SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-5633
ENVIRONMENT ONE CORPORATION
(Name of small business issuer in its charter)
New York 14-1505298
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(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
2773 Balltown Road, Niskayuna, NY 12309-1090
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (518) 346-6161
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 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of Common Stock, par value $.10 as of September 30, 1997:
4,237,338.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
Environment One Corporation
FORM 10-QSB
INDEX
Part I. Financial Information-
Item 1. - Financial Statements
Consolidated Balance Sheets September 30, 1997 and
December 31, 1996
Consolidated Statements of Income for the Nine Months
Ended September 30, 1997 and 1996
Consolidated Statements of Income for the Three Months
Ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Signatures
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
Assets 9/30/97 12/31/96
------------ ------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents ............. $ 1,023,019 62,637
Accounts Receivable, Net .............. 6,152,584 4,931,421
Inventories
Raw Materials ................. 1,535,611 1,439,020
Work in Process ............... 242,776 469,001
Finished Goods ................ 125,741 364,079
------------ ------------
1,904,128 2,272,100
Other Current Assets ....................... 519,916 347,577
------------ ------------
Total Current Assets .................. 9,599,647 7,613,735
------------ ------------
Property, Plant and Equipment
Land .................................. 334,491 334,491
Buildings ............................. 2,294,862 2,271,832
Machinery and Equipment ............... 5,225,364 5,024,175
Construction in Progress .............. 157,698 50,689
Less: Accumulated Depreciation ........ (4,755,173) (4,310,173)
------------ ------------
Net Property, Plant and Equipment ..... 3,257,242 3,371,014
Other Assets ............................... 231,150 269,792
------------ ------------
Total Assets ............................... 13,088,039 11,254,541
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Current Installments - Long Term Debt . 338,100 338,100
Note Payable - Bank ................... 0 75,000
Accounts Payable ...................... 2,211,445 1,918,866
Accrued Expenses ...................... 1,681,724 1,296,170
------------ ------------
Total Current Liabilities ........ 4,231,269 3,628,136
Deferred Compensation ...................... 339,294 369,461
Minority Interest .......................... 63,391 43,068
Long Term Debt ............................. 1,246,919 1,500,494
------------ ------------
Total Liabilities .................... 5,880,873 5,541,159
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(continued)
9/30/97 12/31/96
------------ ------------
<S> <C> <C>
Shareholders' Equity
Common Stock at Par Value ............. 425,772 416,997
Additional Paid in Capital ............ 7,958,571 7,446,789
Accumulated Deficit ................... (757,064) (2,076,164)
------------ ------------
7,627,279 5,787,622
Less: Treasury Stock at Cost .......... (420,113) (74,240)
------------ ------------
Total Shareholders' Equity .......... 7,207,166 5,713,382
------------ ------------
Total Liabilities and Shareholders' Equity . $ 13,088,039 11,254,541
============ ============
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Income
For the Nine Months Ended September 30, 1997 and 1996
Nine Months Ended September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenue .................................... $ 17,227,902 15,307,202
------------ ------------
Costs and Expenses
Cost of Sales .................... 10,819,066 10,446,106
Selling and Marketing ............ 1,896,824 1,726,926
General and Administrative ....... 2,359,796 1,489,956
Interest Expense, Net ............ 105,282 195,478
Other Income, Net ................. (83,566) (45,388)
------------ ------------
Total Expenses, Net ........................ 15,097,402 13,813,078
------------ ------------
Net Income Before Taxes .................... 2,130,500 1,494,124
Income Tax Expense ......................... 811,400 566,505
------------ ------------
Net Income ................................. $ 1,319,100 927,619
============ ============
Per Share Amounts:
Primary Earnings per Common Share .......... $ 0.30 0.22
Fully Diluted Earnings per Common Share .... 0.29 0.22
============ ============
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Income
For the Three Months Ended September 30, 1997 and 1996
Three Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenue ..................................... $ 6,977,174 6,033,821
----------- -----------
Costs and Expenses
Cost of Sales ..................... 4,126,376 3,876,205
Selling and Marketing ............. 676,143 643,684
General and Administrative ........ 1,038,755 720,294
Interest Expense, Net ............. 23,336 65,650
Other Expense (Income), Net ........ (73,345) 134,702
----------- -----------
Total Expenses, Net ......................... 5,791,265 5,440,535
----------- -----------
Net Income Before Taxes ..................... 1,185,909 593,286
Income Tax Expense .......................... 450,100 225,705
----------- -----------
Net Income .................................. $ 735,809 367,581
=========== ===========
Per Share Amounts:
Primary Earnings per Common Share ........... $ 0.16 0.09
Fully Diluted Earnings per Common Share ..... 0.16 0.09
=========== ===========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Income
For the Nine Months Ended September 30,1997 and 1996
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows-Operating Activities:
Net Income ..................................................... $ 1,319,100 927,619
Adjustments to Reconcile Net Earnings
to Net Cash Provided (Used) by Operating Activities:
Non-cash Compensation Expense .................................. 130,006 102,495
Gain on Curtailment of Defined Benefit Pension Plan ............ (63,000) 0
Depreciation and Amortization .................................. 465,552 447,003
Decrease (Increase) - Accounts Receivable, Net ................. (1,221,163) (1,723,818)
Decrease (Increase) - Inventories .............................. 367,972 (30,268)
Decrease (Increase) - Prepaid Expenses ......................... (172,339) (84,928)
Decrease (Increase) - Other L/T Assets ......................... 18,090 131,847
Increase (Decrease) - Accounts Payable ......................... 292,579 648,968
Increase (Decrease) - Accrued Expenses and Other Liabilities..... 455,968 437,217
Increase (Decrease) - Minority Interest ........................ 20,323 (9,528)
----------- -----------
Net Cash Provided (Used) by Operating Activities ............... 1,613,088 846,607
----------- -----------
Cash Flows Used in Investing Activities:
Capital Expenditures ........................................... (331,228) (395,254)
----------- -----------
Cash Flows From Financing Activities:
Increase (Decrease) - Note Payable to Bank ..................... (75,000) (175,000)
Increase (Decrease) - Long Term Debt ........................... (253,575) (253,719)
Issuance of Common Stock ....................................... 7,097 2,073
(Increase) - Treasury Stock .................................... 0 (34,489)
----------- -----------
Net Cash Provided (Used) by Financing Activities ............... (321,478) (461,135)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents ......... 960,382 (9,782)
Cash and Cash Equivalents at Beginning of Period ............. 62,637 91,115
----------- -----------
Cash and Cash Equivalents at End of Period ................... $ 1,023,019 81,333
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Income
For the Nine Months Ended September 30,1997 and 1996
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Supplemental disclosure of non-cash financing activity:
Issuance of 65,681 shares of common stock held in trust,
recorded as treasury stock as part of the Company's
deferred compensation plan for certain executive officers,
reduced by 5,363 shares issued in July, 1997 to a
participant ................................................ $ 339,294 --
=========== ===========
Exchange of 892 and 2,390 shares of common stock in
partial payment of exercise price on stock options during
1997 and 1996, respectively .................................. $ 6,579 14,340
=========== ===========
Tax benefit from exercise of stock options ................... $ 7,414 31,425
=========== ===========
Cash paid during the year for:
Interest $ 127,629 197,892
=========== ===========
Income Taxes $ 777,394 469,946
=========== ===========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, which are only of a
normal recurring nature, necessary to fairly present Environment One
Corporation's financial position as of September 30, 1997 and December 31, 1996,
the results of operations for the three and nine months ended September 30, 1997
and 1996 and cash flows for the nine months ended September 30, 1997 and 1996.
Operating results for any quarter are not necessarily indicative of results for
any future periods.
2. Net earnings per share computations are based on primary and fully
diluted number of shares of Common Stock outstanding for the three and nine
months ended September 30, 1997 and 1996 (September 30, 1997, three months
4,460,745 and 4,475,987 shares, nine months 4,431,542 and 4,475,987 shares;
September 30, 1996, three months 4,248,140 and 4,263,234 shares, nine months
4,248,186 and 4,264,890 shares).
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (Statement 128),
which establishes standards for computing and presenting earnings per share
(EPS). This Statement simplifies the standards for computing EPS making them
comparable to international EPS standards and supersedes Accounting Principals
Board Opinion No. 15, "Earnings per Share" and related interpretations.
Statement 128 replaces the presentation of primary EPS with the presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution (such as the effect of the Company's outstanding
stock options) and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities of other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity (such as the Company's stock options). This
Statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. Earlier application is not
permitted. This Statement requires restatement of all prior-period EPS data
presented.
The Company will present its EPS information in accordance with Statement 128 as
of December 31, 1997. Management anticipates that the effect of the adoption of
this Statement will not have a material effect on the Company's consolidated
financial statements.
3. In January, 1996, the Company concluded an agreement with PROTEC
Fire Detection, plc of Nelson, Lancashire, England for the sale of its Cirrus
IFD product line. In a two-stage transaction with an approximate value of
$750,000, the Company transferred all Cirrus IFD assets and operations to PROTEC
and simultaneously entered into a product technology development contract that
was concluded in 1996. The pre-tax impact of the sale, net of certain expenses,
was a gain of $176,000 and is recorded as other income in the statement of
income for the nine months ended September 30, 1996.
<PAGE>
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 1997 and 1996, continued
4. In September, 1996, the Company recognized the potential default of
a note receivable from General Testing Corporation incurring a pre-tax write-off
of $136,000. After failure to receive timely payments on the note, the Company,
through legal counsel, served notice of default on the note to General Testing
Corporation. General Testing Corporation did not cure the payment defaults in
the period required.
5. In the fourth quarter of 1997, the Company anticipates the
termination of its defined benefit pension plan in favor of a matching program
within its 401K plan. This will result in a gain from curtailment of an
estimated $63,000 offset entirely by one-time costs to terminate the plan. The
income and expense are recorded in other income and general and administrative
expense, respectively in the third quarter of 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following information should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 of this Quarterly
Report, and the consolidated financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996.
Nine Months Ended September 30, 1997 and 1996
(all figures rounded to the nearest 000's)
Revenue for the period increased $1,921,000 or 12.5% over the same period last
year. Increased revenues were recorded over the first nine months of 1996 in
both Sewer Systems and Detection Systems businesses.
Revenue's from the Company's Sewer Systems business continue to show improvement
over prior periods benefited by a surge in third quarter 1997 revenue over 1996.
Management is of the opinion that the addition of a more powerful distribution
network, increases in the number and size of municipal projects, continued
growth in the overall market and realignment of its sales territories accounts
for this growth. Shipments to two large municipal projects, one in Indiana and
one in Texas, were begun in the third quarter of 1997 and will continue into the
fourth quarter.
As part of the Detection Systems business revenue increase, sales of the
Company's Hydrogen Control Cabinet (HCC) showed significant improvement over the
same period last year. During 1996, the Company did not record sales in quarter
one due to project order delays. For 1997, steady shipments of the HCC were
recorded during the first six months of the year while shipments slowed somewhat
during the third quarter. Helping to offset the reduced third quarter 1997
shipments of the Hydrogen Control Cabinet were sales of the recently introduced
Generator Gas Analyzer which continues to show a growing market acceptance.
Generator Condition Monitor sales improved significantly during the first nine
months of 1997 over 1996 buoyed by strong results in all three quarters. The
Company announced a major order with Hitachi of Japan that includes both GCM and
HCC products with shipments beginning in the fourth quarter of 1997.
<PAGE>
Nine Months Ended September 30, 1997 and 1996, continued
(all figures rounded to the nearest 000's)
The Company finished its commitment to manufacture and supply Cirrus IFD units
to PROTEC early in the third quarter of 1997.
Cost of sales increased $373,000 when compared to the same period last year.
Expressed as a percent of sales, cost of sales decreased by 5.4 points from
68.2% to 62.8%. The resulting improvement in gross margin is mainly attributable
to reduced direct material and labor costs expressed as a percent of sales.
Indirect labor costs remained flat while indirect non-labor costs increased in
the categories of maintenance, incoming freight and small tools reflecting the
impact of higher variable indirect manufacturing costs as a result of increased
shipments during the period.
Selling and Marketing costs increased $170,000 compared to the first nine months
of 1996. The majority of this increase resulted from increased expenditures for
sales promotion and literature along with selling and marketing labor costs as
the Company continues its effort to support the Sewer Systems business
distribution network. During the first quarter of 1997, the Company closed its
Sewer System sales offices in Georgia and Texas. During 1996, the Company added
new and more powerful distributors in both areas along with opening a new sales
office in New Mexico allowing for a smooth transition in territory realignment
despite closing of the two offices.
General and Administrative costs, including research and development, increased
$870,000 over the same period last year. Research and development costs
increased $38,000 while other general and administrative costs increased
$832,000.
The major portion of the increase in other general and administrative costs is
attributable to an increased growth performance sharing expense accrual. In the
first quarter of 1996, the Company implemented a new growth performance sharing
plan to take the place of its profit sharing plan. Targets for growth in sales
and operational earnings along with return on assets were established and are
reviewed on an annual basis. Quarterly expense accruals are made based on the
performance of the Company. Other expense categories showing increases over the
same period last year include training, legal, consultant and investor
relations. Consultant expense accruals were made in anticipation of the
termination of the Company's defined benefit pension plan in favor of a matching
program within the Company's 401K plan. Training expenses grew due to a
company-wide training initiative begun in late 1996 with acceleration during the
second and third quarters of 1997.
Interest expense decreased $90,000 over the same period last year. The primary
reason for the lower interest expense is reduced borrowing on the line of
credit. In the third quarter of 1997, the Company had no short term borrowing
and was able to make overnight investments with available funds thereby
generating interest income.
Other income increased $38,000 over the same period last year. The majority of
the other income in 1997 reflects the recognition of a curtailment gain as the
Company plans to terminate its defined benefit pension plan in favor of a
matching program within its 401K plan. During 1996, the Company recorded income
from the first quarter sale of the Incipient Fire Detector to PROTEC and a third
quarter loss resulting from the write-off of the note receivable to General
Testing Corporation.
<PAGE>
Three Months Ended September 30, 1997 and 1996
(all figures rounded to the nearest 000's)
Revenue for the period increased $943,000, or 15.6% over the same period last
year. Revenue increases from the same period in 1996 were recorded in both Sewer
Systems and Detection Systems businesses.
Revenue's from the Company's Sewer Systems business continue to show improvement
over prior periods. Management is of the opinion that the addition of a more
powerful distribution network, increases in the number and size of municipal
projects, continued growth in the overall market and realignment of its sales
territories accounts for this growth. Shipments to two large municipal projects,
one in Indiana and one in Texas, were begun in the third quarter of 1997 and
will continue into the fourth quarter.
As part of the Detection Systems business revenue increase, sales of the
Company's Generator Condition Monitor (GCM) showed significant improvement over
the same period last year while shipments of Hydrogen Control Cabinets (HCC)
slowed against the comparative period in 1996. Helping to offset the reduced
shipments of the Hydrogen Control Cabinet were sales of the recently introduced
Generator Gas Analyzer which continues to show a growing market acceptance. The
Company announced a major order with Hitachi of Japan that includes both GCM and
HCC products with shipments beginning in the fourth quarter of 1997.
The Company finished its commitment to manufacture and supply Cirrus IFD units
to PROTEC early in the third quarter of 1997.
Cost of Sales increased $250,000 when compared to the same period last year.
Expressed in percent of sales, cost of sales decreased from 64.2% in the third
quarter of 1996 to 59.1% in the third quarter of 1997. The resulting improvement
in gross margin is mainly attributable to reduced direct material and labor
costs when expressed as a percent of sales. Indirect costs increased slightly
reflecting the impact of higher variable indirect manufacturing costs as a
result of increased shipments during the period.
Selling and Marketing costs increased $32,000 compared to the third quarter of
1996. The majority of this increase resulted from increased expenditures in
sales promotion and literature costs along with selling and marketing labor
costs as the Company continues its effort to support the Sewer Systems business
distribution network.
General and Administrative costs, including research and development, increased
$318,000 over the same period last year with increases reflected in both
categories.
In the other general and administrative costs area, increased expenses over the
prior comparative quarter were recognized in growth performance sharing (bonus
expense) due to the Company's growth in sales and earnings and return on assets
(which drive the bonus pool calculation), consultant and training expense
categories. Consultant expense accruals were made in anticipation of the
termination of the Company's defined benefit pension plan in favor of a matching
program within the Company's 401K plan. Training expenses grew due to a
company-wide training initiative begun in late 1996 with acceleration during the
second and third quarters of 1997.
<PAGE>
Three Months Ended September 30, 1997 and 1996, continued
(all figures rounded to the nearest 000's)
Interest expense decreased $42,000 over the third quarter of 1996. In the third
quarter of 1997, the Company had no short-term borrowing on its line of credit
and was able to make overnight investments with available funds thereby
generating interest income.
Other income increased $208,000 over the same period last year. The majority of
this increase was due to the General Testing note write-off during the third
quarter of 1996. However, the Company also recognized a curtailment gain as the
Company plans to terminate its defined benefit pension plan in favor of a
matching program within its 401K plan.
Financial Position and Liquidity
(all figures rounded to the nearest 000's)
Cash needs for the first nine months of 1997 were met primarily by short term
borrowing on the Company's line of credit during the first three months of the
year along with cash flow provided from operating activities during the second
and third quarters. During the period, the Company was able to reduce short term
borrowing by $75,000 and end the period with no borrowing on its line of credit.
Capital expenditures decreased by $64,000 over the same period in 1996 while
long term debt was reduced by $254,000 for the year. During the same period last
year, the Company reduced short term borrowing by $175,000 (net line borrowing
at September 30, 1996 was $375,000) along with reducing long term debt by
$254,000.
During the first quarter of 1997, the Company improved its method of banking by
initiating a "target balance" program with Fleet Bank. This program allows the
maximum use of outstanding check float and provides for overnight investment of
available funds when line of credit borrowing is zero.
Continued control over inventory, operating expenses and capital expenditures
along with forecasted cash receipts and line of credit availability will enable
the Company to meet its day-to-day working capital requirements in the near
term.
The line of credit, which expired in April of 1997, was approved for renewal
with borrowing capability increasing from $2.5 million to $5.0 million. At the
same time, a pricing modification to the Company's term loan was agreed to
allowing the Company to purchase a fixed rate swap. In consideration for the
renewal and pricing modification, the lender has modified certain loan
covenants. Management is of the opinion that the revised covenants are in line
with the increased borrowing available to the Company.
Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves while limiting unwarranted litigation,
provided that the statements are identified as forward-looking and are
accompanied by meaningful cautionary statements regarding important factors that
could cause actual results to differ materially from those projected in the
statement. The Company desires to take advantage of the "safe harbor" provisions
of the Act, and is including the information set forth below in the Form 10-QSB
to point out the inherent difficulties in predicting the impact of certain
factors.
<PAGE>
Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995, continued
While the Company believes that its assumptions underlying any forward-looking
statements are reasonable, the following information includes important factors
which could cause the Company's actual results to differ materially from any
result which might be projected, forecasted, estimated, or budgeted by the
Company in its forward-looking statements, whether contained in this Form 10-QSB
or otherwise.
1. Heightened competition, including the intensification of price
competition, the entry of new competitors, and the introduction of new products
by new and existing competitors.
2. Failure to obtain new customers or retain existing customers.
3. Adverse publicity and news coverage impacting the Company's reputation
and sales potential.
4. Inability to carry out marketing and sales plans due to unforeseen
factors.
5. Significant economic downturns in the geographic market areas serviced
by the Company.
6. Higher service, administrative, or general expenses occasioned by the
need for additional advertising, marketing, administrative, or management
information systems expenditures.
7. A lack of availability of raw materials, necessary manufacturing
equipment, or contract manufacturers to meet the Company's needs.
8. Under utilization of the Company's manufacturing resources, resulting in
production inefficiencies and higher costs.
9. Start-up expenses, inefficiencies, delays, and increased depreciation
costs in connection with the start of production in new facilities and
expansions of existing facilities.
10. The acquisition of fixed and other assets, including inventory and
receivables, and the making or incurring of any expenditures and expenses,
including but not limited to depreciation and research and development expenses.
11. Any revaluation of assets or related expenses and the amount of, and
any changes to, tax rates.
12. Loss or retirement of key executives.
13. Any activities of parties with which the Company has agreements or
understandings, including matters affecting any investment or joint venture in
which the Company has an investment.
14. The amount, type, and cost of the financing available to the Company,
and any changes to that financing.
15. Adverse results in significant litigation or regulatory proceedings.
16. Adverse changes in laws, regulations, interpretations, and enforcement
policies affecting the company and its business operations.
17. Natural disasters, work stoppages, and other events beyond the control
of the Company.
The foregoing list of factors should not be construed as exhaustive, or as any
admission regarding the adequacy of disclosures made by the Company prior to the
filing of this Form 10-QSB.
<PAGE>
Environment One Corporation
FORM 10-QSB
Part II - Other Information
Item 1. Legal Proceedings
In the second quarter of 1997, the Company was served with a complaint by a
former distributor, Abaxial Associates, Inc., who was terminated for cause in
1996. The action was filed in the Ontario Court of Justice (General Division),
in Toronto, Canada. Prior to termination, Abaxial Associates, Inc. was a
distributor for the Company's grinder pumps in the Province of Ontario. The
plaintiff's complaint seeks monetary damages in the amount of $1,600,000, plus
interest and costs based on allegations of misrepresentation and breach of
contract relating to the Company's termination of its relationship with the
plaintiff.
Management of the Company is of the opinion that the claim, filed as a result of
termination of the business relationship with Abaxial Associates, Inc., is
unsubstantiated and without merit and that the Company acted properly in
terminating its relationship with Abaxial Associates, Inc. The Company has
engaged legal counsel in Toronto, Canada and intends to vigorously defend the
action. Management does not currently expect the action to have a material
impact on the results of the Company. However, it is possible that the results
of operations or cash flow of the Company in a particular quarterly or annual
period could be materially affected by the ultimate outcome of pending
litigation matters.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ENVIRONMENT ONE CORPORATION
Date: October 24, 1997 By /s/Stephen V.Ardia
------------------
Stephen V. Ardia
Chairman, President and CEO
Date: October 24, 1997 By: /s/Philip W. Welsh
------------------
Philip W. Welsh
Director of Finance
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,023,019
<SECURITIES> 0
<RECEIVABLES> 6,281,959
<ALLOWANCES> 129,375
<INVENTORY> 1,904,128
<CURRENT-ASSETS> 9,599,647
<PP&E> 8,012,415
<DEPRECIATION> 4,755,173
<TOTAL-ASSETS> 13,088,039
<CURRENT-LIABILITIES> 4,231,269
<BONDS> 1,246,919
0
0
<COMMON> 425,772
<OTHER-SE> 6,781,394
<TOTAL-LIABILITY-AND-EQUITY> 13,088,039
<SALES> 17,227,902
<TOTAL-REVENUES> 17,227,902
<CGS> 10,819,066
<TOTAL-COSTS> 10,819,066
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 105,282
<INCOME-PRETAX> 2,130,500
<INCOME-TAX> 811,400
<INCOME-CONTINUING> 1,319,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,319,100
<EPS-PRIMARY> .30
<EPS-DILUTED> .29
</TABLE>
