SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
of 1934 [Fee Required] For the fiscal year ended: June 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 [No Fee Required]
Commission File Number 0-7462
CPT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0972129
State of Incorporation) (I.R.S. Employer identification No.)
1430 Broadway, 13th Floor
New York, New York 10018
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 382-1313
Securities registered pursuant to Section 12(b)
of the Act:
NONE
Securities registered pursuant to Section 12(g)
of the Act:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 1O-K. Yes X No ____
As of August 31, 1995, the aggregate market value of shares of Common Stock of
the registrant held by non-affiliates was approximately $ 2,290,745.00.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___
As of August 31, 1995, 1,510,084 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Form 8-K filed by the Company on April 21, 1995 with
the Securities and Exchange Commission
PART I
ITEM 1. BUSINESS
General
CPT Holdings, Inc. ("CPT" or the "Company"), is a holding company
which, through its indirect operating subsidiary, J & L Structural, Inc., a
Delaware corporation ("J&L "), is a nationwide independent producer of high
quality lightweight structural steel shapes, with a leading market share in the
Northeast, Southeast and Mid-Atlantic regions. The Company's products are used
primarily in the manufactured housing, truck trailer, and highway safety systems
industries. The Company competes effectively on the basis of product quality,
customer service and price, in a number of niche markets characterized by few
competitors. The Company operates a uniquely designed mill on 33 acres in
Aliquippa, Pennsylvania which enables the Company to efficiently produce thin,
lightweight profile structural steel shapes (primarily I-Beams). The Company,
through the Brighton Electric Steel Casting Division of J&L ("Brighton") also
has an 80 % market share in the domestic small piercer point market.
CPT was incorporated in 1971 as CPT Corporation. Its principal offices
are located at 1430 Broadway, 13th Floor, New York, New York 10018 and its
telephone number is (212) 382-1313. References to the Company are intended to
include CPT and its direct and indirect subsidiaries, unless the context
provides otherwise.
CPT adopted its current form as a holding company in accordance with
its Amended Plan of Reorganization (the "Reorganization Plan") approved by the
United States Bankruptcy Court. A Confirmation Hearing on the Reorganization
Plan was held on June 28, 1991, and the Reorganization Plan became effective as
of July 23, 1991.
Under the Reorganization Plan, CPT changed its name from CPT
Corporation to CPT Holdings, Inc. and created CPT Office Systems, Inc. ("Office
Systems") as a wholly-owned operating subsidiary to conduct the business
previously operated by the Company. In exchange for all of Office Systems'
outstanding capital stock, CPT transferred to Office Systems all of CPT's
assets, except for approximately $1.5 million in cash to be used by CPT for its
corporate purposes, including future business acquisitions. In addition, CPT
transferred to Office Systems, and Office Systems assumed, all of CPT's
continuing liabilities, including those arising under the Reorganization Plan.
Consequently, upon consummation of the Company's reorganization under the
Reorganization Plan, CPT had no liabilities with respect to its previous
operations. On February 1, 1993 the Company discontinued the operations of
Office Systems as well as CPT Image Systems, Inc. ("Image Systems"), a
corporation established in June of 1992 to market image based software either
owned or under license to Image Systems.
On January 3, 1992, Brighton Electric Steel Casting Company, a Delaware
corporation ("BESCC"), became a majority-owned subsidiary of CPT when CPT
acquired all of the common stock of BESCC from Precise Plastic Products, Inc.
("Precise"). In exchange for all of the common stock of BESCC, CPT issued to
Precise shares of the Company's Class A Common Stock representing 50% of its
then outstanding Class A Common Stock and 40% of its then outstanding Class A
Common Stock and Class B Common Stock combined.
On February 8, 1993, Hupp Industries, Inc. ("Hupp") became a majority-owned
subsidiary of CPT when CPT acquired the 80.1% of the capital stock of Hupp. Hupp
was a manufacturer of heating, ventilating and air conditioning equipment used
primarily in commercial as well as military applications. Through its wholly
owned division, DCM Corporation, Hupp was a manufacturer of fractional
horsepower electrical motors. Hupp experienced operating difficulties in both
its air conditioning and electrical motor manufacturing businesses and in
February, 1994 decided to discontinue the manufacture of its air conditioning
products. Hupp continued to experience financial problems which caused certain
defaults under its Credit and Security Agreement with its bank. Despite efforts
to bring the operations of Hupp to profitability, Hupp was unable to eliminate
its losses. As a consequence, on October 27, 1994, Hupp's senior lender
exercised it's rights and conducted a secured party sale of the assets of Hupp
to an unrelated party. Hupp had no assets and no employees subsequent to
October, 1994.
On April 6, 1995, J&L Acquisition Corp., a Delaware corporation
("JLA"), a newly incorporated, indirect, majority-owned subsidiary of the
Company, acquired substantially all of the assets of J&L Structural, Inc.
("JLS") and Trailer Components, Inc. ("TCI"), Pennsylvania corporations based in
Aliquippa, Pennsylvania, for $50 Million plus the assumption of certain
liabilities (the "Acquisition"). Simultaneously with the closing, JLA changed
its name to J&L Structural, Inc. JLS was a nationwide independent producer of
high quality lightweight structural steel shapes used primarily in the
manufactured housing, truck trailer and highway safety systems industries. TCI
provided secondary services to JLS which are now provided by the Ambridge
division of J&L.
As part of the Acquisition, the assets of BESCC, the direct parent of
JLA, were contributed to JLA and BESCC changed its name to J & L Holding Corp.
("JLH"). Prior to the closing of the Acquisition, BESCC redeemed its preferred
stock from the holder thereof in consideration for the issuance by the Company
of a Deferred Purchase Money Note in the approximate amount of $475,000, said
amount equal to the stated value for the preferred stock plus the accrued
dividends thereon, bearing interest at 11 percent and due December 15, 2002.
Also as part of the Acquisition, JLA distributed as a dividend to JLH
the right (which JLA acquired from JLS) to acquire a 38-acre parcel of
undeveloped land adjacent to the JLS rolling mill in Aliquippa, Pennsylvania.
JLH, in turn, contributed the right to acquire the 38-acre parcel to Continuous
Caster Corporation, a newly- incorporated Delaware corporation ("CCC") in
exchange for all of the common stock of CCC. Shortly thereafter, CCC acquired
title to the 38-acre parcel, using funds which JLS had placed in escrow prior to
the Acquisition.
Further information regarding the Acquisition is contained in Form 8-K
filed by the Company with the Securities and Exchange Commission on April 21,
1995, which is hereby incorporated by reference herein.
<PAGE>
J&L Structural, Inc.
J&L is segmented into two distinct operating divisions, J&L Structural
division ("J&L Structural") and Brighton, as a result of significant differences
in both customers and products. J&L Structural is also segmented into two
separate divisions which includes the Ambridge division (formerly TCI). This
distinction is due mainly to separate labor contracts which exist among the
employees of J&L Structural. The Ambridge division provides all finishing
services required for J&L Structural products. The following narrative on the
business will be segmented on this basis.
J&L Structural Division
Products
J&L Structural is a producer of high quality lightweight
structural steel shapes (primarily I-Beams) which are used primarily in the
manufactured housing, truck trailer, and highway safety systems industries.
J&L Structural's products are monitored, tested and inspected
throughout the manufacturing process to ensure the tensile and yield strength
meet applicable industry or customer specifications. The products are also
inspected to ensure integrity of surface and dimensions.
J&L Structural's product lines are described below:
JUNIOR(R) Beams are hot rolled lightweight steel beam sections
produced by rolling heated steel billets through J&L Structural's fourteen stand
rolling mill. These sections have been accepted by designers and engineers for
over half a century as the lightest hot-rolled structurals in their size class.
JUNIOR(R) Beams are available in 3, 4, 6, 8, 10 and 12-inch depths, ranging in
weight from 2.9 to 11.8 pounds per foot. A total of fourteen weights of
JUNIOR(R) Beams are currently available. JUNIOR(R) Beams are manufactured in a
wide range of steel grades including conventional and high strength steels.
Strict quality control at J&L Structural's mill assures a homogeneous product,
uniform in mechanical and chemical properties and possessing dimensions within
close rolling tolerance limits. JUNIOR(R) Beams have the strength, light weight
and versatility to be used by makers of manufactured housing and truck trailers,
industrial and commercial contractors and machinery builders. JUNIOR(R) Beams
are primarily used by the manufactured housing industry as undercarriage
structural support.
Crossmembers are fabricated by the Ambridge division from
JUNIOR(R) Beams. Crossmembers are used by the truck trailer and truck body
industry in the production of trailer frames. These manufacturers space
Crossmembers along the entire length of the trailer to provide structural
support to the body and floor.
JUNIOR(R) Channels are available in four sizes and varying
weights. They generally weigh significantly less than the lightest standard
structural steel shape of equal depth, while exhibiting the characteristics of
form and constancy of dimension offered by a standard hot-rolled section.
JUNIOR(R) Channels are preferred over formed plate channels since they assure
perfect fitting square
<PAGE>
corners and true lines. These advantages permit flexibility of design with
minimum weight and lower cost without sacrificing structural strength. JUNIOR(R)
Channels offer excellent application flexibility in architecture and
construction, particularly in the construction of commercial and industrial
stairways. Additionally, truck trailer manufacturers are able to reduce weight
in their finished product through the use of JUNIOR(R) Channels as side rails.
Wide Flange Beams offer durability and economical installation
to builders of highway safety systems as well as for general construction
applications. On a pound-per-foot basis, J&L Structural's Wide Flange Beams are
among the lightest and lowest cost hot-rolled steel structurals available for
highway guardrail posts.
Standard I-Beams are produced by J&L Structural in sections of
3" x 5.7 pounds per foot and 3" x 7.5 pounds per foot in the same variety of
grades and lengths as available for its other products. The lighter weight
three-inch section is becoming increasingly popular as a highway guardrail post
section.
Split Tees (often referred to as Split Beams) are JUNIOR(R)
Beams which are split longitudinally through the web section. This process
produces two identical T-sections which are used for ship hull reinforcement.
J&L Structural's philosophy from its inception has been to
incrementally expand its product offerings and capabilities while, at the same
time, maintaining high levels of profitability. JLS added eleven products to the
original seventeen products offered in November, 1987. Revenues from these
additional products accounted for 25 % of revenues for the period ended June 30,
1995. The Company expects to continue to add new products, new sizes and/or
serve new markets on an "incremental" basis in the future. For example, J&L
Structural is actively pursuing the possibility of rolling certain products in a
manner that would reduce their current weight per foot and/or increase the
products' engineered efficiency. Management believes that a new rolling process
would have significant market implications, since end users are interested in
cost savings through the use of lighter weight, structurally efficient products.
Suppliers
Steel billets, J&L Structural's primary raw materials, are
purchased from several domestic mini-mills and are delivered to J&L Structural's
mill by barge, rail or truck. J&L Structural issues a billet quality standard
which must be met by all suppliers. This standard includes specifications for
billet chemistry, dimension and surface quality. J&L Structural typically
purchases billets from three main suppliers and four alternate suppliers. Over
one-half of J&L Structural's semifinished steel requirements are sourced through
Roanoke Electric Steel Corporation ("Roanoke"). J&L Structural is Roanoke's
largest customer and both companies believe there is significant mutual benefit
in maintaining this relationship. The loss or reduction in capability of Roanoke
as a supplier would require J&L Structural to rely more heavily on other current
sources of semi-finished steel and to potentially locate additional suppliers.
However, the supply of steel billets is a large market in which J&L Structural
has several options and flexibility in terms of its source of supply.
<PAGE>
J&L has engaged a consultant to conduct a preliminary review of the
feasibility of constructing a melt shop/continuous caster complex for J & L
Structural. J&L will seriously consider such an undertaking if the results of
the preliminary review indicate that doing so would make economic sense.
Marketing and Distribution
J & L Structural focuses its marketing efforts directly on end
users of its products. J&L Structural's primary marketing strategy is to
position itself as a high-quality niche manufacturer of a variety of lightweight
structural steel products. Customer service and product quality are pivotal
elements of that strategy. J&L Structural maintains close ties with its
customers and their markets. Due to its unique mill design and flexible
operating schedule, J&L Structural is able to change its mill frequently at
minimal cost. This allows for quick response to customer requirements, while
maintaining reasonable inventory levels. As a result, J&L Structural has
established a record of superior customer service which differentiates it from
its competition.
J&L Structural's products are used in three primary markets:
manufactured housing, truck trailer manufacturing, and highway safety systems.
JUNIOR(R) Beams are used primarily by the manufactured housing industry for
undercarriage support frames. Crossmembers are used principally by the truck
trailer and truck body industry. JUNIOR(R) Channels are used primarily in truck
trailer bodies and in commercial and industrial stairway construction. Wide
Flange Beams and Standard I-Beams are used primarily in highway guardrail
systems. Split Tees are used in the shipbuilding industry for hull
reinforcements.
J&L Structural maintains a sales force of five salaried
employees, two of whom are stationed in the field and three in Aliquippa. In
addition, in an effort to capitalize on growth in Latin America, particularly
the trailer industry, J&L Structural has recently engaged a commissioned sales
agent to handle new sales opportunities in Mexico and the rest of Latin America.
J&L Structural ships to customers from three strategic
locations: Aliquippa, Pennsylvania; Ambridge, Pennsylvania; and Iuka,
Mississippi. The Mississippi location is a down-river public warehouse that
charges J&L Structural a fee for unloading barges and for warehousing beams
prior to shipping to customers in the Southeast. J&L Structural's location in
the Mid-Atlantic region on the inland waterway system provides good proximity to
its major markets. J&L Structural's barge facility provides low cost
transportation for the bulk movement of JUNIOR(R) Beams to be sold to the
manufactured housing industry in Alabama, Mississippi, Tennessee and other
Southeastern states. Moreover, Indiana, North Carolina and Pennsylvania are
leading states in the production of manufactured homes and all are within one
day truck transportation. Additionally, Indiana leads the country in the
production of truck trailers. Over 85 % of J&L Structural's shipments go
directly to an end user rather than a service center or steel distributor.
Moreover, J & L Structural's location also enables it to
utilize barge, rail and truck lines to transport both its raw materials and
finished goods, thereby allowing it to be responsive to its customers. In
addition, the Company is in the process of seeking an additional distribution
facility in the Southeast in order to enhance its storage capacity. The
additional storage capacity is also expected to lower J&L Structural's freight
costs, giving it the ability to seek higher margins in that region.
<PAGE>
Competition
J&L Structural competes effectively in all of its major
product areas on the basis of product quality, customer service and price in a
number of niche markets characterized by few competitors. Its location on the
Ohio River allows it to ship products to customers and obtain raw materials on a
more cost-effective basis than its competitors and provides it with expanded
geographic coverage in an industry which is largely regional.
While J&L Structural has competition in all of its major
product lines, the thin, lightweight sections J&L Structural manufactures are
difficult to produce and therefore, the number of competitors producing these
items is limited. The unique design and relatively small size of J&L
Structural's mill enables it to efficiently produce thin, lightweight profiles.
Under existing industry configurations and considering the aggregate demand for
its niche products, the Company believes that replication of J&L Structural's
unique mill design by other companies wishing to compete in these markets would
not be economical. J&L Structural's small powerful mill is better suited to
produce the items in its product line than larger mills operated by competitors
that produce a broader range of products.
J&L Structural's commitment to providing a focused product
line that is keyed off customer needs differentiates it from its competitors. In
particular, J&L Structural: (i) provides superior service and consistently high
quality products to its customers, many of which purchase all or substantially
all of their requirements for lightweight steel shapes from J&L Structural, (ii)
maintains adequate inventories and a flexible operating schedule which makes it
more responsive to customer needs and market conditions, (iii) focuses its
marketing directly on end users, (iv) relative to its competitors, produces a
narrow, more focused range of products, and (v) provides value-added finishing
services to meet specific customer needs.
Several products have no direct competition (i.e., 6"
JUNIOR(R) Channel, 10 x 6.5# JUNIOR(R) Channel) and another (6" JUNIOR(R) Beams)
has only limited foreign competition. Foreign manufacturers do not play a
significant role in the domestic structural markets which J&L Structural serves.
Employees
As of August 31, 1995, J&L Structural employed a total of 292
employees. The United Steelworkers of America represents approximately 188
employees at J&L Structural (excluding the Ambridge division) under a labor
agreement that expires in November, 1996. The Ambridge division of J&L
Structural and its 65 unionized employees recently concluded negotiations with
the United Steelworkers of America on a five-year labor agreement with somewhat
lower wage rates than J&L Structural. The Company believes that it has an
excellent relationship with both union locals. J&L Structural has never
experienced a work stoppage, has experienced few employee grievances and has
very little employee turnover.
In connection with the Acquisition, the Company entered into
long-term employment agreements with Howell Breedlove, James Howe and Carl
Snyder, the principal owners and executive management of JLS and TCI. The
Agreements provide for employment periods for each extending through March,
2000. Each of the agreements provides for base and additional incentive
compensation and other benefit plans generally available to management employees
of J&L Structural.
Backlog
The backlog of unfilled orders for J&L Structural typically
averages less than 60 days. This remains the case even in strong markets due to
frequent product rollings and adequate finished inventory levels that allow J&L
Structural's customers to work within a short time frame. As of August 31, 1995,
J&L Structural had firm open orders totaling $8,677,000. This compares with a
backlog of $4,836,000 at the same date in 1994.
The winter months are generally slower activity months for J&L
Structural due to the seasonality of the manufactured housing consumer markets
and significant seasonal reductions in highway construction and repair programs.
Environmental Compliance
U.S. steel producers, including J&L Structural, are subject to
stringent Federal, state and local environmental laws and regulations
concerning, among other things, air emissions, waste water discharge, and solid
and hazardous waste disposal. The Company can be expected to spend substantial
amounts for compliance with these environmental laws and regulations in the
future.
No significant environmental problems have arisen concerning
the use or operation of J&L Structural's facilities or the conduct of its
business.
Brighton Electric Steel Casting Division
Products
The principal product manufactured by Brighton is piercer
points, which are disposable tooling used by the steel industry in the
production of seamless steel tubes. Piercer points are bullet-shaped castings
which are driven into the core of heated steel billets and, therefore, are
central in the manufacturing process of seamless steel tubing products.
Generally, seamless tubes are required in applications where welded seamed tubes
lack rigidity and structural strength. Seamless tubing has a multitude of
applications ranging from oil production to bearings used in the automotive
industry. The most common uses of seamless tubes are as follows.
Product Application
Ball Bearing Rings Industrial
Drive Shaft Parts Truck and Automotive
Structural Components Heavy construction
and land moving equipment
Fluid Transmission Lines Oil, gas chemicals
Structural Supports Construction
Casting Pipe Oil and Gas Exploration
Transmission Pipe High pressure fluid applications
(i.e. chemical plants)
<PAGE>
The Company believes that Brighton is the largest producer of
small piercer points (1 to 250 pounds) in the United States. Brighton also
produces piercer points up to 400 pounds. In addition to piercer points,
Brighton supplies high alloy grate bars used by the steel industry, as well as
hi-mill castings and equalizer plates used in the suspension systems of railway
cars. Brighton's manufacturing capabilities provide it with the opportunity to
develop new markets for its molded alloy steel castings.
The manufacturing process at Brighton begins with the
production of a pattern. Brighton relies to a great extent on an outside pattern
shop. Once a pattern is produced a mold is manufactured at Brighton's
facilities. Molten metal is then poured into the mold, allowed to cool and then
"shaken" free of the mold to complete the finished product. From this step
Brighton may heat the molded metal product in one of its annealing ovens after
which it is machined to final tolerances.
The piercer points are usable by customers for only a limited
amount of production before they become too worn for the process. In some
processes, two piercer points are used for larger seamless tubes. Depending on
the process and materials used to manufacture seamless tubing, a piercer point
generally has a useful life of between two to 750 manufacturing runs before it
must be replaced. Used piercer points are then returned to Brighton for
remolding into other piercer points. The seamless and scrap metals are
inexpensive raw materials to Brighton.
Suppliers
Brighton purchases a variety of raw materials, including
alloys (such as chrome, nickel, molybdenum and tungsten), foundry sand and
grinding materials. Brighton currently has strong and established relationships
with all of its major suppliers of raw materials. Brighton has not experienced
any problems in obtaining an adequate supply of raw materials at reasonable
prices and it expects the availability of future supplies to be sufficient.
Nevertheless, limited supplies of these raw materials and/or extraordinary high
prices for such materials could cause Brighton to, among other things, lose
business by failing to meet demand, squeeze its profit margins and/or encourage
the use of substitute products.
Marketing and Distribution
Brighton has 80% of the small piercer points business in the
United States and excels in providing quality service and products. However,
Brighton's customer base is limited. Essentially, the customer base consists of
seven major accounts which account for approximately 90% of Brighton's revenues.
A major loss of one or more of its accounts or a significant reduction in demand
by the steel industry would have a significant adverse impact on Brighton's
profitability.
Brighton sells to and services its customers directly with its
own personnel. In its effort to expand beyond its piercer-point business,
Brighton has in recent years engaged two manufacturing representative firms. The
diversification effort has increased its new non-piercer point sales from 15% of
total sales in fiscal year 1989 to approximately 28% of total sales in fiscal
year 1995. In addition, the enhanced sales and marketing effort has created an
increased market awareness of Brighton's capabilities in producing specialty
high alloy steel castings.
<PAGE>
Competition
Brighton has limited competition in the small piercer point (1 to 250 pounds)
market. Its onlycompetition is Columbiana Foundry ("Columbiana") based in
Columbiana, Ohio whichproduces a wide variety of castings, including piercer
points. In the past, Columbiana has focused its efforts on producing larger
piercer points.
Employees
As of August 31, 1995, Brighton employed a total of 21
employees. Sixteen of Brighton's personnel are represented by the United
Steelworkers of America under a contract which expires in December 1997. The
Company considers its employee relations at Brighton to be good.
Backlog
Brighton typically ships products within 30 days of receipt of
an order. As such, Brighton does not maintain a significant backlog of unshipped
orders. As of August 31, 1995 Brighton had firm open orders totaling $ 416,000.
This compares to a backlog of $423,000 at the same date in 1994. Brighton does
not consider its business to be seasonal.
Environmental Compliance
Brighton operates with several environmental permits issued by
the Pennsylvania Department of Environmental Resources. No significant
environmental problems have arisen concerning the use or operation of Brighton's
facilities or the conduct of its business. However, a change in the law or
regulations at either the federal, state or local level could adversely impact
the operations of Brighton.
Hupp Industries Inc.
DCM Corporation (a wholly owned division of Hupp Industries, Inc.)
Products
The product line manufactured by Hupp consisted mainly of
commercial air conditioning products as well as fuel-fired heaters manufactured
exclusively for military applications.
Due to continuing operating losses as well as poor market
reception for its newly designed SCAV units, Hupp decided to discontinue the
manufacture of air conditioning products during fiscal 1994. This decision did
not affect the fuel fired heater operations. Previous to this decision Hupp
manufactured two main air conditioning product lines: the mini split and the
self -contained, air-cooled, vertical air conditioning package (SCAV). These
products were sold primarily for installation in large commercial settings such
as offices, shopping malls, industrial buildings, light commercial and
industrial renovations, small computer and communication equipment rooms and
government and military facilities.
The decision to discontinue the operations of the air
conditioning products resulted, in the case of the mini split, from continuing
competition from foreign manufactured goods which were, in some instances, sold
at prices below Hupp's cost to produce. In the case of Hupp's SCAV production,
certain key OEM accounts determined to cease offering the product line and in
one case shifted suppliers from Hupp to an alternative supplier. Hupp made the
decision to cease production, sell off the attendant assets and concentrate its
efforts on fuel fired heaters, electrical motors and mobile products.
Hupp's DCM division produced over 250 standard models of direct current
low voltage (twelve to thirty six volts) fractional horsepower motors.
Suppliers
Hupp purchased a variety of raw materials and parts used in
the assembly of manufactured goods. During the period, Hupp experienced
shortages of supplies, due primarily to lack of working capital. Many suppliers
required cash in advance or COD payment.
Marketing and Distribution
Hupp marketed its products to original equipment manufacturers
(OEM's) as well as through its own distribution channels. Generally, electrical
motors were distributed through various distributors as well as through direct
sales by company employees. Mobile products were sold to OEM accounts as well as
through distributors.
Competitors
Hupp had strong competition for all of its product lines from
a variety of companies many of which had far greater resources than Hupp.
Employees
As of June 30, 1995, neither Hupp nor DCM had any employees
having terminated all employees as a result of the secured party sale on October
27, 1994.
Environmental Compliance
Hupp operated its facilities and conducted its business in
substantial compliance with all applicable federal, state and local
environmental laws and regulations.
Financial Information Regarding Industry Segments and Foreign and Domestic
Operations
Financial information about the Company's various industry segments and
its foreign and domestic operations and export sales is contained in Note 14 of
the Notes to the Consolidated Financial Statements of the Company contained in
item 8 of this Form 10-K, which is hereby incorporated by reference herein. The
Company's continuing operations do not currently have significant export sales
nor any foreign operations.
<PAGE>
ITEM 2. PROPERTIES
CPT's principal executive offices were formerly located at 1140
Connecticut Avenue, N.W., Suite 1201, Washington, D.C. in approximately 2,000
square feet of office space, the lease for which expires in May of 1998. On
November 1, 1994 the Company moved its executive offices to 1430 Broadway, 13th
Floor, New York, New York. The New York offices are occupied under a subleasing
arrangement on a month to month lease. Efforts are underway to sublease its
former offices in Washington, D.C.
The Company's facilities include:(i) J&L Structural - a reheat furnace,
a unique close-tolerance fourteen stand continuous rolling mill, a hot bed,
straighteners, and sawing, stacking and bundling facilities located on
approximately 33 acres on the Ohio River in Aliquippa, Pennsylvania, with over
265,000 square feet under roof and an adjacent barge loading facility; (ii) J&L
Structural's Ambridge division - a fabricating facility located in a leased
facility in Ambridge, Pennsylvania, approximately five miles from the main
facilities; and (iii) Brighton's headquarters and manufacturing plant, a 25,000
square foot facility , located in Beaver Falls, Pennsylvania, approximately 10
miles from J&L Structural.
CCC holds title to 38 acres of undeveloped land adjacent to J&L in
Aliquippa, Pennsylvania. Under the agreement by which this parcel was acquired,
the Beaver County Corporation for Economic Development has the right to
repurchase the parcel within a certain time period for an amount approximating
the purchase price plus all environmental testing and remediation costs incurred
by CCC and its affiliates with respect to the property if CCC or its affiliates
have not placed orders for equipment to be used in connection with the
construction of a melt shop and continuous caster on the property. The property
was acquired subject to an agreed order between CCC and the Pennsylvania
Department of Environmental Protection which requires CCC to perform certain
environmental remediation at a cost which is not anticipated to be material to
the consolidated financial statements.
Hupp occupied approximately 88,000 square feet in a facility located in
Cleveland, Ohio. DCM's headquarters and 55,000 square foot manufacturing
facility was located in Valley City, Ohio ( a Cleveland suburb). The Hupp
facility was leased for a term of 5 years ending July 31, 1998. On October 10,
1994, Hupp entered into an agreement with its landlord to turn the leased
premises back to the landlord without any further liability to Hupp beyond
December, 1994. DCM's facility was also leased for a term of 5 years ending on
February 28, 1995. It is believed that the purchaser of Hupp's assets negotiated
a new lease with the landlord on this facility.
ITEM 3. LEGAL PROCEEDINGS
The Industrial and Allied Employees Union Local No. 73 Pension Plan
(the "Plan") issued a claim for payment of withdrawal liability totaling
approximately $870,000 under Section 4219 of ERISA against Hupp, the Company and
all "controlled group members", as a result of Hupp's cessation of contributions
to the Plan following the discontinuance of Hupp's business in October 1994. The
Company feels that it has meritorious defenses against this claim, and in order
to preserve the right to challenge the claimed liability, the Company has been
making monthly installment payments to the Plan of approximately $25,000 since
March 1995. The Company has recorded an accrual totaling $200,000 as of June 30,
1995, in accordance with the requirements of Financial Accounting Standards
Board Statement No. 5 - Accounting for Contingencies. Management believes that
the effect of the ultimate resolution of this claim will not have a material
adverse impact on the financial position or results of the Company.
The Company is a party to several lawsuits arising in the ordinary
course of its business. The Company's management and legal counsel believe that
there are valid defenses to the claims being asserted. While the Company's
ultimate liability with respect to these lawsuits cannot be determined at this
time, management believes the resolution thereof will not have a material
adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Between September 1992 and August 1994, CPT's Common Stock was included
in the NASDAQ Small Cap Market, also known as the NASDAQ System. In August of
1994, the Common Stock of CPT was delisted from the Small Cap Market for failure
to meet the minimum bid price of $1.00. Since August of 1994, the Company's
Common Stock has traded over-the-counter with quotations for the stock available
in the "pink sheets" or through the over-the-counter Bulletin Board of the
National Association of Securities Dealers, Inc.
The following table sets forth for each of the periods indicated, the
range of the high and low bid prices for CPT's common stock, rounded to the
nearest 1/64 of a dollar, based on quotations obtained from the NASDAQ Small Cap
Market and through the over-the-counter bulletin board.
Fiscal 1995
High Low
First Quarter (7/1-9/30/94) $ 1.25 $.38
Second Quarter (10/1-12/31/94) 1.13 .25
Third Quarter (1/1-3/31/95) 1.13 .50
Fourth Quarter( 4/1-6/30/95) 3.25 .56
Fiscal 1994
High Low
First Quarter (7/1-9/30/93) $2.13 $1.37
Second Quarter (10/1-12/31/93) 1.37 .50
Third Quarter (1/1-3/31/94) 1.13 .50
Fourth Quarter (4/1-6/30/94) 1.00 .50
The quoted bid prices reflect inter-dealer prices without retail
mark-ups, mark-downs, or commissions and may not necessarily reflect actual
transactions. As of August 31, 1995, there were approximately 3,935 common
stockholders.
Dividend Policy
CPT has not paid any cash dividends on its common stock within the last
two fiscal years and has no plan to pay any dividends in the foreseeable future.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(in thousands except per share data)
Selected Income Statement Data (1)(2)(3):
<TABLE>
<CAPTION>
Predecessor
Successor Company Company
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenue $31,208 $5,785 $3,739 $1,353 $12,682
(Loss) income before income
taxes 21 232 (199) (75) (20,554)
(Loss) income from operations
of discontinued subsidiaries (553) (2,201) (2,009) (1,893) -
Net gain (loss) on disposal of
discontinued subsidiaries 2,129 (6,371) 1,600 - -
(Loss) income before income taxes
and extraordinary items 1,986 (8,340) (608) (1,968) (20,554)
Gain on extraordinary item 3,527 - - - 34,257
Net income (loss) 5,513 (8,340) (608) (1,968) 13,678
Earnings (loss) per share assuming full dilution:
From continuing operations $ .23 $ .15 $ (.13) $ (.06) $ (5.60)
From discontinued operations .81 (5.67) (.28) (1.61) -
Extraordinary items 1.82 - - - 9.34
Net earnings (loss) per share $ 2.86 ($ 5.52) $ (.41) $ (1.67) $ 3.74
Weighted average common and common
equivalent shares outstanding (000) 1,935 1,510 1,510 1,174 3,668
Selected Balance Sheet Data (3):
Total current assets $ 19,951 $ 5,045 $ 6,957 $ 5,929 7,165
Total assets 61,203 8,431 14,311 8,052 7,165
Current liabilities 16,041 11,857 9,280 3,659 2,974
Long-term obligations, net of
current portion 52,339 2,500 2,448 1,502 1,147
Redeemable preferred stock - 350 350 350 -
Common shareholders equity
(deficit) (9,671) (6,472) 1,868 2,538 3,044
</TABLE>
(1) Earnings (loss) per share amounts for periods prior to fiscal 1992
have been restated to give effect to the distribution of 2,174,975 original
shares (prior to the one-for-eleven reverse stock split) pursuant to the
Bankruptcy Court order as amended on October 29, 1992. See Note 10 to the
Consolidated Financial Statements.
<PAGE>
(2) As a result of the final discontinuance of operations for Hupp as
of October 27, 1994, the consolidated statements of operations for fiscal years
ended June 30, 1994 and 1993 have been restated to reflect the results of
operations of Hupp as discontinued operations. See Note 1 to the Consolidated
Financial Statements.
(3) On April 6, 1995, an indirect, majority-owned subsidiary of the
Company acquired the business and substantially all of the assets of JLS and TCI
as discussed in Note 4 to the Consolidated Financial Statements. The acquisition
was accounted for as a purchase and the results of operations for the acquired
assets from the date of acquisition (April 6, 1995) through June 30, 1995, were
included in the Company's consolidated statement of operations for the fiscal
year ended June 30, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Significant Events
On October 27, 1994, due to continuing operating losses, Hupp's senior
lender proceeded with a secured party sale of the assets of Hupp to an unrelated
party. As a result, all operations of Hupp and its wholly-owned division DCM
were discontinued shortly thereafter. The loss from the final discontinuation of
operations has been reflected in the year-end financial statements and results
for the previous fiscal years ended June 30, 1994 and 1993 have been restated to
show the discontinuation. In addition, on July 24, 1995, a final decree was
issued by the Bankruptcy Court for the Northern District of Ohio closing the
Chapter 11 case filed by Hupp prior to the Company's acquisition of Hupp. As a
result, certain notes payable, unsecured creditor obligations and administrative
claims totaling approximately $3,527,000 were forgiven. This amount has been
recorded in the Company's consolidated statement of operations as an
extraordinary item for the period ended June 30, 1995.
On April 6, 1995, JLA, an indirect majority-owned subsidiary of the
Company, acquired the business and substantially all of the assets of JLS and
TCI as discussed in Note 4 to the Consolidated Financial Statements. JLS and TCI
were specialty manufacturers of high quality, lightweight structural steel
shapes used primarily in the manufactured housing, truck trailer and highway
safety systems industries. The results of operations for the acquired assets
from the date of acquisition (April 6, 1995) through June 30, 1995, were
included in the consolidated statement of operations for the fiscal year ended
June 30, 1995. The assets of BESCC were also contributed to JLA on the
acquisition date, and therefore, the results of operations for BESCC subsequent
to April 6, 1995 are reported as a division (Brighton) within the newly formed
subsidiary, J&L. Further information regarding the Acquisition is contained in
Form 8-K filed by the Company with the Securities and Exchange Commission on
April 21, 1995, which is hereby incorporated by reference herein.
During the fiscal year, the operations of BESCC/Brighton continued to
show improvement over the previous fiscal year. Management believes that
BESCC/Brighton's results are indicative of the general upturn in the steel
industry as a whole and their ability to retain and grow market share due to
their constant focus on product quality and customer service.
<PAGE>
Results of Operations
Revenues: The Company recorded revenues of $31,208,000 for fiscal year
1995, which includes $25,148,000 of revenues attributable to J&L Structural and
$6,060,000 attributable to BESCC/Brighton. This compares to BESCC revenues of
$5,785,000 and $3,739,000 for fiscal years 1994 and 1993, respectively,
representing 4.8% and 54.7% increases, respectively, ignoring the effects of the
Acquisition in fiscal 1995. During fiscal 1994, BESCC became a sole supplier to
a significant customer which accounts for the majority of the sales increase
between fiscal 1994 and fiscal 1993. Further increases experienced are the
result of further market penetration.
Gross Margins: Gross margins as a percentage of total revenues were
16.9%, 26.7% and 27.3% for fiscal years 1995, 1994 and 1993, respectively. Gross
margins for J&L Structural for the period ended June 30, 1995 were 14.9%, and
for BESCC/Brighton for the fiscal year ended June 30, 1995, were 25.1%. During
fiscal 1995 BESCC/Brighton experienced significant increases in raw material
costs which were only partially offset by pricing increases resulting in lower
gross margins. J&L Structural's margins were negatively impacted by
approximately $560,000 due to one-time charges relating to the Acquisition.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses totaled $3,169,000, $1,466,000 and $1,272,000 for fiscal
years 1995, 1994 and 1993, respectively. Selling, general and administrative
expenses for J&L Structural for the period from the Acquisition to June 30, 1995
totaled $1,799,000 while the same type of expenses for BESCC/Brighton and CPT
combined for the fiscal year ended June 30, 1995 totaled $1,370,000.
Approximately $500,000 of J&L Structural's selling, general and
administrative expenses related to one-time acquisition costs.
Discontinued Operations: In fiscal 1995 and 1994, the Company recorded
a loss from discontinued operations of $553,000 and $2,201,000, respectively,
and a gain and loss on the disposal of the discontinued operations of Hupp
totaling $2,129,000 and ($6,371,000), respectively. These results are
attributable to the final discontinuation of Hupp business as a result of the
secured party asset sale on October 27, 1994, and a previous decision to
discontinue the air conditioning segment of the Hupp business in February 1994.
Likewise, fiscal year 1993 has been restated to reflect the discontinuation of
Hupp's business which resulted in a loss from operations of the discontinued
business of $2,009,000.
Liquidity and Capital Resources
The Company's cash flow from operating activities totaled $3,056,000,
$368,000 and ($2,272,000) for the fiscal years ended June 30, 1995, 1994 and
1993, respectively. The significant improvement in cash flow from operations
over this period was due mainly to the discontinuance of Hupp operations and the
Acquisition.
The Company's cash flows from financing and investing activities was
comprised almost exclusively of sources and uses of cash relating to the
Acquisition. See the Company's Consolidated Statements of Cash Flows included in
the Consolidated Financial Statements.
<PAGE>
J&L has recently signed a contract for turnkey development, fabrication
and installation of a new reheat furnace by May 1996. The total estimated cost
of the project is approximately $8,100,000 of which a downpayment of $710,000
was made during September 1995. Funding for this project will be provided from
Pennsylvania Industrial Development Authority (PIDA) loans in the amount of
approximately $400,000 which are currently approved, a Capital Expenditures Line
of Credit from the Company's Senior Lender totaling $3,000,000 and working
capital. See Note 9 to the Consolidated Financial Statements.
Cash and cash equivalents totaled $972,000, $294,000 and $64,000 as of
June 30, 1995, 1994 and 1993, respectively. Although the Company's total equity
represents a deficit of approximately $9,671,000, this position is due largely
to the previous poor performance of discontinued operations and the basis
adjustment for the leveraged Acquisition during fiscal 1995 (refer to the
Statement of Charges in Shareholder's Equity (Deficit) in the Consolidated
Financial Statements). Cash flow from operations was significant during fiscal
1995, and management expects that the Company's near term capital requirements
for operating expenses and payment of current liabilities will be financed
through cash flow from operations and a Revolving Credit Facility from the
Company's Senior Lender. See Note 9 to the Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INCLUDED IN ITEM 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the directors and executive officers
of CPT as of August 31, 1995 are as follows:
Name Age Positions
Richard L. Kramer 46 Chairman of the Board, Director and Secretary of CPT
William L. Remley 44 President, Treasurer and a Director of CPT
John D. Mazzuto 45 Director of CPT
Richard C. Hoffman 47 Assistant Secretary
Mr. Kramer has served as Chairman of the Board and Secretary of the Company
since January 3, 1992. For more than the past five years, Mr. Kramer has
served as Chairman of the Board and as a director of Republic Properties
Corporation, a private real estate development firm. Since 1988, Mr. Kramer
served as Chairman of the Board of Sunderland Industrial Holdings Corporation,
a private holding company in various industrial manufacturing businesses.
Mr. Kramer is also Chairman of the Board of Weldotron Corporation, Chairman of
the Board of Texfi Industries, Inc., and Chairman of the Board and Secretary
for Mentmore Holdings Corporation ("Mentmore")
Mr. Remley has served as a Director, President and Treasurer of CPT since
January 3, 1992. Since 1988, Mr. Remley has served as Vice Chairman of
Sunderland Industrial Holdings Corporation, a private holding company in
various industrial manufacturing businesses. Mr. Remley is also Vice Chairman
and Chief Executive Officer of Weldotron Corporation; Vice Chairman, Chief
Executive Officer and President and a Director of Texfi Industries, Inc.; the
sole Director and Executive Officer of Trinity Investment Corp. ("Trinity");
the sole Director and Executive Officer of Ascott Wing, Inc.("Ascott Wing");
a Trustee for The A.J. 1989 Trust and a Director, President and Treasurer of
Mentmore.
Mr. Mazzuto has served as a Director of CPT since January 1993. Mr. Mazzuto is
Chairman of Greystone Partners which provides investment banking services
focused on clients' capital structuring or restructuring needs. Before becoming
Chairman of Greystone, Mr. Mazzuto was President and Chief Executive Officer of
North American operations of Asian Oceanic Group ("AOG"). Prior to joining AOG,
Mr. Mazzuto was a Managing Director of Corporate Finance at Chemical
Bank. Mr. Mazzuto also serves as Chairman of Communications Group, Inc.
Mr. Mazzuto is a Director of Weldotron Corporation and Texfi Industries, Inc.
Mr. Hoffman is a licensed attorney who has served as General Counsel
of the Company since January, 1995 and Assistant Secretary since July, 1995.
He is also President of InterUrban Management, Inc., a real estate brokerage and
management company in Dallas, Texas. He is currently practices law as Richard
C. Hoffman P.C. in Greenwich, Connecticut.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to Mr. William L.
Remley for the fiscal years 1993, 1994 and 1995, as the only paid executive
officer of the Company.
<TABLE>
<CAPTION>
Annual Compensation
<S> <C> <C> <C> <C>
Name and Salary Bonus Other Annual
Principal Position Year ($) ($) Compensation
(a) (b) (c) (d) (e)
William L. Remley 1995 $25,000(1) -0- -0-
President 1994 $50,000 -0- -0-
1993 $50,000 -0- -0-
</TABLE>
In fiscal 1995, no director received fees for the attendance at Company
Board meetings. However, beginning July 1995, all directors of the Company will
receive director's fees in the amount of $12,000.00 annually.
(1) Reflects the period from July 1,1994 through December 31,1994.
Mr. Remley ceased receiving compensationthereafter.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Norwest Bank Minnesota, N.A. ("Norwest") serves as escrow agent of
certain shares of the Company's Common Stock for the benefit of holders of
"Allowed Claims" and for the benefit of stockholders of CPT Corporation,
pursuant to the Reorganization Plan. As escrow agent, Norwest held approximately
353,525 shares of Common Stock for the benefit of such persons as of August 31,
1995.
The following table sets forth certain information, as of August 31,
1995, with respect to the beneficial ownership of Common Stock by each person
who is known by the Company to own beneficially more than 5% of outstanding
shares of CPT's Common Stock, by each director of CPT, and by all officers and
directors as a group:
<TABLE>
<CAPTION>
Number of Shares Percent of
Beneficially Common
<S> <C> <C>
Name Owned (1) Stock
Richard L. Kramer -0- -0-
William L. Remley -0- -0-
John D. Mazzuto -0- -0-
Ascott Wing, Inc. (2) 604,586 17.22%
Trinity Investment Corp.(3)(4) 2,072,500 59.04%
Halton House Limited(2)(4)(5) 2,677,086 76.27%
The Halton Declaration of Trust(2)(4)(5) 2,677,086 76.27%
Gary R. Siegel(2)(4)(5) 2,683,086 76.44%
All Directors and Officers as a group 2,677,086 76.27%
(4 persons including those named above)(4)(6)
</TABLE>
(1) The Persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
each of them, subject to community property laws, where applicable, and the
information contained in other footnotes to the table.
(2) The principal offices of Ascott Wing, Inc. ("Ascott") are at
1430 Broadway, 13th Floor, New York, New York 10018. Halton House Limited,
owns all of the outstanding stock of Ascott. Halton House Limited's principal
offices are located at c/o Coutts and Company (Bahamas) LTD., P.O. Box N7788,
West Bay Street, Nassau, Bahamas. William L. Remley is the sole director and
executive officer of Halton House Limited. The Halton Declaration of Trust
("Halton Trust") whose principal address is c/o Coutts and Company (Bahamas)
LTD, P.O. Box N7788, West Bay Street, Nassau, Bahamas, is the majority owner
of Halton House Limited. All powers with respect to investment voting
securities beneficially owned by Halton Trust are exercisable by Gary R.Siegel,
protector under the constituent documents of Halton Trust. Mr. Siegel's
business address is 1615 L Street, N.W., Washington, D.C. 20036. Mr. Siegel is
an attorney with Tucker, Flyer and Lewis, a professional corporation at that
address.
(3) The principal offices of Trinity are at 1430 Broadway, 13th Floor,
New York, New York 10018. Halton House Limited owns all of the outstanding stock
of Trinity (see Note 2 above). William L. Remley is the sole director and
executive officer of Trinity.
(4) Includes 2,000,000 shares that could be acquired upon exercise of
a Warrant at an exercise price of $1.00 per share.
(5) Includes shares owned by Ascott and shares subject to a Warrant
owned by Trinity (see Note 4 above).
(6) Includes shares over which Mr. Remley may be deemed to share voting
and investment power (see Notes 2 and 3 above).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 1, 1995, the Company entered into a new Credit Agreement and
Security Agreement with Trinity wherein Trinity agreed to loan the Company the
principal amount of $6,730,000 for the purpose of making a required $5,000,000
equity capital infusion to JLH in order to consummate the Acquisition of the
assets of JLS and TCI, to retire the existing Variable Rate Debenture of the
Company to Trinity in the amount of $ 900,000 dated February 5, 1993 and to
satisfy and retire certain other short-term obligations of the Company plus
accrued interest. Included within the new Credit Agreement was the following:
1. A fixed rate Debenture of the Company dated April 1, 1995 under
which the Company promises to pay Trinity, or any subsequent holder of
the Debenture, the principal sum of $6,730,000, plus accrued and unpaid
interest at the fixed rate of 13% per annum and costs provided therein,
on or before December 15, 2002.
<PAGE>
2. A Warrant Purchase Agreement dated April 1, 1995 by and between the
Company and Trinity, in which (i) CPT granted to Trinity Warrants to
purchase up to 2,000,000 shares of the common stock of the Company at
an exercise price of $ 1.00 per share, (ii) the Company made certain
representations to Trinity regarding its capitalization, the shares of
Common Stock outstanding, the authorization of the Warrant and the
continued truth and accuracy of representations of the Company in the
new Credit Agreement and Security Agreement , (iii) Trinity made
certain representations to the Company, including representations
regarding the status of the Warrant (and the underlying shares of
Common Stock, if issued) as "restricted securities" due to the
anticipated issuance of such securities pursuant to exemptions from
registration under the Securities Act of 1933, as amended, and (iv) the
Company granted Trinity certain rights to receive financial information
and reports of the Company and to inspect the assets, properties, books
and records of the Company and its subsidiaries.
3. Security Agreement dated April 1, 1995, between the Company and
Trinity in which the Company pledged all of its shares of JLH to
Trinity as collateral for the performance of its obligations under the
new Credit Agreement.
Trinity has its principal business and executive offices at
1430 Broadway, 13th Floor, New York, New York 10018. Trinity is engaged in the
investment business. William L. Remley, is the sole director and executive
officer of Trinity.
Halton House Limited, a Bahamian Corporation, owns all of the
outstanding capital stock of Trinity and Ascott Wing. Halton House Limited is a
holding company with interests in investment and
industrial/manufacturing/technology companies. William L. Remley is the sole
director and executive officer of Halton House Limited. Halton House Limited is
owned beneficially by The Halton Declaration of Trust which is a trust created
under the laws of the Bahamas. As of August 31, 1995, all powers with respect to
investment or voting securities beneficially owned by The Halton Declaration of
Trust are currently exercisable by Gary R. Siegel, protector under the
constituent documents of The Halton Declaration of Trust.
Mentmore has its principal business and executive offices at
1430 Broadway, 13th Floor, New York, New York, 10018. Mentmore engages in
investment banking and corporate management services. Mr. Kramer is Chairman of
the Board and Secretary of Mentmore. William L. Remley is a Director, President
and Treasurer of Mentmore. An investment banking fee totaling $500,000 was paid
to Mentmore by J&L in conjunction with the Acquisition.
Ascott Wing has its principal business and executive offices
at 1430 Broadway, 13th Floor, New York, New York 10018. Ascott Wing is engaged
in the investment business. William L. Remley is sole Director and Executive
Officer of Ascott Wing. The preferred stock redemption obligation to Ascott Wing
including accrued dividends through March 15, 1995, totaling $475,204 was
converted to a deferred purchase money note bearing interest at a rate of 11%
and payable interest only annually beginning March 15, 1996 and due December,
2002. Additionally, a note payable to Ascott Wing in the amount of $150,000 plus
accrued interest was repaid in conjunction with the Acquisition.
<PAGE>
The A.J. 1989 Trust is a U.S. grantor trust established for the benefit of
Mr. Kramer's children. Mr. Remley is a Trustee of the A.J. 1989 Trust.
Various advances from and a promissory note to The A.J. 1989 Trust were repaid
in conjunction with the execution of the new Credit Agreement with Trinity on
April 1, 1995.
A management agreement exists between the Company and J&L whereby the
Company or its designated affiliate provides executive management advisory
services to J&L. The contract term of the agreement is for a period of six years
and is subject to being automatically renewed annually thereafter, unless
terminated by either party to the agreement. Annual compensation to the Company
under this agreement totals $600,000 which includes out-of-pocket expenses
incurred by the Company of up to $150,000 annually. The Company exercised its
right under the agreement to designate Mentmore as the management advisory
service provider and as a result has assigned all fees the Company is entitled
to under this agreement to Mentmore. Management fee expense paid to Mentmore for
the year ended June 30, 1995 under this agreement totaled $150,000.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. Documents to be filed as part of this Report.
1. The following financial statements of the Company and the report of
its independent auditors are filed herewith:
Page of this Report
Independent Auditors' Report by LLP 26
Financial Statements
Consolidated Balance Sheets as of June 30, 1995 and 1994 27
Consolidated Statements of Operations for the Years Ended
June 30, 1995, 1994, 1993 28
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the Years Ended June 30, 1995, 1994, 1993 29
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1994, 1993 30
Notes to Consolidated Financial Statements 32
2. The following financial statement schedules of the Company and the
related reports of independent auditors are filed herewith:
Page of this Report
Independent Auditors' Report on Schedules by
Grant Thornton LLP 50
Financial Statement Schedules
I - Condensed Financial Information of Registrant 51
II - Valuation and Qualifying Accounts 52
Exhibit 11 - Computation of Earnings Per Share 53
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information required
is included in the financial statements or the notes thereto.
B. Reports on Form 8-K
Form 8-K filed by the Company on November 4, 1994 Form 8-K
filed by the Company on April 21, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Dated: October 13, 1995 CPT HOLDINGS. INC.
/s/ Richard L. Kramer
William L. Remley, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Richard L. Kramer Chairman of the Board, October 13, 1995
Richard L. Kramer Secretary and Director
/s/ William L. Remley President, Treasurer October 13, 1995
William L. Remley and Director (Principal
Executive, Accounting and
Financial Officer)
/s/ John D. Mazzuto Director October 13, 1995
John D. Mazzuto
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
CPT Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of CPT Holdings,
Inc. and Subsidiaries as of June 30, 1995 and 1994, and the related consolidated
statements of operations, changes in shareholders' equity (deficit) and cash
flows for each of the three years in the period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CPT
Holdings, Inc. and Subsidiaries as of June 30, 1995 and 1994 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Pittsburgh, Pennsylvania
September 26, 1995,
except for Note 9, to which the date is October 12, 1995.
<PAGE>
CPT Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS
<TABLE>
<CAPTION>
(in thousands of dollars)
1995 1994
<S> <C> <C>
Current assets
Cash and cash equivalents $ 972 $ 294
Receivables, net 10,770 2,211
Inventories 8,009 2,445
Other current assets 200 95
Total current assets 19,951 5,045
Property, plant and equipment, net of accumulated
depreciation of $709 and $434 36,860 1,552
Goodwill, net of accumulated amortization of $330 and $310 1,554 1,648
Deferred financing costs, net of accumulated
amortization of $81 2,218 -
Notes receivable - 186
Other assets 620 -
Total assets $ 61,203 $ 8,431
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Current portion of long-term obligations $ 2,116 $ 4,195
Accounts payable 10,368 3,186
Accrued liabilities 3,257 1,277
Accrued income taxes 300 -
Notes payable - 150
Accrued loss on sale of assets - 3,049
Total current liabilities 16,041 11,857
Long-term obligations, net of current portion 52,339 2,500
Minority interest in consolidated subsidiaries 2,494 196
Redeemable preferred stock - authorized and issued
3,500 shares of $100 par value each - 350
Common shareholders' deficit
Common stock - authorized 30,000,000 shares of $0.05 par value each;
1,510,084 shares issued and
outstanding 76 76
Capital in excess of par value 5,361 4,368
Accumulated deficit (15,108) (10,916)
Total common shareholders' deficit (9,671) (6,472)
Total liabilities and common shareholders'
deficit $ 61,203 $ 8,431
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CPT Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30,
<TABLE>
<CAPTION>
(in thousands of dollars, except share amounts)
1995 1994 1993
<S> <C> <C> <C>
Revenue
Net Sales $ 31,208 $ 5,785 $ 3,739
Costs of sales 25,929 4,238 2,717
Gross profit 5,279 1,547 1,022
Selling, general and administrative 3,169 1,466 1,272
Operating income (loss) 2,110 81 (250)
Other (income) expense:
Interest expense - net 2,070 18 83
Minority interest 26 (169) (134)
Other (income) expense, net (7) - -
Income (loss) from continuing
operations before income taxes 21 232 (199)
Income tax benefit 389 - -
Income (loss) from continuing operations 410 232 (199)
Discontinued operations
Loss from operations of discontinued subsidiaries (553) (2,201) (2,009)
Net gain (loss) on disposal of discontinued
subsidiaries, including provision of $0, $0
and $225, for operating losses during the
phase-out period 2,129 (6,371) 1,600
Income (loss) before extraordinary item 1,986 (8,340) (608)
Extraordinary item
Gain from extinguishment of debt of
discontinued operation 3,527 - -
NET INCOME (LOSS) $ 5,513 $ (8,340) $ (608)
Primary earnings (loss) per share
From continuing operations $ .27 $ .15 $ (.13)
From discontinued operations 1.04 (5.67) (.28)
From extraordinary item 2.34 - -
Total $ 3.65 $ (5.52) $ (.41)
Weighted average common shares outstanding 1,510,084 1,510,084 1,510,084
Fully-diluted earnings (loss) per share:
From continuing operations $ .23 $ .15 $ (.13)
From discontinued operations .81 (5.67) (.28)
From extraordinary item 1.82 - -
Total $ 2.86 $ (5.52) $ (.41)
Fully-diluted common and common equivalent
shares 1,934,580 1,510,084 1,510,084
The accompanying notes are an integral part of these statements.
</TABLE>
CPT Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
Years ended June 30, 1995, 1994, 1993
<TABLE>
<CAPTION>
(in thousands of dollars, except share amounts)
Equity
adjustment
Capital in from foreign
Common Stock excess of Accumulated currency
Shares Amount par value deficit translation
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1992 1,312,359 $66 $ 4,378 $(1,968) $62
Translation adjustment - - - - (62)
Net loss - - - (608) -
Issuance of additional shares at
direction of U.S. Bankruptcy
Court 197,725 10 (10) - -
Balance at June 30, 1993 1,510,084 76 4,368 (2,576) -
Net loss - - - (8,340) -
Balance at June 30, 1994 1,510,084 76 4,368 (10,916) -
Basis Adjustment for
Leveraged Acquisition
(See Note 4) - - - (9,705) -
Fair value of warrants to
the Amended Credit Agreement - - 840 - -
Fair value of warrants to
Subordinated Term Note - - 153 - -
Net income - - - 5,513 -
Balance at June 30, 1995 1,510,084 $76 $5,361 $(15,108) $ -
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CPT Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
<TABLE>
<CAPTION>
(in thousands of dollars)
1995 1994 1993
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Net income (loss)
<S> <C> <C> <C>
From continuing operations $ 410 $ 232 $ (199)
From discontinued operations 1,576 (8,572) (409)
From extraordinary item 3,527 - -
5,513 (8,340) (608)
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Minority interest in earnings of subsidiaries 26 (169) (134)
Loss (gain) on discontinued operations (2,129) 3,322 (1,600)
Gain on extinguishment of debt (3,527) - -
Depreciation and amortization 900 478 285
Deferred taxes (710) - -
Provision for restructuring, reorganization
and other unusual items - 106 29
Write-off of reorganization value in excess
of amounts allocable to identifiable assets - 960 -
Changes in assets and liabilities, net of divestiture
effects of Hupp and effects from purchase and
contribution of the assets of J&L and Brighton:
Decrease in accounts receivable 540 591 250
Decrease (increase) in inventory 1,935 870 (430)
Decrease (increase) in other current assets (128) 36 61
Increase (decrease) in accounts payable
and accrued liabilities 4,237 (386) (427)
Increase (decrease) in accrued loss
on sale of assets (3,049) 3,049 -
Increase (decrease) in other current
liabilities (552) (149) 304
Other working capital changes - - (2)
Net cash provided by (used in)
operating activities 3,056 368 (2,272)
Cash flows from investing activities:
Proceeds used to purchase the assets of
J&L Structural, Inc. (54,659) - -
Proceeds from the sale of assets of Hupp 1,934 - -
Increase in other non-current assets (72) - -
Capital expenditures (751) (146) (409)
Other changes, net - - (53)
Net acquisition of Hupp Industries, Inc. - - 4
Net cash used in investing activities (53,548) (146) (458)
</TABLE>
(CONTINUED)
<PAGE>
CPT Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended June 30,
<TABLE>
<CAPTION>
(in thousands of dollars)
1995 1994 1993
Cash flows from financing activities:
<S> <C> <C> <C>
Proceeds from issuance of long-term debt 50,000 649 900
Proceeds used to secure financing for the
Acquisition (2,277) - -
Sale of common stock of subsidiary 2,469 - -
Net borrowings under Revolving Credit Facility 3,656 - -
Payments on long-term debt (2,678) (641) (870)
Net cash provided by financing
activities 51,170 8 30
Net increase (decrease) in cash and cash equivalents 678 230 2,700)
Cash and cash equivalents:
Beginning of year 294 64 2,764
End of year $ 972 $ 294 $ 64
Supplemental Data - Cash paid during the period for:
Interest $ 650 $ 379 $ 193
Income taxes $ 21 $ - $ -
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
Reduction in equity and property, plant & equipment totaling $9,705,000 due
to basis adjustment for leveraged Acquisition.
The accompanying notes are an integral part of these statements.
<PAGE>
Page 53 of 58
CPT Holdings , Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993
NOTE 1 - BASIS OF PRESENTATION
Consolidated Accounts
The accompanying financial statements include the accounts of CPT
Holdings, Inc. and its direct and indirect majority-owned subsidiaries (the
"Company"), J&L Structural, Inc. ("J&L"), J&L Holdings Corp. ("JLH"),
Continuous Caster Corporation ("CCC") and Hupp Industries, Inc.
("Hupp.") All material intercompany transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior year amounts
to conform to the 1995 presentation.
Discontinued Operations
On February 1, 1993, the Company discontinued the operations of CPT Office
Systems ("Office Systems") and CPT Image Systems ("Image Systems"). Office
Systems was organized subsequent to June 30, 1991 in conjunction with the
Reorganization Plan discussed in Note 2. Image Systems was formed as of July
1, 1992 as part of the Company's effort to focus on imaging system products.
These two subsidiaries were engaged in the design, manufacture and sale of
document processing equipment including hardware and applicable software
used primarily in the office environment. The decision to close these
operations was made as a result of low sales volume and the inability of the
subsidiaries to provide working capital to sustain their operations. In
addition, the Internal Revenue Service issued a lien on the assets of Office
Systems and levied certain cash accounts of the subsidiary making the
continued operations of Office Systems extremely doubtful. Pursuant to the
Reorganization Plan, the assets and liabilities of the former CPT
Corporation were assumed by Office Systems with the Company retaining no
further obligations with respect to the liabilities of Office Systems.
Operating results of Office Systems and Image Systems for the period from
July 1, 1992 through February 1, 1993 are shown separately in the
accompanying consolidated statement of operations.
In February 1994, the Company discontinued the air conditioning segment of
the operations of Hupp. The decision to discontinue this segment was based
on the fact that the margin available was inadequate to achieve sustained
profitability.
On October 27, 1994, Hupp, its Senior Lender and the Company entered
into a secured party asset sale agreement under which the Senior Lender
sold to a third party, for approximately $1,780,000, their interests in
substantially all of Hupp's assets. Pursuant to a sharing arrangement,
the Company received $75,000 from the bank from these proceeds.
Additionally, the bank and the Company agreed separately upon a sharing
arrangement in all payments received on Hupp's $213,000 note receivable
in which both held perfected security interests. Under the arrangement,
the Company received a maximum of $75,000 and all remaining amounts were
retained by the bank. Subsequent to the secured party sale, Hupp's
historical operations ended, and Hupp was left with virtually no assets
from which to pay its remaining unsecured obligations, including
approximately $1,275,000 to the bank. This transaction was estimated to
result in a loss totaling $3,049,000 which was recorded as an accrued loss
on sale of assets at June 30, 1994. The actual loss incurred as a result
of the asset sale
<PAGE>
CPT Holdings , Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993
NOTE 1 - BASIS OF PRESENTATION - CONTINUED
totaled approximately $920,000. The difference between the actual and
estimated loss was due to changes in estimates with regard to certain
contingencies and changes in financial position with regard to certain
working capital items.
The consolidated statements of operations and cash flows for the fiscal
years ended June 30, 1993 and 1994 have been restated to reflect separately
the operating results of the discontinued operations of Hupp, Office
Systems and Image Systems.
Extraordinary Item
As a result of the submission of a final decree closing Hupp's Chapter 11
case (discussed further in Note 2) on July 24, 1995, certain outstanding
notes payable, unsecured creditor obligations and administrative claims
relating to this case totaling approximately $3,527,000 have been
recognized as an extraordinary gain on extinguishment of debt for the
fiscal year ended June 30, 1995. Certain accounts payable and accrued
liabilities totaling approximately $2,220,000 remain on the consolidated
balance sheet at June 30, 1995 as contingently payable liabilities. These
remaining liabilities represent those of Hupp and are not guaranteed by the
Company or any of its direct or indirect subsidiaries.
NOTE 2 - HUPP INDUSTRIES, INC.
On February 5, 1993, the Company acquired 80.1% of the common stock of Hupp
Industries, Inc. Hupp had filed a petition for reorganization under Chapter
11 of the United States Bankruptcy Court and a Plan of Reorganization
("Hupp Plan") was approved by the Bankruptcy Court for the District of Ohio
on January 8, 1993 and became effective February 8, 1993. The Company has
accounted for its acquisition of Hupp as if Hupp's Plan was effective as of
the date of purchase.
Under the provisions of SOP 90-7, Hupp adopted "fresh start" reporting as
of February 8, 1993 since its reorganization value at that date was less
than the total of all post-petition liabilities and pre-petition claims,
and holders of voting shares immediately before confirmation of the Hupp
Plan received less than 50% of the voting shares of the emerging entity.
Under this concept, all assets and liabilities were restated to reflect the
reorganization value of Hupp which approximated its fair value at the date
of reorganization.
As discussed more fully in Note 1, on October 27, 1994, the Company, Hupp
and it's primary secured lender entered into a secured party asset sale
with a third party, whereby virtually all of Hupp's operating assets were
sold to a third party for approximately $1,780,000.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. The Business
The Company's operations include two distinct business segments within
its single indirect operating subsidiary, J&L: J&L Structural and
Brighton. J&L Structural manufactures and fabricates lightweight
structural steel shapes which are distributed principally to the
manufactured housing, tractor trailer construction and ship building
industries. Brighton designs, manufactures and sells steel piercer
points which represent disposable tooling used in the production of
seamless steel tubes used in the petrochemical industry. CCC is a
majority-owned, indirect subsidiary which holds title to 38 acres of
undeveloped land adjacent to J&L in Aliquippa, Pennsylvania, which was
acquired for the development of a melt shop, as further described in
Note 4 herein.
b. Inventories
The Company's inventories are valued on a first-in, first-out basis at
lower of cost or market value.
c. Cash Equivalents
For purposes of cash flows reporting, all investments purchased with
maturities of 90 days or less are treated as cash equivalents.
d. Property and Depreciation
Property and equipment are stated at cost. Expenditures for additions,
renewals and improvements of property and equipment are capitalized,
and expenditures for repairs and maintenance and gains or losses on
disposals are included in operations. Depreciation was computed using
primarily the straight-line method over the following estimated lives:
Rental equipment and spare parts 3 - 7 years
Building and improvements 5 - 40 years
Office equipment, machinery and equipment 3 - 20 years
Transportation equipment 7 years
Land improvements 5 - 20 years
Leasehold improvements 2 - 5 years
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
e. Goodwill
The goodwill associated with acquisitions is amortized on a
straight-line basis over a period of 20 years.
On an ongoing basis, management reviews the valuation and amortization
of goodwill. As part of the review, the Company estimates the value and
future benefits of the net income generated by the related subsidiaries
to determine that no impairment has occurred.
f. Deferred Financing Costs
Amortization of deferred financing costs is charged to interest expense
on a periodic basis using a straight-line method over the average term
of the Company's senior and subordinated loan facilities with
independent lenders.
g. Foreign Currency
For those international operations whose cash flows were primarily in
their local currency, income statements are translated to U.S. dollars
using average currency exchange rates in effect during the period, and
financial position balances are translated using rates as of the end of
the accounting period. Gains and losses from translation of financial
statements of these international operations are included in
shareholders' equity.
h. Revenue Recognition
Revenue is recognized when product is shipped to dealers, distributors
and direct customers.
i. Research and Development
All product development costs are expensed as incurred. Product
development costs included in discontinued operations were $0, $268,000
and $367,000 for 1995, 1994 and 1993, respectively.
j. Insurance
J&L provides health insurance and workers compensation coverages to its
employees under separate self-insurance programs that include certain
stop-loss coverages. Insurance expense is recognized based on estimated
losses under the program.
Components of insurance expense include paid claims, incurred but not
paid claims and estimated incurred but not reported claims.
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
k. Income Taxes
The Company accounts for income taxes utilizing the asset and liability
method as prescribed by FAS No. 109 - Accounting for Income Taxes.
Deferred income taxes are recognized for the tax consequences of
temporary differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities by applying
enacted statutory tax rates applicable to future years. Deferred tax
assets are reduced by a valuation allowance , if necessary, by the
amount such benefits are not expected to be realized based upon
available evidence.
i. Earnings Per Share
The computation of primary earnings per share does not included
outstanding stock warrants as common stock equivalents due to the fact
that the average stock price for the period is below the warrant
exercise price making the warrants antidilutive.
NOTE 4 - PURCHASE AND CONTRIBUTION OF ASSETS
On April 6, 1995, J&L Acquisition Corp., a Delaware corporation ("JLA"), a
newly incorporated, indirect, majority-owned subsidiary of the Company,
acquired substantially all of the assets of J&L Structural, Inc. ("JLS")
and Trailer Components, Inc. ("TCI"), Pennsylvania corporations based in
Aliquippa, Pennsylvania, for $50 Million plus the assumption of certain
liabilities (the "Acquisition"). The Acquisition was accounted for as a
purchase effective April 6, 1995, and accordingly, at such date the Company
recorded the assets and liabilites assumed at their estimated fair values,
adjusted for the impact of the continuing residual interest of predecessor
owners. Consequently, the accompanying financial statements reflect the
results of operations and cash flows of J&L Structural from the period from
the Acquisition (April 6, 1995) to June 30, 1995. Because the Acquisition
qualifies as a highly leveraged transaction and a portion of the
predecessor ownership will remain as indirect stockholders of JLA,
application of Emerging Issues Task Force (EITF) Statement No. 88-16 -
"Basis in Leveraged Buyout Transactions" resulted in a reduction of
property, plant and equipment and common stockholder's equity in the amount
of $9,705,000. Simultaneously with the closing, JLA changed its name to J&L
Structural, Inc. ("J&L").
As part of the Acquisition, the assets of Brighton Electric Steel Casting
Company ("BESCC"), an existing subsidiary of and the direct parent of JLA,
were contributed to JLA and as of the date of acquisition operate as a
distinct division ("Brighton"). BESCC simultaneously changed its name to
J&L Holdings Corp. ("JLH"). Prior to the closing of the Acquisition, BESCC
redeemed its preferred stock from the holder thereof in consideration for
the issuance by the Company of a Deferred
<PAGE>
NOTE 4 - PURCHASE AND CONTRIBUTION OF ASSETS - CONTINUED
Purchase Money Note in the approximate amount of $475,000, said amount
equal to the stated value for the preferred stock plus the accrued
dividends thereon, bearing interest at 11% and due December 15, 2002. The
purchase price and related expenses were funded as follows: (1) a $25
Million 6-year Senior Term Loan bearing interest at prime plus 2% and
secured by a first lien on the assets of JLA; (2) $23 Million of
Subordinated Secured Notes each bearing interest at 13%, secured by a
junior lien on the assets of JLA and including a grant of warrants equal in
the aggregate to 15.3% of the common stock ownership of JLA (on a
fully-diluted basis), exercisable at $.01 per share and subject to certain
exercise restrictions; (3) a $15 Million Revolving Line of Credit bearing
interest at prime plus 1.5% having an initial term of 5 years followed by a
1 year right of renewal at the lender's discretion; (4) a capital
contribution of approximately $2.5 Million by the shareholders of JLS and
TCI in return for the issuance of common stock representing 19.8% of JLH,
which was in turn contributed to JLA; and (5) a $5 Million capital
contribution from the Company to JLH which was, in turn, contributed by JLH
to JLA.
Also as part of the Acquisition, JLA distributed as a dividend to JLH the
right (which JLA acquired from JLS) to acquire a 38-acre parcel of
undeveloped land adjacent to the JLS rolling mill in Aliquippa,
Pennsylvania. JLH, in turn, contributed the right to acquire the 38-acre
parcel to CCC in exchange for all of the common stock of CCC. Shortly
thereafter, CCC acquired title to the 38-acre parcel, using funds which JLS
had placed in escrow prior to the Acquisition.
Proforma results of continuing operations for the fiscal years ended June
30, 1995 and 1994, after giving effect to the acquisition of J&L as if it
had occurred at the beginning of each period, are as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net Sales $ 101,118 $ 80,136
Income (loss) before discontinued operations
and extraordinary items 2,000 (1,478)
Net income (loss) 7,103 (10,050)
Income (loss) per share, assuming full dilution:
From continuing operations $ 1.03 $ (.76)
From discontinued operations and
extraordinary item 2.64 (4.43)
Total $ 3.67 $ (5.19)
</TABLE>
<PAGE>
NOTE 5 - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
Accounts receivable consisted of the following at June 30:
(in thousands of dollars)
1995 1994
<S> <C> <C>
Trade receivables $ 10,593 $ 2,335
Other 505 -
11,098 2,355
Less allowance for doubtful accounts (244) (124)
Less allowance for discounts and returns (84) -
Accounts receivable, net $ 10,770 $ 2,211
</TABLE>
NOTE 6 - INVENTORIES
Inventories consisted of the following at June 30:
(in thousands of dollars)
1995 1994
Raw materials $ 2,427 $ 1,506
Work-in-process - 239
Finished goods 5,582 700
Total $ 8,009 $ 2,445
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at June 30:
(in thousands of dollars)
1995 1994
Land and land improvement $ 267 $ 45
Building 1,051 272
Machinery and equipment 35,375 1,483
Furniture and fixtures 326 186
Office equipment 192 -
Roll inventory 178 -
Construction-in-process 180 -
37,569 1,986
Less accumulated depreciation 709 434
Total $ 36,860 $ 1,552
NOTE 8 - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at June 30:
(in thousands of dollars)
1995 1994
Salaries, commissions and severance payable $ 881 $ 437
Interest 1,186 50
Property tax 42 219
Warranty expenses - 210
Outstanding Hupp liabilities 485 -
Other liabilities 663 361
Total $3,257 $ 1,277
NOTE 9 - LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
Long-term obligations consisted of the following at June 30: 1995 1994
(in thousands of dollars)
<S> <C> <C>
Senior Term Loan, $25,000,000 principal amount, interest at prime plus
2.0%, payable in monthly installments, beginning August 1, 1995, with final
payment due April 1, 2001, senior position secured by all the assets,
contracts, real property
and common stock of J&L. $ 22,000 -
Revolving Loan Facility, $15,000,000 principal amount,
interest at prime plus 1.5%, payable April 1, 2000, with a one
year renewal option, senior position secured by all the assets,
contracts, and real property and common stock of J&L. Borrowings
are based on accounts receivable trade amounts and inventory values. 3,229 -
Subordinated Term Notes, $23,000,000 principal amount, interest at the
fixed rate of 13%, payable interest only quarterly beginning June 30, 1995
through March 31, 2002 and then quarterly principal payments of $1,500,000
plus interest until due in June, 2005, subordinated position to the senior
debt with respect to securitization by all the assets, contracts, real
property and common stock of J&L. The Notes have been discounted $153,000
for financial statement reporting purposes as a result of the fair value
attributed to their related warrants (see Note 3). 23,000 -
<PAGE>
NOTE 9 - LONG-TERM OBLIGATIONS - CONTINUED
Fixed rate 13% debenture agreement with a related investment company,
$6,730,000 principal amount, payable semi-annually interest only beginning
October 1, 1995 and due December 2002, secured by the Company's stock held
in JLH. The debenture has been discounted $840,000 for financial statement
reporting purposes as a result of the fair value attributed to the related
warrants (see below). 6,730
-
Deferred purchase money note payable to a related holding company, interest
fixed at 11%, payable annually interest only
beginning March 15, 1996 and due December 2002. 475 -
Secured debt of a bank consisting of a term loan, a revolving line of
credit, pre-petition accounts payable and various other loans, interest at
prime plus 1.75%, payable in increasing monthly installments (from $17,000
in August 1993 to $37,000 in August 1997) and due January 1998, securitized
by substantially all the assets of Hupp. Borrowings are
based on eligible accounts receivable and inventory. - 4,085
Variable rate debenture agreement with a related investment company,
interest at prime plus 2%, payable interest only and due January 21, 2003,
secured by substantially all assets of the
Company. - 900
Claims of unsecured creditors of Hupp - 1,710
Total 55,434 6,695
Less-current maturities 2,116 4,195
Less-discounts on long term obligations 979 -
Long-term obligations, net $ 52,339 $ 2,500
</TABLE>
<PAGE>
NOTE 9 - LONG-TERM OBLIGATIONS - CONTINUED
At June 30, 1995, the following table sets forth the scheduled maturities
of the long-term debt of the Company (in thousands of dollars):
June 30,
1996 $ 2,116
1997 2,776
1998 3,022
1999 3,125
2000 3,487
Thereafter 40,908
$ 55,434
Included as a part of the Senior Term Loan, above, the lender is providing
a Capital Expenditure Line of Credit in the principal amount of $3,000,000.
This facility which bears interest at the same rate as the Senior Term
Loan, is available for a thirty-six month period and terminates as of April
30, 1998. At June 30, 1995, there were no outstanding borrowings under this
facility. Any borrowings made under this Line of Credit, are payable in
equal monthly installments beginning May 1, 1998 with the final payment to
be made April 1, 2001.
Under the terms of the Revolving Loan, the Company used $390,000 of its
credit availability to issue a Letter of Credit. This Letter has been
issued to an insurance company collateralizing the costs of certain
insurance programs (see Note 14).
The Senior Term Loan, Revolving Loan Facility and the Subordinated Term
Notes include certain provisions which, among other things, provide that
J&L will maintain certain financial ratios, limit the amount of annual
capital expenditures, maintain a minimum tangible net worth and limit the
amount of shareholder distributions. As of June 30, 1995, J&L was not in
compliance with the minimum net worth requirement of the loan agreements
due mainly to the application of EITF 88-16 , the effect of which was not
finalized at the time of the closing of the Acquisition. The provisions
of EITF 88-16 require that certain continuing shareholder interests be
valued at their predecessor basis rather than at fair value to the extent
of the lesser of their predecessor interest in the purchased company or
continuing interest in the acquiring company. Application of EITF 88-16
had the effect of reducing property, plant and equipment and shareholder's
equity; however, it had no cash impact to the financial statements. As a
result, on October 12, 1995, the Company's lenders have amended the
existing relevant loan agreements to ignore the effects of EITF 88-16 in
computing minimum tangible net worth effective as of June 30, 1995.
<PAGE>
NOTE 9 - LONG-TERM OBLIGATIONS - CONTINUED
On April 1, 1995, the Company entered into a Credit Agreement ("Amended
Credit Agreement") with Trinity Investment Corp. ("Trinity") whereby
Trinity agreed to lend an aggregate of $6,730,000 in order to repay and
satisfy the following, as well as to fund a $5,000,000 capital contribution
to JLH:
a) variable rate debenture in the original principal amount of
$900,000 together with accrued interest thereon totaling
approximately $185,000;
b) certain intercompany advances plus accrued interest totaling
approximately $270,000;
c) promissory note payable to The A.J. 1989 Trust which
originated in February 1994 in the original principal amount
of $200,000 together with accrued interest thereon totaling
approximately $22,000; and
d) certain non-interest bearing intercompany advances from The
A.J. 1989 Trust totaling approximately $150,000.
Additionally, as part of the Amended Credit Agreement, a stock warrant
purchase agreement was executed whereby Trinity was issued 2,000,000
warrants to purchase the same number of common stock shares of the Company
at an exercise price of $1 per warrant for a period of ten years. These
warrants have been valued at $840,000 as of the date of issuance utilizing
the Black Scholes option pricing model. The value of the warrants has been
recorded as an increase in additional paid-in capital of the Company.
On February 8, 1993, the Company entered into a Credit Agreement (the
"Credit Agreement") with Trinity, Trinity agreed to loan the Company the
principal amount of $900,000 for the purposes of making the Hupp
acquisition. Included within the Credit Agreement is a variable rate
debenture agreement, a warrant purchase agreement and a security agreement.
An aggregate of 302,000 warrants for the purchase of common stock of the
Company at an exercise price of $1.25 per warrant were issued in
conjunction with the Credit Agreement. These warrants were irrevocably
cancelled without consideration by Trinity in March of 1995.
The sole director and executive officer of Trinity and a Trustee for The
A.J. 1989 Trust is also the president and executive officer of the Company.
On March 15, 1995, BESCC redeemed its preferred stock from Ascott Wing,
Inc., a related party, in consideration for the issuance by the Company of
a Deferred Purchase Money Note in the approximate amount of $475,000, said
amount equal to the stated value for the preferred stock plus the accrued
dividends thereon.
<PAGE>
NOTE 9 - LONG-TERM OBLIGATIONS - CONTINUED
BESCC entered into a loan for $150,000 with a related party, which was
repaid at the time of the J&L acquisition. In addition, BESCC had an unused
line of credit with PNC Bank in the amount of $350,000 at June 30, 1994.
This credit facility has been terminated as a result of the J&L
acquisition.
Hupp had secured debt consisting of a term loan and a revolving line of
credit. The term loan and revolver represents two facilities for borrowings
pursuant to a credit and security agreement with a bank which originally
expired in January, 1998. Interest under both facilities was prime (7-1/4%
at June 30, 1994) plus 1-3/4% and is payable monthly. The loans are
collateralized by substantially all of Hupp's assets. As discussed more
fully in Note 1, on October 27, 1994, the Company and Hupp entered into a
secured asset sale with a third party, whereby proceeds of approximately
$1,705,000 were used to reduce the Hupp-related financial institution debt.
NOTE 10 - INCOME TAXES
At June 30, 1995, the provision for income taxes consisted of the
following:
Federal income tax provision $ 135,000
State income tax provision 236,600
Deferred tax provision (760,000)
Total $ (388,400)
The effective income tax rate on income from continuing operations differs
from the statutory federal income tax rate for the fiscal year ended June
30, 1995, as follows:
(in thousands)
Income tax at U.S. Federal statutory rate of 34% $ 7
Acquisition expenses 199
State income taxes 165
Utilization of net operating loss carryforwards and other (760)
Income tax benefit $ (389)
There was no income tax expense for the years June 30, 1994 or 1993 due to
the absence of both financial statement and tax return income.
<PAGE>
NOTE 10 - INCOME TAXES - CONTINUED
Management has calculated its net operating loss carryforward at June 30,
1995 to be approximately $82 million. This amount has been determined with
due regard to the Internal Revenue Code provisions pertaining to net
operating losses of companies reorganized under the Federal bankruptcy
laws. Such laws require that the net operating losses be reduced for
various events occurring in the bankruptcy reorganization, and for two
years thereafter. Consequently, the amount of net operating loss
carryforward cannot yet be determined with total accuracy. Such losses can
be carried forward and expire in the tax years ending June 30, 2002 through
2009.
Temporary differences between financial statement carrying amounts and tax
bases of assets and liabilities at June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Current deferred taxes:
<S> <C>
Assets
Bad debt allowance $ 87,000
Other 8,000
Valuation allowance (95,000)
Total current deferred tax asset $ -0-
Non-current deferred taxes:
Assets
Net operating loss carry forward $ 29,000,000
Basis difference in tax assets acquired 5,000,000
Valuation allowance (34,000,000)
Total non-current deferred tax asset $ -0-
</TABLE>
Management has recorded a valuation allowance against the deferred tax
assets due to their belief that recovery of these future deductions against
future taxable income is less than likely.
NOTE 11 - CAPITAL STOCK
a. Common Stock
All information regarding the common stock of the Company (including per
share amounts) reflects a 1-for-11 reverse split of the Class A Common
Stock and Class B Common Stock effected on September 11, 1992 and a
combination of the post-split Class A Common Stock and Class B Common Stock
into Common Stock, which was effected on September 29, 1992. In addition,
pursuant to an order of the U.S. Bankruptcy Court entered in October 1992
discussed above, the
<PAGE>
NOTE 11 - CAPITAL STOCK - CONTINUED
Company issued an additional aggregate of 197,725 shares of common stock.
The shares outstanding after giving effect to these events total 1,510,084.
b. Preferred Stock
The preferred stock redemption obligation including accrued dividends
through March 15, 1995 totaling $475,204 was converted to a deferred
purchase money note payable to a related holding company (see Note 9).
c. Warrants
Warrants for 2,000,000 shares of Company common stock were issued to
Trinity in conjunction with the Amended Credit Agreement executed on April
1, 1995. These warrants are exercisable for a period of ten years at $1.00
per share.
Warrants for 302,000 shares of Company common stock were issued to Trinity
in conjunction with the Credit Agreement executed on February 8, 1993.
These warrants were irrevocably cancelled without consideration by Trinity
in March 1995.
NOTE 12 - BENEFIT PLANS
J&L maintains a defined contribution (money purchase) plan for
substantially all employees whereby J&L makes contributions, at designated
rates, based on hours worked. All contributions required under the plan
have been funded as of June 30, 1995. Pension expense for the period from
the date of Acquisition (April 6, 1995) to June 30, 1995, was approximately
$ 90,000.
J&L participates in the National Industrial Group Pension Plan (NIGPP)
which is a multi-employer pension plan covering all employees of Brighton's
collective bargaining unit. All contributions required under the plan have
been funded as of June 30, 1995. A withdrawal from the plan would trigger
an obligation to the plan for a portion of the unfunded benefit obligation.
Pension expense for the year ended June 30, 1995, was approximately
$39,000.
J&L provides a profit sharing plan for substantially all employees. The
amount available for profit sharing is based on a return on sales formula
using defined levels of pretax income. For those employees compensated
under terms of collective bargaining agreements, distributions are
calculated and paid quarterly. For other eligible employees, calculations
and distributions are made at J&L's fiscal year end. Such amounts have been
reflected as current liabilities in the accompanying balance sheet. Profit
sharing expense for the period from the date of Acquisition (April 6, 1995)
to June 30, 1995, was approximately $189,000.
<PAGE>
NOTE 12 - BENEFIT PLANS - CONTINUED
J&L also maintains separate 401(k) or salary deferral plans for
substantially all of its employees. Participation in these plans is based
on hours of service. Both plans provide for employee contributions up to
20% of wages subject to certain adjustments. The plan associated with the
collective bargaining agreement provides for discretionary company
contributions. For the period ended June 30, 1995, no employer
contributions had been made.
In connection with its collective bargaining agreement with the Industrial
and Allied Employees Union Local No. 73, (the "Union"), Hupp participated
in a multi-employer defined benefit pension plan. The plan covers all of
Hupp's employees who are members of the Union. Pension expense approximated
$99,000, $38,000 and $33,000 for the fiscal years ended June 30, 1995, 1994
and 1993, respectively. As a result of the secured party asset sale on
October 27, 1994, described in Note 1, Hupp was deemed to have withdrawn
from the plan. This withdrawal triggered a demand for payment of withdrawal
liability by the Union (see Note 13).
Hupp had a profit-sharing plan covering all employees not covered by a
collective bargaining agreement. Under this plan, eligible employees were
permitted to defer a portion of their gross compensation up to a maximum
amount as provided for by the plan or pursuant to Section 401(k) of the
Internal Revenue Code. Hupp matched a portion of each employee's
contribution subject to plan limitations. Contributions by Hupp
approximated $11,000 for the year ended June 30, 1994 and $10,000 for the
period February 8, 1993 through June 30, 1993. In conjunction with the
secured party asset sale and discontinuance of Hupp operations, the plan
has been terminated and final distributions to participants have occurred.
The Company has an Employee Savings and Investment Plan to which eligible
employees (as defined) of CPT Office Systems, Inc. may contribute between
1% and 15% of their annual compensation. The Company will contribute to the
Plan, on behalf of the employee, up to 25% of the first 3% of the
employee's payroll deduction contributions. Contributions totaled $-0-,
$-0- and $3,000 for 1995, 1994 and 1993, respectively. The Company also has
an Employee Stock Ownership Trust (ESOP) for the benefit of all CPT Office
Systems, Inc. domestic employees. The Company's annual contribution is at
the discretion of the Board of Directors and is not to exceed 5% of
eligible employee salaries. No contributions were made for 1995, 1994 or
1993. On July 24, 1990, the Board of Directors authorized an amendment to
the ESOP which, among other things, limits participation to those employees
and former employees who were participating as of June 30, 1990 and
provides for no additional contributions to the Trust by the Company. As a
result of the discontinuance of CPT Office Systems, Inc., the Company is in
the process of terminating these plans.
<PAGE>
NOTE 13 - RENTAL COMMITMENTS
Rental expense on operating leases which extended beyond a period of one
year was $512,000 and $159,000, for fiscal years 1994 and 1993
respectively.
The Company currently has no significant operating lease commitments which
extend beyond a period of one year.
NOTE 14 - LITIGATION, COMMITTMENTS AND CONTINGENCIES
The Industrial and Allied Employees Union Local No. 73 Pension Plan (the
"Plan") issued a claim for payment of withdrawal liability totaling
approximately $870,000 under Section 4219 of ERISA as against Hupp, The
Company and all "controlled group" members, as a result of Hupp's cessation
of contributions to the Plan following the discontinuance of Hupp's
business in October 1994. The Company believes that it has meritorious
defenses against this claim, and in order to preserve the right to
challenge the claimed liability, the Company has been making monthly
installment payments to the plan of approximately $25,000 since March 1995.
The Company has recorded an accrual totaling $200,000 as of June 30, 1995
in accordance with the requirements of Financial Accounting Standards Board
Statement No. 5 - Accounting for Contingencies. Management believes that
the effect of the ultimate resolution of this claim will not have a
material adverse impact on the financial position or results of the
Company.
The Company is a party to several lawsuits arising in the ordinary course
of its business. The Company's management and legal counsel believe that
there are valid defenses to the claims being asserted. While the Company's
ultimate liability with respect to these lawsuits cannot be determined at
this time, management believes the resolution thereof will not have a
materially adverse effect on the financial position or results of the
Company.
J&L's workers compensation insurance program provides for self insurance
with stop-loss protection. Under this arrangement, for the policy year
November 1993-1994, J&L was required to issue a $390,000 letter of credit
in the name of the insurance company. J&L is financially responsible for
the face value of this letter of credit. The face value of this letter of
credit reduces the availability under the Revolving Line of Credit facility
described in Note 9. For the policy year November, 1994-1995, J&L elected
to place on deposit with the insurance company an amount equal to $330,000.
On June 30, 1995, approximately $266,000 remained on deposit with the
insurance company, and is reflected as an Other Asset in the accompanying
balance sheet.
J&L has signed a contract for turnkey development, fabrication and
installation of a new reheat furnace. The total estimated cost of the
project is approximately $8,100,000 of which a downpayment totaling
$710,000 was made during September 1995. Project completion is estimated to
occur in May 1996.
<PAGE>
NOTE 15 - RELATED PARTY TRANSACTIONS
A management agreement exists between the Company and J&L whereby the
Company or its designated affiliate provides executive management advisory
services to J&L. The contract term of the agreement is for a period of six
years and is subject to being automatically renewed annually thereafter,
unless terminated by any party to the agreement. Annual compensation to the
Company under this agreement totals $600,000 which includes out-of-pocket
expenses incurred by the Company of up to $150,000 annually. The Company
exercised its right under the agreement to designate Mentmore Holdings
Corporation ("Mentmore") as the management advisory service provider and as
a result has assigned all fees the Company is entitled to under this
agreement to Mentmore. Management fee expense paid to Mentmore for the year
ended June 30, 1995 under this agreement totaled $150,000.
Mentmore engages in investment banking and corporate management services.
An investment banking fee totaling $500,000 was paid to Mentmore by J&L in
conjunction with the Acquisition. Richard L. Kramer is Chairman of the
Board and Secretary of Mentmore. William L. Remley is a director and
President of Mentmore.
The President and Treasurer of the Company is also the sole director and
executive officer of Trinity, a sole director and executive officer of
Ascott Wing, Inc. and a Trustee for The A.J. 1989 Trust. Various lending
and stock purchase warrant agreements have been executed by the Company
with Trinity (see Notes 9 and 11). Various loans to the Company had been
made by The A.J. 1989 Trust, and a Deferred Purchase Money Note exists in
consideration for BESCC preferred stock redeemed on March 15, 1995 (see
Note 9).
Long-term employment contracts exist with three executives at J&L, formerly
owners of JLS. These employment contracts extend for five year periods each
through March , 2000.
NOTE 16 - SEGMENT INFORMATION
The Company's continuing operations include two distinct business segments
within its single operating subsidiary, J&L. J&L Structural manufactures
and fabricates lightweight structural steel shapes which are distributed
principally to the manufactured housing, tractor trailer construction and
ship building industries. Brighton designs, manufactures and sells steel
piercer points which represent disposable tooling used in the production of
seemless steel tubes used in the petrochemical industry. The remaining
operations of Hupp were discontinued on October 27, 1994, as a result of a
secured party sale of all of its assets (see Note 1). Results of operations
for Hupp have been included in discontinued operations for all fiscal years
presented. Hupp manufactured heating, ventilating and air conditioning
equipment used primarily in commercial applications and fractional
horsepower electrical motors and mobile products used primarily in the
heavy duty and off-road truck markets. The Company had operated in two
additional business
<PAGE>
NOTE 16 - SEGMENT INFORMATION - CONTINUED
segments, CPT Office Systems and CPT Image Systems, which were discontinued
during 1993. These discontinued subsidiaries had operated in the
information handling and communications business. CPT Corporation (the
predecessor company) had operated in the information technology business
consisting of proprietary software and hardware in the word processing
business and the imaging technology business. Financial information for
continuing operations by business segment for the fiscal years ended June
30, is as follows:
<TABLE>
<CAPTION>
(in thousands of dollars)
1995 1994 1993
Sales to unaffiliated customers:
<S> <C> <C> <C>
BESCC/Brighton $ 6,060 $ 5,785 $ 3,739
J&L Structural 25,148 - -
Total $ 31,208 $ 5,785 $ 3,739
Income (loss) from continuing operations:
CPT Holdings, Inc. $ (1,094) $ (476) (674)
BESCC/Brighton 769 708 475
J&L Structural 346 - -
Income (loss) from continuing
operations before income taxes 21 232 (199)
Income tax benefit 389 - -
Total $ 410 $ 232 $ (199)
Identifiable assets:
CPT Holdings, Inc. $ 436 $ 17
BESCC/Brighton 3,299 3,512
J&L Structural 57,120 -
Continuous Caster Corp. 348 -
Discontinued operations (Hupp) - 4,902
Total $ 61,203 $ 8,431
</TABLE>
BESCC/Brighton's revenue was generated by five, five and four customers
that comprised 73%, 82% and 69% of its total revenue in 1995, 1994 and
1993, respectively.
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
CPT Holdings, Inc. and Subsidiaries
In connection with our audit of the consolidated financial statements of CPT
Holdings, Inc. and Subsidiaries referred to in our report dated September 26,
1995, which is included in the 1995 Form 10-K, we have also audited Schedules
I & II and Exhibit 11 as of and for the period ended June 30, 1995. In our
opinion, these schedules present fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Pittsburgh, Pennsylvania
September 26, 1995,
except for Note 9, to which the date is October 12, 1995
<PAGE>
CPT HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
June 30,
($000's)
Balance Sheets
<TABLE>
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Cash and cash equivalents $ 436 $ 17
Note receivable - 200
Investment in subsidiary 7,120 3,400
Total assets $ 7,556 $ 3,617
Liabilities and Shareholders' Equity
Accrued liabilities $ 501 $ 63
Due from subsidiaries - 393
Long-term obligations 6,379 900
Accounts payable 35 538
Common stock: authorized 30,000,000 shares
at $0.05 par value each; 1,510,084 shares
issued and outstanding 76 76
Capital in excess of par value 5,361 4,368
Accumulated deficit (4,796) (2,721)
Total shareholders' equity 641 1,723
Total liabilities and shareholders' equity $ 7,556 $ 3,617
Statements of Cash Flows
Cash flows from operating activities $ 1,185 $ 493
Cash flows from investing activities (4,672) -
Cash flows from financing activities 5,000 -
Net loss (1,094) (476)
Increase (decrease) in cash and cash equivalents 419 17
Cash and cash equivalents
Beginning of year 17 -
End of year $ 436 $ 17
Statements of Loss
Other income $ (7) $ (259)
Interest expense (income), net 470 (2)
Operating expenses 631 737
Net loss $ 1,094 $ 476
</TABLE>
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS For the years ended June 30, 1995,
1994 and 1993
($000's)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C>
------------------------------- ----------------- --------------- --------------------- -------------------- --------------
Description Balance at Charges to Retirements (1) Other charges Balance
beginning of costs & add (deduct) at end of
period expenses period
------------------------------- ----------------- --------------- --------------------- -------------------- --------------
1995
Allowance for Doubtful
Accounts in Accounts
Receivable $ 124 $ 67 $ 161 $ 214 $ 244
Allowance for Sales
Discounts and Claims $ - $ - $ 19 $ 103 $ 84
Contigency Reserve $ - $ 200 $ - $ - $ 200
1994
Allowance for Doubtful
Accounts In Accounts
Receivable $ 106 $ 18 $ - $ - $
124
1993
Allowance for Doubtful
Accounts in Accounts
Receivable $ 2,028 $ 106 $ - $ (2 $ 106
,028)(2)
------------------------------- ----------------- --------------- --------------------- -------------------- --------------
</TABLE>
(1) Represents write-offs of uncollectable accounts or realized sales discounts
and claims.
(2) Represents write-offs of uncollectable accounts of discontinued operations
<PAGE>
EXHIBIT 11
CPT Holdings, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
Years ended June 30,
<TABLE>
<CAPTION>
(in thousands of dollars, except share amounts)
1995 1994
1993
<S> <C> <C> <C>
Income (loss) before extrardinary items $ 1,986 $ (8,340) $ (608)
Gain on extraordinary items 3,527 - -
Net income (loss) $ 5,513 $ (8,340) $ (608)
Primary Shares:
Weighted average number of shares
outstanding during period 1,510,084 1,510,084 1,510,084
Shares issuable on exercise of all dilutive
stock warrants, less shares assumed
repurchased from proceeds - -
- -
Total 1,510,084 1,510,084 1,510,084
Primary earnings (loss) per share before
extraordinary items $ 1.31 $ (5.52) $ (.41)
Primary earnings per share on
extraordinary items 2.34 - -
$ 3.65 $ (5.52) $ (.41)
Assuming Full Dilution:
Weighted average number of shares
outstanding during period 1,510,084 1,510,084 1,510,084
Shares issuable on exercise of all dilutive
stock warrants, less shares assumed
repurchased from proceeds 424,496 - -
Total fully-diluted common
and equivalent shares 1,934,580 1,510,084 1,510,084
Earnings (loss) per share before extraordinary
items assuming full dilution $ 1.04 $ (5.52) $ (.41)
Earnings per share on extraordinary
items assuming full dilution 1.82 - -
Net earnings (loss) per share assuming
full dilution $ 2.86 $ (5.52) $ (.41)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jun-30-1995
<PERIOD-END> Jun-30-1995
<CASH> 972
<SECURITIES> 0
<RECEIVABLES> 11,098
<ALLOWANCES> 328
<INVENTORY> 8,009
<CURRENT-ASSETS> 19,951
<PP&E> 37,569
<DEPRECIATION> 709
<TOTAL-ASSETS> 61,203
<CURRENT-LIABILITIES> 16,041
<BONDS> 0
<COMMON> 76
0
0
<OTHER-SE> (9,747)
<TOTAL-LIABILITY-AND-EQUITY> 61,203
<SALES> 31,208
<TOTAL-REVENUES> 31,208
<CGS> 25,929
<TOTAL-COSTS> 25,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67
<INTEREST-EXPENSE> 2,070
<INCOME-PRETAX> 21
<INCOME-TAX> (389)
<INCOME-CONTINUING> 410
<DISCONTINUED> (1,576)
<EXTRAORDINARY> (3,527)
<CHANGES> 0
<NET-INCOME> 5,513
<EPS-PRIMARY> 3.65
<EPS-DILUTED> 2.86
</TABLE>
