<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT Of 1934
For the quarterly period ended March 31, 1995
--------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT Of 1934
For the transition period from _______________ to ________________
Commission File Number 0-15902
ESSEF Corporation
(Exact name of registrant as specified in its charter)
Ohio 34-0777631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 Park Drive, Chardon, Ohio 44024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 286-2200
None
Former name, former address and former fiscal year, if changed since
last report.
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, as
amended, 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 N/A
--- --- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common shares, as of the latest practicable date.
Class Outstanding at May 9, 1995
Common Shares, no par value 4,875,416 Shares
Page 1 of 24
<PAGE> 2
ESSEF CORPORATION
Form 10-Q
For Quarter Ended March 31, 1995
INDEX
Sequential
Page No.
----------
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1995 and September 30, 1994................. 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended March 31, 1995
and 1994.............................................. 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1995 and 1994.............. 5
Notes to Condensed Consolidated Financial
Statements............................................ 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 9-11
Part II - Other Information
Item 1. Legal Proceedings................................... 12
Item 2. Changes in Securities............................... 12
Item 6. Exhibits and Reports on Form 8-K.................... 13-23
Page 2 of 24
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------- -------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents ............. $ 1,451 $ 2,509
Accounts receivable, net .............. 40,245 20,983
Inventories, net ...................... 14,922 11,789
Other current assets .................. 2,036 1,221
------- -------
Total current assets ............... 58,654 36,502
Property, Plant and Equipment, net ........ 31,106 29,554
Other Assets .............................. 8,427 8,115
------- -------
$98,187 $74,171
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt .. $ 1,429 $ 1,436
Accounts payable ...................... 10,854 6,716
Other current liabilities ............. 8,871 10,138
------- -------
Total current liabilities ...... 21,154 18,290
Long-Term Debt ............................ 31,774 16,246
Other Long-Term Liabilities ............... 3,235 1,739
------- -------
Total liabilities .............. 56,163 36,275
Shareholders' Equity
Preferred shares without par value,
authorized 1,000,000 shares,
none issued ........................ -- --
Common shares without par value,
authorized 15,000,000 shares, issued
4,975,746 and 4,970,250 shares less
101,330 treasury shares at cost,
stated at .......................... 15,116 15,045
Retained earnings ..................... 24,523 21,501
Cumulative foreign currency translation
adjustment ......................... 2,385 1,350
------- -------
Total shareholders' equity ..... 42,024 37,896
------- -------
$98,187 $74,171
======= =======
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
Page 3 of 24
<PAGE> 4
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands,
except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------ ------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales .................... $ 39,926 $ 32,181 $ 71,945 $ 56,839
Cost of Sales ................ 28,401 21,909 51,469 39,363
----------- ----------- ----------- -----------
Gross profit ............ 11,525 10,272 20,476 17,476
Operating Expenses ........... 8,048 7,009 15,141 12,914
----------- ----------- ----------- -----------
Income from Operations .. 3,477 3,263 5,335 4,562
Interest Expense ............. 600 273 990 408
Other (Income) ............... (443) (203) (377) (390)
----------- ----------- ----------- -----------
Income Before Income Taxes ... 3,320 3,193 4,722 4,544
Provision for Income Taxes ... 1,195 1,230 1,700 1,746
----------- ----------- ----------- -----------
Net Income ................... $ 2,125 $ 1,963 $ 3,022 $ 2,798
=========== =========== =========== ===========
Weighted Average Common Shares
Outstanding .................. 5,750,349 5,758,300 5,746,384 5,736,515
Earnings Per Share ........... $ .37 $ .34 $ .53 $ .49
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
Page 4 of 24
<PAGE> 5
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ........................................ $ 3,022 $ 2,798
Adjustments to reconcile net income
to net cash flows from operating activities
Depreciation and amortization ............ 3,137 2,761
Stock option compensation expense ........ 71 73
Change in Operating Assets and Liabilities
Accounts receivable ......................... (18,829) (15,486)
Inventories .................................. (2,881) (3,868)
Other current assets ......................... (808) (4)
Accounts payable ............................. 3,947 4,099
Other current liabilities .................... (1,422) (694)
Other long-term liabilities .................. 1,479 70
-------- --------
Net cash flows from operating activities ..... (12,284) (10,251)
-------- --------
Cash Flows from Investing Activities
Additions to property, plant and
equipment .................................... (4,156) (2,272)
Other, net ...................................... (334) (119)
Acquisition of business ......................... -- (10,147)
-------- --------
Net cash flows from investing
activities............................ (4,490) (12,538)
-------- --------
Cash Flows from Financing Activities
Borrowing on outstanding debt, net .............. 15,521 21,658
-------- --------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents ............................ 195 50
-------- --------
Net (Decrease) in Cash .............................. (1,058) (1,081)
Cash and Cash Equivalents Balance - Beginning ....... 2,509 2,836
-------- --------
Cash and Cash Equivalents Balance - Ending .......... $ 1,451 $ 1,755
======== ========
Supplemental Cash Flow Information
Interest paid ................................ $ 982 $ 321
======== ========
Income taxes paid ............................ $ 40 $ 1,985
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
Page 5 of 24
<PAGE> 6
ESSEF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) In the opinion of the Company the accompanying unaudited Condensed
Consolidated Financial Statements contain all normal and recurring
adjustments and accruals necessary to present fairly the Company's
financial position as of March 31, 1995, the results of its operations
for the three month and six month periods ended March 31, 1995 and 1994,
and its cash flows for the six month periods ended March 31, 1995 and
1994.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's 1994
Annual Report to Shareholders, sections of which are incorporated by
reference into the Company's Form 10-K filed for the fiscal year ended
September 30, 1994. The results of operations for the three month and six
month periods ended March 31, 1995 may not necessarily be indicative of
the operating results for the full year.
(2) Inventories
<TABLE>
<CAPTION>
Inventories are valued as follows:
(Dollars in thousands) March 31, September 30,
1995 1994
-------------------------
(unaudited)
<S> <C> <C>
Raw materials...................... $ 7,870 $ 8,418
Work-in-process.................... 2,261 1,306
Finished goods..................... 6,573 3,374
------- -------
Inventories at FIFO cost......... 16,704 13,098
Less: Allowance to reduce carrying
value to LIFO cost............... (1,782) (1,309)
------- -------
Net Inventories............... $14,922 $11,789
======= =======
</TABLE>
(3) Receivable under Agreement for Deed
The Company has restructured the original Agreement for Deed which was
for the sale of the remaining assets of Fame Plastics, Inc., now known as
Sanford Technology Corporation to Apogee Plastics. Subsequent to the sale
of Fame, Apogee Plastics was acquired by Apogee Acquisition Corporation
which acquired and assumed all rights and obligations of Apogee Plastics
under the Agreement for Deed. Simultaneously with the assumption, the
face value of the note was reduced to $4.6 million, a payment for $ .75
million was then made to reduce the receivable to $3.85 million. The
receivable bears interest at 10% and requires interest payments from
April 1, 1995 through March 1, 1996, at which time a $.25 million
principal payment is due. Interest and principal payments, based on a 15
year amortization, are required monthly beginning April 1,1996 through
and including February 1, 2000. On March 1, 2000 there shall be due and
payable a final payment in an amount equal to the entire unpaid principal
balance and all unpaid accrued interest.
Page 6 of 24
<PAGE> 7
(4) Long-Term Debt
Effective January 3, 1995, the Company amended its agreement with its bank
group. The amendment reduced borrowing rates as follows:
<TABLE>
<CAPTION>
Current Rate Previous Rate Reduction
----------------- ------------------- ---------------
Libor BLR Libor BLR
Plus Plus Plus Plus Libor BLR
----- ---- ----- ---- ----- ---
<S> <C> <C> <C> <C> <C> <C>
Revolving Credit 1.375% 0% 1.875% 0% .5% 0%
Agreement
Term & acquisition 1.625% 0% 2.125% .25% .5% .25%
Loan
</TABLE>
The Company is in compliance with all of its covenants under the new credit
facility. As of March 31, 1995, interest rates for the revolving debt and
the term loan ranged from 7.56% to 9.0%.
Long-term debt consists of
the following:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------------- ---------------
(Dollars in thousands) (unaudited)
<S> <C> <C>
Term loan 8,571 9,643
Revolving credit agreement 24,600 8,000
Other loans 32 39
----------- -----------
33,203 17,628
Less current maturities 1,429 1,436
----------- -----------
Long-term debt $ 31,774 $ 16,246
=========== ===========
</TABLE>
(5) The following components of other current liabilities were in excess
of 5% of total current liabilities:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------- -------------
(Dollars in thousands) (unaudited)
<S> <C> <C>
Accrued compensation $ 2,331 $ 3,567
Product liability retention $ 1,015 $ 931
</TABLE>
Page 7 of 24
<PAGE> 8
(6) On March 7, 1994, the Company, acquired certain assets and assumed
certain liabilities of the Purex Pool Products Division of Hydrotech
Chemical Corporation, a subsidiary of Great Lakes Chemical Company. The
assets acquired consisted of equipment, inventory, and intellectual
property used in the manufacturing of filters, pumps, lights, and heaters
for swimming pools and spas. The purchase price, including liabilities
assumed, totaled approximately $13.6 million. The acquisition was
accounted for as a purchase, and accordingly, the purchase price has been
allocated to assets and liabilities acquired based upon their fair market
values at the date of acquisition. Assets, liabilities, and results of
operations since March 7, 1994 are included in the accompanying condensed
consolidated financial statements.
The table below summarizes the unaudited consolidated proforma results of
operations assuming the acquisition had occurred at the beginning of the
earliest period presented with adjustments primarily attributable to the
amortization of intangible assets, interest expense related to changes in
debt, and depreciation expense related to fair value of assets acquired,
as compared to actual results of operations for the periods ended March
31, 1995.
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in thousands, Three Months Ended Six Months Ended
except per share data) March 31 March 31
------------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
(Proforma) (Proforma)
<S> <C> <C> <C> <C>
Net Sales $39,926 $35,567 $71,945 $65,893
Net Income $ 2,125 $ 1,861 $ 3,022 $ 2,489
Net Income per Share $ .37 $ .32 .53 .44
</TABLE>
These proforma results have been presented for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisition been made at the beginning of the earliest period presented,
or of results which may occur in the future.
Page 8 of 24
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1994
NET SALES
Net sales of $39,926,000 increased 24.1% from 1994 net sales of $32,181,000. The
water treatment and systems equipment segment reported an 8.6% increase in sales
to $17,401,000. The swimming pool and spa equipment segment sales of $22,525,000
increased 39.5% over last year. In March, 1994, the Company acquired the assets
and assumed certain liabilities of Purex Pool Systems, Inc. (Purex) as described
in Note 6. Without the impact of Purex the swimming pool and spa equipment
segment sales would have been approximately the same.
Sales generated by the Company's European subsidiary were approximately 13.5% of
total U.S. dollar sales. The average U.S. dollar exchange rate used to translate
the results of operations as of March 31, 1995 weakened by 15.2% compared to
March 31, 1994 and had the effect of increasing sales and income from
operations.
The Company had a backlog of orders believed by it to be firm of approximately
$9.4 million and $7.4 million as of March 31, 1995 and March 31 1994,
respectively.
COST AND EXPENSES
Cost of sales increased from 68.1% to 71.1% of net sales in fiscal 1995. This
was primarily the result of an increase in material cost. During this year's
second quarter, raw material price increases continued to occur. The addition of
Purex, which has higher manufacturing costs than other business units of the
Company, also contributed to the increased cost of sales percentage. The
increase in net sales resulted in an increase in the Company's gross profit from
$10,272,000 to $11,525,000.
Operating expenses, consisting of administrative, selling, and engineering and
development expenses, increased $1,039,000 to $8,048,000. The addition of Purex
operating expenses accounted for 57.3% of this increase. As a percentage of
sales, these expenses decreased from 21.8% to 20.2%. The percentage of sales
decrease is a result of better management of operating expenses and the
allocation of the expenses over increased sales.
INTEREST EXPENSE
Interest expense increased by $327,000 to $600,000. This primarily was the
result of an approximate 38% increase in average outstanding borrowings of the
Company, caused by the acquisition of Purex and an increase in the effective
interest rate of approximately 230 basis points.
Page 9 of 24
<PAGE> 10
OTHER INCOME
Other income in 1995 and 1994 relates primarily to interest income received
pursuant to a receivable under an Agreement for Deed related to the sale of
assets of the Company's former Fame Plastics, Inc. subsidiary. (As described in
Note 3).
INCOME TAXES
The Company recorded a $1,195,000 provision in 1995 which represents an
effective tax rate of 36%. In 1994 the Company recorded a $1,230,000 provision
which represented an effective tax rate of 38.5%.
NET INCOME
The Company reported net income of $2,125,000 as compared to a 1994 net income
of $1,963,000. The change between years is a result of the addition of Purex
which was partially offset by decreased income at ENPAC and an increase in
interest expense.
SIX MONTHS ENDED MARCH 31, 1995 COMPARED WITH
SIX MONTHS ENDED MARCH 31, 1994
NET SALES
Net sales of $71,945,000 increased 26.6% from 1994 net sales of $56,839,000. The
water treatment and systems equipment segment reported a 4.7% increase in sales
to $32,749,000. All products in this segment increased over the prior year
except the Company's ENPAC subsidiary. The swimming pool and spa equipment
segment sales of $39,196,000 increased 53.4% over last year.
Without the impact of Purex, the swimming pool and spa segment would have
increased 8.3%.
Sales generated by the Company's European subsidiary were approximately 12.3% of
total U.S. dollar sales and in U.S. dollars increased 22.4% over fiscal 1994
results.
COST AND EXPENSES
Cost of sales increased from 69.3% to 71.5% of net sales in fiscal 1995. This
was primarily the result of an increase in material cost and from the addition
of Purex which has a higher than average manufacturing cost. The Company's gross
profit increased from $17,476,000 to $20,476,000 due to the strong sales growth.
Operating expenses, consisting of administrative, selling, and engineering and
development expenses, increased $2,227,000 to $15,141,000. The addition of Purex
operating expenses accounted for 66.9% of this increase. As a percentage of
sales, these expenses decreased from 22.7% to 21.1%.
Page 10 of 24
<PAGE> 11
INTEREST EXPENSE
Interest expense increased by $582,000 to $990,000. This was the result of an
approximate 52% increase in average outstanding borrowings of the Company and a
increase in the effective interest rate of approximately 220 basis points.
OTHER INCOME
Other income in 1995 and 1994 relates primarily to interest income received
pursuant to a receivable under an Agreement for Deed related to the sale of
assets of the Company's former Fame Plastics, Inc. subsidiary. (As described in
Note 3).
INCOME TAXES
The Company recorded a $1,700,000 provision in fiscal 1995 which represents an
effective tax rate of 36%. In fiscal 1994 the Company recorded a $1,746,000
provision which represents an effective tax rate of 38.4%.
NET INCOME
The Company reported net income of $ 3,022,000 as compared to a 1994 net income
of $2,798,000. The change between years is a result of the addition of Purex
offset by decreased income at ENPAC and increased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $37,500,000 at March 31, 1995 compared to
$18,212,000 at September 30, 1994, and the ratio of current assets to current
liabilities increased to 2.77 to 1.00 from 2.00 to 1.00. The increase in working
capital is due to a $19.3 million increase in net accounts receivable, a $3.1
million increase in net inventories offset by a $1.1 decrease in cash and a $4.1
million increase in accounts payable. The increases in accounts receivable,
inventory, and accounts payable reflect normal seasonal working capital
requirements.
Capital expenditures for the first six months of fiscal year 1995 totaled
$4,156,000 compared to $2,272,000 for the same period last year, and were funded
from net income, depreciation and borrowing. The difference in capital
expenditures relates to building renovations, investment in tooling for new and
existing products, and the acquisition of Purex in March, 1994.
As of the end of March, 1995, the Company had foreign assets of approximately
$14.8 million principally located in Belgium. The assets were converted at
quarter end using a U.S. dollar exchange rate that was 12.9% lower than
September 30, 1994.
The Company does not have any material post retirement benefits, and thus will
not experience any significant effect resulting from SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" and SFAS No. 112,
"Employers Accounting for Postemployment Benefits."
Page 11 of 24
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No change.
Item 2. Changes in Securities
No change.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
10.1 Amendment to Credit Agreement
between Essef Corporation and
Society National Bank, Agent
for banks named therein,
dated as of January 3, 1995.
10.2 Amendment to Agreement for
Deed made as as of February
28, 1995 between Sanford
Technology Corporation, c/o
Essef Corporation, and Apogee
Plastics, Inc. and Apogee
Acquisition Corporation.
11 Computation of Per Share
Earnings
27 Financial Data Schedule
(b) Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this Report is filed.
Page 12 of 24
<PAGE> 13
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarter ended March 31, 1995
Commission File No. 0-15902
----------------------
Essef Corporation
EXHIBIT VOLUME
Page 13 of 24
<PAGE> 14
Essef Corporation
Form 10-Q
For the Quarter Ended March 31, 1995
Exhibit Volume - Table of Contents
Exhibits filed with and sequentially numbered as part of the report
<TABLE>
<CAPTION>
Sequential
number of
Exhibit page of
Number Exhibit Description full report
- ------- ------------------- -----------
<S> <C>
10.1 Credit Agreement amendment between Essef 16-18
Corporation and Society National Bank,
Agent for Banks named therein, dated
January 3, 1995.
10.2 Amendment to Agreement for Deed made as 19-22
as of February 28, 1995 between Sanford
Technology Corporation, c/o Essef
Corporation, and Apogee Plastics Inc. and
Apogee Acquisition Corporation.
11 Computation of Per Share Earnings 23
27 Financial Data Schedule 24
</TABLE>
Page 14 of 24
<PAGE> 15
SIGNATURE
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.
ESSEF Corporation
(Registrant)
/s/Thomas B. Waldin
-------------------------
Thomas B. Waldin
President and
Chief Executive Officer
(Principal Executive Officer)
/s/Theodore A. Havens
-------------------------
Theodore A. Havens
Chief Financial Officer
and Treasurer
(Principal Accounting Officer)
Date: May 10, 1995
Page 15 of 24
<PAGE> 1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is entered
into by and among ESSEF CORPORATION, an Ohio corporation ("Essef"), PAC-FAB,
INC., a Delaware corporation ("Pac-Fab"), ENIAC CORPORATION, a Delaware
corporation ("ENPAC"), SANFORD TECHNOLOGY CORPORATION (f/k/a FAME Plastics,
Inc.), a North Carolina corporation ("Sanford"), PUREX POOL SYSTEMS, INC., a
Delaware corporation ("Purex"), HOBSON BROTHERS ALUMINUM FOUNDRY AND MOULD
WORKS, INC., an Ohio corporation ("Hobson"; sometimes Hobson, Essef, Pac-Fab,
ENIAC, Sanford, and Purex collectively may be called "Borrowers" or individually
"Borrower"), SOCIETY NATIONAL BANK ("Society"), BRANCH BANKING AND TRUST COMPANY
("BBT"), and NBD BANK, N.A. ("NBD"; sometimes Society, BBT, and NBD collectively
may be called "Banks" and individually "Bank"), and SOCIETY NATIONAL BANK as
agent for Banks under this First Amendment ("Agent").
RECITALS
A. On March 1, 1994, Borrowers and Banks entered into a certain Credit
Agreement (the "Credit Agreement", all terms defined therein being used in this
First Amendment with the same meaning unless otherwise stated) under the terms
of which Banks provided to Borrowers a revolving credit facility in the maximum
aggregate amount of $33,000,000, an acquisition-related line of credit in the
maximum aggregate amount of $10,000,000, and an additional term loan facility in
the maximum aggregate amount of $10,000,000.
B.Borrowers and Banks now desire to amend the Credit Agreement to (1)
reduce the Applicable Base Rate Margin applicable to the Revolving Loans, the
Acquisition Term Loans, and the Purex Division Term Loan, and (2) reduce the
Applicable LIBOR Loan Margin applicable to the Revolving Loans, the Acquisition
Term Loans, and the Purex Division Term Loan, in accordance with the provisions
of this First Amendment.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the provisions set
forth in this First Amendment, Banks and Borrowers agree as follows:
SECTION I. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is amended as follows:
A.On and after the effective date of this First Amendment, each
reference in the Credit Agreement to "this Agreement," "hereunder," and
"hereof," or words of like import referring to the Credit Agreement shall mean
and refer to the Credit Agreement as amended by this First Amendment. The Credit
Agreement, as amended by this First Amendment, shall continue to be in full
force and effect and hereby is ratified and confirmed in all respects.
Page 16 of 24
<PAGE> 2
B.The definition of "Applicable Base Rate Margin" set forth in Section
1.7 of the Credit Agreement is amended and restated in its entirety as follows:
Applicable Base Rate Margin. The Applicable Base Rate Margin
applicable to (a) the Revolving Loans, (b) the Acquisition Term
Loans and (C) the Purex Division Term Loan shall be zero basis
points above the Base Lending Rate.
C.The definition of "Applicable LIBOR Loan Margin" set forth in Section
1.8 of the Credit Agreement is amended and restated in its entirety as follows:
Applicable LIBOR Loan Margin. The Applicable LIBOR Loan Margin
applicable to (a) the Revolving Loans shall be 137.5 basis points
above Adjusted LIBOR, (b) the Acquisition Term Loans shall be 162.5
basis points above Adjusted LIBOR, and (C) the Purex Division Term
Loan shall be 162.5 basis points above Adjusted LIBOR.
SECTION II.REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS.
A.Each Borrower represents, warrants and covenants that it has good and
marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever,
except as have been granted to Banks.
B.To the extent such representations, warranties and covenants pertain
to or are to be performed by Borrowers, all representations, warranties and
covenants in the Credit Agreement shall continue and be binding on Borrowers
under this First Amendment.
SECTION III.CONDITIONS PRECEDENT.
Borrowers acknowledge that the effectiveness of this First Amendment is
subject to the receipt by Agent for Banks on the date of this First Amendment in
form and substance satisfactory to Banks and their counsel of the following
documents:
A.A certified copy of the corporate resolutions which have been
adopted by the unanimous consent of the respective Board of Directors of
each of Borrowers approving this First Amendment and all of the matters
described in this First Amendment, and authorizing the execution,
delivery and performance by Borrowers of this First Amendment and every
other document required to be delivered pursuant to this First
Amendment.
B.A certificate signed by a duly authorized officer of each of
Borrowers to the effect that:
1.As of the date of this First Amendment, no Possible Default has
occurred and is continuing, and no event has occurred and is
continuing that, with the giving of notice or passage of time or
both, would be a Possible Default or an event of default;
2.The representations and warranties of Borrowers set forth in
Article VI of the Credit Agreement are true and correct on the
Page 17 of 24
<PAGE> 3
date of this First Amendment with the same force and effect as
if made on this date; and
3.Borrowers are in compliance with all of the terms and provisions
set forth in the Credit Agreement as of the date of this First
Amendment.
C.A Certificate signed by a duly authorized officer of each of
Borrowers certifying (a) to the incumbency of the officers of Borrowers
signing this First Amendment and every other document to be delivered
pursuant to this First Amendment, and (b) to the effect that Borrowers'
Articles (or Certificates) of Incorporation and Codes of Regulations (or
By-Laws) have not been amended since the execution of the Credit
Agreement.
D.Such other documents as Banks may reasonably request to implement
this First Amendment and the transactions described in this First
Amendment.
SECTION IV.APPLICABLE LAW.
This First Amendment shall be deemed to be a contract under the laws of
the State of Ohio, and for all purposes shall be construed in accordance with
the laws of such State.
SECTION V. COUNTERPARTS.
This First Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and any
one of the parties hereto may execute this First Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, the parties have executed this First Amendment by
their duly authorized officers effective as of the 3rd day of January, 1995.
<TABLE>
<S> <C>
ENIAC CORPORATION PAC-FAB, INC.
By: Theodore A. Havens By:Theodore A. Havens
Title:Treasurer Title:Treasurer
SANFORD TECHNOLOGY CORPORATION HOBSON BROTHERS ALUMINUM
(f/k/a FAME Plastics, Inc.) FOUNDRY AND MOULD WORKS, INC.
By:Theodore A. Havens By:Theodore A. Havens
Title:Treasurer Title:Treasurer
ESSEF CORPORATION PUREX POOL SYSTEMS, INC.
By:Theodore A. Havens By:Theodore A. Havens
Title:Treasurer Title:Treasurer
NBD BANK, N.A. BRANCH BANKING AND TRUST
By:Fred J. Crawford By:Michael K. Brower
Title:2nd Vice President Title:Vice President
SOCIETY NATIONAL BANK SOCIETY NATIONAL BANK, Agent
By:Rich A. Pohle By:Rich A. Pohle
Title:Vice President Title:Vice President
</TABLE>
Page 18 of 24
<PAGE> 1
FIRST AMENDMENT TO AGREEMENT FOR DEED
THIS FIRST AMENDMENT (this "Amendment") is made and entered into as
of this 28th day of February, 1995, by and between SANFORD TECHNOLOGY
CORPORATION, a North Carolina corporation having an address c/o ESSEF
Corporation, 220 Park Drive, Chardon, Ohio 44024 (the "Vendor"), APOGEE
PLASTICS, INC., a Delaware corporation having offices at 1845 Holsonback Drive,
Daytona Beach, Florida 32117 (the "Vendee"), and APOGEE ACQUISITION CORP., a
Delaware corporation having offices at 1845 Holsonback Drive, Daytona Beach,
Florida 32117 (the "Assignee").
W I T N E S S E T H:
WHEREAS, Vendor and Vendee are parties to an Agreement for Deed
dated as of June 18, 1991 (the "Agreement"), a Notice of which is recorded at
Page 1547 Book 3647 in the Records of Volusa County, Florida; and
WHEREAS, on the date hereof, Vendee is selling substantially all of
its assets to Assignee, and Assignee is assuming certain obligations of Vendee,
including but not limited to Vendee's rights and obligations under the Agreement
as amended by this Amendment; and
WHEREAS, the parties are entering into this Amendment in order to
confirm such assignment and assumption, and to confirm and effect certain
amendments respecting the Agreement required in connection with the said
assignment and assumptions transactions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition
have the respective meanings ascribed to them in the Agreement.
2. Modification of Payment Schedule.
(a) Vendor and Vendee hereby acknowledge that, after giving effect
to all payments heretofore made under the Agreement, the total
outstanding balance of the obligations (principal, interest and
other charges, other than property taxes) under the Agreement on the
date hereof is in the amount of $4,600,000 (the "Outstanding
Principal"). Such Outstanding Principal shall be payable in
accordance with the further provisions of this paragraph 2.
(b) On the date hereof, concurrently with execution and delivery of
this Amendment, Vendee is paying to Vendor the sum of $750,000
(representing a portion of the proceeds received by Vendee from
Assignee in connection with the assignment and assumption
transactions), in reduction of the Outstanding Principal.
(C) After giving effect to the payment pursuant to paragraph 2(b)
above, the remaining principal balance of the obligations under the
Agreement is $3,850,000 (the "Post-Closing Balance"), which shall be
payable by Assignee in installments as follows:
Page 19 of 24
<PAGE> 2
(I) Interest only, at the rate of 10% per annum, shall be
payable monthly in arrears on the first day of each
calendar month commencing April 1, 1995 and continuing
through and including March 1, 1996 (with the first such
interest payment to include all unpaid accrued interest on
the Post-Closing Balance from and after the date hereof);
(ii) On March 1, 1996, the sum of $250,000 shall be due and
payable in respect of the principal of the Post-Closing
Balance;
(iii) On the first day of each calendar month commencing
April 1, 1996 and continuing monthly thereafter through
and including February 1, 2000, there shall be due and
payable the sum of $38,685.78 (subject to adjustment(s)
in the event of any prepayment(s) of principal from time
to time), representing level monthly payments of principal
and interest (at 10% per annum) based on a
fifteen-year level amortization schedule; and
(iv) On March 1, 2000, there shall be due and payable a final
payment in an amount equal to the entire unpaid principal
balance and all unpaid accrued interest thereon (at the
rate of 10% per annum).
(d) Upon payment of the entire Post-Closing Balance and all interest
thereon, Vendor shall effect the transfer of title to the Equipment
and the Real Property to Assignee in accordance with the Agreement.
3. Assignment To And Assumption By Assignee. On the date hereof,
simultaneous with the payment by Vendee to Vendor pursuant to
paragraph 2(b) above, Assignee is acquiring and assuming all
rights and obligations of Vendee under the Agreement (as
amended by this Amendment), and Vendor hereby consents to such
assignment and assumption. In order to induce Assignee to
effect such assignment and assumption, Vendor hereby confirms
that, to the best of Vendor's knowledge, without independent
investigation, there does not exist on the date hereof any
Default or any event or condition which, with notice, lapse of
time or both, would constitute a Default, or any other event or
condition such as would entitle any person to disturb the
peaceful enjoyment and use by Assignee of the Equipment and the
Real Property from and after the effectiveness of such
assignment and assumption. From and after the date hereof,
Assignee will faithfully perform all obligations of Vendee
under the Agreement (as amended hereby) as if Assignee were
expressly named as the "Vendee" therein, and Vendor will look
solely to Assignee for the performance of such ongoing
obligations.
4. No Other Consent Required. Vendor hereby represents and
warrants that no consent is required from any mortgagee or
lienholder (including but not limited to Ameritrust
Page 20 of 24
<PAGE> 3
or any "Banks" as described in the Agreement) in respect of the Real
Property or the Equipment, in connection with the transactions
pursuant to this Amendment.
5. Waiver of Prior Defaults. Vendor hereby waives any and all payment
defaults now or heretofore existing under the Agreement, and Vendor
will not undertake to terminate the Agreement or otherwise assert or
enforce any of such waived defaults; provided, however, that for
purposes of Section 13(C) of the Agreement, such waiver will not
affect the fact that Vendee has failed to make 2 or more payments
within the preceding 24 months.
6. Limitation on Dividend Payments. Assignee hereby agrees that it will
not pay any dividends (other than dividends entirely in capital
stock of Assignee) on any of its capital stock if there shall be any
continuing Default under the Agreement at the time of the payment of
such non-stock dividend, or if a Default under the Agreement would
occur upon or by reason of the payment of such non-stock dividend.
7. Recording. This Amendment or a notice of this Amendment will be
filed for recording. Assignee shall be responsible for any and all
documentary stamp taxes and/or recording fees payable with respect
to such recording.
8. No Novation. None of the amendments effected by this Amendment
constitutes or shall constitute a novation of any of the obligations
outstanding under the Agreement on the date hereof.
9. Ongoing Force and Effect. Except as and to the extent provided in
this Amendment, all covenants, terms and conditions of the Agreement
shall remain unchanged and in full force and effect, including
without limitation, Vendor's interest in the Real Property and the
Equipment.
10. Financing Statements. Prior to execution, Assignee has delivered to
Vendor for filing properly executed UCC-1 statements with respect to
the Equipment. Assignee represents that Vendor's interest in the
Equipment is subject to no superior lien or interest created by
Assignor or Assignee.
11. Miscellaneous.
(a) This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida.
(b) Neither this Amendment nor any provision hereof (nor, from
and after the date hereof, the Agreement or any provision
thereof) may be waived, amended or modified except by means
of a written agreement signed by Vendor and Assignee, and
then only in the specific instance and
Page 21 of 24
<PAGE> 4
for the specific purpose stated therein.
(C) This Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and assigns.
(d) The paragraph headings in this Agreement are included for
convenience of reference only, and shall not affect the
construction or interpretation of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers as of the date first set forth
above.
SANFORD TECHNOLOGY CORPORATION
BY: Theodore Havens
-------------------------
TITLE: Treasurer
APOGEE PLASTICS, INC.
BY: Richard Jones
-------------------------
TITLE: Chief Financial Officer
APOGEE ACQUISITION CORP.
BY: Michael Gibbs
-------------------------
TITLE:
Page 22 of 24
<PAGE> 1
ESSEF CORPORATION EXHIBIT 11
Computation of Per Share Earnings
The computation of simple earnings per share and primary earnings per share is
as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31 March 31 March 31
1995 1994 1995 1994
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Average shares outstanding for
computation of simple earnings
per share 4,870,815 4,866,079 4,869,872 4,865,389
Add equivalent shares for un-
exercised options at end of
period (a) 879,534 892,221 876,512 871,126
--------- --------- --------- ---------
Average shares outstanding for
computation of primary earnings
per share 5,750,349 5,758,300 5,746,384 5,736,515
========= ========= ========= =========
Earnings per common share: $0.44 $0.40 $0.62 $0.58
Primary earnings per common
share: $0.37 $0.34 $0.53 $0.49
</TABLE>
(a) Computed under the "Treasury Stock Method" using the average market price
for the respective period.
Page 23 of 24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,451
<SECURITIES> 0
<RECEIVABLES> 40,245
<ALLOWANCES> 0
<INVENTORY> 14,922
<CURRENT-ASSETS> 58,654
<PP&E> 73,382
<DEPRECIATION> 42,276
<TOTAL-ASSETS> 98,187
<CURRENT-LIABILITIES> 21,154
<BONDS> 0
<COMMON> 15,116
0
0
<OTHER-SE> 26,908
<TOTAL-LIABILITY-AND-EQUITY> 98,187
<SALES> 71,945
<TOTAL-REVENUES> 71,945
<CGS> 51,469
<TOTAL-COSTS> 51,469
<OTHER-EXPENSES> (377)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 990
<INCOME-PRETAX> 4,722
<INCOME-TAX> 1,700
<INCOME-CONTINUING> 3,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,022
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
