<PAGE>
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: 1-10478
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0391175
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 West Segerstrom Avenue
Santa Ana, California 92704
(Address of principal executive offices and zip code)
Registrant's Telephone Number, including area code: (714) 979-7300
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
--- ---
The number of shares of common stock outstanding at April 28, 1996 was
17,649,000 shares.
Page 1 of 15
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PART I. Financial Information
ITEM I. Financial Statements
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
------- -------
REVENUES:
Product sales $11,634 $13,638
Rental and service 1,754 2,270
------- -------
13,388 15,908
------- -------
COSTS AND EXPENSES:
Cost of revenues:
Product sales 9,210 10,369
Rental and service 1,366 1,828
Selling, general and administrative 3,835 3,524
Goodwill amortization -- 33
------- -------
14,411 15,754
------- -------
Operating income (loss) (1,023) 154
------- -------
OTHER INCOME (EXPENSE):
Interest and other income 114 31
Interest and other expense (375) (677)
------- -------
(261) (646)
------- -------
Loss before income taxes (1,284) (492)
Provision (benefit) for income taxes (474) 25
------- -------
Net loss $ (810) $ (517)
======= =======
Net loss per share $ (0.05) $ (0.03)
======= =======
Average common shares outstanding 17,649 17,649
======= =======
See notes to condensed consolidated financial statements.
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WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
--------- ------------
1996 1995
--------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,150 $ 3,840
Restricted cash and cash equivalents 488 1,307
Accounts receivable 13,273 15,935
Cost and estimated earnings in excess of
billings on uncompleted contracts 5,898 6,839
Inventories 8,432 8,711
Other current assets 1,589 1,580
-------- --------
TOTAL CURRENT ASSETS 32,830 38,212
Property, plant and equipment, net 5,657 5,921
Other assets 2,346 2,386
-------- --------
$ 40,833 $ 46,519
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,858 $ 2,744
Accounts payable 6,486 8,932
Accrued payroll and payroll related liabilities 1,952 1,944
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,888 2,376
Current portion of long-term debt 210 204
Taxes payable 286 391
Other accrued liabilities 7,399 8,908
-------- --------
TOTAL CURRENT LIABILITIES 21,079 25,499
Long-term debt 8,114 7,948
Other liabilities 3,666 3,689
Deferred income taxes 1,543 2,016
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock 176 176
Capital in excess of par value 90,534 90,534
Accumulated deficit (81,685) (80,875)
Foreign currency translation adjustment (2,594) (2,468)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 6,431 7,367
-------- --------
$ 40,833 $ 46,519
======== ========
See notes to condensed consolidated financial statements.
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WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (810) $ (517)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 379 440
Deferred income taxes (472) (7)
(Gain) loss on sale of fixed assets (16) 17
Changes in operating assets and operating liabilities:
Accounts receivable 2,589 1,257
Refundable income taxes -- 920
Costs and estimated earnings in excess of
billings on uncompleted contracts 897 (1,744)
Inventories 257 (791)
Other current assets (17) 199
Accounts payable and accrued liabilities (3,903) (1,319)
Billings in excess of costs and estimated earnings
on uncompleted contracts (479) (244)
Income taxes payable (105) 344
------- -------
NET CASH USED IN OPERATING ACTIVITIES (1,680) (1,445)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (100) (206)
Proceeds from dispositions of property, plant and equipment 26 19
Change in other assets 7 248
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (67) 61
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from WES Acquisition Corp. 223 --
Borrowings on notes payable 115 --
Borrowings on long-term debt -- 83
Payments on long-term debt (52) --
Advances from Pacific Diversified Capital Company -- 207
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 286 290
------- -------
Effect of exchange rate changes on cash (48) (47)
------- -------
Net decrease in cash and cash equivalents (1,509) (1,141)
Cash and cash equivalents, beginning of period 5,147 7,121
------- -------
Cash and cash equivalents, end of period $ 3,638 $ 5,980
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for (received from) income taxes $ 107 $(1,250)
======= =======
Cash paid for interest $ 122 $ 420
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments necessary for
a fair presentation of the consolidated financial position of the
Company and the consolidated results of its operations for the three
month periods ended March 31, 1996 and 1995. Although the Company
believes that the disclosures in these financial statements are adequate
to make the information presented not misleading, certain information
and footnote information normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Results of operations for the
period ended March 31, 1996 are not necessarily indicative of results to
be expected for the full year. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1995.
The Company is 81 percent owned by WES Acquisition Corp. ("WESAC"), an
affiliate of Wexford Capital Corporation. On May 15, 1995, WESAC
entered into a purchase agreement with Pacific Diversified Capital
Company ("PDC"), a wholly-owned subsidiary of San Diego Gas & Electric
Company, providing for the purchase of PDC's 81% stock interest in the
Company. The share acquisition received approval under the
Hart-Scott-Rodino Antitrust Act on June 2, 1995 and the purchase of the
stock interest was completed on June 6, 1995.
Certain amounts in the 1995 condensed consolidated financial statements
have been reclassified to conform with the 1996 presentation.
2. INCOME TAXES
The provision for income taxes during the interim periods reflects
estimated effective tax rates for the full year. The effective rates
are different than the Federal statutory rate principally due to losses
from the Company's operations which cannot be utilized and from certain
state taxes provided.
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Prior to the acquisition by WESAC, the Company's U.S. operations were
consolidated into the tax return of its 81% parent, PDC. A tax sharing
agreement with PDC dated April 2, 1990, enabled the Company to receive
tax benefits from its taxable losses. This tax sharing agreement
between the Company and PDC terminated on the closing of the equity sale
to Wexford, retroactive to January 1, 1995. The Company has not and is
not expected to enter into a similar tax sharing arrangement with
Wexford.
With respect to WESAC's acquisition of PDC's shares, the buyer and
seller agreed to jointly elect tax treatment for the transaction as
similar to an asset acquisition under section 338(h)(10) of the tax
code. Under this election, the allocation of the purchase price to the
assets deemed purchased resulted in the recording of deferred tax
liabilities. Buyer and seller agreed to cooperate in determining the
allocation of the purchase price. Pending such agreement, the Company
recorded deferred tax liabilities of $5.0 million, of which
approximately $700 thousand was recorded in current liabilities. Such
amounts are subject to adjustment following later agreement between the
buyer and the seller.
In connection with the WESAC acquisition, PDC contributed $20 million in
debt to the capital of the Company. This resulted in an increase to
stockholders' equity, net of deferred tax liabilities which were
recorded, of approximately $14.9 million. In addition, the acquisition
resulted in the write-off to equity of previously existing deferred tax
assets of approximately $3.2 million.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
3. INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
Raw materials $1,816 $1,910
Work in process 6,422 6,579
Finished goods 194 222
------ ------
$8,432 $8,711
====== ======
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4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
7.9525% note payable, due in fifty-
one monthly installments of $19
(principal and interest) through June
2000, secured by related lease payments $ 832 $ 874
Secured term loan from WESAC,
bearing interest at 13.0% and
due May, 1998. 5,219 5,061
Secured term loan from WESAC,
bearing interest at 13.0% and
due June, 1998. 2,152 2,087
Other credit agreements 121 130
------ ------
8,324 8,152
Less current portion (210) (204)
------ ------
$8,114 $7,948
====== ======
On May 15, 1995, PDC entered into a purchase agreement with WESAC,
pursuant to which WESAC purchased $4.9 million of the Company's
outstanding debt to PDC, and PDC contributed to the capital of the
Company the remaining approximately $20 million the Company owed to it.
Pursuant to the same agreement, WESAC agreed to purchase PDC's 81 %
stock interest in the Company. The purchase of the stock interest was
completed on June 6, 1995. (See note 1)
Subsequent to the completion of the stock purchase, the Company and
WESAC entered into a loan agreement under which WESAC provided the
Company with a $2 million secured loan for ongoing working capital.
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Under an agreement reached between the Company and WESAC on March 22,
1996, interest due and payable from WESAC is capitalized into the debt.
This agreement commenced with interest due and payable for the fourth
quarter of 1995 and extends through December 31, 1996. The above
secured loan balances with WESAC include capitalized interest of $471
thousand as of March 31, 1996, under this agreement.
5. CONTINGENCIES
BESSEY VS. WAHLER LITIGATION:
Since filing the Company's Form 10-K for the period ended December 31,
1995, the following material events have occurred with regard to the
above-referenced litigation.
In April of 1996, the Court of Appeal requested the parties to
simultaneously submit letter briefs addressing a recent California
Supreme Court case regarding attorney fees (HSU V. ABBARA (1995) 9 Cal
4th 863). The letter briefs were submitted to the Court of Appeal on or
about May 3, 1996.
SHARON STEEL CORPORATION VS. WAHLCO POWER PRODUCTS, INC.:
Since the filing of the Company's Form 10-K for the period ended
December 31, 1995, the following material events have occurred with
regard to the above-referenced litigation.
During the Pre-Trial Conference held on April 29, 1996, the Court set
the case for trial on July 31, 1996. The trial is anticipated to take
one to two days.
6. STOCKHOLDERS' EQUITY
Capital in excess of par value increased $11.5 million in June 1995,
primarily reflecting the contribution by PDC of $20 million of debt to
the capital of the Company and the recording of approximately $5 million
in deferred tax liabilities in connection with the purchase by Wexford
of PDC's 81% stock interest in the Company and the purchase of $4.9
million of the Company's outstanding debt to PDC.
Capital in excess of par value decreased $3.2 million in the second
quarter of 1995 due to the reduction in the carrying amount of net
deferred tax assets (see note 2).
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7. GOODWILL AND OTHER INTANGIBLE WRITE-DOWNS
During 1995 and 1994, the Company evaluated the value of goodwill and
intangibles, given intensifying competition and declining margins. As a
result of this analysis, the Company wrote-off goodwill totaling $2.4
million during the fourth quarter of 1995, which represented the
remaining goodwill at Wahlco, Inc. and Pentney of $1.8 million and $634
thousand, respectively. In 1994, the Company recorded write-downs of
$50.4 million and $1.8 million of goodwill and other intangibles,
respectively, during the quarter ended June 30, 1994. The write-down of
goodwill consisted of $36.0 million associated with its Flue Gas
Conditioning ("FGC") and staged nitrogen oxide removal system businesses
and $14.4 million associated with its engineered products business. As
of December 31, 1995, the Company had no goodwill remaining on the
balance sheet.
In March, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("FAS 121") which
changed the method of valuing long-lived assets, whereby long-lived
assets that are expected to be held and used in operations should be
carried at the lower of costs or the fair value of the asset and
long-lived assets to be disposed of should be reported at the lower of
carrying amount or fair value less cost to sell. Subsequent to the
write-off of goodwill in the fourth quarter of 1995, the Company adopted
the provisions of FAS 121, effective December 31, 1995. No additional
write downs of assets were required under FAS 121 in 1995 or in the
first quarter of 1996. It is reasonably possible that the estimates
used to determine the fair value of certain long-lived assets will
change in the near term.
8. SUBSEQUENT EVENT
On May 1, 1996, the Company announced that it had completed negotiations
with Silicon Valley Bank ("SVB") to revise the terms of its credit
line. Under the renegotiated terms, SVB agreed to provide a $3.0
million line of credit, without covenants, to the Company through
October 25, 1996. The Company's majority stockholder, WESAC, agreed to
collateralize its guarantee of the Company's outstanding loan balance of
$1.9 million.
The terms of the line require that any additional principal and interest
borrowings, up to the maximum of $3.0 million, also be collateralized by
cash. WESAC stated that it will take steps to enable the Company to
draw down the remaining funds available on the line if the Company's
activities to restructure and refinance the business are proceeding in
accordance with WESAC's expectations.
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<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and the notes thereto included in this Quarterly Report,
and with the audited Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's Form 10-K and Annual Report to the Stockholders for the fiscal year
ended December 31, 1995.
The Company operates through several distinct subsidiaries which focus on
specific products and/or geographical regions. These entities are
coordinated through a common corporate management. The entities include:
Wahlco, Inc., which designs, manufactures and services equipment for the
reduction and control of air pollution; Wahlco Engineered Products, Inc.,
which designs and manufactures dampers and expansion joints; Wahlco
Engineered Products, Ltd. (U. K.), which designs and sells diverters and
ducting; Wahlco Engineered Products, Pty. Ltd. (Australia), which provides
heat exchangers and pressure vessels; Pentney Engineering Ltd. (U. K.), which
provides precipitator refurbishment, mechanical plant installation, hydraulic
equipment manufacturing, and general fabrication; and Teddington Bellows,
which designs and manufactures metallic expansion joints.
The Company is 81 percent owned by WES Acquisition Corp. ("WESAC"), an affiliate
of Wexford Capital Corporation. On May 15, 1995, Wexford entered into a
purchase agreement with Pacific Diversified Capital Company (PDC), a
wholly-owned subsidiary of San Diego Gas & Electric Company, providing for
the purchase of PDC's 81 percent stock interest in the Company. The share
acquisition received approval under the Hart-Scott-Rodino Antitrust Act on
June 2, 1995 and the purchase of the stock interest was completed on June 6,
1995.
In June 1995, the Company formed a division under Wahlco, Inc. to identify
and develop products designed for the destruction of volatile organic
compounds ("VOCs"). In November 1995, the division signed a license
agreement with LTG Lufttechnische GmbH ("LTG") to sell and manufacture a line
of products for the reduction and control of VOCs in the United States,
Canada and Mexico. LTG is located in Stuttgart, Germany and designs,
manufactures and sells a broad line of catalytic and thermal VOC and odorant
oxidizers. No orders had been taken for these products as of May 3, 1996.
In January 1996, the Company signed an agreement with Viking Water Systems,
Inc., to license the design, manufacture, sale and installation of water
purification systems including pre-treatment systems, reverse osmosis
systems, and bottle washing, filling and capping equipment.
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<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 VS. 1995
REVENUES - Revenues for the quarter ended March 31, 1996 of $13.5 million
were $2.4 million, or 15%, below revenues of $15.9 million for the quarter
ended March 31, 1995. Revenues from discontinued businesses totaled $0.4
million in the first quarter of 1996, compared to $1.9 million in the first
quarter of 1995, and accounted for $1.5 million of the revenue decrease in
the quarter to quarter comparison. Revenues from FGC systems and related
products at Wahlco, Inc. of $2.8 million in the first quarter of 1996 were
down $2.7 million from revenues for such products of $5.5 million reported in
the first quarter of last year. The decrease in FGC system revenues was due
to the absence of large contracts from domestic utilities which continue to
postpone capital expenditure decisions. The U. S. electric utility industry
is currently undergoing restructuring as a result of federal and state
deregulation. WEP, Inc., in Maine, reported revenues of $3.9 million, up
$1.8 million from revenues of $2.1 million reported in the comparable quarter
of 1995. The increase was due to a large multi-unit diverter order from a
domestic customer.
COST OF REVENUES - Cost of revenues totaled $10.5 million, or 79% of
revenues, for the first quarter of 1996, compared to $12.2 million, or 77% of
revenues, for the first quarter of 1995. Cost of revenues in the
manufacturing of FGC systems was 72% of revenues for the first quarter of
1996 compared to 68% of revenues in the comparable quarter of 1995. The
increase reflects lower margins on new contracts, as a result of the
continuing weakness in the air pollution control industry, as well as
increased levels of under absorbed factory overhead resulting from the
reduced production volume.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) - SG&A expense of $3.8 million in
the first quarter of 1996 increased $311 thousand over SG&A expense of $3.5
million in the first quarter of 1995. SG&A expense in the first quarter of
1995 was low due to $200 thousand of expenses charged to PDC in the first
quarter of 1995 under an expense sharing agreement. SG&A expense in the
first quarter of 1996 included additional costs related to the marketing of
products from the VOC division and from the sale of water purification
systems and equipment.
INCOME TAXES - The income tax benefit of $474 thousand in the first quarter
of 1996 represents tax benefits derived from taxable domestic losses in the
quarter. The Company had previously recorded deferred tax liabilities which
enabled the Company to take tax benefits subsequent to the purchase of the
stock interest by WESAC. (See note 2)
In the first quarter of 1995, the Company was unable to provide a tax benefit
against losses since an amendment to the tax sharing agreement between the
Company and PDC restricted reimbursement of tax benefits effective December
31, 1994. This agreement terminated on the closing of the equity sale to
Wexford.
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NET LOSS - The net loss of $810 thousand for the first quarter of 1996 was
$293 thousand higher than the net loss of $517 thousand reported for the
first quarter of 1995. The increased loss was primarily a result of the
above mentioned factors, partially offset by the tax benefit in the quarter
just ended compared to a small tax provision in the first quarter of last
year.
BACKLOG
Backlog, defined as work for which the Company has entered into a signed
agreement or has received a requisition or purchase order, totaled $15.1
million at March 31, 1996, compared to $30.3 million at March 31, 1995 and
$20.6 million at December 31, 1995. Approximately $1.3 million of the
backlog at March 31, 1996 is scheduled for delivery after December 31, 1996.
FGC equipment orders represented $3.6 million of the backlog at March 31,
1996, compared to approximately $6.2 million at March 31, 1995. FGC orders
accounted for $4.9 million of the backlog at December 31, 1995.
The Company's backlog, revenues and earnings from year to year may be
substantially affected by whether the Company has received one or more
significant orders and by fluctuations in foreign currencies. The Company's
major customers have historically changed from year to year because, once the
Company's products have been installed, they can operate for many years
without the need for replacement.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a positive working capital position of $11.8 million at March
31, 1996, compared to a working capital position of $12.7 million at December
31, 1995.
In connection with the transaction between PDC and WESAC, WESAC provided the
Company with a working capital commitment pursuant to which WESAC agreed to
provide a secured three-year loan. On July 28, 1995, the Company and Wexford
finalized the loan agreement under which Wexford provided a $3 million
secured three-year loan to satisfy the Company's immediate working capital
requirements. The Company had drawn $2.0 million against this loan as of
December 31, 1995 and March 31, 1996.
On October 26, 1995, the Company entered into a loan and security agreement
with Silicon Valley Bank ("SVB") under which SVB provided the Company with a
$4.0 million working capital loan through September 1996. Working capital
draws by the Company under this facility are guaranteed by WESAC, up to the
limit of the line. Borrowings under the loan totaled $1.7 million at March
31, 1996 and were collateralized by current assets and backlog. SVB also had
provided cash collateral of $0.2 million for a letter of credit under this
loan arrangement. As of March 31, 1996, the Company was in default of
several of the operating covenants of the facility and was in negotiations
with SVB to amend the existing covenants and restructure the credit facility.
12 of 15
<PAGE>
The Company has incurred recurring operating losses, and has been dependent
on advances from its parent as well as proceeds from the sale of marketable
securities and fixed assets to fund its cash flow requirements. As a result,
the reports of the Company's independent auditors, in the 1995 Form 10-K,
raised doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classifications of
assets, including intangibles, or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
In response to continuing weakness in its major markets and a deteriorating
working capital position, the Company has initiated programs to conserve
cash. A salary reduction program has been implemented for the majority of
the employees at Wahlco, Inc., and all discretionary spending programs are
under review.
On May 1, 1996, the Company announced that it had completed negotiations with
SVB to revise the terms of its credit line. Under the renegotiated terms,
SVB agreed to provide a $3.0 million line of credit, without covenants, to
the Company through October 25, 1996. The Company's majority stockholder,
WESAC, agreed to collateralize its guarantee of the Company's outstanding
loan balance of $1.9 million.
The terms of the line require that any additional principal and interest
borrowings, up to the maximum of $3.0 million, also be collateralized by
cash. WESAC stated that it will take steps to enable the Company to draw
down the remaining funds available on the line if the Company's activities to
restructure and refinance the business are proceeding in accordance with
WESAC's expectations.
The Company is continuing its efforts to restructure its assets and business,
and the Board of Directors has directed the Company to consider various
financing alternatives and other options, including among others, possible
sales of assets or subsidiaries. While the Company is hopeful that its
efforts will be successful, there can be no assurances that they will be; and
if they are not, there would be a material adverse effect on the Company.
13 of 15
<PAGE>
Part II: OTHER INFORMATION
ITEM 1. Legal Proceedings
Except as described in Note 5 ("Contingencies") included herein, no
material changes have occurred in the status of the Company's
litigation since the issuance of the Company's Form 10-K for the
period ended December 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - No exhibits were filed for the quarter ended
March 31, 1996.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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<PAGE>
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.
Wahlco Environmental Systems, Inc.
(Registrant)
Date: May 10, 1996 /s/ Theodore E. Lavoie
----------------------------------------
Theodore E. Lavoie
Vice President & Chief Financial Officer
/s/ A. Noel DeWinter
----------------------------------------
A. Noel DeWinter
Vice President, Controller
15 of 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,638
<SECURITIES> 0
<RECEIVABLES> 13,273
<ALLOWANCES> 0
<INVENTORY> 8,432
<CURRENT-ASSETS> 32,830
<PP&E> 5,657
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,833
<CURRENT-LIABILITIES> 21,079
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> 6,255
<TOTAL-LIABILITY-AND-EQUITY> 40,833
<SALES> 11,634
<TOTAL-REVENUES> 13,388
<CGS> 9,210
<TOTAL-COSTS> 10,576
<OTHER-EXPENSES> 3,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> (1,284)
<INCOME-TAX> (474)
<INCOME-CONTINUING> (810)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (810)
<EPS-PRIMARY> (.046)
<EPS-DILUTED> (.046)
</TABLE>
