U. S. Securities and Exchange Commission

Washington, D.C.  20549

Form 10-QSB

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

[  ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______________ to _______________

Commission File Number 0-15910

Control Chief Holdings, Inc.

(Exact name of small business issuer as specified in its charter)

New York 
16-0955704
(State or other jurisdiction of 
(I.R.S. Employer
incorporation or organization) 
Identification No.)

P.O. Box 141, 200 Williams Street, Bradford, Pennsylvania 16701

(Address of principal executive offices)

(814) 368-4132

(Issuer's telephone number)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such 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 [  ]

 

APPLICABLE ONLY TO CORPORATE ISSUERS
****
The number of shares outstanding of issuer's Common Stock, par value $.50 per share, as of July 31, 2002 was 986,837 shares.

Transitional Small Business Format (Check one): Yes [  ] No [X]
** 

 

Control Chief Holdings, Inc. and Subsidiaries

Table of Contents

 

 
 
Page**Part I    Financial Information   
Item 1     Financial Statements 
               Consolidated Balance Sheets
3
               Consolidated Statements of Operations and Retained Earnings
4
               Consolidated Statements of Cash Flows
5
               Notes to Financial Statements
6  
Item 2    Management's Discussion and Analysis or Plan of Operation
6  **Part II   Other Informations   
Item 6    Exhibits and Reports on Form 8-K
10  **Signatures
10  **Exhibit 99.1
11** 

Part I - Financial Information

Item 1.  Financial Statements

Control Chief Holdings, Inc. and Subsidiary

Consolidated Balance Sheets** **June 30,**December 31, **2002**2001**Assets**(Unaudited) 
Current assets  
   Cash and cash equivalents
$   915,469
$1,047,031
   Marketable securities, at fair value
124,751
149,048
   Accounts receivables, less allowance for  
      doubtful accounts of $36,000 and $36,000
717,650
684,045
   Inventories  
      Work in process
103,390
74,414
      Raw materials and subassemblies
1,248,712
1,147,901
   Prepaid income taxes
152,756
172,641
   Other prepaid items
28,882
30,034
   Deferred income taxes
    113,879
    104,423   
            Total current assets
 3,405,489
 3,409,537   
Equipment and leasehold improvements, net
    623,051
    630,473   
            Total assets
$4,028,540
$4,040,010   **Liabilities and Stockholders' Equity  
Current liabilities  
   Current maturities of long-term debt
$     13,860
$     15,431
   Accounts payable trade
142,855
85,159
   Accrued salaries, wages and withholdings
117,913
184,735
   Accrued commissions
32,509
42,603
   Other accrued items
      15,612
           517   
            Total current liabilities
    322,749
    328,445   
Long-term debt
      22,768
      29,494   
Deferred income taxes
     60,500
      72,173   
Stockholders' equity  
   Common stock, $.50 par value, authorized  
     5,000,000 shares, issued 1,015,220 shares
507,610
507,610
   Capital in excess of par value
1,123,279
1,123,279
   Retained earnings
2,198,125
2,171,066
   Treasury stock, 28,383 shares, at cost
(116,033)
(116,033)
   Accumulated other comprehensive income  
     Unrealized gain (loss) on available-for-sale securities 
   (90,458)
   (76,024)   
            Total stockholders' equity
 3,622,523
 3,609,898   
            Total liabilities and stockholders' equity
$4,028,540
$4,040,010
 

 

See accompanying notes to financial statements.
**Control Chief Holdings, Inc. and Subsidiary

Consolidated Statements of Operations and Retained Earnings

(Unaudited)** **Three Months Ended**Six Months Ended **June 30,**June 30, **2002**2001**2002**2001     
Net sales
$1,183,427
$1,299,954
$2,357,318
$2,618,396     
Cost of products sold
    612,712
    617,242
 1,177,107
 1,301,552     
Gross margin
    570,715
    682,712
 1,180,211
 1,316,844     
Operating expenses    
   Selling expenses
295,630
334,366
571,469
649,518
   General and administrative
260,489
264,020
498,928
518,652
   Research and development
26,232
33,600
60,805
65,519
   Environmental remediation (credit)
               -
     (5,989)
               -
     (5,989)     
Total operating expenses
    582,351
    625,997
 1,131,202
 1,227,700     
Earnings (loss) from operations
(11,636)
56,715
49,009
89,144     
Other income (expense)    
   Interest expense
(718)
(235)
(1,852)
(287)
   Other income (expense), net
        4,429
      10,414
   (14,035)
     48,525     
Earnings (loss) before income taxes
(7,925)
66,894
33,122
137,382     
Provision for income taxes (credit)
     (9,220)
      29,335
       6,063
     61,223     
Net earnings
1,295
37,559
27,059
76,159     
Retained earnings, beginning of period
2,196,830
2,189,656
2,171,066
2,210,272     
Cash dividends paid
                -
                -
                -
    (59,216)     
Retained earnings, end of period
$2,198,125
$2,227,215
$2,198,125
$2,227,215     
Earnings per common share    
   Basic
$ .01
$ .04
$ .03
$ .08
   Diluted
$ .01
$ .04
$ .03
$ .08     
Dividends paid per common share
$     -
$     -
$     -
$ .06     
Weighted average number of common shares outstanding         
   Basic
986,837
986,930
986,837
986,930
   Diluted
991,962
994,305
991,962
994,305
 

 

 

 

See accompanying notes to financial statements.

Control Chief Holdings, Inc. and Subsidiary
**Consolidated Statements of Cash Flows

(Unaudited)	
**Six Months Ended**June 30, **2002**2001**Cash flows from operating activities  
   Net earnings
$   27,059
$   76,159
   Adjustments to reconcile net earnings to net cash  
     provided by (used in) operating activities:  
      Depreciation and amortization
74,920
84,981
      Provision (credit) for bad debts
-
-
      Deferred income taxes
(11,266)
7,032
      Loss on disposal of equipment
15,963
-
      Change in assets and liabilities:  
        (Increase) decrease in receivables
(33,605)
51,885
        (Increase) decrease in inventories
(129,787)
90,030
        (Increase) decrease in prepaid items
21,037
(46,456)
        Increase (decrease) in accounts payable and accruals
      (4,125)
  (112,821)   
          Net cash provided by (used in) operating activities
    (39,804)
    150,810   **Cash flows from investing activities  
   Purchase of equipment and leasehold improvements
    (83,461)
    (40,682)   
         Net cash used in investing activities
    (83,461)
    (40,682)   **Cash flows from financing activities  
   Proceeds from long-term borrowing
-
17,023
   Repayments of long-term debt
(8,297)
(3,713)
   Dividends paid
               -
    (59,216)   
         Net cash used in financing activities
     (8,297)
    (45,906)   
Net increase (decrease) in cash
(131,562)
64,222   
Cash at beginning of period
 1,047,031
    802,758   
Cash at end of period
$  915,469
$  866,980   **Cash paid during the period for:  
   Interest
$      1,852
$         287
   Income taxes
7,406
110,831
 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.
**Control Chief Holdings, Inc. and Subsidiary

Notes to Financial Statements****1.  Basis of Presentation**
The financial statements include the accounts of Control Chief Holdings, Inc. and its wholly owned subsidiary, Control Chief Corporation, (the "Company"). All significant intercompany accounts are eliminated upon consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated, have been included. Interim results are not necessarily indicative of results for a full year.

The financial statements and notes are presented as permitted by Form 10-QSB, and do not contain certain information included in the Company's annual financial statements and notes. Accordingly, these statements should be read in conjunction with the consolidated financial statements and notes thereto appearing in the annual report of the Company on Form 10-KSB for the year ended December 31, 2001.
**2.  Earnings Per Common Share**
Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share assumes the exercise of stock options using the treasury stock method, if dilutive.

 
**Part I - Financial Information

Item 2.  Management's Discussion and Analysis or Plan of Operations**
The following discussion and analysis may be understood more fully by reference to the consolidated financial statements, notes to the consolidated financial statements, and management's discussion and analysis or plan of operations contained in the Control Chief Holdings, Inc. and Subsidiary annual report on Form 10-KSB for the year ended December 31, 2001.
**Forward-Looking Information**
This Form 10-QSB contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology is intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within the Company's control. These factors include but are not limited to economic conditions generally and in the industries in which the Company's customers participate; competition within the Company's industry, including competition from much larger competitors; technological advances which could render the Company's products less competitive or obsolete; failure by the Company successfully to develop new products or to anticipate current or prospective customers' products needs; environmental investigation, remediation and monitoring costs relating to the Company's former facility in Lewis Run, PA; price increases or supply limitations for components purchased by the Company for use in its products; and delays, reductions, or cancellations of orders previously placed with the Company.
**General**
The Company's common stock trades on the NASDAQ Small-Cap Market under the symbol DIGM. The symbol DIGM relates to the Company's former name "Digimetrics, Inc.", which was changed in November 1992 to its present name, "Control Chief Holdings, Inc." Control Chief Holdings, Inc. ("the Company") functions as a holding company and is the sole shareholder of Control Chief Corporation ("Control Chief"). Control Chief designs, engineers and produces remote control devices for material handling equipment and other industrial applications. These controls use either radio or infrared waves as communications media to transmit control data from portable units to receivers mounted on various types of apparatus. All models of products are microprocessor-based systems. These devices are utilized in concert with material handling equipment, industrial machines, process equipment and mobile apparatus. Control Chief markets its products through a network of independent manufacturers' representatives located in key geographical centers throughout the United States, Canada, Central and South America. Products are also sold through direct efforts, distributors, private labeling agreements and licensees.
**Results of Operations**
The following table sets forth certain financial data, as a percentage of net sales, for the three and six-month periods ended June 30, 2002 and 2001.

 
Three Months Ended
Six Months Ended 
June 30,
June 30, 
2002
2001
2002
2001     
Net sales
100.0%
100.0%
100.0%
100.0%     
Cost of products sold
 51.8%
 47.5%
 50.0%
 49.7%     
Gross margin
 48.2%
 52.5%
 50.0%
 50.3%     
Operating expenses    
   Selling expenses
24.9%
25.7%
24.3%
24.8%
   General and administrative
22.0%
20.3%
21.2%
19.8%
   Research and development
2.3%
2.6%
2.5%
2.5%
   Environmental remediation (credit)
          -
 (0.5%)
          -
 (0.2%)     
Total operating expenses
 49.2%
 48.1%
 48.0%
 46.9%     
Earnings (loss) from operations
(1.0%)
4.4%
2.0%
3.4%     
Other income (expense), net
   0.4%
   0.8%
(0.6%)
   1.8%     
Earnings (loss) before income taxes
(0.7%)
5.2%
1.4%
5.2%     
Provision for income taxes (credit)
(0.8%)
   2.3%
   0.2%
   2.3%     
Net earnings (loss)
   0.1%
   2.9%
   1.2%
   2.9%

 
*NET SALES. Net sales were $1,183,427 for the three months ended June 30, 2002. This compares to net sales of $1,299,954 for the three months ended June 30, 2001. The decrease in net sales totaled $116,527 or 8.9%. For the six months ended June 30, 2002 and 2001, net sales were $2,357,318 and $2,618,396, respectively, representing a decrease of $261,078 or 10.0% in net sales for the six month ended June 30, 2002. The decrease in net sales reflects a downturn in demand for the Company's products resulting from the slowdown in the economy.
*COST OF PRODUCTS SOLD AND GROSS MARGIN. Cost of products sold decreased by $4,530 for the three months ended June 30, 2002 compared to the three months ended last year. For the six months ended June 30, 2002, cost of products sold decreased by $124,445 compared to the six months ended June 30, 2001. This decrease corresponds with the decline in net sales for the three and six months ended June 30, 2002. Gross margin for the three months ended June 31, 2002 was $570,715, or 48.2%. For the three months ended June 30, 2001, gross margin was $682,712, or 52.5%. For the six months ended June 30, 2002, gross margin was $1,180,211 or 50.0%, compared to $1,316,844 or 50.3% for the six months ended June 30, 2001. Overall, the Company's gross margin percentage decreased by 0.3% for the six months ended June 30, 2002 compared to the six months ended June 30, 2001.
*OPERATING EXPENSES. For the three months ended June 30, 2002, operating expenses decreased by $43,646 or 6.9%, compared to the same three months ended last year, and decreased by $96,498 or 7.8% for the six months ended June 30, 2002 compared to the six months ended June 30, 2001. Selling, general and administrative expenses, expressed as a percentage of net sales were 46.9% and 46.0% for the three months ended June 30, 2002 and 2001, respectively, and decreased by $42,267 for the three months ended June 30, 2002 when compared to the three months ended June 30, 2001. For the six months ended June 30, 2002 and 2001, selling, general and administrative expenses expressed as a percentage of net sales were 45.5% and 44.6%, respectively, and decreased by $97,773 for the six months ended June 30, 2002 compared to six months ended June 30, 2001. Research and development expenses decreased by $7,368 for the three months ended June 30, 2002 compared to the same three months ended last year, and for the six months ended June 30, 2002, decreased by $4,714 compared to the six months ended June 30, 2001. Total operating expenses expressed as a percentage of net sales were 49.2% and 48.0% for the three and six months ended June 30, 2002, respectively, versus 48.0% and 46.9% for the three and six months ended June 30, 2001, respectively.
*OTHER INCOME (EXPENSE), NET. Other income, net of other (expense) was $4,429 for the three months ended June 30, 2002 versus $10,414 compared to the same three months ended last year. For the six months ended June 30, 2002 and 2001, other income, net of (expense) was ($14,035) and $48,525, respectively. The decrease results from the loss from the disposal of equipment and a decline in the investment earnings of the Company's cash and cash equivalents.
*EARNINGS (LOSS) BEFORE INCOME TAXES. Earnings (loss) before income taxes were ($7,925) for the three months ended June 30, 2002 as compared to pre-tax income of $66,894 for the three months ended June 30, 2001. For the six months ended June 30, 2002 and 2001, earnings before income taxes were $33,122 and $137,382, respectively.
*INCOME TAXES. The Company's effective income tax rate was 18.3% based on pre-tax income of $33,122 for the six months ended June 30, 2002. For the six months ended June 30, 2001, the Company's effective tax rate was 44.5% based on pre-tax income of $137,382.
*NET EARNINGS. Overall earnings, after income taxes, were $1,295 for the three months ended June 30, 2002 as compared to earnings, after income taxes, of $37,559 for the three months ended June 30, 2001. For the six months ended June 30, 2001 and 2000, net earnings were $27,059 and $76,159, respectively.
*EARNINGS (LOSS) PER COMMON SHARE. The Company's basic and diluted earnings (loss) per common share was $.01 for the three months ended June 30, 2002 as compared to $.04 per common share for the three months ended June 30, 2001. For the six months ended June 30, 2002 and 2001, the Company's basic and diluted earnings per common share were $.03 and $.08, respectively.
**Liquidity, Capital Resources and Financial Condition**
The Company funds its needs for liquidity and capital resources through cash from operations, and the availability of short-term and long-term borrowings.

The Company has a commercial demand line of credit in the amount of $1,000,000, with a variable interest rate equal to the lender's prime rate or the Euro-Rate plus 2%. The line of credit is used to finance accounts receivable and inventory of the Company. The line of credit is subject to an annual review by the lending bank each February. At June 30, 2002, no amount was outstanding under the line of credit. The Company also has term loans used to finance the purchase of vehicles. The balance of these loans at June 30, 2002 was $36,628.

At June 30, 2002, the Company's net working capital was $3,082,740, compared to $3,081,092 at December 31, 2001. At June 30, 2002, the Company's ratio of current assets to current liabilities was 10.55 to 1 compared to 10.38 to 1 at December 31, 2001.

During the six months ended June 30, 2002, the Company's cash expenditures for equipment totaled $83,461. In addition, during the six months ended June 30, 2002, the Company repaid principal on term loans of $8,297. There were no cash dividends paid by the Company and there were no long-term borrowings by the Company during the six months ended June 30, 2002.

Current financial resources, including working capital and the existing line of credit, and anticipated funds from operations, are expected to be sufficient to meet the Company's cash requirements throughout the remainder of the year, including scheduled long-term debt repayment and planned capital expenditures. There can be no assurance, however, that unplanned capital replacement or other future events will not require the Company to seek additional debt or equity financing and, if required, will be available on terms that are acceptable and favorable to the Company.

During the six months ended June 30, 2002, the Company's net cash used in operating activities was ($39,804) as compared to net cash provided by operating activities of $150,810 for the six months ended June 30, 2001.
**Part II - Other Information
**Item 6.  Exhibits and Reports on Form 8-K**
(a) Exhibits

The following Exhibits are filed herewith or incorporated by reference herein.

**No.**Exhibit**Location   
3-1
Certificate of Incorporation of Digimetrics, Inc.
Incorporated by reference from Digimetrics, Inc.'s Registration Statement on Form 10 File No. 0-15919 ("Form 10").   
3-2
By-laws of Digimetrics, Inc.
Incorporated by reference from Digimetrics, Inc.'s Form 10.   
3-3
Certificate of Amendment of the Certificate of Incorporation of Digimetrics, Inc.
Incorporated by reference from Form 10-KSB File No. 0-15919 for the fiscal year ended June 30, 1993 as Exhibit 3-3.   
4-1
Specimen of Common Stock Certificate
Incorporated by reference from Digimetrics, Inc.'s Form 10.
99.1
Certification Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002
Attached herewith.

(b) Reports on Form 8-K.

The Registrant filed no Reports on Form 8-K during the reporting period.

 
**Signatures**
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Control Chief Holdings, Inc.

(Registrant)

Date: August 14, 2002					By: \s\ *Douglas S. Bell
Douglas S. Bell

Chairman of the Board,

Chief Executive Officer and President
**Exhibit 99.1****CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES - OXLEY ACT OF 2002**
	In connection with the Quarterly Report on Form 10-QSB of Control Chief Holdings, Inc. (the "Company") for the quarterly period ended June 30, 2002, as filed with the Securities and Exchange Commission on August 14, 2002 (the "Report"), the undersigned, in the capacities and dates indicated below, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

			By:*/s/ Douglas S. Bell*
			Douglas S. Bell

			President, Chief Executive Officer and Director

			By:*/s/ Douglas S. Bell*
			Douglas S. Bell

			Treasurer and Chief Financial Officer***************************************************************************