<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 September 28, 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 - October 20, 1997.
Common stock, $.05 par value 2,876,823
---------------------------- ---------
(Class) (Outstanding shares)
1
<PAGE> 2
C.H. HEIST CORP. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Part I
<S> <C>
Financial Information
Condensed Consolidated Balance Sheets-
September 28, 1997 (Unaudited) and December 29, 1996 3
Condensed Consolidated Statements of Earnings - (Unaudited)
thirteen week periods ended September 28, 1997 and
September 29, 1996 and thirty-nine week periods ended
September 28, 1997 and September 29, 1996 4
Condensed Consolidated Statements of Cash Flows - (Unaudited)
thirty-nine week periods ended September 28, 1997 and
September 29, 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>
September 28, December 29,
Assets 1997 1996
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,002,236 2,691,908
Receivables 18,936,132 14,533,685
Services in progress 1,556,099 1,117,235
Income taxes receivable 135,849 -
Parts and supplies 1,334,484 1,604,470
Prepaid expenses 719,742 324,114
Deferred income taxes 1,010,177 1,010,376
--------------- ---------------
Total current assets 25,694,719 21,281,788
--------------- ---------------
Property, plant and equipment, at cost 52,940,715 49,635,229
Less accumulated depreciation 35,339,189 32,229,168
--------------- ---------------
Net property, plant and equipment 17,601,526 17,406,061
--------------- ---------------
Deferred income taxes 139,626 141,367
Other assets 3,359,156 2,073,881
--------------- ---------------
$46,795,027 40,903,097
=============== ===============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt $ 37,667 537,667
Accounts payable 2,311,189 1,579,775
Accrued expenses 5,321,805 4,470,646
Income taxes payable - 197,753
--------------- ---------------
Total current liabilities 7,670,661 6,785,841
Long-term debt, excluding current installments 11,414,140 6,492,390
Deferred income taxes 551,285 551,285
--------------- ---------------
Total liabilities 19,636,086 13,829,516
--------------- ---------------
Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092. 158,355 158,355
Additional paid-in capital 4,273,915 4,267,798
Retained earnings 25,227,195 24,984,062
Equity adjustment from foreign currency translation (1,257,823) (1,084,731)
--------------- ---------------
28,401,642 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 27,158,941 27,073,581
--------------- ---------------
$ 46,795,027 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 Earnings
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Thirty-nine
week period week period week period week period
ended ended ended ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 31,257,515 28,218,788 87,341,603 79,769,125
Cost of sales 25,912,069 23,937,038 74,445,941 68,912,648
--------------- -------------- ------------ ------------
Gross profit 5,345,446 4,281,750 12,895,662 10,856,477
Selling, general and administrative expenses 3,884,349 3,189,314 11,419,868 10,123,716
-------------- -------------- ------------ ------------
Operating income 1,461,097 1,092,436 1,475,794 732,761
-------------- -------------- ------------ ------------
Other income (expense):
Interest income 32,732 14,004 51,044 51,411
Interest expense (232,894) (164,152) (517,991) (461,626)
Gain (loss) on disposal of property, plant
and equipment, net (3,102) (30,385) (8,043) 52,776
Amortization of other assets (75,278) (24,647) (163,320) (86,661)
Miscellaneous, net (1,581) (9,327) (207,625) (11,692)
-------------- -------------- ------------ ------------
Total other expense, net (280,123) (214,507) (845,935) (455,792)
-------------- -------------- ------------ ------------
Earnings before income taxes 1,180,974 877,929 629,859 276,969
Income tax expense 551,019 305,260 386,726 217,556
-------------- -------------- ------------ ------------
Net earnings $ 629,955 572,669 243,133 59,413
============== ============== ============ ============
Net earnings per share $ .22 .20 .08 .02
============== ============== ============ ============
Weighted average number of common shares
outstanding 2,876,823 2,873,128 2,876,399 2,872,891
============== ============== ============ ============
</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>
Thirty-nine week Thirty-nine
period week period
ended ended
September 28, September 29,
1997 1996
---------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 243,133 59,413
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of plant and equipment 3,823,797 3,614,933
Amortization of other assets 163,320 86,661
(Gain) loss on disposal of property, plant
and equipment, net 8,043 (52,776)
Deferred income taxes - 70,380
Changes in assets and liabilities (see below) (3,479,036) (2,516,468)
---------------- -------------
Net cash provided by operating activities 759,257 1,262,143
---------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (4,082,761) (3,618,281)
Proceeds from disposal of property, plant and equipment 147,105 215,937
Acquisitions (1,903,869) (1,115,492)
---------------- -------------
Net cash used in investing activities (5,839,525) (4,517,836)
---------------- -------------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 13,450,000 7,800,000
Repayment of bank line of credit borrowings (8,500,000) (5,700,000)
Repayment of other long-term debt (528,250) (28,250)
Reissuance of treasury shares 15,319 14,204
---------------- -------------
Net cash provided by financing activities 4,437,069 2,085,954
---------------- -------------
Effect of exchange rate changes on cash and cash equivalents (46,473) 131
---------------- -------------
Net decrease in cash and cash equivalents (689,672) (1,169,608)
Cash and cash equivalents at beginning of period 2,691,908 3,040,815
================ =============
Cash and cash equivalents at end of period $ 2,002,236 1,871,207
================ =============
Changes in assets and liabilities providing (using) cash:
Receivables $ (4,434,945) (1,700,042)
Services in progress (445,079) (1,515,751)
Income taxes receivable/payable, net (330,964) (840,430)
Parts and supplies 268,358 168,645
Prepaid expenses (396,476) (279,130)
Other assets 304,954 (109,553)
Accounts payable 698,698 423,300
Accrued expenses 856,418 1,336,493
================ =============
Total $ (3,479,036) (2,516,468)
================ =============
</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 of C. H. Heist Corp. and Subsidiaries (the
Company), the accompanying condensed consolidated financial statements
contain all normal recurring adjustments necessary to fairly present the
Company's consolidated financial position as of September 28, 1997 and the
results of its operations and cash flows for the thirteen and thirty nine
week periods ended September 28, 1997 and September 29, 1996.
2. The results of operations for the thirteen and thirty nine week periods
ended September 28, 1997 are not necessarily indicative of the results to
be expected for the full year.
3. The changes in stockholders' equity for the thirty nine week period ended
September 28, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Equity
adjustment
Additional from foreign Total
Common paid-in Retained currency Treasurey 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 $ (1,084,73) 292,419 $(1,251,903) $27,073,581
Net earnings - - 243,133 - - - 243,133
Foreign currency translation
Adjustment (173,092) (173,092)
Reissuance of treasury
stock - 6,117 - - (2,150) 9,202 15,319
-------- ---------- ----------- ----------- ------- ----------- ------------
Balance at September 28, 1997 $158,355 $4,273,915 $25,227,195 $(1,257,823) 290,269 $(1,242,701) $ 27,158,941
======== ========== =========== =========== ======= =========== ============
</TABLE>
4. During the quarter ended September 28, 1997, no stock options were
exercised, and none expired. As of September 28, 1997 and December 31,
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 engaged in the information technology
staffing business. 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 has
been allocated to various intangible assets, primarily goodwill, based on
their fair values.
Additionally on June 23, 1997, Ablest purchased certain assets from The
Kelton Group, Inc., a North Carolina corporation engaged in the information
technology staffing and documentation writing service business. 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 has been allocated to various intangible assets, primarily
goodwill, based on their fair values.
The pro forma effect of the above acquisitions on the Company's results of
operations for the thirteen and thirty nine week periods ended September
28, 1997 and September 29, 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 September 28, 1997 and the related condensed consolidated
statements of earnings and cash flows for the thirteen and thirty-nine week
periods ended September 28, 1997 and September 29, 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 inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of C.H. Heist Corp. and subsidiaries
as of December 29, 1996, and the related consolidated statements of earnings,
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
October 24, 1997
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net sales increased by $3 million or 10.8% during the current fiscal quarter and
by $7.6 million or 9.5% for the fiscal year to date period, compared to one
year ago. Net sales in the staffing services segment (Ablest Service Corp.)
increased by $2.9 million or 21.9% during the current fiscal quarter, and by
$10.0 million or 27.8% for the fiscal year to date period, compared to one
year ago. The increase during the current fiscal quarter was primarily due
to sales generated by recent acquisitions in information technology staffing
services. In addition, the increase in year to date sales resulted from
sales generated from offices opened during the prior fiscal year and during
the first quarter of the current fiscal year as well as the servicing of a
high volume, short term commercial staffing project completed during the
first half of fiscal 1997. Net sales in the Company's industrial maintenance
segment increased by $108,000 or .7% during the current fiscal quarter and
decreased by $2.5 million or 5.7% during the fiscal year to date period
compared to one year ago. The increase during the current fiscal quarter was
the result of increased sales in a new service, chemical cleaning, as well
as improvements in sales of wet and dry vacuum services. These improvements
were offset by the year to date decline in major plant clean-up work in the
Company's southern region that occurred earlier in the fiscal year.
Gross profit increased by $1.0 million for the current fiscal quarter and $2.0
million for the fiscal year to date period, compared to one year ago. Gross
profit as a percent of sales increased to 17.1% from 15.2% and to 14.8% from
13.6% during the current fiscal quarter and year to date periods,
respectively. Gross profit as a percent of sales decreased in the staffing
services segment to 16.5% from 17.6% for the current fiscal quarter and to
16.0% from 17.0% for the current fiscal year to date period, compared to one
year ago. The decline in gross profit percentage is the result of
competitive pressures on pricing within the staffing industry as well as the
securing of high volume, lower margin contracts in two of the Company's
regions. Gross profit as a percent of sales improved in the Company's
industrial maintenance segment to 17.0% from 13.0% and to 13.4% from 10.8%
during the current fiscal quarter and year to date periods, respectively.
The improvement in gross profit percentage was partially the result of
improved margins obtained in the performance of painting and sandblasting
services, new services including chemical cleaning and waste management and
a reduction in insurance reserves due to the favorable settlement of two
liability claims previously pending against the Company.
Selling, general and administrative expenses increased by approximately $695,000
or 21.8% and $1.3 million or 12.8% for the current fiscal quarter and year
to date periods, respectively. Selling, general and administrative expenses
for the staffing services segment increased by $604,000 or 45.5% for the
current fiscal quarter and by $1.8 million or 48.6% for the current fiscal
year to date periods, as compared to one year ago. The increase is partially
the result of new office openings and costs associated with information
technology staffing acquisitions. Additional increases were caused by the
establishment of a separate human resources department for the staffing
services segment and fees associated with legal, audit, and board of
directors meeting fees, associated with the attempt to separate the
companies. Selling, general and administrative expenses for the industrial
maintenance segment increased by $91,000 or 4.9% and decreased by $540,000
or 8.5% for the current fiscal quarter and year to date periods,
respectively. The increase in the current quarter was primarily the result
of the hiring of a vice president for sales and marketing and the
undertaking of a strategic sales and marketing planning initiative to take
effect in fiscal 1998. The decrease in the fiscal year to date period is
primarily the result of streamlining and consolidating of 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
Other expenses net, increased by $66,000 or 30.6% for the current fiscal quarter
and by $390,000 or 85.6% for the current fiscal year to date periods,
compared to one year ago. The increase for the current fiscal quarter is the
result of the amortization of acquisition related expenses and increased
interest on debt. The increased interest on debt is the result of higher
levels of borrowing used to acquire certain assets of information technology
staffing companies and provide sufficient working capital for those entities
after the acquisition. Additionally, the fiscal year to date increase
includes the costs associated with the preparation of documents for the
spin-off and initial public offering of Ablest Service Corp., which has been
called off.
The effective tax rates for the current fiscal quarter was 46.7% and for the
fiscal year to date period was 61.4%. The effective rates are effected by
the multiple taxing jurisdictions in which the Company operates.
During 1997, the Company will adopt the provision of Statement of Financial
Accounting Standards No. 128 , "Earnings Per Share". Management believes the
adoption of this standard will not have a material effect on the reported
operating results of the Company.
Financial Condition
The quick ratio was 3.0 to 1 as of September 28, 1997 as opposed to 2.8 to 1 at
December 29, 1996. The current ratio was 3.3 to 1 as of September 28, 1997
as opposed to 3.1 to 1 at December 29, 1996. Net working capital increased
by $3.8 million during the current fiscal quarter. The increase in working
capital is attributable to increases in cash at the Company's Canadian
subsidiary, increases in accounts receivable mostly attributable to the
sales growth in Ablest Service Corp., and a decrease in the current
installments of long term debt due to the payment of a promissory note
entered into in conjunction with the acquisition of certain assets of Tech
Resource, Inc. by Ablest Service Corp. in September 1996. Reference should
be made to the cash flow statement, which details the sources and uses of
cash.
Open credit commitments as of September 28, 1997 were $8.6 million of which
$3.2 million was for C. H. Heist Corp., and $5.4 million was for Ablest
Service Corp. The company also has $361,000 (the U.S. dollar equivalent)
available for C. H. Heist, Ltd., the Company's Canadian subsidiary.
Capital expenditures for the current fiscal quarter were $1.5 million. Of this
amount, $767,000 was for additions to the equipment fleet, $153,000 was for
computer equipment, and the balance was for other equipment and facilities.
Commitments at September 28, 1997 were $218,000 of which $160,000 was for
new facilities, $20,000 was for computer equipment and the balance for other
equipment.
Recent Developments
At a meeting of the Company's board of directors held on August 12, 1997, the
Company called off the spin-off of Ablest Service Corp., the Company's
staffing services subsidiary. The Company has concluded it can better
utilize the financial strength and leverage of the combined entities to
aggressively pursue acquisitions and open new offices in strategic markets.
9
<PAGE> 10
Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 27.1 Financial Data Schedule (for SEC use only).
(B) Reports on Form 8-K
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.
10
<PAGE> 11
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 November 10, 1997 /s/ Mark P. Kashmanian
---------------------------- ----------------------
Mark P. Kashmanian
Chief Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 2,002,236
<SECURITIES> 0
<RECEIVABLES> 18,936,132
<ALLOWANCES> 0
<INVENTORY> 1,334,484
<CURRENT-ASSETS> 25,694,719
<PP&E> 52,940,715
<DEPRECIATION> 35,339,189
<TOTAL-ASSETS> 46,795,027
<CURRENT-LIABILITIES> 7,670,661
<BONDS> 11,414,140
0
0
<COMMON> 158,355
<OTHER-SE> 27,000,586
<TOTAL-LIABILITY-AND-EQUITY> 46,795,027
<SALES> 31,257,515
<TOTAL-REVENUES> 31,257,515
<CGS> 25,912,069
<TOTAL-COSTS> 25,912,069
<OTHER-EXPENSES> 3,884,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 232,894
<INCOME-PRETAX> 1,180,974
<INCOME-TAX> 551,019
<INCOME-CONTINUING> 629,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 629,955
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
