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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Current Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 28, 1997
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C.H. Heist Corp.
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(Exact name of registrant as specified in charter)
New York 0-7907 16-0803301
- --------------- ------------ -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
810 North Belcher Road, Clearwater, Florida 33765
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 461-5656
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(Former name or former address, if changed since last report)
Exhibit Index: 3
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Item 2: Acquisition or Disposition of Assets
On April 28, 1997, Ablest Service Corp. ("Ablest") a wholly owned
subsidiary of C.H. Heist Corp. ("Company"), acquired the technical staffing
business Solution Source, Inc., a Georgia corporation, ("Solution Source")
pursuant to an Asset Purchase Agreement ("Purchase Agreement"). Ablest intends
to combine the Solution Source business with it's recently established Tech
Resource division (collectively the "Tech Resource Group"). The Tech Resource
Group will continue to operate in the Atlanta, Georgia market.
Pursuant to the Purchase Agreement, Ablest purchased certain assets,
primarily customer and employee lists, of Solution Source for $1.3 million paid
in cash at closing and agreed to pay additional contingent consideration not to
exceed $1.125 million over the next three years based on the achievement of
certain goals for earnings before interest and taxes of the Tech Resource Group
for fiscal years 1997, 1998 and 1999. Ablest used funds available to it under
its revolving line of credit to fund the $1.3 million paid at closing. The
purchase price was determined through negotiations and was assigned primarily to
the estimated fair value of the intangible assets acquired.
The two shareholders of Solution Source and Ablest have entered into
three year employment agreements providing for certain base and incentive
compensation. Each shareholder of Solution Source has also agreed not to compete
with Ablest for five years from the date of closing as well as during the time
that he is employed by Ablest.
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<TABLE>
<CAPTION>
Item 7: Financial Statements, Pro Forma Information and Exhibits Pages
- ------- -------------------------------------------------------- -----
<S> <C> <C>
(a) Solution Source, Inc. Financial Statements as of and for the year 5 - 10
ended December 31, 1996 together with independent auditors'
report thereon.
(b) Pro Forma Financial Information:
Unaudited pro forma condensed consolidated balance sheet as of
March 30, 1997. 11
Unaudited pro forma condensed consolidated statement of operations
for the thirteen week period ended March 30, 1997. 12
Unaudited pro forma condensed consolidated statement of earnings
for the year ended December 29, 1996. 13
Notes to unaudited pro forma condensed consolidated financial
statements. 14 - 15
</TABLE>
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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.
Dated: July 8, 1997
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C. H. Heist Corp.
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(Registrant)
/s/ Mark P. Kashmanian
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Mark P. Kashmanian
Treasurer, Chief Accounting Officer
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Independent Auditors' Report
The Board of Directors
Solution Source, Inc.:
We have audited the accompanying balance sheet of Solution Source, Inc. as of
December 31, 1996, and the related statement of earnings and retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solution Source, Inc. as of
December 31, 1996, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.
Buffalo, New York KPMG Peat Marwick LLP
May 16, 1997
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SOLUTION SOURCE, INC.
Balance Sheet
December 31, 1996
<TABLE>
<S> <C>
Assets
------
Current assets:
Cash $ 27,658
Accounts receivable 417,264
Other 2,000
---------
Total current assets 446,922
---------
Office equipment and furniture 50,590
Less: accumulated depreciation 16,317
---------
Office equipment and furniture, net 34,273
Other 75
---------
$ 481,270
=========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accrued compensation and related taxes $ 3,434
Accounts payable and accrued expenses 986
---------
Total current liabilities 4,420
---------
Stockholders' equity:
Common stock, $1.00 par value, 20,000 shares authorized,
issued and outstanding 20,000
Receivable from stockholders (19,500)
Retained earnings 476,350
---------
Total stockholders' equity 476,850
---------
Commitments (note 4) $ 481,270
=========
</TABLE>
See accompanying notes to financial statements.
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SOLUTION SOURCE, INC.
Statement of Earnings and Retained Earnings
Year ended December 31, 1996
<TABLE>
<S> <C>
Service revenues $ 3,259,191
Cost of services 2,265,763
-----------
Gross profit 993,428
Selling, general and administrative expenses 515,095
-----------
Net earnings 478,333
Retained earnings:
Beginning of year 248,617
Dividends paid (250,600)
-----------
End of year $ 476,350
===========
</TABLE>
See accompanying notes to financial statements.
7
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SOLUTION SOURCE, INC.
Statement of Cash Flows
Year ended December 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net earnings $ 478,333
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 8,676
Changes in operating assets and liabilities:
Accounts receivable (173,784)
Other (2,000)
Accrued compensation and related taxes (28,155)
Accounts payable and accrued expenses (28,732)
---------
Net cash provided by operating activities 254,338
---------
Cash flows from investing activities:
Additions to equipment (15,418)
---------
Cash flows from financing activities:
Repayment of note payable (10,000)
Dividends paid (250,600)
---------
Net cash used for financing activities (260,600)
---------
Net decrease in cash (21,680)
Cash at beginning of year 49,338
---------
Cash at end of year $ 27,658
=========
</TABLE>
See accompanying notes to financial statements.
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SOLUTION SOURCE, INC.
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
Solution Source, Inc. (the Company) provides temporary data processing,
consulting, and placement services primarily in the Atlanta,
Georgia regional market. Significant accounting policies of
the Company are as follows:
(a) Revenue Recognition
Service revenue is recognized as staffing services
are provided. The temporary worker is the
Company's employee and all costs of
employing the temporary worker are paid by
the Company and included in cost of
services.
(b) Equipment and Furniture
Equipment and furniture are stated at cost.
Depreciation is provided over the estimated
useful lives of the respective assets on the
straight-line method.
(c) 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.
(d) Income Taxes
The Company has elected for Federal and state income
tax purposes to include its taxable income
with that of its stockholders (an S
Corporation election). Accordingly, the
Company makes no provision for income taxes
in its financial statements.
(2) Significant Clients
The Company's two largest clients accounted for approximately 33% and
15% of the Company's service revenues for 1996.
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(3) Line of Credit
The Company has a $50,000 bank line of credit with interest determined
at the bank's prime rate plus 2%. No amounts were outstanding
at December 31, 1996.
(4) Commitments
The Company occupies its office facility under a noncancellable
operating lease arrangement. Future minimum annual lease
payments amount to $65,995 plus a 4% annual increase through
December 1999. Expense under this arrangement amounted to
$18,792 in 1996.
(5) Subsequent Event
On April 28, 1997, the Company and its shareholders sold its business
and certain assets to Ablest Service Corp. (Ablest), for $1.3
million in cash at closing, plus related acquisition costs,
and agreed to receive additional contingent consideration
not to exceed $1.125 million over the next three years
based on the achievement of certain goals for earnings before
interest and taxes. In connection with that acquisition, the
Company's business results will be included with those of
Ablest from the date of the acquisition.
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C.H. HEIST CORP. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
March 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
C.H. Heist Corp. Adjustments
Assets and Subsidiaries (note 2) Pro Forma
------ ---------------- ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,591,433 (120,000) 1,471,433
Receivables 14,022,563 14,022,563
Services in progress 1,071,011 1,071,011
Income taxes receivable 519,937 519,937
Parts and supplies 1,559,629 1,559,629
Prepaid expenses 1,243,881 1,243,881
Deferred income taxes 1,010,219 1,010,219
------------ ------------ ------------
Total current assets 21,018,673 (120,000) 20,898,673
------------ ------------ ------------
Property, plant and equipment, at cost 50,835,204 50,000 50,885,204
Less accumulated depreciation 33,158,012 33,158,012
------------ ------------ ------------
Net property, plant and equipment 17,677,192 50,000 17,727,192
------------ ------------ ------------
Deferred income taxes 139,994 139,994
Other assets 1,678,668 1,370,000 3,048,668
------------ ------------ ------------
$ 40,514,527 1,300,000 41,814,527
============ ============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt $ 537,667 537,667
Accounts payable 1,624,566 1,624,566
Accrued expenses 4,710,776 4,710,776
------------ ------------ ------------
Total current liabilities 6,873,009 -- 6,873,009
Long-term debt, excluding current installments 6,932,974 1,300,000 8,232,974
Deferred income taxes 551,285 551,285
------------ ------------ ------------
Total liabilities 14,357,268 1,300,000 15,657,268
------------ ------------ ------------
Stockholders' equity:
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092 shares 158,355 158,355
Additional paid-in capital 4,274,057 4,274,057
Retained earnings 24,140,609 24,140,609
Equity adjustment from foreign currency translation (1,173,275) (1,173,275)
------------ ------------ ------------
27,399,746 -- 27,399,746
Less cost of common stock in treasury: 290,219
shares (1,242,487) (1,242,487)
------------ ------------ ------------
Total stockholders' equity 26,157,259 -- 26,157,259
------------ ------------ ------------
$ 40,514,527 1,300,000 41,814,527
============ ============ ============
</TABLE>
See notes to unaudited pro forma financial statements.
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C.H. HEIST CORP. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
For the Thirteen Week Period Ended March 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
C.H. Heist
Corp. Pro Forma
and Solution Adjustments
Subsidiaries Source, Inc. (note 3) Pro Forma
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 24,960,983 $985,972 25,946,955
Cost of sales 22,261,371 735,045 22,996,416
------------ -------- ------- -----------
Gross profit 2,699,612 250,927 2,950,539
Selling, general and administrative 3,464,401 169,573 46,487 (a) 3,680,461
------------ -------- ------- -----------
Operating income (loss) (764,789) 81,354 (46,487) (729,922)
------------ -------- ------- -----------
Other income (expense):
Interest income 11,274 11,274
Interest expense (122,449) (21,125)(b) (143,574)
Gain on disposal of property, plant
and equipment, net 3,137 3,137
Amortization of other assets (35,945) (25,000)(c) (60,945)
Miscellaneous (303,769) (303,769)
------------ -------- ------- -----------
Total other income (expense) net (447,752) -- (46,125) (493,877)
------------ -------- ------- -----------
Earnings (loss) before income taxes (1,212,541) 81,354 (92,612) (1,223,799)
Income tax benefit (369,088) -- (3,861)(d) (372,949)
------------ -------- ------- -----------
Net earnings (loss) $ (843,453) 81,354 (88,751) (850,850)
============ ======== ======= ===========
Net loss per share $ (.29) (.30)
============ ===========
Weighted average number of common shares
outstanding 2,875,519 2,875,519
============ ===========
</TABLE>
See notes to unaudited pro forma financial statements
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C.H. HEIST CORP. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Earnings
For the Year Ended December 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
C.H. Heist
Corp. Pro Forma
and Solution Adjustments
Subsidiaries Source, Inc. (note 3) Pro Forma
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 106,515,038 3,259,191 109,774,229
Cost of sales 90,498,402 2,265,763 92,764,165
------------- --------- -------- -----------
Gross profit 16,016,636 993,428 17,010,064
Selling, general and administrative 13,783,389 515,095 167,841 (a) 14,466,325
------------- --------- -------- -----------
Operating income (loss) 2,233,247 478,333 (167,841) 2,543,739
------------- --------- -------- -----------
Other income (expense):
Interest income 62,299 62,299
Interest expense (643,175) (87,100)(b) (730,275)
Gain on disposal of property, plant
and equipment, net 10,988 10,988
Amortization of other assets (116,919) (100,000)(c) (216,919)
Miscellaneous (37,436) (37,436)
------------- --------- -------- -----------
Total other income (expense) net (724,243) -- (187,100) (911,343)
------------- --------- -------- -----------
Earnings (loss) before income taxes 1,509,004 478,333 (354,941) 1,632,396
Income tax expense 818,908 -- 49,171 (d) 868,079
------------- --------- -------- -----------
Net earnings (loss) $ 690,096 478,333 (404,112) 764,317
============= ========= ======== ===========
Net earnings per share $ .24 .27
============= ===========
Weighted average number of common shares
outstanding 2,873,337 2,873,337
============= ===========
</TABLE>
See notes to unaudited pro forma financial statements
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C. H. HEIST CORP. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet reflects
the historical financial position of C. H. Heist Corp. (the
"Company") as of March 30, 1997, and on a pro forma basis assuming
the acquisition of certain assets of Solution Source, Inc. had been
consummated on that date.
The unaudited pro forma condensed consolidated statements of operations
reflect the historical results of operations of the Company for the
thirteen week period ended March 30, 1997 and for the year ended
December 29, 1996, and on a pro forma basis assuming the acquisition of
certain assets of Solution Source, Inc. had been consummated as of
January 1, 1996.
Management believes that the assumptions used in preparing these
unaudited pro forma condensed consolidated statements provide a
reasonable basis of presenting all of the significant effects of the
acquisition of certain assets of Solution Source, Inc. The pro forma
condensed consolidated financial statements do not purport to be
indicative of the actual results that would have occured had the
acquisition been consummated on January 1, 1996 or of the future
results of operations which will be obtained as a result of the
acquisition.
Note 2 - Adjustments to the Pro Forma Condensed Consolidated Balance Sheet.
To reflect the allocation of the purchase price of the acquired assets
of Solution Source, Inc., the additional long-term debt necessary for
the consummation of the acquisition and payment of acquisition related
costs from available operating funds. The excess of the purchase price
over the estimated fair value of tangible and intangible assets
(approximately $1,012,500) has been allocated to goodwill.
Note 3 - Adjustments to the Pro Forma Condensed Consolidated Statement of
Operations and Earnings.
(a) To reflect an increase in selling, general and administrative
expenses for additional compensation and benefits expected to
be paid to the officers of Solution Source, Inc. who were
primarily compensated through dividends from Solution Source,
Inc.
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(b) To reflect increased interest expense the Company would have
incurred because of additional long term debt necessary to
consummate the acquisition at the Company's average borrowing
rate for each period (6.5% for 1997 and 6.7% for 1996).
(c) To reflect amortization expense of the purchase price
allocated to intangible assets and acquisition related costs
for each period over estimated useful lives of 5 to 7 years
for customer and employee lists, non-compete agreements and
acquisition related costs and 30 years for goodwill.
(d) To reflect estimated income tax expense arising from the net
effect of Solution Source, Inc.'s historical results of
operations and the associated pro forma adjustments for each
period. Prior to its acquisition by the Company, Solution
Source, Inc. had elected S Corporation status and made no
provision for income taxes.
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