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 March 31, 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 April 30, 2002 was 986,837 shares.

 

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

 
** 

 

Control Chief Holdings, Inc. and Subsidiary

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
7  **Part II   Other Informations   
Item 5    Other Information
9
Item 6    Exhibits and Reports on Form 8-K
9  **Signatures
9** 

Part I - Financial Information

Item 1.  Financial Statements

Control Chief Holdings, Inc. and Subsidiary

Consolidated Balance Sheets

 **March 31,**December 31, **2002**2001**Assets**(Unaudited)    
Current assets  
   Cash and cash equivalents
$1,180,586
$1,047,031
   Marketable securities, at fair value
148,927
149,048
   Accounts receivables, less allowance for  
      doubtful accounts of $36,000 and $36,000
572,455
684,045
   Inventories  
      Work in process
177,188
74,414
      Raw materials and subassemblies
1,150,155
1,147,901
   Prepaid income taxes
149,066
172,641
   Other prepaid items
30,784
30,034
   Deferred income taxes
    104,066
    104,423   
            Total current assets
 3,513,227
 3,409,537   
Equipment and leasehold improvements, net
    590,249
    630,473   
            Total assets
$4,103,476
$4,040,010   **Liabilities and Stockholders' Equity     
Current liabilities  
   Current maturities of long-term debt
$     14,390
$     15,431
   Accounts payable trade
155,374
85,159
   Accrued salaries, wages and withholdings
173,208
184,735
   Accrued commissions
28,520
42,603
   Other accrued items
        4,242
           517   
            Total current liabilities
    375,734
    328,445   
Long-term debt, less current maturities
      25,632
      29,494   
Deferred income taxes
      66,521
      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
2,196,830
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 
   (76,097)
   (76,024)   
            Total stockholders' equity
 3,635,589
 3,609,898   
            Total liabilities and stockholders' equity
$4,103,476
$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 **March 31, **2002**2001   
Net sales
$1,173,891
$1,318,442   
Cost of products sold
    564,395
    684,310   
Gross margin
    609,496
    634,132   
Operating expenses  
   Selling expenses
275,839
315,152
   General and administrative
238,439
254,632
   Research and development
      34,573
      31,919   
Total operating expenses
    548,851
    601,703   
Earnings from operations
60,645
32,429   
Other income (expense)  
   Interest expense
(1,134)
(52)
   Other income (expense), net
   (18,464)
      38,111   
Earnings before income taxes
41,047
70,488   
Provision for income taxes  
   Currently payable
20,530
33,396
   Deferred (benefit)
      (5,247)
     (1,508)   
Provision for income taxes
      15,283
      31,888   
Net earnings
25,764
38,600   
Retained earnings, beginning of period
2,171,066
2,210,272   
Cash dividends paid
                -
    (59,216)   
Retained earnings, end of period
$2,196,830
$2,189,656   
Earnings per common share  
   Basic
$ .03
$ .04
   Diluted
$ .03
$ .04   
Dividends paid per common share
$     -
$ .06   
Weighted average number of common shares outstanding
   Basic
986,837
986,930
   Diluted
991,962
994,305

 

 

 

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

Consolidated Statements of Cash Flows

(Unaudited)	

**Three Months Ended**March 31, **2002**2001**Cash flows from operating activities  
   Net earnings
$   25,764
$   38,600
   Adjustments to reconcile net earnings to net cash  
     Provided by (used in) operating activities:  
      Depreciation and amortization
36,513
45,306
      Deferred income taxes
(5,247)
(1,508)
      Loss on disposal of equipment
15,746 
      Change in assets and liabilities:  
        (Increase) decrease in receivables
111,590
144,614
        (Increase) decrease in inventories
(105,028)
115,846
        (Increase) decrease in prepaid items
22,825
32,468
        Increase (decrease) in accounts payable and accruals
     48,330
   (65,995)   
          Net cash provided by operating activities
   150,493
    309,331   **Cash flows from investing activities  
   Purchase of equipment and leasehold improvements
   (12,035)
   (10,820)   
         Net cash used in investing activities
   (12,035)
   (10,820)   **Cash flows from financing activities  
   Repayments of long-term debt
(4,903)
(1,541)
   Dividends paid
               -
   (59,216)   
         Net cash used in financing activities
     (4,903)
   (60,757)   
Net increase in cash
133,555
237,754   
Cash at beginning of period
 1,047,031
    802,758   
Cash at end of period
$1,180,586
$1,040,512   **Cash paid during the period for:  
   Interest
$       1,134
$            52
   Income taxes
-
14,838

 

 

 

 

 

 

 

 

 

 

 

 

 

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 the Control Chief Holdings, Inc. and its wholly owned subsidiary, Control Chief Corporation (together 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; 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**
Control Chief Holdings, Inc. ("Holdings") 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 months ended March 31, 2002 and 2001.

 
Three Months Ended 
March 31, 
2002
2001   
Net sales
100.0%
100.0%   
Cost of products sold
 48.1%
 51.9%   
Gross margin
 51.9%
 48.1%   
Operating expenses  
   Selling expenses
23.5%
23.9%
   General and administrative
20.3%
19.3%
   Research and development
   2.9%
   2.4%   
Total operating expenses
 46.7%
 45.6%   
Earnings from operations
5.2%
2.5%   
Other income (expense), net
(1.7%)
   2.8%   
Earnings before income taxes
3.5%
5.3%   
Provision for income taxes
   1.3%
   2.4%   
Net earnings
   2.2%
   2.9%

 
*NET SALES. Net sales were $1,173,891 for the three months ended March 31, 2002. This compares to net sales of $1,318,442 for the three months ended March 31, 2001. The decrease in net sales totaled $144,551 or 10.9%. The decrease in net sales reflects a downturn in demand for the Company's products resulting from the slow economy and less favorable market conditions.
*COST OF PRODUCTS SOLD AND GROSS MARGIN. Cost of products sold decreased by $119,915 for the three months ended March 31, 2002 as compared to the same period last year. This decrease corresponds with the decline in net sales for the period. Gross margin for the three months ended March 31, 2002 was $609,496, or 51.9%. For the three months ended March 31, 2001, gross margin was $634,310 or 48.1%. Overall, the Company's gross margin percentage increased by 3.8% for the months ended March 31, 2002 when compared to the three months ended March 31, 2001. The increase in the gross margin is reflective of management's continuing efforts to reduce production costs.
*OPERATING EXPENSES. For the three months ended March 31, 2002, operating expenses decreased by $52,852, or 8.8%, as compared to the same period last year. The decrease results from management's efforts to reduce certain selling, general and administrative expenses. However, because of the Company's decrease in sales, overall operating expenses increased as a percentage of net sales to 46.7% for the three months ended March 31, 2002 versus 45.6% for the three months ended March 31, 2001.
*OTHER INCOME (EXPENSE), NET. Other income, net of other expense resulted in expense of ($18,464) for the three months ended March 31, 2002. For the three months period ended March 31, 2001, other income, net of other expense resulted in other income of $38,111. The decrease resulted primarily from a loss recorded with respect to the disposal of certain equipment during the period ended March 31, 2002.
*EARNINGS BEFORE INCOME TAXES. Earnings before income taxes were $41,047 for the three months ended March 31, 2002 as compared to $70,488 for the three months ended March 31, 2001, representing a decrease of $29,441 or 41.8%. The decrease is attributable to the decrease in net sales, together with the expense recorded for equipment disposal.
*INCOME TAXES. The Company's effective income tax rate on an annualized basis was 37.2% and 45.2% for the three month periods ended March 31, 2002 and 2001, respectively. The lower rate for the 2002 period was a result of the reduced earnings before income taxes in the quarter ended March 31, 2002.
*NET EARNINGS. Overall earnings, after income taxes, were $25,764 for the three months ended March 31, 2002 as compared to earnings, after income taxes, of $38,600 for the three months ended March 31, 2001, reflecting a decrease of $12,836 or 33.2%.
*EARNINGS PER COMMON SHARE. The Company's basic and diluted earnings per common share was $.03 for the three months ended March 31, 2002 as compared to $.04 per common share for the three months ended March 31, 2001.
**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 March 31, 2002, no amount was outstanding under the line of credit.

The Company also has term loans that were used to finance the purchase of vehicles. The balance of these loans at March 31, 2002 was $40,022.

At March 31, 2002, the Company's net working capital was $3,137,493, compared to $3,081,092 at December 31, 2001. At March 31, 2002, the Company's ratio of current assets to current liabilities was 9.35 to 1 as compared to 10.38 to 1 at December 31, 2001.

During the three months ended March 31, 2002, the Company's cash expenditures for equipment totaled $12,035. In addition, the Company repaid $4,903 on term loans.

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 three months ended March 31, 2002, the Company's net cash provided by operating activities was $150,493. Net cash provided by operating activities was $309,331 for the three months ended March 31, 2001.
**Part II - Other Information****Item 5.  Other Information***SHAREHOLDER PROPOSALS - DEADLINE FOR INCLUSION IN PROXY MATERIALS.  Any proposal by a stockholder of the Company to be presented at the 2003 Annual Meeting of Stockholders must be received by the Company on or before March 23, 2003 to be included in the proxy materials of the Company relating to such meeting.
*SHAREHOLDER PROPOSALS - DISCRETIONARY VOTING OF PROXIES.  In accordance with Rule 14a-4 under the Securities Exchange Act of 1934, if notice of a proposal by a shareholder of the Company intended to be presented at the 2003 Annual Meeting of Shareholders is received by the Company after March 23, 2003, the persons authorized under the Company's management proxies may exercise discretionary authority to vote or act on such proposal if the proposal is raised at the 2003 Annual Meeting of Shareholders.
**Item 6.  Exhibits and Reports on Form 8-K**
a)  Exhibit 27, the Financial Data Schedule, is no longer required to be filed.

b)  The Company filed no Reports on Forms 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: May 10, 2002					By: \s\ *Douglas S. Bell
Douglas S. Bell

Chairman of the Board,

Chief Executive Officer and President***********************************************************