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: March 31, 1996
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 May 3, 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<CAPTION>
For the three months For the nine months
ended Mar. 31 ended Mar. 31
1996 1995 1996 1995
Sales
<S> <C> <C> <C> <C>
Sales of products $7,200,615 $7,147,473 $24,588,155 $21,973,673
Sales of services and
supplies 2,700,929 2,467,793 7,942,140 6,925,258
---------- ---------- ---------- ----------
TOTAL SALES 9,901,544 9,615,266 32,530,295 28,898,931
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of products sold 5,328,121 4,714,895 17,477,955 15,307,765
Cost of services and supplies 1,405,034 1,239,345 4,013,756 3,396,032
Selling, general and
administrative expenses 2,216,626 2,336,798 6,416,648 6,251,206
---------- ---------- ---------- ----------
Total Costs and Expenses 8,949,781 8,291,038 27,908,359 24,955,003
---------- ---------- ---------- ----------
Operating Profit 951,763 1,324,228 4,621,936 3,943,928
Investment Income 66,775 47,909 187,561 143,541
Equity in Earnings of
Unconsolidated Affiliate 64,134 141,223 420,656 554,600
Interest Expense (3,186) (4,976) (9,818) (25,901)
Other Income - net 74,106 46,444 164,666 81,764
---------- ---------- ---------- ----------
Earnings Before Incomes Taxes
and Non-Owned Interests 1,153,592 1,554,828 5,385,001 4,697,932
Provision for Income Taxes 485,000 789,000 2,227,000 2,236,000
---------- ---------- ---------- ----------
Earnings Before Non-Owned
Interests 668,592 765,828 3,158,001 2,461,932
Non-Owned Interests in
Earnings of Consolidated
Subsidiaries 285,439 564,486 1,651,854 1,589,710
---------- ---------- ---------- ----------
Earnings from Continuing
Operations 383,153 201,342 1,506,147 872,222
Discontinued Operations:
Gain on disposal of
discontinued operations 0 3,648 0 151,349
---------- ---------- ---------- ----------
NET EARNINGS $ 383,153 $ 204,990 $ 1,506,147 $ 1,023,571
========== ========== ========== ==========
Net Earnings per Share of Common Stock:
Earnings from continuing
operations $.26 $.14 $1.03 $.60
Gain on disposal 0 0 .10
---------- ---------- ---------- ----------
Net Earnings per Share $.26 $.14 $1.03 $.70
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
As of
Mar. 31, 1996 June 30, 1995
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 7,751,747 $ 5,197,549
Temporary investments 984,369 1,760,950
Accounts receivable 6,997,742 6,386,343
Inventories 2,705,433 2,832,003
Prepaid and refundable taxes 102,292 53,568
Deferred income taxes 82,000 82,000
Prepaid expenses and other 373,808 325,013
----------- -----------
Total Current Assets 18,997,391 16,637,426
----------- -----------
Property, Plant and Equipment - at cost
less accumulated depreciation of $9,916,759 at
March 31, 1996 and $9,094,562 at June 30, 1995 9,813,149 9,556,139
----------- -----------
Other Assets:
Excess of acquisition cost over value of net assets
acquired - net of accumulated amortization of
$1,575,400 at March 31, 1996 and $1,455,921 at
June 30, 1995 4,768,489 4,887,968
Investment in unconsolidated affiliate 1,630,382 1,481,726
Cash surrender value of life insurance 476,714 254,060
Deferred income taxes 27,000 27,000
Deposits and other 128,400 135,761
----------- -----------
Total Other Assets 7,030,985 6,786,515
----------- -----------
Total Assets $35,841,525 $32,980,080
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
As of
Mar. 31, 1996 June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued liabilities $ 3,812,965 $ 3,952,543
Deferred revenue 511,856 479,858
Current portion of long-term debt 10,210 19,015
Current portion of capital lease obligations 16,993 34,156
----------- -----------
Total Current Liabilities 4,352,024 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) 27,990 37,129
Deferred income taxes 840,000 985,000
Accrued supplemental executive retirement plan
liability 156,407 99,672
----------- -----------
Total Long-term Liabilities 1,024,397 1,126,905
----------- -----------
Total Liabilities 5,376,421 5,612,477
----------- -----------
Commitments and Contingencies
Non-Owned Interests in Consolidated Subsidiaries 13,939,198 12,367,344
----------- -----------
Stockholders' Equity:
Common stock, $.10 par value
Authorized: 3,500,000 shares
Issued and outstanding: 1,157,001 shares
(at Mar. 31, 1996) 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 Mar. 31, 1996) 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 8,947,157 7,441,010
----------- -----------
Total Stockholders' Equity 16,525,906 15,000,259
----------- -----------
Total Liabilities and Stockholders' Equity $35,841,525 $32,980,080
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CERBCO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the nine months ended Mar. 31
1996 1995
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Earnings from continuing operations $1,506,147 $ 872,222
Gain on disposal 0 151,349
----------- -----------
Net earnings 1,506,147 1,023,571
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 1,114,572 999,911
Amounts provided by non-owned interests 1,651,854 1,589,710
Deferred income taxes (145,000) 119,000
Equity in earnings of unconsolidated affiliate (420,656) (554,600)
Increase in other assets (227,293) (132,586)
Increase in long-term liabilities 56,735 49,838
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (611,399) 369,432
(Increase) decrease in inventories 126,570 (766,445)
(Increase) decrease in other current assets (97,519) 312,134
Increase (decrease) in accounts payable and
accrued expenses 182,683 (1,061,941)
Increase (decrease) in income taxes payable (144,618) 425,442
Increase (decrease) in deferred revenue 31,998 16,554
----------- -----------
Net Cash Provided by Operating Activities 3,024,074 2,390,020
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures - net (1,240,103) (1,098,572)
Redemption of temporary investments - net 776,581 1,312,522
Cash distribution from unconsolidated affiliate 272,000 123,250
Acquisition of non-owned interest in consolidated
subsidiary 0 (18,816)
----------- -----------
Net Cash Provided by (Used in) Investing
Activities (191,522) 318,384
----------- -----------
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 (40,211) (2,746,936)
Proceeds from exercise of stock options 19,500 12,375
Dividends paid (257,643) (148,036)
----------- -----------
Net Cash Used in Financing Activities (278,354) (732,597)
----------- -----------
Net Increase in Cash and Cash Equivalents 2,554,198 1,975,807
Cash and Cash Equivalents at Beginning of Period 5,197,549 2,215,624
----------- -----------<PAGE>
Cash and Cash Equivalents at End of Period $7,751,747 $4,191,431
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 9,899 $ 25,901
Income taxes paid $2,574,589 $1,316,747
See notes to condensed consolidated financial statements.
</TABLE>
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 March 31, 1996, the Condensed Consolidated Statements of
Earnings for the three months and nine months ended March 31, 1996 and 1995, and
the Condensed Consolidated Statements of Cash Flows for the nine months ended
March 31, 1996 and 1995 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 March 31, 1996 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 ended Mar. 31 For the nine months ended Mar. 31
1996 1995 1996 1995
1,467,956 1,461,956 1,464,247 1,459,137
========= ========= ========= =========
3. Accounts Receivable
Accounts receivable consist of:
Mar. 31, 1996 June 30, 1995
Due from municipal and commercial customers $6,776,423 $6,195,486
Miscellaneous 276,319 245,857
---------- ----------
7,052,742 6,441,343
Less: Allowance for doubtful accounts (55,000) (55,000)
---------- ----------
$6,997,742 $6,386,343
========== ==========
4. Inventories
Inventories consist of:
Mar. 31, 1996 June 30, 1995
Pipeline rehabilitation materials $ 894,840 $1,111,202
Copier and facsimile equipment 1,316,259 1,274,977
Copier and facsimile supplies 203,244 172,908
Copier and facsimile parts 291,090 272,916
---------- ----------
$2,705,433 $2,832,003
========== ==========
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 former contracts. During the quarter and nine
months ended March 31, 1995, the Company obtained payment of $3,648 and
$151,349, respectively, 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 March 31, 1996, 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 nine months
ended March 31, 1996. If all the options outstanding at March 31, 1996 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 nine months ended March 31, 1996.
7. Equity in Capitol Copy
At March 31, 1996, 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
Accounts payable and accrued liabilities consist of:
Mar. 31, 1996 June 30, 1995
Accounts payable $1,018,185 $1,366,338
Accrued compensation and related expenses 2,416,432 1,885,596
Dividends payable 0 177,643
Income taxes payable 378,348 522,966
---------- ----------
$3,812,965 $3,952,543
========== ==========
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, a
"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 at that stage
were 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. On April 10, 1996, the Delaware Supreme Court
issued its decision. The Court ruled that "[t]he Eriksons were entitled to
profit from their control premium and to that end compete with CERBCO but only
after informing CERBCO of the opportunity" for a transaction with ITI. Although
the Eriksons were deemed to have breached their duty of loyalty, the Supreme
Court affirmed the finding of the Court of Chancery that there was no viable
transaction that could take place between CERBCO and ITI, given the Eriksons'
ability to veto such a transaction as controlling shareholders of CERBCO.
Therefore, no damages could be awarded for the loss of a transaction that had "a
zero probability of occurring due to the lawful exercise of statutory rights."
The Supreme Court did rule, however, that the Eriksons are liable to CERBCO for
$75,000 they received from ITI for extending the Letter of Intent, and must
reimburse the expenses, if any, that CERBCO "incurred to accommodate the
Eriksons' pursuit of their own interests" prior to the abandonment of the
proposed transaction with ITI. The Supreme Court concluded that the Chancery
Court's opinion was therefore "affirmed in part and reversed in part, and this
matter is remanded to the Court of Chancery for further determination of
damages. Once those damages are fixed, the [Chancery] court should proceed to
examine anew any petition for counsel fees on behalf of the plaintiffs."
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.
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
wholly-owned 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 was made without the
prior written consent of the Partnership's two other partners, Insitu, Inc.
("Insitu"), a wholly-owned subsidiary of Insituform East, and Insituform
California, Inc. ("ICI"), a wholly-owned subsidiary of ITI.
The Partnership Agreement grants a non-defaulting partner 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, Insitu 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 appointee of E-Midsouth, Inc.
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 was made without the prior
written consent of Insitu.
On November 17, 1995, Insitu sought to amend its demand for arbitration
alleging, among other things, a breach of the Partnership Agreement by ICI in
connection with ICI, through ITI, engaging in a series of actions designed to
achieve control over MIDSOUTH Partners and ICI wrongfully seeking to deny Insitu
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
Insitu's request to amend and added ICI as a respondent party. In their answer
filed in January 1996, respondents (ICI and E-Midsouth, Inc.) admitted two
events of default by E-Midsouth, Inc. with respect to consummation of the
Enviroq/IMA and IMA/ITI mergers. Respondents denied all of the remaining
claims. An evidentiary hearing before the American Arbitration Association
panel of arbitrators was held March 4-6, 1996. Post-hearing briefs are
scheduled for completion in May 1996, after which a decision from the
arbitration panel is expected to be rendered.
ITI has separately asserted that should Insitu prevail in the above-
described arbitration and achieve management control of MIDSOUTH Partners, ITI
may take action to withdraw from the Partnership and may take action to
terminate the Insituform process license of MIDSOUTH Partners. The Company has
asserted that ITI does not have the right to terminate the Insituform process
license to MIDSOUTH Partners under these circumstances. Although the Company
cannot, at this time, predict the outcome of the matters described herein, any
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.
10. Segment Data and Reconciliation
CERBCO s operations are classified into two industry segments: pipeline
rehabilitation and copier equipment products and services. The following is a
summary of pertinent industry segment information. Corporate holding company
expenses include items which are not allocated to the segments.
<TABLE>
<CAPTION>
(in thousands) For the three months For the nine months
ended Mar. 31 ended Mar. 31
1996 1995 1996 1995
Sales to Unaffiliated Customers:
<S> <C> <C> <C> <C>
Pipeline rehabilitation $5,078 $5,317 $17,550 $15,536
Copier equipment products and services 4,823 4,298 14,980 13,363
------ ------ ------- -------
Total Sales $9,901 $9,615 $32,530 $28,899
====== ====== ======= =======
Earnings Before Income Taxes:
Pipeline rehabilitation $ 58 $ 664 $ 1,723 $ 1,656
Copier equipment products and services 1,001 1,059 3,276 3,142
Corporate holding company expenses - net (107) (399) (377) (854)
------- ------- ------- -------
Operating Profit 952 1,324 4,622 3,944
Equity in earnings of unconsolidated
affiliate 64 141 420 554
Other income 181 134 472 345
Other expenses (43) (44) (129) (145)
------- ------- ------- -------
Earnings Before Income Taxes $1,154 $1,555 $ 5,385 $ 4,698
======= ======= ======= =======
Net Earnings Contribution by Segment:
Pipeline rehabilitation $ 40 $ 168 $ 465 $ 461
Copier equipment products and services 401 407 1,326 1,204
Corporate holding company (58) (374) (285) (793)
------- ------- ------- -------
Earnings from Continuing Operations 383 201 1,506 872
Discontinued operations 0 4 0 152
------- ------- ------- -------
Net Earnings $ 383 $ 205 $ 1,506 $1,024
======= ======= ======= =======
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 $383,153 ($.26 per share) for the third quarter of fiscal
year 1996, as compared to consolidated earnings from continuing operations of
$201,342 ($.14 per share) and net earnings of $204,990 ($.14 per share) for the
third quarter of fiscal year 1995. The Company recognized consolidated earnings
from continuing operations and net earnings of $1,506,147 ($1.03 per share) for
the first nine months of fiscal year 1996, as compared to consolidated earnings
from continuing operations of $872,222 ($.60 per share) and net earnings of
$1,023,571 ($.70 per share) for the first nine months of fiscal year 1995.
Sales and earnings for the current nine months are each records for the
Company. The continued upsurge in comparable period results is attributable
primarily to a material decrease in parent holding company expenses,
specifically legal fees and expenses.
Insituform East, the Company s pipeline rehabilitation segment,
experienced depressed operating results during the third quarter of fiscal year
1996 primarily as a result of unusually harsh and extended winter weather
conditions that significantly impeded installation performance. Insituform
East's superior performance during the first six months of fiscal year 1996,
however, mitigated the impact of the depressed third quarter on cumulative nine-
month earnings, yielding a modest (1%) improvement over the nine-month period of
the previous year. While there can be no assurances regarding future operating
performance, as forward-looking information based both on unfavorable April
weather conditions and on the volume and mix of its present and expected backlog
of customer orders, Insituform East currently anticipates a moderate improvement
in closing fourth quarter results over the preceding quarter ended March 31,
1996. Because fourth quarter earnings of the previous year were a period
record, and current nine-month results are substantially at parity with the
previous year, Insituform East anticipates projected full year fiscal 1996
earnings to remain favorable but below the exceptional results of the previous
year.
Capitol Copy, the Company s copy machine products and services segment,
continued to experience increased sales and earnings in the three months and
nine months ended March 31, 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 previous 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 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. For additional information on the status of this litigation, see Part I,
Item 1, "Notes to Condensed Consolidated Financial Statements (unaudited) - Note
9. Contingencies." In the three months and nine months ended March 31, 1996,
CERBCO experienced total unallocated corporate holding company expenses in the
amount of approximately $107,000 and $377,000, respectively, of which
approximately $30,000 and $127,000, respectively, were legal fees and expenses
in connection with the derivative litigation. From inception in 1990 through
March 31, 1996, such legal fees and expenses have totaled approximately $2.1
million. In addition, in August 1995, plaintiffs in the Delaware derivative
litigation asserted a claim, directly against the Company, for $1,513,499 for
their legal fees and expenses in the suit. Other than set out in the
aforementioned Note 9, the Company cannot, of course, predict the outcome of
pending litigation remanded to the Court of Chancery. Any outcome resulting in
an award to plaintiffs of their counsel fees and expenses could have a material
adverse effect on the earnings of the Company.
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 subsequent acquisition of this 42.5% interest
in MIDSOUTH Partners by Insituform Technologies, Inc. ("ITI") on October 25,
1995 and related actions taken by Insituform California, Inc., ITI's wholly-
owned 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 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
Third Quarter ended 3/31/96 Compared with Third Quarter ended 3/31/95
Consolidated sales increased $0.3 million (3.0%) in the third quarter of
fiscal year 1996 as compared to the third quarter of fiscal year 1995.
Insituform East's pipeline rehabilitation sales decreased $0.2 million (-4.5%)
to $5.1 million, primarily as a result of severe winter weather conditions that
significantly impeded installation performance. Sales of copier equipment
products and services by Capitol Copy increased $0.5 million (12.2%) to $4.8
million. Equipment sales increased 15.9%, and service and supply revenues
increased 9.4%, primarily as a result of a customer base that continues to
expand.
Consolidated operating profit decreased $0.4 million (-28.1%) in the third
quarter of fiscal year 1996 as compared to the third quarter of fiscal year
1995. Insituform East's operating profit decreased $0.6 million (-91.3%).
Insituform East's cost of sales increased 8.3%, primarily a result of increased
semi-fixed operating costs associated with expanded production capabilities in
fiscal year 1996. This increase, combined with decreased sales, gave that
subsidiary a gross profit margin of 23.9% of sales for the third quarter of
fiscal year 1996. Insituform East had a gross profit margin of 32.8% of sales
for the third quarter of fiscal year 1995, when Insituform process sales were
primarily of normal margin work. Insituform East's selling, general and
administrative expenses increased $72 thousand (6.7%) for the third quarter of
fiscal year 1996, as compared to the third quarter of fiscal year 1995,
primarily as a result of increased legal costs associated with the MIDSOUTH
Partners arbitration. Capitol Copy's operating profit decreased $0.1 million (-
5.5%), due to a decrease in its overall gross profit margin from 44.5% to 40.5%
in comparable periods, as decreased margins on sales of equipment were accepted
in order to increase sales volume. Capitol Copy's selling, general and
administrative expenses increased 11.2% primarily due to increased selling
costs. Sales revenues attributable to the new Baltimore territory for the third
quarter of fiscal year 1996 were approximately $200,000 and exceeded total costs
and expenses in that territory by approximately $5,000. The parent company's
operating loss decreased approximately $0.3 million (-73.2%), primarily as a
result of a decrease in unallocated corporate legal expenses.
Insituform East's equity in the operating results of MIDSOUTH Partners
decreased 54.6% from pretax earnings of $141,223 for the third quarter of fiscal
year 1995 to pretax earnings of $64,134 for the third quarter of fiscal year
1996 primarily as a result of reduced comparable period sales and gross profit
margins. The Partnership's sales decreased 14.0% from $2.1 million to $1.8
million for the comparable three month periods, primarily as a result of harsh
winter weather conditions experienced in January and February 1996. The
Partnership's gross profit margin decreased from 27.0% of sales for the third
quarter of fiscal year 1995 to 19.0% of sales for the third quarter of fiscal
year 1996 primarily as a result of reduced Insituform process installation
revenues, reduced margins on those revenues, and increased revenues from lower
margin collateral services during the third quarter of fiscal year 1996.
Nine Months ended 3/31/96 Compared with Nine Months ended 3/31/95
Consolidated sales increased $3.6 million (12.6%) in the first nine months
of fiscal year 1996 as compared to the first nine months of fiscal year 1995.
Insituform East's sales increased $2.0 million (13.0%) to $17.6 million,
primarily due to increased demand met with expanded production capabilities and
a strong workable backlog in the first six months of fiscal year 1996. Capitol
Copy's sales increased $1.6 million (12.1%) to $15.0 million, as equipment sales
increased 9.3% and service and supply revenues increased 14.7%.
Consolidated operating profit increased $0.7 million (17.2%) in the first
nine months of fiscal year 1996 as compared to the first nine months of fiscal
year 1995. Insituform East's operating profit increased $0.1 million (4.0%).
Insituform East's cost of sales increased 15.1%, a larger percentage increase
than the increase in its sales and, as a result, its gross profit margin
decreased from 29.8% of sales to 28.5% of sales in comparable periods. This
increase in Insituform East's cost of sales is due primarily to increased semi-
fixed operating costs associated with expanded production capabilities in fiscal
year 1996. Insituform East's selling, general and administrative expenses
increased 10.1%, a smaller percentage increase than the increase in its sales.
Capitol Copy's operating profit also increased $0.1 million (4.3%). Capitol
Copy's cost of sales increased 14.6%, a larger increase than its increase in
sales and as a result, its gross profit margin decreased from 41.7% to 40.3% in
comparable periods. Capitol Copy's selling, general and administrative expenses
increased 13.9% primarily due to increased selling costs. Sales revenues
attributable to the new Baltimore territory for the first nine months of fiscal
year 1996 were approximately $607,000, and total costs and expenses exceeded
revenues in that territory by approximately $8,000. The parent company's
operating loss decreased approximately $0.5 million (-55.9%), primarily as a
result of a decrease in unallocated corporate legal expenses.
Insituform East's equity in the earnings of MIDSOUTH Partners decreased
24.2% from pretax earnings of $554,600 for the first nine months of fiscal year
1995 to pretax earnings of $420,656 for the first nine months of fiscal year
1996, primarily as the result of reduced gross profit margins. Although nine-
month sales were $6.5 million for both fiscal years, the Partnership's gross
profit margin decreased from 31.6% of sales for the first nine months of fiscal
year 1995 to 26.6% of sales for the first nine months of fiscal year 1996
primarily as a result of an increase in collateral services performed at gross
profit margins that were lower than margins realized for Insituform process
installations.
Liquidity and Capital Resources
The Company s operating activities provided $3.0 million in cash during
the first nine months of fiscal year 1996 primarily as a result of nine month
net earnings, plus depreciation and amortization expenses and non-owned
interests in subsidiaries' earnings that did not require the outlay of cash.
These amounts are partially offset by an increase in Capitol Copy's accounts
receivable resulting from that subsidiary's increased sales.
Net cash in the amount of $0.2 million was used in investing activities in
the first nine months of fiscal year 1996 due to capital expenditures by
Insituform East to expand its production capabilities offset by the redemption
by the parent holding company of temporary investments and a cash distribution
to Insituform East from MIDSOUTH Partners.
Net cash used in financing activities was approximately $0.3 million in
the first nine months of fiscal year 1996 primarily due to the payment of
dividends by Insituform East and Capitol Copy.
The Company's liquidity remained strong, as its cash position, held as
cash or temporary investments in U.S. Treasury obligations, increased $1.8
million during the nine months ended March 31, 1996. Working capital increased
$2.5 million and the Company's current ratio improved from 3.7 to 1.0 to 4.4 to
1.0 during the first nine months of fiscal year 1996.
CERBCO believes that it and its two operating subsidiaries, Insituform
East and Capitol Copy, have existing cash, open bank lines of credit or
borrowing potential against unencumbered assets sufficient to meet the
respective cash flow requirements of each 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 $2.5 million
and $2.9 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 discussed above in the Overview and Outlook section of
this item. Other than set out in the aforementioned Note 9, the Company cannot,
of course, predict the outcome of pending litigation remanded to the Court of
Chancery. 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 filed in the Delaware Court of Chancery,
appealed to the Delaware Supreme Court and remanded to the Court of Chancery for
final disposition (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 for the nine months ended March 31, 1996
99 - CERBCO, Inc. Consolidating Schedules: Statement of Earnings
Information for the three months ended March 31, 1996; Statement of Earnings
Information for the nine months ended March 31, 1996; Balance Sheet Information
and Consolidating Elimination Entries as of March 31, 1996.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended March 31,
1996.
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: May 15, 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)
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 March 31, 1996; Statement
of Earnings Information for the Nine Months
Ended March 31, 1996; Balance Sheet
Information and Consolidating Elimination
Entries as of March 31, 1996.
Note: Exhibit 27, the Financial Data Schedule, is
a requirement by the Securities and Exchange
Commission to be submitted only with the
electronic filing of Form 10-Q. Therefore,
since this schedule contains summary
financial information found elsewhere in
this report, it is not included here.<PAGE>
</TABLE>
<TABLE>
CERBCO, INC.
CONSOLIDATING SCHEDULE - STATEMENT OF EARNINGS INFORMATION
THREE MONTHS ENDED MARCH 31, 1996
(unaudited)
<CAPTION>
CERBCO,Inc. Insituform Capitol
CERBCO, Inc. Unconsoli- East, Inc. Copy Prod-
Consolidated Eliminations dated Incorporated ucts, Inc.
<S> <C> <C> <C> <C> <C>
Sales $9,901,544 $0 $0 $5,078,438 $4,823,106
---------- ---------- ---------- ---------- ----------
Costs and Expenses:
Cost of sales 6,733,155 0 0 3,865,420 2,867,735
Selling, general and
administrative
expenses 2,216,626 0 106,901 1,154,300 955,425
Total Costs and ---------- ---------- ---------- ---------- ----------
Expenses 8,949,781 0 106,901 5,019,720 3,823,160
---------- ---------- ---------- ---------- ----------
Operating Profit (Loss) 951,763 0 (106,901) 58,718 999,946
Investment Income 66,775 0 34,587 32,188 0
Equity in Earnings of
Unconsolidated Affiliate 64,134 0 0 64,134 0
Interest Expense (3,186) 0 0 0 (3,186)
Other Income (Expense) - net 74,106 0 13,980 49,373 10,753
Earnings (Loss) Before ---------- ---------- ---------- ---------- ----------
Income Taxes and
Non-Owned Interests 1,153,592 0 (58,334) 204,413 1,007,513
Provision for Income Taxes 485,000 0 0 80,000 405,000
---------- ---------- ---------- ---------- ----------
Earnings (Loss) Before
Non-Owned Interests 668,592 0 (58,334) 124,413 602,513
Non-Owned Interests in
Earnings of Consolidated
Subsidiaries 285,439 (A) 285,439 0 0 0
---------- ---------- ---------- ---------- ----------
NET EARNINGS (LOSS) $383,153 (B) $(285,439) $(58,334) $124,413 $602,513
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - STATEMENT OF EARNINGS INFORMATION
NINE MONTHS ENDED MARCH 31, 1996
(unaudited)
<CAPTION>
CERBCO,Inc. Insituform Capitol
CERBCO, Inc. Unconsoli- East, Inc. Copy Prod-
Consolidated Eliminations dated Incorporated ucts, Inc.
<S> <C> <C> <C> <C> <C>
Sales $32,530,295 $0 $0 $17,550,280 $14,980,015
----------- ---------- ---------- ----------- -----------
Costs and Expenses:
Cost of sales 21,491,711 0 0 12,554,083 8,937,628
Selling, general and
administrative
expenses 6,416,648 0 377,369 3,272,534 2,766,745
Total Costs and ----------- ---------- ---------- ----------- -----------
Expenses 27,908,359 0 377,369 15,826,617 11,704,373
----------- ---------- ---------- ----------- -----------
Operating Profit (Loss) 4,621,936 0 (377,369) 1,723,663 3,275,642
Investment Income 187,561 0 121,443 66,118 0
Equity in Earnings of
Unconsolidated Affiliate 420,656 0 0 420,656 0
Interest Expense (9,818) 0 0 0 (9,818)
Other Income (Expense)
- net 164,666 0 (29,466) 175,572 18,560
Earnings (Loss) Before ----------- ---------- ---------- ----------- -----------
Income Taxes and
Non-Owned Interests 5,385,001 0 (285,392) 2,386,009 3,284,384
Provision for Income Taxes 2,227,000 0 0 932,000 1,295,000
----------- ---------- ---------- ----------- -----------
Earnings (Loss) Before
Non-Owned Interests 3,158,001 0 (285,392) 1,454,009 1,989,384
Non-Owned Interests
in Earnings of
Consolidated
Subsidiaries 1,651,854 (C) 1,651,854 0 0 0
----------- ---------- ---------- ----------- -----------
(D)
NET EARNINGS (LOSS) $1,506,147 $(1,651,854) $(285,392) $1,454,009 $1,989,384
=========== =========== ========== =========== ===========
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
MARCH 31, 1996
(unaudited)
<CAPTION>
CERBCO,Inc. Insituform Capitol
CERBCO, Inc. Unconsoli- East, Inc. Copy Prod-
Consolidated Eliminations dated Incorporated ucts, Inc.
ASSETS
Current Assets:
Cash and cash
<S> <C> <C> <C> <C> <C>
equivalents $7,751,747 $0 $1,897,925 $3,384,360 $2,469,462
Temporary investments 984,369 0 984,369 0 0
Accounts receivable 6,997,742 0 697 4,751,633 2,245,412
Inventories 2,705,433 0 0 894,840 1,810,593
Prepaid and refundable
taxes 102,292 0 48,292 54,000 0
Deferred income taxes 82,000 0 0 0 82,000
Prepaid expenses and other 373,808 0 0 268,508 105,300
---------- ---------- ---------- ---------- ----------
TOTAL CURRENT ASSETS 18,997,391 0 2,931,283 9,353,341 6,712,767
Investment in and
Advances to Subsidiaries: (E)
Investment in subsidiaries 0 (11,366,444) 11,366,444 0 0
Intercompany receivables
and payables 0 0 699 16,580 (17,279)
Property, Plant and Equipment
- net of accumulated
depreciation 9,813,149 0 96,746 9,506,103 210,300
Other Assets:
Excess of acquisition
cost over value of net (E)
assets acquired - net 4,768,489 2,518,344 0 0 2,250,145
Investment in
unconsolidated
affiliate 1,630,382 0 0 1,630,382 0
Cash surrender value
of life insurance 476,714 0 476,714 0 0
Deferred income taxes 27,000 0 0 0 27,000
Deposits and other 128,400 0 40,000 59,000 29,400
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $35,841,525 $(8,848,100) $14,911,886 $20,565,406 $9,212,333
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
MARCH 31, 1996
(unaudited)
<CAPTION>
CERBCO,Inc. Insituform Capitol
CERBCO, Inc. Unconsoli- East, Inc. Copy Prod-
Consolidated Eliminations dated Incorporated ucts, Inc.
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
<S> <C> <C> <C> <C> <C>
accrued liabilities $3,812,965 $0 $21,112 $3,149,690 $642,163
Deferred revenue 511,856 0 0 0 511,856
Current portion of
long-term debt 10,210 0 0 0 10,210
Current portion of
capital lease obligations 16,993 0 0 0 16,993
---------- ---------- ---------- ---------- ----------
TOTAL CURRENT LIABILITIES 4,352,024 0 21,112 3,149,690 1,181,222
Long-Term Liabilities:
Long-term debt 0 0 0 0 0
Capital lease obligations 27,990 0 0 0 27,990
Deferred income taxes 840,000 0 0 840,000 0
Accrued SERP liability 156,407 0 156,407 0 0
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES 5,376,421 0 177,519 3,989,690 1,209,212
---------- ---------- ---------- ---------- ----------
Non-Owned Interests (C)(E)
13,939,198 13,939,198 0 0 0
---------- ---------- ---------- ---------- ----------
Stockholders' Equity:
Common stock 115,700 (E) (175,486) 115,700 175,486 0
Class B stock 31,096 (E) (12,024) 31,096 11,904 120
Additional paid-in (E)
capital 7,431,953 (4,750,304) 7,431,953 4,000,424 749,880
Retained earnings (D)(E)
8,947,157 (19,039,097) 7,155,618 13,577,515 7,253,121
Treasury stock (E)
0 1,189,613 0 (1,189,613) 0
TOTAL STOCKHOLDERS' ---------- ---------- ---------- ---------- ----------
EQUITY 16,525,906 (22,787,298) 14,734,367 16,575,716 8,003,121
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $35,841,525 $(8,848,100) $14,911,886 $20,565,406 $9,212,333
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
CERBCO, Inc.
CONSOLIDATING ELIMINATION ENTRIES
MARCH 31, 1996
(unaudited)
<CAPTION>
(A)
<S> <C>
Non-owned interests in earnings of subsidiaries $285,439
<S> <C>
Non-owned interests $285,439
To record non-owned interests in earnings of subsidiaries
for the three months ended March 31, 1996.
(B)
Retained earnings $285,439
Current quarter earnings adjustments $285,439
To close out impact of eliminating entries on current quarter's
statement of earnings.
(C)
Non-owned interests in earnings of subsidiaries $1,651,854
Non-owned interests $1,651,854
To record non-owned interests in earnings of subsidiaries
for the nine months ended March 31, 1996.
(D)
Retained earnings $1,651,854
Current quarter earnings adjustments $1,651,854
To close out impact of eliminating entries on nine months'
statement of earnings.
(E)
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 2,518,344
Treasury stock $1,189,613
Non-owned interests 12,287,344
Investment in subsidiaries 11,366,444
To eliminate investments in consolidated subsidiaries.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
UNAUDITED BALANCE SHEET AS OF MARCH 31, 1996, AND THE COMPANY'S UNAUDITED
STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED MARCH 31, 1996 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,752
<SECURITIES> 984
<RECEIVABLES> 7,053
<ALLOWANCES> 55
<INVENTORY> 2,705
<CURRENT-ASSETS> 18,997
<PP&E> 19,730
<DEPRECIATION> 9,917
<TOTAL-ASSETS> 35,842
<CURRENT-LIABILITIES> 4,352
<BONDS> 0
<COMMON> 147
0
0
<OTHER-SE> 16,379
<TOTAL-LIABILITY-AND-EQUITY> 35,842
<SALES> 32,530
<TOTAL-REVENUES> 32,530
<CGS> 21,492
<TOTAL-COSTS> 21,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 5,385
<INCOME-TAX> 2,227
<INCOME-CONTINUING> 1,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,506
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
