<PAGE> 1
UNITED STATES
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 26, 1999.
[ ] 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
incorporation or organization) Identification Number)
810 North Belcher Road
Clearwater, Florida 33765
---------------------- -----
(Address of principal executive offices) (Zip Code)
727-461-5656
------------
(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 -Oct. 14, 1999.
Common stock, $.05 par value 2,881,288
---------------------------- ---------
(Class) (Outstanding shares)
1
<PAGE> 2
C.H. HEIST CORP. AND SUBSIDIARIES
Index
Part I
Financial Information
Condensed Consolidated Balance Sheets - September 26, 1999 -
(Unaudited) and December 27, 1998 3
Condensed Consolidated Statements of Operations and
Comprehensive Income - (Unaudited) Thirteen and
thirty-nine week periods ended September 26, 1999
and September 27, 1998 4
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Thirty-nine week periods ended September 26, 1999 and
September 27, 1998 5
Notes to Condensed Consolidated Financial Statements 6 - 8
Independent Auditors' Review Report 9
Management's Discussion and Analysis of Results of Operations
and Financial Condition 10-12
Part II
Other Information 13
Signatures 14
* * * * *
2
<PAGE> 3
Part I-Financial Information
C.H. HEIST CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
September 26 December 27,
Assets 1999 1998
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,512 3,147
Receivables 20,768 19,653
Services in progress 1,303 1,017
Parts and supplies 1,109 1,174
Prepaid and other expenses 1,139 317
Deferred income taxes 628 626
-------- -------
Total current assets 27,459 25,934
-------- -------
Property, plant and equipment, at cost 60,510 56,350
Less accumulated depreciation 42,518 38,996
-------- -------
Net property, plant and equipment 17,992 17,354
-------- -------
Deferred income taxes 152 144
Intangible assets, net 10,147 10,471
Other assets 106 118
-------- -------
$ 55,856 54,021
======== =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 255 5
Accounts payable 2,428 3,030
Accrued expenses 6,435 5,788
Income taxes payable -- 1
-------- -------
Total current liabilities 9,118 8,824
Long-term debt, excluding current installments 16,873 16,050
Deferred incentive compensation 1,120 869
Deferred income taxes 137 137
-------- -------
Total liabilities 27,248 25,880
-------- -------
Stockholders' equity (note 3):
Common stock of $.05 par value. Authorized
8,000,000 shares; issued 3,167,092 shares 158 158
Additional paid-in capital 4,284 4,278
Retained earnings 27,172 27,176
Accumulated other comprehensive losses (1,783) (2,235)
-------- -------
29,831 29,377
Less cost of common stock in treasury: 285,804 and
288,754 shares for 1999 and 1998, respectively (1,223) (1,236)
-------- -------
Total stockholders' equity 28,608 28,141
-------- -------
$ 55,856 54,021
======== =======
</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
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Thirty-nine
week period week period week period week period
ended ended ended ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1999 1998 1999 1998
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net service revenues $ 38,431 35,881 111,218 98,185
Cost of services 28,437 25,722 81,713 70,355
----------- ---------- ---------- ----------
Gross profit 9,994 10,159 29,505 27,830
Selling, general and administrative
expenses 9,445 8,730 28,698 25,542
Amortization of intangible assets 183 149 548 367
----------- ---------- ---------- ----------
Operating income 366 1,280 259 1,921
----------- ---------- ---------- ----------
Other income (expense):
Interest income 15 17 51 64
Interest expense (310) (259) (848) (643)
Gain (loss) on disposal of property,
plant and equipment, net (2) 69 11 33
Miscellaneous, net 466 295 504 410
----------- ---------- ---------- ----------
Total other income (expense), net 169 122 (282) (136)
----------- ---------- ---------- ----------
Earnings (loss) before income taxes 535 1,402 (23) 1,785
Income tax expense (benefit) 313 644 (19) 817
----------- ---------- ---------- ----------
Net earnings (loss) 222 758 (4) 968
=========== ========== ========== ==========
Basic and diluted net earnings per share $ .08 .26 -- .34
=========== ========== ========== ==========
Weighted average number of common shares
outstanding 2,881,133 2,877,988 2,880,717 2,877,900
=========== ========== ========== ==========
Net earnings (loss) $ 222 758 (4) 968
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (35) (247) 452 (440)
----------- ---------- ---------- ----------
Comprehensive income $ 187 511 448 528
=========== ========== ========== ==========
</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>
Thirty-nine week Thirty-nine week
period ended period ended
Sept. 26, 1999 Sept. 27, 1998
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (4) 968
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation of plant and equipment 3,726 3,646
Amortization of intangible assets 548 367
Gain on disposal of property, plant
and equipment, net (11) (33)
Stock compensation awards 19 9
Changes in assets and liabilities (see below) (655) 25
-------- -------
Net cash provided by operating activities 3,623 4,982
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (3,021) (4,318)
Proceeds from disposal of property, plant and equipment 54 506
Acquisitions and earnout payments, net of cash acquired (1,310) (6,257)
-------- -------
Net cash used in investing activities (4,277) (10,069)
-------- -------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 19,250 19,250
Repayment of bank line of credit borrowings (19,200) (14,047)
Repayment of other long-term debt (124) (28)
-------- -------
Net cash provided (used) by financing activities (74) 5,175
-------- -------
Effect of exchange rate changes on cash and cash equivalents 93 (112)
-------- -------
Net decrease in cash and cash equivalents (635) (24)
Cash and cash equivalents at beginning of period 3,147 2,948
-------- -------
Cash and cash equivalents at end of period $ 2,512 2,924
======== =======
Changes in assets and liabilities providing (using) cash:
Receivables $ (949) (1,661)
Services in progress (275) (730)
Income taxes receivable/payable, net (375) (249)
Parts and supplies 69 117
Prepaid expenses (448) (56)
Other assets 12 4
Accounts payable (644) 535
Accrued expenses 1,708 1,930
Deferred incentive compensation 247 135
-------- -------
Total $ (655) 25
======== =======
Supplemental schedule of non-cash investing and financing activities:
Leases capitalized $ 1,148 --
======== =======
</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 26, 1999 and the
results of its operations for the thirteen and thirty-nine week periods
ended September 26, 1999 and September 27, 1998 and cash flows for the
thirty-nine week periods ended September 26, 1999 and September 27, 1998.
The financial statements have been prepared using the same accounting
policies used in preparation of the December 27, 1998 statements. The
financial statements included herein should be read in conjunction with
those statements and notes thereto.
2. The results of operations for the thirteen and thirty-nine week periods
ended September 26, 1999 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 26, 1999 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 27, 1998 $158 $4,278 $ 27,176 $(2,235) 288,754 $(1,236) $ 28,141
Net loss -- -- (4) -- -- -- (4)
Foreign currency
translation adjustment -- -- -- 452 -- -- 452
Stock compensation awards -- 6 -- -- (2,950) 13 19
==== ====== ======== ======= ======== ======= ========
Balance at September 26, 1999 $158 $4,284 $ 27,172 $(1,783) 285,804 $(1,223) $ 28,608
==== ====== ======== ======= ======== ======= ========
</TABLE>
Accumulated other comprehensive losses consist solely of equity
adjustments from foreign currency translation.
4. For the thirty-nine week period ended September 26, 1999, 74,117
additional stock options were granted and 3,812 options expired. As of
September 26, 1999 the Company had exercisable options outstanding to
employees to purchase 162,276 common shares at prices ranging from $6.94
to $10.13 per share.
5. In 1999 the Company announced its intention to terminate and settle the
obligations of its qualified noncontributory defined benefit pension plans
covering substantially all of its non-bargaining unit personnel in the
United States, and as such has frozen benefits. The Company has recognized
pre tax curtailment gains of $281,000 which are included in the
accompanying statement of operations for the thirteen and thirty-nine week
periods ended September 26, 1999. The actual settlement of the obligations
is not expected to be complete before the end of the current fiscal year.
The net assets of the plans will be allocated, as prescribed by ERISA and
its related regulations. At this time management does not foresee that the
plans' settlements will have a material adverse effect on the Company's
financial condition or liquidity.
6. The Company has two professional service segments: staffing and industrial
maintenance services. Staffing services are provided on a temporary and
contract basis to businesses in clerical, light industrial and technology
professional sectors throughout the eastern United States and select
southwestern U.S. markets. Industrial maintenance services a wide range of
industries by providing hydroblasting, painting, sandblasting, and
vacuuming of industrial wastes throughout the eastern United States and
Canada. Operating segment data is as follows (in thousands):
6
<PAGE> 7
C.H. HEIST CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Thirty-nine
week period week period week period week period
ended ended ended ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1999 1998 1999 1998
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Staffing services:
Net revenues $ 25,432 21,381 70,376 55,879
Intersegment revenues 31 28 92 82
-------- ------ -------- -------
Total revenues 25,463 21,409 70,468 55,961
Cost of services 19,573 16,386 54,312 42,893
Selling, general & administrative:
Operations 3,966 3,110 11,431 8,513
Allocated overhead 838 765 2,413 2,396
-------- ------ -------- -------
Total selling general & administrative 4,804 3,875 13,844 10,909
Amortization 181 148 543 351
Operating income 874 972 1,677 1,726
Depreciation 178 115 497 304
Assets 26,079 23,068 26,079 23,068
Capital expenditures and acquisitions 146 143 2,034 6,751
======== ====== ======== =======
Industrial maintenance services:
Net revenues $ 12,999 14,500 40,842 42,306
Cost of services 8,864 9,336 27,401 27,462
Selling, general & administrative:
Operations 3,237 3,489 10,337 10,200
Overhead 1,404 1,366 4,517 4,433
-------- ------ -------- -------
Total selling general & administrative 4,641 4,855 14,854 14,633
Amortization 2 1 5 16
Operating income (loss) (508) 308 (1,418) 195
Depreciation 1,016 929 3,229 3,342
Assets 28,763 28,637 28,763 28,637
Capital expenditures $ 364 973 2,297 3,824
======== ====== ======== =======
Corporate assets $ 1,014 1,317 1,014 1,317
======== ====== ======== =======
Consolidated:
Net revenues $ 38,431 35,881 111,218 98,185
Cost of services 28,437 25,722 81,713 70,355
Selling, general & administrative 9,445 8,730 28,698 25,542
Amortization 183 149 548 367
Operating income 366 1,280 259 1,921
Other expense, net 169 122 (282) (136)
Earnings (loss) before income taxes 535 1,402 (23) 1,785
Depreciation 1,194 1,044 3,726 3,646
Assets 55,856 53,022 55,856 53,022
Capital expenditures and acquisitions $ 510 1,116 4,331 10,575
======== ====== ======== =======
</TABLE>
7
<PAGE> 8
C.H. HEIST CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. 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
Technologies, Inc. ("Milestone") 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 has been assigned to the fair value of the assets
and liabilities acquired with the excess being assigned to goodwill.
Pro Forma Condensed Combined Financial Information - (Unaudited) thirteen
and thirty-nine week periods ended September 27, 1998.
The unaudited pro forma condensed combined financial information
reflects the pro forma results of operations of the Company for
the thirteen and thirty-nine week periods ended September 27, 1998
assuming the acquisition of Milestone had been consummated as of
the beginning of the periods presented.
Management believes that the assumptions used in preparing this
unaudited pro forma condensed combined financial information
provide a reasonable basis of presenting all of the significant
effects of the acquisition of Milestone. The pro forma condensed
combined financial information does not purport to be indicative
of the actual results that would have occurred had the acquisition
been consummated on or as of the date assumed, and are not
necessarily indicative of the future results of operations which
will be obtained as a result of the acquisition.
<TABLE>
<CAPTION>
Thirteen Thirty-nine
week period week period
ended ended
Sept. 27, Sept. 27,
1998 1998
----------- -----------
<S> <C> <C>
Net service revenues $35,881 101,024
Net earnings 758 1,028
Basic and diluted earnings per share $ .26 .36
</TABLE>
8. Subsequent Events.
On November 2, 1999, the Company announced that it had entered into a
letter of intent to sell its industrial maintenance business to Onyx
Industrial Services, Inc., a subsidiary of CGEA-Onyx, a French waste
service company with worldwide operations. Management expects to fully
analyze and account for this segment as a discontinued operation in its
fourth fiscal quarter.
Since the letter of intent is non-binding, no assurances can be given that
a sale will be consummated.
In 2000, the Company intends to relocate its Buffalo, New York
administrative offices to the Tampa, Florida area, the current location of
its executive and human resources offices. In the fourth quarter the
Company will complete an assessment of the cost of relocation, including
the costs of any employee programs.
8
<PAGE> 9
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 26, 1999 and the related condensed
consolidated statements of operations and comprehensive income and cash flows
for the thirteen and thirty-nine week periods ended September 26, 1999 and
September 27, 1998. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 27, 1998, and the related consolidated statements of earnings
and comprehensive income, stockholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated February 12, 1999, 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 27, 1998, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
Buffalo, New York KPMG LLP
October 22, 1999
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations:
Net service revenue increased by $2.5 million or 7.1% to $38.4 million from
$35.9 million and by $13.0 million or 13.3% to $111.2 million from $98.2
million for the current fiscal quarter and year to date periods, respectively.
Net service revenue in the Company's staffing services segment, Ablest Service
Corp., increased by $4.0 million or 18.9% to $25.4 million from $21.4 million
during the current fiscal quarter and by $14.5 million or 25.9% to $70.4
million from $55.9 million during the current year to date period. Net service
revenue in this segment's commercial staffing division increased in the current
quarter by $4.4 million or 27.9% and for the year to date period by $10.4
million or 24.3%. Increased revenue from existing customers, greater market
penetration in established offices and new office openings in the current and
prior fiscal year, all contributed to this increase. Net service revenue in
this segment's information technology staffing (IT) division declined by
$374,000 or 6.8% for the current fiscal quarter while still showing an increase
of $4.1 million or 31.6% for the current fiscal year to date period. The
decline in IT in the current fiscal quarter is the result of an industry trend
where customers are delaying the development of new projects until the second
quarter of next year because of Y2K concerns. The increase in the year to date
revenues for this division is due to revenues generated for a full year from
acquisitions, which were included for only part of the prior fiscal year.
Net service revenues in the Company's industrial maintenance segment declined
by $1.5 million or 10.3% to $13.0 million from $14.5 million and by $1.5
million or 3.5% to $40.8 million from $42.3 million for the current fiscal
quarter and year to date periods, respectively. The decline in service revenue
for both the current fiscal quarter and year to date periods resulted from
lower service revenues being generated from turnaround services as compared to
the prior fiscal year. Many refineries have postponed plant turnarounds and
major maintenance projects due to the strong demand and higher prices for
gasoline and other petroleum based products. Also contributing to this decline
in service revenues is a drop in revenues from this segment's insulation
services division. These declines are partially offset by increased revenue
being generated by conventional high-pressure water cleaning services and
through the opening of new service locations in the current and prior fiscal
years.
Gross profit on a consolidated basis declined by $165,000 or 1.6% and increased
by $1.7 million or 6.0% for the current fiscal quarter and year to date
periods, respectively. Gross profit as a percentage of service revenue for the
current fiscal quarter declined to 26.0% from 28.3% and for year to date period
to 26.5% from 28.3%.
Gross profit dollars in the staffing services segment increased by $867,000 or
17.3% and by $3.1 million or 23.6% for the current fiscal quarter and year to
date periods, respectively. Gross profit as a percentage of staffing service
revenues declined to 23.0% from 23.4% for the current quarter and to 22.8% from
23.2% for year to date period. The increase in gross profit dollars is the
result of the increased service revenues coupled with the consistent margins in
the commercial staffing division. The decrease in percentage is due to the
decline in gross profit margin in the information technology staffing division
which is caused by competitive pressures on pricing.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
(continued)
Results of Operations, (continued):
Gross profit dollars in the Company's industrial maintenance segment declined
by $1.0 million or 19.9% and by $1.4 million or 9.5% for the fiscal quarter and
year to date periods, respectively. As a percentage of service revenues, gross
profit declined to 31.8% from 35.6% and to 32.9% from 35.1% for the same
respective periods.
Contributing to this decline in both gross profit dollars and percentages is an
increase in direct labor costs associated with the performance of our services,
including related payroll taxes and employee welfare funds.
Selling, general and administrative expenses, including amortization expenses,
increased on a consolidated basis by $749,000 or 8.4% and by $3.3 million or
12.9% for the current fiscal quarter and year to date periods, respectively.
Selling, general and administrative expenses in the Company's staffing service
segment increased by $962,000 or 23.9% and by $3.1 million or 27.8% for the
current fiscal quarter and year to date periods, respectively. Contributing to
this increase were costs and amortization expense associated with prior year
acquisitions and cost associated with new office openings.
Selling, general and administrative expenses in the Company's industrial
maintenance segment decreased by $213,000 or 4.4% for the current fiscal
quarter and increased by $210,000 or 1.4% for the current fiscal year to date
period. The decline in the current fiscal quarter was primarily the result of
the closing of one branch office and three sub-offices in the current and prior
fiscal years. The increase in selling, general and administrative expenses for
the current year to date period is predominately due to the hiring of
additional sales and marketing associates in both the United States and Canada.
Contributing to the increase in other income for the current quarter and
partially offsetting other expense for the year to date period was a gain of
approximately $213,000 recognized on the final distribution of insurance
proceeds related to a 1998 fire at the Company's Rouyn-Noranda, Quebec
facility. In addition to the above, the Company has recognized a pre-tax gain
of approximately $281,000 related to the curtailment of its qualified
non-contributory defined benefit pension plans for all its non-bargaining unit
personnel in the United States. Reference is made to Footnote 5 of the Notes to
Condensed Consolidated Financial Statements, included herein.
These increases in other income were partially offset by an increase in
interest expense of $51,000 and $205,000 for the current fiscal quarter and
year to date periods, respectively. These increases were the result of the
higher level of borrowing associated with prior year acquisitions.
The effective tax rate for the current fiscal quarter is 58.5% and for the
fiscal year to date period is a benefit of 82.6%. The effective tax rate is the
result of the consolidation of effective tax rates from the various taxing
jurisdictions of the Company. Also affecting these effective rates is the
impact of the non-deductibility of certain intangible assets associated with
acquisitions that occurred in prior years.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
(continued)
Financial Condition:
The quick ratio held constant at 2.7 to 1 and the current ratio improved to 3.0
to 1 from 2.9 to 1 at September 26, 1999 and December 27, 1998, respectively.
Net working capital improved by $1.2 million of which $1.4 million is
attributable to an increase in accounts receivable and services in progress,
income taxes receivable of $371,000 and a decrease in accounts payable of
$602,000. These increases in working capital were partially offset by a decline
of $635,000 in cash and cash equivalents and an increase in accrued expenses of
$647,000. The increase in trade accounts receivable and services in progress
were primarily the result of the increased service revenue noted previously in
the staffing services segment while the increase in accrued expenses is
predominately payroll and incentive compensation related. Reference should be
made to the statement of cash flows, which details the sources and uses of
cash.
Open credit commitments as of September 26, 1999 were approximately $8.9
million. The Company also has approximately $340,000 (the US dollar equivalent)
available for C.H. Heist, Ltd., the Company's Canadian subsidiary.
Capital expenditures for the current fiscal quarter were $679,000, including
$160,000 in capital leases. Of this amount, $227,000 was for additions to the
mobile equipment fleet, $182,000 was for computer software, hardware, office
automation and communication systems, $25,000 was for furniture and fixtures,
$33,000 was for new facilities and the remainder was for other equipment.
Impact of Year 2000 Readiness:
Items disclosed herein constitute "Y-2000 Readiness Disclosures" under the Year
2000 Information Readiness Disclosure Act.
Throughout the past two years, the Company has undertaken an extensive review
of its internal systems and has completed an applications upgrade to its
integrated accounting programs and office automation systems that make them Y2K
ready. The term "Y2K ready" as used in this document means that the relevant
hardware, software, embedded chips or interfaces referenced herein will
correctly process, provide and receive date sensitive data within and between
the 20th and 21st centuries. The Company is also in the final phase of
assessing and upgrading where necessary the operating systems at all of its
remote locations. The cost of the upgrades and/or equipment replacements have
not had a material impact on the financial position of the Company as they were
part of the normal maintenance and support fees that are incurred on an ongoing
basis. The Company is also in the final phase of assessing external and third
party compliance for those supplies of critical services that the Company
relies on.
Subsequent Events:
On November 2, 1999, the Company announced that it had entered into a letter of
intent to sell its industrial maintenance business to Onyx Industrial Services,
Inc., a subsidiary of CGEA-Onyx, a French waste service company with worldwide
operations. Management expects to fully analyze and account for this segment as
a discontinued operation in its fourth fiscal quarter.
Since the letter of intent is non-binding, no assurances can be given that a
sale will be consummated.
In 2000, the Company intends to relocate its Buffalo, New York administrative
offices to the Tampa, Florida area, the current location of its executive and
human resources offices. In the fourth quarter the Company will complete an
assessment of the cost of relocation, including the costs of any employee
programs.
12
<PAGE> 13
Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 15 Letter Regarding Unaudited Interim Financial Information
(B) Exhibit 27.1 Financial Data Schedules
(C) Reports on Form 8-K: No reports on Form 8-K have been filed during
the quarter ended September 26, 1999.
13
<PAGE> 14
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 3, 1999 /s/ Mark P. Kashmanian
- ----------------------- ---------------------------------------
Mark P. Kashmanian
Chief Accounting Officer
14
<PAGE> 1
EXHIBIT 15
C.H. Heist Corp.
Clearwater, Florida
Gentlemen:
With respect to the registration statements No. 33-48497 and 333-26007, we
acknowledge our awareness of the use therein of our reports dated April 24,
1999, July 23, 1999 and October 22, 1999 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 LLP
Buffalo, New York
November 3, 1999
15
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