<PAGE> 1
C.H. HEIST CORP.
AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
September 29, 1996
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form l0-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
[x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter period ended September 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-7907
C. H. Heist Corp.
- -----------------
(Exact name of registrant as specified in its charter)
New York 16-0803301
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
810 North Belcher Road
Clearwater, Florida 34625
------------------- -----
(Address of principal executive offices) (Zip Code)
813-461-5656
------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ----------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date - October 28, 1996
Common stock, $.05 par value 2,874,673
---------------------------- ---------
(Class) (Outstanding shares)
<PAGE> 3
C. H. HEIST CORP. AND SUBSIDIARIES
Index
<TABLE>
<S> <C>
Part I
Financial Information
Condensed Consolidated Balance Sheets-
September 29, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Earningsthirteen week periods
ended September 29, 1996 and October 1, 1995 and thirty nine week
period ended September 29, 1996 and the forty week
period ended October 1, 1995. 4
Condensed Consolidated Statements of Cash Flowsthirty nine week period
ended September 29, 1996
and the forty week period ended October 1, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Independent Auditors' Review Report 7
Management's Discussion and Analysis of the
Results of Operations and the Financial Condition 8-10
Part II
Other Information 11
Signatures 12
</TABLE>
* * * * *
2
<PAGE> 4
Part I-Financial Information
C. H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 29, December 31,
Assets 1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,871,207 3,040,815
Receivables 15,989,431 14,283,008
Services in progress 2,508,114 990,729
Income taxes receivable 294,404 --
Parts and supplies 2,002,251 2,170,572
Prepaid expenses 467,044 187,647
Deferred income taxes 860,703 834,417
------------ ------------
Total current assets 23,993,154 21,507,188
------------ ------------
Property, plant and equipment, at cost 48,763,524 47,355,312
Less accumulated depreciation 31,238,408 29,712,818
------------ ------------
Net property, plant and equipment 17,525,116 17,642,494
Deferred income taxes 114,323 131,922
Other assets 1,866,678 265,916
------------ ------------
$ 43,499,271 39,547,520
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 537,667 37,667
Accounts payable 1,724,650 1,306,819
Accrued expenses 5,216,072 3,879,265
Income taxes payable -- 545,675
------------ ------------
Total current liabilities 7,478,389 5,769,426
Long-term debt, excluding current installments 9,051,807 6,980,057
Deferred income taxes 509,237 430,286
------------ ------------
Total liabilities 17,039,433 13,179,769
------------ ------------
Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092 and 3,165,192
shares for 1996 and 1995, respectively 158,355 158,260
Additional paid-in capital 4,267,798 4,253,689
Retained earnings 24,353,379 24,293,966
Equity adjustment from foreign currency translation (1,067,791) (1,086,261)
------------ ------------
27,711,741 27,619,654
Less cost of common stock in treasury - 292,419 shares (1,251,903) (1,251,903)
------------ ------------
Total stockholders' equity 26,459,838 26,367,751
------------ ------------
$ 43,499,271 39,547,520
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE> 5
C. H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Thirteen- Thirteen- Thirty nine Forty
week week week week
period period period period
ended ended ended ended
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 28,218,788 27,179,563 79,769,125 77,024,581
Cost of sales 23,937,038 22,958,087 68,912,648 66,079,147
------------ ------------ ------------ ------------
Gross profit 4,281,750 4,221,476 10,856,477 10,945,434
Selling, general and administrative
expenses 3,189,314 2,978,662 10,123,716 9,112,322
------------ ------------ ------------ ------------
Operating income 1,092,436 1,242,814 732,761 1,833,112
------------ ------------ ------------ ------------
Other income (expense):
Interest income 14,004 34,698 51,411 105,818
Interest expense (164,152) (149,651) (461,626) (390,534)
Gain (loss) on disposal of property,
plant and equipment, net (30,385) (10,050) 52,776 26,066
Amortization of other assets (24,647) (31,008) (86,661) (93,022)
Miscellaneous, net (9,327) 2,450 (11,692) 8,441
------------ ------------ ------------ ------------
Total other expense, net (214,507) (153,561) (455,792) (343,231)
------------ ------------ ------------ ------------
Earnings before income taxes 877,929 1,089,253 276,969 1,489,881
Income tax expense 305,260 489,818 217,556 815,614
------------ ------------ ------------ ------------
Net earnings $ 572,669 599,435 59,413 674,267
============ ============ ============ ============
Net earnings per share $ .20 .21 .02 .24
============ ============ ============ ============
Weighted average number of common
shares outstanding 2,873,128 2,872,773 2,872,891 2,871,461
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
C. H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Thirty nine Forty
week period week period
ended ended
September 29, October 1,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 59,413 674,267
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment 3,614,933 2,970,507
Amortization of other assets 86,661 93,022
Gains on disposal of property, plant
and equipment, net (52,776) (26,066)
Deferred income taxes 70,380 34,938
Changes in assets and liabilities (see below) (2,516,468) (1,482,579)
----------- -----------
Net cash provided by operating activities 1,262,143 2,264,089
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (3,618,281) (5,719,278)
Proceeds from disposal of property, plant and equipment 215,937 178,165
Acquisition (1,115,492) --
----------- -----------
Net cash used in investing activities (4,517,836) (5,541,113)
----------- -----------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 7,800,000 7,250,000
Repayments on bank line of credit borrowings (5,700,000) (3,150,000)
Repayment of other long-term debt (28,250) (31,389)
Exercised stock options 14,204 18,125
----------- -----------
Net cash provided by financing activities 2,085,954 4,086,736
----------- -----------
Effect of exchange rate changes on cash and cash equivalents 131 89,149
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,169,608) 898,861
Cash and cash equivalents at beginning of period 3,040,815 1,533,015
----------- -----------
Cash and cash equivalents at end of period $ 1,871,207 2,431,876
=========== ===========
Changes in assets and liabilities providing (using) cash:
Receivables $(1,700,042) (1,773,863)
Services in progress (1,515,751) 246,926
Income taxes receivable/payable (840,430) 43,406
Parts and supplies 168,645 (38,874)
Prepaid expenses (279,130) (615,328)
Other assets (109,553) 47,428
Accounts payable 423,300 88,985
Accrued expenses 1,336,493 518,741
----------- -----------
Total $(2,516,468) (1,482,579)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 7
C. H. HEIST CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. In the opinion of the management of C.H. Heist Corp. and Subsidiaries
(the Company), the accompanying condensed consolidated financial
statements contain all normal recurring adjustments necessary to fairly
present the Company's consolidated financial position as of September
29, 1996 and the results of its earnings and cash flows for the
thirteen and thirty nine week periods ended September 29, 1996 and the
thirteen and forty week periods ended October 1, 1995.
The Company's fiscal year ends on the last Sunday of December. For fiscal
1995, the Company's operations include 53 weeks. Therefore, the period
ended October 1, 1995 includes forty weeks while the period ended
September 29, 1996 includes thirty nine weeks.
2. The results of operations for the thirteen and thirty nine week periods
ended September 29, 1996 are not necessarily indicative of the results
to be expected for the full year.
3. The changes in stockholders' equity for the thirty nine week period
ended September 29, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Equity
adjustment
Additional from foreign Treasury stock Total
Common paid-in Retained currency -------------- stockholders'
stock capital earnings translation Shares Amount equity
-------- --------- ---------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $158,260 4,253,689 24,293,966 $(1,086,261) 292,419 $(1,251,903) $26,367,751
Net earnings - 59,413 - - - - 59,413
Exercised options 95 14,109 - - - - 14,204
Foreign currency translation
adjustment - - - 18,470 - - 18,470
-------- --------- ---------- ----------- ------- ----------- -----------
Balance at September 29, 1996 $158,355 4,267,798 24,353,379 $(1,067,791) 292,419 $(1,251,903) $26,459,838
======== ========= ========== =========== ======= =========== ===========
</TABLE>
4. During the quarter ended September 29, 1996, 1,900 stock options were
exercised, while 281 expired. As of September 29, 1996 and December 31,
1995 the Company had exercisable options outstanding to employees to
purchase 183,889 and 189,700 common shares, respectively, at prices
ranging from $6.94 to $11.14 per share.
5. On September 15, 1996, Ablest Service Corp. ("Ablest"), a wholly owned
subsidiary of C.H. Heist Corp. purchased certain assets from Tech
Resource, Inc., a Georgia Corporation, and its shareholder. The
aggregate purchase price was $1,500,000, of which $1,000,000 was in
cash and $500,000 in the form of a one year promissory note. The source
of the funds used by Ablest was $1,000,000 from it's operating cash
account. The amount of the purchase was determined through negotiations
and is assigned primarily to the established fair value of the
intangible assets acquired.
6
<PAGE> 8
Independent Auditors' Review Report
The Board of Directors and Stockholders
C. H. Heist Corp.:
We have reviewed the condensed consolidated balance sheet of C. H. Heist Corp.
and subsidiaries as of September 29, 1996, and the related condensed
consolidated statements of earnings and cash flows for the thirteen and thirty
nine week periods ended September 29, 1996 and the thirteen and forty week
periods ended October 1, 1995. These condensed consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of C. H. Heist Corp. and subsidiaries
as of December 31, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated February 16, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
Buffalo, New York
October 29,1996
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND THE FINANCIAL CONDITION
Results of Operations
Sales increased by $1,039,000 or 3.8% for the quarter and $2,745,000 or 3.6%
year to date. Sales for the temporary staffing segment increased $2,049,000
or 18.0% for the quarter and $3,479,000 or 10.7% year to date. The increase
in sales for the temporary staffing division for both the quarter and year
to date periods were mainly due to increased sales in offices opened in the
prior year and increases at existing locations, particulary in the
Company's Mid Atlantic and Mid South regions. Additionally, the increase
was partially attributable to the acquisition of certain assets of Tech
Resource, Inc., which occurred on September 15, 1996 and which contributed
$93,000 in sales for the two week period ended September 29, 1996. Sales
in the industrial maintenance segment decreased by $1,010,000 or 6.4%, and
by $735,000 or 1.7% for the current fiscal quarter and year to date
periods respectively. These declines were mainly the result of the
continued impact of the loss of a contract to provide insulation services
at one of the Company's main customer's facility's in the Company's East
Coast region. During the comparable 9 month period of 1995, sales for
these services amounted to $2,303,000 which have not been made up through
other services at that facility. Sales at the Company's Southern region
(formerly Heist Field Services) declined by $534,000 or 16.0% for the
quarter while still showing an increase of $1,445,000 or 14.9% for the
year to date period. The decline in the current quarter was mainly due to
the reorganization which occurred within the region and the change in
focus away from field repair services and towards attaining day to day
maintenance contracts. The loss of a maintenance contract in the Company's
Central region due to pricing competition also had an impact on the
current year's sales decline.
Gross profit improved by $60,000 for the current fiscal quarter while still
showing a decline of $89,000 for the fiscal year to date period compared to
one year ago. Gross profit as a percentage of sales decreased from 15.5% to
15.2% and from 14.2% to 13.6% during the current fiscal quarter and year to
date periods, respectively. The increase in gross profit dollars during the
current fiscal quarter was mainly due to improvements made at the Company's
Southern region which during the similar quarter last year showed a loss of
$249,000 while reporting a profit of $383,000 during the current fiscal
quarter, at the gross profit level. The majority of this improvement
occurred during the fiscal month of September when work levels were high,
and the results of cost reduction actions taken at the end of the previous
fiscal quarter were starting to have an impact. Management of the Company
believes that this trend will continue at least through the next two fiscal
months. Offsetting this improvement were approximately $45,000, net of
taxes, in expenses associated with the closing of the Company's Buffalo
Service and Repair facility. It was determined that this facility's daily
volume of repair activity did not warrant the level of capital being
employed. These services are now being outsourced. It is anticipated that
this closing will result in an annual savings of approximately $650,000 on
a going forward basis. Also helping to overcome the disappointing first
half of the year (gross profit as a percent of sales was 12.8% for the 6
months ended June 30, 1996), was a strong performance from Ablest, the
temporary staffing segment of the Company.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND THE FINANCIAL CONDITION,
CONTINUED
Selling, general and administrative expenses increased by $211,000 for the
current fiscal quarter and $1,011,000 for the year to date period. Selling,
general and administrative expenses as a percentage of sales increased from
11.0% to 11.3% and from 11.8% to 12.7% for the current fiscal quarter and
year to date period, respectively. The increase for the quarter and year to
date periods were mainly due to costs associated with the upgrade in
information systems which occurred in the prior fiscal year as well as
increases in legal expenses associated with the holding of additional Board
of Directors meetings, the involment of legal council in the planning and
drawing up of certain documents associated with the potential spin-off and
initial public offering of Ablest, and other matters.
Other expenses net, increased during the current fiscal quarter by $61,000 or
39.7% and by $113,000 or 32.8% for the current fiscal year to date period,
compared to one year ago. Interest expenses increased by $14,500 and
$71,000 during the current fiscal quarter and year to date period,
respectively. This was primarily due to the Company maintaining higher
levels of borrowing against its bank line of credit. Interest income
declined by $21,000 and $55,000 for the fiscal quarter and year to date
periods, respectively, due to lower interest rates on investments by the
Company's Canadian subsidiary.
The effective tax rate for the quarter is 34.8% and for the fiscal year to date
period is 78.5%.The high effective year to date rate is due to the impact
of higher foreign tax rates on the Company's Canadian subsidiary and the
fact that the tax benefit of operating losses in the industrial maintenance
divisions are not fully realizable for state tax purposes.
Financial Condition
The quick ratio is 2.8 to 1 as of September 29, 1996 compared to 3.2 to 1 as of
December 31, 1995. The current ratio is 3.2 to 1 as of September 29, 1996
compared to 3.7 to 1 as of December 31, 1995. Working capital decreased
during the current fiscal quarter by $30,000, primarily due to increases in
accrued payroll related items in both the industrial maintenance and
temporary staffing divisions. These increases were partially offset by
increases in cash and cash equivalents in the Company's temporary staffing
division and increased receivables in the Company's industrial maintenance
division. Cash and cash equivalents increased by $364,000 during the
current fiscal quarter due to an increase in cash by the Company's Canadian
subsidiary. Reference should be made to the cash flow statement which
details the sources and uses of cash.
Open credit commitments as of September 29, 1996 were $6,000,000, $1,000,000 for
C.H. Heist Corp., and $5,000,000 for Ablest Service Corp., the temporary
staffing division. The Company also has $367,000 (the US dollar equivalent)
available at the Royal Bank of Canada for Canadian operations.
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS O F THE
RESULTS OF OPERATIONS AND THE FINANCIAL CONDITION,
CONTINUED
Capital expenditures for the current fiscal quarter were $1,008,000. Of this
amount $145,000 was for computer equipment including $38,000 allocated for
hardware and software associated with the Tech Resource, Inc., acquisition,
$442,000 was for additions to the equipment fleet, $92,000 toward the
construction of a new waste water treatment and transfer station at the
Company's Canadian subsidiary and the balance was for other equipment and
facilities. Commitments at September 29,1996 were $302,000 of which
$213,000 is for the new waste water treatment and transfer facility and
$89,000 is for industrial maintenance equipment.
Recent Developments
In a press release dated August 29, 1996, the Company announced that it has
received a favorable ruling from the Internal Revenue Service to
distribute, in a tax free manner, the common stock of Ablest Service Corp.,
its temporary staffing subsidiary, on a pro rata basis to Company
shareholders. In conjunction with the proposed spin-off, Ablest plans to
consummate an initial public offering of additional shares of common stock.
The public offering will be made by prospectus only. The Company expects
that the spin-off and initial public offering will be completed within the
next few months.
10
<PAGE> 12
Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 27.1 Financial Data Schedules (for SEC use only)
(B) Reports on Form 8-K:
On September 30, 1996, the Company filed a report on Form 8-K
regarding its wholly owned subsidiary, Ablest Service Corp.'s
acquisition of certain assets of Tech Resource, Inc., for an
aggregate purchase price of $1,500,000.
11
<PAGE> 13
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.
C. H. Heist Corp.
(Registrant)
Date October 29, 1996 /s/ Mark P. Kashmanian
------------------------
Mark P. Kashmanian
Chief Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 1,871,207
<SECURITIES> 0
<RECEIVABLES> 15,989,431
<ALLOWANCES> 0
<INVENTORY> 2,002,251
<CURRENT-ASSETS> 23,993,154
<PP&E> 48,763,524
<DEPRECIATION> 31,238,408
<TOTAL-ASSETS> 43,499,271
<CURRENT-LIABILITIES> 7,478,389
<BONDS> 9,051,807
0
0
<COMMON> 158,355
<OTHER-SE> 26,301,483
<TOTAL-LIABILITY-AND-EQUITY> 43,499,271
<SALES> 28,218,788
<TOTAL-REVENUES> 28,218,788
<CGS> 23,937,038
<TOTAL-COSTS> 23,937,038
<OTHER-EXPENSES> 3,189,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,152
<INCOME-PRETAX> 877,929
<INCOME-TAX> 305,260
<INCOME-CONTINUING> 572,669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,669
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
