<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, 2000 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, 2000
----------------------------- ----------------------------
Common Stock, $0.10 Par Value 1,838,614 shares
Page 1 of 13
<PAGE>
CROWN ANDERSEN INC.
-------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
Part I. FINANCIAL INFORMATION:
<S> <C>
Consolidated Balance Sheets--
June 30, 2000 and September 30, 1999 3
Consolidated Statements of Operations-
Three Months and Six Months Ended June 30, 2000
and 1999 4
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Information 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
2
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 2,525,009 $ 1,653,516
Receivables:
Trade, less allowance of $178,334 and $174,543 for
possible losses 5,216,565 4,924,700
Other 45,942 41,928
Income taxes - -
Costs and estimated earnings in excess of billings on
uncompleted contracts 2,155,395 2,635,324
Inventories 2,718,320 2,364,616
Prepaid expenses 108,232 154,708
Deferred income taxes 152,868 152,868
----------- -----------
TOTAL CURRENT ASSETS 12,922,331 11,927,660
RESTRICTED CASH - 1,036,000
LONG-TERM RECEIVABLES 1,440,000 -
EQUIPMENT HELD FOR RESALE 490,000 490,000
PROPERTY AND EQUIPMENT, less accumulated depreciation 2,790,562 2,806,522
DEFERRED INCOME TAXES 1,027,251 1,027,251
PROPERTY HELD FOR SALE 1,500,000 1,500,000
GOODWILL, net of accumulated amortization of $93,286 790,636 834,833
OTHER ASSETS 123,310 124,253
----------- -----------
$21,084,090 $19,746,519
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ 393,171
Accounts payable 5,746,081 3,801,352
Accruals:
Income taxes 41,903 4,714
Compensation 403,809 357,015
Warranty 186,100 228,000
Miscellaneous 299,223 417,507
Billings on uncompleted contracts in excess of cost and
estimated earnings 80,882 -
Current maturities of long-term debt 666,228 783,265
Deferred income taxes 364,351 378,322
----------- -----------
TOTAL CURRENT LIABILITIES 7,788,577 6,363,346
LONG-TERM DEBT, less current maturities 28,333 18,744
DEFERRED INCOME TAXES 251,932 251,932
----------- -----------
TOTAL LIABILITIES 8,068,842 6,634,022
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.10 par; shares authorized 20,000,000; issued
1,875,918; outstanding 1,838,614 and 1,832,939 187,592 187,364
Additional paid-in capital 3,836,572 3,826,301
Treasury stock; 37,304 and 40,696 shares, at cost (262,675) (270,235)
Retained earnings 9,390,873 9,327,567
Foreign currency translation adjustment (137,114) 41,500
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,015,248 13,112,497
----------- -----------
$21,084,090 $19,746,519
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CROWN ANDERSEN INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Contracts $5,223,984 $3,815,328 $15,038,076 $11,865,787
Sales 491,459 397,743 1,273,194 1,464,130
Other - 35,782 - 62,920
---------- ---------- ----------- -----------
5,715,443 4,248,853 16,311,270 13,392,837
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of contracts and sales 4,963,046 3,709,069 13,019,245 11,153,396
Selling, general and administrative 1,041,005 829,323 3,237,532 2,438,395
Interest and other (51,297) 8,351 (61,613) 592
---------- ---------- ----------- -----------
5,952,754 4,546,743 16,195,164 13,592,383
---------- ---------- ----------- -----------
Income (loss) from operations before
taxes on income (237,311) (297,890) 116,106 (199,546)
TAXES ON INCOME (BENEFIT) (88,500) (113,400) 52,800 (78,700)
---------- ---------- ----------- -----------
NET INCOME (LOSS) $ (148,811) $ (184,490) $ 63,306 $ (120,846)
========== ========== =========== ===========
AVERAGE NUMBER OF SHARES - BASIC 1,838,614 1,832,939 1,836,556 1,749,369
AVERAGE NUMBER OF SHARES - DILUTED 1,838,614 1,832,939 1,836,556 1,749,369
EARNINGS (LOSS) PER SHARE
BASIC $ (0.08) $ (0.10) $ 0.03 $ (0.07)
DILUTED $ (0.08) $ (0.10) $ 0.03 $ (0.07)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS):
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ --------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (148,811) $ (184,490) $ 63,306 $ (120,846)
OTHER COMPREHENSIVE INCOME
Foreign Currency Translation Adjustment (231) (64,349) (178,614) (204,679)
---------- ---------- ----------- -----------
COMPREHENSIVE LOSS $ (149,042) $ (248,839) $ (115,308) $ (325,525)
========== ========== =========== ===========
</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,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income from operations $ 63,306 $ (120,846)
Items in income from operations not affecting cash:
Depreciation and amortization 249,253 229,559
Gain on sale of assets (16,000) -
Cash provided by (used for)
Trade and other receivables (1,876,061) (907,229)
Refundable income taxes 19,285 33,839
Costs and estimated earnings in excess of billings on
uncompleted contracts 479,929 (1,552,048)
Inventories (409,428) 613,529
Prepaid expenses 42,311 (31,269)
Accounts payable 2,053,060 2,400,336
Accrued expenses (66,400) 757,655
Billings on uncompleted contracts in excess of costs and
estimated earnings 80,882 (6,113)
Other (44,242) (1,480)
----------- -----------
Cash provided by operating activities 575,895 1,415,933
----------- -----------
INVESTING ACTIVITIES:
Decrease in restricted cash 1,036,000 -
Proceeds from sale of assets 16,000 -
Investment in Griffin Environmental Company Inc. - (2,296,010)
Capital expenditures (264,123) (93,719)
----------- -----------
Cash provided by (used for) investing activities 787,877 (2,389,729)
----------- -----------
FINANCING ACTIVITIES:
Reduction in long-term debt (107,448) (284,504)
Decrease in notes payable (393,171) (161,333)
Sale of common stock 18,059 977,198
----------- -----------
Cash (used for) provided by financing activities (482,560) 531,361
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (9,719) (10,735)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net decrease during the period 871,493 (453,170)
Balance at beginning of period 1,653,516 1,171,097
----------- -----------
BALANCE AT END OF PERIOD $ 2,525,009 $ 717,927
=========== ===========
</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, 1999.
2. Earnings per share:
------------------
Earnings (loss) per share is computed based on the weighted average of
common shares, common stock options and warrants (using the treasury stock
method) in accordance with FAS 128 "Earnings Per Share."
3. Stock options and warrants:
--------------------------
As of June 30, 2000, options to purchase 271,233 shares at an average price
of $4.42 were outstanding under the Company's stock option plan.
The Company also has outstanding warrants to purchase 300,000 shares of
common stock under the Directors Stock Warrant Plan at $4.45 per share. Of the
total 300,000 warrants outstanding, only 74,000 are vested.
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 $2,718,320 and $2,364,616 as of June 30, 2000 and
September 30, 1999. Included in inventories is approximately $870,000 related to
incineration equipment purchased from a former competitor.
6. Restricted cash:
---------------
The balance of $1,036,000 in short-term investments previously held as
restricted cash was reclassified to cash and cash equivalents as of June 30,
2000, since the letter of credit requiring collateral is being canceled in July
2000 following settlement of arbitration proceedings.
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.
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, 1999,
except as noted below:
On July 10, 2000, the Company settled its contractual dispute with a
customer in Indonesia. This dispute was the subject of an arbitration
proceeding in Singapore which was discussed in Note 3 to Consolidated Financial
Statements in the Company's 1999 Annual Report. The settlement provides for
total payments by the customer of $1,800,000; two payments of $180,000 each in
July and August, 2000, and ten semi-annual payments of $144,000, plus interest
at 5% per year commencing on April 1, 2001. The payment of the settlement
amount has been guaranteed by the customer's parent company. As a result of the
settlement, a performance bond of $1,036,000 guaranteed by a letter of credit is
being canceled and restricted cash of $1,036,000 is being released to the
Company's general operating funds.
The Company had a $5.0 million line of credit and a term loan with a U.S.
bank. During 1999, the Company's bank notified the Company that the bank was
not going to renew the line of credit beyond September 30, 1999 and was reducing
the available borrowing limit to $2.0 million. As of June 30, 2000, there were
no amounts outstanding under the line of credit. However, there was $600,000
outstanding on the term loan and $196,000 on a letter of credit issued by this
bank and guaranteed by the line of credit. This letter of credit expired in July
2000. Since September 30, 1999, the Company has continued to make scheduled
debt payments to this bank. On January 14, 2000, the bank agreed to extend the
term loan to June 15, 2000 with no further advances allowed under the line of
credit. The term loan was further extended to August 31, 2000 on June 29, 2000.
The Company has been actively seeking financing from other sources since
mid September 1999 to replace this line of credit. The discussions for other
financing include banks with similar collateral requirements and mortgage loans
on the Company's real estate holdings. The Company has reviewed the current
collateral available to it and has determined that there exists sufficient
collateral to refinance its loan obligation and obtain the necessary cash to
fund operations in fiscal 2000. The Company's cash flow projections for fiscal
2000 indicate a need for about $900,000 of working capital in excess of
anticipated bank balances. This cash shortfall will be now covered with the
availability of $1,036,000 in previously restricted cash which has been released
following settlement of a contractual dispute and the availability of a loan
commitment from a private investor. The inability of the Company to be able to
obtain necessary financing within a timely fashion could have an unfavorable
impact on the Company's ability to maintain projected operating levels and to
meet certain obligations when they become due.
9. Litigation settlement:
---------------------
During fiscal 1998, the Company settled the litigation over principal and
interest for certain Kansas property formerly occupied by Struthers Thermo-Flood
Corporation, a former Crown Andersen subsidiary. Under terms of the settlement,
the Company paid $1,630,000 in cash and issued a one year, non-interest bearing
promissory note and the amount of $670,000. The note was paid in May 1999. In
exchange, the Company received the rights (without further obligation) to
transfer title of this property to a purchaser or to the Company. The
estimated value of these assets is presently $1,500,000. This transaction was
recorded as of June 30, 1998 and the Company recognized a net loss of
approximately $900,000. The Company's June 30, 2000 balance sheet includes
these assets as "property held for sale."
10. Acquisition of business:
-----------------------
On December 16, 1998 the Company purchased all the outstanding shares of
stock of Griffin Environmental Company Inc. ("Griffin"). Griffin is a
manufacturer of fabric filter and cartridge dust collector pollution control
equipment. Griffin sells its pollution control equipment to a wide variety of
industries, including concrete, steel, other metals, clays, paper, glass, and
other industries.
7
<PAGE>
The Company purchased Griffin for $2.6 million. This was comprised of cash
of $2.3 million and a one-year promissory note of $273,000 secured by a second
mortgage on the real estate. The note bears interest at 4.33% payable monthly.
The note was paid on December 16, 1999.
The acquisition included the purchase of assets comprised primarily of
inventories, accounts receivable, and property, plant, and equipment.
Liabilities assumed in the acquisition consist primarily of trade accounts
payable, customer deposits, long term debt, and other accrued liabilities. The
transaction was accounted for under the purchase method of accounting whereby
all assets and liabilities were valued at their current fair market value at
December 16, 1998.
* * *
The financial information included in this report is unaudited, however,
such financial information 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.
8
<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 Griffin Environmental
Company, Inc. (Griffin). Through Andersen, the Company owns all of the
outstanding stock of Montair Andersen bv (Montair). The Company is engaged
exclusively in the pollution control, product recovery, and waste processing
equipment businesses.
Liquidity and Capital Resources:
-------------------------------
Cash and cash equivalents of $2,525,009 at June 30, 2000 increased $871,493
from the September 30, 1999 balance of $1,653,516. The increase was primarily
attributable to the release of $1,036,000 in restricted cash, following
settlement of an arbitration dispute with a customer in Singapore. The increase
in accounts receivable of $1,876,061 reflects $1,300,000 transferred from costs
and estimated earnings in excess of billings on uncompleted contracts as a
result of the arbitration settlement. Inventories increased $409,428. The
increases in receivables and inventories were offset by increases in payables of
$1,986,660 and net income plus depreciation of $312,559. Cash provided by
operating activities amounted to $575,895.
Cash provided by investing activities totaled $787,877. This amount
includes $1,036,000 from reduction of restricted cash, and net proceeds from
sale of fixed assets of $16,000, partially offset by capital expenditures of
$264,123.
Cash used for financing activities totaled $482,560. This amount reflects
reduction of long-term debt and notes payable of $107,448 and $393,171,
respectively, and $18,059 received from the sale of common stock.
Montair and Griffin realized a positive cash flow from operations which
offset a negative operating cash flow at Andersen.
As disclosed in Note 7 to the Consolidated Financial Statements, during
1994 the Company repossessed certain equipment sold under a lease arrangement.
This asset is reflected as equipment held for resale in the accompanying
consolidated balance sheet. The Company is attempting to market this equipment
for sale and has active negotiations underway for its sale.
On July 10, 2000, the Company settled its contractual dispute with a
customer in Indonesia. This dispute was the subject of an arbitration
proceeding in Singapore which was discussed in Note 3 to Consolidated Financial
Statements in the Company's 1999 Annual Report. The settlement provides for
total payments by the customer of $1,800,000; two payments of $180,000 each in
July and August, 2000, and ten semi-annual payments of $144,000, plus interest
at 5% per year commencing on April 1, 2001. The payment of the settlement
amount has been guaranteed by the customer's parent company. As a result of the
settlement, a performance bond of $1,036,000 guaranteed by a letter of credit is
being canceled and restricted cash of $1,036,000 is being released to the
Company's general operating funds.
The Company had a $5.0 million line of credit and a term loan with a U.S.
bank. During 1999, the Company's bank notified the Company that the bank was
not going to renew the line of credit beyond September 30, 1999 and was reducing
the available borrowing limit to $2.0 million. As of June 30, 2000, there were
no amounts outstanding under the line of credit. However, there was $600,000
outstanding on the term loan and $196,000 on a letter of credit issued by this
bank and guaranteed by the line of credit. This letter of credit expired in July
2000. Since September 30, 1999, the Company has continued to make scheduled
debt payments to this bank. On January 14, 2000, the bank agreed to extend the
term loan to June 15, 2000 with no further advances allowed under the line of
credit. The term loan was further extended to August 31, 2000 on June 29, 2000.
9
<PAGE>
The Company has been actively seeking financing from other sources since
mid September 1999 to replace this line of credit. The discussions for other
financing include banks with similar collateral requirements and mortgage loans
on the Company's real estate holdings. The Company has reviewed the current
collateral available to it and has determined that there exists sufficient
collateral to refinance its loan obligation and obtain the necessary cash to
fund operations in fiscal 2000. The Company's cash flow projections for fiscal
2000 indicate a need for about $900,000 of working capital in excess of
anticipated bank balances. This cash shortfall will now be covered with the
availability of $1,036,000 in previously restricted cash which has been released
following settlement of a contractual dispute and the availability of a loan
commitment from a private investor. The inability of the Company to be able to
obtain necessary financing within a timely fashion could have an unfavorable
impact on the Company's ability to maintain projected operating levels and to
meet certain obligations when they become due.
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 262,675 of net treasury stock purchases
is reflected in the Company's balance sheet as of June 30, 2000.
As of June 30, 2000, the Company's equity in its Montair operation had
decreased in value by $178,614 from September 30, 1999 as a result of a decrease
in the foreign currency translation adjustment, reflecting a 12% increase in the
U.S. dollar against the Dutch guilder.
The Company experienced no disruptions in its operations as a result of the
year 2000 issue.
Results of Operations:
---------------------
Revenues.
--------
Revenues for the first nine months of fiscal 2000 were $16,311,270 compared
with $13,392,837 for the first nine months of fiscal 1999. For the third quarter
of fiscal 2000, revenues were $5,715,443 compared with $4,248,853 for the
comparable figure in 1999 and $5,193,642 for the second quarter of fiscal 2000.
Foreign sales (including export sales by Andersen and sales by Montair) were
$4.1 million and $3.5 million for the first nine months of 2000 and 1999,
respectively, and accounted for 25.2% and 26.3% of revenues. All changes in
revenues are related to the quantity of products sold, not to pricing changes.
Nine month revenues in 2000 increased $2,918,433 (22%) from 1999. Revenue
increases at Griffin and Montair of $4,124,569 and $546,957, respectively,
offset a decline in revenues at Andersen of $1,753,093.
The Company continues to rely on the international market for some of its
revenues. Demand for the Company's products in the domestic market has remained
low over the last five years because of uncertainty in changes in United States
regulations. However, the Company experienced an increase in domestic business
during fiscal 1999. Domestic revenues accounted for 73.7% of total revenues in
fiscal 1999 and 74.8% for the first nine months of fiscal 2000. This trend is
expected to continue in fiscal 2000 as a result of the additional revenues
generated by Griffin.
Third quarter 2000 revenues increased $1,466,590 (34.5%) from the
comparable period in 1999. The increase reflects higher revenues at Griffin and
Montair, which offset a decline in revenues of $225,586 at Andersen.
Third quarter 2000 revenues increased $521,801 (10.0%) from the preceding
fiscal quarter, primarily as a result of higher revenues at Andersen.
10
<PAGE>
Cost of Sales.
-------------
For the first nine months of fiscal 2000, cost of sales totaled $13,019,245
as compared with $11,153,396 for the first nine months of fiscal 1999. Third
quarter cost of sales were $4,963,046 as compared with $3,709,069 for the third
quarter of 1999 and $3,787,888 for the second quarter of fiscal 2000.
Cost of sales for the nine months of fiscal 2000 increased $1,865,849
(16.7%) from the comparable period in 1999, as a result of higher revenues and a
margin improvement of 3.5%.
For the third quarter of fiscal 2000, cost of sales increased $1,253,977
(33.8%) from the comparable period in 1999. The increase reflects an increase
in revenues of 34.5%.
Third quarter 2000 cost of sales increased $1,175,158 (31.0%) from the
preceding fiscal quarter, as a result of a decline in margin of 13.9%. The
overall margin decline was the result of reduced margin projects at Andersen in
an increasingly competitive marketplace for Andersen products.
Selling, General and Administrative Costs.
-----------------------------------------
Selling, general and administrative costs for the first nine months of
fiscal 2000 were $3,237,532 compared with $2,438,395 for the first nine months
of 1999. For the third quarter of 2000, selling, general and administrative
costs were $1,041,005, as compared with $829,323 in the comparable period of
1999 and $1,120,447 for the second quarter of 2000. As a percentage of revenues,
selling, general and administrative costs were 19.8%, 18.2%, 18.2%, 19.5% and
21.6% of revenues for the first nine months of 2000 and 1999, the third quarter
of 2000 and 1999, and the second quarter of 2000, respectively. The current
period increases of $799,137 (32.8%) and $211,682 (25.5%) from the comparable
nine months and third quarter periods of 1999 reflect increases in salaries,
commissions, professional fees and royalties. The increases also reflect the
inclusion of nine months operations for the Griffin subsidiary, compared to
seven months in fiscal 1999.
Third quarter expenses decreased $79,442 (7.0%) from the second quarter,
primarily as a result of lower costs recorded by Griffin.
Interest and Other (Income) Expenses.
------------------------------------
Interest and other (income) expenses for the first nine months of fiscal
2000 totaled $61,613 (credit), compared to an expense of $592 for the comparable
period in 1999. For the third quarter of 2000, interest and other (income)
expenses were $51,297 (credit), compared to an expense of $8,351for the third
quarter of 1999 and an expense of $6,609 for the second quarter of fiscal 2000.
The credit increase of $62,205 in the nine month period of fiscal 2000, as
compared to the nine months of fiscal 1999, reflects lower bad debt expense
recorded by Andersen and a gain in disposition of assets recorded by Griffin.
The credit increase of $59,648 in the third quarter period also reflects a
reduction in bad debt expense recorded by Andersen. The credit increase of
$57,906, as compared to the preceding fiscal quarter, is due to higher rental
income and lower bad debt expense.
Taxes on Income.
---------------
The effective income tax rate for all periods are:
First 9 months of 2000 - 45.5%
First 9 months of 1999 - 39.4% - benefit
Third quarter of 2000 - 37.3% - benefit
Third quarter of 1999 - 38.1% - benefit
Second quarter of 2000 - 41.3%
11
<PAGE>
Net Income.
----------
Net income for the first nine months of 2000 was $63,306 or $0.03 per share
(basic and diluted), compared with a net loss of $120,846 or $0.07 per share
(basic and diluted) for the first nine months of fiscal 1999. For the third
quarter of 2000, the Company recorded a net loss of $148,411 or $0.08 per share
(basic and diluted), compared with a net loss of $184,490 or $0.10 per share
(basic and diluted) for the third quarter of 1999 and net income of $163,698 or
$0.09 per share (basic and diluted) for the second quarter of 2000.
Net income increased $184,152 in the current nine month period, primarily
as a result of a 22% increase in revenues and an improvement in operating
margins. The increase income was attributable to profitable operations at
Griffin and Montair which offset a loss reported by Andersen. The Griffin
operation reported net income of $274,570 - an increase of $267,911 over the
1999 period. Operations at Montair also reported an increase in net income of
$85,527 over 1999.
In the third quarter of fiscal 2000, Griffin reported net income of
$151,387 - an increase of $151,565 over the 1999 quarter. Net income decreased
$312,509 from the preceding fiscal quarter, primarily as the result of a loss
recorded at Andersen.
Shares Outstanding.
------------------
The average shares and equivalent shares outstanding were:
Basic Diluted
--------- ---------
First 9 months of 2000 1,836,556 1,836,556
First 9 months of 1999 1,749,369 1,749,369
Third quarter of 2000 1,838,614 1,838,614
Third quarter of 1999 1,832,939 1,832,939
Second quarter of 2000 1,837,819 1,837,819
Forward-Looking Statements.
--------------------------
Certain forward-looking statements are made in this Management's Discussion
and Analysis. The Company's results may differ materially from those in the
forward-looking statements. Forward-looking statements are based on
management's current views and assumptions, and involve risks and uncertainties
that significantly affect expected results. For example, operating results may
be affected by external factors. Such factors include, but are not limited to,
changes in the regulatory environment, general conditions in the environmental
industry, the Company's competitive position, and economic conditions in
international markets.
12
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
-------------------------------
ITEM 6. Exhibits and Reports on Form 8-K
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No reports on Form 8-K were filed during the quarter ended June 30,
2000
SIGNATURES
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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, 2000 By: /s/ Jack D. Brady
-------------- -------------------------------
Jack D. Brady
Chairman of the Board
(Duly Authorized Officer)
Dated: August 8, 2000 By: /s/ Milton Emmanuelli
-------------- ------------------------------
Milton Emmanuelli
Treasurer
(Principal Financial Officer)
13
