U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission File Number 0-15910
Control Chief Holdings, Inc.
(Name of small business issuer in its charter)
New York 16-0955704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 141, 200 Williams Street, Bradford, Pennsylvania 16701
Telephone 814-368-4132
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class: on which registered:
Common Stock - $.50 par value The Nasdaq Small-Cap Market
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months, and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB [X].
Issuer's revenues for the fiscal year ended June 30, 1996 were
$7,699,805.
At August 31, 1996, the aggregate market value of voting common stock
held by non-affiliates of the registrant computed at the last trade
price of such stock of $2.81 was $996,801. As of August 31, 1996, the
issuer had outstanding 811,553 shares of Common Stock, $.50 par value.
Documents incorporated by reference
Portions of the registrant's Proxy Statement for the Annual Meeting
of Shareholders to be held November 15, 1996 are incorporated by
reference into Part III of this Form 10-KSB.
CONTROL CHIEF HOLDINGS, INC.
.
INDEX TO ANNUAL REPORT ON FORM 10-KSB
For the Year Ended June 30, 1996
Part I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
Part II
Item 5 Market for Common Equity and
Related Stockholder Matters
Item 6 Management's Discussion and Analysis
of Financial Condition and Results of Operations
Item 7 Financial Statements
Item 8 Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure
Part III
Item 9 Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial
Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports on Form 8-K
Signatures
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business
Control Chief Holdings, Inc. ("the Company") was incorporated in New
York on June 12, 1968. The Company is a holding company and sole
shareholder of Control Chief Corporation, Control Chief (UK) Limited,
and Bradford Classics Woodworking, Inc. Due to declining profits and
failure to increase its customer base and market share, a decision
was made by the Board of Directors on May 16, 1996 to cease the
operations of Bradford Classics and conduct an orderly liquidation of
the subsidiary. On September 14, 1996, subsequent to the fiscal year
end, an auction was held at the subsidiary's location at which time
the remaining assets and inventory were sold. Proceeds from the
auction are being used to pay the remaining secured and unsecured
creditors as of June 30, 1996. On November 18, 1994, the Board of
Directors of the Company approved the name change of its foreign
subsidiary from IRT Holdings Limited to Control Chief (UK) Limited.
Through March 31, 1995, Control Chief (UK) Limited was a holding
company and sole shareholder of Infra-Red Technology Limited
("Infratech") and Vella Willson Limited ("V-W") both located in
Canterbury, Kent, England. Effective April 1, 1995, Infratech
and V-W were merged into Control Chief (UK) Limited, and they continue to
operate as separate divisions. The Financial Statements found in
Part II, Item 7, present the results of the continuing operations for
Control Chief Corporation, and Control Chief (UK) Limited. The
results of operations for Bradford Classics are included in the
financial statements as discontinued operations.
Control Chief Corporation ("Control Chief"), is a Pennsylvania
corporation which designs, engineers and produces remote control
devices for material handling equipment and other industrial
applications. Effective March 1, 1995, Control Chief acquired the net
operating assets of NTR Technologies, Inc. for $100,000. NTR
Technologies has developed expertise in radio frequency field
and it operates as a division of Control Chief. Control Chief (UK)
is a foreign affiliate which designs, engineers and produces remote
control devices for substantially the same markets as Control Chief,
and also produces, to its customers' designs, power transformers.
PRINCIPAL PRODUCTS AND SERVICES AND METHODS OF DISTRIBUTION
Electronic Components and Devices
Control Chief designs, engineers and manufactures remote control
devices for material handling equipment and other industrial
applications. These controls use either radio or infrared waves as
communications media to transmit control data from portable units to
receivers mounted on various types of apparatus. Control Chief was
among the first in its industry to apply infrared technologies to
industrial remote control applications. All models of products are
microprocessor based systems. Remote controls provide the customer a
cost effective means to achieve greater operational safety and
flexibility. These devices are utilized world-wide in concert with
various material handling equipment, industrial machines, process
equipment and mobile apparatus. Control Chief markets its products
through a network of independent manufacturer's representatives
located throughout the United States, Canada, Central and South
America in key geographical centers. Additionally, products are sold
through direct efforts, distributors, private labeling agreements and
licensees. Control Chief (UK) Limited markets its products primarily
through direct efforts in the United Kingdom and Europe. In
addition, Control Chief (UK) Limited manufactures to specific
customer designs specialized transformers incorporated into
electronic devices which are primarily utilized in the civil,
commercial and military aviation field. These manufacturing services
are marketed primarily through direct efforts in the United States
and United Kingdom.
PRODUCT DEVELOPMENT
Electronic Components and Devices
The Company continues to enhance current product designs and develop
new designs within its established product lines. In order to remain
competitive in the market, the Company does not announce to the
general public continuing research and development programs.
Research and development programs are established to keep its
products current with the state of the art. New product designs and
product line expansion is anticipated for the future and currently
being developed. These programs have not been released to the public
and if prematurely released would potentially reduce the anticipated
return on its research investment. Research and development
expenditures for the Company's remote control applications totaled
$154,640 and $222,400 for the fiscal years ended June 30, 1996 and
1995, respectively. Since the Company manufactures its power
transformers to specific customer designs, it does not perform
research and development programs in that area.
COMPETITION
Electronic Components and Devices
The Company experiences competition for its remote controls from
several suppliers of similar products. Throughout the world there
are numerous remote control manufacturers. Several of the largest
manufactures in the world are located in Germany and France. The
Company believes that it is among the three largest suppliers of
remote control devices in the domestic market.
Control Chief Corporation and Control Chief (UK) Limited compete
principally on the basis of technology and quality. Control Chief
Corporation is unique in that it was the first U.S. company to
develop an infrared system to be used for industrial short range
remote control and incorporate it as a standard product along side
its extensive radio technology products. Microprocessors have been
incorporated into all products. The incorporation of these "mini-computers"
into the devices has greatly reduced the size as well as
the cost of the devices while increasing their reliability. Control
Chief Corporation and Control Chief (UK) Limited were among the first
to successfully market devices including that technology. The
Company believes that by its use of radio and infrared technologies
it better serves the needs and requirements of the industrial market.
Management believes that none of its competitors provide a more
diverse product line.
Currently, worldwide competition is extremely price conscious with
many companies entering and exiting the market. Management believes
its products are competitively priced taking into consideration the
Company's reputation as a long-time, high quality manufacturer of
reliable, durable state of the art devices.
Control Chief (UK) Limited primarily markets its transformer
manufacturing capability to a small niche of customers primarily
concerned with reliability. The products produced are labor
intensive by design and require specialized skills which do not
ordinarily exist with volume transformer manufacturers. The Company's
transformer products compete based on cost, quality and delivery, on
an order-by-order basis.
RAW MATERIAL
Electronic Components and Devices
The principal raw materials used in the manufacture of remote control
devices and transformers are electronic components produced by
various manufacturers. No particular manufacturer accounts for a
substantial portion of the electronic components. All components
used are readily available in the current market and it is not
anticipated that there will be any significant shortages in the
foreseeable future.
MAJOR CUSTOMERS
Electronic Components and Devices
Control Chief Corporation and Control Chief (UK) Limited are not
dependent for remote control sales on a single customer or group of
customers, the loss of which would have a material adverse effect
upon this product of the Company. Control Chief (UK) Limited has
sales of its transformers to one significant customer, GEC Avionics,
which represented approximately 59% of its total sales during 1996.
PATENTS, TRADEMARKS AND LICENSES
Electronic Components and Devices
Control Chief Corporation and Control Chief (UK) Limited do not at
the present time hold patents on their current lines of products.
The trademarks, "Control Chief", "Vella Willson", "Crane Chief",
"Remote" and "TeleChief" are registered for their lines of remote
control and wound component products in the U.S. and Europe. Control
Chief Corporation enters into exclusive marketing and sales
agreements for designated territories in the normal course of
business. These agreements typically arrange for exclusive sales and
marketing rights to specific geographical areas as well as private
labeling, marketing assistance, manufacturing rights and software
licensing.
GOVERNMENTAL APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
Electronic Components and Devices
Control Chief Corporation manufactures some products which transmit
data via radio waves. As a result, these products must be approved
by the Federal Communications Commission (FCC). Currently, these
products offered for sale have been approved by the FCC and are
monitored for any changes in regulations which would require re-certification.
RESEARCH AND DEVELOPMENT
Electronic Components and Devices
Company sponsored research and development expenditures for Control
Chief Corporation for the fiscal years ending June 30, 1996 and 1995
were $154,640 and $222,400, respectively.
ENVIRONMENTAL COMPLIANCE
The Company utilizes a consultant to evaluate, maintain, manage and
report on issues of compliance with Federal, State and local
provisions which have been enacted or adopted regulating the
discharge of materials into the environment. The cost of this
service on an ongoing basis is not material.
EMPLOYEES
As of August 31, 1996, 92 individuals were employed by the Company
world-wide. Of this total number of employees world-wide, 87
individuals were employed full time. The Company considers its
relations with its employees to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
Location Function Square Feet Ownership
14 Egbert Lane Manufacturing 10,000 Owned
Lewis Run, PA
200 Williams Street Manufacturing, 20,000 Leased
Bradford, PA Corporate Offices
455 William Pitt Way Manufacturing 1,697 Leased
Pittsburgh, PA
Wincheap Industrial Manufacturing 6,000 Leased
Estates
Canterbury, Kent,
England
20 Russell Blvd. Discontinued 26,227 Leased
Bradford, PA Operation (Bradford
Classics Woodworking,
Inc.)
(1) None of the above properties are encumbered in connection with
the collateralization of the Company's indebtedness.
(2) The Company's office and manufacturing space is adequate for its
existing requirements and its projected business needs.
ITEM 3. LEGAL PROCEEDINGS
In connection with the closure of Bradford Classics Woodworking,
Inc., settlement of certain trade creditors claims against the
subsidiary are pending, which are not of a material amount, and the
Company anticipates that it will settle all claims without
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders
during the fourth quarter of the fiscal year ended June 30, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Small-Cap Market
under the Symbol DIGM. The symbol DIGM relates to the Company's
former name "Digimetrics, Inc.", which was changed in November, 1992
to its present name, "Control Chief Holdings, Inc."
The following is the range of trade information for the quarterly
periods ending September 30, 1994 through June 30, 1996. The trade
prices are actual historical sales information as supplied by Nasdaq
and represents "real-time" sales and price information for securities
traded in The Nasdaq Small-Cap Market.
<TABLE>
<CAPTION>
High Low
Trade Trade
For the Quarter Ended Price Price
<S> <C> <C>
06/30/96 3.50 2.25
03/31/96 3.00 2.63
12/31/95 3.38 2.20
09/30/95 3.38 2.50
06/30/95 3.12 2.50
03/31/95 2.87 2.00
12/31/94 3.00 2.75
09/30/94 2.87 2.75
</TABLE>
As of August 31, 1996, the Company's records indicated that there
were approximately 1,000 registered holders of the 811,553 shares of
common stock that were outstanding as of that date.
<TABLE>
<CAPTION>
Dividends Paid
<S> <C>
September 25, 1992 $.04 per share
September 24, 1993 $.07 per share
September 26, 1994 $.07 per share
September 25, 1995 $.07 per share
</TABLE>
The terms of Control Chief Holdings, Inc.'s line of credit prohibit
the payment of dividends without the express written consent from the
lender.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company's management believes that excellence is a process, not
just an outcome. We cannot achieve excellence through technological
advancements or by just relying on our abilities or talents; buying
excellence is a prospect that would soon leave the corporate
structure. The only way excellence can be obtained is to develop a
strong corporate culture dedicated to the idea of making excellence a
way of life in our corporation. Management believes it has laid the
foundation for this corporate culture over the past year and we are
making great strides towards the process of excellence.
We continue to make changes within our corporation to eliminate those
aspects that have the potential of hindering our progress towards
excellence. Bradford Classics Woodworking, Inc. was closed,
responsibilities were realigned or reassigned, new positions were
established and in some cases positions were eliminated. The
Company's personnel was changed to better utilize capabilities. Old
products are being updated to meet current market demands as well as
new products which are being developed to meet future market demands.
All of these actions were done for the betterment of the corporation
and its continued progress towards excellence.
Selected Financial Information
The following table summarizes certain selected financial information
with respect to the Company, and is qualified in its entirety by
reference to the Consolidated Financial Statements of the Company and
the Notes thereto. Additionally, this table has been restated as the
result of discontinued operations and a previous four into one
reverse stock split. Refer to the Notes to Consolidated Financial
Statements for further information.
<TABLE>
Financial Highlights
<CAPTION>
Financial (in thousands, except current ratio and share data)
Years ended June 30, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $7,700 $6,974 $6,479 $6,128 $4,577
Earnings (loss) from
continuing operations 117 92 48 298 (180)
Working capital 1,556 1,418 1,652 1,596 1,175
Total assets 4,238 4,603 3,952 3,418 3,015
Long-term debt 385 573 679 351 229
Capital expenditures 69 122 126 74 266
Current ratio 1.78 1.76 2.36 2.53 2.30
Per Common Share
Years ended June 30, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings (loss) from
Continuing operations $.14 $.11 $.06 $.37 ($.22)
Discontinued operations (.42) .06 .03 .02 (.01)
----- ---- ---- ---- -----
Net earnings (loss) ($.28) $.17 $.09 $.39 ($.23)
===== ==== ==== ==== =====
</TABLE>
RESULTS OF OPERATIONS
Year ended June 30, 1996 compared to year ended June 30, 1995
- -------------------------------------------------------------
Net sales from continuing operations for the period increased from
the previous fiscal year by $725,931 or 10.4%. The Company's
domestic subsidiary, Control Chief accounted for $766,507 of this
overall increase while the Company's foreign subsidiary, Control
Chief (UK) Limited experienced a decrease in net sales of $40,576.
The demand for the foreign subsidiary's transformer components
remained strong while sales of its radio control products continued
to decrease. The Company does not experience a significant
fluctuation of business attributable to seasonal buying habits of its
customers.
Cost of products sold increased by $656,583 or 17.1%. This increase
is in part reflective of the Company's overall increase in net sales.
Increases have also occurred because of higher material costs and
increased labor costs. Additionally, short term fluctuations may
result from changes in product mix, as well as competitive
discounting.
Selling, general and administrative costs decreased by $33,515 or
1.2%. The Company's foreign subsidiary, Control Chief (UK) Limited
reflected an increase of $42,293. This increase relates to the
addition of an outside salesman, increases in labor costs and an
overall investment in the areas of marketing and travel.
Research and development costs decreased by $67,760 or 30.5%. As a
result of the acquisition of NTR Technologies, Inc. and addition of
staff to its internal engineering department, a significant portion
of engineering outsourcing is now being done internally at a lower
cost. The Company expects to invest funds annually of $150,000 or
greater in the future to stay abreast of changes in technology and
improve and expand its product lines in the electronic components and
devices segment.
Interest expense increased by $6,914 or 6.3%. This slight increase
relates to the increase in the Company's short-term borrowing offset
by decreases in the Company's long-term borrowing. This increase is
also attributable to the financing of the acquisition of NTR
Technologies, Inc.
The Company's working capital increased by $138,215. The current
ratio remained at 1.8 at June 30, 1996 and 1995.
The Company experienced a net loss of $223,597 for the fiscal year
ended June 30, 1996, as compared with net earnings of $138,709 for
the fiscal year ended June 30, 1995. The net loss was attributable
to continuing losses at Tuna Valley Wood Products and a net loss for
the current fiscal year at the Company's foreign subsidiary, Control
Chief (UK) Limited. Net earnings from continuing operations
increased by $24,530 or 26.7%. The provision for income taxes at
June 30, 1996 on pretax earning from continuing operations of
$255,711 was $139,165 or 54.4% of pretax income. This compares to a
provision for income taxes at June 30, 1995 of $8,003 on pretax
earning from continuing operations of $100,019 or 8%. The
significant increase in the provision for income taxes on pretax
income over the previous fiscal year is attributed to the increase in
the pretax income of the Company's domestic operation, Control Chief,
even though the Company's foreign subsidiary, Control Chief (UK)
Limited experienced an operating loss. The pretax loss reflected by
Control Chief (UK) Limited decreases profitability for financial
reporting purposes but is not reflected when calculating the
provision of income taxes. The foreign subsidiary has considerable
prior years operation losses to offset future taxable income.
Year ended June 30, 1995 compared to year ended June 30, 1994
- -------------------------------------------------------------
Net sales from continuing operations of $6,973,874 for the year ended
June 30, 1995, increased 7.6% from the comparable 1994 period of
$6,478,570. Control Chief (UK) Limited accounted for $273,065 of
the Company's overall increase or 55.1%. The Company's domestic
subsidiary, Control Chief, accounted for the remaining $222,239 or
44.9%. The increase in the Company's net sales for its foreign
electronic components and devices segment reflects a continued
general improvement in the U.K. economy. The Company does not
experience a significant fluctuation of business attributable to
seasonal buying habits of its customers.
Cost of products sold increased by $318,122 or 9.1%. Control Chief
(UK) Limited accounted for $41,663 or 13.1% of the Company's overall
increase. The increase is reflective of the increase in net sales
for this segment. Control Chief accounted for the remaining $276,459
or 86.9% of the Company's overall increase. This increase represents
an increase of 8.6% of the domestic subsidiary's cost of sales for
the fiscal year ended June 30, 1995, as compared to its cost of sales
for the fiscal year ended June 30, 1994, while net sales reflected an
increase of 3.4% for the comparable period. This increase in cost of
sales as compared to the increase in sales for the fiscal year is due
to material cost increases and productions wage increases that were
not passed on to the customers due to the competitive nature of the
products.
Selling, general and administrative costs increased by $165,459 or
6.4%. This increase reflects the Company's continued investment in
areas of marketing, sales staffing and travel in the U.S. and U.K.
Research and development costs increased by $14,682 or 7.1%. The
increase is consistent with the Company's continued commitment to
staying abreast of technological changes, enhancement of current
products and development of new product lines in the electronic
components and devices segment.
Interest expense increased by $39,236 or 56%. This increase relates
to the refinancing of short-term debt into a long-term note by
Control Chief Corporation and an increase in short-term borrowing to
finance overall increases in receivables, inventories and other
assets. The Company was also subject to increased fluctuations in
National City Bank's commercial base rate of interest that occurred
during the year.
The Company's working capital decreased by $233,907. The current
ratio decreased to 1.8 at June 30, 1995 from 2.4 at June 30, 1994.
Net earnings from continuing operations increased by $43,539 or
89.8%. The provision for income taxes at June 30, 1995 on pretax
earnings from continuing operations of $100,019 was $8,003 or 8% of
pretax income. This compares to a provision for income taxes at June
30, 1994 of $87,455 on pretax earnings from continuing operations of
$135,932 or 64.3%. The decrease in the provision for income taxes of
pretax income over the previous fiscal year, while pretax earnings
for the year ended June 30, 1995 only decreased $35,913 or 26.4%, is
attributed to the increase in the pretax income of the Company's
foreign operations and an overall decrease in pretax income of the
Company's domestic operations. The pretax income earned by Control
Chief (UK) Limited increases profitability for financial reporting
purposes but is not reflected when calculating the provision for
income taxes. The foreign subsidiary has considerable operating
losses to offset its current and future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
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 $750,000 line of credit with National
City Bank, which expires on November 30, 1996. Amounts outstanding
under the line of credit bear interest at the bank's prime rate,
variable, and are payable on demand. As of June 30, 1996, the rate
of interest on the line of credit was 8.25%. In connection
therewith, Control Chief Corporation has granted National City a
general security interest in its assets, excluding real property.
The line of credit agreement requires the Company to maintain certain
minimum financial ratios and, among other things, to obtain approval
from the bank before the Company permits any additional encumbrances
on its assets, guarantees or incurs any addition indebtedness,
declares or pays dividends, and incurs annual capital expenditures
and/or acquisition expenses in an amount in excess of its annual
depreciation and amortization expense. As of June 30, 1996, a total
of $654,895 was outstanding under Control Chief Corporation's line of
credit.
At June 30, 1996, Control Chief Corporation also had outstanding
$31,504 of debt that is being repaid through March, 1997 at 8%
interest. This seller financed debt arises from the purchase of the
net operating assets of NTR Technologies, Inc., effective March 1,
1995.
Bradford Classics Woodworking, Inc. 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 payable in 84 consecutive
monthly installments of principal plus interest. At June 30, 1996,
$63,268 was outstanding under this term loan. In connection
therewith, Bradford Classics Woodworking, Inc. has granted the City
of Bradford a general security interest in all of its assets.
Subsequent to the fiscal year ended June 30, 1996, the Company, due
to the ceasing of operations of the subsidiary in May of 1996, has
paid off the remaining principal portion of this loan in the amount
of $59,765. The City of Bradford has released its general security
interest in all of the assets of the subsidiary.
On December 8, 1995, the Company borrowed $850,000 from its principal
depository, National City Bank, under an installment loan agreement.
This term loan was obtained for the purpose of consolidating pre-existing
long-term loans of Control Chief Corporation and Bradford Classics
Woodworking, Inc. Amounts outstanding under this loan bear interest at
the bank's commercial base rate plus 5/8%, variable, and is repayable
in 41 consecutive monthly installments of $23,720, with a final payment
of $21,141 due June 8, 1999. In connection therewith, the Company and
its US subsidiaries have granted National City a general security
interest in all of their assets, excluding real property. The Company
is also required to maintain a debt service coverage ratio in excess
of 1.0 and, and among other things, to obtain approval from the bank
before the Company permits any additional encumbrances on its assets,
guarantees or incurs any addition indebtedness, and declares dividends.
As of June 30, 1996, a total of $742,313 was outstanding under this
term loan. The Company expects this loan to be reduced by approximately
$175,000 as a result of payments from the orderly liquidation of
Bradford Classics Woodworking, Inc.'s 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.
ITEM 7. FINANCIAL STATEMENTS
Contents of Financial Statements
Report of Independent Certified Public Accountants
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
and Retained Earnings
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
DIEFENBACH DELIO KEARNEY & DEDIONISIO
CERTIFIED PUBLIC ACCOUNTANTS
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Control Chief Holdings, Inc.
We have audited the accompanying consolidated balance sheets of
Control Chief Holdings, Inc. and Subsidiaries as of June 30, 1996 and
1995, and the related consolidated statements of operations and
retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Control Chief Holdings, Inc. and Subsidiaries as of June 30, 1996
and 1995, and the consolidated results of their operations and their
consolidated cash flows for the years then ended in conformity with
generally accepted accounting principles.
DIEFENBACH DELIO KEARNEY & DEDIONISIO
CERTIFIED PUBLIC ACCOUNTANTS
Erie, Pennsylvania
August 16, 1996
<TABLE>
<CAPTION>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and 1995 1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash $123,285 $157,786
Receivables
Trade, less allowance for doubtful
accounts of $64,421 and $41,340 1,577,215 1,183,442
Other 5,185 8,144
Inventories
Raw materials and subassemblies 1,423,831 1,362,700
Work in process 229,374 314,264
Finished goods - 39,888
Prepaid income taxes 92,818 103,232
Other prepaid items 37,620 54,735
Deferred income taxes 59,453 70,214
--------- ---------
Total current assets 3,548,781 3,294,405
--------- ---------
Property, Plant and Equipment, at cost
Land and improvements 19,874 19,874
Buildings and improvements 250,109 240,804
Machinery and other equipment 1,464,360 1,448,374
--------- ---------
Total cost 1,734,343 1,709,052
Less accumulated depreciation 1,328,533 1,246,365
--------- ---------
Undepreciated cost 405,810 462,687
--------- ---------
Other Assets
Net assets of discontinued operations 51,386 571,933
Note receivable-SPC Technologies, Inc. 98,059 99,651
Goodwill, less accumulated amortization
of $99,553 and $68,341 123,387 154,599
Cash surrender value of officers'
life insurance less policy loans
of $68,770 and $55,457 10,620 19,771
--------- ---------
Total other assets 283,452 845,954
--------- ---------
$4,238,043 $4,603,046
========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30, 1996 and 1995
1996 1995
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $654,895 $520,000
Current maturities of long-term debt 206,446 211,508
Accounts payable
Trade 597,101 676,194
Other 13,911 15,567
Accrued items
Salaries, wages, commissions and
related payroll taxes 461,323 383,327
Income taxes - 507
Other 58,975 69,387
--------- ---------
Total current liabilities 1,992,651 1,876,490
--------- ---------
Other Liabilities
Long-Term Debt, less current maturities 385,365 573,375
Deferred income taxes 25,842 29,448
Total other liabilities 411,207 602,823
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 182,630 463,036
Foreign currency translation adjustment 22,078 31,220
--------- ---------
Total stockholders' equity 1,834,185 2,123,733
--------- ---------
$4,238,043 $4,603,046
========= =========
<FN>
The accompanying notes are and integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Year ended June 30,
1996 1995
_________ _________
<S> <C> <C>
Revenues
Net sales $7,699,805 $6,973,874
Other income 17,508 25,525
--------- ---------
Total revenues 7,717,313 6,999,399
--------- ---------
Costs and expenses
Cost of products sold 4,488,488 3,831,905
Selling general and administrative 2,702,297 2,735,812
Research and development 154,640 222,400
Interest expense 116,177 109,263
--------- ---------
Total costs and expenses 7,461,602 6,899,380
--------- ---------
Earnings from continuing operations
before income taxes 255,711 100,019
Provision for income taxes 139,165 8,003
--------- ---------
Earnings from continuing operations 116,546 92,016
Discontinued operations
Earnings (loss), net of taxes (340,143) 46,693
--------- ---------
Net earnings (loss) (223,597) 138,709
Retained earnings at beginning of year 463,036 381,136
Cash dividends paid (56,809) (56,809)
--------- ---------
Retained earnings at end of year $182,630 $463,036
========= =========
Earnings (loss) per common share
Continuing operations $.14 $.11
Discontinued operations (.42) .06
------ -----
($.28) $.17
====== =====
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from continuing operating activities
Earnings from continuing operations $116,545 $92,016
Adjustments to reconcile earnings from
continuing operations to net cash provided
by operating activities:
Depreciation and amortization 157,934 164,361
Deferred income taxes 7,155 (19,917)
(Gain) loss on sale of fixed assets (260) 3,644
Change in assets and liabilities:
(Increase) decrease in receivables (395,553) (149,265)
(Increase) decrease in inventories 57,614 (150,263)
(Increase) decrease in prepaid
items and other assets 36,238 (61,642)
Increase (decrease) in accounts
payable and accruals (8,205) 357,636
-------- --------
Net cash provided by (used in)
continuing operating activities (28,532) 236,570
-------- --------
Cash flows from discontinued activities
Earnings (loss) from discontinued operations (340,143) 46,693
Adjustments to reconcile earnings (loss)
from discontinued operations to net cash
provided by (used in) discontinued activities:
Depreciation and amortization 55,311 50,571
Deferred income taxes (43,336) 28,681
Gain on sale of fixed assets (225) -
Proceeds from sale of fixed assets 3,000 -
Write-down of net assets of
discontinued operations 328,585 -
(Increase) decrease in net assets
of discontinued operations 177,212 (247,572)
-------- --------
Net cash provided by (used in)
discontinued activities 180,404 (121,627)
-------- --------
Total net cash provided 151,872 114,943
-------- --------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 260 3,000
Purchase of property, plant and equipment (69,398) (122,488)
Receipts of principal on note receivable 1,591 349
-------- --------
Net cash used in investing activities (67,547) (119,139)
-------- --------
Cash flows from financing activities
Net borrowing of short-term debt 134,895 245,000
Proceeds from long-term borrowing 637,833 -
Repayments of long-term debt (830,837) (132,713)
Cash dividends paid (56,809) (56,809)
-------- --------
Net cash provided by (used in)
financing activities (114,918) (55,478)
-------- --------
Effect of exchange rate changes on cash (3,908) (68)
-------- --------
Net increase (decrease) in cash (34,501) 51,214
Cash at beginning of year 157,786 106,572
-------- --------
Cash at end of year $123,285 $157,786
======== ========
Cash paid during the year for:
Interest $150,388 $126,900
Income taxes - 113,267
Noncash investing and financing activities:
Acquisition of net operating assets
of NTR Technologies, Inc. - 80,000
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
[FN]
CONTROL CHIEF HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and 1995
1. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements include the accounts of the Company and its
subsidiaries after elimination of significant intercompany
transactions, and have been restated for the decision to discontinue
its wood products business. The reporting of amounts in the
financial statements and related disclosures in conformity with
generally accepted accounting principles requires management to make
assumptions and estimates. Actual results could differ from the
estimates.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable,
and accrued liabilities approximate fair value due to the short term
maturities of these assets and liabilities. The interest rates on
substantially all of the Company's long-term debt reflect current
market rates available to the Company. Accordingly, the carrying
amounts of the Company's short-term and long-term borrowing also
approximate fair value. The fair values of financial instruments
classified as other assets also approximate their carrying values.
Revenues Recognition and Concentration of Credit Risk
In general, the Company recognizes revenues on product sales when
items are shipped. Long-term contracts are not entered into by the
Company. The Company grants credit to its customers, most of whom
are in the manufacturing industry and are located throughout the
United States and the United Kingdom. Periodic credit evaluations of
customers are performed, and generally the Company does not require
advance payments or collateral. Credit losses to customers have not
been material.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all highly liquid money market instruments with a maturity of three
months or less to be cash equivalents.
Warranties
The Company's products are generally under warranty against defects
in material and workmanship, the duration of which varies. Actual
experience has indicated that costs under warranty expense have not
been significant and are therefore charged against earnings in the
year incurred.
Inventories
Inventories are valued at the lower of cost, average cost (first-in,
first-out), which includes material, labor, and manufacturing
overhead, or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided over their estimated lives by the
straight-line method. Expenditures for maintenance and repairs are charged
against earnings in the year incurred; major replacements, renewals
and betterments are capitalized and depreciated over their estimated
useful lives. The cost and accumulated depreciation of assets sold
or retired are removed from the respective accounts and any gain or
loss is reflected in earnings.
Intangible Assets
Goodwill is amortized on a straight-line basis over five and fifteen
year periods.
Income Taxes
The Company uses the liability method in accounting for income taxes.
Deferred tax assets and liabilities are recorded for temporary
differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements. General business
credits are accounted for by the flow through method.
Foreign Currency Translation
The assets and liabilities of the foreign subsidiary are translated
in U.S. dollars at current exchange rates. Revenue and expense
accounts of these operations are translated at average using the end
of month exchange rates prevailing during the year. These
translation adjustments are accumulated in a separate component of
stockholders' equity.
Earnings Per Common Share
Earnings per common share is computed based on the weighted average
number of shares common stock outstanding during the year. The
weighted average number of shares was 811,553 in 1996 and 1995.
Although the Company has issued potentially dilutive common stock
equivalents in the form of stock options, the dilutive effect of
these securities in the aggregate is less than three percent of
earnings per common share.
2. Discontinued Operations
Effective May 14, 1996, the Company adopted a formal plan to
discontinue its wood products operations and to sell off the related
assets of Bradford Classics Woodworking, Inc., d/b/a Tuna Valley Wood
Products, a wholly-owned subsidiary of the Company located in
Bradford, Pennsylvania. Accordingly, this business unit has been
accounted for as a discontinued operation in the accompanying
financial statements and amounts for prior periods have been
restated. An estimated loss of $328,585 on the disposal of the
discontinued operations has been provided for and charged against
income in the year ended June 30, 1996.
A summary of certain operating results of the discontinued operations
for the years ended June 30, 1996 and 1995 are as follows:
1996 1995
---------- ----------
Net sales $1,718,229 $1,989,308
Earnings (loss) from operations
before income taxes ($204,721) $79,245
Write-down of net assets
of discontinued operations (328,585) -
---------- ----------
(533,306) 79,245
Income taxes (benefit) (193,163) 32,552
---------- ----------
Net earnings (loss) ($340,143) $46,693
========== ==========
The net assets of discontinued operations have been segregated in the
accompanying consolidated balance sheets at June 30, and consist of:
1996 1995
--------- ---------
Assets
Accounts receivable $163,630 $421,200
Inventories 75,000 398,263
Prepaid items 5,258 5,858
Plant and equipment, net 216,000 451,268
--------- ---------
459,888 1,276,589
--------- ---------
Liabilities
Accounts payable and accrued items 159,536 347,769
Long-term debt 248,966 313,551
Deferred income taxes, net - 43,336
--------- ---------
408,502 704,656
--------- ---------
Net assets of
discontinued operations $51,386 $571,933
========= =========
On September 14, 1996, the inventory and fixed assets of the
discontinued operations were sold for their approximate carrying
amounts at June 30, 1996. In connection with the closure of Bradford
Classics Woodworking, Inc., settlement of certain trade creditors
claims are pending , none of which are of a material amount, and the
Company anticipates that it will settle all claims without
litigation.
3. 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 two
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, which is a division of Control Chief Corporation, are
included in the Company's consolidated results of operations from the
date of acquisition.
4. Short-Term Debt
At June 30, 1996 and 1995, short-term debt consisted of borrowing
under a line of credit with a bank, secured by substantially all of
the assets of the Company, excluding real estate, with a floating
interest rate at prime (8.25% at June 30, 1996 and 9% at June 30,
1995). The line of credit agreement requires the Company to maintain
certain minimum financial ratios and, among other things, to obtain
approval from the bank before the Company permits any additional
encumbrances on its assets, guarantees or incurs any additional
indebtedness, declares or pays dividends, and incurs annual capital
expenditures and/or acquisitions in excess of its annual depreciation
expense. At June 30, 1996, the Company was not in compliance with
all of the loan covenants, and has obtained a waiver from their
lending institution not requiring compliance until June 30, 1997.
During 1996 and 1995, the line of credit reached month-end maximums
of $722,849 and $520,000, respectively. Weighted average borrowing
amounted to $599,065 in 1996 and $365,611 in 1995, with average
interest rates of 8.7% in 1996 and 8.9% in 1995 being calculated by
dividing the interest expense during the year for such borrowing by
the weighted average short-term borrowing. At June 30, 1996 and
1995, the Company had additional borrowing available under the line
of credit of $95,105 and $230,000, respectively. The line of credit
agreement is subject to renewal on November 30, 1996.
4. Long-Term Debt
Long-term debt at June 30, 1996 and 1995 consists of the following:
1996 1995
--------- ---------
Prime plus 5/8% term loan, amortized over
3 years and six months, due June, 1999,
payable in monthly installments
of $23,720 including interest $742,313 $ -
Prime plus 1/2% term loan, amortized over
five years, due January, 1999, payable in
monthly installments of $17,610 including
interest (paid in full December 8, 1995) - 693,122
Prime plus 3/4% term loan, amortized over
five years, due February, 1999, payable in
monthly installments of $6,083, including
interest (paid in full December 8, 1995) - 236,532
3% term loan, amortized over five years,
due September, 2000, payable in monthly
installments of $1,323, including interest 63,268 77,019
8% term loan, amortized over two years,
due March, 1997, payable in monthly
installments of $3,618, including interest 31,504 70,684
Other liabilities 3,692 21,077
--------- ---------
840,777 1,098,434
Less debt reclassified
to discontinued operations 248,966 313,551
--------- ---------
591,811 784,883
Less current maturities 206,446 211,508
--------- ---------
$385,365 $573,375
========= =========
The aggregate maturities of long-term debt during each of the three
years ending June 30, 1999, are $206,446 $187,005 and $198,360. The
above indebtedness is secured by substantially all of the assets of
the Company, excluding real estate.
On December 8, 1995, the Company borrowed $850,000 from its principal
depository under an installment loan agreement at prime plus 5/8%,
the proceeds of which were used to retire the prime plus 1/2% and
prime plus 3/4% term loans of the Company. This term loan agreement,
which had a remaining balance in the amount of $742,313 at June 30,
1996, requires the Company to maintain a debt service coverage ratio
of at least 1 to 1, not to exceed a debt to worth ratio beyond 1.5 to
1 and, among other things, to obtain approval from the bank before
the Company permits any additional encumbrances on its assets,
guarantees or incurs any additional indebtedness, and declares or
pays dividends. At June 30, 1996, the Company was not in compliance
with all of the loan covenants, and has obtained a waiver from their
lending institution not requiring compliance until June 30, 1997.
5. Income Taxes
For the years ended June 30, 1996 and 1995, pretax earnings (loss)
from continuing operations was $320,416 and ($1,993) for the
Company's U.S. operations and ($64,706) and $102,012 for the
Company's foreign operations.
For the years ended June 30, 1996 and 1995, the provision for taxes
on earnings from continuing operations consists of the following:
1996 1995
-------- --------
Currently payable
Federal $99,054 $9,928
State 32,956 17,992
Deferred (credit) 7,155 (19,917)
-------- --------
$139,165 $8,003
======== ========
The difference between the provision for income taxes and the amounts
computed by applying the U.S. federal income tax rate in effect for
the years ended June 30, 1996 and 1995 consists of the following:
1996 1995
-------- --------
Statutory federal income tax $86,941 $34,006
(Income) loss of foreign subsidiary 22,000 (34,684)
Statutory federal surtax exemption (3,965) (11,749)
State income taxes 32,956 17,992
Other items 1,233 2,438
-------- --------
$139,165 $8,003
======== ========
At June 30, 1996 and 1995 the net deferred tax asset (liability)
component consists of the following:
1996 1995
-------- --------
Allowance for doubtful accounts $25,205 $16,757
Compensated absence 34,248 27,230
Termination benefits - 26,227
Depreciation (25,842) (29,448)
-------- --------
$33,611 $40,766
======== ========
Balance Sheet Classification
Current asset $59,453 $70,214
Noncurrent liability (25,842) (29,448)
-------- --------
$33,611 $40,766
======== ========
At June 30, 1996, the Company's foreign subsidiary has approximately
$650,000 of tax net operating loss carry forwards available to be
carried forward indefinitely.
6. Employee Savings Plan
The Company has an employee savings plan which permits participants
to make contributions by salary reduction pursuant to section 401(k)
of the Internal Revenue Code. The Company has adopted a
discretionary match that is limited to 6% of compensation and may, at
its discretion, make additional contributions to the plan. In
connection with the discretionary match, the Company's contribution
to the plan was $17,279 in 1996 and $16,980 in 1995. There were no
additional discretionary contributions to the plan for 1996 and 1995.
7. Common Stock Options
In August, 1994 the Company adopted the Control Chief Holdings, Inc.
1994 Stock Option Plan which provides for granting to officers, key
employees, consultants and other persons of the Company options to
purchase up to 40,000 shares of the Company's Common Stock. In
addition to the options available under the 1994 Plan, the Company
has options remaining for exercise under its 1984 Plan to purchase
5,000 shares of the Company's Common Stock. The option price is not
less than the market price for the Company's stock on the date of the
grant. The options become exercisable at varying dates and expire no
later than ten years from the date of grant.
A summary of the stock option data for the years ended June 30, 1996
and 1995 is as follows:
Number
of shares -----Option price-----
under option Per share Aggregate
Outstanding-June 30, 1994 13,000 $2.16-3.28 $31,160
Granted during the year 1,200 3.19 3,828
Exercised during the year - - -
Cancellations (8,000) 2.16-3.28 (20,360)
-------- --------- --------
Outstanding-June 30, 1995 6,200 2.16-3.19 14,628
Granted during the year 3,000 2.93 8,790
Exercised during the year - - -
Cancellations (300) 2.93 (879)
-------- --------- --------
Outstanding-June 30, 1996 8,900 $2.16-3.19 $22,539
======== ========= ========
Exercisable-June 30, 1996 8,900 $2.16-3.19 $22,539
======== ========= ========
At June 30, 1996, options to purchase 35,800 shares of Common Stock
were available for grant.
8. Operating Leases
The Company has several operating lease agreements, primarily
relating to real estate and equipment. These leases are noncancelable
and expire at various dates through July, 2002. Leases that expire
generally are expected to be renewed or replaced by other leases.
Future minimum rental payments for the succeeding five years under
these operating leases are as follows:
Year ended June 30,
--------------------
1997 $158,380
1998 133,110
1999 117,166
2000 80,000
2001 80,000
Total rent expense under operating leases amounted to $191,839 in
1996 and $163,001 in 1995.
9. Related Party Transactions
The Company leases its corporate headquarter facility located in
Bradford, Pennsylvania from a principal stockholder and Director.
This lease agreement expires July, 2002 and is renewable at the then
fair rental value for a five year period. In addition to the annual
rental, the Company is responsible for the real estate taxes,
insurance and other occupancy expenses applicable to the leased
premises. Rent expense under this operating lease was $80,00 for
1996 and 1995. The minimum rental commitment under this agreement is
included with the Company's other operating leases as described in
Note 8 of the financial statements.
The Company also receives certain legal and insurance services from
enterprises which are related to the Company because of common
Directors or Officers of the Company. The total services provided by
these related parties was $255,037 in 1996 and $229,877 in 1995.
At June 30, 1996 and 1995, SPC Technologies, Inc., a related party
through a common Director, owed the Company $98,059 and $99,651
respectively, under a 10% interest bearing note. The note is secured
by the assets of SPC Technologies, Inc., as well as a second position
in the stock of the Company that is owned by the common Director.
The note is being repaid in monthly installments of $957 with a
balloon payment of $86,996 due August 1, 2001.
10. Business Segments
The Company currently operates in a single industry as a manufacturer
of electronic components and devices for use in material handling
equipment and other industrial applications. Previously, the
Company's operations included a wood products business. However,
effective May 16, 1996, this operation was discontinued.
The Company's operations are in the United States and the United
Kingdom. Total revenue by geographic area includes net sales.
Transfers between geographic areas are recorded at amounts reflecting
competitive profit margins for resale activities. Operating profit
is net sales less operating expenses. In computing operating profit,
none of the following has been added or deducted: other income,
interest expense and income taxes. Identifiable assets are those
assets of the Company that are identified with the operations in each
geographic area. Corporate assets are principally cash, cash
surrender value of officer's life insurance and notes receivable.
The geographic distribution of sales operating profit and
identifiable assets for 1996 and 1995 is as follows:
United United Elimin-
June 30, 1996 States Kingdom ations Total
---------- -------- -------- ----------
Revenues from
unaffiliated customers $6,843,623 $856,182 $ - $7,699,805
Transfers between
geographic areas 30,863 11,248 (42,111) -
---------- -------- --------- ----------
Total net sales $6,874,486 $867,430 ($42,111) $7,699,805
========== ======== ========= ==========
Operating profit (loss) $421,449 ($67,069) $ - $354,380
Other income 11,438 6,070 - 17,508
Interest expense (112,470) (3,707) - (116,177)
--------- -------- -------- ---------
Earnings from continuing
operations before
income taxes $320,417 ($64,706) $ - $255,711
========= ======== ======== ========
Identifiable assets:
Electronic components
and devices $3,513,804 $490,834 ($49,945) $3,954,693
Corporate 190,756 41,208 - 231,964
Discontinued operations 51,386 - - 51,386
---------- -------- -------- ----------
Total assets $3,755,946 $532,042 ($49,945) $4,238,043
========== ======== ======== ==========
During the year ended June 30, 1996, the Company's operation in the
United States had export sales totaling $1,068,837. In addition, the
Company's foreign operation had sales revenue to a major customer
representing approximately 59% of its sales.
United United Elimin-
June 30, 1995 States Kingdom ations Total
---------- -------- -------- ----------
Revenues from
unaffiliated customers $6,077,116 $896,758 $ - $6,973,874
Transfers between
geographic areas 23,070 - (23,070) -
---------- -------- -------- ----------
Total net sales $6,100,186 $896,758 ($23,070) $6,974,874
========== ======== ======== ==========
Operating profit $77,597 $106,160 $ - $183,757
Other income 25,525 - - 25,525
Interest expense (105,115) (4,148) - (109,263)
--------- -------- -------- ---------
Earnings (loss) from
continuing operations
before income taxes ($1,993) $102,012 $ - $100,019
Identifiable assets:
Electronic components
and devices $3,197,676 $579,779 ($23,550) $3,753,905
Corporate 238,513 38,695 - 277,208
Discontinued operations 571,933 - - 571,933
---------- -------- --------- ----------
Total assets $4,008,122 $618,474 ($23,550) $4,603,046
========== ======== ========= ==========
During the year ended June 30, 1995, the Company's operation in the
United States had export sales totalling $683,597. In addition, the
Company's foreign operation had sales revenue to a major customer
representing approximately 45% of its sales.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Information required by Item 9 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1996
Annual Meeting of Shareholders and to be filed with the Commission
not later than 120 days after the end of fiscal year 1996.
ITEM 10. EXECUTIVE COMPENSATION
Information required by Item 10 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1996
Annual Meeting of Shareholders and to be filed with the Commission
not later than 120 days after the end of fiscal year 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by Item 11 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1996
Annual Meeting of Shareholders and to be filed with the Commission
not later than 120 days after the end of fiscal year 1996.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 12 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1996
Annual Meeting of Shareholders and to be filed with the Commission
not later than 120 days after the end of fiscal year 1996.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed herewith or incorporated by
reference herein. (For incorporation references, see Exhibit Index
attached hereto.)
Exhibit
3-1 Certificate of Incorporation of Digimetrics, Inc.
3-2 By-laws of Digimetrics, Inc.
3-3 Certificate of Amendment of the Certificate of Incorporation of
Digimetrics, Inc.
4-1 Specimen of Common Stock Certificate.
10-1 Digimetrics/Control Chief Amended and Restated Profit-Sharing Plan
Adoption Agreement and Plan Document.
10-2 Term Loan Note and Security Agreement between Bradford Classics
Woodworking, Inc. and the City of Bradford.
10-3 Asset Purchase Agreement between Digimetrics, Inc. and SPC
Technologies, Inc.
10-4 Agreement for Purchase and Sale between C. Lawrence Shields and
Dorothy V. Shields for the real estate located at 200 Williams
Street, Bradford, PA.
10-5 Lease Agreement dated July 15, 1992 between C. Lawrence
Shields and Dorothy V. Shields for the real estate located at
200 Williams Street, Bradford, PA.
10-6 Lease Agreement dated August 10, 1993 between the City of
Bradford, Office of Economic and Community Development and
Bradford Classics Woodworking, Inc. for the real estate located
at 20 Russell Boulevard, Bradford, PA.
10-7 1994 Stock Option Plan.
10-8 SPC Technologies, Inc. Amended and Restated Promissory Note,
Security Agreement and Pledge Agreement.
10-9 Asset Purchase Agreement between Control Chief Corporation,
NTR Technologies, Inc., Edward C. Nichols, Anthony Rudzki,
William R. Nichols, Robert W. Thomas, Jr., and Christine B.
Mulzet.
21-1 Subsidiaries of the Registrant.
23-1 Consent of Independent Auditors.
27-1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Control Chief Holdings, Inc.
(Registrant)
Date: September 27, 1996 By:/S/Douglas S. Bell
Douglas S. Bell
Chairman of the Board,
Chief Executive Officer and President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
Signature Title Date
/S/Douglas S. Bell Chief Executive September 27, 1996
Douglas S. Bell Officer and Director
/S/Stephen J. Pachla Chief Financial September 27, 1996
Stephen J. Pachla Office
/S/Robert E. Crofford Director September 27, 1996
Robert E. Crofford
/S/Christopher G. Hauser Director September 27, 1996
Christopher G. Hauser
/S/Arvid R. Nelson Director September 27, 1996
Arvid R. Nelson
/S/C. Lawrence Shields Director September 27, 1996
C. Lawrence Shields
/S/Patrick G. Shields Director September 27, 1996
Patrick G. Shields
INDEX OF EXHIBITS
No. Exhibit Location
3-1 Certificate of Incorporation Incorporated by reference
of Digimetrics, Inc. from Digimetrics, Inc.'s
Registration Statement on
Form 10 File No. 0-15919
("Form 10")
3-2 By-laws of Digimetrics, Inc. Incorporated by reference
from Digimetrics, Inc.'s
Form 10
3-3 Certificate of Amendment of Incorporated by reference
the Certificate of Incorporation from Form 10-KSB for the
of Digimetrics, Inc. fiscal year ended June 30,
1993 as Exhibit 3-3
4-1 Specimen of Common Stock Incorporated by reference
Certificate from Digimetrics, Inc.'s
Form 10
10-1 Digimetrics/Control Chief Incorporated by reference
Amended and Restated Profit- from Form 10-KSB for the
Sharing Plan Adoption Agreement fiscal year ended June 30,
and Plan Document 1994 as Exhibit 10-2
10-2 Term Loan Note and Security Incorporated by reference
Agreement between Bradford from Form 10-KSB for the
Classics Woodworking, Inc. fiscal year ended June 30,
and the City of Bradford, PA 1993 as Exhibit 10-5
10-3 Asset Purchase Agreement Incorporated by reference
between Digimetrics, Inc. from Form 8-K filed on
and SPC Technologies, Inc. February 8, 1991 as
Exhibit 2-1
10-4 Agreement for Purchase and Incorporated by reference
Sale between C. Lawrence from Form 8-K filed on
Shields and Dorothy V. Shields July 27, 1992 as
for the real estate at 200 Exhibit 2-1
Williams Street, Bradford, PA
10-5 Lease Agreement dated July 15, Incorporated by reference
1992 between C. Lawrence from Form 8-K filed on
Shields and Dorothy V. Shields July 27, 1992 as
for the real estate at 200 Exhibit 2-2
Williams Street, Bradford, PA
10-6 Lease Agreement dated August 10, Incorporated by reference
1993 between the City of from Form 10-KSB for the
Bradford, Office of Economic fiscal year ended June 30,
and Community Development 1993 as Exhibit 10-10
and Bradford Classics
Woodworking, Inc. for the real
estate at 20 Russell Boulevard,
Bradford, PA
10-7 1994 Stock Option Plan Incorporated by reference
from 1994 Proxy, Exhibit A
10-8 SPC Technologies, Inc. Amended Incorporated by reference
and Restated Promissory Note, from Form 10-KSB for the
Security Agreement and Pledge fiscal year ended June 30,
Agreement 1994 as Exhibit 10-12
10-9 Asset Purchase Agreement between Incorporated by reference
Control Chief Corporation, from Form 10-KSB for the
NTR, Edward C. Nichols, fiscal year ended June 30,
William R. Nichols, 1995 as Exhibit 10-11
Robert W. Thomas, Jr.,
Anthony Rudzki, and
Christine B. Mulzet
21-1 Subsidiaries of the Registrant Filed herewith
23-1 Consent of Independent Auditors Filed herewith
27-1 Financial Data Schedule Filed herewith
SUBSIDIARIES OF THE REGISTRANT Exhibit 21-1
(1)Control Chief Corporation
100% - Owned by Control Chief Holdings, Inc.
Incorporated in the State of Pennsylvania
Operating Company
(2)Control Chief (UK) Limited
100% - Owned by Control Chief Holdings, Inc.
Incorporated as a limited trading company in the United Kingdom
Operating Company
(3)Bradford Classics Woodworking, Inc.
100% - Owned by Control Chief Holdings, Inc.
Incorporated in the State of Pennsylvania
Discontinued Operation, effective May 16, 1996
CONSENT OF INDEPENDENT AUDITORS Exhibit 23-1
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 dated April 25, 1995 pertaining to
the 1994 Stock Option Plan of Control Chief Holdings, Inc. of our
report dated August 16, 1996 appearing in item 7 on Form 10-KSB.
DIEFENBACH DELIO KEARNEY & DEDIONISIO
CERTIFIED PUBLIC ACCOUNTANTS
Erie, Pennsylvania
September 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-KSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 123,285
<SECURITIES> 0
<RECEIVABLES> 1,646,821
<ALLOWANCES> 64,421
<INVENTORY> 1,653,205
<CURRENT-ASSETS> 3,548,781
<PP&E> 1,734,343
<DEPRECIATION> 1,328,533
<TOTAL-ASSETS> 4,238,043
<CURRENT-LIABILITIES> 1,992,651
<BONDS> 0
0
0
<COMMON> 405,776
<OTHER-SE> 1,428,409
<TOTAL-LIABILITY-AND-EQUITY> 4,238,043
<SALES> 7,699,805
<TOTAL-REVENUES> 7,717,313
<CGS> 4,488,488
<TOTAL-COSTS> 4,488,488
<OTHER-EXPENSES> 2,856,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,177
<INCOME-PRETAX> 255,711
<INCOME-TAX> 139,165
<INCOME-CONTINUING> 116,546
<DISCONTINUED> (340,143)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223,597)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
