UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------- to ----------------
Commission file number: 0-16749
CERBCO, Inc.
(Exact name of registrant as specified in its charter)
Delaware 54-1448835
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3421 Pennsy Drive, Landover, Maryland 20785
(Address of principal executive offices) (Zip Code)
Registrant's telephone and fax numbers, including area code:
301-773-1784 (tel)/301-322-3041 (fax)/301-773-4560 (24-hour
public information FaxVault System)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
Class B Common Stock, par value $.10 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes X No
The aggregate market value of the registrant's voting stock held
by non-affiliates of the registrant computed by reference to the
last price at which such stock was sold, as of September 13,
1995, was $7,700,630.
As of September 13, 1995, the following number of shares of each
of the issuer's classes of common stock were outstanding:
Common Stock 1,151,001
Class B Common Stock 310,955
---------
Total 1,461,956
Documents Incorporated by Reference: None
PART I
Item 1. Business
-----------------
(a) General Development of Business
CERBCO, Inc. ("CERBCO", the "Company" or "Registrant")
[NASDAQ:CERB] is a parent holding company with controlling
interests in Insituform East, Incorporated [NASDAQ:INEI]
(excavationless sewer and pipeline rehabilitation), and Capitol
Copy Products, Inc. [copier and facsimile ("fax") equipment
sales, service and supplies].
CERBCO was incorporated on December 23, 1987 in the State
of Delaware. CERBCO was formed for the purpose of implementing
a Plan of Reorganization and Merger (the "Plan"), whereby its
then publicly-traded predecessor, CERBERONICS, Inc.
("CERBERONICS"), became a wholly-owned subsidiary of CERBCO.
Under the Plan, owners of shares of stock previously held in
CERBERONICS, by class, received ownership of an equivalent
number of shares of stock, by class, in the parent holding
company, CERBCO. In 1988, CERBERONICS transferred a material
portion of its assets to CERBCO including all shares of stock
held in Insituform East, Incorporated and Capitol Copy Products,
Inc. CERBERONICS, which had been providing engineering,
analytical and technical support services to the United States
Government, discontinued operations in 1991.
The principal office and corporate headquarters of the
Company are located in suburban Washington, D.C., collocated
with the offices of the Company's subsidiary, Insituform East,
Incorporated, at 3421 Pennsy Drive, Landover, Maryland 20785.
The Company's telephone number is (301) 773-1784, its fax number
is (301) 322-3041, and its twenty-four hour public information
FaxVault number is (301) 773-4560.
(b) Financial Information About Industry Segments
Financial information about the Registrant's industry
segments is set forth below in tabular format. Information by
industry segment is concomitant with financial information
separately attributable to each of the member companies
composing the Registrant's consolidated group, i.e., CERBCO,
Inc. (the parent holding company), Insituform East, Incorporated
and Capitol Copy Products, Inc. For additional information
relating to industry segment information, see Part II, Item 8,
"Notes to Consolidated Financial Statements - Note 19: Segment
Data and Reconciliation"; also Part IV, Item 14, Exhibit 99,
"CERBCO, Inc. Consolidating Schedules: Statement of Earnings
Information for the Year Ended June 30, 1995; Balance Sheet
Information and Consolidating Elimination Entries as of June 30,
1995."
<TABLE>
Financial Information Relating to Industry Segments and Classes
of Products or Services
<CAPTION>
(in thousands) 1995 1994 1993
SALES TO UNAFFILIATED CUSTOMERS:
<S>
Insituform East, Incorporated:
<S> <C> <C> <C>
Sales of products $21,594 $14,804 $13,105
------- ------- -------
Capitol Copy Products, Inc.:
Sales of equipment 8,102 7,468 5,701
Sales of services and
supplies 9,447 7,574 5,968
------- ------- -------
17,549 15,042 11,669
------- ------- -------
TOTAL SALES TO UNAFFILIATED
CUSTOMERS $39,143 $29,846 $24,774
------- ------- -------
------- ------- -------
OPERATING PROFIT (LOSS) BEFORE
NON-OWNED INTERESTS:
CERBCO, Inc. (corporate) ($961) ($566) ($652)
Insituform East, Incorporated 2,490 (204) (1,959)
Capitol Copy Products, Inc. 4,054 3,004 1,954
------- ------- -------
TOTAL OPERATING PROFIT (LOSS) $5,583 $2,234 ($657)
------- ------- -------
------- ------- -------
NET EARNINGS (LOSS) CONTRIBUTION
BY SEGMENT:
CERBCO, Inc. (corporate) ($880) ($569) ($367)
Insituform East, Incorporated 678 47 (272)
Capitol Copy Products, Inc. 1,593 1,110 658
------- ------- -------
Earnings from continuing
operations 1,391 588 19
Discontinued operations 151 731 (309)
------- ------- -------
NET EARNINGS (LOSS) $1,542 $1,319 ($290)
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS:
CERBCO, Inc. (corporate) $6,007 $6,617 $5,385
Insituform East, Incorporated 19,459 16,785 16,719
Capitol Copy Products, Inc. 7,514 6,105 5,455
------- ------- -------
TOTAL ASSETS $32,980 $29,507 $27,559
------- ------- -------
------- ------- -------
</TABLE>
c) Narrative Description of Business
CERBCO, Inc.
------------
GENERAL
CERBCO, Inc. ("CERBCO" or the "Company") is a parent
holding company with controlling interests in two principal
subsidiaries, each of which is in a separate industry segment.
Insituform East, Incorporated, operating pursuant to sublicense
agreements, provides a patented process called "Insituform"
primarily to municipal, Federal government and industrial
customers for the repair and reconstruction of underground
sewers and other types of pipelines. The Insituform/R process
creates a hard, jointless, and impact and corrosion-resistant
Insitupipe/R product inside deteriorating pipes, with a
principal benefit that it can usually be installed without
excavation. Capitol Copy Products, Inc. is in the business of
selling, servicing and providing supply products for copier and
facsimile equipment, operating pursuant to certain dealer
agreements, primarily with Canon U.S.A., Inc.
CERBCO officers participate both directly and indirectly on
the management teams of its subsidiary corporations, in varying
capacities and officerships, with a view to overseeing,
protecting and developing the long-term values of the Company's
holdings. By operating separate lines of business in the
Federal/municipal and commercial sectors, CERBCO is structured
to enable effective response to changing markets through the
combination of capital flexibility and strategic
diversification.
As of June 30, 1995 the Company and its subsidiaries had a
total of 222 employees (including four employees in the parent
holding company).
OTHER INFORMATION
For other information regarding a collective business
description of CERBCO (e.g., material developments, operations,
license agreements, backlog, marketing, competition, etc.), see
specific detailed information by individual subsidiary company
(i.e., industry segment) below.
Insituform East, Incorporated
-----------------------------
GENERAL
Insituform East, Incorporated ("Insituform East" or the
"Company") was organized under the laws of the State of Delaware
on February 26, 1970 under the name Universal Construction and
Supply Company. Its present name was adopted on August 24,
1978. The Company was engaged in the business of underground
conduit construction from inception until 1974 and construction
equipment rental from 1974 to 1978. The Company then phased out
these lines of business and entered into sublicensing agreements
for the Insituform process, a patented technology for
reconstructing pipelines with little or no excavation. Since
July 1978, the Company has been primarily engaged in the
business of rehabilitating underground sewers and other
pipelines, the Company's only business segment.
Between 1982 and 1986, the Company added western
Pennsylvania, Ohio, three Kentucky counties and West Virginia to
its original Insituform process licensed territory of Maryland,
Virginia, the District of Columbia, Delaware and eastern
Pennsylvania.
In December 1985, MIDSOUTH Partners was organized as a
Tennessee General Partnership with the Company holding 42.5%
general partnership interest. MIDSOUTH Partners is the
exclusive licensee for the Insituform process in Tennessee, the
rest of Kentucky and northern Mississippi.
In September 1987, the Company established a branch
facility in Cincinnati, Ohio, to support operating activities in
the western region of its licensed territory.
In May 1989, the Company acquired an 80% interest in TRY
TEK Machine Works, Inc. ("TRY TEK"). TRY TEK, located in
Hanover, Pennsylvania, was founded in September 1985 to custom
design and build special machinery, including machinery used in
the Insituform process. The Company acquired an additional 10%
interest in TRY TEK in February 1993 and the remaining 10%
interest in March 1995.
In December 1990, the Company acquired an exclusive license
for the sales and installation of preformed PVC thermoplastic
pipe under the NuPipe/R process and trademark for a sales region
identical to the territories licensed to the Company for the
Insituform process.
In September 1991, the Company added cement mortar lining
of potable water lines to its service capability. On June 11,
1993, the Company adopted a formal plan to discontinue providing
cement mortar lining services, primarily as a result of
continuing operating losses and significant decreases in market
prices in this already traditionally low margin industry. This
formal plan, which consisted primarily of the completion of two
contracts in progress and the disposal of remaining equipment
and materials, was substantially completed by June 30, 1994.
The Company primarily rehabilitates and repairs underground
sewers and other pipelines -- including waste water, storm water
and industrial process pipelines -- using the Insituform
process. The Insituform process utilizes a polyester fiber-felt
material, the Insitutube/R material, coated with polyurethane
and impregnated with a liquid, thermosetting resin. The
Insitutube material is inserted in the pipe through an existing
manhole or other access point. By use of an inversion tube and
cold water pressure, the Insitutube material is forced through
the pipeline, turned inside out, and pressed firmly against the
inner wall of the damaged pipeline. When the Insitutube
material is fully extended, the cold water within the tube is
recirculated through a boiler in a truck. The heated water
cures the thermosetting resin to form a hard, jointless, impact
and corrosion resistant Insitupipe product within the original
pipe. Lateral or side connections are then reopened by use of
the Insitucutter/R device, a remote-controlled cutting machine.
The principal office and corporate headquarters of the
Company are located at 3421 Pennsy Drive, Landover, Maryland
20785. The Company's telephone number is (301) 386-4100, and
its fax number is (301) 386-2444.
RELATIONSHIP WITH INSITUFORM TECHNOLOGIES, INC.
On December 9, 1992, Insituform Technologies, Inc.
(formerly Insituform of North America, Inc., or "INA") through
its acquisition of Insituform Group, Ltd., N.V., acquired the
worldwide patent rights for the Insituform process. The Company
is a sublicensee of Insituform Technologies, Inc. ("ITI"). The
Company has entered into six sublicense agreements with ITI
which grant the Company rights to perform the Insituform process
in Virginia, Maryland, Delaware, Ohio, the District of Columbia,
Pennsylvania, West Virginia, and three Kentucky counties. The
Company can perform the Insituform process in other locations
subject to payment of additional royalties.
The sublicense agreements require the Company to pay ITI a
royalty of 8% of the revenue, excluding certain deductions, from
all contracts using the Insituform process, with a minimum
annual royalty requirement for each licensed territory. In the
event the Company performs the Insituform process outside its
territory, the sublicense agreements require it to pay a royalty
of from 8% to 12% of the gross contract price to the independent
sublicensee of such other territory, if any, in addition to all
royalties due ITI.
The sublicense agreements extend for the life of the
underlying patents or patent rights, including any improvements
or modifications extending such life. The agreements may be
terminated by the Company upon two calendar quarters written
notice to ITI. The agreements may only be canceled by ITI in
certain events. In addition, ITI has the right to approve the
quality and specifications of equipment and materials not
purchased directly from ITI.
On May 1, 1987, the Company entered into a supply agreement
with ITI whereby the Company has committed to purchase 90% of
its Insitutube material requirements from ITI. The agreement
automatically renews annually unless notice of termination is
provided by either party six months prior to the end of a
renewal period. As a result of certain terms not previously
fulfilled by ITI, the Company believes it is no longer required
to purchase 90% of its Insitutube material requirements from ITI
under the otherwise continuing agreement. The continuing
agreement currently extends through April 30, 1996.
In December 1990, the Company entered into a license
agreement with NuPipe, Inc., a wholly-owned subsidiary of ITI,
for the sale and installation of preformed PVC thermoplastic
pipe under the NuPipe process and trademark. The Company has
committed to pay a royalty equal to 6.75% of gross contract
revenue utilizing the process and to purchase certain
installation equipment and installation materials from ITI.
TRY TEK manufactures Insitucutter devices for sale to ITI
and the Company under an agreement with ITI, the Insitucutter
device patent holder. Unless otherwise terminated, this
agreement will continue until April 14, 1997, the date of
expiration of the Insitucutter device patent.
In 1981, the Company was assigned the rights to an
agreement (the "SAW Agreement") regarding the introduction of
potential Insituform process sublicensees to ITI. In connection
with the introduction of current Insituform process sublicensees
to ITI, the Company receives quarterly payments from ITI equal
to 0.5% of contract revenue from Insituform process
installations in the Company's licensed territory and the states
of New York, New Jersey, North Carolina, South Carolina, Georgia
and Alabama.
PATENTS
The Insituform process was developed in the United Kingdom
in 1971. The Company's rights to utilize the patents,
trademarks and know-how related to the Insituform process are
derived from its licensor, ITI. There are presently 53 United
States patents which cover various aspects of the Insituform
process and related installation techniques. The last patent to
expire will remain in effect until 2013. Two initial method
patents relating to the Insituform process (one of which covers
material aspects of the inversion process) expired in 1994, a
patent relating to the Insitutube material will expire in May
2001 and a primary method patent relating to the Insitutube
material saturation process expires in February 2001.
Although management of the Company believes these patents
are important to the business of the Company, there can be no
assurance that the validity of the patents will not be
successfully challenged or that they are sufficient to afford
protection against another company utilizing a process similar
to the Insituform process. It is possible that the Company's
business could be adversely affected upon expiration of the
patents, or by increased competition in the event that one or
more of the patents were adjudicated to be invalid or inadequate
in scope to protect the Company's operations. Management of the
Company believes, however, that while the Company has relied on
the strength and validity of these patents, the Company's
significant installation experience with the Insituform process
and its degree of market penetration in its licensed territory
should enable the Company to continue to compete effectively in
the pipeline rehabilitation market in the future as older
patents expire or become obsolete.
CUSTOMERS
The Company performs services under contracts with
governmental authorities, private industries and commercial
entities. In each of the last three fiscal years, more than 65%
of the Company's customers have been municipalities and state
agencies. During the year ended June 30, 1995, Federal
government contracts (collectively), the Metropolitan Sewer
District ("MSD") of Greater Cincinnati, Ohio and Washington
Metropolitan Area Transit Authority ("WMATA") accounted for 21%,
15% and 10%, respectively of the Company's sales. During the
year ended June 30, 1994, Federal government contracts
(collectively) accounted for 15% of the Company's sales. During
the year ended June 30, 1993, contracts with the City of
Richmond, Virginia; Fairfax County, Virginia and the Washington
Suburban Sanitary Commission ("WSSC") accounted for 15%, 12% and
11%, respectively, of the Company's sales.
SUPPLIERS
Most of the Company's materials and equipment are generally
available from several suppliers. However, the Company believes
that ITI is presently the sole source of proprietary Insitutube
material and, therefore, the Company is presently dependent upon
ITI for its supply of Insitutube material. During the last
three years the Company has not experienced any difficulty in
obtaining adequate supplies of Insitutube material from ITI and,
subject to ITI's right to approve the quality and specifications
of material not purchased from ITI, the Company has the right to
substitute an alternate polyester fiber-felt or other tube
material available in the marketplace. The Company presently
maintains an annually renewed supply agreement with ITI for
Insitutube material (see "Relationship With Insituform
Technologies, Inc." above).
REVENUE RECOGNITION AND BACKLOG
The Company recognizes sales revenue using the units of
completion method as pipeline sections are rehabilitated using
the Insituform process. An Insituform process installation is
generally performed between manholes or similar access points
within a twenty-four hour period. A rehabilitated pipeline
section is considered completed work and is generally billable
to the customer. In most cases, contracts consisting of
individual line sections have a duration of less than one year.
The total value of all uncompleted and multi-year contract
awards from customers was approximately $11.9 million at June
30, 1995, as compared to $17.0 million at June 30, 1994. The
twelve-month backlog at June 30, 1995 was approximately $11.5
million as compared to $11.1 million at June 30, 1994. The
total value of all uncompleted and multi-year contracts at June
30, 1995 and 1994 includes work not estimated to be released and
installed within twelve months as well as potential work
included in term contract awards which may or may not be fully
ordered by contract expiration. Backlog figures at specific
dates are not necessarily indicative of sales and earnings for
future periods due to the irregular timing and receipt of larger
annual term contract renewals and other large project awards.
MIDSOUTH PARTNERS
MIDSOUTH Partners was organized as a Tennessee general
partnership in December 1985 and began operations February 1,
1986. The following corporations are its general partners:
Interest in
Profits and Losses
Insitu, Inc. (a subsidiary of the Company) 42.5%
E-Midsouth, Inc. (a subsidiary of Enviroq Corporation) 42.5%
Insituform California, Inc. (a subsidiary of ITI) 15.0%
MIDSOUTH Partners operates as the Insituform process
sublicensee for Tennessee, most of Kentucky (excluding Boone,
Kenton and Campbell counties) and northern Mississippi.
MIDSOUTH Partners had a twelve-month backlog of approximately
$4.1 million and $5.0 million at June 30, 1995 and 1994,
respectively.
COMPETITION
The general pipeline replacement, rehabilitation and repair
business is highly competitive. The Company faces conceptual
and practical competition both from a number of contractors
employing traditional methods of pipeline replacement and repair
and from contractors offering alternative trenchless products
and technologies.
Traditional Methods. The Insituform process conceptually
competes with traditional methods of pipe rehabilitation
including full replacement, point repair and sliplining. The
Company believes the Insituform process usually offers a cost
advantage over full replacement as well as the practical
advantage of avoiding excavation. In addition, the Insituform
process also offers qualitatively better rehabilitation than
sliplining which may significantly reduce the diameter of the
pipe. Grouting is also undertaken in the United States. The
Company considers grouting a short-term repair technique and not
a long-term pipeline rehabilitation solution competitive with
the Insituform process. As a practical matter, competition for
the Company typically begins at the point an end user has
conceptually determined to employ trenchless technology over
traditional rehabilitation methods involving substantial
excavation.
Cured-in-Place Trenchless Technologies. Over the years,
the Company has witnessed a continuing introduction of
alternative cured-in-place trenchless technologies, none of
which the Company believes has been able to offer the quality or
technical and other merits inherent in the Insituform process.
The Company believes it remains the dominant provider of cured-
in-place trenchless pipeline rehabilitation in its licensed
territory.
Modified Sliplining Techniques. Several modified
sliplining techniques have been introduced in the trenchless
marketplace to include the use of "fold and formed"
thermoplastic pipe. The NuPipe product offered by the Company
is a folded thermoplastic product installed using modified
sliplining techniques. The Company believes that the majority
of customers will select the cured-in-place Insituform process
over modified sliplining techniques due to the quality and
longevity of the Insitupipe product, the proven performance
record of the Company's Insituform process installations over
the past seventeen years, and the broader range of design
alternatives available with the Insituform process. The Company
does offer its NuPipe product to customers in situations where,
for budget restraints or other reasons, customers or consulting
engineers consider a modified sliplining technique to be an
acceptable rehabilitation alternative.
Other Trenchless Technologies. The Company is aware of a
number of other trenchless technologies both under development
and from time to time introduced into the marketplace with mixed
results. The Company believes that the successful, in the
ground, over twenty year proven performance of the Insituform
process presents a significant advantage over alternative
trenchless products.
The principal areas of competition in pipeline replacement,
rehabilitation and repair include the quality of the work
performed, the ability to provide a long-term solution to the
pipeline problems rather than a short-term repair, the amount of
disruption to traffic and commercial activity, and the price.
The Company believes that the Insituform process competes
favorably in each of these areas with traditional replacement or
repair methods. In particular, the ability to install
Insitupipe products with little or no excavation at prices
typically at or below traditional open trench replacement
methods is of substantial competitive advantage. Further, and
despite a small reduction in pipe diameter resulting from the
installation of the Insitupipe product against the walls of the
original pipe, the smooth finished interior reduces friction and
generally increases flow capacity.
The Company believes the trenchless pipeline reconstruction
marketplace is continuing to expand, enticing ever more entrants
and products hoping that cheapest price alone will permit them
to succeed in a market otherwise dominated by Insituform. The
Company is encouraged that, in response, many of its municipal,
Federal government and industrial customers are increasingly
implementing improved procurement specifications and product
evaluation criteria emphasizing technical value instead of
simply low price. The Company continues to believe that
customers and consulting engineers using such improved
purchasing criteria help to ensure long term solutions to their
infrastructure needs by clearly differentiating a proven product
such as provided by the Insituform process from cheaply priced
trenchless substitutes with quality, technical and other risks
not equally tested by time or independent third parties.
SALES AND MARKETING
The Company's sales and marketing effort is directed by its
Vice President of Sales and Marketing. The Company's sales and
marketing team includes five sales engineers primarily serving
municipal and Federal government customers and one sales
engineer primarily serving industrial market customers. Sales
engineers are full-time employees compensated through a
combination of salary and bonus. The Company also participates
in seminars and trade shows, and produces and distributes
technical video presentations, brochures and newsletters for
current and prospective users of the Insituform process.
RESEARCH AND DEVELOPMENT
The Company is confident of its present capability to
provide pipeline rehabilitation services to its customers
primarily using the Insituform process and relies on its
licensor, ITI, for major research and development projects. On
a continuing basis, however, the Company expends engineering
efforts to improve installation methods and design techniques
for specific customer applications.
GOVERNMENTAL REGULATIONS
The Company does not anticipate any material impediments to
the use of the Insituform process arising from existing or
future regulations or requirements, including those regulating
the discharge of materials into the environment.
EMPLOYEES
At June 30, 1995, the Company employed 129 persons. None of
the Company's employees are represented or covered by collective
bargaining agreements.
PROPERTIES
The Company owns four buildings totaling 76,700 square feet
situated on a 15.45 acre site in the Ardwick Industrial Park,
Prince George's County, Maryland. This facility houses the
maintenance, operations, marketing, administration and executive
offices of the Company.
The Company also leases a 13,000 square foot branch
facility in the Cincinnati, Ohio, metropolitan area to service
operations in the western region of its licensed territory.
TRY TEK owns 13,885 square feet of land in Hanover,
Pennsylvania, with 6,139 square feet of manufacturing,
administration and storage facilities housed in three buildings.
LEGAL PROCEEDINGS
There is no material legal proceeding to which the Company
is a party or any such legal proceeding contemplated of which
the Company is aware.
Capitol Copy Products, Inc.
---------------------------
GENERAL
Capitol Copy Products, Inc. ("Capitol Copy" or the
"Company") is in the business of selling, servicing and
providing supply products for copier and facsimile ("fax")
equipment. Capitol Copy was originally organized under the laws
of the District of Columbia on May 4, 1976. The Company became
a Delaware corporation on January 27, 1988. The Company's
principal business territory comprises the greater metropolitan
Washington, D.C. area. It will expand its principal business
territory to include the greater metropolitan Baltimore area
beginning in July, 1995.
The Company's primary business products are the Canon line
of copiers and fax machines, which the Company is authorized to
sell and service under written dealer agreements with the
equipment manufacturer (see "Dealer Agreements" below). A
material portion of the Company's business is involved in
servicing this equipment.
The principal office, corporate headquarters and central
distribution facility of the Company are located at 12000 Old
Baltimore Pike, Beltsville, Maryland 20705. The Company's
telephone number is (301) 937-5030, and its fax number is (301)
937-6031.
DEALER AGREEMENTS
Capitol Copy presently maintains copier and fax dealer
agreements with its principal equipment vendor, Canon U.S.A.,
Inc. ("Canon"). The agreements formally permit Capitol Copy to
represent the Company as an "authorized" dealer of each of the
manufacturer's copier and fax products, and allows the Company
to benefit from advertising, access to product, training, and
various other support from the equipment manufacturer.
The Canon agreements authorize a primary sales and service
area responsibility ("territory") for the Company to be
comprised of the District of Columbia; the Maryland counties of
Montgomery and Prince George's; the Virginia counties of
Arlington and Fairfax; and the Virginia cities of Alexandria and
Fairfax. Also included in the territory beginning in July, 1995
are the Maryland counties of Anne Arundel, Baltimore, Carroll,
Harford and Howard; and the Maryland city of Baltimore.
The Canon agreements remain in effect until terminated by
either party upon specified notice, or by failure to adhere to
agreement provisions. The Company believes that its
requirements under the Canon agreements have been and are being
met, and that it maintains an excellent relationship with this
principal vendor. While the Company's relationship with its
customers may enable substitution of an alternate vendor line in
the event of any unforeseen termination of the Canon agreements,
the Company presently believes that any such termination could
have a material adverse impact upon the Company.
CUSTOMERS
The Company provides service and supply products to
approximately 8,000 customers in the Washington, D.C.
metropolitan area. More than 90% of its active customers are
utilizing Canon products.
The majority of the Company's customers operate one to
three copier or fax units, with fewer than forty active accounts
operating ten or more machines. No single customer accounts for
more than 5% of the Company's annual sales revenue.
PROPERTIES
At June 30, 1995, Capitol Copy occupied two commercial
sites in Maryland and Virginia. The Company leases all of its
facilities which at year-end aggregated to approximately 18,000
square feet of office, showroom and warehouse space.
The Company believes that the space it occupies for its
operations is adequate for its current and near-term
requirements. As additions or reductions in space become
required, the Company anticipates no material problems in
securing in due course appropriate adjustments in occupied
space.
COMPETITION
Capitol Copy has several regional competitors in each of
the Company's product lines. However, in the Company's
principal product line, copiers and fax machines manufactured by
Canon, the Company believes it presently is the largest full
line dealer in the Washington, D.C. area.
It is possible that the Company's equipment vendors may
authorize additional full line dealers in the Company's
territory, or that the Company's vendors may themselves enter or
expand their product distribution directly. The Company is not
aware of any plans by Canon to market directly in the Company's
territory (to other than government customers, or major,
national accounts, which market segments they have traditionally
reserved), or to authorize additional dealers. Based upon
overall performance by existing dealers, the Company believes
that the historical disinclination of Canon to authorize
additional area dealers remains unchanged at present. The
Company knows of no adverse developments regarding its dealer
agreement with its principal vendor, Canon.
The principal competitive factors affecting the Company are
product recognition, the ability to deliver an efficient service
and repair capability, and price. As the Company's line of
copiers is principally manufactured by an overseas vendor, there
exists the risk of currency fluctuations or trade embargoes
affecting the pricing or delivery of the Company's products.
SALES AND MARKETING
The Company markets its products directly through its own
selling organization consisting of twenty-two sales
representatives, four sales managers and the Company President.
The sales representatives are organized by geographic area. The
sales representatives are full-time employees and are
compensated through a combination of salary, commissions and
bonuses for sales in excess of quotas.
The sales organization is supported by presentation
materials, customer literature and media advertising in both
radio and print. In addition, the Company's product lines are
advertised on a national basis by the equipment manufacturers.
LEGAL PROCEEDINGS
There is no material legal proceeding to which the Company
is a party or any such legal proceeding contemplated of which
the Company is aware.
EMPLOYEES
At June 30, 1995, the Company employed 93 full-time
persons. None of the Company's employees are represented or
covered by collective bargaining agreements.
Item 2. Properties
-------------------
See the "Properties" sections of Part I, Item 1(c),
"Narrative Description of Business" for details concerning the
properties of each subsidiary company comprising, in the
aggregate, the properties of the Registrant.
Item 3. Legal Proceedings
--------------------------
The only material pending legal proceedings to which the
Company is a party or any such legal proceedings contemplated of
which the Company is aware are (a) a previously disclosed
lawsuit in the Court of Chancery of the State of Delaware
currently on appeal, and (b) a previously disclosed lawsuit
pending in the Superior Court of the District of Columbia.
(a) As previously reported by the Company, on March 12,
1990, the controlling stockholders of the Company, George Wm.
Erikson and Robert W. Erikson (together, the "Eriksons"),
executed a letter of intent and subsequently executed four
amendments thereto (collectively referred to herein as the
"Letter of Intent") with Insituform Technologies, Inc. ("ITI")
(formerly Insituform of North America, Inc. or "INA") to effect
a sale of their controlling interest in the Company to ITI for
$6,000,000 (the "Proposed Transaction"). The Proposed
Transaction, if consummated, would have had the effect of making
ITI the controlling stockholder of the Company, and, indirectly,
of each of the Company's three direct subsidiaries at the time,
Insituform East, Capitol Copy, and CERBERONICS. On September
19, 1990, the Eriksons informed the Company that the Letter of
Intent had expired without consummation of any transaction, that
it would not be further extended, that negotiations had ceased,
and that the Eriksons had no further intention at the time of
pursuing the proposed sale of their controlling interest in the
Company to ITI.
As previously reported by the Company, on August 24, 1990,
a complaint was filed in the Court of Chancery of the State of
Delaware in and for New Castle County (the "Court of Chancery")
by two stockholders of the Company, Merle Thorpe, Jr. and the
Foundation for Middle East Peace. The complaint is captioned
Merle Thorpe, Jr. and Foundation for Middle East Peace v.
CERBCO, Inc., et al., C.A. No. 11713. The complaint, as
amended, is hereinafter referred to as the "Complaint."
Defendants to the Complaint are the Company and the Eriksons.
The Complaint, which stated that it was filed by plaintiffs
on their own behalf and derivatively on behalf of the Company,
sought (i) damages against the individual defendants for alleged
breach of fiduciary duties in an amount not less than
$6,000,000, together with interest thereon from March 12, 1990;
(ii) to permanently enjoin the Eriksons from completing any
transaction between the Eriksons and ITI similar in substance to
the Proposed Transaction; (iii) a declaration of the invalidity
of the 1982 authorization for and issuance of the Company's
Class B Common Stock, and, therefore, of the entitlement of
holders of Class B Common Stock to elect any members of the
Company's Board; (iv) a declaration of the invalidity of the
1990 election of the Company's directors and the issuance of new
proxy materials that fully and fairly disclose all facts which
plaintiffs claim are material to the election of directors; (v)
an award to plaintiffs of their costs of bringing the action,
including reasonable attorneys' fees; and (vi) an award to
plaintiffs of such further relief as the Court of Chancery
deemed appropriate. In addition, the Complaint asserted a claim
against the individual defendants alleging that the Company has
forgone a corporate opportunity by the continued failure to
pursue a transaction with ITI.
On May 1, 1991, the Company and the Eriksons filed with the
Court of Chancery a Motion to Dismiss the Complaint. Oral
argument on the Motion to Dismiss was heard on November 7, 1991
and, on November 15, 1991, the Court issued its Memorandum and
Order on the motion. The Court granted defendants' motion to
dismiss some of the claims, but denied defendants' motion with
respect to two of the counts in the litigation. The claims
remaining in the litigation at that time were plaintiffs'
allegations in Count I that the Proposed Transaction was an
opportunity belonging to the Company and that the Eriksons
breached their duty to the Company by precluding the Company
from taking advantage of that opportunity so that the Eriksons
might have a chance to do so, and in Count II that the Company's
1982 proxy statement was false or misleading and, as a result,
the Company's recapitalization should be rescinded.
Following receipt of the Court of Chancery's opinion and
order, as part of the discovery process, the parties began
responding to written interrogatories and producing documents.
Plaintiffs began taking the oral depositions of witnesses, and
the Eriksons took the oral deposition of plaintiffs. On
September 16, 1992, the Company filed a Motion for Summary
Judgment on Count II of the Complaint, which related to the 1982
recapitalization. The basis of this motion was that the
plaintiffs lacked standing to make claims relating to the
recapitalization since they were not stockholders at the time.
The Eriksons also filed a Motion for Summary Judgment as to
Count II of the Complaint on the same basis. Following briefing
on the motions, the Court issued its Memorandum Opinion and
Order on January 26, 1993. The Court granted Summary Judgment
and dismissed Count II of the Complaint, which sought rescission
of the Company's 1982 recapitalization.
On December 21, 1992, the Eriksons filed a Motion for
Summary Judgment on Count I of the Complaint. The basis of this
motion was that the plaintiffs are not proper derivative
representatives and that their counsel, Hogan & Hartson, is not
appropriate derivative counsel. The Eriksons also filed a
Motion for Summary Judgment on the merits of Count I of the
Complaint. The basis of this motion was that (i) there never
was a corporate opportunity available to the Company to sell its
controlling position in Insituform East to ITI; (ii) the
Eriksons did not preclude a transaction between the Company and
ITI or misuse their fiduciary positions; and (iii) plaintiffs
have not shown any damages. The Company informed the Court of
Chancery that it supported the Motion for Summary Judgment on
the merits of Count I. Oral argument on both of the motions was
held before the Court of Chancery on July 23, 1993.
On October 29, 1993, the Court of Chancery issued its
Memorandum Opinion on the Eriksons' Motion for Summary Judgment
on the merits of Count I. The Court of Chancery did not grant
summary judgment, because it did not believe that the record was
sufficiently established.
On November 1, 1993, plaintiffs served the Company and the
Eriksons with additional discovery requests. On November 5,
1993, the Eriksons filed a Motion for Clarification, Reargument
or Supplemental Briefing, together with a Motion to Stay the
Discovery served by plaintiffs until the issues raised by their
other motions were resolved. The Company informed the Court of
Chancery that it supported the motions filed by the Eriksons.
On January 20, 1994, the Court of Chancery issued its
opinion denying the Eriksons' Motion for Clarification,
Reargument, or Supplemental Briefing. The Court reiterated its
prior holding that the record was not sufficiently established
to grant the Eriksons' Motion for Summary Judgment.
On May 6, 1994, the Eriksons filed a Motion for Summary
Judgment on the issue of whether any corporate opportunity
existed for the Company to enter into a transaction with ITI.
On May 31, 1994, the Court of Chancery issued an opinion stating
that a full factual record should be developed at trial before
it ruled on the legal issues presented in the Eriksons' motion.
Trial in this matter was held before Chancellor Allen beginning
on February 21, 1995.
Following post-trial briefing and argument, Chancellor
Allen issued an opinion on August 9, 1995, in which he ruled in
favor of the Eriksons. The court determined that, while the
Eriksons failed in certain limited respects to meet the
standards of loyalty required of them under Delaware corporate
law, that "deviation from proper corporate practice" neither
caused injury to CERBCO nor resulted in any substantial gain to
the Eriksons. The Court also found that the Eriksons met their
burden of showing that their conduct was "wholly fair to the
corporation." With this decision, all of the plaintiffs' claims
have been resolved in favor of CERBCO and/or the Eriksons.
On August 25, 1995, the Court of Chancery issued its
Memorandum and Order on Final Judgment and a corresponding Final
Order and Judgment, which latter document formally entered
judgment in favor of the Eriksons and denied in toto the
plaintiffs' request for legal fees and expenses totaling
$1,513,499. The Court concluded that the litigation conferred
no substantial benefit on CERBCO, so that it would be
inappropriate to require CERBCO and its stockholders to share
the costs that plaintiffs incurred.
Plaintiffs filed a Notice of Appeal with the Delaware
Supreme Court on August 30, 1995. Plaintiffs' opening Delaware
Supreme Court brief is due on October 16, 1995.
(b) As previously reported by the Company, on January 5,
1993, a separate lawsuit arising out of the subject matter of
Count I of the Court of Chancery lawsuit was filed in the
Superior Court of the District of Columbia (the "Superior
Court"). The plaintiffs are Merle Thorpe, Jr. and the
Foundation for Middle East Peace, the same two stockholders who
filed the lawsuit in the Court of Chancery, and George Davies, a
former director of the Company. The complaint is captioned
Merle Thorpe, Jr., George Davies and Foundation for Middle East
Peace v. John Paul Ketels, et al., C.A. No. 93-CA00051. That
complaint is hereinafter referred to as the "D.C. Complaint."
Defendants to the D.C. Complaint are partners in the law firm of
Rogers & Wells and the Company.
The D.C. Complaint, which states that it was filed on
behalf of the Company, alleges that Rogers & Wells breached its
duty of loyalty and care to the Company by representing
allegedly conflicting interests of the Eriksons in the Proposed
Transaction with ITI. The plaintiffs also claim that Rogers &
Wells committed malpractice by allegedly making
misrepresentations to the Company's Board and allegedly failing
to properly inform the Company's Board. The plaintiffs claim
that the conduct of Rogers & Wells caused the Company to lose an
opportunity to sell its control of Insituform East to ITI,
caused the Company to incur substantial expense, and unjustly
enriched Rogers & Wells. The D.C. Complaint seeks to recover
from Rogers & Wells (i) damages in an amount equal to all fees
paid to Rogers & Wells, (ii) damages in an amount not less than
$6,000,000 for the loss of the opportunity for the Company to
sell its control of Insituform East to ITI, and (iii) punitive
damages.
The plaintiffs did not make a demand on the Company's Board
that the Company sue Rogers & Wells. The Company does not
believe that Rogers & Wells should be sued on any of the claims
set forth in the D.C. Complaint. On February 23, 1993, the
Company filed a motion to dismiss the D.C. Complaint for failure
of the plaintiffs to make a proper demand on the Company's
Board. The Company also filed a motion to stay the proceedings
to the Superior Court until the lawsuit pending in the Delaware
Court of Chancery has been concluded. Similar motions were
filed by Rogers & Wells. On March 14, 1993, the Superior Court
denied the motions to dismiss, but granted a stay of the
proceedings in that court until a ruling was made on the motions
pending in the Delaware Court of Chancery.
On January 14, 1994, the plaintiffs and Rogers & Wells
submitted status reports to the Superior Court. The Superior
Court held a status conference on February 16, 1994 and
established a tentative trial date for November 28, 1994. On
July 28, 1994, in light of the scheduled trial in the Delaware
Court of Chancery, the Superior Court stayed all proceedings in
this case until further order. A status report on the Delaware
action was submitted by the parties on April 3, 1995.
After the Court of Chancery's August 9, 1995 opinion was
rendered, the parties to the Superior Court action filed
additional status reports. The Superior Court has scheduled the
next status hearing for October 30, 1995.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
----------------------------------------------------------
(a) Market Information
(i) Common Stock
CERBCO's Common Stock is traded in the over-the-counter
market and is included in the National Association of Securities
Dealers ("NASD") National Market System ("NMS"). Quotations for
such shares are reported in the National Association of
Securities Dealers Automated Quotations ("NASDAQ") System under
the trading symbol CERB. Holders of Common Stock have one vote
per share on all matters on which stockholders are entitled to
vote together.
The following table shows the range of bid quotations for the
period indicated as reported by NASDAQ:
<TABLE>
<CAPTION>
Common Stock
Fiscal Year Ended June 30, 1994 High Low
<C> <S> <C> <C>
1st Quarter 2 1/4 1 5/8
2nd Quarter 4 1/4 1 5/8
3rd Quarter 4 5/8 3 1/8
4th Quarter 4 3/8 3 1/8
Fiscal Year Ended June 30, 1995 High Low
1st Quarter 3 7/8 2 5/8
2nd Quarter 5 1/4 3 3/8
3rd Quarter 5 4
4th Quarter 5 1/8 4 1/4
</TABLE>
The quotations in the above table represent prices between
dealers, without retail mark-ups, mark-downs or commissions, and
may not necessarily represent actual transactions.
(ii) Class B Common Stock
There is no public trading market for shares of CERBCO's
Class B Common Stock. Holders of shares of Class B Common Stock
have ten votes per share on all matters with the exception of
the election of directors and any other matter requiring the
vote of stockholders separately as a class. Holders of Class B
Common Stock are entitled to elect the remaining directors after
election of not less than 25% of the directors by the holders of
Common Stock, voting separately as a class. Shares of Class B
Common Stock are convertible at any time to shares of Common
Stock on a share-for-share basis.
(b) Holders
As of September 13, 1995, the approximate number of holders
of each class of common equity of CERBCO was as follows:
Common Stock 354
Class B Common Stock 140
(c) Dividends
No dividends were declared in 1995 or 1994.
Item 6. Selected Financial Data
--------------------------------
The selected financial data set forth below should be read
in conjunction with the Company's consolidated financial
statements and related notes included elsewhere in this report.
<TABLE>
(in thousands, except per share information and return on equity
amounts)
OPERATIONS STATEMENT INFORMATION
<CAPTION>
Years ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Sales $39,143 $29,846 $24,774 $28,984 $30,806
Operating profit
(loss) $5,583 $2,234 $(657) $2,120 $2,729
Earnings (loss)
before income
taxes and non-owned
interests $6,602 $2,526 $(308) $1,962 $2,397
Earnings (loss)
before non-owned
interests $3,637 $1,246 $(237) $1,220 $1,217
Earnings from
continuing
operations $1,391 $588 $19 $430 $8
Net earnings (loss) $1,542 $1,319 $(290) $340 $(791)
Net earnings (loss)
per share:
Continuing
operations $0.96 $0.40 $0.01 $0.29 $0.01
Net earnings (loss) $1.06 $0.90 $(0.20) $0.23 $(0.54)
Weighted average
number of shares 1,460 1,457 1,457 1,457 1,457
Dividends declared
per share $0 $0 $0 $0 $0
</TABLE>
<TABLE>
BALANCE SHEET INFORMATION
<CAPTION>
June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Accounts receivable $6,386 $6,675 $3,641 $5,423 $5,805
Working capital $12,152 $9,480 $7,313 $8,044 $10,300
Total assets $32,980 $29,507 $27,559 $29,452 $33,397
Short-term debt $0 $561 $701 $420 $565
Long-term debt $24 $41 $629 $1,207 $5,806
Non-owned interests $12,367 $10,318 $9,809 $10,749 $10,489
Stockholders'
equity $15,000 $13,445 $12,127 $12,492 $12,152
Average
stockholders'
equity (Weighted
average equity
during year
exclusive of
current earnings) $13,452 $12,127 $12,454 $12,152 $12,933
Return on equity
(Current earnings
divided by average
stockholders'
equity
as defined above) 11.5% 10.9% (2.3)% 2.7% (6.1)%
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-----------------------------------
Overview and Outlook
--------------------
CERBCO experienced consolidated earnings of $1,391,039
($.96) from continuing operations and overall net earnings of
$1,542,388 ($1.06), including a gain on disposal of discontinued
operations, for its fiscal year ended June 30, 1995. The
Company recognized earnings from continuing operations and an
overall net earnings of $518,817 ($.36) for its fourth quarter.
Sales were $39.1 million and $10.2 million for the fiscal year
and the fourth quarter, respectively.
Of particular note, net earnings per share from continuing
operations rose dramatically from $0.01 to $0.04 to $0.96 over
fiscal years 1993, 1994 and 1995. However, while there can be
no assurances, the Company presently anticipates fiscal 1996
earnings per share to level out at or near fiscal 1995 results,
and to then experience modest growth into the foreseeable future
in the course of ordinary business operations.
The Company attributed its increased results to the
excellent results of its two operating subsidiaries, each of
which is in a separate industry segment. Both of the Company's
operating subsidiaries recognized record sales in fiscal year
1995. Insituform East, the Company's pipeline rehabilitation
segment, saw the favorable results experienced in the fourth
quarter of fiscal year 1994 continue throughout fiscal year
1995. Insituform East's sales increased $6.8 million (45.9%) to
$21.6 million, as it witnessed restored market demand and
expanded its production capacity. Insituform East contributed
$678,435 (up $631,274) in net earnings to CERBCO's fiscal year
results. Capitol Copy, the Company's copy machine products and
services segment, continued to improve its financial performance
in fiscal year 1995. Capitol Copy's sales increased $2.5
million (16.7%) to $17.5 million, as it continued to sell more
high volume, higher priced units and expanded its service and
supply customer base. Capitol Copy contributed $1,592,909 (up
$482,726) in net earnings to CERBCO. The Company also benefited
in fiscal year 1995 from a gain from discontinued operations of
$151,349 obtained from final payment of the last few open
government contracts of the Company's wholly-owned subsidiary,
CERBERONICS, now no longer operating.
Subsidiary contributions were offset by unallocated net
general corporate expenses in the amount of $880,305, including
$537,616 related to the demands made of, and litigation being
continued against, the Company by two associated, minority
stockholders in connection with the unconsummated private sale
of a controlling interest in the Company abandoned in September
1990. From inception in 1990 through the year ended June 30,
1995, legal fees and expenses resulting from this litigation
totaled approximately $2.0 million. In August 1995, a Final
Order and Judgment was rendered by the Court in favor of the
defendants which has been appealed to the Delaware Supreme Court
by plaintiffs. In addition, in August 1995, plaintiffs in such
litigation asserted a claim directly against the Company for
$1,513,499 for their legal fees and expenses in the unsuccessful
suit, subsequently denied in the Court's Final Order and
Judgment, but reasserted in plaintiffs' appeal. The Company
cannot, of course, predict the outcome of pending litigation,
including appeals. Any outcome from the appeal resulting in an
award to plaintiffs of their legal fees and expenses could have
a material adverse effect on the earnings of the Company. For
additional information on the status of this litigation, see
Part I, Item 3, "Legal Proceedings."
For financial information relating to CERBCO's two
operating segments, see Part I, Item 1(b), "Financial
Information about Industry Segments."
After experiencing two years of depressed sales in fiscal
years 1993 and 1994, Insituform East saw a return in 1995 to a
level of sales achieved during the four-year period from 1989 to
1992 when it recorded sales of $21.2 million, $19.5 million,
$21.3 million and $19.4 million, respectively. While there can
be no assurances regarding future operating performance, based
on the volume and mix of Insituform East's present and expected
backlog of customer orders, the favorable results experienced
during fiscal 1995 are presently anticipated to continue through
fiscal year 1996. Insituform East intends to further expand its
production capabilities during fiscal year 1996 to both increase
its Insituform installation capacity for the future and to
extend further its ability to provide complimentary products and
services to its trenchless rehabilitation customers.
The Company believes the trenchless pipeline reconstruction
marketplace is continuing to expand, thereby enticing, however,
the entry of ever more imitations and substitute products hoping
that cheap price alone may permit them to succeed in a market
otherwise dominated by the Insituform process. In those limited
markets where the cheapest priced product may be deemed
technically "good enough," the Insituform process is at a
disadvantage. Conversely, the Company is encouraged that a
majority of its municipal, Federal government and industrial
customers already use or are implementing ever-improving
procurement specifications and contract award evaluation
criteria emphasizing technical value instead of simply low
price. In value and quality based procurements, the Insituform
process remains at an advantage. The Company continues to
believe that customers and consulting engineers using quality
based purchasing criteria help to ensure long term solutions to
their infrastructure needs by clearly differentiating proven
products such as provided by the Insituform process from cheaply
priced trenchless substitutes with technical, performance and
installation risks not equally tested by time or independent
third parties.
The principal factor affecting Insituform East's future
performance remains the volatility of earnings as a function of
sales volume at normal margins. Accordingly, because a
substantial portion of Insituform East's costs are semi-fixed in
nature, earnings can, at times, be severely reduced or
eliminated during periods of depressed sales at normal margins
or material increases in discounted sales, even where total
revenues experience an apparent buoyancy or growth from the
addition of discounted sales undertaken from time to time for
strategic reasons. Conversely, at normal margins, increases in
period sales typically leverage positive earnings significantly.
Capitol Copy has increased sales in each of the last five
years, growing from sales of $9.5 million in fiscal year 1991 to
$17.5 million in fiscal year 1995, in a sales and service
territory consisting of the cities and counties in the
Washington, D.C. metropolitan area. The Company believes that
the favorable results from this territory should continue into
the next fiscal year. In July 1995, Capitol Copy expanded its
territory to include the contiguous Baltimore metropolitan area.
The Company anticipates that it will take approximately four
years to adequately develop the additional territory. While it
is estimated that sales in this new territory could reach
approximately $2 million by June 30, 1996, start up costs and
expenses are expected to exceed revenues by approximately
$200,000 during the initial 1996 fiscal year. Development of
the additional territory over the estimated four-year period is
not anticipated to impact materially on continuing overall
annual operating results.
As further discussed in Part II, Item 8, "Notes to
Consolidated Financial Statements - Note 13: Contingencies,"
the Company has filed a demand for arbitration and Insituform
Technologies, Inc. ("ITI") has initiated litigation in
connection with the acquisition of control of a 42.5% interest
in MIDSOUTH Partners by Insituform Mid-America, Inc. ("IMA") on
April 18, 1995. ITI has agreed to postpone its litigation in
connection with a joint announcement by ITI and IMA on May 24,
1995 that they had entered into a definitive agreement providing
for the combination of ITI and IMA which, if consummated, would
result in IMA becoming a wholly-owned subsidiary of ITI.
Although the Company cannot, at this time, predict the eventual
outcome of these matters and their impact on the Company's
interest in the Partnership, any potential outcome that resulted
in the loss by the Company of its ability to recognize its share
of the results of operations of MIDSOUTH Partners could have a
material adverse effect on the future earnings of the Company.
Results of Operations
---------------------
The following table sets forth, for the periods indicated,
the relative percentages that certain items of expense and
earnings bear to the sales of CERBCO and the percentage
increases in the dollar amounts of each item from period to
period.
<TABLE>
Results of Operations
---------------------
<CAPTION>
Percentage Period to
Relationship Period
to Revenues Changes
Years ended Years ended
June 30 June 30
1995 1994
1995 1994 1993 vs 1994 vs 1993
<S> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 31.2% 20.5%
------ ------ ------
Costs and Expenses:
Cost of Sales 64.6 69.1 72.2 22.6 15.4
Selling, general and
administrative
expenses 21.1 23.4 30.4 18.3 (7.5)
---- ---- ----
Total Costs and
Expenses 85.7 92.5 102.6 21.5 8.6
---- ---- -----
Operating Profit (Loss) 14.3 7.5 (2.6) 149.9 n/a
Investment Income 0.5 0.4 0.4 69.9 4.5
Equity in Earnings of
Unconsolidated Affiliate 1.9 0.5 1.4 377.3 (54.9)
Interest Expense (0.1) (0.3) (0.5) (72.6) (17.1)
Other Income (Expense)
- net 0.3 0.4 0.1 (11.8) 597.9
---- ---- ----
Earnings (Loss) Before
Income Taxes and
Non-Owned Interests 16.9 8.5 (1.2) 161.4 n/a
Income Taxes 7.6 4.3 (0.3) 131.6 n/a
---- ---- ----
Earnings (Loss) Before
Non-Owned Interests 9.3 4.2 (0.9) 191.9 n/a
Non-Owned Interests 5.7 2.2 (1.0) 241.6 n/a
---- ---- ----
Earnings (Loss) from
Continuing Operations 3.6 2.0 0.1 136.5 3,044.8
Discontinued Operations 0.3 2.4 (1.3) (79.3) n/a
---- ---- ----
Net Earnings (Loss) 3.9% 4.4% (1.2)% 17.0 n/a
---- ---- ----
---- ---- ----
</TABLE>
1995 vs 1994
------------
Consolidated sales increased $9.3 million (31.2%) in 1995
as compared to 1994 as sales increased in both of the Company's
operating segments. Insituform East's sales increased $6.8
million (45.9%), primarily due to available work and expanded
production capacity associated with the addition of another
installation crew during the second quarter of fiscal year 1995.
Insituform East achieved sales volume increases at normal
margins in all three of its market sectors -- municipal, Federal
government and industrial. Sales in these three areas were 65%,
21% and 14%, respectively, of Insituform East's fiscal year 1995
sales. Capitol Copy's sales increased $2.5 million (16.7%) in
1995. While equipment sales increased 8.5%, reflecting some
increase in the sales of high volume machines which typically
sell at higher prices, copier service and supply revenues
increased 24.7% primarily due to an increase, net of
cancellations, in service contracts resulting from an expanding
customer base.
Operating profit increased $3.3 million (149.9%) in 1995 as
compared to 1994 due primarily to Insituform East achieving an
operating profit of $2.5 million in 1995 after an operating loss
of -$0.2 million in 1994. Insituform East's gross profit margin
increased from 22.5% to 30.5% as its semi-fixed operating costs
were absorbed over increased sales in 1995. Insituform East's
selling, general and administrative costs increased 15.7%, a
smaller percentage increase than sales, primarily as a result of
costs associated with increased production activities. Capitol
Copy's operating profit increased $1.1 million (35.0%) to $4.1
million, as overall gross profit increased slightly from 39.2%
to 41.4% and general and administrative costs increased 11.3%, a
smaller percentage increase than sales. The parent company's
operating loss increased $0.4 million primarily due to an
increase in corporate legal expenses.
Insituform East's equity in the operating results of
MIDSOUTH Partners increased $0.6 million (377.3%) in 1995 as
compared to 1994, primarily as a result of a 43.5% increase in
MIDSOUTH Partners' comparable period sales from $6.2 million to
$8.9 million. The increase in sales was due to consistently
high production levels throughout the year and increased sales
to Federal government customers. The Partnership's gross profit
margin increased from 21.1% in 1994 to 30.7% in 1995 due in part
to improved production efficiency, the mix of contracts
performed and the absorption of semi-fixed operating costs over
increased sales.
The gain on disposal of discontinued operations decreased
from $0.7 million in 1994 to $0.1 million in 1995, primarily due
to the receipt of a substantial one-time payment in 1994 in
connection with the discontinued operations of CERBERONICS
resulting from the settlement of a lawsuit with the U.S. Navy
(see Part II, Item 8, "Notes to Consolidated Financial
Statements -- Note 7: Discontinued Operations").
1994 vs 1993
------------
Consolidated sales increased $5.1 million (20.5%) in 1994
as compared to 1993 as sales increased in both of the Company's
operating segments. Insituform East's sales increased $1.7
million (13.0%), primarily due to increased purchasing activity
from its Federal government customers and increases in
additional rehabilitation services performed in conjunction with
contracted Insituform process installations. Capitol Copy's
sales increased $3.4 million (28.9%)in 1994. Equipment sales
increased 31.0%, primarily due to the placement of more machines
in total and more high volume machines, which typically sell at
higher prices. Copier service and supply revenues increased
26.9%, primarily due to an increase, net of cancellations, in
service contracts resulting from an expanding customer base.
The Company had an operating profit of $2.2 million in 1994
as compared to an operating loss of -$0.7 million in 1993.
Insituform East had an operating loss of -$0.2 million in 1994
as compared to an operating loss of -$2.0 million in 1993.
While Insituform East's sales volume increased in 1994, its
gross profit margin improved from 16.8% to 22.5%, and its
selling, general and administrative expenses were reduced by
$0.6 million, these improvements were not enough to offset the
effect of semi-fixed operating costs on (still) reduced sales
volume. Capitol Copy had an operating profit of $3.0 million
(up 53.7%) in 1994, primarily due to its substantial increase in
sales. While Capitol Copy's gross profit margin decreased from
40.2% in 1993 to 39.2% in 1994, its operating profit margin
increased from 16.7% to 20.0%, primarily due to a much smaller
increase in general and administrative expenses (5.3%) than its
increase in sales. The parent company's operating loss
decreased, primarily as a result in a decrease in allocated
corporate legal expenses.
Insituform East's equity in the operating results of
MIDSOUTH Partners decreased $0.2 million in 1994 as compared to
1993 primarily due to a decrease in comparable period sales from
$8.1 million to $6.2 million and the mix of contracts performed.
Similar to the experience of Insituform East, MIDSOUTH Partners'
earnings can be significantly reduced during periods of
depressed sales due to the semi-fixed nature of a substantial
portion of its operating costs.
As referred to above, the Company recognized a gain on
disposal of discontinued operations of $0.7 million in 1994 in
connection with its discontinued defense contract segment,
CERBERONICS. In 1993, the Company recognized a loss of -$0.2
million from the discontinued cement mortar lining operations of
Insituform East and an estimated loss or disposal of these
operations of $0.1 million (see Part II, Item 8, "Notes to
Consolidated Financial Statements -- Note 7: Discontinued
Operations").
Liquidity and Capital Resources
-------------------------------
Liquidity may be defined as the Company's ability to
mobilize cash. Cash and cash equivalents increased $3.0 million
in fiscal year 1995. Insituform East's cash and cash
equivalents increased $2.0 million, and Capitol Copy's cash and
cash equivalents increased $1.1 million. At the holding company
level, CERBCO's cash and cash equivalents decreased $0.1
million. Consolidated cash and cash equivalents decreased $1.9
million and $0.3 million in fiscal years 1994 and 1993,
respectively. However, CERBCO purchased temporary investments
of $2.3 million in fiscal year 1994.
The Company's operating activities provided approximately
$4.7 million in cash during fiscal year 1995, primarily due to
the earnings of the Company's two operating subsidiaries and
non-cash expenses by it and its subsidiaries for depreciation
and amortization. Income taxes payable increased $0.4 million
at June 30, 1995. Insituform East's income taxes payable
increased $0.4 million as a result of the timing of payment of
fiscal year 1995 estimated federal and state income tax
deposits. Net cash provided by operating activities was
approximately $1.9 million during fiscal year 1994, primarily
due to the increased earnings of Capitol Copy, the receipt by
CERBCO of the C-9 lawsuit settlement payment plus interest, and
non-cash expenses for depreciation and amortization. These
accounts were offset by an increase in accounts receivable at
June 30, 1994. Insituform East's accounts receivable increased
$2.6 million, primarily due to a $2.3 million increase in sales
in the fourth quarter of fiscal year 1994 as compared with the
fourth quarter of fiscal year 1993. Despite a net loss in
fiscal year 1993, net cash provided by operating activities was
approximately $0.8 million, primarily as a result of non-cash
expenditures for depreciation and amortization and a decrease in
accounts receivable at June 30, 1993. Insituform East's
accounts receivable decreased $1.9 million, primarily due to a
$2.2 million decrease in sales for the fourth quarter of fiscal
1993 as compared with the fourth quarter of fiscal 1992.
Net cash used in investing activities was approximately
$1.0 million, $2.8 million and $0.7 million in fiscal years
1995, 1994 and 1993, respectively. The primary use of such
funds was for capital expenditures by Insituform East in each of
the fiscal years and the purchase by the parent company of six-
month treasury bills, accounted for as temporary investments, in
fiscal year 1994. Insituform East's capital expenditures in
fiscal year 1995 included purchases of vehicles and equipment to
expand the Company's production capabilities, in addition to
replacing aging units. Fiscal year 1994 and 1993 expenditures
were primarily to replace aging units. Insituform East also
received cash distributions of $123,250 and $340,000 from
MIDSOUTH Partners in fiscal years 1995 and 1993, respectively.
Net cash used in financing activities was $0.7 million,
$0.9 million and $0.4 million in fiscal years 1995, 1994, and
1993, respectively, primarily as the result of paydowns by
Capitol Copy on its line of credit in each of the three years
and on long-term borrowings in fiscal years 1994 and 1993.
During fiscal years 1995, 1994 and 1993, Insituform East paid
cash dividends declared for fiscal years 1994, 1993 and 1992,
respectively. During fiscal year 1993, Insituform East also
expended $94,630 for the open-market purchase of shares of its
Common Stock.
CERBCO believes that its two principal operating
subsidiaries, Insituform East and Capitol Copy, have cash
reserves, existing open bank lines of credit or borrowing
potential against unencumbered assets sufficient to meet the
respective cash flow requirements for operating funds and
capital expenditures of each operating company. Insituform East
has available as undrawn the amount of $3.0 million on its
individual line of credit. Capitol Copy did not deem it
necessary to renew its line of credit which expired January 31,
1995. Its cash reserves were in excess of $1.0 million at June
30, 1995 and are expected to grow further in fiscal year 1996.
The parent holding company, CERBCO, also does not have a
separate bank line of credit, but has cash reserves in excess of
$2.5 million which are believed to be adequate to meet its own
cash flow requirements, or the requirements of its subsidiaries,
in the foreseeable future, including continuing legal fees and
expenses of the parent in connection with the stockholder
litigation now on appeal to the Delaware Supreme Court. The
Company cannot, of course, predict the outcome of pending
litigation, including appeals. Any outcome that resulted in an
award to plaintiffs of their legal fees and expenses, however,
could have a material adverse effect on the future liquidity of
the Company.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
See financial statements and supplementary financial
information provided following Item 9 below.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
-----------------------------------
Not applicable.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of CERBCO, Inc.
We have audited the accompanying consolidated balance sheets of
CERBCO, Inc. and subsidiaries as of June 30, 1995 and 1994, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those 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, such consolidated financial statements present
fairly, in all material respects, the financial position of
CERBCO, Inc. and subsidiaries as of June 30, 1995 and 1994, and
the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1995, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
September 15, 1995
Washington, D.C.
<PAGE>
<TABLE>
CERBCO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Years ended June 30
1995 1994 1993
Sales
<S> <C> <C> <C>
Sales of products $29,696,264 $22,271,971 $18,806,252
Sales of services and
supplies 9,446,520 7,573,766 5,968,158
----------- ----------- -----------
TOTAL SALES 39,142,784 29,845,737 24,774,410
----------- ----------- -----------
Costs and Expenses:
Cost of products sold 20,602,316 16,733,878 14,904,672
Cost of services and
supplies 4,692,154 3,891,171 2,974,204
Selling, general and
administrative expenses 8,265,371 6,986,818 7,552,481
----------- ----------- -----------
Total Costs and
Expenses 33,559,841 27,611,867 25,431,357
----------- ----------- -----------
Operating Profit (Loss) 5,582,943 2,233,870 (656,947)
Investment Income 200,421 117,986 112,857
Equity in Earnings of
Unconsolidated Affiliate 738,798 154,786 343,341
Interest Expense (28,290) (103,110) (124,336)
Other Income (Expense)
- net 107,753 122,130 17,500
----------- ----------- -----------
Earnings (Loss) Before
Income Taxes and
Non-Owned Interests 6,601,625 2,525,662 (307,585)
Provision (Credit) for
Income Taxes 2,965,000 1,280,000 (71,000)
----------- ----------- -----------
Earnings (Loss) Before
Non-Owned Interests 3,636,625 1,245,662 (236,585)
Non-Owned Interests in
Earnings (Loss) of
Consolidated
Subsidiaries 2,245,586 657,368 (255,292)
----------- ----------- -----------
Earnings from Continuing
Operations 1,391,039 588,294 18,707
Discontinued Operations:
Loss from discontinued
operations - net of
income tax benefits
and non-owned interests 0 0 (183,188)
Estimated gain (loss) on
disposal of discontinued
operations - net of
income taxes (benefits)
and non-owned interests 151,349 730,337 (125,120)
----------- ----------- -----------
NET EARNINGS (LOSS) $1,542,388 $1,318,631 $(289,601)
----------- ----------- -----------
----------- ----------- -----------
Net Earnings (Loss) per
Share of Common Stock:
Earnings from continuing
operations $0.96 $0.40 $0.01
Loss from discontinued
operations 0 0 (0.12)
Estimated gain (loss) on
disposal 0.10 0.50 (0.09)
----------- ----------- -----------
Net Earnings (Loss)
per Share $1.06 $0.90 $(0.20)
----------- ----------- -----------
----------- ----------- -----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30
1995 1994
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $5,197,549 $2,215,624
Temporary investments 1,760,950 2,292,036
Accounts receivable 6,386,343 6,675,386
Inventories 2,832,003 2,069,309
Prepaid and refundable taxes 53,568 516,239
Deferred income taxes 82,000 63,000
Prepaid expenses and other 325,013 344,464
----------- -----------
Total Current Assets 16,637,426 14,176,058
----------- -----------
Property, Plant and Equipment:
Land and improvements 2,018,587 2,018,587
Buildings and improvements 5,872,053 5,837,796
Automobiles, trucks, trailers, and
specialized equipment 6,381,331 5,435,068
Automobiles under capital leases 136,178 136,178
Small tools, radios and machine shop
equipment 2,993,920 2,823,207
Office furniture and equipment 1,248,632 1,188,961
----------- -----------
18,650,701 17,439,797
Less accumulated depreciation and
amortization (9,094,562) (8,282,201)
----------- -----------
Total Property, Plant and
Equipment 9,556,139 9,157,596
----------- -----------
Other Assets:
Excess of acquisition cost over
value of net assets acquired
- net of accumulated amortization
of $1,455,921 in 1995 and
$1,296,614 in 1994 4,887,968 5,047,275
Investment in unconsolidated
affiliate 1,481,726 866,178
Deferred income taxes 27,000 30,000
Deposits and other 389,821 229,556
----------- -----------
Total Other Assets 6,786,515 6,173,009
----------- -----------
Total Assets $32,980,080 $29,506,663
----------- -----------
----------- -----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Loans payable $0 $561,000
Accounts payable and accrued
liabilities 3,952,543 3,590,406
Deferred revenue 479,858 495,605
Current portion of long-term debt 19,015 16,959
Current portion of capital lease
obligations 34,156 32,584
----------- -----------
Total Current Liabilities 4,485,572 4,696,554
----------- -----------
Long-Term Liabilities:
Long-term debt (less current
portion shown above) 5,104 24,119
Capital lease obligations (less
current portion shown above) 37,129 71,537
Deferred income taxes 985,000 919,000
Other long-term liabilities 99,672 31,740
----------- -----------
Total Long-term Liabilities 1,126,905 1,046,396
----------- -----------
Total Liabilities 5,612,477 5,742,950
----------- -----------
Commitments and Contingencies
Non-Owned Interests in Consolidated
Subsidiaries 12,367,344 10,318,334
----------- -----------
Stockholders' Equity:
Common stock, $.10 par value
Authorized: 3,500,000 shares
Issued and outstanding: 1,150,989
shares (at June 30, 1995) 115,099
Issued and outstanding: 1,146,489
shares (at June 30, 1994) 114,649
Class B Common stock (convertible),
$.10 par value
Authorized: 700,000 shares
Issued and outstanding: 310,967
shares (at June 30, 1995 and 1994) 31,096 31,096
Additional paid-in capital 7,413,054 7,401,012
Retained earnings 7,441,010 5,898,622
----------- -----------
Total Stockholders' Equity 15,000,259 13,445,379
----------- -----------
Total Liabilities and
Stockholders' Equity $32,980,080 $29,506,663
----------- -----------
----------- -----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<CAPTION>
Total
Class B Additional Stock-
Common Stock Common Stock paid-in Retained holders'
Shares Amounts Shares Amounts capital earnings equity
BALANCE -
<S> <C> <C> <C> <C> <C> <C> <C>
JULY 1, 1992 1,145,685 $114,568 311,771 $31,177 $7,476,804 $4,869,592 $12,492,141
Net loss 0 0 0 0 0 (289,601) (289,601)
Conversion
of Class B
stock into
Common stock 748 75 (748) (75) 0 0 0
Change in
ownership
interest in
subsidiaries 0 0 0 0 (75,889) 0 (75,889)
--------- ------- ------- ------ --------- --------- ----------
BALANCE -
JUNE 30, 1993 1,146,433 114,643 311,023 31,102 7,400,915 4,579,991 12,126,651
Net earnings 0 0 0 0 0 1,318,631 1,318,631
Conversion of
Class B stock
into Common stock 56 6 (56) (6) 0 0 0
Change in ownership
interest in
subsidiary 0 0 0 0 97 0 97
--------- ------- ------- ------ --------- --------- ----------
BALANCE -
JUNE 30, 1994 1,146,489 114,649 310,967 31,096 7,401,012 5,898,622 13,445,379
Net earnings 0 0 0 0 0 1,542,388 1,542,388
Issuance of
stock
pursuant
to exercise
of stock
options 4,500 450 0 0 11,925 0 12,375
Change in
ownership
interest
in subsidiary 0 0 0 0 117 0 117
--------- ------- ------- ------ --------- --------- ----------
BALANCE -
JUNE 30, 1995 1,150,989 $115,099 310,967 $31,096 $7,413,054 $7,441,010 $15,000,259
--------- ------- ------- ------ --------- --------- ----------
--------- ------- ------- ------ --------- --------- ----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended June 30
1995 1994 1993
<S>
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Earnings from continuing
operations $1,391,039 $588,294 $18,707
Loss from discontinued
operations 0 0 (183,188)
Estimated gain (loss)
on disposal 151,349 730,337 (125,120)
---------- --------- --------
Net earnings (loss) 1,542,388 1,318,631 (289,601)
Adjustments to reconcile
net earnings (loss) to
net cash provided by
operations:
Depreciation and
amortization 1,364,171 1,309,219 1,532,911
Equity in earnings of
unconsolidated affiliate (738,798) (154,786) (343,341)
Amounts attributable to
non-owned interests 2,245,586 657,368 (910,445)
Estimated loss on disposal
of assets 0 0 299,685
Change in net assets of
discontinued operations 0 261,183 264,458
Deferred income taxes 50,000 309,000 (470,000)
Increase in other assets (124,416) (81,316) (1,921)
Increase in long-term
liabilities 67,932 0 0
Changes in operating assets
and liabilities:
(Increase) decrease in
accounts receivable 289,043 (3,034,298) 1,781,906
(Increase) decrease in
inventories and prepaid
expenses (332,421) 363,355 (643,750)
Increase (decrease) in
accounts payable and
accrued expenses (78,792) 756,422 (423,111)
Increase (decrease) in
income taxes payable 411,322 3,396 (40,168)
Increase (decrease) in
deferred revenue (15,747) 141,876 85,845
---------- --------- --------
Net Cash Provided by
Operating Activities 4,680,268 1,850,050 842,468
---------- --------- --------
Cash Flows from Investing
Activities:
Capital expenditures (1,627,540) (802,218)(1,034,385)
Disposal of equipment
- net 40,133 121,975 44,392
Disposal of net assets of
discontinued operations 0 124,082 0
Redemption (purchase) of
temporary investments - net 531,086 (2,292,036) 0
Cash distribution from
unconsolidated affiliate 123,250 0 340,000
Acquisition of non-owned
interest (18,816) 0 0
Increase in other assets 0 0 (60,000)
---------- --------- --------
Net Cash Used in Investing
Activities (951,887)(2,848,197) (709,993)
---------- --------- --------
Cash Flows from Financing
Activities:
Proceeds from revolving
lines of credit and
long-term borrowings 2,150,000 7,012,582 6,847,000
Principal payments on
revolving lines of
credit, capital lease
obligations and
long-term borrowings (2,760,795)(7,767,399)(7,001,330)
Dividends paid by
subsidiary (148,036) (148,036) (149,200)
Proceeds from exercise of
stock options 12,375 0 0
Purchase of subsidiary
treasury stock 0 0 (94,630)
---------- --------- --------
Net Cash Used in Financing
Activities (746,456) (902,853) (398,160)
---------- --------- --------
Net Increase (Decrease) in
Cash and Cash Equivalents 2,981,925 (1,901,000) (265,685)
Cash and Cash Equivalents at
Beginning of Year 2,215,624 4,116,624 4,382,309
---------- --------- --------
Cash and Cash Equivalents
at End of Year $5,197,549 $2,215,624 $4,116,624
---------- --------- --------
---------- --------- --------
Supplemental disclosure
of cash flow information:
Interest paid $28,290 $97,775 $129,403
---------- --------- --------
---------- --------- --------
Income taxes paid $2,173,715 $428,239 $730,831
---------- --------- --------
---------- --------- --------
Supplemental disclosure of
non-cash investing and
financing activities:
Additions to capital leases $0 $40,362 $95,546
---------- --------- --------
---------- --------- --------
Conversion of notes payable
to subsidiary stockholders
to equity in subsidiary $0 $0 $250,000
---------- --------- --------
---------- --------- --------
See notes to consolidated financial statements.
</TABLE>
CERBCO, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1. Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The consolidated financial statements include the accounts
of the parent holding company, CERBCO, Inc. ("CERBCO"); its
majority-owned subsidiary, Capitol Copy Products, Inc. ("Capitol
Copy"); and its majority-controlled subsidiary, Insituform East,
Incorporated ("Insituform East"). All significant intercompany
balances and transactions have been eliminated in consolidation.
Reclassification
----------------
Interest received during the fiscal year ended June 30,
1994, in connection with settlement of the lawsuit described in
Note 7, has been reclassified to the gain from discontinued
operations in the consolidated statement of operations for
fiscal year 1994. Previously, this amount had been reported as
investment income.
Business Operations
-------------------
CERBCO is a parent holding company with controlling
interests in two principal subsidiaries, each of which is in a
separate industry segment. Insituform East, operating pursuant
to sublicense agreements with Insituform Technologies, Inc.
("ITI"), provides a patented process called "Insituform"
primarily to municipalities and state agencies for the repair
and reconstruction of sewers and other types of pipelines. The
Insituform/R process creates a hard, jointless, impact and
corrosion resistant Insitupipe/R product inside deteriorating
pipes, with a principal benefit that it can usually be installed
without excavation. Capitol Copy is in the business of selling,
servicing and providing supply products for copier and facsimile
equipment, operating pursuant to certain dealer agreements,
primarily with Canon, U.S.A., Inc.
Revenue Recognition
-------------------
The Company recognizes revenue under contracts to
rehabilitate pipeline sections using the units of completion
method. A rehabilitated pipeline section is considered
completed work and is generally billable to the customer.
Sales of copier and facsimile equipment are recorded as
revenue on the date the equipment is shipped. Revenue from
maintenance contracts is recognized ratably over the terms of
the agreements.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents are composed of unrestricted
checking accounts and short-term investments in repurchase
agreements, money market funds, certificates of deposit and U.S.
Treasury instruments. For purposes of the consolidated
statements of cash flows, the Company considers only highly
liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Temporary Investments
---------------------
Temporary investments are composed of U.S. Treasury
instruments with maturities of greater than three months.
Temporary investments are stated at cost plus accrued interest
which approximates market.
Inventories
-----------
Inventories are stated at the lower of cost or market.
Cost for pipeline rehabilitation materials is determined by the
first-in, first-out method. Cost for copier and facsimile
equipment, supplies and parts is determined by the average cost
method.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost.
Depreciation has been provided in the financial statements using
the straight-line or declining balance methods at rates which
are based upon reasonable estimates of the properties' useful
lives. These lives range from three to ten years for vehicles,
equipment and furniture, and twenty to forty years for
buildings. Leasehold improvements are amortized using the
straight-line method over the life of the lease.
Betterments or improvements which increase the estimated
useful life of an asset are capitalized. Repairs and
maintenance are charged directly to expense as incurred. The
Company incurred repair and maintenance costs of $824,000,
$567,000 and $771,000 in fiscal years 1995, 1994 and 1993,
respectively.
Goodwill
--------
The excess of cost over the fair values of the Insituform
East and Capitol Copy net tangible assets ("goodwill") acquired
in 1985 and 1987, respectively, is amortized using the
straight-line method over forty years. The Company annually
reviews its goodwill recoverability by assessing the historical
profitability of its segments and expectations as to future
nondiscounted cash flows and operating income for each segment,
as well as: the continued use of the segments' names; the
continued use of Insituform East's license agreements and the
status of various patents which govern the Insituform process;
and the success of Capitol Copy in meeting its commitments under
its dealer agreements. Based upon its most recent analysis, the
Company believes that no impairment of goodwill exists at June
30, 1995.
Income Taxes
------------
The Company provides for federal and state income taxes at
the statutory rates in effect on taxable income. Deferred
income taxes result from recognizing certain items of income and
expense in consolidated financial statements in different years
from those in income tax returns. These temporary differences
relate principally to use of accelerated depreciation methods
for tax purposes; timing of the payment of compensated absences;
timing of the recognition of income from the Company's
investment in MIDSOUTH Partners (see Note 6: Investment in
Unconsolidated Affiliate); and timing of the recognition of
income from certain lease transactions and maintenance
contracts.
Through September 30, 1992, CERBCO filed consolidated
federal and state tax returns, which included the results of
Capitol Copy. Beginning October 1, 1992, Capitol Copy filed
separate federal and state tax returns. Taxes are reported in
the financial statements for this subsidiary as if it filed
separate returns for all periods through September 30, 1992.
The difference between the total taxes so reported for the
subsidiary and the consolidated expense was reported as part of
the parent company's tax expense. The parent therefore received
the benefit of, or charge for, any difference between the
consolidated tax provision and separate return provisions.
Insituform East files separate federal and state tax
returns, and its provision is combined with CERBCO's
consolidated provision. Capitol Copy's provisions for all
periods beginning after September 30, 1992 are also combined
with CERBCO's consolidated provisions.
2. Accounts Receivable
<TABLE>
Accounts receivable consist of:
<CAPTION>
1995 1994
<S>
Due from municipal and commercial
<S> <C> <C>
customers $6,195,486 $6,514,133
Miscellaneous 245,857 216,253
---------- ----------
6,441,343 6,730,386
Less: Allowance for doubtful
accounts (55,000) (55,000)
---------- ----------
$6,386,343 $6,675,386
---------- ----------
---------- ----------
</TABLE>
3. Inventories
<TABLE>
Inventories consist of:
<CAPTION>
1995 1994
<S> <C> <C>
Pipeline rehabilitation materials $1,111,202 $764,938
Copier and facsimile equipment 1,274,977 808,956
Copier and facsimile supplies 172,908 251,616
Copier and facsimile parts 272,916 243,799
---------- ----------
$2,832,003 $2,069,309
---------- ----------
---------- ----------
</TABLE>
4. Equity in Insituform East
At June 30, 1995 and 1994, CERBCO beneficially held
1,100,000 shares of Insituform East Common Stock and 296,141
shares of convertible Insituform East Class B Common Stock
representing approximately 27.1% of the Common Stock, 99.5% of
the Class B Common Stock, 32.0% of the total equity and 57.7% of
the total voting power of all outstanding classes of Insituform
East stock. Holders of Class B Common Stock, voting separately
as a class, have the right to elect the remaining members of the
Board of Directors after election of not less than 25% of the
directors by holders of shares of Common Stock, voting
separately as a class.
From time to time, Insituform East issues additional shares
of stock as a result of stock dividends and exercised stock
options. Changes in capital structure resulting from such
additional stock issues decrease CERBCO's equity ownership. No
additional shares were issued in 1995, 1994 or 1993. If all the
options and warrants outstanding at June 30, 1995 were
exercised, the resulting percentages of CERBCO's equity
ownership and total voting power would be 29.7% and 55.0%,
respectively.
From time to time, Insituform East purchases shares of
stock for treasury. Changes in capital structure resulting from
such stock purchases increase CERBCO's equity ownership.
Insituform East purchased 23,285 Common shares in 1993.
5. Equity in Capitol Copy
At June 30, 1995 and 1994, CERBCO beneficially held 800
shares, and Capitol Copy's president held 400 shares, of Capitol
Copy Class B Stock, representing 66 2/3% and 33 1/3%,
respectively, of the one outstanding class of Capitol Copy
stock.
6. Investment in Unconsolidated Affiliate
MIDSOUTH Partners was organized as a Tennessee general
partnership in December 1985. The following corporations are
its general partners:
Interest in
Profits and Losses
Insitu, Inc. (a subsidiary of
Insituform East) 42.5%
E-Midsouth, Inc. (a subsidiary of
Enviroq Corporation) 42.5%
Insituform California, Inc.
(a subsidiary of ITI) 15.0%
MIDSOUTH Partners operates as the Insituform process
sublicensee for Tennessee, Kentucky (excluding Boone, Kenton and
Campbell counties) and northern Mississippi.
The following is condensed financial information of
MIDSOUTH Partners at June 30, 1995, 1994 and 1993, and for each
of the three years in the period ended June 30, 1995:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash $241,094 $210,487 $186,382
Accounts Receivable 2,249,690 1,162,273 1,587,521
Inventories 431,738 252,262 252,672
Property, Plant and Equipment
- net 1,319,303 937,901 965,647
Other Assets 185,097 138,807 153,928
---------- ---------- ----------
Total Assets $4,426,922 $2,701,730 $3,146,150
---------- ---------- ----------
---------- ---------- ----------
Current Accounts Payable $859,489 $533,470 $1,299,025
Long-term Obligations
Under Capital Lease 22,196 71,370 113,439
---------- ---------- ----------
Total Liabilities $881,685 $604,840 $1,412,464
---------- ---------- ----------
---------- ---------- ----------
Revenues $8,894,746 $6,185,972 $8,052,548
---------- ---------- ----------
---------- ---------- ----------
Gross Profit $2,739,390 $1,303,112 $1,324,919
---------- ---------- ----------
---------- ---------- ----------
Partnership Earnings $1,738,347 $364,204 $807,861
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7. Discontinued Operations
On June 11, 1993, the Company adopted a formal plan to
discontinue providing cement mortar lining services conducted
through its pipeline rehabilitation segment, Insituform East.
This plan included declining to bid on future cement mortar
lining contracts, fulfilling existing commitments and selling
remaining equipment and materials associated with this service
capability. The Company substantially completed two existing
contracts in progress and sold substantially all remaining
equipment and materials during the year ended June 30, 1994.
Operating results from cement mortar lining activities for
the years ended June 30, 1994 and 1993 are presented separately
in the accompanying Consolidated Statements of Operations.
Sales revenues from cement mortar lining activities for the
years ended June 30, 1994 and 1993 were $1,080,773 and
$1,460,334, respectively. These amounts are not included in
sales in the accompanying Consolidated Statements of Operations.
Insituform East's loss from cement mortar lining activities
was -$572,461, net of an income tax benefit of $366,000, in the
fiscal year ended June 30, 1993. CERBCO's losses as a result of
these activities, net of non-owned interests, was -$183,188 for
the fiscal year ended June 30, 1993.
Insituform East's estimated loss on the disposal of
discontinued operations in fiscal year 1993 was -$391,000, net
of an income tax benefit of $250,000, which represents an
estimated loss on the disposal of equipment and materials used
to provide cement mortar lining services (-$192,000, net) and a
provision for additional operating losses (-$199,000, net)
anticipated for the fiscal 1994 phase out period. CERBCO's
estimated loss on the disposal of this capability, net of
non-owned interests, was -$125,120 in fiscal year 1993. During
the year ended June 30, 1994, Insituform East incurred actual
disposal costs equal to its estimate in total. Disposal costs
consisted of a loss on disposal of equipment and materials of
-$146,000 (net) and operating losses of -$245,000 (net).
On March 31, 1991, the Company adopted a formal plan to
discontinue the operations of its defense contract services
segment conducted through its wholly-owned subsidiary,
CERBERONICS, Inc. ("CERBERONICS"). The segment did not operate
subsequent to June 30, 1991.
On December 14, 1993, the Company obtained payment of
$991,520, consisting of a judgment for $871,649 plus interest of
$119,871, resulting from settlement of a lawsuit against the
U.S. Navy in connection with open proposals under CERBERONICS's
former C-9 contract. The payment resulted in a gain from
discontinued operations of $730,337 for the fiscal year ended
June 30, 1994. During fiscal year 1995, the Company obtained
final payment from the Federal government on five contracts
completed by CERBERONICS on or before June 30, 1991. These
payments resulted in a gain from discontinued operations of
$151,349 for the fiscal year ended June 30, 1995. There are no
material open items remaining that pertain to other former
contracts of CERBERONICS.
8. Supplemental Executive Retirement Plan
The Company has an unfunded supplemental pension plan for
its three executive officers, effected January 1, 1994. The
expense for this plan was $67,932 and $31,740 for the fiscal
years ended June 30, 1995 and 1994, respectively. The Company's
accrued liability for this plan, shown as Other Long-term
Liabilities, was $99,672 and $31,740 as of June 30, 1995 and
1994, respectively.
To facilitate the payment of benefits, the Company has
established a trust. Funds in the trust are included in the
Company's balance sheet as Other Assets in the amounts of
$254,060 and $73,203 at June 30, 1995 and 1994, respectively.
This trust is subject to the claims of the Company's creditors
in the event of bankruptcy or insolvency.
9. Loans Payable
Insituform East maintains a $3,000,000 bank line of credit
which is available to it through December 31, 1996. Interest on
borrowings against this line of credit is payable monthly at the
bank's prime rate. The line is unsecured; however, Insituform
East must comply quarterly with financial liquidity, net worth,
tangible net worth and debt to equity leverage covenants. At
June 30, 1995, the amount available as undrawn on this line was
$3,000,000. Capitol Copy had a $1,500,000 bank line of credit
which expired January 31, 1995. Capitol Copy did not deem it
necessary to renew such line, as both it and Insituform East
have agreements in place with the parent company, CERBCO,
whereby each may borrow up to $1,000,000 for operating purposes
from CERBCO at interest rates not less than the subsidiary would
pay to its respective bank. At June 30, 1995, neither
subsidiary had amounts outstanding under these agreements. The
weighted average interest rate on Capitol Copy's outstanding
balance on its line at June 30, 1994 was 7.1%.
10. Accounts Payable and Accrued Liabilities
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
1995 1994
<S> <C> <C>
Accounts payable $1,366,338 $1,946,792
Accrued compensation and
related expenses 1,885,596 1,383,934
Dividends payable 177,643 148,036
Income taxes payable 522,966 111,644
---------- ----------
$3,952,543 $3,590,406
---------- ----------
---------- ----------
</TABLE>
11. Long-Term Debt
<TABLE>
Long-term debt consists of:
<CAPTION>
1995 1994
<S> <C> <C>
Installment note payable due
in full in September 1996,
with equal monthly payments
of $1,734 including interest
at 11.5% $24,119 $41,078
Less: Current portion (19,015) (16,959)
------- -------
$5,104 $24,119
------- -------
------- -------
</TABLE>
12. Commitments
The Company utilizes certain equipment and facilities under
operating leases providing for payment of fixed rents and the
pass-through of certain landlord expenses. Rental expense was
approximately $480,000, $328,000 and $250,000 for the years
ended June 30, 1995, 1994 and 1993, respectively. In addition,
the Company obtains vehicles and computer and other office
equipment under long-term capital leases. Accumulated
amortization under capital leases was $74,782 and $40,019 as of
June 30, 1995 and 1994, respectively. Minimum future rental
commitments under long-term capital and operating leases in
effect at June 30, 1995, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C>
1996 $43,694 $246,887
1997 19,605 128,443
1998 18,384 33,309
1999 8,320 5,552
2000 - - - -
2001 and thereafter - - - -
------- --------
Total Minimum Payments 90,003 $414,191
Less: Interest 18,718 --------
------- --------
Present Value of Minimum Payments $71,285
-------
-------
</TABLE>
Insituform East operates under six sublicense agreements
with ITI. The sublicenses grant Insituform East exclusive
rights for use of the Insituform process in the states of
Maryland, Virginia, Delaware, the District of Columbia,
Pennsylvania, Ohio, West Virginia and three Kentucky counties.
The agreements are for the life of the patents or the patent
rights unless terminated sooner by a specified action of either
party. The agreements obligate Insituform East to pay ITI a
certain minimum annual royalty, as well as royalties based on
the gross contract price of all contracts performed. Payments
of minimum annual royalties for the years ended June 30, 1996
and 1995 have been waived by ITI. The total royalty expense was
$1,354,000, $920,000 and $872,000 for the years ended June 30,
1995, 1994 and 1993, respectively.
Insituform East has a supply agreement with ITI committing
Insituform East to purchase 90% of its Insitutube/R material
requirements from ITI. As a result of certain terms not
previously fulfilled by ITI, the Company believes it is no
longer required to purchase 90% of its Insitutube material
requirements from ITI under the otherwise continuing agreement.
The agreement, which presently extends through April 30, 1996,
is renewable annually unless notice of termination is provided
by either party six months prior to the end of the current
renewal period.
13. Contingencies
In March 1990, the controlling stockholders of the Company,
George Wm. Erikson and Robert W. Erikson (together, the
"Eriksons"), executed a letter of intent and subsequently
executed four amendments thereto (collectively referred to
herein as the "Letter of Intent") with Insituform Technologies,
Inc. ("ITI") to effect a sale of their controlling interest in
the Company to ITI for $6,000,000 (the "Proposed Transaction").
The Proposed Transaction, if consummated, would have had the
effect of making ITI the controlling stockholder of the Company,
and, indirectly, of each of the Company's three direct
subsidiaries at the time, Insituform East, Capitol Copy, and
CERBERONICS. In September 1990, the Eriksons informed the
Company that the Letter of Intent had expired without
consummation of any transaction, that it would not be further
extended, that negotiations had ceased, and that the Eriksons
had no further intention at the time of pursuing the proposed
sale of their controlling interest in the Company to ITI.
In August 1990, a complaint against the Company and the
Eriksons was filed in the Delaware Court of Chancery by two
stockholders of the Company, on their own behalf and
derivatively on behalf of the Company, which sought (i) damages
against the individual defendants for alleged breach of
fiduciary duties in an amount not less than $6,000,000, together
with interest thereon from March 12, 1990; (ii) to permanently
enjoin the Eriksons from completing any transaction with ITI
similar in substance to the Proposed Transaction; (iii) a
declaration of the invalidity of the 1982 authorization for and
issuance of the Company's Class B Common Stock, and, therefore,
of the entitlement of holders of Class B Common Stock to elect
any members of the Company's Board; (iv) a declaration of the
invalidity of the 1990 election of the Company's directors and
the issuance of new proxy materials that fully and fairly
disclose all facts which plaintiffs claim are material to the
election of such directors; (v) an award to the plaintiffs of
their costs of bringing the action, including reasonable
attorneys' fees; and (vi) an award to plaintiffs of such further
relief as the Court of Chancery deemed appropriate. In
addition, the Complaint asserted a claim against the individual
defendants alleging that the Company had forgone a corporate
opportunity by the continued failure to pursue a transaction
with ITI.
All but one of the plaintiffs' claims subsequently were
dismissed. The claim remaining in the litigation was
plaintiffs' allegation that the Proposed Transaction was an
opportunity belonging to the Company and that the Eriksons
breached their duty to the Company by precluding the Company
from taking advantage of that opportunity so that the Eriksons
might have a chance to do so. Trial in this matter was held
beginning February 21, 1995.
Following post-trial briefing and argument, Chancellor
Allen issued an opinion on August 9, 1995, in which he ruled in
favor of the Eriksons. The court determined that, while the
Eriksons failed in certain limited respects to meet the
standards of loyalty required of them under Delaware corporate
law, that "deviation from proper corporate practice" neither
caused injury to CERBCO nor resulted in any substantial gain to
the Eriksons. The Court also found that the Eriksons met their
burden of showing that their conduct was "wholly fair to the
corporation." With the decision, all of the plaintiffs' claims
have been resolved in favor of CERBCO and/or the Eriksons.
On August 25, 1995, the Court of Chancery issued its
Memorandum and Order on Final Judgment and a corresponding Final
Order and Judgment, which latter document formally entered
judgment in favor of the Eriksons and denied in toto the
plaintiffs' request for legal fees and expenses totaling
$1,513,499. The Court concluded that the litigation conferred
no substantial benefit on CERBCO, so that it would be
inappropriate to require CERBCO and its stockholders to share
the costs that plaintiffs incurred.
Plaintiffs filed a Notice of Appeal with the Delaware
Supreme Court on August 30, 1995. Plaintiffs' opening Delaware
Supreme Court brief is due on October 16, 1995.
In January 1993, a separate lawsuit against the partners in
the law firm of Rogers & Wells and the Company, arising out of
the subject matter of the Delaware litigation, was filed in the
District of Columbia. The plaintiffs are the same two
stockholders, and a former director of the Company, and have
alleged that Rogers & Wells breached its duty of loyalty and
care to the Company by representing allegedly conflicting
interest of the Eriksons in the Proposed Transaction with ITI.
The plaintiffs also claim that Rogers & Wells committed
malpractice by allegedly making misrepresentations to the
Company's Board and allegedly failing to properly inform the
Company's Board. The plaintiffs claim that the conduct of
Rogers & Wells caused the Company to lose an opportunity to sell
its control of Insituform East to ITI, caused the Company to
incur substantial expense, and unjustly enriched Rogers & Wells.
The complaint seeks to recover from Rogers & Wells (i) damages
in an amount equal to all fees paid to Rogers & Wells, (ii)
damages in an amount not less than $6,000,000 for the loss of
the opportunity for the Company to sell its control of
Insituform East to ITI, and (iii) punitive damages. Although
the complaint states that it was filed on behalf of the Company,
management does not believe that Rogers & Wells should be sued
on any of the claims set forth in the complaint.
Motions to dismiss this case by the Company and Rogers &
Wells were denied, but a stay in the proceedings was granted
until after the Delaware trial. A status report on the Delaware
action was submitted by the parties on April 3, 1995.
After the Court of Chancery's August 9, 1995 opinion was
rendered, the parties to the Superior Court action filed
additional status reports. The Superior Court has scheduled the
next status hearing for October 30, 1995.
Management believes there are valid defenses to all of
plaintiffs' allegations in each of the above actions and that
ultimate resolution of these matters will not have a material
effect on the financial statements. Accordingly, no provision
for these contingencies has been reflected therein.
On April 18, 1995, Insituform Mid-America, Inc. ("IMA")
acquired the pipeline rehabilitation business of ENVIROQ
Corporation ("Enviroq"), including Enviroq's 42.5% interest in
MIDSOUTH Partners which is held through Enviroq's special
purpose subsidiary, E-Midsouth, Inc. Under the MIDSOUTH
Partners' Partnership Agreement, it is an event of default if,
among other things, a change in the control of any partner
occurs without the prior written consent of all the other
partners. The IMA acquisition of Enviroq, which resulted in a
change in the control of Enviroq and E-Midsouth, Inc., was made
without the prior written consent of the Partnership's two other
partners, special purpose subsidiaries of Insituform East and
ITI.
The Partnership Agreement grants non-defaulting partners
the right to require compliance with the agreement, enjoin any
breach, seek dissolution of the partnership, replace Management
Committee appointees of the defaulting partner, or exercise any
combination of these and other remedies. Insituform East has
filed with the American Arbitration Association a demand for
arbitration alleging a breach of the Partnership Agreement by E-
Midsouth, Inc. Separately, on April 4, 1995, ITI affiliated
companies initiated action against Enviroq and IMA in Tennessee
Chancery Court regarding ITI's rights as licensor to withhold
consent to the assignment of Insituform and NuPipe license
agreements. Simultaneously with the initiation of its suit, ITI
entered into agreements with IMA and Enviroq to postpone,
through April 30, 1995 (subsequently extended), the Tennessee
court proceedings as well as any other assertion by ITI of its
rights under Insituform and NuPipe license agreements and its
rights under the MIDSOUTH Partners' Partnership Agreement.
On May 24, 1995, ITI and IMA jointly announced that they
had entered into a definitive agreement providing for the
combination of ITI and IMA which, if consummated, would result
in IMA becoming a wholly-owned subsidiary of ITI. The
arrangements between ITI and IMA further extend the postponement
of further assertion of ITI's rights resulting from IMA's
acquisition of the pipeline rehabilitation business of Enviroq
without the consent of ITI, except for certain procedural steps
to preserve the respective rights of the parties.
Although the Company cannot, at this time, predict the
outcome of the matters described herein, any potential outcome
that resulted in the loss by the Company of its ability to
recognize its share of the results of operations of MIDSOUTH
Partners could have a material adverse effect on the future
earnings of the Company.
CERBCO is involved in other contingencies, none of which
could, in the opinion of management, materially affect the
Company's financial position or results of operations.
14. Common Stock
The Company has two classes of Common Stock, which are
designated as Common Stock and Class B Common Stock. Each share
of Class B Common Stock can be converted into one share of
Common Stock at any time. In 1995, no shares of Class B Common
Stock were converted to Common Stock. In 1994 and 1993, 56
shares and 748 shares, respectively of Class B Common Stock were
converted to Common Stock.
Each share of Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes, except
with respect to the election of Directors and any other matter
requiring the vote of shareholders separately as a class. The
holders of Common Stock, voting as a separate class, are
entitled to elect that number of Directors which constitutes
twenty-five percent (25%) of the authorized number of members of
the Board of Directors and, if such 25% is not a whole number,
then the holders of Common Stock are entitled to elect the
nearest higher whole number of Directors that is at least 25% of
such membership The holders of Class B Common Stock, also
voting as a separate class, are entitled to elect the remaining
Directors. In addition, the holders of Common Stock have
certain dividend preferences.
15. Income Taxes
<TABLE>
The provision for taxes is composed of the following (in
thousands):
<CAPTION>
1995 1994 1993
Current:
<S> <C> <C> <C>
Federal $2,418 $981 $117
State 497 240 32
------ ----- -----
Total current 2,915 1,221 149
Deferred: ------ ----- -----
Federal 46 53 (189)
State 4 6 (31)
------ ----- -----
Total deferred 50 59 (220)
------ ----- -----
Total provision for taxes $2,965 $1,280 $(71)
------ ------ -----
------ ------ -----
</TABLE>
<TABLE>
The provision for income taxes is different from that
computed using the statutory Federal income tax rate of 34% for
the following reasons (in thousands, except percentages):
<CAPTION>
1995 1994 1993
Amounts % Amounts % Amounts %
<S>
Taxes computed at
<S> <C> <C> <C> <C> <C> <C>
statutory rate $2,245 34.0 $859 34.0 ($105) (34.0)
Increase (decrease)
in taxes resulting
from:
State and local
income taxes, net
of Federal income
tax benefit 325 4.9 140 5.5 (2) (0.7)
Non-taxable income (1) 0.0 (4) (0.2) (40) (13.0)
Nondeductible items 76 1.2 74 2.9 87 28.2
Effect of NOL 299 4.5 185 7.3 0 0.0
Other 21 0.3 26 1.1 (11) (3.6)
------ ---- ------ ---- ---- -----
Total provision for
taxes $2,965 44.9 $1,280 50.6 $(71) (23.1)
------ ---- ------ ---- ---- -----
------ ---- ------ ---- ---- -----
</TABLE>
<TABLE>
The components of the deferred tax provisions are as
follows (in thousands):
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
MIDSOUTH Partners operations $126 $101 $(145)
Depreciation 0 (38) 9
Deferred compensation 28 11 0
Deferred revenues (107) 21 35
Contract retentions 0 0 (119)
Other 3
(36) 0
--- --- -----
Total deferred taxes $50 $59 $(220)
--- --- -----
--- --- -----
</TABLE>
The Company has tax basis net operating losses of
approximately $1,000,000 that may be carried forward to offset
future income tax liabilities. These carryforwards will expire
in fiscal years 2005 through 2010.
<TABLE>
Deferred Income Taxes, provided for the tax effect of
cumulative temporary differences for income tax and financial
reporting purposes, consists of the following (in thousands):
<CAPTION>
1995 1994
<S> <C> <C>
Depreciation $(942) $(942)
NOL carryforwards 340 136
MIDSOUTH Partners operations (161) (35)
Deferred compensation 38 66
Deferred revenue 107 0
Valuation allowance (340) (136)
Other 82 85
---- ----
$(876) $(826)
---- ----
---- ----
</TABLE>
16. Earnings (Loss) Per Share
Earnings (loss) per share data have been computed based
upon the weighted average number of common shares outstanding
and common share equivalents (when dilutive) during each period.
The following numbers of shares have been used in the
computations:
1995 1994 1993
1,459,848 1,457,456 1,457,456
17. Retirement Benefit Plans
Employees of Insituform East who meet certain minimum
eligibility requirements and who are not covered by a collective
bargaining agreement participate in a profit-sharing plan. No
employee is covered by a collective bargaining agreement as of
June 30, 1995. Contributions to the plan are determined
annually by Insituform East's Board of Directors. Contributions
to the plan were $183,489, $84,775 and $240,000 in fiscal years
1995, 1994 and 1993, respectively.
Employees of Capitol Copy who meet certain minimum
eligibility requirements also participate in a profit-sharing
plan. Contributions are determined annually by Capitol Copy's
Board of Directors. Capitol Copy contributed $55,052, $48,864
and $43,765 to the plan in fiscal years 1995, 1994 and 1993,
respectively.
18. Stock Option Plans
CERBCO granted options under the Directors' Stock Option
Plan on 6,000 shares of CERBCO's Common Stock on December 16,
1994 and December 17, 1993, and options on 7,500 shares of
CERBCO's Common Stock on December 18, 1992, at the option prices
of $5.125, $3.50 and $3.25, respectively, per share, exercisable
within three years of the date of the grant. The following is a
summary of transactions:
<TABLE>
Shares under Option
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Outstanding, beginning of year 18,000 12,000 7,500
Granted during the year 6,000 6,000 7,500
Exercised during the year (4,500) 0 0
Expired/canceled during the year (1,500) 0 (3,000)
------ ------ ------
Outstanding, end of year 18,000 18,000 12,000
------ ------ ------
------ ------ ------
</TABLE>
At June 30, 1995, there were 3,000 shares reserved for
future grants under the Directors' Stock Option Plan.
On June 6, 1987, CERBCO granted under the 1986 Employee
Stock Option Plan options on 51,483 shares of Common Stock to
its officers, and the officers and managers of CERBERONICS, at
an option price of $7.00 per share exercisable within ten years
of the date of the grant. There were no additional grants or
exercise of options available under this plan in fiscal year
1995.
<TABLE>
Shares under Option
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Outstanding, beginning
and end of year 10,336 10,336 10,336
</TABLE>
At June 30, 1995, there were 23,517 shares reserved for
future grants under the Employee Stock Option Plan.
19. Segment Data and Reconciliation
CERBCO's operations are classified into two principal
industry segments: pipeline rehabilitation and copier equipment
products and services. The following is a summary of pertinent
industry segment information. General corporate assets are
principally intercompany receivables and investments that are
owned by the holding company. General corporate expenses
include items which are of an overall holding company nature and
are not allocated to the segments.
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
<S>
Sales to Unaffiliated Customers:
<S> <C> <C> <C>
Pipeline rehabilitation $21,594 $14,804 $13,105
Copier equipment products
and services 17,549 15,042 11,669
------- ------- -------
Total sales $39,143 $29,846 $24,774
------- ------- -------
------- ------- -------
Earnings (Loss) before Income
Taxes and Non-Owned Interests:
Pipeline rehabilitation $2,490 $(204) $(1,959)
Copier equipment products
and services 4,054 3,004 1,954
General corporate expenses (961) (566) (652)
------- ------- -------
Operating profit (loss) 5,583 2,234 (657)
Equity in earnings of
unconsolidated affiliate 739 155 343
Other income 467 409 311
Other expenses (187) (272) (305)
------- ------- -------
Earnings (loss) before
income taxes and non-owned
interests $6,602 $2,526 $(308)
------- ------- -------
------- ------- -------
Net Earnings (Loss) Contribution
by Segment:
Pipeline rehabilitation $678 $47 $(272)
Copier equipment products
and services 1,593 1,110 658
Corporate (880) (569) (367)
------- ------- -------
Earnings from continuing
operations 1,391 588 19
Discontinued operations 151 731 (309)
------- ------- -------
Net earnings (loss) $1,542 $1,319 $(290)
------- ------- -------
------- ------- -------
Assets:
Pipeline rehabilitation $19,459 $16,785 $16,719
Copier equipment products
and services 7,514 6,105 5,455
Corporate 6,007 6,617 5,385
------- ------- -------
Total assets $32,980 $29,507 $27,559
------- ------- -------
------- ------- -------
Capital Expenditures:
Pipeline rehabilitation $1,499 $631 $867
Copier equipment products
and services 129 171 165
Corporate 0 0 2
------- ------- -------
Total capital expenditures $1,628 $802 $1,034
------- ------- -------
------- ------- -------
Depreciation and Amortization:
Pipeline rehabilitation $1,044 $1,004 $1,275
Copier equipment products
and services 225 209 162
Corporate 95 96 96
------- ------- -------
Total depreciation and
amortization $1,364 $1,309 $1,533
------- ------- -------
------- ------- -------
</TABLE>
During the year ended June 30, 1995, the Federal government
(collectively), the Metropolitan Sewer District ("MSD") of
Greater Cincinnati, Ohio and Washington Metropolitan Area
Transit Authority ("WMATA") accounted for 21%, 15% and 10%,
respectively, of the Company's pipeline rehabilitation sales.
During the year ended June 30, 1994, the Federal government
(collectively) accounted for 15% of these sales. During the
year ended June 30, 1993, the City of Richmond, Virginia;
Fairfax County, Virginia and the Washington Suburban Sanitary
Commission ("WSSC") accounted for 15%, 12% and 11%,
respectively, of these sales. No single customer accounted for
10% or more of the Company's copier machine products and service
sales during the last three fiscal years.
20. Unaudited Quarterly Financial Data
The following table provides summarized quarterly results
of operations for fiscal years 1995 and 1994 (in thousands,
except per share information):
<TABLE>
<CAPTION>
Three Months Ended
1995 Sept. 30 Dec. 31 Mar. 31 Jun. 30
<S> <C> <C> <C> <C>
Sales $8,859 $10,425 $9,615 $10,244
Operating profit 1,213 1,406 1,324 1,640
Earnings before income
taxes and non-owned
interests 1,434 1,709 1,555 1,904
Earnings before non-owned
interests 785 911 766 1,175
Earnings from continuing
operations 341 330 201 519
Net earnings 341 478 204 519
Net earnings per share:
Continuing operations 0.23 0.23 0.14 0.36
Net earnings 0.23 0.33 0.14 0.36
1994
Sales $7,957 $7,069 $5,822 $8,998
Operating profit (loss) 1,149 221 (342) 1,206
Earnings before income taxes
and non-owned interests 1,157 394 (273) 1,248
Earnings (loss) before
non-owned interests 647 174 (242) 667
Earnings (loss) from
continuing operations 284 177 (77) 204
Net earnings (loss) 270 908 (77) 218
Net earnings (loss) per share:
Continuing operations 0.19 0.13 (0.05) 0.13
Net earnings (loss) 0.18 0.63 (0.05) 0.14
</TABLE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of CERBCO Directors
<TABLE>
<CAPTION>
Name Age Director Since Other Positions
with Registrant
<S> <C> <C> <C>
Robert W. Erikson 50 December 1974(1) President &
Treasurer
George Wm. Erikson 53 November 1975(1) Chairman &
General Counsel
Webb C. Hayes, IV 47 April 1991 None
Paul C. Kincheloe, Jr. 54 April 1991 None
(1) Date of initial election as a director of the Company's
then publicly-traded predecessor company, CERBERONICS. Elected
as a CERBCO director in February 1988, under a Plan of
Reorganization and Merger whereby CERBERONICS became a
wholly-owned subsidiary of CERBCO.
</TABLE>
Directors of CERBCO are elected at the Annual Meeting of
Stockholders except that vacancies and newly created
directorships may be filled by the directors then in office.
Each director holds office until his successor is elected and
qualified or until his earlier resignation or removal.
(b) Identification of CERBCO Executive Officers and (Principal
Officer of Each Subsidiary)
<TABLE>
<CAPTION>
Name Age Position(s) Held Since
<S> <C> <C> <C>
Robert W. Erikson 50 President &
Treasurer February 1988
George Wm. Erikson 53 Chairman & General
Counsel February 1988
Robert F. Hartman 48 Vice President,
Secretary &
Controller February 1988 (1)
(Robert W. Erikson) 50 President
(Insituform
East) September 1991
(Armen A. Manoogian) 52 President
(Capitol Copy) October 1987
(1) Elected as Secretary in June 1991.
</TABLE>
Each officer holds office until his successor is elected
and qualified or until his earlier resignation or removal.
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
Mr. Robert Erikson, Director, President and Treasurer, and
Mr. George Erikson, Director, Chairman and General Counsel are
brothers.
(e) Business Experience
(1) Mr. Robert Erikson was a Supply Corps officer in the
Navy from 1968 through 1972. Mr. Erikson joined CERBERONICS in
December 1972. In May 1974, he was elected Vice President of
Finance and Administration and, in December 1974, he became
Executive Vice President, Treasurer and a Director. In October
1977, he was elected President. In February 1988, he was
elected President and Treasurer of CERBCO. Mr. Erikson
currently is a Director and Vice Chairman of Capitol Copy, a
Director, Vice Chairman and President of Insituform East and
serves as a member of the Chief Executive Officer Committee of
Capitol Copy and Insituform East. He is a Director of Palmer
National Bancorp, Inc. and The Palmer National Bank. Mr.
Erikson holds a B.A. degree in Engineering and Economics from
Brown University and an M.B.A. degree from The George Washington
University.
Mr. George Erikson joined CERBERONICS in July 1976 as
Vice President and General Counsel, and in August 1976, he was
elected Secretary. He served as Executive Vice President until
July 1987, at which time he was elected to the position of
Chairman. He became a Director of CERBERONICS in November 1975
and served as Chairman of the Board of Directors from February
1979 to February 1988. In February 1988, he was elected
Chairman and General Counsel of CERBCO. Mr. Erikson currently
is a Director and Chairman of Capitol Copy and a Director and
Chairman of Insituform East and serves as a member of the Chief
Executive Officer Committee of Capitol Copy and Insituform East.
From December 1972 to July 1976, he was employed as Vice
President - Legal by National Securities & Research Corporation
and, prior thereto, he was employed as an attorney to the
Dreyfus Corporation. He is a member of the Bar of the State of
New York, District of Columbia and Commonwealth of Virginia.
Mr. Erikson holds a B.S. degree in Business Administration from
Pennsylvania State University, an LL.B. degree from Fordham
University Law School, and an LL.M. degree from New York
University Law School.
Mr. Hartman joined CERBERONICS in August 1979 as
Controller and Manager of the Accounting Department. In
November 1981, he was elected Assistant Vice President and in
April 1984, he was elected Vice President & Treasurer, in which
positions he served until his departure from CERBERONICS in
September 1985. From October 1985 to February 1988, Mr. Hartman
was Controller of Dynamac International, Inc. He returned to
CERBERONICS and his former positions in February 1988 and, in
addition, was elected Vice President and Controller of CERBCO.
In June 1991, he joined Insituform East as Vice President of
Administration and was elected Secretary of CERBCO, Insituform
East and Capitol Copy. From 1976 to 1977, Mr. Hartman was an
accountant for Coopers & Lybrand, and from 1977 to 1979, he was
a partner in the accounting firm of Hartman and Hartman. Mr.
Hartman is a Certified Public Accountant and holds a B.S. degree
form the United States Naval Academy, a B.A. degree from the
University of South Florida and an M.B.A. degree from The George
Washington University.
Mr. Manoogian holds a B.S. degree in Business
Administration from Pennsylvania State University and an M.B.A.
from Pace University. In October 1987, he was elected a
Director and President of Capitol Copy and serves as a member of
the Chief Executive Officer Committee. Immediately prior to
joining Capitol Copy, Mr. Manoogian served as President and
Chief Operating Officer of a publicly-traded East Coast computer
retailing organization. His previous business experience
includes 17 years with the Xerox Corporation, starting as a
sales representative in 1966, progressing through numerous field
and headquarters marketing assignments, and culminating in his
final position as Region General Manager for the Mid-Atlantic
Operations Group based in Washington, D.C.
Mr. Hayes has been Chairman, President and Chief
Executive Officer of Palmer National Bancorp, Inc. and The
Palmer National Bank since March 1985. Mr. Hayes serves as a
Director of Insituform East and Capitol Copy. He is also a
Director of Citizens Corporation in Eastman, Georgia, and is a
member of the Board of Visitors of the University of North
Carolina. In January 1995, he completed a three year term as a
Director of the Federal Reserve Bank of Richmond. He holds a
B.A. degree from the University of North Carolina and an
executive management degree from Columbia University School of
Business.
Mr. Kincheloe holds a B.A. degree from Randolph-Macon
College and a J.D. degree from T.C. Williams School of Law,
University of Richmond. He has been a practicing attorney and
businessman in Fairfax County, Virginia, since 1967. He
previously served on the Board of Herndon Federal Savings & Loan
and then First Federal Savings & Loan of Alexandria. He
currently serves on the Board, as Finance Chairman, of Flint
Hill School in Oakton, Virginia, and on the Board of Trustees
for Randolph-Macon College. Mr. Kincheloe serves as a Director
of Insituform East and Capitol Copy.
(2) Directorships. See Part III, Item 10 (e)(1),
paragraphs 1, 2, 5 and 6, as to Messrs. Robert Erikson and
George Erikson, Hayes and Kincheloe, respectively.
(f) Involvement in Certain Legal Proceedings
Not applicable.
Item 11. Executive Compensation
CERBCO is a parent holding company with controlling
interests in two principal subsidiaries, Insituform East ("IEI")
and Capitol Copy Products ("CCP"). CERBCO officers participate
also in the management of these subsidiaries. The following
table sets forth information concerning the compensation paid to
each of the named executive officers of the Company and/or its
subsidiaries for the fiscal years ended June 30, 1995, 1994 and
1993:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
-------------------------------------------------
Name Other Total
and Annual Annual
Principal Salary Bonus Compensation Compensation
Position Year ($) ($) ($) (2) ($)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Erikson 1995 CERBCO $10,412 $0 $0 $10,412
Director, President IEI 196,555 31,457 0 228,012
& Treasurer (1) CCP 61,063 28,267 0 89,330
-------- ------- --- --------
$268,030 $59,724 $0 $327,754
-------- ------- --- --------
-------- ------- --- --------
1994 CERBCO $10,000 $0 $0 $10,000
IEI 188,559 2,086 0 190,645
CCP 57,432 17,262 0 74,694
-------- ------- --- --------
$255,991 $19,348 $0 $275,339
-------- ------- --- --------
-------- ------- --- --------
1993 CERBCO $10,000 $0 $0 $10,000
IEI 188,000 0 0 188,000
CCP 54,678 24,348 (3) 0 79,026
-------- ------- --- --------
$252,678 $24,348 $0 $277,026
-------- ------- --- --------
-------- ------- --- --------
George Wm. Erikson 1995 CERBCO $10,412 $0 $0 $10,412
Director, Chairman IEI 196,555 31,457 0 228,012
& General Counsel (1) CCP 61,063 28,267 0 89,330
-------- ------- --- --------
$268,030 $59,724 $0 $327,754
-------- ------- --- --------
-------- ------- --- --------
1994 CERBCO $10,000 $0 $0 $10,000
IEI 188,559 2,086 0 190,645
CCP 57,432 17,262 0 74,694
-------- ------- --- --------
$255,991 $19,348 $0 $275,339
-------- ------- --- --------
-------- ------- --- --------
1993 CERBCO $10,000 $0 $0 $10,000
IEI 188,000 0 0 188,000
CCP 54,678 24,348 (3) 0 79,026
-------- ------- --- --------
$252,678 $24,348 $0 $277,026
-------- ------- --- --------
-------- ------- --- --------
Robert F. Hartman 1995 CERBCO $10,412 $0 $0 $10,412
Vice President, IEI 83,664 13,390 0 97,054
Secretary & -------- ------- --- --------
Controller $94,076 $13,390 $0 $107,466
-------- ------- --- --------
-------- ------- --- --------
1994 CERBCO $10,000 $0 $0 $10,000
IEI 80,254 888 0 81,142
-------- ------- --- --------
$90,254 $888 $0 $91,142
-------- ------- --- --------
-------- ------- --- --------
1993 CERBCO $9,808 $0 $0 $9,808
IEI 78,461 0 0 78,461
-------- ------- --- --------
$88,269 $0 $0 $88,269
-------- ------- --- --------
-------- ------- --- --------
Armen A. Manoogian 1995 CCP $224,955 $105,962 $8,400 $339,317
[Subsidiary -------- ------- --- --------
President, CCP] -------- ------- --- --------
1994 CCP $215,775 $69,283 $7,996 $293,054
-------- ------- --- --------
-------- ------- --- --------
1993 CCP $205,425 $91,083 (4) $7,615 $304,123
-------- ------- --- --------
-------- ------- --- --------
Long-Term Compensation
-----------------------------------------------
Awards Payouts
-------------------------------- --------
Name Restricted
and Stock Options/ LTIP All Other
Principal Awards SARs Payouts Compensation
Position Year ($) (#) ($) ($)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Erikson 1995 CERBCO $0 1,500 $0 $0
Director, President IEI 0 15,000 0 10,118(5)
& Treasurer (1) CCP 0 0 0 1,549(6)
--- ------ --- -------
$0 16,500 $0 $11,667
--- ------ --- -------
--- ------ --- -------
1994 CERBCO $0 1,500 $0 $0
IEI 0 15,000 0 18,322
CCP 0 0 0 1,501
--- ------ --- -------
$0 16,500 $0 $19,823
--- ------ --- -------
--- ------ --- -------
1993 CERBCO $0 1,500 $0 $0
IEI 0 15,000 0 19,968
CCP 0 0 0 1,356
--- ------ --- -------
$0 16,500 $0 $21,324
--- ------ --- -------
--- ------ --- -------
George Wm. Erikson 1995 CERBCO $0 1,500 $0 $0
Director, Chairman IEI 0 15,000 0 $12,033(5)
& General Counsel(1) CCP 0 0 0 1,549(6)
--- ------ --- -------
$0 16,500 $0 $13,582
--- ------ --- -------
--- ------ --- -------
1994 CERBCO $0 1,500 $0 $0
IEI 0 15,000 0 19,683
CCP 0 0 0 1,501
--- ------ --- -------
$0 16,500 $0 $21,184
--- ------ --- -------
--- ------ --- -------
1993 CERBCO $0 1,500 $0 $0
IEI 0 15,000 0 20,004
CCP 0 0 0 1,356
--- ------ --- -------
$0 16,500 $0 $21,360
--- ------ --- -------
--- ------ --- -------
Robert F. Hartman 1995 CERBCO $0 0 $0 $0
Vice President, IEI 0 0 0 $5,754(5)
Secretary & --- ------ --- -------
Controller $0 0 $0 $5,754
--- ------ --- -------
--- ------ --- -------
1994 CERBCO $0 0 $0 $0
IEI 0 0 0 6,632
--- ------ --- -------
$0 0 $0 $6,632
--- ------ --- -------
--- ------ --- -------
1993 CERBCO $0 0 $0 $0
IEI 0 0 0 7,648
--- ------ --- -------
$0 0 $0 $7,648
--- ------ --- -------
--- ------ --- -------
Armen A. Manoogian 1995 CCP $0 0 $0 $6,129(6)
[Subsidiary --- ------ --- -------
President, CCP] --- ------ --- -------
1994 CCP $0 0 $0 $5,898
--- ------ --- -------
--- ------ --- -------
1993 CCP $0 0 $0 $5,345
--- ------ --- -------
--- ------ --- -------
(1) The Company's Corporate Executive Committee, consisting of
the Chairman and the President, exercises the duties and
responsibilities of the Chief Executive Officer of the
Company.
(2) None of the named executive officers received perquisites
or other personal benefits in excess of the lesser of
$50,000 or 10% of his total salary and bonus. The amounts
reported represent payment for hours of leave in lieu of
time off.
(3) Consists of bonus paid for fiscal year 1992 ($8,348) and
earned for fiscal year 1993 ($16,000).
(4) Consists of bonus paid for fiscal year 1992 ($31,304) and
earned for fiscal year 1993 ($59,779).
(5) Insituform East contributions to the IEI Advantage Plan,
as described in the section below entitled "Compensation
Pursuant to Plans."
(6) Capitol Copy contributions to the CCP Profit Sharing Plan,
as described in the section below entitled "Compensation
Pursuant to Plans."
</TABLE>
COMPENSATION PURSUANT TO PLANS
CERBCO, Inc. Plans
Supplemental Executive Retirement Plan
During fiscal year 1994, CERBCO entered into Supplemental
Executive Retirement Agreements with three executive officers
pursuant to a Supplemental Executive Retirement Plan (the
"CERBCO Supplemental Retirement Plan"). The agreements provide
for monthly retirement benefits of 50% of the executive's final
aggregate monthly salary from CERBCO and its subsidiaries as
defined in and limited by the executive's agreement, for Messrs.
Robert Erikson and George Erikson. In the case of Mr. Robert
Hartman, the agreement provides for 25% of the executive's final
aggregate monthly salary from CERBCO and its subsidiaries as
defined in and limited by the executive's agreement.
To compute the monthly retirement benefits, the percentage
of final monthly salary is multiplied by a ratio (not to exceed
1) of:
the completed years of employment by CERBCO after 1992
to
the total number of years of employment after 1992 that
the executive would have completed if he had continued
in employment to age 65.
If the executive dies prior to retirement, the executive's
beneficiary will receive a pre-retirement death benefit of a
percentage (50% in the case of Messrs. Robert Erikson and George
Erikson; 25% in the case of Mr. Robert Hartman) of the
executive's final monthly salary for 180 months. If the
executive dies after commencement of the payment of benefits,
but before receiving 180 monthly payments, the executive's
beneficiary will receive payments until the total payments
received by the executive and/or his beneficiary equal 180.
The CERBCO Supplemental Retirement Plan is technically
unfunded, except as described below. CERBCO will pay all
benefits from its general revenues and assets. To facilitate
the payment of benefits and provide the executives with a
measure of benefit security without subjecting the CERBCO
Supplemental Retirement Plan to various rules under the Employee
Retirement Income Security Act of 1974, CERBCO has established
an irrevocable trust (the "CERBCO, Inc. Supplemental Executive
Retirement Trust Agreement"). This trust is subject to the
claims of CERBCO's creditors in the event of bankruptcy or
insolvency. The trust has purchased life insurance on the lives
of the executive officers covered by the Supplemental Executive
Retirement Agreements to provide for CERBCO's financial
obligations under the Plan. Assets in the trust consist of the
cash surrender values of the executive life insurance policies
and are carried on CERBCO's balance sheet as assets. The trust
will not terminate until participants and beneficiaries are no
longer entitled to benefits under the plan. Upon termination,
all assets remaining in the trust will be returned to CERBCO.
For additional information on the CERBCO Supplemental Retirement
Plan, see "Defined Benefit or Actuarial Plans."
1988 Plan of Reorganization and Merger
Pursuant to the Plan of Reorganization and Merger, approved
by CERBERONICS stockholder vote on February 26, 1988, CERBCO
became a successor to the CERBERONICS, Inc. 1986 Employee Stock
Option Plan and the 1986 Board of Directors' Stock Option Plan
(now collectively the "CERBCO Plans") described below. The
CERBCO Plans are now deemed to relate to stock options to
purchase shares of CERBCO Common Stock. Each CERBERONICS stock
option previously outstanding was converted into an option to
purchase, upon the same terms, shares of CERBCO Common Stock in
the same numbers as were provided by the option with respect to
Class A Common Stock of CERBERONICS. The CERBCO Plans do not
relate to shares of CERBCO Class B Common Stock. In all other
respects, the terms of the CERBCO Plans and the options
outstanding, or which may become outstanding, remain unchanged.
1986 Employee Stock Option Plan
CERBERONICS adopted, with stockholder approval at the 1986
Annual Meeting of Stockholders, the CERBERONICS, Inc. 1986
Employee Stock Option Plan (now called the "CERBCO Employee
Plan"). The purpose of the CERBCO Employee Plan is to promote
the growth and general prosperity of the Company by permitting
key management employees to purchase shares, through the grant
and exercise of options, of CERBCO's Common Stock. Under the
terms of the CERBCO Employee Plan, which is administered by the
Stock Option Committee appointed by and comprised of members of
the Board of Directors, both incentive and nonstatutory stock
options may be granted to eligible employees. Under the CERBCO
Employee Plan, 75,000 shares of Common Stock were reserved for
issuance upon the exercise of stock options granted.
The Stock Option Committee, in its sole discretion, has
full power and authority to designate eligible employees to whom
an incentive stock option or a nonstatutory stock option shall
be granted, determine the number of shares to be made available
under any option granted, determine the periods in which a
participant may exercise his option (provided, however, no
incentive stock option may be exercised more than ten years
after the date of its grant), determine the option price and
determine the date on which the option shall expire. The grant
of a stock option under the CERBCO Employee Plan is contingent
on the participant's continued services on behalf of CERBCO for
a period of not less than 24 months from the date of grant of
the option.
During fiscal year 1995, no options were granted to
executive officers of CERBCO, and no options available under
this plan were exercised by executive officers of CERBCO.
1986 Directors' Stock Option Plan
CERBERONICS adopted, with stockholder approval at the 1986
Annual Meeting of Stockholders, the CERBERONICS, Inc. 1986 Board
of Directors' Stock Option Plan (now called the "CERBCO
Directors' Plan"). The purpose of the CERBCO Directors' Plan is
to promote the growth and general prosperity of CERBCO by
permitting the Company, through the granting of options to
purchase shares of CERBCO's Common Stock, to attract and retain
the best available persons as members of CERBCO's Board of
Directors with an additional incentive for such persons to
contribute to the success of the Company. A maximum of 75,000
shares of Common Stock may be made subject to options under the
CERBCO Directors' Plan. Options may be granted to directors of
CERBCO or any of its subsidiaries. Each option granted under
the CERBCO Directors' Plan entitles each director to whom such
option is granted the right to purchase shares of CERBCO's
Common Stock at a designated option price, any time and from
time to time, within three years from the date of grant.
The CERBCO Board of Directors administers the CERBCO
Directors' Plan and has exclusive authority to interpret,
construe and implement the provisions of the CERBCO Directors'
Plan, except as may be delegated in whole or in part by the
Board to a committee of the Board which may consist of three or
more members of the Board. No such delegation of authority has
been made. Each determination, interpretation or other action
that may be taken pursuant to the CERBCO Directors' Plan by the
Board is final and binding and conclusive for all purposes and
upon all persons. The Board from time to time may amend the
CERBCO Directors' Plan as it deems necessary to carry out the
purposes thereof.
The terms of the CERBCO Directors' Plan contemplated that
each director of the Company be granted an option to purchase
1,500 shares of the Company's Common Stock each year for five
years, for a total of 7,500 shares of Common Stock per director,
beginning in fiscal year 1986. On June 28, 1986, options on
1,500 shares of Common Stock were granted to each of the six
CERBERONICS directors then in office. No additional options
were granted until December 19, 1991. On December 19, 1991, the
CERBCO Directors' Plan was amended by the CERBCO Board of
Directors to ensure its original purpose by granting options to
purchase 1,500 shares of Common Stock to CERBCO directors in
fiscal 1992 and subsequent years, so that each director serving
on the date of grant will receive options for a total amount of
7,500 shares over a five year period. Messrs. Robert Erikson
and George Erikson, being the only current directors having
received options in 1986, will each receive options for a total
amount of 6,000 shares over a four year period, to the extent
each is serving as a director on the date of grant.
On December 16, 1994, options on a total of 6,000 shares of
Common Stock were granted to directors of the Company (options
on 1,500 shares to each of four directors) at a per share option
price of $5.125. Options on a total of 4,500 shares available
under this plan were exercised by directors of the Company
during fiscal year 1995.
Insituform East, Incorporated Plans
Insituform East Employee Advantage Plan
During fiscal year 1995, as executive officers of
Insituform East, Messrs. Robert Erikson, George Erikson and
Robert Hartman participated in the Insituform East, Incorporated
Employee Advantage Plan (the "IEI Advantage Plan"). The IEI
Advantage Plan is a noncontributory profit sharing plan in which
all employees not covered by a collective bargaining agreement
and employed with Insituform East for at least one year are
eligible to participate. No employee is covered by a collective
bargaining agreement. The IEI Advantage Plan is administered by
the Insituform East Board of Directors which determines, at its
discretion, the amount of Insituform East's annual contribution.
The Insituform East Board of Directors can authorize a
contribution, on behalf of Insituform East, of up to 15% of the
compensation paid to participating employees during the year.
The plan is integrated with Social Security. Each participating
employee is allocated a portion of Insituform East's
contribution based on the amount of that employee's compensation
plus compensation above FICA limits relative to the total
compensation paid to all participating employees plus total
compensation above FICA limits. Amounts allocated under the IEI
Advantage Plan begin to vest after three years of service (at
which time 20% of the contribution paid vests) and are fully
vested after seven years of service.
<TABLE>
<CAPTION>
Names and Capacities
in Which Cash Contributions for Vested Percent
Contributions Were Made Fiscal Year 1995 (1) as of 6/30/95
<S> <C> <C>
George Wm. Erikson, Chairman $10,118 100%
Robert W. Erikson, President $10,118 100%
Robert F. Hartman, Vice
President - Administration
& Secretary $ 4,586 40%
Executive Officers of
Insituform East as a Group,
(6 persons, including those
named above) $44,375 N/A
(1) Total contributions to employees of $212,646 include
Insituform East's contribution of $183,489 and reallocated
amounts totaling $29,157 forfeited by former participants who
terminated employment with Insituform East during fiscal year
1995.
</TABLE>
The IEI Advantage Plan also includes a salary reduction
profit sharing feature under Section 401(k) of the Internal
Revenue Code. Each participant may elect to defer a portion of
his compensation by any whole percentage from 2% to 16% subject
to certain limitations. During the fiscal year ended June 30,
1995, Insituform East contributed an employer matching
contribution equal to 25% of the participant's deferred
compensation up to a maximum of 1.5% of the participant's total
paid compensation for the fiscal year. Participants are 100%
vested at all times in their deferral and employer matching
accounts.
<TABLE>
<CAPTION>
Names and Capacities
in Which Cash Contributions for Vested Percent
Contributions Were Made Fiscal Year 1995 as of 6/30/95
<S> <C> <C>
George Wm. Erikson, Chairman $1,915 100%
Robert W. Erikson, President $0 100%
Robert F. Hartman, Vice
President - Administration
& Secretary $1,168 100%
Executive Officers of
Insituform East as a Group,
(6 persons, including those
named above) $6,623 N/A
</TABLE>
Insituform East 1985 Employee Stock Option Plan
Insituform East adopted, with stockholder approval at the
1985 Annual Meeting of Stockholders, the Insituform East,
Incorporated 1985 Employee Stock Option Plan (the "IEI Employee
Plan"). The purpose of the plan is to advance the growth and
development of Insituform East by affording an opportunity to
employees of Insituform East to purchase shares of Insituform
East's Common Stock and to provide incentives for them to put
forth maximum efforts for the success of Insituform East's
business. Any employee of Insituform East who is employed on a
full-time basis is eligible for participation. The IEI Employee
Plan is administered by Insituform East's Stock Option
Committee.
During fiscal year 1995, no options were granted to
executive officers of Insituform East. All options granted
under this plan in past years expired prior to fiscal year 1995.
Insituform East 1994 Board of Directors' Stock Option Plan
Insituform East adopted, with stockholder approval at the
1994 Annual Meeting of Stockholders, the Insituform East,
Incorporated 1994 Board of Directors' Stock Option Plan (the
"IEI 1994 Directors' Plan"). The purpose of this plan is to
promote the growth and general prosperity of Insituform East by
permitting Insituform East, through the granting of options to
purchase shares of its Common Stock, to attract and retain the
best available persons as members of Insituform East's Board of
Directors with an additional incentive for such persons to
contribute to the success of Insituform East. The IEI 1994
Directors' Plan is administered and options are granted by the
Insituform East Board of Directors. During fiscal year 1995, as
directors of Insituform East, Messrs. Robert Erikson and George
Erikson participated in this plan.
Each grant of options under the IEI 1994 Directors' Plan
will entitle each Insituform East director to whom such options
are granted the right to purchase 15,000 shares of Insituform
East's Common Stock at a designated option price, any time and
from time to time, within five years from the date of grant.
Options are granted under the IEI Directors' Plan each year for
five years to each member of the Board of Directors of
Insituform East serving as such on the date of grant, i.e., for
each director serving for five years, a total of five options
covering in the aggregate 75,000 shares of Common Stock (subject
to adjustments upon changes in the capital structure of
Insituform East) over a five year period.
On December 9, 1994, options on a total of 105,000 shares
of Insituform East's Common Stock were granted to directors of
Insituform East (options on 15,000 shares to each of seven
directors, including Messrs. Robert Erikson and George Erikson)
at a per share option price of $2.625. No options available
under this plan were exercised by directors of Insituform East
during fiscal year 1995. Under the terms of this plan, up to
525,000 shares of Insituform East's Common Stock have been
reserved for the directors of Insituform East.
Insituform East 1989 Board of Directors' Stock Option Plan
Insituform East adopted, with stockholder approval at the
1989 Annual Meeting of Stockholders, the Insituform East,
Incorporated 1989 Board of Directors Stock Option Plan (the "IEI
1989 Directors' Plan"). The purpose of this plan was the same
as the IEI 1994 Directors' Plan. The term of the plan is for
ten years, unless terminated sooner by the Board of Directors.
Options were first granted to directors on December 1, 1989 and
each of the four succeeding Board of Directors meetings
following the Annual Meetings of Stockholders in 1990, 1991,
1992 and 1993. Each grant of options under the plan entitles
each director to whom such options were granted the right to
purchase 15,000 shares of Insituform East's Common Stock at a
designated option price, any time and from time to time, within
five years from the date of grant. Although no further options
are anticipated to be granted under this plan, options
previously granted, and which have not already been exercised or
expired, will remain in effect until exercise or expiration,
whichever comes first. No options available under the plan were
exercised by directors of Insituform East during fiscal year
1995. Under the terms of this plan, up to 240,000 shares of
Insituform East Common Stock remain reserved for the directors
of Insituform East.
Capitol Copy Products, Inc. Plans
Capitol Copy Profit Sharing Plan
During fiscal year 1995, as executive officers of Capitol
Copy, Messrs. Robert Erikson, George Erikson and Armen Manoogian
participated in the Capitol Copy Products, Inc. Profit Sharing
Plan (the "CCP Profit Sharing Plan"). All full time employees
who have been with Capitol Copy for at least one year are
eligible to participate in this noncontributory plan.
Contributions are made each year in an amount determined by
Capitol Copy's Board of Directors. Each participating employee
is allocated a portion of the contribution based on the amount
of that employee's compensation relative to the total
compensation paid to all participating employees. Amounts
allocated under the CCP Profit Sharing Plan begin to vest after
two years of service (at which time 20% of the contribution paid
vests) and are fully vested after six years of service.
<TABLE>
Names and Capacities
in Which Cash Contributions for Vested Percent
Contributions Were Made Fiscal Year 1995 as of 6/30/95
<S> <C> <C>
George Wm. Erikson, Chairman $1,549 100%
Robert W. Erikson, Vice Chairman $1,549 100%
Armen A. Manoogian, President $6,129 100%
Executive Officers of
Capitol Copy as a Group,
(6 persons, including those
named above) $14,390 N/A
</TABLE>
Capitol Copy 1987 Incentive Stock Option Plan
Capitol Copy adopted, with stockholder approval on October
1, 1987, the Capitol Copy Products, Inc. 1987 Incentive Stock
Option Plan (the "CCP Incentive Plan"). The purpose of this
plan is to advance the interests of Capitol Copy by providing
key employees with additional incentive for them to promote the
success of Capitol Copy, to increase their proprietary interest
in Capitol Copy and to remain in its employ. The term "key
employee" means those employees (including officers and
directors who are also employees, but not including Messrs.
George Erikson and Robert Erikson) who, in the judgment of the
Capitol Copy Board of Directors, are important to the future of
Capitol Copy. The CCP Incentive Plan is administered and
options are granted by the Capitol Copy Board of Directors.
Each grant of options under the CCP Incentive Plan will
entitle the Capitol Copy key employee to whom such options are
granted the right to purchase a designated number of shares of
Class B Stock at a designated price for a designated option
period. No part of any grant of options may be exercised until
the optionee has remained in the employ of Capitol Copy for a
period of time as specified by the Board of Directors in the
option agreement.
No options were granted under this plan to executive
officers of Capitol Copy during fiscal year 1994. All options
granted under this plan in past years were exercised prior to
fiscal year 1995.
OPTION/SAR GRANTS
No option or Stock Appreciation Right grants were made to
any of the named executive officers during fiscal year 1995
under the CERBCO Employee Plan, the IEI Employee Plan, the IEI
1989 Directors' Plan or the CCP Incentive Plan. The following
table sets forth information concerning options granted to each
of the named executive officers during fiscal year 1995, under
the CERBCO Directors' Plan and the IEI 1994 Directors' Plan:
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realized
Value at
Assumed Annual
Rates of
Stock Price
Appreciation
Individual Grants for Option Term
------------------------------------------- ------------------
% of Total
Options/SARs
Granted to
Option/ Employees Exercise
SARs in Fiscal or Base Expiration
Name Granted(#) Year ($/Share) Date 5% ($) 10%($)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Erikson
CERBCO Directors'
Plan 1,500 25% $5.125 12/16/97 $1,212 $2,544
IEI 1994
Directors' Plan 15,000 14% $2.625 12/9/99 $10,875 $24,045
George Wm. Erikson
CERBCO Directors'
Plan 1,500 25% $5.125 12/16/97 $1,212 $2,544
IEI 1994
Directors' Plan 15,000 14% $2.625 12/9/99 $10,875 $24,045
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR
VALUE
No option or Stock Appreciation Right grants made under the
CERBCO Employee Plan, or the IEI 1989 or 1994 Directors' Plans
to any of the named executive officers were exercised during
fiscal year 1995. During fiscal year 1995, Mr. George Erikson
exercised an option to purchase 1,500 shares of CERBCO Common
Stock granted under the CERBCO Directors' Plan. The following
table sets forth information concerning option or Stock
Appreciation Right grants held by each of the named executive
officers under all plans as of June 30, 1995:
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised Unexercised in the Money
Options/SARs at FY-End(#) Options/SARs at FY-End($)
Shares ------------------------- -------------------------
Acquired on Value
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert W.
Erikson
CERBCO
Employee
Plan 0 $0 5,168 0 $0 $0
CERBCO
Directors'
Plan 0 $0 4,500 0 $5,250 $0
IEI 1994
Directors'
Plan 0 $0 15,000 0 $26,250 $0
IEI 1989
Directors'
Plan 0 $0 60,000 0 $29,063 $0
George Wm.
Erikson
CERBCO
Employee
Plan 0 $0 5,168 0 $0 $0
CERBCO
Directors'
Plan 1,500 $3,563 4,500 0 $5,250 $0
IEI 1994
Directors'
Plan 0 $0 15,000 0 $26,250 $0
IEI 1989
Directors'
Plan 0 $0 60,000 0 $29,063 $0
</TABLE>
REPRICING OF OPTIONS/SARs
Neither the Company nor its subsidiaries have adjusted or
amended the exercise price of stock options or SARs previously
awarded to any of the named executive officers during fiscal
year 1995.
LONG-TERM INCENTIVE PLAN AWARDS
Neither the Company nor its subsidiaries have a long-term
incentive plan.
DEFINED BENEFIT OR ACTUARIAL PLANS
The Company maintains the CERBCO Supplemental Retirement
Plan to provide annual retirement benefits to covered executives
based on each executive's covered compensation. The following
tables set forth the annual retirement benefits that would be
received under the CERBCO Supplemental Retirement Plan at
various compensation levels after the specified years of
service:
<TABLE>
Pension Plan Table Where Formula Provides 50% of Compensation
(1)
<CAPTION>
(Final) Years of Service (Under Plan)
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $ 58,594 $ 62,500 $ 62,500 $ 62,500 $ 62,500
$150,000 $ 70,313 $ 75,000 $ 75,000 $ 75,000 $ 75,000
$175,000 $ 82,031 $ 87,500 $ 87,500 $ 87,500 $ 87,500
$200,000 $ 93,750 $100,000 $100,000 $100,000 $100,000
$225,000 $105,469 $112,500 $112,500 $112,500 $112,500
$250,000 $117,188 $125,000 $125,000 $125,000 $125,000
$300,000 $140,625 $150,000 $150,000 $150,000 $150,000
$350,000 $154,627 $175,000 $175,000 $175,000 $175,000
$400,000 $154,627 $182,101 $200,000 $200,000 $200,000
$450,000 $154,627 $182,101 $201,055 $221,961 $225,000
$500,000 $154,627 $182,101 $201,055 $221,961 $245,085
(1) Assumes at the time the Plan was established (i) the
individual is age 50, (ii) maximum covered compensation is
$250,000 and is increased 2% (compounded annually) each year of
service after 1992, and (iii) retirement is effective at the
beginning of the year.
</TABLE>
<TABLE>
Pension Plan Table Where Formula Provides 25% of Compensation
(2)
<CAPTION>
(Final) Years of Service (Under Plan)
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$50,000 $ 8,929 $11,905 $12,500 $12,500 $12,500
$75,000 $13,393 $17,858 $18,750 $18,750 $18,750
$100,000 $17,858 $23,810 $25,000 $25,000 $25,000
$200,000 $21,206 $31,218 $36,190 $39,957 $44,115
$300,000 $21,206 $31,218 $36,190 $39,957 $44,115
$400,000 $21,206 $31,218 $36,190 $39,957 $44,115
$500,000 $21,206 $31,218 $36,190 $39,957 $44,115
(2) Assumes at the time the Plan was established (i) the
individual is age 45, (ii) maximum covered compensation is
$90,000 and is increased 2% (compounded annually) each year of
service after 1992, and (iii) retirement is effective at the
beginning of the year.
</TABLE>
Each executive's covered compensation under the CERBCO
Supplemental Retirement Plan is equal to his final base salary.
The maximum covered compensation for Messrs. Robert Erikson and
George Erikson is limited to $250,000 annually ($20,834 per
month), increased 2% annually beginning in 1993. The maximum
covered compensation for Mr. Robert Hartman is limited to
$90,000 annually ($7,500 per month), increased 2% annually
beginning in 1993.
The following table sets forth information concerning
vested annual benefits as of June 30, 1995 for the executives
listed in the Summary Compensation Table covered by the CERBCO
Supplemental Retirement Plan:
<TABLE>
<CAPTION>
Years of Current
Credited Annual Vested
Years of Service Covered Vested Annual
Name Service Under Plan Compensation Percentage Benefit
<S> <C> <C> <C> <C> <C>
Robert W.
Erikson 22 3 $260,100 16.67% $21,675
George Wm.
Erikson 19 3 $260,100 20.00% $26,010
Robert F.
Hartman 14 3 $ 93,068 15.00% $ 3,490
</TABLE>
See "Compensation Pursuant to Plans, CERBCO, Inc. Plans,
Supplemental Executive Retirement Plan" as to the basis upon
which benefits under the Plan are computed. Each covered
executive's benefit under the Plan is payable in equal monthly
amounts for the remainder of the covered executive's life
beginning as of any date on or after his 62nd birthday (at the
covered executive's election) but not before his termination of
service. In the event of a covered executive's death, his
beneficiary shall be entitled to receive monthly benefits equal
to the covered executive's accrued monthly benefit, for up to a
maximum of 180 months. Payments under the CERBCO Supplemental
Retirement Plan are not subject to any reduction for Social
Security or any other offset amounts but are subject to Social
Security and other applicable tax withholding.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment contracts between the Company or
its subsidiaries and any named executive officer. There are no
arrangements between the Company or its subsidiaries and any
named executive officer, or payments made to an executive
officer, that resulted, or will result, from the resignation,
retirement or other termination of employment with the Company
or its subsidiaries, in an amount that exceeds $100,000.
COMPENSATION OF DIRECTORS
Each non-officer director of the Company is paid an annual
fee of $3,000 and an attendance fee of $500 for Board of
Directors meetings where he attends in person. The attendance
fee is $100 if he participates by telephone. Directors who are
also officers of the Company do not receive separate fees for
service as directors, but are eligible with all other directors
to participate in the CERBCO Directors' Stock Option Plan, as
described under the section entitled, "Compensation Pursuant to
Plans." All directors of the Company are reimbursed for Company
travel-related expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors does not have a
compensation committee; the Board of Directors as a whole serves
in that equivalent capacity. Messrs. George Erikson and Robert
Erikson, both members of the Board of Directors and executive
officers of the Company, holding the offices of Chairman &
General Counsel and President & Treasurer, respectively,
participate in, and during fiscal 1995 participated in,
deliberations of the Board of Directors concerning executive
officer compensation.
Messrs. George Erikson and Robert Erikson are both members
of the Board of Directors and executive officers of Insituform
East and Capitol Copy. In their capacities as directors of
these subsidiary companies, they participate in, and during
fiscal 1995 participated in, deliberations of the respective
subsidiaries' Boards of Directors concerning executive officer
compensation.
Mr. Robert Erikson serves, and served during fiscal 1995,
as a member of the Compensation Committee of the Board of
Directors of Palmer National Bancorp, Inc. and The Palmer
National Bank. Mr. Webb C. Hayes, IV, a director of the Company
and a director of Insituform East and Capitol Copy who
participates in, and during fiscal 1995 participated in,
deliberations of the CERBCO Board of Directors and the Boards of
Directors of its subsidiaries concerning executive officer
compensation for CERBCO and its subsidiaries, respectively, is
Chairman of the Board and an executive officer of Palmer
National Bancorp, Inc. and The Palmer National Bank.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
-------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
The following table reflects, as of September 13, 1995, the
only persons known to the Company to be the beneficial owners of
more than five percent of any class of CERBCO's voting
securities:
<TABLE>
<CAPTION>
Amount and
Nature of
Name & Address of Title of Beneficial Percent
Beneficial Owner Class Ownership of Class
<S> <C> <C> <C> <C>
Robert W. Erikson Common Stock 56,200(1) 4.9%
3421 Pennsy Drive Class B
Landover, MD Common Stock 131,750(2)(4) 42.4%
George Wm. Erikson Common Stock 55,102(3) 4.8%
3421 Pennsy Drive Class B
Landover, MD Common Stock 115,814(3)(4) 37.2%
Koonce Securities,
Inc. Common Stock 229,930(5) 20.0%
6550 Rock Spring Dr
Bethesda, MD
Kennedy Capital Common Stock 108,300(6) 9.4%
Management, Inc.
425 N. New Ballas Rd
St. Louis, MO
(1) Record and beneficial ownership, sole voting and sole
investment power. Does not include 10,125 shares owned by Mr.
Erikson's spouse, the beneficial ownership of which Mr. Erikson
disclaims.
(2) Record and beneficial ownership, sole voting and sole
investment power. Does not include 125 shares owned by Mr.
Erikson's spouse, the beneficial ownership of which Mr. Erikson
disclaims.
(3) Record and beneficial ownership. Includes 2,246 shares of
each class of stock owned jointly with Mr. Erikson's spouse, as
to which there is shared voting and investment power.
(4) See Part I, Item 3, "Legal Proceedings."
(5) Beneficial ownership, sole voting and sole investment
power.
(6) Beneficial ownership, shared voting and shared investment
power.
</TABLE>
(b) Security Ownership of Management
The following information is furnished with respect to all
directors of CERBCO who were the beneficial owners of any shares
of CERBCO's Common Stock and Class B Common Stock as of
September 13, 1995, and with respect to all directors and
officers of CERBCO as a group:
<TABLE>
<CAPTION>
Amount & Nature of
Beneficial Ownership
Name of Beneficial Title Owned Exercisable Percent
Owner of Class Outright Options of Class
<S> <C> <C> <C> <C>
Robert W. Erikson Common Stock 56,200 9,668 5.7%
Class B (1)
Common 131,750 0 42.4%
Stock (2)(4)
George Wm. Erikson Common Stock 55,102 9,668 5.6%
Class B (3)
Common 115,814 0 37.2%
Stock (3)(4)
Webb C. Hayes, IV Common Stock 1,500 4,500 0.5%
Paul C.
Kincheloe, Jr. Common Stock 1,500 4,500 0.5%
All Directors and
Officers as a Common Stock 114,302 28,336 12.1%
Group (6 persons
including Class B
those named Common 247,564 0 79.6%
above) Stock (5)(6)
(1) Record and beneficial ownership, sole voting and sole
investment power. Does not include 10,125 shares owned by Mr.
Erikson's spouse, the beneficial ownership of which Mr. Erikson
disclaims.
(2) Record and beneficial ownership, sole voting and sole
investment power. Does not include 125 shares owned by Mr.
Erikson's spouse, the beneficial ownership of which Mr. Erikson
disclaims.
(3) Record and beneficial ownership. Includes 2,246 shares of
each class of stock owned jointly with Mr. Erikson's spouse, as
to which there is shared voting and investment power.
(4) See Part I, Item 3, "Legal Proceedings."
(5) Mr. George Erikson also is the beneficial owner of 16,500
shares of Common Stock (less than 1% of such class) of
Insituform East, Incorporated, a subsidiary of the Company. In
addition, Messrs. George Erikson and Robert Erikson each are the
beneficial owners of exercisable options on 75,000 shares of the
Common Stock (approximately 1.8% of such class) of Insituform
East, Incorporated, pursuant to the Insituform East 1989 and
1994 Board of Directors' Stock Option Plans.
(6) Mr. Armen Manoogian, President and Director of Capitol Copy
Products, Inc. ("CCP"), a subsidiary of the Company, is the
beneficial owner of 400 shares (33 1/3%) of the Class B Stock of
CCP.
</TABLE>
The following information is furnished with respect to all
directors of Insituform East who were the beneficial owners of
any shares of Insituform East's Common Stock and Class B Common
Stock as of September 13, 1995, and with respect to all
directors and officers of Insituform East as a group:
<TABLE>
<CAPTION>
Amount & Nature
of Beneficial
Ownership
Name of Owned Exercisable Percent
Beneficial Owner Title of Class Outright Options of Class
<S> <C> <C> <C> <C>
Thomas J. Schaefer Common Stock 27,500 75,000 2.5%
George Wm. Erikson Common Stock 16,500 75,000 2.2%
Robert W. Erikson Common Stock 0 75,000 1.8%
Jack Massar Common Stock 0 75,000 1.8%
Webb C. Hayes, IV Common Stock 0 15,000 0.4%
Paul C.
Kincheloe, Jr. Common Stock 0 15,000 0.4%
Calvin G. Franklin Common Stock 0 15,000 0.4%
All Directors and
Officers as
a Group Common Stock 44,500 345,000 8.8%
(11 persons
including Class B Common
those named Stock 0 0 0
above)
</TABLE>
The following information is furnished with respect to all
directors of Capitol Copy who were the beneficial owners of any
shares of Capitol Copy's Class B Stock as of September 13,
1995, and with respect to all directors and officers of Capitol
Copy as a group:
<TABLE>
<CAPTION>
Amount & Nature of
Beneficial Ownership
Name of Owned Exercisable Percent
Beneficial Owner Title of Class Outright Options of Class
<S> <C> <C> <C> <C>
Armen A. Manoogian Class B Stock 400 0 33 1/3%
George Wm. Erikson Class B Stock 0 0 0
Robert W. Erikson Class B Stock 0 0 0
Webb C. Hayes, IV Class B Stock 0 0 0
Paul C.
Kincheloe, Jr. Class B Stock 0 0 0
Anthony J. Zelano Class B Stock 0 0 0
All Directors and
Officers Class B Stock 400 0 33 1/3%
as a Group
(9 persons
including those
named above)
</TABLE>
(c) Changes in Control
There were no changes in control of the Company during the
year ended June 30, 1995. However, in March 1990 George Wm.
Erikson and Robert W. Erikson, the controlling stockholders of
the Company, executed a letter of intent and subsequently
executed four amendments thereto (collectively referred to
herein as the "Letter of Intent") with Insituform Technologies,
Inc. ("ITI") (formerly Insituform of North American, Inc. or
"INA") to effect a sale of their controlling interest in the
Company to ITI for $6,000,000 (the "Proposed Transaction"). The
Proposed Transaction, had it been consummated, would have had
the effect of making ITI the controlling stockholder of the
Company and, indirectly, of each of the Company's three direct
subsidiaries at the time, Insituform East, Capitol Copy and
CERBERONICS. On September 19, 1990, however, the Company issued
a press release announcing that the Eriksons had informed the
Company that the Letter of Intent had expired without
consummation of any transaction, that it would not be further
extended, that negotiations had ceased and that the Eriksons had
no further intention at the time of pursuing the proposed sale
of their controlling interest in the Company to ITI.
A lawsuit challenging the proposed, but unconsummated
transaction brought by two of the Company's stockholders is
described in Part I, Item 3, "Legal Proceedings."
Item 13. Certain Relationships and Related Transactions
--------------------------------------------------------
(a) Transactions with Management and Others
See Item 13.(c) below.
(b) Certain Business Relationships
Not applicable.
(c) Indebtedness of Management
Pursuant to authorizations by the Board of Directors on the
dates indicated below, the Company has made certain advancements
to Mr. George Erikson, Director, Chairman & General Counsel, and
certain advancements to Mr. Robert Erikson, Director, President
& Treasurer (together the "Eriksons") for their respective legal
fees and expenses which each has incurred, and may incur in the
future, for personal legal representation in connection with the
stockholder lawsuit filed in August 1990 challenging a proposed
but unconsummated transaction between each of the Eriksons and
Insituform Technologies, Inc. (see Part I, Item 3, "Legal
Proceedings").
<TABLE>
<CAPTION>
Board Authorizations for Board Authorizations for
Advancements Advancements
to Mr. George Wm. Erikson to Mr. Robert W. Erikson
Amount Amount
Date Authorized Date Authorized
<S> <C> <S> <C>
April 12, 1991 $12,500 April 12, 1991 $12,500
December 19, 1991 12,500 December 19, 1991 12,500
March 17, 1992 12,500 March 17, 1992 12,500
September 15, 1992 25,000 September 15, 1992 25,000
December 18, 1992 50,000 December 18, 1992 50,000
March 16, 1993 50,000 March 16, 1993 50,000
December 17, 1993 12,500 December 17, 1993 12,500
June 7, 1994 50,000 June 7, 1994 50,000
September 13, 1994 75,000 September 13, 1994 75,000
December 16, 1994 100,000 December 16, 1994 100,000
March 7, 1995 75,000 March 7, 1995 75,000
September 12, 1995 25,000 September 12, 1995 25,000
-------- --------
$500,000 $500,000
-------- --------
-------- --------
</TABLE>
As of September 26, 1995, pursuant to such Board
authorizations, the Company has advanced and expensed in total
$472,541 to Mr. George Erikson and has advanced and expensed in
total $472,541 to Mr. Robert Erikson.
While a decision has been rendered in favor of the Eriksons
in the above-referenced lawsuit, it is currently on appeal.
Pending a final outcome thereof, the Board of Directors has
deferred consideration or ultimate determination of entitlement
of Mr. George Erikson and/or Mr. Robert Erikson to
indemnification by the Company for such legal fees and expenses.
If it is ultimately determined by the Board of Directors or
otherwise in accordance with Section 145 of Delaware Corporation
Law that Mr. George Erikson and/or Mr. Robert Erikson are not
entitled to indemnification for any such legal fees and expenses
under Section 145 of Delaware Corporation Law, such advances
shall be reimbursed by Mr. George Erikson and/or Mr. Robert
Erikson to the Company pursuant to an agreement with the Company
executed by each of the Eriksons and delivered to the Board of
Directors.
(d) Transactions with Promoters
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) (1) Financial Statements
The following consolidated financial statements of CERBCO, Inc.
and subsidiaries are included in PART II, Item 8:
Independent Auditors' Report on Consolidated Financial
Statements
Consolidated Statements of Operations for the Years Ended June
30, 1995, 1994 and 1993
Consolidated Balance Sheets as of June 30, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended June
30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Schedules have been omitted for the reason that they are
not required, or are not applicable, or that the required
information is given in the financial statements and notes
thereto.
(3) Exhibits
27. Financial Data Schedule
99. CERBCO, Inc. Consolidating Schedules: Statement of Earnings
Information for the Year Ended June 30, 1995; Balance Sheet
Information and Consolidating Elimination Entries as of June 30,
1995, and Related Independent Auditors' Report
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter
of the fiscal year ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Landover, Maryland, on September
26, 1995.
/s/ ROBERT W. ERIKSON
Robert W. Erikson
President
Pursuant to the requirements of the Securities Exchange Act of
1934, 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 Capacity Date
/s/ ROBERT W. ERIKSON
Robert W. Erikson Director, Sept. 26, 1995
President Principal Executive
Officer,
Principal Financial
Officer
/s/ GEORGE Wm. ERIKSON
George Wm. Erikson Director, Sept. 26, 1995
Chairman & General Counsel Principal Executive
Officer
/s/ ROBERT F. HARTMAN
Robert F. Hartman Principal Sept. 26, 1995
Vice President, Secretary Accounting
& Controller Officer
/s/ WEBB C. HAYES, IV
Webb C. Hayes, IV Director Sept. 26, 1995
/s/ PAUL C. KINCHELOE, JR.
Paul C. Kincheloe, Jr. Director Sept. 26, 1995
Exhibit 27. CERBCO, Inc. Financial Data Schedule
Exhibit 99. CERBCO, Inc. Consolidating Schedules - Statement of
Earnings Information for the Year Ended June 30, 1995; Balance
Sheet Information and Consolidating Elimination Entries as of
June 30, 1995, and Related Independent Auditors' Report.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of CERBCO, Inc.
We have audited the consolidated financial statements of CERBCO,
Inc. and subsidiaries for each of the three years in the period
ended June 30, 1995, and our report thereon appears in Item 8 of
this Report on Form 10-K. Our audits were conducted for the
purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The consolidating
schedules for the year ended June 30, 1995 are presented for the
purpose of additional analysis of the basic consolidated
financial statements rather than to present the financial
position and results of operations of the individual companies,
and are not a required part of the basic consolidated financial
statements. These schedules are the responsibility of the
Company's management. Such schedules have been subjected to the
auditing procedures applied in our audits of the basic
consolidated financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
September 15, 1995
Washington, D.C.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826821
<NAME> CERBCO, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,198
<SECURITIES> 1,761
<RECEIVABLES> 6,441
<ALLOWANCES> 55
<INVENTORY> 2,832
<CURRENT-ASSETS> 16,637
<PP&E> 18,651
<DEPRECIATION> 9,095
<TOTAL-ASSETS> 32,980
<CURRENT-LIABILITIES> 4,486
<BONDS> 0
<COMMON> 146
0
0
<OTHER-SE> 14,854
<TOTAL-LIABILITY-AND-EQUITY> 32,980
<SALES> 39,143
<TOTAL-REVENUES> 39,143
<CGS> 25,294
<TOTAL-COSTS> 25,294
<OTHER-EXPENSES> 8,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 6,602
<INCOME-TAX> 2,965
<INCOME-CONTINUING> 1,391
<DISCONTINUED> 151
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,542
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - STATEMENT OF EARNINGS INFORMATION
YEAR ENDED JUNE 30, 1995
<CAPTION>
CERBCO, Inc. CERBCO, Inc. Insituform East, Capitol Copy
Consolidated Eliminations Unconsolidated Incorporated Products, Inc.
<S> <C> <C><C> <C> <C> <C>
Sales $39,142,784 $0 $0 $21,594,313 $17,548,471
----------- --------------- --------- ----------- -----------
Costs and Expenses:
Cost of sales 25,294,470 0 0 15,016,598 10,277,872
Selling, general and
administrative expenses 8,265,371 0 960,799 4,087,445 3,217,127
----------- --------------- --------- ----------- -----------
Total Costs and Expenses 33,559,841 0 960,799 19,104,043 13,494,999
----------- --------------- --------- ----------- -----------
Operating Profit (Loss) 5,582,943 0 (960,799) 2,490,270 4,053,472
Investment Income 200,421 0 159,751 40,670 0
Equity in Earnings of
Unconsolidated Affiliate 738,798 0 0 738,798 0
Interest Expense (28,290) (B) 8,611 0 0 (36,901)
Other Income (Expense) - net 107,753 (B) (8,611) (79,257) 225,828 (30,207)
----------- --------------- --------- ----------- -----------
Earnings (Loss) Before
Income Taxes and Non-
Owned Interests 6,601,625 0 (880,305) 3,495,566 3,986,364
Provision for Income Taxes 2,965,000 0 0 1,368,000 1,597,000
----------- --------------- --------- ----------- -----------
Earnings (Loss) Before
Non-Owned Interests 3,636,625 0 (880,305) 2,127,566 2,389,364
Non-Owned Interests in
Earnings of Consolidated
Subsidiaries 2,245,586 (C) 2,238,128 0 7,458 0
----------- --------------- --------- ----------- -----------
Earnings (Loss) from
Continuing Operations 1,391,039 (2,238,128) (880,305) 2,120,108 2,389,364
Discontinued Operations:
Gain on Disposal - net 151,349 0 151,349 0 0
----------- --------------- --------- ----------- -----------
NET EARNINGS $1,542,388 (E) $(2,238,128) $(728,956) $2,120,108 $2,389,364
----------- --------------- --------- ----------- -----------
----------- --------------- --------- ----------- -----------
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
JUNE 30, 1995
<CAPTION>
CERBCO, Inc. CERBCO, Inc. Insituform East, Capitol Copy
Consolidated Eliminations Unconsolidated Incorporated Products, Inc.
------------ --------------- -------------- -------------- --------------
ASSETS
<S> <C> <C><C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents $5,197,549 $0 $1,218,266 $2,791,758 $1,187,525
Temporary investments 1,760,950 0 1,760,950 0 0
Accounts receivable 6,386,343 (A) (83,769) 83,769 4,654,597 1,731,746
Inventories 2,832,003 0 0 1,111,202 1,720,801
Prepaid and refundable
taxes 53,568 0 48,292 5,276 0
Deferred income taxes 82,000 0 0 0 82,000
Prepaid expenses and other 325,013 0 0 200,926 124,087
----------- --------------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 16,637,426 (83,769) 3,111,277 8,763,759 4,846,159
Investment in and Advances
to Subsidiaries:
Investment in subsidiaries 0 (D) (9,321,000) 9,321,000 0 0
Intercompany receivables
and payables 0 0 8,611 21,271 (29,882)
Property, Plant and Equipment
- net of accumulated
depreciation 9,556,139 0 101,687 9,142,211 312,241
Other Assets:
Excess of acquisition cost
over value of net
assets acquired - net 4,887,968 (D) 2,584,244 0 0 2,303,724
Investment in
unconsolidated affiliate 1,481,726 0 0 1,481,726 0
Deferred income taxes 27,000 0 0 0 27,000
Deposits and other 389,821 0 294,060 71,000 24,761
----------- --------------- ----------- ----------- -----------
TOTAL ASSETS $32,980,080 $(6,820,525) $12,836,635 $19,479,967 $7,484,003
----------- --------------- ----------- ----------- -----------
----------- --------------- ----------- ----------- -----------
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
JUNE 30, 1995
<CAPTION>
CERBCO, Inc. CERBCO, Inc. Insituform East, Capitol Copy
Consolidated Eliminations Unconsolidated Incorporated Products, Inc.
------------ --------------- -------------- --------------- --------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C><C> <C> <C> <C>
Current Liabilities:
Accounts payable and
accrued liabilities $3,952,543 (A) $(83,769) $8,048 $3,373,260 $655,004
Deferred revenue 479,858 0 0 0 479,858
Current portion of
long-term debt 19,015 0 0 0 19,015
Current portion of
capital lease obligations 34,156 0 0 0 34,156
----------- --------------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,485,572 (83,769) 8,048 3,373,260 1,188,033
Long-Term Liabilities:
Long-term debt 5,104 0 0 0 5,104
Capital lease obligations 37,129 0 0 0 37,129
Deferred income taxes 985,000 0 0 985,000 0
Other long-term liabilities 99,672 0 99,672 0 0
----------- --------------- ----------- ----------- -----------
TOTAL LIABILITIES 5,612,477 (83,769) 107,720 4,358,260 1,230,266
----------- --------------- ----------- ----------- -----------
Non-Owned Interests: 12,367,344 (C/D)12,367,344 0 0 0
----------- --------------- ----------- ----------- -----------
Stockholders' Equity:
Common stock 115,099 (D) (175,486) 115,099 175,486 0
Class B stock 31,096 (D) (12,024) 31,096 11,904 120
Additional paid-in capital 7,413,054 (D) (4,750,304) 7,413,054 4,000,424 749,880
Retained earnings 7,441,010 (D) (15,355,899) 5,169,666 12,123,506 5,503,737
Treasury stock 0 (D/E) 1,189,613 0 (1,189,613) 0
----------- --------------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 15,000,259 (19,104,100) 12,728,915 15,121,707 6,253,737
----------- --------------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $32,980,080 $(6,820,525) $12,836,635 $19,479,967 $7,484,003
----------- --------------- ----------- ----------- -----------
----------- --------------- ----------- ----------- -----------
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING ELIMINATION ENTRIES
JUNE 30, 1995
<CAPTION>
<S> <C> <C>
(A)
Accounts payable and accrued liabilities $83,769
Accounts receivable $83,769
To eliminate dividend receivable from
Insituform East to CERBCO at June 30, 1995.
(B)
Other income $8,611
Interest expense $8,611
To eliminate interest expense paid by Capitol
Copy to CERBCO in 1995.
(C)
Non-owned interests in earnings $2,238,128
Non-owned interests $2,238,128
To record non-owned interests in earnings of
subsidiaries in 1995.
(D)
Common stock $175,486
Class B stock 12,024
Additional paid-in capital 4,750,304
Retained earnings 13,117,771
Excess of acquisition cost over value of 2,584,244
net assets acquired
Treasury stock $1,189,613
Non-owned interests 10,129,216
Investment in subsidiaries 9,321,000
To eliminate investments in consolidated
subsidiaries at June 30, 1995.
(E)
Retained earnings $2,238,128
Current year earnings adjustments $2,238,128
To close out impact of eliminating entries on
statement of earnings for 1995.
</TABLE>
