SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 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 1-3846
CHRISTIANA COMPANIES, INC.
(Exact name of registrant as specified in its charter.)
Wisconsin 95-1928079
(State of Incorporation) (IRS Employer Identification No.)
700 North Water Street, Suite 1200, Milwaukee, Wisconsin 53202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 291-9000
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock $1.00 par value 5,149,330
(Class) (Outstanding at February 12, 1998)
Page 1 of 12 total pages No exhibits are filed with this report.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
December 31, June 30,
1997 1997
ASSETS:
Cash and cash equivalents $ 3,373,000 2,888,000
Short-term investments 3,482,000 4,611,000
Accounts receivable 9,258,000 7,649,000
Prepaids and other current assets 1,459,000 1,729,000
---------- ----------
Total Current Assets 17,572,000 16,877,000
---------- ----------
Long-Term Assets:
Investment in EVI, Inc. 44,703,000 41,257,000
Mortgage notes receivable 1,273,000 1,749,000
Fixed assets, net 73,881,000 75,604,000
Other long-term assets 6,132,000 6,869,000
----------- -----------
Total Long-Term Assets 125,989,000 125,479,000
----------- -----------
$143,561,000 $142,356,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable 4,729,000 $ 3,526,000
Accrued liabilities 5,579,000 5,562,000
Short term debt - -
Current portion of long-term debt 1,245,000 3,531,000
---------- ----------
Total Current Liabilities 11,553,000 12,619,000
---------- ----------
Long-Term Liabilities:
Long-term debt 33,617,000 36,149,000
Deferred federal and state
income taxes 22,434,000 20,289,000
Other liabilities 1,192,000 1,214,000
---------- ----------
Total Long-Term Liabilities 57,243,000 57,652,000
---------- ----------
Total Liabilities 68,796,000 70,271,000
---------- ----------
Shareholders' Equity:
Preferred stock - -
Common stock, par value $1 per share;
authorized 12,000,000 shares;
issued 5,208,330 5,209,000 5,196,000
Additional paid-in capital 12,346,000 12,022,000
Less: Treasury Stock, at cost (1,236,000) (1,236,000)
Retained earnings 58,446,000 56,103,000
----------- -----------
Total Shareholders' Equity 74,765,000 72,085,000
----------- -----------
$143,561,000 $142,356,000
=========== ===========
See notes to consolidated financial statements.
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues:
Warehousing and logistic
services $46,714,000 $40,821,000 $23,667,000 $20,342,000
Costs and Expenses:
Warehousing and logistic
services 39,317,000 33,913,000 20,116,000 16,693,000
Selling, general and
administrative 4,342,000 3,895,000 2,113,000 2,124,000
---------- ---------- ---------- ----------
43,659,000 37,808,000 22,229,000 18,817,000
---------- ---------- ---------- ----------
Earnings from Operations 3,055,000 3,013,000 1,438,000 1,525,000
Other Income (Expense):
Interest income 248,000 257,000 116,000 124,000
Interest expense (1,492,000) (1,667,000) (739,000) (799,000)
Gain (losses) on sales of
real estate - 279,000 - (6,000)
Equity in earnings of EVI, Inc. 3,447,000 7,636,000 1,509,000 6,746,000
Gain (losses) on disposal of
assets 7,000 (1,281,000) - (1,281,000)
Other income (expenses), net (1,386,000) (346,000) (883,000) (183,000)
---------- ---------- ---------- ----------
824,000 4,878,000 3,000 4,601,000
---------- ---------- ---------- ----------
Earnings before income taxes 3,879,000 7,891,000 1,441,000 6,126,000
Income tax provision 1,536,000 3,079,000 583,000 2,396,000
---------- ---------- ---------- ----------
Net earnings $ 2,343,000 $ 4,812,000 $ 858,000 $ 3,730,000
========== ========== ========== ==========
Basic earnings per common share
(Note 4) $0.46 $0.94 $0.17 $0.73
===== ===== ===== =====
Diluted net earnings per common
share (Note 4) $0.45 $0.94 $0.16 $0.73
===== ===== ===== =====
Average number of shares
outstanding 5,136,699 5,136,630 5,136,788 5,136,630
See notes to consolidated financial statements.
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional
Common Stock Treasury Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
Balance, June 30, 1996 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000
--------- --------- --------- --------- ---------- ----------
EVI stock issuance - - - - - 4,345,000
Net earnings - - - - - 6,663,000
--------- --------- --------- --------- ---------- ----------
Balance, June 30, 1997 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000
Common shares issued 12,700 13,000 - - 324,000 -
Net earnings (Unaudited) - - - - - 2,343,000
--------- --------- ---------- --------- ---------- ----------
Balance, December 31, 1997 5,208,330 $5,209,000 (59,000) $(1,236,000) $12,346,000 $58,446,000
========= ========= ========== ========= ========== ==========
See notes to consolidated financial statements.
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
December 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,343,000 $4,812,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 3,406,000 3,698,000
Loss (gain) on sale of assets (7,000) 1,001,000
Deferred income tax expenses 2,145,000 3,134,000
Equity earnings of EVI, Inc. (3,447,000) (7,636,000)
Changes in assets and liabilities:
(Increase) in accounts receivable (1,609,000) (329,000)
Decrease in other assets 850,000 674,000
Increase (Decrease) in accounts
payable and accrued liabilities 1,197,000 (2,042,000)
---------- ----------
Net cash provided by operating activities 4,878,000 3,312,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets - 1,482,000
Decrease in mortgage notes
receivable 476,000 1,472,000
(Increase) Decrease in short-term
investments 1,129,000 (1,903,000)
Capital expenditures (1,518,000) (1,772,000)
---------- ----------
Net cash provided by (used in) investing
activities 87,000 (721,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term
notes and credit lines - 381,000
Payments of notes and loans payable (4,817,000) (2,457,000)
Common stock issuance 337,000 -
---------- ----------
Net cash (used in) financing activities (4,480,000) (2,076,000)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 485,000 515,000
BEGINNING CASH AND CASH EQUIVALENTS,
July 1 2,888,000 3,728,000
---------- ----------
ENDING CASH AND CASH EQUIVALENTS,
December 31 $ 3,373,000 $ 4,243,000
========== ==========
Supplemental disclosures of cash flow
information:
Interest paid $ 1,450,000 $ 1,654,000
Income taxes paid $ 284,000 $ 381,000
See notes to consolidated financial statements.
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to fairly present the
results for the interim periods presented and should be read in
conjunction with the Company's 1997 Annual Report.
NOTE 2 - ENERGY VENTURES, INC. STOCK ISSUANCE
The Company accounts for its investment in EVI under the equity method of
accounting. In July 1996, the Company's share of the underlying net
assets of EVI increased $7,146,000 as a result of a public offering of
EVI's common stock. This was recorded as an increase of $4,345,000 in
retained earnings, and a $2,801,000 increase in deferred income taxes.
NOTE 3 MERGER AGREEMENT
The Company and EVI, Inc. executed a definitive merger agreement, dated
December 12, 1997, under which EVI will acquire all the outstanding common
shares of the Company. The terms of the merger provide that each share of
Christiana common stock will be converted into approximately .74193 shares
of EVI common stock, cash in the approximate amount of $3.50, depending on
the balance of certain assets and liabilities at the time of closing and a
contingent cash payment of approximately $1.92 after five years, subject
to the incurrance of any indemnity claims by EVI during this period.
The merger transaction is subject to the approval of shareholders of both
EVI and the Company as well as customary regulatory approvals.
NOTE 4 EARNINGS PER SHARE
For the Six Months For the Six Months
Ended December 31, 1997 Ended December 31, 1996
Per Share Per Share
Income Shares Amt. Income Shares Amt.
Net Income $2,343,000 $4,812,000
Less: Preferred stock
Dividends 0 0
--------- ---------
Basic Earnings Per Share
Income available to common
Shareholders plus assumed
Conversions $2,343,000 5,136,699 $0.46 $4,812,000 5,136,630 $0.94
===== =====
Options issued to
Employees 81,526 1,312
---------- ---------- --------- -----------
Diluted Earnings per
Share
Income available to
common Shareholders plus
assumed Conversions $2,343,000 5,218,225 $0.45 $4,812,000 5,137,942 $0.94
========== ========= ===== ========= ========= =====
For the Three Months For the Three Months
Ended December 31, 1997 Ended December 31, 1996
Per Share Per Share
Income Shares Amt. Income Shares Amt.
Net Income $858,000 $3,730,000
Less: Preferred stock
Dividends 0 0
--------- ----------
Basic Earnings per Share
Income available to common
Shareholders plus assumed
$0.17 $0.73
Conversions $858,000 5,136,788 $3,730,000 5,136,630
===== =====
Options issued to Employees 85,451 3,274
-------- --------- --------- ---------
Diluted Earnings per Share
Income available to common
Shareholders plus assumed
Conversions $858,000 5,222,239 $0.16 $3,730,000 5,139,904 $0.73
======== ========= ===== ========== ========= =====
Basic earnings per share of common stock were computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the year. In fiscal 1998, the Company adopted SFAS No.
128, "Earnings per Share", effective December 15, 1997. As a result, the
Company's reported earnings per share for fiscal 1997 were restated. The
effect of this accounting change on previously reported earnings per share
(EPS) data was as follows:
Six Months Three Months
Ended Ended
Per Share Amounts 12/31/96 12/31/96
Primary EPS as reported $0.94 $0.73
Effect of SFAS No. 128 .00 .00
----- - -----
Basic EPS as restated $0.94 $0.73
===== = =====
Fully diluted EPS as reported $0.94 $0.73
Effect of SFAS No. 128 .00 .00
----- -----
Diluted EPS as restated $0.94 $0.73
===== =====
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operations
Christiana Companies consolidated revenues for the three months ended
December 31, 1997 were $23,667,000 versus $20,342,000 reported for the
comparable period a year ago, an increase of 16.3%. The increase in
revenues is primarily attributable to Transportation operations,
reflecting both higher equipment utilization and increased volume.
Operating earnings for the quarter were $1,438,000 versus $1,525,000
generated in the comparable period a year ago. The 5.7% decrease in
operating earnings is primarily attributable to a decrease in dry
warehousing operations from the closure of two warehouses located in
Atlanta, Georgia and Sparks, Nevada, and a substantial reduction in
occupancy caused by a change in distribution patterns of a major customer
of the Company's Munster, Indiana facility.
Pretax earnings for the quarter were $1,441,000 compared to $6,126,000 in
the same period last year. Prior year results included equity in earnings
of EVI, Inc. of $6,746,000 compared to $1,509,000 in the current year
quarter. The decrease is attributable to a one-time gain on the sale of
an EVI division which contributed $5,715,000 in pretax earnings to
Christiana in the prior year.
Pretax earnings in the current and prior year's quarters were
significantly impacted by a number of one-time events. In the current
quarter, the Company settled litigation, including a class action, related
to its former ownership of a residential real estate development in San
Diego. Settlement related expenses incurred in this period totaled
$754,000. While the Company fully expected to prevail in its defense, the
damages alleged by the claimants significantly exceeded the settlement
expenses. The time, management involvement and expense of such a process
was considered in determining the settlement terms.
In the prior year's quarter ended December 31, 1996, the Company recorded
a one-time pretax gain in the amount of $5,715,000 attributable to the
sale of Mallard Drilling, a subsidiary of EVI, Inc. In this same period
the Company's subsidiary, Total Logistic Control, incurred a loss on
disposal of assets of $1,281,000 in connection with the execution of a 10-
year contract for vegetable processing, packaging and warehousing services
with a major customer at its Beaver Dam Logistic Center.
Consolidated net earnings reported for the quarter were $858,000 or $0.17
($0.16 diluted) per share compared with $3,730,000 or $0.73 per share
reported for the same period a year ago. Net earnings were lower this
period primarily due to the decrease in Equity in Earnings of EVI which
included a $3,475,000 after tax gain on the sale of Mallard Drilling.
Net earnings for the three months ended December 31, 1997 adjusted for the
one-time events described above were $1,317,000 representing a 29.7%
increase from $1,015,000 of adjusted net earnings for the comparable
period last year.
For the first six months of fiscal 1998 Christiana Companies consolidated
revenues were $46,714,000 versus $40,821,000 for the comparable period
last year, an increase of $5,893,000 or 14.4%. Volume increases in
Transportation and Refrigerated Warehousing, offset by a decline in Dry
Warehousing operations were the main factors in the year to year revenue
increase.
Selling, general and administrative expense for the first six months of
fiscal 1998 increased $447,000 due to higher business development and
information services activities.
Earnings from operations for the six months ended December 31, 1997
increased 1.4% to $3,055,000. The decline in operating margin is
primarily attributable to increased revenues from Transportation
operations which are inherently lower margin and lower volume in dry
warehousing operations as previously noted.
Consolidated net earnings reported for the six months ended December 31,
1997 were $2,343,000 or $0.46 ($0.45 diluted) per share versus $4,812,000
or $0.94 per share reported for the comparable period last year. Net
earnings were lower this period due to the decrease in Equity in Earnings
of EVI related to the one-time gain realized in the sale of Mallard
Drilling last year. Net earnings attributable to the Company's warehousing
and logistic operations were $1,094,000 for the six months ended December
31, 1997 compared to $316,000 for the comparable period last year.
Net earnings adjusted for the one-time events described above for the
first six months of fiscal 1998 were $2,869,000 representing an increase
of $38.3%, compared to $2,074,000 of adjusted net earnings for the
comparable period last year.
Financial Condition
Cash equivalents and short term investments totaled $6,855,000 as of
December 31, 1997 compared with $7,499,000 at June 30, 1997, a decrease of
$644,000. Christiana's working capital at December 31, 1997 was $6,019,000
compared to $4,258,000 at June 30, 1997.
Cash provided by operating activities of $4,878,000 was attributable
primarily to net earnings, depreciation, amortization and deferred taxes.
Cash provided by investing activities of $87,000 resulted from a reduction
in mortgage notes receivable and the sale of short-term investments,
offset by capital expenditures of $1,518,000 primarily attributable to
warehousing and logistics operations.
In the six month period ended December 31, 1997, total funded debt was
reduced by $4,817,000, all of which was generated by internal cash flow
from its operations. In addition, the exercise of stock options resulted
in cash flow of $337,000.
Christiana's balance sheet at December 31, 1997 reflects $44,703,000 as
its carrying value for 3,897,462 shares of EVI common stock. At December
31, 1997, these shares had a market value of $148,610,226 or $38.13 per
Christiana share.
At December 31, 1997, the Company has no commitments for any material
capital projects.
PART II - OTHER INFORMATION
Item 1. Not applicable.
Item 2. Not applicable.
Item 3. Not applicable.
Item 4. See Item 4 of Form 10-Q for quarter ended 9/30/97.
Item 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K
None
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.
CHRISTIANA COMPANIES, INC.
(Registrant)
Date: 2/12/98
/s/ Sheldon B. Lubar
Sheldon B. Lubar
Chairman and Chief Executive
Officer
Date: 2/12/98
/s/ William T. Donovan
William T. Donovan
President and Chief Financial
Officer