UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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)
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
----------- -----------
As of February 2, 1996, the following number of shares of each of the issuer's
classes of common stock were outstanding:
Common Stock 1,157,001
Class B Common Stock 310,955
Total 1,467,956<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<CAPTION>
For the three months For the six months
ended Dec. 31 ended Dec. 31
1995 1994 1995 1994
Sales
<S> <C> <C> <C> <C>
Sales of products $8,851,746 $8,066,037 $17,387,540 $14,826,200
Sales of services
and supplies 2,758,998 2,358,970 5,241,211 4,457,465
---------- ---------- ---------- ----------
TOTAL SALES 11,610,744 10,425,007 22,628,751 19,283,665
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of products sold 6,251,842 5,763,513 12,149,834 10,592,870
Cost of services and
supplies 1,368,056 1,156,545 2,608,722 2,156,687
Selling, general and
administrative
expenses 2,092,665 2,098,577 4,200,022 3,914,408
Total Costs and ---------- ---------- ---------- ----------
Expenses 9,712,563 9,018,635 18,958,578 16,663,965
---------- ---------- ---------- ----------
Operating Profit 1,898,181 1,406,372 3,670,173 2,619,700
Investment Income 50,193 51,901 120,786 95,632
Equity in Earnings of
Unconsolidated Affiliate 170,571 239,732 356,522 413,377
Interest Expense (2,207) (8,770) (6,632) (20,925)
Other Income - net 15,878 19,440 90,560 35,320
Earnings Before Incomes ---------- ---------- ---------- ----------
Taxes and Non-Owned
Interests 2,132,616 1,708,675 4,231,409 3,143,104
Provision for Income
Taxes 907,000 798,000 1,742,000 1,447,000
Earnings Before ---------- ---------- ---------- ----------
Non-Owned Interests 1,225,616 910,675 2,489,409 1,696,104
Non-Owned Interests in
Earnings of
Consolidated
Subsidiaries 693,439 580,456 1,366,415 1,025,224
Earnings from Continuing ---------- ---------- ---------- ----------
Operations 532,177 330,219 1,122,994 670,880
Discontinued Operations:
Gain on disposal of
discontinued operations 0 147,701 0 147,701
---------- ---------- ---------- ----------
NET EARNINGS $532,177 $477,920 $1,122,994 $818,581
========== ========== ========== ==========
Net Earnings per Share
of Common Stock:
Earnings from continuing
operations $.37 $.23 $.77 $.46
Estimated gain on
disposal 0 .10 0 .10
------ ------ ------ ------
Net Earnings per Share $.37 $.33 $.77 $.56
====== ====== ====== ======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
As of
Dec. 31, 1995 June 30, 1995
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $4,413,461 $5,197,549
Temporary investments 1,474,300 1,760,950
Accounts receivable 8,858,654 6,386,343
Inventories 2,992,007 2,832,003
Prepaid and refundable taxes 87,963 53,568
Deferred income taxes 82,000 82,000
Prepaid expenses and other 399,868 325,013
----------- -----------
Total Current Assets 18,308,253 16,637,426
----------- -----------
Property, Plant and Equipment - at cost
less accumulated depreciation of
$9,650,228 at December 31, 1995 and
$9,094,562 at June 30, 1995 9,657,688 9,556,139
----------- -----------
Other Assets:
Excess of acquisition cost over value
of net assets acquired - net of
accumulated amortization of $1,535,574
at December 31, 1995 and $1,455,921 at
June 30, 1995 4,808,315 4,887,968
Investment in unconsolidated affiliate 1,838,248 1,481,726
Cash surrender value of life insurance 440,767 254,060
Deferred income taxes 27,000 27,000
Deposits and other 123,286 135,761
----------- -----------
Total Other Assets 7,237,616 6,786,515
----------- -----------
Total Assets $35,203,557 $32,980,080
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
As of
Dec. 31, 1995 June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued
liabilities $3,798,527 $3,952,543
Deferred revenue 504,649 479,858
Current portion of long-term debt 14,883 19,015
Current portion of capital lease
obligations 23,334 34,156
----------- -----------
Total Current Liabilities 4,341,393 4,485,572
----------- -----------
Long-Term Liabilities:
Long-term debt (less current portion
shown above) 0 5,104
Capital lease obligations (less current
portion shown above) 29,794 37,129
Deferred income taxes 900,000 985,000
Accrued supplemental executive
retirement plan liability 135,858 99,672
----------- -----------
Total Long-term Liabilities 1,065,652 1,126,905
----------- -----------
Total Liabilities 5,407,045 5,612,477
----------- -----------
Commitments and Contingencies
Non-Owned Interests in Consolidated
Subsidiaries 13,653,759 12,367,344
----------- -----------
Stockholders' Equity:
Common stock, $.10 par value
Authorized: 3,500,000 shares
Issued and outstanding:
1,157,001 shares (at Dec. 31, 1995) 115,700
Issued and outstanding:
1,150,989 shares (at June 30, 1995) 115,099
Class B Common stock (convertible),
$.10 par value
Authorized: 700,000 shares
Issued and outstanding:
310,955 shares (at Dec. 31, 1995) 31,096
Issued and outstanding:
310,967 shares (at June 30, 1995) 31,096
Additional paid-in capital 7,431,953 7,413,054
Retained earnings 8,564,004 7,441,010
----------- -----------
Total Stockholders' Equity 16,142,753 15,000,259
----------- -----------
Total Liabilities and
Stockholders' Equity $35,203,557 $32,980,080
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the six months ended Dec. 31
1995 1994
Cash Flows from Operating Activities:
<S> <C> <C>
Earnings from continuing operations $1,122,994 $670,880
Gain on disposal 0 147,701
----------- -----------
Net earnings 1,122,994 818,581
Adjustments to reconcile net earnings
to net cash provided by (used in)
operations:
Depreciation and amortization 744,496 659,534
Amounts provided by non-owned
interests 1,366,415 1,025,224
Deferred income taxes (85,000) 47,000
Equity in (earnings) loss of
unconsolidated affiliate (356,522) (413,377)
Increase in other assets (182,232) (110,162)
Increase in long-term liabilities 36,186 31,745
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (2,472,311) (705,307)
(Increase) decrease in inventories (160,004) (639,885)
Increase (decrease) in other
current assets (109,250) 5,103
Increase (decrease) in accounts
payable and accrued expenses 75,362 3,112
Increase (decrease) in income
taxes payable (131,734) 89,989
Increase (decrease) in deferred
revenue 24,791 (3,191)
Net Cash Provided by (Used in) ----------- -----------
Operating Activities (126,809) 808,366
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures, net (758,392) (613,544)
Redemption (purchase) of temporary
investments - net 286,650 (699,870)
----------- -----------
Net Cash Used in Investing Activities (471,742) (1,313,414)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from revolving lines of credit,
capital lease
obligations and long-term borrowings 0 2,150,000
Principal payments on revolving lines
of credit, capital lease
obligations and long-term borrowings (27,393) (2,734,575)
Proceeds from exercise of stock options 19,499 12,375
Dividends paid (177,643) (148,036)
----------- -----------
Net Cash Used in Financing Activities (185,537) (720,236)
----------- -----------
Net Decrease in Cash and Cash Equivalents (784,088) (1,225,284)
Cash and Cash Equivalents at Beginning
of Period 5,197,549 2,215,624
Cash and Cash Equivalents at End of ----------- -----------
Period $4,413,461 $990,340
=========== ===========
Supplemental disclosure of cash flow
information:
Interest paid $6,632 $20,925
Income taxes paid $2,002,377 $1,155,673
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CERBCO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Financial Information
The accompanying condensed consolidated financial statements include the
accounts of CERBCO, Inc. ( CERBCO ); its majority-owned subsidiary, Capitol
Copy Products, Inc. ( Capitol Copy ); and its majority-controlled subsidiary,
Insituform East, Incorporated ( Insituform East ). The Condensed Consolidated
Balance Sheet as of December 31, 1995, the Condensed Consolidated Statements
of Earnings for the three months and six months ended December 31, 1995 and
1994, and the Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1995 and 1994 have been prepared by the Company
without audit. The Condensed Consolidated Balance Sheet as of June 30, 1995
(unaudited) has been derived from the Company s June 30, 1995 audited
financial statements. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at December 31, 1995
and for all periods presented have been made.
These statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not necessarily include all information and
footnotes necessary to a presentation of the financial position, the results
of operations and the cash flows in conformity with generally accepted
accounting principles. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction
with the audited financial statements and notes thereto included in the CERBCO
annual report on Form 10-K for the fiscal year ended June 30, 1995. Operating
results for interim periods are not necessarily indicative of operating
results for an entire fiscal year.
2. Earnings Per Share
Earnings per share data have been computed based upon the weighted
average number of common shares outstanding and common share equivalents
outstanding (when dilutive) during each period. The following numbers of
shares have been used in the computations:
For the three months For the six months
ended Dec. 31 ended Dec. 31
1995 1994 1995 1994
1,462,869 1,458,092 1,462,413 1,457,774
========= ========= ========= =========
3. Accounts Receivable
<TABLE>
Accounts receivable consist of:
<CAPTION>
Dec. 31, 1995 June 30, 1995
<S> <C> <C>
Due from municipal and commercial
customers $8,729,944 $6,195,486
Miscellaneous 183,710 245,857
---------- ----------
8,913,654 6,441,343
Less: Allowance for doubtful accounts (55,000) (55,000)
---------- ----------
$8,858,654 $6,386,343
========== ==========
</TABLE>
4. Inventories
<TABLE>
Inventories consist of:
<CAPTION>
Dec. 31, 1995 June 30, 1995
<S> <C> <C>
Pipeline rehabilitation materials $910,027 $1,111,202
Copier and facsimile equipment 1,582,524 1,274,977
Copier and facsimile supplies 208,723 172,908
Copier and facsimile parts 290,733 272,916
---------- ----------
$2,992,007 $2,832,003
========== ==========
</TABLE>
5. Discontinued Operations
On March 31, 1991, the Company adopted a formal plan to discontinue the
operations and dispose of the assets and liabilities of its defense contract
services segment conducted through its wholly-owned subsidiary, CERBERONICS,
Inc. ("CERBERONICS"). On June 30, 1991, CERBERONICS ceased all operations.
From that date, the Company processed accounts receivable and other open items
pertaining to CERBERONICS's final contracts. During the quarter ended
December 31, 1994, the Company obtained payment of $147,701 pertaining to
several former contracts. These payments are shown as a gain on disposal of
discontinued operations in the accompanying Condensed Consolidated Statements
of Earnings. There are no material open items remaining that pertain to other
former contracts of CERBERONICS.
6. Equity in Insituform East
At December 31, 1995, 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 common
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 such members 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 such changes in capital structure occurred during the six
months ended December 31, 1995. If all the options outstanding at December
31, 1995 were exercised, the resulting percentages of CERBCO s equity
ownership and total voting power would be 29.0% and 54.3%, respectively.
From time to time, Insituform East purchases shares of its common stock
for treasury. Changes in capital structure resulting from such stock
purchases increase CERBCO s equity ownership. Insituform East did not
purchase any shares during the six months ended December 31, 1995.
7. Equity in Capitol Copy
At December 31, 1995, 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.
8. Accounts Payable and Accrued Liabilities
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
Dec. 31, 1995 June 30, 1995
<S> <C> <C>
Accounts payable $1,412,955 $1,366,338
Accrued compensation and related
expenses 1,914,340 1,885,596
Dividends payable 80,000 177,643
Income taxes payable 391,232 522,966
---------- ----------
$3,798,527 $3,952,543
========== ==========
</TABLE>
9. 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 (the "Delaware Complaint") 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 Delaware 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. Briefing was completed on December 6, 1995. Oral argument
was held on January 18, 1996. The parties are now awaiting the Delaware
Supreme Court's decision.
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 "D.C.
Complaint"). 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
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. Although the D.C. 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. After the Court of Chancery's August 9, 1995 opinion was rendered, the
parties to the Superior Court action filed status reports. On November 13,
1995, plaintiffs agreed to a stay in the Superior Court action pending the
outcome of the appeal to the Delaware Supreme Court. The Superior Court will
set a date for status reports some time in the future.
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 Insituform Technologies, Inc. ("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 rights and other remedies. As
previously reported, Insituform East has filed with the American Arbitration
Association a demand for arbitration alleging a breach of the Partnership
Agreement by E-Midsouth, Inc. and intends to seek one or more of the foregoing
remedies, including replacement of a Management Committee appointee of 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.
Concurrently, representatives of ITI and IMA were engaged in discussions and
negotiations regarding a potential merger of these two companies.
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, when completed on October 25, 1995, resulted in IMA becoming a wholly-
owned subsidiary of ITI. The ITI acquisition of IMA, which resulted in a
second change in the control of Enviroq and E-Midsouth, Inc., was made without
the prior written consent of one of the Partnership's partners, the special
purpose subsidiary of Insituform East.
On November 17, 1995 Insituform East sought to amend its demand for
arbitration alleging, among other things, a breach of the Partnership
Agreement by ITI's special purpose subsidiary, Insituform California, Inc.
("ICI") in connection with ICI's wrongfully seeking to deny Insituform East's
special purpose subsidiary the rights and remedies to which it is entitled as
a non-defaulting partner under the Partnership Agreement. On November 27,
1995, the arbitrators granted Insituform East's request to amend and added ICI
as a respondent party. The evidentiary hearing is scheduled for March 4-6,
1996.
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. In this regard, ITI has informed Insituform East
that should it achieve management control of MIDSOUTH Partners, ITI will
promptly terminate the partnership and contemporaneously terminate the
licenses to MIDSOUTH Partners. The Company has asserted that ITI does not
have the right to terminate the licenses to MIDSOUTH Partners under these
circumstances.
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.
10. 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 expenses include items which are of an
overall holding company nature and are not allocated to the segments.
<TABLE>
<CAPTION>
(in thousands) For the three For the six
months ended months ended
Dec. 31 Dec. 31
1995 1994 1995 1994
Sales to Unaffiliated Customers:
<S> <C> <C> <C> <C>
Pipeline rehabilitation $6,263 $5,324 $12,472 $10,219
Copier equipment products
and services 5,348 5,101 10,157 9,065
------- ------- ------- -------
Total Sales $11,611 $10,425 $22,629 $19,284
======= ======= ======= =======
Earnings Before Income Taxes:
Pipeline rehabilitation $864 $608 $1,665 $992
Copier equipment products
and services 1,193 1,076 2,275 2,083
Corporate holding company
expenses - net (159) (277) (270) (455)
------- ------- ------- -------
Operating Profit 1,898 1,407 3,670 2,620
Equity in earnings of
unconsolidated affiliate 170 239 356 413
Other income 106 112 291 211
Other expenses (42) (49) (86) (101)
------- ------- ------- -------
Earnings Before Income
Taxes $2,132 $1,709 $4,231 $3,143
Net Earnings (Loss) ======= ======= ======= =======
Contribution by Segment:
Pipeline rehabilitation $213 $174 $425 $293
Copier equipment products
and services 479 414 925 797
Corporate holding company (160) (258) (227) (419)
Earnings from Continuing ------- ------- ------- -------
Operations 532 330 1,123 671
Discontinued operations 0 148 0 148
------- ------- ------- -------
Net Earnings $532 $478 $1,123 $819
======= ======= ======= =======
</TABLE>
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations
Overview and Outlook
The Company recognized consolidated earnings from continuing operations
and net earnings of $532,177 ($.37 per share) for the second quarter of fiscal
year 1996, as compared to consolidated earnings from continuing operations of
$330,219 ($.23 per share) and net earnings of $477,920 ($.33 per share) for
the second quarter of fiscal year 1995. The Company recognized consolidated
earnings from continuing operations and net earnings of $1,122,994 ($.77 per
share) for the first six months of fiscal year 1996, as compared to
consolidated earnings from continuing operations of $670,880 ($.46 per share)
and net earnings of $818,581 ($.56 per share) for the first six months of
fiscal year 1995. Sales and earnings at the midpoint of the current year were
each records for the Company. The continued upsurge in comparable period
results is attributable both to increases in the earnings contributions from
the Company s two operating subsidiaries, each of which is in a separate
industry segment, and to a material decrease in parent holding company
expenses.
Insituform East, the Company s pipeline rehabilitation segment,
continued to experience improved results in the first six months of fiscal
year 1996 from the combined impact of increased demand met with expanded
production capabilities, sales awards obtained at normal margins, installation
performance in line with cost estimates and continuing favorable operating
results from MIDSOUTH Partners. 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 for the previous fiscal year are presently anticipated for fiscal
year 1996. Insituform East has expanded its production capabilities during
the current fiscal year to increase its Insituform process capacity and to
further expand its ability to provide complimentary products and services to
its trenchless rehabilitation customers. Severe winter weather conditions
significantly impeded January and early February 1996 operations, and
additional severe weather could further affect installation performance during
the remainder of the third quarter. Accordingly, depressed operating results
are presently expected for the three months ending March 31, 1996.
Nevertheless, the Company continues to anticipate favorable operating results
for the full fiscal year ending June 30, 1996, in line with full year
operating results realized for the previous fiscal year.
Capitol Copy, the Company s copy machine products and services segment,
continued to experience increased sales and earnings in the first six months
of fiscal year 1996, as a result of continued increases in both its copier
equipment sales, and service and supply activities. While again there can be
no assurances, the favorable operating results experienced by Capitol Copy
during the last fiscal year are presently anticipated for fiscal year 1996.
In July 1995, Capitol Copy expanded its territory to include the contiguous
Baltimore metropolitan area. The Company has estimated it will take
approximately four years to adequately develop the additional territory.
During this period, Capitol Copy presently anticipates lower margins and
increased expenses approximately offset by increased total sales.
Accordingly, Capitol Copy's net earnings for the current year should not be
significantly impacted by this development effort.
CERBCO s current earnings remain impacted by legal fees and expenses
related to the demands made of, and derivative 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. In August 1995, a Final Order and Judgment was
rendered by the Court in the Delaware derivative litigation in favor of the
defendants which has been appealed to the Delaware Supreme Court by
plaintiffs. In the first six months of fiscal year 1996, CERBCO experienced
total unallocated corporate holding company expenses in the amount of
approximately $270,000, of which approximately $97,000 were legal fees and
expenses in connection with the derivative litigation. From inception in 1990
through December 31, 1995, such legal fees and expenses have totaled in excess
of $2.0 million. In addition, in August 1995, plaintiffs in the Delaware
derivative litigation asserted a new claim, directly against the Company, for
$1,513,499 for their legal fees and expenses in the unsuccessful Delaware
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 counsel 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 1, "Notes to
Condensed Consolidated Financial Statements (unaudited) - Note 9.
Contingencies."
As discussed further in Part I, Item 1, "Notes to Condensed Consolidated
Financial Statements (unaudited) - Note 9. Contingencies," the Company filed
a demand for arbitration in connection with the acquisition of control of a
42.5% interest in MIDSOUTH Partners by Insituform Mid-America, Inc. on April
18, 1995. On November 27, 1995, the arbitrators granted the Company's request
to amend this demand in connection with the October 25, 1995 acquisition of
control of this 42.5% interest in MIDSOUTH Partners by Insituform
Technologies, Inc. ("ITI") and related actions taken by Insituform California,
Inc., ITI's special purpose subsidiary. 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
Second Quarter ended 12/31/95 Compared with Second Quarter ended 12/31/94
Consolidated sales increased $1.2 million (11.4%) in the second quarter
of fiscal year 1996 as compared to the second quarter of fiscal year 1995.
Insituform East's pipeline rehabilitation sales increased $0.9 million (17.6%)
to $6.3 million, primarily due to expanded production capabilities and a
strong workable backlog of customer orders in fiscal year 1996. Sales of
copier equipment products and services by Capitol Copy increased $0.2 million
(4.8%) to $5.3 million. Equipment sales decreased 5.5% due to increased
competition in the marketplace. Service and supply revenues increased 17.0%
primarily as a result of a customer base that continues to expand.
Consolidated operating profit increased $0.5 million (34.9%) in the
second quarter of fiscal year 1996 as compared to the second quarter of fiscal
year 1995. Insituform East's cost of sales increased 19.3%, a slightly
greater percentage increase than the increase in its sales. This gave that
subsidiary a gross profit margin of 29.7% of sales for the second quarter of
fiscal year 1996, compared to a gross profit margin of 30.7% of sales for the
second quarter of fiscal year 1995, as Insituform process sales in both
quarters were primarily of normal margin work. However, Insituform East's
operating profit increased $0.3 million (42.1%) as a result of a 2.9% decrease
in its selling, general and administrative expenses. Capitol Copy's operating
profit increased $0.1 million (11.0%), due to an increase in its overall gross
profit margin from 36.7% to 40.0% in comparable periods as margins on sales of
equipment returned to more normal levels. Capitol Copy's selling, general and
administrative expenses increased 17.8%, a greater percentage increase than
its increase in sales primarily due to increased selling costs associated with
incentive programs and its new Baltimore office, which partially offset its
increased gross profit margin. Sales revenues attributable to the new
Baltimore territory for the second quarter of fiscal year 1996 were
approximately $260,000, and exceeded total costs and expenses in that
territory by approximately $6,000. The parent company's operating loss
decreased approximately $118,000 (-42.6%), primarily as a result of a decrease
in unallocated corporate legal expenses.
Insituform East's equity in the operating results of MIDSOUTH Partners
decreased 28.9% from pretax earnings of $239,732 for the second quarter of
fiscal year 1995 to pretax earnings of $170,571 for the second quarter of 1996
primarily as a result of reduced comparable period sales and gross profit
margins. The Partnership's sales decreased 13.6% from $2.6 million to $2.2
million for the comparable three month periods. The Partnership's gross
profit margin decreased from 32.7% of sales for the second quarter of fiscal
year 1995 to 31.3% of sales for the second quarter of fiscal year 1996
primarily as a result of the mix of work performed, to include increased
manhole and lateral reconstruction work, collateral services generally
performed at gross margins lower than those realized for Insituform process
installations.
Six Months ended 12/31/95 Compared with Six Months ended 12/31/94
Consolidated sales increased $3.3 million (17.3%) in the first six
months of fiscal year 1996 as compared to the first six months of fiscal year
1995. Insituform East's sales increased $2.3 million (22.0%) to $12.5
million, primarily due to increased demand met with expanded production
capabilities and a strong workable backlog. Capitol Copy's sales increased
$1.1 million (12.0%) to $10.2 million, as equipment sales increased 6.7% and
service and supply revenues increased 17.6%.
Consolidated operating profit increased $1.1 million (40.1%) in the
first six months of fiscal year 1996 as compared to the first six months of
fiscal year 1995. Insituform East's cost of sales increased 18.4%, a smaller
percentage increase than the increase in its sales and, as a result, its gross
profit margin increased from 28.2% of sales to 30.3% of sales in comparable
periods. This increase in gross profit as a percentage of sales is due
primarily to the mix of work performed. During the first quarter of fiscal
year 1995, Insituform East provided additional collateral services to
customers at gross profit margins lower than margins normally realized for
Insituform process installations. Insituform East's selling, general and
administrative expenses increased 12.1%, also a smaller percentage increase
than the increase in its sales, resulting in a $0.7 million (67.8%) increase
in its operating profit. Because a substantial portion of Insituform East's
costs are semi-fixed in nature, increases in period sales at normal margins
typically leverage positive operating results significantly. Capitol Copy's
operating profit increased $0.2 million (9.2%). Capitol Copy's cost of sales
increased 12.2%, and as a result, its gross profit margin remained
approximately level in comparable periods at 40.2% versus 40.3%. Capitol
Copy's selling, general and administrative expenses increased 15.4%. Sales
revenues attributable to the new Baltimore territory for the first six months
of fiscal year 1996 were approximately $409,000, and total costs and expenses
exceeded revenues in that territory by approximately $13,000. The parent
company's operating loss decreased approximately $185,000 (-40.7%), primarily
as a result of a decrease in unallocated corporate legal expenses.
Insituform East's equity in the earnings of MIDSOUTH Partners decreased
13.7% from pretax earnings of $413,377 for the first six months of fiscal year
1995 to pretax earnings of $356,522 for the first six months of fiscal year
1996, primarily as the result of reduced gross profit margins associated with
collateral services performed. Although comparable period sales increased
7.1% from $4.4 million to $4.7 million, the Partnership's gross profit margin
decreased from 33.6% of sales for the first six months of fiscal year 1995 to
29.8% of sales for the first six months of fiscal year 1996 primarily as a
result of the mix of work.
Liquidity and Capital Resources
The Company s operating activities used $0.1 million in cash during the
first six months of fiscal year 1996 as compared to providing $0.8 million in
the first six months of fiscal year 1995. The decrease in cash is primarily
due to an increase in Insituform East's accounts receivable resulting from a
temporary delay in billings and collections for several larger projects
performed during the first six months of fiscal year 1996.
Net cash in the amount of $0.5 million was used in investing activities
in the first six months of fiscal year 1996 due to capital expenditures by
Insituform East to expand its production capabilities offset by the purchase
by the parent holding company of temporary investments. Net cash in the
amount of $1.3 million was used in investing activities in the first six
months of fiscal year 1995 primarily due to the purchase by the parent holding
company of temporary investments and capital expenditures by Insituform East.
Net cash used in financing activities was approximately $0.2 million and
$0.7 million in the first six months of fiscal years 1996 and 1995,
respectively. The primary use of such funds in the first six months of fiscal
year 1996 was the payment of dividends by Insituform East. The primary use of
such funds in the first six months of fiscal year 1995 was paydowns on Capitol
Copy s line of credit and the payment of dividends by Insituform East.
CERBCO believes that its two principal operating subsidiaries,
Insituform East and Capitol Copy, have existing open bank lines of credit or
borrowing potential against unencumbered assets sufficient to meet the
respective cash flow requirements of each operating company. Insituform East
has available as undrawn the amount of $3.0 million on its individual line of
credit. Capitol Copy and the parent holding company, CERBCO, do not have
separate bank lines of credit, but have cash reserves in excess of $1.7
million and $2.8 million, respectively, which are believed to be adequate to
meet their respective cash flow requirements 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.
PART II - OTHER INFORMATION
Item 1. 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 which judgment was rendered in favor
of the Company but subsequently appealed to the Delaware Supreme Court by
plaintiffs (the Delaware Complaint ), and (b) a previously disclosed lawsuit
pending in the Superior Court of the District of Columbia (the D.C.
Complaint ) [see Part I, Item 1, Notes to Condensed Consolidated Financial
Statements (unaudited) - Note 9. Contingencies ].
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule
99 - CERBCO, Inc. Consolidating Schedules: Statement of Earnings
Information for the three months ended December 31, 1995; Statement of
Earnings Information for the six months ended December 31, 1995; Balance Sheet
Information and Consolidating Elimination Entries as of December 31, 1995.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended December
31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 13, 1996
CERBCO, Inc.
(Registrant)
/s/ ROBERT W. ERIKSON
Robert W. Erikson
President
(Principal Financial Officer)
/s/ ROBERT F. HARTMAN
Robert F. Hartman
Vice President & Controller
(Principal Accounting Officer)
<PAGE>
Exhibits to CERBCO, Inc. Form 10-Q
Exhibit 27. CERBCO, Inc. Financial Data Schedule
Exhibit 99. CERBCO, Inc. Consolidating Schedules:
Statement of Earnings Information for the
Three Months Ended December 31, 1995;
Statement of Earnings Information for the
Six Months Ended December 31, 1995;
Balance Sheet Information; and
Consolidating Elimination Entries as of
December 31, 1995.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 4,413
<SECURITIES> 1,474
<RECEIVABLES> 8,914
<ALLOWANCES> 55
<INVENTORY> 2,992
<CURRENT-ASSETS> 18,308
<PP&E> 19,308
<DEPRECIATION> 9,650
<TOTAL-ASSETS> 35,204
<CURRENT-LIABILITIES> 4,341
<BONDS> 0
<COMMON> 147
0
0
<OTHER-SE> 15,996
<TOTAL-LIABILITY-AND-EQUITY> 35,204
<SALES> 22,629
<TOTAL-REVENUES> 22,629
<CGS> 14,759
<TOTAL-COSTS> 14,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 4,231
<INCOME-TAX> 1,742
<INCOME-CONTINUING> 1,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,123
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - STATEMENT OF EARNINGS INFORMATION
THREE MONTHS ENDED DECEMBER 31, 1995
(unaudited)
<CAPTION>
Insituform Capitol Copy
CERBCO, Inc. CERBCO, Inc. East, Products,
Consolidated Eliminations Unconsolidated Incorporated Inc.
<S> <C> <C> <C> <C> <C>
Sales $11,610,744 $0 $0 $6,263,183 $5,347,561
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales 7,619,898 0 0 4,403,892 3,216,006
Selling, general
and administrative
expenses 2,092,665 0 159,591 995,598 937,476
Total Costs and ----------- ----------- ----------- ----------- -----------
Expenses 9,712,563 0 159,591 5,399,490 4,153,482
----------- ----------- ----------- ----------- -----------
Operating Profit
(Loss) 1,898,181 0 (159,591) 863,693 1,194,079
Investment Income 50,193 0 41,704 8,489 0
Equity in Earnings
of Unconsolidated
Affiliate 170,571 0 0 170,571 0
Interest Expense (2,207) 0 0 0 (2,207)
Other Income (Expense)
- net 15,878 0 (41,790) 53,541 4,127
Earnings (Loss) Before ----------- ----------- ----------- ----------- -----------
Income Taxes and
Non-Owned
Interests 2,132,616 0 (159,677) 1,096,294 1,195,999
Provision for Income
Taxes 907,000 0 0 428,000 479,000
----------- ----------- ----------- ----------- -----------
Earnings (Loss) Before
Non-Owned
Interests 1,225,616 0 (159,677) 668,294 716,999
Non-Owned Interests
in Earnings of
Consolidated
Subsidiaries 693,439 (A) 693,439 0 0 0
----------- ----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $532,177 (B) $(693,439) $(159,677) $668,294 $716,999
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - STATEMENT OF EARNINGS INFORMATION
SIX MONTHS ENDED DECEMBER 31, 1995
(unaudited)
<CAPTION>
Insituform Capitol Copy
CERBCO, Inc. CERBCO, Inc. East, Products,
Consolidated Eliminations Unconsolidated Incorporated Inc.
<S> <C> <C> <C> <C> <C>
Sales $22,628,751 $0 $0 $12,471,842 $10,156,909
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales 14,758,556 0 0 8,688,663 6,069,893
Selling, general
and administrative
expenses 4,200,022 0 270,468 2,118,234 1,811,320
Total Costs and ----------- ----------- ----------- ----------- -----------
Expenses 18,958,578 0 270,468 10,806,897 7,881,213
----------- ----------- ----------- ----------- -----------
Operating Profit (Loss) 3,670,173 0 (270,468) 1,664,945 2,275,696
Investment Income 120,786 0 86,856 33,930 0
Equity in Earnings
of Unconsolidated
Affiliate 356,522 0 0 356,522 0
Interest Expense (6,632) 0 0 0 (6,632)
Other Income (Expense)
- net 90,560 0 (43,446) 126,199 7,807
Earnings (Loss) Before ----------- ----------- ----------- ----------- -----------
Income Taxes and
Non-Owned Interests 4,231,409 0 (227,058) 2,181,596 2,276,871
Provision for Income Taxes 1,742,000 0 0 852,000 890,000
----------- ----------- ----------- ----------- ----------
Earnings (Loss) Before
Non-Owned Interests 2,489,409 0 (227,058) 1,329,596 1,386,871
Non-Owned Interests in
Earnings of Consolidated
Subsidiaries 1,366,415 (C) 1,366,415 0 0 0
----------- ----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $1,122,994 (D) $(1,366,415) $(227,058) $1,329,596 $1,386,871
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
DECEMBER 31, 1995
(unaudited)
<CAPTION>
Insituform Capitol Copy
CERBCO, Inc. CERBCO, Inc. East, Products,
Consolidated Eliminations Unconsolidated Incorporated Inc.
ASSETS
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents $4,413,461 $0 $1,358,523 $1,401,836 $1,653,102
Temporary investments 1,474,300 0 1,474,300 0 0
Accounts receivable 8,858,654 (E) (160,000) 160,640 6,518,817 2,339,197
Inventories 2,992,007 0 0 910,027 2,081,980
Prepaid and refundable
taxes 87,963 0 48,292 39,671 0
Deferred income taxes 82,000 0 0 0 82,000
Prepaid expenses and
other 399,868 0 0 288,303 111,565
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 18,308,253 (160,000) 3,041,755 9,158,654 6,267,844
Investment in and
Advances to Subsidiaries:
Investment in subsidiaries 0 (F) (11,388,410) 11,388,410 0 0
Intercompany receivables and
payables 0 0 2,219 12,062 (14,281)
Property, Plant and Equipment
- net of accumulated
depreciation 9,657,688 0 98,393 9,303,574 255,721
Other Assets:
Excess of acquisition cost
over value of net
assets acquired - net 4,808,315 (F) 2,540,310 0 0 2,268,005
Investment in
unconsolidated
affiliate 1,838,248 0 0 1,838,248 0
Cash surrender value
of life insurance 440,767 0 440,767 0 0
Deferred income taxes 27,000 0 0 0 27,000
Deposits and other 123,286 0 40,000 63,000 20,286
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $35,203,557 $(9,008,100) $15,011,544 $20,375,538 $8,824,575
=========== =========== =========== =========== ===========
</TABLE>
PAGE
<PAGE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
DECEMBER 31, 1995
(unaudited)
<CAPTION>
Insituform Capitol Copy
CERBCO, Inc. CERBCO, Inc. East, Products,
Consolidated Eliminations Unconsolidated Incorporated Inc.
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C> <C> <C> <C>
Accounts payable and
accrued liabilities $3,798,527 (E) $(160,000) $82,985 $3,024,235 $851,307
Deferred revenue 504,649 0 0 0 504,649
Current portion of
long-term debt 14,883 0 0 0 14,883
Current portion of
capital lease
obligations 23,334 0 0 0 23,334
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,341,393 (160,000) 82,985 3,024,235 1,394,173
Long-Term Liabilities:
Long-term debt 0 0 0 0 0
Capital lease obligations 29,794 0 0 0 29,794
Deferred income taxes 900,000 0 0 900,000 0
Accrued SERP liability 135,858 0 135,858 0 0
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 5,407,045 (160,000) 218,843 3,924,235 1,423,967
----------- ----------- ----------- ----------- -----------
Non-Owned Interests: (C)(F)
13,653,759 13,653,759 0 0 0
----------- ----------- ----------- ----------- -----------
Stockholders' Equity:
Common stock 115,700 (F) (175,486) 115,700 175,486 0
Class B stock 31,096 (F) (12,024) 31,096 11,904 120
Additional paid-in
capital 7,431,953 (F) (4,750,304) 7,431,953 4,000,424 749,880
Retained earnings (D)(F)
8,564,004 (18,753,658) 7,213,952 13,453,102 6,650,608
Treasury stock 0 (F) 1,189,613 0 (1,189,613) 0
TOTAL STOCKHOLDERS' ----------- ----------- ----------- ----------- -----------
EQUITY 16,142,753 (22,501,859) 14,792,701 16,451,303 7,400,608
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $35,203,557 $(9,008,100) $15,011,544 $20,375,538 $8,824,575
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING ELIMINATION ENTRIES
DECEMBER 31, 1995
(unaudited)
<CAPTION>
(A)
<S> <C> <C>
Non-owned interests in earnings of subsidiaries $693,439
Non-owned interests $693,439
To record non-owned interests in earnings
of subsidiaries for the three months ended
December 31, 1995.
(B)
Retained earnings $693,439
Current quarter earnings adjustments $693,439
To close out impact of eliminating entries on
current quarter's statement of earnings.
(C)
Non-owned interests in earnings of subsidiaries $1,366,415
Non-owned interests $1,366,415
To record non-owned interests in earnings
of subsidiaries for the six months ended
December 31, 1995.
(D)
Retained earnings $1,366,415
Current quarter earnings adjustments $1,366,415
To close out impact of eliminating entries
on six months' statement of earnings.
(E)
Accounts payable and accrued liabilities $160,000
Accounts receivable $160,000
To eliminate dividend receivable from
Capitol Copy to CERBCO at December 31, 1995.
(F)
Common stock $175,486
Class B stock 12,024
Additional paid-in capital 4,750,304
Retained earnings 17,387,243
Excess of acquisition cost over value of
net assets acquired 2,540,310
Treasury stock $1,189,613
Non-owned interests 12,287,344
Investment in subsidiaries 11,388,410
To eliminate investments in consolidated
subsidiaries.
/TABLE
<PAGE>
