ----- -----
Diluted 3,697 3,710 3,697 3,710
----- ----- ----- -----
Earnings per Common Share - Basic
---------------------------------
Earnings before extraordinary
gain per common share $ 0.20 $ 0.26 $ 0.00 $ 0.00
Extraordinary gain
per common share 0.00 0.02 0.00 0.00
Net Income per Common Share $ 0.20 $ 0.28 $ 0.00 $ 0.00
<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 OCTOBER 1, 2000
(Unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
-------------------- ------------------
Oct 1, Sept 26, Oct 1, Sept 26,
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 $ 0.00 $ 0.00
Extraordinary gain
per common share 0.00 0.02 0.00 0.00
Net Income per Common Share $ 0.20 $ 0.27 $ 0.00 $ 0.00
<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 OCTOBER 1, 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 $ (16,655) $ (486)
Net Income - - - 745 -
Foreign currency
translation adj. - - - - 37
------ ----- -------- --------- ------
BALANCE,
Oct. 1, 2000 3,655 $ 366 $ 15,578 $ (15,910) $ (449)
====== ===== ======== ========= ======
<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 OCTOBER 1, 2000
(Unaudited)
<CAPTION>
($ Thousands) Nine Months Ended Three Months Ended
-------------------- -------------------
Oct 1, Sept 26, Oct 1, Sept 26,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 745 $ 1,003 $ 14 $ 8
Other comprehensive income:
Foreign currency
translation adjustment 37 (33) 22 (23)
------- ------- ------- -------
Comprehensive income $ 782 $ 970 $ 36 $ (15)
======= ======= ======= =======
<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 OCTOBER 1, 2000
<CAPTION>
($ Thousands) Nine Months Ended
----------------------------
Oct 1, 2000 Sept 26, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 745 $ 1,003
Adj. to reconcile net income to net
cash provided by operating activities:
Extraordinary gain -0- (59)
(Gain) on the sale of assets (26) -0-
Depreciation and amortization 485 515
Provision for inventory write-offs 582 504
Changes in assets and liabilities:
Accounts receivable (542) 1,157
Inventories (gross) (321) (2,337)
Accounts payable (701) 538
Accrued liabilities & other (841) 228
------- -------
NET CASH PROVIDED BY/(USED IN) OPERATIONS (619) 1,549
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (58) (257)
Proceeds from the sale of assets 37 -0-
------- -------
NET CASH (USED IN) INVESTING ACTIVITIES (21) (257)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings-revolving loan agreement 872 (360)
Payments-term note obligations (451) (451)
Payments-L-T vendor debt obligations (151) (137)
------- -------
NET CASH PROVIDED BY/(USED IN)
IN FINANCING ACTIVITIES 270 (948)
------- -------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 37 (33)
------- -------
NET INCREASE/(DECREASE)IN
CASH & CASH EQUIVALENTS (333) 311
------- -------
CASH AND CASH EQUIVALENTS:
Beginning of period 1,330 784
------- -------
CASH AND CASH EQUIVALENTS:
End of period $ 997 $ 1,095
======== ========
<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 nine and three
months ended October 1, 2000 and September 26, 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.
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 nine and three months ending October 1, 2000
and September 26, 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) October 1, 2000 December 31, 1999
------------------ -----------------
Raw materials $ 3,792 $ 3,130
Work-in-process 3,204 3,536
Finished goods 1,983 2,574
-------- --------
Total Inventories $ 8,979 $ 9,240
======== ========
Included in inventory above were net cores of $4.3 million
(October 1, 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 October 1, 2000 were $1,495,000
versus $2,205,000 during the same period last year. Total
returns for nine months ending October 1, 2000 were
$5,767,000 versus $6,601,000 for the same period in 1999.
<PAGE> -9-
Note 5. The income tax expense attributable to operations for the nine
and three months ended October 1, 2000 differed from the amounts
computed by applying the federal income tax rate of 34%
principally as a result of tax benefits recognized related to
the carryforward of net operating losses.
Note 6. Business Segments - The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 131," Disclosures
About Segments of an Enterprise and Related Information."
Following the provisions of SFAS No. 131, the Company is
reporting two operating business segments in the same format
as reviewed by the Company's senior management. Segment one,
Fuel Systems & C.V. Assemblies, remanufactures and sells
replacement fuel system components (carburetors and diesel
fuel injection components) and constant velocity drive
assemblies for substantially all makes and models of domestic
and foreign automobiles and trucks. Segment two, Electrical
& Mechanical Products, remanufactures and sells replacement
electrical and mechanical products for passenger car,
agricultural and heavy-duty truck original equipment
applications. Management uses operating income as the measure
of profit or loss by business segment. Segment assets include
amounts specifically identified with each operation. Corporate
assets consist primarily of property and equipment.
Business segment information is as follows:
--- Nine Months Ended ---
($ Thousands) Oct 1, 2000 Sept 26, 1999
-------------- --------------
Revenues:
Fuel Systems & C.V. Assy's $ 12,502 $ 16,029
Elect. & Mech. Products 5,116 5,708
-------- --------
Total Revenues $ 17,618 $ 21,737
======== ========
Depr. & Amort. Expense:
Fuel Systems & C.V. Assy's $ 148 $ 176
Elect. & Mech. Products 268 275
Corporate 69 64
-------- --------
Total depr. & amort. $ 485 $ 515
======== ========
Net Income/(Loss):
Fuel Systems & C.V. Assy's $ 2,600 $ 2,656
Elect .& Mech. Products (734) (530)
Corporate (1,121) (1,182)
--------- --------
Earnings B/F extra. gain 745 944
Extraordinary gain -0- 59
-------- --------
Net income $ 745 $ 1,003
======== ========
<PAGE> -10-
Note 6. (Continued)
--- Nine Months Ended ---
($ Thousands) Oct 1, 2000 Sept 26, 1999
-------------- --------------
Capital Additions:
Fuel Systems & C.V. Assy's $ 1 $ 72
Elect. & Mech. Products 13 29
Corporate 44 156
-------- --------
Total capital additions $ 58 $ 257
======== ========
Total Assets:
Fuel Systems & C.V. Assy's $ 9,981 $ 9,501
Elect. & Mech. Products 8,013 7,772
Corporate 878 686
-------- --------
Total assets $ 18,872 $ 17,959
======== ========
<PAGE> -11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 26, 1999
Net sales of $4,597,000 for the third quarter ending October 1, 2000,
were down $1.3 million, or 22.0%, versus net sales of $5,897,000 for
the same period in 1999. Compared to the third quarter 1999, this
decline in net sales principally reflects a 28% drop in carburetor
net sales, which were down $1.3 million. Third quarter 1999 carburetor
sales included new stocking orders for stores acquired by the Company's
two large retail customers that were not repeated in 2000. In addition,
automotive product sales were also under 1999 levels by 27%, reflecting
soft oreders of water pumps and other mechanical product lines.
Offsetting the automotive decline were substantially higher net sales
with agricultural and heavy-duty customers which had a gain of 72% over
1999 on strong orders for heavy duty water pumps and starters. Also,
constant velocity assembly sales increased again this quarter exhibiting
a 12% gain over 1999. Total product and core returns, which are
reflected in reductions to net sales, were 24.3% and 26.8% of gross
sales in the third quarter of 2000 and 1999, respectively. Lower
warranty returns and stock adjustment credits for the third quarter
2000 account for the percentage point decrease over 1999.
Carburetor net sales were 68.5% and 74.6% of total net sales in the
third quarter of 2000 and 1999, respectively. The substantial
percentage point drop versus 1999 reflects a 28% decrease in carburetor
net sales for the quarter. 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
accelerate product returns during periods of declining sales demand.
Cost of products sold were $3,883,000, or 84.5% of net sales in the
third quarter of 2000 as compared to $5,068,000, or 86.0% for the
third quarter of 1999. On a dollar basis, the cost of products sold
was lower than 1999 by $1,135,000, or 23%, primarily reflecting a
cutback in production at both manufacturing facilities in an attempt
to balance production with the orders decline. Emphasis on tighter
materials control and labor utilization also helped to lower cost of
products sold. It should be noted that the Company's manufacturing
operations achieved reduction of rebuilding costs almost proportionate
with the net sales decline.
For the third quarter 2000, selling, distribution and administrative
expenses were $557,000, compared to $678,000 in the third quarter of
1999. The 18% spending decrease can be attributed to reduced
distribution costs reflecting the lower sales volume, lower selling
expenses due to termination of commissions to an outside sales
<PAGE> -12-
representative, and lower administrative spending at both manufacturing
facilities combined with the reduction in Corporate overhead realized by
moving the Corporate headquarters to the Hope facility.
Interest expense was $132,000 for the third quarter of 2000, versus
$150,000 in the same period of 1999. The reduction is due to the lower
amount of Letter of Credit and Industrial Revenue Bond interest cost.
For the third quarter of 2000, net income was $14,000 compared to
$8,000 for the same period in 1999. This $6,000 slight increase in
net income, despite a significant net sales decline, reflects the
Company's ability to control rebuilding and operating costs, as noted
in the preceding analysis.
NINE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 26, 1999
For the nine months ended October 1, 2000, net sales were $17,618,000,
reflecting a decrease of $4,120,000 (19%) below net sales of
$21,737,000 for the same period in 1999. This net sales decline is
primarily due to a substantial drop of $3.7 million in carburetor net
sales. 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. Automotive product sales also declined
$899,000, or 24%, from the 1999 nine-month levels reflecting soft orders
in electrical and water pump lines. Sales of heavy-duty starters,
alternators, generators and water pumps to agricultural equipment
customers continued strong through the nine months, up $400,000, or 20%.
Constant velocity assembly sales for the nine months exhibited an
increase of 12% as compared to 1999. Total product and core returns,
which are reflected in reductions to gross sales, were 24.2% and 22.9%
of gross sales in the nine months 2000 and 1999, respectively. Product
returns did not drop in proportion to the gross sales decline accounting
for the percentage point increase versus last year.
Carburetor sales were 65.7% and 70.0% of net sales for the nine months
of 2000 and 1999, respectively. The percentage point drop versus 1999
reflects a 24% decline in carburetor sales, while all other product
sales declined during the nine-month period 7%. Even though overall
carburetor are declining in the U.S. market, the Company continues to
be a major supplier of carburetors in the aftermarket. While 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. The Company expects that carburetor sales and gross
margins will continue to decline in future years.
Cost of products sold were $14,611,000, or 82.9%, of net sales for the
three-quarters of 2000 as compared to $18,218,000, or 83.8%, for the
same period of 1999. The decrease in the cost of products sold as a
percent of net sales is primarily attributed to lower direct labor,
down $1.3 million (19%), versus 1999. This improvement primarily
reflects improved productivity and a one week shutdown at both
manufacturing facilities in the second quarter. Materials were also
favorable, down $518,000 (10%), due to improved materials utilization,
which resulted in reduced materials spending. Manufacturing overhead
<PAGE> -13-
expenses, which are relatively fixed, were also down $256,000 (6%) from
1999 reflecting controlled overhead spending at all facilities.
Selling, distribution and administrative expenses were $1,830,000 for
the nine months of 2000, compared to $2,158,000 in the same period of
1999. The 15% 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 facility.
Interest expense was $404,000 for the nine months of 2000 as compared to
$464,000 in the same period of 1999. This reduction is due to the lower
Letter of Credit and Industrial Revenue Bond interest cost reflecting
lower debt balances for both of these debt instruments.
Net income before extraordinary gains, was $745,000 for the nine months
of 2000 versus $944,000 for the same period last year. The $199,000,
or 21%, decline from 1999 principally reflects the significant decrease
in net sales and resultant lower margins for the reasons mentioned
earlier.
There were no extraordinary gains during the three-quarters of 2000.
An extraordinary gain of $59,000 was recorded during the same nine
month of 1999 resulting from a creditor debt restructuring settlement.
Net income was $745,000 compared to $1,003,000 for the same period
in 1999, a $258,000, or 26% decline. This decrease in net income
principally reflects the volume decline addressed in the preceding
analysis.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at October 1, 2000 was a positive $2,481,000,
compared to a positive $865,000 at the end of 1999, and a negative
$239,000 for September 26, 1999. The $1.6 million increase in working
capital over the 1999 year-end is principally a result of a reduction
in current assets of $0.2 million, combined with a decrease in current
liabilities of $1.8 million. The reduction in current liabilities
reflects decreases in trade accounts payable (down $768,000 due to lower
spending) and accrued expenses (down $1.1 million principally due to
reductions of excess accruals of workers compensation and sales
deduction reserves). Compared with September 1999, the working capital
increase primarily resulted from substantially higher inventories and
lower accrued expenses.
Net accounts receivable at October 1, 2000 were $4,433,000, or
$542,000 higher versus the year-end 1999 balance of $3,891,000
primarily resulting from slow payments. Net receivables increased
$889,000 compared to the September 26, 1999 balance of $3,544,000
also due to the slower payments.
<PAGE> -14-
Net inventories of $8,979,000 at October 1, 2000, were lower by
$261,000 compared to year-end fiscal 1999 balance. Reductions were
achieved in the work-in-process and finished goods inventory categories
which more than offset an increase in raw materials inventories. Net
inventories increased by $732,000 versus September 1999 reflecting
higher parts, raw core and work-in-process inventories for the ramp-up
of carburetor production at the Hope facility.
Trade accounts payable at the end of the third quarter of 2000 were
$768,000 lower than year-end 1999, however, they were $294,000 higher
than September 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 facility.
Accrued expenses at the end of third quarter were $1.1 million lower
than fiscal year-end 1999 balances because of reductions to excess
accruals relating to workers compensation reserves reflecting favorable
claims settlements, and to sales deduction accruals which were
predicated on carburetor sales estimates which have declined from last
year. Compared to September 1999, accrued expenses were lower by $1.3
million reflecting the same reasons above.
DEBT
At October 1, 2000 the balance outstanding on the Company's loan
facility was $3,845,000 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
September 26, 1999 of $2,692,000 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 ssubstantially 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
<PAGE> -15-
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
acquisitions, 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 88.1% of the Company's total sales through the third quarter 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.
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: November 15, 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-
