-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uer07YJXJbh78N0+xTnop6AIXTl77ikTgUpgDjUpPbMShh0n/FHP8p1hbc5svqlz HV0m52/KGYuOIHDzyY1ghw== 0000950144-99-012424.txt : 19991108 0000950144-99-012424.hdr.sgml : 19991108 ACCESSION NUMBER: 0000950144-99-012424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990926 FILED AS OF DATE: 19991105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEIST C H CORP CENTRAL INDEX KEY: 0000046653 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 160803301 STATE OF INCORPORATION: NY FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10893 FILM NUMBER: 99741938 BUSINESS ADDRESS: STREET 1: 810 NORTH BELCHER ROAD CITY: CLEARWATER STATE: FL ZIP: 34625 BUSINESS PHONE: 8134615656 MAIL ADDRESS: STREET 1: 45 ANDERSON ROAD CITY: BUFFALO STATE: NY ZIP: 14225 10-Q 1 C.H.HEIST CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarter period ended September 26, 1999. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission file number 0-7907 C.H. Heist Corp. ---------------- (Exact name of registrant as specified in its charter) New York 16-0803301 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 810 North Belcher Road Clearwater, Florida 33765 ---------------------- ----- (Address of principal executive offices) (Zip Code) 727-461-5656 ------------ (Registrant's telephone number, including area code) (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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date -Oct. 14, 1999. Common stock, $.05 par value 2,881,288 ---------------------------- --------- (Class) (Outstanding shares) 1 2 C.H. HEIST CORP. AND SUBSIDIARIES Index Part I Financial Information Condensed Consolidated Balance Sheets - September 26, 1999 - (Unaudited) and December 27, 1998 3 Condensed Consolidated Statements of Operations and Comprehensive Income - (Unaudited) Thirteen and thirty-nine week periods ended September 26, 1999 and September 27, 1998 4 Condensed Consolidated Statements of Cash Flows - (Unaudited) Thirty-nine week periods ended September 26, 1999 and September 27, 1998 5 Notes to Condensed Consolidated Financial Statements 6 - 8 Independent Auditors' Review Report 9 Management's Discussion and Analysis of Results of Operations and Financial Condition 10-12 Part II Other Information 13 Signatures 14 * * * * * 2 3 Part I-Financial Information C.H. HEIST CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data)
September 26 December 27, Assets 1999 1998 ------ ---- ---- (Unaudited) Current assets: Cash and cash equivalents $ 2,512 3,147 Receivables 20,768 19,653 Services in progress 1,303 1,017 Parts and supplies 1,109 1,174 Prepaid and other expenses 1,139 317 Deferred income taxes 628 626 -------- ------- Total current assets 27,459 25,934 -------- ------- Property, plant and equipment, at cost 60,510 56,350 Less accumulated depreciation 42,518 38,996 -------- ------- Net property, plant and equipment 17,992 17,354 -------- ------- Deferred income taxes 152 144 Intangible assets, net 10,147 10,471 Other assets 106 118 -------- ------- $ 55,856 54,021 ======== ======= Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term debt $ 255 5 Accounts payable 2,428 3,030 Accrued expenses 6,435 5,788 Income taxes payable -- 1 -------- ------- Total current liabilities 9,118 8,824 Long-term debt, excluding current installments 16,873 16,050 Deferred incentive compensation 1,120 869 Deferred income taxes 137 137 -------- ------- Total liabilities 27,248 25,880 -------- ------- Stockholders' equity (note 3): Common stock of $.05 par value. Authorized 8,000,000 shares; issued 3,167,092 shares 158 158 Additional paid-in capital 4,284 4,278 Retained earnings 27,172 27,176 Accumulated other comprehensive losses (1,783) (2,235) -------- ------- 29,831 29,377 Less cost of common stock in treasury: 285,804 and 288,754 shares for 1999 and 1998, respectively (1,223) (1,236) -------- ------- Total stockholders' equity 28,608 28,141 -------- ------- $ 55,856 54,021 ======== =======
See accompanying notes to condensed consolidated financial statements. 3 4 C.H. HEIST CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (In thousands, except share and per share data)
Thirteen Thirteen Thirty-nine Thirty-nine week period week period week period week period ended ended ended ended Sept. 26, Sept. 27, Sept. 26, Sept. 27, 1999 1998 1999 1998 ----------- ---------- ---------- ---------- Net service revenues $ 38,431 35,881 111,218 98,185 Cost of services 28,437 25,722 81,713 70,355 ----------- ---------- ---------- ---------- Gross profit 9,994 10,159 29,505 27,830 Selling, general and administrative expenses 9,445 8,730 28,698 25,542 Amortization of intangible assets 183 149 548 367 ----------- ---------- ---------- ---------- Operating income 366 1,280 259 1,921 ----------- ---------- ---------- ---------- Other income (expense): Interest income 15 17 51 64 Interest expense (310) (259) (848) (643) Gain (loss) on disposal of property, plant and equipment, net (2) 69 11 33 Miscellaneous, net 466 295 504 410 ----------- ---------- ---------- ---------- Total other income (expense), net 169 122 (282) (136) ----------- ---------- ---------- ---------- Earnings (loss) before income taxes 535 1,402 (23) 1,785 Income tax expense (benefit) 313 644 (19) 817 ----------- ---------- ---------- ---------- Net earnings (loss) 222 758 (4) 968 =========== ========== ========== ========== Basic and diluted net earnings per share $ .08 .26 -- .34 =========== ========== ========== ========== Weighted average number of common shares outstanding 2,881,133 2,877,988 2,880,717 2,877,900 =========== ========== ========== ========== Net earnings (loss) $ 222 758 (4) 968 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (35) (247) 452 (440) ----------- ---------- ---------- ---------- Comprehensive income $ 187 511 448 528 =========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. 4 5 C.H. HEIST CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Thirty-nine week Thirty-nine week period ended period ended Sept. 26, 1999 Sept. 27, 1998 ---------------- --------------- Cash flows from operating activities: Net earnings (loss) $ (4) 968 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation of plant and equipment 3,726 3,646 Amortization of intangible assets 548 367 Gain on disposal of property, plant and equipment, net (11) (33) Stock compensation awards 19 9 Changes in assets and liabilities (see below) (655) 25 -------- ------- Net cash provided by operating activities 3,623 4,982 -------- ------- Cash flows from investing activities: Additions to property, plant and equipment (3,021) (4,318) Proceeds from disposal of property, plant and equipment 54 506 Acquisitions and earnout payments, net of cash acquired (1,310) (6,257) -------- ------- Net cash used in investing activities (4,277) (10,069) -------- ------- Cash flows from financing activities: Proceeds from bank line of credit borrowings 19,250 19,250 Repayment of bank line of credit borrowings (19,200) (14,047) Repayment of other long-term debt (124) (28) -------- ------- Net cash provided (used) by financing activities (74) 5,175 -------- ------- Effect of exchange rate changes on cash and cash equivalents 93 (112) -------- ------- Net decrease in cash and cash equivalents (635) (24) Cash and cash equivalents at beginning of period 3,147 2,948 -------- ------- Cash and cash equivalents at end of period $ 2,512 2,924 ======== ======= Changes in assets and liabilities providing (using) cash: Receivables $ (949) (1,661) Services in progress (275) (730) Income taxes receivable/payable, net (375) (249) Parts and supplies 69 117 Prepaid expenses (448) (56) Other assets 12 4 Accounts payable (644) 535 Accrued expenses 1,708 1,930 Deferred incentive compensation 247 135 -------- ------- Total $ (655) 25 ======== ======= Supplemental schedule of non-cash investing and financing activities: Leases capitalized $ 1,148 -- ======== =======
See accompanying notes to condensed consolidated financial statements 5 6 C.H. HEIST CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. In the opinion of management of C. H.Heist Corp. and Subsidiaries (the Company), the accompanying condensed consolidated financial statements contain all normal recurring adjustments necessary to fairly present the Company's consolidated financial position as of September 26, 1999 and the results of its operations for the thirteen and thirty-nine week periods ended September 26, 1999 and September 27, 1998 and cash flows for the thirty-nine week periods ended September 26, 1999 and September 27, 1998. The financial statements have been prepared using the same accounting policies used in preparation of the December 27, 1998 statements. The financial statements included herein should be read in conjunction with those statements and notes thereto. 2. The results of operations for the thirteen and thirty-nine week periods ended September 26, 1999 are not necessarily indicative of the results to be expected for the full year. 3. The changes in stockholders' equity for the thirty-nine week period ended September 26, 1999 are summarized as follows (in thousands, except shares):
Accumulated Additional Other Total Common paid-in Retained Comprehensive Treasury Stock Stockholders' stock capital Earnings Losses Shares Amount Equity ----- ------- -------- ------ ------ ------ ------ Balance at December 27, 1998 $158 $4,278 $ 27,176 $(2,235) 288,754 $(1,236) $ 28,141 Net loss -- -- (4) -- -- -- (4) Foreign currency translation adjustment -- -- -- 452 -- -- 452 Stock compensation awards -- 6 -- -- (2,950) 13 19 ==== ====== ======== ======= ======== ======= ======== Balance at September 26, 1999 $158 $4,284 $ 27,172 $(1,783) 285,804 $(1,223) $ 28,608 ==== ====== ======== ======= ======== ======= ========
Accumulated other comprehensive losses consist solely of equity adjustments from foreign currency translation. 4. For the thirty-nine week period ended September 26, 1999, 74,117 additional stock options were granted and 3,812 options expired. As of September 26, 1999 the Company had exercisable options outstanding to employees to purchase 162,276 common shares at prices ranging from $6.94 to $10.13 per share. 5. In 1999 the Company announced its intention to terminate and settle the obligations of its qualified noncontributory defined benefit pension plans covering substantially all of its non-bargaining unit personnel in the United States, and as such has frozen benefits. The Company has recognized pre tax curtailment gains of $281,000 which are included in the accompanying statement of operations for the thirteen and thirty-nine week periods ended September 26, 1999. The actual settlement of the obligations is not expected to be complete before the end of the current fiscal year. The net assets of the plans will be allocated, as prescribed by ERISA and its related regulations. At this time management does not foresee that the plans' settlements will have a material adverse effect on the Company's financial condition or liquidity. 6. The Company has two professional service segments: staffing and industrial maintenance services. Staffing services are provided on a temporary and contract basis to businesses in clerical, light industrial and technology professional sectors throughout the eastern United States and select southwestern U.S. markets. Industrial maintenance services a wide range of industries by providing hydroblasting, painting, sandblasting, and vacuuming of industrial wastes throughout the eastern United States and Canada. Operating segment data is as follows (in thousands): 6 7 C.H. HEIST CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands)
Thirteen Thirteen Thirty-nine Thirty-nine week period week period week period week period ended ended ended ended Sept. 26, Sept. 27, Sept. 26, Sept. 27, 1999 1998 1999 1998 -------- -------- ----------- ----------- Staffing services: Net revenues $ 25,432 21,381 70,376 55,879 Intersegment revenues 31 28 92 82 -------- ------ -------- ------- Total revenues 25,463 21,409 70,468 55,961 Cost of services 19,573 16,386 54,312 42,893 Selling, general & administrative: Operations 3,966 3,110 11,431 8,513 Allocated overhead 838 765 2,413 2,396 -------- ------ -------- ------- Total selling general & administrative 4,804 3,875 13,844 10,909 Amortization 181 148 543 351 Operating income 874 972 1,677 1,726 Depreciation 178 115 497 304 Assets 26,079 23,068 26,079 23,068 Capital expenditures and acquisitions 146 143 2,034 6,751 ======== ====== ======== ======= Industrial maintenance services: Net revenues $ 12,999 14,500 40,842 42,306 Cost of services 8,864 9,336 27,401 27,462 Selling, general & administrative: Operations 3,237 3,489 10,337 10,200 Overhead 1,404 1,366 4,517 4,433 -------- ------ -------- ------- Total selling general & administrative 4,641 4,855 14,854 14,633 Amortization 2 1 5 16 Operating income (loss) (508) 308 (1,418) 195 Depreciation 1,016 929 3,229 3,342 Assets 28,763 28,637 28,763 28,637 Capital expenditures $ 364 973 2,297 3,824 ======== ====== ======== ======= Corporate assets $ 1,014 1,317 1,014 1,317 ======== ====== ======== ======= Consolidated: Net revenues $ 38,431 35,881 111,218 98,185 Cost of services 28,437 25,722 81,713 70,355 Selling, general & administrative 9,445 8,730 28,698 25,542 Amortization 183 149 548 367 Operating income 366 1,280 259 1,921 Other expense, net 169 122 (282) (136) Earnings (loss) before income taxes 535 1,402 (23) 1,785 Depreciation 1,194 1,044 3,726 3,646 Assets 55,856 53,022 55,856 53,022 Capital expenditures and acquisitions $ 510 1,116 4,331 10,575 ======== ====== ======== =======
7 8 C.H. HEIST CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 7. On April 13, 1998, Ablest Service Corp., a wholly owned subsidiary of C.H. Heist Corp. acquired one hundred percent of the stock of Milestone Technologies, Inc. ("Milestone") for approximately $6.6 million paid in cash to the shareholders at closing and agreed to pay additional consideration based on the achievement of certain pre-established earning targets for 1998. Milestone provides information technology staffing services in the Phoenix, Arizona metropolitan area and had fiscal 1997 revenues of approximately $9.0 million. The purchase price was determined through negotiations and has been assigned to the fair value of the assets and liabilities acquired with the excess being assigned to goodwill. Pro Forma Condensed Combined Financial Information - (Unaudited) thirteen and thirty-nine week periods ended September 27, 1998. The unaudited pro forma condensed combined financial information reflects the pro forma results of operations of the Company for the thirteen and thirty-nine week periods ended September 27, 1998 assuming the acquisition of Milestone had been consummated as of the beginning of the periods presented. Management believes that the assumptions used in preparing this unaudited pro forma condensed combined financial information provide a reasonable basis of presenting all of the significant effects of the acquisition of Milestone. The pro forma condensed combined financial information does not purport to be indicative of the actual results that would have occurred had the acquisition been consummated on or as of the date assumed, and are not necessarily indicative of the future results of operations which will be obtained as a result of the acquisition.
Thirteen Thirty-nine week period week period ended ended Sept. 27, Sept. 27, 1998 1998 ----------- ----------- Net service revenues $35,881 101,024 Net earnings 758 1,028 Basic and diluted earnings per share $ .26 .36
8. Subsequent Events. On November 2, 1999, the Company announced that it had entered into a letter of intent to sell its industrial maintenance business to Onyx Industrial Services, Inc., a subsidiary of CGEA-Onyx, a French waste service company with worldwide operations. Management expects to fully analyze and account for this segment as a discontinued operation in its fourth fiscal quarter. Since the letter of intent is non-binding, no assurances can be given that a sale will be consummated. In 2000, the Company intends to relocate its Buffalo, New York administrative offices to the Tampa, Florida area, the current location of its executive and human resources offices. In the fourth quarter the Company will complete an assessment of the cost of relocation, including the costs of any employee programs. 8 9 Independent Auditors' Review Report ----------------------------------- The Board of Directors and Stockholders C.H. Heist Corp: We have reviewed the condensed consolidated balance sheet of C.H. Heist Corp. and subsidiaries as of September 26, 1999 and the related condensed consolidated statements of operations and comprehensive income and cash flows for the thirteen and thirty-nine week periods ended September 26, 1999 and September 27, 1998. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of C.H. Heist Corp. and subsidiaries as of December 27, 1998, and the related consolidated statements of earnings and comprehensive income, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 12, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 27, 1998, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Buffalo, New York KPMG LLP October 22, 1999 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations: Net service revenue increased by $2.5 million or 7.1% to $38.4 million from $35.9 million and by $13.0 million or 13.3% to $111.2 million from $98.2 million for the current fiscal quarter and year to date periods, respectively. Net service revenue in the Company's staffing services segment, Ablest Service Corp., increased by $4.0 million or 18.9% to $25.4 million from $21.4 million during the current fiscal quarter and by $14.5 million or 25.9% to $70.4 million from $55.9 million during the current year to date period. Net service revenue in this segment's commercial staffing division increased in the current quarter by $4.4 million or 27.9% and for the year to date period by $10.4 million or 24.3%. Increased revenue from existing customers, greater market penetration in established offices and new office openings in the current and prior fiscal year, all contributed to this increase. Net service revenue in this segment's information technology staffing (IT) division declined by $374,000 or 6.8% for the current fiscal quarter while still showing an increase of $4.1 million or 31.6% for the current fiscal year to date period. The decline in IT in the current fiscal quarter is the result of an industry trend where customers are delaying the development of new projects until the second quarter of next year because of Y2K concerns. The increase in the year to date revenues for this division is due to revenues generated for a full year from acquisitions, which were included for only part of the prior fiscal year. Net service revenues in the Company's industrial maintenance segment declined by $1.5 million or 10.3% to $13.0 million from $14.5 million and by $1.5 million or 3.5% to $40.8 million from $42.3 million for the current fiscal quarter and year to date periods, respectively. The decline in service revenue for both the current fiscal quarter and year to date periods resulted from lower service revenues being generated from turnaround services as compared to the prior fiscal year. Many refineries have postponed plant turnarounds and major maintenance projects due to the strong demand and higher prices for gasoline and other petroleum based products. Also contributing to this decline in service revenues is a drop in revenues from this segment's insulation services division. These declines are partially offset by increased revenue being generated by conventional high-pressure water cleaning services and through the opening of new service locations in the current and prior fiscal years. Gross profit on a consolidated basis declined by $165,000 or 1.6% and increased by $1.7 million or 6.0% for the current fiscal quarter and year to date periods, respectively. Gross profit as a percentage of service revenue for the current fiscal quarter declined to 26.0% from 28.3% and for year to date period to 26.5% from 28.3%. Gross profit dollars in the staffing services segment increased by $867,000 or 17.3% and by $3.1 million or 23.6% for the current fiscal quarter and year to date periods, respectively. Gross profit as a percentage of staffing service revenues declined to 23.0% from 23.4% for the current quarter and to 22.8% from 23.2% for year to date period. The increase in gross profit dollars is the result of the increased service revenues coupled with the consistent margins in the commercial staffing division. The decrease in percentage is due to the decline in gross profit margin in the information technology staffing division which is caused by competitive pressures on pricing. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (continued) Results of Operations, (continued): Gross profit dollars in the Company's industrial maintenance segment declined by $1.0 million or 19.9% and by $1.4 million or 9.5% for the fiscal quarter and year to date periods, respectively. As a percentage of service revenues, gross profit declined to 31.8% from 35.6% and to 32.9% from 35.1% for the same respective periods. Contributing to this decline in both gross profit dollars and percentages is an increase in direct labor costs associated with the performance of our services, including related payroll taxes and employee welfare funds. Selling, general and administrative expenses, including amortization expenses, increased on a consolidated basis by $749,000 or 8.4% and by $3.3 million or 12.9% for the current fiscal quarter and year to date periods, respectively. Selling, general and administrative expenses in the Company's staffing service segment increased by $962,000 or 23.9% and by $3.1 million or 27.8% for the current fiscal quarter and year to date periods, respectively. Contributing to this increase were costs and amortization expense associated with prior year acquisitions and cost associated with new office openings. Selling, general and administrative expenses in the Company's industrial maintenance segment decreased by $213,000 or 4.4% for the current fiscal quarter and increased by $210,000 or 1.4% for the current fiscal year to date period. The decline in the current fiscal quarter was primarily the result of the closing of one branch office and three sub-offices in the current and prior fiscal years. The increase in selling, general and administrative expenses for the current year to date period is predominately due to the hiring of additional sales and marketing associates in both the United States and Canada. Contributing to the increase in other income for the current quarter and partially offsetting other expense for the year to date period was a gain of approximately $213,000 recognized on the final distribution of insurance proceeds related to a 1998 fire at the Company's Rouyn-Noranda, Quebec facility. In addition to the above, the Company has recognized a pre-tax gain of approximately $281,000 related to the curtailment of its qualified non-contributory defined benefit pension plans for all its non-bargaining unit personnel in the United States. Reference is made to Footnote 5 of the Notes to Condensed Consolidated Financial Statements, included herein. These increases in other income were partially offset by an increase in interest expense of $51,000 and $205,000 for the current fiscal quarter and year to date periods, respectively. These increases were the result of the higher level of borrowing associated with prior year acquisitions. The effective tax rate for the current fiscal quarter is 58.5% and for the fiscal year to date period is a benefit of 82.6%. The effective tax rate is the result of the consolidation of effective tax rates from the various taxing jurisdictions of the Company. Also affecting these effective rates is the impact of the non-deductibility of certain intangible assets associated with acquisitions that occurred in prior years. 11 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (continued) Financial Condition: The quick ratio held constant at 2.7 to 1 and the current ratio improved to 3.0 to 1 from 2.9 to 1 at September 26, 1999 and December 27, 1998, respectively. Net working capital improved by $1.2 million of which $1.4 million is attributable to an increase in accounts receivable and services in progress, income taxes receivable of $371,000 and a decrease in accounts payable of $602,000. These increases in working capital were partially offset by a decline of $635,000 in cash and cash equivalents and an increase in accrued expenses of $647,000. The increase in trade accounts receivable and services in progress were primarily the result of the increased service revenue noted previously in the staffing services segment while the increase in accrued expenses is predominately payroll and incentive compensation related. Reference should be made to the statement of cash flows, which details the sources and uses of cash. Open credit commitments as of September 26, 1999 were approximately $8.9 million. The Company also has approximately $340,000 (the US dollar equivalent) available for C.H. Heist, Ltd., the Company's Canadian subsidiary. Capital expenditures for the current fiscal quarter were $679,000, including $160,000 in capital leases. Of this amount, $227,000 was for additions to the mobile equipment fleet, $182,000 was for computer software, hardware, office automation and communication systems, $25,000 was for furniture and fixtures, $33,000 was for new facilities and the remainder was for other equipment. Impact of Year 2000 Readiness: Items disclosed herein constitute "Y-2000 Readiness Disclosures" under the Year 2000 Information Readiness Disclosure Act. Throughout the past two years, the Company has undertaken an extensive review of its internal systems and has completed an applications upgrade to its integrated accounting programs and office automation systems that make them Y2K ready. The term "Y2K ready" as used in this document means that the relevant hardware, software, embedded chips or interfaces referenced herein will correctly process, provide and receive date sensitive data within and between the 20th and 21st centuries. The Company is also in the final phase of assessing and upgrading where necessary the operating systems at all of its remote locations. The cost of the upgrades and/or equipment replacements have not had a material impact on the financial position of the Company as they were part of the normal maintenance and support fees that are incurred on an ongoing basis. The Company is also in the final phase of assessing external and third party compliance for those supplies of critical services that the Company relies on. Subsequent Events: On November 2, 1999, the Company announced that it had entered into a letter of intent to sell its industrial maintenance business to Onyx Industrial Services, Inc., a subsidiary of CGEA-Onyx, a French waste service company with worldwide operations. Management expects to fully analyze and account for this segment as a discontinued operation in its fourth fiscal quarter. Since the letter of intent is non-binding, no assurances can be given that a sale will be consummated. In 2000, the Company intends to relocate its Buffalo, New York administrative offices to the Tampa, Florida area, the current location of its executive and human resources offices. In the fourth quarter the Company will complete an assessment of the cost of relocation, including the costs of any employee programs. 12 13 Part II-Other Information Item 6 Exhibits and Reports on Form 8-K (A) Exhibit 15 Letter Regarding Unaudited Interim Financial Information (B) Exhibit 27.1 Financial Data Schedules (C) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter ended September 26, 1999. 13 14 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. C.H. Heist Corp. (Registrant) Date: November 3, 1999 /s/ Mark P. Kashmanian - ----------------------- --------------------------------------- Mark P. Kashmanian Chief Accounting Officer 14 EX-15 2 LETTER REGARDING UNAUDITED FINANCIAL INFORMATION 1 EXHIBIT 15 C.H. Heist Corp. Clearwater, Florida Gentlemen: With respect to the registration statements No. 33-48497 and 333-26007, we acknowledge our awareness of the use therein of our reports dated April 24, 1999, July 23, 1999 and October 22, 1999 related to our reviews of interim financial information. Pursuant to rule 436(c) under the Securities Act of 1933 (the Act), such reports are not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. Very truly yours, KPMG LLP Buffalo, New York November 3, 1999 15 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-26-1999 DEC-28-1998 SEP-26-1999 2,512 0 20,768 0 1,109 27,459 60,510 42,518 55,856 9,118 0 0 0 158 28,450 55,856 111,218 111,218 81,713 81,713 29,246 0 (848) (23) (19) (4) 0 0 0 (4) (.00) (.00)
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