<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
June 30, 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 June 30, 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 - August 2, 1996.
Common stock, $.05 par value 2,872,773
---------------------------- ---------
(Class) (Outstanding shares)
1
<PAGE> 3
C. H. HEIST CORP. AND SUBSIDIARIES
Index
<TABLE>
<S> <C>
Part I
Financial Information
Condensed Consolidated Balance Sheets -
June 30, 1996 (unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Earnings - (unaudited)
thirteen week periods ended June 30, 1996 and
July 2, 1995 and twenty-six week period
ended June 30, 1996 and the twenty-seven week
period ended July 2, 1995 4
Condensed Consolidated Statements of Cash Flows - (unaudited)
twenty-six week period ended June 30, 1996 and the
twenty-seven week period ended July 2, 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 8-9
Part II
Other Information 10
Signatures 11
</TABLE>
* * * * *
2
<PAGE> 4
Part I-Financial Information
C. H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
Assets 1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,507,138 3,040.815
Receivables 14,433,571 14,283,008
Services in progress 2,158,610 990,729
Income taxes receivable 335,096 -
Parts and supplies 2,167,150 2,170,572
Prepaid expenses 700,734 187,647
Deferred income taxes 834,489 834,417
----------- ----------
Total current assets $22,136,788 21,507,188
----------- ----------
Property, plant and equipment, at cost 48,464,337 47,355,312
Less accumulated depreciation 30,730,623 29,712,818
----------- ----------
Net property, plant and equipment 17,733,714 17,642,494
Deferred income taxes 131,922 131,922
Other assets 215,988 265,916
----------- ----------
Total Assets $40,218,412 39,547,520
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 37,667 37,667
Accounts payable 1,501,874 1,306,819
Accrued expenses 4,052,288 3,879,265
Income taxes payable - 545,675
----------- ----------
Total current liabilities 5,591,829 5,769,426
Long-term debt, excluding current installments 8,361,224 6,980,057
Deferred income taxes 430,286 430,286
----------- ----------
Total liabilities 14,383,339 13,179,769
----------- ----------
Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,165,192
shares for 1996 and 1995. 158,260 158,260
Additional paid-in capital 4,253,689 4,253,689
Retained earnings 23,780,710 24,293,966
Equity adjustment from foreign currency
translation (1,105,683) (1,086,261)
----------- ----------
27,086,976 27,619,654
Less cost of common stock in
treasury - 292,419 shares (1,251,903) (1,251,903)
----------- ----------
Total stockholders' equity 25,835,073 26,367,751
----------- ----------
Total liabilities and stockholder's equity $40,218,412 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 Operations
(Unaudited)
<TABLE>
<CAPTION>
Thirteen- Thirteen- Twenty-six Twenty-seven
week week week week
period period period period
ended ended ended ended
June 30 July 2 June 30 July 2
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 25,781,333 25,301,132 51,550,337 49,845,018
Cost of sales 22,466,873 21,376,244 44,975,610 43,121,060
---------- ---------- ---------- ----------
Gross profit 3,314,460 3,924, 888 6,574,727 6,723,958
Selling, general and administrative
expenses 3,603,088 2,851,392 6,934,402 6,133,660
---------- ---------- ---------- ---------
Operating income (loss) (288,628) 1,073,496 (359,675) 590,298
---------- ---------- ---------- ---------
Other income (expense):
Interest income 23,872 38,887 37,407 71,120
Interest expense (217,047) (129,550) (297,474) (240,883)
Gain (loss) on disposal of property,
plant and equipment, net 20,752 18,710 83,161 (36,116)
Amortization of other assets (31,007) (32,807) (62,014) (62,014)
Miscellaneous, net (7,916) 4,593 (2,365) 5,991
---------- ---------- ---------- ----------
Total other expense, net (211,346) (100,167) (241,285) (189,670)
---------- --------- ---------- ----------
Earnings (loss) before
income taxes (499,974) 973,329 (600,960) 400,628
Income tax expense (benefit) (48,618) 550,868 (87,704) 325,796
---------- --------- ---------- ----------
Net earnings (loss) $ (451,356) 422,461 (513,256) 74,832
========== ========= ========== ==========
Net earnings (loss) per share $ (.16) .15 (.18) .03
========== ========= ========== ==========
Weighted average number of common
shares outstanding 2,872,773 2,871,427 2,872,773 2,870,850
========== ========= ========== ==========
</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>
Twenty-six Twenty-seven
week period week period
ended ended
June 30 July 2
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (513,256) 74,832
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation of plant and equipment 2,436,778 1,935,932
Amortization of other assets 62,014 62,014
Gain on disposal of property, plant
and equipment, net (83,161) (36,116)
Deferred income taxes - 19,265
Changes in assets and liabilities (see below) (2,374,068) (763,950)
----------- ----------
Net cash provided (used) by operating activities (471,693) 1,291,977
----------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (2,657,861) (3,632,509)
Proceeds from disposal of property, plant and equipment 215,644 178,165
------------ ----------
Net cash used in investing activities (2,442,217) (3,454,344)
----------- ----------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 5,600,000 4,950,000
Repayments on bank line of credit borrowings (4,200,000) (2,450,000)
Repayment of other long-term debt (18,833) (21,972)
Exercised stock options - 18,125
----------- ----------
Net cash provided by financing activities 1,381,167 2,496,153
----------- ----------
Effect of exchange rate changes on cash and cash equivalents (934) 37,197
----------- ----------
Net increase (decrease) in cash and cash equivalents (1,533,677) 370,983
Cash and cash equivalents at beginning of period 3,040,815 1,533,015
----------- ----------
Cash and cash equivalents at end of period $ 1,507,138 1,903,998
=========== ==========
Changes in assets and liabilities providing (using) cash:
Receivables $ (149,160) 1,085,319
Services in progress (1,166,255) (693,197)
Income taxes receivable (355,096) -
Parts and supplies 3,578 (60,329)
Prepaid expenses (512,740) (610,218)
Other assets (12,175) 72,494
Accounts payable 170,084 106,909
Accrued expenses 172,997 (368,109)
Income taxes payable (545,301) (296,819)
----------- ----------
Total $(2,374,068) (763,950)
=========== ==========
</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 positions as of June 30, 1996 and December
31, 1995, and the results of its operations and cash flows for the thirteen
and twenty-six week periods ended June 30, 1996 and the thirteen and
twenty-seven week periods ended July 2, 1995.
The Company's fiscal year ends on the last Sunday of December. For fiscal
1995, the Company's earnings include 53 weeks. Therefore, the period ended
June 30, 1996 includes twenty-six weeks while the period ended July 2, 1995
includes twenty-seven weeks.
2. The results of operations for the thirteen and twenty-six week periods
ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
3. The changes in stockholders' equity for the twenty-six week period ended
June 30, 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 (loss) - - (513,256) - - - (513,256)
Exercised options - - - - - - -
Foreign currency translation
adjustment - - - (19,422) - - (19,422)
--------- --------- ---------- ------------ ------- ----------- -----------
Balance at June 30, 1996 $ 158,260 4,253,689 23,780,710 $(1,105,683) 292,419 $(1,251,903) $25,835,073
========= ========= ========== =========== ======= =========== ===========
</TABLE>
4. During the quarter ended June 30, 1996, no additional stock options were
issued, while 3,630 options expired. As of June 30, 1996 and December 31,
1995, the Company had exercisable options outstanding to employees to
purchase 186,070, and 189,700 common shares respectively at prices ranging
from $6.94 to $11.14 per share.
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 June 30, 1996, and the related condensed consolidated
statements of operations and cash flows for the thirteen and twenty-six week
periods ended June 30, 1996 and the thirteen and twenty-seven week periods
ended July 2, 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
July 26, 1996
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND THE FINANCIAL CONDITIONS
Results of Operations
Net sales increased during the current fiscal quarter by $480,000 or 1.9% and
for the fiscal year to date period by $1,705,000 or 3.4%. Sales in the
industrial maintenance segment decreased for the fiscal quarter by $941,000
or 6.3% but still show an increase for the fiscal year to date period of
$274,000 or 1.0%. Sales in the temporary staffing segment increased by
$1,421,000 or 12.1% and $1,431,000 or 6.3% during the current fiscal quarter
and year to date period, respectively. Sales in the industrial maintenance
segment were down during the current fiscal quarter partially due to the
continued impact of the loss of an insulation contract, which was not offset
by increases in equipment related work as was the case in the first quarter,
and partially due to a decline in painting services in both the U.S. and
Canada. The decline in Canada is due to a late start on bridge work due to
the particularly harsh winter and wet spring, while the decline in the U.S.
is primarily due to customers holding off from maintenance painting projects
until later in the year. Management expects sales in these areas to increase
over the next quarter.The increase in temporary staffing was due to the
development of new branches that opened during the previous fiscal year and
earlier in the current fiscal year, as well as increased market penetration
in a number of the companies existing locations.
Gross profit declined by $610,000 for the current fiscal quarter and $149,000
for the fiscal year to date period, compared to one year ago. Gross profit
as a percent of sales decreased from 15.5% to 12.9% and from 13.5% to
12.8% during the current fiscal quarter and fiscal year to date periods,
respectively. The decreases in gross profit for the current fiscal quarter
and year to date periods were partially due to losses incurred in operations
at the company's Heist Field Services Division. Changes made to this division
over the past year have not had the anticipated results. Additional actions
to improve operations and cost efficiencies to the division have been made.
Management does not expect to see the impact of these actions earlier then
the end of the third quarter. Unless these actions have a material impact
upon the operations of this division, significant losses may be incurred by
the division through the balance of this fiscal year. An additional decrease
in gross profit occurred from increased expenditures on the repairs and
maintenance of equipment and from an increase in non-billable time being
incurred by the industrial maintenance division, which guarantees key field
employees a minimum number of hours or pay each week in order to promote
stability and reinforce safety in the workforce. These declines were
partially offset by a strong performance in the temporary staffing segment
which increased its gross profit from 14.4% to 16.8% and from l5.5% to l7.2%
during the current fiscal quarter and year to date periods, respectively.
Selling, general and administrative expenses increased by $752,000 for the
fiscal quarter and $801,000 for the year to date period. A significate
portion of the increase is due to costs associated with the upgrade of
information systems and hardware that were added during the last fiscal year
and continue to be developed, implemented and maintained.
Other expense net, increased during the current fiscal quarter by $111,000 or
111% and by $52,000 or 27.2% for the current fiscal year to date period,
compared to one year ago. This was due to an increase in interest expense of
$87,000 and $57,000 for the fiscal quarter and year to date period,
respectively, as the company incurred a higher level of borrowing during the
current fiscal quarter. Interest income declined by $15,000 and $34,000 for
the fiscal quarter and year to date periods, respectively, due to lower cash
investments by the company's Canadian subsidiary.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND THE FINANCIAL CONDITION,
CONTINUED
The effective tax rate for the current fiscal quarter is a benefit of
9.7% and for the fiscal year to date period is a benefit of 14.6%. The full
tax benefit of the operating losses are offset by state taxes, which are due
even when losses are incurred.
Financial Condition
The quick ratio is 3.7 to 1 as of June 30, 1996 compared to 3.2 to 1 as
of December 31, 1995. The current ratio is 4.0 to 1 as of June 30, 1996
compared to 3.7 to 1 as of December 31, 1995. Working capital decreased by
$599,000 during the current fiscal quarter. The decrease in working capital
was primarily due to a decrease in cash and cash equivalents resulting from
the loss sustained in the industrial maintenance division in the current
fiscal quarter, and an increase in accrued payroll related items in the
temporary staffing division, and were partially offset by an increase in
accounts receivable and services in process due to increases in sales in the
temporary staffing division and the contract terms of some jobs in the
industrial maintenance division which stipulate when payments will be made.
Cash and cash equivalents decreased by $2,384,000 for the current fiscal
quarter due to net operating losses, increases in accounts receivables,
prepaid insurance and additions to property, plant and equipment. Reference
should be made to the cash flow statement which spells out the details of
sources and uses of cash.
Open credit commitments as of June 30, 1996 were $4,700,000, $1,700,000
for C.H. Heist Corp., and $3,000,000 for Ablest Service Corp., the temporary
staffing division. The company also has $367,000 (the U.S. dollar equivalent)
available at the Royal Bank of Canada for Canadian operations.
Capital expenditures for the current fiscal quarter were $2,038,000. Of
this amount $418,000 was for computer equipment, $867,000 was for additions to
the equipment fleet and the balance was for other equipment and facilities.
Commitments at June 30,1996 were $233,000, of which $29,000 is for buildings
and the balance for industrial maintenance equipment.
9
<PAGE> 11
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: No reports on Form 8-K have been filed during
the quarter ended June 30, 1996.
10
<PAGE> 12
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 August 5, 1996 /s/ John L. Rowley
-------------- ------------------------
John L. Rowley
Chief Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,507,138
<SECURITIES> 0
<RECEIVABLES> 14,433,571
<ALLOWANCES> 0
<INVENTORY> 2,158,610
<CURRENT-ASSETS> 22,136,788
<PP&E> 48,464,337
<DEPRECIATION> 30,730,623
<TOTAL-ASSETS> 40,218,412
<CURRENT-LIABILITIES> 5,591,829
<BONDS> 8,361,224
0
0
<COMMON> 158,260
<OTHER-SE> 25,676,813
<TOTAL-LIABILITY-AND-EQUITY> 40,218,412
<SALES> 25,781,333
<TOTAL-REVENUES> 25,781,333
<CGS> 22,466,873
<TOTAL-COSTS> 22,466,873
<OTHER-EXPENSES> 3,603,088
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,047
<INCOME-PRETAX> (499,974)
<INCOME-TAX> (48,618)
<INCOME-CONTINUING> (451,356)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (451,356)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
