<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter period ended June 29, 1997.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
Commission file number 0-7907
------
C.H. Heist Corp.
(Exact name of registrant as specified in its charter)
New York 16-0803301
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
810 North Belcher Road
Clearwater, Florida 33765
------------------- -----
(Address of principal executive offices) (Zip Code)
813-461-5656
------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date - August 1, 1997.
Common stock, $.05 par value 2,876,823
---------------------------- ---------
(Class) (Outstanding shares)
<PAGE> 2
C.H. HEIST CORP. AND SUBSIDIARIES
Index
<TABLE>
<S> <C> <C>
Part I
Financial Information
Condensed Consolidated Balance Sheets-
June 29, 1997 (Unaudited) and December 29, 1996 3
Condensed Consolidated Statements of Operations - (Unaudited)
thirteen and twenty-six week periods ended June 29, 1997
and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows - (Unaudited)
twenty-six week periods ended June 29, 1997 and June 30, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Independent Auditors' Review Report 7
Management's Discussion and Analysis of Results of Operations
and Financial Condition 8-10
Part II
Other Information 11
Signatures 12
</TABLE>
* * * * *
2
<PAGE> 3
Part I-Financial Information
C.H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 29, December 29,
Assets 1997 1996
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 224,640 2,691,908
Receivables 15,956,876 14,533,685
Services in progress 1,848,555 1,117,235
Income taxes receivable 580,805 -
Parts and supplies 1,387,083 1,604,470
Prepaid expenses 1,263,567 324,114
Deferred income taxes 1,010,230 1,010,376
------------- ------------
Total current assets 22,271,756 21,281,788
------------- ------------
Property, plant and equipment, at cost 52,026,539 49,635,229
Less accumulated depreciation 34,442,409 32,229,168
------------- ------------
Net property, plant and equipment 17,584,130 17,406,061
------------- ------------
Deferred income taxes 140,090 141,367
Other assets 3,392,077 2,073,881
------------- ------------
$43,388,053 40,903,097
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt $ 537,667 537,667
Accounts payable 2,377,147 1,579,775
Accrued expenses 5,141,706 4,470,646
Income taxes payable - 197,753
------------- ------------
Total current liabilities 8,056,520 6,785,841
Long-term debt, excluding current installments 8,223,557 6,492,390
Deferred income taxes 551,285 551,285
------------- ------------
Total liabilities 16,831,362 13,829,516
------------- ------------
Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092 shares 158,355 158,355
Additional paid-in capital 4,273,905 4,267,798
Retained earnings 24,597,240 24,984,062
Equity adjustment from foreign currency translation (1,230,108) (1,084,731)
------------- ------------
27,799,392 28,325,484
Less cost of common stock in treasury: 290,269 and
292,419 shares for 1997 and 1996, respectively (1,242,701) (1,251,903)
------------- ------------
Total stockholders' equity 26,556,691 27,073,581
------------- ------------
$43,388,053 40,903,097
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
C.H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Thirteen Twenty-six Twenty-six
week period week period week period week period
ended ended ended ended
June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 31,123,105 25,781,333 56,084,088 51,550,337
Cost of sales 26,272,501 22,466,873 48,533,872 44,975,610
------------ ------------ ------------ ------------
Gross profit 4,850,604 3,314,460 7,550,216 6,574,727
Selling, general and administrative expenses 4,071,118 3,603,088 7,535,519 6,934,402
------------ ------------ ------------ ------------
Operating income (loss) 779,486 (288,628) 14,697 (359,675)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 7,038 23,872 18,312 37,407
Interest expense (162,648) (217,047) (285,097) (297,474)
Gain (loss) on disposal of property, plant
and equipment, net (8,078) 20,752 (4,941) 83,161
Amortization of other assets (52,097) (31,007) (88,042) (62,014)
Miscellaneous, net 97,725 (7,916) (206,044) (2,365)
------------ ------------ ------------ ------------
Total other expense, net (118,060) (211,346) (565,812) (241,285)
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 661,426 (499,974) (551,115) (600,960)
Income tax expense (benefit) 204,795 (48,618) (164,293) (87,704)
------------ ------------ ------------ ------------
Net earnings (loss) $ 456,631 (451,356) (386,822) (513,256)
============ ============ ============ ============
Net earnings (loss) per share $ .16 (.16) (.13) (.18)
============ ============ ============ ============
Weighted average number of common shares outstanding 2,876,854 2,872,773 2,876,186 2,872,773
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
C. H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Twenty-six
week period week period
ended ended
June 29, 1997 June 30, 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (386,822) (513,256)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation of plant and equipment 2,590,076 2,436,778
Amortization of other assets 88,042 62,014
(Gain) loss on disposal of property, plant
and equipment, net 4,941 (83,161)
Changes in assets and liabilities (see below) (1,910,403) (2,374,068)
------------- -------------
Net cash provided (used) by operating activities 385,834 (471,693)
------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,776,916) (2,657,861)
Proceeds from disposal of property, plant and equipment 110,290 215,644
Acquisitions, net of cash (1,891,884) -
------------- -------------
Net cash used in investing activities (4,558,510) (2,442,217)
------------- -------------
Cash flows from financing activities:
Proceeds from bank line of credit borrowing 8,350,000 5,600,000
Repayment on bank line of credit borrowing (6,600,000) (4,200,000)
Repayment of other long-term debt (18,833) (18,833)
Proceeds from reissuance of treasury shares 15,309 -
------------- -------------
Net cash provided by financing activities 1,746,476 1,381,167
------------- -------------
Effect of exchange rate changes on cash and cash equivalents (41,068) (934)
------------- -------------
Net decrease in cash and cash equivalents (2,467,268) (1,533,677)
Cash and cash equivalents at beginning of period 2,691,908 3,040,815
------------- -------------
Cash and cash equivalents at end of period $ 224,640 1,507,138
============= =============
Changes in assets and liabilities providing (using) cash:
Receivables $ (1,446,958) (149,160)
Services in progress (736,826) (1,166,255)
Income taxes receivable (580,805) (335,096)
Parts and supplies 216,237 3,578
Prepaid expenses (940,631) (512,740)
Accounts payable 766,017 (12,175)
Accrued expenses 674,302 170,084
Income taxes payable (197,208) 172,997
Other assets 335,469 (545,301)
------------- -------------
Total $ (1,910,403) (2,374,068)
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
C. H. HEIST CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. In the opinion of Management, the accompanying condensed consolidated
financial statements contain all adjustments necessary (consisting of normal
recurring items) to present a fair statement of consolidated financial
position as of June 29, 1997, and the results of operations and cash flows
for the twenty-six week period ended June 29, 1997 and the twenty-six
week period ended June 30, 1996. These condensed consolidated financial
statements should be read in conjunction with the Company's Audited
Consolidated Financial Statements for 1996 and the notes thereto.
The Company's fiscal year ends on the last Sunday of December. For fiscal
1996, the Company's operations included 52 weeks. Therefore, the period
ended June 30, 1996 includes twenty-six weeks. The second half of 1997 (a
52 week year) includes twenty-six weeks.
2. The results of operations for the twenty-six week period ended June 29,
1997 and the twenty-six week period ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
3. The changes in stockholders' equity for the twenty-six week period ended
June 29, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Equity
adjustment
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>
Balance at December 29, 1996 $158,355 $4,267,798 $24,984,062 $(1,084,731) 292,419 $(1,251,903) $27,073,581
Net Loss - - (386,822) - - - (386,822)
Foreign currency translation
adjustment - - - (145,377) - - (145,377)
Reissue Treasury Stock - 6,107 - - (2,150) 9,202 15,309
-------- ---------- ----------- ----------- ------- ----------- -----------
Balance at June 29, 1997 $158,355 $4,273,905 $24,597,240 $(1,230,108) 290,269 $(1,242,701) $26,556,691
======== ========== =========== =========== ======= =========== ===========
</TABLE>
4. During the quarter ended June 29, 1997, no additional stock options were
issued and 4,853 have expired. As of June 29, 1997 and December 29,
1996, the Company had exercisable options outstanding to employees to
purchase 177,536 and 182,389 common shares respectively, at prices ranging
from $6.94 to $11.14 per share.
5. On April 28, 1997, Ablest Service Corp. ("Ablest"), a wholly owned
subsidiary of C. H. Heist Corp. purchased certain assets from Solution
Source, Inc., a Georgia corporation, and its shareholders. The purchase
price was $1.3 million cash at closing plus additional contingent
consideration not to exceed $1.125 million over the next three years based
on the achievement of certain earnings goals. The source of the funds used
by Ablest was $1.3 million from its revolving line of credit. The purchase
price was determined through negotiations and is assigned primarily to the
established fair value of the intangible assets acquired.
Additionally on June 23, 1997, Ablest purchased certain assets from The
Kelton Group, Inc., a North Carolina corporation and its shareholder. The
purchase price was $300,000 cash at closing which came from Ablest's
operating cash account. The purchase price was determined through
negotiations and is assigned primarily to the established fair value of
the intangible assets acquired.
The proforma effect of the above acquisitions on the Company's results of
operations for the thirteen and twenty-six week periods ended June 29, 1997
and June 30, 1996 is not material.
6
<PAGE> 7
Independent Auditors' Review Report
The Board of Directors and Stockholders
C.H. Heist Corp:
We have reviewed the condensed consolidated balance sheet of C.H. Heist Corp.
and subsidiaries as of June 29, 1997, and the related condensed consolidated
statements of operations and cash flows for the thirteen and twenty-six week
periods ended June 29, 1997 and June 30, 1996. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquires of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of C.H. Heist Corp. and subsidiaries
as of December 29, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended (not presented herein);
and in our report dated February 14, 1997, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
29, 1996, is fairly presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Buffalo, New York KPMG Peat Marwick LLP
July 25, 1997
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net sales increased by $5.3 million or 20.7% during the current fiscal quarter
and by $4.5 million or 8.8% for the fiscal year to date period, compared to
one year ago. Net sales in the industrial maintenance segment increased by
$602,000 or 4.3% during the current fiscal quarter, compared to one year ago
while still showing a decline of $2.6 million or 8.9% for the fiscal
year to date period, compared to one year ago. The increase for the current
fiscal quarter was due to sales of new services such as chemical cleaning and
waste management. The decline in the fiscal year to date period was
primarily attributable to the lack of major plant clean-up work during the
first fiscal quarter of this year. Net sales in the Company's staffing
services segment (Ablest Service Corp.) increased $4.7 million or 40.5%
during the current fiscal quarter, compared to one year ago and by $7.1
million or 31.3% for the fiscal year to date period, compared to one year
ago. The increase for the current fiscal quarter and year to date periods
are partially the result of sales generated from offices opened during the
prior fiscal year as well as during the first fiscal quarter of 1997, recent
acquisitions of Information Technology staffing companies and the servicing
of a high volume, short term commercial staffing project in the Company's
midwest region.
Gross profit increased by $1.5 million for the current fiscal quarter and
$975,000 for the fiscal year to date period, compared to one year ago. Gross
profit as a percent of sales increased to 15.6% from 12.9% and to 13.5% from
12.8% during the current fiscal quarter and year to date periods,
respectively. Gross profit as a percent of sales increased in the industrial
maintenance segment to 15.1% from 10.0% and to 10.9% from 9.6% during the
current fiscal quarter and year to date periods, respectively. This increase
in gross profit percentage is primarily attributable to actions taken in the
second half of the prior fiscal year to streamline operations at the
Company's southern region (formerly Heist Field Services) and at the
Company's Service and Repair facility in Buffalo, New York. Gross profit
decreased as a percentage of sales for the Company's staffing services
segment to 15.5% from 16.8% and to 16.1% from 17.1% during the current fiscal
quarter and year to date periods, respectively. Lower margins caused by the
competitiveness within the staffing industry, costs associated with new
office openings during the current fiscal year and the use of second tier
suppliers to meet assignment demands on the high volume, short term project
noted previously, contributed to the decline.
Selling, general and administrative expenses increased by approximately
$468,000 or 13.0% and $601,000 or 8.7% for the current fiscal quarter and
year to date periods, respectively. Selling, general and administrative
expenses for the industrial maintenance segment decreased by $246,000 or
10.9% and $630,000 or 14.1% for the current fiscal quarter and year to date
periods, respectively. These decreases were primarily the result of
streamlining and the consolidation of some support functions which occurred
during the prior fiscal year.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION,
Continued
Results of Operations
Selling, general and administrative expenses for the Company's staffing
services segment increased by $714,000 or 53.6% and $1.2 million or 50.3%
for the current fiscal quarter and year to date periods, respectively. The
increases were primarily the result of the growth of the staffing services
segment through acquisitions and the opening of new offices. Also
contributing to these increases are costs associated with establishing
Ablest Service Corp. as a stand-alone entity. Included in these expenses
are legal and audit fees, expenses associated with Board of Directors
meetings and costs associated with the establishment of separate human
resources department and other support functions. Additional expense was
incurred during the current fiscal quarter due to reserves of $218,000
against receivables for two large customers; one involves disputed invoices
on the aforementioned short term project and the other a Chapter 11 filing
for protection against creditors. We are continuing to service this customer
while it reorganizes under the Chapter 11 petition.
Other expenses net, decreased by $93,000 or 44.1% during the current fiscal
quarter, compared to one year ago, and increased by $325,000 or 134.5% for
the year to date period, compared to one ago. The decrease in the current
fiscal quarter was the result of a decrease in interest expense due to a
lowering in both the amount of debt incurred by the Company and in the
interest rate paid on that debt. Also contributing to this decrease was the
recognition of a foreign currency gain. The fiscal year to date increase is
primarily attributable to the write-off of costs associated with the
preparation of documents for the spin-off and initial public offering of
Ablest Service Corp., which has been delayed.
The effective tax rates for the current fiscal quarter was 31.0% and for the
fiscal year to date period was a benefit of 29.8%. The effective rates are
the result of the multiple taxing jurisdictions in which the Company
operates.
Financial Condition
The quick ratio was 2.4 to 1 as of June 29, 1997 as opposed to 2.7 to 1 at
December 29, 1996. The current ratio was 2.8 to 1 as of June 29, 1997 as
opposed to 3.1 to 1 at December 29, 1996. Net working capital increased by
$70,000 during the current fiscal quarter. The increase in working capital
is attributable to increases in accounts receivable and services in progress
which were partially offset by decreases in cash, parts and supplies and
increases in accounts payable and accrued expenses. Reference should be
made to the cash flow statement, which details the sources and uses of cash.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION,
Continued
Financial Condition
Open credit commitments as of June 29, 1997 were $6.8 million of which $5.7
million was for C. H. Heist Corp. and $1.1 million was for Ablest Service
Corp. The Company also has $362,000 (the U.S. equivalent) available for
C. H. Heist Ltd., the Company's Canadian subsidiary.
Capital expenditures for the current fiscal quarter were approximately $1.1
million. Of this amount $658,000 was for additions to the equipment fleet,
$162,000 was for computer equipment, $136,000 was for fixed assets from
acquisitions and the balance was for other equipment and facilities.
Commitments at June 29, 1997 were $225,000 of which $205,000 was for
additions to the equipment fleet and $20,000 was for other equipment.
Recent Development
On April 28, 1997, Ablest Service Corp. acquired certain assets of Solution
Source, Inc., of Atlanta, Georgia. Solution Source, Inc. provides
Information Technology staffing and has been combined with Ablest's
Tech Resource Group, which was formed after the September 1996 acquisition
of Tech Resource, Inc.
On June 23, 1997, Ablest Service Corp. acquired certain assets of The Kelton
Group, Inc. of Raleigh, North Carolina. The Kelton Group, Inc. is an
Information Technology staffing and documentation services provider. It
was added to Ablest's Tech Resource Group and represents Ablest's expansion
plans for these services outside of the Atlanta, Georgia marketplace.
References should be made to the Company's May 8, 1997, 8-K filing for the
Solution Source acquisition and July 8, 1997, 8-K filing for The Kelton
Group acquisition.
10
<PAGE> 11
Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 27.1 Financial Data Schedules (for SEC use only)
(B) Reports on Form 8-K
On May 8, 1997, the Company filed a report on Form 8-K
regarding its wholly owned subsidiary, Ablest Service Corp.'s
acquisition of certain assets of Solution Source, Inc. for
$1.3 million cash at closing plus additional contingent
consideration not to exceed $1.125 million over the next 3
years based on the achievement of certain earnings goals.
On July 8, 1997, the Company filed a report on Form 8-K
regarding its wholly owned subsidiary, Ablest Service Corp.'s
acquisition of certain assets of The Kelton Group, Inc. for
$300,000 cash at closing.
On July 9, 1997, the Company filed a report on Form 8-KA
regarding the required audited financial statements of
Solution Source, Inc. and pro forma financial statements not
previously included with the initial Form 8-K filing on May 8,
1997.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C.H. Heist Corp.
(Registrant)
Date August 8, 1997 /s/ Mark P. Kashmanian
--------------------------------
Mark P. Kashmanian
Chief Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> JUN-29-1997
<CASH> 224,640
<SECURITIES> 0
<RECEIVABLES> 15,956,876
<ALLOWANCES> 0
<INVENTORY> 1,387,083
<CURRENT-ASSETS> 22,271,756
<PP&E> 52,026,539
<DEPRECIATION> 34,442,409
<TOTAL-ASSETS> 43,388,053
<CURRENT-LIABILITIES> 8,056,520
<BONDS> 8,223,557
0
0
<COMMON> 158,355
<OTHER-SE> 26,398,336
<TOTAL-LIABILITY-AND-EQUITY> 43,388,053
<SALES> 31,123,105
<TOTAL-REVENUES> 31,123,105
<CGS> 26,272,501
<TOTAL-COSTS> 26,272,501
<OTHER-EXPENSES> 4,071,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162,648
<INCOME-PRETAX> 661,426
<INCOME-TAX> 204,795
<INCOME-CONTINUING> 456,631
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456,631
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
