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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 September 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 November 1, 1995
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Common Stock, $.10 Par Value 7,440,813 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--September 30, 1995
and December 31, 1994......................... 3
Condensed statements of income--Three and
nine months ended September 30, 1995 and 1994. 4
Condensed statements of cash flows--nine
months ended September 30, 1995 and 1994...... 5
Notes to condensed financial statements--
September 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
September 30 December 31
1995 1994
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(Unaudited)
ASSETS (Dollars in thousands)
CURRENT ISSETS
Cash and cash equivalents $ 14,263 $ 11,864
Trade receivables, less allowances 17,956 18,895
Work in Progress 5,826 925
Inventories 4,667 3,867
Other current assets 660 471
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TOTAL CURRENT ASSETS 43,372 36,022
PROPERTY, PLANT &.EQUIPMENT, at cost 13,240 12,417
Less: accumulated depreciation 6,540 5,890
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NET PROPERTY, PLANT & EQUIPMENT 6,700 6,527
INTANGIBLE ASSETS 586 596
OTHER ASSETS 1,440 1,037
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$ 52,098 $ 44,182
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables $ 4,697 $ 3,125
Work in Progress 2,641 1,120
Payroll related accruals 6,921 5,310
Other current liabilities 1,550 572
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TOTAL CURRENT LIABILITIES 15,809 10,127
DEFERRED INCOME TAXES 47 243
Redeemable Common Stock -- 220
EXCESS OF NET ASSETS ACQUIRED OVER COST 785 --
SHAREHOLDERS' EQUITY
Common stock--par value $.IO per share:
Authorized--15,000,000 shares
Issued--7,417,571 shares at June 30;
7,412,571 shares at December 31 743 741
Additional paid-in capital 19,502 19,463
Retained earnings 15,822 14,218
Treasury stock, at cost, 191,008 shares
at June 30; 103,317 shares at
December 31 (610) (410)
Common Stock Subject to Repurchase -- (420)
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TOTAL SHAREHOLDERS' EQUITY 35,457 33,592
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$ 52,098 $ 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 Nine Months Ended
September 30 September 30
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1995 1994 1995 1994
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(Dollars in thousands, except share data)
Revenues......................... $ 16,430 $ 13,331 $ 55,696 $ 41,182
Cost of revenues................. 13,898 11,263 46,537 34,367
-------- -------- -------- --------
Gross profit................ 2,532 2,068 9,159 6,815
Selling, general and adminis-
trative expenses............... 2,198 1,808 6,958 5,243
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Operating income............ 334 260 2,201 1,572
Financial income................. 151 128 405 308
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Income before taxes......... 485 388 2,606 1,880
Income taxes..................... 177 151 1,002 716
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Net income.................. $ 308 $ 237 $ 1,604 $ 1,164
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Net income per Common Share...... $.04 $.03 $.22 $.16
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Weighted average number
of shares outstanding.......... 7,380,557 7,438,068 7,356,190 7,405,187
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<FN>
See Notes to Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30
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1995 1994
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(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES............................ $ $ 7,546
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 305
Purchase of property, plant and equipment (546)
Acquisition of businesses, net of working
capital acquired....................................... (2,424)
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Net cash provided by (used for) investing
activities........................................ (2,665)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................... 128
Purchase of treasury stock................................ (200)
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Net cash used for financing activities............. (72)
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Net increase in cash and cash equivalents.......... 2,399 4,809
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 11,864 13,117
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................... $ 14,263 $ 17,926
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SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid (net of refunds)........................ $ $ 1,546
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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)
September 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 September 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:
Nine Months Ended Three Months Ended
September 30 September 30
1995 1994 1995 1994
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(Dollars in thousands, except per share data)
Revenues................. $63,628 $71,227 $16,430 $24,103
Net Income (Loss)........ 292 (2,754) 308 (200)
Net Income (Loss)
per Common Share...... $ .04 $ (.37) $ .04 $ (.03)
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)
September 30, 1995
NOTE C--WORK IN PROGRESS
Comparative information for fixed-price work in progress
as of September 30, 1995 and December 31, 1994 is as follows:
September 30 December 31
1995 1994
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(Dollars in thousands)
Costs incurred on uncompleted
work in progress....................... $ 65,643 $ 19,559
Estimated earnings....................... 4,185 2,092
Estimated losses......................... -- (3,314)
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69,828 18,337
Less billings to date 66,643 18,532
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$ 3,185 $ (195)
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Included in the accompanying
balance sheets under work
in progress:
Costs and estimated earnings in
excess of related billings on
work in progress....................... $ 5,826 $ 925
Billings in excess of related
costs and estimated earnings
on work in progress and
provision for estimated losses
on work in progress................... (2,641) (1,120)
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$ 3,185 $ (195)
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September 30, 1995 amounts include the operations of CPC. Costs incurred on
work in progress, estimated earnings and billings to date for CPC at
September 30, 1995 were $61,201, $2,184, and $59,808, respectively.
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 September 30 ,1995 were
$16,430,000, a 23.2% increase from last year's third quarter $13,331,000.
Contract revenues decreased 27.6% from $10,137,000 to $7,342,000 in 1995. These
revenues represented 44.7% of total revenues for the third quarter of 1995,
compared to 76.0% for the corresponding period of 1994. This segment's revenues
declined due to an overall decrease in the number of available outages as a
result of spending reductions in electric utility maintenance programs.
Revenues from products manufacturing and distribution increased to $9,088,000
from $3,194,000 in the third quarter of 1994. These revenues represented 55.3%
of total revenues, compared to 24.0% 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 90.7% of contract revenues during the third
quarter of 1995 versus 87.5% in 1994. The increase in this cost percentage was
the result of continuing competitive pricing. Cost of products manufacturing
and distribution revenues were 79.7% of products manufacturing and distribution
revenues in 1995 versus 74.9% in 1994. This percentage increase was the result
of CPC's operations which were at lower margins.
Selling, general and administrative costs increased $390,000 from $1,808,000 to
$2,198,000 in 1995. These expenses increased relative to 1994, due to the
acquisition of CPC. As a percent of revenues, these costs remained constant at
13.4% from 13.6%.
Net income for the third quarter of 1995 and 1994 was $308,000 and $237,000,
respectively. The growth was primarily due to increases in revenues and margins
in the products manufacturing and distribution segment. The Company earned $.04
per share compared to $.03 per share in the third quarter of 1994.
Current nine months compared to the same period last year:
Revenues for the twenty-six week period ended September 30, 1995 were
$55,696,000, compared to the $41,182,000 achieved in the same period of 1994.
Contract revenues increased $3,615,000, or 11.4% over 1994 amounts while
products manufacturing and distribution revenues more than doubled to
$20,270,000.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Gross profit was $9,159,0000, or 16.4% of revenues for the first
nine months of 1995 versus $6,815,000, or 16.5% for 1994.
Selling, general and administrative expenses increased 38.5%, or
$1,715,000, from the $5,243,000 posted in 1994 to the $6,958,000
in 1995. These expenses, as a percentage of revenues, remained
constant at 12.5% and 12.7% for both 1995 and 1994.
Resulting net income for the first nine months of 1995 was
$1,604,000, or $.22 per share, compared to $1,164,000, or $.16 per
share for the same period in 1994.
Financial condition, liquidity and capital resources:
At September 30, 1995, the Company's working capital (current assets
less current liabilities) was $27,563,000 versus $25,895,000 at
December 31, 1994. The ratio of current assets to current
liabilities (current ratio) was 2.7 at the end of the third
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 September 30, 1995, there were no
borrowings against credit facilities available to the Company.
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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27.1 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K/A Amendment No. 2, dated
November 14, 1995 was filed with the Securities and
Exchange Commission. This report amended Form 8-K,
dated May 4, 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 November 13, 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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27.1 Financial Data Schedule