U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from_______________ to_______________
Commission file number 0-15910
CONTROL CHIEF HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
New York 16-0955704
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Williams Street, Bradford, Pennsylvania 16701
(Address of principal executive offices)
(814) 368-4132
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of issuer's Common Stock, par
value $.50 per share, as of March 31, 1995 was 811,553 shares.
Transitional Small Business Format (Check one): Yes [ ] No [X]
Page 1 of 12
<PAGE>
Control Chief Holdings, Inc. and Subsidiaries
Table of Contents
Page No.
PART I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Earnings and Retained Earnings 5
Consolidated Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II Other Information
Item 2 Changes in Securities 11
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 12
Page 2 of 12
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, June 30,
1995 1994
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $108,759 $106,572
Receivables
Trade, less allowance for doubtful
accounts of $39,304 and $38,370 1,750,787 1,253,830
Other 15,639 15,916
Inventories
Raw materials and subassemblies 1,616,325 1,429,214
Work in process 299,750 309,153
Finished goods 48,316 50,153
Prepaid income taxes 32,681 62,245
Other prepaid items 98,193 58,787
Deferred income taxes 47,915 47,915
---------- ----------
Total current assets 4,018,365 3,333,785
---------- ----------
Property, Plant and Equipment, at cost
Land and improvements 19,874 19,874
Buildings and improvements 247,435 231,087
Machinery and other equipment 1,998,909 1,870,742
---------- ----------
Total cost 2,266,218 2,121,703
Less accumulated depreciation 1,330,446 1,194,154
---------- ----------
Undepreciated cost 935,772 927,549
---------- ----------
Other Assets
Note receivable-SPC Technologies, Inc. 98,802 100,000
Goodwill, less accumulated amortization
of $60,562 and $41,588 161,684 81,027
Cash surrender value of officers' life
insurance less policy loans of $53,563 18,509 18,509
---------- ----------
Total other assets 278,995 199,536
---------- ----------
$5,233,132 $4,460,870
========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
Page 3 of 12
<PAGE>
<TABLE>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-CONTINUED
<CAPTION>
March 31, June 30,
1995 1994
---------- ----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $435,000 $275,000
Current maturities of long-term debt 272,615 223,694
Accounts payable
Trade 1,037,170 480,103
Other 15,826 15,069
Accrued items
Salaries, wages, commissions and related
payroll taxes 364,303 309,534
Income taxes - 39,109
Other 53,714 58,545
---------- ----------
Total current liabilities 2,178,628 1,401,054
---------- ----------
Other Liabilities
Long-Term Debt, less current maturities 863,893 987,435
Deferred income taxes 61,621 41,721
---------- ----------
Total other liabilities 925,514 1,029,156
---------- ----------
Stockholders' Equity
Common stock, authorized 5,000,000
shares of $.50 par value; issued and
outstanding 811,553 shares 405,776 405,776
Capital in excess of par value 1,223,701 1,223,701
Retained earnings 464,098 381,136
Foreign currency translation adjustment 35,415 20,047
---------- ----------
Total stockholders' equity 2,128,990 2,030,660
---------- ----------
$5,233,132 $4,460,870
========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
Page 4 of 12
<PAGE>
<TABLE>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $2,542,116 $1,949,209 $6,751,730 $5,323,335
Other income 7,667 34,952 31,216 41,004
---------- ---------- ---------- ----------
Total revenues 2,549,783 1,984,161 6,782,946 5,364,339
---------- ---------- ---------- ----------
Costs and expenses
Cost of products sold 1,646,636 1,206,982 4,275,111 3,126,957
Selling general and
administrative 694,463 632,444 2,004,486 1,828,823
Research and development 56,965 59,423 181,996 136,853
Interest and financing 31,825 23,320 92,382 50,860
---------- ---------- ---------- ----------
Total costs and expenses 2,429,889 1,922,169 6,553,975 5,143,493
Earnings (loss) before
income taxes 119,894 61,992 228,971 220,846
Federal and state income taxes
Currently payable 60,500 45,800 69,300 135,000
Deferred (credit) 8,400 (1,200) 19,900 (4,000)
---------- ---------- ---------- ----------
68,900 44,600 89,200 131,000
---------- ---------- ---------- ----------
Net earnings 50,994 17,392 139,771 89,846
Retained earnings at
beginning of period 413,104 380,825 381,136 365,110
Cash dividends paid - - (56,809) (56,739)
---------- ---------- ---------- ----------
Retained earnings at
end of period $464,098 $398,217 $464,098 $398,217
========== ========== ========== ==========
Earnings per common share $0.063 $0.021 $0.172 $0.111
Dividends paid per common share - - $0.07 $0.07
Weighted average number of
common shares outstanding 811,553 811,618 811,553 811,183
<FN>
See accompanying notes to financial statements.
</TABLE>
Page 5 of 12
<PAGE>
<TABLE>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
March 31 ,
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net earnings $139,771 $89,846
Adjustments to reconcile net earnings to
net cash provided by (used in)
operating activities:
Depreciation and amortization 152,451 138,284
Deferred income taxes 19,900 (4,000)
Change in assets and liabilities:
(Increase) decrease in receivables (488,271) (388,254)
(Increase) decrease in inventories (168,275) (400,798)
(Increase) decrease in prepaid items
and other assets (108,919) (35,130)
Increase (decrease) in accounts payable
and accruals 560,612 193,666
---------- ----------
Net cash provided by (used in)
operating activities 107,269 (406,386)
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (137,358) (551,121)
Receipts of principal on note receivable 1,198 5,127
---------- ----------
Net cash used in investing activities (136,160) (545,994)
---------- ----------
Cash flows from financing activities
Net borrowing (repayments) of short-term debt 160,000 115,309
Net borrowing (repayments) of long-term debt (74,621) 743,821
Dividends paid (56,809) (56,739)
Exercise of stock options - 3,063
Purchase of fractional common shares - (56)
---------- ----------
Net cash provided by financing activities 28,570 805,398
---------- ----------
Effect of exchange rate changes on cash 2,508 17,797
---------- ----------
Net increase (decrease) in cash 2,187 (129,185)
Cash at beginning of period 106,572 186,273
---------- ----------
Cash at end of period $108,759 $57,088
========== ==========
Cash paid during the period for:
Interest $97,802 $50,860
Income taxes 78,845 235,075
<FN>
See accompanying notes to financial statements.
</TABLE>
Page 6 of 12
<PAGE>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. Principles of Consolidation
The consolidated financial statements include the accounts of Control
Chief Holdings, Inc., and its wholly-owned subsidiaries, Control Chief
Corporation, Bradford Classics Woodworking, Inc. and IRT Holdings
Limited (the "Company").
The consolidated balance sheet as of March 31, 1995, and the related
consolidated statements of earnings and retained earnings and cash
flows for the three and nine month periods ended March 31, 1995 and
1994 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted only of normal recurring
items. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the
Company's annual financial statements and notes. Accordingly, these
statements should be read in conjunction with the consolidated
financial statements and notes thereto appearing in the Annual Report
of the Company for the fiscal year ended June 30, 1994.
2. Earnings Per Common Share
Earnings per common share are computed based on the weighted average
shares of common stock outstanding during the period of computation.
Although the Company has issued dilutive common stock equivalents in
the form of incentive stock options, the dilutive effect of these
securities in the aggregate is less than three percent of earnings per
common share.
3. Cash Dividends Paid
The Board of Directors of the Company approved a cash dividend
totalling $56,809 ($.07 per share) payable on September 26, 1994 to
holders of record at the close of business on August 26, 1994.
4. Business Changes
Effective March 1, 1995, the Company acquired the net operating assets
of NTR Technologies, Inc. for $100,000, of which, $20,000 was paid at
the closing and the remaining $80,000 is being paid over 2 years at 8%
interest. The acquisition has been accounted for by the purchase
method of accounting, and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based on
the estimated fair values at the date of acquisition. The excess of
the purchase price over the estimated fair values of the net assets
acquired has been recorded as goodwill, which is being amortized over
fifteen years. The operating results of this acquisition are included
in the Company's consolidated results of operations from the date of
acquisition.
Page 7 of 12
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Acquisitions
In September 1993, the previously non-operating subsidiary, Bradford
Classics Woodworking, Inc. began the start-up of a new wood processing
operation through the purchase of equipment for approximately
$430,000. The equipment acquired consists of various automated and
manual machines used in the surfacing, sizing, molding and handling of
hardwood dimension lumber. This operation is doing business under the
name Tuna Valley Wood Products ("Tuna Valley"). At March 31, 1995,
Tuna Valley has drawn down all available funds from its financing
commitments as well as received its start-up capital from the
Company. Effective March 1, 1995, the Company acquired the net
operating assets of NTR Technologies, Inc. for $100,000, of which,
$20,000 was paid at the closing and the remaining $80,000 is being
paid over 2 years at 8% interest. NTR Technologies expertise is in
radio frequency. With this acquisition, Control Chief hopes to
enhance its product development. The operating results of this
segment are included in the Company's consolidated results of
operations from the date of acquisition. As of March 31, 1995,
this segment's revenues and operating expenses did not have a
material effect on the Company's results of operations. No further
financial commitments are contemplated beyond the ordinary course
of business.
Liquidity
The Company and its subsidiaries currently fund their needs for
liquidity and capital resources through cash from operations, short-
term and long-term borrowing.
Control Chief Corporation has a $500,000 line of credit with Integra
Bank/North ("Integra"), which matures on May 30, 1995. Management has
a written commitment from Integra extending the line of credit to June
30, 1995 and believes that the line of credit will be renewed at the
current interest rate for a one year period through June 30, 1996,
and the amount increased to $750,000. Amounts outstanding under this
line of credit bear interest at Integra's commercial base rate,
variable, and are payable on demand. As of March 31, 1995, the rate
of interest on Control Chief's line of credit was 9%. In connection
therewith, Control Chief has granted Integra a general security
interest in it assets, excluding real property and has agreed not to
distribute dividends unless specific written approval is obtained from
them. As of March 31, 1995, a total of $435,000 was outstanding under
Control Chief's line of credit.
In addition to the line of credit, Control Chief has a term loan with
Integra Bank in the original principal amount of $900,000, obtained
for the purpose of consolidating pre-existing short-term and long-term
debt. Amounts outstanding under this loan bear interest at Integra's
commercial base rate plus 1/2%, variable, and is being repaid in 60
consecutive monthly installments of principal plus interest. At March
31, 1995, $716,814 was outstanding under Control Chief's term loan at
an interest rate of 9 1/2%. In connection therewith, the Company has
granted Integra a general security interest in all of its assets,
excluding real property, and has agreed not to distribute any
dividends unless specific written approval is obtained from Integra.
In addition, the Company has agreed to maintain a debt service
coverage ratio in excess of 1.0 and no additional investment in or
indebtedness with its foreign subsidiary, IRT Holdings Limited,
without the written consent of Integra Bank.
Page 8 of 12
<PAGE>
At March 31, 1995, Control Chief also had outstanding $80,000 of debt
that is being repaid over two years at 8% interest. This seller
financed debt was incurred with the purchase of the net operating
assets of NTR Technologies, Inc., effective March 1, 1995.
Tuna Valley has a term loan with Integra Bank in the original
principal amount of $300,000 that was used for purchasing equipment
for the start-up of its operations. Amounts outstanding under this
loan bear interest at Integra's commercial base rate plus 3/4%,
variable, and is being repaid in 60 consecutive monthly installments
of principal plus interest. At March 31, 1995, $248,173 was
outstanding under this term loan. In connection therewith, Tuna
Valley has granted Integra a general security interest in all of its
assets.
In addition, Tuna Valley has a term loan with the City of Bradford,
Pennsylvania in the original principal amount of $100,000 that was
used for purchasing equipment. Amounts outstanding under this loan
bear interest at 3% and are repayable in 84 consecutive monthly
installments of principal plus interest. At March 31, 1995, $80,393
was outstanding under this term loan. In connection therewith, Tuna
Valley has granted the City of Bradford a general security interest in
all of its assets.
The Company currently does not have a material commitment for any
further capital expenditures and believes its current working capital
is sufficient for its operations.
Results of Operations
Net sales for the quarter ended March 31, 1995 increased overall by
$592,907 or 30.4% compared to the same quarter last year, and
increased overall by $1,428,395 or 26.8% for the nine month period
then ended. This increase reflects the inclusion of the net sales of
Tuna Valley. Net sales of Tuna Valley increased by $1,081,539
compared to the same nine month period last year. This significant
increase in net sales is reflective of the fact that Tuna Valley's
sales have continued to steadily increase. Due to the volatility of
the wood market and wood costs, management is unable to predict at
this time whether this trend will continue. Control Chief experienced
an increase in net sales of $256,810 or 17.1% as compared to the same
quarter of the previous year. IRT experienced an increase in net
sales of $52,998 or 31.3% for the quarter as compared to the same
quarter the of previous year. This increase reflects a continued
general improvement in the U.K. economy.
Cost of products sold increased by $439,654 or 36.4% for the quarter
and $1,148,154 or 36.7% for the nine months ended March 31, 1995 as
compared to the same periods for last year. The dimensioned wood
blanks segment, Tuna Valley, was responsible for $253,076 of the
increase for the quarter and for $921,763 for the nine months ended
March 31, 1995 as compared with the same periods last year. This
increase corresponds to the increase in net sales for the comparable
periods. The component cost of this segment is significantly higher
than electronics manufacturing and as such generates a much lower
gross profit rate. Cost of products sold at Control Chief increased
by $127,717 or 15% for the quarter as compared to last year. This
increase reflects the Company's increased sales for the current
quarter as compared to the same quarter of the previous year, material
cost increases and production wage increases. Cost of products sold
at IRT increased by $58,861 or 55% for the quarter. This increase in
cost of sales compared to the increase in sales for the quarter is due
to products being sold with higher material costs. Additionally,
short term fluctuations may result from changes in product mix for the
period, as well as competitive discounting.
Page 9 of 12
<PAGE>
Selling, general and administrative costs increased by $62,019 or 9.8%
for the quarter and $175,663 or 9.6% for the nine months ended March
31, 1995 as compared with the same periods for last year. This
overall increase reflects continued investment in areas of marketing,
sales staffing and travel. Management is expanding the sales and
marketing of the Company's products to domestic and foreign markets.
Research and development costs decreased by $2,458 for the quarter and
increased by $45,143 for the nine months ended March 31, 1995 as
compared with the same periods last year. Although the Company
experienced a decrease in costs for the current quarter as compared to
the same period last year, the Company's policy remains a continuing
commitment to invest funds in research and development to stay abreast
of changes in technology and improve and expand its product lines in
the electronic components and devices segment to remain competitive
and responsive in the market. It is the policy of the Company not to
release to the public continuing programs in research and development
until products are ready for introduction. The premature public
notification of product development, in the opinion of management,
stands to potentially reduce the anticipated return on its research
and development investment by notifying competitors of a significant
portion of the Company's marketing strategy.
Interest and financing charges increased by $8,505 for the quarter and
$41,522 for the nine months ended March 31, 1995, as compared to the
same periods for last year. The increase relates to the refinancing
of short-term debt to a long-term note by Control Chief and the
increase in short-term borrowing to finance overall increases in
receivables, inventories and other assets, partially offset by
increases in accounts payable and other accruals. The increase is
also attributable to an increase in Integra Bank's commercial base
interest rate as compared to the same period last year.
Net earnings increased by $33,602 for the quarter and $49,925 for the
nine months ended March 31, 1995 as compared to the same periods for
last year. The provision for income taxes at March 31, 1994 on pre-
tax income of $220,846 was $131,000. The provision for income taxes
at March 31, 1995 on pre-tax income of $228,971 was $89,200. The
decrease in the provision for income taxes of $41,800 over the
comparable period of the previous year while pre-tax earnings for the
nine month period ended March 31, 1995 increased by $8,125 is
attributed to the increase in pre-tax income of the Company's foreign
operations, and an overall decrease in pre-tax income of the Company's
domestic operations. The pre-tax income earned by the foreign
subsidiaries increases profitability for financial statement purposes
but is not reflected when calculating taxable income. The foreign
subsidiaries have considerable carryforward operating losses to offset
its current and future taxable income. During the current year's
quarter and nine months ended March 31, 1995, no beneficial tax
credits were available.
Page 10 of 12
<PAGE>
The Company earned $.063 per common share for the quarter March 31,
1995, resulting in nine months earnings of $.172 per common share.
For the same period last year, the Company earned $.021 per common
share for the quarter resulting in nine months earnings of $.111 per
common share. These increases are reflective of the overall
improvement in revenues and earnings over the comparable periods of
the previous year.
Net trade receivables at March 31, 1995 increased by $496,957 or 39.6%
as compared with the balance as of June 30, 1994. The increase is
reflective of the increase in net sales for the nine month period for
the domestic and foreign operations.
Inventories, in total increased $175,871 or 9.8% at March 31, 1995 as
compared to June 30, 1994. Of this increase, inventory attributable
to Tuna Valley's total inventory increased by $120,067. This increase
is reflective of a number of customer orders in various stages of
completion as of March 31, 1995. Management believes that the level
and mix of Tuna Valley's inventory is sufficient to meet future
demands and forecasts a reduction in Tuna Valley's overall inventories
as in process orders are completed. Control Chief's raw materials and
subassemblies inventory increased by $44,403. The Company's foreign
subsidiaries inventory remained relatively unchanged. Management does
not forecast any significant increases in overall inventories.
Prepaid items increased by $9,842 or 8.1% as compared with the balance
as of June 30, 1994. This increase reflects the practice of the
Company of prepaying certain expenses, such as insurance, professional
fees and taxes, at the beginning and during the fiscal year. This is
typical of previous years.
Undepreciated cost of property, plant and equipment remained
relatively unchanged as compared with the balance as of June 30,
1994. Management does not anticipate any major capital
expenditures in the near future.
The Company's liquidity, measured in terms of working capital
decreased by $92,994 or 4.8% as compared with the balance as of June
30, 1994. This decrease arises generally from net increases in
short-term debt, current maturities of long-term debt and trade
accounts payable. The current ratio decreased to 1.8 at March 31, 1995
from 2.3 at June 30, 1994.
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities
a) Working Capital restrictions and other limitations upon the
payment of dividends.
Common Stock, par value $.50 per share.
The Company has agreed not to distribute dividends unless
specific written approval is received from Integra Bank/North.
Additionally, the Company has agreed to maintain a debt
service coverage ratio in excess of 1.0.
Page 11 of 12
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
a) None.
b) None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Control Chief Holdings, Inc.
----------------------------
(Registrant)
Date: May 12, 1995 By: \S\ Douglas S. Bell
------------ --------------------
Douglas S. Bell
Chairman of the Board
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 108,759
<SECURITIES> 0
<RECEIVABLES> 1,805,730
<ALLOWANCES> 39,304
<INVENTORY> 1,964,391
<CURRENT-ASSETS> 4,018,365
<PP&E> 2,266,218
<DEPRECIATION> 1,330,446
<TOTAL-ASSETS> 5,233,132
<CURRENT-LIABILITIES> 2,178,628
<BONDS> 0
<COMMON> 405,776
0
0
<OTHER-SE> 1,723,214
<TOTAL-LIABILITY-AND-EQUITY> 5,233,132
<SALES> 6,751,730
<TOTAL-REVENUES> 6,782,946
<CGS> 4,275,111
<TOTAL-COSTS> 4,275,111
<OTHER-EXPENSES> 2,186,482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,382
<INCOME-PRETAX> 228,971
<INCOME-TAX> 89,200
<INCOME-CONTINUING> 139,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,771
<EPS-PRIMARY> .172
<EPS-DILUTED> .172
</TABLE>
