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: September 30, 1996
_ 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 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 October 31, 1996, 1,510,084 shares of Common Stock were issued and
outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: Financial Statements
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000's Except Per Share Amounts)
<TABLE>
<S> <C> <C>
Three Months Ended
September 30,
1996 1995
Net sales $ 24,934 $ 26,944
Cost of sales 21,795 23,611
Gross profit 3,139 3,333
Selling, general and administrative 1,460 1,427
Operating income 1,679 1,906
Other (income) expense:
Interest expense 1,772 1,799
Minority interest 48 82
Other, net (34) 22
Income (loss) from continuing operations
before income taxes (107) 3
Income taxes -- --
Net income (loss) $ (107) $ 3
Primary and fully-diluted earnings $ (.07) $ --
(loss) per share
Weighted average common and common
equivalent shares outstanding (000's) 1,510 1,510
See Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000's)
<TABLE>
<S> <C> <C>
September 30, June 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $ 90 $ 174
Receivables - net of allowances 9,307 8,506
Inventories 9,058 10,813
Other current assets 122 130
Total current assets 18,577 19,623
Property, plant and equipment - net 46,195 44,500
Deferred financing costs, net 2,275 2,374
Goodwill 1,436 1,460
Other assets 594 627
Total assets $ 69,077 $ 68,584
LIABILITIES & SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 10,669 $ 8,881
Accrued expenses 4,324 4,052
Current portion of long-term debt 2,845 2,776
Total current liabilities 17,838 15,709
Long-term debt 57,336 58,888
Other long-term obligations 375 400
Minority interest 2,619 2,571
Shareholders' deficit:
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 5,737 5,737
Accumulated deficit (14,904) (14,797)
Total shareholders' deficit (9,091) (8,984)
Total liabilities and shareholders' deficit $ 69,077 $ 68,584
See Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($000's)
<TABLE>
<S> <C> <C>
Three Months Ended
September 30
1996 1995
Cash flows from operating activities:
Net income (loss) $ (107) $ 3
Adjustments to reconcile net income (loss)
to net cash provided (used) by operations:
Minority interest in earnings of subsidiaries 48 82
Depreciation and amortization 913 797
Capitalized interest (130) --
Changes in working capital:
Decrease (increase) in receivables (801) 189
Decrease (increase) in inventories 1,755 (1,641)
Decrease in other current assets 8 118
Increase in accounts payable,
accrued expenses and other 2,034 463
Cash provided by operating activities 3,720 11
Cash flows from investing activities:
Capital expenditures (2,330) (1,383)
Increase in other assets 33 (33)
Cash used by investing activities (2,297) (1,416)
Cash flows from financing activities:
Repayment on long-term obligations (668) (361)
Net borrowings (repayments) under
revolving credit facility (1,373) 1,250
Borrowings under Senior loan capital
expenditures line of credit 500 --
Borrowings under unsecured line of credit
with affiliate 34 --
Cash provided (used) by financing activities (1,507) 889
Net decrease in cash and cash equivalents (84) (516)
Cash and cash equivalents:
Beginning of period 174 972
End of period $ 90 $ 456
Supplemental data - cash paid during the period for:
Interest, net of capitalized amounts $ 1462 $ 1,475
Income taxes $ -- $ 7
See Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
CPT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements include the accounts of CPT Holdings,
Inc. and its direct and indirect majority-owned subsidiaries (the "Company" or
"CPT"), J&L Structural, Inc. ("J&L"), J&L Holdings Corp. ("JLH"), Continuous
Caster Corporation ("CCC") and H. Industries, Inc. (formerly Hupp Industries,
Inc.) ("Hupp") All material intercompany transactions have been eliminated in
consolidation.
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, truck trailer
manufacturing, highway construction and ship building industries. Brighton
designs, manufacturers 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.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation which were of a normal and
recurring nature 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, 1996.
2. Inventories
Inventories consisted of the following (in $000's):
<TABLE>
<S> <C> <C>
September 30, June 30,
1996 1996
Raw materials $ 3,015 $ 1,971
Finished goods 6,043 8,842
Total $ 9,058 $ 10,813
</TABLE>
<PAGE>
3. Long-Term Debt
Long-term debt consisted of the following (in $000's):
<TABLE>
<S> <C> <C>
September 30, June 30,
1996 1996
Senior term loan $ 21,716 $ 21,884
Subordinated term notes 23,000 23,000
Revolving loan facility 8,507 9,880
Fixed rate 13% debenture 6,730 6,730
Unsecured revolving credit facility 1,000 966
Deferred purchase money note 475 475
61,428 62,935
Less current portion of long-term debt 2,845 2,776
Less discounts on long-term debt 1,247 1,271
Total $ 57,336 $ 58,888
</TABLE>
Two additional borrowings under J&L's Senior Term Loan of $500,000 each
were effected during the fiscal quarter ended September 30, 1996 and during
October 1996, respectively. These borrowings were made in connection with a
special borrowing provision of up to $3 million for specified capital projects.
As of October 30, 1996, J&L has borrowed all funds available under its Senior
Term Loan.
Effective October 1, 1996, Trinity Investment Corp. ("Trinity"), an
affiliated company, issued waivers of demand for payment of interest to CPT
under its fixed rate 13% debenture and its unsecured revolving credit facility,
which was due on this date. The waiver extends the payment date to April 1,
1997.
4. Litigation. Contingencies and Commitments
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, CPT, 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. On
July 10, 1996, the arbitrator sustained the Plan's claim of withdrawal liability
against CPT. Pursuant to ERISA, CPT subsequently appealed the arbitration
decision to the U.S. District Court for the Northern District of Ohio. As of
September 30, 1996, CPT has made payments aggregating approximately $471,000 to
the Plan and as of June 30, 1996, has fully accrued the amount of the
outstanding claim less payments made through the June 30, 1996 date. The Company
will continue to make monthly installment payments to the plan of approximately
$25,000 against the remaining obligation under this claim.
The Company is 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 operations of the Company.
ITEM 2: Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
J&L Structural, Inc. ("J&L") is segmented into two distinct operating
divisions, J&L Structural Division ("J&L Structural") and Brighton Electric
Steel Casting Company ("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.
Readers should be aware that the following paragraphs contain forward
looking statements regarding management's expectations for the continued growth
of the manufactured housing industry, realization of the benefits of the reheat
furnace and the adequacy of the Company's cash flows, which forward looking
statements may not be realized. Several important factors could cause the
Company's actual results of operations to differ materially from those expressed
in the foregoing forward looking statements, including: a significant downturn
in manufactured housing construction and sales may occur, the reheat furnace
contract specifications or the resulting production efficiencies expected
therefrom may never be reached, or billet costs may increase and the Company may
not have the ability to pass such costs to customers.
Results of Operations
Net Sales for the three month periods ended September 30, were:
<TABLE>
<S> <C> <C>
1996 1995
J&L Structural $23,548,000 $25,538,000
Brighton 1,386,000 1,406,000
Total $24,934,000 $26,944,000
</TABLE>
Net sales for J&L Structural decreased from the prior period due to lower
volume and lower average sales prices. Total tonnage shipped for the quarter
decreased 5.5% from the same period in the previous year. Manufactured housing
related shipments of Junior Beams (Registered Trademark), which represent
approximately 70% of J&L Structural's business, continue to increase as growth
in this industry is projected to continue due to increasing product acceptance
as a result of quality and design improvements. Junior Beam (Registered
Trademark) shipments have increased 11.7% over the same period in the previous
year. These increases were more than offset by lower volume in the truck/trailer
manufacturing, highway construction and steel service center segments of the
business. Truck/trailer manufacturing business shipments of crossmembers were
34.2% lower when compared to the same period last year. The significant decline
in sales to this industry reflects a general reduction in truck/trailer
manufacturing volume in response to sluggish demand. The current backlog of
orders for crossmembers does not indicate a significant near term turnaround.
Highway construction business was sluggish as a result of prolonged state budget
negotiations during 1996, particularly in the state of New York, which resulted
in the elimination of certain highway projects until calendar 1997. This
situation resulted in a volume reduction in wide flange beams of 20.6% compared
to the same period last year. Steel service center business was down
approximately 31.5% as a result of reduced volume to the construction industry.
The highway construction and steel service center business combined represents
approximately 15% of J&L Structural's overall business volume.
The overall reduction in average sales pricing of 2.5% compared to the same
period last year resulted mainly from the lower mix of crossmembers to total
tonnage shipped this year. Crossmembers carry the highest price per ton due to
the value-added processing which is performed prior to shipment.
Brighton's sales as measured in dollars was quite stable in comparison to
the same period in the previous year. However, overall mix shifted to increased
production of the higher profit hastalloy versus lower margin carbide steel
product. This shift was due mostly to timing of orders rather than market share
movement.
Gross Margins for the three months ended September 30, were:
<TABLE>
<S> <C> <C>
1996 1995
J&L Structural 11.9% 12.0%
Brighton 24.1% 19.5%
Total 12.6% 12.4%
</TABLE>
Gross margins for J&L Structural approximated those of the same period in
the previous year. These results were disappointing due to lower overall sales
volumes and production inefficiencies due to start-up costs related to the newly
installed reheat furnace. The furnace builder has committed to complete certain
identified equipment improvements during a plant shutdown scheduled for late
November. Productivity measures have been steadily improving since
mid-September, and management believes that by the new calendar year, subsequent
to installation and testing of the equipment improvements, the Company should
begin to realize the benefits of this significant capital investment.
The negative impact on J&L Structural's gross margins was somewhat
mitigated by a reduction in billet costs of 4% over the same period in the
previous year.
Brighton's gross margins have significantly improved in comparison to the
same period in the prior year due mainly to a greater mix of sales of its most
profitable, hastalloy product.
Selling, general and administrative expenses were slightly greater than for
the comparable period in the prior year due mainly to additional technical
support services required for modification of J&L's management information
systems offset by lower corporate expenses at CPT.
Liquidity and Capital Resources
Cash flows from operations for the three months ended September 30, 1996
and 1995 totaled $3,720,000 and $11,000, respectively. The improvement in cash
flow over the prior year was due mainly to a reduction in inventories coupled
with an increase in accounts payable due to increased aging of trade payables by
approximately five days in the current quarter and the recording of the
remaining holdback on the new reheat furnace totaling approximately $1,400,000.
Significant productivity inefficiencies relating to the start-up of the new
reheat furnace were realized during the first quarter of fiscal 1997, and have
had a negative impact on working capital. Productivity and resulting gross
margins are expected to improve over the coming two quarters as a result of
final retrofit of the reheat furnace and flattening of the learning curve with
regard to its operation. This should improve J&L' s working capital position
significantly as yield and tons per hour performance improvements are realized.
The Company's investing activities included capital expenditures totaling
approximately $1,800,000 representing final expenditures associated with the new
reheat furnace installation of which approximately $1,400,000 remains
outstanding as a holdback, as highlighted earlier.
Financing activities for the first quarter of fiscal 1997 included
scheduled Senior Lender repayments totaling $668,000, net repayments under the
Senior Lender revolving credit facility totaling $1,373,000 and borrowings under
the Senior Loan capital expenditures line of credit totaling $500,000. An
additional and final borrowing of $500,000 under the Senior Loan capital
expenditures line of credit was made during October 1996. J&L completed the
installation of a new reheat furnace in late July 1996. However, due to
outstanding obligations of the furnace builder to complete certain identified
equipment improvements, J&L has not released final payments under the contract
totaling approximately $1,400,000. The furnace builder has agreed to complete
these improvements in order to satisfy contractual specifications. Subsequent to
the installation and satisfactory testing of these improvements, completion of
the contract will be accomplished, including the payment of all or a portion of
retained amounts. Additional borrowings for capital expenditure funding to be
provided by state and county sources totaling approximately $1,350,000 have been
approved. During early November 1996, $500,000 of this additional funding has
been completed, and the balance of the funding is expected to close within 90
days upon finalization of certain lending agreements.
Total outstanding debt as of September 30, 1996 and June 30, 1996, was
$61,428,000 and $62,935,000, respectively. Interest expense totaled $1,772,000
for the three months ended September 30, 1996, representing an average borrowing
rate approximating 11.2% over the period.
Cash and cash equivalents decreased from $174,000 to $90,000 at the end of
the first fiscal quarter compared with June 30, 1996. Although the Company's
total equity represents a deficit of approximately $9,091,000, this position is
due largely to the poor performance of previously discontinued operations and a
basis adjustment for the leveraged acquisition of J&L Structural, during fiscal
1995 totaling ($9,705,000). Management expects that cash flows from operations
will continue to satisfy the Company's requirements to fund operating expenses,
debt service and capital expenditures in the future.
<PAGE>
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.
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, CPT, 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. On
July 10, 1996, the arbitrator sustained the Plan's claim of withdrawal liability
against CPT. Pursuant to ERISA, CPT subsequently appealed the arbitration
decision to the U.S. District Court for the Northern District of Ohio. As of
September 30, 1996, CPT has made payments aggregating approximately $471,000 to
the Plan and as of June 30, 1996, has fully accrued the amount of the
outstanding claim less payments made through the June 30, 1996 date. The Company
will continue to make monthly installment payments to the plan of approximately
$25,000 against the remaining obligation under this claim.
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
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 First Quarter 10-Q
(b) Reports on Form 8-K: None
<PAGE>
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.
Dated: November 14, 1996 By: /s/William L. Remley
William L. Remley
President & Treasurer
<PAGE>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 90
<SECURITIES> 0
<RECEIVABLES> 9663
<ALLOWANCES> 356
<INVENTORY> 9058
<CURRENT-ASSETS> 18577
<PP&E> 50388
<DEPRECIATION> 4193
<TOTAL-ASSETS> 69077
<CURRENT-LIABILITIES> 17838
<BONDS> 0
<COMMON> 76
0
0
<OTHER-SE> (9091)
<TOTAL-LIABILITY-AND-EQUITY> 69077
<SALES> 24934
<TOTAL-REVENUES> 24934
<CGS> 21795
<TOTAL-COSTS> 21795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1772
<INCOME-PRETAX> (107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
