<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 JUNE 30, 1997
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 August 1, 1997 was
17,649,000 shares.
Page 1 of 15
Exhibit Index at Page 15
1 of 15
<PAGE>
PART I. Financial Information
ITEM 1. Financial Statements
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 12,451 $ 7,870 $ 23,808 $ 19,504
Rental, service and other 1,611 2,249 2,988 4,003
-------- ------- ------- -------
14,062 10,119 26,796 23,507
COSTS AND EXPENSES:
Cost of revenues:
Product sales 9,947 7,745 19,063 16,956
Rental, service and other 1,048 2,363 1,915 3,728
Selling, general and administrative 2,992 4,964 5,969 8,799
-------- ------- ------- -------
13,987 15,072 26,947 29,483
-------- ------- ------- -------
Operating profit/(loss) 75 (4,953) (151) (5,976)
OTHER INCOME (EXPENSE):
Interest income 16 22 48 56
Interest expense (485) (398) (895) (751)
Other income (expense) 4 (30) 4 28
-------- ------- ------- -------
(465) (406) (843) (667)
-------- ------- ------- -------
Loss before income taxes (390) (5,359) (994) (6,643)
Benefit for income taxes - (1,301) - (1,774)
-------- ------- ------- -------
Net loss $ (390)$ (4,058) $ (994)$ (4,869)
-------- ------- ------- -------
-------- ------- ------- -------
Net loss per share $ (0.03)$ (0.23) $ (0.06)$ (0.28)
-------- ------- ------- -------
-------- ------- ------- -------
Average common shares outstanding 17,649 17,649 17,649 17,649
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
See notes to condensed consolidated financial statements.
2 of 15
<PAGE>
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1996 1997
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 840 $ 1,853
Restricted cash and cash equivalents 1,209 1,050
Accounts receivable 12,114 12,069
Costs and estimated earnings in excess of
billings on uncompleted contracts 3,054 2,148
Inventories 4,374 4,738
Other current assets 943 1,365
-------- --------
TOTAL CURRENT ASSETS 22,534 23,223
Property, plant and equipment, net 4,777 5,190
Other assets 1,294 1,407
-------- --------
$ 28,605 $ 29,820
-------- --------
-------- --------
CURRENT LIABILITIES:
Notes payable $ 219 $ 373
Accounts payable 8,824 9,622
Accrued payroll and payroll related 1,335 1,589
liabilities
Billings in excess of costs and estimated
earnings on uncompleted contracts 838 1,356
Current portion of long-term debt 252 228
Taxes payable 310 317
Other accrued liabilities 5,535 4,575
-------- --------
TOTAL CURRENT LIABILITIES 17,313 18,060
Long-term debt 12,725 12,145
Other liabilities 2,202 2,435
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 176 176
Capital in excess of par value 90,813 90,735
Accumulated deficit (92,678) (91,684)
Foreign currency translation adjustment (1,946) (2,047)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (3,635) (2,820)
-------- --------
$ 28,605 $ 29,820
-------- --------
-------- --------
See notes to condensed consolidated financial statements.
3 of 15
<PAGE>
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (994) $ (4,869)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 641 738
Deferred income taxes - (1,768)
Deferred compensation 78 132
(Gain) loss on sale of fixed assets 28 177
Changes in operating assets and operating
liabilities:
Accounts receivable (249) 4,747
Costs and estimated earnings in excess of
billings on uncompleted contracts (928) 570
Inventories 317 978
Other current assets 395 (214)
Accounts payable and accrued liabilities (54) (1,791)
Billings in excess of costs and estimated
earnings on uncompleted contracts (496) (818)
Income taxes payable (9) (213)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,271) (2,331)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (247) (168)
Proceeds from dispositions of property, plant and 26 37
equipment
Change in other assets 39 (135)
-------- --------
NET CASH USED IN INVESTING (182) (266)
ACTIVITIES
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from WESAC 652 446
Borrowings on notes payable 283 360
Payments on notes payable (429) (107)
Borrowings on long-term debt 55 29
Payments on long-term debt (102) (148)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 459 580
-------- --------
Effect of exchange rate changes on cash 140 (366)
-------- --------
Net decrease in cash and cash equivalents (854) (2,383)
Cash and cash equivalents, beginning of period 2,903 5,147
-------- --------
Cash and cash equivalents, end of period $ 2,049 $ 2,764
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ - $ 107
-------- --------
-------- --------
Cash paid for interest $ 242 $ 269
-------- --------
-------- --------
See notes to condensed consolidated financial statements.
4 of 15
<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 as of
June 30, 1997 and the consolidated results of its operations for the six
month periods ended June 30, 1997 and 1996. 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 has been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. Results of operations for the period ended June 30, 1997 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, 1996.
The Company is 81% owned by WES Acquisition Corp. ("WESAC"), an affiliate of
Wexford Management LLC.
Certain amounts in the 1996 condensed consolidated financial statements have
been reclassified to conform with the 1997 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INCOME TAXES
The Company prepares a consolidated Federal income tax return. The Company
files separate state and foreign income tax returns. The Company accounts for
income taxes under the method prescribed by FAS No. 109.
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.
5 of 15
<PAGE>
3. INVENTORIES
Inventories consist of the following (in thousands):
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
Raw materials $ 1,260 $ 1,375
Work in process 2,820 3,152
Finished goods 294 211
------- -------
Total inventories $ 4,374 $ 4,738
------- -------
------- -------
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
June 30, December 31,
1997 1996
------- -----------
7.9525% note payable, due in monthly
installments of $19 (principal and
interest) through June 2000,
secured by related lease payments $ 610 $ 702
Secured term loan from WESAC, bearing
interest at 13.0% and due
September, 1998. 6,145 5,763
Secured term loan from WESAC, bearing
interest at 13.0% and due
September, 1998. 2,528 2,372
Secured loan from Silicon Valley Bank,
bearing interest at 5.5% and due
September, 1998. 1,700 1,700
Secured term loan from WESAC, bearing
interest at 13.0% and due September,
1998. 1,689 1,585
Other credit agreements 305 251
------- -------
12,977 12,373
Less current portion (252) (228)
------- -------
$12,725 $ 12,145
------- -------
------- -------
6 of 15
<PAGE>
Under an agreement reached between the Company and WESAC on March 22, 1996,
interest due and payable from WESAC is compounded into the debt. This
agreement commenced with respect to interest due and payable for the fourth
quarter of 1995. The secured loan balances with WESAC include compounded
interest of $2.0 million as of June 30, 1997.
On July 28, 1995, the Company finalized a loan agreement under which WESAC
provided a $2.0 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 June 30, 1997.
On October 25, 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. On May 9,
1996, the Company revised the terms of the credit line with SVB. Under the
renegotiated terms, SVB agreed to provide a $3.0 million line of credit,
without covenants, through October 25, 1996 and WESAC agreed to
collateralize its guarantee of the Company's outstanding loan balance of
$1.7 million and $0.2 million in letters of credit issued by SVB with $1.9
million in cash.
On October 25, 1996, the SVB agreement was further modified, so that (i)
the maturity date was extended to May 1998, and (ii) the interest rate on
funds borrowed by the Company was reduced from about 11% to about 5.5%,
since WESAC deposited cash collateral equivalent to the funds borrowed with
SVB.
On August 28, 1996, WESAC agreed to lend the Company up to $1.6 million.
The loan bears interest at an annual rate of 13%, and is secured by all of
the assets of the Company. Interest and a commitment fee of $32 thousand
payable to WESAC are compounded. The Company had drawn $1.5 million
against this loan as of June 30, 1997. In October 1996, WESAC provided the
Company with a new $2.4 million standby line of credit. As of June 30,
1997, the Company had not drawn any funds on this line.
Also, in October 1996, WESAC extended the maturities of the $1.6 million
and $2.4 million facilities to May 1998. In June 1997, WESAC further
extended the maturities of these two facilities along with the SVB
agreement to September 1998.
5. COMMITMENTS AND CONTINGENCIES
As security for performance and advances on long-term contracts, at June
30, 1997, the Company is contingently liable for approximately $2.3 million
under standby letters of credit and bank guarantees.
As of June 30, 1997, the Company was not subject to any material legal
proceedings.
7 of 15
<PAGE>
6. EARNINGS PER SHARE
Earnings per share for the three and six month periods ended June 30, 1997
and 1996 were calculated based on the weighted average number of common and
equivalent shares outstanding during the periods. Equivalent shares were
determined by using the treasury stock method, which assumes that all
dilutive securities were exercised and that the proceeds received were
applied to repurchase outstanding shares at the average market price during
the period.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted by the Company
on December 31, 1997. At that time, the Company will be required to change
the method used to compute earnings per share and to restate all prior
periods presented. Under the new requirements primary earnings per share
will be replaced with basic earnings per share. Basic earnings per share
excludes the dilutive effect of common stock equivalents, including stock
options. Had earnings per share been calculated under the provisions of the
new standard, both basic and diluted earnings per share would be the same as
net income per share as reflected in the accompanying condensed consolidated
statements of operations for the three and six month periods ended June 30,
1997 and 1996, respectively.
8 of 15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT
From time to time the information provided by the Company or statements made
by its employees may contain so-called "forward looking" information that
involves risks and uncertainties. In particular, statements contained in
this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" which are not historical facts are forward looking statements.
The Company's actual future results may differ significantly from those
stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to, the factors discussed herein as
well as the accuracy of the Company's internal estimates of revenue and
operating expense levels. Each of these factors and others are discussed
from time to time in the Company's Securities and Exchange Commission filings.
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 for the year ended December 31, 1996.
THE COMPANY
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 Engineered Products, Inc. ("WEP, Inc."), which designs, manufactures
and markets diverters, dampers and expansion joints; Wahlco Engineered
Products, Ltd. ("WEP Ltd."), which designs, manufactures and sells dampers
and diverters; Pentney Engineering Ltd., which provides pipework and general
fabrication, mechanical plant installation and hydraulic equipment
manufacturing; Teddington Bellows Ltd., which designs and manufactures
metallic expansion joints; Wahlco, Inc., which designs, manufactures and
services equipment to control air pollution; and Treste Plant Hire Ltd.,
which rents equipment to the mechanical construction industry.
The Company is 81% owned by WES Acquisition Corp. ("WESAC"), an affiliate of
Wexford Management LLC.
In November 1995, the Company signed a license agreement with LTG
Lufttechnische GmbH ("LTG") to sell and manufacture systems to control
volatile organic compounds ("VOCs") in the United States, Canada and Mexico.
LTG, located in Stuttgart, Germany, designs, manufactures and sells a broad
line of catalytic and thermal VOC and odorant oxidizers.
9 of 15
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996
REVENUES - Second quarter revenues of $14.1 million were $3.9 million, or
39%, higher than revenues of $10.1 million reported in the second quarter of
1996. Revenues from the sales, rental and service of flue gas conditioning
(FGC) systems and related products totaled $3.2 million in the second quarter
of 1997, up $2.0 million from revenues generated from such systems in the
second quarter of 1996. The second quarter of 1997 benefited from the
recognition of significant revenues on two large FGC contracts which were
booked late in 1996. Revenues in the second quarter of 1996 reflected a
series of smaller domestic contracts. Additionally, sales of products for
the reduction and control of VOCs totaled $0.5 million in the second quarter
of 1997; revenues from sales of these systems in the first half of last year
were insignificant.
Damper and diverter revenues at WEP, Inc. and WEP Ltd. were $1.5 million
higher than in the second quarter of 1996, also the result of completing
several significant large orders which were booked in 1996.
COST OF REVENUES - Cost of revenues totaled $11.0 million, or 78% of
revenues, for the quarter just ended, compared to $10.1 million, or 100% of
revenues, for the second quarter of 1996. Cost of revenues was significantly
higher as a percent of revenues in the second quarter of 1996 as the second
quarter of last year included provisions for contract charges totaling
approximately $1.7 million, of which $1.0 million related to products
manufactured under subcontract in foreign countries by the WEP Group and $0.7
million related to domestic contracts disputes at Wahlco, Inc.
SALES, GENERAL AND ADMINISTRATIVE (SG&A) - SG&A expense of $3.0 million in
the second quarter of 1997 was $2.0 million below SG&A expense of $5.0
million reported in the comparable quarter of 1996. SG&A expense in the
second quarter of 1996 included $0.7 million of bad debt reserves for
domestic receivables in the WEP Group and one-time charges totaling
approximately $350 thousand related to executive severance expenses and
option programs. Before one-time charges, SG&A expense in the second quarter
of 1996 totaled $3.8 million. The decrease in SG&A expense in the second
quarter of 1997 was due to a reduction in administrative personnel coupled
with increased cost control.
INCOME TAXES - Due to the absence of any remaining deferred tax liabilities,
the Company did not book a tax benefit against domestic losses in the second
quarter of 1997. The income tax benefit of $1.3 million in the second quarter
of 1996 represented tax benefits derived from taxable domestic losses in that
quarter.
NET LOSS - The net loss of $390 thousand for the second quarter of 1997 is
$3.7 million smaller than the net loss of $4.1 million in the second quarter
of 1996 due to the above mentioned factors.
10 of 15
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996
REVENUES - Revenues for the six months ended June 30, 1997 of $26.7 million
were $3.3 million, or 14%, higher than revenues of $23.5 million reported for
the same six month period of 1996. Since revenues for the first six months
of last year included approximately $0.6 million of revenues from
discontinued businesses, revenues from continuing operations increased $3.9
million. Revenues from the sale of dampers and expansion joints at WEP, Inc.
in Maine totaled $9.2 million for the six months just ended, up $3.2 million
from revenues of $6.0 million reported in the comparable six months of last
year, on the strength of WEP Inc.'s strong backlog at the end of 1996.
Revenues from the sale and servicing of FGC and related systems totaled $6.6
million during the first six months of 1997, up $1.5 million from revenues of
$5.1 million from the sales of these systems in the first half of 1996.
Revenues from the U.K. operations declined approximately $1.1 million over
the first six months of last year, reflecting the closure of the Company's
operations in Italy.
COST OF REVENUES - Cost of revenues for the six months ended June 30, 1997
totaled $21.0 million, representing 78% of revenues, compared to cost of
revenues of $20.7 million, representing 88% of revenues for the same period
last year. Cost of revenues represented a lower percentage of revenues in
1997 due primarily to the fact that cost of revenues in 1996 included
contract charges of $1.7 million taken in the second quarter of 1996,
primarily related to jobs subcontracted by the WEP Group in foreign
locations. Additionally, overall margin performance on FGC contracts in 1997
improved from a year ago due to lower levels of factory overhead on a reduced
cost structure, coupled with manufacturing and engineering efficiencies
resulting from the assimilation of the manufacturing process transferred from
Puerto Rico.
SALES, GENERAL AND ADMINISTRATIVE (SG&A) - SG&A expense totaled $6.0 million
for the six months ended June 30, 1997, down $2.8 million from SG&A expense
of $8.8 million for the six months ended June 30, 1996. Adjusted to
eliminate one-time charges totaling approximately $1.1 million, SG&A expense
for the first six months of 1996 totaled $7.7 million. The decrease in SG&A
expense in 1997, from adjusted 1996 levels, reflects a reduction in
administrative personnel, increased purchasing efficiencies and cost controls.
INCOME TAXES - The Company did not book a tax benefit against domestic losses
in the first half of 1997 due to the absence of any remaining deferred tax
liabilities. The income tax benefit of $1.8 million recorded for the six
months ended June 30, 1996 represented tax benefits available on taxable
domestic losses.
NET LOSS - The net loss for the six month period in 1997 totaled $1.0
million, $3.9 million lower than the net loss of $4.9 million reported in the
same period of 1996. The loss this year was caused by the factors mentioned
above.
11 of 15
<PAGE>
BACKLOG
Backlog, defined as work for which the Company has entered into a signed
agreement or has received a requisition or purchase order, totaled $19.0
million at June 30, 1997, compared to $21.3 million at June 30, 1996 and
$23.9 million at December 31, 1996. Approximately $4.1 million of the
backlog at June 30, 1997 is scheduled for delivery after December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had positive working capital position of $5.2 million at June 30,
1997, identical to the working capital at December 31, 1996.
Prior to the second quarter's operating income, the Company had incurred
recurring operating losses, and has been dependent on advances from its
parent to fund its cash flow requirements. As a result, the reports of the
Company's independent auditors in the 1996 Annual Report on Form 10-K
expressed 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, or the amounts and classification of liabilities that may result
from the possible inability of the Company to continue as a going concern.
The Company believes that the extension of the existing facilities with WESAC
and Silicon Valley Bank, along with the new line of credit, will be adequate
to fund the Company's operations during 1997 (See Note 4 to Notes to
Condensed Consolidated Financial Statements). However, significant changes
in the Company's anticipated level of business and other events could
substantially increase the Company's cash requirements above those now
anticipated, and thereby could constrain the Company's results of operations
and financial condition. Therefore, the Company is continuing to evaluate
recapitalization alternatives and to seek additional sources of financing,
including the possible conversion of WESAC debt into equity as well as
exploring unrelated sources of new equity capital. Both the conversion of
the WESAC debt into equity and the raising of any substantial amount of new
equity would require approval of the Company's stockholders as well as the
New York Stock Exchange. The Company has been out of compliance with certain
of the NYSE listing standards for some time. In connection with the proposed
recapitalization, the Company anticipates issuing additional shares and will
confer with the NYSE on both of these matters. While the Company intends to
address the compliance issues, there can be no assurance that the Company's
shares will continue to be listed on that exchange or that it will be
successful in its recapitalization efforts.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 128 EARNINGS PER SHARE
and SFAS No. 129 DISCLOSURE OF IMFORMATION ABOUT CAPITAL STRUCTURE were
issued in February 1997 and are effective for periods ending after December
15, 1997. The Company will adopt SFAS No. 128 and SFAS No. 129 for the period
ending December 31, 1997 and anticipates that such adoption will not
materially impact the Company's financial statements. SFAS No. 130 REPORTING
COMPREHENSIVE INCOME and SFAS No. 131. DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION were issued in June 1997. The Company will
adopt SFAS No. 130 and SFAS No. 131 in 1998 and anticipates that such
adoption will not materially impact the Company's financial statements.
12 of 15
<PAGE>
Part II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Data Schedule (EDGAR filing only)
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
13 of 15
<PAGE>
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.
Wahlco Environmental Systems, Inc.
(Registrant)
Date: August 13, 1997 /s/ C. STEPHEN BEAL
-----------------------------------
C. Stephen Beal
President and Chief Executive Officer
Date: August 13, 1997 /s/ A. NOEL DEWINTER
-----------------------------------
A. Noel DeWinter
Vice President, Chief Financial Officer
14 of 15
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
27. Financial Data Schedule (EDGAR filing only) 16
15 of 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 2,049
<SECURITIES> 0
<RECEIVABLES> 12,114
<ALLOWANCES> 0
<INVENTORY> 4,374
<CURRENT-ASSETS> 22,534
<PP&E> 4,777
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,605
<CURRENT-LIABILITIES> 17,313
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> (3,811)
<TOTAL-LIABILITY-AND-EQUITY> 28,605
<SALES> 23,808
<TOTAL-REVENUES> 26,796
<CGS> 19,063
<TOTAL-COSTS> 20,978
<OTHER-EXPENSES> 5,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (895)
<INCOME-PRETAX> (994)
<INCOME-TAX> 0
<INCOME-CONTINUING> (994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (994)
<EPS-PRIMARY> (.056)
<EPS-DILUTED> (.056)
</TABLE>
