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, 2000
[ ] 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 141, 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, 2000 was 994,101 shares.
Transitional Small Business Format (Check one): Yes [ ] No [ X ]
Control Chief Holdings, Inc. and Subsidiary
Table of Contents
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations and Retained Earnings
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2 Management's Discussion and Analysis or Plan of Operation
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Control Chief Holdings, Inc. and Subsidiary
Consolidated Balance Sheets March 31, June 30,
2000 1999
--------- ---------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 965,509 $ 684,912
Accounts receivable, less allowance for
doubtful accounts of $167,040 and $40,000 1,032,883 984,967
Inventories 1,456,842 1,581,353
Other current assets 103,355 152,952
---------- ----------
Total current assets 3,558,589 3,404,184
Equipment and leasehold improvements, net 822,400 790,616
Other assets 7,841 7,841
---------- ----------
Total assets $4,388,830 $4,202,641
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 12,211 $ 173,018
Accounts payable trade 244,873 421,783
Accrued items 545,280 472,499
---------- ----------
Total current liabilities 802,364 1,067,300
---------- ----------
Long-term debt, less current maturities - 10,319
---------- ----------
Deferred income taxes 58,312 48,712
---------- ----------
Stockholders' equity
Common stock, $.50 par value, authorized
5,000,000 shares, issued 1,014,470 shares,
of which 20,369 shares at March 31, 2000
and issued 1,014,095 shares, of which
14,481 shares at June 30, 1999 were held
in the treasury 507,235 507,048
Capital in excess of par value 1,121,355 1,120,586
Retained earnings 1,982,368 1,510,589
---------- ----------
3,610,958 3,138,223
Less treasury shares at cost 82,804 61,913
---------- ----------
Total stockholders' equity 3,528,154 3,076,310
---------- ----------
$4,388,830 $4,202,641
========== ==========
See accompanying notes to financial statements.
Control Chief Holdings, Inc. and Subsidiary
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net sales $1,888,444 $1,438,224 $5,831,603 $6,058,939
Cost of products sold 851,937 631,662 2,761,611 3,166,790
--------- --------- --------- ---------
Gross margin 1,036,507 806,562 3,069,992 2,892,149
--------- --------- --------- ---------
Operating expenses
Selling expenses 336,093 359,427 974,273 1,092,204
General administrative 382,763 240,583 1,068,833 718,321
Research development 57,047 72,953 174,799 213,381
--------- --------- --------- ---------
Total operating expenses 775,903 672,963 2,217,905 2,023,906
--------- --------- --------- ---------
Earnings from operations 260,604 133,599 852,087 868,243
Other income (expense)
Interest expense (776) (3,677) (6,223) (21,600)
Other income 19,968 8,786 54,517 16,426
--------- --------- --------- ---------
Earnings before taxes 279,796 138,708 900,381 863,069
Provision for taxes 116,500 58,700 378,600 357,300
--------- --------- --------- ---------
Net earnings 163,296 80,008 521,781 505,769
Retained earnings,
beginning of period 1,819,072 1,389,651 1,510,589 1,013,877
Cash dividends paid - - (50,002) (49,987)
--------- --------- --------- ---------
Retained earnings,
end of period $1,982,368 $1,469,659 $1,982,368 $1,469,659
========= ========= ========= =========
Per common share:
Basic net earnings $ 0.17 $ 0.08 $ 0.52 $ 0.51
Diluted net earnings $ 0.16 $ 0.08 $ 0.52 $ 0.50
Dividends $ - $ - $ 0.05 $ 0.05
See accompanying notes to financial statements.
Control Chief Holdings, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited) Nine Months Ended
March 31,
2000 1999
-------- --------
Cash flows from operating activities
Net earnings $521,781 $505,769
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 92,530 64,190
Provision for bad debts 120,000 1,232
Deferred income taxes 9,600 (800)
Changes in operating assets and liabilities:
Accounts receivable (167,916) 665,532
Inventories 124,511 82,663
Other current assets 49,597 205,623
Accounts payable and accruals (104,129) (332,454)
--------- ---------
Net cash provided by operating activities 645,974 1,191,755
--------- ---------
Cash flows from investing activities
Purchase of equipment (124,314) (100,921)
--------- ---------
Net cash used in investing activities (124,314) (100,921)
--------- ---------
Cash flows from financing activities
Net repayments of short-term debt - (150,000)
Net repayments of long-term debt (171,126) (142,483)
Proceeds from exercise of common stock options 956 -
Purchase of treasury stock (20,891) (24,168)
Dividends paid (50,002) (49,987)
--------- ---------
Net cash used in financing activities (241,063) (366,638)
--------- ---------
Net increase in cash 280,597 724,196
Cash at beginning of period 684,912 22,067
--------- ---------
Cash at end of period $965,509 $746,263
========= =========
Cash paid during the period for:
Interest $ 6,223 $ 21,600
Income taxes 283,469 75,492
See accompanying notes to financial statements.
Control Chief Holdings, Inc. and Subsidiary
Notes to Financial Statements
1. Basis of Presentation
The financial statements include the accounts of the Control Chief
Holdings, Inc. (the Company) and its wholly-owned subsidiary, Control
Chief Corporation, (Control Chief). All significant intercompany
accounts are eliminated upon consolidation. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from the estimates.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated, have been included.
Interim results are not necessarily indicative of results for a full
year. Certain reclassifications of prior year's amounts have been made
to conform with the current year's presentation.
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 on Form 10-KSB for the fiscal year ended June 30, 1999.
2. Earnings Per Common Share
Basic earnings per share are computed by dividing net earnings by the
weighted average number of common shares outstanding. Diluted earnings
per share assumes the exercise of stock options using the treasury
stock method, if dilutive. The following table reflects the calculation
of basic and diluted earnings per share.
Three Months Ended Net Number of Per Share
March 31, Earnings Shares Amount
--------- -------- -------- ------
2000 - Basic $163,296 986,897 $ 0.17
2000 - Diluted $163,296 1,006,234 $ 0.16
1999 - Basic $ 80,008 999,739 $ 0.08
1999 - Diluted $ 80,008 1,009,489 $ 0.08
Nine Months Ended Net Number of Per Share
March 31, Earnings Shares Amount
--------- -------- -------- ------
2000 - Basic $521,781 996,096 $ 0.52
2000 - Diluted $521,781 1,008,389 $ 0.52
1999 - Basic $505,769 1,000,348 $ 0.51
1999 - Diluted $505,769 1,010,098 $ 0.50
3. Cash Dividends Paid
The Board of Directors of the Company approved a cash dividend
totaling $50,002 ($ 0.05 per share) payable on September 24, 1999 to
holders of record at the close of business on September 6, 1999.
4. Environmental Matters
The Company has been identified as a potentially responsible party by
the Pennsylvania Department of Environmental Protection concerning
substances that may be present in the groundwater at the site of its
former facility located in Lewis Run, Pennsylvania. Such substances may
be defined as "hazardous substances" pursuant to the Pennsylvania
Hazardous Sites Cleanup Act (HSCA). In January 2000, the Company signed
a consent order and agreement with the DEP. The Company has agreed to
conduct an investigation to identify and evaluate actions that could be
undertaken. A determination still has not been made as to whether or
not the Company is a responsible party, including an estimate of the
cost of environmental remediation, the number of parties involved at
the site, the determination of the extent of contamination, and the
length of time that remediation may require. Through the nine-month
period ended March 31, 2000, the Company has incurred approximately
$38,622 in professional fees relating to this matter which has been
charged to operations as an expense. Additionally, the Company has set
up a reserve and accrued estimated professional fees relating to this
matter of approximately $140,500 through the nine-month period ended
March 31, 2000, which has also been charged to operations as an
expense.
<PAGE>
Part I - Financial Information
Item 2. Management's Discussion and Analysis or Plan of Operations
The following discussion and analysis may be understood more fully by
reference to the consolidated financial statements, notes to the
consolidated financial statements, and management's discussion and
analysis or plan of operations contained in the Control Chief Holdings,
Inc. and Subsidiary annual report on Form 10-KSB for the fiscal year
ended June 30, 1999.
Forward-Looking Information
This Form 10-QSB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For
this purpose any statements contained in this Form 10-QSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may,"
"will," "expect," "believe," "anticipate," "estimate" or "continue" or
comparable terminology is intended to identify forward-looking
statements. These statements by their nature involve substantial risks
and uncertainties, and actual results may differ materially depending
on a variety of factors, many of which are not within the Company's
control. These factors include but are not limited to economic
conditions generally and in the industries in which the Company's
customers participate; competition within the Company's industry,
including competition from much larger competitors; technological
advances which could render the Company's products less competitive or
obsolete; failure by the Company successfully to develop new products
or to anticipate current or prospective customers' products needs;
environmental investigation, remediation and monitoring costs relating
to the Company's former facility in Lewis Run, PA; price increases or
supply limitations for components purchased by the Company for use in
its products; and delays, reductions, or cancellations of orders
previously placed with the Company.
General
Control Chief Holdings, Inc. ("the Company") functions as a holding
company and is the sole shareholder of Control Chief Corporation
("Control Chief"). Control Chief designs, engineers and produces 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. All models of products
are microprocessor-based systems. These devices are utilized in concert
with various material handling equipment, industrial machines, process
equipment and mobile apparatus. Control Chief markets its products
through a network of independent manufacturers' representatives located
in key geographical centers throughout the United States, Canada,
Central and South America. Products are also sold through direct
efforts, distributors, private labeling agreements and licensees.
<PAGE>
Results of Operations
The following table sets forth certain financial data, as a percentage
of net sales, for the three and nine month periods ended March 31, 2000
and 1999.
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 45.1% 43.9% 47.3% 52.2%
------ ------ ------ ------
Gross margin 54.9% 56.1% 52.7% 47.8%
Operating expenses 41.1% 46.8% 38.0% 33.3%
------ ------ ------ ------
Earnings from operations 13.8% 9.3% 14.7% 14.5%
Other income (expense) 1.1% 0.4% 0.8% (0.1%)
------ ------ ------ ------
Earnings before taxes 14.9% 9.7% 15.5% 14.4%
Provision for taxes 6.2% 4.1% 6.5% 5.9%
------ ------ ------ ------
Net earnings 8.7% 5.6% 9.0% 8.5%
------ ------ ------ ------
------ ------ ------ ------
The Company reported net earnings of $163,296 or $ 0.17 per basic and
$ 0.16 per diluted share for the quarter ended March 31, 2000.
Net sales increased $450,220 or 31.3 percent for the quarter ended
March 31, 2000, and were $1,888,444.
For the nine months ending March 31, 2000, reported net earnings were
$521,781, or $ 0.52 per basic and diluted share, which includes charges
of approximately $179,122 for professional fees relating to an
environmental contingency with the Pennsylvania Department of
Environmental Protection (DEP), which is more fully described under
"Environmental Matters" in this Form 10-QSB.
For the nine months ending March 31, 2000, net sales decreased $227,336
or 3.8 percent for a total of $5,831,603. While year to date sales
reflect a decrease over the same period last year, the Company
continues to improve its gross margin percentage.
Earnings from operations were 13.8 percent of net sales for the current
quarter compared to 9.3 percent in the same quarter a year ago and 14.7
percent of net sales for the nine months ended March 31, 2000, compared
to 14.5 percent of net sales for the nine months ended March 31, 1999.
Gross margin was 54.9 percent of net sales for the current quarter
compared to 56.1 percent in the same quarter of the prior year. For the
nine-month period ended March 31, 2000, gross margin was 52.7 percent,
versus 47.8 percent in the same period a year ago. The overall gross
margin improvement for the nine-month period ended March 31, 2000
reflects the Company's continued focus on cost control, improved
pricing and shifts toward premium products. For the nine-month period
ended March 31, 2000, operating margin was 14.7 percent versus 14.5
percent for the nine-month period ended March 31, 1999.
The Company's effective income tax rate was 41.6 percent and 42.0
percent for the three and nine-month periods ended March 31, 2000,
respectively, as compared to 42.3 percent and 42.0 percent for the
three and nine-month periods ended March 31, 1999, respectively.
Overall, net earnings reported as a percentage of net sales were 8.7
percent for the current quarter compared to 5.6 percent in the same
quarter of the prior year and 7.1 percent for the full fiscal year
ended June 30, 1999.
For the nine months ending March 31, 2000, reported net earnings as a
percentage of net sales were 9.0 percent versus 8.5 percent for the
nine-month period ended March 31, 1999.
Liquidity, Capital Resources and Financial Condition
The Company funds its needs for liquidity and capital resources through
cash from operations, short-term and long-term borrowing.
The Company has a commercial demand line of credit in the amount of
$750,000, with a variable interest rate equal to the lender's prime
rate. The line of credit is used to finance accounts receivable and
inventory of the Company. The line of credit is subject to an annual
review by the bank each November. At March 31, 2000, no amount was
outstanding under the line of credit.
The Company also has financed the purchase of a vehicle through a term
loan. The balance outstanding under this loan was $12,211 at March 31,
2000.
The Company's liquidity improved during the period. At March 31, 2000,
the Company had net working capital of $2,756,225, compared to
$2,336,884 at June 30, 1999. The Company's current ratio also improved
with current assets 4.4 times greater than current liabilities at March
31, 2000, compared to 3.2 times greater than current liabilities at
June 30, 1999.
During the nine-month period ended March 2000, the Company's cash
expenditures for equipment totaled $124,314. In addition, during the
nine months ended March 31, 2000, the Company repaid $171,126 of bank
indebtedness, paid cash dividends totaling $50,002 and purchased common
stock for its treasury in the amount of $20,891.
Current financial resources, including working capital and the existing
line of credit, and anticipated funds from operations are expected to
be sufficient to meet cash requirements throughout fiscal 2000,
including scheduled long-term debt repayment and planned capital
expenditures. There can be no assurance, however, that unplanned
capital replacement or other future events will not require the Company
to seek additional debt or equity financing and, if so required, that
it will be available on terms acceptable to the Company.
During the nine months ended March 31, 2000, the Company's net cash
provided by operations was $645,974 as compared to net cash provided by
operations of $1,191,755 for the nine months ended March 1999. The
decrease in net cash provided by operations results from the overall
changes in the Company's operating assets and liabilities during the
periods of comparison.
Environmental Matters
The Company has been identified as a potentially responsible party by
the Pennsylvania Department of Environmental Protection concerning
substances that may be present in the groundwater at the site of its
former facility located in Lewis Run, Pennsylvania. Such substances may
be defined as "hazardous substances" pursuant to the Pennsylvania
Hazardous Sites Cleanup Act (HSCA). In January 2000, the Company signed
a consent order and agreement with the DEP. The Company has agreed to
conduct an investigation to identify and evaluate actions that could be
undertaken. A determination still has not been made as to whether or
not the Company is a responsible party, including an estimate of the
cost of environmental remediation, the number of parties involved at
the site, the determination of the extent of contamination, and the
length of time that remediation may require. Through the nine-month
period ended March 31, 2000, the Company has incurred approximately
$38,622 in professional fees relating to this matter which has been
charged to operations as an expense. Additionally, the Company has set
up a reserve and accrued estimated professional fees relating to this
matter of approximately $140,500 through the nine-month period ended
March 31, 2000, which has also been charged to operations as an
expense.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 Financial Data Schedule.
b) The Company filed no Reports on Forms 8-K during the reporting
period.
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 15, 2000 By: \s\ Douglas S. Bell
-------------------
Douglas S. Bell
Chairman of the Board,
Chief Executive Officer and
President
<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-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 965,509
<SECURITIES> 0
<RECEIVABLES> 1,199,923
<ALLOWANCES> 167,040
<INVENTORY> 1,456,842
<CURRENT-ASSETS> 3,558,589
<PP&E> 2,244,565
<DEPRECIATION> 1,422,165
<TOTAL-ASSETS> 4,388,830
<CURRENT-LIABILITIES> 802,364
<BONDS> 0
0
0
<COMMON> 507,235
<OTHER-SE> 3,020,919
<TOTAL-LIABILITY-AND-EQUITY> 4,388,830
<SALES> 5,831,603
<TOTAL-REVENUES> 5,886,120
<CGS> 2,761,611
<TOTAL-COSTS> 2,791,611
<OTHER-EXPENSES> 2,217,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,223
<INCOME-PRETAX> 900,381
<INCOME-TAX> 378,600
<INCOME-CONTINUING> 521,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521,781
<EPS-BASIC> .52
<EPS-DILUTED> .52
</TABLE>
