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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, 1995
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.)
777 East Wisconsin Avenue, Suite 3380, 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 5,186,630
- ---------------------------- ---------------------------------
(Class) (Outstanding at February 9, 1996)
Page 1 of 10 total pages No exhibits are filed with this report.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
December 31, June 30,
1995 1995
------------ ------------
ASSETS:
Cash and cash equivalents $ 4,916,000 375,000
Short-term investments 293,000 2,822,000
Accounts receivable 11,014,000 10,310,000
Inventories 989,000 248,000
------------ -----------
Total Current Assets 17,212,000 13,755,000
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Long-Term Assets:
Investment in Energy Ventures, Inc. 49,205,000 35,077,000
Mortgage notes receivable 3,045,000 3,205,000
Rental properties, net 2,740,000 3,610,000
Fixed assets, net 72,039,000 71,104,000
Other assets 7,808,000 8,182,000
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Total Long-Term Assets 134,837,000 121,178,000
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$152,049,000 $134,933,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 4,348,000 $ 2,774,000
Accrued liabilities 5,121,000 5,347,000
Short term debt 1,479,000 1,844,000
Current portion of long-term debt 3,181,000 1,679,000
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Total Current Liabilities 14,129,000 11,644,000
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Long-Term Liabilities:
Long-term debt 35,950,000 38,256,000
Deferred federal and state income taxes 24,140,000 17,765,000
Other liabilities 1,568,000 1,266,000
------------ ------------
Total Long-Term Liabilities 61,658,000 57,287,000
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Total Liabilities 75,787,000 68,931,000
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Shareholders' Equity:
Preferred stock -- --
Common stock, par value $1 per share;
authorized 12,000,000 shares;
issued 5,195,630 5,196,000 5,196,000
Additional paid-in capital 12,022,000 12,022,000
Less: Treasury Stock (211,000) --
Unrealized investment gain, net of tax 10,498,000 1,909,000
Retained earnings 48,757,000 46,875,000
------------ ------------
Total Shareholders' Equity 76,262,000 66,002,000
------------ ------------
$152,049,000 $134,933,000
============ ============
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- ---------------------------------
1995 1994 1995 1994
------------- ----------- ---------- -----------
Revenues:
Product sales
Warehousing, rental and $ - $25,690,000 $ - $12,790,000
related services 39,588,000 36,577,000 19,651,000 17,408,000
----------- ----------- ----------- -----------
39,588,000 62,267,000 19,651,000 30,198,000
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of product sales - 21,891,000 - 10,935,000
Warehousing, rental and related
expenses 32,820,000 28,598,000 16,737,000 14,101,000
Selling, general and
administrative 3,662,000 5,450,000 1,861,000 2,807,000
----------- ----------- ----------- -----------
36,482,000 55,939,000 18,598,000 27,843,000
----------- ----------- ----------- -----------
Earnings from Operations 3,106,000 6,328,000 1,053,000 2,355,000
Other Income (Expense):
Interest income 271,000 512,000 142,000 219,000
Interest expense (1,532,000) (2,411,000) (758,000) (1,297,000)
Gain on sales of real estate 1,314,000 2,081,000 474,000 644,000
Other income (expenses), net (25,000) (269,000) (67,000) (71,000)
----------- ----------- ----------- -----------
28,000 (87,000) (209,000) (505,000)
----------- ----------- ----------- -----------
Earnings before income taxes
and minority interest 3,134,000 6,241,000 844,000 1,850,000
Income tax provision 1,251,000 2,403,000 355,000 693,000
----------- ----------- ----------- -----------
Net earnings before
minority interest 1,883,000 3,838,000 489,000 1,157,000
Minority interest - (293,000) - (127,000)
----------- ----------- ----------- -----------
Net Earnings $ 1,883,000 $ 3,545,000 $ 489,000 $ 1,030,000
=========== =========== =========== ===========
Net earnings per share $0.36 $0.66 $0.09 $0.20
=========== =========== =========== ===========
Average number of
shares outstanding 5,194,065 5,354,955 5,195,200 5,269,010
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNREALIZED
COMMON STOCK ADDITIONAL INVESTMENT
----------------------- TREASURY PAID-IN GAIN, RETAINED
SHARES AMOUNT STOCK CAPITAL NET OF TAX EARNINGS
------ ------ -------- ---------- ----------- --------
Balance, June 30, 1994 5,440,899 $5,441,000 - $18,217,000 -- $36,430,000
Repurchase of Stock (245,269) (245,000) - (6,195,000) -- --
Change in unrealized appreciation
on EVI, net of tax -- -- - -- 1,909,000 --
Net Earnings for the Year -- -- - -- -- 10,445,000
Balance, June 30, 1995 5,195,630 $5,196,000 - $12,022,000 $1,909,000 $46,875,000
Change in unrealized appreciation
on EVI, net of tax - - - -- 8,589,000 --
Purchase of Treasury stock - - (211,000) - --
Net earnings for the six months
ended December 31, 1995 (unaudited) - - - - -- 1,882,000
------------------------------------------------------------------------------------------------
Balance, December 31, 1995 5,195,630 $5,196,000 $(211,000) $12,022,000 $10,498,000 $48,757,000
================================================================================================
See notes to consolidated financial statements.
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CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
Six Months Ended
December 31,
----------------------
1995 1994
-------- ---------
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $1,883,000 $ 3,545,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 3,556,000 4,010,000
Gains on sales of assets (1,520,000) (2,139,000)
Deferred income tax expenses 835,000 51,000
Minority interest in
consolidated income of
subsidiaries -- 293,000
Changes in assets and liabilities:
(Increase) in accounts receivable (704,000) (763,000)
(Increase) decrease in inventory (741,000) 440,000
Decrease in other assets 283,000 656,000
Increase in accounts payable
and accrued liabilities 1,348,000 719,000
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Net cash provided by operating activities 4,940,000 6,812,000
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 4,137,000 4,235,000
(Increase) decrease in mortgage notes receivable 160,000 (436,000)
Decrease in short-term investments 2,529,000 6,609,000
Capital expenditures (5,846,000) (7,870,000)
----------- -----------
Net cash provided by investing activities 980,000 2,538,000
CASH FLOW FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term notes
and credit lines 898,000 4,620,000
Payments of notes and loans payable (2,066,000) (5,003,000)
Stock repurchase (211,000) (6,091,000)
------------ -------------
Net cash provided by (used in) financing activities (1,379,000) (6,474,000)
----------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4,541,000 2,876,000
BEGINNING CASH AND CASH EQUIVALENTS, July 1 375,000 3,929,000
----------- ----------
ENDING CASH AND CASH EQUIVALENTS, December 31 $ 4,916,000 $6,805,000
=========== ==========
Supplemental disclosures of cash flow information:
Interest paid $ 5,134,000 $ 2,005,000
Income taxes paid $ 600,000 $ 1,950,000
See notes to consolidated financial statements.
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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 1995 Annual Report.
NOTE 2 - PRO FORMA OPERATING RESULTS
On June 30, 1995, Prideco, Inc. ("Prideco"), a majority-owned subsidiary of the
Company, merged with Grant Acquisition Company, a wholly-owned subsidiary of
Energy Ventures, Inc. ("EVI"). In the merger, the Company's shares of Prideco
were converted into 1,035,858 shares of Common Stock, $1.00 par value, of EVI.
EVI's common stock is listed and traded on the New York Stock Exchange
(NYSE:EVI). Accordingly, the individual accounts of Prideco have been
eliminated from the Company's June 30, 1995 Balance Sheet which reflects the
effect of the merger. Prideco's results of operations are included in the
Company's Consolidated Statement of Earnings through June 30, 1995, the date of
the merger. Concurrently with the merger, the Company acquired an additional
912,873 shares of EVI common stock directly from EVI and the minority
shareholders of Prideco for an aggregate cash price of $13,291,000.
The investment in EVI is classified as "available for sale". Investment
securities classified as available for sale at December 31, 1995 are carried at
fair value with fair value adjustments, net of their related income tax
effects, reported as a component of shareholders' equity.
The following summarizes the unaudited consolidated pro forma operating results
of the Company as if the merger of Prideco, Inc. had occurred as of July 1,
1994 the beginning of the periods.
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1994
------------------- -----------------
Net Revenues $17,408 $36,577
Net Earnings $ 722 $ 2,868
Earnings per share $ 0.14 $ 0.54
Pro forma results are not necessarily indicative of results that would have
occurred had the merger been made at July 1, 1994, or of results which may
occur in the future.
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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, 1995 were $19,651,000 versus $30,198,000 reported for the
comparable period a year ago. Revenues were lower this period due to the
completed merger of Prideco with a unit of Energy Ventures, Inc. (NYSE:EVI) on
June 30, 1995. Revenues attributable to Refrigerated Warehousing and Logistics
increased 13% or $2,243,000 in the first quarter fiscal 1996 compared with
$17,408,000 for the same period last year. Revenue growth this quarter within
this segment occurred due to increased storage and handling volume at Wiscold,
particularly at its largest facility in Rochelle, Illinois and growth in
transportation and international freight forwarding services at The TLC Group.
Operating earnings for the quarter were $1,053,000 versus $2,355,000 generated
in the comparable period a year ago. The reduction in operating earnings is
primarily attributable to the absence of Prideco's operations this quarter and
to a lesser extent reduced margins in Refrigerated Warehousing and Logistics.
Operating margins of the Refrigerated Warehousing and Logistics segment were
lower due to higher unused capacity at certain warehouses and higher start-up
labor expense associated with new high volume distribution accounts.
Sales of 10 condominium homes were completed in the second quarter of fiscal
1996 which generated a pretax gain of $474,000 compared with sales of 10 homes
in the same period last year which contributed pretax earnings of $644,000.
Sales this year tended to be lower-priced homes, resulting in a lower gross
profit.
Consolidated net earnings for the quarter were $489,000 or $0.09 per share
compared with $1,030,000 or $0.20 per share for the same period a year ago.
Net earnings were lower this period due to reduced margins in Refrigerated
Warehousing and Logistics, sales of less expensive homes, and the absence of
Prideco's operations due to its merger.
In the second quarter, Christiana generated $2,602,000 of after-tax cash flow
from operations.
For the first six months of fiscal 1996 Christiana Companies consolidated
revenues were $39,588,000 versus $62,267,000 for the comparable period last
year. Refrigerated Warehousing and Logistics revenue increased 8% when
compared to $36,577,000 for the same period a year ago due to growth at TLC in
warehousing, transportation and international services. Wiscold's revenues
were in line year to year, but due to a poor vegetable harvest in the first
quarter of fiscal 1996 vegetable freezing services this year were reduced
resulting in lower operating margins. For the six month period ended
December 31, 1995, Refrigerated Warehousing and Logistics contributed
$1,436,000 or $0.28 per share versus $2,031,000 or $0.38 per share in the
comparable period last year.
For the six months ended December 31, 1995, sales of 24 homes were completed
generating net earnings of $788,000 or $0.15 per share. That compares with
sales of 30 homes in the same period last year which contributed net earnings
of $1,249,000 or $0.23 per share.
As of December 31, 1995, Christiana had 58 units available for sale in the
Tierrasanta region of San Diego, California. In December, Christiana agreed to
sell 16 homes which are currently in the rental pool to an investor. This
sale, which is scheduled for completion in the third quarter, will transfer the
homes in an "as is" condition, eliminating refurbishment expense.
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In the six month period, Christiana generated $6,274,000 of after-tax cash flow
from operations.
Financial Condition
Cash equivalents and short term investments totaled $5,209,000 as of
December 31, 1995 compared with $3,197,000 at June 30, 1995, an increase of
$2,012,000. Cash provided by operating activities of $4,940,000 was
attributable primarily to net earnings, depreciation, amortization and deferred
taxes. Cash used in investing activities of $980,000 resulted from capital
expenditures of $5,846,000 primarily attributable to warehousing and logistics
operations, offset by a decrease of $2,529,000 in short term investments and
proceeds from asset sales, primarily real estate, of $4,137,000.
On December 31, 1995, Christiana held for investment 1,948,731 shares of EVI
which represented approximately a 10.5% ownership interest. On December 31,
1995 EVI's share price was $25.25 giving Christiana's holdings a market value
of $49,205,000. Unrealized appreciation of this investment, before tax,
increased $3,900,000 in the second quarter to $17,300,000 as of December 31,
1995. At quarter end, unrealized investment gain, net of tax totaled
$10,498,000.
Christiana's operating units have capital commitments to construct new
distribution oriented warehousing capacity. Wiscold is constructing a new
3.5 million cubic foot refrigerated distribution center in Rochelle, Illinois
with an expected cost of $11.5 million. The new facility is being built on
company owned property at the site of its existing 10.6 million cubic foot
refrigerated distribution center. This facility is expected to be completed
and operational early in the fourth quarter of fiscal 1996. At December 31,
1995, $1.1 million had been expended, with a commitment of an estimated $10.4
million remaining.
The TLC Group is expanding its newest dry distribution center in Zeeland,
Michigan by 106,000 sq. ft. When completed during the third quarter of fiscal
1996, this facility will total 220,000 sq. ft. of dry distribution capacity.
Construction costs of this expansion are expected to be $2.3 million, of which
$0.6 million was spent through December 31, 1995.
The construction of these facilities is expected to be funded primarily by
subsidiary issued term debt.
New Accounting Standard
In 1995, the Financial Accounting Standards Board issued FASB No. 123,
"Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based employee compensation. The
company plans to adopt only the pro forma disclosure requirements of this
statement, and to continue to apply the accounting provisions of Opinion 25 to
stock-based employee compensation arrangements, as is allowed by the statement.
This disclosure will be effective with the June 30, 1997 financial statements.
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PART II - OTHER INFORMATION
Item 1. Not applicable.
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Item 2. Not applicable.
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Item 3. Not applicable.
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Item 4. See Item 4 of Form 10-Q for quarter ended 9/30/95.
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Item 5. Not applicable.
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Item 6. Exhibits and Reports on Form 8-K
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None
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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: February 9, 1996
/s/ Sheldon B. Lubar
-------------------------
Sheldon B. Lubar
Chairman and
Chief Executive Officer
Date: February 9, 1996
/s/ William T. Donovan
-------------------------
William T. Donovan
Executive Vice President and
Chief Financial Officer
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