<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 June 30, 1997 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 June 30, 1997
- - ------------------------------- ----------------------------
Common Stock, $0.10 Par Value 1,512,198 shares
Page 1 of 12
<PAGE>
CROWN ANDERSEN INC.
-------------------
INDEX
-----
PAGE NO.
--------
Part I. FINANCIAL INFORMATION:
Consolidated Balance Sheets--
June 30, 1997 and September 30, 1996 3
Consolidated Statements of Income--
Three Months and Nine Months Ended June 30, 1997
and 1996 4
Consolidated Statements of Cash Flows--
Nine Months Ended June 30, 1997 and 1996 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>
JUNE 30, SEPTEMBER 30,
1997 1996
------------ --------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 3,871,256 $ 5,200,796
Receivables:
Trade, less allowance of $109,031 and $120,380 for
possible losses 3,570,905 2,655,281
Other 78,744 48,403
Income taxes 212,023 294,960
Costs and estimated earnings in excess of billings on
uncompleted contracts 6,586,965 6,121,410
Inventories 2,283,976 1,955,127
Prepaid expenses 64,670 126,688
Current maturities of long-term note receivable 300,000 300,000
Deferred income taxes 403,935 403,935
----------- -----------
TOTAL CURRENT ASSETS 17,372,474 17,106,600
RESTRICTED CASH 1,036,000 1,148,000
NOTE RECEIVABLE, less current maturities 640,000 790,000
EQUIPMENT HELD FOR RESALE 761,554 1,031,554
PROPERTY AND EQUIPMENT, less accumulated depreciation 1,633,233 1,862,639
DEFERRED INCOME TAXES 280,944 280,944
OTHER ASSETS 135,411 228,717
----------- -----------
$21,859,616 $22,448,454
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ -
Accounts payable 5,299,462 5,099,140
Accruals:
Income taxes - -
Compensation 390,235 303,201
Warranty 703,300 939,000
Miscellaneous 287,012 336,170
Billings on uncompleted contracts in excess of cost and
estimated earnings 7,699 13,419
Current maturities of long-term debt 486,485 738,253
Deferred income taxes 223,195 249,225
----------- -----------
TOTAL CURRENT LIABILITIES 7,397,388 7,678,408
LONG-TERM DEBT, less current maturities 800,000 1,504,533
DEFERRED INCOME TAXES 137,122 137,122
----------- -----------
TOTAL LIABILITIES 8,334,510 9,320,063
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.10 par; shares authorized 5,000,000; issued
1,561,635: outstanding 1,512,198 and 1,544,635 156,164 156,164
Additional paid-in capital 2,905,801 2,905,801
Treasury stock: 49,437 and 17,000 shares, at cost (319,760) (117,313)
Retained earnings 10,681,527 9,881,306
Foreign currency translation adjustment 101,374 302,433
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,525,106 13,128,391
----------- -----------
$21,859,616 $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 FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------- --------------------------------
1997 1996 1997 1996
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Contracts $5,963,111 $5,545,603 $15,787,809 $15,662,817
Sales 603,683 528,733 1,413,003 1,459,749
Other - - 38,136 32,047
---------- ---------- ----------- -----------
6,566,794 6,074,336 17,238,948 17,154,613
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of contracts and sales 5,375,736 4,969,982 13,412,111 13,312,565
Selling, general and administrative 919,505 961,936 2,643,987 2,828,637
Interest and other (47,585) (92,923) (64,371) (86,082)
---------- ---------- ----------- -----------
6,247,256 5,838,995 15,991,727 16,055,120
---------- ---------- ----------- -----------
Income from operations before
taxes on income 319,538 235,341 1,247,221 1,099,493
TAXES ON INCOME 112,900 85,600 447,000 405,900
---------- ---------- ----------- -----------
NET INCOME $ 206,638 $ 149,741 $ 800,221 $ 693,593
========== ========== =========== ===========
AVERAGE SHARES AND EQUIVALENT SHARES
OUTSTANDING 1,512,198 1,561,635 1,517,888 1,561,635
========== ========== =========== ===========
EARNINGS PER SHARE $ 0.14 $ 0.10 $ 0.53 $ 0.44
========== ========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations $ 800,221 $ 693,593
Items in income from operations not affecting cash:
Depreciation and amortization 206,220 209,338
Provision for valuation of soil processor unit 270,000 270,000
Deferred income taxes (1,801) 13,687
Loss on sales of fixed assets 893 -
Cash provided by (used for)
Trade and other receivables (1,118,022) 3,247,544
Refundable income taxes 14,570 46,280
Costs and estimated earnings in excess of billings on
uncompleted contracts (465,555) 943,720
Inventories (347,587) (1,046,017)
Prepaid expenses 58,786 (49,278)
Accounts payable 337,242 219,481
Accrued expenses (96,149) (501,008)
Billings on uncompleted contracts in excess of costs and
estimated earnings (5,720) (151,923)
Other (10,856) (64,095)
----------- -----------
Cash provided by (used for) operating activities (357,758) 3,831,322
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash 112,000 (2,916,000)
Collection of note receivable 150,000 50,000
Proceeds from sale of fixed assets 1,811 3,298
Capital expenditures (83,305) (232,916)
----------- -----------
Cash provided by (used for) investing activities 180,506 (3,095,618)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (reduction) in long-term debt (933,747) 127,713
Retirement of common stock (202,447) -
----------- -----------
Cash provided by (used for) financing activities (1,136,194) 127,713
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (16,094) (36,831)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (1,329,540) (826,586)
Balance at beginning of year 5,200,796 3,751,637
----------- -----------
BALANCE AT END OF PERIOD $ 3,871,256 $ 4,578,223
=========== ===========
</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 1996 and 1997 were antidilutive and thus did not
affect earnings per share.
3. Treasury stock and stock options:
--------------------------------
During fiscal 1997, the Company purchased 32,437 shares of its stock at a
cost of $202,447. These shares are held as treasury stock.
As of June 30, 1997, options to purchase 48,800 shares at an average
price of $7.00 were outstanding under the Company's stock option plan.
The Company also has outstanding warrants to purchase 15,000 shares of
common stock under the Directors Stock Warrant Plan at $10.50 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 $2,283,976 and $1,955,127 as of June 30, 1997 and
September 30, 1996. Included in inventories at June 30, 1997 and September
30, 1996 is approximately $1,761,000 related to incineration equipment
purchased from a former competitor. The purchase price also included other
assets. Payments to date include a downpayment of $1,000,000 and installments
of $520,000 and $100,000 paid on December 31, 1996 and June 30, 1997,
respectively. The remaining $400,000 is payable on December 31, 1997.
6. Restricted cash:
---------------
As of June 30, 1997, $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
6
<PAGE>
$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 June 30,
1997, the carrying value of this unit has been reduced to $761,554. The
adjustments to carrying value have been charged to operations in each
respective year.
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.
Liquidity and Capital Resources:
-------------------------------
Cash and cash equivalents at June 30, 1997 decreased $1,329,540 from the
September 30, 1996 balance of $5,200,796. The decrease was primarily
attributable to an increase in accounts receivable of $1,118,022 and the
reduction of long-term debt. Montair paid off its entire long-term debt of
$230,300 in the current quarter. Cash used for operating activities amounted
to $357,758. The increase in accounts receivable stated above, and increases
in inventories and in costs and estimated earnings in excess of billings on
uncompleted contracts more than offset net income plus depreciation of
$1,070,221 and an increase in payables.
Montair realized a positive cash flow as a result of profitable
operations and a decrease in receivables.
Cash provided by investing activities totaled $180,506 and reflects a
decrease in restricted cash of $112,000 and a collection of a note receivable
of $150,000, reduced by $83,305 in capital expenditures.
Cash used for financing activities totaled $1,136,194 and reflects a
reduction of long-term debt of $933,747 and the purchase of 32,437 shares of
treasury stock amounting to $202,447.
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
$800,000 as of June 30, 1997 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 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
8
<PAGE>
the opinion of management of the Company and its 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 June 30, 1997, the Company had no borrowings against its $5.0
million 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 retention of cash from prior years, 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 $319,760 in treasury
stock has been purchased as of June 30, 1997.
As of June 30, 1997, the Company's equity in its Montair operation had
declined in value by $201,059 from September 30, 1996 as a result of a
decrease in the foreign currency translation adjustment, reflecting a 15%
increase in the U.S. dollar against the Dutch guilder.
Results of Operations:
---------------------
Revenues.
---------
Revenues for the first nine months of fiscal 1997 were $17,238,948
compared with $17,154,613 for the first nine months of fiscal 1996. For the
third quarter of fiscal 1997, revenues were $6,566,794 compared with
$6,074,336 for the comparable figure in 1996 and $5,769,898 for the second
quarter of fiscal 1997. Foreign sales (including export sales by Andersen and
sales by the Netherlands subsidiary) were $14.1 million and $14.2 million for
the first nine months of fiscal 1997 and 1996, respectively, and accounted for
81.6% and 83.1% of revenues. All changes in revenues are related to the
quantity of product sold, not to pricing changes.
The increase in revenues of $84,335 was attributable to revenue increases
at Andersen.
Third quarter 1997 revenues increased $492,458 (8%) from the comparable
period in 1996. Revenues at Andersen increased $563,410 (12%), however this
increase was offset by lower revenues at Montair of $70,952.
Third quarter 1997 revenues exceeded the preceding fiscal quarter by
$796,896 (14%), primarily as a result of higher revenues generated at Andersen
of $991,249. Montair's revenues decreased $194,353 from the preceding fiscal
quarter.
9
<PAGE>
Cost of Sales.
--------------
For the first nine months of fiscal 1997, cost of sales were $13,412,111
as compared with $13,312,565 for the first nine months of fiscal 1996. Third
quarter costs of sales were $5,375,736 as compared with $4,969,982 for the
third quarter of 1996 and $4,387,398 for the second quarter of 1997.
The increase in cost of sales of $99,546 was all attributable to the
increase in revenues. Consolidated margins were the same. However, Andersen's
margins declined 3% while Montair's margins increased 14%. Third quarter 1997
costs of sales increased $405,354 (8%) from the comparable period of 1996 as a
result of higher revenues.
Third quarter 1997 costs of sales increased $987,938 (23%) from the
preceding fiscal quarter as a result of higher revenues.
Selling, General and Administrative Costs.
------------------------------------------
Selling, general and administrative costs for the first nine months of
fiscal 1997 were $2,643,987 compared with $2,828,637 for the first nine months
of fiscal 1996. For the second quarter of 1997, selling, general and
administrative costs were $919,505, as compared with $961,936 in the
comparable quarter of 1996 and $841,671 for the second quarter of 1997. As a
percentage of revenues, selling, general and administrative costs were 15.3%,
16.5%, 14.0%, 15.8% and 14.9% of revenues for the first nine months of 1996
and 1996; the third quarter of 1997 and 1996; and the second quarter of 1997,
respectively. The current period decreases of $184,650 (6.5%) and $42,431
(4.4%) from the comparable nine months and third quarter periods of fiscal
1996 are primarily attributable to U.S. operations, and reflect lower
expenditures for commissions and professional fees.
Third quarter of 1997 expenses increased $77,834 (9%) from the preceding
fiscal quarter as a result of higher commissions and professional fees
incurred at Andersen.
Interest and Other (Income) Expenses.
-------------------------------------
Interest and other (income) expenses for the first nine months of 1997
resulted in a credit of $64,371 compared to a credit of $86,082 for the
comparable period in 1996. For the third quarter of 1997, interest and other
expenses were $47,585 (credit) compared to $92,923 (credit) for the third
quarter of 1996 and an expense of $3,837 for the second quarter of 1997. The
increases of $21,711 and $45,338 for the current nine months and third quarter
from the comparable periods of 1996 are due primarily to imputed interest cost
on non-interest bearing debt recorded in 1997. During the current quarter
costs decreased $51,422 from the preceding fiscal quarter due to higher
interest income and lower bad debt expense.
Taxes on Income.
----------------
The effective tax rates for all periods are:
<TABLE>
<S> <C>
First 9 months of 1997 - 35.8%
First 9 months of 1996 - 36.8%
Third quarter of 1997 - 35.3%
Third quarter of 1996 - 36.4%
Second quarter of 1997 - 35.7%
</TABLE>
10
<PAGE>
Net Income.
-----------
Net income for the first nine months of 1997 was $800,221 or $0.53 per
share, compared with $693,593 or $0.44 per share for the first nine months of
1996. For the third quarter of 1997, net income was $206,638 or $0.23 per
share compared with $149,741 or $0.10 per share for the third quarter of 1996
and $345,092 or $0.23 per share for the second quarter of 1997.
Net income in the current nine months and third quarter periods increased
$106,628 (15%) and $56,897 (38%) from the comparable periods in 1996 due to
lower selling, general and administrative costs and higher revenues. The
entire earnings increases were attributable to Montair, where margins
increased 14%. Net income at Montair increased $283,335, which offset a
decrease of $176,707 at Andersen.
Third quarter 1997 net income decreased $138,454 from the preceding
fiscal quarter due to a decrease in margins of 6%. The decrease was primarily
attributable to Montair, where record high quarterly earnings were recorded in
the second quarter of 1997.
Shares Outstanding.
-------------------
The average and equivalent shares outstanding for all periods are:
<TABLE>
<S> <C> <C>
First 9 months of 1997 - 1,517,888
First 9 months of 1996 - 1,561,635
Third quarter of 1997 - 1,512,198
Third quarter of 1996 - 1,561,635
Second quarter of 1997 - 1,510,273
</TABLE>
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) No reports were filed on Form 8K during the quarter ended June
30, 1997.
(b) Exhibit 27. Financial Data Schedule
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: August 8, 1997 By: /s/ Jack D. Brady
------------------ ----------------------------
Jack D. Brady
Chairman of the Board
(Duly Authorized Officer)
Dated: August 8, 1997 By: /s/ Milton Emmanuelli
------------------ ----------------------------
Milton Emmanuelli
Secretary and Treasurer
(Principal Financial Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,871,256
<SECURITIES> 0
<RECEIVABLES> 3,679,936
<ALLOWANCES> 109,031
<INVENTORY> 2,283,976
<CURRENT-ASSETS> 17,372,474
<PP&E> 1,633,233
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,859,616
<CURRENT-LIABILITIES> 7,397,388
<BONDS> 800,000
0
0
<COMMON> 156,164
<OTHER-SE> 13,368,942
<TOTAL-LIABILITY-AND-EQUITY> 21,859,616
<SALES> 17,201,713
<TOTAL-REVENUES> 17,238,948
<CGS> 13,412,111
<TOTAL-COSTS> 15,991,727
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (64,371)
<INCOME-PRETAX> 1,247,221
<INCOME-TAX> 447,000
<INCOME-CONTINUING> 1,247,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 800,221
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
