<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED March 31, 1997 COMMISSION FILE NUMBER 0-14229
---------------------- -----------
CROWN ANDERSEN INC.
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1653577
----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
306 Dividend Drive, Peachtree City, Georgia 30269
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 486-2000
-------------------------
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
filing such requirements for the past 90 days. Yes X No
--- ---
=============================================================================
Class Outstanding at March 31, 1997
----------------------------- -----------------------------
Common Stock, $0.10 Par Value 1,512,198 shares
Page 1 of 12
<PAGE>
CROWN ANDERSEN INC.
-------------------
INDEX
-----
PAGE NO.
--------
Part I. FINANCIAL INFORMATION:
Consolidated Balance Sheets--
March 31, 1997 and September 30, 1996 3
Consolidated Statements of Income--
Three Months and Six Months Ended March 31, 1997
and 1996 4
Consolidated Statements of Cash Flows--
Six Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Information 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
------------ --------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 1,486,420 $ 5,200,796
Receivables:
Trade, less allowance of
$120,826 and $120,380 for
possible losses 7,997,496 2,655,281
Other 69,405 48,403
Income taxes 149,209 294,960
Costs and estimated earnings in
excess of billings on
uncompleted contracts 4,744,021 6,121,410
Inventories 2,411,187 1,955,127
Prepaid expenses 82,271 126,688
Current maturities of long-term note
receivable 300,000 300,000
Deferred income taxes 403,935 403,935
----------- -----------
TOTAL CURRENT ASSETS 17,643,944 17,106,600
RESTRICTED CASH 1,036,000 1,148,000
NOTE RECEIVABLE, less current maturities 640,000 790,000
EQUIPMENT HELD FOR RESALE 851,554 1,031,554
PROPERTY AND EQUIPMENT, less
accumulated depreciation 1,685,077 1,862,639
DEFERRED INCOME TAXES 280,944 280,944
OTHER ASSETS 139,911 228,717
----------- -----------
$22,277,430 $22,448,454
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 935,000 $ -
Accounts payable 4,814,294 5,099,140
Accruals:
Income taxes - -
Compensation 345,259 303,201
Warranty 504,800 939,000
Miscellaneous 297,484 336,170
Billings on uncompleted contracts in
excess of cost and estimated earnings - 13,419
Current maturities of long-term debt 591,034 738,253
Deferred income taxes 230,076 249,225
----------- -----------
TOTAL CURRENT LIABILITIES 7,717,947 7,678,408
LONG-TERM DEBT, less current maturities 1,040,441 1,504,533
DEFERRED INCOME TAXES 137,122 137,122
----------- -----------
TOTAL LIABILITIES 8,895,510 9,320,063
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.10 par; shares
authorized 5,000,000; issued
1,561,635: outstanding 1,512,198
and 1,544,635 156,164 156,164
Additional paid-in capital 2,905,801 2,905,801
Treasury stock; 49,437 and 17,000
shares, at cost (319,760) (117,313)
Retained earnings 10,474,889 9,881,306
Foreign currency translation
adjustment 164,826 302,433
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,381,920 13,128,391
----------- -----------
$22,277,430 $22,448,454
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
----------------------- ------------------------
1997 1996 1997 1996
----------------------- ------------------------
<S> <C> <C> <C> <C>
REVENUES:
Contracts $5,389,596 $5,443,146 $ 9,824,698 $10,117,214
Sales 380,302 389,932 809,610 931,016
Other - - 37,846 32,047
---------- ---------- ----------- -----------
5,769,898 5,833,078 10,672,154 11,080,277
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of contracts and sales 4,387,398 4,397,197 8,036,775 8,342,583
Selling, general and
administrative 841,671 962,793 1,724,482 1,866,701
Interest and other 3,837 21,695 (16,786) 6,841
---------- ---------- ----------- -----------
5,232,906 5,381,685 9,744,471 10,216,125
---------- ---------- ----------- -----------
Income from operations before
taxes on income 536,992 451,393 927,683 864,152
TAXES ON INCOME 191,900 166,400 334,100 320,300
---------- ---------- ----------- -----------
NET INCOME $ 345,092 $ 284,993 $ 593,583 $ 543,852
========== ========== =========== ===========
AVERAGE SHARES AND EQUIVALENT
SHARES OUTSTANDING 1,510,273 1,561,635 1,520,733 1,561,635
========== ========== =========== ===========
EARNINGS PER SHARE $ 0.23 $ 0.18 $ 0.39 $ 0.35
========== ========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 593,583 $ 543,852
Items in income from operations not
affecting cash:
Depreciation and amortization 138,928 151,084
Provision for valuation of soil
processor unit 180,000 180,000
Deferred income taxes (1,801) 31,622
Loss on sales of fixed assets 1,193 -
Cash provided by (used for)
Trade and other receivables (5,468,187) (3,187,807)
Refundable income taxes 14,959 93,421
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,377,389 3,043,552
Inventories (475,739) (1,158,676)
Prepaid expenses 41,845 (58,556)
Accounts payable (176,624) (844,654)
Accrued expenses (275,408) (391,501)
Billings on uncompleted
contracts in excess of costs and
estimated earnings (13,419) (173,883)
Other (23,441) (28,634)
----------- -----------
Cash used for operating activities (4,086,722) (1,800,180)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash 112,000 -
Collection of note receivable 150,000 50,000
Proceeds from sale of fixed assets 1,244 3,298
Capital expenditures (40,227) (58,983)
----------- -----------
Cash provided by (used for)
investing activities 223,017 (5,685)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 935,000 -
Reduction in long-term debt (585,337) (284,577)
Retirement of common stock (202,447) -
----------- -----------
Cash provided by (used for)
financing activities 147,216 (284,577)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,113 (16,284)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (3,714,376) (2,106,716)
Balance at beginning of year 5,200,796 3,751,637
----------- -----------
BALANCE AT END OF PERIOD $ 1,486,420 $ 1,644,911
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
===========================================
1. Condensed footnotes:
-------------------
As contemplated by the Securities and Exchange Commission instructions to
Form 10-Q, the following footnotes have been condensed and therefore do not
contain all disclosures required in connection with annual financial statements.
Reference should be made to the notes to Crown Andersen Inc.'s annual financial
statements set forth in its Form 10-K for the year ended September 30, 1996.
2. Earnings per share:
------------------
Earnings per share were computed by dividing consolidated net earnings by
the number of shares of common stock outstanding during the period. The stock
options outstanding during 1996 and 1997 were antidilutive and thus did not
affect earnings per share.
3. Stock options:
-------------
As of March 31, 1997, options to purchase 48,800 shares at an average price
of $7.00 were outstanding under the Company's stock option plan.
The Company also has outstanding warrants to purchase 15,000 shares of
common stock under the Directors Stock Warrant Plan at $10.50 per share.
4. Revenue recognition:
-------------------
Revenues from contracts are reported on the percentage-of-completion
method. Under this method, the percentage of contract revenue to be recognized
currently is based on the ratio of costs incurred to date to total estimated
contract costs, after giving effect to the most recent estimate of costs to
complete. Revenues other than contracts are recorded when the product is
shipped or the service is rendered to the customers.
5. Inventories:
-----------
Inventories were $2,411,187 and $1,955,127 as of March 31, 1997 and
September 30, 1996. Included in inventories at March 31, 1997 and September 30,
1996 is approximately $1,761,000 related to incineration equipment purchased
from a former competitor. The purchase price also included other assets.
Payments to date include a downpayment of $1,000,000 and an installment of
$520,000 paid on December 31, 1996. The remaining $500,000 is payable in two
installments - $100,000 on June 30, 1997 and $400,000 on December 31, 1997.
6. Restricted cash:
---------------
As of March 31, 1997, $1,036,000 of the Company's short-term investments
were held by banks as collateral for an outstanding letter of credit. The
letter of credit expires in 1999.
7. Equipment held for resale:
-------------------------
On September 30, 1992, the Company sold a soil processor unit under a
financing-type lease arrangement. As a result of the customer's default, the
Company, during 1994, terminated the lease and repossessed the equipment. On
September 30, 1994, the Company reclassified this asset as equipment held for
resale and reduced its carrying value from approximately $2.1 million to $1.8
million. The Company employs an outside appraiser and reviews the carrying
value of this unit on a periodic basis. Through March 31, 1997, the carrying
value of this unit has been reduced to $851,554. The adjustments to carrying
value have been charged to operations in each respective year.
6
<PAGE>
8. Commitments and contingencies:
------------------------------
There are no significant changes to the information discussed in the
Company's annual report on Form 10K for the year ended September 30, 1996 (Note
12 to the Consoli-dated Financial Statements).
* * *
The financial information included in this report has not been certified
and should not be relied upon to the same extent as certified financial
statements. The financial information included in this report reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim period. Nevertheless, the results
shown are for interim periods and are not necessarily indicative of results to
be expected for the year.
7
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Introduction:
- ------------
Crown Andersen Inc. (Crown Andersen or the Company) is a publicly-traded
holding company for Andersen 2000 Inc. (Andersen) and, through Andersen, owns
all of the outstanding stock of Montair Andersen bv (Montair). As used herein,
unless otherwise indicated, the term "Company" refers to Crown Andersen and the
above-referenced two subsidiaries and "Andersen" refers to Andersen and Montair.
Late in fiscal 1994, the Company sold the assets of Crown Rotational Molded
Products, Inc. (Crown) and its subsidiary, Roanoke Industries, Inc. (Roanoke) to
Snyder Industries, Inc. The Crown sale was approved by the shareholders in
September, 1994. The Company is no longer involved in the plastics business.
Its two remaining subsidiaries are engaged exclusively in the pollution control
and waste processing equipment businesses.
Liquidity and Capital Resources:
- -------------------------------
Cash and cash equivalents at March 31, 1997 decreased $3,714,376 from the
September 30, 1996 balance of $5,200,796. The decrease was primarily
attributable to an increase in accounts receivable of $5,468,187 related to a
large export project at Andersen. This receivable (approximately $5.9 million)
was collected in the third quarter of fiscal 1997. Cash used for operating
activities amounted to $4,086,722. The increase in accounts receivable stated
above and an increase in inventory more than offset net income plus depreciation
of $912,511 and a decrease in costs and estimated earnings in excess of billings
on uncompleted contracts.
Montair realized a positive operating cash flow as a result of profitable
operations and a decrease in receivables.
Cash provided by investing activities totaled $223,017 and reflects a
decrease in restricted cash of $112,000 and a collection of a note receivable of
$150,000, reduced by $40,227 in capital expenditures.
Cash provided by financing activities totaled $147,216 and reflects an
increase in notes payable of $935,000, a reduction in long-term debt of $585,337
and the purchase of 32,437 shares of treasury stock amounting to $202,447.
As disclosed in Note 7 to the Consolidated Financial Statements, during
1994 the Company repossessed certain equipment sold under a lease arrangement.
The Company has reduced the carrying value of this asset to approximately $0.9
million as of December 31, 1996 and it is reflected as equipment held for resale
in the accompanying consolidated balance sheet. The Company is attempting to
market this equipment for sale.
As indicated in Note 8 of the Notes to the Consolidated Financial
Statements, the Company is one of several defendants in a legal action brought
by various holders of Industrial Revenue Bonds issued by the cities of Winfield
and Arkansas City, Kansas concerning the development of industrial property near
Winfield, Kansas. The Company believes that it has meritorious defenses to the
litigation due to the fact that Crown Andersen was not a party to the
bondholder's agreement, such agreement having been entered into by Struthers
Thermo-Flood Corporation ("STFC") prior to STFC being acquired by the
8
<PAGE>
Company. In response to the lawsuit, STFC filed a liquidation proceeding under
Chapter 7 of the Federal Bankruptcy Act. The Trustee in Bankruptcy abandoned the
property on September 17, 1992. The Bankruptcy Court entered an order of no
distribution on February 10, 1994. STFC was dissolved in March 1995. In the
opinion of management of the Company and its counsel, two possible outcomes
exist. The first and more likely is a ruling from the court or a jury in favor
of the Company, resulting in no significant financial effect upon the Company. A
second and less likely is a ruling by the court or a jury against the Company,
in an amount of the past due lease payments of approximately $1,900,000 plus
interest and attorneys fees, less any proceeds from a sale of the property. This
net amount is estimated not to exceed $1,000,000. If a judgement were to be
rendered against the Company for such amount, payment would be made using the
Company's existing cash reserves or from funds available under its credit
facility.
As of March 31, 1997, the Company had borrowed $0.9 million against its
$5.0 million line of credit and the $0.5 million credit facility available to
the Montair operation. The amount of $2.4 million is available for borrowing
under these credit facilities as $2.2 million in letters of credit are
outstanding against the U.S. line of credit. Because of this credit facility,
profitable operations, and the $4.5 million received from the sale of the
plastics business, the Company has adequate cash reserves to meet its short-term
cash needs.
Under the current loan agreement, the Company is required to obtain the
bank's consent to pay cash dividends, purchase treasury stock, or to sell assets
which constitute collateral. The Company obtained permission to purchase up to
$400,000 of treasury stock. A total of $319,760 in treasury stock has been
purchased as of March 31, 1997.
As of March 31, 1997, the Company's equity in its Montair operation had
declined in value by $137,607 from September 30, 1996 as a result of a decrease
in the foreign currency translation adjustment, reflecting an 11% increase in
the U.S. dollar against the Dutch guilder.
Results of Operations:
- ---------------------
Revenues.
- ---------
Revenues for the first six months of fiscal 1997 were $10,672,154 compared
with $11,080,277 for the first six months of fiscal 1996. For the second
quarter of fiscal 1997, revenues were $5,769,898 compared with $5,833,078 for
the comparable figure in 1996 and $4,902,256 for the first three months of
fiscal 1997. Foreign sales (including export sales by Andersen and sales by the
Netherlands subsidiary) were $9.4 million and $8.6 million for the first six
months of fiscal 1997 and 1996, respectively, and accounted for 88.3% and 77.6%
of revenues. All changes in revenues are related to the quantity of product
sold, not to pricing changes.
The decrease in revenues of $408,123 (4%) from fiscal 1996 was attributable
to revenue decreases of $243,855 and $164,268 at Andersen and Montair,
respectively.
The Company's revenue levels in the United States continued to be adversely
affected by the absence of any new hazardous waste incineration facility permits
in the United States. The Company estimates that U.S. revenues have been
reduced by approximately $2-$3 million per year from 1992 levels as a result of
the Federal government's failure to review permit applications for such
facilities. The Company anticipates that foreign revenues will ultimately
offset these domestic revenue losses. Because of the uncertainty in changes in
United States regulations, it is impossible to predict changes in demands for
the Company's products in the domestic market.
9
<PAGE>
The Company has been successful and will continue to rely on the
international market to replace most, if not all, of the lost U.S. business in
the future. The Company expects to at least maintain the current revenue levels
in fiscal 1997.
Second quarter 1997 revenues decreased $63,180 from the comparable period
in 1996. Revenues at Andersen increased $267,956 (6%), however, this increase
was offset by lower revenues at Montair of $331,136.
Second quarter 1997 revenues exceeded the preceding fiscal quarter by
$867,642 (18%), primarily as a result of higher revenues generated at Andersen
of $596,125. Montair's revenues also increased $271,517 from the preceding
fiscal quarter.
Cost of Sales.
- --------------
For the first six months of fiscal 1997, cost of sales were $8,036,775 as
compared with $8,342,583 for the first six months of fiscal 1996. Second
quarter 1997 costs of sales were $4,387,398 as compared with $4,397,197 for the
second quarter of 1996 and $3,649,377 for the first quarter of 1997.
The decrease in cost of sales of $305,808 (4%) was all attributable to the
decrease in revenues. Consolidated margins were the same. However, Andersen's
margins declined 3% while Montair's margins increased 11%. Second quarter 1997
costs of sales decreased $9,799 from the comparable period of 1996 as a result
of a 0.6% improvement in margins.
Second quarter 1997 costs of sales increased $738,021 (20%) from the
preceding fiscal quarter, primarily as a result of higher revenues.
Selling, General and Administrative Costs.
- ------------------------------------------
Selling, general and administrative costs for the first six months of
fiscal 1997 were $1,724,482 compared with $1,866,701 for the first six months of
fiscal 1996. For the second quarter of 1997, selling, general and
administrative costs were $841,671, as compared with $962,793 in the comparable
quarter of 1996 and $882,811 for the first quarter of 1997. As a percentage of
revenues, selling, general and administrative costs were 16.2%, 16.8%, 14.9%,
16.5% and 18.8% of revenues for the first six months of 1997 and 1996; the
second quarter of 1997 and 1996; and the first quarter of 1997, respectively.
The current period decreases of $142,219 (7.6%) and $121,122 (12.5%) from the
comparable six months and second quarter periods of fiscal 1996 are primarily
attributable to U.S. operations, and reflect lower expenditures for commissions
and professional fees.
Second quarter of 1997 expenses decreased $41,140 (5%) from the preceding
fiscal quarter, primarily attributable to operations at Montair.
Interest and Other (Income) Expenses.
- -------------------------------------
Interest and other income (expenses) for the first six months of fiscal
1997 resulted in a credit of $16,786 compared with expenses of $6,841 for the
comparable period in 1996. For the second quarter of 1997, interest and other
expenses were $3,837 compared to $21,695 in the second quarter of 1996 and a
credit of $20,623 for the first quarter of 1997. The decreases of $23,627 and
$17,858 for the current six months and second quarter from the comparable
periods of 1996 reflect lower bad debt expense. During the current quarter,
costs increased $24,460 from the preceding fiscal quarter as a result of a
decrease in interest income.
10
<PAGE>
Taxes on Income.
- ----------------
The effective tax rates for all periods are:
<TABLE>
<CAPTION>
<S> <C> <C>
First 6 months of 1997 - 36.0%
First 6 months of 1996 - 37.1%
Second quarter of 1997 - 35.7%
Second quarter of 1996 - 36.9%
First quarter of 1997 - 36.4%
</TABLE>
Net Income.
- -----------
Net income for the first six months of 1997 was $593,583 or $0.39 per
share, compared with $543,852 or $0.35 per share for the first six months of
1996. For the second quarter of 1997, net income was $345,092 or $0.23 per
share compared with $284,993 or $0.18 per share for the second quarter of 1996
and $248,491 or $0.16 per share for the first quarter of 1997.
Net income in the current six months and second quarter periods increased
$49,741 (9%) and $60,099 (21%) from the comparable periods in 1996 due to lower
selling, general and administrative and interest costs. These cost decreases
more than offset lower operating margins contributed by lower revenues. The
entire earnings increase was attributable to Montair, where margins increased
11%. Net income at Montair increased $177,693, which offset a decrease of
$127,962 at Andersen.
Second quarter 1997 net income increased $96,601 (39%) over the preceding
fiscal quarter as a result of higher revenues. The increase was entirely
attributable to Montair.
Shares Outstanding.
- -------------------
The average and equivalent shares outstanding for all periods are:
<TABLE>
<CAPTION>
<S> <C> <C>
First 6 months of 1997 - 1,520,733
First 6 months of 1996 - 1,561,635
Second quarter of 1997 - 1,510,273
Second quarter of 1996 - 1,561,635
First quarter of 1997 - 1,531,194
</TABLE>
The unexercised options and warrants are antidilutive for all periods.
11
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
====================================
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Stockholders of the registrant was held on
March 5, 1997. At the Annual Meeting of Stockholders, proxies were
solicited under Regulation 14 of the Exchange Act and all
management nominees for the directors listed in the proxy statement
were elected. There was no solicitation in opposition to
management's nominees. In addition, the following proposal was
approved:
The appointment of BDO Seidman, LLP as independent accountants
of the Company for the fiscal year ending September 30, 1997.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 27. Financial Data Schedule
(b) Loan Documents Modification Agreement dated February 28, 1997 by
and among Crown Andersen Inc., Andersen 2000 Inc. and SouthTrust
Bank of Georgia, N.A.
(c) No reports were filed on Form 8K during the quarter ended March
31, 1997.
SIGNATURES
==========
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CROWN ANDERSEN INC.
Dated: May 5, 1997 By: /s/ Jack D. Brady
----------------- -----------------------------
Jack D. Brady
Chairman of the Board
(Duly Authorized Officer)
Dated: May 5, 1997 By: /s/ Milton Emmanuelli
----------------- -----------------------------
Milton Emmanuelli
Secretary and Treasurer
(Principal Financial Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,486,820
<SECURITIES> 0
<RECEIVABLES> 8,118,322
<ALLOWANCES> 120,826
<INVENTORY> 2,411,187
<CURRENT-ASSETS> 17,643,944
<PP&E> 1,685,077
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,277,430
<CURRENT-LIABILITIES> 7,717,947
<BONDS> 1,040,441
0
0
<COMMON> 156,164
<OTHER-SE> 13,225,756
<TOTAL-LIABILITY-AND-EQUITY> 22,277,430
<SALES> 10,634,308
<TOTAL-REVENUES> 10,672,154
<CGS> 8,036,775
<TOTAL-COSTS> 9,744,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16,786)
<INCOME-PRETAX> 927,683
<INCOME-TAX> 334,100
<INCOME-CONTINUING> 927,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593,583
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
<PAGE>
AFTER RECORDING, RETURN TO: CROSS REFERENCE: Deed Book 1076, Page
Steven A. Pepper, Esq. 234, Fayette County, Georgia records
Altman, Kritzer & Levick, P.C.
6400 Powers Ferry Road, N.W.
Suite 224
Atlanta, Georgia 30339-2949
LOAN DOCUMENTS MODIFICATION AGREEMENT
(February 28, 1997)
THIS LOAN DOCUMENTS MODIFICATION AGREEMENT (hereinafter referred to as
this "Amendment") is made and entered into as of the 28th day of February, 1997,
by and among CROWN ANDERSEN INC., a Delaware corporation, and ANDERSEN 2000
INC., a Delaware corporation (hereinafter collectively referred to as
"Borrower"), and SOUTHTRUST BANK OF GEORGIA, N.A., a national banking
association (hereinafter referred to as "Lender").
BACKGROUND STATEMENT
Borrower and Lender are parties to that certain Commercial Revolving
Note dated June 28, 1996, made by Borrower to the order of Lender in the
original principal amount of Five Million and No/100 Dollars ($5,000,000.00)
(hereinafter referred to as the "Note", and the loan evidenced thereby as the
"Loan"). The Note is secured by (a) that certain General Security Agreement
from Borrower, as "Debtor" therein, to Lender, as "Secured Party" therein, dated
June 28, 1996 (hereinafter referred to as the "Security Agreement"), (b) that
certain Deed to Secure Debt, Assignment of Rents and Security Agreement from
Borrower, as "Grantor" therein, to Lender, as "Grantee" therein, dated June 28,
1996, and recorded in Deed Book 1076, Page 234, Fayette County, Georgia records
(hereinafter referred to as the "Security Deed"), and (c) some of the other
"Loan Documents," as that term is defined in the Commercial Loan Agreement
between Borrower and Lender dated June 28, 1996 (hereinafter referred to as the
"Loan Agreement"). Borrower and Lender have agreed to amend the Note, the Loan
Agreement, the Security Deed, and all of the other Loan Documents, and the
parties hereto are entering into this Amendment to evidence their agreements.
AGREEMENT
FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00),
the foregoing recitals, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Borrower and Lender do hereby
agree as follows:
1. LOAN BALANCE. The foregoing recitals are true and correct and are
incorporated herein by reference. Borrower and Lender acknowledge and agree
that as of February 28, 1997, the outstanding principal balance of the Note is
Zero and No/100 Dollars ($0.00), but that letters of credit have been issued by
Lender for the account of Borrower in the aggregate amount of Two Million Two
Hundred Fourteen Thousand Eighty-Five and No/100 Dollars ($2,214,085.00),
thereby reducing availability under the Note.
2. MODIFICATION OF NOTE. The terms of the Note are hereby modified
and amended, effective as of the date hereof, by deleting in its entirety the
paragraph entitled "Payment Schedule" set forth on page 1 of the Note and
replacing it with the following:
"PAYMENT SCHEDULE. Principal and interest shall be due and payable as
follows: Interest only on the outstanding principal amount shall be due
and payable monthly, in arrears, beginning on August 1, 1996, and
continuing on the first day of each month thereafter until maturity. On
February 27, 1998, all unpaid principal, plus accrued and unpaid interest,
shall be due and payable in full."
The purpose of this modification is to extend the maturity date of the Note to
February 27, 1998.
<PAGE>
3. RATIFICATION; EXPENSES. Except as herein expressly modified or
amended, all the terms and conditions of the Note are hereby ratified, affirmed,
and approved. In consideration of Lender agreeing to extend the maturity date
of the Note, Borrower agrees to pay Lender a loan fee in the amount of Five
Thousand and No/100 Dollars ($5,000.00) and further agrees to pay all fees and
expenses incurred in connection with this Amendment. Borrower acknowledges and
agrees that once paid, the loan fee shall have been fully earned and shall not
be refundable or rebatable, in whole or in part, for any reason whatsoever.
4. MODIFICATION OF LOAN AGREEMENT AND LOAN DOCUMENTS. As of the date
hereof, Borrower hereby reaffirms and restates each and every warranty and
representation set forth in the Loan Agreement and the other Loan Documents. The
terms of the Loan Agreement and the other Loan Documents are hereby modified and
amended, effective as of the date hereof, so that any reference in the Loan
Agreement or any of the other Loan Documents to the Note shall refer to the Note
as herein amended. The Loan Agreement is further modified and amended, effective
as of the date hereof, as follows:
(a) The definition of "Borrowing Base" set forth on page 1 of the Loan
Agreement, is deleted in its entirety and replaced with the following:
" 'Borrowing Base' shall mean eighty percent (80.00%) of Eligible
Accounts, plus forty percent (40.00%) of Eligible Inventory, plus sixty-
---- ----
five percent (65.00%) of Cost and Estimated Earnings in Excess of Billings
on Uncompleted Contracts less Billings on Uncompleted Contracts in Excess
of Costs and Estimated Earnings, plus sixty-five percent (65.00%) of cash
----
on deposit in United States depositories, except for cash held as
collateral for other obligations."
(b) The definition of "Eligible Accounts" set forth on page 2 of the
Loan Agreement, is amended by deleting subparts (i) and (ii), which read "(i)
the account is unpaid more than one hundred twenty (120) days after the invoice
date thereof; (ii) twenty-five percent (25%) or more of the aggregate balances
of all accounts owed to Borrower by said account debtor are unpaid more than one
hundred twenty (120) days after the invoice dates thereof," and replacing them
with "(i) the account is unpaid more than one hundred twenty-five (125) days
after the invoice date thereof; (ii) twenty-five percent (25%) or more of the
aggregate balances of all accounts owed to Borrower by said account debtor are
unpaid more than one hundred twenty-five (125) days after the invoice dates
thereof."
(c) Section 9 (b) of the Loan Agreement, which sets forth Borrower's
required minimum Tangible Net Worth, is deleted in its entirety and replaced
with the following:
"(b) Borrower's Tangible Net Worth, as shown on its financial statements,
shall exceed as of June 30, 1996, and at all times thereafter until
September 30, 1996, Nine Million Six Hundred Thousand and No/100 Dollars
($9,600,000.00), and, shall exceed as of September 30, 1996, and at all
times thereafter until February 28, 1997, Nine Million Eight Hundred
Thousand and No/100 Dollars ($9,800,000.00), and, shall exceed as of
February 28, 1997, and at all times thereafter, Ten Million Four Hundred
Thousand and No/100 Dollars ($10,400,000.00)."
5. MODIFICATION OF SECURITY DEED. As of the date hereof, Borrower
hereby reaffirms and restates each and every warranty and representation set
forth in the Security Deed. The terms of the Security Deed are hereby modified
and amended, effective as of the date hereof, by deleting the paragraph on page
1 of the Security Deed that commences "THAT, WHEREAS, Grantor is justly indebted
to Grantee" in the aggregate sum of Six Million and No/100 Dollars
($6,000,000.00) in lawful money of the United States, its entirety and replacing
it with the following:
"THAT, WHEREAS, Grantor is justly indebted to Grantee in the aggregate sum
of Six Million and No/100 Dollars ($6,000,000.00) in lawful money of the
United States, or so much of said sum as may be advanced and outstanding
from time to time, and has agreed to pay the same, with interest thereon,
according to the terms of (a) that certain Commercial Promissory Note
given by Grantor to Grantee in the original principal amount of One
Million and No/100 Dollars ($1,000,000.00), bearing even date herewith,
with final payment being due on February 28, 1999, and (b) that certain
Commercial Revolving Note given by Grantor to Grantee in the original
principal amount of Five Million and No/100 Dollars
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<PAGE>
($5,000,000.00), bearing even date herewith, with final payment being due
on February 27, 1998 (hereinafter collectively referred to as the
"Note");".
6. NO DEFENSES; RELEASE. For purposes of this Paragraph , the terms
"Borrower Parties" and "Lender Parties" shall mean and include Borrower and
Lender, respectively, and each of their respective predecessors, successors and
assigns, and each past and present, direct and indirect, parent, subsidiary and
affiliated entity of each of the foregoing, and each past and present employee,
agent, attorney-in-fact, attorney-at-law, representative, officer, director,
shareholder, partner and joint venturer of each of the foregoing, and each heir,
executor, administrator, successor and assign of each of the foregoing;
references in this paragraph to "any" of such parties shall be deemed to mean
"any one or more" of such parties; and references in this sentence to "each of
the foregoing" shall mean and refer cumulatively to each party referred to in
this sentence up to the point of such reference. Borrower hereby acknowledges,
represents and agrees: that Borrower has no defenses, setoffs, claims,
counterclaims or causes of action of any kind or nature whatsoever with respect
to the Note, the Loan Agreement and the other Loan Documents or the indebtedness
evidenced and secured thereby, or with respect to any other documents or
instruments now or heretofore evidencing, securing or in any way relating to the
Loan, or with respect to the administration or funding of the Loan, or with
respect to any other transaction, matter or occurrence between any of the
Borrower Parties and any Lender Parties or with respect to any acts or omissions
of any Lender Parties (all of said defenses, setoffs, claims, counterclaims or
causes of action being hereinafter referred to as "Loan Related Claims"); that,
to the extent that Borrower may be deemed to have any Loan Related Claims,
Borrower does hereby expressly waive, release and relinquish any and all such
Loan Related Claims, whether or not known to or suspected by Borrower; that
Borrower shall not institute or cause to be instituted any legal action or
proceeding of any kind based upon any Loan Related Claims; and that Borrower
shall indemnify, hold harmless and defend all Lender Parties from and against
any and all Loan Related Claims and any and all losses, damages, liabilities,
costs and expenses suffered or incurred by any Lender Parties as a result of any
assertion or allegation by any Borrower Parties of any Loan Related Claims or as
a result of any legal action related thereto.
7. NO NOVATION. Borrower and Lender hereby acknowledge and agree that
this Amendment shall not constitute a novation of the indebtedness evidenced by
the Loan Documents, and further that the terms and provisions of the Loan
Documents shall remain valid and in full force and effect except as may be
hereinabove modified and amended.
8. NO WAIVER OR IMPLICATION. Borrower hereby agrees that nothing
herein shall constitute a waiver by Lender of any default, whether known or
unknown, which may exist under the Note or any other Loan Documents. Borrower
hereby further agrees that no action, inaction or agreement by Lender,
including, without limitation, any extension, indulgence, waiver, consent or
agreement of modification which may have occurred or have been granted or
entered into (or which may be occurring or be granted or entered into hereunder
or otherwise) with respect to nonpayment of the Loan or any portion thereof, or
with respect to matters involving security for the Loan, or with respect to any
other matter relating to the Loan, shall require or imply any future extension,
indulgence, waiver, consent or agreement by Lender. Borrower hereby
acknowledges and agrees that Lender has made no agreement, and is in no way
obligated, to grant any future extension, indulgence, waiver or consent with
respect to the Loan or any matter relating to the Loan.
9. NO RELEASE OF COLLATERAL. Borrower further acknowledges and agrees
that this Amendment shall in no way occasion a release of any collateral held by
Lender as security to or for the Loan, and that all collateral held by Lender as
security to or for the Loan shall continue to secure the Loan.
10. EXTENSION; WAIVER OF STAY. Borrower and Lender acknowledge and
agree that this Amendment is being entered into as part of an extension of the
loan relationship created by the Loan Agreement following the scheduled maturity
of the Note. In consideration of Lender agreeing to the terms and conditions
set forth in this Amendment, Borrower hereby (i) waives and agrees not to assert
or take advantage of an assertion or claim that the automatic stay provided by
11 U.S.C. (S) 362 (arising upon the voluntary or involuntary bankruptcy
proceeding of Borrower), or any other stay provided under any other debtor
relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
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<PAGE>
now or hereafter acquired, which Lender may have against Borrower, and (ii)
consents to, and waives the right to oppose, Lender obtaining relief from the
automatic stay provided by 11 U.S.C. (S) 362 (arising upon the voluntary or
involuntary bankruptcy proceeding of Borrower), or any other stay provided under
any other debtor relief law (whether statutory, common law, case law or
otherwise).
11. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns, whether voluntary by act of the parties or involuntary by operation of
law.
12. AUTHORITY. By executing this Amendment as hereinafter provided,
Milton Emmanuelli hereby certifies that he is the Treasurer and Chief Financial
Officer of Crown Andersen Inc. and the Secretary of Andersen 2000 Inc. and is
duly authorized to execute this Amendment on behalf of each of the parties
comprising Borrower.
IN WITNESS WHEREOF, this Amendment has been duly executed under seal by
Borrower, Guarantor and Lender, as of the day and year first above written.
BORROWER:
Signed, sealed and delivered in the CROWN ANDERSEN INC., a Delaware
presence of: corporation
- ----------------------------------
Unofficial Witness By:
-----------------------------
Milton Emmanuelli
Treasurer/Chief Financial
Officer
[CORPORATE SEAL]
- ----------------------------------
Notary Public ANDERSEN 2000 INC.,
[NOTARIAL SEAL] a Delaware corporation
By:
----------------------------
Milton Emmanuelli
Secretary
[CORPORATE SEAL]
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<PAGE>
LENDER:
Signed, sealed and delivered in
the presence of:
SOUTHTRUST BANK OF GEORGIA, N.A.,
a national banking association
- -----------------------------------
Unofficial Witness
By:
------------------------------
Jesse R. Erickson
Vice President
- -----------------------------------
Notary Public [CORPORATE SEAL]
[NOTARIAL SEAL]
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