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FORM 10-Q/A
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 March 31, 1996
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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: (330) 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 May 1, 1996
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Common Stock, $.10 Par Value 7,565,113 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--March 31, 1996
and December 31, 1995......................... 3
Condensed statements of income--Three
months ended March 31, 1996 and 1995. 4
Condensed statements of cash flows--three
months ended March 31, 1996 and 1995...... 5
Notes to condensed financial statements--
March 31, 1996............................ 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
March 31 December 31
1996 1995
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(Unaudited)
ASSETS (Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 12,745 $ 11,603
Marketable securities 2,561 1,084
Trade receivables, less allowances 15,549 22,022
Contracts in progress 4,743 4,608
Inventories 4,509 4,058
Other current assets 1,378 385
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TOTAL CURRENT ASSETS 41,485 43,760
PROPERTY, PLANT &.EQUIPMENT, at cost 14,247 13,638
Less: accumulated depreciation 7,092 6,773
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NET PROPERTY, PLANT & EQUIPMENT 7,155 6,865
INTANGIBLE ASSETS 614 623
OTHER ASSETS 3,281 3,322
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$ 52,535 $ 54,570
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables $ 4,687 $ 4,688
Contracts in progress 1,173 1,465
Payroll related accruals 6,619 7,740
Other current liabilities 2,040 2,726
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TOTAL CURRENT LIABILITIES 14,519 16,619
DEFERRED CREDIT, EXCESS OF ACQUIRED INTEREST OVER COST 853 986
SHAREHOLDERS' EQUITY
Common stock--par value $.IO per share:
Authorized--15,000,000 shares
Issued--7,756,121 shares at March 31
and December 31 776 776
Additional paid-in capital 20,334 20,334
Retained earnings 16,663 16,465
Treasury stock, at cost, 191,008 shares
at March 31 and December 31 (610) (610)
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TOTAL SHAREHOLDERS' EQUITY 37,163 36,965
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$ 52,535 $ 54,570
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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
March 31
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1996 1995
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(Dollars in thousands,
except share data)
Revenues......................... $ 16,990 $ 19,039
Cost of revenues................. 14,735 16,688
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Gross profit................ 2,255 2,351
Selling, general and adminis-
trative expenses............... 2,186 2,084
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Operating income............ 69 267
Financial income................. 128 136
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Income before taxes......... 197 403
Income taxes..................... (1) 141
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Net income.................. $ 198 $ 262
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Net income per Common Share...... $.03 $.04
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Weighted average number
of shares outstanding.......... 7,643,152 7,378,986
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<FN>
See Notes to Condensed Financial Statements
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CHEMPOWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31
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1996 1995
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(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES............................ $ 1,751 $ 2,618
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment................. (609) (204)
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Net cash used for investing activities.............. (609) (204)
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CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock................................ -- (200)
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Net cash used for financing activities............. -- (200)
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Net increase in cash and cash equivalents.......... 1,142 2,214
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 11,603 11,864
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................... $ 12,745 $ 14,078
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SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid (net of refunds)........................ $ 705 $ 93
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<FN>
See Notes To Condensed Financial Statements
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CHEMPOWER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
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 three month
period ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the entire year of 1996.
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, 1995.
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, 1995 is as follows:
Three Months Ended
March 31
1996 1995
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(Dollars in thousands,
except per share data)
Revenues................. $16,990 $25,435
Net Income (Loss)........ 198 (1,575)
Net Income (Loss)
per Common Share...... $ .03 $ (.21)
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)
March 31, 1996
NOTE C--CONTRACTS IN PROGRESS
Comparative information for fixed-price contracts in progress
at March 31, 1996 and December 31, 1995 is as follows:
March 31 December 31
1996 1995
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(Dollars in thousands)
Costs incurred on
uncompleted contracts.................. $ 61,673 $ 68,335
Estimated earnings....................... 4,066 5,906
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65,739 74,241
Less billings to date 62,169 71,098
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$ 3,570 $ 3,143
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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.................. $ 4,743 $ 4,608
Billings in excess of related
costs and estimated earnings
on uncompleted contracts and
provision for estimated losses
on contracts........................... (1,173) 1,465
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$ 3,570 $ 3,143
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March 31, 1996 amounts include the operations of CPC. Costs incurred on
uncompleted contracts, estimated earnings, and billings to date for CPC at
March 31, 1996 were $61,146, $3,928, and $61,802, respectively.
NOTE D--CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an
original maturity of 90 days or less when purchased to be cash
equivalents. Cash equivalents consist primarily of money
market funds.
NOTE E--MARKETABLE SECURITIES
The Company has classified all investment securities as
available-for-sale. At March 31, 1996, the fair market value of
marketable securities approximated their carrying cost.
NOTE F--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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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The discussion of Results of Operations are grouped as follows:
CONSOLIDATED --- Represents consolidated data of Chempower, Inc. and
subsidiaries.
CONSTRUCTION SERVICES --- This category consists of Chempower, Inc.,
Global Power Company and its Global Erectors division, excluding
Manufacturing Services.
MANUFACTURING SERVICES --- This category consists of CPC and the
Company's three divisions: Houston Products, Owens Precision
Fabricators and Advanced Coil Industries.
RESULTS OF OPERATIONS
CURRENT THREE MONTHS COMPARED TO THE SAME PERIOD LAST YEAR.
Revenues for the thirteen week period ended March 31, 1996 were
$16,990,000 a decrease from $19,039,000 or 10.8% from 1995. This decrease was
attributable to the decline in the number of projects available in the
Construction Services marketplace.
Selling, general and administrative expenses increased 4.9% to
$2,186,000 for the first quarter of 1996 as compared to $2,084,000 during the
same period of 1995. This increase was due to the added operations of CPC,
which was acquired May 3, 1995.
Operating income decreased in 1996 to $69,000 compared to $267,000 in
1995. This decrease was due to lower Construction Services revenues.
Interest income decreased to $128,000 in 19996 from $141,000 in 1995.
Net income for the first quarter of 1996 was $198,000 or $.03 per share
compared to $262,000 or $.04 per share in the same period of 1995. Net income
as a percent of revenues was fairly constant at 1.2% in 1996 as compared to
1.4% in 1995.
Construction Services
Construction Services revenues were $10,309,000 for the first quarter
of 1996 as compared to $15,740,000 for the same period 1995. This decrease was
attributable to the decline in the number of projects available in the
marketplace. Construction Services revenues represented 60.7% of total
revenues in 1996 as compared to 82.7% of total revenues in 1995.
Cost of Construction Services revenues represented 90.7% of Construction
Services revenues in 1996 versus 92.4% in 1995.
Construction services had an operating loss of $30,000 for the first
quarter of 1996, compared to $186,000 of operating income in 1995. This loss
was due to a decrease in Construction Services revenues.
Manufacturing Services
Manufacturing Services revenues more than doubled for the first three
months of 1996 to $6,681,000 as compared to $3,299,000 from the same period of
1995. This increase was primarily the result of the inclusion of operations
from CPC.
Cost of Manufacturing Services revenues represented 80.6% of
Manufacturing Services revenues versus 64.8% in 1995. This decrease was due to
the inclusion of CPC operations during the year. A majority of the products
manufactured by CPC (i.e. electrical metal-clad switchgear and power
distribution systems) offer a lower rate of margin as compared to other
products manufactured in this segment. In addition, increased competition in
the marketplace resulted in lower sales pricing by the Houston Products
division.
Operating income decreased to $703,000 in 1996 from $735,000 in 1995 due
to the lower rates of margin as a result of the competitive and economic
factors discussed above.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Liquidity and Capital Resources:
Working capital (current assets less current liabilities) at March 31,
1996 decreased to $26,966,000 from $27,141,000 at December 31, 1995. The ratio
of current assets to current liabilities was 2.9 at the end of the first quarter
of 1996 compared to 2.6 at the end of 1995. The Company currently has a
$10,00,000 line of credit with FirstMerit First National Bank of Ohio. As of
March 31, 1996, there was no borrowing against credit facilities available to
the Company.
The Company's current cash, funds available under its credit facility
and future cash flow from operations, should be sufficient to meet capital
requirements and short-term work capital needs.
Events, Transactions, and Trends:
The Company is experiencing a slow-down in Construction Services. This is
primarily the result of the electric utilities delaying maintenance outages as
the result of the impending deregulation in the electric power industry. The
limited number of projects availble in the marketplace has caused strong
competition for lower profit margin work. The Company expects this slow-down to
continue through 1996 and could have an adverse impact on Construction Services.
The Company continues to experience increased workers' compensation costs in a
number of the states in which the Company operates its Construction Services.
The Company closely monitors these costs and adjusts its pricing accordingly.
However, an inability to pass these increases on could have an adverse affect
on the Company's Construction Services.
The Company continues to look for opportunities to expand Manufacturing
Services through the acquisition of additional businesses and through internal
growth.
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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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10.1 1991 Incentive/Non-Qualified Stock Option
Plan As Amended and Restated
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three months ended March 31, 1996.
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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 May 14, 1996 /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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10.1 1991 Incentive/Non-Qualified Stock Option Plan as Amended and
Restated
27.1 Financial Data Schedule