<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 March 29, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-7907
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C.H. Heist Corp.
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(Exact name of registrant as specified in its charter)
New York 16-0803301
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization Number)
810 North Belcher Road
Clearwater, Florida 33765
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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)
(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 - April 17, 1998.
Common stock, $.05 par value 2,877,943
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(Class) (Outstanding shares)
<PAGE> 2
C.H. HEIST CORP. AND SUBSIDIARIES
Index
<TABLE>
<S> <C> <C>
Part I
Financial Information
Condensed Consolidated Balance Sheets-
March 29, 1998 - (Unaudited) and December 28, 1997 3
Condensed Consolidated Statements of Operations and Comprehensive
Income (Loss) - (Unaudited) thirteen week periods ended
March 29, 1998 and March 30, 1997 4
Condensed Consolidated Statements of Cash Flows - (Unaudited)
thirteen week periods ended March 29, 1998 and
March 30, 1997 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
(In thousands, except share data)
<TABLE>
<CAPTION>
March 29, December 28,
Assets 1998 1997
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,902 2,948
Receivables 16,062 16,621
Services in progress 1,004 1,357
Income taxes receivable 497 -
Parts and supplies 1,239 1,254
Prepaid expenses 865 539
Deferred income taxes 807 806
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Total current assets 22,376 23,525
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Property, plant and equipment, at cost 54,228 52,677
Less accumulated depreciation 37,195 35,838
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Net property, plant and equipment 17,033 16,839
---------- ---------
Deferred income taxes 179 176
Intangible assets, net 3,309 3,386
Other assets 219 160
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$ 43,116 44,086
========== =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt $ 33 38
Accounts payable 2,726 2,660
Accrued expenses 4,078 3,814
Income taxes payable - 454
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Total current liabilities 6,837 6,966
Long-term debt, excluding current installments 8,300 8,755
Deferred incentive compensation 466 479
Deferred income taxes 398 398
---------- ---------
Total liabilities 16,001 16,598
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Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092. 158 158
Additional paid-in capital 4,277 4,274
Retained earnings 25,389 25,882
Accumulated other comprehensive losses (1,471) (1,583)
---------- ---------
28,353 28,731
Less cost of common stock in treasury: 289,149 and
290,269 shares for 1998 and 1997, respectively. (1,238) (1,243)
---------- ---------
Total stockholders' equity 27,115 27,488
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$ 43,116 44,086
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
C.H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Thirteen Thirteen
week period week period
ended ended
March 29, March 30,
1998 1997
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<S> <C> <C>
Net service revenues $ 28,168 24,961
Cost of services (note 1) 20,569 18,581
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Gross profit 7,599 6,380
Selling, general and administrative expenses (note 1) 8,319 7,145
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Operating (loss) (720) (765)
---------- ---------
Other income (expense):
Interest income 32 11
Interest expense (137) (122)
Gain (loss) on disposal of property, plant
and equipment, net (7) 3
Amortization of other assets (77) (36)
Miscellaneous, net 19 (303)
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Total other expense, net (170) (447)
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(Loss) before income taxes (890) (1,212)
Income tax benefit 397 369
---------- ---------
Net (loss) (493) (843)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 112 (89)
---------- ---------
Comprehensive (loss) $ (381) (932)
========== =========
Basic and diluted net (loss) per share $ (.17) (.29)
========== =========
Weighted average number of common shares outstanding 2,877,758 2,875,519
========== =========
</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)
(In thousands)
<TABLE>
<CAPTION>
Thirteen week Thirteen week
period ended period ended
March 29, March 30,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (493) (843)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation of plant and equipment 1,280 1,269
Amortization of other assets 77 36
(Gain) loss on disposal of property, plant
and equipment, net 7 (3)
Deferred income taxes - -
Stock compensation awards 8 16
Changes in assets and liabilities (see below) 193 (423)
--------- ---------
Net cash provided by operating activities 1,072 52
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Cash flows from investing activities:
Additions to property, plant and equipment (1,428) (1,682)
Proceeds from disposal of property, plant and equipment 4 99
Acquisitions and earnout payments, net of cash (264) -
--------- ---------
Net cash used in investing activities (1,688) (1,583)
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Cash flows from financing activities:
Proceeds from bank line of credit borrowings 4,400 1,300
Repayment of bank line of credit borrowings (4,850) (850)
Repayment of other long-term debt (9) (9)
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Net cash provided (used) by financing activities (459) 441
--------- ---------
Effect of exchange rate changes on cash and cash equivalents 29 (11)
--------- ---------
Net decrease in cash and cash equivalents (1,046) (1,101)
Cash and cash equivalents at beginning of period 2,948 2,692
--------- ---------
Cash and cash equivalents at end of period $ 1,902 1,591
========= =========
Changes in assets and liabilities providing (using) cash:
Receivables $ 593 478
Services in progress 355 46
Income taxes receivable/payable, net (953) (718)
Parts and supplies 17 43
Prepaid expenses (323) (924)
Other assets (58) 359
Accounts payable 53 48
Accrued expenses 523 245
Deferred incentive compensation (14) -
--------- ---------
Total $ 193 (423)
========= =========
</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 March 29, 1998 and the
results of its operations and cash flows for the thirteen week periods
ended March 29, 1998 and March 30, 1997.
The Company has reclassified 1997 branch expenses that are not directly
attributable to the services it performs from cost of services to selling,
general and administrative expenses to conform to the 1998 classification.
The effect of this reclassification was to lower cost of services and
increase selling, general and administrative expenses by $3,680,000 for the
thirteen week period ended March 30, 1997. Management believes that its
current presentation is generally consistent with industry practice.
2. The results of operations for the thirteen week period ended March 29, 1998
are not necessarily indicative of the results to be expected for the full
year.
3. The changes in stockholders' equity for the thirteen week period ended
March 29, 1998 are summarized as follows (in thousands, except shares):
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive Treasury Stock Stockholders'
stock capital Earnings losses Shares Amount Equity
------ ---------- -------- ------------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1997 $ 158 $ 4,274 $ 25,882 $ (1,583) 290,269 $ (1,243) $ 27,488
Net loss - - (493) - - - (493)
Foreign currency
translation adjustment - - - 112 - - 112
Stock compensation awards - 3 - - (1,120) 5 8
------ ---------- -------- ------------- -------- --------- -----------
Balance at March 29, 1998 $ 158 $ 4,277 $ 25,389 $ (1,471) 289,149 $ (1,238) $ 27,115
====== ========== ======== ============= ======== ========= ===========
</TABLE>
Accumulated other comprehensive losses consist solely of equity adjustments
from foreign currency translation.
4. During the quarter ended March 29, 1998, no stock options were exercised,
and none expired. As of March 29, 1998 and December 28, 1997, the Company
had exercisable options outstanding to employees to purchase 169,484 common
shares respectively, at prices ranging from $6.94 to $10.13 per share.
5. The Company has adopted the provision of Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information". Disclosures are not required until fiscal year end reporting.
Management believes that the adoption of this standard will not have a
material effect on the reported operating results of the Company.
6. On April 13, 1998, Ablest Service Corp., a wholly owned subsidiary of C.H.
Heist Corp. acquired one hundred percent of the stock of Milestone
("Milestone") Technologies, Inc. for approximately $6.6 million paid in cash
to the shareholders at closing and agreed to pay additional consideration
based on the achievement of certain pre-established earning targets for
1998. Milestone provides information technology staffing services in the
Phoenix, Arizona metropolitan area and had fiscal 1997 revenues of
approximately $9.0 million. The purchase price was determined through
negotiations and is expected to be assigned to the fair value of the assets
and liabilities acquired with the excess being assigned to various
intangible assets, primarily goodwill.
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 March 29, 1998 and the related condensed consolidated
statements of operations and comprehensive loss and cash flows for the thirteen
week periods ended March 29, 1998 and March 30, 1997. 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 28, 1997, 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 11, 1998, 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
28, 1997, 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
April 24, 1998
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
As of the first quarter of the current fiscal year, the Company has reclassified
certain previously reported branch expenses that are not directly attributable
to the services it performs from cost of services to selling, general and
administrative expenses. Management believes that its current presentation is
generally consistent with industry practice. Please refer to Note 1 of the Notes
to Condensed Consolidated Financial Statements on Page 6 of this Form 10-Q for
additional information.
Service revenues increased by $3.2 million or 12.8% to $28.2 million from $25.0
million for the fiscal quarter ended March 29, 1998 compared to the same fiscal
quarter one year ago. Service revenues for Ablest Service Corp., "Ablest", the
Company's staffing services segment, increased by $2.3 million or 16.9% to
$15.7 million from $13.4 million for the current fiscal quarter as compared to
the same fiscal quarter one year ago. Acquisitions during the second quarter
of 1997 of information technology staffing companies accounted for $1.6 million
of this increase. The remainder of the increase was the result of offices
opened after the first fiscal quarter of the prior year and greater market
penetration from established offices predominately in the Mid-South and
Southern regions. Service revenues for the Company's industrial maintenance
service segment increased by $940,000 or 8.1% to $12.5 million for the current
fiscal quarter compared to $11.6 million for the same fiscal quarter one year
ago. Increases were achieved in hydroblasting, industrial vacuuming and
chemical cleaning services predominately in the Company's Southern region as
well as in waste management services performed by the Company's Canadian
subsidiary, C.H. Heist, Ltd.
Gross Profit (Margin) increased by $1.2 million or 19.1% and as a percentage of
sales to 26.9% from 25.6% for the current fiscal quarter compared to the same
period one year ago. The increase in both gross profit dollars and percentages
is the result of several factors, primary of which are the acquisitions that
were made during the prior fiscal year of technology staffing companies which
have produced greater margins than traditional commercial staffing services.
Also contributing to this increase is a reduction of premiums charged for
Workers Compensation insurance due to the continued improvements in the
Company's safety-risk management programs, and increased service revenue
generated from hourly rated maintenance equipment including hydroblasting,
industrial vacuuming and chemical cleaning services.
Selling, general and administrative expenses increased by $1.2 million or 16.4%
to $8.3 million for the current fiscal quarter. As a percentage of service
revenues it increased to 29.5% from 28.6% for the current fiscal quarter
compared to the same period one year ago. This increase is primarily the result
of costs associated with new office openings and information technology
staffing acquisitions. Also contributing to this increase is the Company's
ongoing strategic sales and marketing planning initiative, the hiring of
additional territorial sales representatives and the Company's continued
development of and investment in information technology hardware, software and
personnel to better service our customers.
Other expenses net, decreased by $277,000 or 62.0% during the current fiscal
quarter compared to one year ago. This improvement was primarily attributable
to costs associated with the planned spin-off and initial public offering of
Ablest which were written off during the first fiscal quarter of the prior year
and not repeated in the current year. The spin-off and initial public offering
was subsequently called off by the Company's Board of Directors. Also
contributing to the decrease in other expenses net, was an increase in interest
income earned on investments of excess cash by the Company's Canadian
subsidiary. Partially offsetting the decrease were increases in interest
expense and amortization expense associated with the four acquisitions completed
by Ablest in the past two years.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Continued
Results of Operations
The effective tax rate for the current fiscal quarter is a benefit of 44.6%.
The effective tax rates are affected by the multiple taxing jurisdictions in
which the Company operates.
Financial Condition
The quick ratio was 2.9 to 1 compared to 3.1 to 1 and the current ratio was 3.3
to 1 as compared to 3.4 to 1 for the period ending March 29, 1998 and December
28, 1997, respectively. Net working capital decreased by $1.0 million,
primarily due to a $1.0 million reduction in cash and cash equivalents. The
reduction in cash and cash equivalents occurred due to the equipping of a new
office in Northern Ontario and additional investments in new equipment in
Canada to meet the needs of a long term contract. Reference should be made to
the Statements of Cash Flows which details the sources and uses of cash.
Open credit commitments as of March 29, 1998 were $16.7 million. The Company
also has $353,000 (the US dollar equivalent) available for C.H. Heist , Ltd.,
the Company's Canadian subsidiary.
Capital expenditures for the current fiscal quarter were approximately $1.4
million. Of this amount, $863,000 was for additions to the mobile equipment
fleet, $265,000 was for computer equipment including office automation and
communication systems for both segments of the Company's business, $124,000 for
new office facilities with the balance for other equipment. Open purchase
commitments at March 29, 1998 were $991,000 of which $935,000 was for new
mobile equipment, $42,000 was for computer equipment and the remaining for
other equipment and facilities. 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 for the remainder
of fiscal 1998.
Recent Developments
In a press release dated April 14, 1998, the Company announced that Ablest
Service Corp., the Company's staffing services subsidiary, acquired one hundred
percent of the stock of Milestone Technologies, Inc., ("Milestone") of Tempe,
Arizona. Milestone provides information technology staffing services with 1997
annualized revenues of approximately $9.0 million. Established in 1988, the
company services the Phoenix market and will continue to operate as Milestone
Technologies, Inc., reporting under Ablest Technology Services. Reference is
made to the definitive form 8-K that was filed on April 24, 1998.
9
<PAGE> 10
Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 27.1 Financial Data Schedules
(B) Reports on Form 8-K: No reports on Form 8-K have been filed
during the quarter ended March 29, 1998.
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 May 8, 1998 /s/ Mark P. Kashmanian
------------------------
Mark P. Kashmanian
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 1,902
<SECURITIES> 0
<RECEIVABLES> 16,062
<ALLOWANCES> 0
<INVENTORY> 1,239
<CURRENT-ASSETS> 22,376
<PP&E> 54,228
<DEPRECIATION> 37,195
<TOTAL-ASSETS> 43,116
<CURRENT-LIABILITIES> 6,837
<BONDS> 0
0
0
<COMMON> 158
<OTHER-SE> 26,957
<TOTAL-LIABILITY-AND-EQUITY> 43,116
<SALES> 28,168
<TOTAL-REVENUES> 28,168
<CGS> 20,569
<TOTAL-COSTS> 20,569
<OTHER-EXPENSES> 8,319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> (890)
<INCOME-TAX> 397
<INCOME-CONTINUING> (493)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (493)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
