<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996] FOR THE FISCAL
YEAR ENDED DECEMBER 29, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
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
incorporation or organization) Identification No.)
810 North Belcher Road
Clearwater, Florida 34625
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(Address of principal executive offices) (Zip Code)
(813) 461-5656
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.05 par value
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(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements, incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K (X).
<PAGE> 2
The aggregate market value of the Registrant's common shares held by
non-affiliates at March 16, 1997 was approximately $8,032,000.
The number of common shares of the Registrant outstanding at March 16,
1997 was 2,876,873.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in the
following parts of this report: Part I and II -- the Registrant's Annual
Report to Shareholders for the year ended December 29, 1996, which appears as
Exhibit 13 to this Form 10-K; Part III -- the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission and used in
connection with the solicitation of proxies for the Registrant's annual meeting
of shareholders to be held on May 9, 1997.
<PAGE> 3
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PART I
ITEM 1. BUSINESS
General. C.H. Heist Corp. and its subsidiaries (the "Company") are engaged in
two industry segments: industrial maintenance and temporary staffing. The
Company operates in both segments in the United States and in the industrial
maintenance segment in Canada.
Industrial Maintenance Services
The Company performs high-pressure water maintenance cleaning services,
primarily by the use of mobile high-pressure water pumping units, on industrial
and chemical equipment and facilities. The Company's services also include
sandblasting, industrial painting, and the vacuuming of wet and dry industrial
wastes. The Company engages in the business of exchanger extraction and
insertion, shell side cleaning, tube cleaning and field service repairs of heat
exchangers for the same client base. The services are performed through the use
of specialized automated mechanical equipment which is generally regarded as
state of the art. The Company also installs, maintains and sells insulation for
commercial applications.
The Company's principal customers include oil refineries, petrochemical,
chemical, ferrous and non-ferrous metal plants, mining installations,
governmental authorities, nuclear and fossil fuel electric generating plants
and pulp and paper mills.
Sales of industrial maintenance services to one customer, E. I. Dupont De
Nemours and Company, accounted for approximately 8.4% of the Company's sales
during its fiscal year ended December 29, 1996. The total amount of services
purchased by this customer is an aggregate of services provided at a number of
separate plants. Plant managers at the respective plants generally make the
decisions as to whether or not to use the Company's services. If the contracts
with this customer were not renewed, it would have a substantial impact on the
Company's operations.
Many of the Company's industrial maintenance services are performed
outdoors, but the Company does not consider its business to be seasonal.
However, due in part to weather factors, the first quarter of the Company's
fiscal year has historically produced the lowest levels of revenue and
profitability.
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The Company from time to time investigates and develops new equipment
components, tools and methods for use in the conduct of its operations. Most of
the components in its equipment are designed to the Company's specification.
The amounts expended for such activities, all of which were performed at a
Company facility, during the fiscal years ended December 29, 1996, December 31,
1995 and December 25, 1994 amounted to $248,046, $154,417 and $182,542
respectively. During the fiscal year ended December 29, 1996, these services
were performed primarily by seven individuals who were employed by the Company
on a full-time basis.
The Company competes with numerous other companies engaged in
high-pressure water maintenance cleaning services, industrial painting,
maintenance-cleaning of heavy industrial equipment through the use of
mechanical, chemical and other methods, the vacuum removal of dry and wet
industrial waste, and the installation and maintenance of insulation. The
Company does not believe that any single competitor is dominant in any of these
services. Competition is primarily based upon quality of services and price.
The Company is subject to various statutes and regulations respecting
control of noise, air, water and land pollution. In addition, its customers may
be subject to other environmental protection statutes and regulations relating
to some of the industrial maintenance services rendered by the Company. From
time to time modifications or improvements have been required in the Company's
equipment in order to comply with government regulations, including those
relating to safety and noise reductions. Such modifications or improvements
have not resulted in any material capital expenditures nor are any anticipated
for such purpose in the foreseeable future.
Temporary Staffing Services
The Company also supplies temporary employees in the U.S. through Ablest
Service Corp. ("Ablest"), a wholly owned subsidiary of the Company. Ablest is a
temporary staffing organization with 31 offices located in the Eastern United
States with the capability to supply temporary employees for the clerical,
industrial and technical needs of their customers. Ablest does not have any
principal customers, nor does it service any specific industry or field.
Instead, its services are provided to a broad based customer list.
On September 15, 1996, Ablest purchased certain assets of Tech Resource
Inc. a Georgia corporation. This acquisition established Ablest in the
Information Technology staffing sector. See note 11 to the Consolidated
Financial Statements on page 19 of the Company's Annual Report to Shareholders
incorporated herein by reference.
The temporary staffing business is highly competitive. There are numerous
local, regional and national firms principally engaged in offering such
services. The primary competitive factors in the temporary staffing field are
reliability, personnel and price.
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Industry Segments and Service Activities. The following table is a summary of
information relating to the Company's operations in its two industry segments
for each of the Company's last three fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
Dec.29, Dec.31, Dec.25,
In Thousands 1996 1995 1994
- ------------ ------ ------ -------
<S> <C> <C> <C>
Sales to Unaffiliated
Customers:
Industrial
Maintenance $57,001 $57,974 $58,469
Temporary Staffing 49,514* 44,685* 44,103*
Operating Income (loss):
Industrial
Maintenance (1,114) 488 (1,930)
Temporary Staffing 3,347 2,922 3,401
Identifiable Assets:
Industrial
Maintenance 31,598 30,468 29,948
Temporary Staffing 9,268 7,588 5,704
</TABLE>
* Sales figures do not include intersegment sales of approximately
$84,000, $134,000 and $152,000 in 1996, 1995 and 1994, respectively.
The following table sets forth the approximate amounts of total sales and
revenues by service activity within the Company's industrial maintenance
segment for each of the Company's last three fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended
Industrial -------------------------
Maintenance Dec.29, Dec.31, Dec.25,
Sales and Revenues 1996 1995 1994
- -------------------- ----- ----- -----
<S> <C> <C> <C>
Hydro/Mechanical 69% 72% 74%
Sandblasting and 16% 17% 15%
Painting
Other 15% 11% 11%
</TABLE>
<PAGE> 6
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Working Capital. By virtue of the nature of the Company's business
segments and the size and financial status of its customers, the attainment and
maintenance of high levels of working capital is not required, other than to
meet debt requirements as disclosed in Note 4 to the Consolidated Financial
Statements on page 15 of the Company's Annual Report to Shareholders which is
incorporated herein by reference.
Backlog. In view of the fact that the Company's services are primarily
furnished pursuant to purchase orders or on a call basis, backlog is not
material.
Employees. On December 29, 1996, the Company employed approximately 3,700
persons of whom 230 persons were employed on a full-time basis and the
remainder were part-time and temporary employees. Some of the Company's
industrial maintenance employees are represented by unions. The Company
considers its employee relations to be good.
Canadian Operations. The following table sets forth the relative
contributions in U.S. dollars to sales, operating income and identifiable
assets attributable to the Company's Canadian operations for the last three
fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------
Dec.29, Dec.31, Dec.25,
In Thousands 1996 1995 1994
- ------------ ---- ---- ----
<S> <C> <C> <C>
Sales to Unaffiliated
Customers $14,877 $14,483 $12,673
Operating Income $ 923 $ 1,118 $ 549
Identifiable Assets $ 9,316 $10,093 $ 9,451
</TABLE>
There were no export sales during any period.
<PAGE> 7
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Executive Officers of Registrant
(a) Identification. The Company's executive officers are:
<TABLE>
<CAPTION>
Served as
Position and Executive
Office with Officer
Name Age Registrant Since
- ---- --- ------------ ---------
<S> <C> <C> <C>
Charles H. Heist 46 Chairman of the 1978
Board of Directors,
President and Chief
Executive Officer
John L. Rowley 53 Chief Financial Officer 1979
Isadore Snitzer 75 Secretary 1956
W. David Foster 62 President - Chief 1976
Executive Officer
Ablest Service Corp.
Duane F. Worthington 45 Vice President - 1989
U.S. Operations,
C. H. Heist Corp.
Andrew R. Crowe, Jr. 45 Vice President - 1990
Chief Operating
Officer, C. H.
Heist, Ltd.
Kurt R. Moore 38 Executive Vice President - 1991
Ablest Service Corp.
Thomas B. Boisture 45 Vice President - 1993
Engineering and
Development,
C. H. Heist Corp.
Mark P. Kashmanian 41 Treasurer - Chief 1997
Accounting Officer
Paul K. Brumfield 54 Vice President - Human 1997
Resource, Safety, Health
and Environment
</TABLE>
<PAGE> 8
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(b) Arrangements and Understandings. There are no arrangements or
understandings pursuant to which the above officers were elected.
(c) Family Relationships. None of the officers has any family
relationship with any other officer of the Company.
(d) Business Experience. Messrs. Charles H. Heist, John L. Rowley, W.
David Foster, Duane F. Worthington, Kurt R. Moore, Andrew R. Crowe, Jr., Mark
P. Kashmanian and Paul K. Brumfield have been employees of the Company for more
than five years. Mr. Snitzer is a partner in the Buffalo, New York, law firm
of Borins, Setel, Snitzer & Brownstein, and its predecessors, which firm served
as general counsel to the Company until July 1996. Thomas B.Boisture joined the
Company on June 28, 1993 with the acquisition of certain assets of Ohmstede
Mechanical Services, Inc. (OMSI). Mr. Boisture started with OMSI in 1989 after
two years as a manager for a mechanical contracting company in Houston, Texas.
For thirteen years prior to that Mr. Boisture served in management at Exxon, a
major U.S. oil refining company, in mechanical, operational, environmental and
technical positions.
ITEM 2. PROPERTIES
The Company's subsidiary, Ablest Service Corp., owns the executive office
facilities for C.H. Heist Corp. and Ablest Service Corp. in Clearwater,
Florida. The Company owns and leases properties in Buffalo, New York which
house its administrative offices, and Methods and Development facilities. The
leased facilities in Buffalo are leased from persons who are affiliates of
certain officers and directors. See Part III, Item 13 "Certain Relationships
and Related Transactions" in this form 10-K, the response to which is
incorporated herein by reference.
The daily operations of the Company are currently operated out of 27
service facilities and 31 temporary staffing offices as well as eight Regional
Centers. The Regional Centers are covered by short term leases. Twenty-one
service facilities and 31 temporary staffing offices are located in the
continental United States and six service facilities are located within Canada.
With respect to the service facilities, 12 are owned by the Company, and
fifteen service areas and all of the temporary staffing offices are subject to
leases with various expiration dates. The Company considers its service
facilities, temporary staffing offices and Regional Centers suitable and
adequate for servicing its customers.
<PAGE> 9
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In meeting the requirements of its industrial maintenance customers, the
Company relies on its extensive, specially designed and equipped (to Company's
specifications) mobile equipment, which must be kept in good repair and
replaced from time to time. The Company considers this equipment adequate for
current operations. Each of the Company's active service facilities has mobile
equipment permanently assigned to it by the Company.
Certain of the properties owned by the Company are subject to mortgages.
Reference is made to Note 4 to the Consolidated Financial Statements on page 15
of the Company's Annual Report to Shareholders, incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The information in response to this item is hereby incorporated by
reference to the information presented on page 20 of the Company's 1996 Annual
Report to Shareholders which appears as Exhibit 13 to this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information in response to this item is hereby incorporated by
reference to the information presented at page 8 in the Company's 1996 Annual
Report to Shareholders which appears as Exhibit 13 to this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in response to this item is hereby incorporated by
reference to the information presented at pages 9 through 10 in the Company's
1996 Annual Report to Shareholders which appears as Exhibit 13 to this Form
10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and independent auditors report required in
response to this item is hereby incorporated by reference to pages 10 through 20
in the Company's 1996 Annual Report to Shareholders which appears as Exhibit 13
to this Form 10-K.
<PAGE> 10
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in response to this item is hereby incorporated by
reference to the information under the caption "Nominees for Directors"
presented in the Company's definitive proxy statement to be filed with the
Securities and Exchange Commission and used in connection with the solicitation
of proxies for the Company's annual meeting of shareholders to be held on May
9, 1997, except insofar as information with respect to executive officers is
presented in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information in response to this item is hereby incorporated by
reference to the information under the caption "Compensation of Executive
Officers" presented in the Company's definitive proxy statement to be filed with
the Securities and Exchange Commission and used in conjunction with the
solicitation of proxies for the Company's annual meeting of shareholders to be
held on May 9, 1997; provided, however, that information appearing in the proxy
statement under the headings "Report on Executive Compensation by the
Compensation Committee and Board of Directors" and "Common Stock Performance" is
not incorporated herein and should not be deemed to be included in this document
for any purposes.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in response to this item is hereby incorporated by
reference to the information under the caption "Security Ownership of Certain
Beneficial Owners and Management" presented in the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission and used in
connection with the solicitation of proxies for the Company's annual meeting of
shareholders to be held on May 9, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in response to this item is hereby incorporated by
reference to the information under the caption "Certain Transactions" presented
in the Company's definitive proxy statement to be filed with the Securities and
Exchange Commission and used in connection with the solicitation of proxies for
the Company's annual meeting of shareholders to be held on May 9, 1997.
<PAGE> 11
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements and Schedules
See Index to Financial Statements and Schedules at page 13.
(2) Exhibits
Exhibits identified below are filed herewith or incorporated herein by
reference to the documents indicated in parentheses.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Registrant dated January 19,
1983. (Exhibit to the Company's Form 10-K Report for the year ended
June 25, 1989).
3.2 Certificate of Amendment of Certificate of Incorporation of the
Company (Appendix A to the Company's definitive Proxy Statement in
connection with its Annual Meeting held on May 11, 1992).
3.3 Amended By-laws of the Registrant adopted August 27, 1990 (Exhibit
to the Company's Form 10-K Report for the year ended June 24, 1990).
10.1 Business Loan Agreement with Manufacturers and Traders Trust Company
dated December 22, 1994 (Exhibit to the Company's Form 10-K Report
for the year ended December 25, 1994).
10.2 Corporate Revolving Term Loan Agreement with Manufacturer and Traders
Trust Company dated August 21, 1995 (Exhibit to the Company's Form
10-K Report for the year ended December 31, 1995).
10.3 * Amendement to Business Loan Agreement dated October 25, 1996.
10.4 EVA incentive plan. Incorporated herein by reference to the Company's
definitive Proxy Statement in connection with its annual meeting held
on May 10, 1996.
10.5 Leveraged Stock Option plan. Incorporated herein by reference to the
Company's definitive Proxy Statement in connection with its annual
meeting held on May 10, 1996.
10.6 Purchase Agreement dated as of September 15, 1996, with Tech Resource,
Inc. (Exhibit to the Company's Form 8-K report dated September 30,
1996).
13 * 1996 Annual Report to Shareholders.
15 * Letter regarding Unaudited Interim Financial Information.
</TABLE>
<PAGE> 12
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<TABLE>
<S> <C> <C>
21 * Subsidiaries of the Registrant. Inside back cover of the 1996
Annual Report to Shareholders. (Exhibit 13 to this 10-K report).
23 * Consent of KPMG Peat Marwick LLP to incorporation of reports into
Form S-8 No. 33-48497.
27.1 * Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------------
* Filed herewith.
<PAGE> 13
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(b) One report on Form 8-K was filed by the Company on September 30, 1996
during the quarter ended December 29, 1996, regarding the Company's acquisition
of certain assets of Tech Resource, Inc.
The Company will furnish, without charge to a security holder upon request,
a copy of the documents portions of which are incorporated by reference herein
and will furnish any other exhibit at cost.
<PAGE> 14
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C.H. HEIST CORP. AND SUBSIDIARIES
Index to Financial Statements and Schedules
Form 10-K
Items 8, 14(a)(1)
<TABLE>
<CAPTION>
Page reference
---------------------
Annual Form
Report 10-K
------- ------
<S> <C> <C>
The financial statements of the registrant and its
subsidiaries required to be included in Item 8
are listed below:
Independent Auditors' Report 10
Financial Statements:
Consolidated Balance Sheets as of
December 29, 1996 and
December 31, 1995 11
Consolidated Statements of Earnings
for the years ended December 29, 1996,
December 31, 1995 and December 25, 1994 12
Consolidated Statements of Stockholders'
Equity for the years ended December 29,
1996, December 31, 1995 and December 25, 1994 12
Consolidated Statements of Cash Flows for the
years ended December 29, 1996,
December 31, 1995 and December 25, 1994 13
Notes to Consolidated Financial Statements 14 - 19
Supplemental information, Quarterly data 20
The following consolidated financial statement schedules of the
registrant and its subsidiaries are included in Item 14(a)(1):
Independent Auditors' Report 14
Schedule:
II - Valuation Account 15
</TABLE>
Schedules other than those listed above are omitted because the conditions
requiring their filing do not exist or because the required information is
provided in the consolidated financial statements, including the notes thereto.
<PAGE> 15
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Independent Auditors' Report
The Board of Directors
C.H. Heist Corp.:
Under date of February 14, 1997, we reported on the consolidated financial
statements of C. H. Heist Corp. and subsidiaries as listed in the accompanying
index. These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 1996.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidation financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Buffalo, New York
February 14, 1997
<PAGE> 16
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SCHEDULE II
C. H. HEIST CORP. AND SUBSIDIARIES
VALUATION ACCOUNT
<TABLE>
<CAPTION>
Additons
Balance at charged to Accounts Balance
Beginning cost and receivable at end
of period expenses written-off of period
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 25, 1994 $ 356,701 174,441 (168,599) 362,543
========= ======= ======= =======
Year ended December 31, 1995 $ 362,543 114,979 (51,288) 426,234
========= ======= ======= =======
Year ended December 29, 1996 $ 426,234 42,296 (9,219) 459,311
========= ======= ======= =======
</TABLE>
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 24, 1997
C. H. HEIST CORP.
By: /s/ John L. Rowley
------------------------------
John L. Rowley
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and as of the date indicated:
C. H. HEIST CORP.
By: /s/ Charles H. Heist By: /s/ John L. Rowley
---------------------- ---------------------------------
Charles H. Heist John L. Rowley, Director and Vice
Chairman of the Board President-Finance-Chief Financial
and President Officer-Asst. Secretary
By: /s/ Ronald K. Leirvik By: /s/ Chauncey D. Leake, Jr.
---------------------- ----------------------------------
Ronald K. Leirvik Chauncey D. Leake, Jr.
Director Director
By: /s/ Brian J. Lipke By: /s/ Charles E. Scharlau
---------------------- ----------------------------------
Brian J. Lipke Charles E. Scharlau
Director Director
By: /s/ Richard W. Roberson
-------------------------
Richard W. Roberson
Director
February 24, 1997
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page or
Number Description Reference
- ------- ----------- ---------
<S> <C> <C>
3.1 Restated Certificate of Incorporation (1)
of Registrant dated January 19, 1983
3.2 Certificate of Amendment of Certificate (2)
of Incorporation of the Registrant
3.4 Amended By-laws of the Registrant adopted on
August 27, 1990
10.1 Business Loan Agreement with Manufacturers and (3)
Trades Trust Company dated December 22, 1994.
10.2 Corporate Revolving Term Loan Agreement with (6)
Manufactuers and Traders Trust Company Dated
August 21, 1995.
10.3 Amendment to Corporate Revolving Term Loan (7)
Agreement with Manufacturers and Traders Trust
Company dated October 25, 1996.
10.4 EVA Incentive Plan (4)
10.5 Leveraged Stock Option Plan (4)
10.6 Purchase agreement dated September 15, 1996 with (5)
Tech Resource, Inc.
13 1996 Annual Report to Shareholders. (7)
13 1996 Annual Report to Shareholders inside back cover. (7)
15 Letter regarding Unaudited Interim Financial (7)
Information.
23 Consent of KPMG Peat Marwick LLP to incorporation of (7)
reports into Form S-8 No. 33-48497
27 Financial Data Schedule (for SEC use only).
</TABLE>
- ----------------------
(1) Filed as an Exhibit to the Registrant's Form 10-K Report for the year
ended June 25, 1989 and incorporated herein by reference.
(2) Filed as Appendix A to the Registrant's definitive Proxy Statement in
connection with its Annual Meeting of Shareholders held on May 11, 1992.
(3) Filed as an exhibit to the Registrant's form 10-K report for the period
ended December 25, 1994 and incorporated herein by reference.
(4) Filed as part of Registrant's definitive Proxy statement in connection
with its annual meeting of shareholders held on May 10, 1996 and
incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's form 8-K report dated September
30, 1996 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's form 10-K report for the period
ended December 31, 1995 and incorporated herein by reference.
(7) Filed as an Exhibit to this report.
<PAGE> 1
EXHIBIT 10.3
Amendment to Corporate Revolving Term Loan
Agreement with Manufacturers and Traders Trust Company
dated October 25, 1996
<PAGE> 2
AMENDMENT NO. 3
TO
CORPORATE REVOLVING AND TERM LOAN AGREEMENT
Manufacturers and Traders Trust Company (the "Bank") and C.H. Heist
Corp. (the "Borrower") hereby agree as follows:
1. Loan Agreement. The Bank and the Borrower are parties to a
Corporate Revolving and Term Loan Agreement dated December 23, 1993, as amended
by Amendment No. 1 dated December 22, 1994, and Amendment No. 2 dated August
21, 1995 (The "Loan Agreement"). The Bank and the Borrower wish to amend the
Loan Agreement as set forth herein.
2. Amendment to Loan Agreement. The Bank and the Borrower hereby
agree that the Loan Agreement is amended as follows:
a. Section 11.dd(i) of the Loan Agreement, as previously
modified by Amendment No. 1, is modified so that the reference to
"August 1, 1997" is deleted and "August 1, 1998" is substituted in its
place.
3. Except as expressly modified herein, the Loan Agreement
otherwise remains unchanged and the Borrower hereby ratifies and reaffirms the
Loan Agreement, as amended, and any other documents executed in connection
therewith, and agrees that the Loan Agreement and all documents executed in
connection herewith are in full force and effect and fully enforceable with
their terms and not subject to any offset, claim, counterclaim or defense.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3
to be duly executed by their authorized officers as of the 25th day of October,
1996.
C.H. HEIST CORP. MANUFACTURERS AND TRADERS
TRUST COMPANY
By: /s/ John L. Rowley By: /s/ Kevin B. Quinn
------------------ ------------------
John L. Rowley Kevin B. Quinn
Vice President - Finance Banking Officer
<PAGE> 1
EXHIBIT 13
1996 Annual Report to Shareholders
<PAGE> 2
C.H.Heist Corp.
1996 annual report
<PAGE> 3
ANNUAL REPORT
Table of Contents
1 Financial and Performance Highlights
2 - 3 Chairman's Letter
4 - 5 Heist Industrial Maintenance Services Review
6 - 7 Ablest Temporary Staffing Subsidiary Review
8 Selected Financial Data
9- 10 Management's Discussion & Analysis
11 Consolidated Balance Sheets
12 Consolidated Statements of Earnings
12 Consolidated Statements of Stockholders' Equity
13 Consolidated Statements of Cash Flows
14 - 19 Notes to Consolidated Financial Statements
20 Quarterly Financial Data
21 Shareholder and Corporate Information
The 1996 C.H. Heist Corp. annual report is dedicated to the memory of Frank C.
Trotter. Through an extraordinary knowledge of Heist's business, his unrivaled
wit, innumerable anecdotes and his magical way with people, Frank had the
uncanny ability to find the solution to any problem, moderate any dispute and
counsel his colleagues on a myriad of issues. That's why many of us at Heist
affectionately called Frank our "Secretary of State." A talented and devoted
Company executive, he was with Heist for 25 years before his untimely death late
in 1996. A beloved friend and associate to us all, we are grateful to have known
Frank for so long and so well. We will miss him.
C.H. Heist Corp. stock trades on the American Stock Exchange under
the symbol "HST"
Statements made in this report, other than those concerning historical
information, should be considered forward-looking and subject to certain risks
and uncertainties which could cause actual results to differ materially from
those projected. Readers should carefully review and consider disclosures,
including periodic reports on Forms 10-K and 10-Q filed with the Securities and
Exchange Commission, which attempt to advise interested parties of the factors
which affect the Company's business.
<PAGE> 4
Performance Highlights
Heist announced that the Company received a favorable ruling from the Internal
Revenue Service to distribute the common stock of Ablest Service Corp. on a pro
rata basis to its shareholders. In conjunction with the spin-off during 1997,
Ablest plans to consummate an initial public offering.
Ablest, the Company's temporary staffing subsidiary, purchased the assets of
Tech Resource, Inc. - an Atlanta-based information technology staffing company.
The new IT unit operates as Ablest Tech Resource Group.
Heist changed its operating structure to reduce costs and eliminate support
functions that could be outsourced more cost effectively. The Company closed the
Buffalo, N.Y. industrial maintenance service and repair facility, which will
generate savings in 1997 of approximately $650,000.
Ablest opened four new offices and posted record annual sales in 1996,
increasing to $49.5 million from $44.7 million in 1995.
The Heist Southern Region improved Economic Value Added(R) by $1.1 million, the
largest EVA(R) improvement of any Heist business unit.
Financial Highlights
<TABLE>
<CAPTION>
(in thousands, except per share earnings December 29,1996 December 31,1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $106,515 102,659
- ---------------------------------------------------------------------------------------
Cost of Sales 90,498 86,933
- ---------------------------------------------------------------------------------------
Gross Profit 16,017 15,726
- ---------------------------------------------------------------------------------------
Selling, General & Administrative Expenses 13,784 12,316
- ---------------------------------------------------------------------------------------
Operating Income 2,233 3,410
- ---------------------------------------------------------------------------------------
Other Expense, Net 724 499
- ---------------------------------------------------------------------------------------
Earnings Before Income Taxes 1,509 2,911
- ---------------------------------------------------------------------------------------
Income Taxes 819 1,305
- ---------------------------------------------------------------------------------------
Net Earnings 690 1,606
- ---------------------------------------------------------------------------------------
Earnings Per Share $ .24 .56
- ---------------------------------------------------------------------------------------
</TABLE>
Heist company profile
C.H. Heist Corp ("Heist") provides industrial cleaning and maintenance services
to a wide range of industries, such as chemical, petrochemical, power
generation, pulp and paper, mining, nuclear and metallurgical plants and mills.
Its industrial services include high-pressure water cleaning, painting,
sandblasting, vacuuming of wet and dry industrial wastes, turnaround services
and insulation sales and application.
The Company's industrial services offices and satellite facilities are located
predominantly throughout the eastern United States. Heist has operations in
states in the Great Lakes, Mid-Atlantic, Northeast, Southeast, Gulf Coast and
Mississippi and Ohio river valleys. C.H. Heist Ltd., the company's Canadian
subsidary, has offices, facilities and customers located in Ontario and Quebec,
Canada.
Ablest Service Corp company profile
Ablest Service Corp. - a wholly owned subsidiary of C.H. Heist Corp. - is a
temporary staffing company with 31 offices throughout the eastern half of the
United States. It serves the business, professional and industrial sectors with
both white and blue collar employes. With the acquisition of Tech Resource in
September 1996, Ablest gained entry into the fast-growing, high-margin
information technology (IT) sector.
C.H. Heist Corp. has announced its intention to spin-off Ablest Service Corp.,
combined with and initial public offering, during 1997. The move will transform
Ablest into a "pure-play" company - essential in facilitating further growth and
securing equity capital to finance expansion through acquisistion and new-office
openings.
1
<PAGE> 5
Positioning C.H. Heist and Ablest for the Future
(l-r) John L. Rowley, Chief Financial Officer, Dirctor
Charles H. Heist, Chairman of the Board, President and Chief Exectutive Officer;
C.H. Heist Corp.
W. David Foster; President & Chief Executive Officer; Ablest Service Corp.
"Spinning off our temporary staffing subsidiary into a `pure play' company will
deliver long-term benefits to both companies, as well as shareholders."
Fellow Shareholders
1996 saw C.H. Heist Corp. take a number of significant steps to position its
industrial maintenance business and its temporary staffing subsidiary, Ablest
Service Corp., for growth and prosperity in 1997 and beyond.
Fiscal 1996 sales increased to $106.5 million, $3.8 million or 3.8% over the
$102.7 million recorded for 1995. Net earnings in 1996 were $690,000 or $.24 per
share, compared to $1.6 million or $.56 per share in 1995.
While the write-off of obsolete inventory and higher-than-normal equipment
repairs negatively impacted industrial maintenance earnings, great strides were
made in 1996 in this business segment. For example, our Southern Region,
formerly the Field Services Division, improved Economic Value Added(R) by $1.1
million, the largest EVA(R) improvement of any Heist business unit.
Ablest Service Corp. Spin-off and IPO
- -------------------------------------
In 1996 we announced our intention to spin-off Ablest Service Corp., combined
with an initial public offering, during 1997. The management team and Board of
Directors believe spinning-off our temporary staffing subsidiary into a "pure
play" company will deliver long-term benefits to both companies, as well as
shareholders. We also believe the move is vital to allow Ablest to continue its
excellent growth rate and to enhance its acquisition capabilities.
Technology Upgrades
- -------------------
Another initiative is our investment in computer hardware and software. These
upgrades allowed us to improve closing times and enhance our ability to provide
customers with actionable data. We will continue to realize operational and
process efficiencies as all our new systems come on line.
EVA Implementation
- ------------------
Heist implemented the Economic Value Added process in 1996 to guide and measure
our financial reporting and incentive compensation systems. As we've stated
before, EVA is a long-term strategy, and in 1996 we took major steps in
educating all levels of management on the process and how to improve EVA
results.
New Directors
- -------------
In 1996 we made the decision to alter the structure of the Board of Directors -
moving to five outsiders and two insiders. The new directors bring very
impressive credentials and track records to the board.
Brian J. Lipke is the Chairman of the Board, President and Chief Executive
Officer of Gibraltar Steel Corporation. The Chase Manhattan Corporation
Northeast Regional Advisory Board and the Dunlop Tire Corporation are among Mr.
Lipke's other directorships. Since becoming Chairman of Gibraltar
2
<PAGE> 6
in 1992 the processor of value-added steel products increased sales from $130
million to approximately $350 million, with an objective of $1 billion annually
by 2003.
RONALD K. LEIRVIK is President of RKL Enterprises, an acquirer and manager of
small to medium size manufacturing companies. Mr. Leirvik sits on the Board of
Directors of AGA Gas, Inc. and Purdue Research Corp. He was formerly President,
Chief Executive Officer and a Director of RB&W Corporation and Executive Vice
President and General Manager of MOEN, Inc.
RICHARD W. ROBERSON is President of Sand Dollar Partners, Inc., an investment
and consulting firm. He also serves on the Board of Directors of TransGlobal
Systems, Inc. He was formerly President and Chief Executive Officer of
Visionworks, Inc. Mr. Roberson, a certified public accountant, has also served
as Senior Vice President of Eckerd Corporation and as a Senior Audit Manager
with Peat Marwick in Tampa and New York.
I'd also like to note that in preparation for the planned spin-off and IPO of
our temporary staffing subsidiary, CHARLES E. SCHARLAU and DONNA R. MOORE have
been named to the Board of Directors of Ablest Service Corp.
After the spin-off, MR. SCHARLAU will resign his longtime position as a Heist
Director. He is currently Chairman of the Board and Chief Executive Officer with
the Southwestern Energy Company and Arkansas Western Gas Company.
MS. MOORE is Chairman of the Board of Discovery Zone, Inc., which operates 220
children's entertainment FunCenters throughout the United States. From 1987 to
1992, she led the Walt Disney Company's highly successful Disney Store concept,
opening its first 156 stores in the United States and abroad. Before joining
Discovery Zone, Ms. Moore was President - North American Division of Laura
Ashley, Inc. and President and CEO of Motherhood Maternity.
As we approach the year 2000, we believe it is vital to add directors who can
regularly work with the management team to provide counsel and insight on the
operations of the Company. I am confident that the new Board will make the tough
decisions necessary to guide the Company now and in the future.
C.H. Heist also owes a debt of gratitude to two directors who are leaving the
Board after a combined 60-plus years of dedicated and meritorious service to
Heist.
WILLARD F. FOSTER has been associated with the Company for nearly 40 years.
Thanks to his incredible engineering skills and foresight, he is responsible for
developing and implementing many of the processes, systems and equipment we use
out in the field today.
RICHARD J. O'NEIL was responsible for shaping the sound fiscal policies of
Heist, and ensuring that the Company's financial structure continually enabled
us to grow and prosper. He was also a creative and insightful thinker who
contributed to our entry into the temporary staffing industry.
On behalf of the management team and the Board, thank you for the countless
hours of learned counsel and guidance you've given to the Company.
2000 AND BEYOND
- ---------------
The management team and the Board of Directors enter 1997 with tremendous
confidence in both C.H. Heist Corp. and Ablest Service Corp. With the planned
spin-off and initial public offering of Ablest, each company will be
strategically positioned to take advantage of tremendous opportunities in their
respective industries.
Sincerely,
/s/ Charles H. Heist
Charles H. Heist
Chairman of the Board, President
and Chief Executive Officer
C.H. Heist Corp.
<TABLE>
<CAPTION>
Annual Sales
in millions
<S> <C>
1992 71.4
1993 82.5
1994 102.6
1995 102.7
1996 106.5
</TABLE>
C.H. Heist Corp.
<TABLE>
<CAPTION>
Shareholders' Equity
in thousands
<S> <C>
1992 24,916
1993 24,709
1994 24,513
1995 26,368
1996 27,074
</TABLE>
3
<PAGE> 7
A Tale of Two Companies
An interview with Charles H. Heist
Charles H. Heist,
Chairman of the Board, President and Chief Executive Officer, C.H. Heist Corp.
"Part of our strategy for competing with the larger companies is using the
EVA(R) process to evaluate projects and internal investment of equipment, manage
capital deployed and increase shareholder value."
WHAT STEPS ARE UNDER WAY TO GROW INDUSTRIAL MAINTENANCE REVENUES?
We'll soon be bringing in a vice president of marketing - someone from outside
Heist - to work with the rest of our executive team to formulate and execute a
new strategic initiative.
We also have re-emphasized chemical cleaning because of the introduction of new
environmentally friendly chemicals. While clean up is absolutely necessary with
these environmentally friendly chemicals, neutralization is not. This lowers the
overall cost of the job. That's one of the reasons we're so excited about the
chemical cleaning business. That business has grown well, and we're expecting
sales for this service to grow to approximately $3 million in 1997.
We're introducing some new services as well. While still in their infancy, we're
very confident in the potential each has for steadily growing revenues.
One is "dewatering" using a mobile filter press that removes liquids from
industrial wastes. This greatly reduces associated disposal costs. One recently
completed tank dewatering contract cost the customer about $350,000. The
traditional disposal alternative would have cost approximately $1.4 million.
There are thousands of tanks around the country for which this service can be
provided.
Federal Indoor Air Quality (IAQ) standards have become a big issue for our
current and potential customers, and will likely be the impetus for steady
growth in yet another service area for Heist. Office, commercial and industrial
facilities all have heat, ventilation and air-conditioning ducts which harbor
dust with a variety of microbes and other unwanted particles. Heist has a
licensing agreement to use some innovative new equipment to clean and disinfect
ducts. This is another new service that has great potential.
Taking advantage of economies of scale in transportation costs is the key to our
newly built hazardous materials transfer station in northern Quebec. It is very
expensive for companies to ship small quantities of hazardous waste long
distances to licensed disposal facilities. Heist can save these customers money
by collecting waste for less than the long-haul transportation cost. The waste
is categorized at the transfer station, reduced in volume through filtration and
clarification, then accumulated on site until it's economical to take it to a
licensed disposal facility. Sales should approximate $800,000 in the first year.
WHERE ARE THE PRIMARY GEOGRAPHIC MARKETS THAT THE INDUSTRIAL SERVICES BUSINESS
SERVES?
Our current focus is in the Ohio Valley, the Mississippi Valley, Ontario and
Quebec. We maintain a substantial presence throughout the eastern United States
and on the Gulf Coast. Our intention is to continue to expand within and around
those markets. Our recent strategy has been to open satellite offices close to
areas we presently serve. In 1996 we opened satellites in Covington, Virginia;
Welden, North Carolina; Circleville, Ohio; Chattanooga, Tennessee and Charleston
and Spartanburg, South Carolina. These satellites all contributed modestly in
1996, and we expect
4
<PAGE> 8
increased performance from these markets in 1997.
WHAT IS THE COMPANY'S STRATEGY FOR COMPETING WITH LARGER INDUSTRIAL MAINTENANCE
AND ENVIRONMENTAL COMPANIES?
We focus on customized services that the bigger players in the business do not
offer.
The other part of our strategy for competing with the larger companies is using
the EVA(R) process to evaluate projects and internal investment of equipment,
manage capital deployed and increase shareholder value. Our industry is
currently in a period of consolidation and the result is a lot of volume
pricing. A number of our competitors are content to give their services away,
but we are not going to do that. We have no interest in growing revenue at the
expense of margins. EVA is not designed to be a quick-fix scenario. It's a tool
that helps us to focus on long-term profit growth and increased shareholder
value.
There are a number of other factors that make Heist competitive in the
industrial maintenance business. We believe our overall risk management and
safety program is the best in our industry. For the fourth year in a row the
Company has achieved reductions in our insurance premiums that are a direct
result of our safety and risk management programs. We have continued to look
into automating operational processes on an on-going basis to reduce the risk
for our employees and provide a safe work environment.
Another major competitive attribute is the experience of our people. Compared to
our competitors, you'll find that no one in our business keeps employees at the
management and worker levels as long as we do. Our average service time in
management is approximately 20 years. Some of the front-line workers in our
original offices have been with us for 15 to 17 years. That long-term employment
reduces the need for entry-level training, so we are able to focus on the more
sophisticated training that brings results to the bottom line and performance to
our customers.
THE COMPANY ADOPTED THE ECONOMIC VALUE ADDED(R) (EVA(R)) SYSTEM IN 1996. WHAT
BENEFITS ARE YOU SEEING FROM THE USE OF THIS PROCESS?
We fully anticipate definitive long-term benefits from our EVA program. While
our intentions and strategies with regard to EVA have indeed been long term,
we've also enjoyed some immediate improvements. By improving inventory turnover
and reducing inventory size - through implementation of just-in-time deliveries
or having vendors stock inventory - we have reduced investment in inventory by
$400,000.
ARE YOU SATISFIED THAT THE TURNAROUND MANAGEMENT BUSINESS IS NOW FUNCTIONING AS
WAS INTENDED?
The most disappointing aspect of 1996 was that we were unable to stimulate the
maintenance business - that is our real forte - in conjunction with our
turnaround work. The turnaround business is very cyclical, with some jobs
occurring on two- to five-year intervals. Our goal is to smooth out the peaks
and valleys in the turnaround business with regular day-to-day maintenance
contracts. On the plus side, we have completed the turnarounds on time and
within cost estimates.
It's important to note that from the EVA viewpoint, the turnaround business for
the Southern Region has improved EVA by $1.1 million. It's still not where we
want it to be, but it has improved tremendously. It was the single largest EVA
improvement in the organization.
DO YOU EXPECT THE CHANGES TO THE C.H. HEIST OPERATING STRUCTURE IN THE THIRD
QUARTER TO HAVE A SUBSTANTIAL POSITIVE IMPACT ON EARNINGS DURING 1997?
Yes, I do. We have identified an estimated annual savings of approximately
$650,000 for 1997.
IS HEIST'S FINANCIAL POSITION STRONG ENOUGH TO ABSORB ANOTHER ACQUISITION AT
THIS TIME?
Yes. We could absorb an acquisition as long as it is accretive to earnings. Our
financial position is very strong.
WHAT AFFECT DO YOU ANTICIPATE THE ABLEST SPIN-OFF WILL HAVE ON THE HEIST
INDUSTRIAL SERVICES BUSINESS?
We expect the spin-off to have no appreciable impact on the operations of the
industrial services business.
C.H. Heist Corp. will be significantly smaller with revenues of approximately
$60 million, and will be focused solely on the industrial cleaning and
maintenance services that the company has been identified with since 1949. While
the temporary staffing subsidiary has provided a significant portion of Company
revenues, I am very confident of Heist's ability to prosper with our focus on
the core business, our new services, state-of-the-art IT systems and a
restructured organization.
Heist
<TABLE>
<CAPTION>
Industrial Maintenance Sales
in millions
<S> <C>
1992 43.7
1993 46.4
1994 58.5
1995 58.0
1996 57.0
</TABLE>
5
<PAGE> 9
A Tale of Two Companies
An interview with W. David Foster
W. David Foster,
President & Chief Executive Officer, Ablest Service Corp.
ARE YOU COMFORTABLE THAT ABLEST CAN ACHIEVE ITS LONG-TERM GROWTH GOAL OF ANNUAL
SALES OF $200 MILLION BY THE YEAR 2000?
I'm very comfortable with our goal of reaching $200 million in annual net sales
by 2000, and doing so primarily through acquisition. We are currently having
discussions with several acquisition candidates, and intend to be even more
aggressive with our acquisition activity once we complete our spin-off and IPO.
WHICH AREAS OF THE TEMPORARY STAFFING BUSINESS OFFER THE MOST POTENTIAL FOR
ABLEST?
All segments of the staffing industry offer potential, though information
technology (IT) is hot right now. The reality is that, long-term, the whole
industry still has the potential for growth and we are not backing off from our
traditional commercial staffing business. Strategically, it makes sense for us
to enter IT, because this area is growing based on high demand and short supply.
Therefore, it's a higher margin business.
As Ablest grows, our IT business will grow, but at this point I don't expect it
to exceed 15% of our business. We believe that there will be opportunities to
grow the IT business in the near term, as it is consolidating more rapidly than
traditional commercial staffing.
HOW WILL ABLEST BE ABLE TO REMAIN COMPETITIVE WITH THE INCREASING NUMBER OF
LARGE COMPANIES THAT ARE RESULTING FROM CONSOLIDATION WITHIN THE INDUSTRY?
We plan to be part of the consolidation through our acquisition plans. Our
perspective, however, is that being the biggest does not necessarily give you a
competitive edge. Some of the largest and oldest temporary staffing companies
had problems related to their dependence on large national contracts. We don't
know what the exact critical mass is, nor have we targeted an optimum size. But
we do believe that there will always be opportunity for a quality regional
player.
IN SEARCHING FOR LOCATIONS FOR NEW OFFICES OR ACQUISITION CANDIDATES, IS THERE
ONE OR MORE SPECIFIC GEOGRAPHIC AREAS THAT ABLEST WILL CONCENTRATE ON?
Ablest plans to open five additional offices in `97, after opening four in `96
and four in `95. We plan to expand in the eastern United States concentrating on
the Mid-Atlantic area, including the metro-Washington D.C. market. We currently
operate in New York State and the Chicago, Illinois area and are looking at the
Ohio market to fill in the Great Lakes region. We feel it is a natural fit and a
strong business environment.
We are opening an office in Dallas, Texas to service Blockbuster Entertainment.
We have been working with them in Ft. Lauderdale, Florida for many years, and
they've asked us to move with them to help staff their new headquarters office.
We're very happy to do that. It is a great market, and this really is an
exceptional opportunity to enter an area that also has excellent IT potential. I
am really excited about Dallas.
THE STAFFING INDUSTRY, LIKE ABLEST, HAS DOUBLED IN SIZE OVER THE LAST FOUR
YEARS. DO YOU EXPECT THIS LEVEL OF GROWTH TO CONTINUE?
I don't think expansion will continue at that pace. I feel the industry overall
will grow at about 15% per year. Commercial staffing growth will probably be in
the 11 to 13% range, and I believe that IT will grow in the range of 20 to 25%
over the next year. The acquisition of Tech Resource provides Ablest with access
to the IT market and we intend to expand this business. We are currently
exploring opportunities within the IT market and hope to complete one or two
acquisitions in that area in 1997.
THE TREND AMONG FORTUNE 1000 COMPANIES IS CONSOLIDATION OF VENDORS. WHAT
STRATEGY WILL ABLEST EMPLOY TO REMAIN A VIABLE CONTENDER FOR THIS BUSINESS?
We look for clients who want value-added services and a supplier they can
partner with. Our major competitive strength is our ability to empower local
management to react as owners of the Company and have the motivation to satisfy
their customers' expectations. These local offices have the backing of a larger
company, providing human resources support and IT systems, but they have the
autonomy to operate as
6
<PAGE> 10
a local company which can meet the needs of their customers. We don't force
everyone into a specific model, and this is a significant advantage for a
local-regional player like us. Our branch offices bring in their own business,
develop programs for their customers, and make it a part of their operations.
We have, and will continue to, walk away from national contract pricing that
doesn't add economic value to the company.
Ablest has provided service to some business locations that have national
contracts with another supplier when the customer became dissatisfied with the
service. In those instances, we were happy to come in and work at rates
necessary to attract qualified candidates. This clearly doesn't happen
everywhere, but we're finding it gives us the opportunity to establish
partnerships based on our value-added service concept.
HOW IS ABLEST POSITIONED TO RESPOND TO THE CURRENT CONSOLIDATION OF FIRMS THAT
SERVICE THE COMMERCIAL STAFFING SECTOR?
We want to complete the spin-off and IPO to make Ablest a "pure-play" company,
so it is easier for us to participate in the consolidation movement by making
acquisitions. The spin-off and IPO will enable us to assemble more creative
purchase plans and buyout offers. Our intention is to become one of the
consolidators. That's how we plan to get our $200 million in annual sales by
2000.
HOW WILL THE PLANNED SPIN-OFF OF ABLEST AFFECT THE OPERATION OF THE BUSINESS?
The major effect of the spin-off will be a clearer focus of who we are and where
we are taking the company. The day-to-day operations will show no up-front
changes. However, operating our own back-office services, rather than sharing
with Heist, will be the most visible change. We are already in the process of
establishing these programs. Ablest has been run relatively independently over
the past 10 years, so the spin-off will tend to formalize this relationship.
WHAT STRATEGIC ADVANTAGES ARE OFFERED BY A STAND-ALONE ABLEST IN COMPARISON TO
THE CURRENT SUBSIDIARY ARRANGEMENT?
It's the pure-play concept. A single-industry company is easier for investors to
understand and to benchmark against the expectations for the entire industry
group. And there is just no question that it will improve our ability to
participate in consolidation activities by providing our stock as a potential
acquisition currency.
We also expect the spin-off will result in greater coverage by staffing industry
trade publications. The current tie-in with C.H. Heist Corp. is confusing for
those that write about industry issues.
From all perspectives - customers, employees, recruits, acquisition targets and
shareholders - our spinning-off into a pure-play company will put Ablest into a
tremendously positive position.
"We want to complete the spin-off and IPO to make Ablest a `pure play' company.
... The spin-off and IPO will enable us to assemble more creative purchase plans
and buyout offers. Our intention is to become one of the consolidators. That's
how we plan to get our $200 million in annual sales by 2000."
ABLEST
<TABLE>
<CAPTION>
Temporary Staffing Sales
in millions
<S> <C>
1992 27.7
1993 36.1
1994 44.1
1995 44.7
1996 49.5
</TABLE>
7
<PAGE> 11
C.H. Heist Corp. & Subsidiaries
Summary of Selected Financial Data
[in thousands, except per share earnings]
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 1996 (1) 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 106,515 102,659 102,572 82,476 71,397
Cost of sales 90,498 86,933 90,098 71,506 60,941
- -----------------------------------------------------------------------------------------------------------------------------------
Gross profit 16,017 15,726 12,474 10,970 10,456
Selling, general and administrative expenses 13,784 12,316 11,003 9,511 7,886
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 2,233 3,410 1,471 1,459 2,570
Interest expense (643) (541) (396) (224) (170)
Other income (expense) (81) 42 (23) (149) (31)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,509 2,911 1,052 1,086 2,369
Income taxes 819 1,305 734 600 1,099
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 690 1,606 318 486 1,270
===================================================================================================================================
Effective tax rate 54.3% 44.8% 69.8% 55.3% 46.4%
Net earnings per share $ .24 .56 .11 .17 .44
===================================================================================================================================
Canadian operations (U.S. $):
Sales $ 14,877 14,483 12,673 12,643 10,437
Operating income (loss) 923 1,118 549 (153) (361)
Total assets $ 9,316 10,093 9,451 8,479 10,117
===================================================================================================================================
Other data:
Working capital $ 14,496 15,738 14,356 12,431 11,856
Property, plant and equipment, net 17,406 17,642 14,964 15,631 12,627
Capital expenditures, including acquisitions 5,859 7,091 3,957 7,643 2,458
Depreciation and amortization 4,905 4,530 4,433 4,534 4,200
Cash flow from operations (2) 5,595 6,135 4,751 5,020 5,470
Total assets 40,903 39,548 36,756 33,972 29,895
Long-term debt 6,492 6,980 5,121 3,760 568
Stockholders' equity $ 27,074 26,368 24,513 24,709 24,916
Return on beginning stockholders' equity 2.6% 6.6% 1.3% 2.0% 5.2%
Weighted average number 2,873 2,872 2,872 2,885 2,905
of shares outstanding
</TABLE>
(1) Includes effect of acquisition in 1996. See note 11 to Consolidated
Financial Statements.
(2) Defined as net earnings plus depreciation and amortization.
8
<PAGE> 12
Management's Discussion and Analysis of the
Results of Operations and Financial Condition
For the fiscal years ended Dec. 29, 1996 compared to Dec. 31, 1995
Results Of Operations
- ---------------------
Sales for the current year increased by $3.8 million or 3.8% to $106.5 million
from $102.7 million a year earlier. Sales in the company's temporary staffing
segment, Ablest Service Corp. (Ablest), increased $4.8 million or 10.8%.
Increased sales in offices opened in the prior year and sales in five new
locations opened or acquired in 1996, including $682,000 in sales attributable
to Tech Resource, Inc., acquired in September 1996, accounted for the increase.
For more information in regard to this acquisition, please refer to footnote 11
in the accompanying financial statements.
Sales for the industrial maintenance segment declined by $974,000 or 1.7%
compared to the same period one year ago. This decrease was mainly attributed to
the loss at the end of 1995 of a contract to provide insulation application
services at a facility of one of the Company's major customers. This contract
accounted for approximately $2.4 million in sales in fiscal 1995. Also
contributing to the decline in sales was a reduction in painting services of
approximately $573,000 due in part to a lower magnitude of work being performed
in 1996 on a major lead abatement contract. Field service repair sales declined
by $1.2 million due to the change in focus away from this service and towards
attaining annual maintenance contracts. Partially offsetting these declines were
increases in equipment related services of $3.1 million. Larger volume of
turnaround work and sales of a new service, "dewatering with a mobile filter
press," were the reasons for this increase.
In terms of dollars, gross profit improved by $291,000 during fiscal 1996 as
compared to fiscal 1995, however as a percentage of sales gross profit decreased
to 15.0% from 15.3%. The increase in gross profit dollars was mainly
attributable to improvements made at the Company's Southern region (formerly
Heist Field Services) which had a gross profit during the current fiscal year
compared to a gross loss during fiscal 1995. Partially offsetting this increase
was a decline in gross profit dollars due to the loss of the insulation services
contract and to higher than normal equipment repair costs. Ablest continued to
contribute with gross profit improving to 17.4% in fiscal 1996 from 16.5% in
fiscal 1995. The Company also was able to attain savings of approximately $2.0
million through safety training, development of safety programs and focusing on
risk management.
Gross profit was also affected during 1996 by the August closing of the
Company's Buffalo service and repair facility. When measured under the
principals of EVA(R) (Economic Value Added), it was determined that this
facility's daily volume of repair activity did not warrant the level of capital
being employed. These services are currently being outsourced and resulted in a
savings of approximately $140,000 in the fourth quarter of fiscal 1996. Savings
in 1997 should approximate $650,000. During the last quarter inventories at
field locations and the Buffalo service facility were reviewed and obsolete
items were written off. This amounted to a charge of approximately $251,000
further reducing gross profit.
Selling, general and administrative expenses increased by $1.5 million or 12%
compared to fiscal 1995. The increase in the current fiscal year was partially
the result of depreciation expense on the upgrade in information systems which
occurred during fiscal 1995. In addition, legal expenses associated with the
planning and preparation of documents associated with the potential spin-off and
initial public offering of Ablest and increased costs for wages, training, and
recruiting of personnel contributed to the increase.
Other expenses net, increased during the current fiscal year by $225,000 or 45%
over the comparable period one year ago. This was partially due to an increase
in interest expense of approximately $103,000 and a decrease in interest income
of approximately $77,000. The increase in interest expense was due to a higher
level of borrowing during the current fiscal year while the decline in interest
income was due to both a reduction in short term investments and the rate of
return on those investments.
The effective tax rate for the current fiscal period is 54% compared to 45% in
the prior fiscal year. The full tax benefit of operating losses are offset by
state taxes, which are due even when losses are incurred. Also higher foreign
tax rates on earnings at the Company's Canadian subsidiary contributed to the
higher effective tax rate.
Financial Condition
- -------------------
The quick ratio is 2.7 to 1 compared to 3.2 to 1 and the current ratio is 3.1 to
1 compared to 3.7 to 1 at December 29, 1996, and December 31, 1995,
respectively. Working capital decreased by $1.3 million during fiscal 1996 in
part due to a $500,000 short term promissory note associated with the
acquisition of certain assets of Tech Resource, Inc., an increase in accrued
payroll related items of $591,000, reduced inventories of $566,000, and a
$349,000 reduction in cash and cash equivalents. The reduction in cash and cash
equivalents is the result of using available cash to fund capital additions, the
acquisition of certain assets of Tech Resource, Inc. and reducing debt.
Partially offsetting these reductions were increases in accounts receivable,
current deferred tax assets, prepaid insurance and a decrease in income taxes
payable.
Long term borrowings decreased by $488,000, leaving open credit commitments at
Manufacturers and Traders Trust Company of $3.5 million for C.H. Heist Corp. and
$5 million for Ablest Service Corp. The Company also has $366,000 (the U.S.
dollar equivalent) available at the Royal Bank of Canada.
Capital expenditures were $4.7 million for fiscal 1996. Of this amount, $1.8
million were additions to the mobile equipment fleet, $872,000 were for computer
equipment and software, $567,000 were for facilities and $1.6 million were for
other equipment, furniture and fixtures. Commitments as of December 29, 1996
were $41,000 of which $38,000 were for facilities and the remainder for
replacement equipment. It is anticipated that existing internally available
funds, cash flows from operations and available borrowings will be sufficient to
cover working capital and capital expenditures in 1997.
Recent Developments
- -------------------
In a press release dated January 8, 1997, the Company announced that it will
delay the spin-off and initial public offering of Ablest Service Corp. until
later this year. The conditions in the stock market for an initial public
offering of the size contemplated became unfavorable and therefore the Company,
based on the advice of investment bankers, decided to delay these plans until
later in 1997.
9
<PAGE> 13
Results of Operations
- ---------------------
For the fiscal years ended December 31, 1995 compared to December 25, 1994
Sales for the current year increased by $87,000. More importantly net earnings
increased more than five fold to $1,606,000. Sales in the temporary staffing
segment, Ablest Service Corp. (Ablest), increased $582,000 or 1.3% with a
decrease in the industrial maintenance segment of $495,000 or .8%. Ablest growth
was offset by sales reductions when some customers implemented discounted or
national contracts and in other situations a decision was made not to provide
staffing that was low rate, high refill and required high staff hours to
service.
The decrease in industrial maintenance sales was due to declines in equipment
related services of $481,000 and reduced sales in the Heist Field Services (HFS)
division (OMSI until May 1, 1995) of $1,500,000. These reductions were offset by
increases in painting and sandblasting of $1,286,000 and insulation sales and
application of $200,000. The decline in equipment related and HFS division sales
was a result of turnaround and major plant cleanup work done in the prior period
that was not duplicated in the current period. The timing of turnaround projects
typically varies depending on customer operating cycles. The increase in
painting sales was due to the Peace Bridge painting and lead abatement project.
Insulation sales increased at our PBI division. During the fourth quarter of
1995 a significant insulation maintenance contract was not renewed. This will
result in a decline of sales in 1996 of approximately $3,000,000. However, this
was a highly discounted contract which will not result in a material impact on
net earnings.
Gross profit as a percent of sales increased from 12.2% to 15.3%. Through our
safety department, management has been emphasizing training, development of
safety programs and increased effort on risk management. This program has
reduced the number and severity of the insurance claims and the Company has
achieved major cost reductions in its insurance expense. The savings amounted to
$2,000,000 during the current year. The fourth quarter of 1995 included
approximately $800,000 of non-recurring reductions in certain accrued expenses.
The majority of these adjustments related to the reduction in the insurance
accrual to reflect the aforementioned savings once the effect had been
confirmed. Improved margins in the HFS division and in our Canadian operation
also contributed to the increase in gross profit.
Selling, general and administrative expenses increased by $1.3 million or 11.9%.
The increases resulted from the upgrade of Information Technology to accommodate
planned growth, consulting services to design a management reporting system that
follows the Economic Value Added (EVA(R)) Model, implementing an automated
retrieval system in temporary staffing offices and personnel additions to
strengthen the service to our customers.
Interest income increased due to excess cash invested at higher rates in the
Canadian subsidiary. Interest expense increased due to higher interest rates on
borrowed funds in the United States and higher average debt levels. Sales of
equipment resulted in a net loss on sale of property, plant and equipment.
Intangible assets relating to two acquisitions were fully amortized in 1994,
resulting in the decrease in amortization expense in 1995. Collectively, the
above caused the increase in other expense of $80,000 or 19.2%.
The effective income tax rate is 44.8% compared to the expected federal tax rate
of 34.0%. This difference in rates is explained in footnote 5 to the
consolidated financial statements. The reasons for the difference are the effect
of state taxes on the Company and its subsidiaries which file separate tax
returns and the Canadian subsidiary's income which is taxed at a higher rate
than U.S. income.
Independent Auditors' Report
The Board of Directors
C.H. Heist Corp.:
We have audited the accompanying consolidated balance sheets of C. H. Heist
Corp. and subsidiaries as of December 29, 1996 and December 31, 1995, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for the years ended December 29, 1996, December 31, 1995 and December 25, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of C. H. Heist Corp.
and subsidiaries as of December 29, 1996 and December 31, 1995, and the results
of their operations and their cash flows for the years ended December 29, 1996,
December 31, 1995 and December 25, 1994, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Buffalo, New York
February 14, 1997
10
<PAGE> 14
C.H. Heist Corp. & Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
YEAR ENDED Dec. 29, 1996 Dec. 31, 1995
- ---------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,691,908 3,040,815
Receivables, less allowance for doubtful receivables of
$459,311 and $426,234 in 1996 and 1995, respectively 14,533,685 14,283,008
Services in progress 1,117,235 990,729
Parts and supplies 1,604,470 2,170,572
Prepaid expenses 324,114 187,647
Deferred income taxes (note 5) 1,010,376 834,417
- ---------------------------------------------------------------------------------------------------------
Total current assets 21,281,788 21,507,188
Property, plant and equipment, at cost (note 2) 49,635,229 47,355,312
Less accumulated depreciation 32,229,168 29,712,818
- ---------------------------------------------------------------------------------------------------------
Net property, plant and equipment 17,406,061 17,642,494
Deferred income taxes (note 5) 141,367 131,922
Other assets 2,073,881 265,916
- ---------------------------------------------------------------------------------------------------------
$ 40,903,097 39,547,520
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current installments of long-term debt (note 4) $ 537,667 37,667
Accounts payable 1,579,775 1,306,819
Accrued expenses (note 3) 4,470,646 3,879,265
Income taxes payable 197,753 545,675
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 6,785,841 5,769,426
Long-term debt, excluding current installments (note 4) 6,492,390 6,980,057
Deferred income taxes (note 5) 551,285 430,286
- ---------------------------------------------------------------------------------------------------------
Total liabilities 13,829,516 13,179,769
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity (notes 4, 5 and 6):
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 24,984,062 24,293,966
Equity adjustment from foreign currency translation (1,084,731) (1,086,261)
- ---------------------------------------------------------------------------------------------------------
28,325,484 27,619,654
Less cost of common stock in treasury - 292,419 shares (1,251,903) (1,251,903)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 27,073,581 26,367,751
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 12 and 13) -- --
- ---------------------------------------------------------------------------------------------------------
$ 40,903,097 39,547,520
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 15
C.H. Heist Corp. & Subsidiaries
Consolidated Statement of Earnings
<TABLE>
<CAPTION>
YEAR ENDED Dec. 29, 1996 Dec. 31, 1995 Dec. 25, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 106,515,038 102,659,211 102,572,391
Cost of sales 90,498,402 86,933,518 90,098,687
- ------------------------------------------------------------------------------------------------------------------
Gross profit 16,016,636 15,725,693 12,473,704
Selling, general and administrative expenses 13,783,389 12,315,628 11,003,144
- ------------------------------------------------------------------------------------------------------------------
Operating income 2,233,247 3,410,065 1,470,560
- ------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (643,175) (540,517) (395,960)
Interest income 62,299 139,337 64,146
Gain (loss) on disposal of property,
plant and equipment, net 10,988 (25,251) 39,049
Amortization of other assets (116,919) (124,029) (194,982)
Miscellaneous, net (37,436) 51,521 69,109
- ------------------------------------------------------------------------------------------------------------------
Other expense, net (724,243) (498,939) (418,638)
- ------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,509,004 2,911,126 1,051,922
Income taxes (note 5) 818,908 1,305,318 733,899
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 690,096 1,605,808 318,023
===================================================================================================================
Net earnings per common share $ .24 .56 .11
===================================================================================================================
Weighted average number of
common shares outstanding 2,873,337 2,871,812 2,871,743
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity
adjustments
Additional from foreign Total
Common paid-in Retained currency Treasury stock stockholders'
stock capital earnings translation Shares Amount equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 26, 1993 $ 158,135 4,235,689 22,370,135 (841,504) 287,419 (1,213,778) 24,708,677
Net earnings -- -- 318,023 -- -- -- 318,023
Foreign currency translation
adjustment -- -- -- (475,554) -- -- (475,554)
Purchase of treasury shares -- -- -- -- 5,000 (38,125) (38,125)
- ---------------------------------------------------------------------------------------------------------------------------------
Balances at December 25, 1994 158,135 4,235,689 22,688,158 (1,317,058) 292,419 (1,251,903) 24,513,021
Net earnings -- -- 1,605,808 -- -- -- 1,605,808
Exercised options 125 18,000 -- -- -- -- 18,125
Foreign currency translation
adjustment -- -- -- 230,797 -- -- 230,797
- ---------------------------------------------------------------------------------------------------------------------------------
Balances 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 -- -- 690,096 -- -- -- 690,096
Exercised options 95 14,109 -- -- -- -- 14,204
Foreign currency translation
adjustment -- -- -- 1,530 -- -- 1,530
- ---------------------------------------------------------------------------------------------------------------------------------
Balances at December 29, 1996 $ 158,355 4,267,798 24,984,062 (1,084,731) 292,419 (1,251,903) 27,073,581
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 16
C.H. Heist Corp. & Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED Dec. 29,1996 Dec. 31, 1995 Dec. 25,1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 690,096 1,605,808 318,023
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of plant and equipment 4,787,806 4,405,519 4,237,734
Amortization of other assets 116,919 124,029 194,982
(Gain) loss on disposal of property,
plant and equipment, net (10,988) 25,251 (39,049)
Deferred income taxes (64,405) 81,313 (186,848)
Changes in assets and liabilities (see below) 238,197 281,265 (3,056,906)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,757,625 6,523,185 1,467,936
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment, net (4,740,100) (7,090,800) (3,957,032)
Proceeds from disposal of property, plant
and equipment 225,430 150,262 226,895
Acquisition (note 11) (1,118,579) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (5,633,249) (6,940,538) (3,730,137)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 8,700,000 8,200,000 9,206,000
Repayment of bank line of credit borrowings (9,150,000) (6,300,000) (7,806,000)
Repayments of other long-term debt (37,667) (40,806) (112,263)
Purchase of treasury shares -- -- (38,125)
Exercised stock options 14,204 18,125 --
- -----------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (473,463) 1,877,319 1,249,612
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 180 47,834 (113,436)
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (348,907) 1,507,800 (1,126,025)
Cash and cash equivalents at beginning of year 3,040,815 1,533,015 2,659,040
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,691,908 3,040,815 1,533,015
=======================================================================================================================
Changes in assets and liabilities providing (using) cash:
Receivables $ (255,840) 705,732 (4,201,372)
Services in progress (127,604) 863,594 (291,125)
Parts and supplies 565,729 (108,077) (312,509)
Prepaid expenses (136,548) (158,639) 111,478
Accounts payable 292,797 (442,344) 378,545
Accrued expenses 592,148 (895,833) 1,168,486
Income taxes payable (348,529) 215,186 162,143
Other assets (343,956) 101,646 (72,552)
- -----------------------------------------------------------------------------------------------------------------------
Total $ 238,197 281,265 (3,056,906)
=======================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest $ 457,939 433,534 300,244
Income taxes $ 1,144,414 938,737 760,243
=======================================================================================================================
Non cash investing and financing activities:
Note issued in connection with acquisition (note 11) $ 500,000 -- --
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 17
C.H. Heist Corp. & Subsidiaries
Notes to Consolidated Financial Statements
Years ended December 29, 1996, December 31, 1995 and December 25, 1994
(1) Summary of Significant Accounting Policies
C. H. Heist Corp. and subsidiaries (the Company) provide industrial cleaning and
maintenance services and, through its subsidiary, Ablest Service Corp. (Ablest),
provides temporary staffing services. The industrial business provides services
for a wide range of industries domestically and through C.H. Heist Ltd., a
wholly owned subsidiary, in Canada. The temporary staffing business provides
commercial and technical staffing services to various businesses and
organizations.
Significant accounting policies followed by the Company are summarized as
follows:
(a) FISCAL YEAR
The Company's fiscal year ends on the last Sunday of December. The
consolidated financial statements include 52 weeks for each of the years
ended December 29, 1996 and December 25, 1994, and 53 weeks for the year
ended December 31, 1995.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) CASH EQUIVALENTS
All highly liquid investments with original maturities of three months or
less are considered cash equivalents.
(d) SERVICES IN PROGRESS
Income on services in progress is recorded as the work progresses.
Anticipated losses, if any, are provided for in full.
(e) PARTS AND SUPPLIES
Parts and supplies are valued at the lower of cost (first-in, first-out) or
market.
(f) PROPERTY, PLANT AND EQUIPMENT
Depreciation of plant and equipment is provided over the estimated useful
lives of the respective assets, principally on the straight-line method.
Leasehold improvements are amortized on the straight-line method over the
shorter of the lease term or estimated useful life of the asset.
(g) INTANGIBLE ASSETS
The values ascribed to acquired intangibles (included in other assets),
primarily goodwill, covenants not-to-compete, and customer and employee
lists are being amortized on the straight-line method over periods of five
to thirty years.
(h) INCOME TAXES
Income taxes are accounted for by the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to operating loss
and credit carryforwards and differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized as income or expense in the period that includes the enactment
date.
(i) EARNINGS PER SHARE
The weighted average number of common shares outstanding includes the
dilutive effect, if any, of stock options.
(j) FOREIGN CURRENCY TRANSLATION
The Canadian subsidiary utilizes the Canadian dollar as its functional
currency. Assets and liabilities are translated using rates of exchange as
of the balance sheet date and the statements of earnings are translated at
the average rate of exchange during the year. Gains and losses resulting
from translation are reported separately in stockholders' equity as "Equity
adjustment from foreign currency translation." Foreign currency transaction
gains and losses, if any, are reflected in operations.
(k) USE OF ESTIMATES
Management has made a number of estimates and assumptions in preparing
these financial statements to conform with generally accepted accounting
principles. Actual results could differ from those estimates.
(l) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" on January 1, 1996.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of
the assets exceed their fair value. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell.
Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
14
<PAGE> 18
(m) STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
No. 123, "Accounting for Stock- Based Compensation," which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net earnings and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and thereafter as
if the fair-value-based method defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123
(note 6).
(2) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment, at cost, follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31,1995
- --------------------------------------------------------------------
<S> <C> <C>
Land $ 1,458,089 1,446,844
Buildings and improvements 5,495,550 5,147,329
Machinery and equipment 24,147,290 24,227,007
Automotive equipment 12,966,536 11,869,224
Office furniture and equipment 5,151,771 4,287,886
Leasehold improvements 415,993 377,022
- --------------------------------------------------------------------
$ 49,635,229 47,355,312
====================================================================
</TABLE>
(3) ACCRUED EXPENSES
A summary of accrued expenses follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31, 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Payroll and other compensation $ 2,058,075 1,495,414
Taxes, other than income 345,069 453,816
Insurance 1,709,346 1,607,583
Site rehabilitation 149,499 318,881
Other 208,657 3,571
- ---------------------------------------------------------------------
$ 4,470,646 3,879,265
=====================================================================
</TABLE>
(4) INDEBTEDNESS
A summary of long-term debt follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31,1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable, bank -revolving credit agreement $ 6,450,000 6,900,000
Note payable issued in connection with an
acquisition (note 11) with interest at
8%, payable on September 15, 1997 500,000
Mortgage notes with interest at 8.75%,
payable in principal installments of
approximately $37,700 annually 80,057 117,724
- ------------------------------------------------------------------------------------
Total long-term debt 7,030,057 7,017,724
Less current installments of long-term debt 537,667 37,667
- ------------------------------------------------------------------------------------
Long-term debt, excluding current installments $ 6,492,390 6,980,057
====================================================================================
</TABLE>
The Company has a $10,000,000 unsecured bank line of credit under a revolving
credit agreement. The interest rate on borrowings under the line of credit is
elected weekly by the Company and is either (i) the bank's prime rate or (ii)
the Secondary Market Certificate of Deposit (CD) Rate plus 7/8%. The rate in
effect at December 29, 1996 is 6.4%. On July 31, 1998, the Company has the
option of converting the then outstanding borrowings to a term loan, payable in
twenty equal quarterly installments, bearing interest at either (i) the bank's
prime rate plus 1/2% or (ii) the Secondary Market CD Rate plus 1-1/2%. If
converted, the Company continues electing, on a weekly basis, the interest rate
to be charged. The revolving credit agreement contains working capital
requirements, and limits the amount of liabilities, capital expenditures and
payment of cash dividends. Under the most restrictive of these provisions,
$1,000,000 of retained earnings is free of dividend restrictions at December 29,
1996. Commitment fees of 1/4% per annum are payable on the average daily unused
portion of the line of credit. Compensating balances, may be, but are not
required to be, maintained. If compensating balances are not maintained at 5% of
borrowings, fees at the bank's prime rate are charged on the balance not
maintained.
One of the Company's U.S. subsidiaries also has an unsecured line of credit in
the amount of $5,000,000. The interest rate on any borrowings is determined in
the same manner as the Company's revolving credit notes, (with the Secondary
Market CD Rate plus 1-1/8%). Commitment fees of 1/4% per annum are payable on
the average daily unused portion of the line of credit. No compensating balances
are required and no amounts have been borrowed to date.
The Company's Canadian subsidiary has an unsecured line of credit in the U.S.
dollar equivalent amount of $365,550 at December 29, 1996. Any borrowings
thereunder bear interest at the prime rate of the Royal Bank. Commitment fees of
1/4% per annum are payable on the average daily unused portion of the line of
credit. No compensating balances are required.
No amounts were outstanding at December 29, 1996 and December 31, 1995.
Long-term debt matures as follows, assuming conversion of the amount due under
the revolving credit agreement; $537,667 in 1997; $682,667 in 1998; $1,294,723
in 1999; $1,290,000 in 2000; $1,290,000 in 2001; and $1,935,000 thereafter. The
fair value of long-term debt approximates its recorded value.
15
<PAGE> 19
(5) Income Taxes
Income tax expense consists of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31,1995 Dec. 25,1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current expense:
Federal $ 149,952 377,936 234,128
State 295,018 246,433 344,506
Foreign 438,343 599,636 342,113
- -------------------------------------------------------------------------------------------------------------------
883,313 1,224,005 920,747
- -------------------------------------------------------------------------------------------------------------------
Deferred expense (benefit):
Federal $ (29,247) 75,906 (181,089)
State (2,355) 5,407 (12,941)
Foreign (32,803) -- 7,182
- -------------------------------------------------------------------------------------------------------------------
Total deferred (64,405) 81,313 (186,848)
- -------------------------------------------------------------------------------------------------------------------
$ 818,908 1,305,318 733,899
====================================================================================================================
Earnings before income taxes consist of:
Domestic $ 426,260 1,602,578 353,655
Foreign 1,082,744 1,308,548 698,267
- -------------------------------------------------------------------------------------------------------------------
$ 1,509,004 2,911,126 1,051,922
====================================================================================================================
</TABLE>
Actual income taxes differ from the "expected" taxes (computed by applying the
U.S. Federal corporate tax rate of 34% to earnings before income taxes) as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31,1995 Dec. 25,1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected tax expense $ 513,061 989,783 357,653
Adjustments resulting from:
Effect of higher foreign tax rates 166,627 154,970 111,884
State taxes net of Federal tax benefit 193,158 166,214 218,834
Change in beginning of year valuation allowance
for deferred tax assets (129,220) (7,403) 1,756
Other 75,282 1,754 43,772
- -------------------------------------------------------------------------------------------------------------------
$ 818,908 1,305,318 733,899
===================================================================================================================
Effective tax rate 54.3% 44.8% 69.8%
===================================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and liability are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
YEAR ENDED Dec.29, 1996 Dec. 31,1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful receivables $ 127,572 105,332
Accrued site rehabilitation expense 60,931 117,728
Accrued insurance expense 648,251 531,544
Other 173,622 79,813
- ---------------------------------------------------------------------------------------------
1,010,376 834,417
- ---------------------------------------------------------------------------------------------
Long-term deferred tax assets:
Accumulated depreciation of plant and equipment 141,367 261,142
Valuation allowance -- (129,220)
- ---------------------------------------------------------------------------------------------
141,367 131,922
- ---------------------------------------------------------------------------------------------
Long-term deferred tax liability, net:
Liabilities:
Accumulated depreciation of plant and equipment (724,227) (652,956)
Other (1,268) (17,314)
- ---------------------------------------------------------------------------------------------
(725,495) (670,270)
Assets:
Operating loss and credit carryforwards 811,127 334,193
Accumulated amortization of other assets 174,210 189,897
Valuation allowance (811,127) (284,106)
- ---------------------------------------------------------------------------------------------
(551,285) (430,286)
- ---------------------------------------------------------------------------------------------
Net deferred tax assets $ 600,458 536,053
=============================================================================================
</TABLE>
16
<PAGE> 20
In assessing the realizability of deferred tax assets, management considers,
within each taxing jurisdiction, whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the years which the deferred tax assets are deductible, management
has provided valuation allowances for those carryforwards that are not expected
to be realized.
Undistributed earnings of the Canadian subsidiary, which are intended to be
permanently reinvested in the business are approximately $11,123,000 at December
29, 1996. If such earnings were remitted to the domestic parent, taxes based at
the then current rates and subject to certain limitations would be payable after
reduction for any foreign taxes previously paid on such earnings.
(6) STOCK OPTION PLANS
The Company has reserved 375,000 common shares for issuance in conjunction with
its Stock Option Plan (Plan). The Plan provides for the granting of incentive
stock options and/or nonqualified options to officers and key employees to
purchase shares of common stock at a price not less than the fair market value
of the stock on the dates options are granted. Such options are exercisable at
such time or times as may be determined by the Compensation Committee of the
Board of Directors and generally expire no more than ten years after grant.
Options vest and become fully exercisable six months after the grant date. A
summary of stock option activity follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec. 31, 1995 Dec. 25, 1994
- --------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 189,700 $7.80 149,153 $ 8.09 69,041 $ 8.79
Granted - - 47,000 6.94 80,400 7.49
Exercised (1,900) 7.48 (2,500) 7.25 - -
Canceled or expired (5,411) 8.06 (3,953) 8.49 (288) 10.13
- --------------------------------------------------------------------------------------------------------------
Outstanding, end of year 182,389 $7.80 189,700 $ 7.80 149,153 $ 8.09
==============================================================================================================
Options exercisable at year end 182,389 142,700 102,853
==============================================================================================================
</TABLE>
At December 29, 1996, the range of exercise prices and weighted average
contractual life of outstanding and exercisable options was $6.94 - $11.14 and
7.3 years, respectively.
At December 29, 1996, there were 188,211 shares available for grant under the
Plan. The per share weighted average fair value of stock options granted during
1995 was $3.81 on the date of grant using the Black Scholes option-pricing model
with the following weighted average assumptions: expected dividend yield - none,
risk free interest rate of 5.6%, volatility of 31% and an expected life of ten
years.
The Company applies APB Opinion No. 25 in accounting for the Plan and, since
options have been granted with exercise prices equal to the market value per
share, no compensation cost has been recognized in the financial statements. Had
the Company determined compensation cost based on the fair value of options at
the grant date, the net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec 31,1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Net earnings As Reported $ 690,096 1,605,808
Pro forma 597,696 1,590,766
Earnings per share As Reported .24 .56
Pro forma $ .21 .55
=============================================================================
</TABLE>
In May, 1996, the Company's shareholders approved the adoption of a Leveraged
Stock Option plan (Leveraged Plan) for key employees. The Leveraged Plan
authorizes the issuance of options covering up to 375,000 shares of common
stock. Pursuant to the Leveraged Plan, 10%of an executive's annual incentive
compensation will be used to calculate the number of stock options which will be
granted following the end of the fiscal year. The number of options, and the
exercise price, will be set by the Company's Compensation Committee and will be
based on the average market price per share of common stock for the ten days
prior to the calendar year end for which the option is granted. The exercise
price of the options will be subject to escalation based on a formula to be
approved by the Compensation Committee. Options will vest after three years and
will be exercisable over a ten-year period. Based on 1996 incentive compensation
results and subject to the approval of the Compensation Committee, 33,583
options are expected to be issued under the Leveraged Plan in 1997. The exercise
price is initially expected to be set at $6.22 per share.
(7) EMPLOYEE BENEFIT PLANS
The Company has a qualified noncontributory defined benefit pension plan
covering substantially all of its non-bargaining unit personnel in the United
States. The benefits are based on years of service and the employee's average
compensation during employment. Pension costs are funded as required by
applicable regulations. The following table sets forth the funded status of the
plan at the October 1 measurement dates and the components of pension expense:
17
<PAGE> 21
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec. 31, 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Funded status:
Accumulated benefit obligation:
Vested $ 1,764,135 1,744,222
Nonvested 307,140 376,786
- ---------------------------------------------------------------------------------
$ 2,071,275 2,121,008
=================================================================================
Projected benefit obligation 2,633,293 2,762,755
Plan assets (insurance contracts
and money market funds), at fair value 2,787,708 2,351,367
Plan assets in excess of (less than)
projected benefit obligation 154,415 (411,388)
Unrecognized cumulative experience gain (1,233,281) (629,424)
Unrecognized prior service cost 685,385 746,923
Unrecognized net transition asset 15,107 17,814
- ---------------------------------------------------------------------------------
Accrued pension liability $ (378,374) (276,075)
=================================================================================
Principal actuarial assumptions are:
Weighted average discount rate 7.25% 6.25%
Weighted average return on plan assets 7.75% 7.75%
Rate of compensation increase 5.15% 4.90%
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec. 31,1995 Dec. 25, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension expense:
Service cost-for projected benefits
earned during the period $ 426,715 300,416 424,609
Interest cost on projected benefit obligation 171,981 128,884 119,768
Actual return on plan assets (137,526) (328,967) 101,275
Net amortization and deferral (18,658) 167,510 (208,202)
- ---------------------------------------------------------------------------------------------------
Total pension expense $ 442,512 267,843 437,450
===================================================================================================
</TABLE>
The Company maintains a deferred profit sharing plan covering all salaried
employees of its Canadian subsidiary. Contributions to the plan are based on net
earnings, as defined, subject to certain limitations based on the salaries of
the participants. Expenses under the plan were $35,000 in 1996, $30,000 in 1995
and $32,028 in 1994.
(8) METHODS AND DEVELOPMENT COSTS Methods and development costs amounted to
$248,046, $154,417 and $182,542 for the fiscal years 1996, 1995 and 1994,
respectively.
(9) INDUSTRY SEGMENTS AND MAJOR CUSTOMERS The Company operates in two industry
segments, industrial maintenance and temporary help. Net sales by segment are
sales to unaffiliated customers. Intersegment sales, where applicable, are
accounted for on the same basis as sales to unaffiliated customers. The cost of
performing certain administrative services are allocated between the segments.
Segment data as of and for each of the years ended December 29, 1996, December
31, 1995, and December 25, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec. 31,1995 Dec. 25,1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial maintenance services:
Net sales $ 57,001 57,974 58,469
Operating income (loss) (1,114) 488 (1,930)
Identifiable assets 31,598 30,468 29,948
Capital expenditures 4,485 6,706 3,653
Depreciation 4,468 4,085 4,144
Amortization $ 24 24 91
=========================================================================================================
Temporary help:
Net sales $ 49,514 44,685 44,103
Intersegment sales 84 134 152
- ---------------------------------------------------------------------------------------------------------
Total sales $ 49,598 44,819 44,255
=========================================================================================================
Operating income $ 3,347 2,922 3,401
Identifiable assets 9,268 7,588 5,704
Capital expenditures, including acquisition in 1996 1,374 385 304
Depreciation 320 321 94
Amortization $ 93 100 104
=========================================================================================================
Corporate assets $ 37 1,492 1,104
=========================================================================================================
Consolidated:
Net sales $ 106,515 102,659 102,572
Operating income 2,233 3,410 1,471
Total assets 40,903 39,548 36,756
Capital expenditures, including acquisition in 1996 5,859 7,091 3,957
Depreciation 4,788 4,406 4,238
Amortization $ 117 124 195
=========================================================================================================
</TABLE>
18
<PAGE> 22
The segment data reflects the Company's operational structure. However, certain
corporate expenses and assets have been allocated to industry segments.
Corporate assets not allocated include certificates of deposit. One customer
accounted for approximately 8.4%, 12.9% and 11.2% of the Company's consolidated
net sales in 1996, 1995 and 1994, respectively. At December 29, 1996 and
December 31, 1995, receivables include $1,328,867 and $1,016,416, respectively,
from the same customer.
(10) CANADIAN OPERATION
A summary of financial data (in U.S. dollars) relating to the Company's
Canadian industrial maintenance operation follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
YEAR ENDED Dec. 29, 1996 Dec. 31, 1995 Dec. 25,1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets $ 9,316 10,093 9,451
Liabilities 754 703 803
Net sales 14,877 14,483 12,673
Net earnings $ 677 709 349
=========================================================================
</TABLE>
(11) ACQUISITION OF BUSINESS
On September 15, 1996, Ablest purchased certain assets from Tech Resource, Inc.,
a Georgia Corporation, and its shareholder. The aggregate purchase price,
including acquisition costs, was approximately $1,619,000, of which
approximately $1,119,000 was paid in cash and $500,000 in the form of a one year
promissory note (note 4). The acquisition was accounted for using the purchase
method of accounting. The operations of the acquired business are included in
the 1996 consolidated statement of earnings from the acquisition date. The
purchase price was allocated to assets acquired based on their fair values,
including approximately $1,581,000 which has been allocated to various
intangible assets, primarily goodwill.
(12) LEASE COMMITMENTS
The Company and its subsidiaries occupy certain facilities under noncancellable
operating lease arrangements. Expense under such arrangements amounted to
$785,730, $659,594 and $549,907 in 1996, 1995 and 1994, respectively. Of these
amounts, $91,970, $83,400 and $83,400 applied to leases with related persons in
1996, 1995 and 1994, respectively.
In addition, the Company leases certain automotive and office equipment under
noncancellable operating lease arrangements which provide for minimum monthly
rentals. Expense under such arrangements amounted to $813,431, $689,897, and
$517,863 in 1996, 1995 and 1994, respectively.
Management expects that in the normal course of business, leases that expire
will be replaced by new leases. Real estate taxes, insurance and maintenance
expenses are obligations of the Company.
A summary of future minimum rental payments at December 29, 1996 under operating
leases follows:
<TABLE>
<CAPTION>
Real Property
Year Related Persons Other Equipment
===========================================================
<S> <C> <C> <C>
1997 $54,560 481,636 833,130
- -----------------------------------------------------------
1998 57,000 241,374 395,048
- -----------------------------------------------------------
1999 58,400 85,893 128,667
2000 54,780 47,470 --
2001 $ -- 28,413 --
- -----------------------------------------------------------
</TABLE>
(13) CONTINGENCIES
The Company is exposed to a number of asserted and unasserted potential claims
encountered in the normal course of business. In the opinion of management, the
resolution of such matters will not have a material adverse effect on the
Company's financial condition.
19
<PAGE> 23
C.H.Heist Corp. & Subsidiaries
Quarterly Data
In order to assist our stockholders and other members of the financial community
in following our progress, this chart is provided, with the blank spaces
provided for the current 1997 fiscal year.
[in thousands, except per share data and percentages]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED MARCH JUNE SEPT. DEC. FULL YR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1997:
Net sales $ $ $ $ $
Earnings (loss) before
income taxes % % % % %
Income taxes (benefit) % % % % %
Net earnings (loss) % % % % %
Earnings (loss) per share $ $ $ $ $
EPS - last 12 months $ $ $ $ $
Stock price range $ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal 1996:
Net sales $ 25,769 $ 25,781 $ 28,219 $ 26,746 $106,515
Earnings (loss) before
income taxes (101) (.4)% (500) (1.9)% 878 3.1% 1,232 4.6% 1,509 1.4%
Income taxes (benefit) (39) 38.7)% (49) (9.7)% 305 34.8% 602 48.8% 819 54.3%
Net earnings (loss) (62) (.2)% (451) (1.8)% 573 2.0% 632 2.4% 690 .6%
Earnings (loss) per share $ (.02) $ (.16) $ .20 $ .22 $ .24
EPS - last 12 months $ .66 $ .35 $ .34 $ .24 $ .24
Stock price range $ 7 5/8-6 1/4 $ 7 7/8-6 1/2 $ 8 7/8-5 1/2 $ 8 5/8-7 3/4 $ 8 7/8-5 1/2
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal 1995:
Net sales $ 24,544 $ 25,301 $ 27,179 $ 25,635 $102,659
Earnings (loss) before
income taxes (573) (2.3)% 974 3.8% 1,089 4.0% 1,421 5.5% 2,911 2.8%
Income taxes (benefit) (225) (39.3)% 550 56.5% 490 45.0% 490 34.5% 1,305 44.8%
Net earnings (loss) (348) (1.4)% 424 1.7% 599 2.2% 931 3.6% 1,606 1.6%
Earnings (loss) per share $ (.12) $ .15 $ .21 $ .32 $ .56
EPS - last 12 months $ .61 $ .62 $ .64 $ .56 $ .56
Stock price range $ 10 3/4-6 3/4 $ 9 1/2-8 $ 8 1/8-7 1/4 $ 8 5/8-6 3/4 $10 3/4-6 3/4
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal 1994:
Net sales $ 23,199 $ 24,897 $ 26,964 $ 27,512 $102,572
Earnings (loss) before
income taxes (2,435) (10.5)% 519 2.1% 1,105 4.1% 1,863 6.8% 1,052 1.0%
Income taxes (benefit) (659) (27.1)% 114 22.0% 555 50.2% 724 38.9% 734 69.8%
Net earnings (loss) (1,776) (7.7)% 405 1.6% 550 2.0% 1,139 4.1% 318 .3%
Earnings (loss) per share $ (.62) $ .14 $ .19 $ .40 $ .11
EPS - last 12 months $ (.41) $ (.41) $ (.26) $ .11 $ .11
Stock price range $ 8-7 $ 7 5/8-6 1/4 $ 6 7/8-5 5/8 $ 7 1/2-6 1/2 $ 8-5 5/8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The percentages indicate the pre-tax margin (earnings before income taxes / net
sales), the effective tax rate (provision for income taxes / earnings before
taxes) and after the tax margin (net earnings / net sales).
On December 29, 1996, there were 180 registered shareholders. Proxies were
mailed to an additional 450 shareholders whose certificates
were registered in the name of brokers, banks and nominees on March 27, 1997.
20
<PAGE> 24
Heist Officers & Directors
Charles H. Heist
Chairman of the Board, President and Chief Executive Officer
John L. Rowley
Chief Financial Officer, Director
Chauncey D. Leake, Jr.
Financial Consultant
Director
Charles E. Scharlau
Chairman of the Board and Chief Executive Officer, Southwestern Energy Company
and Arkansas Western Gas Company
Director
Ronald K. Leirvik
President, RKL Enterprises
Director
Brian J. Lipke
Chairman of the Board, President and Chief Executive Officer, Gibraltar Steel
Corporation
Director
Richard W. Roberson
President, Sand Dollar Partners, Inc
Director
Isadore Snitzer, Esq.
Partner, Borins, Setel, Snitzer & Brownstein
Secretary
Mark P. Kashmanian
Chief Accounting Officer, Treasurer
Duane F. Worthington II
Vice President, U.S. Operations
Andrew R. Crowe, Jr.
Vice President and Chief Operating Officer, C.H. Heist, Ltd.
Thomas B. Boisture
Vice President, Engineering & Development
Paul K. Brumfield
Vice President, Human Resources, Safety, Health and Environment
Ablest Officers & Directors
W. David Foster
President and Chief Executive Officer, Director
John L. Rowley
Vice President - Finance, Director
Kurt R. Moore
Executive Vice President
Charles H. Heist
Chairman of the Board
Charles E. Scharlau
Chairman of the Board and Chief Executive Officer, Southwestern Energy Company
and Arkansas Western Gas Company,
Director
Donna R. Moore
Chairman of the Board, Discovery Zone, Inc.,
Director
Shareholder Services
To change the name, address or ownership of stock, report lost certificates or
to consolidate accounts, please contact the Transfer Agent:
First Union National Bank
Securities Transfer Department
CMG - 5 Mailing Code
Suite 1200
Charlotte, North Carolina 28288
or phone toll free (800) 829-8432
Stock Trading
C.H. Heist Corp. common stock is traded on the American Stock Exchange under the
symbol "HST"
Investor Relations and General Information
Analysts, investors and others
seeking financial information should contact:
John L. Rowley
Chief Financial Officer
(813) 461-5656 (phone)
(813) 447-1146 (fax)
Form 10-K
Copies of our Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, are available to shareholders at no charge. To request a
copy please write or fax John L. Rowley.
Financial information is also available from Corporate Financials On-Line. Set
modems to dial 1-718-279-3590 (8N1). Financial information is also available via
the Internet at http://www.cfonews.com or http://www.heist.com
Corporate Headquarters
C.H. Heist Corp.
810 North Belcher Road
Clearwater, Florida 34625
(813) 461-5656 (phone)
(813) 447-1146 (fax)
http://www.heist.com (Internet)
Wholly Owned Subsidiaries
C.H. Heist, Ltd.
Ablest Service Corp.
PLP Corp.
Corporate Services
Independent Certified Public Accountants
KPMG Peat Marwick LLP
Buffalo, New York 14202
General Counsel
Baker & Hostetler
Cleveland, Ohio 44114
<PAGE> 1
EXHIBIT 15
Letter regarding Unaudited Interim Financial Information
<PAGE> 2
C.H. Heist Corp.
Clearwater, Florida
With respect to the registration statement No. 33-48497, we acknowledge our
awareness of the incorporation of our reports dated April 26, 1996, July 26,
1996 and October 29, 1996 related to our reviews of interim financial
information.
Pursuant to rule 436(c) under the Securities Act of 1933 (the Act), such
reports are not considered part of a registration statement prepared or
certified by an accountant or a report prepared or certified by an accountant
within the meaning of sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
Buffalo, New York
March 24, 1997
<PAGE> 1
EXHIBIT 23
Consent of KPMG Peat Marwick LLP to
incorporation of reports in Form S-8
No. 33-48497
<PAGE> 2
The Board of Directors
C.H. Heist Corp.;
We consent to the inclusion and incorporation by reference in the registration
statement (No. 33-48497) on Form S-8 of C.H. Heist Corp. of our reports dated
February 14, 1997, relating to the consolidated balance sheets of C.H. Heist
Corp. and subsidiaries as of December 29, 1996 and December 31, 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 29, 1996,
and related schedule, which reports appear in, or are incorporated by reference
into, the December 29, 1996 annual report on Form 10-K of C.H. Heist Corp.
KPMG Peat Marwick LLP
Buffalo, New York
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-29-1996
<EXCHANGE-RATE> 1
<CASH> 2,691,908
<SECURITIES> 0
<RECEIVABLES> 14,533,685
<ALLOWANCES> 0
<INVENTORY> 1,604,470
<CURRENT-ASSETS> 21,281,788
<PP&E> 49,635,229
<DEPRECIATION> 32,229,168
<TOTAL-ASSETS> 40,903,097
<CURRENT-LIABILITIES> 6,785,841
<BONDS> 6,492,390
0
0
<COMMON> 158,355
<OTHER-SE> 26,915,226
<TOTAL-LIABILITY-AND-EQUITY> 40,903,097
<SALES> 106,515,038
<TOTAL-REVENUES> 106,515,038
<CGS> 90,498,402
<TOTAL-COSTS> 90,498,402
<OTHER-EXPENSES> 13,783,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 643,175
<INCOME-PRETAX> 1,509,004
<INCOME-TAX> 818,908
<INCOME-CONTINUING> 690,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690,096
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
