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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17575
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CHEMPOWER, INC.
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(Exact name of registrant as specified in its charter)
OHIO 34-1481970
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
807 EAST TURKEYFOOT LAKE ROAD, AKRON, OHIO 44319
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 896-4202
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NOT APPLICABLE
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Former name, former address and former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding August 1, 1995
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Common Stock, $.10 Par Value 7,226,563 shares
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CHEMPOWER, INC.
INDEX
PART I. FINANCIAL INFORMATION Page Number
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Item 1. Financial Statements
Condensed balance sheets--June 30, 1995
and December 31, 1994......................... 3
Condensed statements of income--Three and
six months ended June 30, 1995 and 1994....... 4
Condensed statements of cash flows--Six
months ended June 30, 1995 and 1994........... 5
Notes to condensed financial statements--
June 30, 1995................................. 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
operations.................................... 8-9
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.............. 10
SIGNATURES................................................ 11
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PART I. FINANCIAL INFORMATION
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CHEMPOWER, INC.
CONDENSED BALANCE SHEETS
June 30 December 31
1995 1994
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(Unaudited)
ASSETS (Dollars in thousands)
CURRENT ISSETS
Cash and cash equivalents $ 11,899 $ 11,864
Trade receivables, less allowances 21,107 18,895
Contracts in Progress 4,477 925
Inventories 4,396 3,867
Other current assets 604 471
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TOTAL CURRENT ASSETS 42,483 36,022
PROPERTY, PLANT &.EQUIPMENT, at cost 13,065 12,417
Less: accumulated depreciation 6,215 5,890
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NET PROPERTY, PLANT & EQUIPMENT 6,850 6,527
INTANGIBLE ASSETS 589 596
OTHER ASSETS 1,041 1,037
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$ 50,963 $ 44,182
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables $ 4,874 $ 3,125
Contracts in progress 2,185 1,120
Payroll related accruals 6,225 5,310
Other current liabilities 1,658 572
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TOTAL CURRENT LIABILITIES 14,942 10,127
DEFERRED INCOME TAXES 73 243
EXCESS OF NET ASSETS ACQUIRED OVER COST 828 220
SHAREHOLDERS' EQUITY
Common stock--par value $.IO per share:
Authorized--15,000,000 shares
Issued--7,417,571 shares at June 30;
7,412,571 shares at December 31 742 741
Additional paid-in capital 19,475 19,463
Retained earnings 15,513 14,218
Treasury stock, at cost, 191,008 shares
at June 30; 103,317 shares at
December 31 (610) (410)
Common Stock Subject to Repurchase -- (420)
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TOTAL SHAREHOLDERS' EQUITY 35,120 33,592
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50,963 44,182
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<FN>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
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1995 1994 1995 1994
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(Dollars in thousands, except share data)
Revenues......................... $ 20,227 $ 18,572 $ 39,266 $ 27,851
Cost of revenues................. 15,952 15,310 32,640 23,104
-------- -------- -------- --------
Gross profit................ 4,275 3,262 6,626 4,747
Selling, general and adminis-
trative expenses............... 2,674 1,887 4,758 3,435
-------- -------- -------- --------
Operating income............ 1,601 1,375 1,868 1,312
Financial income................. 118 84 254 180
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Income before taxes......... 1,719 1,459 2,122 1,492
Income taxes..................... 685 582 826 565
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Net income.................. $ 1,034 $ 877 $ 1,296 $ 927
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Net income per Common Share...... $ .14 $.12 $.18 $.13
======== ======== ======== ========
Weighted average number
of shares outstanding.......... 7,314,021 7,425,977 7,346,458 7,388,449
========= ========= ========= =========
<FN>
See Notes to Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30
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1995 1994
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(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES............................ $ 5,727 $ 2,604
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 9 --
Purchase of property, plant and equipment (970) (379)
Acquisition of businesses, net of working
capital acquired....................................... (4,543) (2,424)
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Net cash provided by (used for) investing
activities........................................ (5,504) (2,803)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................... 12 83
Purchase of treasury stock................................ (200) (200)
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Net cash used for financing activities............. (188) (117)
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Net increase in cash and cash equivalents.......... 35 (316)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 11,864 13,117
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................... $ 11,899 $ 12,801
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SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid (net of refunds)........................ $ 250 $ 928
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SUPPLEMENTAL NONCASH FINANCING ACTIVITIES
Portion of acquisition of business purchased
with common stock...................................... -- $ 375
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<FN>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, the financial statements reflect all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation. Operating results for the six month
period ended June 30, 1995 are not necessarily indicative of
the results that may be expected for the entire year of 1995.
For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report and
Form 10-K as of December 31, 1994.
NOTE B--ACQUISITION
On May 3, 1995, the Company through its wholly-owned subsidiaries,
Southwick Corp. and Brookfield Corp., purchased all of the issued and
outstanding partnership units of Controlled Power Limited Partnership
("CPC"). CPC is in the business of designing, manufacturing and selling
electrical metalclad switchgear, power distribution systems, bus duct
systems and replacement parts for mass transit authorities, utilities,
and chemical and other industrial facilities throughout the country.
Through the purchase of the partnership units, the subsidiaries took
control of CPC's inventory, accounts receivable, patents, real estate,
plant and equipment. Pursuant to the terms of the Purchase Agreement, the
subsidiaries made a cash payment of $4,900,000 at closing.
Pro forma consolidated information assuming ownership of CPC as of
January 1, 1994 is as follows:
Six Months Ended Three Months Ended
June 30 June 30
1995 1994 1995 1994
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(Dollars in thousands, except per share data)
Revenues................. $47,198 $47,174 $21,763 $27,513
Net Income (Loss)........ (16) (2,554) 660 (1,073)
Net Income (Loss)
per Common Share...... $ .00 $ (.35) $ .09 $ (.14)
The pro forma information does not purport to be indicative of results
which would actually have been obtained if the combination had been in
effect for the periods indicated or which may be obtained in the
future.
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CHEMPOWER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
June 30, 1995
NOTE C--CONTRACTS IN PROGRESS
Comparative information for fixed-price contracts in progress
as of June 30, 1995 and December 31, 1994 is as follows:
June 30 December 31
1995 1994
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(Dollars in thousands)
Costs incurred on uncompleted
contracts.............................. $ 65,247 $ 19,559
Estimated earnings....................... 2,330 2,092
Estimated losses......................... -- (3,314)
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67,577 18,337
Less billings to date 65,285 18,532
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$ 2,292 $ (195)
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Included in the accompanying
balance sheets under contracts
in progress:
Costs and estimated earnings in
excess of related billings on
uncompleted contracts...................$ 4,477 $ 925
Billings in excess of related
costs and estimated earnings
on uncompleted contracts and
provision for estimated losses
on contracts............................. (2,185) (1,120)
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$ 2,292 $ (195)
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NOTE D--CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a
maturity of 90 days or less when purchased to be cash
equivalents. Cash equivalents consist primarily of money
market securities.
NOTE E--NET INCOME PER COMMON SHARE
The net income per common share amounts have been computed by
dividing net income by the weighted average number of shares
(common and common equivalent) outstanding. For purposes of
this computation, stock options are common equivalent shares.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Current three months compared to the same period last year:
Revenues for the thirteen week period ended June 30, 1995 were
$20,227,000, an 8.9% increase from last year's second quarter
$18,572,000. The increase in revenues occurred in the products
manufacturing and distribution segment, more than offsetting the
decrease in the contract segment.
Contract revenues decreased 13% from $14,809,000 to $12,892,000
in 1995. These revenues represented 63.7% of total revenues for
the second quarter of 1995, compared to 79.7% for the correspon-
ing period of 1994. This segment's revenues declined due to an
overall decrease in the number of available outages.
Revenues from products manufacturing and distribution increased
to $7,335,000 from the $3,762,000 in the second quarter of 1994.
These revenues represented 36.3% of total revenues, compared to
20.3% for the same period in 1994. The increase was primarily
due to the inclusion of revenues from the recently acquired
Controlled Power Limited Partnership ("CPC").
Cost of contract revenues was 80.1% of contract revenues during
the second quarter of 1995 versus 82.9% in 1994. Cost of
products manufacturing and distribution revenues were 76.8% of
products manufacturing and distribution revenues in 1995 versus
80.6% in 1994. The improvement was due to the addition of the
CPC operations and higher margins experienced by our Owens
Precision Fabricators division.
Selling, general and administrative costs increased $787,000
from $1,887,000 to $2,674,000 in 1995. As a percent of
revenues, these costs increased to 13.2% from 10.2%. The
increase was mainly the result of additional costs resulting
from the recently acquired operations of CPC and costs accrued
for employee incentive programs.
Net income for the second quarter of 1995 and 1994 was
$1,034,000 and $877,000, respectively. The growth was primarily
due to increases in revenues and margins in the products
manufacturing and distribution segment. The Company earned $.14
per share compared to $.12 per share in the second quarter of
1994.
Current six months compared to the same period last year:
Revenues for the twenty-six week period ended June 30, 1995 were
$39,266,000, compared to the $27,851,000 achieved in the same
period of 1994. Contract revenues increased $6,410,000, or
29.6% over 1994 amounts while products manufacturing and
distribution revenues increased $5,005,000, or 81%.
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MANAGEMENTIS DISCUSSION AND ANALYSIS (Continued)
Gross profit was $6,626,000, or 16.9% of revenues for the first
six months of 1995 versus $4,747,000, or 17% for 1994.
Selling, general and administrative expenses increased 38.5%, or
$1,323,000, from the $3,435,000 posted in 1994 to the $4,758,000
in 1995. These expenses, as a percentage of revenues, remained
constant at approximately 12.2% for both 1995 and 1994.
Resulting net income for the first six months of 1995 was
$1,296,000, or $.18 per share, compared to $927,000, or $.13 per
share for the same period in 1994.
Financial condition, liquidity and capital resources:
At June 30, 1995, the Company's working capital (current assets
less current liabilities) was $27,541,000 versus $25,895,000 at
December 31, 1994. The ratio of current assets to current
liabilities (current ratio) was 2.8 at the end of the second
quarter of 1995, compared to 3.6 at December 31, 1994. The
Company currently has a $10,000,000 line of credit with First
National Bank of Ohio. As of June 30, 1995, there were no
borrowings against credit facilities available to the Company.
Gross capital expenditures totaled $766,000 during the second
quarter of 1995.
Management believes that its cash balances, funds available from
the line of credit, and cash flow from operations should be
sufficient to meet current capital requirements and working
capital needs.
Inflation:
The Company's operations have not been materially affected
by inflation or changing prices. A majority of revenues are
pursuant to contracts which enable the Company to pass expected
labor and material cost increases to its customers. Unantic-
ipated levels of inflation could reduce the expected profit on
firm price service or products distribution contracts.
Events, Transactions, and Trends:
On May 3, 1995, the Company, through it's wholly-owned
subsidiaries, Southwick Corp. and Brookfield Corp. purchased all
of the partnership interests of CPC. Through the purchase of
the interests, the Company took control of CPC's accounts
receivable, inventory, real estate, plant and equipment, and
patents.
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PART II. OTHER INFORMATION
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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2.3 Partnership Unit Purchase and Sale
Agreement, dated April 13, 1995 by and
among Canton Power Company, Henry Crown
and Company (Not Incorporated), The
Second Venture, Southwick Corp. and
Brookfield Corp. (incorporated by
reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K
of May 3, 1995)
10.9 Business Loan Agreement and Promissory
Note, dated May 5, 1995, between the
Company and Controlled Power Limited
Partnership
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated May 3, 1995 was filed
with the Securities and Exchange Commission, as
amended through Form 8-K/A Amendment No. 1, which
includes the Partnership Unit Purchase and Sale
Agreement relating to the Company's acquisition of
May 3, 1995
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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.
CHEMPOWER, INC.
(Registrant)
Date August 11, 1995 /s/ Robert E. Rohr
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Robert E. Rohr
Vice President of Finance and
Treasurer
(on behalf of the Registrant and
as Principal Financial officer)
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EXHIBIT INDEX
Pagination By
Sequential
Exhibit Exhibit Numbering
Number Description System
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2.3 Partnership Unit Purchase and Sale
Agreement, dated April 13, 1995 by
and among, Henry Crown and Company
(Not Incorporated), The Second
Venture, Southwick Corp. and
Brookfield Corp. (incorporated by
reference to Exhibit 2.1 to the
Company's Current Report on Form
8-K of May 3, 1995)
10.9 Business Loan Agreement and Promissory
Note, dated May 5, 1995, between the
Company and Controlled Power Limited
Partnership
27.1 Financial Data Schedule