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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, 1997
___ 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
(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 ___
As of April 30, 1997, 1,510,084 shares of Common Stock were issued and
outstanding.
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<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>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
Net sales $ 23,155 $ 24,047 $ 70,935 $ 75,806
Cost of sales 19,997 20,775 62,089 66,116
----------- ---------- ---------- ---------
Gross profit 3,158 3,272 8,846 9,690
Selling, general and administrative 1,698 1,899 4,754 5,168
----------- ---------- ---------- ---------
Operating income 1,460 1,373 4,092 4,522
Other expense (income):
Interest expense 1,920 1,851 5,565 5,465
Minority interest 3 8 (62) (95)
Other expense (income), net (21) 486 (89) 1,263
------------ ---------- ----------- ---------
Loss from continuing operations
before provision for income taxes (442) (972) (1,322) (2,111)
Provision for income taxes - - - -
----------- ---------- ---------- ---------
Net Loss $ (442) $ (972) $ (1,322) $ (2,111)
============ =========== =========== ==========
Primary and fully-diluted loss per share $ (0.29) $ (0.64) $ (0.88) $ (1.40)
============ ============ ============== ==========
Weighted average common and common
equivalent shares outstanding (000's) 1,510 1,510 1,510 1,510
=========== ========== ========== =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
March 31, June 30,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 28 $ 174
Receivables, net of allowances 8,742 8,506
Inventories 10,688 10,813
Other current assets 60 130
----------- ----------
Total current assets 19,518 19,623
Property, plant and equipment, net 45,401 44,500
Deferred financing costs, net 2,060 2,374
Goodwill 1,389 1,460
Other assets 348 627
----------- ----------
Total assets $ 68,716 $ 68,584
=========== ==========
LIABILITIES & SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 9,813 $ 8,881
Accrued expenses 4,458 4,052
Current portion of long-term debt 3,085 2,776
----------- ----------
Total current liabilities 17,356 15,709
Long-term debt 58,757 58,888
Other long-term obligations 400 400
Minority interest 2,509 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
Additional paid in capital 5,737 5,737
Accumulated deficit (16,119) (14,797)
------------ -----------
Total shareholders' deficit (10,306) (8,984)
------------ -----------
Total liabilities and shareholders' deficit $ 68,716 $ 68,584
=========== ==========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
CPT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
Cash flows from operating activities:
Net loss $ (442) $ (972) $ (1,322) $ (2,111)
Adjustments to reconcile net loss to net cash
provided (used) by operations:
Minority interest in earnings of subsidiaries 3 8 (62) (95)
Depreciation and amortization 1,082 787 3,032 2,367
Capitalized interest - - (130) -
Changes in working capital:
Decrease (increase) in receivables (2,432) (372) (236) 1,167
Decrease (increase) in inventories (1,083) 158 125 (4,275)
Decrease (increase) in other current assets 19 (55) 70 121
Increase (decrease) in accounts payable
and accrued expenses 1,662 1,389 1,338 (489)
----------- ----------- ----------- ------------
Cash used by operating activities (1,191) 943 2,815 (3,315)
------------ ----------- ----------- ------------
Cash flows from investing activities:
Capital expenditures (361) (2,411) (3,332) (5,725)
Increase in other assets 235 (76) 279 (108)
----------- ------------ ----------- -----------
Cash provided (used) by investing activities (126) (2,487) (3,053) (5,833)
------------ ------------ ------------ -----------
Cash flows from financing activities:
Repayment of long-term obligations (726) (570) (2,095) (1,486)
Net borrowings under revolving
credit facility 1,914 1,127 653 8,863
Borrowings under unsecured line of credit - 509 34 509
Borrowings under senior term loan - 1,000 1,000 1,000
Borrowings under state development loans - - 500 -
----------- ----------- ----------- -----------
Cash provided by financing activities 1,189 2,066 92 8,886
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (128) 522 (146) (262)
Cash and cash equivalents:
Beginning of period 157 188 174 972
----------- ----------- ----------- -----------
End of period $ 28 $ 710 $ 28 $ 710
=========== =========== =========== ===========
Supplemental data - cash paid during the period for:
Interest $ 1,557 $ 1,586 $ 4,586 $ 4,569
========== =========== ========== ===========
Income taxes $ - $ - $ - $ 167
========== =========== ========== ===========
</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 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, tractor
trailer manufacturing and highway construction 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.
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 fiscal year ended June 30, 1996.
2. Inventories
Inventories consisted of the following (in $000's):
<TABLE>
<S> <C> <C>
March 31, June 30,
1997 1996
Raw materials $ 2,544 $ 1,971
Finished goods 8,144 8,842
--------- ---------
Total $ 10,688 $ 10,813
========= =========
</TABLE>
3. Long-Term Debt
Long-term debt consisted of the following (in $000's):
<TABLE>
<S> <C> <C>
March 31, June 30,
1997 1996
Senior term loan $ 20,828 $ 21,884
Subordinated term notes 23,000 23,000
Revolving loan facility 10,533 9,880
Fixed rate 13% debenture 6,730 6,730
Unsecured revolving credit facility 1,000 966
Note payable to state 461 --
Deferred purchase money note 475 475
--------- ---------
63,027 62,935
Less: current portion of long-term debt 3,085 2,776
Less: discounts on long-term debt 1,185 1,271
--------- ---------
Total $ 58,757 $ 58,888
========= =========
</TABLE>
<PAGE>
J&L's Senior Term Loan, Revolving Loan Facility and 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 March 31, 1997, J&L was not in compliance
with certain operating cash flow to debt service financial maintenance
covenants with its senior and subordinated lenders. J&L's lenders have
waived their rights with respect to the above covenant violations as of
March 31, 1997, in response to J&L's request to do so. In addition, a
mechanics' lien was filed against J&L as described further in Note 4 which
resulted in a technical default under the credit agreements with J&L's
lenders. The lenders also waived their rights with respect to this technical
default for the period through August 31, 1997.
On April 17, 1997, J&L closed on two local sources of debt totaling $500,000
which were available to it in order to assist in the financing of the new
reheat furnace. The debt bears interest at 3% and 5% and amortizes over 60
months beginning June 1, 1997 with monthly payments totaling $9,110.
On October 30, 1996, J&L closed on certain state debt totaling $500,000
which was available to it in order to assist in the financing of the new
reheat furnace. This debt bears interest at 3% and amortizes over 60 months
beginning December 1, 1996 with monthly payments totaling $8,984.
Two additional borrowings under J&L's Senior Term Loan of $500,000 each were
effected during the fiscal quarters ended September 30, 1996 and December
31, 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 borrowed all funds available under its
Senior Term Loan.
Effective April 1, 1997, 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 October 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, an 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, which appeal remains pending. As of March 31,
1997, CPT has made payments aggregating approximately $620,000 to the Plan,
and as of June 30, 1996 the Company had fully accrued all amounts payable
under this claim. The Company will continue to make monthly installment
payments to the plan of approximately $25,000 against the remaining
obligation under this claim.
On March 25, 1997, J&L's furnace builder filed a statement of mechanics'
lien in the Court of Common Pleas of Beaver County, Pennsylvania against the
real property situated in Aliquippa and owned by J&L for payment of
$1,420,000 claimed due it. The mechanics' lien asserts that work was
completed on the furnace in December 1996, and that under the contract the
final holdback payment would be payable following completion of work. J&L
has not delivered final payment due to variances noted under performance
testing results which did not meet contract specifications. However, the
furnace builder has refused to recognize these test results due to its
disagreement with J&L's procedural methods utilized in carrying out the
testing. Subsequent to filing of the mechanics' lien, on April 18, 1997, J&L
filed a demand for arbitration under the contract. J&L is seeking
declaratory judgment and performance on the following: (i) contract
interpretation of performance criteria to be applied under the contract,
(ii) contract interpretation with regard to procedures to be utilized in
conducting performance testing and (iii) dismissal of the mechanics' lien
claim against J&L's real property on the basis that it is premature and
improper. J&L has fully accrued $1,420,000 which is included in accounts
payable as of March 31, 1997.
<PAGE>
5. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 "Earnings Per Share" ("FAS 128") which establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities
with publicly held common stock or potential common stock. It replaces the
presentation of primary EPS with a presentation of basic EPS which
significantly limits the inclusion of common stock equivalents used in its
computation. Disclosure requirements include a dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the factors
utilized in computing basic and diluted EPS. FAS 128 will become effective
for financial statements issued for periods ending after December 15, 1997.
There would have been no effect to the reported per share results for the
three and nine month periods ended March 31, 1997 and 1996 per application
of FAS 128 due to the antidilutive effect of common stock equivalents for
these periods.
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 and the Aliquippa Division. 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 following
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 on to customers.
Results of Operations
Net Sales for the three and nine month periods ended March 31, were:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
J&L Structural $21,631,000 $22,207,000 $66,314,000 $71,153,000
Brighton 1,524,000 1,840,000 4,621,000 4,653,000
--------- --------- --------- ---------
Total $23,155,000 $24,047,000 $70,935,000 $75,806,000
</TABLE>
Net sales for J&L Structural for the three and nine months ended March 31,
1997 decreased from the same periods in the prior year due mainly to lower
volume shipped. Total tonnage shipped for the three and nine months ended March
31, 1997 decreased 0.8% and 4.4%, respectively, from the same periods in the
previous year. Manufactured housing related shipments of Junior Beams(Registered
trademark), which represent approximately 65% of J&L Structural's business,
continue to increase along with the long-term growth experienced in this
industry. Manufactured housing industry growth is anticipated to continue based
on increasing consumer acceptance resulting from improved product quality and
design at significantly reduced cost compared to site built homes. J&L
Structural maintains a significant market share of total structural steel beam
shipments in this business segment. Junior Beam(Registered trademark) tonnage
shipments to the manufactured housing industry have decreased approximately 0.7%
and increased approximately 4.5% compared to the three and nine month periods in
the previous year, respectively. The most significant impact on net sales,
however, has come from business to truck/trailer manufacturers whose industry
has experienced a general market downturn in 1996 orders due to sluggish demand.
Sales of crossmembers to truck/trailer manufacturers decreased approximately
23.7% and 34.2% compared to the three and nine month periods in the previous
year, respectively. The current backlog of orders for crossmembers has improved,
however, mainly as a result of the addition of new customers and expanded
relationships with existing customers. The truck/trailer manufacturing business
represents 15% to 20% of J&L Structural's total business. The highway
construction business shipments continue to show signs of improvement over the
prior year results due mainly to the relatively mild weather experienced in the
northeast United States this year in comparison to the unusually severe winter
last year. Wide flange beams shipments increased approximately 112.6% and 16.2%
compared to the three and nine month periods in the previous year, respectively.
Steel service center business decreased approximately 0.5% and 10.7% compared to
the three and nine month periods in the previous year, respectively, as a result
of reduced volume to the construction industry. The highway construction and
steel service center business combined represent approximately 20% of J&L
Structural's overall business.
An overall reduction in average pricing on shipped tonnage of 2.0% and 2.5%
compared to the same three and nine month periods last year resulted mainly from
the lower mix of crossmembers 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 for the current three and nine month periods, as measured in
dollars, decreased 17.2% and 0.7% as compared to the same periods in the
previous fiscal year, respectively. The decrease in sales was due mainly to
timing of customer orders and periodic scrap sales rather than market share
changes.
Gross Margins for the three and nine months ended March 31, were:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
J&L Structural 12.5% 12.8% 11.5% 12.2%
Brighton 30.4% 23.8% 26.9% 21.3%
----- ----- ----- -----
Total 13.6% 13.6% 12.5% 12.8%
</TABLE>
Gross margins for J&L Structural were lower compared to prior period results for
both the three and nine months due to lower overall sales volumes and production
inefficiencies due to start-up costs for the newly installed reheat furnace.
Productivity measures, however, continued to improve over the most recent
operating quarter wherein certain identified equipment improvements were
completed. The negative impact of the reheat furnace start-up on J&L
Structural's gross margins was somewhat mitigated by a reduction in billet costs
in comparison to the prior year as a result of lower steel scrap costs, which
play a major factor in billet pricing, and improved supply agreements with
certain billet suppliers.
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, in addition to more favorable experience relating
to workers compensation claims.
Selling, general and administrative expenses expressed as a percentage of net
sales for the three month periods ended March 31, 1997 and 1996 were 7.3% and
7.9%, respectively. Selling, general and administrative expenses expressed as a
percentage of net sales for the nine month periods ended March 31, 1997 and 1996
were 6.7% and 6.8%, respectively. The reduction in these costs is primarily due
to the reduction in corporate level charges relating to finalization of
litigation concerning Hupp.
<PAGE>
Other expense reported in the prior year periods relates to a $550,000 corporate
charge during the third quarter of fiscal 1996 resulting from an accrual for a
pension claim for payment of withdrawal liability relating to Hupp, in addition
to a charge of approximately $830,000 during the second quarter of fiscal 1996
relating to a signing bonus and retroactive profit sharing plan charge which was
included in a new labor contract with the United Steel Workers of America.
Liquidity and Capital Resources
Cash flows from operations for the three months ended March 31, 1997 and 1996
totaled ($1,191,000) and $943,000, respectively. This decrease in cash flows
over the prior year was due mainly to the fact that J&L Structural was building
inventories following the six month period of reduced productivity relating to
start-up difficulties experienced with the new reheat furnace. In addition, J&L
experienced an increase in trade receivables due primarily to unusually low
levels of net sales during the final month and a half of the second fiscal
quarter due to the reheat furnace enhancement and maintenance shutdowns. Cash
flows from operations for the nine months ended March 31, 1997 and 1996 totaled
$2,815,000 and ($3,315,000), respectively. The increase in cash flows in the
current year compared to the prior year is primarily due to a reduced level of
net loss coupled with less of a requirement for incremental cash for management
of inventory levels compared to the same period in the prior year. Reduced
inventory levels were experienced in the first half of fiscal 1996 resulting
from production inefficiencies experienced with establishing a second production
shift.
The Company's investing activities included capital expenditures totaling
approximately $361,000 and $3,332,000 for the three and nine months ended March
31, 1997. Capital expenditures included final expenditures associated with the
new reheat furnace installation of which approximately $1,420,000 remains
outstanding as a holdback pending satisfaction of the furnace builder's
contractual performance guarantees. See Note 4 of the Notes to the Unaudited
Consolidated Financial Statements.
Financing activities for the third quarter of fiscal 1997 included scheduled
Senior Lender repayments totaling $726,000 and net borrowings under the Senior
Lender revolving credit facility totaling $1,914,000. J&L completed the
installation of a new reheat furnace in late July 1996; however, until final
satisfaction of equipment performance guarantees is obtained from furnace
builder based on testing, J&L will retain final payments under the contract
totaling approximately $1,420,000. Additional borrowings for capital expenditure
funding provided by local sources totaling $500,000 closed in April, 1997.
Total outstanding debt of J&L, which excludes affiliated debt, as of March 31,
1997 and June 30, 1996 totals $54,822,000 and $54,764,000, respectively.
Interest expense on unaffiliated debt of J&L totaled $4,671,000 for the nine
months ended March 31, 1997, which represents an effective average borrowing
rate approximating 11.4% over the period.
J&L was in violation of certain financial maintenance, as well as incurrence of
lien covenants with its senior and subordinated lenders based on the March 31,
1997 measurement date, as described further in Notes 3 and 4 of the Notes to the
Unaudited Consolidated Financial Statements. These covenants have been waived as
of such measurement date by J&L's lenders at the request of J&L's management.
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 foreseeable future.
The Company evaluates potential prospects for growth of its business from
time to time, including through acquisitions of existing businesses. The Company
recently proposed to negotiate the acquisition of Steel of West Virginia, Inc.
("SWVA") for $9.00 per share in cash, but SWVA management rebuf fed the Company.
The Company is currently soliciting proxies to oppose certain anti-takeover
proposals made by SWVA management and in favor of the Company's non-binding
resolution urging SWVA to enter into negotiations with any qualified bidder,
including the Company, to sell SWVA. The Company fi led suit in the Delaware
Court of Chancery on May 14, 1997 seeking to invalidate portions of the
shareholder rights plan adopted by SWVA shortly after SWVA's management rejected
the Company's proposal. The Company is considering its options with regard to
SWVA which include, among other possibilit ies, renewed proposals for a
negotiated transaction, a proxy or consent solicitation in opposition to
management or in support of a merger with the Company, or a tender offer for
shares of SWVA. The Company will consummate financing arrangements, before
closing any such transaction, which may incl ude public or private placement of
equity or debt or senior bank financing. There can be no assurance that the
management of SWVA will agree to negotiate any transaction with the Company on
terms acceptable to the Company, or that the Company will consummate any of the
foregoing transactions.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: 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 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, an 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, which appeal remains pending. As of March 31,
1997, CPT has made payments aggregating approximately $620,000 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.
On March 25, 1997, J&L's furnace builder filed a statement of mechanics'
lien in the Court of Common Pleas of Beaver County, Pennsylvania against the
real property situated in Aliquippa and owned by J&L for payment of
$1,420,000 claimed due it. The mechanics' lien asserts that work was
completed on the furnace in December 1996, and that under the contract the
final holdback payment would be payable following completion of work. J&L
has not delivered final payment due to variances noted under performance
testing results which did not meet contract specifications. However, the
furnace builder has refused to recognize these test results due to its
disagreement with J&L's procedural methods utilized in carrying out the
testing. Subsequent to filing of the mechanics' lien, on April 18, 1997, J&L
filed a demand for arbitration under the contract. J&L is seeking
declaratory judgment and performance on the following: (i) contract
interpretation of performance criteria to be applied under the contract,
(ii) contract interpretation with regard to procedures to be utilized in
conducting performance testing and (iii) dismissal of the mechanics' lien
claim against J&L's real property on the basis that it is premature and
improper. J&L has fully accrued $1,420,000 which is included in accounts
payable as of March 31, 1997.
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
J&L's Senior Term Loan, Revolving Loan Facility and 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 March 31, 1997, J&L was not in compliance
with certain operating cash flow to debt service financial maintenance
covenants with its senior and subordinated lenders. J&L's lenders have
waived their rights with respect to the above covenant violations as of
March 31, 1997, in response to J&L's request to do so. In addition, a
mechanics' lien was filed against J&L as described further in Note 4 and
Item 1 of this document which resulted in a technical default under the
credit agreements with J&L's lenders. The lenders also waived their rights
with respect to this technical default for the period through August 31,
1997.
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 Third 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: May 15, 1997 By: /s/William L. Remley
--------------------------
William L. Remley,
President & Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 8927
<ALLOWANCES> 185
<INVENTORY> 10688
<CURRENT-ASSETS> 19518
<PP&E> 51390
<DEPRECIATION> 5989
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0
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</TABLE>
