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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ___________
Commission file number: 0-3947
HACH COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 42-0704420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5600 Lindbergh Drive
Loveland, CO 80537
(Address of principal executive offices) (Zip code)
(970) 669-3050
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: COMMON STOCK, $1.00
PAR VALUE (Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / /
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As of July 10, 1997, 8,211,374 shares of Common Stock were outstanding.
The aggregate value of 2,513,963 shares of Common Stock held by
non-affiliates (based upon the last sales price of $20.00 on July 9, 1997,
for the Registrant's Common Stock listed in the WALL STREET JOURNAL in the
NASDAQ National Market System section on July 10, 1997) was approximately
$50,279,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Hach Company Annual Report to Stockholders for the year
ended April 30, 1997 (the "1997 Annual Report") are incorporated by reference
into Parts I, II and IV
Portions of the Hach Company Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held September 9, 1997 (the "1997 Proxy
Statement") are incorporated by reference into Part III.
NOTE ON FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-K and in the future filings by the
Company with Securities and Exchange Commission and in the Company's written
and oral statements made by or with the approval of an authorized executive
officer constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. The Company intends that such forward-looking statements be
subject to the safe harbors created thereby. Statements containing the words
and phrases "looking ahead," "projected," "we are confident," "should be,"
"will be," "predicted," "believe," "plans," "expect," "estimated" and
"anticipate" and similar expressions identify forward-looking statements.
These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, but are subject to many
uncertainties and factors relating to the Company's operations and business
environment which could change at any time and which may cause the actual
results of the Company to be materially different from any future results
expressed or implied by such forward-looking statements. There are inherent
difficulties in predicting important factors. Potential risks and
uncertainties include, but are not limited to, changes in customer demand and
requirements, delays in introducing new products, foreign exchange rates, the
level of government funding, especially municipalities funding for
water-related products, changes in federal income tax laws and regulations,
competition, unanticipated expenses and delays in the integration of any
newly-acquired business, unanticipated expenses relating to plant
construction and expansion, the timing and scope of technological advances,
the ability to attract and retain skilled technical, marketing and management
personnel, ability to successfully implement its strategies and the soundness
of those strategies, conditions in the U.S. economy in general and world wide
economic and business conditions. The mix of products sold in a quarter is a
result of a combination of factors, including, but not limited to, changes in
customer demands and/or requirements, new product announcements, price
changes, changes in delivery dates, and price competition from other
suppliers. The Company undertakes no obligation to publicly update or revise
any forward-looking statements whether as a result of new information, future
events or otherwise.
PART I
ITEM 1. BUSINESS
The Registrant was incorporated in Iowa in 1951 and reincorporated in
Delaware on April 3, 1968.
Additional information required by this item appears under the heading
"Description of Business" on pages 14 and 15 of the 1997 Annual Report and as
Note 7 of the Notes to Consolidated Financial Statements, "Segment
Information," on pages 26 and 27 of the 1997 Annual Report.
The Company operates primarily in a single industry segment encompassing
laboratory instruments, process analyzers and test kits which analyze the
chemical content and other properties of water and other aqueous solutions.
This segment also encompasses the chemicals manufactured and sold by the
Company, most of which are used with the instruments and test kits
manufactured by the Company.
Sales for the Company's European subsidiary are made to European dealers
and to customers in the Middle East and Mediterranean Africa in Belgium
francs and U.S. dollars, respectively. Payments from the European subsidiary
to the U.S. parent are made in U.S. dollars and are subject to the exchange
rate in effect at the time of payment. Export transactions made to all other
parts of the world by the international staff based in Loveland, Colorado,
are conducted primarily in U.S. dollars.
The amount of sales made into the international marketplace is influenced
to some degree by the strength of the U.S. dollar against other currencies.
Other conditions which to some extent affect the sales of the Company's
products in international markets include restrictive tariff and trade
policies imposed by foreign countries, and domestic and foreign tax and
economic policies.
ITEM 2. PROPERTIES
The principal physical properties of the Registrant are as follows:
The Registrant owns a 150,000 square foot steel frame, concrete building
situated on 50 acres adjacent to the Loveland, Colorado airport at 5600
Lindbergh Drive in Loveland, Colorado. This building contains the
Registrant's executive and administrative offices and its research,
development, engineering and instrument manufacturing operations.
The Registrant also owns a 169,000 square foot building complex situated
on 45 acres at 100 Dayton Avenue in Ames, Iowa. These facilities contain
chemical manufacturing operations, a chemical research laboratory, the home
office service function and the shipping department and warehouse for all of
the products manufactured and sold by the Registrant.
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The Registrant also owns two buildings totaling 45,000 square feet
located in Loveland, Colorado. These buildings contain the Registrant's
plastic component manufacturing operation, part of the Registrant's component
assembly operation and an employee training center.
The Registrant's wholly-owned subsidiary, Hach Europe, S.A., owns a
distribution and manufacturing plant containing approximately 44,000 square
feet in Namur, Belgium.
All of the Registrant's principal physical properties are modern and were
designed and constructed to the Registrant's specifications specifically for
use in its business.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF REGISTRANT
Name Age Title
Kathryn Hach-Darrow 74 Chairman of the Board, Chief Executive Officer,
Chairman of the Executive Committee and Director
Bruce J. Hach 51 President and Chief Operating Officer and Director
Robert O. Case 75 Secretary and General Counsel
Gary R. Dreher 44 Vice President and Chief Financial Officer and
Director
Loel J. Sirovy 58 Senior Vice President, Operations
Jerry M. Churchill 57 Vice President, Domestic Sales
Randall A. Petersen 45 Vice President, Human Resources
John C. Privette 42 Vice President, Sales and Marketing
Larry D. Thompson 53 Vice President, Ames Operations
Kenneth Ogan 52 Vice President, Research and Development and Chief
Technical Officer
Brian K. Bowden 32 Vice President, Information Services
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Kathryn Hach-Darrow has been active in the business of the Registrant
since its inception. She has served on the Board of Directors and was
responsible, prior to May 6, 1977, as Executive Vice President for certain of
the Registrant's administrative and marketing matters. On May 5, 1977, the
Board of Directors elected Mrs. Hach-Darrow President and Chief Operating
Officer. On April 28, 1983, she was elected Vice Chairman of the Board of
Directors and on February 28, 1986, she was elected Chairman of the Board,
Chief Executive Officer and Chairman of the Executive Committee and Director,
and has served in these capacities since that date.
Bruce J. Hach, son of Kathryn Hach-Darrow, joined the Registrant November
1, 1970 and served the Company in various capacities. From August 27, 1985
to February 28, 1986, he was an Assistant Vice President in charge of Human
Relations. He was elected Senior Vice President of February 28, 1986. On
April 30, 1987, he was elected a Director of the Registrant, and he was
elected Executive Vice President of the Registrant on August 27, 1987. In
August 1988, he was elected President and Chief Operating Officer of the
Registrant and has served in these capacities since that date.
Robert O. Case has been Secretary of the Registrant since May 29, 1968.
He was named General Counsel to the Registrant on August 29, 1989. From
September 1989 to February 1991, he was a shareholder of the Chicago,
Illinois law firm of Schuyler, Roche & Zwirner and a member of its management
committee. From February 1, 1991 to April 30, 1993, he was a senior member
of Walsh, Case & Brown. Since May 1, 1993, Mr. Case has been of counsel to
McBride Baker & Coles, a Chicago, Illinois law firm. Mr. Case was a director
of the Registrant from May 29, 1968, until his retirement as a Director of
the Registrant effective at the August 30, 1994 Annual Meeting of
Shareholders.
Gary R. Dreher joined the Registrant on January 17, 1977. He has held a
variety of positions since then. In September 1985, he was named Controller
for the Company. In August 1990, he was elected Vice President and Treasurer
of the Registrant. He was named Vice President and Chief Financial Officer
on November 22, 1994 and has served in that capacity since that date. He was
elected a Director of the Company at the Company's Annual Meeting of
Shareholders on August 30, 1994.
Loel J. Sirovy joined the Registrant on October 19, 1972. He has held a
number of management positions in Production and Human Relations. On
September 1, 1985, he was elected Vice President of Instrument Operations.
On April 28, 1989, he was elected Senior Vice President of Manufacturing. On
August 25, 1992, he was elected Senior Vice President of Operations of the
Registrant and has served in that capacity since that date.
Jerry M. Churchill joined the Registrant on December 1, 1977, as
Marketing Manager of Carle Instruments, Inc., which was a wholly-owned
subsidiary of the Registrant engaged in the manufacturing and sale of gas
chromatographs. On April 2, 1981, he was elected Vice President of Carle
Instruments, Inc. After Carle Instruments, Inc. was merged into Hach
Company, Mr. Churchill was made Assistant Vice President of Chromatography
Operations on September 18, 1983. On February 28, 1986, he was elected Vice
President of Domestic Sales and Marketing. On February 27, 1990, he was
elected Senior Vice President of Marketing and Sales. On August 25, 1992, he
was elected Senior Vice President of Domestic Sales of the Registrant. On
August 24, 1993, he was named Vice President of Domestic Sales of the
Registrant and has served in that capacity since that date. Mr. Churchill
was a Director of the Registrant from August 28, 1990, until his retirement
as a Director of the Registrant effective at the August 29, 1995 Annual
Meeting of Shareholders.
Randall A. Petersen joined the Registrant on October 14, 1974. He has held
a number of positions in Manufacturing and Human Resources. On April 28, 1989,
he was elected Vice President of Human Resources of the Registrant and has
served in that capacity since that date.
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John C. Privette joined the Registrant on December 1, 1986. He has held
a number of positions in Marketing. In October 1989, he was named Director
of Domestic Marketing. On August 25, 1992, he was elected Vice President of
Marketing of the Registrant. On November 22, 1994, he was elected Vice
President of Sales and Marketing of the Registrant. On January 7, 1997, he
was named Vice President of International Sales and has served in that
capacity since that date.
Larry D. Thompson joined the Registrant on April 6, 1964. He has held a
variety of positions in Chemical Operations. In April 1991, he was named
Plant Manager of the Ames, Iowa facility. On August 25, 1992, he was elected
Vice President of Ames Operations of the Registrant and has served in that
capacity since that date.
Kenneth Ogan joined the Registrant in February 1996 as Vice President of
Research and Development and Chief Technical Officer and has served in that
capacity since that date. He most recently served as Principal Scientist,
Sales and Marketing Division and, prior to that, as Senior Manager, Advanced
Technology Group for Hitachi Instruments, Inc., where he was employed from
1989 through January 1996. Prior to joining Hitachi Instruments, Inc., he
was a Group Manager in Instrumentation and Research and Development for
Perkin-Elmer, Inc.
Brian K. Bowden joined the Registrant on January 4, 1988. He has held a
number of management positions in Research and Development, Production,
Marketing and Information Services. On January 7, 1997, he was elected Vice
President of Information Services of the Registrant and has served in that
capacity since that date.
The officers of the Company serve at the pleasure of the Board of
Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item appears under the heading "Common
Stock Price Range and Dividends" on page 15 of the 1997 Annual Report and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears under the heading
"Comparative Financial Data - 10-Year Summary" on pages 16 and 17 of the 1997
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this item appears in the Chairman's and
President's letter "To Our Fellow Shareholders" on pages 2, 3 and 4 of the
1997 Annual Report and under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 13 and 14
of the 1997 Annual Report, all of which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item appears in the Consolidated
Financial Statements and the Notes thereto on pages 18 through 27 of the 1997
Annual Report and is incorporated herein by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears under the heading "Election
of Directors" on pages 4 through 8 in the 1997 Proxy Statement and under the
caption "Executive Officers of the Registrant" at pages 3 through 5 at the
end of Part I of this Report and is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the heading
"Executive Compensation" on pages 8 through 16 in the 1997 Proxy Statement,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the headings "Security
Ownership of Certain Beneficial Owners and Management" at pages 2 and 3
and "Election of Directors" on pages 4 through 8 in the 1997 Proxy Statement,
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the headings "Certain
Transactions and Business Relationships" on page 8 of the 1997 Proxy
Statement and "Compensation Committee Interlocks and Insider Participation"
on page 17 of the 1997 Proxy Statement, and each is incorporated herein by
reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report on Form 10-K:
1. FINANCIAL STATEMENTS: The information required by this item appears on
the pages listed below in the 1997 Annual Report and is incorporated by
reference in response to Item 14(a) 1.
Page No. in
1997 ANNUAL REPORT
Report of Independent Accountants 18
Financial Statements:
Consolidated statements of income for the years
ended April 30, 1997, 1996 and 1995 19
Consolidated balance sheets, April 30, 1997 and 1996 20
Consolidated statements of stockholders' equity for the
years ended April 30, 1997, 1996 and 1995 21
Consolidated statements of cash flows for the years
ended April 30, 1997, 1996 and 1995 22
Notes to the consolidated financial statements 23
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2. FINANCIAL STATEMENT SCHEDULES: None
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The following exhibits
are included in this Annual Report on Form 10-K. The items identified below
as Exhibits (10)c - (10)l are management contracts or compensatory plans
required to be filed as an Exhibit to this Annual Report on Form 10-K
pursuant to Item 14(c) on Form 10-K.
NO. ASSIGNED IN
EXHIBIT TABLE ON PAGE NO. IN
ITEM 601 OF REG. S-K EXHIBIT THIS REPORT
(3) a. Restated Certificate of Incorporation of the
Registrant -- hereby incorporated by
reference to Exhibit 99.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended October 26, 1996, Commission File No.
0-3947.
(3) b. By-laws of the Registrant, as amended and
restated through October 26, 1996 -- hereby
incorporated by reference to Exhibit 99.3 to the
Registrant's Quarterly Report on Form 10-Q for
the year ended October 26, 1996, Commission
File No. 0-3947.
(10) c. Hach Company 1993 Stock Option Plan -- hereby
incorporated by reference to Exhibit (10)c. to the
Registrant's Annual Report on Form 10-K for the
year ended April 30, 1994, Commission File No. 0-3947.
(10) d. Form of Stock Option Agreement under 1993 Stock
Option Plan -- hereby incorporated by reference to
Exhibit (10)d. to the Registrant's Annual Report
on form 10-K for the year ended April 30, 1994,
Commission file No. 0-3947.
(10) e. Hach Company Restated 1983 Stock Option Plan --
hereby incorporated by reference to Exhibit (10) d.
to the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1993, Commission File No. 0-3947.
(10) f. Form of Stock Option Agreements for 1983 Stock
Option Plan -- hereby incorporated by reference to
Exhibit (10)e. of the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 30, 1991,
Commission File No. 0-3947.
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(10) g. Hach Company Restated director's Bonus Compensation
Plan -- hereby incorporated by reference to Exhibit (10)f.
of the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 1991, Commission File No.
0-3947; Fifth Amendment to Directors Bonus
Compensation Plan -- hereby incorporated by reference to
Exhibit (10)g. to the Registrant's Annual Report on
Form 10-K. for the year ended April 30, 1996, Commission
File No. 0-3947.
(10) h. Executive Employment Agreements between the Company
and each of Bruce J. Hach, Richard D. Vanous, Loel J.
Sirovy, Jerry M. Churchill, Gary R. Dreher, Randall A.
Petersen, Larry D. Thompson and John C. Privette -- hereby
incorporated by reference to Exhibit 10(h). to the
Registrant's Annual Report on Form 10-K for the year ended
April 30, 1994, Commission File No. 0-3947; Executive
Employment Agreement between the Company and Kenneth
Ogan -- hereby incorporated by reference to Exhibit (10)h.
to the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1996, Commission File No. 0-3947.
(10) i. Hach Company 1995 Employee Stock Purchase Plan--
hereby incorporated by reference to Exhibit (10)j. of the
Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995, Commission File No. 0-3947.
(10) j. Hach Company Deferred Compensation Plan (as amended
through March 1, 1995) -- hereby incorporated by reference
to Exhibit (10)j. of the Registrant's Annual Report on Form
10-K for the fiscal year ended April 30, 1995, Commission
File No. 0-3947.
(10) k. Trust Under Hach Company Deferred Compensation Plan
dated as of April 10, 1995 between the Company and the
Dauphin Deposit Bank and Trust Company, as trustee
hereby incorporated by reference to Exhibit (10)k. of the
Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995, Commission File No. 0-3947.
(10) l. Hach Company 1995 Non-Employee Director Stock Plan
-- hereby incorporated by reference to Exhibit (10)l.
to the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1996, Commission File No. 0-3947.
(10) m. Revolving Credit Agreement dated as of July 7, 1997 among
the Registrant, Hach Europe S.A. and Colorado National
Bank.
(13) n. Pages 2, 3, 4 and 13 through 27 of the Registrant's Annual
Report to Stockholders for the year ended April 30, 1997.
(21) o. Subsidiaries of the Registrant.
(23) p. Consent of Coopers & Lybrand L.L.P.
(27) q. Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K were filed during the quarter ended
April 30,1997.
(c) and (d) The exhibits and financial statement schedules required to be
filed by this item are attached to or incorporated by reference
in this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HACH COMPANY
JULY 29, 1997 By: /S/ KATHRYN HACH-DARROW
- ------------- -------------------------------------------------
Date Kathryn Hach-Darrow, Chairman of the Board, Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
JULY 29, 1997 By: /S/ KATHRYN HACH-DARROW
- ------------- -----------------------------------------------
Date Kathryn Hach-Darrow, Chairman of the Board,
Chief Executive Officer and Director
JULY 29, 1997 By: /S/ GARY R. DREHER
- ------------- -----------------------------------------------
Date Gary R. Dreher, Vice President, Chief Financial
Officer, Principal Accounting Officer and Director
JULY 29, 1997 By: /S/ BRUCE J. HACH
- ------------- -----------------------------------------------
Date Bruce J. Hach, Director
JULY 29, 1997 By: /S/ FRED W. WENNINGER
- ------------- -----------------------------------------------
Date Fred W. Wenninger, Director
JULY 29, 1997 By: /S/ JOSEPH V. SCHWAN
- ------------- -----------------------------------------------
Date Joseph V. Schwan, Director
JULY 29, 1997 By: /S/ JOHN N. MCCONNELL
- ------------- -----------------------------------------------
Date John N. McConnell, Director
JULY 29, 1997 By: /S/ LINDA O. DOTY
- ------------- -----------------------------------------------
Date Linda O. Doty, Director
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INDEX TO EXHIBITS
NO. ASSIGNED IN
EXHIBIT TABLE ON PAGE NO. IN
ITEM 601 OF REG. S-K EXHIBIT THIS REPORT
(3) a. Restated Certificate of Incorporation of the
Registrant -- hereby incorporated by
reference to Exhibit 99.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended October 26, 1996, Commission File No.
0-3947.
(3) b. By-laws of the Registrant, as amended and
restated through October 26, 1996 -- hereby
incorporated by reference to Exhibit 99.3 to the
Registrant's Quarterly Report on Form 10-Q for
the year ended October 26, 1996, Commission
File No. 0-3947.
(10) c. Hach Company 1993 Stock Option Plan -- hereby
incorporated by reference to Exhibit (10)c. to the
Registrant's Annual Report on Form 10-K for the
year ended April 30, 1994, Commission File No. 0-3947.
(10) d. Form of Stock Option Agreement under 1993 Stock
Option Plan -- hereby incorporated by reference to
Exhibit (10)d. to the Registrant's Annual Report
on form 10-K for the year ended April 30, 1994,
Commission file No. 0-3947.
(10) e. Hach Company Restated 1983 Stock Option Plan --
hereby incorporated by reference to Exhibit (10) d.
to the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1993, Commission File No. 0-3947.
(10) f. Form of Stock Option Agreements for 1983 Stock
Option Plan -- hereby incorporated by reference to
Exhibit (10)e. of the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 30, 1991,
Commission File No. 0-3947.
(10) g. Hach Company Restated director's Bonus Compensation
Plan -- hereby incorporated by reference to Exhibit (10)f.
of the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 1991, Commission File No.
0-3947; Fifth Amendment to Directors Bonus
Compensation Plan -- hereby incorporated by reference to
Exhibit (10)g. to the Registrant's Annual Report on
Form 10-K. for the year ended April 30, 1996, Commission
File No. 0-3947.
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(10) h. Executive Employment Agreements between the Company
and each of Bruce J. Hach, Richard D. Vanous, Loel J.
Sirovy, Jerry M. Churchill, Gary R. Dreher, Randall A.
Petersen, Larry D. Thompson and John C. Privette -- hereby
incorporated by reference to Exhibit 10(h). to the
Registrant's Annual Report on Form 10-K for the year ended
April 30, 1994, Commission File No. 0-3947; Executive
Employment Agreement between the Company and Kenneth
Ogan -- hereby incorporated by reference to Exhibit (10)h.
to the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1996, Commission File No. 0-3947.
(10) i. Hach Company 1995 Employee Stock Purchase Plan--
hereby incorporated by reference to Exhibit (10)j. of the
Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995, Commission File No. 0-3947.
(10) j. Hach Company Deferred Compensation Plan (as amended
through March 1, 1995) -- hereby incorporated by reference
to Exhibit (10)j. of the Registrant's Annual Report on Form
10-K for the fiscal year ended April 30, 1995, Commission
File No. 0-3947.
(10) k. Trust Under Hach Company Deferred Compensation Plan
dated as of April 10, 1995 between the Company and the
Dauphin Deposit Bank and Trust Company, as trustee
hereby incorporated by reference to Exhibit (10)k. of the
Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995, Commission File No. 0-3947.
(10) l. Hach Company 1995 Non-Employee Director Stock Plan
-- hereby incorporated by reference to Exhibit (10)l.
to the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1996, Commission File No. 0-3947.
(10) m. Revolving Credit Agreement dated as of July 7, 1997 among
the Registrant, Hach Europe S.A. and Colorado National
Bank.
(13) n. Pages 2, 3, 4 and 14 through 27 of the Registrant's Annual
Report to Stockholders for the year ended April 30, 1997.
(21) o. Subsidiaries of the Registrant.
(23) p. Consent of Coopers & Lybrand L.L.P.
(27) q. Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K were filed during the quarter ended
April 30, 1997.
(c) and (d) The exhibits and financial statement schedules required to be
filed by this item are attached to or incorporated by reference
in this report.
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REVOLVING CREDIT AGREEMENT
DATED AS OF
JULY 7, 1997
AMONG
HACH COMPANY, A
DELAWARE CORPORATION,
AND
HACH EUROPE S.A./N.V., A
BELGIAN LIMITED LIABILITY COMPANY,
(COLLECTIVELY THE "BORROWER")
AND
COLORADO NATIONAL BANK
(THE "BANK")
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THIS REVOLVING CREDIT AGREEMENT, dated as of July 7, 1997, is by and
between HACH COMPANY, a Delaware corporation, and HACH EUROPE S.A./N.V., a
Belgian limited liability company (collectively, the "Borrower") and COLORADO
NATIONAL BANK (the "Bank").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. DEFINED TERMS. In addition to the terms defined elsewhere
in this Agreement, the following terms shall have the following respective
meanings (and such meanings shall be equally applicable to both the singular
and plural form of the terms defined, as the context may require):
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date, the rate per annum obtained by dividing a) the London Interbank Offered
Rate (expressed as a rate per annum and rounded upward to the nearest 1/16 of
one percent) appearing on the Reuters system (as quoted by the Bank's
standard administrative procedures) on such Interest Rate Determination Date
for U.S. dollar deposits of amounts in same day funds comparable to the
principal amount of the Eurodollar Loan for which the Adjusted Eurodollar
Rate is then being determined with maturities comparable to the Interest
Period for which such Adjusted Eurodollar Rate will apply by b) a percentage
equal to 100% MINUS the actual rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) actually imposed on the Bank on such Interest Rate Determination
Date.
"ADVANCE" means an advance of funds under a Revolving Credit Loan.
"ADVERSE EVENT": The occurrence of any event that could reasonably be
expected to have a material adverse effect on the business, operations,
property, assets or condition (financial or otherwise) of the Borrower and
the Subsidiaries as a consolidated enterprise or on the ability of the
Borrower or any other party obligated thereunder to perform its obligations
under the Loan Documents.
"AFFILIATE" shall include, any Person which directly or indirectly
controls, is controlled by, or is under common control with the Borrower.
"AGREEMENT": This Revolving Credit Agreement, as it may be amended,
modified, supplemented, restated or replaced from time to time.
"BORROWER" means the entities described on the first page hereof
collectively on a consolidated basis and singularly as to each of the
entities constituting the Borrower.
"BORROWING DATE" means the date of funding of a Loan.
"BUSINESS DAY" means (i) with respect to any Reference Rate Loan or any
payment of the Nonuse Fee, any day except a Saturday, Sunday or other day on
which commercial banks in Denver are authorized by law to close and (ii) with
respect to any Eurodollar Loan, any day on which commercial banks are open
for domestic and international business (including dealings in dollar
deposits) in London and New York City.
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"CAPITAL EXPENDITURES": Any expenditures for fixed or capital assets
including assets financed under Capitalized Leases which are deemed "capital
expenditures under GAAP and should be shown in the "Capital Expenditures" entry
in the consolidated statements of cash flows.
"CAPITALIZED LEASE": Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
"CASH FLOW LEVERAGE RATIO" shall mean the ratio of Funded Debt compared
to EBITDA for the previous 12 months. Such ratio shall be measured on a
consolidated basis as of the end of each fiscal quarter of the Borrower in
accordance with GAAP.
"CASH FLOW RATIO" shall mean the ratio of EBITDA divided by the sum of
Interest Expense plus Mandatory Debt Reduction. Such ratio shall be measured
on consolidated basis as of the end of each fiscal quarter of the Borrower
for the previous 12 months in accordance with GAAP.
"CHANGE IN CONTROL": The sale, transfer or disposition either
beneficially or of record of outstanding voting common stock of Hach Company
so that Kathryn Hach-Darrow, her descendants or their spouses and any trust
or similar entity for the benefit of Kathryn Hach - Darrow, her descendants
or their spouses shall beneficially own less than 40% of the outstanding
voting common stock of Hach Company.
"CODE": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
"COMMITMENT": The agreement of the Bank to make Loan to the Borrower
subject to the terms and conditions of this Agreement.
"COMPLIANCE CERTIFICATE" The certificate required pursuant to Section
7.1(d) hereof, substantially in the form of Exhibit D hereto.
"CURRENT RATIO" shall mean as of the date of determination, the current
assets divided by current liabilities of the Borrower excluding principal
reduction of the Revolving Credit Loans required on the Revolving Credit
Maturity Date, measured on a consolidated basis as of the end of each fiscal
quarter of the Borrower in accordance with GAAP.
"DEFAULT": Any event which, with the giving of notice to the Borrower or
lapse of time, or both, would constitute an Event of Default.
"EBITDA" means, with respect to the Borrower on a consolidated basis in
accordance with GAAP (net of minority interest and without duplication), for
any period, the sum of (i) consolidated net income after taxes for such
period, (ii) consolidated interest expense, (iii) federal, state and local
income tax expense which is deducted from revenue in determining such
consolidated net income, and
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(iv) depreciation and amortization less (v) to the extent reflected in net
income (or loss), extraordinary gain (or plus any extraordinary loss) for
such period.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, and any successor statute, together with regulations thereunder.
"ERISA AFFILIATE": Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
"EURODOLLAR LOAN": shall have the meaning set forth in Section 3.3(a)
hereof.
"EVENT OF DEFAULT": Any event described in Section 9.1.
"FIXED RATE": shall have the meaning set forth in Section 3.3(a) hereof.
"FUNDED DEBT" shall mean the total Indebtedness of the Borrower including
Capitalized Lease Obligations determined on a consolidated basis in
accordance with GAAP.
"GAAP": Generally accepted accounting principles consistently applied
and maintained. Whenever an accounting term is used herein which is not
otherwise defined, it shall be interpreted in accordance with GAAP.
"HACH COMPANY": Hach Company, a Delaware corporation.
"INDEBTEDNESS": Without duplication, all indebtedness for borrowed money
including the indebtedness created hereunder and the following (whether or
not they should be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or
another party; (b) any obligation on account of deposits or advances; (c) any
obligation for the deferred purchase price of any property or services,
except Trade Accounts Payable, (d) any obligation as lessee under any
Capitalized Lease; (e) all guaranties, endorsements and other contingent
obligations with respect to the indebtedness of others (excluding salary
guaranties); (f) undertakings or agreements to reimburse or indemnify issuers
of letters of credit; and (g) liabilities with respect to unfunded vested
benefits under any retirement plan. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership
or joint venture in which such Person is a general partner or a joint
venturer.
"INTEREST EXPENSE": The expense of the Borrower for interest under the
Revolving Credit Loans and any other Indebtedness of the Borrower, on a
consolidated basis.
"INTEREST PERIOD": shall have the meaning set forth in Section 3.3(b)
hereof.
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"INTEREST RATE DETERMINATION DATE" means each date for calculating the
Adjusted Eurodollar Rate for purposes of determining the Fixed Rate with
respect to an Interest Period. The Interest Rate Determination Date shall be
the first Business Day of the related Interest Period for a Eurodollar Loan.
"INVESTMENT": The acquisition, purchase, making or holding of any stock
or other security, any loan, advance, contribution to capital, extension of
credit (except for trade and customer accounts receivable for inventory sold
or services rendered in the ordinary course of business and payable in
accordance with customary trade terms), any acquisitions of real or personal
property (other than real and personal property acquired in the ordinary
course of business) and any purchase or commitment or option to purchase
stock or other debt or equity securities of or any interest in another Person
or any integral part of any business.
"LIEN": Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation,
the interest of the lessors under Capitalized Leases and the interest of a
vendor under any conditional sale or other title retention agreement).
"LOAN DOCUMENTS": This Agreement, the Note, and each other instrument,
document, or other agreement executed and delivered by the Borrower in
connection with this Agreement, the Loans or any collateral for the Loans.
"LOANS": The Revolving Credit Loans.
"MANDATORY DEBT RETIREMENT" shall mean the mandatory debt reduction of
the Borrower including mandatory reductions in the Revolving Credit Loans and
Capitalized Lease Obligations determined on a consolidated basis in
accordance with GAAP
"NET WORTH" means as of the date of determination, the net worth or
shareholders equity of the Borrower, determined on a consolidated basis in
accordance with GAAP.
"NOTE": The Revolving Credit Note.
"NOTICE OF BORROWING" means a notice substantially in the form of EXHIBIT
B hereto delivered by the Company to the Bank with respect to each and every
request for a Loan.
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"NOTICE OF CONVERSION/CONTINUATION" means a notice, substantially in the
form of EXHIBIT C attached hereto, delivered from time to time by the Company
to the Bank pursuant to Section 3.3(c) hereof with respect to a proposed
conversion or continuation of the applicable basis for determining the
interest rate with respect to certain Loans.
"PAYMENT DATE" means (i) with respect to Reference Rate Loans, the first
day of each month (ii) with respect Eurodollar Rate Loans having an Interest
Rate Period of 90 days or less, the last day of the related Interest Rate
Period; and (iii) with respect to Eurodollar Rate loans having an Interest
Rate Period in excess of 90 days, 90 days from the Borrowing Date and each
increment of 90 days during the Interest Rate Period and the last day of the
related Interest Rate Period.
"PBGC": The Pension Benefit Guaranty Corporation, established pursuant
to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PERSON": Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
"PLAN": An employee benefit plan or other plan, maintained for employees
of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA
or Section 412 of the Code.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Bank as its "base" or "reference" rate. The Bank may lend to
its customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate which is based on the Reference
Rate, such interest rate shall change on the effective date of any change in
the Reference Rate.
"REFERENCE RATE LOAN": shall have the meaning set forth in Section 3.2
hereof.
"REPORTABLE EVENT": A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and Section 302 of ERISA
shall be a reportable event regardless of the issuance of any such waivers in
accordance with Section 412(d) of the Code.
"REVOLVING CREDIT COMMITMENT": The maximum unpaid principal amount of
Revolving Credit Loans which may from time to time be outstanding hereunder,
being the amounts set forth on Exhibit A hereto, and the agreement of the
Bank to make Revolving Credit Loans to the Borrower subject to the terms and
conditions of this Agreement.
"REVOLVING CREDIT LOANS": The Loans described in Section 2.1.
"REVOLVING CREDIT MATURITY DATE": The date set forth on Exhibit A hereto
being the date on which the Revolving Credit Loans shall be due and payable
in full.
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"REVOLVING CREDIT NOTE": The Revolving Credit Promissory Note of the
Borrower of even date described in Section 2.3, as such promissory note may
be amended, modified or supplemented from time to time, and such term shall
include any substitutions for, or renewals of, such promissory note.
"REVOLVING CREDIT RATE": The rate of interest accruing on each Revolving
Credit Loan prior to maturity or acceleration as set forth on Exhibit A
hereto.
"SUBSIDIARY": Any Person of which or in which the Borrower or the other
Subsidiaries own directly or indirectly fifty one percent (51%) or more of:
(a) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of
directors of such Person, if it is a corporation, (b) the capital interest,
profit interest and voting interest of such Person, if it is a partnership,
joint venture, limited liability company or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other
unincorporated organization.
"TRADE ACCOUNTS PAYABLE": The trade accounts payable of any Person with
a maturity of not greater than 90 days incurred in the ordinary course of
such Person's business.
Section 1.2. ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder (including,
without limitation, determination of compliance with financial ratios and
restrictions in Articles VIII and IX hereof) shall be made in accordance with
GAAP consistently applied. Any reference to "consolidated" financial terms
shall be deemed to refer to those financial terms as applied to the Borrower
and its Subsidiaries in accordance with GAAP.
Section 1.3. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, unless otherwise stated the word "from" means "from and including" and
the word "to" or "until" each means "to but excluding."
Section 1.4. OTHER DEFINITIONAL TERMS. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections, Exhibits, schedules and like
references are to this Agreement unless otherwise expressly provided.
ARTICLE II
TERMS OF LENDING
Section 2.1 THE REVOLVING CREDIT LOANS. Subject to the terms and
conditions hereof and in reliance upon the representations, warranties and
covenants of the Borrower herein, the Bank agrees to make loans (each, a
"Revolving Credit Loan" and, collectively, the "Revolving Credit Loans") to
the Borrower from time to time from the date hereof until the Revolving
Credit Maturity Date, during which period the Borrower shall repay and may
reborrow in accordance with the provisions hereof in
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such amount as the Borrower shall request subject to the limitations of
Section 2.2, provided, that the aggregate unpaid principal amount of all
outstanding Revolving Credit Loans shall not exceed the Revolving Credit
Commitment at any time.
Section 2.2 BORROWING PROCEDURES FOR LOANS. Any request by the
Borrower for a Loan shall be made by delivery of a written Notice of
Borrowing, or by telephone promptly confirmed by telecopy of the Notice of
Borrowing no later than the next Business Day, and must be given so as to be
received by the Bank not later than 10:00 a.m., Denver time, on the date of
the requested Revolving Credit Loan. Each request for a Loan shall include:
(i) the Borrowing Date (which shall be a Business Day) and (ii) the amount of
such Loan. Unless the Bank determines that any provisions hereof have not
been satisfied, the Bank will make the amount of the requested Loan available
to the Borrower at the Bank's office in Boulder, Colorado, in immediately
available funds on the date requested no later than 2:00 p.m. Denver time for
Revolving Credit Loans. Each requested Loan shall be in an amount not less
than $500,000 and in minimum increments of $100,000.
Section 2.3 THE REVOLVING CREDIT NOTES. The Revolving Credit Loans
shall be evidenced by the Revolving Credit Note, in the amount of the
Revolving Credit Commitment originally in effect and dated as of the date of
this Agreement. The Revolving Credit Loans and the Revolving Credit Note
shall mature and be payable on the Revolving Credit Maturity Date subject to
mandatory prepayment requirements provided in the Loan Documents. The Bank
shall enter in its records the amount of each Advance comprising the
Revolving Credit Loans, and such records shall be conclusive evidence of the
subject matter thereof, absent manifest error.
Section 2.4 USE OF PROCEEDS. Proceeds of the Revolving Credit Loans
shall be used by the Borrower to repurchase approximately 3,157,220 shares of
the common stock $1.00 par value of Hach Company from Lawter International,
Inc. (the "Stock Repurchase"), to fund the working capital requirements of
the Borrower and for the general corporate purposes of the Borrower.
ARTICLE III
INTEREST AND FEES
Section 3.1 INTEREST.
(a) REVOLVING CREDIT RATE. The unpaid principal amount of each
Revolving Credit Loan shall bear interest prior to maturity at a rate per
annum equal to the Revolving Credit Rate as a Reference Rate Loan or a
Eurodollar Loan.
(b) INTEREST AFTER MATURITY. Effective five (5) business days after
the Borrower receives written notice from the Bank of the occurrence of any
Event of Default and the applicability of this Section 3.1(b) and for as
long thereafter as any such Event of Default shall be continuing, the
amount of the Loans not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest until paid in
full at a rate per annum equal to five (5%) percent in excess of the
applicable rate.
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Section 3.2 INTEREST ON REFERENCE RATE LOANS. Each Loan or any
portion of the outstanding principal balance thereof (a "Reference Rate
Loan"), which is not bearing interest at a Fixed Rate (as defined below)
shall bear interest at a rate per annum (on the basis of a 360-day year for
the actual number of days involved) equal to the Revolving Credit Rate for
Reference Rate Loans in effect from time to time, as shown on Exhibit A
hereto.
Section 3.3 INTEREST ON EURODOLLAR LOANS.
(a) CALCULATION OF FIXED RATE. Each Loan or any portion of the
outstanding principal balance thereof (a "EURODOLLAR LOAN"), which has been
designated by the Borrower in a Notice of Borrowing or a Notice of
Conversion/Continuation as a "Eurodollar Loan" in accordance with the terms
hereof, shall bear interest from and including the first day of the
applicable Interest Period to but excluding the last day of such Interest
Period at a rate per annum (the "FIXED RATE") (on the basis of a 360-day
year for the actual number of days involved), equal to the Revolving Credit
Rate for Eurodollar Loans as determined by the Bank for each Interest
Period, as shown on Exhibit A hereto. Borrower shall be entitled to elect
not more than ten (10) Eurodollar Loans at any time.
(b) SELECTION OF INTEREST PERIODS. The Borrower shall select an
interest period (each, an "INTEREST PERIOD") to be applicable to each
Eurodollar Loan, pursuant to the applicable Notice of Borrowing or Notice
of Conversion/Continuation, as the case may be, which Interest Period shall
be, at the Borrower's option, a 30-, 60-, 90-, or 180-day period; PROVIDED,
that all of the following shall be satisfied with respect thereto:
(i) the initial Interest Period for any Eurodollar Loan shall
commence on the Borrowing Date in respect of such Loan, in the case of
a Loan initially made as a Eurodollar Loan, in which event the Notice
of Borrowing must be given at least two Business Days prior to the
Borrowing Date and specify the Interest Period thereon or on the date
specified in the applicable Notice of Conversion/Continuation, in the
case of a Loan converted to a Eurodollar Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period
expires. Notwithstanding the foregoing, if any Interest Period would
otherwise end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall
end on the immediately preceding Business Day;
(iii) any Interest Period for a Eurodollar Loan that begins
on the last Business Day of a calendar month (or on a day for which
there is no numerically
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corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (ii) above, end
on the last Business Day of a calendar month; and
(iv) no Interest Period with respect to any portion of the
Revolving Credit Loans shall extend beyond the Revolving Credit
Maturity Date.
(c) CONVERSION OR CONTINUATION.
(i) Subject to the provisions of subparagraph (b) above and
Section 3.4, the Borrower shall have the option (A) to convert at any
time all or any part of its outstanding Loans or any portion thereof
equal to $500,000 and integral multiples of $100,000 in excess of that
amount, from Reference Rate Loans to Eurodollar Loans or from
Eurodollar Loans to Reference Rate Loans or (B) upon the expiration of
any Interest Period applicable to a Eurodollar Loan, to continue all
or any portion of such Loan equal to $500,000 and integral multiples
of $100,000 in excess of that amount, as a Eurodollar Loan; PROVIDED,
HOWEVER, that a Eurodollar Loan may only be converted into a Reference
Rate Loan on the expiration date of an Interest Period applicable
thereto.
(ii) The Borrower shall deliver a Notice of
Conversion/Continuation to the Bank no later than 12:00 noon (Denver
time) at least two Business Days in advance of the proposed
conversion/continuation date in the case of a conversion to or from,
or a continuation of, a Eurodollar Loan. A Notice of
Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B) the
amount and type of the Loan, or portion thereof, to be
converted/continued, (C) in the case of a conversion to, or a
continuation of a Eurodollar Loan, the requested Interest Period, and
(D) that no Event of Default has occurred and is continuing. In lieu
of delivering the above-described Notice of Conversion/Continuation,
the Borrower may give the Bank telephonic notice by the required time
of any proposed conversion/continuation under this subparagraph (d);
PROVIDED that such notice shall be promptly confirmed in writing by
delivery of a Notice of Conversion/Continuation to the Bank on or
before the proposed conversion/continuation date.
(iii) The Bank shall not incur any liability to the Borrower
in acting upon any telephonic or telecopy notice referred to above
that the Bank believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of the
Borrower or for otherwise acting in good faith under this
subparagraph (c), and upon conversion or continuation of the
applicable basis for determining the interest rate with respect to any
Loans in accordance with this Agreement pursuant to any such
telephonic notice the Borrower shall have effected a conversion or
continuation, as the case may be, hereunder.
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(iv) Except as otherwise provided in Section 3.4 hereof, a Notice
of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date,
and the Borrower shall be bound to effect a conversion or continuation
in accordance therewith.
Section 3.4 SPECIAL PROVISIONS GOVERNING EURODOLLAR LOANS.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Loans as to the
matters covered:
(a) DETERMINATION OF ADJUSTED EURODOLLAR RATE. As soon as
practicable after 10:00 A.M. (Denver time) on each Interest Rate
Determination Date, the Bank shall determine the Adjusted Eurodollar Rate
that shall apply to the Eurodollar Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to the
Borrower.
(b) NO MEANS FOR DETERMINING RATE. In the event that the Bank shall
have determined, on any Interest Rate Determination Date with respect to
any Eurodollar Loans, that by reason of circumstances affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the interest rate applicable to such Loans on the basis
provided for in the definition of Adjusted Eurodollar Rate, the Bank shall
on such date give notice (by telecopy or by telephone confirmed in writing)
to the Borrower of such determination, whereupon (i) no Loans may be made
as, or converted to, Eurodollar Loans, until such time as the Bank notifies
the Borrower that the circumstances giving rise to such notice no longer
exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation
given by the Borrower with respect to the Loans in respect of which such
determination was made shall be deemed to be rescinded by the Borrower.
(c) CONTINUATION OF EURODOLLAR LOANS UNLAWFUL. In the event that on
any date the Bank reasonably determines after consultation with the
Borrower that the making, maintaining or continuation of its Eurodollar
Loans (i) has become unlawful as a result of compliance by the Bank in good
faith with any law, treaty, governmental rule, regulation, guideline or
order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) would cause the
Bank material hardship, as a result of contingencies occurring after the
date of this Agreement which materially and adversely affect the interbank
Eurodollar market, or the position of the Bank in that market, then, and in
any such event, the Bank shall give notice (by telecopy or by telephone
confirmed in writing) to the Borrower of such determination (which notice
shall set forth the reasons for the determination). Thereafter (I) the
obligation of the Bank to make Eurodollar Loans, or to convert Loans to
Eurodollar Loans, shall be suspended until such time as the reasons for the
suspension no longer exist, at which time the obligations of the Bank to
make Eurodollar Loans shall be reinstated, (II) to the extent such
determination by the Bank relates to a Eurodollar Loan then being requested
by the
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Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Bank shall make such Loan as (or convert
such Loan to) a Reference Rate Loan,(III) the Bank's obligation to
maintain its outstanding Eurodollar Loans (the "AFFECTED LOANS"), shall
be terminated at the earlier to occur of the expiration of the Interest
Period then in effect with respect to the Affected Loans or when required
by law, and (IV) the Affected Loans shall automatically convert into
Reference Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by the Bank as described
above relates to a Eurodollar Loan then being requested by the Borrower
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
the Borrower shall have the option, subject to the provisions of
subparagraph (d) below, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation by giving notice (by telecopy or by telephone
confirmed in writing) to the Bank of such rescission on the date on which
the Bank gives notice of its determination as described above.
(d) COMPENSATION OF BANK FOR LOSSES. The Borrower shall compensate
the Bank, upon written request by the Bank (which request shall set forth
in reasonable detail the basis for requesting such amounts), for all
reasonable actual losses, loss of yield, expenses and liabilities
(including, without limitation, any interest paid by that Bank to lenders
of funds borrowed by it to make or carry its Eurodollar Loan and any loss,
expense or liability actually sustained by the Bank in connection with the
liquidation or re-employment of such funds) which the Bank actually
sustains: (i) if due to the fault of the Borrower, a borrowing of any
Eurodollar Loan does not occur on a date specified therefor in a Notice of
Borrowing or a telephonic request for conversion or continuation, (ii) if
any prepayment or conversion of any of its Eurodollar Loans occurs on a
date that is not the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Loans is not made on
any date specified in a notice of prepayment given by the Borrower, or
(iv) as a consequence of any other failure by the Borrower in the repayment
of its Eurodollar Loans when required by the terms of this Agreement.
(e) TRANSFER TO BRANCH BANKS. The Bank may make, carry or transfer
Eurodollar Loans at, to, or for the account of any of its branch offices or
the office of an affiliate of the Bank.
(f) ACTUAL PURCHASE OF EURODOLLAR DEPOSITS. Calculation of all
amounts payable to the Bank under this Section 3.4 shall be made as though
the Bank had actually funded each of its relevant Eurodollar Loans through
the purchase of a Eurodollar deposit bearing interest at the rate obtained
pursuant to clause (a) of the definition of Adjusted Eurodollar Rate in an
amount equal to the amount of such Eurodollar Loan and having a maturity
comparable to the relevant Interest Period; PROVIDED, HOWEVER, that the
Bank may fund each of its Eurodollar Loans in any manner it sees fit and
the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this Section. In no event, however,
shall the adjustments in clause (b) of the definition of Adjusted
Eurodollar Rate be applicable unless the Bank has actually funded the
Eurodollar Loans through the purchase of a Eurodollar deposit.
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(g) EURODOLLAR LOANS AFTER EVENT OF DEFAULT. After the occurrence of
and during the continuation of an Event of Default, (i) the Borrower may
not elect to have a Loan be made or maintained as, or converted to, a
Eurodollar Loan after the expiration of any Interest Period then in effect
for that Loan and (ii) subject to the provisions of subparagraph (d) above,
any Notice of Borrowing or Notice of Conversion/Continuation given by the
Borrower with respect to a requested borrowing or conversion/continuation
that has not yet occurred shall be deemed to be rescinded by the Borrower.
Section 3.5 OTHER INTEREST RATES. The parties may enter into interest
rate protection agreements (swaps or caps) or provide for longer term
interest periods and alternative payment dates upon such terms as the parties
shall agree in writing.
Section 3.6 FACILITY FEE. The Borrower shall pay to the Bank a fee of
$50,000 upon execution and delivery of this Agreement (the "Facility Fee").
Section 3.7 NONUSE FEE. The Borrower shall pay a nonuse fee (the
"Nonuse Fee") in the amount set forth on Exhibit A calculated on the daily
unused amount of the Revolving Credit Commitment, payable quarterly
(calendar) in arrears within 30 days of invoice.
Section 3.8 COMPUTATION. Interest and Nonuse Fees shall be computed
on the basis of actual days elapsed and a year of 360 days.
Section 3.9 PAYMENT DATES. Accrued interest under Section 3.1 (a)
shall be payable on each Payment Date. Accrued interest under Section 3.1(b)
shall be payable on demand.
Section 3.10 ADDITIONAL COSTS.
(a) ADDITIONAL COSTS. In the event that any change in applicable law
or regulation or in the interpretation thereof by any governmental
authority charged with the administration thereof subjects the Bank to any
taxes whatsoever with respect to the basis of taxation of payments to the
Bank of principal or interest payable on any Eurodollar Loan (except for
changes in the rate of tax based on or measured by the net income of the
Bank), and the result of the foregoing is to increase the cost to the Bank
of making or maintaining any Eurodollar Loan by an amount which the Bank
reasonably deems to be material, then the Borrower shall pay to the Bank 30
days after written notice thereof from the Bank to the Borrower the
additional amount or amounts necessary to compensate the Bank for such
additional cost.
(b) CERTIFICATE, ETC. The Bank shall promptly notify the Company
upon becoming aware that the Company may be required to make any payment
pursuant to this Section. The Bank shall provide to the Borrower a
certificate, signed by an officer of the Bank, setting forth the amount
required to be paid by the Borrower to the Bank and the computations made
by the Bank to determine such amount.
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Section 3.11 REASONABLE EFFORTS TO MITIGATE. Bank agrees that as
promptly as practicable after it becomes aware of the occurrence of an event or
the existence of a condition that would cause it to be affected under Section
3.4 or Section 3.9, Bank will give notice thereof to the Borrower, and, to the
extent so requested by the Borrower and not inconsistent with applicable law,
the Bank's internal policies or sound banking practices, Bank shall use
reasonable efforts and take such actions as are reasonably appropriate if as a
result thereof the additional moneys which would otherwise be required to be
paid to Bank pursuant to such sections would be materially reduced, or the
illegality or other adverse circumstances which would otherwise require a
conversion of such Loans or result in the inability to make such Loans pursuant
to such sections would cease to exist, and in each case if, as determined by the
Bank in its sole discretion, taking such actions would not adversely affect such
Loans or Bank or otherwise be disadvantageous to Bank.
ARTICLE IV
PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF
Section 4.1 REPAYMENT. Principal of the Loans, together with all
accrued and unpaid interest thereon, shall be due and payable as provided in
Section 2.3 regarding maturity of the Note and as provided in this Article IV.
Section 4.2 MANDATORY PREPAYMENT. The Borrower shall, without notice or
demand on the dates set forth on Exhibit A hereto, make mandatory principal
payments in such amounts as are necessary to reduce the aggregate outstanding
principal balance of the Revolving Credit Loans to be equal to or less than the
amount of the Revolving Credit Commitment as it reduces as shown on Exhibit A
hereto. In the event an Advance causes the aggregate outstanding principal
balance of the Revolving Credit Loans to exceed the Revolving Credit Commitment,
such excess shall be payable upon receipt of written demand from the Bank.
Section 4.3 OPTIONAL PREPAYMENT. The Borrower may prepay the Loans, in
whole or in part, at any time. Any such prepayment must be accompanied by
accrued and unpaid interest on the amount prepaid. Any prepayment of Reference
Rate Loans shall be without penalty or premium. A payment of Eurodollar Loans
prior to the last day of the Interest Period therefor shall require payment of
the amounts specified in Section 3.4(d).
Section 4.4 PREPAYMENT UPON FINANCIAL COVENANT NONCOMPLIANCE. If the
Borrower shall at any time fail to comply with the financial covenants set forth
in Article III of Exhibit A, the Borrower shall, if applicable, immediately upon
demand of the Bank, prepay the principal balance of the Revolving Credit Loans
in the amount necessary to cause compliance with the financial covenants.
Section 4.5 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Note and all fees, expenses and other obligations under the
Loan Documents shall be made without set-off or counterclaim in immediately
available funds not later than 2:00 p.m., Denver time, on the dates due
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at the office of the Bank in Boulder, Colorado. Funds received after such
time shall be deemed to have been received on the next Business Day and an
additional day's interest shall be due provided that, the failure of the
Borrower to make any such payment by such time shall not constitute a Default
or Event of Default hereunder if such payment is received by the Bank by 5:00
p.m. on such due date. Whenever any payment to be made hereunder or on the
Note shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension
of time shall be included in the computation of any interest or fees.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 CONDITIONS OF INITIAL LOAN. Unless a later date is
specified herein or otherwise agreed to by the Bank in writing, the obligation
of the Bank to make the initial Loan hereunder shall be subject to the
satisfaction of the conditions precedent. In this regard, as set forth in
Sections 5.1 and 5.2, the Bank shall have received all of the following and the
following shall have been completed, in form and substance satisfactory to the
Bank, each duly executed and certified or dated the date of the initial Loan or
such other date as is satisfactory to the Bank:
(a) The Note and the Loan Documents by a duly authorized officer
(or officers) of the Borrower as appropriate.
(b) A certified copy of the corporate resolution of the Borrower
authorizing the execution, delivery and performance of the Loan Documents
to which they are a party.
(c) An incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of the Borrower authorized to
execute the Loan Documents and to request Loans hereunder, certified by the
Secretary or an Assistant Secretary of the Borrower.
(d) A copy of the organizational documents of the Borrower with all
amendments thereto.
(e) A Certificate of Good Standing for the Borrower in the
jurisdiction of its incorporation, certified by the appropriate
governmental officials.
(f) An opinion of counsel to the Borrower, addressed to the Bank, in
form and content acceptable to the Bank.
(g) Receipt by the Bank of current UCC searches for the Borrower
disclosing no liens or security interests on the assets of the Borrower.
(h) A Compliance Certificate giving effect to the proposed initial
Advance of funds.
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(i) Receipt by the Bank of such other approvals, opinions or
documents as the Bank may reasonably request.
Notwithstanding the foregoing, Hach Europe S.A./N.V. shall have until
August 7, 1997 within which to deliver the materials described in subparagraphs
(b), (c), (d), (e) and (f) above.
Section 5.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Bank to make any Loan hereunder (including the initial Loan but excluding a
continuation or conversion of a Eurodollar Rate Loan) shall be subject to the
satisfaction of the following conditions precedent (and the request for a Loan
shall be deemed a representation and warranty that the following are true and
correct):
(a) Before and after giving effect to such Loan, the representations
and warranties contained in Article VI shall be true and correct, as though
made on the date of such Loan, and Borrower shall have performed the
affirmative covenants set forth in Article VII and not breached the
negative covenants set forth in Article VIII as of the date of such Loan;
(b) Before and after giving effect to such Loan, no Default or Event
of Default shall have occurred and be continuing;
(c) Before and after giving effect to such Loan, no Adverse Event
shall have occurred with respect to the Borrower.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the Commitment
and to make Loans hereunder, the Borrower represents and warrants to the Bank:
Section 6.1 ORGANIZATION, STANDING, ETC.. Each of the entities
constituting the Borrower are corporations, limited partnerships or limited
liability companies, as appropriate duly organized and validly existing and in
good standing under the laws of their respective jurisdiction organization and
have all requisite power and authority to carry on their respective businesses
as now conducted, to enter into the Loan Documents to which they are a party and
to perform its obligations under the Loan Documents. The Borrower is duly
qualified and in good standing in each jurisdiction in which the failure to so
qualify might materially adversely affect the consolidated financial condition
or operations of the Borrower.
Section 6.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower of the Loan Documents have been duly authorized by
all necessary entity action by the Borrower, and the Loan Documents constitute
the legal, valid and binding obligations of the Borrower, enforceable against
them in accordance with their respective terms, subject to limitations as to
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enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
Section 6.3 NO CONFLICTS NO DEFAULT. The execution, delivery and
performance by the Borrower of the Loan Documents to which they are a party will
not (a) violate any provision of any law, statute, rule or regulation or any
order, writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
the Borrower except to the extent that the failure to comply therewith could
not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of the Borrower taken as a
whole, or could not materially adversely effect the ability of the Borrower to
perform its obligations under this Agreement, (b) violate or contravene any
provisions of the organizational documents or by-laws of the Borrower, or (c)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which such entity or any of such entity's properties
may be bound or result in the creation of any Lien on any asset of the Borrower.
The Borrower is not in default under or in violation of any such law, statute,
rule or regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, loan or credit agreement or other agreement, lease
or instrument in any case in which the consequences of such default or violation
could constitute an Adverse Event.
Section 6.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents to which it is a party.
Section 6.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's audited
consolidated financial statements as of April 30, 1997, as heretofore furnished
to the Bank, have been prepared in accordance with GAAP on a consistent basis
and fairly present, in all material respects, the financial position of the
Borrower as at such dates and the results of their operations and cash flows for
the respective periods then ended. As of the dates of such financial
statements, the Borrower has no material obligation, contingent liability,
liability for taxes or long-term lease obligation which is not reflected in such
financial statements or in the notes thereto. Since April 30, 1997, no Adverse
Event has occurred except as set forth on Schedule 6.5.
Section 6.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described
in Schedule 6.6, there are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrower, could constitute an Adverse Event. Except as
described in Schedule 6.6(a), the Borrower has no contingent liabilities which
are material to the Borrower as a consolidated enterprise.
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Section 6.7 COMPLIANCE. The Borrower is in compliance with all statutes
and governmental rules and regulations applicable to them for which the failure
to comply would have a material adverse effect on the Borrower.
Section 6.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist
any violation by the Borrower of any applicable federal, state or local law,
rule or regulation or order of any government, governmental department, board,
agency or other instrumentality relating to environmental, pollution, health or
safety matters which will or threatens to impose a material liability on the
Borrower or which would require a material expenditure by the Borrower to cure.
The Borrower has not received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which non-compliance or remedial action could
constitute an Adverse Event.
Section 6.9 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for
which the reporting requirements have been waived by regulations of the PBGC,
has occurred and is continuing with respect to any Plan. All of the minimum
funding standards applicable to such Plans have been satisfied and there exists
no event or condition which would permit the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. The current value of the Plans'
benefits guaranteed under Title IV or ERISA does not exceed the current value of
the Plans' assets allocable to such benefits.
Section 6.10 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan will be used for any purpose which would
violate any of the margin stock requirements of the Board of Governors of the
Federal Reserve System.
Section 6.11 OWNERSHIP OF PROPERTY; LIENS. The Borrower has good and
marketable title to its real properties and good and sufficient title to its
other properties, including all properties and assets referred to as owned by
the Borrower in the financial statements of the Borrower referred to in Section
6.5 (other than property disposed of since the date of such financial statement
in the ordinary course of business). None of the properties, revenues or assets
of the Borrower is subject to a Lien, except for (a) Liens disclosed in the
financial statements referred to in Section 6.5, (b) Liens listed on Schedule
6.11, or (c) Liens allowed under Section 8.6.
Section 6.12 TAXES. The Borrower has filed all federal, state and local
tax returns required to be filed and has paid or made provision for the payment
of all material amounts of taxes due and payable pursuant to such returns and
pursuant to any assessments made against it or any of its property and all other
taxes, fees and other charges imposed on it or any of its property by any
governmental
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authority (other than taxes, fees or charges the amount or validity
of which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in accordance with GAAP have been provided on
the books of the Borrower). No tax Liens have been filed and no material claims
are being asserted with respect to any such taxes, fees or charges. The
charges, accruals and reserves on the books of the Borrower in respect of taxes
and other governmental charges are adequate.
Section 6.13 TRADEMARKS, PATENTS. The Borrower possesses or has the
right to use all of the patents, trademarks, trade names, service marks and
copyrights, and applications therefor, and all technology, know-how, processes,
methods and designs used in or necessary for the conduct of its business,
without known conflict with the rights of others.
Section 6.14 INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or a company "controlled" by an investment company within the meaning
of the Investment Company Act of 1940, as amended.
Section 6.15 PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a
"holding company" or a "subsidiary company" of a holding company or an
affiliate" of a holding company or of a subsidiary company of a holding company
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 6.16 SUBSIDIARIES. Schedule 6.16 sets forth as of the date of
this Agreement a list of all Subsidiaries and the percentage ownership of each
class of equity ownership owned beneficially or of record by Hach Company or any
Subsidiary therein, and the jurisdiction of organization of each Subsidiary.
ARTICLE VII
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Loans and all other liabilities of the Borrower to
the Bank hereunder and under the Note has been paid in full, unless the Bank
shall otherwise expressly consent in writing, the Borrower will do all of the
following:
Section 7.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank:
(a) As soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, the annual audit report of the
Borrower prepared on a consolidated basis and in conformity with GAAP,
consisting of at least statements of income, cash flows, and
stockholders' equity, and a consolidated balance sheet as at the end of
such year, setting forth in each case in comparative form corresponding
figures from the previous annual audit, certified without qualification
by independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Bank, together with any
management
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letters, management reports or other supplementary comments or
reports to the Borrower or its board of directors furnished by such
accountants.
(b) Together with the audited financial statements required under
Section 7.1(a), a statement by the accounting firm performing such audit
stating that it has reviewed this Agreement and that in performing its
examination nothing came to its attention that caused it to believe that
any Default or Event of Default exists, or, if such Default or Event of
Default exists, describing its nature.
(c) As soon as available and in any event within 45 days after the
end of each fiscal quarter of each fiscal year, a copy of the unaudited
financial statements of the Borrower prepared on a consolidated and
consolidating basis in the same manner and format as the audit report
referred to in Section 7.1(a), except for normal year end adjustments and
the inclusion of footnotes signed by the Borrower's chief financial
officer, consisting of at least consolidated statements of income, cash
flows, and stockholders' equity for the Borrower for such quarter and for
the period from the beginning of such fiscal year to the end of such
quarter, and a consolidated balance sheet of the Borrower as at the end of
such quarter.
(d) Together with the financial statements furnished by the Borrower
under Sections 7.1(a) and 7.1(c), a statement in the form of Exhibit D
hereto or other acceptable form signed by the chief financial officer of
the Borrower demonstrating in reasonable detail compliance (or
noncompliance, as the case may be) with each of the financial ratios and
restrictions contained in Article VIII and Exhibit A and stating that as at
the date of each such financial statement there did not exist any Default
or Event of Default or, if such Default or Event of Default existed,
specifying the nature and period of existence thereof and what action the
Borrower proposes to take with respect thereto (a "Compliance
Certificate").
(e) Within seven (7) days of becoming aware of any Default or Event
of Default, a notice describing the nature thereof and the remedial action
the Borrower proposes to take with respect thereto.
(f) Immediately upon becoming aware of the occurrence, with respect
to any Plan, of any Reportable Event (other than a Reportable Event for
which the reporting requirements have been waived by PBGC regulations) or
any "prohibited transaction" (as defined in Section 4975 of the Code), a
notice specifying the nature thereof and what action the Borrower proposes
to take with respect thereto, and, when received, copies of any notice from
PBGC of intention to terminate or have a trustee appointed for any Plan.
(g) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports, proxy statements and other items filed with
the Securities Exchange Commission.
(h) Immediately upon becoming aware of the occurrence thereof, notice
of the institution of any litigation, arbitration or governmental
proceeding, or the rendering of a
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judgment or decision in such litigation or proceeding, which could
constitute an Adverse Event, and the steps being taken by the Person(s)
affected by such proceeding.
(i) Immediately upon becoming aware of the occurrence thereof, notice
of any violation as to any environmental matter by the Borrower and of the
commencement of any judicial or administrative proceeding relating to
health, safety or environmental matters (i) in which an adverse
determination or result could result in the revocation of or have a
material adverse effect on any operating permits, air emission permits,
water discharge permits, hazardous waste permits or other permits held by
the Borrower which are material to the operations of the Borrower or (ii)
which will or threatens to impose a material liability on the Borrower to
any Person or which will require a material expenditure by the Borrower to
cure any alleged problem or violation.
(j) From time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Bank may
reasonably request.
Section 7.2 ENTITY EXISTENCE. Subject to Section 8.1 in the instance of
a Subsidiary, maintain its entity existence in good standing under the laws of
its jurisdiction of organization and its qualification to transact business in
each jurisdiction in which the failure to so qualify might materially adversely
affect the consolidated financial condition or operations of the Borrower.
Section 7.3 INSURANCE. Maintain with financially sound and reputable
insurance companies such insurance as may be required by law and such other
insurance in such amounts and against such hazards as is customary in the case
of reputable corporations of similar sizes engaged in the same or similar
business and similarly situated.
Section 7.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and
reports which to the knowledge of the Borrower are required by law to be filed
by it and pay before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims
or demands of any kind (including, without limitation, those of suppliers,
mechanics, carriers, warehouses, landlords and other like Persons) which, if
unpaid, would result in the creation of a Lien upon its property (other than
taxes, assessments and other governmental charges imposed by foreign
jurisdictions which in the aggregate are not material to the business, financial
conditions, or assets of the Borrower and its Subsidiaries on a consolidated
basis); provided that the foregoing items need not be paid if they are being
contested in good faith by appropriate proceedings, and as long as the
Borrower's title to its property is not materially adversely affected, its use
of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set aside
on the Borrower's books in accordance with GAAP.
Section 7.5 INSPECTION. Permit any Person designated by the Bank to
visit and inspect any of its properties, corporate books and financial records,
to examine and to make copies of its books of accounts and other financial
records, and to discuss the affairs, finances and accounts of the Borrower with,
and to be advised as to the same by, its officers at such reasonable times and
intervals as the Bank
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may designate. In this regard Borrower shall permit an audit of its books
and records, semiannually on not less than 15 days prior written notice. So
long as no Event of Default exists, the expenses of the Bank for such visits,
inspections and examinations shall be at the expense of the Bank, but any
such visits, inspections, and examinations made while any Event of Default is
continuing shall be at the expense of the Borrower.
Section 7.6 MAINTENANCE OF PROPERTIES. Maintain its properties used or
useful in the conduct of its business in good condition, repair and working
order (ordinary wear and tear excepted), and supplied with all necessary
equipment, and make all necessary repairs, renewals, replacements, betterments
and improvements thereto, all as may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; provided, however that nothing in this section shall prevent the Borrower
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the judgement of such
Borrower or Subsidiary, desirable in the conduct of its or their business and
which does not in the aggregate materially adversely affect the financial
condition, business or assets of the Borrower and its Subsidiaries on a
consolidated basis.
Section 7.7 BOOKS AND RECORDS. Keep adequate and proper records and
books of account in which full and correct entries will be made of its material
dealings, business and affairs.
Section 7.8 COMPLIANCE. Comply in all respects with all laws, rules,
regulations, orders,writs, judgments, injunctions, decrees or awards to which it
may be
subject the non-compliance with which could have a materially adverse effect on
the business, operations, financial conditions or properties of the Borrower or
on the ability of the Borrower to perform its obligations under this Agreement.
Section 7.9 ERISA. Maintain each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and of
the Code.
Section 7.10 ENVIRONMENTAL MATTERS. Observe and comply with all laws,
rules, regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a Adverse Event.
Section 7.11 FINANCIAL COVENANTS. Comply with the financial covenants
described on Exhibit A hereto.
Section 7.12 ACCREDITATION. Maintain and comply with the terms of all
licenses, permits and accreditations necessary to conduct their businesses as
presently being conducted.
Section 7.13 FORM U-1. Furnish to the Bank, upon its request, a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
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Section 7.14 MANAGEMENT. Advise the Bank in writing with respect to any
change in senior management (president, chief executive officer or chief
financial officer) within 30 days of such change.
ARTICLE VIII
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Loans and all other liabilities of the Borrower to
the Bank hereunder and under the Note have been paid in full, unless the Bank
shall otherwise expressly consent in writing, the Borrower will not do any of
the following:
Section 8.1 MERGER. Merge or consolidate with or merge into or with any
other corporation, or purchase or otherwise acquire all or substantially all of
the assets of any person or sell, transfer, lease or otherwise dispose of all or
any substantial part of its assets to any person, or permit any of its
subsidiaries to do so, except:
(a) the merger, consolidation or liquidation of any Subsidiary into
the Borrower or with any other Subsidiary of the Borrower (the surviving
entity thereof also being a Subsidiary);
(b) the Borrower may merge with another entity provided Borrower is
the surviving entity; or
(c) the merger, consolidation or liquidation into the Borrower or any
Subsidiary, or the acquisition by the Borrower or any Subsidiary of all or
substantially all the assets, of any other person other than Hach Company,
but only if:
(i) such Person is engaged primarily in a business which is in
substantially the same fields, related fields or supporting fields as
the existing business of the Borrower or such Subsidiary, as the
case may be; and
(ii) any such merger or acquisition would not cause the Borrower
to violate any other provision of this Agreement;
provided, however, that any such action of the nature referred to in this
Section 8.1 shall only be permitted if no Event of Default has occurred and is
continuing or would result therefrom.
Section 8.2 SALE OF ASSETS. Sell, transfer, lease or otherwise convey
all or any substantial part of its assets except for sales and leases of
equipment in the ordinary course of business which will not impair or impede the
conduct of the Borrower's business and except for sales or other transfers by a
Subsidiary to the Borrower or another wholly-owned Subsidiary.
Section 8.3 PLAN DEFICIENCY. Permit any condition to exist in
connection with any Plan which might constitute grounds for the PBGC to
institute proceedings to have such Plan terminated or
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a trustee appointed to administer such Plan, permit any Plan to terminate
under any circumstances which would cause the lien provided for in Section
4068 of ERISA to attach to any property, revenue or asset of the Borrower or
any Subsidiary or permit the underfunded amount of Plan benefits guaranteed
under Title IV of ERISA to exceed $250,000.
Section 8.4 CHANGE IN NATURE OF BUSINESS. Make any material change in
the nature of the business of the Borrower provided, however, that the Borrower
may expand its business through the application of its existing technologies to
additional fields such as the food and beverage field, and medical and clinical
fields.
Section 8.5 INVESTMENTS. Acquire for value, make, have or hold any
Investments, except:
(a) Investments in municipal bonds having an investment grade rating
and investments in the types of securities outstanding on the date hereof
and listed on Schedule 8.5;
(b) Travel, moving expense, entertainment and other similar advances
to officers and employees in the ordinary course of business;
(c) Investments in readily marketable direct obligations of the
United States of America having maturities of three years or less from the
date of acquisition;
(d) Certificates of deposit or bankers' acceptances, each maturing
within one year from the date of acquisition, issued by any commercial bank
organized under the laws of the United States or any State thereof which
has (i) combined capital, surplus and undivided profits of at least
$100,000,000, and (ii) an investment grade credit rating with respect to
its unsecured indebtedness from a nationally recognized rating service that
is satisfactory to the Bank;
(e) Commercial paper maturing within 270 days from the date of
issuance and given the highest rating by a nationally recognized rating
service;
(f) Repurchase agreements relating to securities issued or guaranteed
as to principal and interest by the United States of America;
(g) Extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale of goods and services in the
ordinary course of business;
(h) Shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business; and
(i) Investments in subsidiaries or entities engaged in a similar
business to that of the Borrower provided, however, that any such
investment shall only be permitted if no Event of Default has occurred and
is continuing or would result therefrom.
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(j) Investments in the $1.00 par value common stock of Hach Company
including approximately 3,157,220 shares owned by Lawter International, Inc.
(k) Investments in the voting or nonvoting common stock of Hach
Company for general corporate purposes.
Section 8.6 INDEBTEDNESS. Incur, create, issue, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Current liabilities, other than for borrowed money, incurred in
the ordinary course of business;
(c) Indebtedness existing on the date of this Agreement and disclosed
on Schedule 8.6 hereto;
(d) Indebtedness secured by Liens permitted under Section 8.7 hereof;
(e) Indebtedness consisting of endorsements for collection, deposit
or negotiation and warranties of products or services, in each case
incurred in the ordinary course of business;
(f) Indebtedness for Capitalized Leases in as permitted under
Section 8.10 hereof; and
(g) Intercompany indebtedness among Subsidiaries and the Borrower.
(h) Indebtedness of an entity acquired by the Borrower, at the time
of acquisition, provided, however, that:
(i) any such indebtedness shall only be permitted if no Event of
Default has occurred and is continuing or would result therefrom;
(ii) such entity is maintained as a separate corporate or other
limited liability subsidiary; and
(iii) such indebtedness is nonrecourse to Borrower.
Section 8.7 LIENS. Create, incur, assume or suffer to exist any
Lien with respect to any property, revenues or assets now owned or
hereafter arising or acquired at any time, except:
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(a) Deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of business of the Borrower;
(b) Liens for taxes, fees, assessments and governmental charges not
delinquent or to the extent that payments therefor shall not at the time be
required to be made in accordance with the provisions of Section 7.4;
(c) Liens of carriers, warehousemen, mechanics and materialmen, and
other like Liens arising in the ordinary course of business, for sums not
due or to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 7.4;
(d) Deposits to secure the performance of bids, trade contracts,
leases, statutory obligations and other obligations of a like nature
incurred in the ordinary course of business; and
(e) Liens incident to the acquisition of equipment pursuant to
Capitalized Leases permitted under Section 8.10 hereof.
(f) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of
tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds.
Section 8.8 CONTINGENT LIABILITIES. Either: (i) endorse, guarantee,
contingently agree to purchase or to provide funds for the payment of, or
otherwise become contingently liable upon, any obligation of any other Person,
except by the endorsement of negotiable instruments for deposit or collection
(or similar transactions) in the ordinary course of business, or (ii) agree to
maintain the net worth or working capital of, or provide funds to satisfy any
other financial test applicable to, any other Person.
Section 8.9 TRANSACTIONS WITH RELATED PARTIES. Enter into or be a party
to any transaction or arrangement, including, without limitation, the purchase,
sale lease or exchange of property or the rendering of any service, with any
affiliated entity other than a wholly-owned Subsidiary, except in the ordinary
course of and pursuant to the reasonable requirements of the Borrower's or the
applicable Subsidiary's business and upon fair and reasonable terms to the
Borrower than would be obtained in a comparable arm's-length transaction with an
unaffiliated Person.
Section 8.10 CAPITAL EXPENDITURES. Make, incur or become liable for
Capital Expenditures in excess of the amount in any fiscal year of Borrower, as
set forth on Exhibit A hereto.
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ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due, whether by acceleration
or otherwise, any payment of principal required to be made to the Bank
pursuant to the Loan Documents;
(b) The Borrower shall fail to pay any interest or fees or other
amounts owing hereunder within three (3) Business Days after the same
shall become due and payable whether at the Revolving Credit Maturity
Date or any accelerated date of maturity or at any other date fixed for
payment;
(c) Any representation or warranty made or deemed to have been made
by or on behalf of the Borrower in the Loan Documents or on behalf of the
Borrower in any certificate, statement, report or other writing furnished
by or on behalf of the Borrower to the Bank pursuant to the Loan Documents
shall prove to have been false or misleading in any material respect on the
date as of which the facts set forth are stated or certified or deemed to
have been stated or certified;
(d) The Borrower shall fail to comply with any agreement, covenant,
condition, provision or term contained in the Loan Documents to which it is
a party (and such failure shall not constitute an Event of Default under
any of the other provisions of this Section 9.1) and such failure to comply
shall continue for 30 calendar days after notice thereof to the Borrower by
the Bank;
(e) The Borrower shall become insolvent or shall generally not pay
its debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver of the
Borrower or for a substantial part of the property thereof or, in the
absence of such application, consent or acquiescence, a custodian, trustee
or receiver shall be appointed for the Borrower or for a substantial part
of the property thereof and shall not be discharged within 60 days;
(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower and, if instituted against the Borrower or a
Subsidiary, shall have been consented to or acquiesced in by the Borrower
or shall remain undismissed for 60 days, or an order for relief shall have
been entered against the Borrower, or the Borrower shall take any corporate
action to approve institution of, or acquiescence in, such a proceeding;
(g) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower and, if instituted against the Borrower, shall be
consented to or acquiesced in by the
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Borrower or shall remain for 60 days undismissed, or the Borrower shall
take any corporate action to approve institution of, or acquiescence in,
such a proceeding;
(h) A judgment or judgments for the payment of money in excess of the
sum of $250,000 in the aggregate shall be rendered against the Borrower and
the Borrower shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof, prior to
any execution on such judgments by such judgment creditor, within 30 days
from the date of entry thereof, and within said period of 30 days, or such
longer period during which execution of such judgment shall be stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal;
(i) The institution by the Borrower or any ERISA Affiliate of steps
to terminate any Plan if in order to effectuate such termination, the
Borrower or any ERISA Affiliate would be required to make a contribution to
such Plan, or would incur a liability or obligation to such Plan, in excess
of $250,000, or the institution by the PBGC of steps to terminate any Plan;
(j) Any Indebtedness of the Borrower (other than Indebtedness under
this Agreement) in excess $250,000 shall be accelerated, or the Borrower
shall fail to pay any such Indebtedness when due or, in the case of such
Indebtedness payable on demand, when demanded, or any event shall occur or
condition shall exist and shall continue for more than the period of grace,
if any, applicable thereto and shall have the effect of causing, or
permitting (any required notice having been given and grace period having
expired) the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause, such Indebtedness to become due
prior to its stated maturity or to realize upon any collateral given as
security therefor; or
(k) The Borrower shall suffer or incur a Change of Control.
(l) The Borrower shall fail to give written notice as provided in
Section 7.1(e) hereof.
Section 9.2 REMEDIES. If (a) any Event of Default described in Section
9.1(e) or (f) shall occur with respect to the Borrower or any Subsidiary, the
Commitment shall automatically terminate and the outstanding unpaid principal
balance of the Notes, the accrued interest thereon and all other obligations of
the Borrower to the Bank under the Loan Documents shall automatically become
immediately due and payable; or (b) any other Event of Default shall occur and
be continuing, then the Bank at its sole option may take any or all of the
following actions: (i) declare the Commitment terminated, whereupon the
Commitment shall terminate, (ii) declare the outstanding unpaid principal
balance of the Note, the accrued and unpaid interest thereon and all other
obligations of the Borrower to the Bank under the Loan Documents to be
immediately due and payable, whereupon the Note, all accrued and unpaid interest
thereon and all such obligations shall immediately become due and payable, in
each case without further demand or notice of any kind, all of which are hereby
expressly waived, anything in this Agreement or in the Note to the contrary
notwithstanding, (iii) exercise all other rights
27
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and remedies under any Loan Document other instrument, document or agreement
between the Borrower and the Bank, and (iv) enforce all rights and remedies
under any applicable law.
ARTICLE X
MISCELLANEOUS
Section 10.1 WAIVER AND AMENDMENT. No failure on the part of the Bank or
the holder of the Note to exercise and no delay in exercising any power or right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
The remedies herein and in any other instrument, document or agreement delivered
or to be delivered to the Bank hereunder or in connection herewith are
cumulative and not exclusive of any remedies provided by law. No notice to or
demand on the Borrower not required hereunder or under the Note shall in any
event entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the right of the Bank or the
holder of the Note to any other or further action in any circumstances without
notice or demand. No amendment, modification or waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom shall be
effective unless the same shall be in writing and signed by the Bank, and then
such amendment, modification, waiver or consent shall be effective only in the
specific instances and for the specific purpose for which given.
Section 10.2 EXPENSES AND INDEMNITIES. Whether or not any Loan is made
hereunder, the Borrower agrees to reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including filing and recording
costs and fees and expenses of outside legal counsel) in connection with the
preparation, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of the Loan Documents. The Borrower
agrees to pay, and save the Bank harmless from all liability for, any stamp or
other taxes which may be payable with respect to the execution or delivery of
the Loan Documents. The Borrower agrees to indemnify and hold the Bank harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic, telecopy or other instructions for making Loans or disbursing the
proceeds thereof. The obligations of the Borrower under this Section 10.2 shall
survive any termination of this Agreement.
Section 10.3 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the first
Business Day after the date of sending if sent by facsimile or overnight
courier, or from four days after the date of mailing if mailed.
Section 10.4 JOINT AND SEVERAL SUCCESSORS. The obligations of the
Borrower hereunder and under the Note shall be the joint and several obligation
of each of the entities constituting the
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Borrower. This Agreement shall be binding upon the Borrower and the Bank and
their respective successors and assigns, and shall inure to the benefit of
the Borrower and the Bank and the successors and assigns of the Bank. The
Borrower shall not assign its rights or duties hereunder without the written
consent of the Bank.
Section 10.5 PARTICIPATION AND INFORMATION. The Bank may sell
participation interests in any or all of the Loans and in all or any portion
of the Commitment to any Person. The Bank may furnish any information
concerning the Borrower in the possession of the Bank from time to time to
participants and prospective participants and may furnish information in
response to credit inquiries consistent with general banking practice. Bank
agrees to hold any confidential information that it may receive from the
Borrower pursuant to this Agreement or any other Loan Document in confidence,
except for disclosure: (a) to legal counsel and accountants for the Borrower
or Bank; (b) to other counsel and accountants for the Borrower or Bank; (b)
to other professional advisors to the Borrower or Bank, provided that the
recipient has delivered to such Bank, as applicable, a written
confidentiality agreement substantially similar to this Section; (c) to
regulatory officials having jurisdiction over Bank; (d) as required by law or
legal process or in connection with any legal proceeding to which Bank and
the Borrower (or any Subsidiary of the Borrower) are adverse parties; and (e)
to another financial institution in connection with a disposition or proposed
disposition to that financial institution of all or part of Bank's interests
hereunder or a participation interest provided that the recipient has
delivered to such Bank, as applicable, a written confidentiality agreement
substantially similar to this Section. Bank further agrees that it will not
use any such confidential information in any activity or for any purpose
other than the administration of the credit facilities extended to the
Borrower under this Agreement. For purposes of the foregoing, "confidential
information": shall mean any information respecting the Borrower or its
Subsidiaries reasonably considered to be, is treated as, and is marked as,
confidential by the Borrower, other than (i) information previously filed
with any governmental agency and available to the public, (ii) information
previously published in any public medium from a source other than, directly
or indirectly, Bank, (iii) information already known by Bank or the other
party in question other than as a result of a breach of this Agreement, and
(iv) information previously disclosed by the Borrower or any Subsidiary to
any Person not associated with the Borrower without a written confidentiality
agreement substantially similar to this Section. Nothing in this Section
shall be construed to create or give rise to any fiduciary duty on the part
of the Bank to the Borrower or any Subsidiary.
Section 10.6 SEVERABILITY. Any provision of the Agreement which is
prohibited or enforceability in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 10.7 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 10.8 ENTIRE AGREEMENT. This Agreement and the Notes embody the
entire agreement and understanding between the Borrower and the Bank with
respect to the subject matter
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hereof and thereof. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
Section 10.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 10.10 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF COLORADO, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS.
Section 10.11 CONSENT TO JURISDICTION. AT THE OPTION OF THE BANK, THIS
AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR COLORADO
STATE COURT SITTING IN DENVER, COLORADO; AND THE BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 10.12 WAIVER OF JURY TRIAL. THE BORROWER WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a)
UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
BORROWER
HACH COMPANY, a Delaware corporation
By: /s/ Bruce J. Hach
_______________________________
Bruce J. Hach, President
Hach Company
5600 Lindbergh Drive
Loveland, CO 80538
Attn: Gary R. Dreher
Telephone:(970) 669-3050
Telecopy: (970) 962-6740
HACH EUROPE S.A./N.V., a Belgian limited liability
company
By: /s/ Bruce J. Hach
_______________________________
Bruce J. Hach, Director and Administrator
Hach Company
5600 Lindbergh Drive
Loveland, CO 80538
Attn: Gary Dreher
Telephone:(970) 669-3050
Telecopy: (970) 962-6740
BANK
COLORADO NATIONAL BANK
By: /s/ Brian T. McKinney
_________________________________
Title: Vice President
_________________________________
28th and Arapahoe
Boulder, CO 80306
Attn: Brian McKinney
Telephone: (303) 444-8876
Telecopy: (303) 444-1081
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS. . . . . . . . 1
1.1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. ACCOUNTING TERMS AND CALCULATIONS . . . . . . . . . . . . . . . . 6
1.3. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . . . . . . . 6
1.4. OTHER DEFINITIONAL TERMS. . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
TERMS OF LENDING. . . . . . . . . . . . 6
2.1 THE REVOLVING CREDIT LOANS. . . . . . . . . . . . . . . . . . . . 6
2.2 BORROWING PROCEDURES FOR LOANS. . . . . . . . . . . . . . . . . . 7
2.3 THE REVOLVING CREDIT NOTES. . . . . . . . . . . . . . . . . . . 7
2.4 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
INTEREST AND FEES. . . . . . . . . . . . 7
3.1 INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 INTEREST ON REFERENCE RATE LOANS. . . . . . . . . . . . . . . . . 8
3.3 INTEREST ON EURODOLLAR LOANS. . . . . . . . . . . . . . . . . . . 8
3.4 SPECIAL PROVISIONS GOVERNING EURODOLLAR LOANS . . . . . . . . . . 10
3.5 OTHER INTEREST RATES. . . . . . . . . . . . . . . . . . . . . . . 12
3.6 FACILITY FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 NONUSE FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 COMPUTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 PAYMENT DATES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 ADDITIONAL COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF. . . . . . . . . . 13
4.1 REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 MANDATORY PREPAYMENT. . . . . . . . . . . . . . . . . . . . . . . 13
4.3 OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 PREPAYMENT UPON FINANCIAL COVENANT NONCOMPLIANCE. . . . . . . . . 14
4.5 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
CONDITIONS PRECEDENT. . . . . . . . . . . 14
5.1 CONDITIONS OF INITIAL LOAN. . . . . . . . . . . . . . . . . . . . 14
5.2 CONDITIONS PRECEDENT TO ALL LOANS . . . . . . . . . . . . . . . . 15
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES . . . . . . . . 16
6.1 ORGANIZATION, STANDING, ETC.. . . . . . . . . . . . . . . . . . . 16
6.2 AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . 16
6.3 NO CONFLICTS NO DEFAULT . . . . . . . . . . . . . . . . . . . . . 16
6.4 GOVERNMENT CONSENT. . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 FINANCIAL STATEMENTS AND CONDITION. . . . . . . . . . . . . . . . 17
6.6 LITIGATION AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . 17
6.7 COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS . . . . . . . . . . . . . . 17
6.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 REGULATION U. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 OWNERSHIP OF PROPERTY; LIENS. . . . . . . . . . . . . . . . . . . 18
6.12 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.13 TRADEMARKS, PATENTS . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 INVESTMENT COMPANY ACT. . . . . . . . . . . . . . . . . . . . . . 18
6.15 PUBLIC UTILITY HOLDING COMPANY ACT. . . . . . . . . . . . . . . . 18
6.16 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII
AFFIRMATIVE COVENANTS. . . . . . . . . . . 19
7.1 FINANCIAL STATEMENTS AND REPORTS. . . . . . . . . . . . . . . . . 19
7.2 ENTITY EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . . 21
7.5 INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 MAINTENANCE OF PROPERTIES . . . . . . . . . . . . . . . . . . . . 21
7.7 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 22
7.8 COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.10 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . 22
7.11 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 22
7.12 ACCREDITATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.13 FORM U-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.14 MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII
NEGATIVE COVENANTS . . . . . . . . . . . 22
8.1 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 PLAN DEFICIENCY . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 CHANGE IN NATURE OF BUSINESS. . . . . . . . . . . . . . . . . . . 23
8.5 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.6 INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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8.7 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.8 CONTINGENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . 26
8.9 TRANSACTIONS WITH RELATED PARTIES . . . . . . . . . . . . . . . . 26
8.10 CAPITAL EXPENDITURES. . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . 26
9.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . 28
10.1 WAIVER AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 28
10.2 EXPENSES AND INDEMNITIES. . . . . . . . . . . . . . . . . . . . . 29
10.3 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 JOINT AND SEVERAL SUCCESSORS. . . . . . . . . . . . . . . . . . . 29
10.5 PARTICIPATION AND INFORMATION . . . . . . . . . . . . . . . . . . 29
10.6 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 30
10.9 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.10 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.11 CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . . . 30
10.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . 31
iii
<PAGE>
EXHIBITS
EXHIBIT CONTENTS
A Loan Terms
B Notice of Borrowing
C Notice of Conversion/Continuation
D Compliance Certificate
SCHEDULES
SCHEDULE CONTENTS
6.5 Financial Statements (Section 6.5)
6.6 Litigation (Section 6.6)
6.6(a) Contingent Liabilities (Section 6.6)
6.11 Existing Liens (Section 6.11 and 8.9)
6.16 Subsidiaries (Section 6.16)
8.5 Investments (Section 8.5)
8.6 Existing Indebtedness (Section 8.6)
iv
<PAGE>
EXHIBIT A
I. REVOLVING CREDIT LOANS
1. Revolving Credit Commitment - (i) $40,000,000 to June 30, 2000;
(ii) $32,500,000 from July 1, 2000 to
June 30, 2001; and
(iii) $22,500,000 from July 1, 2001
to the Revolving Credit
Maturity Date
2. Revolving Credit Maturity Date - July 1, 2002
3. Revolving Credit Rate
(a) Reference Rate Loans - Reference Rate minus one percent
(1%)
(b) Eurodollar Loans - If the Cash Flow Leverage Ratio
determined as set forth in the most
recent compliance certificate and
financial statements delivered to
the Bank pursuant to Section 7.1
is:
(i) greater than 2 to 1, then the
Revolving Credit Rate shall be the
Adjusted Eurodollar Rate plus one and
three quarters percent (1.75%) per
annum;
(ii) greater than 1.75 to 1 but less
than or equal to 2 to 1, then the
Revolving Credit Rate shall be the
Adjusted Eurodollar Rate plus one and
one-half percent (1.5%) per annum;
(iii) greater than 1 to 1 but less than
or equal to 1.75 to 1, then the
Revolving Credit Rate shall be the
Adjusted Eurodollar Rate plus one
percent (1%) per annum; or
A-1
<PAGE>
(iv) less than or equal to 1 to 1, then
the Revolving Credit Rate shall be the
Adjusted Eurodollar Rate plus sixty-five
hundredths percent (.65%) per annum.
Changes in the Cash Flow Leverage Ratio shall not affect the rate stated
above for outstanding Eurodollar Loans until expiration of the applicable
Interest Period.
III. FINANCIAL COVENANTS
1. Current Ratio (current assets compared to current liabilities excluding the
principal payment required on the Revolving Credit Loans on the Revolving Credit
Maturity Date) of not less than 2 to 1.
2. Cash Flow Leverage Ratio (Funded Debt compared to EBITDA) of not more than
3 to 1.
3. Cash Flow Ratio (EBITDA divided by the sum of Interest Expense and
Mandatory Debt Reduction excluding the principal payment required on the
Revolving Credit Loans on the Revolving Credit Maturity Date) of not less
than 1.75 to 1.
4. Net Worth of not less than $25,000,000.
5. Capital Expenditures for any fiscal year shall not exceed $13,000,000.
IV. NONUSE FEE
During the term of the Revolving Credit Commitment, the Borrower shall pay
a nonuse fee determined as follows. If the Cash Flow Leverage Ratio determined
as set forth in the most recent compliance certificate and financial statements
delivered to the Bank pursuant to Section 7.1 is:
(i) greater than 2 to 1, then the Borrower shall pay to the Bank a
nonuse fee equal to the product of one-quarter percent (.25%) annualized
multiplied by the daily amount of the unused portion of the Revolving Credit
Commitment; or
(ii) less than or equal to 2 to 1, the Borrower shall pay to the Bank a
nonuse fee equal to the product of one-eighth percent (.125%) annualized
multiplied by the daily amount of the unused portion of the Revolving Credit
Commitment.
Such fees shall be calculated daily, billed quarterly (calendar) and payable
within 30 days after invoice.
A-2
<PAGE>
TO OUR FELLOW SHAREHOLDERS
We are pleased to report another successful year at Hach with all time record
results for net sales, net income, cash flow and economic value added. Beyond
the financial results, a number of other significant events took place. First,
our increased investments in research and development over the past two years
have provided a number of new products that were introduced late in fiscal year
1997 and should contribute to sales growth in 1998 and beyond. Second, our
ongoing efforts to enhance competitiveness and quality continue to show
progress. Third, our Board of Directors approved a proposal to amend the
Company's Certificate of Incorporation to create a new, non-voting class of
stock. Fourth, subsequent to our fiscal year end, we purchased all Hach Company
stock which was owned by Lawter International. And finally, 1997 marks our
fiftieth year in business.
FINANCIAL RESULTS
Net sales reached a record $121,480,000, 6% ahead of 1996 sales of
$114,285,000. Once again international sales led the way, increasing 7%
despite a strong United States dollar. Although sales measured in Belgium
Francs increased, the strong dollar had the effect of reducing 1997 European
sales by $1,300,000 when compared to 1996. International sales outside of
Europe increased 16% due to volume increases in all of the Company's major
product lines. Net income rose 11% to $12,495,000 and earnings per share
increased to $1.10. Operating cash flow increased $896,000 to a record
$20,396,000. Economic Profit increased to $4,367,000 from $2,871,000 in
1996, thus yielding Economic Value Added of $1,496,000 for 1997. Economic
Profit is defined as net operating profit after taxes, in excess of a
computed capital charge for average capital employed. Economic Value Added
represents the growth in Economic Profit from year to year. We believe that
Economic Value Added is the single best measure of assessing our overall
performance. Major factors contributing to both the operating cash flow and
economic profit increases were the improvement in operating income and
improvements in operating asset management. During 1997 better asset
utilization resulted in a 8% decrease in inventory and a $308,000 reduction
in net property, plant and equipment. At year end our cash and investments
had grown to $41,081,000 thus providing a great deal of flexibility to
finance our future growth. During the year dividends paid amounted to 24
cents per share. This marks the 16th consecutive year dividends have
increased.
NEW PRODUCTS
Results from our research and development efforts pay off in many ways. Fiscal
year 1997 marks the completion of the replacement and upgrade of the entire
colorimeter and spectrophotometer product line to incorporate the latest in
chemical procedures and electronics. Additionally, the introduction of the
Pocket Turbidimeter and 1720D Process Turbidimeter completes the upgrade to the
clean water turbidimeters. This gives Hach Company the newest and most complete
line of turbidimeters in the world. Finally, the recent introduction of the
APA6000 Process Analyzer promises to bring solid sales growth from the process
control market by bringing a Hach developed modification of sequential injection
analysis to routine instrumentation.
In fiscal year 1997 our research and development investment reached seven
percent of net sales. This investment is helping to bring more new products to
market while at the same time shortening the product development cycle.
ENHANCED COMPETITIVENESS
During fiscal year 1997 we continued to make progress toward our goals of making
the Company more efficient and improving quality. Net income grew at nearly
twice the rate of sales growth, reaching 10.3% of net sales for 1997 compared to
9.8% of sales in 1996. Sales per employee increased by 6% to $140,500 compared
to $132,200 for the previous year, and the quality of our products and services
continued to improve.
1
<PAGE>
During fiscal year 1998 we will be making significant capital investments
designed to assure these improvements continue. Total capital spending in
fiscal 1998 will approximate $10,000,000, and includes construction of a new
building at our main plant in Loveland, Colorado. This building will be a
66,000 square foot state of the art manufacturing facility and once completed
should supply adequate space to meet our needs for the next several years. We
will also be investing significant resources into modernizing our information
systems. When complete, this investment will provide an integrated information
system to support customer service, manufacturing, finance and other areas of
the Company. Brian Bowden has been promoted to Vice President of Information
Systems and is heading up this important project. Brian has been with Hach for
nine years and during that time has held a number of management positions.
PROPOSED NEW CLASS OF STOCK
In May our Board of Directors approved a proposal to amend the Company's
Certificate of Incorporation. The amendment, which is subject to approval by
the holders of a majority of the outstanding shares of existing common stock,
would create a new class of stock designated as Class A Common Stock. The Class
A stock would be non-voting except under certain limited circumstances. Upon
approval and filing of the amendment under Delaware law, the Board plans to
authorize distribution of a stock dividend of one share of Class A common stock
on each share of the Company's outstanding common stock. The benefits and other
consequences of this dual class structure are described in the proxy statement
accompanying this annual report.
REPURCHASE OF HACH COMMON STOCK
On July 8, 1997, the Company repurchased the entire block of Hach Company common
stock which was owned by Lawter International. This stock represented
approximately 28% ownership in Hach Company. The purchase of the 3,157,223
shares at $19.00 per share was financed with $30 million of cash on hand and $30
million in bank financing. By reducing the number of outstanding shares, the
remaining stockholders will experience an immediate increase in earnings per
share. Other anticipated benefits of this transaction include a more freely
traded marketplace for our stock and the flexibility to utilize Hach Company
stock for future growth initiatives.
FIFTY YEARS OF SERVICE
This year marks our fifty year anniversary of providing quality systems for
analysis to our chosen markets. Our financial condition has never been
stronger. During fiscal year 1997 cash and investment balances grew by more
than $10,000,000. With the repurchase of the shares previously owned by Lawter
International, we have used a significant portion of our cash balances and
provided a more appropriate capital structure for our company. We believe this
structure, along with the operational plans already in place, will lend to
enhanced shareholder value over the coming years.
Over the past fifty years we have grown from a small two person proprietorship
to a complex organization of more than 875 individuals. During this time we
have remained focused on providing quality products and services to our many
customers. We are grateful to the employees of Hach Company for their dedicated
service. Without their support and cooperation our success over the past fifty
years would not have been possible.
2
<PAGE>
As we enter our second fifty years we are confident in the continued efforts of
our employees to pursue superior rewards for our customers and shareholders.
Sincerely,
/s/ Kathryn C. Hach-Darrow
Chairman of the Board
and Chief Executive Officer
/s/ Bruce J. Hach
President
and Chief Operating Officer
3
<PAGE>
HACH COMPANY & SUBSIDIARIES
COMPARATIVE FINANCIAL DATA - 10 YEAR SUMMARY
(THOUSANDS OF DOLLARS EXCEPT RATIO AND SHARE DATA)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS Years ended April 30, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
Net Sales:
United States $ 77,688 $ 73,472 $ 69,867 $ 69,100 $ 62,497
International 43,792 40,813 35,402 31,269 31,504
- --------------------------------------------------------------------------------------------------------------
Worldwide 121,480 114,285 105,269 100,369 94,001
Cost of sales 62,342 57,839 51,994 49,534 46,623
Selling, general and administrative expense 33,385 33,000 32,240 30,802 28,685
Research and development expense 8,459 7,464 6,875 6,586 5,752
Electrochem line phaseout - - 775 - -
Interest income 1,799 1,324 661 467 427
Interest expense 13 6 1 12 48
Income taxes 6,585 6,046 4,775 4,842 4,700
Net income 12,495 11,254 9,270* 9,508+ 8,620
Per share data:++
Net income 1.10 0.99 .081* .084+ 0.76
Cash dividends 0.24 0.22 0.17 0.136 0.128
OTHER DATA
Current ratio 4.71 4.59 4.55 4.14 3.49
Working capital 53,332 41,886 38,596 30,699 25,124
Property, plant and equipment, net 28,804 29,112 29,128 28,903 29,270
Total assets 105,580 93,655 84,258 74,358 66,971
Long-term liabilities 1,726 1,347 2,070 2,081 2,246
Stockholders' equity 87,289 78,820 71,328 62,497 54,651
Equity per share at year end++ 7.68 6.93 6.27 5.49 4.81
Sales per employee 140 132 120 112 105
Weighted average shares outstanding++ 11,365,108 11,368,126 11,385,355 11,385,793 11,361,958
</TABLE>
4
<PAGE>
HACH COMPANY & SUBSIDIARIES
COMPARATIVE FINANCIAL DATA - 10 YEAR SUMMARY
(THOUSANDS OF DOLLARS EXCEPT RATIO AND SHARE DATA)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS Years ended April 30, 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------
Net Sales:
United States $ 57,148 $ 50,476 $ 45,645 $ 40,598 $ 36,056
International 27,591 21,844 17,456 15,253 11,579
- ---------------------------------------------------------------------------------------------------------------
Worldwide 84,739 72,320 63,101 55,851 47,635
Cost of sales 41,938 36,094 32,193 27,392 23,698
Selling, general and administrative expense 25,936 22,360 18,912 17,619 15,564
Research and development expense 4,951 4,372 3,991 3,519 2,984
Electrochem line phaseout - - - - -
Interest income 312 296 311 332 313
Interest expense 119 177 244 283 322
Income taxes 4,357 3,648 3,007 2,815 2,250
Net income 7,750 5,965 5,065 4,555 3,130
Per share data:++
Net income 0.68 0.53 0.45 0.40 0.28
Cash dividends 0.106 0.09 0.077 0.065 0.052
OTHER DATA
Current ratio 2.72 2.79 2.89 2.76 3.57
Working capital 20,977 17,631 16,546 14,555 15,293
Property, plant and equipment, net 28,094 25,024 21,678 18,221 14,493
Total assets 61,619 52,849 47,217 42,530 37,201
Long-term liabilities 2,104 2,593 3,131 3,629 4,259
Stockholders' equity 47,301 40,401 35,328 30,610 27,001
Equity per share at year end++ 4.17 3.56 3.12 2.71 2.40
Sales per employee 98 90 85 82 78
Weighted average shares outstanding++ 11,348,444 11,319,723 11,311,315 11,304,776 11,259,349
</TABLE>
5
<PAGE>
*Net income for 1995 includes a one-time pretax charge of $775,000 or $.05 per
share after tax for the provision to reduce carrying value of electrochemical
assets.
+ Net income for 1994 includes a benefit of $448,000 or $.04 per share for the
cumulative effect of a change in accounting for income taxes.
++ All shares and per share amounts have been restated to give effect to the
five-for-four stock split in April 1994 and the three-for-two stock split in
June of 1992 and the five-for-four stock splits in fiscal 1991, 1990 and 1989.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Net sales were a record $121,480,000, an increase of 6.3% over 1996 net sales of
$114,285,000. The Company's domestic and international net sales increased 5.7%
and 7.3% respectively, due primarily to unit volume increases in most of the
Company's major product lines. Although sales measured in Belgium francs
increased, a strong U.S. dollar had the effect of reducing European sales by
approximately $1,300,000 when compared to the prior year. International sales
outside of Europe increased 16%.
Cost of sales increased 7.8% to $62,342,000 from $57,839,000. This cost item,
composed of material, labor and product overhead, increased because of unit
volume increases. The gross margin was 48.7% and 49.4% of net sales for 1997
and 1996 respectively. The gross margin decrease was due primarily to the
geographic mix of products sold. In general, international sales have lower
gross margins than domestic sales due to the higher discounting granted to the
Company's international distributors.
Selling, general and administrative expense increased 1.2% to $33,385,000 from
$33,000,000. The increase was due primarily to normal wage and salary increases
and costs associated with the increased sales volume, offset partially by
efficiency improvements throughout the administrative area.
Research and development expense increased 13.3% to $8,459,000 from $7,464,000.
The increase was primarily due to normal wage and salary increases and increased
emphasis on research and development efforts.
Interest income increased to $1,799,000 from $1,324,000. The increase was the
result of higher average investments in the current period.
The effective income tax rate was 34.5%, compared to 35.0% in 1996. The
decrease in the effective income tax rate was due primarily to foreign tax
credits.
Net dollar sales for the Company's European subsidiary decreased 4.6% to
$16,531,000 from $17,290,000, due primarily to a stronger U.S. dollar. The
actual unit sales volume increased by 3.3% from that of the prior year. The
operating income decreased 35% to $2,380,000 from $3,689,000. The decrease was
due primarily to increased costs for U.S. goods, brought about by a stronger
U.S. dollar on a weighted average basis in fiscal year 1997 as compared to
fiscal year 1996. In addition, during 1997 the Company increased the transfer
price for U.S. goods sold to its European subsidiary.
6
<PAGE>
1996 COMPARED TO 1995
Net sales were a record $114,285,000, an increase of 8.6% over 1995 net sales of
$105,269,000. The Company's domestic and international net sales increased 5.2%
and 15.3% respectively. The domestic increase was due primarily to unit volume
increases in most of the Company's major product lines. The international sales
increase was due to unit volume increases and, to a lesser degree, a weak U.S.
dollar.
Cost of sales increased 11.2% to $57,839,000 from $51,994,000. This cost item,
composed of material, labor and product overhead, increased because of unit
volume increases. The gross margin was 49.4% and 50.6% of net sales for 1996
and 1995 respectively. The deterioration in gross margin was due to the mix of
products sold.
Selling, general and administrative expense increased 2.4% to $33,000,000 from
$32,240,000. The increase was due primarily to normal wage and salary increases
and costs associated with the increased sales volume.
Research and development expense increased 8.6% to $7,464,000 from $6,875,000.
The increase was primarily due to normal wage and salary increases and increased
emphasis on research and development efforts.
Interest income increased to $1,324,000 from $661,000. The increase was the
result of higher average investments in the current period.
The effective income tax rate was 35.0%, compared to 34.0% in 1995. The
increase in the effective income tax rate was due primarily to an expiration of
the research and experimentation tax credit.
Net dollar sales for the Company's European subsidiary increased 15.4% to
$17,290,000 from $14,989,000, due primarily to a weaker U.S. dollar. The actual
unit sales volume increased by 5.5% from that of the prior year. The operating
income increased 128% to $3,689,000 from $1,619,000. The increase was due
primarily to lower cost for U.S. goods, brought about by a weaker U.S. dollar on
a weighted average basis in fiscal year 1996 as compared to fiscal year 1995,
and lower operating costs resulting from efficiency improvements.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity showed continued improvement as reflected by an increase
of $11,446,000 or 27.3% in working capital. Capital resources were strengthened
further as reflected by an increase of $8,469,000 or 10.7% in stockholders'
equity. The Company expects to continue to pay cash dividends in the future.
Company cash dividends paid in 1997, 1996 and 1995 were $2,728,000, $2,502,000
and $1,935,000, respectively. The Company intends to continue to increase cash
dividend payments, provided long-term growth is not jeopardized.
The Company monitors cash flow and capital expenditures in great detail as part
of its total budgeting process. During fiscal year 1997, the Company spent
approximately $6,163,000 on capital equipment. During fiscal year 1998, the
Company expects to spend approximately $10,000,000 on capital items. These
expenditures include the construction of a 66,000 square foot building at the
Loveland, Colorado site, production equipment and computer hardware and software
to support production, research and development and administration. Total costs
to construct the building are estimated at $5,500,000 and will be incurred in
fiscal years 1998 and 1999. The addition will provide more manufacturing,
research and development and office space. Construction is tentatively
scheduled to begin in late summer or early fall of 1997.
Throughout most of the world, the Company transacts business in U.S. dollars.
In Europe, the Company's foreign subsidiary, Hach Europe, transacts business
primarily in Belgium Francs. The change in the cumulative currency translation
adjustment in fiscal year 1997 was due primarily to a stronger U.S. dollar at
April 30, 1997, compared to April 30, 1996.
7
<PAGE>
On June 26, 1997, the Company and Lawter International, entered into a
definitive agreement for the repurchase of Lawter International's entire
holdings of Hach Company Common Stock. The 3,157,223 shares, representing
approximately 28% of Hach Company outstanding Common Stock, were purchased for
$19.00 per share. The transaction was completed on July 8, 1997. The purchase
was made using approximately $30 million of cash on hand, supplemented by bank
borrowings.
During the fiscal year 1995, the Company's Board of Directors authorized the
Company to repurchase up to $2,000,000 in value of the Company's common stock.
As of April 30, 1997, the Company has repurchased approximately 98,060 shares at
an average cost of $15.35 per share. The Company intends to finance its capital
projects, working capital needs and stock buy-back through existing cash and
cash equivalents, short-term investments and projected cash flow from
operations.
EFFECTS OF INFLATION ON THE COMPANY
The Company is affected by inflation to about the same degree as other U.S.
companies. The Company sells a great variety of products and has a relatively
small order size and short production runs. This causes a higher ratio of
support or overhead personnel in the factory, research and selling functions.
Thus, the impact of wage increases is somewhat greater than would be typical.
As the rate of inflation has declined in recent years, the impact of inflation
on the Company has lessened. However, inflation continues to increase costs to
the Company, including the costs of material, labor and overhead.
ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," in February 1997. This
statement, which is required to be adopted in the third quarter of fiscal year
1998, establishes standards for computing and presenting earnings per share.
The company has not yet adopted this statement but believes that this statement
will have no material effect on the Company's financial statements.
DESCRIPTION OF BUSINESS
GENERAL NATURE AND SCOPE OF BUSINESS
Hach Company is engaged predominantly in a single industry segment encompassing
laboratory instruments, process analyzers and test kits which are used to
analyze the chemical content and other properties of water and other aqueous
solutions. This segment encompasses the analytical reagents and chemicals
manufactured and sold by the Company. The Company manufactures and sells a
small amount of chemicals for uses not associated with the Company's analytical
systems for water analysis.
SALES BY PRINCIPAL PRODUCT GROUP
(PERCENT OF NET SALES) 1997 1996 1995
- -------------------------------------------------------------------------------
Analytical Reagents and Chemicals 31.7% 30.9% 31.3%
Laboratory and Portable Instruments 29.5% 29.7% 29.1%
Continuous Reading Process Analyzers 17.4% 16.8% 16.6%
Portable Test Kits and Replacements 12.2% 13.2% 13.7%
Other 9.2% 9.4% 9.3%
- -------------------------------------------------------------------------------
Total 100% 100% 100%
===============================================================================
8
<PAGE>
Analytical reagents and chemicals are manufactured and sold to support Hach
testing systems of laboratory and portable instruments, process analyzers and
portable test kits. More stringent water quality standard and a worldwide
direction toward better control of processes - exhibited by ISO (International
Organization for Standardization) 9000 registration of many industrial companies
- - drive the demand for the Company's products and their continued use.
Laboratory and portable instruments consist of Hach-manufactured analytical
instruments in the following categories: spectrophotometers and colorimeters,
turbidimeters, Ion Selective Electrodes, COD (chemical oxygen demand) apparatus,
digestion apparatus and precision reagent-dispensing devices. These products
are sold to municipal water and wastewater utilities, chemical manufacturers,
industrial water conditioning firms and organizations, power utilities,
commercial analytical laboratories and government agencies for the testing and
monitoring of controlled impurities in water systems.
Continuous-reading process analyzers consist of Hach-manufactured products in
the following categories: colorimetric analyzers, process turbidimeters, pH
controllers and analyzer accessories. These products are sold to
municipalities for monitoring and controlling drinking water quality and to
ensure that wastewater treatment procedures comply with government
regulations. Steam-generating plants, including operations at electrical
utilities, petrochemical processors, heavy industry installations and pulp
and paper factories, use the Company's continuous-reading process analyzers
for on-line monitoring of cooling-tower and boiler-feedwater quality. The
microelectronics industry uses the Company's trace silica analyzers to
monitor ultrapure water systems used in processing electronic components.
Hach offers more than 200 different test kits for 12 different application areas
ranging from agriculture to water quality. These portable test kits are
recognized worldwide for ease of use, innovative chemistry, field-oriented
design and rugged construction. Test kits are sold to municipalities for use in
monitoring drinking water distribution systems; to conservation groups to
monitor for influences impacting the environment; to educators for use in
teaching environmental awareness; to customers monitoring industrial processes;
to the water-conditioning industry to use in testing water quality and to
environmental regulatory authorities for use in checking compliance
requirements.
No material part of the business of the Company is dependent upon a single
product or any customer or a small group of customers.
DISTRIBUTION
Hach Company sells it analytical systems throughout the United States by direct
marketing. The Company has Regional Sales Managers located across the country
and responsive telemarketing Customer Service Representatives in the Loveland
facility selling its products. The Company directly distributes products to
customers in the United States through a modern distribution facility in Ames,
Iowa.
Independent distributors and sales representatives, who frequently handle
complementary and/or competitive product lines, are used to sell and distribute
the Company's products to international customers. Customers in Canada are
supported directly by a sales and service office in Winnipeg, Manitoba.
Hach Company operates a facility in Namur, Belgium, for the marketing and
distribution of its products to the European market. The Namur facility
primarily services the Company's European independent distributors and, to a
lesser extent, distributors and sales agents in Mediterranean Africa and the
Middle East.
9
<PAGE>
AVAILABILITY OF MATERIALS
The Company has developed close working relationships with many of its key
vendors to assure an adequate and continuous supply of materials for the
Company's products. There are some unique components that would cause temporary
stoppage of specific products if these components were not available. However,
since the Company could obtain alternate sources of supply after a reasonable
period of time, the temporary stoppage would not have a material adverse effect
on the Company.
COMPETITION
The Company competes domestically with a fairly large number of companies.
These companies range in size from a few which are larger than Hach and sell,
primarily, laboratory and portable instruments, to numerous smaller companies
which sell products competitive with only a few of Hach's products. The Company
is not aware of any company which competes with it across the full range of
products sold by it or which competes with it in all major product lines.
Different competitive factors are of greater or lesser importance with respect
to each of the Company's product lines although, overall, technical
sophistication, reliability, quality, relative ease of operation and price
probably are most important. The Company believes that it has no competitive
disadvantages with respect to any of these factors. In many instances the
Company has a competitive advantage due to the relative ease with which
individuals without technical backgrounds can use the Company's products to
perform analyses. Hach Company's competition in international markets is
comparable to its competition in domestic markets. However, the international
competition, particularly from Europe, appears to be growing more aggressive and
competes across a broader range of products.
RESEARCH
During fiscal 1997, 1996 and 1995, the Company spent $8,459,000, $7,464,000 and
$6,875,000, respectively, on Company-sponsored research and development
activities.
PATENTS
The Company owns a number of patents. While the company regards its patents as
valuable, it does not consider any of its business materially dependent upon any
single patent.
BACKLOG
The dollar amounts of backlogged orders at May 23, 1997 and May 24, 1996 were
$5,797,000 and $4,227,000, respectively. During the current fiscal year the
Company expects to fill all of the orders which were backlogged at May 23, 1997.
EMPLOYEES
At April 30, 1997, the Company employed approximately 875 people. The Company
is not a party to any collective bargaining agreements.
10
<PAGE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
CASH
FISCAL SALE DIVIDENDS
YEAR QUARTER HIGH LOW PER SHARE
1997 Fourth................ 19 3/4 14 1/2 .06
Third................. 19 16 1/4 .06
Second................ 20 14 7/8 .06
First................. 17 1/2 14 1/2 .06
1996 Fourth................ 17 3/4 16 1/4 .06
Third................. 17 1/2 15 .06
Second................ 20 3/8 12 3/4 .05
First................. 16 12 3/4 .05
The Company's Common Stock trades on the Nasdaq Stock Market under the symbol
HACH. The preceding table sets forth the daily high and low last sales prices
for the Company's Common Stock for the periods indicated, as reported in the
Wall Street Journal, together with the amounts of dividends paid for the fiscal
years ended April 30, 1997 and 1996. These prices represent quotations between
dealers in securities, do not include retail markdowns or commissions and do not
necessarily represent "actual transactions." The current quoted price of the
stock is listed daily in the WALL STREET JOURNAL in the Nasdaq National Market
System section. On April 30, 1997, there were 805 holders of record of the
Company's Common Stock.
MANAGEMENT'S REPORT AND REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders of Hach Company:
The information presented in this Annual Report was prepared by your company's
management. The financial statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis. These principles
require choices among alternatives and numerous estimates of financial matters.
We believe that the accounting principles chosen are appropriate in the
circumstances and the estimates and judgments involved in Hach's financial
reporting are reasonable. All other financial and operating data included in
this Annual Report are presented to provide information we believe useful to
investors.
Management recognizes its responsibility for the integrity and objectivity of
the information presented. To meet this responsibility, management maintains a
system of internal accounting controls designed to provide reasonable assurance
that the financial reports are fairly presented and that our employees comply
with our stated policies and procedures, including policies on the ethical
conduct of business.
The Audit Committee recommended and the Board of Directors approved the
appointment of Coopers & Lybrand L.L.P. as independent auditor for the Company.
The Coopers & Lybrand L.L.P. report on the financial statements is presented in
this Annual Report.
Audit and related activities of Coopers and Lybrand L.L.P. are conducted
throughout the year for the purposes of the annual audit and limited reviews of
interim financial statements. The audit of the financial statements is
conducted in accordance with generally accepted auditing standards and includes
tests of internal controls and accounting records as deemed necessary.
11
<PAGE>
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, performs an oversight role relating Hach's public financial
reporting. The Audit Committee meets at least two times a year with management
and Coopers & Lybrand L.L.P., both privately and collectively, to discuss
internal accounting control and financial reporting matters. Coopers & Lybrand
L.L.P. has access to the Audit Committee to discuss any matter.
KATHRYN HACH-DARROW
Chairman of the Board
GARY R. DREHER
Vice President and
Chief Financial Officer
To the Stockholders and Board of Directors of Hach Company:
We have audited the accompanying consolidated balance sheets of Hach Company and
Subsidiaries as of April 30, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended April 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hach
Company and Subsidiaries as of April 30, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
June 26, 1997
12
<PAGE>
HACH COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
Net sales $ 121,480 $ 114,285 $ 105,269
Cost of sales 62,342 57,839 51,994
- --------------------------------------------------------------------------------------------------------------
Gross Profit 59,138 56,446 53,275
Selling, general and administrative expense 33,385 33,000 32,240
Research and development expense 8,459 7,464 6,875
Provision to reduce carrying value of electrochemical assets --- --- 775
- --------------------------------------------------------------------------------------------------------------
Income from operations 17,294 15,982 13,385
Investment income 1,799 1,324 661
Interest expense (13) (6) (1)
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 19,080 17,300 14,045
Income tax expense 6,585 6,046 4,775
- --------------------------------------------------------------------------------------------------------------
Net income $ 12,495 $ 11,254 $ 9,270
- --------------------------------------------------------------------------------------------------------------
Net income per common share $ 1.10 $ 0.99 $ 0.81
==============================================================================================================
Weighted average shares outstanding 11,365,108 11,368,126 11,385,355
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
13
<PAGE>
HACH COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
YEAR ENDED APRIL 30, 1997 AND 1996
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
- ----------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,575 $ 8,487
Marketable securities, held to maturity 19,100 12,821
Accounts receivable, less reserves of $249 and $248, respectively 17,829 15,846
Inventories, net 11,798 12,769
Deferred tax assets and other current assets 4,416 3,637
- ----------------------------------------------------------------------------------------------------
Total current assets 67,718 53,560
- ----------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost
Buildings and improvements 23,404 23,557
Machinery and equipment 46,555 43,129
- ----------------------------------------------------------------------------------------------------
69,959 66,686
Less: allowance for depreciation and amortization 42,141 38,571
- ----------------------------------------------------------------------------------------------------
27,818 28,115
Land 986 997
- ----------------------------------------------------------------------------------------------------
Net property, plant and equipment 28,804 29,112
- ----------------------------------------------------------------------------------------------------
Marketable securities, held to maturity 7,406 9,299
Other assets 1,652 1,684
- ----------------------------------------------------------------------------------------------------
Total assets $ 105,580 $ 93,655
====================================================================================================
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 4,044 $ 2,826
Accrued liabilities:
Compensation 1,082 731
Compensated absences 3,655 3,500
Profit sharing 3,473 3,069
Income taxes payable 753 360
Other 1,379 1,188
- ----------------------------------------------------------------------------------------------------
Total current liabilities 14,386 11,674
- ----------------------------------------------------------------------------------------------------
Long term liabilities 1,726 1,347
Deferred income taxes 2,179 1,814
- ----------------------------------------------------------------------------------------------------
Total liabilities 18,291 14,835
- ----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized 25,000,000 shares in 1997
and 40,000,000 shares in 1996; issued 11,622,953 shares 11,623 11,623
Capital contributed in excess of par value of common stock 453 316
Retained earnings 76,944 67,177
Cumulative currency translation adjustment 338 1,636
- ----------------------------------------------------------------------------------------------------
89,358 80,752
Less: shares held in treasury, at cost: (254,356 in 1997 and 258,881 in 1996) (2,069) (1,932)
- ----------------------------------------------------------------------------------------------------
Total stockholders' equity 87,289 78,820
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 105,580 $ 93,655
====================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
HACH COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
COMMON CAPITAL RETAINED CUMULATIVE SHARES HELD TOTAL
STOCK, $1 CONTRIBUTED IN EARNINGS CURRENCY IN TREASURY, STOCKHOLDERS'
PAR VALUE EXCESS OF PAR TRANSLATION AT COST EQUITY
VALUE OF ADJUSTMENT
COMMON STOCK
- --------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1994 $ 11,623 $ 31 $ 51,090 $ 497 $ (744) $ 62,497
Net income --- --- 9,270 --- --- 9,270
Cash dividends, $.17 per share --- --- (1,935) --- --- (1,935)
Purchase of treasury stock --- --- --- --- --- ---
(30,922 shares) --- --- --- --- (445) (445)
Stock options exercised, net
(12,130 shares) --- 117 --- --- (84) 33
Foreign currency --- --- --- --- --- ---
translation adjustment --- --- --- 1,908 --- 1,908
- --------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1995 $ 11,623 $ 148 $ 58,425 $ 2,405 $ (1,273) $ 71,328
Net income --- --- 11,254 --- --- 11,254
Cash dividends, $.22 per share --- --- (2,502) --- --- (2,502)
Purchase of treasury --- --- --- --- --- ---
stock (47,638 shares) --- --- --- --- (736) (736)
Stock options exercised, net
(21,722 shares) --- 168 --- --- 77 245
Foreign currency --- --- --- --- --- ---
translation adjustment --- --- --- (769) --- (769)
- --------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1996 $ 11,623 $ 316 $ 67,177 $ 1,636 $ (1,932) $ 78,820
Net income --- --- 12,495 --- --- 12,495
Cash dividends, $.24 per share --- --- (2,728) --- --- (2,728)
Purchase of treasury --- --- --- --- --- ---
stock (19,500 shares) --- --- --- --- (326) (326)
Shares purchased under
employee stock purchase plan --- 137 --- --- 189 326
Foreign currency --- --- --- --- --- ---
translation adjustment --- --- --- (1,298) --- (1,298)
- ---------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1997 $ 11,623 $ 453 $ 76,944 $ 338 $ (2,069) $ 87,289
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE>
HACH COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
Cash from operating activities:
Net income $ 12,495 $ 11,254 $ 9,270
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,196 6,049 5,769
(Benefit) provision for deferred income taxes (38) (277) (559)
Loss on disposal of equipment 40 63 177
Provision to reduce carrying value of electrochemical assets --- --- 775
(Increase) decrease in accounts receivable (1,983) 490 (393)
(Increase) decrease in inventories 971 (1,038) (362)
(Increase) decrease in deferred tax assets and
other current assets (376) 798 (1,509)
Increase (decrease) in accounts payable 1,218 (9) 385
Increase in accrued liabilities 1,873 2,170 695
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,396 19,500 14,248
- -----------------------------------------------------------------------------------------------------------
Cash flow from investing activities:
Proceeds from sale of equipment 11 271 62
Capital expenditures (6,163) (6,488) (6,445)
Purchases of investments held-to-maturity (21,727) (23,397) (4,723)
Proceeds from maturities of short-term investments 17,341 9,587 2,241
(Increase) decrease in other assets 32 (395) (573)
- ------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (10,506) (20,422) (9,438)
- ------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Payments on capital lease obligations --- (6) (6)
Dividends paid (2,728) (2,502) (1,935)
Purchases of treasury stock (326) (736) (445)
Shares purchased under employee stock purchase plan 326 245 33
- ------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (2,728) (2,999) (2,353)
- ------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes (1,074) (642) 1,556
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 6,088 (4,563) 4,013
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the beginning of the year 8,487 13,050 9,037
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $ 14,575 $ 8,487 $ 13,050
============================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 6,231 $ 5,028 $ 6,422
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
account balances have been eliminated in consolidation.
Certain amounts in the financial statements for prior years have been
reclassified to conform with the current year's presentation.
CASH EQUIVALENTS AND CONCENTRATIONS OF CREDIT RISK
Cash and cash equivalents include currency on hand, demand deposits with banks
or other financial institutions and other highly liquid securities purchased
with a maturity of three months or less. Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents. The Company places its cash and cash
equivalents with high-credit quality financial institutions. At times, these
deposits may exceed federally insured limits. The Company has not experienced
any losses in such accounts.
The Company's concentration of credit risk with respect to accounts receivable
is limited due to a large customer base and its geographic dispersion.
INVESTMENTS
The Company accounts for investments in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
This accounting standard requires companies to classify securities as
held-to-maturity, trading or available-for-sale. A substantial majority of
the Company's marketable investments are classified as held-to-maturity. The
Company uses the amortized cost method of accounting for investments in
held-to-maturity debt securities for which it has the positive intent and
ability to hold to maturity. The cost of securities sold is based on the
specific identification method. Of these securities, $19,100,000 have
contracted maturities within one year and $7,406,000 within one to five
years. The carrying amount of these securities approximated the fair value
at April 30, 1997.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of United
States inventories is based on the last-in, first-out (LIFO) method; all other
inventories are based on the average cost method.
PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment are stated at cost. Depreciation and
amortization are computed by using the straight-line method based on estimated
useful lives of the related assets or the lease term. Estimated useful lives
range from three to 30 years.
Maintenance and repairs are charged to expense as incurred while major renewals
and improvements are capitalized.
The cost and related allowances for depreciation of assets sold or otherwise
disposed of are deducted from the related accounts and resulting gains or losses
are reflected in operations.
INCOME TAXES
The Company accounts for taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes," using an asset and liability approach. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of those assets and liabilities.
18
<PAGE>
FOREIGN CURRENCY TRANSLATION
Foreign asset and liability accounts are converted into U.S. dollars using the
exchange rate in effect at the end of the year and revenue and expense accounts
are converted at the average exchange rate in effect during the year.
The Company's European subsidiary occasionally enters into foreign exchange
forward contracts in an attempt to mitigate risk of currency fluctuations on a
portion of the anticipated inventory purchases to be made from Hach Company.
Gains and losses on these contracts are included in the determination of net
income. As of April 30, 1997 and 1996, the Company had no forward contracts to
sell Belgium francs.
REVENUE RECOGNITION
The Company sells a large number of different tangible products and the average
size of a customer order is relatively small. Revenue is recognized upon
shipment of products to customers. Customers purchasing products from the
Company may return the products within a 30-day period if they are not
satisfied. Estimated returns are charged against earnings in the period the
original sale occurred.
The Company does not warrant products for an extended period of time. Warranty
claims historically have been minor. Known warranty claims are accrued in the
period they become known.
ADVERTISING
Costs associated with advertising are expensed in the year incurred except
for direct-response advertising costs. Direct-response advertising costs are
recorded as prepaid and amortized over the life of the associated program
which is generally one year. Advertising expense was $3,741,000, $4,352,000
and $4,046,000 in 1997, 1996 and 1995, respectively.
EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of shares
outstanding during each year. Stock options outstanding do not have a material
dilutive effect on earnings per share. Shares used in computing per share
amounts give a retroactive effect in all periods to the stock splits.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," in February 1997. This
statement, which is required to be adopted in the third quarter of fiscal year
1998, establishes standards for computing and presenting earnings per share.
The company has not yet adopted this statement but believes that this statement
will have no material effect on the Company's financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may be based upon
amounts which differ from those estimates.
2. INVENTORIES
Components of inventory at April 30 were:
(THOUSANDS OF DOLLARS)
1997 1996
- -------------------------------------------------------------
Raw materials and purchased parts $ 2,811 $ 2,623
Work in process 1,534 2,030
Finished Goods 7,031 7,762
Resale 422 354
- -------------------------------------------------------------
Total $ 11,798 $ 12,769
- -------------------------------------------------------------
Inventory Valuation Allowances at April 30, 1997, 1996 and 1995 were $555,000,
$188,000 and $505,000 respectively.
19
<PAGE>
Management believes the LIFO method, which results in better matching of current
costs with current revenues, minimizes inflation-induced inventory profits and
thus more clearly reflects results of operations. The cost of United States
inventories stated under LIFO method for 1997, and 1996 was approximately 80% of
the value of total inventories.
For purposes of comparison to companies not utilizing the LIFO method, the
following information is presented. If all inventories had been determined
using the current replacement cost at April 30, 1997, and 1996, reported
inventories would have been $3,184,000 and $2,819,000 higher, respectively.
Reported net income would have been $226,000 ($.02 per common share) higher for
fiscal year 1997, $94,000 ($.01 per common share) higher for fiscal year 1996,
and $208,000 ($.02 per common share) for fiscal year 1995. The impact on
reported net income utilizing LIFO as opposed to the current replacement cost
method has been computed by taking the change from year to year in the
difference between inventory valuation under LIFO and the inventory valuation
under current replacement costs and tax affecting such difference by 38% for
1997 and 1996, and 36% for 1995, the approximate incremental tax rate for each
year.
3. INCOME TAXES
Income before income tax expense consisted of the following:
(THOUSANDS OF DOLLARS)
1997 1996 1995
Income before income tax:
Domestic $16,559 $13,386 $12,352
Foreign 2,522 3,914 1,693
- -------------------------------------------------------------
$19,081 $17,300 $14,045
==============================================================
Income tax expense:
Current
Federal $ 4,852 $ 4,122 $ 4,045
State 775 631 606
Foreign 997 1,570 683
- -------------------------------------------------------------
6,624 6,323 5,334
Deferred
Federal (63) (227) (496)
State 30 (46) (69)
Foreign (6) (4) 6
- -------------------------------------------------------------
(39) (277) (559)
- -------------------------------------------------------------
$ 6,585 $ 6,046 $ 4,775
==============================================================
Components of the net deferred tax assets resulting from differences in book
and tax accounting methods are as follows:
20
<PAGE>
NET DEFERRED TAX ASSET
(THOUSANDS OF DOLLARS)
1997 1996 1995
- -----------------------------------------------------------------------
Deferred tax assets:
Vacation pay $ 1,104 $ 1,087 $ 1,055
Inventory capitalization / valuation 654 527 545
Write-off of electrochemical assets --- --- 233
Deferred compensation 652 376 208
Intercompany profits 271 120 117
Marketable securities 114 108 75
Employee benefit plans --- 83 53
Other 113 122 114
- -----------------------------------------------------------------------
Total deferred tax assets 2,908 2,423 2,400
Deferred tax liabilities:
Accelerated depreciation $ 2,103 $ 1,749 $ 1,998
Foreign deferrals 86 91 95
Employee benefit plans 97 --- ---
- -----------------------------------------------------------------------
Total deferred tax liabilities 2,286 1,840 2,093
- -----------------------------------------------------------------------
Net deferred tax asset $ 622 $ 583 $ 307
=======================================================================
Current deferred tax asset 2,801 2,397 2,377
Noncurrent deferred tax liability 2,179 1,814 2,070
- -----------------------------------------------------------------------
Net deferred tax asset $ 622 $ 583 $ 307
=======================================================================
The company believes, based upon past earnings, that all of the deferred tax
assets will be realized. Accordingly, no valuation allowance has been
provided.
Effective tax rates on income before income taxes for the years ended April 30,
1997, 1996 and 1995 were 35%, 35% and 34%, respectively. Differences from
applying the statutory Federal corporate income tax rate to income before
income taxes are due to the following:
(THOUSANDS OF DOLLARS)
1997 1996 1995
- -----------------------------------------------------------------------
Computed statutory expense $ 6,487 $ 5,882 $ 4,775
State income tax, net 512 443 386
Prior years' tax accrual adjustment --- --- 284
Difference between U.S. statutory rates
and foreign effective rates 135 235 114
Foreign sales corporation (212) (136) (95)
Tax credits, net (352) (306) (185)
Prior year's amended tax credits, net --- --- (418)
Other, net 15 (72) (86)
- -----------------------------------------------------------------------
$ 6,585 $ 6,046 $ 4,775
========================================================================
Undistributed earnings intended to be reinvested indefinitely by the foreign
subsidiaries totaled $8,492,000 at April 30, 1997. The earnings would become
taxable upon the sale or liquidation of the foreign subsidiaries or upon the
remittance of dividends. The determination of the deferred tax liability
related to these undistributed earnings is not practicable and, accordingly,
no U.S. deferred tax has been recorded.
21
<PAGE>
4. EMPLOYEE BENEFITS
EMPLOYEE PROFIT SHARING AND SAVINGS PLANS
The Company has an employee profit-sharing plan covering substantially all
regular employees of the Company with the maximum contribution limited to the
amount allowable for federal tax purposes. Each year the Company's Board of
Directors approves an amount the Company will contribute to the plan. The
Company has a savings plan which qualifies under Section 401(k) of the Internal
Revenue Code. Eligible employees may contribute from 1% to 10% of their income
on a pretax basis to this savings plan. The Company matches 50% of the first 4%
of the employee's contribution. The Company's annual contributions under these
Plans were $2,638,000 in 1997, $2,385,000 in 1996 and $1,967,000 in 1995.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan (ESOP) which is a
noncontributory plan established to acquire shares of the Company's common stock
for the benefit of all eligible employees. The Company accounts for the ESOP
under Employers' Accounting for Employee Stock Ownership Plans (SOP 93-6). Each
year the Company's Board of Directors approves an amount the Company will
contribute to the plan. The Company contributions to the Plan were $917,000 in
1997, $829,000 in 1996 and $650,000 in 1995. ESOP stock purchases are made from
the open market. As of April 30, 1997, all shares in the ESOP plan were
allocated to participants.
STOCK OPTION PLANS
The Company has two active stock option plans. Under the 1993 Stock Option Plan
the Company periodically grants certain officers and key employees incentive
stock options to purchase common stock. A total of 625,000 shares of the
Company's common stock have been reserved for option at a price not less than
the market price on the date of grant. Options granted under the plan may not
be exercised until one year after the date of grant. Options are exercisable in
installments on a cumulative basis beginning in the second year after grant and
expiring not later than ten years from the date of grant. Under the 1995
Non-Employee Director Stock Plan, 150,000 shares of the Company's common stock
have been reserved for option. The option price per share is equal to the fair
market value of a company share on the date of grant. The term of each option
may not exceed ten years, and an option first becomes exercisable six months
after the option grant date.
A summary of the status of the Company's stock option plans follows:
Options Weighted Average
OUTSTANDING EXERCISE PRICE
Balance at April 30, 1994 303,303 $16.88
Exercised (25,101) 8.96
- -------------------------------------------------------------
Balance at April 30, 1995 278,202 17.60
Granted 245,000 16.15
Exercised (33,827) 8.96
Expired (20,000) 19.00
- -------------------------------------------------------------
Balance at April 30, 1996 469,375 17.41
Granted 88,648 16.79
- -------------------------------------------------------------
Balance at April 30, 1997 558,023 $17.31
Options exercisable at:
April 30, 1996 183,999 $19.34
22
<PAGE>
April 30, 1997 332,016 $18.01
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan for all eligible employees.
Under the plan, shares of the Company's common stock may be purchased at
six-month intervals at 85% of the lower of the fair market value on the first
or the last day of each six-month period. Employees may purchase shares,
through payroll deductions not exceeding 10% of their gross compensation
during an offering period. During 1997, employees purchased 11,485 shares on
June 30, 1996 and 12,540 shares on December 31, 1996, at a price of $13.60
per share. During 1996, employees purchased 13,510 shares at a price of
$11.47 per share, for the plan's first offering period. At April 30, 1997,
462,465 shares were reserved for future issuance.
PRO FORMA INFORMATION
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," requires companies to measure employee stock compensation plans
based on the fair value method of accounting. However, the Statement allows the
alternative of continued use of Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," with pro forma disclosure of net
income and earnings per share determined as if the fair value based method had
been applied in measuring compensation cost. The Company adopted the new
standard in 1997, using the disclosure method, and elected the continued use of
APB Opinion No. 25 for financial statement purposes.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123. This information is required to be determined as if the Company
had accounted for its employee stock options (including shares issued under the
Employee Stock Purchase Plan, collectively called "options") granted subsequent
to April 30, 1995, under the fair value method of that statement. The fair
value of options granted in 1996 and 1997 reported below has been estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions:
Employee Stock
Stock Options Purchase Plan Shares
1997 1996 1997 1996
- -------------------------------------------------------------------------------
Expected life (in years) 4.0 4.0 .5 .5
Risk-free interest rate 6.2% 5.7% 5.4% 5.5%
Volatility .233 .233 .233 .233
Dividend yield 1.5% 1.5% 1.5% 1.5%
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in the opinion of management, the
existing models do not necessarily provide a reliable single measure of the fair
value of its options. The weighted average estimated fair value of employee
stock options granted during 1997 and 1996 was $4.18 and $3.87 per share,
respectively. The weighted average estimated fair value of shares granted under
the Employee Stock Purchase Plan during 1997 and 1996 was $3.88 and $3.40,
respectively.
The majority of the Company's stock options are classified as Incentive Stock
Options and therefore, provide no tax benefit to the Company.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
23
<PAGE>
1997 1996
- --------------------------------------------------------------------
Pro forma net income (thousands of dollars) $12,067 $11,029
Pro forma earnings per share $ 1.06 $ .97
Because SFAS No. 123 is applicable only to options granted subsequent to April
30, 1995, the resulting pro forma effect may not be representative of that to be
expected in future years.
At April 30, 1997, options with a weighted average remaining life of 3.1 years
covering 558,023 shares were outstanding at $16.125 to $21.80 per share. Shares
available for future grants amounted to 320,102 and 408,750 in 1997 and 1996,
respectively.
DEFERRED COMPENSATION PLAN
The Company has a Deferred Compensation Plan which permits eligible employees to
defer a portion of their compensation The deferred compensation, together with
a Company contribution and accumulated earnings is accrued but unfunded. At
April 30, 1997 and 1996, the liability for the deferred compensation is
$1,507,000 and $1,087,000 respectively, and is included with long-term
liabilities.
5. CAPITAL STOCK
On May 19, 1997, the Board of Directors of the Company approved revisions to a
proposal to implement a dual class stock structure previously approved by the
Board in March 1997. The revised proposal would amend the Company's Certificate
of Incorporation to allow a new class of stock, which would be non-voting. The
amendment is subject to approval by the holders of a majority of the outstanding
shares of existing common stock. Upon such approval and the filing of the
amendment under Delaware law, the Board plans to establish a record date and
authorize distribution of a stock dividend of one share of non-voting stock on
each share of the Company's outstanding common stock.
6. SUBSEQUENT EVENT
On June 26, 1997, the Company and Lawter International, entered into a
definitive agreement for the repurchase of Lawter International's entire
holdings of Hach Company Common Stock. The 3,157,223 shares, representing
approximately 28% of Hach Company outstanding Common Stock, were purchased for
$19.00 per share. The transaction was completed on July 8, 1997. The purchase
was made using approximately $30 million of cash on hand, supplemented by bank
borrowings.
7. SEGMENT INFORMATION
The Company operates primarily in a single industry segment encompassing
laboratory instruments, process analyzers and test kits which analyze the
chemical content and other properties of water and other aqueous solutions.
This segment also encompasses the chemicals manufactured and sold by the
Company, most of which are used with the instruments and test kits manufactured
by the Company.
Sales for the Company's European subsidiary are made to European dealers and to
customers in the Middle East and Mediterranean Africa in Belgium francs and U.S.
dollars, respectively. Payments from the European subsidiary to the U.S. parent
are made in U.S. dollars and are subject to the exchange rate in effect at the
time of payment. Export transactions made to all other parts of the world by
the international staff based in Loveland, Colorado, are conducted primarily in
U.S. dollars.
24
<PAGE>
The amount of sales made into the international marketplace is influenced to
some degree by the strength of the U.S. dollar against other currencies. Other
conditions which to some extent affect the sales of the Company's products in
international markets include restrictive tariff and trade policies imposed by
foreign countries and domestic and foreign tax and economic policies.
The table below summarizes certain financial information by geographic segments:
(THOUSANDS OF DOLLARS)
GEOGRAPHIC SEGMENT INFORMATION 1997 1996 1995
- --------------------------------------------------------------------
Net Sales to Unaffiliated Customers:
United States:
Domestic $ 77,688 $ 73,472 $ 69,867
- ---------------------------------------------------------------------
Export:
Canada 5,018 4,840 3,951
Asia 10,875 9,388 7,414
Australia/Oceania 1,360 1,496 1,212
Mexico/Central America/Caribbean 3,619 2,738 2,924
South America 4,121 3,313 3,023
Other 2,268 1,748 1,889
- ---------------------------------------------------------------------
27,261 23,523 20,413
- ---------------------------------------------------------------------
104,949 96,995 90,280
Europe 16,531 17,290 14,989
- ---------------------------------------------------------------------
121,480 114,285 105,269
- ---------------------------------------------------------------------
Net Sales to European Subsidiaries:
United States 11,402 10,140 8,310
Eliminations (11,402) (10,140) (8,310)
- ----------------------------------------------------------------------
$ 121,480 $ 114,285 $ 105,269
======================================================================
Income from Operations:
United States $ 14,914 $ 12,293 $ 11,766
Europe 2,380 3,689 1,619
- ----------------------------------------------------------------------
$ 17,294 $ 15,982 $ 13,385
======================================================================
Identifiable Assets:
United States $51,244 $ 49,384 $ 48,795
Europe 7,186 8,342 8,401
- ---------------------------------------------------------------------
58,430 57,726 57,196
Corporate Assets 47,150 35,929 27,062
- ---------------------------------------------------------------------
$105,580 $ 93,655 $ 84,258
======================================================================
25
<PAGE>
8. UNAUDITED SUMMARY OF QUARTERLY FINANCIAL INFORMATION
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------
Fiscal Year 1997:
Net Sales $ 28,910 $ 30,284 $ 29,481 $ 32,805
Gross Profit 14,163 14,960 14,157 15,858
Net income 2,960 3,215 3,025 3,295
Net income per common share 0.26 0.28 0.27 0.29
Fiscal Year 1996:
Net Sales $ 27,188 $ 28,717 $ 27,999 $ 30,381
Gross Profit 13,750 14,370 13,737 14,589
Net income 2,610 2,940 2,750 2,954
Net income per common share 0.23 0.26 0.24 0.26
26
<PAGE>
HACH COMPANY AND SUBSIDIARIES
CORPORATE DATA
<TABLE>
<CAPTION>
<S> <C> <C>
WORLD HEADQUARTERS BOARD OF DIRECTORS CORPORATE OFFICERS
5600 Lindbergh Drive KATHRYN HACH-DARROW KATHRYN HACH-DARROW
Loveland, Colorado, U.S.A. Chairman of the Board Chairman of the Board
and Chief Executive Officer and Chief Executive Officer
U.S.A. SALES BRUCE J. HACH BRUCE J. HACH
Davis, California President and Chief President and Chief
Corona, California Operating Officer Operating Officer
Loveland, Colorado GARY R. DREHER ROBERT O. CASE
Daytona Beach, Florida Vice President and Secretary and General Counsel
Snellville, Georgia Chief Financial Officer LOEL J. SIROVY
Roselle, Illinois LINDA O. DOTY Senior Vice President
Fort Wayne, Indiana Partner Operations and Outbound Marketing
Huxley, Iowa Doty & Associates JERRY M. CHURCHILL
Louisville, Kentucky Denver, Colorado Vice President
Westminster, Maryland JOHN N. MCCONNELL US Sales and Service
Preston, Mississippi Chairman and President GARY R. DREHER
Auburn, New Hampshire Labconco Vice President and
Whitehouse Station, New Jersey Kansas City, Missouri Chief Financial Officer
Mt. Laurel, New Jersey JOSEPH V. SCHWAN RANDALL A. PETERSEN
Ponce City, Oklahoma Chief Operating Officer Vice President
Columbus, Ohio and Executive Vice President Human Resources
Sullivan's Island, South Carolina Standard Register JOHN C. PRIVETTE
Georgetown, Texas Dayton, Ohio Vice President
Conroe, Texas FRED W. WENNINGER International Operations
Mill Creek, Washington Independent Businessman KENNETH OGAN
Spoakane, Washington Vice President
Research & Development
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL SALES TRANSFER AGENT BRIAN BOWDEN
Headquarters: Loveland, AND STOCK REGISTRAR Vice President
Colorado, U.S.A. HARRIS TRUST & SAVINGS BANK Information Systems Technology
European Sales: Namur, Belgium 311 West Monroe Street LARRY D. THOMPSON
sales agents in principal cities Chicago, IL 60690 Vice President
throughout the world Ames Chemical Operations
Hach Sales & Service Canada Ltd.
Winnipeg, Manitoba, Canada
WHOLLY OWNED SUBSIDIARIES AUDITORS FOR MORE INFORMATION
HACH EUROPE, S.A./N.V. COOPERS & LYBRAND L.L.P. To learn more about Hach Company
Namur, Belgium 370 17th Street visit our site on the World Wide Web
HACH (BARBADOS) FSC, INC. Denver, CO 80202 at www.hach.com.
Loveland, Colorado
HACH SALES & SERVICE CANADA LTD.
Winnipeg, Manitoba, Canada
</TABLE>
28
<PAGE>
EXHIBIT (21)O.
(ITEM 601(21))
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION
OF
SUBSIDIARY INCORPORATION
Hach Europe, S.A./N.V. Belgium
Hach (Barbados) FSC, Inc. Barbados
Hach Sales & Service Canada Ltd. Canada
<PAGE>
Exhibit (23)P.
(Item 601(23))
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation in this Annual Report on Form 10-K of Hach
Company of our report dated June 26, 1997 on our audits of the consolidated
financial statements of Hach Company and Subsidiaries as of April 30, 1997 and
1996, and for the years ended April 30, 1997, 1996, and 1995.
/s/ Coopers & Lybrand L.L.P.
Denver, Colorado
July 28, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1997
ANNUAL REPORT FOR THE YEAR ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 14,575
<SECURITIES> 19,100
<RECEIVABLES> 18,078
<ALLOWANCES> 249
<INVENTORY> 11,798
<CURRENT-ASSETS> 67,718
<PP&E> 70,945
<DEPRECIATION> 42,141
<TOTAL-ASSETS> 105,580
<CURRENT-LIABILITIES> 14,386
<BONDS> 0
0
0
<COMMON> 11,623
<OTHER-SE> 75,666
<TOTAL-LIABILITY-AND-EQUITY> 105,580
<SALES> 121,480
<TOTAL-REVENUES> 121,480
<CGS> 62,342
<TOTAL-COSTS> 62,342
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,080
<INCOME-TAX> 6,585
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,495
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>