<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17575
CHEMPOWER, INC.
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(Exact name of registrant as specified in its charter)
OHIO 34-1481970
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
807 EAST TURKEYFOOT LAKE ROAD, AKRON, OHIO 44319
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 896-4202
NOT APPLICABLE
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Former name, former address and former fiscal year, if changed since last report
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding May 1, 1995
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<S> <C>
Common Stock, $.10 Par Value 7,221,563 shares
</TABLE>
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CHEMPOWER, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
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<S> <C> <C>
Item 1. Financial Statements
Condensed balance sheets--March 31. 1995
and December 31, 1994...................... 3
Condensed statements of income--Three
months ended March 31, 1995 and 1994....... 4
Condensed statements of cash flows--Three
months ended March 31, 1995 and 1994....... 5
Notes to condensed financial statements--
March 31, 1995............................. 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................. 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........... 10
SIGNATURES............................................ 11
</TABLE>
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PART I. FINANCIAL INFORMATION
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CHEMPOWER, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
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(Unaudited)
ASSETS (Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................. $ 14,078 $ 11,864
Trade receivables.......................... 14,272 18,895
Contracts in progress...................... 676 925
Inventories................................ 4,148 3,867
Other current assets....................... 365 471
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TOTAL CURRENT ASSETS................. 33,539 36,022
PROPERTY, PLANT & EQUIPMENT, at cost.......... 12,621 12,417
Less: accumulated depreciation............. 6,206 5,890
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NET PROPERTY, PLANT & EQUIPMENT...... 6,415 6,527
INTANGIBLE ASSETS............................. 594 596
OTHER ASSETS.................................. 1,037 1,037
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$ 41,585 $ 44,182
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables............................. $ 2,113 $ 3,125
Contracts in progress...................... -- 1,120
Payroll related accruals................... 1,286 5,310
Other current liabilities.................. 3,869 572
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TOTAL CURRENT LIABILITIES............ 7,268 10,127
DEFERRED INCOME TAXES......................... 243 243
REDEEMABLE COMMON STOCK ...................... -- 220
SHAREHOLDERS' EQUITY
Common stock--par value $.10 per share:
Authorized--15,000,000 shares
Issued--7,412,571 shares at March 31
and December 31........................ 741 741
Additional paid-in capital................. 19,463 19,463
Retained earnings.......................... 14,480 14,218
Treasury stock, at cost, 191,008 shares at
March 31, 103,317 shares at December 31.. (610) (410)
Common stock subject to repurchase......... -- (420)
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TOTAL SHAREHOLDERS' EQUITY........... 34,074 33,592
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$ 41,585 $ 44,182
============ ============
</TABLE>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1995 1994
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(Dollars in thousands,
except per share data)
<S> <C> <C>
Revenues....................................... $ 19,039 $ 9,279
Cost of Revenues............................... 16,688 7,794
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Gross profit.............................. 2,351 1,485
Selling, General and Administrative Expenses... 2,084 1,548
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Operating income (loss)................... 267 (63)
Financial Income............................... 136 96
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Income before taxes....................... 403 33
Income Taxes (credit).......................... 141 (16)
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Net income................................ $ 262 $ 49
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Earnings per Common and Common
Equivalent Share............................. $ .04 $ .01
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Weighted-average Number of Common and
Common Equivalent Shares Outstanding......... 7,378,986 7,350,399
========== ==========
</TABLE>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1995 1994
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(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES................. $ 2,618 $ 5,407
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment....... (204) (114)
Proceeds from sale of property, plant
and equipment................................ -- 60
Business Acquisition, net of working
capital acquired............................. -- (900)
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Net cash provided by (used for) investing
activities............................... (204) (954)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.......... (200) (200)
Purchase of treasury stock...................... -- 83
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Net cash used for financing activities..... (200) (117)
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Net increase in cash and cash equivalents.. 2,214 4,336
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 11,864 13,117
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CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 14,078 $ 17,453
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid (net of refunds).............. $ 93 $ --
======== ========
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES
Portion of acquisition of business purchased
with common stock............................ $ -- $ 375
======== ========
</TABLE>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the financial statements reflect all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. Operating results for the three month period ended March 31,
1995 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report and
Form 10-K as of December 31, 1994.
NOTE B--CONTRACTS IN PROGRESS
Comparative information with respect to fixed-price contracts in progress as of
March 31, 1995 and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
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(Dollars in thousands)
<S> <C> <C>
Costs incurred on uncompleted
contracts...................... $ 5,444 $ 19,559
Estimated earnings............... 305 2,092
Estimated losses................. -- (3,314)
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5,749 18,337
Less billings to date............ 5,073 18,532
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$ 676 $ (195)
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Included in the accompanying
balance sheets under contracts
in progress:
Costs and estimated earnings in
excess of related billings on
uncompleted contracts.......... $ 676 $ 925
Billings in excess of related
costs and estimated earnings
on uncompleted contracts and
provision for estimated losses
on contracts................... $ -- $ (1,120)
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$ 676 $ (195)
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</TABLE>
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CHEMPOWER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
March 31, 1995
NOTE C--CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of 90 days
or less when purchased to be cash equivalents. Cash equivalents consist
primarily of money market funds.
NOTE D--NET INCOME PER COMMON SHARE
The net income per common share amounts have been computed by dividing net
income by the weighted-average number of shares (common and common equivalent)
outstanding. For purposes of this computation, stock options are common
equivalent shares.
NOTE E--REDEEMABLE COMMON STOCK
During 1993, the Company entered into an agreement to purchase the common shares
and options held by a former employee. The original purchase price was $819,514,
of which $419,514 remained unpaid at December 31, 1994. In January 1995, the
Company entered into a mutual release agreement in which the former employee
rescinded his rights to the options and agreed to tender the remaining 87,691
common shares in exchange for $200,000.
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Current three months compared to the same period last year
Revenues for the thirteen week period ended March 31, 1995 were $19,039,000, a
105.2% increase from last year's first quarter $9,279,000. This represents
increases in both of our core segments: contracts and products manufacturing and
distribution.
Contract revenues were $15,192,000, an increase of $8,328,000 from the
$6,864,000 recorded in the first three months of 1994. This increase was the
result of three major construction contracts in progress during the first
quarter of 1995 as well as the inclusion of Global Power Company operations,
acquired in the second quarter of 1994. Contract revenues represented 79.8% of
total revenues for the first quarter of 1995, compared to 74.0% for the
corresponding period of 1994.
Revenues from products manufacturing and distribution were $3,847,000, which was
an increase of $1,432,000 from the $2,415,000 during the same period of 1994.
This increase was primarily the result of the inclusion of Owens Precision
Fabricators operations, acquired in the first quarter of 1994, as well as an
increased demand for products manufactured by our Houston Products division.
Products manufacturing and distribution represented 20.2% of total revenues in
1995, as compared to 26.0% in 1994.
Cost of contract revenues was 93.0% of contract revenues during the first
quarter of 1995 versus 88.5% in 1994. The increase in this segment's cost
percentage was the result of continuing competitive pricing and excess costs
recognized on one major fixed-price project. Cost of products manufacturing and
distribution was 66.5% of products manufacturing and distribution revenues in
1995 versus 71.1% in 1994. This cost percentage was affected by the addition of
operations of the Owens Precision Fabricators division.
Resulting gross profit improved $866,000 between the first quarter of 1994 and
1995, due to increased revenues in our core segments.
Selling, general and administrative costs increased $536,000, or 34.6% from
$1,548,000 in 1994 to $2,084,000 in 1995. The increase was primarily related to
the 1994 acquisitions.
Interest income was $136,000 and $96,000 for the first quarter of 1995 and 1994,
respectively. This increase was the result of higher rates of return on our
investments.
Net income for the first quarter of 1995 was $262,000 or $.04 per share compared
to $49,000 or $.01 per share in 1994. Net income increased to 1.4% of revenues
compared to .5 % in 1994.
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
Financial condition, liquidity and capital resources
At March 31, 1995, the Company's working capital (current assets less current
liabilities) was $ 26,271,000 versus $25,895,000 at December 31, 1994.
The cash and cash equivalents component of working capital increased $2,214,000
to $14,078,000 primarily due to the increased collection efforts on trade
receivables.
The ratio of current assets to current liabilities (current ratio) was 4.6 at
the end of the first quarter of 1995, compared to 3.6 at December 31, 1994. The
Company currently has a $10,000,000 line of credit with First National Bank of
Ohio. As of March 31, 1995, there were no borrowings against credit facilities
available to the Company.
Gross capital expenditures totaled $204,000 during the first quarter of 1995.
The Company's current cash, funds available under its credit facility and future
cash flow from operations should be sufficient to meet capital requirements and
short-term working capital needs.
Inflation
The Company's operations have not been materially affected by inflation or
changing prices. A majority of revenues are pursuant to contracts which enable
the Company to pass labor and material cost increases to its customers.
Unanticipated levels of inflation could, however, reduce the expected profit on
firm price service or product distribution contracts.
Events, Transactions, and Trends
The Company continues to experience increased workers' compensation costs in a
number of the states in which it operates. The Company closely monitors these
costs and adjusts its pricing accordingly. However, an inability to pass these
increases on could have an adverse affect on the Company's business.
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<PAGE> 10
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the three months ended March 31, 1995.
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<PAGE> 11
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.
CHEMPOWER, INC.
(Registrant)
Date May 2, 1995 /s/ Robert E. Rohr
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Robert E. Rohr
Vice President of Finance and
Treasurer
(on behalf of the Registrant and
as Principal Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000847595
<NAME> CHEMPOWER, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 14,078
<SECURITIES> 0
<RECEIVABLES> 15,027
<ALLOWANCES> 79
<INVENTORY> 4,148
<CURRENT-ASSETS> 33,539
<PP&E> 12,621
<DEPRECIATION> 6,206
<TOTAL-ASSETS> 41,585
<CURRENT-LIABILITIES> 7,268
<BONDS> 0
<COMMON> 741
0
0
<OTHER-SE> 33,333
<TOTAL-LIABILITY-AND-EQUITY> 41,585
<SALES> 19,039
<TOTAL-REVENUES> 19,039
<CGS> 16,688
<TOTAL-COSTS> 16,688
<OTHER-EXPENSES> 2,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 403
<INCOME-TAX> 141
<INCOME-CONTINUING> 262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
