<PAGE>
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
FOR QUARTER ENDED December 31, 1996 COMMISSION FILE NUMBER 0-14229
---------------------- -----------
CROWN ANDERSEN INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1653577
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
306 Dividend Drive, Peachtree City, Georgia 30269
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 486-2000
-------------------------
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 filing such
requirements for the past 90 days. Yes X No
--- ---
================================================================================
Class Outstanding at December 31, 1996
----------------------------- --------------------------------
Common Stock, $0.10 Par Value 1,504,635 shares
Page 1 of 12
<PAGE>
CROWN ANDERSEN INC.
-------------------
INDEX
-----
PAGE NO.
--------
Part I. FINANCIAL INFORMATION:
Consolidated Balance Sheets--
December 31, 1996 and September 30, 1996 3
Consolidated Statements of Income--
Three Months Ended December 31, 1996
and 1995 4
Consolidated Statements of Cash Flows--
Three Months Ended December 31, 1996 and 1995 5
Notes to Consolidated Financial Information 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------- --------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 2,958,424 $ 5,200,796
Receivables:
Trade, less allowance of $124,662 and $120,380 for
possible losses 2,496,361 2,655,281
Other 81,243 48,403
Income taxes 219,341 294,960
Costs and estimated earnings in excess of billings on
uncompleted contracts 8,150,997 6,121,410
Inventories 2,043,959 1,955,127
Prepaid expenses 52,976 126,688
Current maturities of long-term note receivable 300,000 300,000
Deferred income taxes 403,935 403,935
----------- -----------
TOTAL CURRENT ASSETS 16,707,236 17,106,600
RESTRICTED CASH 1,036,000 1,148,000
NOTE RECEIVABLE, less current maturities 790,000 790,000
EQUIPMENT HELD FOR RESALE 941,554 1,031,554
PROPERTY AND EQUIPMENT, less accumulated depreciation 1,791,095 1,862,639
DEFERRED INCOME TAXES 280,944 280,944
OTHER ASSETS 192,438 228,717
----------- -----------
$21,739,267 $20,448,454
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ -
Accounts payable 5,119,951 5,099,140
Accruals:
Income taxes - -
Compensation 327,055 303,201
Warranty 689,000 939,000
Miscellaneous 328,554 336,170
Billings on uncompleted contracts in excess of cost and
estimated earnings 97,198 13,419
Current maturities of long-term debt 581,946 738,253
Deferred income taxes 267,402 249,225
----------- -----------
TOTAL CURRENT LIABILITIES 7,411,106 7,678,408
LONG-TERM DEBT, less current maturities 1,087,220 1,504,533
DEFERRED INCOME TAXES 137,122 137,122
----------- -----------
TOTAL LIABILITIES 8,635,448 9,320,063
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.10 par; shares authorized 5,000,000; issued
1,561,635; outstanding 1,504,635 and 1,544,635 156,164 156,164
Additional paid-in capital 2,905,801 2,905,801
Treasury stock; 57,000 and 17,000 shares, at cost (364,187) (117,313)
Retained earnings 10,129,796 9,881,306
Foreign currency translation adjustment 276,245 302,433
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,103,819 13,128,391
----------- -----------
$21,739,267 $22,448,454
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
=================================
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
------------------------
1996 1995
---------- -----------
<S> <C> <C>
REVENUES:
Contracts $4,435,102 $4,674,068
Sales 429,519 541,084
Other 37,635 32,047
---------- ----------
4,902,256 5,247,199
---------- ----------
COSTS AND EXPENSES:
Cost of contracts and sales 3,649,377 3,945,386
Selling, general and administrative 882,811 903,908
Interest and other (20,623) (14,854)
---------- ----------
4,511,565 4,834,440
---------- ----------
Income from operations before
taxes on income 390,691 412,759
TAXES ON INCOME 142,200 153,900
---------- ----------
NET INCOME $ 248,491 $ 258,859
========== ==========
AVERAGE SHARES AND EQUIVALENT SHARES
OUTSTANDING 1,531,194 1,561,635
---------- ----------
EARNINGS PER SHARE $ 0.16 $ 0.17
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
---------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations $ 248,491 $ 258,859
Items in income from operations not affecting cash:
Depreciation and amortization 70,680 74,700
Provision for valuation of soil processor unit 90,000 90,000
Deferred income taxes 21,756 12,770
Gain on sales of fixed assets - 6,399
Cash provided by (used for)
Trade and other receivables 99,626 2,058,108
Refundable income taxes (9,763) (14,535)
Costs and estimated earnings in excess of billings on
uncompleted contracts (2,029,587) (714,867)
Inventories (89,118) (1,041,681)
Prepaid expenses 73,354 1,574
Accounts payable 43,964 (1,925,452)
Accrued expenses (144,705) (55,255)
Billings on uncompleted contracts in excess of costs and
estimated earnings 83,779 (178,404)
Other 15,782 1,065
----------- -----------
Cash used for operating activities (1,525,741) (1,426,719)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash 112,000 -
Proceeds from sale of fixed assets - (4,721)
Capital expenditures (8,866) (6,711)
----------- -----------
Cash provided by (used for) investing activities 103,134 (11,432)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in long-term debt (568,653) (141,062)
Retirement of common stock (246,874) -
----------- -----------
Cash used for financing activities (815,527) (141,062)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (4,238) (1,969)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (2,242,372) (1,581,182)
Balance at beginning of year 5,200,796 3,751,637
----------- -----------
BALANCE AT END OF PERIOD $ 2,958,424 $ 2,170,455
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
===========================================
1. Condensed footnotes:
-------------------
As contemplated by the Securities and Exchange Commission instructions to
Form 10-Q, the following footnotes have been condensed and therefore do not
contain all disclosures required in connection with annual financial
statements. Reference should be made to the notes to Crown Andersen Inc.'s
annual financial statements set forth in its Form 10-K for the year ended
September 30, 1996.
2. Earnings per share:
------------------
Earnings per share were computed by dividing consolidated net earnings by
the number of shares of common stock outstanding during the period. The stock
options outstanding during 1995 and 1996 were antidilutive and thus did not
affect earnings per share.
3. Stock options:
-------------
As of December 31, 1996, options to purchase 60,800 shares at an average
price of $6.87 were outstanding under the Company's stock option plan.
The Company also has outstanding warrants to purchase 25,000 shares of
common stock under the Directors Stock Warrant Plan at $11.15 per share.
4. Revenue recognition:
-------------------
Revenues from contracts are reported on the percentage-of-completion
method. Under this method, the percentage of contract revenue to be
recognized currently is based on the ratio of costs incurred to date to total
estimated contract costs, after giving effect to the most recent estimate of
costs to complete. Revenues other than contracts are recorded when the
product is shipped or the service is rendered to the customers.
5. Inventories:
-----------
Inventories were $2,043,959 and $1,955,127 as of December 31, 1996 and
September 30, 1996. Included in inventories of $2,043,959 at December 31,
1996 is approximately $1,761,000 related to incineration equipment purchased
from a former competitor. The purchase price also included other assets and
was paid $1,000,000 in cash and the remaining $1,020,000 is payable in three
semi annual installments commencing on December 31, 1996 under a non-interest
bearing promissory note.
6. Restricted cash:
---------------
As of December 31, 1996, $1,036,000 of the Company's short-term
investments were held by banks as collateral for an outstanding letter of
credit. The letter of credit expires in 1999.
7. Equipment held for resale:
-------------------------
On September 30, 1992, the Company sold a soil processor unit under a
financing-type lease arrangement. As a result of the customer's default, the
Company, during 1994, terminated the lease and repossessed the equipment. On
September 30, 1994, the Company reclassified this asset as equipment held for
resale and reduced its carrying value from approximately $2.1 million to $1.8
million. The Company employs an outside appraiser and reviews the carrying
value of this unit on a periodic basis. Through December 31, 1996 the
carrying value of this unit has been reduced to $941,554. The adjustments to
carrying value have been charged to operations in each respective year.
6
<PAGE>
8. Commitments and contingencies:
------------------------------
There are no significant changes to the information discussed in the
Company's annual report on Form 10K for the year ended September 30, 1996
(Note 12 to the Consolidated Financial Statements).
* * *
The financial information included in this report has not been certified
and should not be relied upon to the same extent as certified financial
statements. The financial information included in this report reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim period. Nevertheless, the results
shown are for interim periods and are not necessarily indicative of results to
be expected for the year.
7
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Introduction:
------------
Crown Andersen Inc. (Crown Andersen or the Company) is a publicly-traded
holding company for Andersen 2000 Inc. (Andersen) and, through Andersen, owns
all of the outstanding stock of Montair Andersen bv (Montair). As used
herein, unless otherwise indicated, the term "Company" refers to Crown
Andersen and the above-referenced two subsidiaries and "Andersen" refers to
Andersen and Montair.
Late in fiscal 1994, the Company sold the assets of Crown Rotational
Molded Products, Inc. (Crown) and its subsidiary, Roanoke Industries, Inc.
(Roanoke) to Snyder Industries, Inc. The Crown sale was approved by the
shareholders in September, 1994. The Company is no longer involved in the
plastics business. Its two remaining subsidiaries are engaged exclusively in
the pollution control and waste processing equipment businesses.
Liquidity and Capital Resources:
-------------------------------
Cash and cash equivalents at December 31, 1996 decreased $2,242,372 from
the September 30, 1996 balance of $5,200,796. The decrease was primarily
attributable to an increase in costs and estimated earnings in excess of
billings on uncompleted contracts of $2,029,587, reflecting accumulated costs
on a large export project at Andersen which will be shipped in the second
quarter of fiscal 1997. Cash used for operating activities amounted to
$1,525,741. The increase in cost and estimated earnings in excess of billings
on uncompleted contracts stated above more than offset net income plus
depreciation and amortization of $409,171.
Montair realized a positive operating cash flow as a result of profitable
operations and a decrease in receivables.
Cash provided by investing activities totaled $103,134 and reflects a
decrease in restricted cash of $112,000, reduced by $8,866 in capital
expenditures (primarily at Andersen).
Cash used for financing activities totaled $815,527 and reflects a
reduction in long-term debt of $568,653 and the purchase of 40,000 shares of
treasury stock amounting to $246,874.
As disclosed in Note 7 to the Consolidated Financial Statements, during
1994 the Company repossessed certain equipment sold under a lease arrangement.
The Company has reduced the carrying value of this asset to approximately $0.9
million as of December 31, 1996 and it is reflected as equipment held for
resale in the accompanying consolidated balance sheet. The Company is
attempting to market this equipment for sale.
As indicated in Note 8 of the Notes to the Consolidated Financial
Statements, the Company is one of several defendants in a legal action brought
by various holders of Industrial Revenue Bonds issued by the cities of
Winfield and Arkansas City, Kansas concerning the development of industrial
property near Winfield, Kansas. The Company believes that it has meritorious
defenses to the litigation due to the fact that Crown Andersen was not a party
to the bondholder's agreement, such agreement having been entered
8
<PAGE>
into by Struthers Thermo-Flood Corporation ("STFC") prior to STFC being
acquired by the Company. In response to the lawsuit, STFC filed a liquidation
proceeding under Chapter 7 of the Federal Bankruptcy Act. The Trustee in
Bankruptcy abandoned the property on September 17, 1992. The Bankruptcy Court
entered an order of no distribution on February 10, 1994. STFC was dissolved
in March 1995. In the opinion of management of the Company and its legal
counsel, two possible outcomes exist. The first and more likely is a ruling
from the court or a jury in favor of the Company, resulting in no significant
financial effect upon the Company. A second and less likely is a ruling by
the court or a jury against the Company, in an amount of the past due lease
payments of approximately $1,900,000 plus interest and attorneys fees, less
any proceeds from a sale of the property. This net amount is estimated not to
exceed $1,000,000. If a judgement were to be rendered against the Company for
such amount, payment would be made using the Company's existing cash reserves
or from funds available under its credit facility.
As of December 31, 1996, the Company had not made any borrowings against
its $5.0 million U.S. line of credit and the $0.5 million credit facility
available to the Montair operation. The amount of $3.3 million is available
for borrowing under these credit facilities as $2.2 million in letters of
credit are outstanding against the U.S. line of credit. Because of this
credit facility, profitable operations, and the $4.5 million received from the
sale of the plastics business, the Company has adequate cash reserves to meet
its short-term cash needs.
Under the current loan agreement, the Company is required to obtain the
bank's consent to pay cash dividends, purchase treasury stock, or to sell
assets which constitute collateral. The Company obtained permission to
purchase up to $400,000 of treasury stock. A total of $364,187 in treasury
stock has been purchased as of December 31, 1996.
Results of Operations:
---------------------
Revenues.
---------
Revenues for the first quarter of fiscal 1997 were $4,902,256 compared
with $5,247,199 for the comparable period of fiscal 1996 and $4,871,895 for
the last quarter of fiscal 1996. Foreign sales (including export sales by
Andersen and sales by the Netherlands subsidiary) were $4.3 million and $4.5
million for the first quarter of fiscal 1997 and 1996, respectively, and
accounted for 87.0% and 85.0% of revenues, respectively.
The decrease in revenues of $344,943 (6.6%) from fiscal 1996 was entirely
attributable to Andersen operations, but was only the result of timing of
shipments and did not indicate any slowdown in business activity. All changes
in revenue are related to the quantity of product sold, not to pricing
changes.
The Company's revenue levels in the United States continued to be
adversely affected by the absence of any new hazardous waste incineration
facility permits in the United States. The Company estimates that U.S.
revenues have been reduced by approximately $2-$3 million per year from 1992
levels as a result of the Federal government's failure to review permit
applications for such facilities. The Company anticipates that foreign
revenues will offset these domestic revenue losses. Because of the
uncertainty in changes in United States regulations, it is impossible to
predict changes in demands for the Company's products in the domestic market.
The Company has been successful and will continue to rely on the
international market to replace most, if not all, of the lost U.S. business in
the future. The Company expects to at least maintain the current revenue
levels in fiscal 1997.
9
<PAGE>
First quarter 1997 revenues increased $30,361 from the preceding quarter
revenues, primarily as a result of higher revenues of $846,601 generated by
Andersen.
Cost of Sales.
--------------
For the first quarter of fiscal 1997, cost of sales totaled $3,649,377
compared with $3,945,386 in the comparable period of fiscal 1996 and
$4,461,385 in the fourth quarter of fiscal 1996.
The decrease in cost of sales of $296,009 (7%) from the fiscal 1996
quarter is the result of lower revenues and a margin improvement of 1%. This
was largely attributable to operations at Andersen.
First quarter 1997 cost of sales were $812,008 lower than in the fourth
quarter of 1996. The fourth quarter of fiscal 1996 was adversely affected by
substantial cost overruns on two Andersen international incineration projects
and a major component failure at one of these two projects.
Selling, General and Administrative Costs.
------------------------------------------
Selling, general and administrative costs for the first three months of
fiscal 1997 were $882,811 compared with $903,908 for the first fiscal quarter
of 1996 and $935,325 in the fourth quarter of fiscal 1996. The decrease of
$21,097 (2.3%) from the comparable quarter in 1996 is entirely attributable to
U.S. operations and reflects decreases in professional fees and commissions,
As a percentage of revenues, selling, general and administrative expenses were
18.0%, 17.2% and 19.2% of revenues for the fiscal quarters of 1997 and 1996
and the fourth quarter of fiscal 1996. Expenses for the current 1997 quarter
decreased $52,514 (5.6%) from the preceding fiscal quarter as a result of
lower employee costs and bank fees.
Interest and Other (Income) Expenses.
-------------------------------------
Interest and other (income) expenses for the first three months of fiscal
1997 resulted in a credit of $20,623 compared with a credit of $14,854 for the
first quarter of fiscal 1996 and a credit of $97,761 for the fourth quarter
of 1996. The credits in all periods reflect a substantial reduction in net
interest costs as a result of offsetting interest income realized on short-
term investments. The higher credit in fiscal 1997 reflects lower bad debt
expense recorded at the Montair Operation.
Taxes on Income.
----------------
The effective tax rate for the first quarter of fiscal 1997 was 36.4%
compared to 37.3% for the first quarter of fiscal 1996 and 44.1% (benefit) for
the fourth quarter of fiscal 1996.
Net Income.
-----------
Net income for the first quarter of fiscal 1997 was $248,491 or $0.16 per
share, compared with $258,859 or $0.17 per share for the first quarter of
fiscal 1996 and a net loss of $238,539 or $0.15 per share for the fourth
quarter of fiscal 1996.
The decrease in earnings of $10,368 was the result of lower revenues.
Lower earnings of $25,029 at Andersen were partly offset by an increase in
earnings at Montair of $14,661.
10
<PAGE>
Earnings increased $487,030 over the preceding fiscal quarter, reflecting
no charges in the quarter for additions to the warranty reserve. Operations
for the preceding fiscal quarter resulted in a loss of $238,539 as a result of
substantial cost overruns on two Andersen international projects and the
component failure discussed above.
Shares Outstanding.
-------------------
The average shares and equivalent shares outstanding were 1,531,194,
1,561,635 and 1,557,668 for the first fiscal quarter of 1997, the first fiscal
quarter of 1996 and the fourth fiscal quarter of 1996, respectively. The
unexercised options and warrants are antidilutive for all periods.
11
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
------------------------------------
PART II
OTHER INFORMATION
====================================
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 27. Financial Data Schedules
(b) No reports were filed on Form 8K during the quarter ended
December 31, 1996.
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.
CROWN ANDERSEN INC.
Dated: February 7, 1997 By: /s/ Jack D. Brady
------------------ -----------------------------
Jack D. Brady
Chairman of the Board
(Duly Authorized Officer)
Dated: February 7, 1997 By: /s/ Milton Emmanuelli
------------------ -----------------------------
Milton Emmanuelli
Secretary and Treasurer
(Principal Financial Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,958,424
<SECURITIES> 0
<RECEIVABLES> 2,621,023
<ALLOWANCES> 124,662
<INVENTORY> 2,043,959
<CURRENT-ASSETS> 16,707,236
<PP&E> 1,791,095
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,739,267
<CURRENT-LIABILITIES> 7,411,106
<BONDS> 1,087,220
0
0
<COMMON> 156,164
<OTHER-SE> 12,947,655
<TOTAL-LIABILITY-AND-EQUITY> 21,739,267
<SALES> 4,865,021
<TOTAL-REVENUES> 4,902,256
<CGS> 3,649,377
<TOTAL-COSTS> 4,511,565
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (20,623)
<INCOME-PRETAX> 390,691
<INCOME-TAX> 142,200
<INCOME-CONTINUING> 390,691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 248,491
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
