2
<PAGE>
- --------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the ------ quarterly period ended: March 31, 1995
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 10018
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (212)382-1313
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 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 May 1, 1995, 1,510,084 shares of Common Stock were issued and outstanding
<PAGE>
- ----------------------------------------------------------------------------
<PAGE>
CPT HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations (Unaudited):
Three Months and Nine Months Ended March 31, 1995 and
March 31, 1994 3
Consolidated Balance Sheets (Unaudited)
March 31, 1995 and June 30, 1994 4
Consolidated Statements of Cash Flows (Unaudited):
Three Months and Nine Months Ended March 31, 1995 and
March 31, 1994 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial 9
Condition
II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: Financial Statements
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
---- ---- ---- ----
(as restated, See Note 2) (as restated, See Note 2)
<S> <C> <C> <C> <C>
Net sales $1,626 $1,596 $4,509 $4,063
Cost of sales 1,210 1,095 3,406 2,884
----- ----- ----- -----
Gross profit 416 501 1,103 1,179
Operating expenses:
Selling, general and administrative 265 573 867 1,183
Interest expense 25 3 102 18
Minority interest 31 73 95
Other income-net (1) (67) (5) (192)
------- -------- ------- -----
Total operating expenses 289 540 1,037 1,104
----- --- ----- -----
Income (loss) before income taxes 127 (39) 66 75
Provision for income taxes 10 32 72 111
------ ------- ------- ------
Income (loss) from continuing operations 117 (71) (6) (36)
Income (loss) from discontinued operations (171) 1,577 (871)
------- ----- ----- ----
Net income (loss) $ 117 $ (242) $1,571 $ (907)
====== ======== ====== =======
Income (loss) per share:
From continuing operations $ 0.08 $ (0.05) $ - $ (0.02)
From discontinued operations (0.11) 1.04 (0.58)
-------- ------ ---- ------
Total income (loss) per share $ 0.08 $(0.16) $ 1.04 $ (0.60)
====== ======= ====== ========
Weighted average common shares outstanding 1,510,084 1,510,084 1,510,084 1,510,084
See notes to unaudited consolidated financial statements
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands, except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
ASSETS
<S> <C> <C>
Cash $ 175 $ 294
Receivables - net of allowances 649 2,211
Inventories 734 2,445
Other current assets 7 95
---------- -------
Total current assets 1,565 5,045
Goodwill, net 1,577 1,648
Notes receivable 186
Property, plant and equipment, net 362 1,552
Other 200
--------
Total assets $ 3,704 $ 8,431
======= ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 150 $ 150
Current portion of long-term obligations 3,168 4,195
Accounts payable 2,651 3,186
Accrued liabilities 1,117 1,277
Accrued loss on sale of assets 3,049
----------- -------
Total current liabilities 7,086 11,857
-------- ------
Long-term obligations 900 2,500
Minority interest 269 196
Redeemable preferred stock-authorized and
issued 3,500 shares of $100 par value each 350 350
Common shareholders' equity:
Common stock authorized 30,000,000 shares
of $.05 par value each, 1,510,084 shares
issued and outstanding 76 76
Capital in excess of par value 4,368 4,368
Accumulated deficit (9,345) (10,916)
------- ------
Total common shareholders' deficit (4,901) (6,472)
------- -------
TOTAL LIABILITIES AND COMMON
SHAREHOLDERS' EQUITY $ 3,704 $ 8,431
======= =======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
---- ---- ---- ----
(as Restated, See Note 2) (as Restated, See Note 2)
Cash flows from operating activities:
Income (loss):
<S> <C> <C> <C> <C>
From continuing operations $ 117 $ (71) $ (6) $ (36)
From discontinued operations (171) 1,577 (871)
------- ----- ----- -----
Net loss 117 (242) 1,571 (907)
Adjustments to reconcile net loss to net cash
provided (used) by operations:
Minority interest in earnings of subsidiaries (13) 73 (140)
Depreciation and amortization 33 151 197 451
Gain from sale of Hupp Assets (1,577)
Change in current assets and liabilities,
net of the effects from the sale of Hupp Assets :
Decrease in receivables (132) (594) 1,276 359
(Increase)decrease in inventory (18) 109 180 571
(Increase)decrease in other current assets 51 (27) (92) 34
(Increase)decrease in other assets (150) (200)
Increase (decrease) in accounts payable and
accrued expenses 200 130 (226) (1034)
Decrease in other current liabilities (552)
------ ------- --------
Cash provided (used) by operating activities 101 (486) 650 (666)
--- ----- ------- -------
Cash flows from investing activities:
Proceeds from sale of Hupp Assets 1,934
Capital expenditures (13) (32) (25) (88)
Collections on notes receivable 17 54
------ ----- ------- ------
Cash provided (used) by investing activities (13) (15) 1,909 (34)
--------- ----------- ----- -------
Cash flows from financing activities:
Payments on long term obligations 2,678
Borrowings from banks 494 695
--- --------- ---
Cash provided (used) by financing activities 494 (2,678) 695
--- ------- ---
Net increase (decrease) in cash 88 (7) (119) (5)
Cash:
Beginning of period 87 66 294 64
----- ----- ------ -----
End of period $ 175 $ 59 $ 175 $ 59
--- -- ------ ===== ====== ===== ======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared on the basis of generally accepted accounting principles and, in
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. The results of operations for any interim
period are not necessarily indicative of the results for the year. These
unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1994.
2. Discontinued Operations
During the fourth quarter of fiscal 1994, the Company chose to discontinue
Hupp Industries, Inc.'s ("Hupp") air conditioning operations involving the
manufacture and sale of mini-split and SCAV commercial air conditioning
units. This decision resulted from the Company's inability to earn an
adequate gross profit on this segment of its business, coupled with a lack
of market acceptance for the Company's new SCAV product line.
Additionally, as a result of the expiration of a forbearance agreement with
Hupp's secured lender on July 15, 1994 and the inability to renegotiate an
extension of the same, the lender exercised its right under the Credit and
Security Agreement and held a third party secured sale of substantially all
of Hupp's assets on October 27, 1994. Proceeds from this sale approximated
$1.9 million and an estimated loss from the October 27th secured party sale
of assets of $3.05 million, which was reflected in discontinued operations,
was recorded as of June 30, 1994. A realized loss of approximately $1.5
million resulted in recognition of a credit of $1.58 million at the time of
sale. Subsequent to this sale, Hupp was left with virtually no assets from
which to pay its remaining unsecured and under-secured obligations,
including creditors from the previous Hupp bankruptcy case, which
approximated $5.8 million at March 31, 1995. The consolidated statements of
operations for the three and nine months ended March 31, 1994 have been
restated to reflect separately the operating results of the discontinued
operations. Results for Hupp for the three months ended September 30, 1994,
included in the results for the nine months ended March 31, 1995, have also
been restated to reflect separately the operating results of the
discontinued operations.
3. Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
<S> <C> <C>
Raw materials $ 217 $ 1,506
---------- --------
Work-in-process 0 239
Finished goods 517 700
-------- ------
Total $ 734 $ 2,445
======= =======
</TABLE>
<PAGE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
<S> <C> <C>
Payments to tax authorities $ 110 $ 110
--------- --------
Loan payable to financial institutions at
prime plus 1.75% 980 3,885
--- -----
Secured loan to investment co. 900 900
at prime plus 2%
Unsecured creditor claims 2,078 1,800
--------- -------- ------ --------- -------
4,068 6,695
Less: current portion of long-term 3,168 4,195
obligations --------- -------
$ 900 $ 2,500
========= ======== -======== -=======
</TABLE>
5. Litigation and Contingencies
On June 24, 1992, the Company won a judgment in U.S. Bankruptcy Court
against Daewoo International (America), the Company's former landlord for
office space in New York City, based on the Company's claim for damages due
to its inability to sublet the office space. On July 15, 1992, a second
amended judgment was entered correcting a mathematical error, and the
judgment was increased to $864,000. This judgment was appealed by Daewoo
International (America) in United States District Court and on February 23,
1993, the United States District Court reversed the U.S. Bankruptcy Court
decision and awarded Daewoo $552,532. The Company appealed the District
Court decision to the U.S. Court of Appeals. On April 4, 1994 the U.S.
Court of Appeals issued its opinion reversing the decision of the United
States District Court and remanding the matter to the District Court for
purposes of amending the order to make clear that the judgement entered in
favor of Daewoo represents Daewoo's allowed claim in the Company's
bankruptcy and does not represent a monetary award to Daewoo. Daewoo's
claim will be satisfied by the issuance of shares of the Company now held
in escrow and will not result in any cash payment.
6. Capital Stock
All information regarding the Common Stock of CPT (including per share
amounts) reflects a 1-for-11 reverse split of CPT's 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, CPT issued
an additional aggregate of 197,725 shares of common stock. All information
regarding the Common Stock of CPT (including per share amounts) has been
retroactively restated to reflect, as of the beginning of each period
presented, the reverse split, the combination of the Class A and Class B
Common Stock and the additional shares issued at the direction of the
Bankruptcy Court. The shares outstanding, after giving effect to these
events, total 1,510,084.
7. Subsequent Event - Acquisition 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 which were satisfied at closing (the "Acquisition").
Simultaneously with the closing, JLA changed its name to J&L Structural,
Inc. JLS is 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 provides secondary
services to JLS. Current management of JLS will remain with JLA under long
term employment agreements.
<PAGE>
As part of the Acquisition, the asset's of Brighton Electric Steel Casting
Company ("Brighton"), an existing subsidiary of the Company and the direct
parent of JLA, were contributed to JLA and Brighton changed its name to J &
L Holdings, Inc.("JLH"). Prior to the closing of the Acquisition, Brighton
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 and the accrued dividends thereon, bearing interest at
11 percent and due December 15, 2002.
The purchase price and related expenses were funded as follows: (1) a $22
Million 6-year Senior Term Loan bearing interest at prime plus 2
percent and secured by a first lien on the assets of JLA; (2) $23 Million
of Subordinated Secured Notes each bearing interest at 13 percent, secured
by a junior lien on the assets of JLA and including a grant of warrants
equal in the aggregate to 15.3 percent of the common stock ownership of
JLA, subject to certain exercise restrictions; (3) a $15 Million Revolving
Line of Credit provided by seniored secured lender and bearing interest at
prime plus 1.5 percent 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 in
return for the issuance of common stock representing 19.8 percent 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.
The $5 Million equity capital infusion from the Company was loaned to the
Company by Trinity Investment Corp. as part of a larger borrowing in the
approximate total amount of $ 6.7 Million (the "Credit Agreement"), the
additional borrowings being used to retire the existing Variable Rate
Debenture of the Company to Trinity in the amount of $ 900,000 dated
February 5, 1993 and certain other short-term obligations of the Company
plus accrued interest. The Credit Agreement is evidenced by a Debenture of
the Company to Trinity bearing interest at the fixed rate of 13% per annum
and due December 15, 2002. As additional consideration for the Credit
Agreement, the Company granted 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.
Pro forma results of operations for the nine months ended March 31, 1995, and
1994, after giving effect to the Acquisition 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 $68,224 $52,615
Loss before taxes and discontinued operations (3,572) (4,678)
Net loss (1,995) (5,549)
------- -------
Income (loss) per share:
From continuing operations $ (2.36) $ (3.10)
From discontinued operations 1.04 (0.57)
------ ------
Total $ (1.32) $ (3.67)
========= =========
</TABLE>
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
CPT Holdings, Inc. ("CPT" or the "Company"), formerly known as CPT Corporation,
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 (the "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.
Brighton Electric Steel Castings Company's ("Brighton") net sales for the three
and nine months ended March 31, 1995 totaled $1,626,000 and $4,509,000,
respectively, representing increases of 1.9% and 11.0% over prior year's sales
of $1,596,000 and $4,063,000 for the same respective periods. Gross profit
decreased 17.0% and 6.4% to $416,000 and $1,103,000 for the three and nine
months ended March 31, 1995, respectively, compared with gross profit of
$501,000 and $1,179,000 for the same respective periods in the prior year. Gross
profit rates, as a percent of sales, were 25.6%, 31.4%, 24.5% and 29.0% for the
three and nine months ended March 31, 1995 and 1994, respectively. The decline
in the gross profit rates resulted from a combination of product mix changes and
raw material price increases that were absorbed by Brighton. Net income before
taxes increased to $187,000 and $513,000 for the three and nine months ended
March 31, 1995, respectively, representing increases of 23.0% and 9.1% over the
$152,000 and $470,000 earned during the three and nine months ended March 31,
1994, respectively. The increases resulted from Brighton's ability to control
selling, general and administrative expenses.
During the fourth quarter of the fiscal year ended June 30, 1994, Hupp
Industries, Inc. ("Hupp"), the Company's other operating subsidiary, decided to
discontinue the operation of its air conditioning segment. This decision
resulted from Hupp's inability to earn an adequate gross profit on this segment
of its business coupled with a lack of market acceptance for Hupp's new SCAV
product line. Subsequently, during the first quarter of the fiscal year ending
June 30, 1995, the Company attempted to renegotiate its forbearance agreement
with its secured lender. The initial forbearance had expired July 15, 1994. On
October 27, 1994, however, the secured lender chose to exercise its rights
pursuant to the Credit and Security Agreement and held a secured party sale of
the assets of Hupp to an unrelated party. For additional information, refer to
Form 8-K filed November 4, 1994. As a result of the above described events, Hupp
has been treated as a discontinued operation effective as of June 30, 1994.
Where appropriate, financial statement information for prior periods has been
restated to reclassify the results of discontinued operations separately after
the results from continuing operations.
Comparison of three months and nine months ended March 31, 1995 with the three
months and nine months ended March 31, 1994.
CPT's consolidated net sales on a year-to-date basis, which are comprised
exclusively of Brighton sales, continue to improve from increased market share
realized during fiscal 1994 due mainly from reduced competition. Gross profit as
a percentage of sales has been negatively impacted by product mix changes and
increased raw material costs. Selling, general and administrative expenses
decreased 53.8% and 26.7% for the three and nine months ended March 31, 1995,
respectively, compared to the same periods for fiscal 1994. This decrease
resulted mainly from a reduction in independent consulting fees.
Other Income for the nine months ended March 31, 1994 of $192,000 resulted
mainly from a refund of real estate taxes.
The consolidated statements of operations for the three and nine months ended
March 31, 1994 have been restated to reflect separately the operating results of
Hupp as a discontinued business.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow: Cash totaled $175,000 at the end of the third fiscal quarter compared
with $294,000 as of June 30, 1994. Cash flow from operations totaled $101,000
and $650,000 for the three and nine months ended March 31, 1995, and compared
favorably to the same periods in the prior fiscal year due mainly to the
improvement in operating results and a significant reduction in liabilities at
Hupp.
The proceeds from the sale of Hupp assets totaled $1,934,000 and together with
the significant cash generated from liquidation of trade receivables allowed for
repayments of bank debt of $2,678,000.
Liquidity: As of March 31, 1995, the Company's unrestricted cash totaled
$175,000.
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is presently engaged in litigation related to its business
activities. It is believed that the Company has meritorious defenses to such
lawsuits and is defending itself in the ordinary course of business.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As a part of its acquisition of Hupp Industries, Inc. ("Hupp"), Hupp
entered into a Credit and Security Agreement with a bank which provided certain
working capital as well as term financing. During the fiscal year ended June 30,
1994, Hupp experienced financial problems which caused it to be in default under
the Credit and Security Agreement. After discussions with its senior lender, on
February 21, 1994 Hupp and the bank entered into a Conditional Forbearance
Agreement by which the bank agreed to forbear from declaring a default and
accelerating the maturity of the balance due under the Credit and Security
Agreement until July 15, 1994 and to defer certain required principal payments
owed by Hupp under the Credit and Security Agreement.
Hupp's financial condition worsened and, as a consequence, on October 27, 1994
the bank exercised its rights under the Credit and Security Agreement to conduct
a secured party sale of Hupp's assets to an unrelated third party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27: Financial Data Schedule for 3rd Quarter 10-Q
(b) Reports on Form 8-K: Referenced to filing Form 8-K
dated as of November 4, 1994.
Referenced to filing Form 8-K dated as of April 6, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CPT HOLDINGS, INC.
Date: May 15, 1995 By: /s/ William L. Remley
- ----- --- --- ---- --- --- ------- -- ------
William L. Remley,
President & Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for 3rd Quarter 10-Q
(for the nine month Ended March 31, 1995
(dollars in thousands, except per share amounts)
</LEGEND>
<CIK> 0000025360
<NAME> CPT Holdings
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-31-1995
<PERIOD-END> MAR-31-1995
<CASH> $175
<SECURITIES> 0
<RECEIVABLES> 678
<ALLOWANCES> 29
<INVENTORY> 734
<CURRENT-ASSETS> 1,565
<PP&E> 487
<DEPRECIATION> 125
<TOTAL-ASSETS> 3,704
<CURRENT-LIABILITIES> 7,086
<BONDS> 900
<COMMON> 76
350
0
<OTHER-SE> (4,977)
<TOTAL-LIABILITY-AND-EQUITY> 3,704
<SALES> 4,509
<TOTAL-REVENUES> 4,509
<CGS> 3,406
<TOTAL-COSTS> 3,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> 66
<INCOME-TAX> 72
<INCOME-CONTINUING> (6)
<DISCONTINUED> 1,577
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,571
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
